1035 exchange

A tax-sheltered Exchange of Cash value from one life Insurance policy to another. This allows an individual to avoid Capital gains or losses in the first policy as long as the second policy is of greater or equal cost.

1040

The standard IRS form for individual tax returns.

1040EZ

Simplified IRS tax form which some individuals can file instead of the 1040 form. Simplified IRS tax form which some individuals can file instead of the 1040 form. 1040EZ Simplified IRS tax form which some individuals can file instead of the 1040 form. 1040EZ Simplified IRS tax form which some individuals can file instead of the 1040 form. Simplified IRS tax form which some individuals can file instead of the 1040 form.

1099

The IRS form for the annual reporting of Dividend and Interest payments made to investors.

12b-1 fee

An extra fee charged by some mutual funds to Cover promotion, distributions, marketing expenses, and sometimes commissions to brokers. A genuine No-load fund does not have 12b-1 fees, although some funds calling themselves "no-load" do have 12B-1 fees (as do some Load funds). 12b-1 fee information is disclosed in a fund's prospectus, is included in the stated expense ratio, and is usually less than 1%.

12B-1 fees

The percent of a mutual fund's Assets used to defray marketing and Distribution expenses. The amount of the fee is stated in the fund's prospectus. The SEC has recently proposed that 12B-1 fees in excess of 0.25% be classed as a load. A true no Load fund has neither a Sales charge nor a 12b-1 fee.

12B-1 funds

Mutual funds that do not charge an up-front or back-end commission, but instead Take out Up to 1.25% of Average daily Fund assets each year to Cover the costs of selling and marketing shares, an arrangement allowed by the SEC`s Rule 12B-1 (passed in 1980).

12b-1 funds

A Type of mutual fund that charges 12B-1 fees instead of commissions. The fees, charged every year, Cover promotional and Distribution costs and can be significant.

144 stock

Used in the context of general equities. Restricted stock.

19c3 stock

A Stock that was listed On one of the national securities exchanges, such as the NYSE, after April 16, 1979, absolving it from rule 19c3 which forbids Exchange members from participating in Off-board trading.

401(k) plan

A defined Contribution plan offered by a Corporation to its employees, which allows employees to set aside Tax-deferred income for Retirement purposes. The name 401(k) comes from the IRS section describing the program.

403(b) plan

A Retirement plan similar to a 401(k) plan, but one which is offered by non-profit organizations, such as universities and some charitable organizations, rather than corporations.

457 plan

A tax-exempt deferred Compensation program made available to employees of state and federal Governments and agencies. Similar to a 401(k) plan, except there are never employer matching contributions and the IRS does not consider it a qualified Retirement plan.

48-hour rule

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 date.

5 C's of credit

The five key elements a borrower should have to obtain credit: character (integrity), Capacity (sufficient Cash flow to service the obligation), Capital (net worth), Collateral (assets to secure the debt), and conditions (of the borrower and the overall economy).

52-week high

The highest price a security reached during the last 52 weeks.

52-week low

The lowest price a security reached during the last 52 weeks.

72 rule

The estimation of doubling time On an investment, for which the compounded Annual rate of return times the number of years must equal roughly 72 for the Investment to double in value.

A-D

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.

Abandonment

Controlling party giving Up rights to property voluntarily.

Abandonment option

The option of terminating an Investment earlier than originally planned.

ABC agreement

A Contract between an employee and a brokerage Firm outlining the rights of the firm purchasing an NYSE membership for that employee.

Abnormal returns

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.

Absolute form of purchasing power parity

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."

Absolute Physical Life

The period of use after which an Asset has deteriorated to such an extent that it can no longer be used.

Absolute priority

Rule in Bankruptcy proceedings requiring senior creditors to be paid in Full before junior creditors receive any payment.

Absorbed

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.

Abusive tax shelter

A limited Partnership that the IRS judges to be claiming tax deductions illegally.

Accelerated cost recovery system (ACRS)

Schedule of Depreciation rates allowed for tax purposes.

Accelerated depreciation

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.

Acceleration clause

A Contract stating that the unpaid balance becomes due and payable if specific actions transpire, such as failure to make interests payments On time.

Acceptance

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 banker`s acceptance.

Accommodative monetary policy

Federal Reserve System policy to increase the amount of Money available to banks for lending. See: Monetary policy.

Account

In the context of bookkeeping, refers to the ledger pages upon which various assets, liabilities, income, and expenses are represented. 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.

Account balance

Credits Minus debits at the end of a reporting period.

Account executive

The brokerage Firm employee who handles Stock orders for clients. See: Broker.

Account reconciliation

The reviewing and adjusting of the balance in a personal checkbook to match your bank statement.

Account statement

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.

Accountant's opinion

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.

Accounting earnings

Earnings of a Firm as reported On its income statement.

Accounting exposure

The change in the value of a firm's foreign currency-denominated accounts due to a change in Exchange rates.

Accounting insolvency

Total liabilities exceed Total assets. A Firm with a negative Net worth is Insolvent on the books.

Accounting liquidity

The ease and quickness with which Assets can be converted to cash.

Accounts payable

Money owed to suppliers.

Accounts receivable

Money owed by customers.

Accounts receivable financing

A Short-term financing method in which Accounts receivable are Collateral for Cash advances. See: Factoring.

Accounts receivable turnover

The Ratio of net Credit sales to Average accounts receivable, which is a measure of how quickly customers pay their bills.

Accredited investor

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 Commission.

Accretion (of a discount)

In Portfolio accounting, a straight-line Accumulation of Capital gains On a Discount Bond in Anticipation of receipt of Par at maturity.

Accrual Accounting Convention

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 and expenses.

Accrual basis

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.

Accrual bond

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 maturity.

Accrued benefits

The pension benefits earned by an employee accourding to the years of the employee`s service.

Accrued discount

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.

Accrued interest

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.)

Accrued market discount

The rise in The Market value of a Discount Bond as it approaches maturity (when it is Redeemable at par) and not because of falling market Interest rates.

Accumulate

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.

Accumulated Benefit Obligation (ABO)

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.

Accumulated dividend

A Dividend that has reached its due date, but is not paid out. See: Cumulative preferred stock.

Accumulated profits tax

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.

Accumulation

The first phase of a Bull market. While most investors are discouraged with the market, and Earnings are at their worst, some investors start buying shares. Or, an addition to a Traders position. In the context of corporate finance, refers to profits that are added to the Capital Base of the Company rather than paid Out as dividends. See: Accumulated profits tax. 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 share up. In the context of mutual funds, refers to the regular investing of a fixed amount while reinvesting dividends and capital gains.

Accumulation area

A Price range within which a buyer accumulates Shares of a stock. See: On-balance volume and Distribution area.

Acid test ratio

Also called the quick ratio, the Ratio of Current assets minus inventories, accruals, and prepaid items to current liabilities.

Acquired surplus

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.

Acquiree

A Firm that is being acquired.

Acquirer

A Firm or individual that is acquiring something.

Acquisition

When a Firm buys another firm.

Acquisition cost

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: Tax basis.

Acquisition of assets

A Merger or Consolidation in which an Acquirer purchases the selling firm`s assets.

Acquisition of stock

A Merger or Consolidation in which an Acquirer purchases the acquiree`s stock.

Across the board

Movement or trend in the Stock market that affects almost all stocks in all sectors to move in the same direction.

Act of state doctrine

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.

Acting in concert

Investors Working together and performing identical actions to attain the same Investment goal.

Active

A Market in which there is frequent trading.

