Accounting & Investement Dictionary
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An alphabetical listing of General terms and items.
Fifth letter of a Nasdaq stock symbol specifying that it is the company's second class of preferred shares.
Used for listed equity securities. "Legal to cross the buy and sell orders on the exchange floor because transactor is not a principal in the transaction."
See: Option adjusted spread
optimal asset utilization (OAU): A supply-chain metric to gauge the right speed for asset turnover. Operational Asset Utilization (OAU) is identical to asset utilization, except that it excludes demand related losses. Demand related losses are either plant shutdowns or production rate limits that are planned for the purpose of inventory control. The difference between asset utilization and Operational Asset Utilization (OAU) represents available additional capacity for meeting increases in market demand.
The fund's investment strategy category as stated in the prospectus. There are more than 20 standardized categories. E.g. Aggressive growth, balanced.
A legal responsibility, such as to repay a debt.
A municipal bond with a face value greater than the value of the underlying property. The difference is designed to compensate the lender for costs exceeding the mortgage value.
A person who has an obligation to pay off a debt.
See: Options Clearing Corporation
A trading order for less than 100 shares of stock. Compare round lot.
A broker who combines odd lots of securities from multiple buy or sell orders into round lots and executes transactions in those round lots.
The percentage of total odd-lot sales that is composed of short sales.
The theory that profits can be made by making trades contrary to odd-lot trading patterns, since odd-lot investors have poor timing. This theory is no longer popular.
Applies to derivative products. Quotron symbol for the S&P 100 index option.
Financing that is not shown as a liability on a company's balance sheet.
Used for listed equity securities. Transacted away from a national securities exchange even though the stock itself is listed, such as on the NYSE, and instead of on the OTC market, a regional exchange, or in the third or fourth markets (between customers directly). After 9:30 a.m., if the stock has not opened due to the exchange's discretion, trading can occur elsewhere, but the trader must assume the role of a quasi-specialist in the process.
Used for listed equity securities. (1) Order to buy or sell a security that originates off the floor of an exchange; customer orders originating with brokers, as distinguished from orders placed by floor members trading for their own accounts. Exchange rules require that an off-floor order be executed before orders initiated on the floor. Upstairs order. Antithesis of on-floor order; (2) order not handled on the floor but instead upstairs.
Indicates a willingness to sell at a given price. Related: Bid.
Used in the context of general equities. Notice by a potential buyer of a security that he or she is looking for supply from a potential seller of the security, often requiring a capital commitment. Antithesis of bid wanted.
Date on which a new set of stocks or bonds will first be sold to the public.
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A document that outlines the terms of securities to be offered in a private placement.
The range of prices offered by the underwriter of a serial bond issue with different maturities.
Often refers to initial public offerings. When a firm goes public and makes an offering of stock to the market.
An agency of the U.S. Treasury department responsible for the U.S. savings and loan industry.
Holdings of gold and foreign currencies by official monetary institutions.
A statement published by an issuer of a new municipal security describing itself and the issue
Include a variety of subsidies, military aid, voluntary cancellation of debt, contributions to international organizations, indemnities imposed under peace treaties, technical assistance, taxes, or fines.
Elimination of a long or short position by making an opposite transaction. Related: Liquidation.
A wholly owned affiliate incorporated overseas, usually in a tax haven country, whose function is to issue securities abroad for use in either the parent's domestic or foreign business.
See: Original issue discount debt
Factoring arrangement that provides collection, insurance, and finance for accounts receivable.
A Market characterized by a small number of producers who often act together to control the supply of a particular good and its market price.
A Market characterized by a small number of large buyers who control all purchases and therefore the market price of a good or service.
The derivatives market of Sweden, trading a wide variety of interest rate and bond futures. The exchange trades futures and options on the OMX equity index.
A dividend that was scheduled to be declared, but that is not voted by the board of directors probably because the company is experiencing financial difficulties.
An account carried by one futures commission merchant with another futures commission merchant in which the transactions of two or more persons are combined and carried in the name of the originating broker, rather than designated separately. Related: Commission house.
Used in the context of general equities. Conjunction that denotes trade execution /indication, usually during a pre-opening look. "Looks 6 on 6000 shares at opening." See: for/at.
Used in the context of general equities. Willingness to participate in part of a trade if all of the stock available is spoken for except for the "clean up amount."
Used for listed equity securities. Left over after pairing off other market buy and sell orders, usually before the opening of a stock or market but at times at the close (especially during index expirations). See: Imbalance of orders.
