Stock Market Dictionary - I

I
Fifth letter of a NASDAQ stock symbol specifying that it is the third preferred bond of the company.

I.B.E.S.
See: Institutional Broker's Estimate System

I.B.F.
See: International Banking Facility

I.B.R.D.
See: International Bank for Reconstruction and Development

I.D.R.
See: International Depository Receipt

I.C.
See: Information Coefficient

I.F.C.
See: International Finance Corporation

I.M.F.
See: International Monetary Fund

I.M.M.
See: International Monetary Market

I.O.
See: Interest Only Strip

I.O.C. order
See: Immediate or cancelled order

I.O.M.
See: Index and option market

I.P.L.
See: Investment Product Line

I.P.O.
See: Initial Public Offering

I.R.B.
See: Industrial Revenue Bond

I.R.R.
See: Internal rate of return

I.S.D.A.
See: International Swap Dealers Association

I.S.M.A.
See: International Security Market Association

I.T.S.
See: Intermarket trading system

IBC's money fund report average
Report giving the average yield of all major money market funds.

I-bonds
Savings bonds indexed to account for inflation, issued by the United States Treasury with a 30-year maturity, which offer tax benefits to the holders of the bonds.

Identified shares
Stock or mutual fund whose purchase date and price may be identified for capital gains and tax purposes when they are sold.

Idiosyncratic Risk
Unsystematic risk or risk that is uncorrelated to the overall market risk. In other words, the risk that is firm specific and can be diversified through holding a portfolio of stocks.

I-I page
Refers to over-the-counter trading. Same as H-H page, but exclusively for O.T.C. Stocks.

Illegal dividend
A corporation's dividend that is declared in violation of its charter and/or of state laws, typically because of the way it was calculated.

Illiquid
Used in the context of finance. A lack of cash flow needed to fulfill financial debts and obligations. Used in the context of investments. Refers to a lightly traded investment such as a stock or bond that is not easily converted into cash.

Imbalance of orders
Used for listed equity securities. Too many market orders of one kind -- to buy or to sell or limit orders to buy up or sell down, without matching orders of the opposite kind. An imbalance usually follows a dramatic event such a takeover, research recommendation, death of a key executive, or a government ruling that will significantly affect the company's business. If it occurs before the stock exchange opens, trading in the stock is delayed. If it occurs during the trading day, the specialist halts and then suspends trading (with floor governor's approval) until enough matching orders can be found to make an orderly market.

Immediate family
Term used in the NASD rules of fair practice to refer to one's parents, brothers, sisters, children, relatives supported financially, father-in-law, mother-in-law, sister-in-law, and brother-in-law.

Immediate or cancelled order (I.O.C. order)
Used in the context of general equities. Market or limited price order which is to be executed in whole or in part as soon as such order is represented in the trading crowd. The portion not executed is to be treated as cancelled. A stop is considered an execution in this context. See: A.O.N. order, F.O.K. order.

Immediate payment annuity
An annuity contract paid by a single payment and with a specified payment plan the starts immediately after the contract is purchased.

Immediate settlement
Delivery and settlement of securities within five business days.

Immunization
The construction of an asset and a liability that are subject to offsetting changes in value.

Immunization strategy
A bond portfolio strategy whose goal is to eliminate the portfolio's risk against a general change in the rate of interest through the use of duration.

Impaired capital
Term used to describe the situation when a company's total capital that is less than the par value of all of its capital stock.

Impaired credit
The lowering or lessening of a borrower's credit rating.

Implied call
The right of the homeowner to prepay, or call, the mortgage at any time.

Implied repo rate
The rate that a seller of a futures contract can earn by buying an issue and then delivering it at the settlement date. Related: cheapest to deliver issue.

Implied volatility
The expected volatility in a stock's return derived from its option price, maturity date, exercise price, and riskless rate of return, using an option-pricing model such as Black/Scholes.

Import-substitution development strategy
A development strategy followed by many Latin American countries and other L.D.C.s that emphasized import substitution - accomplished through protectionism - as the route to economic growth.

Imputation tax system
Arrangement by which investors who receive a dividend also receive a tax credit for corporate taxes that the firm has paid.

Imputed interest
Used in accounting to refer to interest that has been effectively paid to a bondholder, even though no money has actually been paid.

Imputed value
Refers to the value of an asset, service, or company that is not physically recorded in any accounts but is implicit in the product e.g. The opportunity cost of cash remaining in a savings account and not being invested.

Inactive asset
Asset not actively used in a productive manner at all times.

Inactive post
Trading post on NYSE floor where inactive, lightly traded stocks are traded in 10-share as opposed to 100 share lots.

Inactive stock/bond
A security that trades in very small volume on a daily basis. See:: illiquid.

In & out
Refers to over-the-counter trading. Trade in which the trader has both the buyers and sellers lined up for a clean trade. See: cross

In-and-out trader
A daytrader, or a speculator who buys and sells the same security in the same day.