Active account

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.

Active bond crowd

Refers to members of the Bond department of the NYSE who Trade the most bonds. Antithesis of cabinet crowd.

Active box

Securities that are held in safekeeping and are available as Collateral for securing brokers' loans or customers' margin positions.

Active fund management

An Investment approach that purposely shifts funds either between Asset classes (asset allocation) or between individual securities (security selection).

Active income

Income from an Active business as opposed to Passive investment income according to the U.S. tax code.

Active Management

The pursuit of Investment returns in excess of a specified benchmark.

Active portfolio strategy

A Strategy that uses available information and Forecasting techniques to seek better performance than a Buy and Hold portfolio. Related: Passive portfolio strategy.

Active Return

Return relative to a benchmark. If a portfolio's Return is 5%, and the benchmark's return is 3%, then the portfolio's Active return is 2%.

Active Risk

The Risk (annualized standard deviation) of the Active return. Also called the tracking error

Actual market

Used in context of general equities. Firm market. Antithesis of Subject market.

Actuals

The physical commodities Underlying a futures contract. Cash commodity, physical asset.

Adaptive Filter

Continuously updating the weighting of past prices for smoothing or Forecasting purposes.

Additional bonds test

A Test for ensuring that Bond issuers can meet the Debt service requirements of issuing any new additional bonds.

Additional hedge

A protection against Borrower fallout risk in the Mortgage pipeline.

Adequacy of coverage

A Test that measures the extent to which the value of an Asset is protected from potential Loss either through Insurance or hedging.

Adjustable rate

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.

Adjustable-rate mortgage (ARM)

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.

Adjustable-rate preferred stock (ARPS)

Publicly traded issues that may be collateralized by mortgages and MBS

Adjusted balance method

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.

Adjusted basis

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.

Adjusted debit balance (ADB)

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.

Adjusted exercise price

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.

Adjusted gross income (AGI)

Gross income less allowable adjustments, is the income On which an individual is taxed by the federal government.

Adjusted present value (APV)

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.

Adjustment bond

A Bond issued in Exchange for Outstanding Bonds when a Corporation facing Bankruptcy is recapitalized.

Administrative pricing rules

IRS rules used to allocate income On export sales to a foreign sales corporation.

Advance

Increase in The Market price of stocks, bonds, commodities, or other assets.

Advance commitment

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.

Advance Computerized Execution System (ACES)

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 execution.

Advance funded pension plan

A Pension plan in which funds are set aside in Advance of the date of retirement.

Advance refunding

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.

Advance/Decline Line

Each days declining issues are subtracted from that days advancing issues. The difference is added to (subtracted from if negative) a running sum. Failure of this line to confirm a new High is a sign of weakness. Failure of this line to confirm a new low is a sign of strength.

Adverse opinion

An independent auditor's opinion expressing that a firm's financial statements do not reflect the company's position accurately. See also: Qualified opinion.

Adverse selection

Refers to a situation in which sellers have relevant information that buyers lack (or vice versa) about some aspect of product quality.

Advising bank

Corresponding bank in the beneficiary's country to which an Issuing bank sends a letter of credit.

Advisory letter

A newsletter offering financial advice to its readers.

Affiliate

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, parent company.

Affiliated corporation

A Corporation that is an Affiliate to the parent company.

Affiliated person

An individual who possesses enough influence and Control in a Corporation as to be able to alter the actions of the corporation.

Affirmative covenant

A Bond covenant that specifies certain actions the Firm must take.

Affordability index

An index that measures the financial ability of consumers to Purchase a home.

After acquired clause

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 mortgage.

After-hours dealing or trading

Securities Trading after regular trading hours On organized exchanges.

After-tax basis

The Comparison Basis used to analyze the Net after-tax returns On a corporate taxable Bond and a municipal tax-free bond.

After-tax profit margin

The Ratio of Net income to net sales.

After-tax real rate of return

The after-tax rate of return Minus the Inflation rate.

Aftermarket

See: Secondary market.

Aged fail

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.

Agency

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.

Agency bank

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.

Agency basis

A means of compensating the Broker of a program Trade solely On the Basis of Commission established through bids submitted by various brokerage firms.

Agency cost view

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.

Agency costs

The incremental costs of having an Agent make decisions for a principal.

Agency incentive arrangement

A means of compensating the Broker of a program Trade using Benchmark prices for issues to be traded in determining commissions or fees.

Agency pass-throughs

Mortgage Pass-through securities whose Principal and Interest payments are guaranteed by government agencies, such as the Government National Mortgage Association (Ginnie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac), and Federal National Mortgage Association(Fannie Mae).

Agency problem

Conflicts of Interest among stockholders, bondholders, and managers.

Agency securities

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.

Agency theory

The Analysis of principal-agent relationships, in which one person, an agent, acts On behalf of another person, a principal.

Agent

The decision-maker in a principal-agent relationship.

Aggregate exercise price

The Exercise price multiplied by the number of Shares in a put or Call contract. The Option premium is excluded in the aggregate exercise price. In the case of options traded on Debt instruments, the aggregate Exercise price is the exercise price of the Underlying security multiplied by its face value.

Aggregation

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.

Aggressive growth mutual fund

A mutual fund designed for maximum Capital appreciation that places its Money in companies with High growth rates.

Aggressively

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.

Aging schedule

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.

Agreement among underwriters

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.

Ahead of itself

In context of general equities, refers to equities that are overbought or oversold On a fundamental basis.

Ahead of you

Used for listed Equity securities. At the same price but entered ahead of your order/interest, usually referring to the specialist`s book. See: Behind, matched orders, priority, Stock ahead.

AIMR Performance Presentation Standards Implementation Committee

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.

Air pocket stock

A Stock whose price drops precipitously, often On the unexpected news of poor results.

Alien corporation

A Company incorporated under the laws of a foreign country regardless of where the company conducts its operations.

All equity rate

The Discount rate that reflects only the business risks of a project, distinct from the effects of financing.

All in

Refers to an issuer's Interest rate after accounting for commissions and various related expenses.

All or none order (AON)

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.

All Ordinaries Index

The major index of Australian stocks comprising 330 of the major companies listed On the Australian Stock Exchange.

All-in cost

Total costs, explicit and implicit.

All-in-rate

Rate used in charging customers for accepting banker's acceptances, consisting of the Discount interest rate Plus the commission.

All-or-none underwriting

An arrangement whereby a security Issue is cancelled if the underwriter is unable to resell the entire issue.

Allied member

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.

Alligator spread

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 anticipated.

Allocation-of-income rules

US tax provisions that define how income and deductions are to be allocated between domestic source and foreign source income.

Allocational efficiency

The effectiveness with which a Market channels Capital toward its most productive uses.

Allotment

The number of securities assigned to each of the participants in an Underwriting syndicate.

Alpha

The premium an Investment earns above a set standard. This is usually measured in terms of the Dow Industrials or the SP 500. How the Stock performs independent of the market. 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.

Alpha equation

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.

Alphabet stock

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.

Alternative Minimum Tax (AMT)

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.

Alternative mortgage instruments

Variations of mortgage Instruments such as adjustable-rate and variable-rate mortgages, graduated-payment mortgages, reverse-annuity mortgages, and several seldom-used variations.

T-period holding-period return

The percentage return over the T-year period an investment is held.

T-Rex Fund

A large venture capital fund (over one billion dollars). Such funds are known for imposing strong discipline on the firms they fund.

