Shark watcher
Often used in risk arbitrage. Firm specializing in the early detection of takeover activity. Such a firm, whose primary business is usually the solicitation of proxies for client corporations, monitors trading patterns in a client's stock and attempts to determine the identity of parties accumulating shares.
Sharpe benchmark
A statistically created benchmark that adjusts for a manager's index-like tendencies. Named after William Sharpe, Nobel Laureate, and developer of the capital asset pricing model.
Sharpe ratio
A measure of a portfolio's excess return relative to the total variability of the portfolio. Related: Treynor index. Named after William Sharpe, Nobel Laureate, and developer of the capital asset pricing model.
Shelf offering
Offering of registered securities covered by a prospectus whose distribution is not underwritten on a firm commitment basis. The shares may be sold in one block or in small amounts from time to time in agency or principal transactions. See: Rule 415.
Shelf registration
A procedure that allows firms to file one registration statement covering several issues of the same security. SEC Rule 415, adopted in the 1980s, allows a corporation to comply with registration requirements up to two years prior to a public offering of securities. With the registration "on the shelf," the corporation, by simply updating regularly filed annual, quarterly, and related reports to the SEC, can go to the market as conditions become favorable with a minimum of administrative preparation and expense.
Shell corporation
An incorporated company with no significant assets or operations, often formed to obtain financing before beginning actual business, or as a front tax evasion.
Shenzhen Stock Exchange
One of two major securities markets in China.
Shipper's Export Declaration (SED)
Document required by the U.S. Department of Commerce for exports of certain controlled items, and/or shipments to certain countries, and/or shipments anywhere that exceed certain dollar amounts. This document is used to monitor shipments of controlled goods.
Shipping Documents
A generic term for the various typesof forms required for overseas shipments, such as commercial invoices, transport documents, packing lists, origin certificates, etc.
Shirking
The tendency to do less work when the return is smaller. Owners may have more incentive to shirk if they issue equity as opposed to debt, because they retain less ownership interest in the company and therefore may receive a smaller return. Thus, shirking is considered an agency cost of equity.
Shock absorbers
See: Circuit breakers
Shogun bond
Dollar bond issued in Japan by a nonresident.
Shootout
Venture capital jargon. Refers to two or more venture capital firms fighting for the startup.
Shop
Wall Street slang for a firm.
Shopped stock
Sell inquiry that has been seen by or shown to other dealers before coming to an investment bank.
Shopping
Seeking to obtain the best bid or offer available by calling a number of dealers and/or brokers.
Short
One who has sold a contract to establish a market position and who has not yet closed out this position through an offsetting purchase; the opposite of a long position. Related: Long.
Short against the box
A short sale of a stock is where the seller actually owns the stock, but does not want to close out the position.
Short Bias
In the context of hedge funds, a style of management where part or all of the fund consists of short sales.
Short bonds
Bonds with short (not much time to maturity) current maturities.
Short book
See: Unmatched book.
Short coupon
A bond payment covering less than six-months' interest, because the original issue date is less than six months from the first scheduled interest payment. A bond with a short time to maturity, usually two years or less.
Short covering
Used in the context of general equities. Actual purchase of securities by a short seller to replace those borrowed at the time of a short sale.
Short exempt
Used for listed equity securities. A special trading situation where a short sale is allowed on a minustick. The owners of a convertible trading at parity can sell the equivalent amount of common short on a minus tick, assuming they have the firm intention to convert.
Short hedge
The sale of futures contracts to eliminate or lessen the possible decline in value of an approximately equal amount of the actual financial instrument or physical commodity. Related: Long hedge.
Short interest
Total number of shares of a security that investors have sold short and that have not been repurchased to close out the short position. Usually, investors sell short to profit from price declines. As a result, the short interest is often an indicator of the amount of pessimism in the market about a particular security, although there are other reasons to short that are not related to pessimism. For example, hedging strategies for mergers and acquisition as well as derivative positions may involve short sales.
Short interest theory
The theory that a large interest in short positions in stocks will precede a rise in the market prices, because the short positions must eventually be covered by purchases of the stock.
Short-Form Registration
A procedure that allows a firm to condense its registration statement and prospectus by referencing financial data already on file with the SEC.
Short position
Occurs when a person sells stocks he or she does not yet own. Shares must be borrowed, before the sale, to make "good delivery" to the buyer. Eventually, the shares must be bought back to close out the transaction. This technique is used when an investor believes the stock price will drop.
Short ratio(or short interest ratio)
Number of shares of a security that investors have sold short divided by average daily volume of the security (measured over 30 days or 90 days). There are various interpretations of this ratio. When people short, it is usually (but not always) because they are pessimistic about the security's future performance. Shorting involves buying at at some point however. Hence, some would interpret a high short ratio as an indicator that there will be some buying pressure on the security that would increase its price.
Short-run operating activities
Events and decisions concerning the short-term finance of a firm, such as how much inventory to order and whether to offer cash terms or credit terms to customers.
Short sale
Selling a security that the seller does not own but is committed to repurchasing eventually. It is used to capitalize on an expected decline in the security's price.
Short-sale rule
An SEC rule requiring that short sales be made only in a market that is moving upward; this means either on an uptick from the last sale, or showing no downward movement.
Short selling
Establishing a market position by selling a security one does not own in anticipation of the price of that security falling.
Short settlement
Trade settlement made prior to the standard five-day period due to customer request.
Short-short test
A repealed IRS restriction, that used to limit profits from short-term trading, which three months, to 30% of gross income. The penalty for exceeding this limit would be the loss of certain tax-free benefits.
Short squeeze
When a lack of supply tends to force prices upward. In particular, when prices of a stock or commodity futures contracts start to move up sharply and many traders with short positions are forced to buy stocks or commodities in order to cover their positions and prevent (limit) losses. This sudden surge of buying leads to even higher prices, further aggravating the losses of short sellers who have not covered their positions.
Short straddle
A straddle involves both purchase and sale. In short straddle one put and one call are sold.
Short-term capital gain
A profit on the sale of a security or mutual fund share that has been held for one year or less. A short-term capital gain is taxed as ordinary income.
Short-term interest rates
Interest rates on loan contracts-or debt instruments such as Treasury bills, bank certificates of deposit or commerical paper-having maturities of less than one year. Often called money market rates.
Short-term reserves
Investments in interest-bearing bank deposits, money market instruments, U.S. Treasury bills, and short-term bonds.
Short tender
Practice prohibited by SEC that involves the use of borrowed stock to respond to a tender offer.
Short-term
Any investments with a maturity of one year or less.
Short-term bond fund
A bond mutual fund holding short to intermediate-term bonds that have maturities of three to five years.
Short-term debt
Debt obligations, recorded as current liabilities, requiring payment within the year.
Short-term financial plan
A financial plan that covers the coming fiscal year.
Short-term gain (or loss)
A profit or loss realized from the sale of securities held for less than a year that is taxed at normal income tax rates if the net total is positive.
Short-term investment services
Services that assist firms in making short-term investments.
Short-term solvency ratios
Ratios used to judge the adequacy of liquid assets for meeting short-term obligations as they come due, including (1) the current ratio, (2) the acid test ratio, (3) the inventory turnover ratio, and (4) the accounts receivable turnover ratio.
Short-term tax exempts
Short-term securities issued by states, municipalities, and quesi-government entities such as local housing and urban renewal agencies.
Short-term trend
Erratic price movements that last less than three weeks.
Shortage cost
Costs that fall with increases in the level of investment in current assets.
Shortfall risk
The risk of falling short of any investment target.
Show me buyer/seller
Used in the context of general equities. Customer who has not placed a firm order to buy stock but has requested that the salesperson propose available stock for sale or purchase, along with the asking/bid price. See: Bidding buyer.
Show stopper
A legal barrier, such as a scorched-earth policy or shark repellant system, that firms use to prevent a takeover.
Show and tell list
Used in the context of general equities. Block list which is full of real customer indications (rather than profile).
Shrinkage
Discrepancy between a firm's actual inventory and its recorded inventory due to theft, deterioration, loss, or clerical problems.
Shut out the book
Used for listed equity securities. Exclude a public bid or offer from participation in a print.
Side effects
Effects of a proposed project on other parts of the firm.
Side-by-side trading
Trading a security and an option on the same security on the same exchange.
Sidelines
Hypothetical position referring to noninvolvement in a stock; merely watching.
Sideways market
See: Horizontal price movement
Sight draft
Demand for immediate payment.
Sight Letter of Credit
A letter of credit made payable to a beneficiary upon presentation to the opener of conforming documents.
Signal
To convey information through a firm's actions. The more costly it is to provide a signal, the more credibility it has. For example, to call a press conference and tell everyone that the firm's prospects have improved is less effective than saying the same thing and raising the dividend.
Signaling approach
Notion that insiders in a firm have information that the market does not have, and that the choice of capital structure by insiders can signal information to outsiders and change the value of the firm. This theory is also called the asymmetric information approach.
Signaling approach (on dividend policy)
The argument that dividend changes are important signals to investors about changes in management's expectation about future earnings.
Signature guarantee
The authentication of a signature in the form of a stamp, seal, or written confirmation by a bank or member of a domestic stock exchange (or other acceptable guarantor). A notary public cannot provide a signature guarantee. A signature guarantee is a common requirement when transferring or redeeming shares or changing the ownership of an account.
Signature loan
A good faith loan that is unsecured and requires only the borrower's signature on the loan application.
Signatures on Proxies
The basic rule of acceptability is that if the signature reads as the proxy is printed, it is acceptable. If an individual signs on behalf of another individual and states a legal representation, it is acceptable. Examples: executor, guardian, power of attorney; but not husband, wife, next of kin, etc. On corporate registrations, a manual signature in the name of the corporation is acceptable. A facsimile signature is also acceptable, but a rubber-stamp signature with a signature line is acceptable only if signed on that line. With joint tenancy, one signature is sufficient, as in the case of one trustee signing for two or more.
Significant influence
The holding of a large portion of the equity of a corporation, usually at least 20%, which gives the holder a significant amount of control over the corporation. This degree of holding must be recorded in a firm's financial statements.
Significant order
An order to buy or sell a large enough quantity of securities that the price of the security may be affected. Institutional investors usually spread out such an order over a few days or weeks to avoid adverse pressures on the buy or sell price.
Significant order imbalance
A large number of buy or sell orders for a stock that cause an abnormally wide spread between bid and offer prices, and often causes the exchange to halt the sale of the stock until significant balance has been reestablished.
Silent partner
A partner in a business who has no role in management but shares in the liability, tax responsibility, and cash flow.
Silver Parachutes
These provisions are similar to Golden Parachutes in that they provide severance payments upon a change in corporate control, but unlike Golden Parachutes, a large number of a firm's employees are eligible for these benefits.
Single-buyer policy
Ex-Im Bank practice allows the exporter to insure certain transactions selectively.
Single European Act
Act intended to eliminate barriers on trade and capital flows between and among European countries.
Simple compound growth method
Calculating a growth rate by relating terminal value to initial value and assuming a constant percentage annual rate of growth between the two values.
Simple interest
Interest calculated as a simple percentage of the original principal amount. Compare to compound interest.
Simple IRA
A salary deduction plan for retirement benefits provided by some small companies with no more than 100 employees.
Simple linear regression
A regression analysis between only two variables, one dependent and the other explanatory.
Simple linear trend model
An extrapolative statistical model that asserts that earnings have a base level and grow at a constant amount each period.
Simple moving average
The mean, calculated at any time over a past period of fixed length.
Simple prospect
An investment opportunity in which only two outcomes are possible.
Simple rate of return
The return from investments figured by dividing income plus capital gains by the amount of capital invested. The effect of compounding is not taken into account.
Simplified Employee Pension (SEP) plan
A pension plan in which both the employee and the employer contribute to an individual retirement account. Also available to the self-employed.
Simulation
The use of a mathematical model to imitate a situation many times in order to estimate the likelihood of various possible outcomes. See: Monte Carlo simulation.
Singapore International Monetary Exchange (SIMEX)
A leading futures and options exchange in Singapore.
Single-country fund
A mutual fund that invests in individual countries outside the United States.
Single-factor model
A model of security returns that acknowledges only one common factor. The single factor is usually the market return. See: Factor model.
Single-index model
A model of stock returns that decomposes influences on returns into a systematic factor, as measured by the return on the broad market index, and firm specific factors. Related: Market Model
Single life annuity
An annuity covering one person. A straight life annuity provides payments until death, while a life annuity with a guaranteed period provides payments until death or continues payments to a beneficiary for a guaranteed term, such as ten years.
Single option
A single put option or call option, as opposed to a spread or straddle, which involves multiple puts and calls.
Single-payment bond
A bond that makes only one payment of principal and interest.
Single-Premium Deferred Annuity (SPDA)
An IRA-like annuity into which an investor makes a lump-sum payment that is invested in either a fixed-return instrument or a variable-return portfolio, which is taxed only when distributions are taken.
Single-premium life insurance
A whole life insurance policy requiring one premium payment, which accrues cash value much more quickly than a policy paid in installments.
Single-state municipal bond fund
A mutual fund investing only in government obligations within a single state, with state tax-free dividends, but taxed capital gains.
Sinker
A bond with interest and principal payments coming from the proceeds of a sinking fund.
Sinking fund
A fund to which money is added on a regular basis that is used to ensure investor confidence that promised payments will be made and that is used to redeem debt securities or preferred stock issues.
Sinking fund requirement
A condition included in some corporate bond indentures that requires the issuer to retire a specified portion of debt each year. Any principal due at maturity is called the balloon maturity.
Sit tight
Directive from the trader to the customer to be patient, emphasizing that one's piece of business will be executed.
Size
Refers to the magnitude of an offering, an order, or a trade. Large as in the size of an offering, the size of an order, or the size of a trade. Size is relative from market to market and security to security. "I can buy size at 102-22," means that a trader can buy a significant amount at 102-22. Small is <10,000 shares. Medium is 15,000-25,000 shares. Good is 50,000 shares. Size is 100,000 shares. Good six-figure size is 200,000-300,000 shares. Multiple six-figure size is >300,000 shares. Size of the market is actual number of shares represented in one's market, or bid and offering; unless specified, assumed to be at least 500 to 1000 shares, depending on the stock.
Size out the book
Overt action to exclude a public bid or offer from participation in a print through trading a larger size in the book. Can never size out a market order. See: Priority, shut out the book.
Skewed distribution
Probability distribution in which an unequal number of observations lie below (negative skew) or above (positive skew) the mean.
Skewness
Negative skewness means there is a substantial probability of a big negative return. Positive skewness means that there is a greater-than-normal probability of a big positive return.
Skill
The ability to accurately forecast returns. We measure skill using the information coefficient.
Skip-day settlement
Settling a trade one business day beyond what is normal.
Skip-payment privilege
A mortgage contract clause giving borrowers the right to skip payments if they are ahead of schedule.
Skort-Swing Transaction
Any purchase and sale, or sale and purchase, of the issuer's equity securities by an insider within a period of less than six months, See: Section 16(b) above.
SLD last sale
Shortened version of "sold last sale," which shows up on the consolidated tape when a large change (one point for lower priced securities and two points for higher-priced securities) occurs between transactions.
Sleeper
Stock in which there is little investor interest but that has significant potential to gain in price once its attractions are recognized. Antithesis of high flyer.
Sleeping beauty
Often used in risk arbitrage. Potential takeover target that has not yet been approached by an acquirer. Such a company usually has particularly attractive features, such as a large amount of cash, or undervalued real estate or other assets.
Slippage
The difference between estimated transactions costs and actual transactions costs. The difference usually represents revisions to price difference or spread and commission costs.
Slump
A temporary fall in performance, often describing consistently falling security prices for several weeks or months.
Small business policy
Insurance coverage available to new exporters and small businesses.
Small-cap
A stock with a small capitalization, meaning a total equity value of less than $500 million.
Small-capitalization (small-cap) fund
A mutual fund that invests primarily in stocks of companies whose market value is less than $1 billion. Small-cap stocks historically have been more volatile than large-cap stocks, and often perform differently from the overall market.
Small-capitalization (small cap) stocks
The stocks of companies whose market value is less than $1 billion. Small-cap companies tend to grow faster than large-cap companies and typically use any profits for expansion rather to pay dividends. They also are more volatile than large-cap companies, and have a higher failure rate.
Small-firm effect
The tendency of small firms (in terms of total market capitalization) to outperform the stock market (consisting of both large and small firms).
Small investor
An individual person investing in small quantities of stock or bonds. This group of investors makes up a minimal fraction of total stock ownership.
Small issues exemption
Securities issues that involve less than $1.5 million are not required to file a registration statement with the SEC. Instead, they are governed by Regulation A, for which only a brief offering statement is needed.
Small Order Execution System (SOES)
Three-tiered system of automatic execution of an order at the best price. Size is either 200, 500, or, most often, 1000 shares.
Smart money
Investors who make consistent profits in the market, regardless of the investing environment, by making wise, educated moves.
Smidge
Small amount of price, usually +/- 1/8 or 1/4.
Smithsonian Agreement
A revision to the Bretton Woods international monetary system that was signed at the Smithsonian Institution in Washington, D.C., in December 1971. Included were a new set of par values, widened bands to +/- 2.25% of par, and an increase in the official value of gold to US$38.00 per ounce.
Snake
Arrangement established in 1972, that ties European currencies to each other within specified limits.
Snowballing
Used in the context of general equities. Process by which the exercise of stop orders in a declining or advancing market causes further downward or upward pressure on prices, thus triggering more stop orders and more price pressure, and so on.
Social Security benefits
Monthly government payments to retired workers or their families who have paid Social Security taxes for a total of 40 quarters or 10 years.
Social Security Disability Income Insurance
Program financed by the Social Security tax to provide assistance to disabled individuals with disabilities expected to last at least one year, to compensate for lost income.
Socially conscious mutual fund
A mutual fund that does not invest in companies that have interests in socially unacceptable markets or produce harmful products or by-products, such as high levels of environmental pollution.
Society for Worldwide Interbank Financial Telecommunications (SWIFT)
A dedicated computer network to support funds transfer messages internationally between over 900 member banks world-wide.
"Soft" capital rationing
Constraints on spending that under certain circumstances can be violated or even viewed as constituting targets rather than absolute limits.
Soft currency
The money of a country that is expected to drop in value relative to other currencies.
Soft dollars
The value of research services that brokerage houses supply to investment managers "free of charge" in exchange for the investment manager's business commissions.
Soft landing
A term describing a growth rate high enough to keep the economy out of recession, but also slow enough to prevent high inflation and interest rates.
Soft market
A buyer's market in which supply exceeds demand, causing little trading activity and wide bid-ask spreads.
Soft spot
Stocks or groups of stocks that remain weak in a strong market.
Softs
Tropical commodities such as coffee, sugar, and cocoa.
Sold away
Refers to over-the-counter trading. Having sold stock to another dealer before making the present offering.
Sold-out market
Unavailability of a futures contract in a particular commodity or maturity date because of contract executions and limited offerings.
Sole proprietorship
A business owned by a single individual. A sole proprietor pays no corporate income tax but has unlimited liability for business debts and obligations.
Solvency
Ability to meet obligations.
Sour bond
A bond issue that has defaulted on interest or principal payments, and will thus trade at a large discount and a poor credit rating.
Source of funds seller
Customer seller of stock for the purpose of raising cash for other purchases. Such a seller will sell only at advantageous prices, and not aggressively.
Sources and applications of funds statement
See: Statement of cash flows
South African Futures Exchange (SAFEX)
Electronic futures and options exchange based in South Africa.
Sovereign risk
The risk that a central bank will impose foreign exchange regulations that will reduce or negate the value of foreign exchange contracts. Also refers to the risk of government default on a loan made to a country or guaranteed by it. The government's part of political risk.
Span
To cover all contingencies within a specified range.
SPDRs
SPDRs (Spiders) are designed to track the value of the Standard & Poor's 500 Composite Price Index. Stands for Standard & Poor's Depositary Receipt. They trade on the American Stock Exchange under the symbol SPY. SPDRs are similar to closed-end funds but are formally known as, a unit investment trust. One SPDR unit is valued at approximately one-tenth (1/10) of the value of the S&P 500. Dividends are disbursed quarterly, and are based on the accumulated stock dividends held in trust, less any expenses of the trust. See: Mid-cap SPDR.
Special arbitrage account
A margin account with lower cash requirements, reserved for transactions that are hedged by an offsetting position in futures or options.
Special assessment bond
A municipal bond with interest paid by the taxes of the community benefiting from the bond-funded project.
Special bid
A method of purchasing a large block of stock on the NYSE by advertising a client's large buy order, and matching it up with a number of other traders' smaller sell orders.
Special bond account
A special broker margin account used only for transactions in US government bonds, municipals, and eligible listed and unlisted non-convertible corporate bonds.
Special Claim on Residual Equity (SCORE)
A certificate that entitles the owner to the capital appreciation of an underlying security, but not to the dividend income from the security.
Special dividend
Also referred to as an extra dividend. Dividend that is unlikely to be repeated.
Special Drawing Rights (SDR)
A form of international reserve assets, created by the IMF in 1967, whose value is based on a portfolio of widely used currencies.
Special Meeting
Refers to a meeting of shareholders outside the usual annual general meeting. In the context of corporate governance, some limitations either increase the level of shareholder support required to call a special meeting beyond that specified by state law or eliminate the ability to call one entirely. Such provisions add an extra time delay to many proxy fights, since bidders must wait until the regularly scheduled annual meeting to replace board members or dismantle takeover defenses.
Special-Purpose Entity
A financing technique in which a company decreases its risk by creating separate partnerships, rather than subsidiaries, for certain holdings and solicits outside investors to take on the risk. In order to qualify as a special-purpose entity, whose financial results are not carried on the company's books, the unit must meet strict accounting guidelines. Compare to subsidary.
