Accounting & Investement Dictionary
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An alphabetical listing of General terms and items.
Fifth letter of a Nasdaq stock symbol specifying Class A shares.
Can mean either Appropriation & Expense or Analysis & Evaluation.
A&E can mean either Appropriation & Expense or Analysis & Evaluation.
Administrative & General.
Additions and Maintenance.
An acronym for Administrative and Personnel.
Advance-Decline, or measurement of the number of issues trading above their previous closing prices less the number trading below their previous closing prices over a particular period. As a technical measure of market breadth, the steepness of the A-D line indicates whether a strong bull or bear market is under way.
Is American Accounting Association, Association of Accounting Administrators.
American Association of Attorney-Certified Public Accountants.
American Assembly of Collegiate Schools of Business
Associated Accounting Firms International
American Association of Hispanic CPAs.
See: American Association of Individual Investors
In Great Britain, is Association of Accounting Technicians.
(Accredited Business Accountant or Accredited Business Advisor), in the US, is a national credential conferred by Accreditation Council for Accountancy and Taxation to professionals who specialize in supporting the financial needs of individuals and small to medium sized businesses. ABA is the only nationally recognized alternative to the CPA. Most accredited individuals do not perform audits. Generally, they are small business owners themselves. In addition to general accounting work, CPAs are also heavily schooled in performing audits; however, only a small fraction of America's businesses require an audit. In general, a CPA has majored in accounting, passed the CPA examination and is licensed to perform audits. An ABA has majored in accounting, passed the ABA comprehensive examination and in most states is not licensed to perform audits.
Controlling party giving up rights to property voluntarily.
The option of terminating an investment earlier than originally planned.
A contract between an employee and a brokerage firm outlining the rights of the firm purchasing an NYSE membership for that employee.
Refers to the borrower's ability to make interest and principal payments on debts. See: Fixed charge coverage ratio.In context of municipal bonds, refers to the issuer's present and future ability to create sufficient tax revenue to fulfill its contractual obligations, accounting for municipal income and property values.In context of taxation, notion that tax rates should be determined according to income or wealth.
The component of the return that is not due to systematic influences (market-wide influences). In other words, abnormal returns are above those predicted by the market movement alone. Related: excess returns.
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See: Accumulated Benefit Obligation
See: Automated Bond System
Rule in bankruptcy proceedings requiring senior creditors to be paid in full before junior creditors receive any payment.
Used in context of general equities. Securities are "absorbed" as long as there are corresponding orders to buy and sell. The market has reached the absorption point when further assimilation is impossible without an adjustment in price. See: Sell the book.
Geographic model or representation of the real world. For example, maps and globes are abstractions of the real world or concrete space.
A limited partnership that the IRS judges to be claiming tax deductions illegally.
See: Automated Customer Account Transfer
Schedule of depreciation rates allowed for tax purposes.
Any depreciation method that produces larger deductions for depreciation in the early years of a asset's life. Accelerated cost recovery system (ACRS), which is a depreciation schedule allowed for tax purposes, is one such example.
A contract stating that the unpaid balance becomes due and payable if specific actions transpire, such as failure to make interests payments on time.
Contractual agreement instigated when the drawee of a time draft "accepts" the draft by writing the word "accepted" thereon. The drawee assumes responsibility as the acceptor and for payment at maturity. See: Letter of credit and banker's acceptance.
Federal Reserve System policy to increase the amount of money available to banks for lending. See: Monetary policy.
An accounting record in which the results of transactions are accumulated; shows increases, decreases, and a balance.
Credits minus debits at the end of a reporting period.
The brokerage firm employee who handles stock orders for clients. See: Broker.
A current asset representing money due for services performed or merchandise sold on credit.
A measure used to determine a company's average collection period for receivables; computed by dividing net sales (or net credit sales) by average accounts receivable.
The reviewing and adjusting of the balance in a personal checkbook to match your bank statement.
In the context of banking, refers to a summary of all balances. In the context of securities, a summary of all transactions and positions (long and short) between a broker/dealer and a client. See also: Option agreement.
A signed statement from an independent public accountant after examination of a firm's records and accounts. The opinion may be unqualified or qualified. See: Qualified opinion.
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A service activity designed to accumulate, measure, and communicate financial information about economic entities for decision-making purposes.
The procedures for analyzing, recording, classifying, summarizing, and reporting the transactions of a business.
Earnings of a firm as reported on its income statement.
The change in the value of a firm's foreign currency-denominated accounts due to a change in exchange rates.
Total liabilities exceed total assets. A firm with a negative net worth is insolvent on the books.
The ease and quickness with which assets can be converted to cash.
The basic accounting assumptions, concepts, principles, and procedures that determine the manner of recording, measuring, and reporting an entity's transactions.
The set of manual and computerized procedures and controls that provide for identifying relevant transactions or events; preparing accurate source documents, entering data into the accounting records accurately, processing transactions accurately, updating master files properly, and generating accurate documents and reports.
Money owed to suppliers.
Money owed by customers.
A short-term financing method in which accounts receivable are collateral for cash advances. See: Factoring.
The ratio of net credit sales to average accounts receivable, which is a measure of how quickly customers pay their bills.
