Fifth letter of a Nasdaq stock symbol specifying that the issue is a foreign company.
A debt security issued by face amount. The holder makes payments periodically
to the issues, and the issuer promises to pay the purchaser the face value
at maturity or the surrendered value if the security is presented by the maturity
specified in the certificate.
A financial institution that buys a firm's accounts receivable and collects the accounts.
A statistical procedure that seeks to explain a certain phenomenon, such as the return on a common stock, in terms of the behavior of a set of predictive factors.
A way of decomposing the forces that influence a security's rate of return into common and firm-specific influences.
A well-diversified portfolio constructed to have a beta of 1.0 on one factor and a beta of zero on any other factors.
The return attributable to a particular
common factor. We decompose asset returns into a
common factor component, based on the asset's exposures to common factors times the
factor returns, and a specific return.
Sale of a firm's accounts receivable to a financial institution known as a factor.
Refers to over-the-counter trading. Fill another OTC dealer's bid for or offer of stock.
A deal is said to fail if on the settlement date either the seller does not deliver securities in proper form or the buyer does not to deliver funds in proper form.
A set of requirements for a plan of reorganization to be approved by the bankruptcy court.
An investment prospect that has a zero risk premium.
Amount at which an asset would change hands between two parties, that both have knowledge of the relevant facts. Also referred to as market price.
The rate of return that state governments allow a public utility to earn on its investments and expenditures. Utilities then use these profits to pay investors and provide service upgrades to their customers.
In the context of futures, the equilibrium price for futures contracts. Also called the theoretical futures price, which equals the spot price continuously compounded at the cost of carry rate for some time interval. More generally, fair value for any asset simply refers to the perception that it is neither underpriced (too cheap) nor overpriced (too expensive).
In the context of general equities, may not be able to produce as indicated in one's advertised market, due to less help (than anticipated) from other parties or due to changing market conditions.
A sudden drop in a stock's price resulting from failed or poor business deals gone bad or falling through.
Bonds that at the time of issue were considered investment grade but that have dropped below that rating over time.
A type of mortgage pipeline risk that is generally created when the terms of the loan to be originated are set at the same time the sale terms are established. The risk is that either of the two parties, borrower or investor, fails to close and the loan "falls out" of the pipeline.
Finance professor at the University of Chicago. Developer of the Efficient Markets Hypothesis.
Used in the context of option or futures to refer to the trading month of the contract that is farthest away. Antithesis of nearest month.
U.S. accounting standard that requires US firms to translate their foreign
affiliates' accounts by the temporal
method; that is reporting gains and losses from currency
fluctuations in current income. It was in effect between 1975 and 1981 and
became the most controversial accounting standard in the US It was replaced
by FASB No. 52 in 1981.
The US accounting standard that replaced FASB
No. 8. US companies are required to translate foreign accounts in terms
of the current rate and report
the changes from currency fluctuations in a cumulative translation adjustment
account in the equity section of the balance
Excessively rapid trading in a specific security that causes a delay in the electronic updating of its last sale and market conditions, particularly in options.
Condition that total exports of a nation exceed total imports, creating a net export.
A portfolio that an investor can construct, given the assets available.
The collection of all feasible portfolios.
Payout ratios that are consistent with the level of excess funds available to make cash dividend payments.
A Federal Reserve action adding more reserves to the banking system, increasing the money available for lending, and making credit easier to attain.
Fixed-income security issued by a government agency such as FNMA.
A federal agency chartered in 1988 to provide a secondary market for farm mortgage loans.
Agencies of the federal government set up to supply credit to various classes of institutions and individuals, e.g., S&Ls, small business firms, students, farmers, and exporters.
When federal government expenditures are exceeded by federal government revenue.
An institution created by the government with the purpose of uniting the financing activities of the federal land banks, the federal intermediate credit banks, and the banks for cooperatives. See: Federal Farm Credit System.
A system chartered in 1971 through the farm credit act providing farmers with credit services through a federal land bank, a federal intermediate credit bank, and a bank for cooperatives. See: Federal Farm Credit Bank.
A federal institution that insures bank deposits.
A federal institution that lends to a wide array of federal credit agencies funds it obtains by borrowing from
the US Treasury.
Noninterest-bearing deposits held in reserve for depository institutions at their district Federal Reserve Bank. Also, excess reserves lent by banks to each other.
The interest rate that banks with
excess reserves at a Federal
Reserve district bank charge other banks that need overnight loans. The
Fed funds rate, as it is called,
often points to the direction of US interest
rates. The most sensitive indicator
of the direction of interest rates,
since it is set daily by the market, unlike the prime
rate and the discount rate.
A federal tax imposed on assets conveyed as gifts to individuals.
The institutions that regulate and lend to savings and loan associations. The Federal Home Loan Banks play a role analogous to that played by the Federal Reserve Banks vis-à-vis member commercial banks.
Federally sponsored agency chartered in 1934 whose stock is currently owned by savings institutions across the United States. The agency buys residential mortgages that meet certain requirements, sells these mortgages in packages, and insures the lenders against loss.
