Beijing suffers the curse of the Olympic city

Workers at Beijing's 'Bird's Nest' Stadium wait for custumers at a photo booth that allows them to be photographed with the Olympic torch and stand on the winners podium Photo: AP

Three months after the end of the games, new figures show the "Olympic Effect" has been short-lived and hotels are empty, industrial output has fallen and the streets are quiet.

Much of the pain is due to the worldwide financial crisis – and in some cases due to brave decisions by the government to keep polluting industries shut to spare the environment.

But even the biggest single symbol of the modern rise of China, the "Bird's Nest" National Stadium, stands forlorn, largely unused except for a shrinking number of tourists.

Attempts to attract the city's main football team to move to the ground have failed – it is simply too big for the club's crowds. Instead, it charges 50 yuan – around five pounds – per person to come and stand where Usain Bolt and others touched glory in the summer.

Henry Zhang, deputy head of the Stadium's management firm, said he was concerned about whether it would recoup its investment. "I have been worried and I'm still worried," he said.

"The situation is OK at the moment but we are calling it 'Ju An Si Wei' – 'Enjoy the calm but prepare for danger'."

Other countries have suffered post-Olympic blues, a warning to Britain's own planning for London 2012. The huge investment in facilities and transport comes to a sudden end, and if alternative uses cannot be found for the venues, they can seem like expensive white elephants.

But China was forecast to avoid the fate of Australia and Greece after the Sydney and Athens Games of 2000.

The amounts being spent on Beijing, though on the surface huge at between 25-40 billion pounds, were dwarfed by sums being spent countrywide in a large and booming economy on roads, airports and new factories.

Unfortunately, the figures show that in some ways the Olympics may have actually contributed to a downturn.

Hotel occupancy rates have been lower than managers hoped for most of the year, something blamed on a more restrictive visa regime for foreigners and other measures aimed at tightening security.

Now, though China's economy is still supposed to be growing nine per cent every year, hotel prices in the capital are actually falling as rooms empty.

The average in November was more than seven per cent down overall, and 13 per cent for five star hotels. Many of the new luxury palaces opened specifically for the Games are less than half full.

That is partly because the tourists are staying away – there were a fifth fewer foreign tourists in November compared to last year.

"There was a pickup in September and October, but since then is when the credit crunch has come down on everybody," said Cary Gray, manager of the St Regis, a five-star hotel in the embassy district used to hosting world leaders such as Bill Clinton and Henry Kissinger.

It underwent a 18 million pound refit before the Games, but is now on average two thirds empty.

Many Beijingers are enjoying the increased number of "blue sky" days – days when the air meets China's own standards for pollution. A number of factories which were closed down for the Olympics have not been allowed to reopen, including concrete factories inside the fifth ring road and chemical plants that do not meet new pollution standards.

But those hoping for an Olympic dividend have been disappointed.

"There was a primary school athletics contest here, and I've heard they want to arrange a concert for next year" said Zhen Yan, a woman running a photo stall at the Bird's Nest, supposedly one of the world's greatest sports stadiums.

"But that's it. And the visitors are getting fewer and fewer."

 

Stock Market Dictionary - Z

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.

Stock Market Dictionary - Y

Y
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.

Stock Market Dictionary - X

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 attached.

Stock Market Dictionary - W

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. There are some variations in how working capital is calculated. Variations include the treatment of short-term debt. In addition, 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.

Wrong-way risk
This type of risk occurs when exposure to a counterparty is adversely correlated with the credit quality of that counterparty. There are two types of wrong-way risk. Specific wrong way risk arises through poorly structured transactions, for example, those collateralized by own or related party shares. General or conjectural wrong way risk arises where the credit quality of the counterparty may for non-specific reasons be held to be correlated with a macroeconomic factor which also affects the value of derivatives transactions. An example of conjectural wrong way risk is that fluctuations in the interest rate causes changes in the value of the derivative transactions but could also impact the credit worthiness of the counterparty. Another example might occur with an emerging-market counterparty, where there is country and possibly currency risk associated with the counterparty (however creditworthy it might otherwise be).

W-type bottom
A double bottom pattern in a price history that looks like the letter W. See: Technical analysis.

Stock Market Dictionary - V

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.

Stock Market Dictionary - T

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.

Stock Market Dictionary - S

S
Fifth letter of a Nasdaq stock symbol specifying a beneficial interest.

SA
The two-character ISO 3166 country code for SAUDI ARABIA.

SAIF
See: Savings Association Insurance Fund

SAR
The ISO 4217 currency code for the Saudi Arabian Riyal.

SATURNS
See Structured Asset Trust Unit Repackagings.

SB
The two-character ISO 3166 country code for SOLOMON ISLANDS.

SBD
The ISO 4217 currency code for the Solomon Islands Dollar.

SC
The two-character ISO 3166 country code for SEYCHELLES.

SCR
The ISO 4217 currency code for the Seychelles Rupee.

SD
The two-character ISO 3166 country code for SUDAN.

SDD
The ISO 4217 currency code for the Sudanese Dinar.

SDR
See: Special drawing rights

SE
The two-character ISO 3166 country code for SWEDEN.

SEAQ
See: Stock Exchange Automated Quotation System

SEC
See: Securities & Exchange Commission

SED
See: Shipper's Export Declaration

SEHK
See: Stock Exchange of Hong Kong

SEK
The ISO 4217 currency code for the Swedish Krona.

SHP
The ISO 4217 currency code for the Saint Helena Pound.

SIAC
See: Security Industry Automated Corporation

SIC
See: Standard Industrial Classification

SIMEX
See: Singapore International Monetary Exchange

SG
The two-character ISO 3166 country code for SINGAPORE.

SGD
The ISO 4217 currency code for the Singapore Dollar.

SH
The two-character ISO 3166 country code for SAINT HELENA.

SI
The two-character ISO 3166 country code for SLOVENIA.

SIT
The ISO 4217 currency code for the Slovenian Tolar.

SJ
The two-character ISO 3166 country code for SVALBARD AND JAN MAYEN.

SK
The two-character ISO 3166 country code for SLOVAKIA.

SKK
The ISO 4217 currency code for the Slovak Republic Koruna.

SL
The two-character ISO 3166 country code for SIERRA LEONE.

SLL
The ISO 4217 currency code for the Sierra Leone Leone.

SM
The two-character ISO 3166 country code for SAN MARINO.

SMBS
See: Stripped mortgage backed securities

SN
The two-character ISO 3166 country code for SENEGAL.

SO
The two-character ISO 3166 country code for SOMALIA.

SOES
See: Small Order Execution System

SOS
The ISO 4217 currency code for the Somalian Shilling.

SOXS
See: Sarbanes Oxley Act of 2002

SPDR
The Standard and Poor's depositary receipt. This is a tracking stock which trades like an index mutual fund which follows the S&P 500. It trades continuously.

SR
The two-character ISO 3166 country code for SURINAME.

SRG
The ISO 4217 currency code for the Surinam Guilder.

ST
The two-character ISO 3166 country code for SAO TOME AND PRINCIPE.

STD
The ISO 4217 currency code for the Sao Tome & Principe Dobra.

SV
The two-character ISO 3166 country code for EL SALVADOR.

SVC
The ISO 4217 currency code for the El Salvador Colon.

SWIFT
See: Society for Worldwide Interbank Financial Telecommunications

SY
The two-character ISO 3166 country code for SYRIAN ARAB REPUBLIC.

SYP
The ISO 4217 currency code for the Syrian Pound.

SZ
The two-character ISO 3166 country code for SWAZILAND.

SZL
The ISO 4217 currency code for the Swaziland Lilangeni.

SACE
The Italian export credit agency.

Safe harbor
Often used in risk arbitrage as a form of shark repellent. A target company acquires a business so onerously regulated that it makes the target less attractive, giving it, in effect, a safe harbor.

Safe harbor lease
A lease to transfer tax benefits of ownership (depreciation and debt tax shield) from the lessee, if the lessee could not use them, to a lessor that could use them.

Safekeep
Holding by a bank of bonds and money market instruments. For a fee, the bank clips coupons and presents for payment at maturity.

Safety cushion
In a contingent immunization strategy, the difference between the initially available immunization level and the safety-net return.

Safety-net return
The minimum available return that will trigger an immunization strategy in a contingent immunization strategy.

Salary
Regular wages and benefits an employee receives from an employer.

Salary freeze
A temporary halt to increases in salary due to financial difficulties experienced by a company.

Salary reduction plan
A plan allowing employees to contribute pre-tax income to a tax-deferred retirement plan.

Salary Reduction Simplified Employee Pension Plan (SARSEP)
A low-cost, no-frills version of a 401(k) employee savings plan available to companies with 25 or fewer employees. It allows employees to make pretax contributions to their IRAs through salary reduction each year. The Small Business Job Protection Act of 1996 replaced SARSEPs with SIMPLE (Savings Incentive Match Plan for Employees) plans. Existing SARSEPs were allowed to add new participants, but new plans could not be formed after December 31, 1996.

Sale
An agreement between a buyer and a seller on the price to be paid for a security, followed by delivery.

Sale and lease-back
Sale of an existing asset to a financial institution that then leases it back to the user. Related: Lease.

Sales charge
The fee charged by a mutual fund at purchase of shares, usually payable as a commission to a marketing agent, such as a financial adviser, who is thus compensated for assistance to a purchaser. It represents the difference, if any, between the share purchase price and the share net asset value.

Sales completion
In the context of project financing, the state in which the project has reached physical completion and has delivered product or generated revenues in satisfaction of a sales completion test.

Sales Contract
Contract between a seller and buyer for the sale of goods, services, or both.

Sales forecast
A key input to a firm's financial planning process. External sales forecasts are based on historical experience, statistical analysis, and consideration of various macroeconomic factors.

Sales literature
Material written by an institution selling a product, which informs potential buyers of the product and its benefits.

Sales load
See: Sales charge

Sales tax
A percentage tax on the selling price of goods and services.

Sales-type lease
The leasing out of a firm's own equipment, such as a printing company leasing its own presses, thereby competing with an independent leasing company.

Sallie Mae
See: Student Loan Marketing Association

Salomon Brothers World Equity Index (SBWEI)
A top-down, float capitalization-weighted index used to measure the performance of fixed-income and equity markets. It includes approximately 6000 companies in 22 countries.

Salomon Brothers Non-U.S. Dollar World Government Bond Index
A benchmark index that includes institutionally traded bonds other than U.S. issues that have a fixed rate and a remaining maturity of one year or longer.

Salvage value
Scrap value of plant and equipment.

Same-Day Funds Settlement (SDFS)
A method of settlement used in trading between well-collateralized parties in good-the-same-day federal funds used by the Depository Trust Company for transactions in US government securities, short-term municipal notes, medium-term commercial paper notes, CMOs, and other instruments.

Same-day substitution
Offsetting changes in a margin account during the day that result in no overall change in the balance of the account.

Samurai bond
A yen-denominated bond issued in Tokyo by a non-Japanese borrower. Related: Bulldog bond and Yankee bond.

Samurai market
The foreign market in Japan.

Santa Claus Rally
Seasonal rise in stock prices in the last week of the calendar year, between Christmas and New Year's Day.

Sao Paulo Stock Exchange
See: Bolsa de Valores de Sao Paulo

S&P
Standard & Poor's Corporation.

S&P 500 Composite Index
Index of 500 widely held common stocks that measures the general performance of the market.

S&P phenomenon
Tendency of stocks newly added to the S&P composite index to rise in price due to a large number of buy orders as S&P-related index funds add the stock to their portfolios.

S&P Rating
Rating service provided by S&P that indicates the amount of risk involved with different securities.

Sarbanes Oxley Act of 2002
Legislation passed largely as a result of a number of accounting scandals. Among the many features is the creation of the Public Company Accounting Oversight Board. This board is charged to: The Board shall: 1) register public accounting firms; 2) establish, or adopt, by rule, auditing, quality control, ethics, independence, and other standards relating to the preparation of audit reports for issuers; (3) conduct inspections of accounting firms; (4) conduct investigations and disciplinary proceedings, and impose appropriate sanctions; (5) perform such other duties or functions as necessary or appropriate; (6) enforce compliance with the Act, the rules of the Board, professional standards, and the securities laws relating to the preparation and issuance of audit reports and the obligations and liabilities of accountants with respect thereto; (7) set the budget and manage the operations of the Board and the staff of the Board.

Saturday night special
Often used in risk arbitrage. Sudden attempt by one company to take over another by making a public tender offer.

Saucer
Technical chart pattern depicting a security whose price has reached bottom and is moving up.

Savings Association Insurance Fund (SAIF)
A government organization that replaced the Federal Savings and Loan Insurance Corporation as the provider of deposit insurance for thrift institutions.

Savings bank
An institution that primarily accepts consumer savings deposits and to make home mortgage loans.

Savings bond
A government bond issued in face value denominations from $50 to $10,000, with local and state tax-free interest and semiannually adjusted interest rates.

Savings deposits
Accounts that pay interest, typically at below-market interest rates, that do not have a specific maturity, and that usually can be withdrawn upon demand.

Savings element
Used in the context of life insurance, the cash value built up in a policy, which equals the amount of premium paid minus the cost of protection. This excess is invested by the insurance company, and the returns are tax-deferred inside the policy.

Savings Incentive Match Plan for Employees (SIMPLE) 401(k) plan
A tax-deferred retirement savings plan similar to a conventional 401(k) plan, redesigned with specific rules to meet the needs of small employers. The Small Business Job Protection Act of 1996 created these plans for companies with fewer than 100 employees. An employee's contributions are indexed for inflation, and employers must make annual annual matching contributions.

Savings and loan association
National- or state-chartered institution that accepts savings deposits and invests the bulk of the funds thus received in mortgages.

Savings rate
Personal savings as a percentage of disposable personal income.

Scale
Payment of different rates of interest on CDs of varying maturities. A bank is said to "post a scale." Commercial paper dealers also post scales.

Scale-enhancing
Describes a project that is in the same risk class as the whole firm. That is, the project allows the firm to grow larger in the context of their current business rather than diversify into new businesses.

Scale in
Gradually taking a position in a security or market over time.

Scale order
Order to buy (sell) a security that specifies the total amount to be bought (sold) and the amount to be bought (sold) at successively decreasing (increasing) price intervals; often placed in order to average the price.

Scaling
How the characteristics of an object change as you change the size of your measuring device. For a three dimensional object, it could be the volume of an object covered as you increase the radius of a covering sphere. In a times series, it could be the change in the amplitude of the time series as you increase the increment of time.

Scalp
To trade for small gains. Scalping normally involves establishing and liquidating a position quickly, usually within the same day.

Scalping
Buying up the good IPOs.

Scattered
Used for listed equity securities. Unconcentrated buy or sell interest.

Scenario analysis
The use of horizon analysis to project total returns under different reinvestment rates and future market yields.

Schedule C
Describes membership requirements and procedures of NASD, in its bylaws.Schedule 13d
Disclosure form required when more than 5% of any class of equity securities in a publicly held corporation is purchased.

Scheduled cash flows
The mortgage principal and interest payments due to be paid under the terms of the mortgage, not including possible prepayments.

Scorched-earth policy
Often used in risk arbitrage. Any technique a company that has become the target of a takeover attempt uses to make itself unattractive to the acquirer. For example, it may agree to sell off its crown jewels, or schedule all debt to become due immediately after a merger.

S Corporation
A corporation that elects not to be taxed as a corporation. That is, the corporation does not directly pay federal income tax on its earnings. Similar to a partnership, it passes its income or losses and other tax items on to its shareholders.

Screen stocks
To analyze various stocks in search of stocks that meet predetermined criteria. For example, a simple value screen would sort all stocks by their price-to-book ratio and pick the stocks with the lowest ratios as candidates for the value portfolio.

Scrip
A temporary document that represents a portion of a share of stock, often issued after a stock split or spin-off.

Scripophily
Collecting stock and bond certificates for their scarcity, rather than for their value as securities.

Search costs
Costs associated with locating a counterparty to a trade, including explicit costs (such as advertising) and implicit costs (such as the value of time). Related: Information costs.

Seasonally adjusted
Mathematically adjusted by moderating a macroeconomic indicator (e.g., oil prices/imports) so that relative comparisons can be drawn from month to month all year.

Seasoned
In the case of equity, having gained a reputation for quality with the investing public and enjoying liquidity in the secondary market; in the case of convertibles, having traded for at least 90 days after issue in Europe, and thus available for sale legally to U.S. investors.

Seasoned datings
Extended credit for customers who order goods in periods other than peak seasons.

Seasoned issue
Issue of a security for which there is an existing market. Related: Unseasoned issue.

Seasoned new issue
A new issue of stock after the company's securities have previously been issued. A seasoned new issue of common stock can be made using a cash offer or a rights offer.

Seat
Position of membership on a securities or commodity exchange, bought and sold at market prices.

SEC fee
Small fee the SEC charges to sellers of equity securities on an exchange.

Second market
The OTC market.

Second pass regression
A cross-sectional regression of portfolio returns on betas. The estimated slope is the measurement of the reward for bearing systematic risk during the period analyzed.

Second-preferred stock
Preferred stock issue that has less priority in claiming dividends and assets in liquidation than another issue of preferred stock.

Second round
Stage of venture capital financing following the start-up and first round stages and before the mezzanine level stage.

Second-to-die insurance
Insurance policy that, on the death of the spouse dying last, pays a death benefit to the heirs that is designed to cover estate taxes.

Secondary distribution/offering
Public sale of previously issued securities held by large investors, usually corporations or institutions, as distinguished from a primary distribution, where the seller is the issuing corporation. The sale is handled off the NYSE, by a securities firm or a group of firms, and the shares are usually offered at a fixed price related to the current market price of the stock.

Secondary issue
(1) Procedure for selling blocks of seasoned issues of stocks. (2) More generally, sale of already issued stock.

Secondary Offering
An IPO in which privately held shares in a corporation are sold to the public.

Secondary market
The market in which securities are traded after they are initially offered in the primary market. Most trading occurs in the secondary market. The New York Stock Exchange, as well as all other stock exchanges and the bond markets, are secondary markets. Seasoned securities are traded in the secondary market.

Secondary mortgage market
Buying and selling existing mortgage loans, which are often pooled and traded as mortgage-backed securities.

Secondary stocks
Stocks with smaller market capitalization, less quality and more risk than blue chip issues that behave differently than larger corporations' stocks.

Second mortgage lending
Loans secured by real estate previously pledged in a first mortgage.

Secert Ballot
In the context of corporate governance, this is also known as confidential voting. An independent third party or employees sworn to secrecy are used to count proxy votes, and the management usually agrees not to look at individual proxy cards. This can help eliminate potential conflicts of interest for fiduciaries voting shares on behalf of others, or can reduce pressure by management on shareholder-employees or shareholder-partners.

Section 16(a)
Provision of the Securities Exchange Act of 1934 that requires company insiders to file periodic reports disclosing their holdings and changes in beneficial ownership of the company's equity securities.

Section 16(b)
Provision of the Securities Exchange Act of 1934 that requires that any profit realized by a company insider from the purchase and sale, or sale and purchase, of the company's equity securities within a period of less than six months must be returned to the company. It is also known as the "short-swing profit" rule.

Section 83(b) Election
A tax filing within 30 days of grant that allows employees granted stock to pay taxes on the grant date instead of on the date restrictions lapse. If an employee files the election, taxes are based on the fair market value on the grant date, with any future appreciation taxed as a capital gain. If the employee does not file an election, taxes are based on the fair market value on the date the restrictions lapse, which will be higher assuming the stock has appreciated in value.

Section 423
The government agency responsible for the supervision and regulation of the securities industry and markets, as well as public securities offerings and the ongoing disclosure obligations of public companies.

Section 482
US Department of Treasury regulations governing transfer prices.

Sector
Used to characterize a group of securities that are similar with respect to maturity, type, rating, industry, and/or coupon.

Sector allocation
Investment of certain proportions of a portfolio in certain sectors. See: Industry allocation.

Sector diversification
Constituting of a portfolio of stocks of companies in each major industry group.

Sector fund
A mutual fund that concentrates on a relatively narrow market sector. These funds can experience higher share price volatility than some diversified funds because sector funds are subject to common market forces specific to a given sector.

Sector rotation
An active asset management strategy certain sectors, that tactically overweights and underweights depending on expected performance. Sometimes called rotation.

Secular
Long-term time frame (10-50 years or more).

Secured bond
A bond backed by the pledge of collateral, a mortgage, or other lien, as opposed to an unsecured bond, called a debenture .

Secured debt
Debt that has first claim on specified assets in the event of default.

securities
Paper certificates (definitive securities) or electronic records (book-entry securities) evidencing ownership of equity (stocks) or debt obligations (bonds).

Securities Act of 1933
First law designed to regulate securities markets, requiring registration of securities and disclosure.

Securities Acts Amendments of 1975
Legislation to encourage the establishment of a national market system together with a system for nationwide clearing and settlement of securities transactions.

Securities analysts
Related: Financial analysts

Securities and commodities exchanges
Exchanges on which securities, options, and futures contracts are traded by members for their own accounts and for the accounts of customers.

Securities & Exchange Commission (SEC)
A federal agency that regulates the US financial markets. The SEC also oversees the securities industry and promotes full disclosure in order to protect the investing public against malpractice in the securities markets.

Securities and Exchange Commission Rules
Rules enacted by the SEC to assist in the regulation of US financial markets.

Securities Exchange Act of 1934
Legislation that created the SEC, outlawing dishonest practices in the trading of securities.

Securities Exchange of Thailand (SET)
The only stock market in Thailand, based in Bangkok.

Securities Industry Association (SIA)
An association of broker-dealers who sell taxable securities, which lobbies the government, records industry trends, and keeps records of broker profits.

Securities Industry Committee on Arbitration (SICA)
A private group that provides mediation services in case of customer complaints against securities firms.