Refers to a wealthy investor (net worth $7 million or annual income >200,000) who does not count to the maximum of 35 people allowed to invest in a private limited partnership.
In portfolio accounting, a straight-line accumulation of capital gains on a discount bond in anticipation of receipt of par at maturity.
Gross income is recognized when earned.
A bond on which interest accrues but is not paid to the investor during the time of accrual. The amount of accrued interest is added to the remaining principal of the bond and is paid at maturity.
A system of accounting in which revenues and expenses are recorded as they are earned and incurred, not necessarily when cash is received or paid.
The pension benefits earned by an employee accourding to the years of the employee's service.
Expenses that arise through adjusting entries when accounting for unrecorded expenses.
Applies mainly to convertible securities. Interest that has accumulated between the most recent payment and the sale of a bond or other fixed-income security. At the time of sale, the buyer pays the seller the bond's price plus "accrued interest," calculated by multiplying the coupon rate by the fraction of the coupon period that has elapsed since the last payment. (If a bondholder receives $40 in coupon payments per bond semiannually and sells the bond one-quarter of the way into the coupon period, the buyer pays the seller $10 as the latter's proportion of interest earned.)
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Liabilities that arise through adjusting entries when accounting for unrecorded liabilities.
The rise in the market value of a discount bond as it approaches maturity (when it is redeemable at par) and not because of falling market interest rates.
Broker/analyst recommendation that could mean slightly different things depending on the broker/analyst. In general, it means to increase the number of shares of a particular security over the near term, but not to liquidate other parts of the portfolio to buy a security that might skyrocket. A buy recommendation, but not an urgent buy.
An approximate measure of the liability of a pension plan in the event of a termination at the date the calculation is performed. Related: Projected benefit obligation.
The total depreciation recorded on an asset since its acquisition; a contra account deducted from the original cost of an asset on the balance sheet.
A dividend that has reached its due date, but is not paid out. See: Cumulative preferred stock.
A tax on earnings kept in a firm to prevent the higher personal income tax rate that would obtain if profits were paid out as dividends to the owners.
In the context of corporate finance, refers to profits that are added to the capital base of the company rather than paid out as dividends. See: Accumulated profits tax. In the context of investments, refers to the purchase by an institutional broker of a large number of shares over a period of time in order to avoid pushing the price of that share up. In the context of mutual funds, refers to the regular investing of a fixed amount while reinvesting dividends and capital gains.
A price range within which a buyer accumulates shares of a stock. See: On-balance volume and distribution area.
See: Advance Computerized Execution System
See: Automated Clearing House
Also called the quick ratio, the ratio of current assets minus inventories, accruals, and prepaid items to current liabilities.
A measure of a firm's ability to meet current liabilities; more restrictive than the current ratio, it is computed by dividing net quick assets (all current assets, except inventories and prepaid expenses) by current liabilities.
The surplus acquired when a company is purchased in a pooling of interests combination, i.e. the net worth not considered to be capital stock.
A firm that is being acquired.
A firm or individual that is acquiring something.
When a firm buys another firm.
Refers to the price (including the closing costs) to purchase another company or property. In the context of investments, refers to price plus brokerage commissions, of a security, or the sales charge applied to load funds. See: Tax basis.
A merger or consolidation in which an acquirer purchases the selling firm's assets.
A merger or consolidation in which an acquirer purchases the acquiree's stock.
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Movement or trend in the stock market that affects almost all stocks in all sectors to move in the same direction.
See: Accelerated cost recovery system
This doctrine says that a nation is sovereign within its own borders, and its domestic actions may not be questioned in the courts of another nation.
Investors working together and performing identical actions to attain the same investment goal.
A market in which there is frequent trading.
Refers to a brokerage account in which many transactions occur. Brokerage firms may levy a fee if an account generates an inadequate level of activity.
Refers to members of the bond department of the NYSE who trade the most bonds. Antithesis of cabinet crowd.
Securities that are held in safekeeping and are available as collateral for securing brokers' loans or customers' margin positions.
A strategy that uses available information and forecasting techniques to seek better performance than a buy and hold portfolio. Related: Passive portfolio strategy.
Used in context of general equities. Firm market. Antithesis of Subject market.
The physical commodities underlying a futures contract. Cash commodity, physical asset.
See: Asian currency units
See: Adjusted Debit Balance
A test for ensuring that bond issuers can meet the debt service requirements of issuing any new additional bonds.
A protection against borrower fallout risk in the mortgage pipeline.
A test that measures the extent to which the value of an asset is protected from potential loss either through insurance or hedging.
Applies mainly to convertible securities. Refers to interest rate or dividend that is adjusted periodically, usually according to a standard market rate outside the control of the bank or savings institution, such as that prevailing on Treasury bonds or notes. Typically, such issues have a set floor or ceiling, called caps and collars that limits the adjustment.
A mortgage that features predetermined adjustments of the loan interest rate at regular intervals based on an established index. The interest rate is adjusted at each interval to a rate equivalent to the index value plus a predetermined spread, or margin, over the index, usually subject to per-interval and to life-of-loan interest rate and/or payment rate caps.
