Fifth letter of a Nasdaq stock symbol specifying Class
Association of International Bond Dealers
Alternative Trading System. This term is defined under section 301 of the U.S. Securities
Controlling party giving up rights to property voluntarily.
The option of terminating an investment earlier than originally
A contract between an employee and a brokerage firm outlining
the rights of the firm purchasing an NYSE membership for
In context of municipal bonds, refers to the
issuer's present and future ability to create sufficient tax revenue to
fulfill its contractual obligations, accounting for municipal income and property
In context of taxation, notion that tax rates should be determined according to
income or wealth.
The component of the return that is not due to
systematic influences (market-wide influences). In other words, abnormal
returns are above those predicted by the market movement
alone. Related: excess returns.
A theory that prices of products of two different countries should be equal when
measured by a common currency. Also called the "law of one price."
The period of use after which an asset has deteriorated
to such an extent that it can no longer be used.
Rule in bankruptcy proceedings requiring senior
creditors to be paid in full before junior creditors receive any payment.
Used in context of general equities. Securities are "absorbed" as long
as there are corresponding orders to
buy and sell. The market has reached the absorption
point when further assimilation is impossible without an adjustment in price. See:
Sell the book.
Schedule of depreciation rates allowed for tax purposes.
A contract stating that the unpaid balance becomes due
and payable if specific actions transpire, such as failure to make
interests payments on time.
Any depreciation method that produces larger deductions
for depreciation in the early years of a asset's life. Accelerated
cost recovery system (ACRS), which is a depreciation schedule allowed for
tax purposes, is one such example.
Contractual agreement instigated when the drawee of a time draft
"accepts" the draft by writing the word "accepted" thereon.
The drawee assumes responsibility as the acceptor and for payment at
maturity. See: Letter of credit and
Federal Reserve System policy to increase the amount of
money available to banks for lending. See: Monetary policy.
In the context of bookkeeping, refers to the ledger pages upon which various
assets, liabilities, income, and expenses are
In the context of investment banking, refers to the status
of securities sold and owned or the relationship between
parties to an underwriting syndicate. In the context of
securities, the relationship between a client and a broker/dealer
firm allowing the firm's employee to be the client's buying and selling
agent. See: Account executive;
Credits minus debits at the end of a reporting period.
The brokerage firm employee who handles stock
orders for clients. See: Broker.
The reviewing and adjusting of the balance in a personal checkbook to match your
In the context of banking, refers to a summary of all balances.
In the context of securities, a summary of all
transactions and positions (long
and short) between a broker/dealer and a client. See also: Option agreement.
A signed statement from an independent public accountant after examination of a
firm's records and accounts. The opinion may be unqualified
or qualified. See: Qualified opinion.
The change in the value of a firm's foreign currency-denominated
accounts due to a change in exchange rates.
The ease and quickness with which assets can be converted
Money owed to suppliers.
Money owed by customers.
The ratio of net credit sales to average
accounts receivable, which is a measure of how quickly customers pay their
Refers to an individual whose net worth, or joint net worth with a spouse, exceeds
$1,000,000; or whose individual income exceeded $200,000 or whose joint income with
a spouse exceeded $300,000 in each of the 2 most recent years and can be expected
to meet that income in the current year. More details of the definitions for investors
other that individuals are found in Regulation D of the Securities and Exchange
In portfolio accounting, a straight-line accumulation of capital
gains on a discount bond in anticipation of receipt
of par at maturity.
An accounting system that tries to match the recognition of revenues earned with
the expenses incurred in generating those revenues. It
ignores the timing of the cash flows associated with revenues
In the context of accounting, practice in which expenses and income are accounted
for as if they are earned or incurred, whether or not they have been received or
paid. Antithesis of cash basis accounting.
A bond on which interest accrues
but is not paid to the investor during the time of accrual.
The amount of accrued interest is added to the remaining
principal of the bond and is paid at
The pension benefits earned by an employee accourding to the years of the employee's
Interest that accumulates on
savings bonds from the date of purchase until the date
of redemption or final maturity,
whichever comes first. Series A, B, C, D, E, EE, F, I, and J are discount or
accrual bonds, meaning principal and interest
are paid when the bonds are redeemed. Series G, H, HH,
and K are current-income bonds, and the semiannual interest
paid to their holders is not included in accrued discount.
