Accounting & Investement Dictionary
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An alphabetical listing of General terms and items. |
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A broker's commission from his or her involvement on both the purchase and the sale side of a security.
European Australian and Far East index
Penalty paid by the holder of a fixed-term investment penalizing an investor who withdraws money before the agreed-upon maturity date.
Refers to an additional payment in a merger or acquisition that is not part of the original acquisition cost, which is based on the acquired company's future earnings relative to a level determined by the merger agreement.
Payment received for work, such as wages, salaries, commissions, and tips.
A tax credit for taxpayers with children.
Retained earnings
Money given to a seller by a buyer to demonstrate the buyer's good faith. If the deal falls through, the deposit is usually forfeited.
An asset that generates income, e.g., income from rental property.
Earnings before interest and taxes (EBIT) divided by total assets.
A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and nonoperating profit before the deduction of interest plus cash income taxes. Equivalent to EBIT minus cash taxes.
A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and nonoperating profit before the deduction of interest and income taxes.
Is used to isolate operating numbers from long-term costs -- for example, goodwill resulting from a flurry of acquisitions.
A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and nonoperating profit before the deduction of interest and income taxes. Depreciation expenses are not included in the costs.
A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and nonoperating profit before the deduction of interest and income taxes. Depreciation and amortization expenses are not included in the costs.
A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and nonoperating profit before the deduction of income taxes.
An increase in the earnings per share growth rate from one reporting period to the next.
The amount of net income (earnings) related to each share of stock; computed by dividing net income by the number of shares of common stock outstanding during the period.
Plowback rate.
Positive or negative differences from the consensus forecast of earnings by institutions such as First Call or IBES Negative earnings surprises generally have a greater adverse effect on stock prices than a reciprocal positive earnings surprise.
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The ratio of earnings per share, after allowing for tax and interest payments on fixed interest debt, to the current share price. The inverse of the price-earnings ratio. It is the total twelve months, earnings divided by number of outstanding shares, divided by the recent price, multiplied by 100. The end result is shown in percentage terms. We often look at earnings yield because this avoids the problem of zero earnings in the denominator of the price-earning ratio.
Earnings yield
European Association of Securities Dealers
Tight money
When an underwriter can't find buyers for a stock and therefore has to buy them for his own account.
Earnings Before Interest after Taxes
Earnings Before Interest and Taxes
Earnings Before Interest, Taxes and Depreciation
earnings before interest, tax, depreciation, and amortization: Is used to isolate operating numbers from long-term costs -- for example, goodwill resulting from a flurry of acquisitions.
Earnings Before Taxes
Emerging company marketplace
General market environment a firm expects to operate in over the life of a financial plan.
In-substance defeasance
When the costs and/or revenues of one project depend on those of another.
The real flow of cash that a firm could pay out forever in the absence of any change in the firm's productive capacity.
The extent to which the value of a firm will change because of an exchange rate change.
The annual percentage rate of change in the Gross National Product.
Cash flow plus change in present value.
The key statistics of the economy that reveal the direction the economy is heading in; for example, the unemployment rate and the inflation rate.
The order quantity that minimizes total inventory costs.
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Profits in excess of the competitive level.
In project financing, the risk that the project's output will not be salable at a price that will cover the project's operating and maintenance costs and its debt service requirements.
For any entity, the difference between the market value of all its assets and the market value of its liabilities.
An agreement between two or more countries that allows the free movement of capital, labor, and all goods and services, and involves the harmonization and unification of social, fiscal, and monetary policies.
The decrease in the marginal cost of production as a firm's extent of operations expands.
Scope economies exist whenever the same investment can support multiple profitable activities less expensively in combination than separately.
European Currency Unit
Specialized banking institutions, authorized and chartered by the Federal Reserve Board of Goverors in the U.S., that are allowed to engage in transactions of a foreign or international character. They are not subject to restrictions on interstate banking. Foreign banks operating in the U.S. are permitted to organize and own an edge corporation.
Electronic Data Interchange
A term referring to the use of computers in recording, classifying, manipulating, and summarizing data.
Electronic data processing : A term referring to the use of computers in recording, classifying, manipulating, and summarizing data.