Publicly traded issues that may be collateralized by mortgages and MBS
Method of calculating finance charges that uses the account balance remaining after adjusting for all transactions posted during the given billing period as its basis. Related: Average daily balance method, previous balance method, past due balance method.
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Price from which to calculate and derive capital gains or losses upon sale of an asset. Account actions such as any stock splits that have occurred since the initial purchase must be accounted for.
The account balance for a margin account that is calculated by combining the balance owed to a broker with any outstanding balance in the special miscellaneous account, and any paper profits on short accounts.
Term used in options on Ginnie Mae (Government National Mortgage Association) contracts. The final exercise price of the option accounts for the coupon rates carried on Ginnie Mae mortgages. For example, if the standard GNMA mortgage has an 9% yield, the price of GNMA pools with 13% mortgages in them is altered so that the investor receives the same yield.
An individual taxpayer's total income minus deductions (adjustments) for individual retirement plan contributions and alimony paid.
The net present value analysis of an asset if financed solely by equity (present value of unlevered cash flows), plus the present value of any financing decisions (levered cash flows). In other words, the various tax shields provided by the deductibility of interest and the benefits of other investment tax credits are calculated separately. This analysis is often used for highly leveraged transactions such as a leveraged buyout.
Entries required at the end of each accounting period to recognize, on an accrual basis, revenues and expenses for the period and to report proper amounts for asset, liability, and owners' equity accounts.
A bond issued in exchange for outstanding bonds when a corporation facing bankruptcy is recapitalized.
Amounts deducted from the gross income of an individual taxpayer in arriving at adjusted gross income; includes contributions to individual retirement plans and alimony paid.
IRS rules used to allocate income on export sales to a foreign sales corporation.
See: American Depository Receipt
See: American Depository Share
Increase in the market price of stocks, bonds, commodities, or other assets.
A promise to sell an asset before the seller has lined up purchase of the asset. This seller can offset risk by purchasing a futures contract to fix the sales price approximately.
Refers to the Advance Computerized Execution System, run by Nasdaq. ACES automates trades between order entry and market maker firms that have established trading relationships with each other. Securities are designated as specified for automatic execution.
A pension plan in which funds are set aside in advance of the date of retirement.
In the context of municipal bonds, refers to the sale of new bonds (the refunding issue) before the first call date of old bonds (the issue to be refunded). The refunding issue usually specifies a rate lower than the issue to be refunded, and the proceeds are invested, usually in government securities, until the higher-rate bonds become callable. See: Refunding escrow deposits.
Audit report indicating the auditor believes the overall financial statements are so materially misstated or misleading that the statements do not fairly represent the financial position or results of the operations and cash flows.
Refers to a situation in which sellers have relevant information that buyers lack (or vice versa) about some aspect of product quality.
A newsletter offering financial advice to its readers.
See: Amsterdam Exchange
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Relationship between two companies when one company owns substantial interest, but less than a majority of the voting stock of another company, or when two companies are both subsidiaries of a third company. See: Subsidiaries, parent company.
A corporation that is an affiliate to the parent company.
An individual who possesses enough influence and control in a corporation as to be able to alter the actions of the corporation.
A bond covenant that specifies certain actions the firm must take.
An index that measures the financial ability of consumers to purchase a home.
See: Amman Financial Market
A contractual clause in a mortgage agreement stating that any additional mortgageable property attained by the borrower after the mortgage is signed will be regarded as additional security for the obligation addressed in the mortgage.
Securities trading after regular trading hours on organized exchanges.
The comparison basis used to analyze the net after-tax returns on a corporate taxable bond and a municipal tax-free bond.
The ratio of net income to net sales.
The after-tax rate of return minus the inflation rate.
See: Secondary market.
See: Selling short against the box.
An account between two broker/dealers that remains intact after 30 days after the settlement date. The receiving firm must adjust its capital as it can no longer treat this account as an assets.
See: Federal agency securities.
In context of general equities, buying or selling for the account and risk of a customer. Generally, an agent, or broker, acts as intermediary between buyer and seller, taking no financial risk personally or as a firm, and charging a commission for the service. The broker represents a customer buyer/seller to a customer seller/buyer and does not act as principal for the firm's own trading account. Antithesis of principal. See: Dealer.
A form of organization commonly used by foreign banks to enter the U.S. market. An agency bank cannot accept deposits or extend loans in its own name; it acts as agent for the parent bank. It is also the financial institution that issues ADRs to the general market.
A means of compensating the broker of a program trade solely on the basis of commission established through bids submitted by various brokerage firms.
The argument that specifies that the various agency costs create a complex environment in which total agency costs are at a minimum with some, but less than 100%, debt financing.
The incremental costs of having an agent make decisions for a principal.
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A means of compensating the broker of a program trade using benchmark prices for issues to be traded in determining commissions or fees.
Mortgage pass-through securities whose principal and interest payments are guaranteed by government agencies, such as the Government National Mortgage Association (Ginnie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac), and Federal National Mortgage Association(Fannie Mae).
Conflicts of interest among stockholders, bondholders, and managers.