Tactical Asset Allocation (TAA)

Portfolio strategy that allows active departures from the normal asset mix according to specified objective measures of value. Often called active management. It involves forecasting asset returns, volatilities, and correlations. The forecasted variables may be functions of fundamental variables, economic variables, or even technical variables.

Tail

(1) The difference between the average price in Treasury auctions and the stopout price. (2) A future money market instrument (one available some period hence) created by buying an existing instrument and financing the initial portion of its life with a term repo. (3) The extreme ends under a probability curve. (4) The odd amount in an MBS pool.

Tailgating

Purchase of a security by a broker after the broker places an order for the same security for a customer. The broker hopes to profit either because of information which the customer has or because the customer`s purchase is of sufficient size to affect security prices. This is an unethical practice.

Taiwan Stock Exchange

Exchange of the Republic of China in Taipei.

Take

(1) To agree to buy. A dealer or customer who agrees to buy at another dealer`s offered price is said to take the offer. (2) Euro bankers speak of taking deposits rather than buying money.

Take a bath

To sustain a loss on either a speculation or an investment.

Take a flier

To speculate on highly risky securities.

Take a position

To buy or sell short; that is to own or to owe some amount on an asset or derivative security.

Take a powder

Temporarily cancel an order or indication in a stock, while unrepresented interest still exists. See: Back on the shelf, sidelines.

Take a swing

Execute a trade at a price that the trader feels is higher or more risky than would normally be acceptable, in order to gain market share in the institutional arena.

Take it down

Reduce the offering price or hit others` bids to such an extent as to lower the inside market.

Take me along

"Allow me to participate in the side of a particular trade.

Take off

A sharp increase in the price of a stock, or a positive movement of the market as a whole.

Take the offer

Buy stock by accepting a floor broker`s (listed) or dealer`s (OTC) offer at an agreed-upon volume. Antithesis of hit the bid.

Take-or-pay contract

An agreement that obligates the purchaser to take any product that is offered (and pay the cash purchase price) or pay a specified amount if the product is not taken.

Take-out

A cash surplus generated by the sale of one block of securities and the purchase of another, e.g., selling a block of bonds at 99 and buying another block at 95. Also, a bid made to a seller of a security that is designed (and generally agreed) to take the seller out of the market.

Take-up fee

A fee paid to an underwriter in connection with an underwritten rights offering or an underwritten forced conversion. Represents compensation for each share of common stock the underwriter obtains and must resell upon the exercise of rights or conversion of bonds.

Takedown

The share of securities of each participating investment banker in a new or a secondary offering, or the price at which the securities are distributed to the different members of an underwriting group.

Takeover

General term referring to transfer of control of a firm from one group of shareholders to another group of shareholders. Change in the controlling interest of a corporation, either through a friendly acquisition or an unfriendly, hostile, bid. A hostile takeover (with the aim of replacing current existing management) is usually attempted through a public tender offer.

Takeover target

A company that is the object of a takeover attempt, friendly or hostile.

Takes a call

Requires a phone call to an account in order for a trade to be completed. See: Show me.

Takes price

Requiring some price movement or concession on behalf of the initiating party before a trade can be consummated. See: Price give.

Taking a view

A London expression; means forming an opinion as to where market prices are headed and acting on it.

Taking delivery

When the buyer actually assumes possession from a seller of assets agreed upon in a forward contract or a futures contract.

Tandem programs

Ginnie Mae mortgage funds provided at below-market rates to residential MBS buyers with FHA Section 203 and 235 loans and to developers of multifamily projects with Section 236 loans initially and later with Section 221(d)(4) loans.

Tangibility

Characteristic that an assets can be used as collateral to secure debt.

Tangible asset

An asset whose value depends on particular physical properties. These include reproducible assets such as buildings or machinery and non-reproducible assets such as land, a mine, or a work of art. Also called real assets. Converse of: Intangible asset

Tangible net worth

Total assets minus intangible assets, which include patents and copyrights, and total liabilities.

Tape

(1) Service that reports prices and sizes of transactions on major exchanges-ticker tape. (2) Dow Jones and other news wires. See: Consolidated tape.

Tape is late

When the trading volume is so heavy that trades appear on the tape more than a minute behind the timer they actually take place.

Target cash balance

Optimal amount of cash for a firm to hold, considering the trade-off between the opportunity costs of holding too much cash and the trading costs of holding too little cash.

Target company

Often used in risk arbitrage. Firm chosen as an attractive takeover candidate by a potential acquirer. The acquirer may buy up to 5% of the target`s stock without public disclosure, but it must report all transactions and supply other information to the SEC, the exchange the target company is listed on, and the target company itself once the 5% threshold is hit. See: Raider.

Target firm

A firm that is the object of a takeover by another firm.

Target investment mix

The percentage mix of stocks, bonds, and short-term reserves that an investor considers appropriate based on his/her personal objectives, time horizon, risk tolerance, and financial resources.

Target Leverage Ratio

The ratio of the market value of debt to the total market value of the firm that management seeks to maintain.

Target payout ratio

A firm`s long-run dividend-to-earnings ratio. The firm`s policy is to attempt to pay out a certain percentage of earnings, but it pays a stated dollar dividend and adjusts it to the target as base line increases in earnings occur.

Target price

In the context of takeovers, the price at which an acquirer aims to buy a target firm. In the context of options, the price of the underlying security at which an option will become in the money. In the context of stocks, the price that an investor hopes a stock will reach in a certain time period.

Target zone arrangement

A monetary system under which countries pledge to maintain their exchange rates within a specific margin around agreed-upon, fixed central exchange rates.

Target zones

Implicit boundaries on exchange rates established by central banks.

Targeted Amortization Class (TAC) bonds

Bonds offered as a tranche class of some CMOs, according to a sinking fund schedule. They differ from PAC bonds whose amortization is guaranteed as long as prepayments on the underlying mortgages do not exceed certain limits. A TAC`s schedule is met at only one prepayment rate.

Ultra vires activities

Corporate actions and operations that are not sanctioned by corporate charter, sometimes leading to shareholder lawsuits.

Ultra-short-term bond fund

A mutual fund that invests in bonds with very short maturity periods, usually one year or less.

Ultradot

Applies to derivative products. Firm proprietary software that stores, and sends baskets of stock through SEAQ to either the NYSE or the curb for program trading.

Umbrella personal liability policy

A liability insurance policy that provides protection against damages not covered by standard liability policies, such as large jury awards in lawsuits.

Umbrella policy

Insurance for exports of an exporter whose issuer handles all administrative requirements.

Unamortized bond discount

Par value of a bond less the proceeds received from the sale of the bond, less whatever portion has been amortized.

Unamortized premiums on investments

The unexpensed portion of the difference between the price paid for a security and its par value.

Unbiased expectations hypothesis

Theory that forward exchange rates are unbiased predictors of future spot rates. See Forward parity.

Unbiased predictor

A theory that spot prices at some future date will be equal to today`s forward rates.

Unbundling

Separation of a multinational firm`s transfers of funds into discrete flows for specific purposes. See: Bundling.

Uncollected funds

The amount of bank deposits in the form of checks that have not yet been paid by the banks on which the checks are drawn.

Uncollectible account

An account which cannot be collected by a company because the customer is not able to pay or is unwilling to pay.

Uncovered call

A short call option position in which the writer does not own shares of underlying stock represented by the option contracts. Uncovered calls are much riskier for the writer than a covered call, where the writer of the uncovered call owns the underlying stock. If the buyer of a call exercises the option to call, the writer would be forced to buy the asset at the current market price. Also called a "naked" asset.