Specialist
On an exchange, the member firm that is designated as the market maker (or dealer for a listed common stock). Member of a stock exchange who maintains a "fair and orderly market" in one or more securities. Only one specialist can be designated for a given stock, but dealers may be specialists for several stocks. In contrast, there can be multiple market makers in the OTC market. Major functions include executing limit orders on behalf of other exchange members for a portion of the floor broker's commission, and buying or selling for the specialist's own account to counteract temporary imbalances in supply and demand and thus prevent wide swings in stock prices.
Specialist block purchase and sale
Purchase of a large number of securities by a specialist for himself or to pass on to another floor trader or block buyer.
Specialist market
Market in a stock made solely by the specialist, as no public orders, and henceforth no depth, exist in the market.
Specialist unit
A specialist who maintains a stable market by acting as a principal and agent for other brokers in one or many stocks.
Specialist's book
Chronological record maintained by a specialist that includes the specialist's own inventory of securities, market orders to sell short, and limit orders and stop orders that other stock exchange members have placed with the specialist.
Specialist's short-sale ratio
The percentage of the total short sales of stock sold short by specialists.
Specific issues market
The market in which dealers reverse in securities they wish to short.
Specific Return
The part of the excess return not explained by common factors. The specific return is independent of (uncorrelated with) the common factors and the specific returns to other assets. It is also called the idiosyncratic return.
Specific risk
See: Unique risk
Spectail
A dealer doing business with retail but concentrating more on acquiring and financing its own speculative positions.
Speculation
Purchasing risky investments that present the possibility of large profits, but also pose a higher-than-average possibility of loss. A profitable strategy over the long term if undertaken by professionals who hedge their portfolios to control the amount of risk.
Speculative
Securities that involve a high level of risk.
Speculative demand (for money)
The need for cash to take advantage of investment opportunities that may arise.
Speculative-grade bond
Bond rated Ba or lower by Moody's, or BB or lower by S&P, or an unrated bond.
Speculative motive
A desire to hold cash in order to be poised to exploit any attractive investment opportunity requiring a cash expenditure that might arise.
Speculative stock
Very risky stock.
Speculator
One who attempts to anticipate price changes and, through buying and selling contracts, aims to make profits. A speculator does not use the market in connection with the production, processing, marketing, or handling of a product. See: Trader.
Speed
Related: Prepayment speed
Spider
See: SPDRs
Spike
Order ticket that shows the stock, price, number of shares, type, and account of the order. Origin: Practice of placing the ticket on a metal spike upon execution or cancellation. Spike is also a sudden, drastic increase in a company's share price.
Spin-off
A company can create an independent company from an existing part of the company by selling or distributing new shares in the so-called spin-off.
Spinning
In investment banking, the practice of an investment bank setting aside portions of a corporation's Initial Public Offering for senior management of that corporation. Ethically questionable practice which appears to be a form of bribery.
SPINs
Stands for Standard & Poor's 500 Index Subordinated Notes.
Split
Sometimes companies split their outstanding shares into more shares. If a company with 1 million shares executes a two-for-one split, the company would have 2 million shares. An investor with 100 shares before the split would hold 200 shares after the split. The investor's percentage of equity in the company remains the same, and the share price of the stock owned is one-half the price of the stock on the day prior to the split.
Split commission
A commission shared between a broker and a financial adviser or other professional who brought the customer to the broker.
Split-coupon bond
A bond that begins as a zero-coupon bond paying no interest and converts to an interest paying bond on a future date.
Split-fee option
An option on an option. The buyer generally executes the split fee with first an initial fee, with a window period at the end of which (upon payment of a second fee) the original terms of the option may be extended to a later predetermined final notification date.
Split offering
A municipal bond issue that is made up of serial bonds and term maturity bonds.
Split order
A large securities transaction that is divided into smaller orders that are spread out over some period of time to avoid large fluctuations in the market price.
Split print
Block trade printed at two different prices. Often used in dividend rolls to get an average price equal to the dividend.
Split-rate tax system
A tax system that taxes retained earnings at a higher rate than earnings that are distributed as dividends.
Split rating
Two different ratings given to the same security by two important rating agencies.
Split stock
(1) Purchases or sales shared with others. (2) Division of the outstanding shares of a corporation into a large number of shares. Ordinarily, splits must be proposed by directors and approved by shareholders.
Spoken for
Amount of opposite demand (placement) or supply (availability) the trader has in efforts to cross the stock. Not open.
Sponsor
An underwriting investment company that offers shares in its mutual funds, or an influential institution that highly values a particular security and thus creates additional demand for the security. In the context of project financing, a developer of the project or a party poviding financial support.
Spontaneous Current Liabilities
Short-term obligations that automatically increase and decrease in response to financing needs, such as accounts payable.
Spontaneous Liabilities
Obligations that arise automatically in the course of operating a business when a firm buys goods and services on credit.
Spot commodity
A commodity that is traded with the expectation of actual delivery, as opposed to a commodity future that is usually not delivered.
Spot exchange rates
Exchange rate on currency for immediate delivery. Related: Forward exchange rate.
Spot futures parity theorem
Describes the theoretically correct relationship between spot and futures prices. Violation of the parity relationship gives rise to arbitrage opportunities.
Spot interest rate
Interest rate fixed today on a loan that is made today. Related: Forward interest rates.
Spot lending
Originating mortgages by processing applications taken directly from prospective borrowers.
Spot markets
Related: Cash markets
Spot month
The nearest delivery month on a futures contract.
Spot price
The current market price of the actual physical commodity. Also called cash price. Current delivery price of a commodity traded in the spot market, in which goods are sold for cash and delivered immediately. Antithesis of futures price.
Spot rate
The theoretical yield on a zero-coupon Treasury security.
Spot rate curve
The graphical depiction of the relationship between the spot rates and maturity.
Spot secondary
Secondary distribution that may not require an SEC registration statement and may be attempted without delay. An underwriting discount is normally included in these offerings.
Spot trade
The purchase and sale of a foreign currency, commodity, or other item for immediate delivery.
Spot transaction
A foregin exchange transaction in which each party promises to pay a certain amount of currency to the other on the same day or within one or two days.
Spousal IRA
An individual retirement account in the name of an unemployed spouse.
Spousal remainder trust
A fixed-term trust from which income is distributed to the beneficiary (such as a child of the grantor) to take advantage of a lower tax bracket, and that at the end of the term passes to the grantor's spouse.
Spread
(1) The gap between bid and ask prices of a stock or other security. (2) The simultaneous purchase and sale of separate futures or options contracts for the same commodity for delivery in different months. Also known as a straddle. (3) Difference between the price at which an underwriter buys an issue from a firm and the price at which the underwriter sells it to the public. (4) The price an issuer pays above a benchmark fixed-income yield to borrow money.
Spread income
Also called margin income, the difference between income and cost. For a depository institution, the difference between the assets it invests in (loans and securities) and the cost of its funds (deposits and other sources).
Spread option
A position consisting of the purchase of one option and the sale of another option on the same underlying security with a different exercise price and/or expiration date.
Spread order
An order listing the series of options that the customer wants to buy and sell and the desired spread between the premiums paid and received for the options.
Spread position
The status of an account after a spread order has been carried out.
Spread strategy
A strategy that involves a position in one or more options so that the cost of buying an option is funded entirely or in part by selling another option in the same underlying. Also called spreading.
Spreadsheet
A computer program that organizes numerical data into rows and columns in order to calculate and make adjustments based on new data.
Sprinkling trust
A trust in which the trustee decides how to distribute trust income among a group of designated people.
SPX
Applies to derivative products. Symbol for the S&P 500 index.
Squeeze
Period when stocks or commodities futures increase in price and investors who have sold short must cover their short positions to prevent loss of large amounts of money.
SS1
Securities sales speaker box that transmits to all investment banks' regional trading and sales desks.
Stabilization
The action undertakes a country when it buys and sells its own currency to protect its exchange value.
Actions registered competitive traders undertake by on the NYSE to meet the exchange requirement that 75% of their traded be stabilizing, meaning that sell orders follow a plus tick and buy orders a tick.
Actions a managing underwriter undertake so that the market price does not fall below the public offering price during the offering period.
Stable Paretian, or Fractal Hypothesis
In the characteristic function of the fractal family of distributions, the characteristic exponent alpha can range between one and two. See: Alpha, Fractal Distributions, Gaussian.
Stability
The relative steadiness or safety of a security or fund compared to the market as a whole. For example, money market funds and other short-term investments offer more stability than funds that invest in growth stocks.
Stag
Speculator who buys and sells stocks to hold for short intervals to make quick profits.
Stagflation
A period of slow economic growth and high unemployment with rising prices (inflation).
Staggered board of directors
Occurs when a portion of directors are elected periodically, instead of all at once. Board terms are often staggered in order to thwart unfriendly takeover attempts, since potential acquirers would have to wait longer before they could take control of a company's board through the normal voting procedure.
Staggering maturities
Hedging against interest rate movements by investment in short-, medium-, and long-term bonds.
Stagnation
A period of slow economic growth, or, in securities trading, a period of inactive trading.
Stakeholders
All parties that have an interest, financial or otherwise, in a firm-stockholders, creditors, bondholders, employees, customers, management, the community, and the government.
Stale price
An old price of the asset that does not reflect the most recent information.
Stale price arbitrage
For a number of assets, the most recent transaction price at 4PM ET does not fully reflect all available market information. One example is international equities that trade on exchanges that are located in different time zones and close 2-15 hours before U.S. markets. In addition, domestic small-capitization equities and high-yield and convertible bonds often trade infrequently and have wide bid-ask spreads. This can cause the most recent transaction price to be much different from the price that one would see in a liquid market at 4 PM, even for assets that trade on exchanges that are open at that time. Investors can take advantage of mutual funds that calculate their NAVs using stale closing prices by trading based on recent market movements. For example, if the U.S. market has risen since the close of overseas equity markets, investors can expect that overseas markets will open higher the following morning. Investors can buy a fund with a stale-price NAV for less than its current value, and they can likewise sell a fund for more than its current value on a day that the U.S. market has fallen. Similar opportunities exist when the values of infrequently or illiquidly-traded domestic assets have recently changed. Also referred to as Net Asset Value Arbitrage or NAV Arbitrage.
Stalking horse
In bankruptcy proceedings, this refers to the company that first bids for the companies assets.
Stalking horse bid
In bankruptcy proceedings, this refers to first bid for the companies assets. This is the bid to beat. If there are multiple bids, often there is a bankruptcy auction.
Stamp duty
Applies mainly to international equities. Taxes on foreign transactions, usually a percentage of total transaction amount, that can be unilateral or bilateral in nature.
Stamp tax
Tax on a financial transaction.
Stand-alone principle
Investment approach that advocates a firm should accept or reject a project by comparing it with securities in the same risk class.
Standby Letter of Credit
Documents evidencing failure of the bank's customer (the applicant) to pay an obligation when due.
Stand up to
Make a good-sized market in the trader's own bid and offering prices. Hence, "standing up" to the bid signifies the trader's willingness to buy size (i.e., 50m) volume at the advertised bid, even if the customer buyer/seller falls down.
Standard deduction
The IRS-specified amount by which a taxpayer is entitled to reduce income an alternative to itemizing deductions.
Standard deviation
The square root of the variance. A measure of dispersion of a set of data from its mean.
Standard error
In statistics, a measure of the possible error in an estimate. Plus or minus 2 standard errors usually provides a 95% confidence interval.
Standard Industrial Classification (SIC)
A code system that designates a unique business activity classified by industry.
Standard & Poor's MidCap 400 Index
A market capitalization-weighted benchmark index made up of 400 securities with market values between $200 million and $5 billion.
Standard & Poor's SmallCap 600 Index
A small-capitalization benchmark index made up of 600 domestic stocks chosen for market size, liquidity, and industry group representation.
Standardized normal distribution
A normal distribution with a mean of 0 and a standard deviation of 1.
Standardized value
Also called the normal deviate, the distance of one data point from the mean, divided by the standard deviation of the distribution.
Standby agreement
In a rights issue, agreement that the underwriter will purchase any stock not purchased by investors.
Standby commitment
An agreement between a corporation and investment firm that the firm will purchase whatever part of a stock issue that is offered in a rights offering that is not subscribed to in the two- to four- week standby period.
Standby fee
Amount paid to an underwriter who agrees to purchase any stock that is not purchased by public investors in a rights offering.
Standby letter of credit
Agreement to guarantee invoice payments to a supplier; a standby LOC promises to pay the seller if the buyer fails to pay.
Standing
Level of priority in the trading crowd.
Standstill agreement
Contract by which the bidding firm in a takeover attempt agrees to limit its holdings of another firm.
Start-up
The earliest stage of a new business venture.
State bank
A bank authorized in a specific state by a state-based charter, with generally the same functions as a national bank.
State and local government series (SLUGs)
Special nonmarketable certificates, notes, and bonds offered to state and local governments as a means to invest proceeds from their own tax-exempt financing. Interest rates and maturities comply with IRS arbitrage provisions. Slugs are offered in both time deposit and demand deposit forms. Time deposit certificates have maturities of up to one year. Notes mature in one to ten years and bonds mature in more than ten years. Demand deposit securities are one-day certificates rolled over with a rate adjustment daily.
State tax-exempt income fund
A mutual fund that seeks current income exempt from federal and a specific state's income taxes.
Stated annual interest rate
The interest rate expressed as a per year percentage, by which interest payments are determined. See: Annual percentage rate.
Stated conversion price
At the time of issuance of a convertible security, the price the issuer effectively grants the securityholder to purchase the common stock, equal to the par value of the convertible security divided by the conversion ratio.
Stated maturity
For the CMO tranche, the date the last payment would occur at zero CPR.
Stated value
A monetary worth figure that bears no relation to market value that is assigned, for accounting purposes, to stock for use instead of par value.
Statement of Additional Information (SAI)
A document provided as a supplement to a mutual fund prospectus. It provides more detailed information about fund policies, operations, and risks. Also known as a Part B prospectus.
Statement billing
Billing method in which the sales for a period such as a month (for which a customer also receives invoices) are collected into a single statement, and the customer must pay all the invoices represented on the statement.
Statement of Cash Flows
A financial statement showing a firm's cash receipts and cash payments during a specified period.
Statement-of-Cash-Flows Method
A method of cash budgeting that is organized along the lines of the statement of cash flows.
Statement of condition
A document describing the status of assets, liabilities, and equity of a person or business at a particular time.
Statement of Financial Accounting Standards No. 8
The is a currency translation standard once used by U.S. accounting firms. See: Statement of Accounting Standards No. 52.
Statement of Financial Accounting Standards No. 52
The currency translation standard currently used by US firms. It mandates the use of the current rate method. See: Statement of Financial Accounting Standards No. 8.
"Static" Return
The return that an investor would make on a particular position if the underlying stock were unchanged in price at the expiration of the options in the position.
Static theory of capital structure
Theory that the firm's capital structure is determined by a trade-off of the value of tax shields against the costs of bankruptcy.
Stationary time series
A longitudinal measure in which the process generating returns is identical over time.
Statistical Arbitrage
In the context of hedge funds, a style of management that employs complex statistical models that try to capture small abnormalities in a security's intraday return.
Statistical tracking error
Used in the context of general equities. Standard deviation of the difference between the portfolio return and the desired investment benchmark return.
Statutory debt limit
The cap that Congress imposes on the amount of public debt that may be outstanding whether temporary or permanent. When this limit is reached, the Treasury may not sell new debt issues until Congress raises the limit. For a detailed listing of changes in the limit since 1941, see Budget of the United States Government. See: Debt outstanding subject to limitation.
Statutory investment
An investment that a trustee is authorized to make under state law.
Statutory merger
A merger in which one corporation remains as a legal entity, instead of a new legal entity being formed.
Statutory surplus
The surplus of an insurance company determined by the accounting treatment of both assets and liabilities as established by state statutes.
Statutory voting
The standard rule in most corporations that there is one vote per share in elections of the Board of Directors.
Staying power
The ability of an investor to stay in the market and not to sell out of a position when an investment has fallen in value.
Steady state
As an MBS pool ages, or four to six months after component mortgages have passed at least once the threshold for refinancing, the prepayment speed tends to stabilize within a fairly steady range.
Steenth
1/16 (0.0625) of one full point in price. Often used in negotiations to compromise an eighth difference, and in options trading.
Steepening of the yield curve
A change in the yield curve where the spread between the yield on a long-term and short-term Treasury has increased. Compare flattening of the yield curve and butterfly shift.
Step aside
Allow a block to trade at a price at which you do not care to participate in the trade.
Step-down note
A floating-rate note whose interest rate declines after a specified period of time.
Step up
To increase, as in step up the tax basis of an asset.
Step-up bond
A bond that pays a lower coupon rate for an initial period, and then increases to a higher coupon rate. Related: Deferred-interest bond, payment-in-kind bond.
Step-up swap
An interest rate swap on which the notional principal increases according to a predetermined schedule.
Sterilized intervention
Foreign exchange market activity by which monetary authorities insulate their domestic money supplies from the foreign exchange transactions with offsetting sales or purchases of domestic assets.
Sticky deal
A new securities issue that may be difficult to sell because of problems in the market or underlying problems with the corporation.
Stochastic models
Liability-matching models that assume that the liability payments and the asset cash flows are uncertain. Related: Deterministic models.
Stochastics index
A computerized tool measuring overbought and oversold conditions in a stock over a certain period.
Stock
Ownership of a corporation indicated by shares, which represent a piece of the corporation's assets and earnings.
Stock ahead
When two or more orders for a stock at a certain price arrive about the same time, and the exchange's priority rules take effect. NYSE rules stipulate that the bid made first should be executed first, or, if two bids come in at once, the bid for the larger number of shares receives priority. The bid that is not executed is then turned to the broker, who informs the customer that the trade was not completed because there was "stock ahead.".
Stock bonus plan
A plan used as an incentive that rewards employee performance with stock in the company.
Stockbroker
See: Registered representative
Stock Appreciation Right (SAR)
A contractual right, often granted in tandem with an option that allows an individual to receive cash or stock of a value equal to the appreciation of the stock from the grant date to the date the SAR is exercised.
Stock buyback
A corporation's purchase of its own outstanding stock, usually in order to raise the company's earnings per share.
Stock certificate
A document representing the number of shares of a corporation owned by a shareholder.
Stock dividend
Payment of a corporate dividend in the form of stock rather than cash. The stock dividend may be additional shares in the company, or it may be shares in a subsidiary being spun off to shareholders. Stock dividends are often used to conserve cash needed to operate the business. Unlike a cash dividend, stock dividends are not taxed until sold.
Stock Exchange Automated Quotation System (SEAQ)
London's Nasdaq system.
Stock Exchange of Hong Kong (SEHK)
Only stock exchange located in Hong Kong.
Stock Exchange, Mumbai (BSE)
Formerly the Bombay stock exchange, the BSE accounts for more than one-third of Indian trading volume.
Stock Exchange of Singapore (SES)
The only stock exchange in Singapore.
Stock Appreciation Rights
An incentive scheme for employees similar to stock options. The employee get the increase in the stock price from the date of the grant to the date of the exercise. However, in contrast to options, there is no dillutive effect. That is, no shares are issued. Similar to options, if the company's stock falls in value, the appreciation right is worthless.
Stock Exchange of Thailand
The major securities market of Thailand.
Stock exchanges
Formal organizations, approved and regulated by the Securities and Exchange Commission (SEC), that are made up of members who use the facilities to exchange certain common stocks. The two major national stock exchanges are the New York Stock Exchange (NYSE) and the American Stock Exchange (ASE or AMEX). Five regional stock exchanges include the Midwest, Pacific, Philadelphia, Boston, and Cincinnati. The Arizona Stock Exchange is an after-hours electronic marketplace where anonymous participants trade stocks via personal computers.
Stock index
Index like the Dow Jones Industrial Average that tracks a portfolio of stocks.
Stock Index Future
A security that uses composite stock indexes to allow investors to speculate on the performance of the entire market, or to hedge against losses in long or short positions. The settlement of the contracts is in cash.
Stock index option
An option in which the underlying is a common stock index.
Stock index swap
A swap involving a stock index. The other asset involved in a stock index swap can be another stock index (a stock-for-stock swap), a debt index (a debt-for-stock swap), or any other financial asset or financial price index.
Stock insurance company
An insurance company owned by a group of stockholders, who are not necessarily policyholders.
Stock jockey
A stock broker who frequently buys and sells shares in a client's portfolios.
Stock list
The department within a stock exchange that oversees compliance with listing requirements and exchange regulations.
Stock market
Also called the equity market, the market for trading equities.
Stock option
An option whose underlying asset is the common stock of a corporation.
Stock power
A power of attorney form giving ownership of a security to another person, brokerage firm, bank, or lender after it has been sold or pledged to that party.
Stock purchase plan
A plan allowing employees of a company to purchase shares of the company, often at a discount or with matching employer funds.
Stock rating
An evaluation by a rating agency of the expected financial performance or inherent risk of common stocks.
Stock record
The accounting a brokerage firm keeps of all securities held in inventory.
Stock replacement strategy
A strategy for enhancing a portfolio's return, used when the futures contract is expensive according to its theoretical price. The strategy involves a swap between the futures and a Treasury bill and stock portfolio.
Stock repurchase
A firm's repurchase of outstanding shares of its common stock.
Stock right
Another terminology for a stock option.
Stock selection
An active portfolio management technique that focuses on advantageous selection of particular stock rather than on broad asset allocation choices.
Stock split
Occurs when a firm issues new shares of stock and in turn lowers the current market price of its stock to a level that is proportionate to pre-split prices. For example, if IBM trades at $100 before a two-for-one split, after the split it will trade at $50, and holders of the stock will have twice as many shares as they had before the split. See: Split.
Stock symbol
See: Ticker symbol
Stock ticker
A letter designation assigned to securities and mutual funds that trade on US financial exchanges.
StockWatch
A stock surveillance program offered by proxy solicitation firms, and selected transfer agents, to track and monitor sales and purchases of a corporation's shares and provide valuable information at the beneficial owner level.
