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S - When the fifth letter of a NASDAQ stock symbol is an
S, the represented item is a beneficial interest.
S And P - Abbreviation for Standard and Poors Corporation.
Safe Harbor - Referring to risk arbitrage, a tactic used to avoid
takeover where a target company acquires a business that is so heavily
regulated that is makes the target less attractive; a company’s legal
privilege to publicly discuss operations and future plans in good faith.
Safe Harbor Lease - A lease that allows for the transfer of tax benefits
of ownership from the lessee to the lessor.
Safe Return Certificate - A note with upside return linked to an equity
and guaranteed return of principal.
Safekeeping - The act of holding items in a bank vault.
Safety Cushion - Referring to contingent immunization strategy, the
difference between the initial immunization level and the safety net
return.
Safety First Objective Function - A function that has as a primary goal
of attaining a minimum target and as a secondary goal of attaining a
higher target.
Safety-Net Return - The lowest available return that will provoke an
immunization strategy.
Saitori - Special members of the Tokyo Stock Exchange who match buy and
sell orders in markets but do not trade for their own positions.
Sale And Lease-Back - Agreement where an asset is sold to a bank, and
then leased back to the seller for use.
Sales Charge - A fee assessed by a mutual fund when shares are
purchased.
Sales Forecast - A prediction of sales for a future period, used in the
financial planning process.
Sales-Type Lease - Situation where a company leases out its own
equipment.
Salvage Value - The scrap value of a manufacturer including its
equipment.
Same Day Funds Settlement (SDFS) - A U.S. same day payment and fund
transfer system introduced in 1996 that increases payment and settlement
efficiency and reduces transaction- related risks.
Same Day Securities Settlement (SDSS) - A projected system to clear and
settle securities transactions on the day of the trade.
Samurai Bond - A bond issued in Tokyo by a non-Japanese borrower,
denominated in yen.
Samurai Market - The foreign market to the Japanese.
Samurai Warrants - European-style capped calls convertible into
non-voting equity.
Saturday Night Special - An impromptu takeover attempt by a company
making a public tender offer.
Savings and Loan Association - A government chartered institution that
invests in mortgages with funds generated from savings deposits by
customers.
Savings Deposit - An account that pays interest, can usually be
withdrawn from easily, and does not have a maturity date.
Saw Toothed Convergence - Numerical occurrence in the valuation of
options by which the approximation to the analytical value improves with
the number of periods, then gets worse, then again improves, and then
worsens, repeating this pattern as it approaches the analytical value.
Scale - An list of CDs with varying maturities and interest rates being
offered by a bank.
Scale Enhancing - A project that is in the same risk class as the entire
company.
Scale In - The incremental taking of a position in a security or market
over a period of time.
Scale Order - Referring to general equities, an order that specifies a
total amount of a security to be traded, and then specifies the
improving price level at successive intervals.
Scalp - Successive small trades conducted for small gains.
Scattered - Buy or sell interest that is not focussed in one area.
Scenario Analysis - A method of analysis where different variables are
used to project different returns in an effort to decide on an
investment strategy.
Schedule 13D - A report filed in order to sell shares.
Scheduled Cash Flows - Scheduled or planned mortgage principal and
interest payments due under the terms of the mortgage.
Scorched-Earth Policy - A technique used in order to make a company less
attractive to a potential acquirer.
Screen Trading - A trading system that involves the display of firm bids
and offers on a computer monitor.
Scrip - A temporary document used as evidence of a right to receive a
security.
Seagull - A long near-the-money call financed by writing an
out-of-the-money call and an out-of-the-money put.
Search Costs - Cost that occur as a result of attempts to locate a
counterparty to a trade.
Seasonal Swap - A swap intended to help finance a seasonal business.
Seasonally Adjusted - Adjusting an indicator so that is can be used to
make month-to-month comparisons.
Seasoned Datings - Credit given to customers for purchases made in
off-peak seasons.
Seasoned Issue - Issue of a security that has an existing market.
Seasoned New Issue - A new issue of stock made after the firm’s
securities have been issued previously.
Seat - A membership in an exchange.
SEC - Abbreviation for the Securities and Exchange Commission.
Second Generation Duration - A measure of duration in which the relevant
cash flows are discounted by the yields associated with zero coupon
bonds that mature simultaneously with each cash flow.
Secondary Currency Option - An option contract with a payoff in a
different currency than the underlying's trading currency.
Secondary Distribution - Referring to general equities, the sale of
securities by large investors that previously purchased the securities
from the issuer.
Secondary Issue - The sale of stock that has been issued previously.
Secondary Market - The market where secondary issues are traded. The
NYSE is in the secondary market.
Secondary Offering - The sale of previously issued securities, being
sold by large investors, often institutions. The Primary offering is the
sale of a new issue, being sold by the issuer.
Secondary Warrants - A warrant with another warrant as the underlying.
Section 482 - Regulations involving transfer pricing.
Sector - A group of securities that have a common trait such as
maturity.
Sector Rotation - An equity management style that attempts to produce
superior returns by taking advantage of changes in overall interest of
industry sectors or valuation factors.
Secure Principal Energy Receipt (SPER) - A unit consisting of interests
in natural gas or oil producing properties and zero coupon Treasury
obligations.
Secured Debt - A debt that has a priority claim on assets in the event
of default.
Secured Investor Trust - A pool of collateralized mortgage obligations
that provide the cash flow for kitchen sink bonds.
Securities Act of 1933 - A body of Federal law that regulates the
securities industry. This act required full and fair disclosure of
information about issues of securities.
Securities And Exchange Commission - Abbreviated as SEC, the federal
agency charged with the regulation of American financial markets and
overseeing the securities industry, responsible for the enforcement of
US securities laws.
Securities and Investment Board (SIB) - The regulatory agency
responsible for regulating securities and derivative markets in the
United Kingdom.
Securities Exchange Act of 1934 - Act that created the Securities and
Exchange Commission; federal law written to further regulate the
securities industry (in addition to the Securities Act of 1933).