Used in the context of general equities. Long.
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A market order that is to be executed as close as possible to the closing price of the day.
Used in the context of general equities. In-line, or at the same price, as the last sale.
A market order that is to be executed at the price of the first trade of the day.
Used in the context of general equities. To participate in a block trade that has already transpired, as if that customer had been part of the trade originally; often used by a new party looking to participate in a trade that has just happened. See: Open on the print.
The most recently issued (and typically the most liquid) government bond in a particular maturity range.
An investor who decides not to invest due to market uncertainty.
Used in the context of general equities. Price moving upward, because more buyers are taking offerings, causing offerings to vanish and be replaced by higher ones. Antithesis of come in, get hit.
Used in the context of general equities. (1) Trade printed on the ticker tape; (2) news displayed on Reuters or the Dow Jones News Service.
Used for listed equity securities. Security order originating with a member on the floor of an exchange when dealing with his or her own account, versus an upstairs order. Antithesis of off-floor order.
A quality stock that is not actively traded, but rather held for its growth potential.
A special case of the arbitrage pricing theory that is derived from the one-factor model by using diversification and arbitrage. It shows that the expected return on any risky asset is a linear function of a single factor.
When both bid and the offered prices of a broker come from the same source.
The principle that all shareholders should have equal voting rights in public companies and each shareholder should have one vote.
(1) A market in which only one side, the bid or asked, is quoted or firm. (2) A market that is moving strongly in one direction.
Tape symbol showing either the first transaction of the day in a security after a delayed opening or the opening transaction in a security whose price has experienced a large rise or fall from the previous day's closing price.
See: Organization of Petroleum Exporting Countries
Used in the context of general equities. Having either buy or sell interest at the indicated price level and side of a preceding trade. "Open on the buy/sell sid" means looking for buyers/sellers (for someone who is a seller/buyer). Antithesis of clean.
Order to buy or sell a security that stays active until it is completed or the investor cancels it.
Arrangement whereby sales are made with no formal debt contract. The buyer signs a receipt, and the seller records the sale in the sales ledger.
See: Unmatched book
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Contracts that have been bought or sold without completion of the transaction by subsequent sale or purchase, or by making or taking actual delivery of the financial instrument or physical commodity.
Used for listed equity securities. Having room for a customer buyer or seller contingent on the results of a trade being executed on the floor (i.e., satisfying the specialist book and the orders the trader opened up). See: Open on the print, subject.
The total number of derivatives contracts traded that have not yet been liquidated either by an offsetting derivative transaction or by delivery. Related: Liquidation.
Used in the context of general equities. Block trader's term for a block trade that has been completed with an institutional client and printed on the consolidated tape, but leaves the block trader with stock available (because the trader has taken a long or short position to complete the trade) for new customers who are on the opposite side of the market to the initiating customer.
A net long or short position whose value will change with a change in prices.
A repurchase agreement with no definite term. The agreement is made on a day-to-day basis, and either the borrower or the lender may choose to terminate. The rate paid is higher than on overnight repo and is subject to adjustment if rates move.
A transaction that is not completed at the end of the accounting period; a purchase that has not yet been paid for or a sale where payment is yet to be collected when the accounting period ends.
Used in the context of general equities. Disclose more information (e.g., the exact price and quantity of one's potential interest). See: Put pants on it.
Revolving line of credit that is extended with every purchase or cash advance.
Used in the context of general equities. Mutual fund that continually creates new shares on demand. Mutual fund shareholders buy the funds at net asset value and may redeem them at any time at the prevailing market prices. Antithesis of closed-end fund.
A lease agreement that provides for an additional payment at the expiration of the lease to adjust for any change in the value of the property.
Mortgage against which additional debts may be issued. Related: Closed-end mortgage.
Purchase or sale of government securities by the monetary authorities to increase or decrease the domestic money supply.
A systematic program of repurchasing shares of stock in market transactions at current market prices, in competition with other prospective investors.
Interest rates that are determined in the open market by supply and demand, as opposed to being set by the Federal Reserve Board.
The method of trading used at futures exchanges, typically involving calling out the specific details of a buy or sell order, so that the information is available to all traders.
The period at the beginning of the trading session officially designated by an exchange, during which all transactions are considered made "at the opening." Related: Close.
The range of prices at which the first bids and offers are made or the first transactions are completed on an exchange.
Creation of or increase in a long position in a given series of options.
Creation of or increase in a short position in a given series of options.