A type of individual retirement account enabling the contribution of up to $500 per year for each child up to the age of 18 by the parents in the family.
An annual measure of the time value of money that fully reflects the effects of compounding.
Annualized interest rate on a security computed using compound interest techniques.
The strike price in a market redemption provision plus the accrued interest to the redemption date.
The convexity of a bond calculated using cash flows that change with yields.
In an interest rate swap, the date the swap begins accruing interest.
The total debt owed by a firm to its creditors.
The duration calculated using the approximate duration formula for a bond with an embedded option, reflecting the expected change in the cash flow caused by the option. Measures the responsiveness of a bond's price-taking into account that expected cash flows will change as interest rates change due to the embedded option.
Used with SAT performance measures, the amount equal to the net earned spread, or margin of income, on assets in excess of financing costs for a given interest rate and prepayment rate scenario.
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Net worth plus subordinated debt.
A measure of the time value of money that fully reflects the effects of compounding.
The actual interest rate earned or paid on a bond investment.
A sale based on the most recent round-lot price, which determines the price of the next odd lot. The difference created between the last round-lot price and the odd-lot price is referred to as the odd-lot differential.
The gross underwriting spread adjusted for the impact that a common stock offering's announcement has on the firm's share price.
A tax rate that reflects the percentage of the actual tax liability to the accounting income generated by the company, that is, net tax liability/financial (book) income before taxes.
A method of systematically writing off a bond premium or discount that takes into consideration the time value of money and results in an equal rate of amortization for each period.
A market in which new information is very quickly reflected accurately in share prices.
The organizing principle of modern portfolio theory, which maintains that any risk-averse investor will search for the highest expected return for any particular level of portfolio risk.
The combinations of securities portfolios that maximize expected return for any level of expected risk, or that minimizes expected risk for any level of expected return. Pioneered by Harry Markowitz.
States that all relevant information is fully and immediately reflected in a security's market price, thereby assuming that an investor will obtain an equilibrium rate of return. In other words, an investor should not expect to earn an abnormal return (above the market return) through either technical analysis or fundamental analysis. Three forms of efficient market hypothesis exist: weak form (stock prices reflect all information on past prices), semistrong form (stock prices reflect all publicly available information), and strong form (stock prices reflect all relevant information including insider information).
A portfolio that provides the greatest expected return for a given level of risk (i.e., standard deviation), or, equivalently, the lowest risk for a given expected return.
Graph representing a set of portfolios that maximize expected return at each level of portfolio risk.
Used in the context of general equities. Alternative order.
In the interbank Eurodollar deposit market, an either-way market is one in which the bid and offered rates are identical.
An agreement permitting a bank customer to borrow either domestic dollars from the bank's head office or Eurodollars from one of its foreign branches.
Percentage change in the value of an option given a 1% change in the value of the option's underlying stock.
The degree of buyers' responsiveness to price changes. Elasticity is measured as the percent change in quantity divided by the percent change in price. A large value (greater than 1) of elasticity indicates sensitivity of demand to price, e.g., luxury goods. Goods with a small value of elasticity (less than 1) have a demand that is insensitive to price, e.g., food.
The direct exchange of information electronically, from one firm's computer to another firm's computer in a structured format.
A term referring to the use of computers in recording, classifying, manipulating, and summarizing data.
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A term referring to the use of computers in recording, classifying, manipulating, and summarizing data (EDP).
The transfer of funds between bank accounts through the Automated Clearing House (ACH) system.
A term used to refer to large institutional investors.
An index based on the average yield of 11 municipal bonds that mature in 20 years and carry an average AA rating. The eleven bonds used to calculate the index are also found in the 20 bond index, which serves as a benchmark in tracking municipal bond yields.
In the BA market, an acceptance may be referred to as eligible because it is acceptable by the Fed as collateral at the discount window and/or because the accepting bank can sell it without incurring a reserve requirement.
Technical market timing strategy that predicts price movements on the basis of historical price wave patterns and their underlying psychological motives. Robert Prechter is a famous Elliott Wave theorist.