Stock watcher (NYSE)
A computerized service that monitors and investigates trading activity on the NYSE in order to identify any unusual activity or security movement that might be caused by rumors or illegal activities.
Stockholder
See: Shareholder.
Stockholder books
Set of books kept by firm management for its annual report that follows Financial Accounting Standards Board rules. The tax books follow IRS tax rules.
Stockholder equity
Balance sheet item that includes the book value of ownership in the corporation. It includes capital stock, paid-in surplus, and retained earnings.
Stockholder of record
Stockholder whose name is registered on the books of a corporation and thus will receive dividends from the corporation.
Stockholder's equity
The residual claims that stockholders have against a firm's assets, calculated by subtracting all current liabilities and debt liabilities from total assets.
Stockholder's report
The annual report and other reports given to stockholders to inform them of the company's financial standing and developments.
Stockholm Stock Market (Stockholm B&#ouml;rsen)
The major securities market of Sweden.
Stockout
Running out of inventory.
Stop basis
Refers to over-the-counter trading. Method of entering an OTC trade into the trader's position without reporting the trade on the OTC tape.
Stop-limit order
A stop order that designates a price limit. Unlike the stop order, which becomes a market order once the stop is reached, the stop-limit order becomes a limit order.
Stop-loss order
An order to unwind a position when the price moves against you. For example, you had purchased a stock, the stop-loss order would be to sell the stock when the price falls to a specified level. If you were short the asset, the stop-loss would trigger a purchase.
Stop order (or stop)
An order to buy or sell at the market when a definite price is reached, either above (on a buy) or below (on a sell) the price that prevailed when the order was given.
Stop-out price
The lowest auction price at which Treasury bills are sold.
Stop payment
An order given a depository institution not to pay out cash for a check; often used when the check has been stolen or lost.
Stop Transfer
A block placed against a security reported lost or stolen (an adverse claim), so it cannot be transferred.
Stopped
Guaranteed a specific price on the customer's working order while the dealer tries to obtain a better one. Stopped against one's self involves a customer order and a firm's own account, not two customers. One can cancel an order even after being stopped by another party.
Stopped out
A purchase or sale that is executed under a stop order at the stop price specified by the customer.
Stopping curve
A curve showing the refunding rates for different times at which the expected value of refunding immediately equals the expected value of waiting to refund.
Stopping curve refunding rate
A refunding rate that falls on the stopping curve.
Story stock/bond
A highly complex security that requires a long "story" so that investors may understand the corporation and be persuaded of its merits.
Straddle
Purchase or sale of an equal number of puts and calls with the same terms at the same time. Related: Spread.
Straight
Direct telephone line, compared to an outside line that requires a telephone number to be dialed.
Straight Bill of Lading
A bill of lading that is cosigned to a specific party and is therefore non negotiable.
Straight Discount
The rate applied to the face value of the promissory note to calculate present value without compounding. For example, a note with a face value in three years of 100, with a straight discount of 10% per annum has a present value of 70.
Straight-line depreciation
Amortizing or apportioning an equal dollar amount of depreciation in each accounting period.
Straight term insurance policy
Term life insurance policy providing a fixed-amount death benefit over a certain number of years.
Straight value
Also called investment value, the value of a convertible security without the conversion option.
Straight voting
Allows shareholder to cast all of the shareholder's votes for each candidate for the Board of Directors.
Strange Attractor
An attractor in phase space, where the points never repeat themselves, and orbits never intersect, but they stay within the same region of phase space. Unlike limit cycles or point attractors, strange attractors are non-periodic, and generally have a fractal dimension. They are a picture of a non-linear, chaotic system. See: Attractor, Chaos, Limit Cycle, Point Attractor.
Strangle
Buying or selling an out-of-the-money put option and call option on the same underlying instrument, with the same expiration. Profits are made only if there is a drastic change in the underlying instrument's price.
Strategic alliance
Collaboration between two or more companies designed to achieve some corporate objective. May include international licensing agreements, management contracts, or joint ventures.
Strategic buyout
Acquisition of another firm in order to realize some operational benefits which will result in increased earnings.
Strategy
The general or specific approach to investing that an individual, institution, or fund manager employs.
Stratified equity indexing
A method of constructing a replicating portfolio that classifies the stocks in the index into strata, and represents each stratum in the portfolio.
Stratified sampling approach to indexing
Dividing an index into cells, each representing a different characteristic of the index, such as duration or maturity.
Stratified sampling bond indexing
A method of bond indexing that divides the index into cells, each cell representing a different characteristic, and that buys bonds to match those characteristics.
Stray
(1) Not a member of the participating party in the trade at hand; (2) not a meaningful indication of a customer's desire to take a sizable position or be involved in a stock.
Street
Means Wall Street financial community; brokers, dealers, underwriters, and other knowledgeable participants.
Street name
Registration under which securities maybe held by a broker on behalf of a client but be registered in the name of the Wall Street firm.
Strike index
For a stock index option, the index value at which the buyer of the option can buy or sell the underlying stock index. The strike index is converted to a dollar value by multiplying by the option's contract multiple. Related: Strike price.
Strike price
The stated price per share for which underlying stock may be purchased (in the case of a call) or sold (in the case of a put) by the option holder upon exercise of the option contract.
Striking price
The price at which an option can be exercised. See: Exercise price.
Striking Price Intercal
The distance between striking prices on a particular underlying security. Normally, the interval is 2-1/2 points for stocks under $25, 5 points for stocks selling over $25 per share, and 10 points (or greater) is acceptable for stocks over $200 per share. There are, however, exceptions to this general guideline.
Strip
Variant of a straddle. A strip is two puts and one call on a stock. A strap is two calls and one put on a stock. The puts and calls have the same strike price and expiration date. See: Strap.
Strip mortgage participation certificate (strip PC)
Ownership interests in specified mortgages purchased by Freddie Mac from a single seller in exchange for separate instruments representing interests in the same mortgages.
Stripped bond
Bond that can be subdivided into a series of zero-coupon bonds.
Stripped mortgage-backed securities (SMBS)
Securities that redistribute the cash flows from the underlying generic MBS collateral into the principal and interest components of the MBS to enhance their attractiveness to different groups of investors.
Stripped yield
Applies mainly to convertible securities. Return on the debt portion of a bond/warrant unit after subtracting the value of the issued warrant segment.
Strong Currency
A currency whose value compared to other currencies is improving, as indicated by a decrease in the direct exchange rates for the currency.
Strong dollar
When the dollar can be exchanged for a large amount of foreign currency, benefiting travelers but hurting exporters.
Strong-form efficiency
A form of pricing efficiency, that posits that the price of a security reflects all information, whether or not it is publicly available. Related: Weak-form efficiency, semi-strong form efficiency.
Strong form of the EMT
Theory that market prices reflect all relevant publicly and privately available information. Defined by Eugene F. Fama in 1970.
Structural Adjustment Loan Facility (SAL)
World Bank program established in 1980 to enhance a country's long-term economic growth through financing projects.
Structure
The description of how a project financing is drawdown, repaid, and collateralized secured.
Structured arbitrage transaction
A self-funding, self-hedged series of transactions that usually use mortgage-backed securities (MBS), commercial mortgage backed securities, and collateralized debt obligations as the primary assets.
Structured Asset Trust Unit Repackagings
A synthetic security linked or weak-linked to underlying collateral. Ratings usually reflect the credit quality of the underlying securities.
Structured debt
Debt that has been customized for the buyer, often by incorporating unusual options.
Structured finance
Often refers to a group within an investment bank that deals with mortgage-backed securities (MBS), commercial mortgage backed securities, and collateralized debt obligations,and real estate.
Structured note
A derivative investment that will change in value with movements of an underlying index; or a note whose issuer makes swap arrangements to alter its required cash flows.
Structured portfolio strategy
Designing a portfolio to achieve a level of performance that matches some predetermined liabilities that must be paid out in the future.
Structured settlement
An agreement in settlement of a lawsuit involving specific payments made over a period of time. Property and casualty insurance companies often buy life insurance products to pay the costs of such settlements.
Stub
Often used in risk arbitrage. Piece of equity security left over from a major cash or security distribution from a recapitalization.
Student Loan Marketing Association (SLMA)
A publicly traded corporation established by federal action that increases availability of educational loans by guaranteeing student loans traded in the secondary market. Also known as Sallie Mae.
Subaccount
A term used in bookkeeping. For example, the insurance expense account may have various different subcategories such as building and property insurance, auto/fleet insurance, general liability, environmental, professional liability, law enforcement, and other insurance.
Subchapter M
An IRS regulation dealing with investment companies and real estate investment trusts that avoid double taxation by distributing interest, dividends, and capital gains directly to shareholders, who are taxed individually.
Subchapter S
IRS regulation that gives a corporation with 35 or fewer shareholders the option of being taxed as a partnership to escape corporate income taxes.
Subject
Refers to a bid or offer that cannot be executed without confirmation from the customer. In other words, not firm, but a bid/offer that needs additional information/confirmation before becoming firm and is therefore still negotiable.
Subject market
Quote in which prices are subject to confirmation. See: Fast market.
Subject to a (NY) can
Contingent upon trader's ability to cancel an order (on the indicated exchange).
Subject to opinion
An auditor's opinion reflecting acceptance of a company's financial statements subject to pervasive uncertainty that cannot be adequately measured, such as information relating to the value of inventories, reserves for losses, or other matters open to judgment.
Subject to a print/execution/trading
Contingent on execution of a trade because the picture in the stock has not been materially altered.
Subjective probabilities
Probabilities that are determined subjectively (for example, on the basis of judgment rather than statistical sampling).
Subordinated
A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt.
Subordinated bonds
Securities that fall after others in priority of claims on the entity in the case of financial distress.
Subordinated debenture bond
An unsecured bond that ranks after secured debt, after debenture bonds, and often after some general creditors in its claim on assets and earnings. Related: Debenture bond, mortgage bond, collateral trust bonds.
Subordinated debt
Debt over which senior debt takes priority. In the event of bankruptcy, subordinated debtholders receive payment only after senior debt claims are paid in full.
Subordination clause
A provision in a bond indenture that restricts the issuer's future borrowing by subordinating future lenders' claims on the firm to those of the existing bondholders.
Subpart F
Special category of foreign-source "unearned" income that is currently taxed by the IRS whether or not it is remitted to the US
Subperiod return
The return of a portfolio over a shorter period of time than the evaluation period.
Subrogation
An insurance process whereby a company that has paid out to a policyholder for a loss incurred recovers the amount of the loss from the party that is legally liable.
Subscription
Agreement to buy new issue of securities.
Subscription agreement
An application reviewed by the general partner to join a limited partnership.
Subscription price
Price that current shareholders pay for a share of stock in a rights offering.
Subscription privilege
The right of current shareholders of a corporation to buy newly issued shares before they are available to the public.
Subscription right
See: Subscription privilege
Subscription warrant
Applies to derivative products. Type of security, usually issued with another security, such as a bond or stock, that entitles the holder to buy a proportionate amount of common stock at a specified price, usually higher than the market price at the time of issuance. Warrant.
Subsidiary
A wholly or partially owned company that is part of a large corporation. A foreign subsidiary is a separately incorporated entity under the host country's law. A subsidiary's financial results are carried on the parent company's books.
Subsidized financing
Funding provided by a government or other entity that is available at a below-market interest rate.
Substitute sale
A method for hedging price risk that uses debt market instruments, such as interest rate futures, or that involves selling borrowed securities as the primary assets.
Substitution swap
A swap in which a money manager exchanges one bond for another bond that is similar in terms of coupon, maturity, and credit quality, but that offers a higher yield.
Substantially equal periodic payments (SEPP)
A method of distribution from IRA account assets that under certain conditions is not subject to the IRS's 10% premature withdrawal penalty for those under age 59-1/2.
Success tax
A 15% excise tax on "excess" distributions from tax-deferred retirement plans that was repealed by the Taxpayer Relief Act of 1997. In essence, the tax had penalized "successful" investors who accumulated large retirement accounts and took distributions that exceeded an annual limit deemed excessive by the tax code.
Suicide pill
A hostile takeover prevention tactic that could destroy the target company. Taking on a large amount of debt to prevent the takeover might cause bankruptcy, for example.
Suitability
A requirement that any investing strategy fall within the financial means and investment objectives of an investor.
Suitability rules
Policies and guidelines that brokers must use to ensure that investors have the financial means to assume risks that they wish to undertake. These are enforced by the NASD and other self-regulatory organizations.
Suitable
Describing a strategy or trading philosophy in which the investor is operating in accordance with his(her) financial means and investment objectives.
Summary plan description (SPD)
A document that explains the fundamental features of an employer's defined benefit or defined contribution plan, including eligibility requirements, contribution formulas, vesting schedules, benefit calculations, and distribution options. ERISA requires that the SPD be easy to understand and that each participant receive a copy within 90 days of joining the plan.
Sum-of-the-years'-digits depreciation
Method of accelerated depreciation.
Sunk costs
Costs that have been incurred and cannot be reversed.
Sunrise industries
Growth industries in an economy that may become leaders in the market in the future.
Super Bowl indicator
A theory that if a team from the old American Football League pre-1970 wins the Super Bowl, the stock market will decline during the coming year. If a team from the old pre-1990 National Football League wins the Super Bowl, stock prices will increase in the coming year.
Super DOT
Super DOT provides faster execution than regular DOT and focuses on large-size trades and baskets. See: Program trading.
Super Majority
A proposal requiring more than a simple majority of the votes eligible to be cast at an annual or special meeting. A super majority is often a 2/3 (66.66%) vote, but it can be as high as 3/4 (75%) or 4/5 (80%).
Super message
See: Autex
Super sinker bond
Usually a home financing bond, but also any other bond that has long-term coupons but short maturity; the mortgages may be prepaid, and the holders may receive the long-term yield after a short period of time.
Supermajority
Provision in a company's charter requiring a majority of, say, 80% of shareholders to approve certain changes, such as a merger.
Supermajority amendment
Often used in risk arbitrage. Corporate amendment requiring that a substantial majority (usually 67% to 90%) of stockholders approve important transactions, such as mergers.
Supervisory analyst
An analyst who is qualified to approve publicly distributed research reports on the NYSE.
Supervisory board
The board of directors that represents stakeholders in the governance of the corporation.
Supplemental Security Income
A Social Security program established to help the blind, disabled, and poor.
Supplier credit
Self-financing of a supplier's operations. Also the agreement of a supplier of goods or services to deferred repayment terms.
Supply risk
The risk associated with a change in raw materials or input to a project from those assumed or projected. In the context of a resources production project, this is called reserves risk.
Supply shock
An event that influences production capacity and costs in an economy.
Supply-side economics
A theory of economics that reductions in tax rates will stimulate investment and in turn will benefit the entire society.
Support
An effective lower bound on prices supported because of many willing buyers at that price level.
Support level
A price level below which it is supposedly difficult for a security or market to fall. That is, the price level at which a security tends to stop falling because there is more demand than supply; can be identified on a technical basis by seeing where the stock has bottomed out in the past.
Surcharge
An additional levy added to some charge.
Surety
An individual or corporation that guarantees the performance or actions of another.
Surplus funds
Cash flow available after payment of taxes in a project.
Surplus management
Related: Asset management
Surtax
A tax added to the normal tax paid by corporations or individuals who have earned income above a certain level.
Surveillance department of exchanges
A department that monitors trading activity on an exchange in order to identify any unusual activity that may indicate illegal practices.
Survivorship bias
Usually pertaining to fund manager or individual investor performance. Suppose we examined the performance over the last ten years of a group of managers that exist today. This performance is biased upwards because we are only considering those that survived for 10 years. That is, some dropped out because of poor performance. Hence, in evaluating performance, one has to be careful to include both the current and the managers that dropped out of the sample due to poor performance.
Sushi bond
A Eurobond issued by a Japanese corporation.
Suspended trading
Temporary halt in trading in a particular security, in advance of a major news announcement or to correct an imbalance of orders to buy and sell.
Suspense account
An account used temporarily to record receipts and disbursements that have yet to be classified.
Sustainable growth rate
Maximum rate of growth a firm can sustain without increasing financial leverage.
Swap
An arrangement in which two entities lend to each other on different terms, e.g., in different currencies, and/or at different interest rates, fixed or floating.
Swap arrangements
Short-term reciprocal lines of credit between the Federal Reserve and 14 foreign centeral banks as well as the Bank for International Settlements. Through a swap transactions, the Federal Reserve can, in effect, borrow foreign currency in order to purchase dollars in the foreign exchange market. In doing so, the demand for dollars and the dollar's foreign exchange value are increased. Similarly, the Federal Reserve can temporarily provide dollars to foreign central banks through swap arrangments.
Swap assignment
Related: Swap sale
Swap book
A swap bank's portfolio of swaps, usually arranged by currency and maturity.
Swap buy back
The sale of an interest rate swap by one counterparty to the other, effectively ending the swap.
Swap fund
See: Exchange fund
Swap option
See: Swaption. Related: Quality option.
Swap rate
The difference between spot and forward rates expressed in points, e.g., $0.0001 per pound sterling.
Swap reversal
An interest rate swap designed to end a counterparty's role in another interest rate swap, accomplished by counterbalancing the original swap in maturity, reference rate, and notional amount.
Swap sale
Also called a swap assignment, a transaction that ends one counterparty's role in an interest rate swap by substituting a new counterparty whose credit is acceptable to the other original counterparty.
Swaption
Options on interest rate swaps. The buyer of a swaption has the right to enter into an interest rate swap agreement by some specified date in the future. The swaption agreement will specify whether the buyer of the swaption will be a fixed-rate receiver or a fixed-rate payer. The writer of the swaption becomes the counterparty to the swap if the buyer exercises.
Sweat equity
An increase in equity created by the labor of the owner.
Sweep
The act of using all available cash flow for the repayment of debt service.
Sweep account
Account providing that a bank invest all the excess available funds at the close of each business day for the firm.
Sweetener
A feature of a security that makes it more attractive to potential purchasers.
Swing Trading
Refers to a type of short term (one day to a couple of weeks) trading, triggered by technical analysis, for example, momentum. Swing trading is distinguished by the notion thatthe trades are executed while the assets is moving in upward or downward momentummomentum.
Swingline facility
Bank borrowing facility to provide finance while the firm replaces US commercial paper with eurocommercial paper.
Swiss Electronic Bourse (EBS)
Computer linking system between the former stock exchange trading floors in Zurich, Geneva, and Basel, Switzerland so that trades can be carried out among traders on all three of the trading floors.
Swiss Options and Financial Futures Exchange (SOFFEX)
The Swiss derivatives market with the first fully electronic trading system in the world, now called Eurex Zurich AG.
Swiss Exchange
The major securities market of Switzerland.
Swissy
Slang for the Swiss franc.
Switch order
Order for the purchase (sale) of one stock and the sale (purchase) of another stock at a stipulated price difference. Contingent order, swap.
Switching
Liquidating a position and simultaneously reinstating a position in another futures contract of the same type.
Switching options
A sequence of transactions in which exercise of one option creates one or more additional options. Investment-disinvestment, entry-exit, expansion-contraction, and suspension-reactivation decisions are switching options.
Sydney Futures Exchange (SFE)
The derivatives market of Australia.
Symbol
Letters used to identify companies on the consolidated tape and other locations.
Symbol book special
Illiquid, inactively traded stock not familiar market
Symmetric cash matching
An extension of cash flow matching that allows for the short-term borrowing of funds to satisfy a liability prior to the liability due date, reducing the cost of funding liabilities.
Synchronous data
Information available at the same time. To test option-pricing models, the price of the option and of the underlying should be synchronous and reflect the same moment in the market.
Syndicate
A group of banks that acts jointly, on a temporary basis, to loan money in a bank credit (syndicated credit) or to underwrite a new issue of bonds.
Syndicate manager
See: Managing underwriter
Syndicated Eurocredit loans
Funding provided by a group (or syndicate) of banks in the Eurocredit market.
Syndicated Loan
A large Eurocurrency loan from a group of international banks.
Syndication
The selling of a project finance to a group of prospective participants, the syndicate.
Synergistic effect
A violation of value-additivity in that the value of a combination is greater than the sum of the individual values.
Synergy
Describes a combination whose value is greater than the sum of the separate individual parts.
Synthetic convertible
Combination of usable bonds and warrants (that expire on or after the bonds' maturity) that resembles convertible bond.
Synthetic forward position
A forward position constructed through borrowing in one currency, lending in another currency, and offsetting these transactions in the spot exchange market.
Synthetic Lease
When a company creates a special-purpose entity to arrange for a loan to purchase property, and then leases the property from the entity.The synthetic lease therefore keeps the loan off the company's balance sheet, while the company provides enough income to the special-purpose entity to cover the interest rate on the loan.
Synthetic put
A strategy equivalent in risk to purchasing a put option where an investor sells stock short and buys a call.
Synthetic stock
An option strategy that is equivalent to the underlying stock. A long call and a short put is synthetic long stock. A long put and a short call is sythetic short stock.
Synthetics
Customized hybrid instruments created by blending an underlying price on a cash instrument with the price of a derivative instrument. It is a combination of security holdings that mimics the price movement of another single security (i.e., synthetic call: long position in a stock combined with a put on that position; a protected long sale; synthetic put: short position in a stock combined with a call on that position; a protected short sale).
System Noise
See: Dynamical Noise
Systematic
Common to all businesses.
Systematic investment plan
An approach involving regular investments in order to take advantage of dollar-cost averaging.
Systematic Return
The part of the return dependent on the benchmark return. We can break excess returns into two components: systematic and residual. The systematic return is the beta times the benchmark excess return.
Systematic risk
Also called undiversifiable risk or market risk.
Systematic risk principle
Only the systematic portion of risk matters in large, well-diversified portfolios. Thus, expected returns must be related only to systematic risks.
Systematic withdrawal plan
A provision of certain mutual funds to pay out to the shareholder specified amounts after specified periods of time.
Systemic Risk
Risk common to a particular sector or country. Often refers to a risk resulting from a particular "system" that is in place, such as the regulator framework for monitoring of financial_institutions.