Securities Investors Protection Corporation - Abbreviated as SIPC, a
government insurance agency that protects investors from loss due to
bankruptcy of a brokerage firm.
Securities Lending - Method of loaning positions to dealers and short
sellers who must make physical delivery of fungible positions.
Securitization - The replacement of nonmarketable loans with negotiable
securities in the public markets.
Securitized Options - Stock or stock index options combined with another
security.
Security - Proof of ownership of an investment.
Security Characteristic Line - A graphical representation of the excess
return on a security over the risk-free rate.
Security Deposit - Amount a customer deposits with a broker before
purchasing securities as a guarantee of contract fulfillment.
Security Industry Automated Corporation - Institution that operates the
Designated Order Turnaround System.
Security Market Line - A line on a graph the illustrates the
relationship between expected return and market risk.
Security Market Plane - A plane in a graph showing the relationship
between expected a beta coefficient and the expected return.
Security Selection Decision - Selecting securities to include in a
particular portfolio.
Segmented Market Hypothesis - The belief that investors sacrifice
diversification by showing partiality toward local assets.
Select Auction Variable Rate Securities (SAVRs) - A direct auction reset
municipal floating rate note paired with Residual Interest Bonds in
which the issuer pays a fixed rate.
Self-Liquidating Loan - A loan secured in order to finance existing
assets the sale of which provides the funds to repay the loan.
Self-Regulatory Organization - An organization that regulates the
activities of its members.
Sell Limit Order - An order that stipulates that a security may be sold
at the designated price or at a higher price.
Sell Off - The selling of a security, getting rid of it.
Sell Order - A request for a broker to sell a security on behalf of the
customer.
Sell Plus Order - Referring to general equities, a limit order to sell a
specified amount of stock if the obtained price is no less than the
previous sale if the previous sale was a plus.
Sell The Book - Referring to listed securities, instruction given by the
holder of a large number of shares to sell all that can be sold at the
current bid price.
Sell-Side Analyst - A financial analyst.
Seller's Option - A transaction settlement arrangement by which the
seller can determine delivery and payment dates.
Selling Group - A group of brokers assembled to jointly sell units of an
offering.
Selling Short - Situation where an investor borrows shares from a
broker, sells them, and then later purchases them at a lower price.
Semi-Fixed Swap - Swap with the rate for each period set above or below
the market swap rate dependent on the level of a designated index on the
reset date.
Semi-Strong Form Efficiency - A type of pricing efficiency where the
price fully reflects all available information.
Semi-Variance - The difference between the average of the squared
deviations below the mean return. Used as a measure of downside risk.
Senior Debt - A debt that has priority for payment in the event of
bankruptcy; also called a senior note.
Seniority - A ranking or order of debt claims.
Sensitivity - A measure of the relationship between two or more of the
variables determining option value.
Sensitivity Analysis - Analysis of the possible changes to a project
profitability caused by
Separation Property - A portfolio characteristic that allows for choice
by two tasks; the construction of the optimal high-risk portfolio, and
the choice of a risk balanced portfolio based on the person’s comfort
level.
Separation Theorem - Theory stating that all investors will either
accept or reject the same investment by asserting the net present value
rule, without regard for personal preference.
Sequential Pay (SEQ) Bond - A bond that pays principal only when a
previous bond have paid to zero.
Serial Bonds - Corporate bonds with specified principal amounts and due
dates.
Serial Covariance - Another term for auto covariance; covariance between
a variable and the lagged value of a variable.
Series - A group of options or bonds that have common characteristics.
Series 3 - An examination given by the National Association of
Securities Dealers to license options principals or brokerage firm
managers.
Series 6 - An examination given by the National Association of
Securities Dealers to license people to sell a limited number of
securities (mainly mutual funds and annuities).
Series 63 - An examination given by the National Association of
Securities Dealers to license people to serve as a principal or manage a
stock brokerage.
Series 7 - An examination given by the National Association of
Securities Dealers to license stockbrokers.
Series Bond - Bonds that is issued in numerous series under one
indenture.
Series of Options - All listed option contracts with the same class,
exercise price and expiration date.
Set Of Contracts Perspective - The line of thought that considers a
corporation to be a group of contracting relationships. These
relationships are among parties with conflicting purposes, such as
managers and shareholders.
Set Up - Arbitrage where the investor goes long on the convertible and
short on the underlying common stock.
Set-Off - The right of the non-defaulting party to reduce its debt to
the defaulting party by the amount owed it.
Settlement - When payment is made, the finalization of a trade; the
specific date a securities trade is credited to the accounts of the
buyer and seller and all evidence of ownership and payment are
transferred.
Settlement Date - The date on which a trade is settled, payment is made.
Settlement Price - The price determined by the closing range; price used
to compute gains, losses, invoice prices, and margin calls.
Settlement Rate - The rate used to settle when a company wants to
terminate its pension obligation.
Settlement Risk - Possibility that one side of a contract will default.
Severability - The right to separate a warrant attached to a stock.
Shadow Stock - A "fake" stock created by a company that is used as a
performance evaluator for company management. The "fake" stock will not
be effected by factors beyond the control of the company such as
market-wide movements.
Share Ratio Contract - The contract pays an amount based on the
difference between the performance of a stock and the performance of a
market index.
Share Repurchase - Situation whereby a company buys back its own shares
at a time when they are undervalued. This reduced the number of
outstanding shares, boosting the earnings per share as well as the value
of the remaining stockholder shares.
Shareholders - Investor that owns shares in a company.
Shareholders' Equity - Net worth; total assets minus total liabilities.
Shareholders' Letter - A portion of a company’s annual report that is
addressed directly to the shareholders detailing the events of the
previous fiscal year.
Shares - Pieces of ownership in a company.
Shark Repellant - Any of many strategies used to avert a takeover.
Shark Watcher - Firm or company manager who closely monitors trading
patterns in a stock in an effort to detect upcoming any takeover
attempts.