Uncovered put

A short put option position in which the writer does not have a corresponding short stock position or has not deposited, in a cash account, cash or cash equivalents equal to the exercise value of the put. The writer has pledged to buy the asset at a certain price if the buyer of the option chooses to exercise it. Uncovered put options limit the writer`s risk to the value of the stock (adjusted for premium received.) Also called "naked" puts.

Under the belt

Long position in a stock.

Underbanked

When an originating investment banker cannot find enough firms to underwrite a new issue.

Underbooked

Describes limited interest by prospective buyers in a new issue of a security during the preoffering registration period.

Undercapitalized

A business has insufficient capital to carry out its normal functions.

Underfunded pension plan

A pension plan that has a negative surplus (i.e., liabilities exceed assets).

Underinvestment problem

The mirror image of the asset substitution problem, in that stockholders refuse to invest in low-risk assets to avoid shifting wealth from themselves to debtholders.

Underlying

What supports the security or instrument that parties agree to exchange in a derivative contract.

Underlying asset

The security or property or loan agreement that an option gives the option holder the right to buy or to sell.

Underlying Bid

The bid or bids that are listed in the Level II Nasdaq market but are not the best (highest) bid price.

Underlying debt

Municipal bonds issued by government entities but under the control of larger government entities and for which the larger entity shares the credit responsibility.

Underlying futures contract

A futures contract that supports an option on that future, which is executed if the option is exercised .

Underlying Instrument

A trading instrument subject to purchase upon exercise.

Undermargined account

A margin account that no longer meets minimum maintenance requirements, requiring a margin call on the investor.

Underperform

When a security is expected to, or does, appreciate at a slower rate than the overall market rate of performance.

Underpricing

Issuing securities at less than their market value.

Undervalued

A stock price perceived to be too low or cheap, as indicated by a particular valuation model. For instance, some might consider a particular company`s stock price cheap if the company`s price-earnings ratio is much lower than the industry average. To refer to undervaluation or overvaluation implicitly assumes some model of valuation. It is always possible that the security is valued correctly and that model applied is wrong.

Undervalued security

A security selling below its market value or liquidation value.

Underwithholding

When a taxpayer has withheld too little tax from salary and will therefore owe tax when filing a return.

Underwrite

To guarantee, as to guarantee the issuer of securities a specified price by entering into a purchase and sale agreement. To bring securities to market.

Underwriting

Acting as the underwriter in the issue of new securities for a firm.

Underwriting agreement

The contract between a corporation issuing new publicly offered securities and the managing underwriter as agent for the underwriting group. Compare to agreement among underwriters.

Underwriting Commission

The fee investment bankers charge for underwriting a security issue.

Underwriting fee

The portion of the gross underwriting spread that compensates the securities firms that underwrite a public offering for their services.

Underwriting income

For an insurance company, the difference between the premiums earned and the costs of settling claims.

Underwriting spread

The income that is generated by the underwriting syndicate and the selling group, which is essentially the difference between the amount paid to the issuer of securities in a primary distribution and the public offering price.

Underwriting syndicate

A group of investment banks that work together to sell new security offerings to investors. The underwriting syndicate is led by the lead underwriter. See also: Lead underwriter.

Underwritten offering

A purchase and sale.

Undigested securities

Newly issued securities that are not purchased because of lack of demand during the initial public offering.

Unearned income (revenue)

Income received in advance of the time at which it is earned, such as prepaid rent.

Unearned interest

Interest that has been received on a loan, but that cannot be treated as a part of earnings yet, because the principal of the loan has not been outstanding long enough.

Unemployment rate

The percentage of the people classified as unemployed as compared to the total labor force.

Unencumbered

Property that is not subject to any claims by creditors. For example, securities bought with cash instead of on margin and homes with mortgages paid off.

Unfunded debt

Debt maturing within one year (short-term debt). See: Funded debt.

Unfunded pension plan

Provides for the employer to pay out amounts to retirees or beneficiaries as and when they are needed. There is no money put aside on a regular basis. Instead, it is taken out of current income.

Unified tax credit

A federal tax credit that reduces tax liability, dollar for dollar, on lifetime gifts and asset transfers at death.

Uniform Commercial Code (UCC)

Collection of laws dealing with commercial business.

Uniform Gifts to Minors Act (UGMA)

Legislation that provides a tax-effective manner of transferring property to minors without the complications of trusts or guardianship restrictions.

Uniform practice code

Standards of the NASD prescribing procedures for handling over-the-counter securities transactions, such as delivery, settlement date, and ex-dividend date.

Uniform securities agent state law examination

A test required in some states for registered representatives who are employees of member firms of the NASD or over-the-counter brokers.

Uniform Transfers to Minors Act (UTMA)

A law similar to the Uniform Gifts to Minors Act that extends the definition of gifts to include real estate, paintings, royalties, and patents.

Unilateral transfers

Items in the current account of the balance of payments of a country`s accounting books that correspond to gifts from foreigners or pension payments to foreign residents who once worked in the particular country.

Uninsured motorist insurance

Insurance that covers the policyholder and family if they are injured by a hit-and-run or uninsured motorist, assuming the other driver is at fault.

Unique Diversification Benefit

Reduction in the likelihood of financial distress for a conglomerate firm that comes with its diversified investments.

Unique risk

Also called unsystematic risk or idiosyncratic risk. Specific company risk that can be eliminated through diversification. See: Diversifiable risk and unsystematic risk.

Unissued stock

Shares authorized in a corporation`s charter, but not issued.

Unit

More than one class of securities traded together (e.g., one common share and three subscription warrants).

Unit benefit formula

Method used to determine a participant`s benefits in a defined benefit plan. Involves multiplying years of service by the percentage of salary.

Unit investment trust

Money invested in a portfolio whose composition is fixed for the life of the fund. Shares in a unit trust are called redeemable trust certificates, and they are sold at a premium to net asset value.

Unit Share Investment Trust (USIT)

A unit investment trust comprising one unit of prime and one unit of score.

Unit trust

In the United Kingdom and other foreign markets, an open-end mutual fund.

United States government securities

Debt issues of the U.S. government, as distinguished from government-sponsored agency issues.

Universal life

A whole life insurance product whose investment component pays a competitive interest rate rather than the below-market crediting rate.

Universe of securities

A group of stocks having a common feature, such as similar outstanding market capitalization or same product line.

Unleveraged beta

The beta of an unleveraged required return (i.e., no debt) on an investment when the investment is financed entirely by equity.

Unleveraged program

The use of borrowed funds to finance less than 50% of a purchase of assets. In a leveraged program borrowed funds are used to finance more than 50%.

Unleveraged required return

The required return on an investment when the investment is financed entirely by equity (i.e., no debt).

Unlevered cost of equity

The discount rate appropriate for an investment that it is financed with 100% equity.

Unlimited liability

Full liability for the debt and other obligations of a legal entity. The general partners of a partnership have unlimited liability.

Unlimited marital deduction

An Internal Revenue Service provision that allows an individual to transfer an unlimited amount of assets to a spouse, during life or at death, without incurring federal estate or gift tax.

Unlimited tax bond

A municipal bond secured by the pledge to levy taxes until full repayment at an unlimited rate.

Unlisted security

A security traded in the over-the-counter market that is not listed on an organized exchange.

Unlisted trading

Trading in unlisted securities that occurs on an organized exchange to accommodate members. This practice is not permitted at the NYSE.

Unloading

Selling securities or commodities whose prices are dropping to minimize loss.