Securities Investor Protection Corporation (SIPC)
A nonprofit corporation that insures customers' securities and cash held by member brokerage firms against the failure of those firms.

Securities loan
The loan of securities between brokers, often to cover a client's short sale; or a loan secured by marketable securities.

Securities markets
Organized exchanges plus over-the-counter markets in which securities are traded.

Securitization
Creating a more or less standard investment instrument such as the mortgage pass-through security, by pooling assets to back the instrument. Also refers to the replacement of nonmarketable loans and/or cash flows provided by financial intermediaries with negotiable securities issued in the public capital markets.

Security
Piece of paper that proves ownership of stocks, bonds, and other investments.

Security characteristic line
A plot on a graph of the excess return on a security over the risk-free rate as a function of the excess return on the market. The slope of this line is the security's beta.

Security deposit (initial)
Synonymous with the term margin. A cash amount that must be deposited with the broker for each contract as a guarantee of fulfillment of the futures contract. It is not considered as part payment or purchase. Related: Margin.

Security deposit (maintenance)
Related: Maintenance margin

Security Industry Automated Corporation (SIAC)
Entity that executes automated DOT orders.

Security interest
The creditor's right to take property or a portion of property offered as security.

Security market line
Line representing the relationship between expected return and market risk or beta. The slope of this line is the risk premium for beta.

Security Market Line
The linear relationship between expected asset returns and betas posited by the Capital Asset Pricing Model.

Security market plane
A plane that shows the relationship between expected return and the beta coefficient of more than one factor.

Security ratings
Commercial rating agencies' assessment of the credit and investment risk of securities.

Security selection
See: Security selection decision

Security selection decision
Choosing the particular stocks or bonds or other investment instruments to include in a portfolio.

Seed money
The first contribution by a venture capitalist toward the financing of a new business, often using a loan or purchase of convertible bonds or preferred stock. See: Mezzanine level and second round.

Seek a market
Search for a securities buyer or seller.

Segmented Market
A market in which there are impediments to the free flow of labor, capital, and information.

Segregation of securities
SEC rules to dictate how customers' securities may be used by broker-dealers in broker loans.

Seigniorage
The amount of goods and services that the government obtains by printing new money in a given period. Often we consider this in real terms, by dividing the new money by the price level.

Select ten portfolio
A unit investment trust that buys and holds for one year the ten stocks in the Dow Jones Industrial Average with the highest dividend yields.

Selective hedging
Protecting investments during some time periods and not during others.

Selected dealer agreement
The set of rules governing the selling group in an underwriting.

Self-amortizing mortgage
Mortgage whose entire principal is paid off in a specified period of time with regular interest and principal payments.

Self-directed IRA
An IRA that the account holder can after appointing a custodian manager to carry out investment instructions.

Self-employed income
Taxable income of a person involved in a sole proprietorship or other sort of free-lance work.

Self-employment tax
A tax self-employed people must pay to qualify them to receive Social Security benefits at retirement.

Self-liquidating loan
Loan to finance current assets. The sale of the current assets provides the cash to repay the loan.

Self-regulatory organization (SRO)
Organizations that enforce fair, ethical, and efficient practices in the securities and commodity futures industries, including all national securities and commodities exchanges and the NASD.

Self-selection
Consequence of a contract that induces only one group to participate.

Self-Similar
When small parts of an object are qualitatively the same, or similar to the whole object. In certain deterministic fractals, like the Sierpinski Triangle, small pieces look the same as the entire object. In random fractals, small increments of time will be statistically similar to larger increments of time. See: Fractal.

Self-supporting debt
Bonds sold to finance a project that will produce enough revenue through tolls or other charges to retire the debt . See: revenue bond.

Self Tender
A company buys back a certain percentage of its own shares through a tender offer.

Self-tender offer
A company that tenders for its own shares.

Sell the book
Used for listed equity securities. Order to a broker by the holder of a large quantity of shares of a security to sell all that can be absorbed at the current bid price. The term derives from the specialist's book - the record of all the buy and sell orders members have placed in the stock one handles. In this scenario, the buyers potentially include those in the specialist's book, the specialist for its own account, and broker-dealers.

Sell hedge
Related: short hedge.

Sell limit order
Conditional trading order that indicates that a security may be sold at the designated price or higher. Related: Buy limit order.

Sell off
Sale of securities under pressure. See: Dumping.

Sell order
An order that may take many different forms by an investor to a broker to sell a particular stock, bond, option, future, mutual fund, or other holding.

Sell out
Liquidation of a margin account after a customer has failed to bring an account to a required level by producing additional equity after a margin call.
The selling of securities by a broker when a customer fails to pay for them.
The complete sale of all securities in a new issue.

Sell plus order
Market or limit order to sell a stated amount of stock provided that the price to be obtained is not lower than the last sale if the last sale was a plus, or zero plus tick, and is not lower than the last sale plus the minimum fractional change in the stock if the last sale was a minimum or zero minimum tick. (In a limit order, sale cannot be lower than the limit, regardless of tick.)Sell price
See: Redemption price

Sell-side analyst
A financial analyst who works for a brokerage firm and whose recommendations are passed on to the brokerage firm's customers. Also called Wall Street analyst.

Seller financing
Funding a purchase by a seller's loan to the buyer, the buyer takes full title to the property when the loan is fully repaid.

Seller's market
Market in which demand exceeds supply. As a result, the seller can dictate the price and the terms of sale.

Seller's option
Delayed settlement/delivery in a transaction.

Seller's points
In reference to a loan, seller's points consist of a lump sum paid by the seller to the buyer's creditor to reduce the cost of the loan to the buyer. This payment is either required by the creditor or volunteered by the seller, usually in a loan to buy real estate. Generally, one point equals one percent of the loan amount.

Selling climax
A sudden drop in security prices as sellers dump their holdings.

Selling concession
The discount underwriters offer the selling group on securities in a new issue.

Selling dividends
Inducing a prospective customer tobuy shares in order to profit from a dividend scheduled in the near future.

Selling, general, and administrative (SG&A) expenses
Expenses such as salespersons' salaries and commissions, advertising and promotion, travel and entertainment, office payroll and expenses, and executives' salaries.

Selling on the good news
A strategy of selling stock shortly after a company announces good news and the stock price rises. Investors believe that the price is as high as it can go and is on the brink of going down.

Selling group
All banks involved in selling or marketing a new issue of stock or bonds.

Selling short
Selling a stock not actually owned. If an investor thinks the price of a stock is going down, the investor could borrow the stock from a broker and sell it. Eventually, the investor must buy the stock back on the open market. For instance, you borrow 1000 shares of XYZ on July 1 and sell it for $8 per share. Then, on Aug. 1, you purchase 1000 shares of XYZ at $7 per share. You've made $1000 (less commissions and other fees) by selling short.

Selling short against the box
Selling short stock that is actually owned by the seller but held in the box, meaning it is held in safekeeping. The seller borrows securities needed to cover as the stock in the box may be inaccessible, or the seller may not wish to disclose ownership. The traditional motive for this transaction was to defer capital gains taxes. However, this method became infeasible under the Taxpayer Relief Act of 1997.

Selling the spread
A spread whose option to be sold is trading at a higher premium than the option to be bought.

Selling Syndicate
A group of underwriters that issues a firm's securities by buying them from the issuing firm and reselling them to a group of smaller brokerage firms for eventual sale to individual investors.

Semistrong-form efficiency
A form of pricing efficiency that profits the price of a security fully reflects all public information (including, but not limited to, historical price and trading patterns). Compare weak-form efficiency and strong-form efficiency.

"Send it in"
Market language: "I bought your stock - 'send it in' (and possibly more)."

Senior debt
Debt whose terms in the event of bankruptcy, require it to be repaid before subordinated debt receives any payment.

Senior mortgage bond
A bond that, in the event of bankruptcy, will be redeemed before any other bonds are repaid.

Senior refunding
Replacement by the issuer of securities with 5-to 12-year maturities with securities of 15-year or longer maturities, in order to delay, reduce, or consolidate payment.

Senior security
A security that, in the event of bankruptcy, will be redeemed before any other securities.

Seniority
The order of repayment. In the event of bankruptcy, senior debt must be repaid before subordinated debt is repaid.

Sensitive market
A market that reacts to a great extent to good or bad news.

Sensitivity analysis
Analysis of the effect on a project'sprofitability of changes in sales, cost, and so on.

Sentiment indicators
The general feeling of investors about the state of the market, such as whether they are bullish or bearish.

Separate customer
Method of allocating insurance by the Securities Investor Protection Corporation. Each account that is under the name of a different person or group of people is entitled to maximum protection.

Separate tax returns
Tax returns of married persons who choose to file their returns individually, usually because this approach produces lower overall tax payments.

Separate Trading of Registered Interest and Principal Securities (STRIPS)
Long-term notes and bonds divided into principal and interest-paying components, which may be transferred and sold in amounts as small as $1000. STRIPS are sold at auction at a minimum par amount, varying for each issue. The amount is an arithmetic function of the issue's interest rate.

Separation property
The property that portfolio choice can be divided into two independent tasks: (1) Determination of the optimal risky portfolio, which is a purely mathematical problem, and (2) the personal choice of the best mix of the optimal risky portfolio and the risk-free asset, which depends on a person's degree of risk aversion.

Separation theorem
Theory that the value of an investment to an individual is not dependent on consumption preferences. That is, investors will want to accept or reject the same investment projects by using the NPV rule, regardless of personal preference.

Serial bonds
Corporate bonds arranged so that specified principal amounts become due on specified dates. Related: Term bonds.

Serial covariance
The covariance between a variable and the lagged value of the variable; the same as autocorrelation.

Serial entrepreneur
Business person that successfully starts (does not kill) a number of different businesses.

Serial redemption
The redemption of a serial bond.

Series
Options: All option contracts of the same class that also have the same unit of trade, expiration date, and exercise price. Stocks: shares that have common characteristics, such as rights to ownership and voting, dividends, or par value. In the case of many foreign shares, one series may be owned only by citizens of the country in which the stock is registered.

Series bond
Bond that may be issued in several series under the same indenture document.

Series E bond
A local and state tax-free bond issued by the U.S. government from 1941 to 1979, which was then replaced by Series HH bonds.

Series EE bond
See: Savings bond

Series HH bond
See: Savings bond

Service charge
A component of some finance charges, such as the fee for triggering an overdraft checking account into use.

Set-aside
A percentage of a municipal or corporate bond underwriting that is allocated for handling by a minority-owned broker/dealer firm.

Set of contracts perspective
View of corporation as a set of contracting relationships among individuals who have conflicting objectives, such as shareholders or managers. The corporation is a legal construct that serves as the nexus for the contracting relationships.

Set up
Applies mainly to convertible securities. Arbitrage involving going long the convertible and short a certain percentage of the underlying common. Antithesis of Chinese hedge.

Setoff
Money held on behalf of a borrower that may be applied to repay the loan, but usually without the permission of the borrower.

Settle price
An average of the trading prices in the futures market during the last few minutes of trading.

Settlement
When payment is made for a trade.

Settlement date
The date on which payment is made to settle a trade. For stocks traded on US exchanges, settlement is currently three business days after the trade. For mutual funds, settlement usually occurs in the US the day following the trade. In some regional markets, foreign shares may require months to settle.

Settlement options
The various possibilities open to a beneficiary under a life insurance policy as to how the benefit will be paid out.

Settlement price
A figure determined by the closing range that is used to calculate gains and losses in futures market accounts. Settlement prices are used to determine gains, losses, margin calls, and invoice prices for deliveries. Related: Closing range.

Settlement rate
The rate suggested in Financial Accounting Standards Board (FASB) 87 for discounting the obligations of a pension plan. The rate at which the pension benefits could be effectively settled if the company sponsoring the pension plan wishes to terminate its pension obligation.

Settlement risk
The risk that one party will deliver and the counterparty will not be able to pay and vice versa.

Severally but not jointly
An agreement between members of an underwriting group buy a new issue (severally), but not to assume joint liability for shares left unsold by other members.

Severance
A settlement received after being released from a corporation. In the context of corporate governance, an agreement that assures high-level executives of their postions or some compensation and are not contingent upon a change in control.

Segmented market
A market that is partially or wholly isolated from other markets by one or more market imperfections.

Shadow calendar
A backlog of securities issues registered with the SEC, awaiting the determination of an offer date.

Shadow stock
First, a public company may create a stock that strips out the market wide movements for the purpose of rewarding managers. That is, the management might have done a great job - but the traded stock plummets because the market as a whole plummets. A second interpretation of shadow stock is a phantom stock that is created by a private company (i.e. that does not have stock traded either on exchange or over the counter) again for the purpose of performance evaluation and rewards.

Shadows
The thin lines above and below the real body on a candlestick line.

Shakeout
A dramatic change in market conditions that forces speculators to sell their positions, often at a loss.

Sham
A business transaction, such as a limited partnership, that is entered into for the sake of avoiding tax.

Shanghai Stock Exchange
One of two major securities markets in China.

Share broker
A discount broker who charges per share traded, and reduces the per unit charge as the number of shares traded increases, as opposed to a dealer who charges a percentage of the dollar amount of the trade.

Share repurchase
Program by which a corporation buys back its own shares in the open market. It is usually done when shares are undervalued. Since repurchase reduces the number of shares outstanding and thus increases earnings per share, it tends to elevate the market value of the remaining shares held by stockholders.

Shared Appreciation Mortgage (SAM)
A mortgage with a low rate of interest, offset by giving the lender some portion of the appreciation in the value of the underlying property.

Shareholder
Person or entity that owns shares or equity in a corporation.

Shareholders' equity
This is a company's total assets minus total liabilities. A company's net worth is the same thing.

Shareholders' letter
A section of an annual report where one can find general overall discussion by management of successful and failed strategies. Provides guidance for looking at specific parts of the report.

Shares
Certificates or book entries representing ownership in a corporation or similar entity.

Shares authorized
The maximum number of shares of stock of a company allowed in the articles of incorporation, which may be changed only by a shareholder vote. See: Issued and outstanding.

Shark repellant
Often used in risk arbitrage. Examples are golden parachutes, poison pills, safe harbor, and scorched-earth policy. Porcupine provision. Amendment to company charter intended to protect it against takeover.

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.

Stock Market Dictionary - R

Fifth letter of a Nasdaq stock symbol specifying that the stock has rights.

RAM
See: Reverse-annuity mortgage

RAP
See: Regulatory accounting procedures

RE
The two-character ISO 3166 country code for REUNION.

REIT
See: Real Estate Investment Trust

REMIC
See: Real Estate Mortgage Investment Conduit

RO
The two-character ISO 3166 country code for ROMANIA.

ROA
See: Return on assets

ROA
See: Right of accumulation

ROCE
See: Return on capital employed

ROE
See: Return on equity

ROI
See: Return on investment

ROL
The ISO 4217 currency code for the Romanian Leu.

RPPP
See: Relative purchasing power parity

RU
The two-character ISO 3166 country code for RUSSIAN FEDERATION.

RUB
The ISO 4217 currency code for the Russian Rouble.

RW
The two-character ISO 3166 country code for RWANDA.

RWF
The ISO 4217 currency code for the Rwanda Franc.

Radar alert
Close monitoring of trading patterns in a company's stock by senior managers to uncover unusual buying activity that might signal a takeover attempt. See: Shark watcher.

Raider
Individual or corporate investor who intends to take control of a company (often ostensibly for greenmail) by buying a controlling interest in its stock and installing new management. Raiders who accumulate 5% or more of the outstanding shares in the target company must report their purchases to the SEC, the exchange of listing, and the target itself. See: takeover.

Rainmaker
A valuable employee, manager or subcontracted person who brings new business to a company.

Rally (recovery)
An upward movement of prices. Opposite of reaction.

Reverse-annuity mortgages (RAM)
Bank loan for an amount equal to a percentage of the appraisal value of the home. The loan is then paid to the homeowner in the form of an annuity.

Random variable
A function that assigns a real number to each and every possible outcome of a random experiment.

Random walk
Theory that stock price changes from day to day are accidental or haphazard; changes are independent of each other and have the same probability distribution. Many believers in the random walk theory believe that it is impossible to outperform the market consistently without taking additional risk.

Randomized strategy
A strategy of introducing into the decision-making process a chance element that is designed to confound the information content of the decision-maker's observed choices.

Range
The high and low prices, or high and low bids and offers, recorded during a specified time.

Range forward
A forward exchange rate contract that places upper and lower bounds on the future cost of foreign exchange.

Rate anticipation swaps
An exchange of bonds in a portfolio for new bonds that will achieve the target portfolio duration, given the investor's assumptions about future changes in interest rates.

Rate base
The value of a regulated public utility and its operations as defined by its regulators and on which the company is allowed to earn a particular rate of return.

Rate covenant
A provision governing a municipal revenue project financed by a revenue bond issue, which establishes the rates to be charged users of the new facility.

Rate of exchange
See: Exchange Rate

Rate lock
An agreement between the mortgage banker and the loan applicant guaranteeing a specified interest rate for a designated period, usually 60 days.

Rate of interest
The rate, as a proportion of the principal, at which interest is computed.

Rate of return
Calculated as the (value nowminus value at time of purchase) divided by value at time of purchase. For equities, we often include dividends with the value now. See also: Return, annual rate of return.

Rate of return ratios
Ratios that measure the profitability of a firm in relation to various measures of investment in the firm.

Rate risk
In banking, the risk that profits may drop or losses occur because a rise in interest rates forces up the cost of funding fixed-rate loans or other fixed-rate assets.

Ratings
An evaluation of credit quality of a company's debt issue by Thomson Financial BankWatch, Moody's, S&P, and Fitch Investors Service. Investors and analysts use ratings to assess the riskness of an investment. Ratings can also be an evaluation a country's creditworthiness or ability to repay, taking into consideration its estimated percentage default rate and political risk.

Ratio analysis
A way of expressing relationships between a firm's accounting numbers and their trends over time that analysts use to establish values and evaluate risks.

Ratio Calendar Combination
A strategy consisting of a simultaneous position of a ratio calendar spread using "calls" and a similar position using puts, where the striking price of the "calls" is greater that the striking price of the "puts".

Ratio Calendar Spread
Selling more near-termoptions than longer-term ones purchased, all with the same strike; either puts or calls.

Ratio Spread
Constructed with either puts or calls, the strategy consists of buying a certain amount of options and then selling a larger quantity of more out-of-the-money options.

Ratio Strategy
A strategy in which one has an unequal number of long secruities and short sercurities. Normally, it implies a preponderance of short options over either long options or long stock.

Ratio writer
An option writer who does not own the number of shares required to cover the call options he or she writes.

Rational expectations
The idea that people rationally anticipate the future and respond today to what they see ahead. This concept was pioneered by Nobel Laureate, Robert E. Lucas, Jr.

Raw material
Materials a manufacturer converts into a finished product.

Raw material supply agreement
As used in connection with project financing, an agreement to furnish a specified amount per period of a specified raw material.

Reachback
The ability of a tax shelter or limited partnership to deduct certain costs and expenses at the end of the year that were incurred throughout the entire year.

Reaction
A decline in prices following an advance. Opposite of rally.

Reading the tape
Judging the performance of stocks by monitoring changes in price as they are displayed on the ticker tape.

Real
Used in the context of general equities. (1) natural, (2) not dividend roll-or program trading-related; (3) not tax-related. "Real" indications have three major repercussions: a) pricing will be more favorable to the other side of the trade since an investment bank is not committing any capital; b) price pressure will be stronger if real since a natural buyer/seller may have information leading to his decision or more behind it, and c) an uptick may be required for the trader to transact if the indication is not real and the trader has no long position.

Real assets
Identifiable assets, such as land and buildings, equipment, patents, and trademarks, as distinguished from a financial investment.

Real appreciation/depreciation
A change in the purchasing power of a currency.

Real body
On a candlestick line, it is the broad part consisting of the difference between opening and closing prices.

Real capital
Wealth that can be represented in financial terms, such as savings account balances, financial securities, and real estate.

Real cash flow
Income expressed in current purchasing power terms.

Real Currency
The purchasing power in today's currency of future nominal currency to be disbursed or received.

Real estate
A piece of land and whatever physical property is on it.

Real estate appraisal
An estimate of the value of property using various methods.

Real estate broker
An intermediary who receives a commission for arranging and facilitating the sale of a property for a buyer or a seller.

Real Estate Investment Trust (REIT)
REITs invest in real estate or loans secured by real estate and issue shares in such investments. A REIT is similar to a closed-end mutual fund.

Real Estate Mortgage Investment Conduit (REMIC)
A pass-through tax entity that can hold mortgages secured by any type of real property and can issue multiple classes of ownership interests to investors in the form of pass-through certificates, bonds, or other legal forms. A financing vehicle created under the Tax Reform Act of 1986.

Real exchange rates
Exchange rates that have been adjusted for the inflation differential between two countries.

Real gain or loss
A gain or loss adjusted for increasing prices by an inflation index such as the CPI.

Real GDP
Inflation-adjusted measure of Gross Domestic Product.

Real income
The income of an individual, group, or country adjusted for inflation.

Real interest rate
The rate of interest excluding the effect of expected inflation; that is, the rate that is earned in terms of constant-purchasing-power dollars. Interest rate expressed in terms of real goods, i.e. nominal interest rate adjusted for expected inflation.

Real market
The bid and offer prices at which a dealer could execute the desired quantity of shares. Quotes in the brokers market.

Real option
An option or option-like feature embedded in a real investment opportunity.

Real property
Land plus all other property that is in some way attached to the land.

Real rate of return
The percentage return on some investments that has been adjusted for inflation.

Real return
The actual payback on an investment after removing the effect of inflation.

Real time
A real-time stock or bond quote is one that states a security's most recent offer to sell or bid (buy). Different from a delayed quote, which shows the same bid and ask prices 15 minutes and sometimes 20 minutes after a trade takes place.

Realistic on price
In trading, and indication that the size under consideration requires price give, especially with illiquid stocks. See: Takes price.