Applies mainly to convertible securities. Interest that
has accumulated between the most recent payment and the sale of a
bond or other fixed-income security. At the time
of sale, the buyer pays the seller the bond's price plus
"accrued interest," calculated by multiplying the coupon
rate by the fraction of the coupon period that
has elapsed since the last payment. (If a bondholder receives
$40 in coupon payments per bond semiannually and sells
the bond one-quarter of the way into the coupon period, the buyer pays the seller
$10 as the latter's proportion of interest earned.)
Broker/analyst recommendation that could mean slightly different things depending
on the broker/analyst. In general, it means to increase the number of shares of
a particular security over the near term, but not to liquidate other parts of the
portfolio to buy a security that might skyrocket. A buy recommendation, but not
an urgent buy.
An approximate measure of the liability of a pension plan
in the event of a termination at the date the calculation is performed. Related:
Projected benefit obligation.
A tax on earnings kept in a firm to prevent the higher
personal income tax rate that would obtain if profits
were paid out as dividends to the owners.
In the context of investments, refers to the purchase
by an institutional broker of a large number of
shares over a period of time in order to avoid pushing the price of that
In the context of mutual funds, refers to the regular
investing of a fixed amount while reinvesting dividends
and capital gains.
The surplus acquired when a company is purchased in a pooling
of interests combination, i.e. the net worth not
considered to be capital stock.
A firm that is being acquired.
A firm or individual that is acquiring something.
When a firm buys another firm.
Refers to the price (including the closing costs) to purchase
another company or property.
In the context of investments, refers to price plus brokerage
commissions, of a security,
or the sales charge applied to load funds. See:
A merger or consolidation in
which an acquirer purchases the selling firm's assets.
A merger or consolidation in
which an acquirer purchases the acquiree's stock.
Movement or trend in the stock market
that affects almost all stocks in all sectors to move
in the same direction.
Investors working together and performing identical actions
to attain the same investment goal.
This doctrine says that a nation is sovereign within its own borders, and its domestic
actions may not be questioned in the courts of another nation.
A market in which there is frequent
Refers to a brokerage account in which many
transactions occur. Brokerage firms may levy a fee if an account generates
an inadequate level of activity.
Refers to members of the bond department of the
NYSE who trade the most bonds.
Antithesis of cabinet crowd.
Securities that are held in safekeeping and are available
as collateral for securing brokers'
loans or customers' margin positions.
Income from an active business as opposed to passive investment income according to the U.S. tax code.
The pursuit of investment returns in excess of a specified
A strategy that uses available information and forecasting techniques to seek better
performance than a buy and hold portfolio. Related: Passive portfolio strategy.
Used in context of general equities. Firm market. Antithesis
of Subject market.
Advance-Decline, or measurement of the number of issues trading above their previous closing prices less the number
trading below their previous closing prices over a particular period. As a technical
measure of market breadth, the steepness of the AD line
indicates whether a strong bull or bear
market is under way.
A test for ensuring that bond issuers
can meet the debt service requirements of issuing any
new additional bonds.
A test that measures the extent to which the value of an asset
is protected from potential loss either through insurance
Applies mainly to convertible securities. Refers to interest rate
or dividend that is adjusted periodically, usually
according to a standard market rate outside the control of the bank or savings institution,
such as that prevailing on Treasury bonds or
notes. Typically, such issues have a set floor
or ceiling, called caps and collars
that limits the adjustment.
A mortgage that features predetermined adjustments of
the loan interest rate at regular intervals based on an
established index. The interest rate is adjusted at each
interval to a rate equivalent to the index value plus
a predetermined spread, or margin,
over the index, usually subject to per-interval and to life-of-loan interest rate
and/or payment rate caps.
Method of calculating finance charges that uses the account balance remaining after adjusting for all
transactions posted during the given billing period as its basis. Related:
Average daily balance method, previous
balance method, past due balance method.
Price from which to calculate and derive capital gains
or losses upon sale of an asset.
Account actions such as any stock splits that have occurred
since the initial purchase must be accounted for.
The account balance for a margin account that is calculated
by combining the balance owed to a broker with any outstanding
balance in the special miscellaneous account, and any paper profits
on short accounts.
Term used in options on Ginnie Mae
(Government National Mortgage Association) contracts.
The final exercise price of the option
accounts for the coupon rates carried on
Ginnie Mae mortgages. For example, if the standard
GNMA mortgage has an 9% yield,
the price of GNMA pools with 13% mortgages in them is altered so that the
investor receives the same yield.
Gross income less allowable adjustments, is the income
on which an individual is taxed by the federal government.