Unmargined account

A cash account held at a brokerage firm.

Unmatched book

If the average maturity of a bank`s liabilities is shorter than that of its assets, it is said to be running an unmatched book. The term is commonly used with the Euromarket. Also refers to entering into OTC derivatives contracts and not hedging by making trades in the opposite direction to another financial intermediary. In this case, the firm with an unmatched book usually hedges its net market risk with futures and options. Related expressions: Open book and short book.

Unpaid dividend

A dividend declared by the directors of a corporation that has not yet been paid.

Unqualified opinion

An independent auditor`s opinion that a company`s financial statements comply with accepted accounting procedures. Antithesis of qualified opinion.

Unrealized capital gain/loss

An increase/decrease in the value of a security that is not "real" because the security has not been sold. Once a security is sold by the portfolio manager, the capital gains/losses are "realized" by the fund, and any payment to the shareholder is taxable during the tax year in which the security is sold.

Unseasoned issue

Issue of a security for which there is no existing market. See: Seasoned issue.

Unsecured debt

Debt that does not identify specific assets that the debtholder is entitled to in case of default.

Unsterilized intervention

Foreign exchange market intervention in which the monetary authorities have not insulated their domestic money supplies from the foreign exchange transactions.

Unsystematic risk

Also called the diversifiable risk or residual risk. The risk that is unique to a company such as a strike, the outcome of unfavorable litigation, or a natural catastrophe that can be eliminated through diversification. Related: Systematic risk.

Unwind a trade

Reverse a securities transaction through an offsetting transaction in the market.

Up

Market indication; willingness to go both ways (buy or sell) at the mentioned volume and market. Print; up on the ticker tape, confirming that the trade has been executed.

Up tick

Plus tick.

Upgrading

Raising the quality rating of a security because of new optimism about the prospects of a firm due to tangible or intangible factors. This can increase investor confidence and push up the price of the security.

Upset price

The minimum price at which a seller of property will accept a bid at an auction.

Upside potential

The amount by which analysts or investors expect the price of a security may increase.

Upstairs market

A network of trading desks for the major brokerage firms and institutional investors, which communicate with each other by means of electronic display systems and telephones to facilitate block trades and program trades.

Upstairs order

Used for listed equity securities. Off-floor order.

Upswing

An upward turn in a security`s price after a period of falling prices.

Uptick rule

SEC rule that selling short is allowed only on an up tick.

Uptick trade

A transaction that takes place at a higher price than the preceding transaction involving the same security. Related: Tick test rules.

US Prime Rate

The rate at which US banks will lend to their prime corporate customers

US Treasury bill

US government debt with a maturity of less than a year.

US Treasury bond

US government debt with a maturity of more than 10 years.

US Treasury note

US government debt with a maturity of one to 10 years.

Useful life

The expected period of time during which a depreciating asset will be productive.

Usury laws

Laws limiting the amount of interest that can be charged on loans.

Utility

A power company that owns or operates facilities used for the generation, transmission, or distribution of electric energy, which is regulated at state and federal levels.

Utility function

A mathematical expression that assigns a value to all possible choices. In portfolio theory, the utility function expresses the preferences of economic entities with respect to perceived risk and expected return.

Utility revenue bond

A municipal bond issued to finance the construction of public utility services. These bonds are repaid from the operating revenues the project produces after the utility is finished.

Utility value

The welfare a given investor assigns to an investment with a particular expected return and risk.

V formation

A technical chart Pattern that follows a letter V form, indicating that the security price has bottomed out, and is now in a Bullish trend.

Valuation

Determination of the value of a company`s Stock based on Earnings and The Market value of assets.

Valuation Opportunity Cost

The potential increase in Firm value associated with Investments that are for gone due to Capital rationing.

Valuation reserve

An allowance to provide for changes in the value of a company`s assets, such as depreciation.

Value Added

Value added is the Risk adjusted Return generated by an Investment strategy: the return of the Investment strategy minus the return of the benchmark.

Value additivity principal

When the value of a whole group of Assets exactly equals the sum of the values of the individual assets that make Up the group of assets. Or, the principle that the net Present value of a set of independent projects is just the sum of the Net present values of the individual projects.

Value broker

A Discount Broker whose rates are a percentage of the dollar value of each transaction.

Value dating

When value or Credit is given for funds transferred between banks.

Value Line investment survey

A proprietary service that ranks stocks for Timeliness and safety.

Value manager

A Manager who seeks to Buy stocks that are at a Discount to their "fair value" and to Sell them at or in excess of that value. Often a value Stock is one with a low price-to-book value ratio. Opposite of to growth stock.

Value Maximization

Increases in owners` wealth achieved by maximizing of the value of a firm`s common stock.

Value stock fund

A mutual fund that emphasizes stocks of companies whose growth opportunities are generally regarded as subpar by the market. A value stock Company often pays regular Dividend income to shareholders and sells at relatively low prices in relation to its Earnings or Book value.

Value stocks

Stocks with low price/book ratios or price/earnings ratios. Historically, Value stocks have enjoyed higher Average returns than growth stocks (stocks with High price/book or P/E ratios) in a variety of countries.

Value-added tax

Method of indirect taxation that levies a tax is at each stage of production On the Value Added at that specific stage.

Value-at-risk model (VaR)

Procedure for estimating the Probability of Portfolio losses exceeding some specified proportion based On a statistical Analysis of historical Market price trends, correlations, and volatilities.

Vancouver Stock Exchange (VSE)

A securities and options Exchange in Vancouver, British Columbia, (Canada), specializing in venture Capital companies.

Vanilla issue

A security Issue that has no unusual features.

Variable

An element in a model. For example, in the model RS&Pt+1 = a + b Tbill t + et, where RS&Pt+1 is the Return on the S&P in month t+1 and Tbill is the Tbill return at month t, both RS&P and Tbill are "variables" because they change through time; i.e., they are not constant.

Variable annuities

Investment contracts whose Issuer pays a periodic amount linked to the Investment performance of an Underlying portfolio.

Variable cost

A cost that is directly proportional to the volume of output produced. When production is zero, the Variable cost is equal to zero.

Variable life insurance policy

A whole life Insurance policy that provides a death benefit Dependent on the insured`s Portfolio market value at the time of death. Typically the Company invests premiums in common stocks, so Variable life policies are referred to as equity-linked policies.

Variable rated demand bond (VRDB)

Floating-rate Bond that periodically can be sold back to the issuer.

Variable Ratio Write

An options Strategy in which a trader writes 2 or more options contracts for every 100 Shares owned. Each option has a different strike price.

Variable-price security

A security that sells at a fluctuating market-determined price stocks and Bonds are example.

Variable-rate CDs

Short-term Certificate of deposits that pay Interest periodically On roll dates. On each roll date, the Coupon on the CD is adjusted to reflect current Market rates.

Variable-rate demand note

A Note that is payable on Demand and bears Interest tied to a money Market rate.

Variable-rate loan

Loan made at an Interest rate that fluctuates depending On a Base interest rate, such as the PRIME rate or LIBOR.

Variance

A measure of dispersion of a set of data points around their Mean value. The mathematical expectation of the Average squared deviations from the mean. The square root of the Variance is the standard deviation.

Variance rule

Specifies the permitted minimum or maximum quantity of securities that can be delivered to satisfy a TBA trade. For Ginnie Mae, Fannie Mae, and Freddie Mac pass-through securities, the accepted Variance is Plus or Minus 2.499999 % per million of the Par value of the TBA quantity.