Realized compound yield
Yield assuming that coupon payments are invested at the going market interest rate at the time of their receipt and held thus until the bond matures.

Realized profit (or loss)
A capital gain or loss on securities held in a portfolio that has become actual by the sale or other type of surrender of one or many securities.

Realized return
The return that is actually earned over a given time period.

Realized volatility
Sometimes referred to as the historical volatility, this term usually used in the context of derivatives. While the implied volatility refers to the market's assessment of future volatility, the realized volatility measures what actually happened in the past. The measurement of the volatility depends on the particular situation. For example, one could calculate the realized volatility for the equity market in March of 2003 by taking the standard deviation of the daily returns within that month. One could look at the realized volatility between 10:00AM and 11:00AM on June 23, 2003 by calculating the standard deviation of one minute returns.

Realized yield
The holding-period return actually generated from an investment in a bond.

Realtor
A specific designation given to members of real estate firms affiliated with the National Association of Realtors (NAR) who are trained and licensed to assist clients in buying and selling real estate.

Rebalancing
Realigning the proportions of assets in a portfolio as needed.

Rebate
Negotiated return of a portion of the interest earned by the lender of stock to a short seller. When a stock is sold short, the seller borrows stock from an owner or custodian and delivers it to the buyer. The proceeds are delivered to the lender. The borrower, who is short, often wants a rebate of the interest earned on the proceeds under the lender's control, especially when the stock can be borrowed from many sources. Note: The seller must pay the lender any dividends paid out or, in the case of bonds, interest that accrues daily during the term of the loan.

Recalculation method
A method of calculating required minimum distributions from a retirement plan using life expectancy tables. Unisex data tables allow a plan holder to determine the applicable life expectancy each year a distribution is required.

Recapitalization proposal
Often used in risk arbitrage. Plan by a target company to restructure its capitalization (debt and equity) in a way to ward off a hostile or potential suitor.

Recapture
A provision in a contract that allows one party to recover (recapture) some degree of possession of an asset, such as a share of the profits derived from some property.

Receipts
Funds collected from selling land, capital, or services, as well as collections from the public (budget receipts), such as taxes, fines, duties, and fees.

Receive fixed counterparty
The transactor in an interest rate swap who receives payments based on the fixed rate and makes payments based on the floating rate.

Receive floating counterparty
The transaction in an interest rate swap who receives payments based on the floating rate and makes payments based on the fixed rate.

Receive versus payment
An instruction that only cash will be accepted in exchange for delivery of securities.

Receivables balance fractions
The percentage of a month's sales that remains uncollected (and part of accounts receivable) at the end of succeeding months.

Receivables turnover ratio
Total operating revenues divided by average receivables. Used to measure how effectively a firm is managing its accounts receivable.

Received for Shipment Bill of Lading
A document issued by a carrier that looks like a bill of lading as evidence of receipt of goods for shipment. This type of document is issued prior to the vessel loading and is therefore not an on board bill of lading.Receiver
A bankruptcy practitioner appointed by secured creditors to oversee the repayment of debts.

Receiver's certificate
A debt instrument issued by a receiver and serving as a lien on the property, which provides funding to continue operations or to protect assets in receivership.

Recession
A temporary downturn in economic activity, usually indicated by two consecutive quarters of a falling GDP.

Recharacterization
The reversal of a traditional IRA contribution or conversion into a Roth IRA, or vice versa.

Reciprocal marketing agreement
A strategic alliance in which two companies agree to comarket each other's products. Production rights may or may not be transferred.

Reclamation
A claim for the right to return or the right to demand the return of a security that has been previously accepted as a result of bad delivery or other irregularities in the delivery and settlement process.

Record date
(1) Date by which a shareholder must officially own shares in order to be entitled to a dividend. For example, a firm might declare a dividend on Nov. 1, payable Dec. 1 to holders of record Nov. 15. Once a trade is executed, an investor becomes the "owner of record" on settlement, which currently takes five business days for securities and one business day for mutual funds. Stocks trade ex-dividend the fourth day before the record date, since the seller will still be the owner of record and is thus entitled to the dividend. (2) The date that determines who is entitled to payment of principal and interest due to be paid on a security. The record date for most MBS is the last day of the month, although the last day on which an MBS may be presented for the transfer is the last business day of the month. The record dates for CMOs and asset-backed securities vary with each issue.

Recordholder
The individual or institution listed on the corporation's books as a securityholder as of a specified record date.

Record Owner
The stockholder of record as distinguished from the beneficial owner.

Recourse
Term describing a type of loan. If a loan is with recourse, the lender has a the ability has the ability to fall back to the guarantor of the loan if the borrower fails to pay. For example, Bank A has a loan with Company X. Bank A sells the loan to Bank B with recourse. If Company X defaults, Bank B can demand Bank A fulfill the loan obligation.

Recovery
The use of depreciation of assets to offset costs; or a new period of rising securities prices after a period of declining security values.

Redemption date
The date on which a bond matures or is redeemed.

Redemption fee
A fee some mutual funds charge when an investor sells shares within a specified short period of time.

Redemption price
See: Call price

Red herring
A preliminary prospectus providing information required by the SEC. It excludes the offering price and the coupon of the new issue.

Redeemable
Eligible for redemption under the terms of an indenture.

Redemption
Repayment of a debt security or preferred stock issue, at or before maturity, at par or at a premium price.

Redemption charge
The commission a mutual fund charges an investor who is redeeming shares. For example, a 2% redemption charge (also called a back end load) on the sale of shares valued at $1000 will result in payment of $980 (or 98% of the value) to the investor. This charge may decline or be eliminated as shares are held for longer time periods.

Redemption cushion
The percentage by which the conversion value of a convertible security exceeds the redemption price (strike price).

Redemption or call
Right of the issuer to force holders on a certain date to redeem their convertibles for cash. The objective usually is to force holders to convert into common prior to the redemption deadline. Typically, an issue is not called away unless the conversion price is 15%-25% below the current level of the common. An exception might occur when an issuer's tax rate is high, and the issuer could replace it with debt securities at a lower after-tax cost.

Rediscount
To discount short-term negotiable debt instruments for a second time, after they have been discounted with a bank.

Red-lining
Illegal discrimination in making loans, insurance coverage, or other financial services available to people or property in certain areas because of poor economic conditions, high levels of fraudulent transaction, or frequent defaults.

Reduction-Option Loan (ROL)
A hybrid of a fixed-rate and adjustable-rate mortgage. An ROL matches the borrower to the current mortgage rate, which then becomes fixed for the rest of the term. This reduction is usually allowed if rates drop more than 2% in a year.

Reference rate
A benchmark interest rate (such as LIBOR) used to specify conditions of an interest rate swap or an interest rate agreement.

Refinancing
An extension and/or increase in amount of existing debt.

Reflation
Government monetary action that causes a reversal of deflation.

Refund
To retire existing bond issues through the sale of a new bond issue, usually to reduce the interest rate being paid.

Refundable
Eligible for refunding under the terms of a bond indenture.

Refunded bond
Also called a prerefunded bond, a bond that originally may have been issued as a general obligation or revenue bond but that is now secured by an escrow fund consisting entirely of direct U.S. government obligations that are sufficient for paying the bondholders.

Refunding
Redeeming a bond with proceeds received from issuing lower-cost debt obligations with ranking equal to or superior to the debt to be redeemed.

Refunding Escrow Deposits (REDs)
A financial instrument involving a forward purchase contract that obligates investors to buy bonds at a certain rate when issued. The future date coincides with the first optional call date on an existing high-rate bond. In the interim, investors' money is invested in secondary market Treasury bonds. The Treasuries mature around the call date on the existing bonds, providing the money to buy the new issue and redeem the old one.

Regional bank
A bank operating in a specific region of the country, taking deposits and offering loans.

Regional Check Processing Center (RCPC)
A Federal Reserve check processing operation that clears checks drawn on depository institutions located within a specified area. RCPCs expedite collection and settlement of checks within the area on an overnight basis.

Regional fund
A mutual fund that invests in a specific geographic area overseas, such as Asia or Europe.

Regional stock exchanges
Organized national securities exchanges located outside of New York City and registered with the SEC They include: the Boston, Cincinnati, Intermountain (Salt Lake City-dormant, owned by COMEX), Midwest (Chicago), Pacific (Los Angeles and San Francisco), Philadelphia (Philadelphia and Miami), and Spokane (local mining and Canadian issues, non-reporting trades) Stock Exchanges.

Registered bond
A bond whose issuer records ownership and interest payments. Differs from a bearer bond, which is traded without record of ownership and whose possession is the only evidence of ownership.

Registered check
A check issued and guaranteed by a bank for a customer who provides funds for payment of the check.

Registered company
A company that is listed with the SEC after submission of a required statement and compliance with disclosure requirements.

Registered competitive market maker
An NASD-registered dealer who acts as a market maker for a designated over-the-counter stock by buying and selling that stock to maintain stability.

Registered equity market maker
Member firm of the American Stock Exchange registered as a trader to make stabilizing trades for its own account in particular securities.

Registered investment adviser
SEC-registered individual or firm that substantiates completion of education and work experience in the field, and pays an annual membership fee.

Registered investment company
An investment firm which is registered with the SEC and complies with certain stated legal requirements.

Registered options trader
An American Stock Exchange specialist who monitors a certain group of options to help maintain a fair and orderly market.

Registered Owner
An individual or organization to whom certificates are directly issued and who, as a result, is recorded on the corporation's securityholder records (as maintained by the transfer agent).

Registered Retirement Savings Plan (RRSP)
Tax-sheltered retirement plan for Canadian citizens, much like an American IRA.

Registered representative
A person registered with the CFTC who is employed by and solicits business for a commission house or futures commission merchant.

Registered secondary offering
A reoffering of a large block of securities, previously publicly issued, by the holder of a large portion of some corporation through an investment firm.

Registered security
Used in the context of general equities. Securities whose owner's name is recorded on the books of the issuer or the issuer's agent, called a registrar.

Registered Shares
Shares that are issued in a shareholder's name as the holder of record.

Registered trader
A member of the exchange who executes frequent trades for his or her own account.

Registrar
Financial institution appointed to record issue and ownership of company securities.

Registration
In the securities market describes process set up pursuant to the Securities Exchange Acts of 1933 and 1934 whereby securities that are to be sold to the public are reviewed by the SEC.

Registration statement
A legal document filed with the SEC to register securities for public offering that details the purpose of the proposed public offering. The statement outlines financial details, a history of the company's operations and management, and other facts of importance to potential buyers. See: Registration.

Regression
A mathematical technique used to explain and/or predict. The general form is Y = a + bX + u, where Y is the variable that we are trying to predict; X is the variable that we are using to predict Y, a is the intercept; b is the slope, and u is the regression residual. The a and b are chosen in a way to minimize the squared sum of the residuals. The ability to fit or explain is measured by the R-square.

Regression analysis
A statistical technique that can be used to estimate relationships between variables.

Regression coefficient
Term yielded by regression analysis that indicates the sensitivity of the dependent variable to a particular independent variable. See: Parameter.

Regression equation
An equation that describes the average relationship between a dependent variable and a set of explanatory variables.

Regression toward the mean
The tendency that a random variable will ultimately have a value closer to its mean value.

Regressive tax
A tax system that provides that average tax rates decrease with increases in individuals' income brackets.

Regular settlement
Transaction in which a stock contract is settled and delivered on the fifth full business day following the date of the transaction (trade date). In Japan, regular settlement occurs three business days following the trade date; in London, two weeks following the trade date (at times, three weeks); in France, once per month.

Regular way settlement
In the money and bond markets, the standard basis on which some security trades are settled is that the delivery of the securities purchased is made against payment in Fed funds on the day following the transaction.

Regulated commodities
The group of registered commodity futures and options contracts traded on organized U.S. futures exchanges.

Regulated investment company
An investment company allowed to pass capital gains, dividends, and interest earned on fund investments directly to its shareholders so that it is taxed only at the personal level, and double taxation is avoided.

Regulation A
An exemption from the Securities Act of 1933 that exempts small public offerings, valued at less than $1.5MM from most registration requirements with the SEC.

Regulation D
There are two Regulation Ds. First, it refers to the exemption from the Securities Act of 1933 for Private Placements. These placements are exempt from registration and prospectus delivery requirements. Second, it refers to a Federal Reserve Board regulation that currently requires member banks to hold reserves against their net borrowings from foreign offices of other banks over a 28-day averaging period. Regulation D has been merged with Regulation M.

Regulation FD (fair disclosure)
U.S. S.E.C. regulation whose purpose is to ensure that select groups of investors are not privy to firm-specific information before other investors. Executives are not allowed to reveal nonpublic information during their communications with analysts and select shareholders. If information is inadvertently released, they must take steps to broaden the dissemination of the information within 24 hours of discovering the disclosure.

Regulation G
Federal Reserve Board regulation of lenders other than commercial banks, brokers, or dealers that provide credit for the purchase of or carrying of securities. This regulation was discontinued by a 1998 amendment.

Regulation M
Federal Reserve Board regulation that currently requires member banks to hold reserves against theirnet borrowings from their foreign branches over a 28-day averaging period. Reg M has also required member banks to hold reserves against Eurodollars lent by their foreign branches to domestic corporations for domestic purposes.

Regulation Q
Federal Reserve Board regulation imposing caps on the rates that banks may pay on savings and time deposits. Currently time deposits with a denomination of $100,000 or more are exempt from Reg Q.

Regulation T
Federal Reserve Board regulation that deals with grantingcredit to customers by securities brokers, dealers, and exchange member as far as initial margin requirements and securities that are covered under the rules.

Regulation T Calls
Federal Reserve Board Regulation T margin calls are issued when a customer makes a transaction in a margin account and does not meet the minimum initial requirement of 50% cash or loan available. This margin call is referred to as a Fed Call. The customer must increase the equity in the account by depositing additional funds and/or marginable securities. If the necessary amount of cash or securities is not deposited into the account within the specified time period, securities may be sold to meet the call, and the account may become restricted.

Regulation U
Federal Reserve Board limit on how much credit a bank can allow a customer for the purchase and carrying of margin securities.

Regulations
Rules specifying the appropriate behavior of agencies, organizations or individuals in the securities industry.

Regulatory accounting procedures (RAP)
Accounting principles required by the FHLB that allow S&Ls to elect annually to defer gains and losses on the sale of assets and amortize these deferrals over the average life of the asset sold.

Regulatory pricing risk
Risk that arises when insurance companies are subject to regulation of the premium rates that can they charge.

Regulatory surplus
The surplus as measured using regulatory accounting principles (RAP), which may allow the nonmarket valuation of assets or liabilities and which may be materially different from economic surplus.

Rehypothecation
Pledging to banks by securities brokers of the amount in customers' margin account as collateral for broker loans, which are used to cover margin loans to customers for margin purchases and selling short.

Reimbursement
Payment made to someone for out-of-pocket expenses has incurred.

Reinstatement
The restoration of an insurance policy after it has lapsed for nonpayment of premiums.

Reinsurance
The spreading of risk and division of client premiums among insurance companies allowing the sharing of the burden of a large risk.

Reinvestment
Use of investment income to buy additional securities. Many mutual fund companies and investment services offer the automatic reinvestment of dividends and capital gains distributions as an option investors.

Reinvestment date
The date on which an investment's dividend or capital gains income is reinvested, if requested by the shareholder, to purchase additional shares. Also known as the ex-dividend date.

Reinvestment effect
The impact of a change in interest rates on the reinvestment rate.

Reinvestment privilege
A shareholder's right to reinvest dividends and buy more shares in the corporation or mutual fund.

Reinvestment rate
The rate at which an investor assumes interest payments made on a debt security can be reinvested over the life of that security.

Reinvestment risk
The risk that proceeds received in the future may have to be reinvested at a lower potential interest rate.

Reinvoicing center
A central financial subsidiary an MNC uses to reduce transaction exposure by billing all home country exports in the home currency and reinvoicing to each operating affiliate in that affiliate's localcurrency. It can also be used as a netting center.

Rejection
Refusal by a bank to grant credit, usually because of the applicants financial history, or refusal to accept a security presented to complete a trade, usually because of a lack of proper endorsements or violation of rules of a firm.

Relative form of purchasing power parity
Theory that the rate of change in the prices of products should be somewhat similar, but not absolutely the same when measured in a common currency, as long as transportation costs and trade barriers are unchanged.

Relative PE
A firm or industry's price to earnings ratio divided by the market price to earnings ratio.

Relative purchasing power parity (RPPP)
Idea that the rate of change in the price level of commodities in one country relative to the price level in another determines the rate of change of the exchange rate between the two countries' currencies.

Relative strength
Movement of a stock price over the past year as compared to a market index (like the S&P 500). A value below 1.0 means the stock shows relative weakness in price movement (underperformed the market); a value above 1.0 means the stock shows relative strength over the one-year period. Equation for Relative Strength: [current stock price/year-ago stock price] divided by [current S&P 500/year-ago S&P 500]. Note: this can be a misleading indicator of performance because it does not take risk into account.

Relative value
The attractiveness measured in terms of risk, liquidity, and return of one instrument relative to another, or, for a given instrument, of one maturity relative to another.

Relative yield spread
The ratio of the yield spread to the yield level. Used for bonds.

Release
Relieve party to a trade of any previously made obligation concerning that trade, hence allowing the would-be transactor to show the inquiry/order to a new broker.

Release clause
A mortgage provision that releases a pledged asset after a certain portion of the total payments has been made.

Reload Stock Option
A replacement stock option granted by some companies to optionees upon a stock swap. The number of reload shares granted is equal to the number of shares delivered to exercise the option plus, in some cases, any shares withheld for tax withholding obligations. The exercise price of the new option is the current market price. The option generally expires on the same date that the original option would have.

Remainderman
One who receives the principal of a trust when it is dissolved.

Remaining maturity
The length of time remaining until a bond comes due

Remaining principal balance
The amount of principal dollars remaining to be paid under a mortgage as of a given time.

Remargining
Putting up additional cash or securities after a margin call on a brokerage customer's margin account so that it meets minimum maintenance requirements.

Rembrandt market
The foreign market in the Netherlands.

Remit
To pay for purchases by cash, check, or electronic transfer.

Remote disbursement
Technique that involves writing checks drawn on banks in remote locations so as to maximize disbursement float.

Renegotiable rate
A type of variable rate involving a renewable short-term "balloon" note. The interest rate on the loan is generally fixed during the term of the note, but when the balloon comes due, the lender may refinance it at a higher rate. In order for the loan to be fully amortized, periodic refinancing may be necessary.

Renewal
Placement of a day order identical to one not completed on the previous day.

Renewable term life insurance
A policy for a stated period that may be renewed if desired at the end of the term.

Rent
Regular payments to an owner for the use of some leased property.

Rental lease
See: Full-service lease

Rent control
Municipal regulation restricting the amount of rent that a building owner can charge.

Reoffering yield
In a purchase and sale, the yield to maturity at which an underwriter offers to sell bonds to investors.

Reopen an issue
The Treasury, when it wants to sell additional securities, will occasionally sell more of an existing issue (reopen it) rather than offer a new issue.Reopening
Treasury offerings of additional amounts of outstanding issues, rather than an entirely new issue. A reopened issue will always have the same maturity date, CUSIP number, and interest rate as the original issue.

Reorg (or Corporate Action or Reorganization)
Any transaction involving the issuance of stock or cash, or the cancellation of stock tendered by a shareholder, such as in the case of a merger, acquisition or tender offer.

Reorganization
Creation of a plan to restructure a debtor's business and restore its financial health.

Reorganization bond
A bond issued by a company undergoing a reorganization process.

Repatriation
The return from abroad of the financial assets of an organization or individual.

Replacement Chain
A concept that views a capital investment as an indefinite commitment to a specific type of technology. The replacement chain concept can be used to allow the comparison of mutually exclusive investments with unequal lives.

Replacement cost
Cost to replace a firm's assets.

Replacement cost accounting
An accounting method that includes as part of depreciation the difference between the original purchase price of an asset and the current replacement cost.

Replacement cost insurance
Insurance that pays out the full amount required to replace damaged property with new property, without taking into account the depreciated value of the property.

Replacement cycle
The frequency with which an asset is replaced by an equivalent asset.

Replacement value
Current cost of replacing the firm's assets.

Replacement-chain problem
Idea that future replacement decisions must be taken into account in selecting among projects.

Replicating portfolio
A portfolio constructed to match an index or benchmark.

Repo
An agreement in which one party sells a security to another party and agrees to repurchase it on a specified date for a specified price. See: Repurchase agreement.

Report
Written or oral confirmation that all or part of one's order has been executed, including the price and size parameters of the trade being reported; often followed by a fresh picture.

Report of Condition and Income
Financial report that all banks, bank holding companies, savings, and loan associations, Edge Act and agreement corporations, and certain other types of organizations must file with a federal regulatory agency. Informally termed a call report.

Reported factor
The pool factor as reported by the bond buyer for a given amortization period.

Reporting currency
The currency in which the parent firm prepares its own financial statements; that is, US dollars for a US company.

Representations
In the context of project financing, a series of statements about a project, a sponsor, or the obligations under the project contracts or the financing agreements.

Repricing
To change the price of an asset. In derivatives, it sometimes refers to the exchange of options of with different strike prices.

Reproducible assets
A tangible asset with physical properties that can be matched or duplicated, such as a building or machinery.

Repurchase agreement
An agreement with a commitment by the seller (dealer) to buy a security back from the purchaser (customer) at a specified price at a designated future date. Also called a repo, it represents a collateralized short-term loan for which, where the collateral may be a Treasury security, money market instrument, federal agency security, or mortgage-backed security. From the purchaser's (customer's) perspective, the deal is reported as a reverse repo.

Repurchase of stock
Technique to pay cash to firm's shareholders that provides more preferential tax treatment for shareholders than dividends. Treasury stock is the name given to previously issued stock that has been repurchased by the firm. A repurchase is achieved through either a Dutch auction, open market, purchase, or tender offer.