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Applies to derivative products. (1)Buy or sell transaction that creates a position out of a flat one (writing an option short or buying an option long). Antithesis of closing transaction. (2) First transaction of the day in a stock.
Transactions and events that enter into the determination of net income.
Long-term, or noncurrent, assets acquired for use in the business rather than for resale; includes property, plant, and equipment; intangible assets; and natural resources.
Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements.
The average time between the acquisition of materials or services and the final cash realization from that acquisition.
Degree to which exchange rate changes, in combination with price changes, will alter a company's future operating cash flows.
Doing business while losing money.
A simple rental agreement.
The extent to which fixed costs are part of a company's cost structure; the higher the proportion of fixed costs, the faster income increases or decreases with sales volumes.
An overall measure of the efficiency of operations during a period; computed by dividing net income by net sales.
Revenue from a firm's regular activities less costs and expenses and before income deductions.
The ratio of operating profit to net sales.
The percentage of total production capacity of a company, industry, or country that is being used.
A ratio that measures a firm's operating efficiency.
The inherent or fundamental risk of a firm, without regard to financial risk. The risk that is created by operating leverage. Also called business risk.
Market in which investors can obtain transactions services that reflect the true costs associated with furnishing those services. Also called an internally efficient market.
See: Back office.
Attempts by a corporation to attain reporting objectives by following questionable accounting principles, with the help of an auditor willing to sanction the practices. Prohibited by the SEC.
Stands for "other people's money," which refers to borrowed funds used to increase the return on invested capital.
Portugal's derivatives exchange (Bolsa de Derivados do Oporto) trading futures on the ten-year government bond, Portuguese stock index, and three-month interbank deposit rate LISBOR (Lisbon Interbank Offered Rate).
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The opportunity cost of a choice is the value of the best alternative given up.
Expected return that is forgone by investing in a project rather than in comparable financial securities.
The difference in the performance of an actual investment and a desired investment adjusted for fixed costs and execution costs. When not all desired trades can be implemented. Most valuable alternative that is given up.
The possible expected return and standard deviation pairs of all portfolios that can be constructed from a given set of assets.
The contract that balances the three types of agency costs (contracting, monitoring, and misbehavior) against one another to minimize the total cost.
An efficient portfolio most preferred by an investor because its risk/reward characteristics approximate the investor's utility function. A portfolio that maximizes an investor's preferences with respect to return and risk.
Provision of a bond indenture that governs the issuer's ability to call the bonds for redemption prior to their scheduled maturity date.
An approach to indexing that seeks to optimize some objective, such as to maximize the portfolio yield, to maximize convexity, or to maximize expected total returns.
The amount of manufacturing output that creates the lowest cost per unit.
Gives the buyer the right, but not the obligation, to buy or sell an asset at a set price on or before a given date. Investors, not companies, issue options. Buyers of call options bet that a stock will be worth more than the price set by the option (the strike price), plus the price they pay for the option itself. Buyers of put options bet that the stock's price will drop below the price set by the option. An option is part of a class of securities called derivatives, which means these securities derive their value from the worth of an underlying investment.
A brokerage account that is approved to hold option positions or trades.
A form that an options investor opening an option account fills out guarantees the investor will follow trading regulations and has the financial resources to settle possible losses.
The cycle of option expiration months. The most common cycles are: January, April, July, and October (JAJO); February, May, August, and November (FMAN); and March, June, September, and December (MJSD).
The percentage increase in an option's value, given a 1 percentage point change in the value of the underlying security.
A person who has an option that has not been exercised.
The margin requirement for options described in Regulation T and in brokers' individual policies.
A mutual fund that buys and sells options for aggressive or conservative investment.
In the mortgage pipeline, an additional hedge placed in tandem with the forward or substitute sale.
The option price.
Also called the option premium; the price the buyer of the options contract pays for the right to buy or sell a security at a specified price in the future.
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Also called the option writer; the party who grants a right to trade a security at a given price in the future.
A group of options on the same underlying security with the same exercise price and maturity month.
The trading of options of the same class at the same time in order to profit from changes in the size of the spread between different options.
See: Option seller
(1) The spread over an issuer's spot rate curve, developed as a measure of the yield spread that can be used to convert dollar differences between theoretical value and market prices. (2) The cost of the implied call embedded in an MBS, defined as additional basis-yield spread. When added to the base yield spread of an MBS without an operative call produces the option-adjusted spread.
A dividends that the shareholder can elect to receive either in cash or in stock.