Sharpe Ratio - A portfolio's return in excess of the riskless return
divided by the portfolio's standard deviation. Used as a measure of
performance as a function of risk.
Shelf Offering - Referring to general equities, an offering of
securities that are not underwritten on a on a strong commitment basis,
but may be sold in one block or in small increments.
Shelf Registration - Registration of an issue up to two years in advance
of when it is to be offered publicly.
Shell - The skeleton on a corporation; a corporation with outstanding
shares but no operating business and often, no substantial assets.
Shirking - The inclination to do less work if the return is small.
Shogun Bond - A dollar bond issued in Japan by a nonresident.
Shop - Another term for a company or firm.
Shopped Stock - Referring to general equities, a sell inquiry that has
been seen by another potential investor before coming to an investment
bank.
Shopping - Looking for the best bid/offer available.
Short - The opposite of long; when a trader has sold a contract and
established a market position, but has not yet made an offsetting
purchase to close out the position.
Short Against the Box - The act of selling short shares that are already
owned by an investor in order to take advantage of unrealized gains
without incurring taxes.
Short Bonds - Bonds that are near maturity.
Short Covering - Referring to general equities, the purchase of
securities in order to cover, or replace, those borrowed at the time of
a short sale.
Short Exempt - Referring to listed equity securities, term describing a
trader, owning a convertible that is trading at parity, who sells the
equivalent amount of common short on a minus tick with the intention to
convert.
Short Hedge - Selling a futures contract in order to lessen the chance
of a decline in value of an equal amount of the actual financial
instrument or commodity.
Short Interest - The number of a security’s shares that have been sold
by investors but not repurchased to close out the short position. A high
quantity of shares in a stock’s short interest may be an indicator of
the market’s loss of confidence in that particular stock.
Short Interest Ratio - A measurement of the number of shares that have
been sold short divided by the average daily volume of the security.
Short Position - A strategy used when an investor fells that a stock’s
price will go down. The trader sells stock that is only borrowed from a
broker, then purchases it back in order to close the transaction; a
position in a client’s account resulting from the credit due from a
short sale.
Short Proceeds - The cash received from shorting a security.
Short Sale - The sale of a security where the seller does not own the
stock, but is only borrowing it. The seller is then committed to
purchasing the stock back at a later time, hopefully at a lower price.
Short Sale Rule - Requirment that short sales can only be made on a plus
tick or zero plus tick.
Short Settlement - The settlement of a trade that is done more quickly
than in the standard five day period.
Short Squeeze - A situation where short sellers are forced to buy
securities to cover their short position because of rising prices due to
a lack of supply moving prices upward.
Short Straddle - The sale of one put and one call with the same terms at
the same time.
Short Tendering - During a tender offer, the illegal practice of
tendering more shares than an investor owns outright and has not covered
with short in-the-money call positions.
Short the Basis - A hedged position usually consisting of a long futures
and a short underlying.
Short-Dated Swap - A swap used to adjust the effective maturity of
short-term borrowings.
Short-Run Operating Activities - Activities and decisions in regard to a
company’s short term finance/cash flow (for example, inventory
ordering).
Short-Short Rule - A provision of the tax code that excludes a mutual
fund from income pass- through treatment if more than 30 percent of its
gross income before deduction of losses is from gains on positions held
less than 3 months.
Short-Term - An investment with a maturity of one year or less.
Short-Term Appreciation and Investment Return Trust (STAIR) - A
portfolio consisting of long positions in Treasury securities and short
in-the-money puts.
Short-Term Equity Participation Units (STEP Units) - An equity-linked
unit using a portfolio or index instead of a single stock as the
underlying. The unit returns a higher yield than the underlying
instrument(s) and full participation in the value of the underlying up
to the capped price.
Short-Term Financial Plan - Financial plan for the next fiscal year.
Short-Term Instruments Linked to Treasuries (STILT) - A note that
promises the return of principal with a variable coupon related to the
performance of one or more Treasury instruments.
Short-Term Investment Service - A firm that helps other companies make
short-term investments.
Short-Term Solvency Ratios - A series of ratios used to measure a firm’s
ability to meet short-term obligations.
Short-Term Tax Exempts - Short-term securities that are issued by
governmental agencies that are tax exempt.
Shortage Cost - Costs that are lessened with increases in the level of
investment.
Shortfall Constraint - An approach to risk management that places
emphasis on preventing the circumstance of having more liabilities than
assets when the liabilities come due.
Shortfall Risk - The possibility of falling short of the targeted
return.
Shout Option - An option contract with the strike set at the spot price
of the underlying at the time the holder 'shouts' to fix the strike.
Show And Tell List - Referring to general equities, a block list (list
of potential buys and sells for an investor) that consists of real
indications rather than just profiles.
Show Me Buyer (Seller) - Referring to general equities, a customer who
has not yet placed an order but has requested to be shown available
stock and its pricing.
Shut Out The Book - Referring to listed equity securities, to exclude a
public bid or offer.
Side Effects - The effects of a project on the rest of the company.
Side-by-Side Trading - Trading a security and its options on the same
exchange within a space where non-electronic communication is possible
between markets.
Sidelines - Referring to general equities, not involved, but merely
watching a stock.
Siegel's Paradox - The observation that two investors from different
countries do not have offsetting perspectives when they have the same
expectation of the value change of future exchange rates.
Sight Draft - A demand for payment.
Signal - The conveying of information through actions; a clue of things
to come; a sign.
Signaling Approach - Idea that the choice of capital structure by those
that are company insiders may send signals about information that is not
yet known by company outsiders.
Signaling View - In regard to dividend policy, the belief that dividend
changes can be considered signals to investors about expected future
earnings.
Simple Compound Growth Method - Approach to calculating growth rates by
using the terminal value, the initial value, and a constant annual rate
of growth.
Simple Interest - As opposed to compound interest, interest that is
calculated on the initial investment only.
Simple Linear Regression - A regression analysis that involves only two
variables; the dependent variable, and the explanatory variable.