Securities issued by federally related institutions and U.S. government-sponsored entities. Such agencies were created to reduce borrowing costs for certain sectors of the economy, such as agriculture.
The analysis of principal-agent relationships, in which one person, an agent, acts on behalf of another person, a principal.
The decision-maker in a principal-agent relationship.
The exercise price multiplied by the number of shares in a put or call contract. The option premium is excluded in the aggregate exercise price. In tje case of options traded on debt instruments, the aggregate exercise price is the exercise price of the underlying security multiplied by its face value.
Process in corporate financial planning whereby the smaller investment proposals of each of the firm's operational units are aggregated and effectively treated as a whole.
A mutual fund designed for maximum capital appreciation that places its money in companies with high growth rates.
Used in context of general equities. For a customer it means working to buy or sell one's stock, with an emphasis on execution over price. For a trader it means acting in a way that puts the firm's capital at higher risk through paying a higher price, selling cheaper, or making a larger short sale or purchase than the trader would under normal circumstances.
The process of categorizing each account receivable by the number of days it has been outstanding.
A table of accounts receivable broken down into age categories (such as 0-30 days, 30-60 days, and 60-90 days), which is used to determine if customer payments are keeping close to schedule.
A contract amoung participating members of a syndicate that defines the members' proportionate liability, which is usually limited to and based on the participants' level of involvement. The contract outlines the payment schedule on the settlement date. Compare: Underwriting agreement.
In context of general equities, refers to equities that are overbought or oversold on a fundamental basis.
Used for listed equity securities. At the same price but entered ahead of your order/interest, usually referring to the specialist's book. See: Behind, matched orders, priority, stock ahead.
Association of International Bond Dealers
The Association for Investment Management and Research (AIMR) Performance Presentation Standards Implementation Committee is charged with the responsibility to interpret, revise, and update the AIMR Performance Presentation Standards (AIMR-PPS(TM) for portfolio performance presentations.
A stock whose price drops precipitously, often on the unexpected news of poor results.
A company incorporated under the laws of a foreign country regardless of where the company conducts its operations.
The discount rate that reflects only the business risks of a project, distinct from the effects of financing.
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Refers to an issuer's interest rate after accounting for commissions and various related expenses.
Used in context of general equities. A limited price order that is to be executed in its entirety or not at all (no partial transaction), and thus is testing the strength/conviction of the counterparty. Unlike an FOK order, an AON order is not to be treated as cancelled if not executed as soon as it is represented in the trading crowd, but instead remains alive until executed or cancelled. The making of "all or none" bids or offers in stocks is prohibited, and the making of "all or none" bids or offers in bonds is subject to the restrictions of Rule 61. AON orders are not shown on the specialist's book because they cannot be traded in pieces. Antithesis of any-part-of order. See: FOK order.
The major index of Australian stocks comprising 330 of the major companies listed on the Australian Stock Exchange.
Total costs, explicit and implicit.
An arrangement whereby a security issue is cancelled if the underwriter is unable to resell the entire issue.
A partner or stockholder of a firm that is a member of the NYSE, the partner or stockholder is not personally a member of the NYSE.
The term used to describe a spread in the options market that generates such a large commission that the client is unlikely to make a profit even if the markets move as the investor anticipated.
The number of securities assigned to each of the participants in an underwriting syndicate.
A contra account, deducted from Accounts Receivable, that shows the estimated losses from uncollectible accounts.
The recording of estimated losses due to uncollectible accounts as expenses during the period in which the sales occurred.
Measure of risk-adjusted performance. An alpha is usually generated by regressing the security or mutual fund's excess return on the S&P 500 excess return. The beta adjusts for the risk (the slope coefficient). The alpha is the intercept. Example: Suppose the mutual fund has a return of 25%, and the short-term interest rate is 5% (excess return is 20%). During the same time the market excess return is 9%. Suppose the beta of the mutual fund is 2.0 (twice as risky as the S&P 500). The expected excess return given the risk is 2 x 9%=18%. The actual excess return is 20%. Hence, the alpha is 2% or 200 basis points. Alpha is also known as the Jensen Index. Related: Risk-adjusted return.
Regression usually run over 36-60 months of data: Return-Treasury bill= alpha + beta (S&P 500 - Treasury bill) + error. The alpha is the intercept. Note that the benchmark does not necessarily have to be the S&P 500. A mutual fund specializing in international investment might be benchmarked to a broader world market index, such as the MSCI World Index.
Categories of common stock of a corporation associated with a particular subsidiary resulting from acquisitions and restructuring. The various alphabetical categories have different voting rights and pay dividends tied to the operating performance of the particular divisions. See also: Tracking stocks.
A federal tax aimed at ensuring that wealthy individuals, estates, trusts, and corporations pay a minimal level income tax. For individuals, the AMT is calculated by adding adjusted gross income to tax preference items.
Variations of mortgage instruments such as adjustable-rate and variable-rate mortgages, graduated-payment mortgages, reverse-annuity mortgages, and several seldom-used variations.