T
Fifth letter of a Nasdaq stock symbol indicating that the stock has warrants or rights.
TAA
See: Tactical asset allocation
TABs
See: Tax anticipation bill
TANs
See: Tax anticipation notes
TBA
See: To be announced
TC
The two-character ISO 3166 country code for TURKS AND CAICOS ISLANDS.
TD
The two-character ISO 3166 country code for CHAD.
TEFRA (Tax Equity and Fiscal Responsibility Act of 1983)
The law requiring federal income tax withholding on payments of dividend and interest to accounts without a certified tax identification number on file. See: W-9.
TF
The two-character ISO 3166 country code for FRENCH SOUTHERN TERRITORIES.
TG
The two-character ISO 3166 country code for TOGO.
TH
The two-character ISO 3166 country code for THAILAND.
THB
The ISO 4217 currency code for the Thai Baht.
TIGER
See: Treasury Investors Growth Receipt
TIIS
See: Treasury inflation-indexed securities
TIPS
See: Treasury inflation-proteced securities
TITAL
See: Transaction insured trade acceptance locator
TJ
The two-character ISO 3166 country code for TAJIKISTAN.
TJR
The ISO 4217 currency code for the Tajikistan Rouble.
TK
The two-character ISO 3166 country code for TOKELAU.
TM
The two-character ISO 3166 country code for TURKMENISTAN.
TMM
The ISO 4217 currency code for the Turkmenistan Manet.
TN
The two-character ISO 3166 country code for TUNISIA.
TND
The ISO 4217 currency code for the Tunisian Dinar.
TO
The two-character ISO 3166 country code for TONGA.
TOP
The ISO 4217 currency code for the Tonga Pa'anga.
TP
The two-character ISO 3166 country code for EAST TIMOR.
TR
The two-character ISO 3166 country code for TURKEY.
TRL
The ISO 4217 currency code for the Turkish Lira.
TT
The two-character ISO 3166 country code for TRINIDAD AND TOBAGO.
TTD
The ISO 4217 currency code for the Trinidad and Tobago Dollar.
TTM
Trailing 12 months. Often used with Earnings Per Share.
TV
The two-character ISO 3166 country code for TUVALU.
TW
The two-character ISO 3166 country code for TAIWAN, PROVINCE OF CHINA.
TWD
The ISO 4217 currency code for the Taiwan Dollar.
TZ
The two-character ISO 3166 country code for TANZANIA, UNITED REPUBLIC OF.
TZS
The ISO 4217 currency code for the Tanzania Shilling.
T-period holding-period return
The percentage return over the T-year period an investment is held.
T+3
The settlement date for securities transactions such as a stock sale. It refers to the obligation in the brokerage business to settle securities trades by the third day following the trade date. The settlement occurs when the seller receives the sales price (the broker's commission) and the buyer receives the shares.
Tabulation Report
A proxy tally report detailing the current quorum and vote figures on each proposal.
TAC bonds
See: Targeted amortization class bond.
Tactical Asset Allocation (TAA)
Portfolio strategy that allows active departures from the normal asset mix according to specified objective measures of value. Often called active management. It involves forecasting asset returns, volatilities, and correlations. The forecasted variables may be functions of fundamental variables, economic variables, or even technical variables.
Tail
The remaining reserves after a project financing has been repaid. Sometimes refers to the residual value.
Tailgating
Purchase of a security by a broker after the broker places an order for the same security for a customer. The broker hopes to profit either because of information which the customer has or because the customer's purchase is of sufficient size to affect security prices. This is an unethical practice.
Taiwan Stock Exchange (TSEC)
Established in 1961, the only centralized securities market in Taiwan.
Take
(1) To agree to buy. A dealer or customer who agrees to buy at another dealer's offered price is said to take the offer. (2) Euro bankers speak of taking deposits rather than buying money.
Take a bath
To sustain a loss on either a speculation or an investment.
Take a flier
To speculate on highly risky securities.
"Take it down"
Reduce the offering price or hit others' bids to such an extent as to lower the inside market.
"Take me along"
"Allow me to participate in the side of a particular trade.
Take off
A sharp increase in the price of a stock, or a positive movement of the market as a whole.
Take the offer
Buy stock by accepting a floor broker's (listed) or dealer's (OTC) offer at an agreed-upon volume. Antithesis of hit the bid.
Take-out
A cash surplus generated by the sale of one block of securities and the purchase of another, e.g., selling a block of bonds at 99 and buying another block at 95. Also, a bid made to a seller of a security that is designed (and generally agreed) to take the seller out of the market.
Take-and-pay contract
An agreement that obligates the purchaser to take any product that is offered (and pay the cash purchase price) and pay a specified amount if the product is not taken.
Take a position
To buy or sell short; that is to own or to owe some amount on an asset or derivative security.
Take a powder
Temporarily cancel an order or indication in a stock, while unrepresented interest still exists. See: Back on the shelf, sidelines.
Take a swing
Execute a trade at a price that the trader feels is higher or more risky than would normally be acceptable, in order to gain market share in the institutional arena.
Takedown
The share of securities of each participating investment banker in a new or a secondary offering, or the price at which the securities are distributed to the different members of an underwriting group.
Takeout
A financing to refinance or take out another loan.
Takeover
General term referring to transfer of control of a firm from one group of shareholders to another group of shareholders. Change in the controlling interest of a corporation, either through a friendly acquisition or an unfriendly, hostile, bid. A hostile takeover (with the aim of replacing current existing management) is usually attempted through a public tender offer.
Takeover target
A company that is the object of a takeover attempt, friendly or hostile.
Take-up fee
A fee paid to an underwriter in connection with an underwritten rights offering or an underwritten forced conversion. Represents compensation for each share of common stock the underwriter obtains and must resell upon the exercise of rights or conversion of bonds.
Takes a call
Requires a phone call to an account in order for a trade to be completed. See: Show me.
Takes price
Requiring some price movement or concession on behalf of the initiating party before a trade can be consummated. See: Price give.
Taking delivery
When the buyer actually assumes possession from a seller of assets agreed upon in a forward contract or a futures contract.
Taking a view
A London expression; means forming an opinion as to where market prices are headed and acting on it.
Tandem programs
Ginnie Mae mortgage funds provided at below-market rates to residential MBS buyers with FHA Section 203 and 235 loans and to developers of multifamily projects with Section 236 loans initially and later with Section 221(d)(4) loans.
Tangible asset
An asset whose value depends on particular physical properties. These include reproducible assets such as buildings or machinery and non-reproducible assets such as land, a mine, or a work of art. Also called real assets. Converse of: Intangible asset
Tangible net worth
Total assets minus intangible assets, which include patents and copyrights, and total liabilities.
Tangibility
Characteristic that an assets can be used as collateral to secure debt.
Tape
(1) Service that reports prices and sizes of transactions on major exchanges-ticker tape. (2) Dow Jones and other news wires. See: Consolidated tape.
Tape is late
When the trading volume is so heavy that trades appear on the tape more than a minute behind the timer they actually take place.
Tare Weight
The weight of an empty container and any packaging materials used in the container.
Tariff
A tax on imports or exports.
Target cash balance
Optimal amount of cash for a firm to hold, considering the trade-off between the opportunity costs of holding too much cash and the trading costs of holding too little cash.
Target company
Often used in risk arbitrage. Firm chosen as an attractive takeover candidate by a potential acquirer. The acquirer may buy up to 5% of the target's stock without public disclosure, but it must report all transactions and supply other information to the SEC, the exchange the target company is listed on, and the target company itself once the 5% threshold is hit. See: Raider.
Target firm
A firm that is the object of a takeover by another firm.
Target investment mix
The percentage mix of stocks, bonds, and short-term reserves that an investor considers appropriate based on his/her personal objectives, time horizon, risk tolerance, and financial resources.
Target Leverage Ratio
The ratio of the market value of debt to the total market value of the firm that management seeks to maintain.
Target payout ratio
A firm's long-run dividend-to-earnings ratio. The firm's policy is to attempt to pay out a certain percentage of earnings, but it pays a stated dollar dividend and adjusts it to the target as base line increases in earnings occur.
Target price
In the context of takeovers, the price at which an acquirer aims to buy a target firm.
In the context of options, the price of the underlying security at which an option will become in the money.
In the context of stocks, the price that an investor hopes a stock will reach in a certain time period.
Target zone arrangement
A monetary system under which countries pledge to maintain their exchange rates within a specific margin around agreed-upon, fixed central exchange rates.
Target zones
Implicit boundaries on exchange rates established by central banks.
Targeted registered offerings
Securities issues sold to "targeted" foreign financial_institutions according to U.S. Securities and Exchange Commission guidelines. These foreign institutions then maintain a secondary market in the foreign market.
Targeted repurchase
Buying back of a firm's stock from a potential acquirer, usually at a substantial premium, to forestall a takeover attempt. Related: Greenmail.
Targeted Amortization Class (TAC) bonds
Bonds offered as a tranche class of some CMOs, according to a sinking fund schedule. They differ from PAC bonds whose amortization is guaranteed as long as prepayments on the underlying mortgages do not exceed certain limits. A TAC's schedule is met at only one prepayment rate.
Tax anticipation bills (Tabs)
Special bills that the Treasury occasionally issues that mature on corporate quarterly income tax dates and can be used at face value by corporations to pay their tax liabilities.
Tax Anticipation Notes (Tans)
Notes issued by states or municipalities to finance current operations in anticipation of future tax receipts.
Tax arbitrage
Trading that takes advantage of a difference in tax rates or tax systems as the basis for profit.
Tax audit
Audit by the IRS or other tax-collecting agency to determine whether a taxpayer has paid the correct amount of tax.
Tax avoidance
Minimizing tax burden through legal means such as tax-free municipal bonds, tax shelters, IRA accounts, and trusts. Compare with tax evasion.
Tax base
The assessed value of the taxable property, assets, and income within a specific geographic area.
Tax basis
In the context of finance, the original cost of an asset less depreciation that is used to determine gains or losses for tax purposes.
In the context of investments, the price of a stock or bond plus the broker's commission.
Tax books
Records kept by a firm's management that follow IRS rules. The books follow Financial Accounting Standards Board rules.
Tax bracket
The percentage of tax obligation for a particular taxable income.
Tax clawback agreement
An agreement to contribute as equity to a project the value of all previously realized project-related tax benefits not already clawed back. Exercised to the extent required to cover any cash deficiency of the project.
Tax clientele
Categories of investors who have specific preferences for debt or equity because of differences in their personal tax rates.
Tax credit
A direct dollar-for-dollar reduction in tax allowed for expenses such as child care and R&D for building low-income housing. Compare tax deduction.
Tax-deductible
The effect of creating a tax deduction, such as charitable contributions and mortgage interest.
Tax deduction
An expense that a taxpayer is allowed to deduct from taxable income.
Tax-deferred income
Dividends, interest, and unrealized capital gains on investments in an account such as a qualified retirement plan, where income is not subject to taxation until a withdrawal is made.
Tax deferral option
Allowing the capital gains tax on an asset to be payable only when the gain is realized by selling the asset.
Tax-deferred retirement plans
Employer-sponsored and other plans that allow contributions and earnings to be made and accumulate tax-free until they are paid out as benefits.
Tax differential view (of dividend policy)
The view that shareholders prefer capital gains over dividends, and hence low payout ratios, because capital gains are effectively taxed at lower rates than dividends.
Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)
Legislation to increase tax revenue by eliminating various taxation loopholes and instituting tougher enforcement procedures in collecting taxes.
Tax-equivalent yield
The pre-tax yield required from a taxable bond in order to equal the tax-free yield of a municipal bond.
Tax evasion
Illegal by reducing tax burden by underreporting income, overstating deductions, or using illegal tax shelters.
Tax-exempt bond
A bond usually issued by municipal, county, or state governments whose interest payments are not subject to federal and, in some cases, state and local income tax.
Tax-exempt income
Dividends and interest not subject to federal and, in some cases, state and local income taxes.
Tax-exempt income fund
A mutual fund that seeks income that is exempt from federal and, in some cases, state and local income taxes.
Tax-exempt money market fund
A money market fund that invests in short-term tax-exempt municipal securities.
Tax-exempt sector
The municipal bond market where state and local governments raise funds. Bonds issued in this sector are exempt from federal income taxes.
Tax-exempt security
An obligation whose interest is tax-exempt, often called a municipal bond, offered by a country, state, town, or any political district.
Tax free acquisition
A merger or consolidation in which (1) the acquirer's tax basis on each asset whose ownership is transferred in the transaction is generally the same as the acquiree's, and (2) each seller who receives only stock does not have to pay any tax on the gain realized until the shares are sold.
Tax haven
A nation with a moderate level of taxation and/or liberal tax incentives for undertaking specific activities such as exporting or investing.
Tax haven affiliate
A wholly owned entity in a low-tax jurisdiction that is used to channel funds to and from a multinational's foreign operations. The tax benefits of tax haven affiliates were largely removed in the US by the Tax Reform Act of 1986.
Tax holiday
A reduced tax rate that a government provides as an inducement to foreign direct investment.
Tax liability
The amount in taxes a taxpayer to the government.
Tax lien
The right of the government to enforce a claim against the property of a person owing taxes.
Tax and loan account
An account at a private bank, held in the name of the district Federal Reserve Bank, which holds operating cash for the business of the US Treasury.
Tax loss carryback, carryforward
A tax benefit that allows business losses to be used to reduce tax liability in previous and or following years.
Tax-neutrality
Characteristic that taxes do not interfere with the natural flow of capital toward its most productive use.
Tax planning
Devising strategies throughout the year in order to minimize tax liability, for example, by choosing a tax filing status that is most beneficial to the taxpayer.
Tax preference item
Items that must be included when calculating the alternative minimum tax.
Tax preparation services
Firm that prepare tax returns for a fee.
Tax rate
The percentage of tax paid for different levels of income.
Tax Reduction Strategy
A source of competitive advantage that depends on differences in the tax rates imposed in different locations.
Tax Reform Act of 1976
Legislation aimed at tightening provisions relating to taxation, including changes in the capital gains tax laws.
Tax Reform Act of 1984
Legislation enacted as part of the Deficit Reduction Act of 1984 to reduce the federal budget deficit. Among its provisions are a decrease in the minimum holding period for assets to qualify for long-term capital gains treatment from one year to six months.
Tax Reform Act of 1986
A 1986 law involving a major overhaul of the US tax code.
Tax Reform Act of 1993
See: Revenue Reconciliation Act of 1993
Tax refund
Money back from the government when too much tax has been paid or withheld from a salary.
Tax schedules
Tax forms used to report itemized deductions, dividend and interest income, profit or loss from a business, capital gains and losses, supplemental income and loss, and self-employment tax.
Tax selling
Selling of securities to realize losses that will offset capital gains and reduce tax liability. See: Wash sale.
Tax shelter
Legal methods taxpayers can use to reduce tax liabilities. An example is the use of depreciation of assets.
Tax-sheltered annuity
A type of retirement plan under Section 403(b) of the Internal Revenue Code that permits employees of public educational organizations or tax-exempt organizations to make before-tax contributions via a salary reduction agreement to a tax-sheltered retirement plan. Employers are also allowed to make direct contributions on behalf of employees.
Tax shield
The reduction in income taxes that results from taking an allowable deduction from taxable income.
Tax software
Computer software designed to assist taxpayers in filling out tax returns and minimizing tax liability.
Tax status election
The decision of the status under which to file a tax return. For example, a corporation may file as a C corporation or an S corporation.
Tax straddle
Technique used in futures and options trading to create tax benefits. For example, an investor with a capital gain takes a position creating an artificial offsetting loss in the current tax year and postponing a gain from the position until the next tax year.
Tax swap
Swapping two similar bonds to receive a tax benefit.
Tax-timing option
The option to sell an asset and claim a loss for tax purposes or not sell the asset and defer the capital gains tax.
Tax umbrella
Tax loss carryforwards from previous business losses that form a tax shelter for profits earned in current and future years.
Taxpayer Relief Act of 1997
Legislation forming part of a larger act designed to balance the federal budget. Some of the legislation's provisions included tax credits for taxpayers supporting children, an increase in the amount that could be excluded from estate taxes, and a lower capital gains tax rate.
Taxable acquisition
A merger or consolidation that is not a acquisition. The selling shareholders are treated as having sold their shares.
Taxable equivalent yield
The return from a higher-paying but taxable investment that would equal the return from a tax-free investment. This depends on the investor's tax bracket.
Taxable estate
That portion of a deceased person's estate that is subject to transfer tax.
Taxable event
An event or transaction that has a tax consequence, such as the sale of stock holding that is subject to capital gains taxes.
Taxable income
Gross income less a variety of deductions.
Taxable municipal bond
Taxed private-purpose bonds issued by the state or local government to finance prohibited projects such as sports stadiums.
Taxable transaction
Any transaction that is not tax-free to the parties involved, such as a taxable acquisition.
Taxable year
The 12-month period an individual uses to report income for income tax purposes. For most individuals, their tax year is the calendar year.
Tear sheet
A page from an S&P stock that provides information on thousands of stocks, often sent to prospective purchasers.
Teaser rate
A low initial interest rate on an adjustable-rate mortgage to entice borrowers, that is later eliminated and replaced by a market-level rate.
Technical analysis
Security analysis that seeks to detect and interpret patterns in past security prices.
Technical analysts
Also called chartists or technicians, analysts who use mechanical rules to detect changes in the supply of and demand for a stock, and to capitalize on the expected change.
Technical condition of a market
Demand and supply factors affecting price, in particular, the net position, either long or short, of the dealer community.
Technical descriptors
Variables that are used to describe the market in terms of patterns in historical data.
Technical forecasting
A forecasting method that uses historical prices and trends.
Technical Information
Information related to the momentum of a particular variable. In market analysis, technical information is information related to market dynamics and crowd behavior only.
Technical insolvency
Default on a legal obligation of the firm. Technical insolvency occurs when a firm doesn't pay a bill on time.
Technical rally
Short rise in securities or commodities futures prices in the face of a general declining trend. Such a rally may result because investors are bargain hunting or because analysts have noticed a particular support level at which securities usually bounce up. Antithesis of correction.
Technical sign
A short-term trend in the price movement of a security that analysts recognize as significant.
Technician
Related: Technical analysts
TED spread
Difference between US Treasury bill rate and Eurodollar rate; used by some traders as a measure of investor/trader anxiety or credit quality.
Teeny
1/16 or 0.0625 of one full point in price. Steenth.
Tel Aviv Stock Exchange
Israel's only stock exchange.
Telephone switching
Moving one's assets from one mutual fund or variable annuity to another by telephone.
Temporal method
A currency translation method under which the choice of exchange rate depends on the underlying method of valuation. Assets and liabilities valued at historical cost (market cost) are translated at the historical (current market) rate.
Temporary Assets
That portion of a firm's current assets that fluctuates in response to seasonal or anticipated short-term.
Temporary Financing
The sum of negotiated current liabilities and temporary spontaneous current liabilities.
Temporary investment
A short-term investment, such as a money market fund, Treasury bills, or short-term CD, which is usually held a year or less.
Ten largest holdings
The percentage of a portfolio's total net assets or equity holdings in its ten largest securities positions. As this percentage rises, a portfolio's returns are likely to be more volatile because they are more dependent on the fortunes of fewer companies.
10% guideline
The standard analysts' principle that funded debt over 10% of the assessed valuation of taxable property for a municipality is excessive.
10-K
Annual report required by the SEC each year. Provides a comprehensive overview of a company's state of business. Must be filed within 90 days after fiscal year-end. A 10-Q report is filed quarterly.
10-Q
Quarterly report required by the SEC each quarter. Provides a comprehensive overview of a company's state of business.
1040 form
The standard individual tax return form of the IRS.
1099
A statement sent to the IRS and taxpayers by the payers of dividends and interest and by issuers of taxable original issue discount securities.
1099 B
The tax statement used for reporting proceeds resulting from the sale, redemption or liquidation of shares.
1099 DIV
The tax statement used for reporting dividends paid to registered shareholders.
Ten-Day Rule
The New York Stock Exchange rule permitting member firms (brokers) to vote in favor of management ten days or less before the meeting, provided that the member firm mailed proxy material to beneficial owners at least 15 business days before the meeting. The rule allows many shares to be voted, which would otherwise not be, to reach a quorum, approve the choice of directors and auditors and handle other routine matters. This rule does not apply to banks, their nominees or their depository positions, nor to non-routine proposals such as approval for the corporation to issue more shares.
Tenant
A partial owner of a security, or the holder of some property. See: Lessee.
Tenants by Entireties (TEN ENT)
Joint ownership of property or securities by a husband and wife where, upon the death of one, the property goes to the survivor.
Tenants in common
Account registration in which two or more individuals own a certain proportion of an account. Each tenant's proportion is distributable as part of the owners estate, so that if one of the account holders dies, that owner's heirs are entitled to that proportional share of the account.
Tenbagger
A stock that grows in value ten-fold.
Tender
To offer for delivery against futures.
Tender offer
General offer made publicly and directly to a firm's shareholders to buy their stock at a price well above the current value market price.
Tender offer premium
The premium offered above the current market price in a tender offer.
Tenor
The length of time until a loan is due. For example, a loan is taken out with a two year tenor. After one year passes, the tenor of the loan is one year.
Term
The period of time during which a contract is in force.
Term bonds
Bonds whose principal is payable at maturity. Often referred to as bullet-maturity bonds or simply bullet bonds. Related: Serial bonds.
Term certificate
A certificate of deposit with a longer time to maturity.
Term Fed funds
Fed funds sold for a period of time longer than overnight.
Term insurance
Provides a death benefit only, no build up of cash value.
Term life insurance
A contract that provides a death benefit but no cash build up or investment component. The premium remains constant only for a specified term of years, and the policy is usually renewable at the end of each term.
Term loan
A bank loan, typically with a floating interest rate, for a specified amount that matures in between one and ten years, and requires a specified repayment schedule.