Required minimum distribution (RMD)
The minimum amount that the IRS requires must be withdrawn each year from all tax-advantaged retirement plans starting in the calendar year following the year in which the plan holder reaches age 70-1/2. Roth IRAs are exempt from this rule.

Required Rate of Return (RRR)
The minimum expected yield by investors require in order to select a particular investment.

Required reserves
The dollar amounts, based on reserve ratios, that banks are required to keep on deposit at a Federal Reserve Bank.

Required return
The minimum expected return you would need in order to purchase an asset, that is, to make the investment.

Required yield
Generally referring to bonds; the yield required by the marketplace to match available expected returns for financial instruments with comparable risk.

Rescaled Range (R/S) Analysis
The analysis developed by H.E. Hurst to determine long-memory effects and fractional Brownian motion. Rescaled range analysis measures how the distance covered by a particle increases as we look at longer and longer time scales. For Brownian motion, the distance covered increases with the square root of time. A series which increases at a different rate is not random. See: Anti-persistence, Fractional Brownian Motion, Hurst Exponent, Persistence, Joseph Effect, Noah Effect.

Rescheduled loans
Bank loans that are usually altered to have longer maturities in order to assist the borrower in making the necessary repayments.

Rescind
To cancel a contract because of misrepresentation, fraud, or illegal procedure.

Research and development (R"D)>
Development of new products and services by a company in order to obtain a competitive advantage.

Research and development limited partnership
A partnership whose investors put up money to finance new product R&D in return for profits generated from the products.

Research department
The office in an institutional investing organizations that analyzes markets and securities.

Research portable
Service offered to clients that transmits investment bank research electronically by computers.

Reserve
An accounting entry that properly reflects contingent liabilities.

Reserve account
A separate amount of cash or letter of credit to service a payment requirement such as debt service or maintenance.

Reserve currency
A foreign currency held by a central bank or monetary authority for the purposes of exchange intervention and the settlement of intergovernmental claims.

Reserve ratios
Specified percentages of deposits, established by the Federal Reserve Board, that banks must keep in a noninterest-bearing account at one of the twelve Federal Reserve Banks.

Reserve requirements
The percentage of different types of deposits that member banks are required to hold on deposit at the Fed.

Reservation price
The price below or above which a seller or purchaser is unwilling to go.

Reset bonds
Bonds that allow the initial interest rates to be adjusted on specific dates in order that the bonds trade at the value they had when they were issued.

Reset frequency
The frequency with which the floating rate changes.

Residential mortgage
Mortgage on a residential property, tax-deductible for individuals up to $1 million.

Residential property
Property that consists of homes, apartments, townhouses, and condominiums.

Residual
See:Residual value

Residual assets
Assets that remain after sufficient assets are dedicated to meet all senior debtholders' claims in full.

Residual claim
Related: Equity claim

Residual cover
The cash flow remaining after a project financing has been repaid, expressed as a percentage of the original loan. Residual cushion.

Residual dividend approach
An approach that suggests that a firm pay dividends if and only if acceptable investment opportunities for those funds are currently unavailable.

Residual method
A method of allocating the purchase price for the acquisition of another firm among the acquired assets.

Residual Return
Return independent of the benchmark. The residual return is the return relative to beta times the benchmark return. To be exact, an asset's residual return equals its excess return minus beta times the benchmark excess return.

Residual risk
Related: Unsystematic risk

Residuals
(1) Part of stock returns not explained by the explanatory variable (the market index return). Residuals measure the impact of firm-specific events during a particular period. (2) Remainder cash flows generated by pool collateral and those needed to fund bonds supported by the collateral.

Residual value
Usually refers to the value of a lessor's property at the time the lease expires.

Resiliency
Speed with which new orders respond to a change in prices.

Resistance
An effective upper bound on prices achieved because of many willing sellers at that price level.

Resistance level
A price level above which it is supposedly difficult for a security or market to rise. Price ceiling at which technical analysts note persistent selling of a commodity or security. Antithesis of support level.

Resolution
A document that records a decision or action by a Board of Directors, or a bond resolution by a government entity authorizing a bond issue.

Resolution Funding Corporation (RefCorp)
A government agency established by Congress in 1989 to issue bailout bonds and raise funds for the activities of the Resolution Trust Corporation, as well as to administer struggling institutions inherited from the disbanded Federal Savings and Loan Corporation.

Resolution Trust Corporation (RTC)
A government agency established in 1989 and disbanded in 1996 that administered federal savings and loan institutions that were insolvent between 1989 and August 1992 by either bailing them out or merging them.

Restricted
Placed on a list that dictates that the trader may not maintain positions, solicit business, or provide indications in a stock, but may serve as broker in agency trades after being properly cleared. Traders are so restricted due to investment bank involvement with the company on nonpublic activity (i.e., mergers and acquisitions defense), affiliate ownership, or underwriting activities; signified on the Quotron by a flashing "R." A restricted list and the stocks on it should never be conveyed to anyone outside of the trading areas, much less outside the firm. See: Grey list.

Restricted account
A margin account without enough equity to meet the initial margin requirement that is restricted from any purchases until the requirement is fulfilled.

Restricted Securities
The term used under Rule 144 for securities issued privately by the company, without the benefit of a registration statement. Restricted securities are subject to a holding period before they can be sold under Rule 144.

Restricted surplus
A portion of retained earnings not allowed by law to be used for the payment of dividends.

Restricted stock
Stock that must be traded in compliance with special SEC regulations concerning its purchase and resale. These restrictions generally result from affiliate ownership, M&A activity, and underwriting activity. Many firms are now using restricted stock as a reward for employees. The advantages to restricted stock are: employees get dividends, employees usually get voting rights, and employee gets something even if the stock price drops over the vesting period (whereas an option would be worthless).

Restricted Stock Award
Grants of shares of stock subject to restrictions on sale and risk of forfeiture until vested by continued employment. Restricted stock typically vests in increments over a period of several years. Dividends or dividend equivalent rights may be paid, and award holders may have voting rights, during the restricted period.

Restricted stock units
Similar to restricted stock. However, the unit represents a promise that employees will receive stock in the future. The units do not pay dividends until the stock is vested.

Restrictive covenants
Provisions that place constraints on the operations of borrowers, such as restrictions on working capital, fixed assets, future borrowing, and payment of dividends.

Restrictive endorsement
An endorsement signature on the back of a check that specifies the conditions under which the check can be transferred or paid out.

Restructuring
The reorganization of a company in order to attain greater efficiency and to adapt to new markets. Major corporate restructuring transactions include mergers, acquisitions, tender offers, leveraged buyouts, divestitures, spin-offs, equity carve-outs, liquidations and reorganizations.

Resyndication limited partnership
The sale of existing properties to new limited partners, so that they can receive the tax advantages that are no longer available to the old partners.

Retail
Individual and institutional customers as opposed to dealers and brokers.

Retail credit
Credit granted by a firm to consumers for the purchase of goods or services. See: consumer credit.

Retail house
A brokerage firm that caters to individual customers rather than large institutions.

Retail investors
Small individual investors who commit capital for their personal account rather than on behalf of another company.

Retail price
The total price charged for a product sold to a customer, which includes the manufacturer's cost plus a retail markup.

Retained earnings
Accounting earnings that are retained by the firm for reinvestment in its operations; earnings that are not paid out as dividends.

Retained earnings statement
A statement of all transactions affecting the balance of a company's retained earnings account.

Retention
The number of units allocated to an underwriting syndicate member less the units held back by the syndicate manager for facilitating institutional sales and for allocation to nonmember firms. In the context of construction contracts, an amount retained from construction contract payments (5-15% of the contract price) to ensure the contractor completes the construction before the retention is returned.

Retention rate
The percentage of present earnings held back or retained by a corporation, or one minus the dividend payout rate. Also called the retention ratio.

Retire
To extinguish a security, as in paying off a debt.

Retirement
Removal from circulation of stock or bonds that have been reacquired or redeemed.

Retirement Protection Act of 1994
Legislation designed to protect the pension benefits of workers and retirees by increasing required support of pension plans by employers.

Retracement
A price movement in the opposite direction of the previous trend.

Return
The change in the value of a portfolio over an evaluation period, including any distributions made from the portfolio during that period.

Return if Exercised
The return that a covered call writer would make if the underlying stock were called away.

Return of capital
A cash distribution resulting from the sale of a capital asset, or securities, or tax breaks from depreciation.

Return on assets (ROA)
Indicator of profitability. Determined by dividing net income for the past 12 months by total average assets. Result is shown as a percentage. ROA can be decomposed into return on sales (net income/sales) multiplied by asset utilization (sales/assets).

Return on capital employed (ROCE)
Indicator of profitability of the firm's capital investments. Determined by dividing Earnings Before Interest and Taxes by (capital employed plus short-term loans minus intangible assets). The idea is that this ratio should at least be greater than the cost of borrowing.Return on equity (ROE)
Indicator of profitability. Determined by dividing net income for the past 12 months by common stockholder equity (adjusted for stock splits). Result is shown as a percentage. Investors use ROE as a measure of how a company is using its money. ROE may be decomposed into return on assets (ROA) multiplied by financial leverage (total assets/total equity).

Return on investment (ROI)
Generally, book income as a proportion of net book value.

Return on sales
A measurement of operational efficiency equalingnet pre-tax profits divided by net sales expressed as a percentage.

Return on total assets
The ratio of earnings available to common stockholders to total assets.

Return-to-maturity expectations
A variant of pure expectations theory that suggests that the return an investor will realize by rolling over short-term bonds to some investment horizon will be the same as holding a zero-coupon bond with a maturity that is the same as that investment horizon.

Reuters
International news and quotation service based in London.

Revaluation
An increase in the foreign exchange value of a currency that is pegged to other currencies or gold.

Revenues
Sales or royalty proceeds. Quantity times price sold.

Reversal Arbitrage
A riskless arbitrage that involves selling the stock short, writing a put, and buying a call. The options have the same terms.

Revenue Anticipation Note (RAN)
A short-term municipal debt issue that will be repaid with anticipated revenues, such as sales taxes, from the project.

Revenue bond
A bond issued by a municipality to finance either a project or an enterprise in which the issuer pledges to the bondholders the revenues generated by the operation of the projects financed. Examples are hospital revenue bonds and sewer revenue bonds.

Revenue fund
A fund accounting for all revenues from an enterprise financed by a municipal revenue bond.

Revenue Reconciliation Act of 1993
Legislation created to reduce the federal budget deficit by cutting spending and increasing taxes.

Revenue sharing
The percentage split between the general partner and limited partners of profits and losses resulting from the operation of the involved business.

Reversal
Turn, unwind. For convertible reversal, selling a convertible and buying the underlying common, usually effected by an arbitrageur. For market reversal, change in direction in the stock or commodity futures markets, as charted by technical analysts in trading ranges. For options reversal, closing the positions of each aspect of an options spread or combination strategy.

Reverse a swap
Reswap of bonds to gain the advantage of a yield spread or tax loss and restore a bond portfolio to its position before the original swap.

Reverse conversion
A technique in which brokerage firms earn interest on the stocks they hold for their customers by selling the short and investing the proceeds in money market accounts. The short positions are hedged to protect against adverse market conditions.

Reverse leverage
Occurs when the interest on borrowings exceeds the return on investment of the funds that were borrowed.

Reverse leveraged buyout
Bringing back into publicly traded status a company that had been privatized by way of a leveraged buyout.

Reverse mortgage
A mortgage agreement allowing a homeowner to borrow against home equity and receive tax-free payments until the total principal and interest reach the credit limit of equity, and the lender is either repaid in full or takes the house.

Reverse price risk
A type of mortgage pipeline risk that occurs when a lender commits to sell loans to an investor at rates prevailing at the time of mortgage application but sets the note rates when the borrowers closes. The lender is thus exposed to the risk of falling rates.

Reverse repo
In essence, refers to a repurchase agreement. From the customer's perspective, the customer provides a collateralized loan to the seller.

Reverse stock split
A proportionate decrease in the number of shares, but not the total value of shares of stock held by shareholders. Shareholders maintain the same percentage of equity as before the split. For example, a 1-for-3 split would result in stockholders owning one share for every three shares owned before the split. After the reverse split, the firm's stock price is, in this example, three times the pre-reverse split price. A firm generally institutes a reverse split to boost its stock's market price. Some think this supposedly attracts investors.

Reversing trade
Entering the opposite side of a currently held futures position to close out the position.

Revised estimate
The third estimate of GDP released about three months after the measurement period.

Revisionary trust
An irrevocable trust that becomes a revocable trust after a certain amount of time.

Revocable letter of credit
Assurance of funds issued by a bank that can be canceled at any time without prior notification to the beneficiary.

Revocable trust
A trust that may altered as many times as desired in which income-producing property passes directly to the beneficiaries at the time of the grantor's death. Since the arrangement can be altered at any time, the assets are considered part of the grantor's estate and they are taxed as such.

Revolving credit agreement
A legal commitment in which a bank promises to lend a customer up to a specified maximum amount during a specified period.

Revolving line of credit
A bank line of credit on which the customer pays a commitment fee and can take and repay funds at will. Normally a revolving LOC involves a firm commitment from the bank for a period of several years.

Reward-to-volatility ratio
Ratio of excess return to portfolio standard deviation.

Rich
Term for a security whose price seems too high in light of its price history.

RICO
Stands for Racketeer Influenced and Corrupt Organization Act. Legislation under/which inside traders may be convicted.

Rider
A form accompanying an insurance policy that alters the policy's terms or coverage.

Riding the yield curve
Buying long-term bonds in anticipation of capital gains as yields fall with the declining maturity of the bonds.

Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
Law permitting interstate banking in the U.S.

Rigged market
Manipulation of prices in a market to attract buyers and sellers.

Right
Privilege granted shareholders of a corporation to subscribe to shares of a new issue of common stock before it is offered to the public. Such a right, which normally has a life of two to four weeks, is freely transferable and entitles the holder to buy the new common stock below the public offering price. See: Warrant.

Right here
Used in the context of general equities. In-line, emphasizing that this is a customer inquiry that is ready to be executed and not distant on price. See: Tight.

Right of accumulation
Allow investors to combine prior mutual fund purchases with current purchases in the same mutual fund or related mutual fund family to qualify for a breakpoint and obtain a lower sales charge.

Rights offering
Issuance to shareholders that allows them to purchase additional shares, usually at a discount to market price. Holdings of shareholders who do not exercise rights are usually diluted by the offering. Rights are often transferable, allowing the holder to sell them on the open market to others who may wish to exercise them. Rights offerings are particularly common to closed-end funds, which cannot otherwise issue additional common stock.

Right of first refusal
The right of a person or company to purchase some thing before the offering is made to others.

Right of redemption
The right to recover property that has been attached by paying off the debt .

Right of rescission
The right to void a contract without any penalty within three days as provided in the Consumer Credit Protection Act of 1968.

Rights Agreement (aka "Poison Pill")
An anti-takeover arrangement often established by a company in anticipation of a hostile takeover attempt. The company appoints a Rights Agent who will issue Rights Certificates to each shareholder at the time of the takeover attempt. The shareholder may then exercise these rights to receive additional shares of stock and/or debentures, making the target company more expensive to acquire as a result of the additional shares outstanding, or the additional debt.

Rights Offering
A popular means of raising capital by offering shareholders the opportunity to buy additional shares of the same stock at a price below the current market value.

Rights-on
Shares trading with rights attached to them.

Rights of set-off
An agreement defining each party's rights should one party default on its obligation. A setoff is common in parallel loan arrangements.

Rings
Trading arenas located on the floor of an exchange in which traders execute orders. Sometimes called a pit.

"Ring the cash register"
Used in the context of general equities. "Take a profit." See: Profit taking.

Rio de Janeiro Stock Exchange (Bolsa do Rio)
Brazil's major securities market.

Rising bottoms
Chart pattern showing an increasing trend in the daily low prices of a security or commodity.

Risk
Often defined as the standard deviation of the return on total investment. Degree of uncertainty of return on an asset. In context of asset pricing theory. See: Systematic risk.

Risk-adjusted discount rate
The rate established by adding a expected risk premium to the risk-free rate in order to determine the present value of a risky investment.

Risk-adjusted profitability
A probability used to determine a "sure" expected value (sometimes called a certainty equivalent) that would be equivalent to the actual risky expected value.

Risk-adjusted return
Often we subtract from the rate of return on an asset a rate of return from another asset that has similar risk. This gives an abnormal rate of return that shows how the asset performed over and above a benchmark asset with the same risk. We can also use the beta against the benchmark to calculate an alpha, which is also risk-adjusted performance.

Risk arbitrage
Traditionally, the simultaneous purchase of stock in a company being acquired and the sale of stock of the acquirer. Modern risk arbitrage focuses on capturing the spreads between the market value of an announced takeover target and the eventual price at which the acquirer will buy the target's shares.

Risk-averse
Describes an investor who, when faced with two investments with the same expected return but different risks, prefers the one with the lower risk.

Risk-based capital ratio
Bank requirement that there be a minimum ratio of estimated total capital to estimated risk-weighted asset.

Risk classes
Groups of projects that have approximately the same amount of risk.

Risk controlled arbitrage
A self-funding, self-hedged series of transactions that generally use mortgage securities (MBS) as the primary assets.

Risk factor
In arbitrage pricing theory or the multibeta capital asset pricing model, the set of common factors that impact returns, e.g., market return, interest rates, inflation, or industrial production.

Risk-Free Interest Rate
Describes return available to an investor in a security somehow guaranteed to produce that return. The risk-free interest rate compensataes the investor for the temporary sacrifice of consumption.

Risk indexes
Categories of risk used to calculate fundamental beta, including (1) market variability, (2) earnings variability, (3) low valuation, (4) immaturity and smallness, (5) growth orientation, and (6) financial risk.

Risk profile
The slope of a line graphed according to the value of an underlying asset on the x-axis and the value of a position exposed to risk in the underlying asset on the y-axis. Also used with changes in value. See: Payoff profile.

Risk-return trade-off
The tendency for potential risk to vary directly with potential return, so that the more risk involved, the greater the potential return, and vice versa.

Risk tolerance
An investor's ability or willingness to accept declines in the prices of investments while waiting for them to increase in value.

Riskless arbitrage
The simultaneous purchase and sale of the same asset to yield a profit.

Riskless or risk-free asset
An asset whose future return is known today with certainty. The risk-free asset is commonly defined as short-term obligations of the US government.

Riskless rate
The rate earned on a riskless investment, typically the rate earned on the 90-day US Treasury Bill.

Riskless rate of return
The rate earned on a riskless asset.

Riskless transaction
A transaction that is guaranteed a profit, such as the arbitrage of a temporary differential between commodity prices in two different markets. The evaluation of whether dealer markups and markdowns in OTC transactions are reasonable. According to NASD, markups or markdowns should not exceed 5%.

Risk lover
A person willing to accept lower expected returns on prospects with higher amounts of risk.

Risk management
The process of identifying and evaluating risks and selecting and managing techniques to adapt to risk exposures.

Risk-neutral
Insensitive to risk.

Risk-prone
Willing to pay money to assume risk from others.

Risk premium
The reward for holding the risky market portfolio rather than the risk-free asset. The spread between Treasury and non-Treasury bonds of comparable maturity.

Risk premium approach
A common approach for tactical asset allocation to determine the relative valuation of asset classes based on expected returns.

Risk profile
A mapping of the change in value or profits and losses to which an organization has exposure.

Risk-return tradeoff
The basic concept that higher expected returns accompany greater risk, and vice versa.

Risk-reward ratio
Relationship of substantial reward corresponding to the amount of risk taken; mathematically represented by dividing the expected return by the standard deviation.

Risk seeker
Investor who likes to take risk and is even willing to pay for it. Also called risk lover.

Risk transfer
The shifting of risk through insurance or securitization of debt because of risk aversion.

Risky asset
An asset whose future return is uncertain.

Risk-adjusted return
Return earned on an asset normalized for the amount of risk associated with that asset.

Risk-free asset
An asset whose future normal return is known today with certainty.

Risk-free rate
The rate earned on a riskless asset.

Road show
A promotional presentation by an issuer of securities to potential buyers about the desirable qualities of the investments.

Rotation
An active asset management strategy that tactically overweighted and underweighted certain sectors, depending on expected performance. Sometimes called sector rotation.

Rocket scientist
An employee of an investment firm (often having a Ph.D. in physics or mathematics) that works on highly mathmatic models of derivative pricing.

Roll down
To move to an option position with a lower exercise price.

Roll forward
To move to an option position with a later expiration date.

Roll, Richard
Author of path-breaking work on asset pricing including the famous Roll critique. Finance professor at UCLA.

Roll order
(1) Dividend roll; (2) Replacement of a maturing position with an identical one in the new maturity; (3) Recognizition of capital gain or loss while reestablishing the position at the risk of the market.

Roll over
To reinvest funds received from a maturing security in a new issue of the same or a similar security.

Roll up
To move to an option position with a higher exercise price. In venture capital, refers to the venture capitalist forcing small firms to merge operations in order to reduce costs

Rolling of Futures
As financial futures have short-term maturities, often 3-9 months, before or at maturity, the future must be sold and a new future (for the same asset but with a new maturity) must be repurchased.

Rollover
Means that a loan is periodically repriced at an agreed spread over the appropriate, currently prevailing rate. Most term loans in the Euromarket are made on a rollover basis as to current LIBOR rate.

Rollover IRA
A traditional individual retirement account holding money from a qualified plan or 403(b) plan. These assets, as long as they are not mixed with other contributions, can later be rolled over to another qualified plan or 403(b) plan. Also known as a conduit IRA.

Roll's Critique
That the CAPM holds by construction when performance is measured against a mean-variance efficient index; otherwise, it holds not at all. Attributable to Richard Roll in 1977.

Ross, Stephen
Developer of the Arbitrage Pricing Theory. Finance professor at MIT.