Used in context of general equities. Order giving a broker a choice between two courses of action, either to buy or sell, never both. Execution of one course automatically eliminates the other. An example is a combination buy limit/buy stop order, where the buy limit is below the current market and the buy stop is above. If the order is for one unit of trading, when one part of the order is executed on the occurrence of one alternative, the order on the other alternative is to be treated as cancelled. If the order is for an amount of more than one unit of trading, the number of units executed determines the amount of the alternative order to be treated as cancelled. See: Either-or order.
A not-for-profit organization to educate individual investors about stocks, bonds, mutual funds, and other financial instruments.
Certificates issued by a U.S. depository bank, representing foreign shares held by the bank, usually by a branch or correspondent in the country of issue. One ADR may represent a portion of a foreign share, one share or a bundle of shares of a foreign corporation. If the ADR's are "sponsored," the corporation provides financial information and other assistance to the bank and may subsidize the administration of the ADR "Unsponsored" ADRs do not receive such assistance. ADRs are subject to the same currency, political, and economic risks as the underlying foreign share. Arbitrage keeps the prices of ADRs and underlying foreign shares, adjusted for the SDR/ordinary ratio essentially equal. American depository shares (ADS) are a similar form of certification.
Fees associated with the creating or releasing of ADRs from ordinary shares, charged by the commercial banks with correspondent banks in the international sites.
The number of ordinary shares into which an ADR can be converted.
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Foreign stock issued in the U.S. and registered in the ADR system.
An option that may be exercised at any time up to and including the expiration date. Related: European option
Securities certificates issued in the U.S. by a transfer agent acting on behalf of the foreign issuer. The certificates represent claims to foreign equities.
Stock exchange with the third highest volume of trading in the U.S. Located at 86 Trinity Place in downtown Manhattan. The bulk of trading on AMEX consists of index options (computer technology index, institutional index, major market index) and shares of small to medium-sized companies are predominant. Recently merged with Nasdaq See: Curb.
An option contract that can be exercised at any time between the date of purchase and the expiration date. Most exchange-traded options are American style.
See: American Stock Exchange
Established in 1976, the AFM is the only stock exchange in Jordan.
The process of cost allocation that assigns the original cost of an intangible asset to the periods benefited.
The pool factor implied by the scheduled amortization assuming no prepayments.
Swap in which the principal or notional amount rises (falls) as interest rates rise (decline).
See: Auction Market Preferred Stock
Exchange that comprises the AEX-Effectenbeurs, the AEX-Optiebeurs (formerly the European Options Exchange or EOE) and the AEX-Agrarische Termijnmarkt. AEX-Data Services is the operating company responsible for the dissemination of data from the Amsterdam Exchange via its integrated Mercury 2000 system.
Used in context of general equities. In-house message system entered and displayed through Quotron A page.
Employee of a brokerage or fund management house who studies companies and makes buy-and-sell recommendations on stocks of these companies. Most specialize in a specific industry.
An indication that the buyer will receive accrued interest in addition to the price quoted for a bond.
An investment-grade bond. Antithesis to fallen angel. In the context of venture capital, the first investor.
Individuals providing venture capital.
Stock issued with a market capitalization of less than $500 million.
Date on which particular news concerning a given company is announced to the public. Used in event studies, which researchers use to evaluate the economic impact of events of interest.
The technique in statistics of taking a figure covering a period of less than one year and extrapolating it to cover a full one year period. The process is known as annualizing.
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See: Annual percentage yield.
A tax rule allowing the deduction of certain income from taxation.
For investment companies, the management fee and "other expenses," including the expenses for maintaining shareholder records, providing shareholders with financial statements, and providing custodial and accounting services. For 12b-1 funds, selling and marketing costs are also included.
Meeting of stockholder held once a year at which the managers of a company report to the stockholders on the year's results.
The cost of credit on a yearly basis, expressed as a percentage rather than a dollar amount.
The effective, or true, annual rate of return. The APY is the rate actually earned or paid in one year, taking into account the effect of compounding. The APY is calculated by taking one plus the periodic rate and raising it to the number of periods in a year. For example, a 1% per month rate has an APY of 12.68% (1.01^12 -1).
There are many ways of calculating the annual rate of return. If the rate of return is calculated on a monthly basis, we sometimes multiply this by 12 to express an annual rate of return. This is often called the annual percentage rate (APR). The annual percentage yield (APY), includes the effect of compounding interest.
See: Term insurance.
A document that summarizes the results of operations and financial status of a company for the past year and outlines plans for the future.
If stock X appreciates 1.5% in one month, the annualized gain for that stock over a twelve month period is 121.5% = 18%. Compounded over the 12 month period, the gain is (1.015)^12 -1 = 19.6%.
The annual rate of return that when compounded t times generates the same t-period holding return as actually occurred from period 1 to period t.
See: Annual basis.
An individual who receives benefits from an annuity.
To commence a series of payments from the capital that has accumulated in an annuity. The payments may be a fixed amount, for a fixed period of time, or for a lifetime.
A series of equal amounts to be received or paid at the end of equal time intervals.
An annuity that pays a specific amount on a monthly basis for a set amount of time.
An annuity with n payments, where the first payment is made at time t = 0, and the last payment is made at time t = n - 1.
Present value of $1 paid for each of t periods.
An annuity with a first payment one full period hence, rather than immediately.