Term to maturity
The time remaining on a bond's life, or the date on which the debt will cease to exist and the borrower will have completely paid off the amount borrowed. See: Maturity.
Term premiums
Excess of the yields to maturity on long-term bonds over those of short-term bonds.
Term repo
A repurchase agreement with a term of more than one day.
Term structure of interest rates
Relationship between interest rates on bonds of different maturities, usually depicted in the form of a graph often called a yield curve. Harvey shows that inverted term structures (long rates below short rates) have preceded every recession over the past 30 years.
Term trust
A closed-end fund that has a fixed termination or maturity date.
Terminal value
The value of a bond at maturity, typically its par value, or the value of an asset (or an entire firm) on some specified future valuation date. Usually, a perpetuity formula is used. For example, suppose we forecast cash flows through year 10. We make an assumption that year 11 and beyond will be no growth (except for inflation). If the cash flow forecast for year 11 is 100, the firm's discount rate is 12%, and inflation is expected to be 2%, we use the formula V10 = CF11/(disc rate-inflation). Hence, the value is 100/(0.12 - 0.02) that is 1,000. This cash flow needs to be brought back to present value using the formula 1000/(1.12)10, which is 321.97. Note the importance of the inflation assumption.
Terms of Delivery
The part of a sales contract that indicates the point at which title and risk of loss of merchandise pass from the seller to the buyer. See: Incoterms.
Terms of sale
Conditions under which a firm proposes to sell its goods or services for cash or credit.
Terms of trade
The weighted average of a nation's export prices relative to its import prices.
Territorial tax system
A tax system that taxes domestic income but not foreign income. Territorial tax regimes are found in Hong Kong, France, Belgium, and the Netherlands.
Test
The event of a price movement that approaches a support level or a resistance level established earlier by the market. A test is passed if prices do not go below the support or resistance level, and the test is failed if prices go on to new lows or highs.
Testamentary trust
A trust created by a will, that is scheduled to occur after the maker's death.
The Curb
Another name for the American Stock Exchange (AMEX).
The Desk
The trading desk at the Federal REserve Bank of New York through which open market purchases and sales of government and federal agancy securities are made. The desk maintains direct telephone communication with major government securities dealers. A "foreign desk" at the Federal Reserve Bank of New York conducts transactions in the foregin exchange market.
Theoretical futures price
The equilibrium futures price. Also called the fair price.
Theoretical spot rate curve
A curve derived from theoretical considerations as applied to the yields of actually traded Treasury debt securities, because there are no zero-coupon Treasury debt issues with a maturity greater than one year. Like the yield curve, this is a graphic depiction of the term structure of interest rates.
Theoretical value
Applies to derivative products. Mathematically determined value of a derivative instrument as dictated by a pricing model such as the Black-Scholes model.
Theta
The ratio of the change in an option price to the decrease in time to expiration. Also called time decay.
Thin market
A market in which trading volume is low, and consequently bid and asked quotes are wide and the instrument traded is not very liquid. Very little stock to buy or sell.
Thinly traded
Infrequently traded.
Third market
Exchange-listed securities trading in the OTC market.
Thirty-day visible supply
The total volume in dollars of municipal bonds with maturities of 13 months or more that should reach the market within 30 days.
Thirty-day wash rule
IRS rule stating that losses on a sale of stock may not be used as tax shelter if equivalent stock is purchased 30 days or less before or after the sale of the stock.
Three-phase DDM
A version of the dividend discount model that applies a different expected dividend rate depending on a company's life-cycle phase: growth phase, transition phase, or maturity phase.
Three steps and a stumble rule
A rule predicting that stock and bond prices will fall following three increases in the discount rate by the Federal Reserve. This is a result of increased costs of borrowing for companies and the increased attractiveness of money market funds and CDs over stocks and bonds as a result of the higher interest rates.
Threshold for refinancing
The point when the weighted-average coupon of an MBS is at a level to induce homeowners to prepay the mortgage in order to refinance to a lower-rate mortgage, generally reached when the weighted-average coupon of the MBS is 2 percentage points or more above currently available mortgage rates.
Thrift institution
An organization formed as a depository for primarily consumer savings. Savings and loan associations and savings banks are thrift institutions.
Thrift Institution Advisory Council (TIAC)
A council, established following the passage of the Monetary Control Act of 1980, whose purpose is to provide information and views on the special needs and problems of thrifts. The group is comprised of representatives of savings banks, savings and loan associations, and creditor unions.
Thrift plan
A defined contribution plan in which an employee contributes, usually on a before-tax basis, toward the ultimate benefits that will be provided. The employer usually agrees to match all or a portion of the employee's contributions.
Throughput agreement
An agreement to put a specified amount of product per period through a particular facility. An example is an agreement to ship a specified amount of crude oil per period through a particular pipeline.
Tick
Refers to the minimum change in price a security can have, either up or down. Related: Point.
Tick indicator
A market indicator based on the number of stocks whose last trade was an uptick or a downtick. Used as an indicator of market sentiment or psychology to try to predict the market's trend.
Tick-test rules
SEC-imposed restrictions on when a short sale may be executed, intended to prevent investors from destabilizing the price of a stock when the market price is falling. A short sale can be made only when either (1) the sale price of the particular stock is higher than the last trade price (referred to as an uptick trade) or (2) if there is no change in the last trade price of the particular stock, the previous trade price must be higher than the trade price that preceded it (referred to as a zero uptick).
Ticker symbol
An abbreviation assigned to a security for trading purposes.
Ticker tape
Computerized device that relays to investors around the world the stock symbol and the latest price and volume on securities as they are traded.
Ticket
An abbreviation of order ticket.
Tier 1 and Tier 2
Descriptions of the capital adequacy of banks. Tier 1 refers to core capital while Tier 2 refers to items such as undisclosed resources.
Tight
In line with or extremely close to the inside market or last sale in a stock (+/- 1/8). On the money.
Tight market
A market in which volume is high, trading is active and highly competitive, and consequently spreads between bid and ask prices are narrow.
Tight money
When a restricted money supply makes credit difficult to secure. The antithesis of tight money is easy money.
Tiki
Tick of Dow Jones Industrial Average component issues.
Tilted portfolio
An indexing strategyy that is linked to active management through the emphasis of a particular industry sector, selected performance factors such as earnings momentum, dividend yield, price-earnings ratio, or selected economic factors such as interest rates and inflation.
Time decay
Related: Theta
Time deposit
Interest-bearing deposit at a savings institution that has a specific maturity. Related: Certificate of deposit.
Time draft
Demand for payment at a stated future date.
Time horizon
The period, usually expressed in years, for which an investor expects to hold an investment.
Time Letter of Credit
See: Usance Letter of Credit.
Time to maturity
The time remaining until a financial contract expires. Also called time until expiration.
Time order
Order that becomes a market or limited price order or is canceled at a specific time.
Time premium
Also called time value, the amount by which an option price exceeds its intrinsic value. The value of an option beyond its current exercise value representing the optionholder's control until expiration, the risk of the underlying asset, and the riskless return.
Time-series analysis
Assessment of relationships between two or among more variables over periods of time.
Time series models
Systems that examine series of historical data; sometimes used as a means of technical forecasting, by examining moving averages.
Time spread strategy
Buying and selling puts and calls with the same exercise price but different expiration dates, and trying to profit from the different premiums of the options.
Time until expiration
The time remaining until a financial contract expires. Also called time to maturity.
Time value
Applies to derivative products. Portion of an option price that is in excess of the intrinsic value, due to the amount of volatility in the stock; sometime referred to as premium. Time value is positively related to the length of time remaining until expiration.
Time value of money
The idea that a dollar today is worth more than a dollar in the future, because the dollar received today can earn interest up until the time the future dollar is received.
Time value of an option
The portion of an option's premium that is based on the amount of time remaining until the expiration date of the option contract, and the idea that the underlying components that determine the value of the option may change during that time. Time value is generally equal to the difference between the premium and the intrinsic value. Related: In the money.
Time value permium
The amount by which an option's total premium exceeds its intrinsic value.
Times-interest-earned ratio
Earnings before interest and tax, divided by interest payments.
Time-weighted rate of return
Related: Geometric mean return
Time-Zone Arbitrage
A form of stale price arbitrage where the pricing discrepencies are due to the primary markets for the underlying securities being closed at the times that the fund is traded. Note that time zone arbitrage is sometimes mistakenly used if it were a pure synonym for stale price arbitrage. These are not synonyms since stale prices can also be due to illiquid stocks or bonds that are not traded frequently.
Timeliness
A source of competitive advantage that depends on being the first to enter a given market with a product or service.
Timing
See: Market timing
Timing option
The seller's choice of when in the delivery month to deliver. A Treasury Bond or note futures contract.
Tip
Information given by one trader to another, which is used in making buy or sell decisions but is not available to the general public.
Tired
Has been strong for a while and will probably fall due to increased supply at current price level (due to e.g. profit taking, technical analysis). Heavy.
Title insurance
Insurance policy that protects a policyholder from future challenges to the title claim a property that may result in loss of the property.
To be announced (TBA)
A contract for the purchase or sale of an MBS to be delivered at an agreed-upon future date but does not include a specified pool number and number of pools or precise amount to be delivered.
Tobin's Q
Market value of assets divided by replacement value of assets. A Tobin's Q ratio greater than 1 indicates the firm has done well with its investment decisions. Named after James Tobin, Yale University economist.
Toehold purchase
Often used in risk arbitrage. Accumulation by an acquirer of less than 5% of the shares of a target company. Once 5% is acquired, the acquirer must file with the SEC and other agencies to explain its intentions and notify the acquiree. See: Rule 13d.
Tokyo Commodity Exchange (TOCOM)
Tokyo exchange for trading futures on gold, silver, platinum, palladium, rubber, cotton yarn, and woolen yarn.
Tokyo International Financial Futures Exchange
Exchange that trades Euroyen futures and options, and futures on the one-year Euroyen, three-month eurodollar, and US dollar/Japanese yen currency.
Tokyo Stock Exchange (TSE)
The largest stock exchange in Japan with the some of the most active trading in the world.
Toll revenue bond
A municipal bond that is repaid with revenues from tolls that are paid by users of the public project built with the bond revenue.
Tolling agreement
An agreement to put a specified amount of raw material per period through a particular processing facility. For example, an agreement to process a specified amount of alumina into aluminum at a particular aluminum plant.
Tom next
Means to "tomorrow next". In the interbank market in Eurodollar deposits and the foreign exchange market, the value (delivery) date on a tom next transaction is the next business day.
Tombstone
Advertisement listing the underwriters of a security issue.
Ton
$100 million in bond trader's terms.
too-big-too-fail
Government practices that protect large banking organizations from the normal discipline of the marketplace because of concerns that such institutions are so important to markets and their positions so intertwined with those of other banks that their failure would be unaccrptably disruptive, financially and economically.
Top
Indicates the higher price one is willing to pay for a stock in an order; implies a not held order.
Top-down approach
A method of security selection that starts with asset allocation and works systematically through sector and industry allocation to individual security selection.
Top-down equity management style
Investment style that begins with an assessment of the overall economic environment and makes a general asset allocation decision regarding various sectors of the financial markets and various industries. The bottom-up manager, in contrast, selects specific securities within the particular sectors.
Top-heavy
At a price level where supply is exceeding demand. See: Resistance level.
Topline growth
Growth in revenues. Also see: Bottomline growth.
Topping out
Denoting a market or a security that is at the end of a period of rising prices and can now be expected to stay on a plateau or even to decline.
Toronto Stock Exchange (TSE)
Canada's largest stock exchange, trading approximately 1,200 company stocks and 33 options.
Total
Complete amount of buy or sell interest, as opposed to having more behind it. See: Partial.
Total asset turnover
The ratio of net sales to total assets.
Total capitalization
The total long-term debt and all types of equity of a company that constitutes its capital structure.
Total cost
The price paid for a security plus the broker's commission and any accrued interest that is owed to the seller (in the case of a bond).
Total debt-to-equity ratio
A capitalization ratio comparing current liabilities plus long-term debt to shareholders' equity.
Total dollar return
The dollar return on a nondollar investment, which includes the sum of any dividend/interest income, capital gains or losses, and currency gains or losses on the investment. See also: Total return.
Total Market Capitalization
The total market value of all of a firm's outstanding securities.
Total return
In performance measurement, the actual rate of return realized over some evaluation period. In fixed income analysis, the potential return that considers all three sources of return (coupon interest, interest on coupon interest, and any capital gain/loss) over some investment horizon.
Total return for calendar year
The profit or loss realized by an investment at the end of a specified calendar year, stated as the percentage gained or lost per dollar invested on January 1.
Total revenue
Total sales and other revenue for the period shown. Known as "turnover" in the U.K.
Total risk
The sum of systematic and unsystematic risk.
Total volume
The total number of shares or contracts traded on national and regional exchanges in a stock, bond, commodity, future, or option on a certain day.
Touch, the
Mainly applies to international equities. Inside market in London terminology.
Tough on price
Firm price mentality at which one wishes to transact stock, often at a discount/premium that is not available at the time.
Tout
To promote a security in order to attract buyers.
Toxic Convertible
Used by companies that are in such bad shape, that there is no other way to get financing. This instrument is similar to a convertible bond, but convertible at a discount to the share price at issuance and for a fixed dollar amount rather than a specific number of shares. The further the stock falls, the more shares you get. Popular in the mid to late 1990s. Also known as death spiral convertibles or floorless convertibles.
Tracers
Refers to investment trusts which are populated by corporate bonds. In October 2001, Morgan Stanley's Tradable Custodial Receipts (Tracers) was launched. Tracers contain a number of coporate bonds and credit default swaps which are selected for liquidity and diversity. Lehman Brothers launched a similar product, Targeted Return Index Securities (Trains) in January 2002. Both contain investment grade bonds. If a bond falls out of the investment grade category, it is either liquidated from the trust or delivered to the investor. Both Tracers and Trains are 144a trust structures and are only available to qualified buyers because they are considered private securities due to the trust structure.
Tracking error
In an indexing strategy, the standard deviation of the difference between the performance of the benchmark and the replicating portfolio.
Tracking stock
Best defined with an example. Suppose Company A purchases a business from Company B and pays B with 1 million shares of A's stock. The agreement provides that B cannot sell the 1 million shares for 60 days, and also prohibits B from hedging by purchasing put options on A's shares or short-selling A's shares. B is worried that the market may fall in the next 60 days. B could hedge by purchasing put options or selling the futures on the S&P 500. However, it is possible that A's business is much more cyclical than the S&P 500. One solution to this problem is to find a tracking stock. This is a stock that has high correlation with A. Let us call it Company C. The solution is to sell short or buy protective put options on this tracking stock C. This protects B from fluctuations in the price of A's stock over the next 60 days. Because the degree of the protection is related to the correlation of A and C's stock, it is extremely unlikely that the protection is perfect. Multidivisional firms have used a form of restructuring called tracking stock since 1984 to segment the performance of a particular division -- similar to a spin-off or carve-out, except that the parent firm does not relinquish control of the tracked division. Previously, this was known as alphabet stock, but the technically correct name is tracking stock (e.g., EDS traded for years as a tracking stock of GM). This is a way to reward managers for good divisional performance with an equity that is tied to their division-rather than potentially penalizing them compensation for bad performance in a division they have no control over.
Trade
An oral (or electronic) transaction involving one party buying a security from another party. Once a trade is consummated, it is considered "done" or final. Settlement occurs 1-5 business days later.
Trade acceptance
Written demand that has been accepted by an industrial company to pay a given sum at a future date. Related: Banker's acceptance.
Trade away
Trade execution by another broker/dealer.
Trade balance
Overall result of a country's exports.
Trade credit
Credit one firm grants to another firm for the purchase of goods or services.
Trade date
The date that the counterparties in an interest rate swap commit to the swap. Also, the day on which a security or a commodity future trade actually takes place. Trades generally settle (are paid for) 1-5 business days after a trade date. With stocks, settlement is generally 3 business days after the trade. The settlement date usually follows the trade date by five business days, but varies depending on the transaction and method of delivery used.
Trade debt
Accounts payable.
Trade deficit or surplus
The difference in the value of a nation's imports over exports (deficit) or exports over imports (surplus).
Trade draft
A draft addressed to a commercial enterprise. See: Draft.
Trade flat
For convertibles, trade without accrued interest. Preferred stock always "trades flat," as do bonds on which interest is in default or is in doubt. In general, trade in and out of a position at the same price, neither making a profit nor taking a loss.
Trade house
A firm that deals in actual commodities.
Trade Lanes
The direction of trade, e.g. US to Europe.
"Trade me out"
Work out of one's long position (usually created by committing firm principal to complete a trade block trade) by selling stock. Antithesis of "buy them back."
Trade on the wire
Immediately give a bid or offer to a salesperson without checking the floor conditions (listed), dealer depth (OTC) or customer interest. An aggressive trading posture.
Trade on top of
Trade at a narrow speed or no spread in basis points relative to some other bond yield, usually Treasury bonds.
Trade reporting
Dealer: In a trade between two registered Market Participants (MP), only the sell side reports the trade. Auction: In a trade between two member firms, only the sell side reports the trade. Dealer: In a trade between a registered MP and a non-registered MP (Market Maker not registered in a particular stock, an ECN, etc.), the registered MP reports the trade as a buy or sell. Auction: Trading can occur ONLY between two member firms. (Thus, a buy is never reported.)
Trade Surplus
A nation's excess of exports over imports during a given time frame.
Trade-weight value of the dollar
The value of the dollar pegged to, a market basket of selected foreign currencies. The Federal Reserve calculates a trade-weighted value of the dollar based on the weighted-average exchange value of the dollar against the currencies of 10 industrial countries.
Trademark
A distinctive name or symbol used to identify a product or company and build recognition. Trademarks may be registered with the US Patent and Trademark Office.
Traders
Individuals who take positions in securities and their derivatives with the objective of making profits. Traders can make markets by trading the flow. When they do this, their objective is to earn the bid/ask spread. Traders can also take proprietary positions in which they seek to profit from the directional movement of prices or spread positions.
Trades by appointment
A stock that is very difficult to trade to because of illiquidity.
Trading
Buying and selling securities.
Trading Ahead
A New York Stock Exchange rule violation. Basically, in this situation the specialist puts their firm's interest ahead of the investor's interest. Consider an example. Suppose that the specialist simultaneously receives orders from two investors, one to sell 5,000 shares of XYZ and one to buy 5,000 shares of XYZ. Normally, these orders are matched. However, suppose that the specialist substitutes (matches) her own firm's 5,000 shares of XYZ. That is, the firm's own shares are sold instead of the order that came in previously. This disadvantages the buyer because the very next transaction will be the order to sell 5,000 shares of XYZ (which will likely put downward pressure on the price). Notice that the firm has bailed out of XYZ at a higher price than if the order was reversed (the specialist's firm selling afterwards). Trading ahead is part of what is known as negative obligation. Trading ahead should not be confused with front_running.
Trading authorization
A document (power of attorney) a customer gives to a broker in order that the broker may buy and sell securities on behalf of the customer.
Trading costs
Costs of buying and selling marketable securities and borrowing. Trading costs include commissions, slippage, and the bid/ask spread. See: Transactions costs.
Trading desk (dealing desk)
Personnel at an international bank who trade spot and forward foreign exchange.
Trading dividends
Maximizing a firm's revenues by purchasing stock in other firms in order to collect the maximum amount of dividends of which 70% is tax-free.
Trading halt
When trading of a stock, bond, option or futures contract is stopped by an exchange while news is being broadcast about the security. See: Suspended trading.
Trading limit
The exchange-imposed maximum daliy price change that a futures contract or futures option contract can undergo.
Trading paper
CDs purchased by accounts that are likely to resell them. The term is commonly used in the Euromarket.
Trading pattern
Long-range direction of a security or commodity futures price, charted by drawing one line connecting the highest prices the security has reached and another line connecting the lowest prices at which the security has traded over the same period. See: Technical analysis.
Trading posts
The positions on the floor of a stock exchange where the specialists stand and securities are traded.
Trading price
The price at which a security is currently selling.
Trading profit
The profit earned on short-term trades of securities held for less than one year, subject to tax at normal income tax rates.
Trading range
The difference between the high and low prices traded during a period of time; for commodities, the high/low price limit an exchange establishes for a specific commodity for any one day's trading.
Trading symbol
See: Ticker symbol
Trading unit
The number of shares of a particular security that is used as the acceptable quantity for trading on the exchanges.
Trading variation
The increments to which securities prices are rounded up or rounded down.
Trading volume
The number of shares transacted every day. As there is a seller for every buyer, one can think of the trading volume as half of the number of shares transacted. That is, if A sells 100 shares to B, the volume is 100 shares.
Traditional IRA
A tax-deferred individual retirement account that allows annual contributions of up to $2000 for each income earner. Contributions are fully deductible for all individuals who are not active participants in employer-sponsored plans or for plan participants within certain income ranges.
Traditional view (of dividend policy)
An argument that, "within reason," investors prefer higher dividends to lower dividends because the dividend is sure but future capital gains are uncertain.
Trailing earnings
Past earnings. Often used in the context of the price earnings ratio. This ratio is usually distinguished as price to trailing earnings (today's price divided by the most recent 12 months of earnings) versus price to prospective earnings (today's price divided by consensus forecast earnings for the next 12 months).
Trailing sales
Past sales. Often used in the valuation of companies that have negative cash flows or earnings. The company is said to be valued at some multiple of past sales - usually, the last 12 months sales.
Trains
Refers to investment trusts which are populated by corporate bonds. In October 2001, Morgan Stanley's Tradable Custodial Receipts (Tracers) was launched. Tracers contain a number of coporate bonds and credit default swaps which are selected for liquidity and diversity. Lehman Brothers launched a similar product, Targeted Return Index Securities (Trains) in January 2002. Both contain investment grade bonds. If a bond falls out of the investment grade category, it is either liquidated from the trust or delivered to the investor. Both Tracers and Trains are 144a trust structures and are only available to qualified buyers because they are considered private securities due to the trust structure.