US government agency chartered in 1989 to assume the responsibilities formerly
held by the Federal Home Loan
A bank sponsored by the federal government to provide funds to institutions making loans to farmers.
Intrabudgetary transactions in which payments and receipts both occur within the same Federal fund group.
A bank administered under the US Farm Credit Administration that provides
long-term mortgage credit to farmers for
A publicly owned, government-sponsored corporation chartered in 1938 to purchase mortgages from lenders and resell them to investors. Known by the nickname Fannie Mae, it packages mortgages backed by the Federal Housing Administration, but also sells some nongovernment-backed mortgages.
The body that is responsible for setting the interest rates and credit policies of the Federal Reserve System.
One of the 12 member banks constituting the Federal Reserve System that is responsible for overseeing the commercial and savings banks of its region to ensure their compliance with regulation.
The seven-member governing body of the Federal Reserve System, which is responsible for setting reserve requirements, and the discount rate, and making other key economic decisions.
Issues by the US government to the public
through the Federal Reserve Banks and their member banks. They represent money
owed by the government to the public. Currently, the item "Federal Reserve
notes amounts outstanding" consists of new series issues. The Federal
Reserve note is the only class of currency currently issued.
The monetary authority of the US, established in 1913, and governed by the
Federal Reserve Board located in Washington, D.C. The system includes 12 Federal
Reserve Banks and is authorized to regulate monetary
policy in the US as well as to supervise Federal Reserve member banks,
bank holding companies, international operations of US banks, and US operations
of foreign banks.
An institution chartered by the federal government whose primary function is to collect savings deposits and to provide mortgage loans.
Arms of the federal government exempt from SEC
registration whose securities are backed
by the full faith and credit of the US government (with the exception of the
Tennessee Valley Authority).
A wire transfer system for high-value payments operated by the Federal Reserve
Schedule found in a mutual fund's prospectus that discloses and illustrates the expenses and fees a shareholder will incur.
Payment to a financial adviser of a set hourly rate, or an agreed-upon percentage of assets under management, for a financial plan. When the plan is implemented, the adviser may also receive commission on some or all of the investment products purchased, which would be fee-and-commission compensation.
Payment to a financial adviser of a set hourly rate, or an agreed-upon percentage of assets under management, for a financial plan.
An equation where the output becomes the input in the next iteration. This is
much like a public address system where the microphone is placed next to the speakers
generating feedback as the signal is looped through the PA system.
The percentage of loans in a pool of mortgages outstanding at the origination anniversary, based on annual statistical historic survival rates for FHA-insured mortgages.
Nonconvertible paper money.
A margin account's credit balance. Fictitious credit exists after the proceeds from a short sale are accounted for with respect to the margin requirement. The proceeds from the short sale are reflected as a credit, but must stay in the account to serve as security for the loan of securities made in a short sale, and are therefore inaccessible to the client for withdrawal.
One who must act for the benefit of another party.
Warehouse rented by a company on another firm's premises.
Refers to details about price including the bid and ofter. See: Handle
Calculating the yield at which a future money market (one available some period hence) is purchased when that future security is created by buying an existing instrument and financing the initial portion of its life with a term repo.
The price at which an order is executed.
A trading order
that is canceled unless executed
within a designated time period. A market
or limited price order that
is to be executed in its entirety as soon
as it is represented in the trading crowd, and, if not so executed, is to
be treated as canceled. For purposes of this
definition, a stop is considered an execution.
Equivalent to AON and IOC
A rule that stipulates when a security should be bought or sold according to its price action.
A discipline concerned with determining value and making decisions. The finance function allocates resources, including the acquiring, investing, and managing of resources.
The total cost of credit a customer must pay on a consumer loan, including interest.
A company whose business and primary function is to make loans to individuals, while not receiving deposits like a bank.
Board composed of independent members who create and interpret Generally Accepted Accounting Principles (GAAP).
A professional offering financial advice to clients for a fee and/or commission.
Analysis of a company's financial statement, often by financial analysts.
Also called securities analysts
and investment analysts. Professionals
who analyze financial statements, interview corporate executives, and attend
trade shows, in order to write reports recommending either purchasing, selling,
or holding various stocks.
The management of a firm's costs and expenses in relation to budgeted amounts.
Events preceding and including bankruptcy, such as violation of loan contracts.
Legal and administrative costs of liquidation or reorganization. Also includes implied costs associated with impaired ability to do business (indirect costs).
Combining or carving up existing instruments to create new financial products.
A contract entered into now that provides for the delivery of a specified asset in exchange for the selling price at some specified future date.
Insurance created to cover losses from specified financial transactions.
Design of any new financial product, such as exotic currency options and swaps.
An enterprise such as a bank whose primary business and function is to collect money from the public and invest it in financial assets such as stocks and bonds.
Insurance coverage for loans by banks to foreign buyers of exports.
Legislation that established the Office of Thrift Supervision, which was created in the wake of the savings and loan crisis of the late 1980s.
Institutions that provide the market function of matching borrowers and lenders or traders.
Long-term, noncancellable rental agreement.