An option that is part of the structure of a bond that gives either the bondholder or the issuer the right to take some action against the other party, as opposed to a bare option, which trades separately from any underlying security.
A reserve of cash kept available to meet the costs of any unexpected financial emergencies.
The federal legislation creating the Federal Home Loan Mortgage Corporation, a partially government-run program initiated to stimulate the development of a secondary mortgage market and expand mortgages available to veterans and other groups.
A service once offered by the American Stock Exchange to help small growth companies fulfill special listing requirements. The service is no longer available.
The financial markets of developing economies.
A Morgan Stanley Capital International index created to track stock markets in selected emerging markets that are open to foreign investment like Argentina, Chile, Jordan, Malaysia, Mexico, Philippines, and Thailand.
Something of value that an employee receives in addition to a wage or salary. Examples include health insurance, life insurance, discounted childcare, and subsidized meals at the company cafeteria.
The law that regulates the operation of private pensions and benefit plans.
A firm-sponsored program that enables employees to purchase shares of the firm's common stock on a preferential basis.
(ESOARS): An auction process to assign a value to the options. The high bidder owns the option and receives a payment from the company for the ESOARS when the employee exercises the option.
A company contributes to a trust fund that buys stock on behalf of employees.
Tax-deferred savings plans offered by employers that provide a federal tax deduction, tax-deferral of contributions and earnings, and, in some cases, employer matching. They include 401(k) plans for corporate employees, 403(b) plans for employees of schools and non-profit organizations, and Section 457 plans for state and local government employees.
A government-approved program through which an employer can assist workers in building their personal retirement funds.
Securities and Exchange Commission rule that allows only the bidder of a tender offer to trade in the stock while possessing inside information.
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European Monetary System
Treating cash flows as if they occur at the end of a year as opposed to the date convention. Under the end-of-year convention, the present is time 0, the end of year 1 occurs one year hence; and so on.
A value determined within the context of a model. Related: Exogenous variable.
Signature on the back of the check, entitling the payee to either receive or transfer payment.
Investment funds established for the support of institutions such as colleges, private schools, museums, hospitals, and foundations. The investment income may be used for the operation of the institution and for capital expenditures.
Mutual fund investing in energy stocks only, e.g., oil and gas companies.
Also called indexing-plus, an indexing strategy whose objective is to exceed or replicate the total return performance of some predetermined index.
An organizational unit (a person, partnership, or corporation) for which accounting records are kept and about which accounting reports are prepared.
A person who starts a business.
A mutual fund that invests strictly in stocks of companies that are environmentally friendly and/or have the goal of environmental betterment. The investors are trying to support and profit from opportunities related to the environmental movement.
European Options Exchange
Economic Order Quantity
earnings per share : The amount of net income (earnings) related to each share of stock; computed by dividing net income by the number of shares of common stock outstanding during the period.
(Earnings per share): The amount of net income (earnings) related to each share of stock; computed by dividing net income by the number of shares of common stock outstanding during the period.
Selling common stock/convertibles in one company and reinvesting the proceeds in as many shares of (1) another type of security issued by the company, or (2) another security of the same type but of another company -- as can be bought with the proceeds of the sale. Equal shares swap.
Applies mainly to convertible securities. Selling the underlying common and reinvesting the proceeds in as much of the convertible as can be converted into the number of shares of common just sold. See equal dollar swap.
Special dividends received by investors of a firm for income the investor lost because the firm altered the dividends payment schedule.
The slope of the capital market line (CML). Since the C.M.L. represents the expected return offered to compensate for a perceived level of risk, each point on the line is a balanced market condition, or equilibrium. The slope of the line determines the additional expected return needed to compensate for a unit change in risk. The equation of the CML is defined by the capital asset pricing model.
The price when the supply of goods matches demand.
The interest rate that clears the market. Also called the trade-clearing interest rate.
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A limited partnership that receives income and tax benefits such as depreciation costs by purchasing equipment and leasing it to other parties.
Certificates issued by a trust that is formed to purchase an asset and lease it to a lessee. When the last of the certificates has been repaid, title and ownership of the asset transfers to the lessee.