Tranche
One of several related securities offered at the same time. Tranches from the same offering usually have different risk, reward, and/or maturity characteristics.
Transaction
The delivery of a security by a seller and its acceptance by the buyer.
Transaction account
A checking or similar account from which transfers can be made to third parties. Demand-deposit accounts, negotiable order of withdrawal NOW accounts, automatic transfer service (ATS) accounts, and credit union share draft accounts are examples of transaction accounts at banks and other depository institutions.
Transactions costs
The time, effort, and money necessary, including such things as commission fees and the cost of physically moving the asset from seller to buyer. Transcations costs should also include the bid/ask spread as well as price impact costs (for example a large sell order could lower the price). Related: Round-trip transactions costs, information costs, search costs.
Transaction demand (for money)
The money needed to accommodate a firm's expected cash transactions.
Transaction exposure
Risk to a firm with known future cash flows in a foreign currency, that arises from possible changes in the exchange rate. Related: Translation exposure.
Transaction fee
A charge an intermediary, such as a broker-dealer or a bank, assesses for assisting in the sale or purchase of a security.
Transaction Insured Trade Acceptance Locator (TITAL)
A trade acceptance through an insurance entity (rather than a bank) which is conditional upon exporter performance.
Transaction loan
A loan extended by a bank for a specific purpose. Lines of credit and revolving credit agreements involve by contrast loans that can be used for various purposes.
Transaction tax
Applies mainly to international equities. Levies on a deal that foreign governments sometimes charge.
Transaction risk
The risk of changes in the home currency value of a specific future foreign currency cash flow.
Transactions motive
A desire to hold cash in order to conduct cash-based transactions.
Transcript of Account
A listing of all prior and present registered securityholder account information.
Transfer
A change of ownership from one person or party to another.
Transfer agent
Individual or institution a company appoints to look after the transfer of securities.
Transfer On Death (TOD)
The process of changing title of a security from one name to another upon the death of one of the titleholders.
Transfer payments
Payments from a government to its citizens, such as welfare and other government benefits.
Transfer price
The price at which one unit of a firm sells goods or services to another unit of the same firm.
Transfer risk
The risk associated with the possibility of a currency not being able to be sent out of the country, usually due to central bank restrictions or a national debt rescheduling.
Transfer tax
A small federal tax on the movement of ownership of all bonds (except obligation of the US, foreign governments, states, and municipalities) and all stocks.
Transferable letter of credit
Document that allows the first beneficiary on a standby bank assurance of funds to transfer all or part of the original letter of credit to a third party.
Transferable Stock Options
Options that provide by their terms that they may be transferred by the optionee, generally only to a family member or to a trust, limited partnership or other entity for the benefit of family members, or to a charity.
Transferable put right
An option issued by a firm to its shareholders to sell the firm one share of its common stock at a fixed price (the strike price) within a stated period (the time to maturity). The put right is "transferable" because it can be traded in the capital markets.
Transferee
The party who has received the benefits of a letter of credit by action of a transfer.
Transferor
The beneficiary of a transferable letter of credit who causes a bank to transfer the credit to another party.
Transshipment
The passing goods from one ocean vessel to another.
Transition phase
A stage of development when a company begins to mature and its earnings decelerate to the rate of growth of the economy as a whole. Related: Three-phase DDM.
Translation exposure
Risk of adverse effects on a firm's financial statements that may arise from changes in exchange rates. Related: Transaction exposure.
Translation Risk
The risk of changes in the reported home currency accounting results of foreign operations due to changes in currency exchange rates.
Transmittal letter
A letter describing the contents and purpose of a transaction delivered with a security that is changing ownership.
Travel and entertainment expense
Funds spent on business travel and entertainment that qualify for a tax deduction of 50% of the amount claimed.
Treasurer
The corporate officer responsible for designing and implementing a firm's financing and investing activities.
Treasurer's check
A check issued by a bank to make a payment. Treasurer's checks outstanding are counted as part of a bank's reservable deposits and as part of the money supply.
Treasuries
Related: Treasury securities
Treasury
US Department of the Treasury, which issues all Treasury bonds, notes, and bills as well as overseeing agencies. Also, the department within a corporation that oversees its financial operations including the issuance of new shares.
Treasury bills
Debt obligations of the US Treasury that have maturities of one year or less. Maturities for T-bills are usually 91 days, 182 days, or 52 weeks. Treasury bills are sold at a discount from face value and do not pay interest before maturity. The interest is the difference between the purchase price of the bill and the amount that is paid to you either at maturity (this amount is the face value) or when you sell the bill prior to maturity.
Treasury bonds
Debt obligations of the US Treasury that have maturities of more than 10 years.
Treasury certificates
From 1963 to 1975, the Treasury issued something called a "Treasury Certificates". It was a nonmarketable, public issue with a short maturity, usually three months and never more than a one year. They were issued once or twice every month with odd interest rates (such as 5.471% and 6.053%) and sold at par.
Treasury direct
A system allowing an individual investor to make a noncompetitive bid on US Treasury securities and thus avoid broker-dealer fees.
Treasury Inflation-Indexed Securities (TIIS)
Refers to a broad range of U.S. Treasury securities that are inflation indexed. The most popular are the TIPS. The index for measuring the inflation rate is the non-seasonally adjusted U.S. City Average All Items Consumer Price Index for All Urban Consumers (CPI-U), published monthly by the Bureau of Labor Statistics (BLS).
Treasury Inflation-Protected Security (TIPS)
First issued by the U.S. Treasury in 1997, these Treasury bonds attempt to protect investors against fluctuations in inflation by linking the principal amount to the consumer price index. Each year, the principal is adjusted by the inflation rate during the previous year. The index for measuring the inflation rate is the non-seasonally adjusted U.S. City Average All Items Consumer Price Index for All Urban Consumers (CPI-U), published monthly by the Bureau of Labor Statistics (BLS). These bonds are taxable. Indeed, one must pay tax on both the interest and the increase in principal. TIPS are one of two types of inflation-indexed securities sold by the U.S. Treasury; the other type is Series I Savings Bonds.
Treasury Investors Growth Receipt (TIGER)
US government-backed bonds without coupons, meaning that the bondholders do not receive the periodic interest payments. The principal of the bond and the individual coupons are sold separately.
Treasury notes
Debt obligations of the US Treasury that have maturities of more than one year, but not more than 10 years.
Treasury securities
Securities issued by the US Department of the Treasury.
Treasury Shares
Shares issued in the name of the corporation. The shares are considered issued, but not outstanding.Usually refers to stock that was once traded in the market but has since been repurchased by the corporation. Treasury stock not considered when calculating dividends or earnings per share.
Treasury stock
Common stock that has been repurchased by the company and held in the company's treasury.
" Treat me subject "
In the equities market, a conditional bid or offer. "My bid or offer is not firm, but is subject to confirmation between other parties and to market changes."
Trend
The general direction of the market.
Trend Ratio Analysis
The comparison of the successive values of each ratio for a single firm over a number of years.
Trendline
A technical chart line that depicts the past movement of a security and that is used in an attempt to help predict future price movements.
Treynor Index
A measure of the excess return per unit of risk, where excess return is defined as the difference between the portfolio's return and the risk-free rate of return over the same evaluation period and where the unit of risk is the portfolio's beta. Named after Jack Treynor.
T-Rex Fund
A large venture capital fund (over one billion dollars). Such funds are known for imposing strong discipline on the firms they fund.
Triangular arbitrage
Striking offsetting deals among three markets simultaneously to obtain an arbitrage profit.
Trickle down
An economic theory that the support of businesses that allows them to flourish will eventually benefit middle- and lower-income people, in the form of increased economic activity and reduced unemployment.
TRIN
Name derived from TRading INdex. Also known as an ARMS index. The index is usually calculated as the number of advancing issues divided by the number of declining issues. This, in turn, is divided by the advancing volume divided by the declining volume. If there is considerably more advancing volume relative to declining volume this will tend to reduce the index (i.e. increase the denominator). Hence, a value less than 1.0 is bullish while values greater than 1.0 indicate bearish demand. The index often is smoothed with a simple moving average.
Triple net lease
A lease providing that the tenant pay for all maintenance expenses, plus utilities, taxes, and insurance. This results in lower risk for investors, who usually form a limited partnership.
Triple tax-exempt
Municipal bonds featuring federal, state, and local tax-free interest payments.
Triple witching hour
The four times a year that the S&P futures contract expires at the same time as the S&P 100 index option contract and option contracts on individual stocks. It is the last trading hour on the third Friday of March, June, September, and December, when stock options, futures on stock indexes, and options on these futures expire concurrently. Massive trades in index futures, options, and underlying stock by hedge strategists and arbitrageurs cause abnormal activity (noise) and volatility.
Trough
The transition point between economic recession and recovery.
True interest cost
For a security such as commercial paper that is sold on a discount basis, true interest cost is the coupon rate required to provide an identical return assuming a coupon-bearing instrument of like maturity that pays interest in arrears.
True lease
A contract that qualifies as a valid lease agreement under the Internal Revenue Code.
Trust
A fiduciary relationship calling for a trustee to hold the title to assets for the benefit of the beneficiary. The person creating the trust, who may or may not also be the beneficiary, is called the grantor.
Trust company
An organization that acts as a fiduciary and administers trusts.
Trust deed
Agreement between trustee and borrower setting out terms of a bond.
Trust fund transaction
An intra budgetary financial arrangement in which both payments and receipts occur within the same trust fund group.
Trust Indenture Act of 1939
A law that requires all corporate bonds and other debt securities to be issued subject to indenture agreements and comply with certain indenture provisions approved by the SEC.
Trust receipt
Receipt for goods that are to be held in trust for the lender.
Trustee
Agent of a bond issuer who handles the administrative aspects of a loan and ensures that the borrower complies with the terms of the bond indenture.
Trustee in bankruptcy
An appointed trustee who supervises and administers the affairs of a bankrupt company or individual.
TSE 300 (Toronto Stock Exchange 100 index)
Canadian form of a S&P 500.
Truth in lending law
Legislation governing the granting of credit, that requires lenders to disclose the true cost of loans and the actual interest rates and terms of the loans in a manner that is easily understood.
TT&L account
Treasury tax and loan account at a bank.
Turkey
A losing investment.
Turn
In the equities market, a reversal; unwind.
Turnaround
Securities bought and sold for settlement on the same day. Also describes a firm that has been performing poorly, but changes its financial course and improves its performance.
Turnaround time
Time available or needed to effect a turnaround.
Turnkey construction contract
A type of construction contract under which the construction firm is obligated to complete a project according to prespecified criteria for a price that is fixed at the time the contract is signed.
Turnover
For mutual funds, a measure of trading activity during the previous year, expressed as a percentage of the average total assets of the fund. A turnover rate of 25% means that the value of trades represented one-fourth of the assets of the fund. For finance, the number of times a given asset, such as inventory, is replaced during the accounting period, usually a year. For corporate finance, the ratio of annual sales to net worth, representing the extent to which a company can grow without outside capital. For markets, the volume of shares traded as a percent of total shares listed during a specified period, usually a day or a year. For Great Britain, total revenue. Percentage of the total number of shares outstanding of an issue that trades during any given period.
Turnover rate
Measures trading activity during a particular period. Portfolios with high turnover rates incur higher transaction costs and are more likely to distribute capital gains, which are taxable to nonretirement accounts.
12B-1 fees
The percent of a mutual fund's assets used to defray marketing and distribution expenses. The amount of the fee is stated in the fund's prospectus. The SEC has recently proposed that 12B-1 fees in excess of 0.25% be classed as a load. A true no load fund has neither a sales charge nor a 12b-1 fee.
12B-1 funds
Mutual funds that do not charge an up-front or back-end commission, but instead take out up to 1.25% of average daily fund assets each year to cover the costs of selling and marketing shares, an arrangement allowed by the SEC's Rule 12B-1 (passed in 1980).
Twenty bond index
A benchmark indicator of the level of municipal bond yields. It consists of the yields on 20 general obligation municipal bonds with 20-year maturities with an average rating equivalent to a1l.
Twenty-day period
The period during which the SEC inspects registration statement and preliminary prospectus prior to a new issue or secondary distribution.
20% cushion rule
Guideline that revenues from facilities financed by municipal bonds should exceed the operating budget plus maintenance costs and debt service by at least 20% to allow for unforeseen expenses.
25% rule
The guidelines that bonded debt over 25% of a municipality's annual budget is excessive.
Twisting
Convincing a customer that trades are necessary in order to generate a commission. This is an unethical practice.
Two dollar broker
Floor broker of the NYSE, who executes orders for other brokers having more business at that time than they can handle with their own private floor brokers or who do not have their exchange member on the floor.
Two-factor model
Usually, Fischer Black's zero-beta version of the capital asset pricing model. It may also refer to another type of model whereby expected returns are generated by any two factors.
Two-fund separation theorem
The theoretical result that all investors will hold a combination of the risk-free asset and the market portfolio.
Two-sided market
A market in which both bid and asked prices, good for the standard unit of trading, are quoted. When customers or market makers are lined up on both sides (buy and sell) of a stock.
Two-state option pricing model
A pricing equation allowing an underlying asset to assume only two possible (discrete) values in the next time period for each value it can take on in the preceding time period. Also called the binomial option pricing model.
Two-tier bid
Takeover bid in which the acquirer offers to pay more for the shares needed to gain control than for the remaining shares, or to pay the same price but at different times in the merger period; contrasts with any-or-all bid.
Two-tier tax system
Taxation system that results in taxing the income going to shareholders twice.
Type
The classification of an option contract as either a put or a call. UA
The two-character ISO 3166 country code for UKRAINE.
UAH
The ISO 4217 currency code for the Ukraine Hryvnia.
UG
The two-character ISO 3166 country code for UGANDA.
UGX
The ISO 4217 currency code for the Uganda Shilling.
UM
The two-character ISO 3166 country code for UNITED STATES MINOR OUTLYING ISLANDS.
US
The two-character ISO 3166 country code for UNITED STATES.
USD
The ISO 4217 currency code for the USA Dollar.
UY
The two-character ISO 3166 country code for URUGUAY.
UYU
The ISO 4217 currency code for the Uruguay Peso Uruguayo.
UZ
The two-character ISO 3166 country code for UZBEKISTAN.
UZS
The ISO 4217 currency code for the Uzbekistan Sum.
Ultra vires activities
Corporate actions and operations that are not sanctioned by corporate charter, sometimes leading to shareholder lawsuits.
Ultradot
Applies to derivative products. Firm proprietary software that stores, and sends baskets of stock through SEAQ to either the NYSE or the curb for program trading.
Ultra-short-term bond fund
A mutual fund that invests in bonds with very short maturity periods, usually one year or less.
Umbrella personal liability policy
A liability insurance policy that provides protection against damages not covered by standard liability policies, such as large jury awards in lawsuits.
Umbrella policy
Insurance for exports of an exporter whose issuer handles all administrative requirements.
Unamortized bond discount
Par value of a bond less the proceeds received from the sale of the bond, less whatever portion has been amortized.
Unamortized premiums on investments
The unexpensed portion of the difference between the price paid for a security and its par value.
Unbiased expectations hypothesis
Theory that forward exchange rates are unbiased predictors of future spot rates. See Forward parity.
Unbiased predictor
A theory that spot prices at some future date will be equal to today's forward rates.
Unbundling
Separation of a multinational firm's transfers of funds into discrete flows for specific purposes. See: Bundling.
Uncollected funds
The amount of bank deposits in the form of checks that have not yet been paid by the banks on which the checks are drawn.
Uncollectible account
An account which cannot be collected by a company because the customer is not able to pay or is unwilling to pay.
Unconfirmed Letter of Credit
A letter of credit which has not been guaranteed or confirmed by any bank other than the bank that opened it. The advising bank merely informs the beneficiary of the letter of credit terms and conditions.
Uncovered call
A short call option position in which the writer does not own shares of underlying stock represented by the option contracts. Uncovered calls are much riskier for the writer than a covered call, where the writer of the uncovered call owns the underlying stock. If the buyer of a call exercises the option to call, the writer would be forced to buy the asset at the current market price. Also called a "naked" asset.
Uncovered call writing
A short call option position in which the writer does not own an equivalent position in the underlying security represented by his option contracts.
Uncovered options
See: Naked options
Uncovered put
A short put option position in which the writer does not have a corresponding short stock position or has not deposited, in a cash account, cash or cash equivalents equal to the exercise value of the put. The writer has pledged to buy the asset at a certain price if the buyer of the option chooses to exercise it. Uncovered put options limit the writer's risk to the value of the stock (adjusted for premium received.) Also called "naked" puts.
Uncovered Put writing
A short put option position in which the writer does not have a corresponding short position in the underlying security or has not deposited, in a cash account,
Under the belt
Long position in a stock.
Underbanked
When an originating investment banker cannot find enough firms to underwrite a new issue.
Underbooked
Describes limited interest by prospective buyers in a new issue of a security during the preoffering registration period.
Undercapitalized
A business has insufficient capital to carry out its normal functions.
Underfunded pension plan
A pension plan that has a negative surplus (i.e., liabilities exceed assets).
Underinvestment problem
The mirror image of the asset substitution problem, in that stockholders refuse to invest in low-risk assets to avoid shifting wealth from themselves to debtholders.
Underlying
What supports the security or instrument that parties agree to exchange in a derivative contract.
Underlying asset
The security or property or loan agreement that an option gives the option holder the right to buy or to sell.
Underlying debt
Municipal bonds issued by government entities but under the control of larger government entities and for which the larger entity shares the credit responsibility.
Underlying futures contract
A futures contract that supports an option on that future, which is executed if the option is exercised .
Underlying security
For options, the security that is subject to purchase or sold upon exercise of an option contract. For example, IBM stock is the underlying security for IBM options. For Depository receipts, the class, series, and number of the foreign shares represented by the depository receipt.
Undermargined account
A margin account that no longer meets minimum maintenance requirements, requiring a margin call on the investor.
Underperform
In general, this means to do worse than some particular benchmark. Mutual Fund XYZ is said to underperform the S&P500 if its return falls short of the S&P500 return. However, this language does not take risk into account. That is, one might have a lower return than the benchmark in a particular year because of lower risk exposure. Underperform is also a term used by analysts to describe the prospects of a particular company. Usually, this means that the company will do worse than its industry average. Related: outperform.
Underpricing
Issuing securities at less than their market value.
Undervalued
A stock price perceived to be too low or cheap, as indicated by a particular valuation model. For instance, some might consider a particular company's stock price cheap if the company's price-earnings ratio is much lower than the industry average. To refer to undervaluation or overvaluation implicitly assumes some model of valuation. It is always possible that the security is valued correctly and that model applied is wrong.
Undervalued security
A security selling below its market value or liquidation value.
Underweight
Usually refers to recommendation that leads an investor to reduce their investment in a particular security or asset class. The reduction is usually with respect to a benchmark. Suppose that U.S. equities compose 40% of the benchmark portfolio. If one thinks the U.S. will underperform, the investor may reduce the exposure to U.S. equity to less than 40%.
Underwithholding
When a taxpayer has withheld too little tax from salary and will therefore owe tax when filing a return.
Underwrite
To guarantee, as to guarantee the issuer of securities a specified price by entering into a purchase and sale agreement. To bring securities to market.
Underwriter
A firm, usually an investment bank, that buys an issue of securities from a company and resells it to investors. In general, a party that guarantees the proceeds to the firm from a security sale, thereby in effect taking ownership of the securities.
Underwriter's discount
See: Gross spread
Underwriting
Acting as the underwriter in the issue of new securities for a firm.
Underwriting agreement
The contract between a corporation issuing new publicly offered securities and the managing underwriter as agent for the underwriting group. Compare to agreement among underwriters.
Underwriting Commission
The fee investment bankers charge for underwriting a security issue.
Underwriting fee
The portion of the gross underwriting spread that compensates the securities firms that underwrite a public offering for their services.
Underwriting income
For an insurance company, the difference between the premiums earned and the costs of settling claims.
Underwriting spread
The income that is generated by the underwriting syndicate and the selling group, which is essentially the difference between the amount paid to the issuer of securities in a primary distribution and the public offering price.
Underwriting syndicate
A group of investment banks that work together to sell new security offerings to investors. The underwriting syndicate is led by the lead underwriter. See also: Lead underwriter.
Underwritten offering
A purchase and sale.
Undigested securities
Newly issued securities that are not purchased because of lack of demand during the initial public offering.
Undiversifiable risk
Related: Systematic risk
Unearned income (revenue)
Income received in advance of the time at which it is earned, such as prepaid rent.
Unearned interest
Interest that has been received on a loan, but that cannot be treated as a part of earnings yet, because the principal of the loan has not been outstanding long enough.
Unemployment rate
The percentage of the people classified as unemployed as compared to the total labor force.
Unencumbered
Property that is not subject to any claims by creditors. For example, securities bought with cash instead of on margin and homes with mortgages paid off.
Unequal Voting
These provisions limit the voting rights of some shareholders and expand those of others. Under time-phased voting, shareholders who have held the stock for a given period of time are given more votes per share than recent purchases. Another variety is the substantial shareholder provision, which limits the voting power of shareholders who have exceeded a certain threshold of ownership.
Unfavorable Balance of Trade
The value of a nation's imports in excess of the value of its exports.
Unfunded debt
Debt maturing within one year (short-term debt). See: Funded debt.
Unfunded pension plan
Provides for the employer to pay out amounts to retirees or beneficiaries as and when they are needed. There is no money put aside on a regular basis. Instead, it is taken out of current income.
Unified tax credit
A federal tax credit that reduces tax liability, dollar for dollar, on lifetime gifts and asset transfers at death.
Uniform Commercial Code (UCC)
Collection of laws dealing with commercial business.
Uniform Customs and Practices (Brochure 500)
International Chamber of Commerce rules (commonly referred to as UCP 500 or ICC 500), that are used for Letters of credit. These letters then become legally binding when written into the text of the letter.