In between
Used in the context of general equities. Priced higher than the bid price but lower than the offer price. See: in the middle

Incentive fee
Compensation paid to commodities trading advisers or to any consultant who achieve above-average returns. Some times called performance fee.

Incestuous share dealing
Trading of shares between companies in order to create a tax or financial benefit for the companies involved.

Income beneficiary
One who receives income from a trust.

Income bond
A bond on which the payment of interest is contingent on sufficient earnings. These bonds are commonly used during the reorganization of a failed or failing business.

Income dividend
Any payout to mutual fund shareholders resulting from interest, dividends, or other income.

Income exclusion rule
The IRS rule that functions to exclude certain types of income from taxation e.g. Welfare payments.

Income investment company
A management company focused on managing a mutual fund whose primary purpose is income generation, typically investing in bonds and high yielding stocks.

Income fund
A mutual fund providing for liberal current income from investments.

Income limited partnership
A limited partnership whose main goal is income generation e.g. real estate, oil equipment etc.

Income property
Real estate purchased on the basis of the property's income generation.

Income statement (statement of operations)
A statement showing the revenues, expenses, and income (the difference between revenues and expenses) of a corporation over some period of time.

Income stock
Common stock with a high dividend yield and few profitable investment opportunities.

Income tax
The federal government's annual tax which assessed to individuals as personal income tax and on the earnings of corporations as corporate income tax.

In competition
Indication that the customer has shown his interest to multiple brokers and that the trade will take place with the firm having the highest bid or lowest offer. Antithesis of exclusive.

Incontestability clause
Clause in a life insurance contract preventing the insurer from revoking the policy after it has been in force for a year or two and the life insurance company reveals any important facts about a policyholder who was not completely open with their past e.g. A policyholder not telling the life insurance company about a stroke.

Incorporation
The legal process by which a company receives a charter and is allowed by the state in which it is based to operate as a corporation.

Incremental cash flows
Difference between the firm's cash flows with and without a project.

Incremental cost of capital
Average cost applicable to the issue of each additional unit of debt and equity.Incremental costs and benefits
Costs and benefits that would occur if a particular course of action were taken compared to those that would occur if that course of action were not taken.

Incremental internal rate of return
Internal rate of return (I.R.R.) on the incremental investment from choosing a large project instead of a smaller project.

Indemnify
Used in the context of insurance policies to refer to the agreement to compensate for damage or loss.

Indenture
Agreement between lender and borrower which details specific terms of the bond issuance. Specifies legal obligations of bond issuer and rights of bondholders. Document spelling out the specific terms of a bond as well as the rights and responsibilities of both the issuer of the security and the holder.

Independent auditor
A Certified Public Accountant operating outside the company who can provide an accountant's opinion.

Independent broker
NYSE member who executes orders for other floor brokers and firms other than their own.

Independent project
A project whose acceptance or rejection is independent of the acceptance or rejection of other projects.

Index
Often applies to derivative products. Statistical composite that measures changes in the economy or in financial markets, often expressed in percentage changes from a base year or from the previous month. Most relevantly, indices measure the ups and downs of stock, bond , and some commodities markets, reflecting market prices and weighing of the companies on the index.

Index and Option Market (I.O.M.)
A division of the C.M.E. established in 1982 for trading stock index products and options. Related: Chicago Mercantile Exchange (C.M.E.).

Index arbitrage
An investment/trading strategy that exploits divergences between actual and theoretical futures prices. For example, the simultaneous buying (selling) of stock index futures (i.e., S&P 500) while selling (buying) the underlying stocks of that index, capturing as profit the temporarily-inflated basis between these two baskets. Often, the point where profitability exists is expressed at the block call as a number of points the future must be over or under the underlying basket for an arbitrage opportunity to exist. See: program trading

Indexed bond
Bond whose payments are linked to an index, e.g. the consumer price index.

Index fund
Investment fund designed to match the returns on a stock market index. Mutual fund whose portfolio matches that of a broad-based index such as the S&P 500 and whose performance therefore mirrors the market as represented by that index.

Indexing
A passive instrument strategy consisting of the construction of a portfolio of stocks designed to track the total return performance of an index of stocks.

Indexing plus
See: Enhanced indexing

Index model
A model of stock returns using a market index such as the S&P 500 to represent common or systematic risk factors.

Index option
A call or put option based on a stock market index.

Index warrant
A stock index option issued by either a corporate or sovereign entity as part of a security offering, and guaranteed by an option clearing corporation.

Indicated dividend
Total amount of dividends that would be paid on a share of stock over the next 12 months if each dividend were the same amount as the most recent dividend. Usually represent by the letter "e" in stock tables.

Indicated yield
The yield, based on the most recent quarterly rate times four. To determine the yield, divide the annual dividend by the price of the stock. The resulting number is represented as a percentage. See: dividend yield.