Use of debt to increase the expected return on equity. Financial leverage is measured by the ratio of debt to debt plus equity.
A group of investors who have a preference for investing in firms that adhere to a particular financial leverage policy.
Common ratios are debt divided by equity a debt divided by the sum of debt plus equity. Related: capitalization ratios.
An organized institutional structure or mechanism for creating and exchanging financial assets.
A method of establishing the amount of life insurance required by an individual by estimating the financial needs of dependents in the event of the individual's death.
Goals related to returns that a firm will strive to accomplish during the period covered by its financial plan.
A blueprint relating to the financial future of a firm.
An investment professional who assists individuals with long- and short-term financial goals.
Evaluating the investing and financing options available to a firm. Planning includes attempting to make optimal decisions, projecting the consequences of these decisions for the firm in the form of a financial plan, and then comparing future performance against that plan.
Criteria describing a corporation's choices regarding its debt/equity
mix, currencies of denomination, maturity
structure, method of financing investment
projects, and hedging decisions with a goal
of maximizing the value of the firm to some set of stockholders.
The account status of a firm's or individual's assets, liabilities, and equity positions as reflected on its financial statement.
Media devoted to reporting financial news.
The chance there will be unexpected changes in a financial price, including currency (foreign exchange) risk, interest rate risk, and commodity price risk.
Public relations division of a company charged with cultivating positive investor relations and proper disclosure information.
A risk structure that spreads investor's risks across low-, medium-, and high-risk vehicles. The bulk of the assets are in safe, low-risk investments that provide a predictable return (base of the pyramid). At the top of the pyramid are a few high-risk ventures that have a modest chance of success.
The result of dividing one financial statement item by another. Ratios help analysts interpret financial statements by focusing on specific relationships.
The risk that the cash flow of an issuer will not be adequate to
meet its financial obligations. Also referred to as the additional risk that a firm's stockholder bears when the firm uses debt and equity.
Income from delivery of financial services such as banking, insurance, leasing, or financial service management fees.
A report of basic accounting data that helps investors understand a firm's financial history and activities.
Evaluation of a firm's financial statements in order to assess the firm's worth and its ability to meet its financial obligations.
Practices a firm adopts to pursue its financial objectives.
The way in which a company's assets are financed, such as short-term borrowings, long-term debt, and ownership equity. Financial structure differs from capital structure in that capital structure accounts for long-term debt and equity only.
A company offering a wide variety of financial services such as a combination of banking services, stock, and insurance brokerage.
Share price indexes for U.K. companies The denominator in the index
formula is the market capitalization at the base date, adjusted for all capital
changes affecting the particular index since the base date. See: Footsie
(FTSE) (pronounced footsie).
A government agency chartered in 1987 to bail out the Federal Savings and Loan Insurance Corporation (FSLIC) by issuing bonds.
Institutions that effect agreement terms between borrower and lender by reaching separate agreements with the borrower and the lender.
A source of competitive advantage that depends on access to low cost sources of capital.
A fee a person or company charges for service as an intermediary in a transaction.
The financial futures and options division of the New York Cotton Exchange (NYCE), with a trading floor in Dublin, FINEX Europe, creating a 24-hour market in most FINEX contracts.
Used in the context of general equities. See: Fill.
Refers to an order to buy or sell that can be executed without confirmation for some fixed period. Also, a synonym for company.
Trading strategies that generate abnormal returns based on firm-specific characteristics.
An underwriting in which an investment banking firm commits to buy and sell an entire issue of stock and assumes all financial responsibility for any unsold shares.
In the context of general equities, prices at which a security can actually be bought or sold in decent sizes, as compared to an inside market with very little depth. See: Actual market.
In the context of general equities, (1) order to buy or sell for the proprietary account of the broker-dealer firm; (2) buy or sell order not conditional upon the customer's confirmation.
A definite price on a round-lot bid or offer declared by a market maker on a given security and not identified as a nominal quotation (therefore is not negotiable).
News that affects only a specific firm. Market news by contrast affects many firms.
Total firm value minus total firm debt.
A date stated in an indenture, that is the first date on which the issuer may redeem a bond either partially or completely.
An accounting method for valuing the cost of goods sold that uses the cost of the oldest item in inventory first.
A type of mortgage that through a lien gives precedence to the lender of the first mortgage over all other lenders in case of default.
The first day, varying by contracts and exchanges, on which notices of intent to deliver actual financial instruments or physical commodities against futures are authorized.
An alternative to a bond trust deed. Unlike the trustee, the fiscal agent acts as a representative of the borrower.
Government spending and taxing for the specific purpose of stabilizing the economy.
Accounting period covering 12 consecutive months over which a company determines earnings and profits. The fiscal year serves as a period of reference for the company and does not necessarily correspond to the calendar year.
The end of a 12-month accounting period.
A theory that nominal interest rates in two or more countries should be equal to the required real rate of return to investors plus compensation for the expected amount of inflation in each country.
The notion that a firm's choice of investments is separate from its owner's
attitudes toward investments. Also referred to as portfolio
The matching of the investor's requirements and needs such as risk tolerance and growth potential preference with a specific investment.