The net present value analysis of an
asset if financed solely by equity (present value
of unlevered cash flows), plus the present
value of any financing decisions (levered cash flows). In other words, the
various tax shields provided by the deductibility of interest and the benefits of other investment
tax credits are calculated separately. This analysis is often used for
highly leveraged transactions such as a leveraged buyout.
A bond issued in exchange for outstanding
bonds when a corporation facing bankruptcy is recapitalized.
IRS rules used to allocate income on export sales to a foreign
A promise to sell an asset before the seller has lined
up purchase of the asset. This seller can offset
risk by purchasing a futures contract to fix the
sales price approximately.
Refers to the Advance Computerized Execution System, run by Nasdaq.
ACES automates trades between order
entry and market maker firms
that have established trading relationships with each
other. Securities are designated as specified for automatic
A pension plan in which funds are set aside in advance
of the date of retirement.
In the context of municipal bonds, refers to the sale
of new bonds (the refunding issue) before the first call date
of old bonds (the issue to be
refunded). The refunding issue usually specifies a rate lower than the
issue to be refunded, and the proceeds are invested, usually in government
securities, until the higher-rate bonds become
callable. See: Refunding escrow deposits.
An independent auditor's opinion expressing that a firm's
financial statements do not reflect the company's position
accurately. See also: Qualified opinion.
Refers to a situation in which sellers have relevant information that buyers lack
(or vice versa) about some aspect of product quality.
Corresponding bank in the beneficiary's country to which an issuing bank sends a
letter of credit.
A newsletter offering financial advice to its readers.
Relationship between two companies when one company owns substantial
interest, but less than a majority of the voting stock
of another company, or when two companies are both subsidiaries
of a third company. See: Subsidiaries,
A corporation that is an affiliate to the parent company.
An individual who possesses enough influence and control in a corporation as to
be able to alter the actions of the corporation.
A bond covenant that specifies certain actions the firm
An index that measures the financial ability of consumers
to purchase a home.
A contractual clause in a mortgage agreement stating that
any additional mortgageable property attained by the borrower
after the mortgage is signed will be regarded as additional
security for the obligation addressed in the
The comparison basis used to analyze the net after-tax returns
on a corporate taxable bond and a municipal tax-free bond.
The after-tax rate of return minus the inflation rate.
An account between two broker/dealers
that remains intact after 30 days after the settlement date.
The receiving firm must adjust its capital
as it can no longer treat this account as an assets.
In context of general equities, buying or selling for the account and
risk of a customer. Generally, an agent, or broker,
acts as intermediary between buyer and seller, taking no financial risk personally
or as a firm, and charging a commission for the service. The broker represents a
customer buyer/seller to a customer seller/buyer and does not act as
principal for the firm's own trading account.
Antithesis of principal. See: Dealer.
A form of organization commonly used by foreign banks to enter the US
market. An agency bank cannot accept deposits or extend loans
in its own name; it acts as agent for the parent bank. It is also the financial
institution that issues ADRs
to the general market.
A means of compensating the broker of a
program trade solely on the basis of commission
established through bids submitted by various brokerage
The argument that specifies that the various agency costs
create a complex environment in which total agency costs are at a minimum with some,
but less than 100%, debt financing.
The incremental costs of having an agent make decisions
for a principal.
Securities issued by federally
related institutions and U.S. government-sponsored entities. Such agencies were
created to reduce borrowing costs for certain
sectors of the economy, such as agriculture.
Process in corporate financial planning whereby the smaller
investment proposals of each of the firm's operational units are aggregated and
effectively treated as a whole.
A mutual fund designed for maximum capital appreciation that places its money in companies with high
Used in context of general equities. For a customer it means working to
buy or sell one's stock, with an emphasis on execution
over price. For a trader it means acting in a way that
puts the firm's capital at higher risk through paying a higher price, selling cheaper,
or making a larger short sale or purchase
than the trader would under normal circumstances.
A table of accounts receivable broken down into age categories
(such as 0-30 days, 30-60 days, and 60-90 days), which is used to determine if customer
payments are keeping close to schedule.
A contract among participating members of a
syndicate that defines the members' proportionate liability,
which is usually limited to and based on the participants' level of involvement.
The contract outlines the payment schedule on the
settlement date. Compare: Underwriting agreement.
In context of general equities, refers to equities that are overbought
or oversold on a fundamental basis.
The Association for Investment Management and Research (AIMR) Performance Presentation
Standards Implementation Committee is charged with the responsibility to interpret,
revise, and update the AIMR Performance Presentation Standards (AIMR-PPS(TM) for
portfolio performance presentations.