Uniform Gifts to Minors Act (UGMA)
Legislation that provides a tax-effective manner of transferring property to minors without the complications of trusts or guardianship restrictions.
Uniform practice code
Standards of the NASD prescribing procedures for handling over-the-counter securities transactions, such as delivery, settlement date, and ex-dividend date.
Uniform Rules for Collections
International Chamber of Commerce rules on the handling of documentary and clean collections.
Uniform securities agent state law examination
A test required in some states for registered representatives who are employees of member firms of the NASD or over-the-counter brokers.
Uniform Transfers to Minors Act (UTMA)
A law similar to the Uniform Gifts to Minors Act that extends the definition of gifts to include real estate, paintings, royalties, and patents.
Unilateral transfers
Items in the current account of the balance of payments of a country's accounting books that correspond to gifts from foreigners or pension payments to foreign residents who once worked in the particular country.
Unincorporated joint venture
A joint venture in which the legal means of dividing the project's equity is by shareholdings in a company.
Uninsured motorist insurance
Insurance that covers the policyholder and family if they are injured by a hit-and-run or uninsured motorist, assuming the other driver is at fault.
Unique Diversification Benefit
Reduction in the likelihood of financial distress for a conglomerate firm that comes with its diversified investments.
Unique risk
Also called unsystematic risk or idiosyncratic risk. Specific company risk that can be eliminated through diversification. See: Diversifiable risk and unsystematic risk.
Uninvested
Usually refers to cash that could be invested but is being held in reserve.
Unissued stock
Shares authorized in a corporation's charter, but not issued.
Unit
More than one class of securities traded together (e.g., one common share and three subscription warrants).
Unit benefit formula
Method used to determine a participant's benefits in a defined benefit plan. Involves multiplying years of service by the percentage of salary.
Unit investment trust
Money invested in a portfolio whose composition is fixed for the life of the fund. Shares in a unit trust are called redeemable trust certificates, and they are sold at a premium to net asset value.
Unit Share Investment Trust (USIT)
A unit investment trust comprising one unit of prime and one unit of score.
Unit of trading
See: Trading unit.
Unit trust
In the United Kingdom and other foreign markets, an open-end mutual fund.
United States Customs Service
An agency of the Treasury Department charged with enforcing laws relative to imports.
United States government securities
Debt issues of the U.S. government, as distinguished from government-sponsored agency issues.
Universal life
A whole life insurance product whose investment component pays a competitive interest rate rather than the below-market crediting rate.
Universe of securities
A group of stocks having a common feature, such as similar outstanding market capitalization or same product line.
Unleveraged beta
The beta of an unleveraged required return (i.e., no debt) on an investment when the investment is financed entirely by equity.
Unleveraged program
The use of borrowed funds to finance less than 50% of a purchase of assets. In a leveraged program borrowed funds are used to finance more than 50%.
Unleveraged required return
The required return on an investment when the investment is financed entirely by equity (i.e., no debt).
Unlevered cost of equity
The discount rate appropriate for an investment that it is financed with 100% equity.
Unlimited liability
Full liability for the debt and other obligations of a legal entity. The general partners of a partnership have unlimited liability.
Unlimited marital deduction
An Internal Revenue Service provision that allows an individual to transfer an unlimited amount of assets to a spouse, during life or at death, without incurring federal estate or gift tax.
Unlimited tax bond
A municipal bond secured by the pledge to levy taxes until full repayment at an unlimited rate.
Unlisted security
A security traded in the over-the-counter market that is not listed on an orgainzed exchange.
Unlisted trading
Trading in unlisted securities that occurs on an organized exchange to accommodate members. This practice is not permitted at the NYSE.
Unloading
Selling securities or commodities whose prices are dropping to minimize loss.
Unmargined account
A cash account held at a brokerage firm.
Unmatched book
If the average maturity of a bank's liabilities is shorter than that of its assets, it is said to be running an unmatched book. The term is commonly used with the Euromarket. Also refers to entering into OTC derivatives contracts and not hedging by making trades in the opposite direction to another financial intermediary. In this case, the firm with an unmatched book usually hedges its net market risk with futures and options. Related expressions: Open book and short book.
Unpaid dividend
A dividend declared by the directors of a corporation that has not yet been paid.
Unqualified opinion
An independent auditor's opinion that a company's financial statements comply with accepted accounting procedures. Antithesis of qualified opinion.
Unrealized capital gain/loss
An increase/decrease in the value of a security that is not "real" because the security has not been sold. Once a security is sold by the portfolio manager, the capital gains/losses are "realized" by the fund, and any payment to the shareholder is taxable during the tax year in which the security is sold.
Usance
The time allowed for settlement of a draft.
Usance Draft
See: Time Draft
Usance Letter of Credit
A letter of credit payable at a determined future date after presentation of conforming documents.
Unseasoned issue
Issue of a security for which there is no existing market. See: Seasoned issue.
Unsecured debt
Debt that does not identify specific assets that the debtholder is entitled to in case of default.
Unsterilized intervention
Foreign exchange market intervention in which the monetary authorities have not insulated their domestic money supplies from the foreign exchange transactions.
Unsystematic risk
Also called the diversifiable risk or residual risk. The risk that is unique to a company such as a strike, the outcome of unfavorable litigation, or a natural catastrophe that can be eliminated through diversification. Related: Systematic risk.
Unwind a trade
Reverse a securities transaction through an offsetting transaction in the market.
Up
Market indication; willingness to go both ways (buy or sell) at the mentioned volume and market. Print; up on the ticker tape, confirming that the trade has been executed.
Up tick
Plus tick.
Up volume
When a stock closes increases in value on a particular day, the volume in that stock is considered up volume. Related: Down volume.
Upgrading
Raising the quality rating of a security because of new optimism about the prospects of a firm due to tangible or intangible factors. This can increase investor confidence and push up the price of the security.
Upset price
The minimum price at which a seller of property will accept a bid at an auction.
Upside potential
The amount by which analysts or investors expect the price of a security may increase.
Upstairs market
A network of trading desks for the major brokerage firms and institutional investors, which communicate with each other by means of electronic display systems and telephones to facilitate block trades and program trades.
Upstairs order
Used for listed equity securities. Off-floor order.
Upswing
An upward turn in a security's price after a period of falling prices.
Uptick rule
SEC rule that selling short is allowed only on an up tick.
Uptick trade
A transaction that takes place at a higher price than the preceding transaction involving the same security. Related: Tick test rules.
Useful life
The expected period of time during which a depreciating asset will be productive.
US Treasury bill
US government debt with a maturity of less than a year.
US Treasury bond
US government debt with a maturity of more than 10 years.
US Treasury note
US government debt with a maturity of one to 10 years.
U.S. Treasury securities
Interest-bearing obligations if the U.S. government issued by the U.S. Department of the Treasury as a means of borrowing money to meet government expenditures not covered by tax revenues. There are three types of marketable Treasury securities-bills, notes and bonds.
Usury laws
Laws limiting the amount of interest that can be charged on loans.
Utility
A power company that owns or operates facilities used for the generation, transmission, or distribution of electric energy, which is regulated at state and federal levels.
Utility function
A mathematical expression that assigns a value to all possible choices. In portfolio theory, the utility function expresses the preferences of economic entities with respect to perceived risk and expected return.
Utility revenue bond
A municipal bond issued to finance the construction of public utility services. These bonds are repaid from the operating revenues the project produces after the utility is finished.
Utility value
The welfare a given investor assigns to an investment with a particular expected return and risk.
V
Fifth letter of a Nasdaq stock symbol indicate that it is when-issued or when-distributed.
VAMI
A way of reporting fund performance whereby each reporting period is indexed at 100 or 1000. Hence, for a fund with a total return of 39% over the year, the VAMI indexed at 100 is 139.
VA
The two-character ISO 3166 country code for HOLY SEE (VATICAN CITY STATE).
VaR
See: Value-at-risk model
VAT
See: Value-added tax
VC
The two-character ISO 3166 country code for SAINT VINCENT AND THE GRENADINES.
VE
The two-character ISO 3166 country code for VENEZUELA.
VEB
The ISO 4217 currency code for the Venezuelan Bolivar.
VG
The two-character ISO 3166 country code for VIRGIN ISLANDS, BRITISH.
VI
The two-character ISO 3166 country code for VIRGIN ISLANDS, U.S..
VN
The two-character ISO 3166 country code for VIET NAM.
VND
The ISO 4217 currency code for the Vietnamese Dong.
VRDB
See: Variable-rated demand bond
VU
The two-character ISO 3166 country code for VANUATU.
VUV
The ISO 4217 currency code for the Vanuatu Vatu.
VWAP
The volume-weighted average price.
Validated Export License
Document issued by the U.S. government (BXA), authorizing the export of specific commoditites to a specified foreign country within a specified time period.
Valuation
Determination of the value of a company's stock based on earnings and the market value of assets.
Valuation Clause
Stipulates a fixed sum for insured property in the event of loss when included in a marine cargo insurance policy.
Valuation Opportunity Cost
The potential increase in firm value associated with investments that are for gone due to capital rationing.
Valuation reserve
An allowance to provide for changes in the value of a company's assets, such as depreciation.
Value Added
Value added is the risk adjusted return generated by an investment strategy: the return of the investment strategy minus the return of the benchmark.
Value-added tax
Tax added onto a product during each step of production, from raw material to finished good.
Value additivity principal
When the value of a whole group of assets exactly equals the sum of the values of the individual assets that make up the group of assets. Or, the principle that the net present value of a set of independent projects is just the sum of the net present values of the individual projects.
Value broker
A discount broker whose rates are a percentage of the dollar value of each transaction.
Value date
In the market for Eurodollar deposits and foreign exchange, the delivery date of funds traded. For spot transactions, it is normally on spot transactions two days after a transaction is agreed upon. In the case of a forward foreign exchange trade, it is the future date.
Value dating
When value or credit is given for funds transferred between banks.
Value investing
In the context of asset management, mutual funds, and hedge funds, the a style of investment that focuses on securities with low price to earnings ratios or low price to book ratios. Some of these securities are deemed cheap and are viewed by manager as having a lot of profit potential.
Value Line investment survey
A proprietary service that ranks stocks for timeliness and safety.
Value manager
A manager who seeks to buy stocks that are at a discount to their "fair value" and to sell them at or in excess of that value. Often a value stock is one with a low price-to-book value ratio. Opposite of to growth stock.
Value Maximization
Increases in owners' wealth achieved by maximizing of the value of a firm's common stock.
Value-at-risk model (VaR)
Procedure for estimating the probability of portfolio losses exceeding some specified proportion based on a statistical analysis of historical market price trends, correlations, and volatilities.
Value stocks
Stocks with low price/book ratios or price/earnings ratios. Historically, value stocks have enjoyed higher average returns than growth stocks (stocks with high price/book or P/E ratios) in a variety of countries.
Value stock fund
A mutual fund that emphasizes stocks of companies whose growth opportunities are generally regarded as subpar by the market. A value stock company often pays regular dividend income to shareholders and sells at relatively low prices in relation to its earnings or book value.
Vancouver Stock Exchange (VSE)
A securities and options exchange in Vancouver, British Columbia, (Canada), specializing in venture capital companies.
Vanilla issue
A security issue that has no unusual features.
Variable
An element in a model. For example, in the model RS&Pt+1 = a + b Tbill t + et, where RS&Pt+1 is the return on the S&P in month t+1 and Tbill is the Tbill return at month t, both RS&P and Tbill are "variables" because they change through time; i.e., they are not constant.
Variable annuities
Investment contracts whose issuer pays a periodic amount linked to the investment performance of an underlying portfolio.
Variable cost
A cost that is directly proportional to the volume of output produced. When production is zero, the variable cost is equal to zero.
Variable interest rate
See: Adjustable rate
Variable life insurance policy
A whole life insurance policy that provides a death benefit dependent on the insured's portfolio market value at the time of death. Typically the company invests premiums in common stocks, so variable life policies are referred to as equity-linked policies.
Variable Plan
A plan in which either the number of shares and/or the price at which they will be issued is not known on the grant date.
Variable-price security
A security that sells at a fluctuating market-determined price stocks and bonds are example.
Variable-rate
A varible-rate agreement, as distinguished from a fixed-rate agreement, calls for an interest rate that may fluctuate over the life of the loan. The rate is often tied to an index that reflects changes in market rates of interest. A fluctuation in the rate causes changes in either the payments or the length of the loan term. Limits are often placed on the degree to which the interest rate or the payments can vary.
Variable-rate CDs
Short-term certificate of deposits that pay interest periodically on roll dates. On each roll date, the coupon on the CD is adjusted to reflect current market rates.
Variable-rate demand note
A note that is payable on demand and bears interest tied to a money market rate.
Variable-rate loan
Loan made at an interest rate that fluctuates depending on a base interest rate, such as the prime rate or LIBOR.
Variable rated demand bond (VRDB)
Floating-rate bond that periodically can be sold back to the issuer.
Variable Ratio Write
An option strategy in which the investor owns 100 shares of the underlying security and writes two call options against it, each option having a different striking price.
Variance
A measure of dispersion of a set of data points around their mean value. The mathematical expectation of the average squared deviations from the mean. The square root of the variance is the standard deviation.
Variance-minimization approach to tracking
An approach to bond indexing that uses historical data to estimate the variance of the tracking error.
Variance rule
Specifies the permitted minimum or maximum quantity of securities that can be delivered to satisfy a TBA trade. For Ginnie Mae, Fannie Mae, and Freddie Mac pass-through securities, the accepted variance is plus or minus 2.499999 % per million of the par value of the TBA quantity.
Variation margin
An additional required deposit to bring an investor's equity account up to the margin level when the balance falls below the maintenance margin requirement.
Vault cash
Cash kept on hand in a depository institution's vault to meet day-to-day business needs, such as cashing checks for customers; can be counted as a portion of the institution's required reserves.
Vega
A term that describes the sensitivity of the option price to a one-percent change in volatility.
Velda Sue
Stands for Venture Enhancement and Loan Development Administration for Smaller Undercapitalized Enterprises. A federal agency that buys and pools small business loans made by banks, and then issues securities that are bought by large institutional investors.
Velocity
The number of times a dollar is spent, or turns over, in a specific period of time. Velocity affects the amount of economic activity generated by a given money supply.
Vendor
Seller or supplier.
Venture capital
An investment in a start-up business that is perceived to have excellent growth prospects but does not have access to capital markets. Type of financing sought by early-stage companies seeking to grow rapidly.
Venture capital limited partnership
A partnership between a startup company and a brokerage firm or entrepreneurial company that provides capital for the new business in return for stock in the company and a share of the profits.
Vertical acquisition
Buying or taking over a firm in the same industry in which the acquired firm and the acquiring firm represent different steps in the production process.
Vertical analysis
Dividing each expense item in the income statement of a given year by net sales to identify expense items that rise more quickly or more slowly than a change in sales.
Vertical line charting
A form of technical charting that shows the high, low, and closing prices of a stock or a market on each day on one vertical line with the closing price indicated by a short horizontal mark.
Vertical merger
When one firm acquires another firm that is in the same industry but at another stage in the production cycle. For example, the firm being acquired serves as a supplier to the firm doing the acquiring.
Vertical spread
Simultaneous purchase and sale of two options that differ only in their exercise price. See: Horizontal spread.
Vessel
A conveyance for the transport of goods by water.
Vest
Become applicable or exercisable. A term mainly used on the context of employee stock ownership or option programs. Employees might be given equity in a firm but they must stay with the firm for a number of years before they are entitled to the full equity. This is a vesting provision. It provides incentive for the employee to perform.
Vesting
Nonforfeitable ownership (or partial ownership) by an employee of the retirement account balances or benefits contributed on the employees behalf by an employer. The Tax Reform Act of 1986 established minimum vesting rights for employees based on their years of service—full vesting in five years or 20% vesting per year starting by the end of the third year.
Vesting Schedule
Schedule setting forth when, and to what extent, options become exercisable or restricted stock or stock units are no longer subject to forfeiture (for example, 20% per year over five years).
Veterans Administration (VA) mortgage
A home mortgage loan granted by a lending institution to U.S. veterans and guaranteed by the Veterans Administration.
V formation
A technical chart pattern that follows a letter V form, indicating that the security price has bottomed out, and is now in a bullish trend.
Vienna Convention
Common name for the United Nations Convention on Contracts for the International Sale of Goods. They are a body of law governing the international sale of goods between parties domiciled in member countries.
Vienna Stock Exchange (VSX)
One of the world's oldest exchanges, which accounts for approximately 50% of Austrian stock transactions; the balance are traded OTC.
Vignette
A symbol or pictorial representation of the corporation on a stock certificate. Usually a complicated and artistic design, it is meant to make the counterfeiting of stock certificates as difficult as possible.
Virtual currency option
A new option contract introduced by the PHLX in 1994 that is settled in US dollars rather than in the underlying currency. These options are also called 3-Ds (dollar-denominated delivery).
Visible supply
New muni bond issues scheduled to come to market within the next 30 days.
VIX
The implied volatility on the S&P 100 (OEX) option. This volatility is meant to be a forward looking volatility. It is calculated from both calls and puts that are near the money. The VIX is a popular measure of market risk.
Volatility
A measure of risk based on the standard deviation of the asset return. Volatility is a variable that appears in option pricing formulas, where it denotes the volatility of the underlying asset return from now to the expiration of the option. There are volatility indexes. Such as a scale of 1-9; a higher rating means higher risk.
Volume counting
The SEC dictates how volume is counted. Thus, volume is counted in the same manner on all markets based on the above reporting structure. Any time money changes hands (or any time capital is risked), it must be counted as a trade. Examples: 1) One registered market participant on Nasdaq buys 100 shares into inventory from another registered market participant or from one of its clients. In either case, it is counted as 100 shares. 2) One member firm on the NYSE or Amex buys 100 shares from another member firm. The Specialist matches the order between the two firms and it is counted as 100 shares. 3)The Specialist sells 100 shares from his inventory to a member firm on the NYSE. It is counted as 100 shares. 4) A Market Maker receives an order to buy 100 shares from it's client. It does not have 100 shares in its inventory. It must go buy 100 shares from someone else. It then sells these 100 shares to the client. Thus, there are two trades in this example for a total of 200 shares.
Volume deleted
A note appearing on the consolidated tape when the tape is running behind under heavy trading, meaning that only the stock symbol and price will be shown for trades under 5000 shares.
Volume discount
A reduction in price based on the purchase of a large quantity.
Voluntary accumulation plan
Arrangement allowing shareholders of a mutual fund to purchase shares over a period of time on a regular basis, and in so doing take advantage of dollar cost averaging.
Voluntary bankruptcy
The legal proceeding that follows a petition of bankruptcy.
Voluntary liquidation
Liquidation proceedings that are supported by a company's shareholders.
Voluntary plan
A pension plan supported partially by the employee by pension contributions deducted from each paycheck.
Volatility risk
The risk in the value of options portfolios due to the unpredictable changes in the volatility of the underlying asset.
Voting Instruction Card
The voting card sent to participants in an employee plan giving the trustee of the plan the authority to vote the shares as indicated on a proxy card.
Volume
This is the daily number of shares of a security that change hands between a buyer and a seller. Also known as volume traded. Also see Up volume and Down volume.
Up volume
When a stock closes increases in value on a particular day, the volume in that stock is considered up volume. Related: Down volume.
Voting certificate
Certificates issued by a voting trust to stockholders in exchange for their common stock, which represent all the rights of common stock except voting rights.
Voting rights
The right to vote on matters that are put to a vote of security holders. For example the right to vote for directors.
Voting stock
The shares in a corporation that entitle the shareholder to vote.
Voting trust certificate
A trust in which control of a corporation is given to a few individuals, usually to support reorganization of a corporation without interference.
VXN
The implied volatility on the Nasdaq 100 (NPX) option. This volatility is meant to be a forward looking volatility. It is calculated from both calls and puts that are near the money.
W
Fifth letter of a Nasdaq stock symbol indicating that this particular stock is a warrant.
WACC
See: Weighted average cost of capital
WEBS
See: World Equity Benchmark Series
WF
The two-character ISO 3166 country code for WALLIS AND FUTUNA.
WI
See: When issued
WS
The two-character ISO 3166 country code for SAMOA.
WST
Western Samoa Tala currency
W-8
Certificate of Foreign Status form required by the IRS to tell the payer, transfer agent, broker or other middleman that an employee is a nonresident alien or foreign entity that is not subject to U.S. tax reporting or backup withholding rules.
W-9
Request for Taxpayer Identification Number and Certification form required by the IRS to furnish the payer, transfer agent, broker or other middleman with an employee's social security or taxpayer identification number, in order that the employee not be subject to backup withholding because of under-reporting of interest and dividends on his or her tax return.
W-9
A form used to certify a shareholder's social security or tax identification number as true and correct, in order to avoid federal tax withholding.
Wage assignment
A loan agreement provision allowing the lender to deduct payments from an employee's wages in case of default.
Wage-push inflation
Inflation caused by skyrocketing wages.
Waiting period
Time during which the Securities and Exchange Commission (SEC) studies a firm's registration statement. During this time the firm may distribute a preliminary prospectus.
Waiver of premium
A provision in an insurance policy that allows payment of insurance premiums to be permanently or temporarily stopped in the event the policyholder becomes incapacitated.
Walk away
To take and maintain a position in a stock after going to the floor to consummate a trade. Antithesis of trade me out, buy them back.
Wall Street
Generic term for the securities industry firms that buy, sell, and underwrite securities.
Wall Street analyst
Related: Sell-side analyst
Wallflower
Stock that has fallen out of favor with investors; stock that tends to have a low P/E (price-to-earnings ratio).
Wallpaper
A security with no monetary value.
Wanted for cash
A statement displayed on market tickers indicating that a bidder will pay cash for same-day settlement of a block of a specified security.
War babies
Slang term for the stocks and bonds of corporations in the defense industry.
War chest
Cash kept aside for a takeover or for defense against a takeover bid.
War Risk Insurance
Separate insurance coverage against loss or damage due to acts of war (including objects left over from previous wars).