Variance-minimization approach to tracking

An approach to Bond indexing that uses Historical Data to estimate the Variance of the tracking error.

Variation margin

An additional required deposit to bring an investor`s Equity account Up to the Initial margin level when the balance falls below the Maintenance margin requirement.

Vega

A measurement of how much an options price changes for a 1% change in volatility.

Velda Sue

Stands for Venture Enhancement and Loan Development Administration for Smaller Undercapitalized Enterprises. A federal Agency that buys and pools small business loans made by banks, and then issues securities that are bought by large institutional investors.

Velocity

The number of times a dollar is spent, or turns over, in a specific period of time. Velocity affects the amount of economic activity generated by a given Money supply.

Vendor

Seller or supplier.

Venture capital

An Investment in a Start-up business that is perceived to have excellent growth prospects but does not have access to Capital markets. Type of financing sought by early-stage companies seeking to grow rapidly.

Venture capital limited partnership

A Partnership between a startup Company and a brokerage Firm or entrepreneurial company that provides Capital for the new business in Return for Stock in the company and a share of the profits.

Vertical acquisition

Buying or taking over a Firm in the same Industry in which the acquired firm and the acquiring firm represent different steps in the production process.

Vertical analysis

Dividing each expense item in the income statement of a given year by Net sales to identify expense items that rise more quickly or more slowly than a change in sales.

Vertical line charting

A form of technical Charting that shows the high, low, and closing prices of a Stock or a Market on each day On one vertical line with the Closing price indicated by a Short horizontal mark.

Vertical merger

When one Firm acquires another firm that is in the same Industry but at another stage in the production cycle. For example, the firm being acquired serves as a supplier to the firm doing the acquiring.

Vest

Become applicable or exercisable. A Term mainly used On the context of employee Stock ownership or option programs. Employees might be given Equity in a Firm but they must stay with the firm For a number of years before they are entitled to the Full equity. This is a vesting provision. It provides incentive for the employee to perform.

Veterans Administration (VA) mortgage

A home mortgage Loan granted by a lending institution to U.S. veterans and guaranteed by the Veterans Administration.

Vienna Stock Exchange (VSX)

One of the world`s oldest exchanges, which accounts for approximately 50% of Austrian Stock transactions; the balance are traded OTC.

Virtual currency option

A new option Contract introduced by the PHLX in 1994 that is settled in US dollars rather than in the Underlying currency. These options are also called 3-Ds (dollar-denominated delivery).

Visible supply

New muni Bond issues scheduled to come to Market within the next 30 days.

Volatility risk

The Risk in the value of options portfolios due to the unpredictable changes in the volatility of the Underlying asset.

Volume deleted

A Note appearing On the Consolidated tape when the tape is running Behind under Heavy trading, meaning that only the Stock symbol and price will be shown for trades under 5000 shares.

Volume discount

A reduction in price based On the Purchase of a large quantity.

Volume Moving Average (Volume MA)

This is an indicator used in Charts and technical analysis. It refers to the Average volume of a security, Commodity or index constructed in a period as Short as a few minutes or as long as several years and showing trends for the latest interval. As each new Variable is included in calculating the average, the last variable of the Series is deleted.

Volume Price Trend (VPT)

In which a running sum is maintained when a day`s Total volume is added if The Market closes positive or the day`s Total volume is subtracted if the market closes lower. See On-balance volume.

Voluntary accumulation plan

Arrangement allowing shareholders of a mutual fund to Purchase shares over a period of time On a regular basis, and in so doing Take advantage of dollar cost averaging.

Voluntary bankruptcy

The LEGAL proceeding that follows a petition of bankruptcy.

Voluntary liquidation

Liquidation proceedings that are supported by a company`s shareholders.

Voluntary plan

A Pension plan supported partially by the employee by pension contributions deducted from each paycheck.

Voting certificate

Certificates issued by a voting Trust to stockholders in Exchange for their common stock, which represent all the rights of Common stock except voting rights.

Voting rights

The Right to vote On matters that are put to a vote of security holders. For example the right to vote for directors.

Voting stock

The Shares in a Corporation that entitle the Shareholder to vote.

Voting trust certificate

A Trust in which Control of a Corporation is given to a few individuals, usually to support Reorganization of a corporation Without interference.

VWAP

The volume-weighted Average price.

W-type bottom

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

Wage assignment

A Loan agreement provision allowing the Lender to deduct payments from an employee`s wages in case of default.

Wage-push inflation

Inflation caused by skyrocketing wages.

Waiting period

Time during which the Securities and Exchange Commission (SEC) studies a firm`s Registration statement. During this time the Firm may distribute a preliminary prospectus.

Waiver of premium

A provision in an Insurance policy that allows payment of insurance premiums to be permanently or temporarily Stopped in the event the Policyholder becomes incapacitated.

Walk away

To Take and maintain a position in a Stock after going to the Floor to consummate a trade. Antithesis of Trade me out, Buy them back.

Wall Street

Generic Term for the securities Industry firms that buy, sell, and Underwrite securities.

Wallflower

Stock that has fallen Out of favor with investors; Stock that tends to have a low P/E (price-to-earnings ratio).

Wallpaper

A security with no monetary value.

Wanted for cash

A statement displayed on Market tickers indicating that a Bidder will pay Cash for same-day Settlement of a Block of a specified security.

War babies

Slang Term for the stocks and Bonds of corporations in the defense industry.

War chest

Cash kept aside for a Takeover or for defense against a takeover bid.

Warehouse receipt

Evidence that a Firm owns goods stored in a warehouse.

Warehousing

The interim Holding period from the time of the closing of a Loan to its subsequent marketing to Capital market investors.

Warranty

A Guarantee by a seller to a buyer that if a product requires repair or remedy of a problem within a certain period after its purchase, the seller will repair the problem at no cost to the buyer.

Wash

Gains equal losses.

Wash sale

Purchase and Sale of a security either simultaneously or within a Short period of time, often in Order to recognize a tax loss Without altering one`s position. See: Tax selling.

Wasting asset

An Asset that has a limited life and thus decreases in value (depreciates) over time. Also applies to consumed assets, such as oil or gas, and termed "depletion."

Watch list

A list of securities selected for special surveillance by a brokerage, exchange, or regulatory organization; firms On the list are often Takeover targets, companies planning to Issue new securities, or stocks showing unusual activity.

Watered stock

A Stock representing ownership in a Corporation that is worth less than the actual invested capital, resulting in problems of low liquidity, inadequate Return on investment, and low Market value.

Wave

In Elliott Wave theory, a sustained move by a market`s price in one direction as determined by the Reversal points that initiated and terminated it.

Weak dollar

A depreciated dollar with respect to other currencies, meaning that more dollars are needed to Buy a Unit of foreign currency. Antithesis of strong dollar.

Weak market

A Market with few buyers and many sellers and a declining trend in prices.

Weak-form efficiency

A pricing theory that the price of a security reflects the past price and Trading history of the security. Theory implies that security prices follow a random walk. Related: Semistrong-form efficiency, strong-form efficiency.

Wedge

A chart Pattern composed of two converging lines connecting peaks and troughs. In the case of falling wedges, the pattern indicates temporary interruptions of upward price rallies. In the case of rising wedges, indicates interruptions of a falling price trend.

Weekend effect

The common recurrent low or negative Average return from Friday to Monday in the Stock market.

Weighted average cost of capital (WACC)

Expected Return on a Portfolio of all a firm's securities. Used as a Hurdle rate for Capital investment. Often the weighted Average of the Cost of equity and the cost of Debt The weights are determined by the relative proportions of equity and debt in a firm`s capital structure.