Simple Linear Trend Model - An model asserting that earnings grow at a
constant amount from a base level.
Simple Moving Average - The average, or mean, calculated over a given
period of time.
Simple Prospect - An uncomplicated investment opportunity.
Simulation - An imitation of a situation; simulations are done
repeatedly in order to estimate how likely various outcomes are.
Simulation Analysis - An analysis of the risk of an instrument or index
based on the previous prices and changes in price.
Singapore International Monetary Exchange - Abbreviated as SIMEX, a
futures and options exchange in Singapore.
Single Country Fund - A mutual fund that focuses its investments in
individual countries outside of the US.
Single Factor Model - A analysis model that utilizes only one common
factor.
Single Index Model - An analysis model of returns that breaks down
influencing factors into one systematic factor.
Single Issue Options - Low strike price options that provide investors
with most features of stock ownership when actual ownership of
registered shares cannot be transferred.
Single Monthly Mortality (SMM) - Rate equal to the unscheduled
prepayments during a month divided by the scheduled balance for the end
of the month.
Single Point Adjustable Rate Stock (SPARS) - A preferred stock with a
dividend reset every 49 days at a relative to high grade commercial
paper.
Single-Payment Bond - A bond that makes only one payment.
Single-Premium Deferred Annuity - An annuity, or insurance policy,
purchased by a pension plan sponsor for a single premium. The insurance
company then makes pension payments to retired employees of the firm.
Sinking Fund - A provision set forth by an issuer of a bond to set aside
money for later use in redeeming or retiring the principal of the bond
issued and outstanding, either at maturity or at another date stipulated
by the bond.
Sinking Fund Requirement - A requirement of some bond indentures that
the issuer retire a portion of the debt every year.
Sit Tight - Be patient; wait for the right time to execute a trade.
Size - A large amount, as in the number of shares; the number of shares
represented by the highest bid/lowest offer in the trading of a
security.
Size Out The Book - Excluding a public bid or offer from participating
by trading a larger size than exists in the book.
Skew Measure - The change in volatility for a 1% change in option strike
price.
Skewed Distribution - A probability distribution in which an unequal
number of observations lie below or above the mean; a distribution with
an unequal number of positive and negative skews.
Skewness - The degree to which there is a high probability of either a
big negative or a big positive return.
Skip-Day Settlement - Settlement of a trade one day late than is normal.
Sleeper - Referring to general equities, a stock that receives little
attention from investors but has a large potential for gain once it does
get noticed; the opposite of a high flyer.
Sleeping Beauty - A potential target for takeover that has not yet been
noticed by any acquirers.
Sleeping Point - An investment expression used to measure the level of
risk an investor is comfortable handling on a position.
Sliding Floor Plan - A price protection strategy where a commodity
producer buys put options on his expected production volume and pays for
them by selling lookback calls on part of the expected production.
Slippage - The spread between estimated and actual transaction costs.
Small Issues Exemption - The exemption of small issues (less than $1.5
million) from the SEC registration requirement. Instead, they are
required by Regulation A to file a brief offering statement.
Small Order Execution System - An system that automatically executes an
order at the best price.
Small-Cap Investment Manager - An equity portfolio manager who
specializes in smaller companies.
Small-Firm Effect - The tendency of small companies to perform better
than the stock market in terms of total market capitalization.
Smidge - Referring to general equities, a small amount of price, often a
small price change.
Smithsonian Agreement - A currency exchange rate plan that replaced the
fixed exchange rates and gold convertibility of the dollar and led to
the subsequent floating exchange rate mechanism.
Snowballing - Referring to general equities, the cycle created by stop
orders in a moving market that cause further downward/upward pressure on
prices which then triggers more stop orders, and so on.
Society For Worldwide Interbank Financial Telecommunications -
Abbreviated as SWIFT, a network that handles fund transfer messages
internationally between member banks
Soft Call Protection - A premium to parity an issuer must pay to call a
bond after any period of hard call protection has passed.
Soft Currency - A currency that is expected to drop in value as compared
to other currencies.
Soft Dollars - The unmeasured value of the research services that
brokerage houses provide to investors in exchange for their business.
Sold Away - Referring to over-the-counter trading, having sold stock to
another party before making the current offering.
Sole Proprietorship - A form of a company where it is owned by a single
person. A sole proprietor has unlimited liability for company debt.
Solvency - Ability to consistently meet financial obligations.
Source Of Funds Seller - Referring to general equities, a seller of
stock who has the need to raise cash for other purchases. A source of
funds seller will generally hold out for the best price.
Sovereign Risk - The possibility for loss due to a central bank imposing
foreign exchange regulations that will reduce contract value; the
possibility of loss due to a government defaulting on a loan.
SPDR (Standard & Poor's-500 Depository Receipts) - A warehouse receipt
with a return that tracks the return of the S&P-500 index.
Special Claim On Residual Equity (SCORE) - Element of an Americus Trust
Unit that acts like a warrant.
Special Dividend - An extra dividend; a dividend that was given one time
only, not as part of a regular schedule.
Special Drawing Rights - A type of international reserve assets with a
value based on a portfolio of widely used currencies.
Special Miscellaneous Account (SMA) - An account used to accumulate the
value of a brokerage customer's excess margin and buying power.
Special Quotation (SQ) - A unique opening settlement price that
establishes the value of a Japanese stock index derivative at
expiration.
Specialist - Stock exchange member firm with the responsibility of
ensuring an orderly market in a particular security.
Specialist Market - A market created solely by the specialist with no
public orders.
Specialist's Book - Referring to listed equity securities, a written,
chronological log of activity in a particular stock, kept by the
specialist.
Specialty Management - Investment management that provides a narrow
range of services and products.
Specie - Gold and silver currency.
Specific Issues Market - A market where brokers reverse in securities
that they wish to short.
Spectail - A term created from a combination of the words "speculative"
and "retail"; a dealer that concentrates his/her efforts on speculative
investments, but does some retail business.