The date when an annuitant starts receiving payments from an annuity.
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The period of time an individual expects to hold an asset.
Paying what is owed before it is due (usually to save interest charges).
Result of a transaction that increases earnings per common share (e.g., by decreasing the number of shares outstanding).
Legislation established by the federal government to prevent the formation of monopolies and to regulate trade.
A call provision in a municipal bond indenture that establishes the right of redemption for the issuer on any interest payment due date.
Often used in risk arbitrage. Takeover bid in which the acquirer offers to pay a set price for all outstanding shares of the target company, or any part thereof; contrasts with two-tier bid.
In context of general equities, order to buy or sell a quantity of stock in pieces if necessary. Antithesis of an all-or-none order (AON).
See: All or none order
See: Automated Order System
The signal-to-noise ratio of an analyst's forecasts. The ratio of alpha to residual standard deviation.
A right of shareholders in a merger to demand the payment of a fair price for their shares, as determined independently.
Increase in the value of an asset.
Formal request for funds for capital investment project.
A list of equities and other investments that a financial institution or mutual fund is approved to make. See: Legal list.
The cost of credit on a yearly basis, expressed as a percentage rather than a dollar amount.
Auction Preferred Stock. A type of Dutch Auction Preferred Stock (Goldman Sachs product).
See: Arbitrage Pricing Theory
See: Adjusted Present Value
See: Annual Percentage Yield
The simultaneous buying and selling of a security at two different prices in two different markets, resulting in profits without risk. Perfectly efficient markets present no arbitrage opportunities. Perfectly efficient markets seldom exist, but, arbitrage opportunities are often precluded because of transactions costs.
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Municipality issued bonds issued intended to gain an interest rate advantage by refunding a higher-rate bond in ahead of their call date. Lower-rate refunding issue proceeds are invested in Treasuries until the first call date of the higher-rate issue.
An alternative model to the capital asset pricing model developed by Stephen Ross and based purely on arbitrage arguments. The APT implies that there are multiple risk factors that need to be taken into account when calculating risk-adjusted performance or alpha.
See: Program trading.
Yield curve option-pricing models.
One who profits from the differences in price when the same, or extremely similar, security, currency, or commodity is traded on two or more markets. The Arbitrageur profits by simultaneously purchasing and selling these securities to take advantage of pricing differentials (spreads) created by market conditions. See: Risk arbitrage, convertible arbitrage, index arbitrage, and international arbitrage.
Used in context of general equities. "Can a new customer still participate on opposing side of the trade from that which the first customer initiated?", Inquiring as to whether any portion of that trade is still available See: Open.
Arithmetic mean return.
An average of the subperiod returns, calculated by summing the subperiod returns and dividing by the number of subperiods.
See: Adjustable-rate mortgage
The price at which a willing buyer and a willing unrelated seller would freely agree to transact.
Also known as a trading index (TRIN) (total up volume)/(total down volume). An advance/decline market indicator. Less than 1.0 indicates bearish demand, while above 1.0 is bullish. The index often is smoothed with a simple moving average.
Used in context of general equities. See: Away from you.
See: Adjustable-rate preferred stock
See: Average rate of return
In the context of investments, refers to the amount by which interest on bonds or dividends on cumulative preferred stock is due and unpaid.
Legal document establishing a corporation and its structure and purpose.
The interrelationships among the financial statements.
A currency substitute, e.g., special drawing rights (SDRs).
A chart pattern that depicts that each peak in a security's price over a period of time is higher than the preceding peak. Antithesis of descending tops.
See: Athens Stock Exchange.
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Dollar deposits held in Singapore or other Asian centers.
Option based on the average price of the underlying assets during the life of the option.
This is the quoted ask, or the lowest price an investor will accept to sell a stock. Practically speaking, this is the quoted offer at which an investor can buy shares of stock; also called the offer price.
In context of general equities, price at which a security or commodity is offered for sale on an exchange or in the OTC Market.
Used in context of general equities. Usually a seller (buyer) looking to aggressively sell (buy) stock, usually asking for a capital commitment from an investment bank.
Australian Stock Price Riskless Indexed Notes. Zero-coupon four-year bonds repayable at face value plus the percentage increase by which the Australian stock index of all ordinaries (common stocks) rises above a predefined level during the given period.
Metal purity test to confirm that the metal meets the standards for trading on a commodities exchange (commodities exchange center).
The value assigned to property by a municipality for the purpose of tax assessment. Such an assessed valuation is important to investors in municipal bonds that are backed by property taxes.
Is anything owned by an individual or a business, which has commercial or exchange value. Assets may consist of specific property or claims against others, in contrast to obligations due others
Ratios that measure how effectively the firm is managing its assets.
The decision regarding how an institution's funds should be distributed among the major classes of assets in which it may invest.
A mutual fund that rotates amoung stocks, bonds, and money market securities to maximize return on investment and minimize risk.
Categories of assets, such as stocks, bonds, real estate, and foreign securities.
A range of depreciable lives the IRS allows for particular classes of assets.
Creditors exchange the debt of one defaulting borrower for the debt of another defaulting borrower.
Account at a brokerage house, bank, or savings institution that integrates banking services and brokerage features.