A stock whose price drops precipitously, often on the
unexpected news of poor results.
A company incorporated under the laws of a foreign country regardless of where the
company conducts its operations.
The discount rate that reflects only the
business risks of a project, distinct from the effects of financing.
Refers to an issuer's interest rate
after accounting for commissions and various related expenses.
The major index of Australian stocks comprising 330 of
the major companies listed on the Australian Stock Exchange.
Used in context of general equities. A limited price order
that is to be executed in its entirety or not at all (no
partial transaction), and thus is testing the strength/conviction of the counterparty.
Unlike an FOK order, an AON order is not to be treated
as cancelled if not executed as soon as it is represented
in the trading crowd, but instead remains alive until
executed or cancelled. The making of "all or none" bids
or offers in stocks is prohibited,
and the making of "all or none" bids or
offers in bonds is subject to the restrictions
of Rule 61. AON orders are not shown on the specialist's book
because they cannot be traded in pieces. Antithesis of any-part-of
order. See: FOK order.
Total costs, explicit and implicit.
An arrangement whereby a security issue
is cancelled if the underwriter
is unable to resell the entire issue.
A partner or stockholder of a firm
that is a member of the NYSE, the partner
or stockholder is not personally a member of the NYSE.
The term used to describe a spread in the
options market that generates such a large commission
that the client is unlikely to make a profit even if the
markets move as the investor
US tax provisions that define how income and deductions are to be allocated between
domestic source and foreign source income.
The effectiveness with which a market channels
capital toward its most productive uses.
Measure of risk-adjusted performance. An alpha is usually generated by regressing
the security or mutual fund's excess return on the S&P
500 excess return. The beta adjusts for the
risk (the slope coefficient). The alpha is the intercept. Example: Suppose
the mutual fund has a return of 25%, and the short-term interest
rate is 5% (excess return is 20%). During the same time the market excess
return is 9%. Suppose the beta of the mutual fund is 2.0 (twice as risky as the
S&P 500). The expected excess return given the risk
is 2 x 9%=18%. The actual excess return is 20%. Hence, the alpha is 2% or 200 basis points. Alpha is also known as the
Jensen Index. Related: Risk-adjusted return.
Regression usually run over 36-60 months of data: Return-Treasury
bill= alpha + beta (S&P 500 - Treasury bill)
+ error. The alpha is the intercept. Note that the benchmark
does not necessarily have to be the S&P 500. A
mutual fund specializing in international investment might be benchmarked
to a broader world market index, such as the MSCI World Index.
Categories of common stock of a corporation associated
with a particular subsidiary resulting from
acquisitions and restructuring. The various alphabetical
categories have different voting rights and pay
dividends tied to the operating performance of the particular divisions.
See also: Tracking stocks.
Refers to investments in hedge funds. Many hedge funds pursue strategies that are
uncommon relative to mutual funds. Examples of alternative investment strategies
are: long-short equity, event driven, statistical arbitrage, fixed income arbitrage,
convertible arbritage, short bias, global macro, and equity market neutral.
A federal tax aimed at ensuring that wealthy individuals, estates,
trusts, and corporations pay a minimal level income tax.
For individuals, the AMT is calculated by adding adjusted gross
income to tax preference items.
Used in context of general equities. Order giving a broker a choice between two courses of action, either
to buy or sell, never both. Execution
of one course automatically eliminates the other. An example is a combination buy
limit/buy stop order, where the buy limit is below the
current market and the buy stop is above. If the order
is for one unit of trading, when one part of the order
is executed on the occurrence of one alternative, the order on the other alternative
is to be treated as cancelled. If the order is for an
amount of more than one unit of trading, the number of units executed determines
the amount of the alternative order to be treated as cancelled. See:
A not-for-profit organization to educate individual investors
about stocks, bonds,
mutual funds, and other financial instruments.
Certificates issued by a US depository bank, representing foreign
shares held by the bank, usually by a branch or correspondent in the country
of issue. One ADR may represent a portion of a foreign share, one share or a bundle
of shares of a foreign corporation. If the ADR's are "sponsored," the
corporation provides financial information and other assistance to the bank and
may subsidize the administration of the ADR "Unsponsored" ADRs do not
receive such assistance. ADRs are subject to the same currency, political, and economic
risks as the underlying foreign share. Arbitrage keeps
the prices of ADRs and underlying foreign shares, adjusted for the
SDR/ordinary ratio essentially equal. American depository
shares (ADS) are a similar form of certification.