Indication
1) Notice given by a dealer (through Autex ) or customer of his interest in buying or selling stock, sometimes including specific volume and price; 2) approximation of where a specialist sees buy and sell interest to tighten the range to an opening price.

Indication of interest
A dealer's or investor's interest in purchasing (not commitment to buy) securities that are still in the underwriting stage and are being registered by the Securities and Exchange Commission.

Indicator
Used in the context of general equities. Technical or fundamental measurement securities analysts use to forecast the market's direction, such as investment advisory sentiment, volume of stock trading, direction of interest rates, and buying or selling or corporate insiders.

Indifference curve
The graphical expression of a utility function, where the horizontal axis measures risk and the vertical axis measures expected return. The curve connects all portfolios with the same utilities.

Indirect quote
For foreign exchange, the number of units of a foreign currency needed to buy one U.S.dollar.

Individual Retirement Account (IRA)
A retirement account that may be established by an employed person. IRA contributions are tax deductible and the gains made in the account are tax deferred.

Individual Retirement Account (IRA) rollover
A provision of the law governing IRA's which enables a person who has retired or been fired by their employer and is receiving a lump-sum payment from their company's pension, profit-sharing, or salary reduction plan to transfer the amount into an IRA.

Individual tax return
A tax return filed by an individual to account for their personal income and taxes payable.

Inductive reasoning
The attempt to use information about a specific situation to draw a conclusion.

Industrial
General term used in the stock markets to refer to companies manufacturing, producing or distributing goods and services.

Industrial production
A statistic determined by the Federal Reserve Board focusing on the total output of all U.S. factories and mines on a monthly basis. Used as an economic indicator.

Industry
The category describing a company's primary business activity. This category is usually determined by the largest portion of revenue.

Industrial revenue bond (I.R.B.)
A bond issued by local government agencies on behalf of corporations.

Infant industry argument
Argument that industries in the developing and emerging sectors of the economy need protection against international competition in order to establish themselves.

Inflation
The rate at which the general level of prices for goods and services is rising.

Inflation accounting
Accounting practices allowing for the effects of inflation.

Inflation-escalator clause
A clause in a contract providing for increases or decreases in inflation based on fluctuations in the cost of living, production costs, and so forth.

Inflation hedge
Investments designed to hedge against inflation and the loss of purchasing power associated with it.

Inflation-indexed securities
Securities such as bonds or notes that guarantee a return higher than the rate of inflation if the security is held to maturity.

Inflexible expenses
Expenses which cannot be adjusted or eliminated such as car payments or rental payments. Antithesis of flexible expenses.

Inflation risk
Also called purchasing-power risk, the risk that changes in the real return the investor will realize after adjusting for inflation will be negative.

Inflation uncertainty
The fact that future inflation rates are not known. It is a possible contributing factor to the makeup of the term structure of interest rates.

Information asymmetry
A situation involving information that is known to some, but not all, participants.

Information Coefficient (I.C.)
The correlation between predicted and actual stock returns, sometimes used to measure the value of a financial analyst. An I.C. of 1.0 indicates a perfect linear relationship between predicted and actual returns, while an I.C. of 0.0 indicates no linear relationship.

Information-content effect
The rise in the stock price following the dividend signal.

Information costs
Transaction costs that include the assessment of the investment merits of a financial asset. Related: search costs.

Informational efficiency
The speed and accuracy with which prices reflect new information.

Informationless trades
Trades that are the result of either a reallocation of wealth or an implementation of an investment strategy that only utilizes existing information.

Information-motivated trades
Trades in which an investor believes he or she possesses pertinent information not currently reflected in the stock's price.

Information services
Organizations that furnish investment and other types of information, such as information that helps a firm monitor its cash position.

Infrastructure
A country's fundamental system of transportation, communication, and other aspects of its physical capabilities.

Ingot
A bar of metal such as the type that the Federal Reserve System uses to store gold reserves.

Inheritance tax return
Tax return required by the state used to determine the amount of state tax due on an inheritance.

In hand
Used in the context of general equities. Firm, indicating control of a bid, offer, or order.

In-house
Used in the context of general equities. Keeping an activity within the firm. For example, rather than go to the marketplace and sell a security for a client to anyone, an attempt is made to find a buyer to complete the transaction with the firm. Although a listed trade must be brought to the floor of the stock exchange, matching supply with demand within the confines of the firm results in greater commissions for the firm.

In-house processing float
Refers to the time it takes the receiver of a check to process the payment and deposit it in a bank for collection.

Initial filing
Used in the context of general equities. Has various meanings. It could refer to a form that is filed with the Securities and Exchange Commission in advance of a major event, such as a public offering or a share repurchase. It could also refer to filings that occur before legal inside transactions.

Initial margin
Used in the context of general equities. 1) Amount of money deposited by both buyers and sellers of futures contracts to ensure performance of the terms of the contract; 2) amount of cash or eligible securities required to be deposited with a broker before engaging in margin transactions.