A company with assets that are not believed to be accurately reflected in its stock price, making it an attractive buy or play.
A model for determining the required or expected rate of return on an asset. Related: Capital asset pricing model and arbitrage pricing theory.
A corporate raider (company A) that takes over a target company (company B) in order to sell large assets of company B to repay debt. Company A calculates that the net selling of the assets and paying off the debt, will leave the raider with assets that are worth more than what it paid for company B.
Occurs when a firm invests in assets that are riskier than those that the debtholders expected.
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Arises when the stockholders substitute riskier assets for the firm's existing assets and expropriate value from the debtholders.
An interest rate swap used to alter the cash flow characteristics of an institution's assets in order to provide a better match with its liabilities.
The ratio of net sales to total assets.
An overall measure of how effectively assets are used during a period; computed by dividing net sales by average total assets.
The net market value of a corporation's assets on a per-share basis, not the market value of the shares. A company is undervalued in the market when asset value exceeds market value.
A security that is collateralized by loans, leases, receivables, or installment contracts on personal property, not real estate.
Methods of financing in which lenders and equity investors look principally to the cash flow from a particular asset or set of assets for a return on, and the return of, their financing.
A bond indenture restriction that permits additional borrowing if the ratio of assets to debt does not fall below a specified minimum.
The ratio of total assets to stockholder equity.
The task of managing the funds of a financial institution to accomplish the two goals of a financial institution: (1) to earn an adequate return on funds invested and (2) to maintain a comfortable surplus of assets beyond liabilities. Also called surplus management.
Economic resources that are owned or controlled by an entity.
A common element of a financial plan that describes projected capital spending and the proposed uses of net working capital.
The receipt of an exercise notice by an options writer that requires the writer to sell (in the case of a call) or purchase (in the case of a put) the underlying security at the specified strike price.
The public absorption of a new issue of stocks once the stock has been completely sold by underwriter. See: Absorbed.
Rate of interest used by an insurance company to calculate the payout on an annuity contract.
Becoming responsible for the liabilities of another party.
See: Australian Stock Exchange
Options market trading options on more than 50 of Australia's and New Zealand's leading companies.
Information that is known to some people but not to other people.
When participants in a transaction have different net tax rates.
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Phenomenon that volatility is higher in down markets than in up markets.
A lack of equivalence between two things, such as the unequal tax treatment of interest expense and dividend payments.
A price equal to nominal or face value of a security. See: Par.
The exposure to the danger of economic loss. Frequently used in the context of claiming tax deductions. For example, a person can claim a tax deduction in a limited partnership if the taxpayer can show it is at risk of never realizing a profit and of losing its initial investment. See: Value at risk.
In context of general equities, at the opening or close of the market. See: MOC Order.
In the context of securities, an all or none market order that is to be executed at the closing price of the security on the exchange. If the execution cannot be made under this condition, the order is to be treated as cancelled. In the context of futures and options, refers to a contract that is to be executed on some exchanges during the closing period, a period in which there is a range of prices.
In context of general equities, at the whole integer price (excluding the fraction) closest to the side of the market (bid/ask) being discussed. At the full.
Used in context of general equities. At the figure.
See: Market order.
In context of general equities, market order or limited price order that is to be executed at the opening (and corresponding price) of the stock or not at all, and any such order or portion thereof not so executed is to be treated as cancelled.
An option is at the money if the strike price of the option is equal to the market price of the underlying security. For example, if xyz stock is trading at 54, then the xyz 54 option is at the money.
Greece's principal stock exchange.
See: Arbitrage Trading Program
The tendency of stocks preferred by the dividend discount model to share certain equity attributes such as low price-earnings ratios, high dividend yield, high book value ratio, or membership in a particular industry sector.
A type of Dutch Auction Preferred Stock (A Merrill Lynch product).
Markets in which the prevailing price is determined through the free interaction of prospective buyers and sellers, as on the floor of the stock exchange.
Floating-rate preferred stock, whose dividend is adjusted every seven weeks through a Dutch auction.
The result of an independent accountant's review of the statements and footnotes to ensure compliance with generally accepted accounting principles and to render an opinion on the fairness of the financial statements.
Members of a client's board of directors who are responsible for dealing with the external and internal auditors.
A report issued by an independent CPA that expresses an opinion about whether the financial statements present fairly a company's financial position, operating results, and cash flows in accordance with generally accepted accounting principles.
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Resolves the validity of an accounting entry by a step-by-step record by which accounting data can be traced to their source.
See: Accountant's opinion.
A section of an annual report that includes the auditor's opinion about the veracity of the financial statements.
An unsophisticated investor.
Established in 1987 following the amalgamation of the six independent stock exchanges operating in the Australian state capitals. The ASX is the tenth-largest stock exchange in the world on the basis of domestic capitalization.
Video communication network through which brokerage houses alert institutional investors of their desire to transact block business (a purchase or sale) in a given security. Indications transmit small, medium, and large sizes only, with occasional limits mentioned. Supers are messages with specific size and price included. Both "indications" and "supers" can be only seen by customers (institutional subscribers to Autex). Trade recaps, advertised block trades entered by the dealer/subscribers, are also displayed, but can be seen by both institutions and dealers. See: Expunge, size.