Fees associated with the creating or releasing of ADRs
from ordinary shares, charged by the commercial banks
with correspondent banks in the international sites.
The number of ordinary shares into which an
ADR can be converted.
Foreign stock issued in the US and registered in the ADR system.
Securities certificates issued in the US by a
transfer agent acting on behalf of the foreign issuer.
The certificates represent claims to foreign equities.
Stock exchange with the third highest volume of trading
in the US Located at 86 Trinity Place in downtown Manhattan. The bulk of trading
on AMEX consists of index options (computer technology
index, institutional index, major market index) and shares
of small to medium-sized companies are predominant. Recently merged with
Nasdaq See: Curb.
Established in 1976, the AFM is the only stock exchange
The repayment of a loan by installments.
All currency issued by the Bureau of the Mint and intended as a medium of exchange.
Coins sold by the Bureau of the Mint at premium prices are not included; uncirculated
coin sets sold at face value plus handling charge are included.
Exchange that comprises the AEX-Effectenbeurs, the AEX-Optiebeurs (formerly the
European Options Exchange or EOE) and the AEX-Agrarische
Termijnmarkt. AEX-Data Services is the operating company responsible for the dissemination
of data from the Amsterdam Exchange via its integrated Mercury 2000 system.
Used in context of general equities. In-house message system entered and displayed
through Quotron A page.
Employee of a brokerage or fund management house who studies companies and makes
buy-and-sell recommendations on stocks
of these companies. Most specialize in a specific industry.
An indication that the buyer will receive accrued interest
in addition to the price quoted for a bond.
A regional trade pact that includes Venezuela, Colombia, Ecuador, Peru, and Bolivia.
An investment-grade bond. Antithesis to
fallen angel. In the context of venture capital, the first investor.
Date on which particular news concerning a given company is announced to the public.
Used in event studies, which researchers use to evaluate
the economic impact of events of interest.
The technique in statistics of taking a figure covering a period of less than one
year and extrapolating it to cover a full one year period. The process is known
A tax rule allowing the deduction of certain income from
For investment companies, the management fee and "other
expenses," including the expenses for maintaining shareholder
records, providing shareholders with financial statements, and providing custodial
and accounting services. For 12b-1 funds, selling and
marketing costs are also included.
The periodic rate times the number of periods in a year.
For example, a 5% quarterly return has an APR of 20%.
The effective, or true, annual rate of return. The APY
is the rate actually earned or paid in one year, taking into account the effect
of compounding. The APY is calculated by taking one plus
the periodic rate and raising it to the number of periods in a year. For example,
a 1% per month rate has an APY of 12.68% (1.01^12 -1).
There are many ways of calculating the annual rate of return. If the
rate of return is calculated on a monthly basis, we sometimes multiply this
by 12 to express an annual rate of return. This is often called the
annual percentage rate (APR). The annual percentage yield
(APY), includes the effect of compounding interest.
Yearly record of a publicly held company's financial condition. It includes a description
of the firm's operations, as well as balance sheet, income statement, and cash flow statement information.
SEC rules require that it be distributed to all
shareholders. A more detailed version is called a 10-K.
If stock X appreciates 1.5% in one month, the annualized gain for that stock over
a twelve month period is 121.5% = 18%. Compounded over
the 12 month period, the gain is (1.015)^12 -1 = 19.6%.
The annual rate of return that when
compounded t times generates the same t-period holding return
as actually occurred from period 1 to period t.
Meeting of stockholder held once a year at which the managers
of a company report to the stockholders on the year's
An individual who receives benefits from an annuity.
To commence a series of payments from the capital that
has accumulated in an annuity. The payments may be a fixed
amount, for a fixed period of time, or for a lifetime.
A regular periodic payment made by an insurance company to a policyholder for a
specified period of time.
An annuity that pays a specific amount on a monthly basis for a set amount of time.
An annuity with n payments, where the first payment
is made at time t = 0, and the last payment is made at time t = n -
Present value of $1 paid for each of t periods.
An annuity with a first payment one full period hence,
rather than immediately.
The date when an annuitant starts receiving payments from
The period of time an individual expects to hold an asset.
Paying what is owed before it is due (usually to save interest charges).
In R/S Analysis, an anti-persistent time series reverses
itself more often than a random series would. If the system had been up in the previous
period, it is more likely that it will be down in the next period and vice versa.
Also called pink noise, or 1/f noise. See: Persistence,
R/S Analysis, Hurst Exponent,
Joseph Effect, Noah Effect.