Initial margin requirement
When buying securities on margin, the proportion of the total market value of the securities that the investor must pay for in cash. The Security Exchange Act of 1934 gives the Board of Governors of the Federal Reserve the responsibility to set initial margin requirements, but individual brokerage firms are free to set higher requirements. In futures contracts, initial margin requirements are set by the exchange.

Initial public offering (I.P.O.)
A company's first sale of stock to the public. Securities offered in an I.P.O. are often, but not always, those of young, small companies seeking outside equity capital and a public market for their stock. Investors purchasing stock in I.P.O.s generally must be prepared to accept very large risks for the possibility of large gains. I.P.O.'s by investment companies (closed-end funds) usually contain underwriting fees which represent a load to buyers.

Initiate coverage
1. Firm is now followed by analysts at a particular securities house. 2. Indication to cover short position by purchasing the underlying stock (this cancels out the short position).

In-line
Used in the context of general equities. 1) An order or market in a specific security which lies within the inside market; 2) any announcement (earnings) that adheres closely to Wall Street analysts' expectations.

In play
Often used in risk arbitrage. Company that has become the target of a takeover, and whose stock has now become a speculative issue.

Input-output tables
Tables that indicate how much each industry requires of the production of each other industry in order to produce each dollar of its own output.

Inquiry
Used in the context of general equities. In-line expression of interest in a particular stock, usually asking the firm to bid for or offer stock.

Insider trading sanctions act of 1984
Act imposing civil and criminal penalties for insider trading violations.

Inside market
Refers to over-the-counter trading. Best (highest) bid and best (lowest) offer, often used in the O.T.C. Market. See: in-line

Insider information
Material information about a company that has not yet been made public. It is illegal for holders of this information to make trades based on it, however received.

Insiders
These are directors and senior officers of a corporation -- in effect those who have access to inside information about a company. An insider also is someone who owns more than 10% of the voting shares of a company.

Insider trading
Trading by officers, directors, major stockholders, or others who hold private inside information allowing them to benefit from buying or selling stock.

Insolvency risk
The risk that a firm will be unable to satisfy its debts. Also known as bankruptcy risk.

Insolvent
A firm that is unable to pay debts (liabilities are greater than assets).

Installment sale
The sale of an asset in exchange for a specified series of payments (the installments).Instinet (Institutional Networks Corporation)
Computerized subscriber service that serves as a vehicle for the fourth market. "Instinet" is registered with the S.E.C. As a stock exchange if numbers among its subscribers a large number of mutual funds and other institutional investors linked to each other by computer terminals. The system permits subscribers to display bids and offers (which are exposed system-wide for whatever length of time the initiating party specifies) and to consummate trades electronically. Instinet is largely used by market-makers, but, as mentioned, non-market-makers and customers have equal access.

Institutional broker
A broker who buys and sells securities for institutional investors such as banks, mutual funds, pensions etc.

Institutional Brokers' Estimate System (I.B.E.S.)
Service which assembles analysts' estimates of future earnings for thousands of publicly-traded companies, detailing how many estimates are available for each company and the high, low, and average estimates or each.

Institutional investors
Organizations that invest, including insurance companies, depository institutions, pension funds, investment companies, mutual funds, and endowment funds.

Institutionalization
The gradual domination of financial markets by institutional investors, as opposed to individual investors. This process has occurred throughout the industrialized world.

Instrumentality
Notes issued by a federal agency whose obligations are guaranteed by the full-faith-and-credit of the government, even though the agency's responsibilities are not necessarily those of the U.S. government.

Instruments
Financial securities, such as money market instruments or capital market instruments.

In-substance defeasance
Defeasance whereby debt is removed from the balance sheet but not cancelled.

Insurable interest
An insurance term referring to the relationship between a policy's insured person or property and the potential beneficiary. The beneficiary must have an insurable interest in the insured person or property to receive payment of the policy if the insured died while the policy was in force.

Insurance
A system whereby individuals or companies apprehensive about property loss or damage make payments in the form of premiums to an insurance company, who pays an agreed upon sum to the insured in the event of loss.

Insurance agent
The insurance company representative and advisor who sells insurance policies.

Insurance broker
A broker, independent of any insurance company, who represents the interests of the buyer in searching for insurance coverage at the lowest cost and highest benefit to the buyer.

Insurance claim
A claim for reimbursement from the insurance company when the insured has suffered a loss which is covered under an insurance policy.

Insurance dividend
Money paid annually to policyholders participating in cash value life insurance policies.

Insurance policy
A contract detailing an insurance policy and outlining what risks are insured, what insurance premiums are to be paid by the policyholder, what deductibles will exist, and all the details associated with a policy.

Insurance premium
Payments calculated by the insurance company based on risk factors that must be made by the insured guarantee protection of property loss under an insurance policy.