Used in the context of general equities. Chronological listing of trades in a security showing the price, size, exchange, and time (to the second) of the trades; obtained by hitting "#M" on Quotron.
Five characteristics that are used to form a judgment about a customer's creditworthiness: character, capacity, capital, collateral, and conditions.
A rule of the Federal Reserve that excludes deficiencies of $500 or less in margin requirements as a necessary reason for the firm to liquidate the client's account to cover a margin call.
The process of setting a price of a commodity, whether in the present or the future. See: Gold fixing.
Long-lived property owned by a firm that is used by a firm in the production of its income. Tangible fixed assets include real estate, plant, and equipment. Intangible fixed assets include patents, trademarks, and customer recognition.
Contracts in which an insurance company or issuing financial institution pays a fixed dollar amount of money per period.
Payments to a beneficiary that are paid in fixed preset amounts and are not variable.
A measure of a firm's ability to meet its fixed-charge obligations: the ratio of (net earnings before taxes plus interest charges paid plus long-term lease payments) to (interest charges paid plus long-term lease payments).
A cost that is fixed in total for a given period of time and for given production levels.
In the Euromarket, the
standard periods for which Euros are traded (one month out to a year out) are referred to as the fixed dates.
Conventional bonds for which the coupon rate is set at a fixed percentage of the par value.
A nonnegotiable debt security that can be redeemed at some fixed price or according to some schedule of fixed values, e.g., bank deposits and government savings bonds.
A country's decision to tie the value of its currency to another country's currency, gold (or another commodity), or a basket of currencies.
An interest rate swap in which
the fixed rate payments are traded for a floating rate.
Payments of a fixed, equal amounts paid to an insurance company for insurance or an annuity.
An offering of securities at a fixed price.
A one-time offer to purchase a stated number of shares at a stated fixed price, usually at a premium over the current market price.
A loan whose rate is fixed for the life of the loan.
A mortgage in which the lending institution provides payments to a homeowner for a fixed number of years.
A unit investment trust consisting of securities that were agreed upon at the time of investment and do not change.
A pattern reflecting price fluctuations within a narrow range, generating a rectangular area on a graph both prior to and after sharp rises or declines.
Value of a security displayed, or flashed across the tape, when the tape display cannot keep up with volume on an exchange and lags the current price is lagged more than approximately five minutes.
Convertibles: Earning interest on the date of payment only.
General: Having neither a short nor a long position in a stock. Clean.
Market: Characterized by horizontal price movement, usually the result of low activity.
Equities: To execute without commission or markup.
Method used to determine a participant's benefits in a defined benefit plan by multiplying months of service by a flat monthly benefit.
The quoted newspaper price of a bond that does not include accrued interest. The price paid by the purchaser is the full price.
The pattern for new issues where shorter- and longer-term yields display very little difference over the bond's maturity range.
A tax which is levied at the same rate on all levels of income. Antithesis of progressive tax.
A bond in default trades flat; that is, the price quoted covers both principal and unpaid accrued interest. Any security that trades without accrued interest or at a price that includes accrued interest is said to trade flat.
A budget that shows how costs vary with different rates of output or at different levels of sales volume and projects revenue based on these different output levels.
Expenses for an individual or corporation that can be adjusted or completely dispessed with, e.g., luxury goods.
Fund that invests in a variety of securities in varying proportions in order to maximize shareholder returns while maintaining a low level of risk.
The tendency of investors to move toward safer investments (often government bonds) during periods of high economic uncertainty.
Note that allows investors to switch between two different types of debt.
In the context of general equities, opposite side to a proposition or position (buy, if sell is the proposition and vice versa).
Buying shares in an initial public offering (IPO), and then selling the shares immediately after the start of public trading to turn an immediate profit.
Currency: Exchange rate policy that does not limit the range of the market rate.
Equities: Number of shares of a corporation that are outstanding and available for trading by the public, excluding insiders or restricted stock on a when-issued basis. A stock's volatility is inversely correlated to its float.
Short-term debt that is renewed and refinanced constantly to fund capital
needs of a firm or institution.
A country's decision to allow its currency value to change freely. The currency is not constrained by central bank intervention and does not have to maintain its relationship with another currency in a narrow band. The currency value is determined by trading in the foreign exchange market.
General attachment against a company's assets or against a particular class of assets.
Securities bought in a broker's name and resold quickly to attain a profit in a short amount of time.
The aggregate of securities believed to be available for immediate purchase, that is, in the hands of dealers and investors wanting to sell.
The area of a stock exchange where active trading occurs. Also the price at which a stop order is activated (when the price drops low enough to activate such an order).
An employee of a stock exchange who settles disputes related to the auction process on the floor of the stock exchange.
Arrangement used to finance inventory. A finance company buys the inventory, which is then held in trust for the user.
Summary of a stock or commodities exchange order ticket by the registered representative on receipt of a buy or sell order from a client; gives the floor broker the information needed to execute a securities transaction.