Legislation established by the federal government to prevent the formation of monopolies and to regulate trade.
Often used in risk arbitrage. Takeover
bid in which the acquirer offers to pay a set
price for all outstanding shares of the
target company, or any part thereof; contrasts with two-tier bid.
In context of general equities, order to buy or sell a
quantity of stock in pieces if necessary. Antithesis of
an all-or-none order (AON).
The signal-to-noise ratio of an analyst's forecasts. The
ratio of alpha to residual standard
A right of shareholders in a merger
to demand the payment of a fair price for their shares,
as determined independently.
Increase in the value of an asset.
Formal request for funds for capital investment project.
A list of equities and other investments
that a financial institution or mutual fund is approved
to make. See: Legal list.
Auction Preferred Stock. A type of Dutch Auction Preferred Stock
(Goldman Sachs product).
The simultaneous buying and selling of a security at two
different prices in two different markets,
resulting in profits without risk.
Perfectly efficient markets present no arbitrage opportunities.
Perfectly efficient markets seldom exist, but, arbitrage
opportunities are often precluded because of transactions costs.
An alternative model to the capital asset pricing model
developed by Stephen Ross and based purely on arbitrage
arguments. The APT implies that there are multiple risk factors
that need to be taken into account when calculating risk-adjusted performance or
One who profits from the differences in price when the same, or extremely similar,
security, currency, or
commodity is traded on two or more
markets. The Arbitrageur profits by simultaneously purchasing and selling
these securities to take advantage of pricing differentials (spreads)
created by market conditions. See: Risk arbitrage,
convertible arbitrage, index arbitrage, and
Used in context of general equities. "Can a new customer still participate
on opposing side of the trade from that which the first
customer initiated?", Inquiring as to whether any portion of that trade is
still available See: Open.
An average of the subperiod returns,
calculated by summing the subperiod returns and dividing by the number of subperiods.
The price at which a willing buyer and a willing unrelated seller would freely agree
Also known as a TRading INdex (TRIN). 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.
Used in context of general equities. See: Away from you.
Legal document establishing a corporation and its structure and purpose.
A chart pattern that depicts that each peak in a
security's price over a period of time is higher than the preceding peak.
Antithesis of descending tops.
A loose economic affiliation of Southeast Asian and Far Eastern nations. The most
prominent members are China, Japan, and Korea.
Dollar deposits held in Singapore or other Asian centers.
Asian banks that collect deposits and make loans denominated in US dollars.
Option based on the average price of the
underlying assets during the life of the option.
This is the quoted ask, or the lowest price an investor
will accept to sell a stock. Practically speaking, this
is the quoted offer at which an investor
can buy shares of
stock; also called the offer price.
In context of general equities, price at which a security
or commodity is offered for
sale on an exchange or in the OTC
Used in context of general equities. Usually a seller (buyer) looking to
aggressively sell (buy) stock,
usually asking for a capital commitment from an investment bank.
Australian Stock Price Riskless Indexed Notes. Zero-coupon
four-year bonds repayable at face value
plus the percentage increase by which the Australian stock index of all ordinaries
(common stocks) rises above a predefined level during
the given period.
Metal purity test to confirm that the metal meets the standards for
trading on a commodities exchange (commodities
The value assigned to property by a municipality for the
purpose of tax assessment. Such an assessed valuation is important to
investors in municipal bonds that are backed by
Any possession that has value in an exchange.
Ratios that measure how effectively the firm is managing
The decision regarding how an institution's funds should be distributed among the
major classes of assets in which it may invest.
Methods of financing in which lenders and equity investors
look principally to the cash flow from a particular asset or set of assets for a return
on, and the return of, their financing.
Categories of assets, such as stocks,
bonds, real estate, and foreign securities.
A bond indenture restriction that permits additional borrowing
if the ratio of assets to debt
does not fall below a specified minimum.
A range of depreciable lives the IRS allows for particular
classes of assets.
Creditors exchange the debt
of one defaulting borrower for the debt of another defaulting
The task of managing the funds of a financial institution to accomplish the two
goals of a financial institution: (1) to earn an adequate return
on funds invested and (2) to maintain a comfortable surplus of
assets beyond liabilities. Also called
Account at a brokerage house, bank, or savings institution that integrates banking
services and brokerage features.
A company with assets that are not believed to be accurately
reflected in its stock price, making it an attractive
buy or play.
A corporate raider (company A) that takes over a
target company (company B) in order to sell large assets
of company B to repay debt. Company A calculates that
the net selling of the assets and paying off the debt, will leave the raider with
assets that are worth more than what it paid for company B.