Insurance settlement
The payment of proceeds by an insurance company to the insured to settle an insurance claim within the guidelines stipulated in the insurance policy.

Insured
The property or persons covered by an insurance policy.

Insured account
A bank or financial account which is insured for the benefit of the depositor, protecting against loss in the event that the savings institution becomes insolvent. See: FDIC.

Insurance principle
The law of averages. The average outcome for many independent trials of an experiment will approach the expected value of the experiment.

Insured bond
A municipal bond backed both by the credit of the municipal issuer and by commercial insurance policies.

Insured plans
Defined benefit pension plans that are guaranteed by life insurance products. Related: non-insured plans

Intangible asset
A legal claim to some future benefit, typically a claim to future cash. Goodwill, intellectual property, patents, copyrights, and trademarks are examples of intangible assets.

Integer programming
Variant of linear programming whereby the solution values must be integers.

Interbank rate
See: LIBOR.

Intercommodity spread
Referring to the commodities market, a spread consisting of a long position and a short position in different but related commodities-for example speculating that the price relationship between the two commodities will change e.g. platinum and gold.

Intercompany loan
Loan made by one unit of a corporation to another unit of the same corporation.

Intercompany transaction
Transaction carried out between two units of the same corporation.

Interdelivery spread
Used in the context of futures or options to refer the purchase of one month of a contract and selling another month in the same contract in hope that the price difference widens or narrows according to the investment.

Interest
The price paid for borrowing money. It is expressed as a percentage rate over a period of time and reflects the rate of exchange of present consumption for future consumption. Also, a share or title in property.

Interest coverage ratio
The ratio of the earnings before interest and taxes to the annual interest expense. This ratio measures a firm's ability to pay interest.

Interest coverage test
A debt limitation that prohibits the issuance of additional long-term debt if the issuer's interest coverage would, as a result of the issue, fall below some specified minimum.

Interest deduction
An interest expense, such as interest on a margin account, which is allowed as a deduction for tax purposes.

Interest equalization tax
Tax on foreign investment by residents of the U.S. which was abolished in 1974.

Interest expense
In a corporate setting, interest expense is the money the company or corporation pays out in interest on loans.

Interest on interest
Interest earned on reinvestment of each interest payment on money invested. See: compound interest.

Interest-only loan
A loan in which payment of principal is deferred and interest payments are the only current obligation.

Interest-only strip (I.O.)
A security based solely on the interest payments form a pool of mortgages, Treasury bonds, or other bonds. Once the principal on the mortgages or bonds has been repaid, interest payments stop and the value of the IO falls to zero.

Interest payments
Contractual debt payments based on the coupon rate of interest and the principal amount.

Interest 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.

Interest rate agreement
An agreement whereby one party, for an upfront premium, agrees to compensate the other at specific time periods if a designated interest rate (the reference rate) is different from a predetermined level (the strike rate).

Interest rate cap
Also called an interest rate ceiling, an interest rate agreement in which payments are made when the reference rate exceeds the strike rate.

Interest rate ceiling
See: interest rate cap.

Interest-rate futures contract
A futures contract based on an inter-bank deposit rate or an underlying debt security. The value of the contract rises and falls inversely to changes in interest rates.

Interest rate floor
An interest rate agreement in which payments are made when the reference rate falls below the strike rate. Related: Interest rate cap

Interest rate on debt
The firm's cost of debt capital.

Interest rate parity theorem
Interest rate differential between two countries is equal to the difference between the forward foreign exchange rate and the spot rate.

Interest rate risk
The risk that a security's value changes due to a change in interest rates. For example, a bond's price drops as interest rates rise. For a depository institution, also called funding risk, the risk that spread income will suffer because of a change in interest rates.

Interest rate swap
A binding agreement between counterparties to exchange periodic interest payments on some predetermined dollar principal, which is called the notional principal amount. For example, one party will pay fixed and receive variable.

Interest-sensitive insurance policy
A cash value life insurance policy whose insurance dividends rates vary with respect to inflation, enabling the policyholder to avoid the loss of purchasing power associated with inflation.

Interest-sensitive stock
Stocks whose earnings are dependent upon and change with the interest rate e.g. bank stocks.

Interest subsidy
A firm's deduction of the interest payments on its debt from its earnings before it calculates its tax bill under current tax law.

Interest tax shield
The reduction in income taxes that results from the tax-deductibility of interest payments.

Interim dividend
The declaration and payment of a dividends prior to annual earnings determination.

Interim financing
A short-term loan made to a company on the condition that a takeout follows with long-term or intermediate financing.

Interim statement
A financial statement which reflects only a portion of time of a company's financial statement, not the entire fiscal year.

Interlocking directorate
An individual who is a member of more than one company's board of directors.

Intermarket sector spread
The spread between the interest rate offered in two sectors of the bond market for issues of the same maturity.

Intermarket spread swaps
An exchange of one bond for another based on the manager's projection of a realignment of spreads between sectors of the bond market.