The beneficiary of a property held in a trust.
An agreement in which one party, for an up-front premium, agrees to pay the other at specific time periods if a designated stock market benchmark tops a predetermined level.
Also called a residual claim; a claim to a share of earnings after debt obligations have been satisfied.
The simultaneous purchase of an equity floor and sale of an equity cap.
An agreement to contribute equity to a project under certain specified conditions.
Acquiring funds in the form of investments by owners (proprietor, partner, or stockholder).
An agreement in which one party agrees to pay the other at specific time periods if a specific stock market benchmark falls below a predetermined level.
An investment consisting of a life insurance policy and a mutual fund. The insurance policy is paid by the collateral value of fund shares, give the investor the advantages of insurance protection with the growth potential of a mutual fund.
Stock warrants issued attached to privately placed bonds.
Related: stock market
Method used to account for an investments in the stock of another company when significant influence can be imposed (presumed to exist when 20 to 50 percent of the
Total assets divided by total common stockholders' equity; the total assets per dollar of stockholders' equity.
Securities that give the holder the right (but not the obligation) to buy or sell a specified number of shares of stock, at a specified price for a certain (limited) time period. Typically one option equals 100 shares of stock.
A Real Estate Investment Trust that assumes ownership status in the property it invests in enabling investors of the REIT to earn dividends on rental income from the property and appreciation in property resale. Antithesis of a Mortgage REIT.
Shares of ownership in a corporation that can change significantly in value and that provide for a return to investors in the form of dividends.
A swap in which the cash flows exchanged are based on the total return on some stock market index and an interest rate (either a fixed rate or floating rate). Related: Interest rate swap.
Related: Variable life
Stockholders; those holding shares of the firm's equity.
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The amount per year for some number of years that has a present value equal to a given amount.
The annual annuity with the same value as the net present value of an investment project.
Annuity with the same net present value as the company's proposed investment.
The cost per year of owning an asset over its entire life.
Annual yield on a short-term, noninterest-bearing security calculated for comparison to yields quoted on coupon securities.
Given the after-tax stream associated with a lease, the maximum amount of conventional debt that the same period-by-period after-tax debt service stream is capable of supporting.
The yield that must be offered on a taxable bond issue to give the same after-tax yield as a tax-exempt issue.
Exchange Rate Mechanism
Provision in a contract allowing cost increases to be passed on. In an employment contract, for example an escalator clause may call for wage increases in line with inflation.
A document provided by a bank in options trading to guarantee that the underlying security is on deposit and available for potential delivery.
Holding of the proceeds from a new bond issue to pay off an existing bond issue at its maturation date.
employee stock option appreciation rights securities: An auction process to assign a value to the options. The high bidder owns the option and receives a payment from the company for the ESOARS when the employee exercises the option.
Public purpose bond
A federal or state tax imposed on an individual's assets inherited by heirs.
Social conscious mutual fund.
The European derivatives exchange formed in 1998 by a merger of the Deutsche Terminb?rse (DTB) and the Swiss Options and Financial Futures Exchange (SOFFEX).
CDs issued by a U.S. bank branch or foreign bank located outside the U.S. Almost all Euro CDs are issued in London.
Lines of credit granted by banks (foreign or foreign branches of U.S. banks) for Eurocurrencies.
A fixed-rate coupon Eurobond.
Short-term notes with maturities up to 360 days that are issued by companies in international money markets.
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A nonunderwritten Euronote issued directly to the market. Euro-MTNs are offered continuously rather than all at once as a bond issue is. Most Euro-MTN maturities are under five years.
Short- to medium-term debt instrument sold in the Eurocurrency market.
Created on March 1, 1996, Euro.NM is a pan-European network of regulated markets dedicated to growth companies, regardless of their sector of activity or country of origin. Euro.NM member exchanges and their respective new markets consist of the Paris Stock Exchange (Le Nouveau Marché), the Deutsche B?rse AG (Neuer Markt), the Amsterdam Exchanges (NMAX), and the Brussels Stock Exchange (Euro.NM Belgium).
A bank that regularly accepts foreign currency-denominated deposits and makes foreign currency loans.