Occurs when a firm invests in assets that are riskier
than those that the debtholders expected.
Arises when the stockholders substitute
riskier assets for the firm's existing assets
and expropriate value from the debtholders.
An interest rate swap used to alter the
cash flow characteristics of an institution's assets
in order to provide a better match with its liabilities.
The ratio of net sales to total assets.
The net market value of a corporation's
assets on a per-share basis, not the
market value of the shares. A company is undervalued
in the market when asset value exceeds market value.
A firm's productive resources.
Property in which a firm has already invested.
A common element of a financial plan that describes projected capital spending and
the proposed uses of net working capital.
Arrangement that allows the original beneficiary of a letter of
credit to pledge or turn over proceeds to another, typically end supplier.
The public absorption of a new issue of
stocks once the stock has been completely sold by underwriter.
A loose economic and geopolitical affiliation that includes Singapore, Brunei, Malaysia,
Thailand, the Philippines, Indonesia, and Vietnam. Future members are likely to
include Burma, Laos, and Cambodia.
Becoming responsible for the liabilities of another party.
Options market trading options
on more than 50 of Australia's and New Zealand's leading companies.
Information that is known to some people but not to other people.
When participants in a transaction have different net tax rates.
Phenomenon that volatility is higher in down markets than
in up markets.
A lack of equivalence between two things, such as the unequal tax treatment of interest expense and dividend
Used in context of general equities. Paramount terms used to differentiate an offering. Stock is offered at; stock is bid for. In an
offering, the trading syntax followed is "Quantity-at-Price";
in a bid, the syntax followed is "Price-for-Quantity."
The exposure to the danger of economic loss. Frequently used in the context of claiming
tax deductions. For example, a person can claim a
tax deduction in a limited partnership if the
taxpayer can show it is at risk of never realizing a profit and of losing its initial investment.
See: Value at risk.
In context of general equities, at the opening or
close of the market. See: MOC Order.
In the context of futures and options,
refers to a contract that is to be executed
on some exchanges during the closing
period, a period in which there is a range of
In context of general equities, at the whole integer price (excluding the fraction)
closest to the side of the market (bid/ask)
being discussed. At the full.
Used in context of general equities. At the figure.
An option is at the money if the strike
price of the option is equal to the market price
of the underlying security. For example, if xyz stock
is trading at 54, then the xyz 54 option is at the money.
In context of general equities, market order or
limited price order that is to be executed at
the opening (and corresponding price) of the
stock or not at all, and any such order or portion
thereof not so executed is to be treated as cancelled.
In non-linear dynamic series, an attractor defines the equilibrium level of the
system. See: Point Attractor, Limit
Cycle, and Strange Attractor.
Markets in which the prevailing price is determined through
the free interaction of prospective buyers and sellers, as on the floor of the stock
An examination of a company's accounting records and books conducted by an outside
professional in order to determine whether the company is maintaining records according
to generally accepted accounting principles. See:
Resolves the validity of an accounting entry by a step-by-step record by which accounting
data can be traced to their source.
A section of an annual report that includes the auditor's
opinion about the veracity of the financial statements.
An unsophisticated investor.
Established in 1987 following the amalgamation of the six independent
stock exchanges operating in the Australian state capitals. The ASX is the
tenth-largest stock exchange in the world on the basis
of domestic capitalization.
Absence of a cross-border trade in models of international
Video communication network through which brokerage houses alert
institutional investors of their desire to transact block
business (a purchase or sale) in a given security.
Indications transmit small, medium, and large sizes only, with occasional
limits mentioned. Supers are messages with specific size
and price included. Both "indications" and "supers" can be only
seen by customers (institutional subscribers to Autex). Trade recaps, advertised
block trades entered by the dealer/subscribers,
are also displayed, but can be seen by both institutions and dealers. See:
In the context of bonds, refers to the validation of a
A bond issued by a government agency or a corporation
created to manage a revenue-producing public enterprise. The difference between
an authority bond and a municipal bond is that
margin protections may be incorporated in the authority bond
contract as well as in the legislation that enables the authority.
Number of shares authorized for issuance
by a firm's corporate charter.
The correlation of a variable
with itself over successive time intervals. Sometimes called serial correlation.
The computerized system that records bids and
offers for inactively traded bonds
until they are cancelled or executed
on the NYSE.
A collection of 32 regional electronic interbank networks used to process transactions
electronically with a guaranteed one-day bank collection float.