Roth IRA
Individual Retirement Account that allows contributors to make annual contributions and to withdraw the principal and earnings tax-free under certain conditions. Maximum annual contributions are $3,000 per year (phasing up to $4,000 per year in 2005 and $5,000 per year in 2008.

Round lot
A trading order typically of 100 shares of a stock or some multiple of 100. Related: odd lot.

Round-trip trade
The purchase and sale of a security within a short period of time.

Round-trip transactions costs
Costs of completing a transaction, including commissions, market impact costs, and taxes.

Round-turn
Procedure by which the long or short position of an individual is offset by an opposite transaction or by accepting or making delivery of the actual financial instrument or physical commodity.

Royalty
Payment for the right to use intellectual property or natural resources.

Rubber check
A check that bounces for lack of funds.

R square (R2)
Square of the correlation coefficient. The proportion of the variability in one series that can be explained by the variability of one or more other series a regression model. A measure of the quality of fit. 100% R-square means perfect predictability.

Rule lOb-5
An SEC rule that prohibits trading by insiders on material nonpublic information. This is also the rule under which a company may be sued for false or misleading disclosure.

Rule 13-d
Often used in risk arbitrage. Requirement under Section 13-d of the Securities Act of 1934 that a form must be filed with the SEC within ten business days of acquiring direct or beneficial ownership of 5% or more of any class of equity securities in a publicly held corporation. The purchaser of such stock must also file a 13-d with the stock exchange on which the shares are listed (if any) and the company itself. Required information includes the way the shares were acquired, the purchaser's background, and future plans regarding the target company. The law is designed to protect against insidious takeover attempts and to keep the investing public aware of information that could affect the price of their stock. See: Williams Act.

Rule 14-d
Often used in risk arbitrage. Regulations and restrictions covering public tender offers and related disclosure requirements.

Rule 144
Restricts solicitation of buyers to complete the sell order of an insider (unless the firm is already a buyer); signified by a flashing "E" on Quotron.

Rule 144a
SEC rule allowing qualified institutional buyers to buy and trade unregistered securities.

Rule 405
NYSE codification of "know your customer" rules, which require that a customer's situation is suitable for any investment being made.

Rule 415
Permits corporations to file a registration for securities they intend to issue in the future when market conditions are favorable. See: Shelf registration.

Rule of Absolute Priority
A condition of bankruptcy proceedings under which junior (subordinated) claim holders can receive no payment until senior (priority) claim holders are paid in full.

Rule of 72
A formula used to determine the amount of time it will take for invested money to double at a given compound interest rate, which is 72 divided by the interest rate. The logic is as follows. The time for an amount A to double is given by 2A=A(1+i)^t where ^ represents exponent and i is the interest rate, e.g. .05 is 5%. The A term cancels from both sides of the question. Solve for t by taking the natural log of both sides of the equation. Hence, t= [ln(2) over {ln(1+i)}], which is approximately equal to 0.72 over i. Hence the rule of 72.

Rules of fair practice
Rules established by the NASD that lay down guidelines for just and equitable principles of trade and business in securities markets.

Rumortrage
A term combining the words "rumor" and arbitrage, used to describe trading that occurs on the basis of rumors of a takeover.

Rump
Usually used in the context of a merger or acquisition. A group of shareholders who refuse to tender their shares for a merger or acquisition. In a merger of Company A and Company B for example, if a sufficient number of Company B shareholders do not tender their shares, the new company will not be able to access the cash flows of Company B.

Run
A run consists of a series of bid and offer quotes for different securities or maturities. Dealers give and ask for runs from each other.

Rundown
A summary of the amount and prices of a serial bond issue that is still available for purchase.

Running ahead
The illegal practice of trading in a security for a broker's personal account before placing an order for the same security for a customer.

Runoff
Used for listed equity securities. Series of trades printed on the ticker tape that occur on the NYSE before 4:00 p.m., but are not reported until afterwards due to heavy trading that makes the tape late.

Russell Indexes
US equity index widely used by pension and mutual fund investors that are weighted by market capitalization and published by the Frank Russell Company of Tacoma, Washington. For example, the Russell 3000 index includes the 3,000 largest US companies according to market capitalization.

Russell 1000
A market capitalization-weighted benchmark index made up of the 1000 highest-ranking US stocks in the Russell 3000.

Russell 2000
A market capitalization-weighted benchmark index made up of the 2000 smallest US companies in the Russell 3000.

Russell 3000
A market capitalization-weighted benchmark index made up of the 3000 largest US stocks, which represent about 98% of the US equity market.

Russian Exchange
Russia's major securities market.

Russian Trading System (RTS)
An electronic system in Russia, like the Nasdaq system on which the majority of Russian equities trading is conducted.

Stock Market Dictionary - Q

Q
Fifth letter of a Nasdaq stock symbol specifying that it is in bankruptcy proceedings.

QA
The two-character ISO 3166 country code for QATAR.

QAR
The ISO 4217 currency code for the Qatar Rial.

QQQ
The Nasdaq-100 Index Tracking Stock. This is a tracking stock which trades like an index mutual fund which follows the Nasdaq 100 index. It trades continuously.

Q ratio or Tobin's Q ratio
Market value of a firm's assets divided by replacement value of the firm's assets. Named after James Tobin of Yale University.

Quadratic programming
Variant of linear programming in which the objective function is quadratic rather than linear. In portfolio selection, we often minimize the variance of the portfolio (which is a quadratic function) subject to constraints on the mean return of the portfolio.

Qualification period
A period of time during the first few months or weeks of a new policy when an insurance company will not reimburse a policyholder for a claim in order to allow the insurance company time to find any fraudulent information in the application.

Qualified Domestic Relations Order (QDRO)
A judgment, decree, or order that gives a pension plan participant access to retirement assets that must be used to pay an ex-spouse or dependent children.

Qualified endorsement
A signature on the back of a negotiable instrument transferring the amount to some other party but that includes wording that limits the endorser's liability.

Qualified opinion
An auditor's opinion expressing certain limitations of an audit.

Qualified plan or trust
A tax-deferred plan allowing employer and employee contributions that build up savings, which are paid out at retirement or on termination of employment. Tax is paid only when amounts are drawn from the trust.

Qualified retirement plan
A retirement plan established by employers for their employees that meets the requirements of Internal Revenue Code Section 401(a) or 403(a) and is eligible for special tax considerations. The plan may provide for employer contributions, as in a pension or profit-sharing plan, as well as employee contributions. Employers can deduct plan contributions made on behalf of eligible employees on the business's tax return as business expenses. Plan earnings are not taxed to the employee until withdrawn.

Qualified Terminable Interest Property Trust (Q-TIP)
A trust that allows a surviving spouse to receive income generated from the trust, while the actual distribution of the trust's assets is made to other beneficiaries such as the grantor's children.

Qualified total distribution
A payment representing an employee's interest in a qualified retirement plan. The payment must be prompted by retirement (or other separation from service), death, disability, or attainment of age 59-1/2. Payment can be in installments as long as the complete distribution is made within a single tax year.

Qualifying annuity
An annuity allowable as investment for a qualified plan or trust.

Qualifying share
Shares of common stock that a person must hold in order to qualify as a director of the issuing corporation.

Qualifying stock option
A benefit granted by a corporation that allows employees to purchase shares at a discount price.

Qualitative analysis
An analysis of the qualities of a company that cannot be measured concretely, such as management quality or employee morale.

Qualitative research
Traditional analysis of firm-specific prospects for future earnings. It may be based on data collected by the analysts, there is no formal quantitative framework used to generate projections.

Quality of earnings
Increased earnings due to increased sales and cost controls, as compared to artificial profits created by inflation of inventory or other asset prices.

Quality option
Gives the seller choice of deliverables in Treasury bond and Treasury note futures contracts. Also called the swap option. Related: Cheapest to deliver issue.

Quantitative analysis
An assessment of specific measurable securities or investment factors, such as cost of capital, value of assets; and projections of sales, costs, earnings, and profits. Combined with more subjective or qualitative considerations (such as management effectiveness), quantitative analysis can enhance investment decisions and portfolios.

Quantity risk
Occurs when the quantity of an asset to be hedged is uncertain.

Quality spread
Difference between Treasury securities and non-Treasury securities that are identical in all respects except for quality rating. For instance, the difference between yields on Treasuries and those on single A-rated industrial bonds. Also called credit spread.

Quant
A person with numerical and computer skills who carries out quantitative analyses of companies.

Quantize
To convert an asset or liability into a currency other than the regular trading currency.

Quantitative analysis
An analysis of the mathematically measurable figures of a company, such as the value of assets or projected sales.

Quantitative research
Use of advanced econometric and mathematical valuation models to identify the firms with the best possible prospectives. Antithesis of qualitative research.

Quanto swap
See: Differential swap

Quantos
Currency options with a guaranteed exchange rate that enable buyers who like an asset, German bonds for example, but not the asset's pricing currency, to arrange payment in a different currency for a fee.

Quarter stock
Stock with a par value of $25 per share.

Quarterly
Occurring every three months.

Quarterly financing
February 15, May 15, August 15 and November 15, or next working day offerings of several "coupon" security issues. Quarterly issues currently consist of a 3-year note, a 10-year note, and a 30-year bond. The Treasury sometimes offers additional amounts of outstanding long-term notes or bonds, rather than selling new security issues. See: Reopening.

Quasi-public corporation
A corporation that is operated privately, but is supported by the government in its operations and that often traded publicly.

Quay
A landing place or pier, usually of solid construction, where vessels berth to load or unload cargo.

Quick assets
Current assets minus inventories.

Quick ratio
Indicator of a company's financial strength (or weakness). Calculated by taking current assets less inventories, divided by current liabilities. This ratio provides information regarding the firm's liquidity and ability to meet its obligations. Also called the Acid test ratio.

Quid pro quo
An arrangement allowing a firm to use research from another firm at no cost in exchange for executing all of its trades with the firm that provides the research.

Quiet period
Time period an issuer is "in registration" with the SEC and may not promote its forthcoming issue.

Quorum
The minimum number of people who must be present or must provide a proxy to vote at a meeting in order to make a valid decision.

Quota
See Import Quota

Quotation
Highest bid and lowest offer (asked) price currently available on a security or a commodity.

Quotation board
The electronic board at a brokerage firm displaying prices other financial data.

Quote rule
Rule requiring market makers to publish quotations for any listed security when a quotation represents more than 1% of the aggregate trading volume for that security.

Quoted price
The price at which the last trade of a particular security or commodity took place.

Stock Market Dictionary - P

P
Fifth letter of Nasdaq stock symbol specifying issue is the company's first class of preferred shares.

P2P
Business slang, usually used in reference to startups or internet startup,refers to "path to profitability.".

PA
The two-character ISO 3166 country Code for PANAMA.

PAB
The ISO 4217 currency code for the Panama Balboa.

PAC
See: Planned amortization class

PAC
See: Preauthorized checks

PAD
See: Preauthorized electronic debits

P/B
See: Price to book ratio

PBGC
See: Pension Benefit Guaranty Corporation

PC
See: Participation certificates

PE
The two-character ISO 3166 country code for PERU.

PEFCO
See: Private Export Funding Corporation

PEG Ratio
See: Prospective earnings growth ratio

PEN
The ISO 4217 currency code for the Peruvian Nuevo Sol.

PERC
See: Preferred equity redemption stock

PERLS
Principal Exchange-Rated-Linked Securities.

PF
The two-character ISO 3166 country code for FRENCH POLYNESIA.

PG
The two-character ISO 3166 country code for PAPUA NEW GUINEA.

PGK
The ISO 4217 currency code for the Papua New Guinea Kina.

PH
The two-character ISO 3166 country code for PHILIPPINES.

PHP
The ISO 4217 currency code for the Philippines Peso.

PHLX
See: Philadelphia Stock Exchange

PIBOR
See: Paris Interbank Offer Rate

PIK
See: Payment-in-kind bond

PIPE
See: Private Investment in Public Equity

PK
The two-character ISO 3166 country code for PAKISTAN.

PK
A suffix that refers to Pink Sheets

PKR
The ISO 4217 currency code for the Pakistani Rupee.

PL
The two-character ISO 3166 country code for POLAND.

PLC
See: Project loan certificate

PLN
The ISO 4217 currency code for the Polish Zloty.

PM
The two-character ISO 3166 country code for SAINT PIERRE AND MIQUELON.

PN
The two-character ISO 3166 country code for PITCAIRN.

PN
See: Project notes

PO
See: Principal only

PPP
See:Purchasing power parity

PR
The two-character ISO 3166 country code for PUERTO RICO.

PRI
See:Political risk insurance

PS
The two-character ISO 3166 country code for PALESTINIAN TERRITORY, OCCUPIED.

PSA
See: Public Securities Association.

PT
The two-character ISO 3166 country code for PORTUGAL.

PTE
The ISO 4217 currency code for the Portugese Escudo.

P/S
See: Price to sales

PV
See:Present value

PVBP
See: Price value of a basis point

PW
The two-character ISO 3166 country code for PALAU.

PY
The two-character ISO 3166 country code for PARAGUAY.

PYG
The ISO 4217 currency code for the Paraguay Guarani.

PAC Bond
Stands for Planned Amortization Class bond. A tranche class offered by some CMOs that has a sinking fund schedule and an ability to make principal payments that are not subordinated to other classes.

Pacific Stock Exchange
Used for listed equity securities. Regional exchange located in Los Angeles and San Francisco; only U.S. exchange open between 4:00 and 4:30.

Pac-Man strategy
Takeover defense strategy in which the prospective acquiree retaliates against the acquirer's tender offer by launching its own tender offer for the other firm.

Package mortgage
A mortgage on a house and property in the house.

Paid-in capital
Capital received from investors in exchange for stock, but not stock from capital generated from earnings or donated. This account includes capital stock and contributions of stockholders credited to accounts other than capital stock. It would also include surplus resulting from recapitalization.

Paid in surplus
See: Paid-in capital

Paid up
When all payments that are due have been made.

Paid-up policy
A life insurance policy in which all premiums that are due have been paid.

Painting the tape
Illegal practice by traders who manipulate the market by buying and selling a security to create the illusion of high trading activity and to attract other traders who may push up the price.

Paired off
Used for listed equity securities. Matched buy and sell market orders, usually pertaining to the pre-opening market picture in a stock, or MOC orders (especially relating to futures/options expirations).

Paired shares
Stock of two companies under the same management that are sold as one unit with one certificate.

Pairoff
A buyback to offset and effectively liquidate a prior sale of securities.

Panic buying or selling
Rapid trading of stocks or bonds in high volume in anticipation of sharply rising or falling prices, usually after unexpected news is released.

Paper
Money market instruments, commercial paper, and other.

Paper dealer
A brokerage firm that buys and sells commercial paper to make a profit.

Paper gain (loss)
Unrealized capital gain (loss) on securities held in a portfolio based on a comparison of current market price to original cost.

Par
Equal to the nominal or face value of a security. A bond selling at par is worth an amount equivalent to its original issue value or its value upon redemption at maturity-typically $1000/bond. See: Discount, premium.

Par bond
A bond trading at its face value.

Par value
Also called the maturity value or face value; the amount that an issuer agrees to pay at the maturity date.

Par value of currency
The official exchange rate between two countries' currencies.

Parallel bonds
Fixed income instruments denominated in the respective currencies of the countries where they are placed.

Parallel loan
A process whereby two companies in different countries borrow each other's currency for a specific period of time, and repay the other's currency at an agreed maturity for the purpose of reducing foreign exchange risk. Also referred to as back-to-back loans.

Parallel shift in the yield curve
A shift in economic conditions in which the change in the interest rate on all maturities is the same number of basis points. In other words, if the three month T-bill increases 100 basis points (one %), then the 6-month, 1-year, 5-year, 10-year, 20-year, and 30-year rates all increase by 100 basis points as well. Related: Non-parallel shift in the yield curve.

Parameter
A model is a combination of variables, such as GDP growth, and coefficients which multiply these variables. The coefficients are often estimated from the data. The coefficients are called parameters.

Parent company
A company that controls subsidiaries through its ownership of voting stock, as well as runs its own business.

Paris Bourse
National stock market of France.

Paris Interbank Offer Rate (PIBOR)
The deposit rate on interbank transactions in the Eurocurrency market quoted in Paris.

Parity
For convertibles, level at which a convertible security's market price equals the aggregate value of the underlying common stock; value/worth of the convertible bond considered only as an equity instrument (Conversion ratio times common price). See: Conversion value. For international parity, U.S.$ price of a foreign stock's last sale in an overseas market (Local currency stock price times forex rate times ADR ratio). For listed parity, condition whereby no party has floor priority, and matching thus occurs. For options parity, dollar amount by which an option is in the money. See: Intrinsic value.

Pari passu
Refers to the equal ranking of securities.

Parity value
Related: Conversion value

Parking
Putting money into safe investments such as money market investments while deciding where to invest the money.

Parking violation
Often used in risk arbitrage. Illegal holding of stock by a third party, or the financing of such a stock, in which the third party's sole reason for holding the stock is to conceal ownership or control of a raider, thus sidestepping the Williams Act requirements of 5% holding limits. See: Rule 13d.

Part B prospectus
See: Statement of Additional Information

Partial
Used in the context of general equities. Trade whose size is only part of the total customer indication/order, usually made to avoid a compromise in price and also to get some business instead of losing the customers inquiry/order to a competitor.

Partial compensation
Incomplete payment for the delivery of goods to one party by buying back a certain amount of product from the same party.

Partial Vote
When only a portion of the total shares in an account is voted. For example, a broker has 1,000 shares and sends out a card to each of four shareholder clients. If only three of the four client cards are returned to the broker, the broker will submit only 3/4ths(750 shares) of the total 1,000 shares to vote. If the fourth card arrives later, an additional vote can be counted.

Participant risk
The risk associated with the credit of the participants and possibility of non-performance.

Participant
A party of a funding. It usually refers to the lowest rank or smallest level of funding.

"Participate but do not initiate"
Used for listed equity securities. "Participate in the side of the market indicated by the order, but do not initiate the interest that causes the trade to take place." This kind of order can cause one to "miss stock" because the broker or investor is at the mercy of the player who does initiate the trade. See: Market order go along, percentage order.

Participating buyer/seller
Used for listed equity securities. (1) Customer willing to buy/sell in line with market. (2) Buyer/seller who goes along with another buyer/seller in a percentage order.

Participating convertible preferred stock
Preferred stock that can be converted into common stock at the option of the holder. In contrast, to the usual preferred stock, the value of the preferred stock is refunded to the holder. That is, one gets conversion plus the value of the stock.

Participating dividend
Dividend received from ownership of participating preferred stock.

Participating fees
The portion of total fees in a syndicated credit that go to the participating banks.

Participating GIC
A guaranteed investment contract whose policyholder is not guaranteed a crediting rate, but instead receives a return based on the actual experience of the portfolio managed by the life insurance company.

Participating life insurance policies
Life insurance that pays dividends to policyholders depending on the company's success as provided by few claims and profitable underwritings and investments.

Participating preferred stock
Preferred stock that provides the holder with a specified dividend plus the right to additional earnings under specified conditions.

Participation
The amount of loan or bond issue taken directly from another direct lender or underwriter.

Participation certificates (PC)
Used in the context of general equities. Investments representing an interest in a pool of funds or in other instruments, such as foreign securities, that allow participation in the rise or fall of a security or group of securities.

Participation loan
A large loan made by a group of lenders, that enables a borrower to obtain financing above the legal lending limit of an individual lender.

Partner
Business associate who shares equity in a firm.

Partnership
Shared ownership among two or more individuals, some of whom may, but do not necessarily, have limited liability with respect to obligations of the group. See: General partnership, limited partnership, and master limited partnership.

Partnership agreement
A written agreement among partners detailing the terms and conditions of participation in a business ownership arrangement.

Party in interest
An ERISA-specified individual—such as an administrator, officer, fiduciary, trustee, custodian, or counsel—who is prohibited from making certain transactions involving a retirement plan. A trustee, for example, would be prohibited from using an IRA as collateral for a loan.

Pass the book
The process of transferring responsibility for a brokerage firm's trading account from one office to another around the world in order to benefit from trading 24 hours a day.

Pass-through coupon rate
The interest rate paid on a securitized pool of assets, which is less than the rate paid on the underlying loans by an amount equal to the servicing and guaranteeing fees.

Pass-through rate
The net interest rate passed through to investors after deducting servicing, management, and guarantee fees from the gross mortgage coupon.

Pass-through securities
A pool of fixed income securities backed by a package of assets (i.e., mortgages) where the holder receives the principal and interest payments. Related: Mortgage pass-through security

Passive
Income or loss from business activities in which a person does not materially participate, such as a limited partnership.

Passive Activity Loss (PAL)
A loss incurred in participating in passive investing.

Passive bond
A bond without any interest yield.

Passive income
Income (such as investment income) that does not come from active participation in a business. Specified by the U.S. tax code.

Passive Income Generator (PIG)
An investment that favors passive income, such as an income-oriented real estate limited partnership.

Passive investing
Putting money into a profitable business opportunity that is deemed passive by the IRS and thus benefits from tax deductions.

Passive investment management
Buying a well diversified portfolio to represent a broad-based market index without attempting to search out mispriced securities.

Passive investment strategy
See: Passive investment management.

Passive management
See: Indexing

Passive portfolio
A market index portfolio.

Passive portfolio strategy
A strategy that involves minimal expectational input, and instead relies on diversification to match the performance of some market index. A passive strategy assumes that the marketplace will reflect all available information in the price paid for securities, and therefore, does not attempt to find mispriced securities. Related: Active portfolio strategy.

Patent
The exclusive right to use documented intellectual property in producing or selling a particular product or using a process for a designated period of time.

Path-dependent option
An option whose value depends on the sequence of prices of the underlying asset rather than just the final price of the asset.

Pattern
A technical chart formation used to make market predictions by following the price movements of securities.