Intermarket Surveillance Information System (ISIS)
A database that distributes information from all the major stock exchanges in the United States.

Intermarket trading system (I.T.S.)
Electronic communications network linking the trading floors of seven registered exchanges to permit trading among them in stocks listed on either the N.Y.S.E. or A.M.E.X. and one or more regional exchanges. Through I.T.S., any broker or market-maker on the floor of any participating exchange can reach out to other participants for an execution whenever the nationwide quote shows a better price available. A floor broker on the exchange can enter an I.T.S. order to assure that he will get all of an offering or bid, instead of splitting it up with competing brokers.

Intermediary
See: financial intermediary.

Intermediate-term
Typically 1-10 years.

Intermediation
Investment through a financial institution. Related: disintermediation.

Internal auditor
An employee of a company who analyzes the company's accounting records to that the company is following and complying with all regulations.

Internal expansion
Growth of assets resulting from internal financing or generated cash flow.

Internal finance
Finance generated within a firm by retained earnings and depreciation.

Internal growth rate
Maximum rate a firm can expand without outside sources of funding. Growth generated by cash flows retained by company.

Internally efficient market
See: Operationally efficient market.

Internal market
The mechanisms for issuing and trading securities within a nation, including its domestic market and foreign market. Compare: external market.

Internal measure
The number of days that a firm can finance operations without additional cash income.

Internal rate of return (I.R.R.)
Dollar-weighted rate of return. Discount rate at which net present value (N.P.V.) investment is zero. The rate at which a bond's future cash flows, discounted back to today, equals its price.

Internal revenue code
The various legislation and statutes making up federal tax law.

Internal Revenue Service (IRS)
The federal agency responsible for the collection federal taxes, including personal and corporate income taxes, social security taxes, and excise and gift taxes.

Internal Revenue Service Restructuring and Reform Act of 1998
The legislative act targeted at IRS reform, specifically the time period required for capital gains and taxpayer protection and rights.

International arbitrage
Simultaneous buying and selling of foreign securities and A.D.R.s to capture the profit potential created by time, currency, and settlement inconsistencies that vary across international borders.

International Bank for Reconstruction and Development (I.B.R.D.)
International Bank for Reconstruction and Development or World Bank makes loans at nearly conventional terms to countries for projects of high economic priority.

International Banking Facility (I.B.F.)
International Banking Facility. A branch that an American bank establishes in the United States to do Eurocurrency business.

International bonds
A collective term that refers to global bonds, Eurobonds, and foreign bonds.

International Depository Receipt (I.D.R.)
A receipt issued by a bank as evidence of ownership of one or more shares of the underlying stock of a foreign corporation that the bank holds in trust. The advantage of the I.D.R. structure is that the corporation does not have to comply with all the regulatory issuing requirements of the foreign country where the stock is to be traded. The U.S. version of the I.D.R. is the American Depository Receipt (A.D.R.).

International diversification
The attempt to reduce risk by investing in the more than one nation. By diversifying across nations whose economic cycles are not perfectly correlated, investors can typically reduce the variability of their returns.

International Finance Corporation (I.F.C.)
A corporation owned by the World Bank that produces a number of well known stock indexes for emerging markets.

International finance subsidiary
A subsidiary incorporated in the U.S., usually in Delaware, whose sole purpose was to issue debentures overseas and invest the proceeds in foreign operations, with the interest paid to foreign bondholders not subject to U.S. withholding tax. The elimination of the corporate withholding tax has ended the need for this type of subsidiary.

International Fisher effect
States that the interest rate differential between two countries should be an unbiased predictor of the future change in the spot rate.

International fund
A mutual fund that can invest only outside the United States.

International market
Related: external market.

International market index
An index listed on the American Stock Exchange tracking the performance of 50 American Depositary Receipts traded on the American Stock Exchange, NYSE, and NASDAQS.

International Monetary Fund (I.M.F)
An organization founded in 1944 to oversee exchange arrangements of member countries and to lend foreign currency reserves to members with short-term balance of payment problems.

International Monetary Market (I.M.M.)
A division of the C.M.E. established in 1972 for trading financial futures. Related: Chicago Mercantile Exchange (C.M.E.).

International mutual fund
A mutual fund that invests strictly in securities markets throughout the world, excluding the United States. A global fund, on the other hand, invests in both foreign and domestic securities.

International Petroleum Exchange (IPE)
Energy futures and options exchange based in London.

International Security Market Association (I.S.M.A.)
Swiss law association located in Zurich that regroups all the participants on the Eurobond primary and secondary markets. Establishes uniform trading procedures in the international bond markets.

International Stock Exchange of the U.K. and the Republic of Ireland (ISE)
Organization which replaced the London stock exchange after its merger with the International Securities Regulatory Organization (ISRO).

International Swap Dealers Association (I.S.D.A.)
. Formed in 1985 to promote uniform practices in the writing, trading, and settlement of swaps and other derivatives.