A bond whose principal and/or interest may be paid in foreign or domestic currency at the discretion of the bondholder.
Applies to derivative products. Financial institution that is the actual issuer and guarantor of all listed option contracts.
A contract that, in exchange for the option price, gives the option buyer the right, but not the obligation, to buy (or sell) a financial asset at the exercise price from (or to) the option seller within a specified time period, or on a specified date (expiration date).
A constant, set at $100, that when multiplied by the cash index value gives the dollar value of the stock index underlying an option. That is the dollar value of the underlying stock index = Cash index value x $100 (the options contract multiple).
Interest rate options written on fixed income securities, as opposed to those written on interest rate futures contracts.
Used in the context of general equities. Indication on the order ticket of a limit order to buy or sell securities at a price better than the specified limit price if a better price can be obtained. Does not imply a not-held order, but rather puts more emphasis on executing at the limit if available.
A contract not recorded on paper or on computer, buy made vocally which is usually enforceable.
Instruction to a broker/dealer to buy, sell, deliver, or receive securities or commodities that commits the issuer of the "order" to the terms specified. See: indication, inquiry, bid wanted, offer wanted.
Orders of one kind for a stock not offset by the opposite orders, which causes a wide spread between bid and offer prices.
The brokerage firm department receives and processes all orders to buy and sell securities.
Breaking up orders so that they can be processed as small orders for execution by SOES. Prohibited by NASD.
A form detailing an order instruction that a customer gives an account executive.
The income derived from the regular operating activities of a firm or individual.
Interest based on a 360-day year instead of a 365-day year, resulting in what can be a significant difference.
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Apples mainly to international equities. Shares of non-U.S. companies traded in their individual home markets. Usually cannot be delivered in the U.S. See: ADR.
A chart showing the hierarchical interrelationships of positions within an organization.
A cartel of oil-producing countries.
Lines of authority and responsibility.
A securities marketplace where purchasers and sellers regularly gather to trade securities according to the formal rules adopted by the exchange.
The principal amount of a mortgage as of its issue date.
Debt that is initially offered at a price below par.
The margin needed to cover a specific new position. Related: Margin, security deposit (initial).
Maturity at issue. For example, a five-year note has an original maturity of five years; one year later it has a maturity of four years.
The making of mortgage loans.
A bank, savings and loan, or mortgage banker that initially made a mortgage loan that is part of a pool. Also, an investment bank that has worked with the issuer of a new securities offering from the beginning and is usually appointed manager of the underwriting syndicate.
A stock that is ignored by research analysts and as a result may be trading at low price earnings ratios.
An exchange founded in 1819 and trading stocks, bonds, and stock options that is considered the options market of Norway.
An electronic quotation listing of the bid and asked prices of OTC stocks that do not meet the requirements to be listed on the NASDAQ stock-listing system.
Shares traded over-the-counter that can be used as margin securities under Regulation T.
In the balance of payments, other capital is a residual category that groups all the capital transactions that have not been included in direct investment, portfolio investment, and reserves categories. It is divided into long-term capital and short-term capital and, because of its residual status, can differ from country to country. Generally speaking, other long-term capital includes most nonnegotiable instruments of a year or more, like bank loans and mortgages. Other short-term capital includes financial assets that can be liquidated in less than a year such as currency, deposits, and bills.
Value of noncash assets, including prepaid expenses and accounts receivable, due within one year.
Income from activities that are not undertaken in the ordinary course of a firm's business.
Value of leases, future employee benefits, deferred taxes, and other obligations not requiring interest payments that must be paid over a period of more than one year.
Items incurred or earned from activities that are outside, or peripheral to, the normal operations of a firm.
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Amount of funds generated during the period from operations by sources other than depreciation or deferred taxes. Part of free cash flow calculation.
Used in the context of general equities. (1) No longer obligated to an order, as it has already been cancelled: (2) advertised on Autex.
A stock price that is too high or too low in comparison with similar-quality stocks in the same industry, according to its price/earnings ratio.
Not open on the print. See: Clean.
Used in the context of general equities. To no longer have an active trading profile/position in the stock.
Used in the context of general equities. Indication gained from their trading and inquiry activity that buyers and/or (more often) sellers are in the market and should be found to get their order. "Feels like IBM is 'out there'."
Used in the context of general equities. Showing of an inquiry to another broker by a customer ("he's out with....").
An unpopular industry or stock that usually has a low price-earnings ratio.