Pay-as-you-go basis
A method of paying income tax in which the employer deducts a portion of an employee's monthly salary to remit to the IRS.

Pay-to-play
Attempts by municipal bond underwriting businesses to gain influence with political officials who decide which underwriters are awarded the municipality's business.

Pay-up
The loss of cash resulting from a swap into higher-priced bonds or the need/willingness of a bank or other borrower to pay a higher rate of interest to get funds. Used in the context of general equities. (1) When an investor who wants to buy a stock at a particular price hesitates and the stock begins to rise; instead of letting the stock go, he "pays up" to buy the shares at the higher prevailing price. (2) Buy shares in a high-quality company at what is felt to be a high, but supportable, price due to its quality.aPayable through drafts
A method of making payment that is used to maintain control over payments made on behalf of the firm by personnel in noncentral locations. The payer's bank delivers the payable through draft to the payer, which must approve it and return it to the bank before payment can be received.

Payable date
The date when dividends or capital gains are paid to shareholders or reinvested in additional shares.

Payables
Related: Accounts payable

Payback
The length of time it takes to recover the initial cost of a project, without regard to the time value of money.

Pay-down
In a Treasury refunding, the amount by which the par value of the securities maturing exceeds that of those sold. In the context of general equities, paying a lower price in an accumulation of stock. Antithesis of pay-up.

Payee
A person receiving payment through any form of money transfer method.

Payer
The person making a payment to a payee.

Paying agent
An agent who makes principal and interest payments to bondholders on behalf of the issuer.

Payment
The amount required to repay a loan, including interest and fees.

Payment date
The date on which shareholders of record will be sent a check for the declared dividend.

Payment float
Company-written checks that have not yet cleared.

Payment-in-kind (PIK) bond
A bond that gives the issuer an option (during an initial period) either to make coupon payments in cash or in the form of additional bonds.

Payments netting
Reducing fund transfers between affiliates to only a netted amount. Netting can occur on a bilateral basis (between pairs of affiliates), or on a multi-lateral basis (taking all affiliates together).

Payments pattern
Describes the collection pattern of receivables. The pattern might describe the probability that a 72-day-old account will still be unpaid when it is 73 days-old.

Payments System
Collective term for mechanisms (both paper-backed and electronic) for moving funds, payments and money among financial institutions throughout the nation. The Federal Reserve plays a major role in the nation's payments system through distribution of currency and coin, processing of checks, electronic transfer of funds and the operation of automated clearinghouses that transfer funds electronically among depository intitutions; various private organizations also perform payments system functions.

Payoff diagram
In option pricing, a graph of the value of the option position at expiration as a function of the underlying asset price.

Payoff profile
The slope of a line graphed according to the value of an underlying asset on the x-axis and the value of a position taken to hedge against risk exposure on the y-axis. Also used with changes in value. See: Risk profile.

Payout period
The time period during which withdrawals from a retirement account or annuity are paid.

Payout ratio
Generally, the proportion of earnings paid out to the common stockholders as dividends. Morespecifically, the firm's cash dividend divided by the firm's earnings in the same reporting period.

P-coast
Refers to west coast listed equity securities. See: Pacific Stock Exchange.

P/E
See: Price/earnings ratio

P/E effect
That portfolios with low P/E stocks exhibit higher average risk-adjusted returns than those with high P/E stocks. Related: Value manager.

P/E ratio
Current stock price divided by trailing annual earnings per share or expected annual earnings per share. Assume XYZ Co. sells for $25.50 per share and has earned $2.55 per share this year; $25.50 = 10 times $2.55. XYZ stock sells for ten times earnings.

Peak
The high point at the end of an economic expansion until the start of a contraction.

Pecking-order view (of capital structure)
The argument that external financing transactions costs, especially those associated with the problem of adverse selection, create a dynamic environment in which firms have a preference, or pecking-order of preferred sources of financing, when all else is equal. Internally generated funds are the most preferred, followed by new debt, and debt-equity hybrids. Finally, new equity is at the least preferred source.

Pegged exchange rate
Exchange rate whose value is pegged to another currency's value or to a unit of account.

Pegging
Making transactions in a security, currency, or commodity in order to stabilize or target its value through market intervention.

Penalty clause
A clause found in contract agreements that provides for a penalty in the event of default.

Penalty tax
A federal tax that can be applied if a plan holder does not meet certain requirements when making withdrawals from a tax-advantaged retirement plan (for instance, if the plan holder has not reached age 59-1/2). This penalty tax is owed in addition to any income taxes due.

Pennant
A chart pattern resembling a pointed flag, with the point facing to the right, which shows a diminishing variance of price.

Penny stock
Used in the context of general equities. Stock that typically sells for less than $1 a share, although it may rise to as much as $10/share after the initial public offering, usually because of heavy promotion. All are traded OTC, many of them in the local markets of Denver, Vancouver, or Salt Lake City.

Pension Benefit Guaranty Corporation (PBGC)
A federal agency that insures the vested benefits of pension plan participants (established in 1974 by the ERISA legislation).

Pension fund
A fund set up to pay the pension benefits of a company's workers after retirement.

Pension liabilities
Future liabilities resulting from pension commitments made by a corporation. Accounting for pension liabilities varies widely by country.

Pension parachute
A form of poison pill providing that in the event of a hostile takeover attempt, any excess pension plan assets can be used to benefit pension plan participants. This prevents the raiding firm from using the pension assets to finance the takeover. In the context of corporate governance, these provisions prevent an acquirer from using surplus cash in the pension fund of the target in order to finance an acquisition. Surplus funds are required to remain the property of the pension fund and to be used for plan participants' benefits.

Pension plan
A fund that is established for the payment of retirement benefits.

Pension reversion
Termination of an overfunded defined benefit pension plan and replacement of it with a life insurance company-sponsored fixed annuity plan.

Pension sponsors
Organizations that have established a pension plan.

Penultimate profit prospect (PPP)
The second-lowest-priced of the ten highest-yielding stocks in the Dow Jones Industrial Average that is said (by authors O'Higgins and Downes) to be the Dow stock with the best possibility of outperforming the average as a whole.

People pill
A form of poison pill providing that the entire management threatens to resign in the event of a takeover.

Per annum
Yearly.

Per capita debt
The total bonded debt of a municipality divided by the population of the municipality.

Per stirpes
A method for distributing the assets of an individual who dies without a valid will. The Latin means for each descendant.

Percent to double
Percentage that the stock price has to rise (fall) to double the price of the call (put).

Percentage financial statement
Balance sheet and income statement represented as percentages.

Percentage order
Used for listed equity securities. Market limited price order to buy/sell a specified percentage (usually 50%) of shares traded (sometimes after a fixed number of shares of the stock have already traded). See: participating buyer/seller, "Participate but do not initiate."

Percentage premium
Applies mainly to convertible securities. Premium over parity of a convertible bond divided by parity.

Perfect capital market
A market in which there are never any arbitrage opportunities.

Perfect competition
An idealized market environment in which every market participant is too small to affect the market price by acting on its own.

Perfect forecast line
Graph of a slope that matches the forecast of an exchange rate with the actual exchange rate.

Perfect hedge
A situation in which the profit and loss from the underlying asset and the hedge position are equal.

Perfect market assumptions
Conditions under which the law of one price holds. The assumptions include frictionless markets, rational investors, and equal access to market prices and information.

Perfect market view (of capital structure)
Analysis of a firm's capital structure decision, which shows the irrelevance of capital structure in a perfect capital market.

Perfect market view (of dividend policy)
Analysis of a decision on dividend policy, in a perfect capital market environment, that shows the irrelevance of dividend policy.

Perfected first lien
A first attachment on an asset that is duly recorded with the relevant government body so that the lender will be able to act on it should the borrower default.

Perfectly competitive financial markets
Markets in which no trader has the power to change the price of goods or services. Perfect capital markets are characterized by certain conditions: (1) Trading is cost less, and access to the financial markets is free; (2) information about borrowing and lending opportunities is freely available; and (3) there are many traders, and no single trader can have a significant impact on market prices.

Performance Accelerated Restricted Stock Award Plans ("PARSAPs")
Also known as performance-accelerated restricted stock ("PARS") and time-accelerated restricted stock award plans ("TARSAPs"). Grants of restricted stock or restricted stock units which may vest early upon attainment of specified performance objectives. Otherwise, a time-vesting schedule would remain in effect.

Performance attribution analysis
The decomposition of a money manager's performance results to explain the reasons why those results were achieved. This analysis seeks to answer questions such as: (1) What were the major sources of added value? (2) Was short-term factor timing statistically significant? (3) Was market timing statistically significant? and (4), was security selection statistically significant?

Performance bond
A surety bond between two parties, insuring one party against loss if the terms of a contract are not fulfilled. Usually part of a construction contract or supply agreement.

Performance evaluation
The assessment of a manager's results, which involves, first, determining whether the money manager added value by outperforming the established benchmark (performance measurement) and, second, determining how the money manager achieved the calculated return (performance attribution analysis).

Performance fund
A growth-oriented mutual fund investing in growth stock and performance stock with low dividends and high risk.

Performance index
A risk-adjusted measure of how well a portfolio has performed.

Performance measurement
Calculation of the return a money manager realizes over some time interval.

Performance shares
Shares of stock paid out to managers only if the company makes certain sales, earnings per share, or other similar criteria.

Performance stock
High-growth stock in a company that retains earnings for further growth and therefore pays no dividends, but that an investor feels has significant future potential.

Period-certain annuity
An annuity that provides guaranteed payments to an annuitant for a specified period of time.

Period of digestion
The time period of often high volatility after a new issue is released when the trading price of the security is established by the market.

Periodic call auction
Selling stocks by bid at intervals throughout the day.

Periodic payment plan
Accumulation of capital in a mutual fund by making regular payments on a monthly or quarterly basis.

Periodic payments
A series of payments from an annuity, qualified retirement plan, or 403(b)(7) account made over a certain term of years. A payment from an IRA, even if over a period of years, is not considered a periodic payment for tax purposes.

Periodic purchase deferred contract
A fixed or variable annuity contract for which fixed-amount premiums are paid either monthly or quarterly, and that does not begin paying out until a time elected by the annuitant.

Periodic rate
The monthly effective interest rate. For example, the periodic rate on a credit card with an 18% annual percentage rate is 1.5% per month.

Permanent Assets
Fixed assets (plant and equipment) and permanent current assets.

Permanent Current Assets
The minimum level of current assets that a firm needs to continue operation. Because some level is always maintained, they are called permanent current assets.

Permanent financing
Long-term financing using either debt or equity.

Permanent spontaneous current Liabilities
The minimum level of spontaneous liabilities that is always maintained by a firm.

Permissiable nonbank activities
Financial activities closely related to banking that may be engaged in by bank holding companies (BHCs), either directly or through nonbank subsidiaries. For example, a BHC might own finance companies or engage in mortgage banking. The Federal Reserve Board determines which activities are closely related to banking. Before making such activities permissible, the Board must determine that performance of the activities by bank holding companies is in the public interest.

Perpendicular spread
Option strategy involving the purchase of options with similar expiration dates and different exercise prices.

Perpetual bond
Nonredeemable bond with no maturity date that pays regular interest rates indefinitely.

Perpetual inventory
Recordkeeping system in which book inventory is updated daily.

Perpetual warrants
Warrants that have no expiration date.

Perpetuity
A constant stream of identical cash flows without end, such as a British consol.

Perquisites
Personal benefits, including direct benefits, such as the use of a firm car or expense account for personal business, and indirect benefits, such as up-to-date office decoration.

Personal article floater
Insurance policy attachment designed to cover specified personal valuables.

Personal exemption
Amount of money a taxpayer can exclude from personal income for each member of the household in calculation of a tax obligation.

Personal income
Total income received from all sources, including wages, salaries, or rents, and the like.

Personal inflation rate
The inflation rate as it affects a specific individual.

Personal property
Any assets other than real estate.

Personal tax view (of capital structure)
The argument that the difference in personal tax rates between income from debt and income from equity eliminates the disadvantage of the double taxation (corporate and personal) of income from equity.

Personal trust
An interest in an asset held by a trustee for the benefit of another person.

Petrodollars
Deposits by countries that receive dollar revenues from the sale of petroleum to other countries; the term commonly refers to OPEC deposits of dollars in the Eurocurrency market.

Phantom income
Income from a limited partnership that creates taxability without generating cash flow.

Phantom Stock Award
A type of incentive grant in which the recipient is not issued actual shares of stock on the grant date but receives an account credited with a certain number of hypothetical shares. The value of the account increases over time based on the appreciation of the stock price and the crediting of phantom dividends. Payout may be settled in cash or stock.

Phantom stock plan
An incentive scheme that awards management bonuses based on increases in the market price of the company's stock.

Phase space
A graph which shows all possible states of a system. In phase space we plot the value of a variable against possible values of the other variables at the same time. If a system had three descriptive variables, we plot the phase space in three dimensions, with each variable taking one dimension.

Philadelphia Board of Trade (PBOT)
A subsidiary of the Philadelphia Stock Exchange that trades currency futures.

Philadelphia Stock Exchange (PHLX)
A securities exchange trading American and European foreign currency options on spot exchange rates.

Philippine Stock Exchange
Established in 1992 through the merger of the Manila Stock Exchange and the Makati Stock Exchange, the Philippines'only securities market.

Phillips Curve
A graph that supposedly shows the relationship between inflation and unemployment. It is conjectured that there is a simple trade-off between inflation and unemployment (high inflation and low unemployment, and low inflation and high unemployment). Named after A.W. Phillips. Obviously, the relation between these important macroeconomic variables is more complicated than this simple graph would suggest. For a modern treatment, see work of Robert Lucas.

Phone switching
Transferring money between funds in the same mutual fund family by telephone request. There may be a charge associated with these transfers. Phone switching is also possible among different fund families if the funds are held in street name by a participating broker/dealer. Physical asset
Actual property such as precious metals or real estate. Also called real or tangible assets.

Physical commodity
See: Commodity

Physical completion
The state in which a project is physically functioning, but not yet fully generating cash flow.

Physical option
An option whose underlying security is a physical commodity that is not stock or futures. The physical commodity itself (a currency, treasury debt issue, commodity) - underlies that option contract. See also index option.

Physical verification
A procedure auditors use to ensure that inventory recorded in the book is correct by actually checking out the physical inventory.

P & I
Stands for principal and interest on bonds or mortgage-backed securities.

Pickup
The gain in yield that occurs when a block of bonds is swapped for another block of higher-coupon bonds.

Pickup bond
A bond with a relatively high coupon that is close to the date at which it is callable, meaning that a fall in interest rates will most likely cause early redemption of the bond at a premium.

Picture
Describes bid and asked prices a broker quotes for a given security. Used for listed equity securities. Bid and ask prices and quantity information from a specialist or from a dealer regarding a particular security (i.e., "IBM's 1/4 to 1/2, 5m by 10m").

Piece
Apply mainly to convertible securities. Increment of bonds that trade in portions of $1000 minimum. Not all bonds can be traded in "pieces," and the increments can vary.

Pie model of capital structure
A model of the debt-equity ratio of the firms, graphically depicted in slices of a pie that represent the value of the firm in the capital markets.

Pier
A man made structure extending from the shore against which vessels may lie to load or unload cargo.

Piggyback registration
When a securities underwriter allows existing holdings of shares in a corporation to be sold in combination with an offering of new public shares.

Piggybacking
A broker who trading stocks, bonds or commodities in a personal account following a trade just made for a customer. The broker assumes that the customer is making the trade on valuable inside information.

PIK (Payment-in-kind) securities
Highly bonds or preferred stock that pay interest or dividends through additional bonds or preferred stock.

Pink sheets
Refers to over-the-counter trading. Daily publication of the National Quotation Bureau that reports the bid and ask prices of thousands of OTC stocks, as well as the market makers who trade each stock.

Pip
Used for listed equity securities. Smallest unit of a currency (i.e., cents for US dollars).

Pipeline
The underwriting process that must be completed with the SEC before a security can be offering for sale to the public.

Pit
A specific area of the trading floor that is designed for the trading of commodities, individual futures, or option contracts.

Pit committee
A committee of the exchange that determines the daily settlement price of futures contracts.

PITI
Stands for principal, interest, taxes, and insurance, the four main parts of monthly mortgage obligations.

Pivot
Price level established as being significant by market's failure to penetrate or as being significant when a sudden increase in volume accompanies the move through the price level.

P&L
Profit and loss statement for a trader.

Place
The marketing of new securities, usually through sales to institutional investors. See: Float.

Placement
The transfering of securities to a small group of investors.

Placement ratio
The percentages of last week's new municipal bond offerings that have been bought from the underwriters, according to the Bond Buyer newspaper.

Plain vanilla
A term that refers to a relatively simple derivative financial instrument, usually a swap or other derivative that is issued with standard features.

Plain vanilla swap
See: Fixed for floating swap

Plan agreement
A document detailing the terms and conditions of a retirement plan such as an IRA.

Plan participants
Employees or other beneficiaries who are eligible to receive benefits from a company's employee benefit plan.

Plan for reorganization
A plan for reorganizing a firm during the Chapter 11 bankruptcy process.

Plan sponsors
The entities that establish pension plans, including private business entities acting for their employees; state and local entities operating on behalf of their employees; unions acting on behalf of their members; and individuals representing themselves.

Planned amortization class (PAC)
(1) The class of CMO that has the most stable cash flows and the lowest prepayment risk of any class of CMO. Because of a stable cash flow, it is considered the least risky CMO. (2) A CMO bond class that stipulates cash flow contributions to a sinking fund. A PAC directs principal payments to the sinking fund on a priority basis in accordance with a predetermined payment schedule, with prior claim to the cash flows before other CMO classes. Similarly, cash flows received by the trust in excess of the sinking fund requirement are also allocated to other bond classes. The prepayment experience of the PAC is therefore very stable over a wide range of prepayment experience.

Planned capital expenditure program
Budgeted or projected outlays for major expenditures on permanent or fixed assets as outlined in the corporate financial plan.

Planned financing program
Budgeted or projected ways need for reasons or to obtain short-term and long-term financing as outlined in the corporate financial plan.

Planning horizon
The length of time a model or investor or plan projects into the future.

Plant
The assets of a business including land, buildings, machinery, and all equipment permanently employed.

Player
Used in the context of general equities. Customer or trader who is actively involved in a particular stock or the market in general.

Playing the market
Trading in high, uncalculated risk usually refers to actions of amateur investors.

Plaza Accord
Agreement among country representatives in 1985 to implement a coordinated program to weaken the dollar.

Pledging
See: Hypothecation

Plow back
To reinvest earnings in a business rather than pay out them out as dividends. Common practice in high-growth companies.

Plowback rate
Related: Retention rate

Plug
A variable that handles financial slack in the financial plan.

Plus
Used to quote a price in 64ths. Dealers in government bonds normally give price quotes in 32nds. To quote a bid or offer in 64ths, they use pluses; a dealer who bids 4+ is bidding the handle plus 4/32 + 1/64, which equals the handle plus 9/64.

Plus a match
Used for listed equity securities. Floor indication that someone is on the floor with equal priority standing who wants to buy/sell at least the same number of shares at the same price as one's own order. Outside. See: Matched orders. Compare to ahead.

Plus tick
Used in the context of general equities. Trade occurring at a price higher than the previous sale. Uptick. Antithesis of minus tick. See: Short sale.

Plus tick seller
Used for listed equity securities. A short seller (referring to the regulation requiring a plus tick to short).

Point
The smallest unit of price change quoted, or one one-hundredth of a percent. Related: Minimum price fluctuation and tick.

Point and figure chart
A price-only chart that takes into account only whole integer changes in price, i.e., a 2-point change. Point and figure charting disregards the element of time and is used solely to record changes in price.

Point Attractor
In non-linear dynamics, an attractor where all orbits in phase space are drawn to one point, or value. Essentially, any system which tends to a stable, single valued equilibrium will have a point attractor. A pendulum which is damped by friction will always stop, so its phase space will always be drawn to the point where velocity and position are equal to zero. See: Attractor, Phase Space.

Points quote
An abbreviated form of the outright quote used by traders in the interbank market.

Poison pill
Anti-takeover device that gives a prospective acquiree's shareholders the right to buy shares of the firm or shares of anyone who acquires the firm at a deep discount to their fair market value. Named after the cyanide pill that secret government agents are said to be instructed to swallow if capture is imminent.

Poison put
A covenant allowing the bondholder to demand repayment in the event of a hostile takeover.

Policy asset allocation
Way in which an investor seeks to assess an appropriate long-term "normal" mix of assets that represents an ideal blend of controlled risk and enhanced return.

Policy limit
The maximum dollar amount of coverage provided by an insurance company for a certain policy.

Policy loan
A loan often made at a below-market interest rate from an insurance company to a policyholder that is secured by the cash surrender value of a life insurance policy.

Policyholder
An individual who owns an insurance policy.

Policyholder loan bonds
Packaged loans acquired by policyholders that are secured by the cash surrender value of the policies, and are offered by a broker/dealer as bonds.

Political risk insurance
The risk associated with possible negative events such as expropriation of assets, changes in tax policy, restrictions on the exchange of foreign currency, or other changes in the business climate of a country.

Pool
In capital budgeting, the concept that investment projects are financed out of a pool of bonds, preferred stock, and common stock, and a weighted-average cost of capital must be used to calculate investment returns. In insurance, a group of insurers who share premiums and losses in order to spread risk. In investments, the combination of funds for the benefit of a common project, or a group of investors who use their combined influence to manipulate prices.

Pool factor
The outstanding principal balance divided by the original principal balance with the result expressed as a decimal. Pool factors are published monthly by the Bond Buyer newspaper for Ginnie Mae, Fannie Mae, and Freddie Mac (Federal Home Loan Mortgage Corporation) MBSs.

Pooling of interests
An accounting method for reporting acquisitions accomplished through the use of equity. The combined assets of the merged entity are consolidated using book value, as opposed to the purchase method, which uses market value. The merging entities' financial results are combined as though the two entities have always been a single entity.