A bond that is (1) underwritten by an international syndicate, (2) issued simultaneously to investors in a number of countries, and (3) issued outside the jurisdiction of any single country.
One of two principal clearing systems in the Eurobond market. It began operations in 1968, is located in Brussels, and is managed by Morgan Guaranty Bank. Applies mainly to international equities. European clearing organization that functions much like the DTC
Intermediate-term loans of Eurocurrencies made by banking syndicates to corporate and government borrowers.
A short-term fixed-rate time deposit denominated in a currency other than the local currency (i.e., U.S. dollars deposited in a London bank).
The money market for borrowing and lending currencies that are held in the form of deposits in banks located outside the countries where the currencies are issued as legal tender.
Eurobonds denominated in U.S.dollars.
A certificate of deposit paying interest and principal in dollars, but issued by a bank outside the United States, usually in Europe.
Securities sold in the Euromarket. That is, securities initially sold to investors simultaneously in several national markets by an international syndicate. Related: External market.
Stock index, computed by Morgan Stanley Capital International.
European equivalent of NASDAQS.
Bank created to monitor the monetary policy of the 11 countries that have converted to the Euro from their local currencies. The 11 countries are: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain.
An index of foreign exchange consisting of European currencies, originally devised in 1979. See also: Euro.
An exchange arrangement formed in 1979 that governs the currencies of European Union member countries.
Option that may be exercised only at the expiration date. Related: American option.
Now AEX-Optiebeurs. Amsterdam Exchanges (AEX).
An economic association of European countries founded by the Treaty of Rome in 1957 as a common market for six nations. It was known as the European Community until January 1, 1994 and currently comprises 15 European countries. Its goals are a single market for goods and services without any economic barriers, and a common currency with one monetary authority.
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A method of exercising options contracts in which the buyer can exercise the contract on the last day before expiration.
An option contract that can be exercised only on the expiration date.
Eurobonds denominated in Japanese yen.
The time interval over which funds assess a money manager's performance.
Buying or selling to offset an existing market position.
The risk that the ability of an issuer to make interest and principal payments will change because of rare, discontinuous, and very large, unanticipated changes in the market environment such as (1) a natural or industrial accident or some regulatory change or (2) a takeover, or corporate restructuring.
A statistical study that examines how the release of information affects prices at a particular time.
Contractually specified events that allow lenders to demand immediate repayment of a debt.
Revolving credit without maturity.
A British term referring to the gradual injection of capital into a new or existing enterprise.
The expected return or anticipated return of an asset or portfolio.
Related: Holding-period return
The sale of a security without the privileges associated with the security such as dividends, voting rights, or warrants.
This literally means "without dividend." The buyer of shares when they are quoted ex-dividend is not entitled to receive a declared dividend. It is the interval between the record date and the payment date during which the stock trades without its dividend-the buyer of a stock selling ex-dividend does not receive the recently declared dividend. Antithesis of cum dividend (with dividend).
The first day of trading when the seller, rather than the buyer, of a stock will be entitled to the most recently announced dividend payment. The date set by the NYSE (and generally followed on other U.S. exchanges) is currently two business days before the record date. A stock that has gone ex-dividend is denoted by an x in newspaper listings on that date.
A municipal bond offered without a law firm's legal opinion. As the majority of bonds are issued with legal opinions.
The purchase of commodities off the exchange's floor.
Shares of stock that are trading without rights attached.
The date on which a share of common stock begins trading ex-rights.
The time period between the announcement of a stock dividend and its actual payment. The buyer of shares during this time period does is not entitled to the dividend.
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Describes a stock sale in which the buyer is not entitled to the warrant accompanying the stock.
Interest paid based on the basis of a 365-day/year schedule by a bank or other financial institution as opposed to a 360-day basis (ordinary interest). Difference can be material when large principal sums of money are involved.
A bond portfolio management strategy that involves finding the lowest cost portfolio generating cash inflows exactly equal to cash outflows that are being financed by investment.
An auditor's opinion reflecting the fact that the auditor is unable to audit certain areas of the company's operations because of restrictions imposed by management or other conditions beyond the auditor's control.