Speculation - The act of investing in risky securities.
Speculative Demand - A demand for cash in the event an investment
opportunity arises.
Speculative Grade Bond - A low-rated, or unrated bond.
Speculator - A trader; a person who attempts to profit through the
buying and selling of contracts, especially risky ones.
Spider - See SPDR.
Spike - Referring to general equities, a sudden, sharp increase in a
price; an order ticket.
Spin-Off - A separate, independent company created from a division or
subsidiary of another company. Shareholders of the parent company
receive shares in the new company on a pro rata basis.
Split - The act of multiplying the number of outstanding shares in a
company without affecting shareholder equity.
Split Cylinder or Split Risk Reversal - A collar with different
expiration dates on the put and call and/or on the cap and floor.
Split Print - Referring to general equities, a block trade that is
printed with two different prices.
Split Stock - Referring to general equities, a stock that has been
split, meaning divided into a larger number of shares.
Split-Fee Option - An option on an option where the buyer makes a
payment in the beginning, and then pays the balance of the broker fee at
the end.
Split-Rate Tax System - Tax system where retained earnings are taxed at
a higher rate than earnings that are distributed as dividends.
Spoken For - Referring to general equities, not open.
Spot Exchange Rates - The exchange rate on currency available for
immediate delivery.
Spot Futures Parity Theorem - Theory regarding the relationship between
spot and futures prices.
Spot Interest Rate - The interest rate locked in today on a loan made
today.
Spot Lending - Originating a loan or mortgage using an application taken
directly from the potential borrower.
Spot Market - Market where goods are traded for immediate delivery (and
payment).
Spot Month - The futures contract closest to expiration.
Spot Price - Another term for cash price; the current market price of a
commodity (the actual physical commodity); the opposite of the futures
price; the quoted price of a metals commodity (such as gold or silver).
Spot Rate - A zero-coupon Treasury security’s yield.
Spot Rate Curve - The relationship between the spot rates and maturity,
expressed on a graph.
Spot Secondary - Referring to general equities, a secondary distribution
offering that is transacted immediately.
Spot Start - A financial contract whose that becomes effective when the
agreement is reached.
Spot Trade - A trade for immediate delivery.
Spot-Deferred Contract - A forward contract that gives the option seller
the right to roll the contract forward rather than make delivery on a
specific date.
SPRD - Abbreviation for Standard & Poors Depositary Receipt; often
called spiders; a unit investment trust that tracks Standard and Poors
500 Composite Price Index.
Spread - The difference between a security’s bid and ask prices; the
difference between the price at which one purchases an issue and the
price at which one sells it; the price difference between the highest
bid and lowest ask for a security.
Spread Hedge - A risk management position designed to lock in a profit
in a commodity.
Spread Income - Another term for margin income; the difference between
income and cost.
Spread Option - An option that locks in an interest rate spread into a
bond.
Spread Put Bond - A bond puttable to the issuer or to an underwriter at
a basis point spread in order to protect the buyer from a downgrade in
the issuer's credit rating.
Spread Risk - An exposure to a change in the yield spread between
government and non-government notes.
Spread Strategy - Approach where the cost of purchasing an option is
funded by the selling of another option in the same underlying.
Spread-Lock Agreement - A contract to buy or sell a debt instrument at a
pre-set spread to the yield on a specific bond or note at a specified
future date.
Spread-Lock Option - An option to enter into a spread-lock agreement.
Spread-Lock Swap - An interest rate swap agreement with an option to fix
the floating rate payment at a fixed spread over a benchmark rate at a
future date.
Spreadsheet - A sheet, or computer program where data is compiled in
rows and columns.
Stabilization - Entry of a series of bids and offers designed to keep
the price of a security within a narrow range over a period of time.
Stabilized Mortgage Reduction Term (SMRT) Bond - A mortgage bond with
principal payments that corresponds to the sinking fund schedule of a
corporate bond as long as the prepayment rate on the mortgage bond is
within a designated range.
Stack Hedge - A hedge position using a sequence of short term risk
offsetting contracts.
Staggered Board Of Directors - A company Board of Directors that has
varying election dates. With this type of board, it is more difficult to
takeover the company since not all directors are elected at the same
time.
Stakeholder - A party that has an interest in a company, for example,
stockholders, employees, and creditors.
Stamp Duty - A tax on foreign transactions.
Stand Up To - Referring to general equities, to show a willingness to
buy a large amount at one’s own bid and offering prices.
Stand-Alone Principle - Investment principle that says a company should
decided for or against projects by comparing them with securities that
have the same risk level.
Standard & Poor's (S&P) 'r' Symbol - A symbol added to S&P's ratings of
certain derivative instruments with high volatility potential.
Standard & Poor's Index Notes (SPINs) - A fixed coupon note with
principal payment linked to the value of the S&P-500 stock index.
Standard & Poors Corporation - Abbreviated as the S and P, publisher of
a range of financial information including the "Standard & Poors 500,"
which is one of the most widely-followed stock market indexes.
Standard Deviation - A measure used to examine the dispersion of a set
of data from its mean; the square root of the variance.
Standard Error - A statistical measure of possible error.
Standard Industrial Classification - Often called a SIC code, a code
that represents a business industry classification.
Standard Option - A plain vanilla option with no bells or whistles to
complicate its evaluation.
Standard Portfolio Analysis of Risk (SPAN) - A device for calculating
margin requirements for a portfolio of futures and futures option
positions.
Standard Prepayment Assumptions - Monthly and annual mortgage principal
prepayment rates published by the Public Securities Association (PSA).
Standardization - The ability of buyers and sellers to comprehend the
distinctiveness of an stock or option based on a few words of
description or a security identification number or symbol.
Standardized Normal Distribution - Normal distribution where the mean is
0 and the standard deviation is 1.
Standardized Value - The value of one piece of data divided by the
standard deviation of the distribution.
Standby Agreement - Agreement where the underwriter of a stock must
purchase any left over stock that is not purchased by investors.