Porcupine provision
Often used in risk arbitrage. See: Shark repellent.

Portability
The character of benefits that may be carried from a previous job to the next.

Portfolio
A collection of investments, real and/or financial.

Portfolio allocation by region
The distribution, by geographic region, of a portfolio's holdings.

Portfolio asset allocation
The distribution, by type of asset, of a portfolio's holdings.

Portfolio beta
Used in the context of general equities. The beta of a portfolio is the weighted sum of the individual asset betas, According to the proportions of the investments in the portfolio. E.g., if 50% of the money is in stock A with a beta of 2.00, and 50% of the money is in stock B with a beta of 1.00,the portfolio beta is 1.50. Portfolio beta describes relative volatilityof an individual securities portfolio, taken as a whole, as measured by the individual stock betas of the securities making it up. A beta of 1.05 relative to the S&P 500 implies that if the S&P's excess return increases by 10% the portfolio is expected to increase by 10.5%.

Portfolio diversification
Investing in different asset classes and in securities of many issuers in an attempt to reduce overall investment risk and to avoid damaging a portfolio's performance by the poor performance of a single security, industry, (or country).

Portfolio expected return
A weighted average of individual assets' expected returns.

Portfolio insurance
A strategy using a leveraged portfolio in the underlying stock to create a synthetic put option. The strategy's goal is to ensure that the value of the portfolio does not fall below a certain level.

Portfolio internal rate of return
The rate of return computed by first determining the cash flows for all the bonds in the portfolio and then finding the interest rate that will make the present value of the cash flows equal to the market value of the portfolio.

Portfolio management
Related: Investment management

Portfolio manager
Used in the context of general equities. Professional responsible for the securities portfolio of an individual or institutional investor, such as a mutual fund, pension fund, profit-sharing plan, bank trust department, or insurance company. In return for a fee, the manager has the fiduciary responsibility to manage the assets prudently and choose which asset types are most appropriate over time. Related: Investment manager.

Portfolio opportunity set
The expected return/standard deviation pairs of all portfolios that can be constructed from a given set of assets.

Portfolio R2
Used in the context of general equities. Number between 0 and 1 that measures the strength of correlation of movement between the portfolio/stock and the index. Indeed, the R2 is the square of the correlation. For hedging purposes, the higher the R2, the better.

Portfolio restructuring
Applies to derivative products. Recomposition of a portfolio's asset mix by selling off undesired asset types (equities, debt, or cash) or specific securities within that class, while simultaneously buying desired types or securities. Often a firm is asked to bid on an old portfolio and give an offering of the desired portfolio. See: Program trading.

Portfolio separation theorem
Theory that an investor's choice of a risky investment portfolio is separate from his attitude towards risk. Related: Fisher's separation theorem.

Portfolio theory
See: Modern portfolio theory.

Portfolio transaction costs
The expenses associated with buying and selling securities, including commissions, purchase and redemption fees, exchange fees, and other miscellaneous costs. In a mutual fund prospectus, these expenses are listed separately from the fund's expense ratio.

Portfolio turnover rate
For an investment company, an annualized rate found by dividing the lesser of purchases and sales by the average of portfolio assets.

Portfolio variance
Weighted sum of the covariance and variances of the assets in a portfolio.

Position
A market commitment; the number of contracts bought or sold for which no offsetting transaction has been entered into. The buyer of a commodity is said to have a long position, and the seller of a commodity is said to have a short position. Related: Open contracts.

Position building
Buying shares to build up a long position or selling shares to create a short position in a particular security or group of securities.

Position diagram
Diagram showing the possible payoffs from a derivative investment.

Position limits
Applies to derivative products. Maximum position available in any one future or option contract for a given institution. For "bona fide" futures hedgers, there are no position limits.

Position self
Used in the context of general equities. Going long or short in anticipation of a stock's movement.

Position sheet
Used in the context of general equities. List of long and short positions for an individual trader or desk, at times accompanied by the trades from the previous trading session that brought these closing positions.

Position trader
A commodities trader who takes a long-term approach in maintaining positions in the market and does not close out of these positions until close to the delivery date.

Positive carry
Related: Net financing cost

Positive convexity
A property of option-free bonds that the price appreciation for a large downward change in interest rates will be greater (in absolute terms) than the price depreciation for the same downward change in interest rates.

Positive covenant (of a bond)
A bond covenant that specifies certain actions the firm must take. Also called an affirmative covenant.

Positive float
See: Float

Positive obligation
A New York Stock Exchange rule that governs the behavior of specialists. Positive obligation is the mandate of the specialists to step in and act as either the buyer or the seller public investor orders exist do not match up naturally. Also known as affirmative_obligation. Related: negative_obligation.

Positive yield curve
When long-term debt interest rates are higher than short-term debt rates (because of the increased risk involved with long-term debt security).

Possessions corporation
A type of corporation permitted under the US tax code whose branch operation in a US possession can obtain tax benefits as though it were operating as a foreign subsidiary.

Post
Particular place on the floor of an exchange where transactions in stocks listed on the exchange occur.

Post-audit
A set of procedures for evaluating a capital budgeting decision after the fact.

Post-dated check
A check that becomes payable and negotiable on a future date specified.

Post-Money Valuation
The value of a company after its most recent round of financing. Related: Pre-Money Valuation

Postponement option
The option of deferring a project without eliminating the possibility of undertaking it.

Postponing income
Purposely delaying receipt of income to a later year in order to reduce current tax liability.

Post-trade benchmarks
Prices after the decision to trade.

Pot
The portion of stock or bond issue that is returned to the managing underwriter by the participating investment bankers for sale to institutional investors.

Pot is clean
Phrase used when managing underwriter has sold the entire pot.

Potential Default
A condition where a default may occur in time.

Power of attorney
A written authorization allowing a person to perform certain acts on behalf of another, such as moving of assets between accounts or trading for a person's benefit.

Praecipium
The amount of the front-end fee not distributed to the joining members of a syndication.

Prearranged trading
Possibly fraudulent practice whereby commodities dealers carry out risk-free trades at predetermined prices to acquire tax advantages.

Preauthorized checks (PAC)
Checks that are authorized by a payer in advance, and written either by the payee or by the payee's bank and then deposited in the payee's bank account.

Preauthorized electronic debits (PAD)
Debits to a bank account in advance by the payer. The payer's bank sends payment to the payee's bank through the Automated Clearing House (ACH) system.

Preauthorized payment
Accelerating cash inflows by directly charging a customer's bank account with permission.

Pre Carriage
Usually freight charges for port or airport delivery arising before the principal international carriage.

Precautionary demand (for money)
The need to meet unexpected or extraordinary contingencies with a buffer stock of cash.

Precautionary motive
A desire to hold cash in order to be able to deal effectively with unexpected events that require cash outlay.

Precedence
The established system of priorities of trades in an exchange. For example, the highest bid and lowest offer have highest precedence; the first bid or first offer at a price has highest priority, and large orders have priority over smaller orders.

Precious metals
Gold, silver, platinum, and palladium, which are used for their intrinsic value or for their value in production. These may be traded either in their physical state or by way of futures and options contracts, mining company stocks, bonds, mutual funds, or other instrument.

Precompute
Method of charging interest in which the annual interest is either deducted from the face amount of the loan when the funds are distributed or is added to the total amount and divided into the regular payments.

Preemptive right
Common stockholders' right to anything of value distributed by thecompany.

Preference
Refers to over-the-counter trading. Selection of a dealer to handle a trade despite the dealer's market not being the best available. Often the "preferenced dealer" will then move his market in line.

Preference share
Preferred shares of a corporation that have first claim to preferred dividends.

Preference stock
A security that ranks junior to preferred stock but senior to common stock in the right to receive payments from the firm; essentially junior preferred stock.

Preferred dividend coverage
Net income after interest and taxes (before common stock dividends) divided by preferred stock dividends.

Preferred equity redemption stock (PERC)
Preferred stock that converts automatically into equity at a stated date. A limit is placed on the value of the shares the investor receives.

Preferred habitat theory
A biased expectations theory that believes the term structure reflects the expectation of the future path of interest rates as well as risk premium. The theory rejects the assertion that the risk premium must rise uniformly with maturity, but instead profits that to the extent that the demand for and supply of funds do not match for a given maturity range, some participants will shift to maturities showing the opposite imbalances, as long as they are compensated by an appropriate risk premium whose magnitude will reflect the extent of aversion to either price or reinvestment risk.

Preferred shares
Preferred shares give investors a fixed dividend from the company's earnings and entitle them to be paid before common shareholders. See: Preferred stock.

Preferred stock
A security that shows ownership in a corporation and gives the holder a claim, prior to the claim of common stockholders, on earnings and also generally on assets in the event of liquidation. Most preferred stock pays a fixed dividend that is paid prior to the common stock dividend, stated in a dollar amount or as a percentage of par value. This stock does not usually carry voting rights. Preferred stock has characteristics of both common stock and debt.

Preferred stock agreement
A contract for preferred stock.

Preferred stock ratio
Preferred stock at par value divided by total capitalization, which gives the portion of capitalization that consists of preferred stock.

PREG
Financial ratio defined as stock price divided by sales over earnings growth. Often used in the valuation of Internet stocks. Related: PSSG.

Preliminary estimate
The second estimate of GDP released about two months after the measurement period.

Preliminary prospectus
An initial or tentative version of a prospectus.

Premature distribution
A distribution from an IRA before the owner reaches age 59-1/2. Generally, a 10% penalty tax is owed on such a distribution. Also known as an early distribution or an early withdrawal.

Premium
(1) A bond sold above its par value. (2) The price of an option contract; also, in futures trading, the amount by which the futures price exceeds the price of the spot commodity. (3) For convertibles, amount by which the price of a convertible exceeds parity, and is usually expressed as a percentage. Suppose a stock is trading at $45, and the bond is convertible at a $50 stock price and the convertible bond trading at 105. A similar bond without the conversion feature trades at $90. In this case, the premium is $15, or 16.66%=(105-90)/90. If the premium is high, the bond trades like any fixed income bond; if low, like a stock. See: Gross parity, net parity. (4) For futures, excess of fair value of future over the spot index, which in theory will equal the Treasury bill yield for the period to expiration minus the expected dividend yield until the future's expiration. (5) For options, price of an option in the open market (sometimes refers to the portion of the price that exceeds parity). (6) For straight equity, price higher than that of the last sale or inside market. Related: Inverted market premium payback period. Also called break-even time; the time it takes to recover the premium per share of a convertible security.

Premium bond
A bond that is selling for more than its par value.

Premium income
The income received by an investor who sells an option.

Premium raid
An attempt to acquire a large portion of a company's stock to gain control by offering stockholders a premium over the market value for their shares.

Pre-Money Valuation
The value of a company just before its most recent round of financing. Related: Post-Money Valuation

Prepackaged bankruptcy
A bankruptcy in which a debtor and its creditors pre-negotiate a plan of reorganization and then file it along with the bankruptcy petition.

Prepaid interest
An asset account showing interest that has been paid in advance, which is expensed and charged to the borrower's P & L statement.

Prepayment penalty
A fee a borrower pays a lender when the borrower repays a loan before its scheduled time of maturity.

Prepayment speed
Also called speed, the estimated rate at which mortgagors pay off their loans ahead of schedule, critical in assessing the value of mortgage pass-through securities.

Prepayments
Payments made in excess of scheduled mortgage principal repayments. Prerefunded bond
Refunded bond.

Prerefunding
Procedure of floating a second bond at a lower interest rate in order to pay off the first bond at the first call date and to reduce overall borrowing costs.

Presale order
An order to purchase part of a new municipal bond issue that is accepted by an underwriting syndicate before an official public offering.

Present value
The amount of cash today that is equivalent in value to a payment, or to a stream of payments, to be received in the future. To determine the present value, each future cash flow is multiplied by a present value factor. For example, if the opportunity cost of funds is 10%, the present value of $100 to be received in one year is $100 x [1/(1 + 0.10)] = $91.

Present Value Components Analysis
An analytical tool that establishes a base NPV for a project that can then be adjusted for the incremental NPV effect of separate elements of the project's overall potential sales.

Present value factor
Factor used to calculate an estimate of the present value of an amount to be received in a future period. If the opportunity cost of funds is 10% over next year, the factor is [1/(1 + 0.10)].

Present value of growth opportunities
Net present value (NPV) of investments the firm is expected to make in the future.

Present Value Index (PVI)
The ratio of the NPV of a project to the initial outlay required for it. The index is an efficiency measure for investment decisions under capital rationing.

President
Highest-ranking officer in a corporation after the chief executive officer.

Pre shipment Finance
Short term funding for inventory and production costs associated with manufacturing goods being exported.

Presidential election cycle theory
A theory that stock market trends can be predicted and explained by the four-year presidential election cycle.

Pre-sold issue
An issue that is sold out before the coupon announcement.

Pre-tax contribution
Payment to an account made with funds from a worker's paycheck before federal income taxes are deducted.

Pretax earnings or profits
Net income before federal income taxes are subtracted.

Pretax rate of return
Gain on a security before taxes.

Pre-trade benchmarks
Prices occurring before or at the decision to trade.

Previous balance method
Method of calculating finance charges based on the account balance at the end of the previous month.

Price of admission
Used in the context of general equities. Cost to become a player in a stock in an inordinately aggressive market (i.e.,locking on one side, size or price concessions); trader becomes aggressive in order to break the domination of customer activity by another dealer.

Price-book ratio
Compares a stock's market value to the value of total assets less total liabilities (book value). Determined by dividing current stock price by common stockholder equity per share (book value), adjusted for stock splits. Also called Market-to-Book.

Price change
Increase or decrease in the closing price of a security compared to the previous day's closing price.

Price compression
The limitation of the price appreciation potential for a callable bond in a declining interest rate environment, based on the expectation that the bond will be redeemed at the call price.

Price continuity
Minimal price changes due to transactions.

Price discovery process
The process of determining the prices of assets in the marketplace through the interactions of buyers and sellers.

Price-earnings ratio
Shows the multiple of earnings at which a stock sells. Determined by dividing current stock price by current earnings per share (adjusted for stock splits). Earnings per share for the P/E ratio are determined by dividing earnings for past 12 months by the number of common shares outstanding. Higher multiple means investors have higher expectations for future growth, and have bid up the stock's price.

Price effect
Impact of a change in interest rates on bond prices.

Price elasticities
The percentage change in quantity divided by a percentage change in the price. Answers the question: How much will the demand for my product decrease if I raise prices by 10%?

Price gap
A term used when the price of a stock rockets or dives in a direction away from its last price range, such as a stock with a trading range of $10-$12 that closes at $12 and climbs to $14 the next day.

Price give
Used in the context of general equities. Willingness of a buyer or seller to negotiate on price, within reason, from the price at the last sale or the indicated level. See: Takes price.

Price immunization
Portfolio protection strategy that focuses on the market value of assets and liabilities.

Price impact costs
Related: Market impact costs

Price indexes
See: Consumer price index and producer price index

Price leadership
A price charged by the dominant producer that becomes the price adopted by all the other producers.

Price momentum
Related: Relative strength

Price persistence
Related: Relative strength

Price range
The interval between the high and low prices over which a stock has traded over a particular period of time.

Price risk
The risk that the value of a security (or a portfolio) will decline in the future. Or, a type of mortgage pipeline risk created in the production segment when loan terms are set for the borrower in advance of setting terms for secondary market sale. If the general level of rates rises during the production cycle, the lender may have to sell the originated loans at a discount.

Price-sales ratio
Determined by dividing current stock price by revenue per share (adjusted for stock splits). Revenue per share for the P/S ratio is determined by dividing revenue for past 12 months by number of shares outstanding.

Price-specie flow mechanism
Adjustment mechanism under the classic gold standard allowing disturbances in the price level in one country to be wholly or partly offset by a countervailing flow of specie (gold coins) that would act to equalize prices across countries and automatically bring international payments into balance.

Price spread
An options strategy that involves buying and selling two options on the same security with the same expiration month, but with different exercise prices.

Price support
Government intervention to set an artificially high price through the use of a price floor designed to aid producers.

Price takers
Individuals who respond to rates and prices by acting as though prices have no influence on them.

Price uncertainty
Chance that the future price of an asset will change.

Price value of a basis point (PVBP)
Also called the dollar value of a basis point; a measure of the change in the price of a bond if the required yield changes by one basis point.

Price-volume relationship
A relationship espoused by some technical analysts that signals continuing rises or falls in security prices that are related to changes in volume traded.

Price-weighted index
An index giving a greater influence to higher-valued stocks by weighting all component stocks by their price.

Prices (of equity)
Price of a share of common stock on the date shown. Highs and lows are based on the highest and lowest intraday trading price.

Priced out
The market has already incorporated information, such as a low dividend, into the price of a stock.

Pricey
Term used for an unrealistically low bid price or unrealistically high offer price.

Pricing efficiency
Also called external efficiency; a market characteristic that prices at all times fully reflect all available information that is relevant to the valuation of securities.

Primary dealer
Usually refers to the select list of securities firms that are authorized to deal in new issues of government bonds.

Primary distribution
Sale of a new issue of stock or bonds, as distinguished from a secondary distribution.

Primary earnings per (common) share
Earnings available for the payment of dividends to common stockholders divided by the number of common shares outstanding.

Primary market
Where a newly issued security is first offered. All subsequent trading of this security occurs is done in the secondary market.

Primary offering
Direct/Sale of a firm's newly issued shares by the firm to investors.

Primary trend
General movement in price data that lasts 4 to 4 1/2 years.

PRIME
Stands for Prescribed Right to Income and Maximum Equity, a certificate that entitles the owner to the dividend/income from an underlying security, but not to the capital appreciation of that security.

Prime paper
The highest-quality, investment-grade debt of corporations as decided by rating agencies such as Moody's.

Prime rate
The interest rate at which banks lend to their best (prime) customers. More often than not, a bank's most creditworthy customers borrow at rates below the prime rate.

Prime rate fund
A mutual fund that buys portions of corporate loans from banks and pays the interest to shareholders.

Primitive security
An instrument such as a stock or bond for which payments depend only on the financial status of the issuer.

Principal
(1) The total amount of money being borrowed or lent. (2) The party affected by agent decisions in a principal-agent relationship.

Principal-agent relationship
Occurs when one person, an agent, acts on the behalf of another person, the principal.

Principal amount
The face amount of debt; the amount borrowed or lent. Often called principal.

Principal Exchange-Rated-Linked Securities (PERLS)
A debt instrument with its principal and interest denominated in U.S. dollars, but with principal repayment depending on the exchange rate of the U.S. dollar against a foreign currency.

Principal Finance
Usually refers to the area within an investment bank that deals with high grade fixed income. This group will not just trade bonds on the secondard market but will be actively involved in the debt financing of new projects. Many firms have Principal Finance Officers.

Principal Finance Officer
The head of an investment bank's Principal Finance division or a person that overseas the principal finance dealings of a firm. These dealings usually involve high grade bonds that are used to finance new projects for firms.

Principal-only (PO)
A mortgage-backed security (MBS) whose holder receives only principal cash flows on the underlying mortgage pool. All the principal distribution due from the underlying collateral pool is paid to the registered holder of the stripped MBS on the basis of the current face value of the underlying collateral pool.

Principal stockholder
A stockholder who owns 10% or more of the voting stock of a company. Such stockholders must report all trading in the stock to the SEC pursuant insider trading rules.

Principle of diversification
That portfolios of different sorts of assets differently correlated with one another will have negligible unsystematic risk. In other words, unsystematic risks disappear in diversified portfolios, and only systematic risks persist, those related to particular assets.

Print
Used in the context of general equities. As a verb execute a trade, evidenced by its printing on the ticker tape. As a noun, a trade.

Prior-lien bond
A bond usually arising from reorganization with precedence over another bond of the same issuing company that is equally secured.

Prior-preferred stock
Preferred stock that has a higher claim on all dividends and assets in liquidation than claims of other preferred stock.

Priority
Used for listed equity securities. System used in an auction market, in which the first bid or offer price is executed before other bid and offer prices, even if subsequent orders are larger. NYSE rules stipulate that the bid made first should be executed first, or if two bids came in at once, the bid for the large number of shares receives "priority." The bid not executed is then turned to the broker, who informs the customer that the trade was not completed because there was stock ahead. See: Standing.

Private Export Funding Corporation (PEFCO)
Company that mobilizes private capital for financing the export of big-ticket items by US firms by purchasing at fixed interest rates the medium- to long-term debt obligations of importers of US products.

Private Investment in Public Equity (PIPE)
Occurs when private investors take a sizable investment in publicly traded corporations. This usually occurs when equity valuations have fallen and the company is looking for new sources of capital.

Private-label pass-throughs
Related: Conventional pass-throughs.

Private letter ruling
A ruling by the IRS in response to a request for interpretation of a tax law.

Private limited partnership
A limited partnership with no more than 35 participants that is not registered with the SEC.

Private market value (PMV)
The break-up market value of all divisions of a company if divisions were each independent and established their own market stock prices.

Private Mortgage Insurance (PMI)
Policy protecting the holder against loss resulting from default on a mortgage loan.

Private placement
The sale of a bond or other security directly to a limited number of investors. For example, sale of stocks, bonds, or other investments directly to an institutional investor like an insurance company, avoiding the need for SEC registration if the securities are purchased for investment as opposed to resale. Antithesis of public offering.

Private-purpose bond
A municipal bond allowing more than 10% of the proceeds go to private activities.

Private unrequited transfers
Resident immigrant workers' remittances to their country of origin as well as, e.g., gifts, dowries, inheritances, prizes, charitable contributions.

Privatization
The transfer of government-owned or government-run companies to the private sector, usually by selling them.

Pro forma capital structure analysis
A method of analyzing the impact of alternative possible capital structure choices on a firm's credit statistics and reported financial results, especially to determine whether the firm will be able to use projected tax shield benefits fully.