Weighted average Coupon

The weighted Average of the Gross interest rates of mortgages Underlying a Pool as of the pool Issue date; the balance of each Mortgage is used as the weighting factor.

Weighted average maturity

The Weighted average maturity of an MBS is the weighted average of the remaining terms to maturity of the mortgages Underlying the Collateral pool at the date issue, using as the weighting Factor the balance of each of the mortgages as of the Issue date.

Weighted average portfolio yield

The weighted Average of the yield of all the Bonds in a portfolio.

Weighted average remaining maturity

The Average remaining Term of the mortgages Underlying a MBS.

Well-diversified portfolio

A Portfolio that includes a variety of securities so that the weight of any security is small. The Risk of a Well-diversified portfolio closely approximates the Systematic risk of the overall market, and the Unsystematic risk of each security has been diversified Out of the portfolio.

Whipsawed

Buying stocks just before prices fall and selling stocks just before prices rise in a volatile market, often as the result of misleading signals.

Whisper number or forecast

An unofficial Earnings estimate of a Company given to clients by a security Analyst if there is more optimism or pessimism about earnings than shown in the published number. These are often found On the Internet.

Whisper stock

A Stock rumored to be the target of a Takeover bid, drawing speculators who hope to make a Profit after the takeover is completed.

Whistle blower

A person who has knowledge of fraudulent activities inside a Firm or government agency, who is protected from the employer`s retribution by federal law.

White knight

A friendly potential Acquirer sought Out by a target Firm that is threatened by a less welcome suitor.

White Noise

The audio equivalent of Brownian motion. Sounds that are unrelated and sound like a hiss. The video equivalent of White Noise is "snow" in television reception.

White sheets

Lists of prices published by the National Quotation Bureau for Market Makers.

White squire

White knight who buys less than a majority interest.

White-shoe firm

Broker-dealer firms that disdain practices such as hostile takeovers.

White's rating

A rating of municipal securities, that uses Market factors rather than Credit considerations to find appropriate yields.

Whitemail

Sale of a large amount of Stock by a Company that is the target of a Takeover Bid to a friendly party at below-market prices, so that the Raider is forced to Buy more of highly priced Shares to accomplish the takeover.

Whole life insurance

A Contract with both Insurance and Investment components: (1) It pays off a stated amount upon the death of the insured, and (2) it accumulates a Cash value that the Policyholder can redeem or Borrow against.

Whole loan

A Term that distinguishes an Investment representing an original mortgage Loan from a loan representing a participation with one or more lenders.

Wholesale mortgage banking

The purchasing of loans originated by others, for the Acquisition of the servicing rights.

Wholesaler

An underwriter or a Broker-dealer who trades with other broker-dealers, rather than with the Retail investor.

Wholly owned subsidiary

A Subsidiary whose parent Company owns virtually 100% of its common stock.

Whoops

A nickname for the Washington Public Power Supply System, which in the 1970s raised billions of dollars through municipal Bond offerings, the projects that never materialized. WPPSS defaulted On the payments to bondholders.

Wi WI

Come from when issued. Treasury bills Trade on a WI Basis between the day they are auctioned and the day Settlement is made. Bills traded before they are auctioned are said to be traded Wi WI

Wide opening

Abnormally wide spread between the Bid and asked prices of a security at the Opening of a Trading session.

Widow-and-orphan stock

A Stock paying High dividends with a low Beta and noncyclical business, that is an extremely safe investment.

Wild card option

The Right of the seller of a Treasury Bond futures Contract to give notice of intent to Deliver at or before 8:00 p.m. Chicago time after the closing of the Exchange (3:15 p.m. Chicago time) when the futures Settlement price has been fixed. Related: Timing option.

Williams Act

Federal legislation enacted in 1968 (and now constituting Rules 13d and 14d of the Security Exchange Act of 1934) that imposes requirements with respect to public Tender offers.

Wilshire indexes

Widely followed Performance measurement indexes measuring performance of all U.S.-headquartered Equity securities with readily available price data, created by Wilshire Associates, Inc.

Windfall profit

A sudden unexpected Profit uncontrolled by the profiting party.

Window

A brokerage firm's cashier department, where Delivery of securities and Settlement of transactions Take place.

Window contract

A guaranteed investment Contract purchased with deposits over some Future designated time period (the "window"), usually between 3 and 12 months. All deposits made are guaranteed the same Credit rating. Related: Bullet contract.

Window dressing

Trading activity near the end of a quarter or fiscal year that is designed to improve the appearance of a Portfolio to be presented to clients or shareholders. For example, a Portfolio manager may Sell losing positions so as to display only positions that have gained in value.

Winner's curse

Problem faced by uninformed bidders. For example, in an initial Public offering uninformed participants are likely to receive larger allotments of issues that informed participants know are overpriced.

Winnipeg Commodity Exchange

Canada's only agricultural futures and options exchange, located in Manitoba.

Wire house

A Firm operating a private wire to its own Branch offices or to other firms, Commission houses, or brokerage houses.

Wire room

A department within a brokerage Firm that receives customers` orders and transmits the orders to the Exchange floor or the firm`s Trading department.

With dividend

Purchase of Shares that entitle the buyer to the forthcoming dividend. Related: Ex-dividend.

With ice

When issued.

With rights

Shares sold accompanied by entitlement the buyer to Buy additional Shares in the company`s rights issue.

Withdrawal plan

Agreement that a mutual fund will disburse automatic periodic redemptions to the investor.

Withholding

Used in the context of securities, the illegal practice of a Public offering participant keeping some Shares in a private Account or with a family member, employee, or Dealer to Profit from the higher Market price of a Hot issue. Used in the context of taxes, the Withholding by an employer of a certain amount of an employee`s income in Order to Cover the employee`s tax liability. Also used to refer to the withholding by corporations and financial institutions of a Flat 10% of Interest and Dividend payments due to security holders.

Withholding tax

A tax levied by a country of source On income paid, usually on dividends remitted to the home country of the Firm operating in a foreign country.

Without

Indicates a one-way Market if 70 were Bid in The Market and there was no offer, the quote would be "70 bid without.".

Without recourse

Giving the Lender no Right to seek payment or seize Assets in the event of nonpayment from anyone other than the party specified in the debt Contract (such as a special-purpose entity).

Woody

Slang to describe a Market moving strongly upward, as in, "This market has a woody."

Working

Attempting to Complete the remaining part of a trade, by finding either buyers or sellers for the rest.

Working away

Transacting with another broker/dealer.

Working capital

Defined as the difference between Current assets and Current liabilities (excluding Short-term debt). Current assets may or may not include Cash and cash equivalents, depending On the company.

Working capital management

The deployment of Current assets and Current liabilities so as to maximize Short-term liquidity.

Working capital ratio

Working Capital expressed as a percentage of sales.

Working control

Control of a Corporation by a Shareholder or shareholders having less than 51% voting Interest because of the wide dispersion of share ownership.

Working order

Standing Order in the marketplace, through which a Broker bids or offers to Fill the order in a Series of Lots at opportune times in hopes of obtaining the best price.

Workout

Informal repayment or Loan forgiveness arrangement between a borrower and creditors.

Workout market

Market indicating prices at which it is believed a security can be bought or sold within a reasonable length of time.

Workout period

Realignment of a temporarily misaligned yield relationship that sometimes occurs in fixed income markets.