Standby Fee - The fee, or amount paid to an underwriter who agrees to
purchase any stock not purchased by investors.
Standing - Level, or ranking of priority.
Standstill Agreement - An agreement in which the firm bidding to
takeover another firm is limited in its number of holdings.
Start Date - The date when interest payments begin to be calculated.
Stated Annual Interest Rate - The rate used to determine interest
payments; the interest rate stated as a per annum percentage.
Stated Conversion Price - Par value of a convertible security divided by
the conversion ratio; the price the issuer gives the security holder to
purchase the common stock at the time of issuing the convertible
security.
Stated Rate Auction Preferred Stock - Preferred stock which converts
(years after issuance) from fixed dividend payments to reset rates every
49 days by Dutch auction.
Statement Billing - A statement sent to a customer as a bill for
payment; a statement that shows all invoices due for payment from the
customer.
Statement of Cash Flows - A financial report that shows cash receipts
and payments during a particular period.
Statement-Of-Cash-Flows Method - A budgeting approach organized around a
Statement Of Cash Flows.
Static Theory Of Capital Structure - Theory that capital structure is
determined as a result of a trade-off of the value of tax shields versus
the cost of bankruptcy.
Statute of Frauds - A law that requires specific contracts to be in
writing in order to be able to take action against a party who fails to
keep their obligation.
Statutory Surplus - The surplus of an insurance company figured by the
accounting treatment of assets and liabilities as dictated by state
statutes.
Steady State - The prepayment speed of a mortgage backed security pool
tends to stabilize within a steady range after it is passed at least one
time through the refinancing threshold.
Steepening Of The Yield Curve - Change in the yield curve because of an
increase in the spread between the yield on a long-term and short-term
bond.
Step Aside - Allow a block to trade without your involvement, at a price
you do not care for.
Step Premium Option - An option which the buyer pays no upfront premium.
As the option becomes closer or moves through the strike, more premium
is paid.
Step-Down Coupon Note - A note with declining coupon payments during the
life of the note.
Step-Down Swap - An interest rate swap agreement with a gradually
decreasing fixed payment rate over the life of the swap.
Step-Down Warrant - A stock or equity index call warrant with a strike
that resets at a lower price as a result of a price decrease in the
underlying.
Step-Up - To increase.
Step-Up Bond - A bond that has an initial coupon rate that is increased
to a higher rate as time goes by.
Step-Up Cap - A cap structure that limits an interest coupon increase to
a certain amount at each reset date.
Step-Up Capped Floating Rate Note - A capped floating rate note with an
increasing cap strike.
Step-Up Coupon Note - A debt instrument that gradually increases in
payments.
Step-Up Swap - An interest rate swap agreement with an increase in the
fixed rate at one or more dates over the life of the swap.
Step-Up Warrant - A call warrant with an increasing strike price as time
passes.
Sterilized Intervention - Situation where authorities lower their risk
by insulating their domestic money supply from foreign exchange with
offsetting sales, or t he purchase of domestic assets.
Sterling At Risk (SAR) - Value at risk denominated in sterling.
Sticky Jump (SJ) Bond - A bond whose payment of principal is changed by
a trigger condition.
Stock - A piece of ownership in a company, its earnings, and its assets.
Stock Ahead - Situation where two or more orders for the same stock come
in at one time, therefore priority rules come into effect. The order for
the larger number of shares will take priority over the others, it is
the "stock ahead".
Stock Appreciation Right - Compensation that binds part of a corporate
employee’s income to the performance of the corporation's stock. May be
used as an alternative to stock options for accounting and tax purposes.
Stock Dividend - A dividend given to shareholders in the form of stock
instead of cash.
Stock Equivalent - An option position that will change in value at the
same or similar rate as the price of the underlying stock changes.
Stock Exchange Automated Quotation System - London’s equivalent to
NASDAQ; abbreviated as SEAQ.
Stock Exchange Of Hong Kong - The sole stock exchange in Hong Kong.
Stock Exchanges - Organizations that provide members with a format and
place to exchange common stocks. The two major US stocks exchanges are
the NYSE (New York Stock Exchange) and the AMEX (American Stock
Exchange). There are five regional stock exchanges in the US, along with
an after-hours electronic exchange.
Stock Index - An index that follows a portfolio of stocks, for example,
the Dow Jones Industrial Average.
Stock Index Contingent Option - A put or call on a stock index that must
be in the money and satisfy an additional condition in order for the
option to be exercisable.
Stock Index Futures Contract - A cash-settled futures contract with a
stock index as the underlying.
Stock Index Insured Account - An equity-linked certificate of deposit
with the payoff based on the performance of a stock index option.
Stock Index Option - An option where the underlying is a common stock
index.
Stock Loan Contracts - Exchange-traded contracts that make the lending
of securities possible in some countries.
Stock Market - The market where equities are traded.
Stock Market Annual Reset Term (SMART) Note - A variable rate note with
the periodic coupon based on the performance of a stock market index
rather than a rate spread.
Stock Option - An option where the underlying asset is the common stock
of a company.
Stock Power - A form giving power of attorney for the transfer of
ownership of securities.
Stock Replacement Strategy - A strategy used to improve a portfolio’s
return.
Stock Repurchase - A company’s repurchase of outstanding shares of its
own stock.
Stock Right - A stock option.
Stock Selection - An approach to portfolio management that focuses on
the selection of individual stocks.
Stock Split - The act of multiplying the number of outstanding shares in
a company without affecting shareholder equity.
Stock Ticker - Letters assigned to symbolize securities and mutual funds
on an exchange.
Stock Upside Note Security (SUNS) - A periodic reset note with the
annual coupon linked to the annual percentage gain of a designated
instrument or index minus a fixed percentage to pay for the option
component of the return.
Stock-Over-Bond (SOB) Warrant - Warrant with a payoff based on the
return of a stock index minus the return on a bond index.
Stockbroker - A professional who is registered by the National
Association of Securities Dealers and or a state’s securities regulation
authority; a broker.