A stock exchange member who generally trades only for his own account or
for an account controlled by him, or who has such a trade made for him. Also referred to as a "local."
The costs associated with creating capital through the issue of new stocks or bonds, including the compensation earned by the investment banker plus legal, accounting and printing expenses.
In the context of municipal bonds, refers to the statement displaying the priorities by which municipal revenue will be applied to the debt.
In the context of mutual funds, refers
to the movement of money into or out of a mutual
funds or between or among various fund sectors.
An account for an investment credit to show all income statement benefits of the credit in the year of acquisition, rather than spreading them over the life of the asset.
The practice of reporting to shareholders using straight-line depreciation but using accelerated depreciation for tax purposes and "flowing through" the lower income taxes actually paid to financial statements prepared for shareholders.
Government bonds that when owned at the time of death are acceptable at par in payment of federal estate taxes.
The limit created by the commodity exchange that halts trading on a future if the price of the future changes, in either direction, more than a previously set amount.
A drastic volume increase in a specific security.
Used in the context of general equities. Investment banks published list of buy and sell recommendations from its research department; signified by a flashing "F" on Quotron.
Used in the context of general equities. Conjunctions used in an order, market summary, or trade recap that signify a bid or an offer, respectively. See: On.
Used in the context of general equities. Implies that the quantity mentioned is not his total but instead is only approximate, and to open him up more will obligate one to participate.
A prefix to a security price indicating that the quote is for information purposes only, and not an offer to trade.
Forbes magazine's list of the largest publicly owned corporations in the United States according to sales, assets, profits, and market value.
The risk that there will be prolonged interruption of operations for a project finance enterprise due to fire, flood, storm, or some other factor beyond the control of the project's sponsors.
Occurs when a convertible security is called in by the issuer, usually when the underlying stock is selling well above the conversion price. The issuer thus assures the bonds will be retired without requiring any cash payment. Upon conversion into common, the carrying value of the bonds becomes part of a corporation's equity, thus strengthening the balance sheet and enhancing future debt capability.
Making projections about future performance on the basis of historical and current conditions data.
Process by which the holder of a mortgage seizes the property of a homeowner who has not made interest and/or principal payments on time as stipulated in the mortgage contract.
That portion of domestic bank loans supplied to foreigners for use abroad.
A category of Subpart F income that includes foreign holding company income and foreign base company sales and service income.
A foreign affiliate that is legally a part of the parent firm. According to the U.S. tax code, foreign branch income is taxed as it is earned in the foreign country.
A corporation conducting business in another country from the one it is chartered in and that abides by the laws of another country. See: Alien corporation.
An amendment to the Securities Exchange Act created to sanction bribery
of foreign officials by publicly held US companies.
A private consortium of US insurance companies that offers trade credit insurance to US exporters in conjunction
with the US Export-Import Bank.
Money of another country from one's own.
Agreement that obligates its parties to exchange given quantities of currencies at a prespecified exchange rate on a certain future date.
Standardized and easily transferable obligation between two parties to exchange currencies at a specified rate during a specified delivery month; standardized contract on specified underlying currencies, in multiples of standard amounts. Purchased and traded on a regulated exchange on which margins are posted.
An option that conveys the right (but not the obligation) to buy or sell a specified amount of foreign currency at a specified price within a specified time period.
The process of restating foreign currency accounts of subsidiaries into the reporting currency of the parent company in order to prepare consolidated financial statements.
The acquisition abroad of physical assets such as plant and equipment, with operating control residing in the parent corporation.
Currency of another country. Abbreviated Forex.
Intermediaries in the foreign exchange market that do not put their own money at risk.
Various forms of controls imposed by a government on the purchase/sale of foreign currencies by residents or on the purchase/sale of local currency by nonresidents.
A firm or individual that buys foreign exchange from one party and then sells it to another party. The dealer makes the difference between the buying and selling prices, or the spread.
Largely banks that serve firms and consumers who may
wish to buy or sell various currencies.
An agreement to exchange stipulated amounts of one currency for another currency at one or more future dates.
Graph that displays financial and political risk by intervals on which countries may be compared according to risk ratings.
Central governments of foreign countries, including all departments and agencies of national governments; central banks, exchange authorities, and all fiscal agents of foreign national governments that undertake activities similar to those of a treasury, central bank, or stabilization fund; diplomatic and consular establishments of foreign national governments; and any international or regional organization, including subordinate and affiliate agencies, created by treaty or convention between sovereign states.
Part of a nation's internal market, representing the mechanisms for issuing and trading securities of entities domiciled outside that nation. Compare external market and domestic market.
Foreign official institutions; the corporations and agencies of foreign central governments, including development banks and institutions, and other agencies that are majority owned by the central government or its departments; and state, provincial and local governments of foreign countries and their departments and agencies.
A special type of corporation created by the Tax Reform Act of 1984 that is designed to provide a tax incentive for exporting U.S.-produced goods.
Income earned from international operations.
Notes sold between October 1984 and February 1986 to foreign institutions,
foreign branches of US institutions, foreign central banks or monetary authorities,
and to international organizations in which the United States held membership.
