Glossary A
Friday, January 1, 2010 // 0 Comments // Glossary
Abandonment option The option of terminating an investment earlier than originally planned. Abnormal returns Part of the return that is not due to systematic influences (market wide influences). In other words, abnormal returns are above those predicted by the market movement alone. Related: excess returns. Absolute priority Rule in bankruptcy proceedings whereby senior creditors are [...]
Read more & Talk about itGlossary B
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Back fee The fee paid on the extension date if the buyer wishes to continue the option. Back office Brokerage house clerical operations that support, but do not include, the trading of stocks and other securities. Includes all written confirmation and settlement of trades, record keeping and regulatory compliance. Back-end loan fund A mutual fund [...]
Read more & Talk about itGlossary C
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Cable Exchange rate between British pounds sterling and the U.S.$. Calendar List of new issues scheduled to come to market shortly. Calendar effect The tendency of stocks to perform differently at different times, including such anomalies as the January effect, month-of-the-year effect, day-of-the-week effect, and holiday effect. Call An option that gives the right to [...]
Read more & Talk about itGlossary D
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Date of payment Date dividend checks are mailed. Date of record Date on which holders of record in a firm’s stock ledger are designated as the recipients of either dividends or stock rights. Dates convention Treating cash flows as being received on exact dates – date 0, date 1, and so forth – as opposed [...]
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EAFE index The European, Australian, and Far East stock index, computed by Morgan Stanley. Earning power Earnings before interest and taxes (EBIT) divided by total assets. Earnings Net income for the company during the period. Earnings before interest and taxes (EBIT) A financial measure defined as revenues less cost of goods sold and selling, general, [...]
Read more & Talk about itGlossary F
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Face value See: Par value. Factor A financial institution that buys a firm’s accounts receivables and collects the debt. Factor analysis A statistical procedure that seeks to explain a certain phenomenon, such as the return on a common stock, in terms of the behavior of a set of predictive factors. Factor model A way of [...]
Read more & Talk about itGlossary G
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Gamma The ratio of a change in the option delta to a small change in the price of the asset on which the option is written. Garmen-Kohlhagen option pricing model A widely used model for pricing foreign currency options. Gearing Financial leverage. GEMs (growing-equity mortgages) Mortgages in which annual increases in monthly payments are used [...]
Read more & Talk about itGlossary H
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Haircut The margin or difference between the actual market value of a security and the value assessed by the lending side of a transaction (ie. a repo). Handle The whole-dollar price of a bid or offer is referred to as the handle (ie. if a security is quoted at 101.10 bid and 101.11 offered, 101 [...]
Read more & Talk about itGlossary I
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Idiosyncratic Risk Unsystematic risk or risk that is uncorrelated to the overall market risk. In other words, the risk that is firm specific and can be diversified through holding a portfolio of stocks. Immediate settlement Delivery and settlement of securities within five business days. Immunization The construction of an asset and a liability that are [...]
Read more & Talk about itGlossary J
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J-curve Theory that says a country’s trade deficit will initially worsen after its currency depreciates because higher prices on foreign imports will more than offset the reduced volume of imports in the short-run. Jensen index An index that uses the capital asset pricing model to determine whether a money manager outperformed a market index. The [...]
Read more & Talk about itGlossary K
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Kappa The ratio of the dollar price change in the price of an option to a 1% change in the expected price volatility. Keiretsu A network of Japanese companies organized around a major bank.
Read more & Talk about itGlossary L
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Ladder strategy A bond portfolio strategy in which the portfolio is constructed to have approximately equal amounts invested in every maturity within a given range. Lag Payment of a financial obligation later than is expected or required, as in lead and lag. Also, the number of periods that an independent variable in a regression model [...]
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