Stockholder's Equity - Total liabilities less total assets: the
ownership that stockholders can claim.
Stockout - Running out of inventory.
Stop Order - An order stipulating that when a definite price is reached,
it should be executed.
Stop-Limit Order - A stop order that gives a price limit.
Stop-Loss Order - An order that stipulates that a stock will be sold
when its price falls to a specified level.
Stopped - Referring to general equities, A guaranteed price on an order.
Stopping Curve - A graphical expression that shows the refunding rates
for various points in time at which the expected value of refunding
equals the expected value of waiting to refund.
Stopping Curve Refunding Rate - A refunding rate that hits the stopping
curve.
Straddle - Purchasing and selling an equal number of puts and calls
simultaneously, with the same terms. The objective of a straddle is to
make a profit from a volatile market where prices may swing
significantly up or down.
Straight line Depreciation - An equal amount (in dollars) of
depreciation in each accounting period
Straight Value - The value of a convertible security not taking into
account its conversion option.
Straight Voting - Voting by a shareholder for all candidates for the
board of directors.
Strangle - An option position involving a short put and a short call or
a long put and a long call on the same underlying security with the same
expiration date and different strike prices.
Strap - A variation of a straddle; two calls and one put on a stock when
the puts and calls have the same strike price and expiration date.
Strategic Asset Allocation (SAA) - A strategy in portfolio management
which attempts to increase exposure to a market when recent market
performance has been poor and to reduce exposure when recent market
performance has been good.
Strategic Business Unit (SBU) - A division of a corporation with it’s
own set of products, strategies, objectives and competitors.
Strategic Risks - Basic risk exposures that have a significant effect on
the fundamental outlook of an economic unit's, and therefore are crucial
in any risk management strategy.
Stratified Equity Indexing - A method of constructing a portfolio where
stocks are categorized by stratum.
Stratified Sampling Approach To Indexing - Sampling technique whereby an
index is divided into cells.
Stratified Sampling Bond Indexing - Method of indexing bonds where the
index is divided into cells and bonds are purchased to fit in each cell.
Street - A member of the financial community.
Street Name - Security assets are registered in the name of a broker on
behalf if the client. The broker’s name is then the street name.
Stress Testing - Observing the reaction of a portfolio to a variety of
types of financial distress.
Strike Bonus Option - The value added to the premium of a standard
option by a lookback or strike reset feature.
Strike Index - The index value at which an option buyer can buy/sell the
underlying stock index.
Strike Premium - The premium paid for the second option in a compound
option at the time the first option is exercised.
Strike Price - The price for which an underlying stock can be purchased
or sold by the holder; a specified price of an option at which the
contract may be exercised for the purchase/sale of the shares of
underlying stock; also called the exercise price.
Strike-Step Option - An option in which the strike price changes when a
trigger price or rate is touched or breached.
Strip - A variation of a straddle; two puts and one call on a stock when
the puts and calls have the same strike price and expiration date; an
acronym for Separated Trading of Registered Interest and Principal of
Securities, a bond, usually issued by the U.S. government, whose
interest and repayment of principal are separated and sold individually
as zero-coupon bonds.
Strip Hedge - A risk offsetting position that use non-coinciding option
contracts expiring on dates appropriate to the risk being hedged.
Stripped Bond - Type of bond that can be subdivided into a series of
zero-coupon bonds.
Stripped Mortgage-Backed Securities - Securities that move the cash
flows from the underlying generic collateral into the principal and
interest of the mortgage-backed security.
Stripped Mortgage-Backed Security (SMBS) - A collateralized mortgage
obligations broken up to create specialized instruments, such as
'interest only' or 'principal only' obligations.
Stripped Municipals - ‘Principal only’ and ‘interest only’ components of
municipal bonds. All gains are tax exempt until the total yield exceeds
the YTM of the whole bond at issuance.
Stripped Yield - The return of a bond with warrant minus the value of
the issued warrant.
Strong-Form Efficiency - Efficiency in price, meaning a price accurately
reflects all information.
Structured Arbitrage Transaction - Self-funded transactions using
mortgage backed securities as assets.
Structured Debt - A debt that is custom-made for the buyer.
Structured Enhanced Returns Trust - An instrument designed to allow an
institutional investor to participate in a swap indirectly that it might
not be able to acquire directly.
Structured Financial Transaction - A security backed by loans or bonds
with inferior rating.
Structured Note - A debt obligation with one or more risk/return
enhancement devices that change its return pattern. Examples of these
devices are options, caps, floors or swaps.
Structured Product - An instrument traded over-the-counter that consists
of an embedded warrant, option or combination.
Structured Settlement - An agreement where a payments are made in a
specified amount over a period of time.
Stub - A leftover piece of security from a major distribution.
Student Loan Marketing Agency (Sallie Mae) - An organization that issues
securities to fund U.S. government-guaranteed student loans.
Style Management - An investment management technique that focuses on a
particular market sector.
Sub-Diversification - Ownership of a mixed bag of assets other than a
fully diversified, market-weighted portfolio.
Subject - Not firm, needing additional information or confirmation from
the customer.
Subject Bid or Offer - An indicative bid or offer for an inactive
security. A subject bid or offer is not the same as a firm bid.
Subject To Opinion - Term used relating to financial audits.
Subjective Probabilities - Probabilities that are determined based on
personal judgement as opposed to statistically or mathematically.
Subordinated Debenture Bond - An unsecured bond that does not have
priority in its claim to assets.
Subordinated Debt - A debt that does not have priority in its claim to
assets.
Subordination Clause - A clause, or provision in a bond indenture
limiting the issuer’s future borrowing by making future lender’s claim
subordinate to the claims of existing bondholders.
Subperiod Return - The return on a portfolio for a period of time that
is shorter than the designated evaluation period.
Subrogation - Substitution of a legal party in the place of a creditor.
Subscription - An agreement of intent to buy newly issued securities.
Subscription Price - The price existing shareholders are given for a
share of stocks in regard to a rights offering.