Interpolation
A method of approximating price or yield which is unknown by using numbers which are known.

Interpositioning
The practice of using a second broker in a securities transaction, which is considered illegal if used to generate additional commission.

Inter vivos trust
A trust created between living persons. Antithesis of a testamentary trust.

In the box
This means that a dealer has a wire receipt for securities indicating that effective delivery on them has been made.

In the hole
Used in the context of general equities. Below the inside market when one is attempting to sell the stock; at a significant discount. Antithesis of premium.

In the middle
Used in the context of general equities. At a price exactly in between the bid and offer prices.

In-the-money
A put option that has a strike price higher than the underlying futures price, or a call option with a strike price lower than the underlying futures price. For example, if the March COMEX silver futures contract is trading at $6 an ounce, a March call with a strike price of $5.50 would be considered in-the-money by $0.50 an ounce. Related: put. Antithesis of Out of the money.

In the tank
Used in the context of general equities. Slang expression meaning market prices are dropping rapidly.

In touch with
Used in the context of general equities. Having a sell inquiry in a stock (not a firm customer sell order), often entailing a capital commitment. Antithesis of looking for.

Intracommodity spread
Used in the context of futures trading to refer to a trader holding, buying, and selling contracts in the same commodity on the same exchange, but for different months.

Intraday
Term meaning "within the day", often to refer to the high and low price of a stock.

Intramarket sector spread
The spread between two issues of the same maturity within a market sector. For instance, the difference in interest rates offered for five-year industrial corporate bonds and five-year utility corporate bonds.

Intrastate offering
A securities offering which limits itself to just one state in the United States.

Intrinsic value of an option
The amount by which an option is in-the-money. An option which is not in-the-money has no intrinsic value.

Intrinsic value of a firm
The present value of a firm's expected future net cash flows discounted by the required rate of return.

Inventory
For companies: Raw materials, items available for sale or in the process of being made ready for sale. They can be individually valued by several different means, including cost or current market value, and collectively by (First-in-first-out) F.I.F.O., (Last-in-first-out) L.I.F.O. or other techniques. The lower value of alternatives is usually used to preclude overstating earnings and assets. For security firms: securities bought and held by a broker or dealer for resale.

Inventory financing
Used in the context of factoring and general finance to refer to loans to consumer product producers that use inventory as collateral. See: also inventory loan.

Inventory loan
A secured short-term loan to purchase inventory. The three basic forms are a blanket inventory lien, a trust receipt, and field warehousing financing.

Inventory turnover
The ratio of annual sales to average inventory which measures the speed that inventory is produced and sold. Low turnover is an unhealthy sign, indicating excess stocks and/or poor sales.

Inverse floater
A derivative instrument whose coupon rate is linked to the market rate of interest in an inverse relationship.

Inverse floating rate note
A variable rate security whose coupon rate increases as a benchmark interest rate declines.

Inverted market
A futures market in which the nearer months are selling at price premiums to the more distant months. Related: premium.

Inverted scale
A serial bond offering whose bonds with earlier maturity dates have higher yields than bonds with later maturity dates.

Inverted yield curve
Situation which exists when short-term interest rates are higher than long-term rates. Antithesis of positive yield curve.

Investment
The creation of more money through the use of existing capital.

Investment Advisers Act
Legislation passed in 1940 requiring financial advisors register with the Securities and Exchange Commission. The measure was enacted to protect the public from fraud or misrepresentation by investment advisers.

Investment advisory service
A business that specializes in providing investment advice for a fee. All advisors of an advisory service must be registered with the Securities and Exchange Commission.

Investment analysts
Related: financial analysts

Investment bank
Financial intermediaries who perform a variety of services, including aiding in the sale of securities, facilitating mergers and other corporate reorganizations, acting as brokers to both individual and institutional clients, and trading for their own accounts. See: Underwriters.

Investment certificate
A document which serves as proof that an individual has an investment in a savings and loan association.

Investment climate
Factors such as economic, monetary, and other conditions that affect the performance of investments.

Investment club
A group of people who combine their money into a larger pool, then invest collectively in stocks and bonds, making decisions as a group.

Investment company
A firm that that invests the funds of investors in securities appropriate for its stated investment objectives in return for a management fee. See: also mutual fund.

Investment Company Act of 1940
Legislation enacted requiring investment company register with the SEC and outlining standards by which investment companies must operate.

Investment decisions
Decisions concerning the asset side of a firm's balance sheet, such as the decision to offer a new product.

Investment grade bonds
A bond that is assigned a rating in the top four categories by commercial credit rating companies. For example, S&P classifies investment grade bonds as BBB or higher, and Moodys' classifies investment grade bonds as Ba or higher. Related: High-yield bond.

Investment history
The history of a member firm which establishes certain norms in respect of its investment practice.

Investment income
The revenue from a portfolio of invested assets.