Sold as companion issues, they could be converted to domestic (normal) Treasury
notes with the same maturity and interest
rates. Interest was paid annually.
Home country credit against domestic income tax. Received in return for foreign taxes paid on foreign derived earnings.
All institutions and individuals living outside the United States, including
US citizens living abroad, and branches, subsidiaries, and other affiliates
abroad of US banks and business concerns; also central governments, central
banks, and other official institutions of countries other than the United
States, and international and regional organizations, wherever located. Also
refers to persons in the United States to the extent that they are known by
reporting institutions to be acting for foreigners.
Purchaser of promises to pay issued by importers.
A form of factoring that involves selling large, medium to long-term receivables to buyers (forfaiters) who are willing and able to bear the costs and risks of credit and collections.
Method of financing international trade of capital goods.
The loss of rights to an asset outlined in a legal contract if a party fails to fulfill obligations of the contract.
The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock.
The form required by the SEC for a change in the holdings of an individual owning 10% or more of the outstanding stock or in the holdings of a company officer.
The form required by the NASD to report equity transactions after the market's regular hours.
A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information.
A form required by the SEC and the stock exchange from all holders of 10% or more of a company's stock and all directors and officers, which details securities owned.
A method of selling a new issue of common
stock in which the SEC declares the registration
statement effective on the basis of a price formula rather than on a specific
A formula-based investment technique in which investment decisions are made using predetermined timing or asset allocation models, e.g., dollar cost averaging.
Fortune magazine's listing of the top 500 US corporations determined by
an index of 12 variables.
PSA Uniform Practices requirement that all pool information in a to
be announced (TBA) transaction be communicated by the seller to the buyer
before 3 p.m. EST on the business day 48 hours prior to the agreed-upon trade
A method of calculating taxes on a lump-sum distribution from a qualified retirement plan that enables the tax payer to pay less than the current tax rate.
A contract that specifies the price and quantity of an asset to be delivered on in the future. Forward contracts are not standardized and are not traded on organized exchanges
The purchase in the cash market of the difference between what you are obligated to deliver in a forward contract and the amount of the asset you own. For example, if you agreed to sell 100,000 bushels of corn in September in a forward contract, but you only have 60,000, you need to purchase 40,000 to cover your obligation.
An agreement to buy or sell a country's currency at a specific price, usually 30, 60, or 90 days in the future. This guarantees an exchange rate on a given date.
A transaction in which the settlement will occur on a specified date in the future at a price agreed upon on the trade date.
Annualized percentage difference between spot and forward rates.
Exchange rate fixed today for exchanging currency at some future date.
Foreign currency purchase or sale at the current exchange rate but with payment or delivery of the foreign currency at a future date.
Agreement that obligates an investor to deliver a specified quantity of one currency in return for a specified amount of another currency.
The exchange rate available today to exchange currency at some specified date in the future.
In Eurocurrencies, a contract under which a deposit of fixed maturity is agreed to at a fixed price for future delivery.
Interest rate fixed today on a loan to be made at some future date.
A truncated expression for a P/E ratio that is based on forward (expected) earnings rather than on trailing earnings.
Practice mandated by the SEC that open-end investment companies establish all incoming buy and sell orders on the next net asset valuation of fund shares.
Agreement to borrow or lend at a specified future date at an interest rate that is fixed today.
A method for hedging price risk that involves an agreement between a lender and an investor to sell particular kinds of loans at a specified price and future time.
A transaction for which settlement will occur on a specified date in the future at a price agreed upon on the trade date.
An object in which the parts are in some way related to the whole. That is,
the individual components are "self-similar." An example is the branching
network in a tree. While each branch, and each successive smaller branching is different,
they are qualitatively similar to the structure of the whole tree.
A number that quantitatively describes how an object fills its space. In Euclidean, or Plane geometry, objects are solid
and continuous. That is, they have no holes or gaps. As such, they have integer
dimensions. Fractals are rough and often
discontinuous, like a wiffle ball, and so have fractional, or fractal dimensions.
density function that is statistically self-similar. That is, in different increments of
time, the statistical characteristics remain the same.
The fractal market hypothesis states that (1) a market consists of many investors with different investment horizons, and (2)
the information set that is important to each investment horizon is different. As long as
the market maintains this fractal structure, with
no characteristic time scale, the market remains
stable. When the market's investment horizon
becomes uniform, the market becomes unstable because everyone is trading based upon
the same information set. Theory due to Ed Peters.
A biased random walk.
Unlike standard Brownian motion, the odds are biased in one direction or the other. It is
like playing with loaded dice.
Metal currency minted in denominations of 50, 25, and 10 cents, and minor coins (5 cents and 1 cent).
A type of order that gives the broker discretion to alter the price, up or down, within a specific fractional range in order to guarantee an execution.
Stocks amounting to less than one full share,
usually resulting from splits, acquisitions, exchanges, or dividend
Contract by which a domestic company (franchisor) licenses its trade name and/or business system and practices for a fee to an independent company (franchisee) in a foreign market.