Kurtosis measures the "fatness" of the tails of a distribution. Excess kurtosis means that distribution has fatter tails than a normal distribution. Fat tails means there is a higher than normal probability of big positive and negative returns realizations.
Equity present in an individual's account above the legal minimum required for a margin account or the maintenance requirement at a brokerage firm.
Additional federal taxes placed on the earnings of a business, used only in time of national emergency such as war.
Actual reserves that exceed required reserves.
Difference between the return on the market portfolio and the riskless rate.
Difference between asset return and riskless rate. Sometimes confused with abnormal returns, returns in excess of those required by some asset pricing model.
Government restrictions on the purchase of foreign currencies by domestic citizens or on the purchase of the local domestic currency by foreigners.
A sale on an exchange floor of a large block of stock in a single transaction. A broker bunches a large number of buy orders and sells the block all at once. The broker receives a special commission from the seller.
Investment vehicle introduced in 1999 that appeals to wealthy investors with large holdings in a single stock who want to diversify without paying capital gains taxes. These funds allow investors to exchange their stock for shares in the diversified portfolio of stocks in a tax-free transaction.
The gain or loss incurred when the exchange rates are different on the purchase and payment dates or on the sale and receipt of payment dates.
Member firm; seat
Acquisition of another company by purchase of its assets in exchange for cash or stock.
Acquisition of another company by purchase of its stock in exchange for cash or shares.
An offer by a firm to give one security, such as a bond or preferred stock, in exchange for another security, such as shares of common stock.
A mutual fund shareholder's right to switch from one fund to another within one fund family, usually at no additional charge.
The value of one currency in terms of another.
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The methodology by which members of the EMS maintain their currency exchange rates within an agreed-upon range with respect to other member countries.
Also called currency risk; the risk that an investment's value will change because of currency exchange rates.
The variability of a firm's value that results from unexpected exchange rate changes, or the extent to which the present value of a firm is expected to change as a result of a given currency's appreciation or depreciation.
A nickname for the New York Stock Exchange. Also known as the Big Board, where more than 2000 common and preferred stocks are traded. The exchange is the oldest in the United States, founded in 1792, and the largest. It is located on Wall Street in New York City.
Applies mainly to convertible securities. Bond or preferred stock that may be exchangeable into the common stock of a different public corporation.
Investment instrument that grants its holder the right to exchange it for the common stock of a firm other than the issuer of the instrument.
Federal or state tax placed on the sale or manufacture of a commodity, typically a luxury item e.g., alcohol.
A firm's offer to buy a given amount of its own stock while excluding targeted stockholders.
Gross receipts that are not subject to tax and are not included in gross income, such as interest on state and local government bonds.
The difference between the execution price of a security and the price that would have existed in the absence of a trade, which can be further divided into market impact costs and market timing costs.
Instrumentsexempt from the registration requirements of the Securities Act of 1933 or the margin requirements of the SEC Act of 1934. Such securities include government bonds, agencies, munis, commercial paper, and private placements.
Cap on the number of option contracts of any one class of contract. that can be exercised within a five-day period contract. Stock option's exercise limit is typically 2000 contracts.
A broker's notification a client want to exercise a right to buy or sell (depending on the type of contract) the underlying security of the option contract.
The price at which the security underlying a future or options contract may be bought or sold.
The amount of advantage over a current market transaction provided by an in-the-money option.
The act of buying or selling the underlying asset via the option contract.
The low price at which a broker must liquidate a client's holding in a stock purchased in a margin account in order to meet a margin call when the client cannot meet the call.
Export-Import Bank
Back-end load
A variable whose value is determined outside the model in which it is used. Related: Endogenous variable
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Refers to options that are more complex than simple puts or call options. For example, a Caput is a call option on a put option.
Theories of the term structure of interest rates, which include the pure expectations theory; the liquidity theory of the term structure, and the preferred habitat theory. These theories hold that each forward rate equals the expected future interest rate for the relevant period. These three theories differ, however, on whether other factors also affect forward rates, and how.
A theory of foreign exchange rates that states that the expected future spot foreign exchange rate t periods from now equals the current t-period forward exchange rate.