A call option is out of the money if the strike price is greater than the market price of the underlying security. That is, you have the right to purchase a security at a price higher than the market price, which is not valuable. A put option is out of the money if the strike price is lower than the market price of the underlying security.
Actual forward rate expressed in dollars per currency unit, or vice versa.
A director of a company who is not an employee of that company and brings in outside experience to help make board decisions.
Used in the context of general equities. Outside the inside market (above the lowest offering and below the highest bid).
Used for listed equity securities. Another order bidding for or offering stock at the same price that the trader has put on the floor himself, represented by another broker in the trading crowd. These orders may have different price limits (possible top or low on floor mentioned to floor broker but not announced in the crowd). See: Matching orders.
Purchasing a significant percentage of intermediate components from outside suppliers.
Used in the context of general equities. Stock held by shareholders (verses the company's treasury stock).
Issued share capital less the par value of shares that are held as the company's treasury stock.
Shares that are currently owned by investors.
Issued stock that is still being held by investors.
A decentralized market (as opposed to an exchange market) where geographically dispersed dealers are linked by telephones and computer screens. The market is for securities not listed on a stock or bond exchange. The NASDAQ market is an OTC market for U.S. stocks. Antithesis of listed.
Apples mainly to convertible securities. Difference between how much common stock one party must sell and the other wishes to buy for the same amount of convertible in a swap.
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Total assets less intangibles divided by the total of the market value of the security issue and the book value of liabilities and issues having a prior claim. This is used to determine how much of the market value of a certain class of securities would be covered in liquidation.
Used in the context of general equities. Technically too high in price, and hence a technical correction is expected. See: Heavy. Antithesis of oversold.
An indicator that attempts to define when prices have moved too far and too fast in either direction and thus are vulnerable to reaction.
Lack of sufficient funds to cover the full amount of a check.
Procedure agreed upon by an account holder and a bank in advance to transfer funds from a savings or credit account to a checking account to cover insufficient funds.
A pension plan that has a positive surplus (i.e., assets exceed liabilities).
Used in the context of general equities. Sizable block of securities or commodities contracts that, if released on the market, would put downward pressure on prices; prohibits buying activity that would otherwise translate into upward price movement. Examples include shares held in a dealer's inventory, a large institutional holding, a secondary distribution still in registration, and a large commodity position about to be liquidated.
The expenses of a business that are not attributable directly) the production or sale of goods.
An economy that is growing very quickly, with the risk of high inflation.
An excess of issued shares over authorized shares.
Used in the context of general equities. Create a crossed market by expressing a willingness to sell on the bid side of the market and buy on the offer side.
The portion of debt of political subdivisions or neighboring special districts that a municipality is responsible for.
A strategy of using futures for asset allocation by pension sponsors to avoid disrupting the activities of money managers.
A risk brought about because differences in time zones between settlement centers require that payment or delivery on one side of a transaction be made without knowing until the next day whether the funds have been received in an account on the other side. Particularly apparent when delivery takes place in Europe for payment in dollars in New York.
A broker-dealer's position in a security at the end of a trading day.
A repurchase agreement with a term of one day.
To appreciate at a rate faster than appreciation of the overall market.
Used in the context of general equities. Creating artificial volume in a stock through activity not generated by normal/natural buyers and sellers in the market.
The supposition that investors overreact to unanticipated news, resulting in exaggerated movements in stock prices followed by corrections.
The tendency of a pool of MBS to reflect an especially high rate of prepayments the first time it crosses the threshold for refinancing, especially if two or more years have passed since the date of issue without the weighted average coupon of the pool crossing the refinancing threshold.
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Used in the context of general equities. Technically too low in price, and hence a technical correction is expected. Antithesis of overbought.
Investors are not able to buy all the shares or bonds they want, so underwriters must allocate the shares or bonds among investors. This occurs when a new issue is underpriced or in great demand because of growth prospects.
In a rights issue, arrangement by which shareholders are given the right to apply for any shares that are not taken up.
Excessive broker trading in a discretionary account. Underwriters persuade brokerage clients to purchase some part of a new issue in return for the purchase by the underwriter of other securities from the clients at a premium. This premium is offset by the underwriting spread.
A stock price that is seen as too high according to the company's price-earnings ratio, expected earnings, or financial condition.
Deducting and paying too much tax that may be refunded to the taxpayer or applied against the next period's obligation.
A speculative options strategy that involves selling call or put options on stocks that are believed to be overpriced or underpriced; the options are expected not to be exercised.
Paid-in capital plus donated capital plus retained earnings less liabilities.
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