Provision of a specialized sales or service strategy, support assistance, and possibly an initial investment in the franchise in exchange for periodic fees.
The largest of Germany's eight securities exchanges, operated by Deutsche Borse AS.
A Congressionally chartered corporation that purchases residential mortgages
in the secondary market from S&Ls,
banks, and mortgage bankers and securities
these mortgages for sale in the capital
Implies that distribution services like transport and handling performed on goods up to the customs frontier (of the economy from which the goods are classed as merchandise.) are included in the price.
A bank vault or other suitable storage place for the securities of a firm's customer.
Cash not required for operations or for reinvestment. Often defined as earnings before interest (often obtained from the operating income line on the income statement) less capital expenditures less the change in working capital. In terms of a formula:
Free cash flows =
Sales (Revenues from operations)
- COGS (Cost of goods sold-labor, material, book depreciation)
- SG&A (Selling, general administrative costs)
EBIT (Earnings before interest and taxes or Operating Earnings)
- Taxes (Cash taxes)
EBIAT (Earnings before interest after taxes)
+ DEP (Book depreciation)
- CAPX (Capital expenditures)
- ChgWC (Change in working capital)
C (Free cash flows)
There is an issue as to whether you want to define the FCFs to the firm as a whole (the cash
flow to all of its security holders), or the FCFs only to the firm's equity
holders. For firm valuation, you want the former; for stock valuation you want the
To value the firm, calculate the stream of FCFs to the firm and discount this stream
by the firm's WACC (Weighted average cost of capital). This will give you the value
of a levered firm, including the tax benefits of debt financing. Alternatively, you
can discount the firm's FCFs by its unlevered cost of capital and add separately the
present value of the tax benefits.
To value the firm's equity, you can either take the above number and subtract the
market value of all outstanding debt (liabilities) or you can
calculate the FCFs to the firm's equity holders and discount this stream by the
firm's levered equity cost of capital.
Notice that changes in working capital have the same effect on free cash flows as do changes
in physical capital, i.e., capital expenditures. For example, suppose you had
to spend $XX to increase the capacity of your plant. This expenditure would be
a reduction in free cash flow in the year it was made. Likewise, if you had to
increase the level of your cash balance, inventory or receivables by $XX to
accommodate greater sales, then this too would result in a like reduction in
free cash flows in the year the level of working capital was increased.
[Definition and discussion courtesy of Professor Michael Bradley.]
Securities industry procedure whereby delivery of securities sold is made to the buying customer's bank without requiring immediate payment; thus a credit agreement of sorts. Antithesis of delivery vs. payment.
An exchange rate system characterized by the absence of government intervention. Also known as clean float.
Excess reserves minus member bank borrowings at the Fed.
A follower who avoids the cost and expense of finding the best course of action simply by mimicking the behavior of a leader who made these investments.
A forbidden practice in which the member of an underwriting syndicate retains a portion of an initial public offering (IPO) and resells the securities at a higher price determined by the market at a later time.
Also forbidden is a brokerage customer's rapid buying and selling of a security without putting up money for the purchase.
An investor's right to transfer securities from one name to another name without paying charges that accompany a sales transaction.
A stock that is paid for in full and is not pledged in any way as collateral.
Used in the context of general equities. Not subject to any internal (restricted list) or external restrictions on trading; hence, the trader is free to solicit interest.
A term used to indicate that an underwriting syndicate's members are no longer restricted to the fixed price agreed upon in the agreement among underwriters and are permitted to trade the security on a free market basis.
Monetary system in which exchange rates are allowed to move due to market forces without intervention by country governments.
The action of pressurizing shareholders with relatively minor amounts of stock to sell their shares after a takeover.
Agents who coordinate the logistics of transportation.
The organization of data to show how often certain values or ranges of values occur.
Updated estimation of a stock or market, usually following recent trading activity or news that has changed the previous look.
Piece of information (fundamental or technical) leading one to believe a stock will move in a certain manner.
Costs, both implied and direct, associated with a transaction. Such costs include time, effort, money, and associated tax effects of gathering information and making a transaction.
The difference between an index fund return and the index it represents. The typically lower rate of return from the fund results from transactions costs.
Ideal trading environment that imposes no costs or restraints on transactions.
The "stickiness" involved in making transactions; the total process including time, effort, money, and tax effects of gathering information and making a transaction such as buying a stock or borrowing money.
A business combination that the management of both firms believes will be beneficial to stockholders.
The fee applied to an investment at the time of initial purchase, e.g., on a mutual fund purchased from a broker or mutual fund company.
The fee initially paid by the buyer upon entering a split-fee option contract.
Refers to revenue generating sales personnel in a brokerage, insurance, or other financial services operation.
Entering into options or futures contracts with advance knowledge of a block transaction that will influence the price of the underlying security to capitalize on the trade. This practice is expressly forbidden by the SEC.
A disciplinary action taken by the Federal Reserve Board for some violation of Regulation T, an individual investor cannot sell securities until they are paid for in full and certificates delivered.
Used in the context of general equities. Work on a trade of larger size than a trade just disclosed.