Total amount of dividends received during the life of a futures contract or total dividends received for holding a particular stock one year. Current yield.
Projected future cash flows associated with an asset.
The return that is expected to be earned on an asset in the future. Also called the expected return.
The expected return on a risky asset, given a probability distribution for the possible rates of return. Expected return equals some risk-free rate (generally the prevailing U.S. Treasury note or bond rate) plus a risk premium (the difference between the historic market return, based upon a well diversified index such as the S&P 500 and the historic U.S. Treasury bond) multiplied by the assets beta. The conditional expected return varies through time as a function of current market information.
The return one can expect to earn on an investment. Capital asset pricing model.
Implication of the CAPM that security risk premiums will be proportional to beta.
The weighted average of a probability distribution. Also known as the mean value.
The expected value if the future uncertain outcomes could be known minus the expected value with no additional information.
The percentage of the assets that are spent to run a mutual fund (as of the last annual statement). This includes expenses such as management and advisory fees, overhead costs, and 12b-1 (distribution and advertising) fees. The expense ratio does not include brokerage costs for trading the portfolio, although these are reported as a percentage of assets to the SEC by the funds in a Statement of Additional Information (SAI). The SAI is available to shareholders on request. Neither the expense ratio nor the SAI includes the transactions costs of spreads, normally incurred in unlisted securities and foreign stocks. These two costs can add significantly to the reported expenses of a fund. The expense ratio is often termed an Operating Expense Ratio (OER).
Charged to an expense account, fully reducing reported profit of that year, as is appropriate for expenditures for items with useful lives under one year.
Costs incurred in the normal course of business to generate revenues.
A technique insurance companies use to determine the correct price of a policy premium.
Dates on which options on a particular security expire. A given option will be placed in one of three cycles; the January cycle, the February cycle, or the March cycle. At any time, an option has contracts with four expiration dates outstanding: two in near-term months and two in far-term months. Last day on which an option may be exercised.
The last day (in the case of American-style) or the only day (in the case of European-style) on which an option may be exercised. For stock options, this date is the Saturday immediately following the thrid Friday of the expiration month; brokerage firms may set an earlier deadline for notification of an option holder's intention to exercise. If Friday is a holiday, the last trading day will be the preceding Thursday.
Venture capital jargon. Often a proposed term sheet, might explode or be null and void in a fixed period set to negotiate the final contract.
The U.S. federal government agency that extends trade credits to U.S. companies to facilitate the financing of U.S. exports.
Offsetting exposures in one currency with exposures in the same or another currency, when exchange rates are expected to move in such a way that losses or gains on the first exposed position should be offset by gains or losses on the second currency exposure.
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Bond whose maturity can be extended at the option of the lender or issuer.
Note with maturity that can be extended by mutual agreement between the issuer and investors.
The day on which the first option either expires or is extended.
Extending maturity through a swap, e.g. selling a 2-year note and buying one with a slightly longer current maturity.
Independent CPAs who are retained by organizations to perform audits of financial statements.
Audits conducted by CPAs who are independent of the client company.
Related: Pricing efficiency
Funding that is not generated by a firm's operations: new borrowing or a stock issue.
Funds originating from a source outside the corporation to increase cash flow and to aid in expansion efforts, e.g., bank loan or bond offering.
Also referred to as the international market, the offshore market, or, more popularly, the Euromarket. A mechanism for trading securities that at issuance (1) are offered simultaneously to investors in a number of countries and (2) are issued outside the jurisdiction of any single country. Related: Internal market.
A dividend that is paid in addition to a firm's established or expected quarterly dividend.
Early redemption of a revenue bond because the revenue source paying the interest on the bond has been eliminated or has disappeared.
An unusual and unexpected one-time event that must be explained to shareholders in an annual or quarterly report, e.g., employee fraud, a lawsuit, etc.
Nonoperating gains and losses that are unusual in nature, infrequent in occurrence, and material in amount.
A positive net present value.
Models that apply a formula to historical data and project results for a future period. Such models include the simple linear trend model, the simple exponential model, and the simple autoregressive model. Back to top |