Pro forma financial statements
A firm's financial statements as adjusted to reflect a projected or planned transaction. "What-if" analysis.

Pro forma statement
A financial statement showing the forecast or projected operating results and balance sheet, as in pro forma income statements, balance sheets, and statements of cash flows.

Probability
The relative likelihood of a particular outcome among all possible outcomes.

Probability density function
The function that describes the change of certain realizations for a continuous random variable.

Probability distribution
A function that describes all the values a random variable can take and the probability associated with each. Also called a probability function.

Probability function
A measure that assigns a likelihood of occurrence to each and every possible outcome.

Proceeds
Money received by the seller of an asset.

Proceeds sale
OTC securities sale whose revenue is used to buy another security.

Processing Delay
Time a selling firm takes to record receipt of a payment and deposit it.

Producer Price Index (PPI)
Index measuring changes in wholesale prices, published by the US Bureau of Labor Statistics every month.

Product cycle
The time it takes to bring new and/or improved products to market.

Product cycle theory
Theory suggesting that a firm initially establish itself locally and expand into foreign markets in response to foreign demand for its product; over time, the MNC will grow in foreign markets; after some point, its foreign business may decline unless it can differentiate its product from competitors.

Product Differentiation
A source of competitive advantage that depends on producing some item that is regarded to have unique and valuable characteristics.

Product risk
A type of mortgage pipeline risk that occurs when a lender has an unusual loan in production or inventory but does not have a sale commitment at a prearranged price.

Production
In the context of project financing, a defined portion of the proceeds of production up to a dollar amount.

Production Cost Advantage
A source of competitive advantage that depends on producing some product or service at the lowest cost.

Production-flow commitment
An agreement by the loan purchaser to allow a monthly loan quota to be delivered in batches.

Production Loan
A project financing where the repayment is linked to the production, often on a dollar/unit basis.

Production payment financing
A method of nonrecourse asset-based financing in which a specified percentage of revenue realized from the sale of the project's output is used to pay debt service.

Production possibilities schedule
The maximum amount of goods (i.e., food and clothing) that a country is able to produce given its labor supply.

Production rate
The coupon rate at which a pass-through security guaranteed by Ginnie Mae is issued.

Productivity
The amount of output per unit of input, such as the quantity of a product produced per hour of capital employed.

Profile buyer/seller
Trader trying to get involved in a stock who presents self as a buyer/seller to draw a call from a customer. That is the trader has nothing real, or natural.

Profit
Revenue minus cost. The amount one makes on a transaction.

Profit
Revenue minus cost. The amount one makes on a transaction.

Profit center
A division of an organization held responsible for producing its own profits.

Profit forecast
A prediction of future profits of a company, which may affect investment decisions.

Profit Graph
A graphical representation of the potential outcomes of a strategy. Dollars of profit or loss are graphed on the vertical axis, and various stock prices are graphed on the horizontal axis. Results may be depicted at any point in time, although the graph usually depicts the results at expiration of the options involved in the strategy.

Profit margin
Indicator of profitability. The ratio of earnings available to stockholders to net sales. Determined by dividing net income by revenue for the same 12-month period. Result is shown as a percentage. Also known as net profit margin.

Profit Range
The range within which a particular position makes a profit. Generally used in refernce to strategies that have two break-even points - an upside break-even and a downside break-even. The price range between the two break-even points would be the profit range.

Profit-sharing plan
An incentive system providing that employees share in companys profits through a cash fund or a deferred plan used to buy stock or bonds.

Profit Table
A table of results of a particular strategy at some point in time. This is usually a tabular compilation of the data drawn on a profit graph. See also Profit Graph.

Profit taking
Action by short-term securities traders to cash in on gains created by a sharp market rise, which pushes prices down temporarily but implies an upward market trend. See: Ring the [cash] register.

Profitability index
The present value of the future cash flows divided by the initial investment. Also called the benefit-cost ratio.

Profitability ratios
Ratios that focus on how well a firm is performing. Profit margins measure performance with relation to sales. Rate of return ratios measure performance relative to some measure of size of the investment.

Proforma
A financial projection based on assumptions.

Proforma Invoice
A quotation in the form of a ninvoice prepared by the seller that details items which would appear on a commercial invoice if an order results.

Program trades
Orders requiring the execution of trades in a large number of different stocks at as near the same time as possible. Also called basket trades. Related: Block trade

Program trading
Trades based on signals from computer programs, usually entered directly from the trader's computer in to the market's computer system and executed automatically. Applies to derivative products. A process of electronic execution of trading of a basket of stocks simultaneously, for index arbitrage, portfolio restructuring, or outright buy/sell interests. See: super dot.

Progress payments
Periodic payments to a supplier, contractor, or subcontractor for work as it is completed as desired, in order to reduce working capital requirements.

Progress review
A periodic review of a capital investment project to evaluate its continued economic viability.

Progressive tax system
A tax system that taxes the wealthy at a higher percentage rate than the less wealthy.

Progressive taxation
Characterizes a convex tax schedule that results in a higher effective tax rate on higher income levels. Increases for some increases in income, but never decreases with an increase in income.

Project
The asset constructed with or owned via a project financing, which is expected to produce cash flow at a debt-service coverage ratio sufficient to repay the project financing.

Project contracts
In the context of project financing, the suite of agreements underlying the project.

Project Finance Loan Program
Program under which banks, the Ex-Im Bank, or a combination of both may extend long-term financing for capital equipment and related services for major projects.

Project financing
A form of asset-based financing in which a firm finances a discrete set of assets on a stand-alone basis.

Project link
An econometric model forecasting and describing the effects of changes in different economies on other economies.

Project loan certificate (PLC)
A primary program of Ginnie Mae for securitizing FHA-insured and coinsured multifamily, hospital, and nursing home loans.

Project loans
Usually FHA-insured and HUD-guaranteed mortgages on multiple-family housing complexes, nursing homes, hospitals, and other special development.

Project loan securities
Securities backed by a variety of FHA-insured loans-primarily multifamily apartment buildings, hospitals, and nursing homes.

Project notes (PN)
Notes issued by municipalities to finance federally sponsored programs in urban renewal and housing and guaranteed by the U.S. Department of Housing and Urban Development.

Projected benefit obligation (PBO)
A measure of a pension plan's liability at the calculation date assuming that the plan is ongoing and will not terminate in the foreseeable future. Related: Accumulated benefit obligation.

Projected maturity date
With CMOs, the date at the end of the estimated cash flow window where final payment is made.

Projection
The use of econometric models to forecast the future performance of a company, country, or other financial entity using historical and current information.

Promissory note
Written pledge to pay.

Property inventory
A list of personal property with corresponding values and initial costs often used to substantiate insurance claim and tax losses.

Property rights
Rights of individuals and companies to own and use property as they see fit and to receive the stream of income that their property generates.

Property tax
A tax levied on real property based on its use and its assessed value.

Proportional representation
A method of stockholder voting that allows minority shareholders and groups of small shareholders to have a better chance of getting representation on a Board of Directors than under statutory voting.

Proprietary trading
Principal trading in which firm seeks direct gain rather than commission dollars.

Proprietorship
An unincorporated business that is owned and operated by only one person who has complete liability for all assets, and complete rights to all profits.

Pro rata
Shared or divided according to a ratio or in proportion to participation.

Proration
Refers to the division between cash and stock in a takeover offer. Often a takeover is a combination of cash and the acquiring firm's equity. Shareholders can elect to take cash or equity. After the election is made, the stock is prorated. For example, if the takeover offer was 500 million in cash and 500 million in shares, if everybody elected cash, then the maximum cash for each shareholder is 50%. If 75% elected to receive cash, 25% of the shareholders would get 100% equity and the other 75% would get 75% cash and 25% equity. The proportions are complicated to compute if the new shares are worth more than the old shares. In this case, small shareholders (with say 100 shares) might receive 100% cash because it is disadvantageous to have a lot less than 100 shares.

Prospective Earnings Growth (PEG Ratio)
Based on forecasts from proprietary sources such as Institutional Brokers' Estimate System (IBES), First Call, or Zach's. Growth is forecast of earnings minus current earnings divided by current earnings. Forward-looking measure rather than typical earnings growth measures, which look back in time (historical).

Prospectus
Formal written document to sell securities that describes the plan for a proposed business enterprise, or the facts concerning an existing one, that an investor needs to make an informed decision. Prospectuses are used by mutual funds to describe fund objectives, risks, and other essential information.

Protect
Assure the salesperson or trader that interest, buy or sell, will be attended to, given any change in the trading circumstances, as follows:
At a price: If the stock trades at a certain price or price range, the trader will show this market to the salesperson and thus allow participation under these favorable circumstances.

Floor protection: Representation of a client on the floor of the exchange-so that if size were to trade at his price or a better price, salesperson would participate.
Volume (OTC): If a certain amount of volume trades (that parallels the protectee's interest), trader assures salesperson of reasonable participation in the trading activity. The extent of this protection depends on liquidity, number of market makers, and other aspects of the stock.

Protected Strategy
A position that has limited risk. A protected short sale (short stock, long call) has limited risk, as does a protected straddle write (short straddle, long out-of-the-money combination). See also Combination and Straddle.

Protectionism
Notion that governments should protect domestic industry from import competition by means of tariffs, quotas, and other trade barriers.

Protective covenant
A part of an indenture or loan agreement that limits certain actions a company may take during the term of the loan to protect the lender's interests.

Protective put buying strategy
A strategy that involves buying a put option on the underlying security that is held in a portfolio. Related: Hedge option strategies.

Protest
Instructions given to a collecting bank that drafts falling due for payment are to be formally presented to the drawee by a notary, who is to formally record any default.

Prototype plan
A qualified retirement plan sponsored by a financial institution. It may be adopted by executing a written agreement. A prototype is generally more flexible than the IRS Form 5305 or 5305-A and may have additional special features. Also called a master pension plan.

Provision for income taxes
An amount on the P & I statement that estimates a company's total income tax liability for the year.

Provisional call feature
A stipulation in a convertible issue that allows the issuer to call the issue during the noncall period if the price of the stock reaches a certain level. In the case of convertible securities, right of an issuer to accelerate the first redemption date if the underlying common should trade at or above a certain level for a sustained period. Most typical terms are 150% of conversion price for 20 consecutive days. Note that under these circumstances the security has appreciated, at a minimum, 50% since being issued.

Proxy
Authorization, whether written or electronic, that shareholders' votes may be cast by others. Shareholders can and often do give management their proxies, delegating the right and responsibility to vote their shares as specified.

Proxy Committee
A group of individuals appointed by the board of directors of the companies to formally represent the shareholders who send in proxy cards, to vote the represented shares in accordance with the shareholders' instructions.

Proxy Committee Ballot
The ballot signed and submitted at the meeting by the Proxy Committee. It is the legal voting of shares represented by proxies assigned to the Proxy Committee and should always be completed.

Proxy contest
A battle for the control of a firm in which a dissident group seeks, from the firm's other shareholders, the right to vote those shareholders' shares in favor of the dissident group's slate of directors. Also called proxy fights.

Proxy fight
Often used in risk arbitrage. Technique used by an acquiring company to attempt to gain control of a takeover target. The acquirer tries to persuade the shareholders of the target company that the present management of the firm should be ousted n favor of a slate of directors favorable to the acquirer, thus enabling the acquiring company to gain control of the company without paying a premium price.

Proxy Fight
Competition of outside group with management for stockholders' proxies in order to accumulate votes to elect a new board of directors.

Proxy Solicitor
A specialist (firm) hired to gather proxy votes.

Proxy statement
Document intended to provide shareholders with information necessary to vote in an informed manner on matters to be brought up at a stockholders' meeting. Includes information on closely held shares. Information required by the SEC that must be provided to shareholders who wish to vote for directors and on other company decisions by proxy.

Proxy vote
Vote cast by one person or entity on behalf of another.

Prudent-man rule
A common law standard against which those investing the money of others fiduciaries are judged.

P&S
Purchase and sale statement. A statement provided by the broker showing change in the customer's net ledger balance after the offset of any previously established positions.

PSA Prepayment Rate
The Bond Market Trade Association's Mortgaged Asset-Backed Securities Division's prepayment model based on an assumed rate of prepayment each month of the then unpaid principal balance of a pool of mortgages. PSA is used primarily to derive an implied prepayment speed of new production loans. 00% PSA assumes a prepayment rate of 2% per month in the first month following the date of issue, increasing at 2% percentage points per month thereafter until the 30th month. Thereafter, 100% PSA is the same as 6% CPR (Constant prepayment rate).PSSG
Financial ratio defined as stock price divided by sales over sales growth. Often used in the valuation of Internet stocks. Related: PREG.

Public Book (of order)
The orders to buy or sell, entered by the public, that are generally away from the current market. The order book official or specialist keeps the public book. Market-Makers on the CBOE can see the highest bid and lowest offer at any time. The specialist's book is closed (only he knows at what price and in what quantity the nearest public orders are). See also Market-Maker and Specialist.

Public Company
A company that has held an initial public offering and whose shares are traded on a stock exchange or in the over-the-counter market. Public companies are subject to periodic filing and other obligations under the federal securities laws.

Public debt
Issues of debt by governments to compensate for a lack of tax revenues.

Public housing authority bond
Bonds of local public housing agencies that are secured by the federal government and whose proceeds are used to provide low-rent housing.

Public limited partnership
A limited partnership with an unlimited number of partners that is registered with the SEC and is available for public trading by broker/dealers.

Public offering
Used in the context of general equities. Offering to the investment public, after compliance with registration requirements of the SEC, usually by an investment banker or a syndicate made up of several investment bankers, at a price agreed upon between the issuer and the investment bankers. Antithesis of private placement. See: Primary distribution and secondary distribution.

Public offering price
The price of a new issue of securities at the time that the issue is offered to the public.

Public ownership
The portion of a company's stock that is held by the public.

Public-purpose bond
A specific type of municipal bond used to finance public projects such as roads or government buildings. Interest on municipal bonds is federal income tax-free.

Public Securities Association(PSA)
The trade association for primary dealers in US government securities, including MBSs. In 1997, they became known as the Bond Market Association.

Public securities offering
A securities issue placed with the public through an investment or commercial bank.

The Public
Individual investors who trade single securities independently or invest in intermediaries such as mutual funds, as opposed to professional investors.

Public Utility Holding Company Act of 1935
Legislation intended to eliminate many holding company abuses by reorganizing the financial structures of holding companies in the gas and electric utility industries and regulating their debt and dividend policies.

Public warehouse
Storage facility operated by an independent warehouse company on its own premises.

Publicly held
Describes a company whose stock is held by the public, whether individuals or business entities.

Publicly traded assets
Assets that can be traded in a public market, such as the stock market.

Puke
Slang for a trader selling a position, usually a losing position, as in, "When in doubt, puke it out."

Pull
Used in the context of general equities. See: Cancel.

Pullback
The downward reversal of a prolonged upward price trend.

Pulling in their horns
Investors selling off positions after a stock or bond market has increased sharply or setting up hedging positions to guard against a negative turn of the market.

Purchase
Buy; be long; have an ownership position.

Purchase accounting
Method of accounting for a merger that treats the acquirer as having purchased the assets and assumed the liabilities of the acquiree, which are then written up or down to their respective fair market values. The difference between the purchase price and the net assets acquired is attributed to goodwill.

Purchase agreement
Used in connection with project financing; an agreement to purchase a specific amount of project output per period.

Purchase fee
A charge assessed by an intermediary, such as a broker-dealer or a bank, for assisting in the sale or purchase of a security.

Purchase fund
Resembles a sinking fund, except that money is used to purchase bonds only if they are selling below their par value.

Purchase group
See: Underwriting syndicate

Purchase loan
A consumer loan taken to finance a purchase.

Purchase method
Accounting for an acquisition using market value for the consolidation of the two entities' net assets on the balance sheet. Generally, depreciation/amortization will increase for this method (due to the creation of goodwill) compared to the pooling method resulting in lower net income.

Purchase-money mortgage
A mortgage given by a buyer in lieu of cash when the buyer is unable to borrow commercially for the purchase of property.

Purchase order
A written order to buy specified goods at a stipulated price.

Purchase and sale
A method of securities distribution in which a firm purchases securities from the issuer for its own account at a stated price and then resells them, as contrasted with a best-efforts sale.

Purchasing power
The amount of credit available for securities trading in a margin account, after taking margin requirements into consideration.

Purchasing power of the dollar
The amount of goods and services that can be exchanged for a dollar as compared with amount of a previous time period.

Purchasing power parity
The notion that the ratio between domestic and foreign price levels should equal the equilibrium exchange rate between domestic and foreign currencies.

Purchasing power risk
Related: Inflation risk

Pure discount bond
A bond that will make only one payment of principal and interest. Also called a zero-coupon bond or a single-payment bond.

Pure expectations theory
A theory that asserts that forward rates exclusively represent the expected future rates. In other words, the entire term structure reflects the market's expectations of future short-term rates. For example, an increasing slope to the term structure implies increasing short-term interest rates. Related: Biased expectations heories.

Pure index fund
A portfolio that is managed so as to perfectly replicate the performance of the market portfolio.

Pure monopoly
A market in which only one firm has total control over the entire market for a product due to some sort of barrier to entry for other firms, often a patent held by the controlling firm.

Pure play
A company involved in only one line of business.

Pure yield pickup swap
Moving to higher yield-bonds.

Purpose credit
Credit used for the purpose of buying, carrying or trading in securities.

Purpose loan
A loan that is backed by securities and that is used to buy other securities under certain government regulations.

Purpose statement
A form filed by a borrower that describes the use of a loan backed by securities, and guarantees that the funds lent will not be used illegally to buy securities against Federal Reserve regulations.

Put
An option granting the right to sell the underlying futures contract. Opposite of a call.

Put bond
A bond that the holder may choose either to exchange for par value at some date or to extend for a given number of years. If the price is above par, the put is a "premium put."

Put-call parity
Applies to derivative products. Option pricing principle that says, given a stock's price, a put and call of the same class must have a static price relationship because arbitrage opportunities or activities will always reestablish such a relationship.

Put-call parity relationship
The relationship between the price of a put and the price of a call on the same underlying security with the same expiration date, which prevents arbitrage opportunities. Holding the underlying stock and buying a put will deliver the exact payoff as buying one call and investing the present value (PV) of the exercise price. The call value equals C = S + P - PV(k).

Put-call ratio
The ratio of the volume of put options traded to the volume of call options traded, which is used as an indicator of investor sentiment (bullish or bearish).

Put guarantee letter
A bank's letter certifying that the person writing a put option has sufficient funds in an account to cover the exercise price if required.

Put on
Used for listed equity securities. Trade, or cross, a block of stock at the designated price and quantity. See: Print.

"Put it on "
Used for listed equity securities. "Go to the floor to transact." See: Print.

Put option
This security gives investors the right to sell (or put) a fixed number of shares at a fixed price within a given period. An investor, for example, might wish to have the right to sell shares of a stock at a certain price by a certain time in order to protect, or hedge, an existing investment.

Put an option
To exercise a put option.

"Put pants on it "
Used in the context of general equities. "Elaborate on your intentions or your inquiry," especially with respect to size, side, and price. See: Open up.

Put price
The price at which an asset will be sold if a put option is exercised. Also called the strike or exercise price of a put option.

Put provision
Gives the holder of a floating-rate bond the right to redeem the note at par on the coupon payment date.

Put ratio backspread
A complex options strategy adopted when one believes a stock price will decline but wants to protect against it rising.

Put to seller
Exercise a put option; require that the option writer to purchase the stock at the strike price.

Put swaption
A financial instrument giving the buyer the right, or option, to enter into a swap as a floating-rate payer. The writer of the swaption therefore becomes the floating-rate receiver/fixed-rate payer.

Put up
See: Print

Pyramid scheme
An illegal, fraudulent scheme in which a con artist convinces victims to invest by promising an extraordinary return but instead simply uses newly invested funds to pay off any investors who insist on terminating their investment.

Pyramiding
A type of stock swap option exercise in which a small number of previously-owned shares is surrendered to the company to pay a portion of the exercise price, for which a slightly larger number of option shares may be purchased, which are then immediately surrendered back to the company to pay additional amounts of the exercise price, and so on until the full option price has been paid and the optionee is left with just the number of shares equal to the option spread. With the advent of broker-assisted "Cashless Exercise/Same Day Sale" programs (see above), pyramiding has fallen out of favor.

Stock Market Dictionary - O

Fifth letter of a Nasdaq stock symbol specifying that it is the company's second class of preferred shares.

OAS
See: Option adjusted spread

OCC
See: Options Clearing Corporation

OECD
See: Orgainization for Economic Cooperation and Development

OID
See: Original issue discount debt

OM
The two-character ISO 3166 country code for OMAN.

OMR
The ISO 4217 currency code for the Oman Rial.

OSE
See: Osaka Securities Exchange

OTC
See: Over-the-counter.

OTM
See: Out of the money.

OPEC
See: Organization of Petroleum Exporting Countries

Oath of Inspectors
A sworn statement signed by the Inspectors of Election, usually notarized, wherein they swear they will impartially and faithfully execute their duties as Inspectors of Election at the annual or special meeting of shareholders.

Objective (mutual funds)
The fund's investment strategy category as stated in the prospectus. There are more than 20 standardized categories. E.g. Aggressive growth, balanced.

Objective probability
The true unobservable underlying odds that something is so.

Obligation
A legal responsibility, such as to repay a debt.

Obligation bond
A municipal bond with a face value greater than the value of the underlying property. The difference is designed to compensate the lender for costs exceeding the mortgage value.

Obligor
A person who has an obligation to pay off a debt.

Observational Noise
The error between the true value in a system and its observed value due to imprecision in measurement. Also called Measurement Noise. See: Dynamical Noise.

Ocean bill of lading
Receipt for a shipment by boat, that includes freight charges and title to the merchandise.

Odd lot
A trading order for less than 10