For transfers of securities from a non-equity trading account to your equity trading
account with your broker.
Introduced in 1989, APT is the LIFFE screen-based trading
system that replicates the open outcry method of trading on screen. APT is used
to extend the trading day for the major futures contracts as well as to provide
a daytime trading environment for non-floor trading products.
An automatic extension of time granted to a taxpayer to file a tax return.
A transfer of funds from one account or investment vehicle
to another using electronic or telecommunications technology.
A program in which an investor can invest or withdraw
funds automatically. A mutual fund, for example, automatically
withdraw a pre determined specified amount from the investor's bank account on a
The restricting of liabilityholders from collection efforts
related to collateral seizure. Automatically imposed when
a firm files for bankruptcy under Chapter 11.
A mutual fund that gives shareholders
the right to receive a fixed payment from dividends on
a quarterly or monthly basis.
Autoquote indicative prices are generated for many of the financial
options contracts traded at LIFFE using standard
mathematical models as derived by Black and Scholes and
Cox, Ross, Rubinstein. Autoquote calculates prices for all series by processing
variables captured in real-time from other systems and
trading members each time the underlying price changes.
Autoquotes indicate where a series may
trade, given the current level of the underlying instrument.
Using past data or variable of interest to predict future
values of the same variable.
A stationary stochastic process where the current value of the time
series is related to the past p values, where p is any integer, is called
an AR(p) process. When the current value is related to the previous two values,
it is an AR(2) process. An AR(1) process has an infinite memory.
A nonlinear stochastic process, where the variance is
time-varying, and a function of the past variance. ARCH processes have frequency
distributions which have high peaks at the
mean and fat-tails, much like fractal distributions.
The Generalized ARCH (GARCH) model is also widely used. See: Fractal
Checks deposited by a company that have not yet been cleared.
In context of general equities, stock is available to
new customer as trade initiated by another customer is
about to be consummated (on the exchange floor). Usually
said to an inquiring salesperson. See: Open.
An arithmetic mean return of selected
stocks intended to represent the behavior of the market
or some component of it. One good example is the widely quoted
Dow Jones Industrial Average, which adds the current prices
of the 30 DJIA stocks, and divides the results by a predetermined number, the divisor.
The average project earnings after taxes and
depreciation divided by the average book value
of the investment during its life.
An estimation of price that uses the average or representative
price of a large number of trades.
The weighted-average age of all the firm's outstanding invoices.
The ratio of accounts receivables to sales, or the total
amount of credit extended per dollar of daily sales (average
In the context of investing, refers to the average cost of shares
or stock bought at different prices over time.
A firm's required payout to bondholders and
stockholders expressed as a percentage of capital contributed to the firm.
Average cost of capital is computed by dividing the total required cost of capital
by the total amount of contributed capital.
A method for calculating interest in which the balance
owed each day by a customer is divided by the number of days. See also:
Adjusted balance method and previous balance method.
Purchasers tender their competitive
bids on a discount rate basis. The weighted, or
adjusted, mean of all bids accepted in Treasury bill auctions.
A strategy used by investors to reduce the
average cost of shares, in which the
investor purchases more shares with a fixed amount of capital
as the price of the shares decrease. The investor receives
more shares per dollar and decreases the average price per share.
Also referred to as the weighted-average life (WAL). The
average number of years that each dollar of unpaid principal
due on the mortgage remains outstanding.
Average life is computed as the weighted-average time to the receipt of all future
cash flows, using as the weights the dollar amounts of
the principal paydowns.
The average time to maturity
of securities held by a mutual fund.
Changes in interest rates have greater impact on funds
with longer average maturity.
The ratio of the average cash inflow to the amount invested.
Taxes as a fraction of income; total taxes divided by total taxable
A strategy used by investors to lower the overall cost
of shares by buying as many shares with a given amount
of capital in an increasing market. Buying $1000 worth
of shares at $30, $35, $40, and $45, for instance, will make the average cost of
the shares $37.50.
A trade, quote, or market that
does not originate with the dealer in question, e.g.,
"the bid is 98-10 away from me."
In context of general equities, out of line with the inside market
at this time, such as when a bid on a
limit order is lower or the offer price is higher
than the current market price for the
security; held by the specialist for later
execution unless FOK. Antithesis of
Used in context of general equities, to characterize role of a competing
broker/dealer. Trading away from us signifies
that stock is bought and/or sold with institutions using
other trading firms.
Used for listed equity securities. See: Outside of you.
Used in context of general equities. Involvement in a security,
whether through a position, order,