Warehouse receipt
Evidence that a firm owns goods stored in a warehouse.
Warehousing
The interim holding period from the time of the closing of a loan to its subsequent marketing to capital market investors.
Warrant
A security entitling the holder to buy a proportionate amount of stock at some specified future date at a specified price, usually one higher than current market price. Warrants are traded as securities whose price reflects the value of the underlying stock. Corporations often bundle warrants with another class of security to enhance the marketability of the other class. Warrants are like call options, but with much longer time spans-sometimes years. And, warrants are offered by corporations, while exchange-traded call options are not issued by firms.
Warranty
A guarantee by a seller to a buyer that if a product requires repair or remedy of a problem within a certain period after its purchase, the seller will repair the problem at no cost to the buyer.
Warsaw Stock Exchange
The major securities market of Poland.
Wash
Gains equal losses.
Wash sale
Purchase and sale of a security either simultaneously or within a short period of time, often in order to recognize a tax loss without altering one's position. See: Tax selling.
Wasting asset
An asset that has a limited life and thus decreases in value (depreciates) over time. Also applies to consumed assets, such as oil or gas, and termed "depletion."
Watch list
A list of securities selected for special surveillance by a brokerage, exchange, or regulatory organization; firms on the list are often takeover targets, companies planning to issue new securities, or stocks showing unusual activity.
Watered stock
A stock representing ownership in a corporation that is worth less than the actual invested capital, resulting in problems of low liquidity, inadequate return on investment, and low market value.
Waybill
A document (that looks like a bill of lading) issued by a carrier that describes the goods to be transported and that details the shipping particulars. Waybills are issued by both air carriers (air waybills) and ship lines (sea waybills). They merely indicate that the stated goods were received by the carrier for transport, they do not convey title.
Weak dollar
A depreciated dollar with respect to other currencies, meaning that more dollars are needed to buy a unit of foreign currency. Antithesis of strong dollar.
Weak-form efficiency
A pricing theory that the price of a security reflects the past price and trading history of the security. Theory implies that security prices follow a random walk. Related: Semistrong-form efficiency, strong-form efficiency.
Weak market
A market with few buyers and many sellers and a declining trend in prices.
Wedge
A chart pattern composed of two converging lines connecting peaks and troughs. In the case of falling wedges, the pattern indicates temporary interruptions of upward price rallies. In the case of rising wedges, indicates interruptions of a falling price trend.
Weekend effect
The common recurrent low or negative average return from Friday to Monday in the stock market.
Weight
Either Gross Weight, Net Weight, or Tare Weight.
Weighted average cost of capital (WACC)
Expected return on a portfolio of all a firm's securities. Used as a hurdle rate for capital investment. Often the weighted average of the cost of equity and the cost of debt The weights are determined by the relative proportions of equity and debt in a firm's capital structure.
Weighted average Coupon
The weighted average of the gross interest rates of mortgages underlying a pool as of the pool issue date; the balance of each mortgage is used as the weighting factor.
Weighted average life
See: Average life
Weighted average maturity
The weighted average maturity of an MBS is the weighted average of the remaining terms to maturity of the mortgages underlying the collateral pool at the date issue, using as the weighting factor the balance of each of the mortgages as of the issue date.
Weighted average portfolio yield
The weighted average of the yield of all the bonds in a portfolio.
Weighted average remaining maturity
The average remaining term of the mortgages underlying a MBS.
Well-diversified portfolio
A portfolio that includes a variety of securities so that the weight of any security is small. The risk of a well-diversified portfolio closely approximates the systematic risk of the overall market, and the unsystematic risk of each security has been diversified out of the portfolio.
When distributed
When issued.
When issued (W.I.)
Refers to a transaction made conditionally, because a security, although authorized, has not yet been issued. Treasury securities, new issues of stocks and bonds, stocks that have split, and in-merger situations after the time the proxy has become effective but before completion are all traded on a when-issued basis. With ice.
Whipsawed
Buying stocks just before prices fall and selling stocks just before prices rise in a volatile market, often as the result of misleading signals.
Whisper number or forecast
An unofficial earnings estimate of a company given to clients by a security analyst if there is more optimism or pessimism about earnings than shown in the published number. These are often found on the Internet.
Whisper stock
A stock rumored to be the target of a takeover bid, drawing speculators who hope to make a profit after the takeover is completed.
Whistle blower
A person who has knowledge of fraudulent activities inside a firm or government agency, who is protected from the employer's retribution by federal law.
White knight
A friendly potential acquirer sought out by a target firm that is threatened by a less welcome suitor.
White Noise
The audio equivalent of Brownian motion. Sounds that are unrelated and sound like a hiss. The video equivalent of white noise is "snow" in television reception.
White sheets
Lists of prices published by the National Quotation Bureau for Market Makers.
White-shoe firm
Broker-dealer firms that disdain practices such as hostile takeovers.
White squire
White knight who buys less than a majority interest.
White's rating
A rating of municipal securities, that uses market factors rather than credit considerations to find appropriate yields.
Whitemail
Sale of a large amount of stock by a company that is the target of a takeover bid to a friendly party at below-market prices, so that the raider is forced to buy more of highly priced shares to accomplish the takeover.
Whole life insurance
A contract with both insurance and investment components: (1) It pays off a stated amount upon the death of the insured, and (2) it accumulates a cash value that the policyholder can redeem or borrow against.
Whole loan
A term that distinguishes an investment representing an original mortgage loan from a loan representing a participation with one or more lenders.
Wholesale mortgage banking
The purchasing of loans originated by others, for the acquisition of the servicing rights.
Wholesaler
An underwriter or a broker-dealer who trades with other broker-dealers, rather than with the retail investor.
Wholly owned subsidiary
A subsidiary whose parent company owns virtually 100% of its common stock.
Whoops
A nickname for the Washington Public Power Supply System, which in the 1970s raised billions of dollars through municipal bond offerings, the projects that never materialized. WPPSS defaulted on the payments to bondholders.
WI WI
Come from when issued. Treasury bills trade on a WI basis between the day they are auctioned and the day settlement is made. Bills traded before they are auctioned are said to be traded WI WI
Wide opening
Abnormally wide spread between the bid and asked prices of a security at the opening of a trading session.
Widow-and-orphan stock
A stock paying high dividends with a low beta and noncyclical business, that is an extremely safe investment.
Wiener B&#ouml;rse (Austrian Stock Exchange)
Established in 1771, the major securities market of Austria.
Wild card option
The right of the seller of a Treasury bond futures contract to give notice of intent to deliver at or before 8:00 p.m. Chicago time after the closing of the exchange (3:15 p.m. Chicago time) when the futures settlement price has been fixed. Related: Timing option.
Williams Act
Federal legislation enacted in 1968 (and now constituting Rules 13d and 14d of the Security Exchange Act of 1934) that imposes requirements with respect to public tender offers.
Wilshire indexes
Widely followed performance measurement indexes measuring performance of all U.S.-headquartered equity securities with readily available price data, created by Wilshire Associates, Inc.
Windfall profit
A sudden unexpected profit uncontrolled by the profiting party.
Window
A brokerage firm's cashier department, where delivery of securities and settlement of transactions take place.
Window contract
A guaranteed investment contract purchased with deposits over some future designated time period (the "window"), usually between 3 and 12 months. All deposits made are guaranteed the same credit rating. Related: Bullet contract.
Window dressing
Trading activity near the end of a quarter or fiscal year that is designed to improve the appearance of a portfolio to be presented to clients or shareholders. For example, a portfolio manager may sell losing positions so as to display only positions that have gained in value.
Winnipeg Commodity Exchange
Canada's only agricultural futures and options exchange, located in Manitoba.
Winner's curse
Problem faced by uninformed bidders. For example, in an initial public offering uninformed participants are likely to receive larger allotments of issues that informed participants know are overpriced.
Wire house
A firm operating a private wire to its own branch offices or to other firms, commission houses, or brokerage houses.
Wire room
A department within a brokerage firm that receives customers' orders and transmits the orders to the exchange floor or the firm's trading department.
Wire transfer
Electronic transfer of funds; usually involves large dollar payments.
With Average (W.A.)
Marine cargo insurance coverage providing for partial loss or damage to goods, either with or without a deductible. Also called With particular average.
With dividend
Purchase of shares that entitle the buyer to the forthcoming dividend. Related: Ex-dividend.
With ice
When issued.
With rights
Shares sold accompanied by entitlement the buyer to buy additional shares in the company's rights issue.
Withdrawal plan
Agreement that a mutual fund will disburse automatic periodic redemptions to the investor.
Withholding
Used in the context of securities, the illegal practice of a public offering participant keeping some shares in a private account or with a family member, employee, or dealer to profit from the higher market price of a hot issue.
Used in the context of taxes, the withholding by an employer of a certain amount of an employee's income in order to cover the employee's tax liability. Also used to refer to the withholding by corporations and financial institutions of a flat 10% of interest and dividend payments due to security holders.
Withholding tax
A tax levied by a country of source on income paid, usually on dividends remitted to the home country of the firm operating in a foreign country.
Without
Indicates a one-way market if 70 were bid in the market and there was no offer, the quote would be "70 bid without.".
With Particular Average (WPA)
See: With Average
Without recourse
Giving the lender no right to seek payment or seize assets in the event of nonpayment from anyone other than the party specified in the debt contract (such as a special-purpose entity).
Without Recourse Financing
Financing in which the right of recourse to the party receiving funds is forfeited to the party advancing funds. This may be evidenced by conditions added to the endorsement of a draft being sold by an exporter in order to protect the exporter, if the instrument is not paid at maturity by the original obligor.
Woody
Slang to describe a market moving strongly upward, as in, "This market has a woody."
Working
Attempting to complete the remaining part of a trade, by finding either buyers or sellers for the rest.
Working away
Transacting with another broker/dealer.
Working capital
Defined as the difference between current assets and current liabilities (excluding short-term debt). Current assets may or may not include cash and cash equivalents, depending on the company.
Working capital management
The deployment of current assets and current liabilities so as to maximize short-term liquidity.
Working capital ratio
Working capital expressed as a percentage of sales.
Working control
Control of a corporation by a shareholder or shareholders having less than 51% voting interest because of the wide dispersion of share ownership.
Working order
Standing order in the marketplace, through which a broker bids or offers to fill the order in a series of lots at opportune times in hopes of obtaining the best price.
Workout
Informal repayment or loan forgiveness arrangement between a borrower and creditors.
Workout market
Market indicating prices at which it is believed a security can be bought or sold within a reasonable length of time.
Workout period
Realignment of a temporarily misaligned yield relationship that sometimes occurs in fixed income markets.
World Bank
A multilateral development finance agency created by the 1944 Bretton Woods, (New Hampshire) negotiations. It makes loans to developing countries for social overhead capital projects that are guaranteed by the recipient country. See: International Bank for Reconstruction and Development.
World Equity Benchmark Series (WEBS)
The World Equity Benchmark Series are similar to SPDRs. WEBS trade on the AMEX, and track the Morgan Stanley Capital International (MSCI) country indexes. WEBS are available for: Australia, Austria, Belgium, Canada, France, Germany, Hong Kong, Italy, Japan, Malaysia Free, Mexico, the Netherlands, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.
World investible wealth
The part of world wealth that is traded and is therefore accessible to investors.
World Trade Organization (WTO)
A multilateral agency that administers world trade agreements, fosters trade relations among nations, and solves trade disputes among member countries.
Wrap account
An investment consulting relationship for management of a client's funds by one or more money managers, that bills all fees and commissions in one comprehensive fee charged quarterly.
Wraparound
A financing device that permits an existing loan to be refinanced and new money to be advanced at an interest rate between the rate charged on the old loan and the current market interest rate. The creditor combines or "wraps" the remainder of the old loan with the new loan at the intermediate rate.
Wraparound annuity
An investment that allows the annuitant the choice of underlying investments tax-deferred.
Wraparound mortgage
A second mortgage that leaves the original mortgage in force. The wraparound mortgage is held by the lending institution as security for the total mortgage debt. The borrower makes payments on both loans to the wraparound lender, which in turn makes payments on the original senior mortgage.
Wrinkle
A feature of a new product or security intended to entice a buyer.
Write
Sell an option. Applies to derivative products.
Write-down
Reducing the book value of an asset if its is overstated compared to current market values.
Write-off
Charging an asset amount to expense or loss, such as through the use of depreciation and amortization of assets.
Write out
The procedure used when a specialist makes a trade involving his own inventory, on one hand, and a floor broker's order, on the other. The broker must first complete the trade with the specialist, who then transacts a separate trade with the customer.
Writer
The seller of an option, usually an individual, bank, or company that issues the option and consequently has the obligation to sell the asset (if a call) or to buy the asset (if a put) on which the option is written if the option buyer exercises the option.
Writing cash-secured puts
An option strategy to avoid using a margin account. Instead of depositing margin with a broker, a put writer can deposit a cash balance equal to the option exercise price, and can avoid additional margin calls.
Writing naked
See: Naked option
Writing puts to acquire stock
Selling a put option at an exercise price that would represent a good investment by an option writer who believes a stock's value will fall, so that the writer cannot lose. If the stock price unexpectedly goes up, the option will not be exercised and the writer is at least ahead the amount of the premium received. If the stock loses value, as expected, the option will be exercised, and the writer has the stock at what he had earlier decided was originally a good buy, and he has the premium income in addition.
Written-down value
The book value of an asset after allowing for depreciation and amortization.
W-type bottom
A double bottom pattern in a price history that looks like the letter W. See: Technical analysis.
X
Fifth letter of a Nasdaq stock symbol indicating that listing is a mutual fund.
XAF
The ISO 4217 currency code for the CFA Franc.
XBA
The ISO 4217 currency code for the European Composite Unit (EURCO).
XBB
The ISO 4217 currency code for the European Monetary Unit (EMU).
XCD
The ISO 4217 currency code for the East Caribbean Dollar.
XDR
The ISO 4217 currency code for the Special Drawing Rights (SDR).
XEU
The ISO 4217 currency code for the European currency Unit (ECU).
XMI
Applies to derivative products. Quotron symbol for the Major Market Index (MMI).
XOF
The ISO 4217 currency code for the CFA Franc.
XPF
The ISO 4217 currency code for the CFP Franc.
X or XD
Symbol that indicating that stock is trading ex-dividend, with no dividend.
XR
Symbol indicating that a stock is trading ex-rights, with no rights attached.
XW
Symbol indicating that a stock is trading ex-warrants, with no warrants attachedY
Fifth letter of a Nasdaq stock symbol specifying that it is an ADR
YE
The two-character ISO 3166 country code for YEMEN.
YER
The ISO 4217 currency code for the Yemen Rial.
YT
The two-character ISO 3166 country code for MAYOTTE.
YU
The two-character ISO 3166 country code for YUGOSLAVIA.
YUM
The ISO 4217 currency code for the Yugoslavia New Dinar.
Yankee bonds
Foreign bonds denominated in U.S. dollars and issued in the United States by foreign banks and corporations. These bonds are usually registered with the SEC. Such as, bonds issued by originators with roots in Japan are called Samurai bonds.
Yankee CD
A CD issued in the domestic market, typically New York, by a branch of a foreign bank.
Yankee market
The foreign market in the United States.
Yard
Slang for one billion currency units. Used particularly in currency trading, e.g., for Japanese yen since one billion yen equals approximately US$10 million. It is clearer to say, "I'm a buyer of a yard of yen," than to say, "I'm a buyer of a billion yen," which could be misheard as "I'm a buyer of a million yen."
Year-end dividend
A special dividend declared at the end of a fiscal year that usually represents distribution of higher-than-expected company profits.
Year-to-date (YTD)
The period beginning at the start of the calendar year up to the current date.
Yellow sheets
Sheets published by the National Quotation Bureau that detail bid and ask prices, plus those firms that are making a market in over-the-counter corporate bonds.
Yen bond
Any bond denominated in Japanese yen currency.
Yield
The percentage return paid on a stock in the form of dividends, or the effective rate of interest paid on a bond or note.
Yield advantage
The advantage gained by purchasing convertible securities instead of common stock, which equals the difference between the rates of return of the convertible security and the common shares.
Yield burning
A municipal bond financing method. Underwriters in advance refundings add large markups on US Treasury bonds bought and held in escrow to compensate investors while waiting for repayment of old bonds after issuance of the new bonds. Since bond prices and yields move in opposite directions, when the bonds are marked up, they "burn down" the yield, which may violate federal tax rules and diminishes tax revenues.
Yield curb
Applies mainly to convertible securities. Difference in current yield between the convertible and the underlying common.
Yield curve
The graphic depiction of the relationship between the yield on bonds of the same credit quality but different maturities. Related: Term structure of interest rates. Harvey (1991) finds that the inversions of the yield curve (short-term rates greater than long term rates) have preceded the last five US recessions. The yield curve can accurately forecast the turning points of the business cycle.
Yield curve option-pricing models
Models that can incorporate different volatility assumptions along the yield curve, such as the Black-Derman-Toy model. Also called arbitrage-free option-pricing models.
Yield curve strategies
Investments that position a portfolio to capitalize on expected changes in the shape of the Treasury yield curve.
Yield differential/pickup
Mainly applies to convertible securities. Graph showing the term structure of interest rates by plotting the yield of all bonds of the same quality with maturities ranging from the shortest to the longest available.
Yield equivalence
The interest rate at which a tax-exempt bond and a taxable security of similar quality give the investor the same rate of return.
Yield ratio
The quotient of two bond yields.
Yield spread
The difference in yield between different security issues usually securities of different credit quality.
Yield spread strategies
Investments that position a portfolio to capitalize on expected changes in yield spreads between sectors of the bond market.
Yield to average life
A yield calculation in which bonds are retired routinely during the life of the issue. Since the issuer buys its own bonds on the open market because of sinking fund requirements, if the bonds are trading below par, this action provides automatic price support for these bonds and they will usually trade on a yield to average life basis.
Yield to call
The percentage rate of a bond or note if the investor buys and holds the security until the call date. This yield is valid only if the security is called prior to maturity. Generally bonds are callable over several years and normally are called at a slight premium. The calculation of yield to call is based on coupon rate, length of time to call, and market price.
Yield to maturity
The percentage rate of return paid on a bond, note, or other fixed income security if the investor buys and holds it to its maturity date. The calculation for YTM is based on the coupon rate, length of time to maturity, and market price. It assumes that coupon interest paid over the life of the bond will be reinvested at the same rate.
Yield to warrant call
Applies mainly to convertible securities. Effective yield of usable or synthetic convertible bonds determined against the first date at which the warrants can be called.
Yield to warrant expiration
Applies mainly to convertible securities. Effective yield of usable convertible bonds determined by the expiration date of the applicable warrants.
Yield to worst
The bond yield computed by using the lower of either the yield to maturity or the yield to call on every possible call date.
Yo-yo stock
A highly volatile stock that moves up and down like a yo-yo. Z
Fifth letter of a Nasdaq stock symbol indicating that listing is a fifth class of preferred stock, a stub, a certificate representing a limited partnership interest, foreign preferred when issued, or a second class of warrants.
ZA
The two-character ISO 3166 country code for SOUTH AFRICA.
ZAR
The ISO 4217 currency code for the South Africa Rand.
ZBA
See: Zero balance account
ZM
The two-character ISO 3166 country code for ZAMBIA.
ZMK
The ISO 4217 currency code for Zambian Kwacha .
ZRN
The ISO 4217 currency code for the Zaire New Zaire.
ZW
The two-character ISO 3166 country code for ZIMBABWE.
ZWD
The ISO 4217 currency code for the Zimbabwe Dollar.
Zabara
Applies mainly to international equities. Japanese securities transactions conducted on the principal of auction, i.e., (1) price priority in which the selling (buying) order with the lowest (highest) price takes precedence over other orders, and (2) time priority in that an earlier order takes precedence over other orders at the same price.
Zaibatsu
Large family-owned conglomerates that controlled much of the economy of Japan prior to World War II.
Z bond
A bond on which interest accrues but is not currently paid to the investor but rather is added to the principal balance of the Z bond and becoming payable upon satisfaction of all prior bond classes.
Zero-balance account (ZBA)
A checking account in which zero balance is maintained by transfers of funds from a master account in an amount only large enough to cover checks presented.
Zero-base budgeting (ZBB)
Budgeting method that disregards the previous year's budget in setting a new budget, since circumstances may have changed. Each and every expense must be justified in this system.
Zero-beta portfolio
A portfolio constructed to have zero systematic risk, similar to the risk-free asset, that is, having a beta of zero.
Zero-bracket amount
The standard deduction portion of income which is not taxed for taxpayers choosing not to itemize deductions.
Zero-coupon bond
A bond in which no periodic coupon is paid over the life of the contract. Instead, both the principal and the interest are paid at the maturity date.
Zero-coupon convertible security
A zero-coupon bond convertible into the common stock of the issuing company after the stock reaches a certain price, using a put option inherent in the security.
Also refers to zero-coupon bonds, which are convertible into an interest bearing bond at a certain time before maturity.
Zero-investment portfolio
A portfolio of zero net value established by buying and shorting component securities, usually in the context of an arbitrage strategy.
Zero-minus tick
Sale that takes place at the same price as the previous sale, but at a lower price than the last different price. Antithesis of zero-plus tick.
Zero-one integer programming
An analytical method that can be used to determine the solution to a capital rationing problem.
Zero prepayment assumption
The assumption of payment of scheduled principal and interest with no payments.
Zero-plus tick
Used for listed equity securities. Transaction at the same price as the preceding trade, but higher than the preceding trade at a different price. Antithesis of zero-minus tick. See: Short sale.
Zero-sum game
A type of game wherein one player can gain only at the expense of another player.
Zero uptick
Related: Tick-test rules
Zombies
Companies that continue operation while they await merger or closure, even though they are insolvent and bankrupt.
Z score
Statistical measure that quantifies the distance (measured in standard deviations) a data point is from the mean of a data set. Separately, Z score is the output from a credit-strength test that gauges the likelihood of bankruptcy.