Subscription Warrant - A type of security that gives the holder the
ability to purchase an amount of common stock at a certain price.
Subsidiary - A company that is part of a larger corporation.
Substitute Sale - An approach to hedging price risk involving
debt-market instruments.
Substitution Swap - A swap, or exchange, of bonds that are similar in
credit quality, coupon, and maturity, but differ in yield.
Suitability Risk - Risk that a regulator might void an instrument or
contract on the grounds that a counterparty was incapable of
understanding its terms or that the contract was inappropriate to the
counterparty's stated objectives.
Suitability Rules - Laws to ensure that registered securities
representatives do not solicit inappropriate business from individuals
who are unable to make informed decisions about certain types of risk.
Sunk Cost - A cost that can not be reversed.
Sunset Provision - A provision in a contract that will terminate the
contract on a specific date.
Super DOT (Super Designated Order Turn-around System) - System that
focuses on the execution of large trades and baskets.
Super Planned Amortization Class Bond - A PAC with a defined prepayment
schedule and slight prepayment or extension risk.
Super Upside Note (SUN) - A leveraged position that uses the expected
dividends to buy call options on the underlying. This type of position
leaves little downside protection on the underlying.
Superfloater Swap - A fixed rate for floating rate swap with a reverse
risk reversal on the floating rate payment.
Supermajority - A provision in a firm’s charter that requires a majority
to pass certain transactions.
Supermajority Amendment - An amendment to a firm’s charter that requires
a large majority to pass certain transactions.
Supervisory Analyst - A financial analyst who is qualified to approve
research reports for public distribution.
Supply Shock - A shock, or event that has an effect on production
capacity.
Support - A stable price showing that the market "supports" that price.
Support Bond - A collateralized mortgage obligation that receives
principal payments after scheduled payments have been made to some or
all of the PAC, TAC and Scheduled (SCH) bonds for each payment date.
Support Level - The price level where a security tends to stop when
falling.
Surplus Funds - Remaining cash flow from a project after taxes are paid.
Sushi Bond - A Eurobond that is issued by a Japanese entity.
Suspended Trading - A temporary stop in trading in a particular
security.
Sustainable Earnings Level - An estimate of the underlying earning power
of a corporation over an extended period of years.
Sustainable Growth Rate - The maximum growth rate that can be held
without increasing financial leverage.
Swap - An agreement where two companies give each other loans, but on
different terms.
Swap Arranger - A third party who acts as an agent betwwen two swap
counterparties.
Swap Buy-Back - When one party sells an interest rate swap to the other.
Swap Market Maker - A financial intermediary who works as a dealer by
warehousing a assortment of swaps which he hedges with offsetting swaps
or with positions taken in other financial markets.
Swap Rate - The difference between spot rates and forward rates.
Swap Rate Differential - The difference between a bond yield and the
default-free bond swap rate for the same maturity.
Swap Rate Lock - An agreed upon swap rate level for a swap with a future
start date.
Swap Replacement Cost - The cost sustained to replace a defaulted
in-the-money swap with a comparable instrument.
Swap Reversal - An interest rate swap transacted in order to end one
party’s role in another interest rate swap.
Swap Sale - A transaction that terminates one party’s role in an
interest rate swap by substituting a new party.
Swap Spread - The interest rate differential between the swap rate and
the comparable government borrowing rate.
Swap Spread Lock - An agreement that provides a guaranteed maximum
spread over a specific Treasury rate to a fixed rate payer in a swap
agreement starting on a fixed future date.
Swaps with Option Payoffs - A fixed rate for floating rate swap with a
cap and/or a floor on the floating rate.
Swaption - An option to enter into a swap contract either as an opening
transaction or to close out an existing swap position.
Sweep Account - An account where a bank invests a company’s excess
available funds at the end of each business day.
Swingline - A short-term credit agreement designed to accommodate a
borrower's needs between the time the notes are offered and funds are
received.
Swissy - Slang term for the Swiss Franc.
Switch Order - A swap, a contingent order.
Switchback Option - An instrument combining a capped call option and an
up-and-in put option or a floored put option and a down-and-in call
option.
Switching - Liquidating, or ending an existing position while at the
same time, reinstating a position in another futures contract; the
practice of moving shares from one mutual fund to another in an effort
to take advantage of different investment objectives.
Symbol - Letters representing a company.
Symbol Book Special - A stock that is inactive on the market.
Symmetric Cash Matching - Cash flow matching where funds are borrowed
short-term in order to satisfy a liability before its due date. This
technique lessens to cost of funding liabilities.
Synchronous Data - Data representing the same moment in the market,
simultaneous data.
Syndicate - A group of banks or investment firms which jointly
underwrite a security offering.
Syndicate Bid - A bid posted by an underwriting syndicate to insure that
the price of a security being offered is not available at a lower price
in the open market than from a member of the Syndicate.
Synergistic Effect - The phenomenon where the combined value is greater
than the sum of individual values; the whole is greater than the sum of
its parts.
Synthetic Agreement for Foreign Exchange - A forward currency exchange
rate agreement designed to protect against an adverse change in currency
exchange rates.
Synthetic Convertible - A combination of bonds and warrants resembling a
convertible bond.
Synthetic Long - A combination of a long call and a short put plus a
money market position.
Synthetic Put Option - A combination of a short position in an
underlying asset, instrument or index and a long position in a call
option.
Synthetic Short - A combination of a long put and a short call.
Synthetic Stock - A combination of a long call and a short put, or a
short call and a long put on the same stock with the same strike and
expiration date.
Synthetic Zero Coupon Convertible Bond - A combination of a zero coupon
note and a detachable warrant with an equal term to expiration.
Synthetics - Investment instruments combined to create a hybrid blend.
Systematic - Common to the entire market.
Systematic Risk - Risk that is inherent in the market.
Systematic Risk Principle - Principle stating that expected returns are
to be figured in regard to systematic risk only.
Systemic Risk - Risk associated with the general structure of the
financial system. |