In the context of bonds, refers to the validation of a bond certificate.
A bond issued by a government agency or a corporation created to manage a revenue-producing public enterprise. The difference between an authority bond and a municipal bond is that margin protections may be incorporated in the authority bond contract as well as in the legislation that enables the authority.
Number of shares authorized for issuance by a firm's corporate charter.
The amount and type of stock that may be issued by a company, as specified in its articles of incorporation.
The correlation of a variable with itself over successive time intervals. Sometimes called serial correlation.
The computerized system that records bids and offers for inactively traded bonds until they are cancelled or executed on the NYSE.
A collection of 32 regional electronic interbank networks used to process transactions electronically with a guaranteed one-day bank collection float.
For transfers of securities from a non-equity trading account to your equity trading account with your broker.
Investment banks, computerized order entry system that sends single order entries to DOT (Odd-Lot) or to investment banks, floor brokers on the exchange. See: Round lot, GTC orders.
Introduced in 1989, APT is the LIFFE screen-based trading system that replicates the open outcry method of trading on screen. A.P.T. is used to extend the trading day for the major futures contracts as well as to provide a daytime trading environment for non-floor trading products.
An automatic extension of time granted to a taxpayer to file a tax return.
A transfer of funds from one account or investment vehicle to another using electronic or telecommunications technology.
A program in which an investor can invest or withdraw funds automatically. A mutual fund, for example, automatically withdraw a pre determined specified amount from the investor's bank account on a regular basis.
See: Constant dollar plan.
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The restricting of liabilityholders from collection efforts related to collateral seizure. Automatically imposed when a firm files for bankruptcy under Chapter 11.
A mutual fund that gives shareholders the right to receive a fixed payment from dividends on a quarterly or monthly basis.
Autoquote indicative prices are generated for many of the financial options contracts traded at LIFFE using standard mathematical models as derived by Black and Scholes and Cox, Ross, Rubinstein. Autoquote calculates prices for all series by processing variables captured in real-time from other systems and trading members each time the underlying price changes. Autoquotes indicate where a series may trade, given the current level of the underlying instrument.
Using past data or variable of interest to predict future values of the same variable.
Checks deposited by a company that have not yet been cleared.
In context of general equities, stock is available to new customer as trade initiated by another customer is about to be consummated (on the exchange floor). Usually said to an inquiring salesperson. See: Open.
Debt and equity securities not classified as trading, held-to-maturity, or equity method securities.
An arithmetic mean return of selected stocks intended to represent the behavior of the market or some component of it. One good example is the widely quoted Dow Jones Industrial Average, which adds the current prices of the 30 DJIA stocks, and divides the results by a predetermined number, the divisor.
An estimation of price that uses the average or representative price of a large number of trades.
The average project earnings after taxes and depreciation divided by the average book value of the investment during its life.
The weighted-average age of all the firm's outstanding invoices.
The rate of return on investments averaged over a specific period of time(e.g., the last 20 years). It is determined by adding together the rates ofreturn for each year and dividing by the number of years in the calculation.
The ratio of accounts receivables to sales, or the total amount of credit extended per dollar of daily sales (average AR/sales 365).
In the context of investing, refers to the average cost of shares or stock bought at different prices over time.
A firm's required payout to bondholders and stockholders expressed as a percentage of capital contributed to the firm. Average cost of capital is computed by dividing the total required cost of capital by the total amount of contributed capital.
A method for calculating interest in which the balance owed each day by a customer is divided by the number of days. See also: Adjusted balance method and previous balance method.
A strategy used by investors to reduce the average cost of shares, in which the investor purchases more shares with a fixed amount of capital as the price of the shares decrease. The investor receives more shares per dollar and decreases the average price per share.
A customer's average daily balance in a trading account at a brokerage firm.
Also referred to as the weighted-average life (WAL). The average number of years that each dollar of unpaid principal due on the mortgage remains outstanding. Average life is computed as the weighted-average time to the receipt of all future cash flows, using as the weights the dollar amounts of the principal paydowns.
The average time to maturity of securities held by a mutual fund. Changes in interest rates have greater impact on funds with longer average maturity.
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The ratio of the average cash inflow to the amount invested.
Taxes as a fraction of income; total taxes divided by total taxable income.
A strategy used by investors to lower the overall cost of shares by buying as many shares with a given amount of capital in an increasing market. Buying $1000 worth of shares at $30, $35, $40, and $45, for instance, will make the average cost of the shares $37.50.
See: Constant dollar plan.
A trade, quote, or market that does not originate with the dealer in question, e.g., "the bid is 98-10 away from me."
In context of general equities, out of line with the inside market at this time, such as when a bid on a limit order is lower or the offer price is higher than the current market price for the security; held by the specialist for later execution unless FOK. Antithesis of in-line.
Used in context of general equities, to characterize role of a competing broker/dealer. Trading away from us signifies that stock is bought and/or sold with institutions using other trading firms.
Used for listed equity securities. See: Outside of you.
Used in context of general equities. Involvement in a security, whether through a position, order, or inquiry.
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