Payment for delivery of goods to one party by buying back more than 100 % of the value that was originally sold.
A bond with a coupon equal to the going market rate; the bond is therefore selling at par.
Describes exchange and government regulations providing for the release and free exchange of all information pertinent to a given security.
The security pledges for larger municipal bond issuers, such as states and large cities that have diverse funding sources.
A broker who provides clients an all-inclusive selection of services such as advice on security selection and financial planning.
Also called rental lease. Arrangement in which lessor promises to maintain and insure the equipment leased.
Indication that a broker with a discretionary account can operate free of all trading guidelines from the client.
An asset that has already been charged with the maximum amount of depreciation allowed by the IRS for accounting purposes.
A new stock issue that has been completely resold to the investing public and is no longer held by dealers.
Used to describe an investor whose assets are totally committed to investments, typically stock.
Used in the context of general equities. Said of a stock that has reached a price at which analysts think the underlying company's fundamental earnings power has been fully recognized by the market.
As defined by FASB No. 52, an affiliate's functional currency is the currency of the primary economic environment in which the affiliate generates and expends cash.
The total value of a portfolio's securities, cash, and other holdings, minus any outstanding debts.
Set of funds with different investment objectives offered by one management company. In many cases, investors may move their assets from one fund to another within the family at little or no cost.
A mutual fund or hedge fund that invests in other funds.
The person whose responsibility it is to oversee the allocation of the pool of money invested in a particular mutual fund. The fund manager is charged with investing the money to attain the returns and level of risk of the mutual fund investors.
Moving money within a mutual fund family from one mutual fund to another.
Money that can be used to invest in risky investments with high potential return.
Security analysis that seeks to detect
misvalued securities through an analysis
of the firm's business prospects. Research often focuses on earnings,
dividend prospects, expectations for future
interest rates, and risk
evaluation of the firm. Antithesis of
technical analysis. In macroeconomic analysis, information such as interest
rates, GNP, inflation, unemployment,
and inventories is used to predict the direction of the economy, and therefore
the stock market. In microeconomic
analysis, information such as balance sheet, income statement, products, management,
and other market items is used to forecast
a company's imminent success or failure, and hence the future price action
of the stock.
The product of a statistical model to predict the fundamental risk of a security using not only price data but also other market-related and financial data.
In the model for calculating fundamental beta, ratios in risk indexes other than market variability, which rely on financial data other than price data.
Analyzing the future on the basis of fundamental relationships between economic variables and exchange rates.
Information relating to the economic state of a company or economy. In market analysis, fundamental information
is related to the earnings prospects of the firm
Debt maturing after more than one year.
A source of funds that a firm must take overt action to arrange and that carries an interest cost.
A pension plan in which all liabilities, including payments to be made to pensioners in the immediate future, are completely funded.
Used to describe the refinancing of a debt prior to its maturity (the same as refunding). In corporate finance refers to the floating of bonds to raise finance and levels of capital. See also: refunding.
Used by real estate and other investment trusts to define the cash flow from trust operations; earnings with depreciation and amortization added back. A similar term increasingly used is funds available for distribution (FAD), which is FFO less capital investments in trust property and the amortization of mortgages.
The substitutability of listed options, which is dependent upon their common expiration dates and strike prices. The congruence of expiration dates and strike prices lets investors close positions by offsetting transactions through the options clearing corporation.
Used in the context of commodities or options trading to refer to the month that is away from the contract's date of settlement.
The Danish derivatives market, merged with the Copenhagen Stock Exchange in 1997.
A term used to designate all contracts covering the sale of financial instruments or physical commodities for future delivery on a commodity exchange.
The identification of additional, more valuable, investment opportunities in the future that result from a current opportunity or operation.
A term used to designate all contracts covering the sale of financial instruments or physical commodities for future delivery on a commodity exchange.
A firm or person engaged in soliciting or accepting and handling orders for the purchase or sale of futures contracts, subject to the rules of a futures exchange and, who, in connection with such solicitation or acceptance of orders, accepts any money or securities to provide margin for any resulting trades or contracts. The FCM must be licensed by the CFTC. Related: Commission house, omnibus account.
A legally binding agreement to buy or sell a commodity or financial instrument in a designated future month at a price agreed upon today by the buyer and seller. Futures contracts are standardized according to the quality, quantity, and delivery time and location for each commodity. A futures contract differs from an option because an option is the right to buy or sell, while a futures contract is the promise to actually make a transaction. A future is part of a class of securities called derivatives, so named because such securities derive their value from the worth of an underlying investment.
The amount of cash at a specified date in the future that is equivalent in value to a specified sum today.
A system which mathematically models complex relationships which are
usually handled in a vague manner by language. Under the title of "Fuzzy
Logic" falls formal fuzzy logic (a multi-valued form of logic), and fuzzy sets. Fuzzy
sets measure the similarity between an object and a group of objects. A member of a
fuzzy set can belong to both the set, and its compliment. Fuzzy sets can more closely
approximate human reasoning than traditional "crisp" sets. See: Crisp sets.