Investment letter
A letter of intent between the issuer of new securities and the buyer, in the private placement of theses new securities. The letter of intent establishes that the securities are being bought for a minimum time period and are treated as an investment, not for resale. If no such letter exists, the securities must be registered with Securities and Exchange Commission.

Investment management
Also called portfolio management and money management, the process of managing money.

Investment manager
Also called a portfolio manager and money manager, the individual who manages a portfolio of investments.

Investment objective
The financial objective of an investor, for example does the investor require income or capital appreciation. The investor's objective governs his or her investment strategy.

Investment philosophy
The style and general ideology of investment practiced by an investor, for example certain investors favor small-capitalization stocks, while others prefer large blue-chip stocks.

Investment product line (I.P.L.)
The line of required returns for investment projects as a function of beta (nondiversifiable risk).

Investments
As a discipline, the study of financial securities, such as stocks and bonds, from the investor's viewpoint. This area deals with the firm's financing decision, but from the other side of the transaction.

Investment software
Computer software which assists investors in making investment decisions by identifying situations that meet programmed parameters.

Investment strategy
A strategy, or plan of attack, and investor uses when deciding how to allocate his or her capital among several options including stocks, bonds, cash equivalents, commodities, and real estate. The strategy should take into account the investor's tolerance for risk as well as his or her future need for capital.

Investment strategy committee
A committee within a brokerage firm which conducts research and makes reccomendations on the firms stated investment strategy.

Investment tax credit
Proportion of new capital investment that can be used to reduce a company's tax bill (abolished in 1986).

Investment trust
A closed-end fund regulated by the Investment Company Act of 1940. These funds have a fixed number of shares which are traded on the secondary markets similarly to corporate stocks. The market price may exceed the net asset value per share, in which case it is considered at a "premium." When the market price falls below the (N.A.V.)/share, it is at a "discount." Many closed-end funds are of a specialized nature, with the portfolio representing a particular industry, country, etc. These funds are usually listed on US and foreign exchanges.

Investment value
Mainly applies to dealer securities. Fixed income value of a convertible, the price at which the convert would have to sell as a straight debt instrument relative to the yield of other bonds of like maturity, size and quality; represents a presumed floor to the bond, allowing, of course, for the continued credit worthiness of the issuer and the general level of interest rates. Bond value. See: conversion value

Investor
The owner of a financial asset.

Investor fallout
In the mortgage pipeline, risk that occurs when the originator commits loan terms to the borrowers and gets commitments from investors at the time of application, or if both sets of terms are made at closing.

Investor relations
The process by which the corporation communicates with its investors.

Investor's equity
The balance of a margin account. Related: buying on margin, initial margin requirement.

Investors service bureau
NYSE service which deals with all general inquiries concerning securities investments.

Invoice
Bill written by a seller of goods or services and submitted to the purchaser for payment.

Invoice billing
Billing system in which the invoices are sent off at the time of customer orders and are all separate bills to be paid.

Invoice date
Usually the date when goods are shipped. Payment dates are set relative to the invoice date.

Invoice price
The price that the buyer of a futures contract must pay the seller when a Treasury Bond is delivered.

Involuntary liquidation preference
A premium that must be paid to preferred or preference stockholders if the issuer of the stock is forced into involuntary liquidation.

IRA/Keogh accounts
Special accounts where you can save and invest, and the taxes are deferred until money is withdrawn. These plans are subject to frequent changes in law with respect to the deductibility of contributions. Withdrawals of tax deferred contributions are taxed as income, including the capital gains from such accounts.

Irredeemable bond
A bond lacking a call feature or a right of redemption. Also refers to a perpetual bond.

Irrational call option
The implied call imbedded in the M.B.S.. Identified as irrational because the call is sometimes not exercised when it is in the money (interest rates are below the threshold to refinance). Sometimes exercised when not in the money (some sold without regard to the relative level of interest rates).

Irrelevance result
The Modigliani and Miller theorem that a firm's capital structure is irrelevant to the firm's value.

"-ish"
Used in the context of general equities. Representation of an approximation around the prefix number.

Issue
A particular financial asset.

Issued share capital
Total amount of shares that are in issue. Related:outstanding shares.

Issuer
An entity that issues a financial asset.

Italian Derivatives Market (IDEM)
A derivatives market operated by the Italian Stock Exchange Council. It trades futures and options on the 30 index and individual stock options. See: Italian Stock Exchange.

Italian Stock Exchange (ISE)
The Milan based stock exchange, which came into effect after the unification of Italy's 10 national exchanges in 1991. All listed securities are traded electronically. The main indices are the MIB and the MIBTEL, based on the prices of all listed shares, and the MIB 30, based on a sample of the 30 most liquid and highly capitalized shares.

Itemized deduction
Specific deductions allowed by the IRS outlined in the tax return.

"It's us"
Used in the context of general equities. "The firm, and not a customer, is the party involved." Profile.