World Bank

A multilateral development Finance agency created by the 1944 Bretton Woods, (New Hampshire) negotiations. It makes loans to developing countries for social overhead Capital projects that are guaranteed by the recipient country. See: International Bank for Reconstruction and Development.

World Equity Benchmark Series (WEBS)

The World Equity Benchmark Series are similar to SPDRs. WEBS Trade on the AMEX, and track the Morgan Stanley Capital International (MSCI) country indexes. WEBS are available for: Australia, Austria, Belgium, Canada, France, Germany, Hong Kong, Italy, Japan, Malaysia Free, Mexico, the Netherlands, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

World investible wealth

The part of world wealth that is traded and is therefore accessible to investors.

World Trade Organization (WTO)

A multilateral Agency that administers world Trade agreements, fosters trade relations among nations, and solves trade disputes among member countries.

Wrap account

An Investment consulting relationship for Management of a client`s funds by one or more Money managers, that bills all fees and commissions in one comprehensive fee charged quarterly.

Wraparound annuity

An Investment that allows the Annuitant the choice of underlying Investments tax-deferred.

Wraparound mortgage

A second Mortgage that Leaves the original mortgage in force. The Wraparound mortgage is held by the lending institution as security for the Total mortgage debt. The borrower makes payments On both loans to the wraparound lender, which in Turn makes payments on the original senior mortgage.

Wrinkle

A feature of a new product or security intended to entice a buyer.

Write out

The procedure used when a specialist makes a Trade involving his own inventory, On one hand, and a Floor broker`s order, on the other. The Broker must first Complete the trade with the specialist, who then transacts a separate trade with the customer.

Write-down

Reducing the Book value of an Asset if its is overstated compared to current Market values.

Write-off

Charging an Asset amount to expense or loss, such as through the use of Depreciation and Amortization of assets.

Writing cash-secured puts

An option Strategy to avoid using a margin account. Instead of depositing margin with a broker, a put writer can deposit a Cash balance equal to the option Exercise price, and can avoid additional margin calls.

Writing puts to acquire stock

Selling a put option at an Exercise price that would represent a good Investment by an option writer who believes a stock`s value will fall, so that the writer cannot lose. If the Stock price unexpectedly Goes up, the option will not be exercised and the writer is at least ahead the amount of the premium received. If the stock loses value, as expected, the option will be exercised, and the writer has the stock at what he had earlier decided was originally a good buy, and he has the Premium income in addition.

Written-down value

The Book value of an Asset after allowing for Depreciation and amortization.

X or XD

This is a symbol used by newspapers to signify that a Stock is Trading ex-dividend, or that a Bond is trading Without interest, or that a mutual fund recently paid a Capital gain or dividend.

Yankee bonds

Foreign Bonds denominated in U.S. dollars and issued in the United States by foreign banks and corporations. These bonds are usually registered with the SEC. Such as, bonds issued by originators with roots in Japan are called Samurai bonds.

Yankee CD

A CD issued in the domestic market, typically New York, by a Branch of a foreign bank.

Yankee market

The Foreign market in the United States.

Yard

Slang for one billion Currency units. Used particularly in currency trading, e.g., for Japanese yen since one billion yen equals approximately US$10 million. It is clearer to say, "I`m a buyer of a Yard of yen," than to say, "I`m a buyer of a billion yen," which could be misheard as "I`m a buyer of a million yen."

Yates's Correction

When a small amount of data is available for testing, the chi-square formula is adjusted to Account for the small sample base.

Year-end dividend

A special Dividend declared at the end of a fiscal year that usually represents Distribution of higher-than-expected Company profits.

Year-to-date (YTD)

The period beginning at the start of the Calendar year Up to the current date.

Yellow sheets

Sheets published by the National Quotation Bureau that detail Bid and Ask prices, Plus those firms that are making a Market in over-the-counter corporate bonds.

Yen bond

Any Bond denominated in Japanese yen currency.

Yield advantage

The advantage gained by purchasing convertible securities instead of common stock, which equals the difference between the rates of Return of the Convertible security and the common shares.

Yield burning

A municipal Bond financing method. Underwriters in Advance refundings add large markups On US Treasury Bonds bought and held in Escrow to compensate investors while waiting for repayment of old bonds after issuance of the new bonds. Since bond prices and yields move in opposite directions, when the bonds are marked up, they "burn down" the yield, which may violate federal tax rules and diminishes tax revenues.

Yield curb

Applies mainly to convertible securities. Difference in Current yield between the convertible and the Underlying common.

Yield curve option-pricing models

Models that can incorporate different volatility assumptions along the yield curve, such as the Black-Derman-Toy model. Also called arbitrage-free option-pricing models.

Yield curve strategies

Investments that position a Portfolio to capitalize On expected changes in the shape of the Treasury yield curve.

Yield differential/pickup

Mainly applies to convertible securities. Graph showing the Term structure of Interest rates by plotting the yield of all Bonds of the same quality with maturities ranging from the shortest to the longest available.

Yield equivalence

The Interest rate at which a tax-exempt Bond and a taxable security of similar quality give the Investor the same rate of return.

Yield ratio

The quotient of two Bond yields.

Yield spread

The difference in yield between different security issues usually securities of different Credit quality.

Yield spread strategies

Investments that position a Portfolio to capitalize On expected changes in yield spreads between sectors of the Bond market.

Yield to average life

A yield calculation in which Bonds are retired routinely during the life of the issue. Since the Issuer buys its own bonds On the open Market because of Sinking fund requirements, if the bonds are Trading below par, this action provides automatic Price support for these bonds and they will usually Trade on a Yield to average life basis.

Yield to call

The percentage rate of a Bond or Note if the Investor buys and holds the security until the Call date. This yield is valid only if the security is called prior to maturity. Generally Bonds are Callable over several years and normally are called at a slight premium. The calculation of Yield to call is based on Coupon rate, length of time to call, and Market price.

Yield to maturity

The percentage Rate of return paid On a bond, note, or other fixed income security if the Investor buys and holds it to its maturity date. The calculation for YTM is based on the Coupon rate, length of time to maturity, and Market price. It assumes that coupon Interest paid over the life of the Bond will be reinvested at the same rate.

Yield to warrant call

Applies mainly to convertible securities. Effective yield of usable or Synthetic convertible Bonds determined against the first date at which the warrants can be called.

Yield to warrant expiration

Applies mainly to convertible securities. Effective yield of usable convertible Bonds determined by the Expiration date of the applicable warrants.

Yield to worst

The Bond yield computed by using the lower of either the Yield to maturity or the yield to Call on every possible call date.

Yo-yo stock

A highly volatile Stock that moves Up and down like a yo-yo.

Z bond

A Bond on which Interest accrues but is not currently paid to the Investor but rather is added to the Principal balance of the Z bond and becoming payable upon satisfaction of all prior bond classes.

Z score

Statistical measure that quantifies the distance (measured in standard deviations) a data Point is from the Mean of a data set. Separately, Z score is the output from a credit-strength Test that gauges the likelihood of bankruptcy.

Zabara

Applies mainly to international equities. Japanese securities transactions conducted On the Principal of auction, i.e., (1) price Priority in which the selling (buying) Order with the lowest (highest) price takes Precedence over other orders, and (2) time priority in that an earlier order takes precedence over other orders at the same price.

Zaibatsu

Large family-owned conglomerates that controlled much of the economy of Japan prior to World War II.

Zero prepayment assumption

The Assumption of payment of scheduled Principal and Interest with no payments.

Zero-balance account (ZBA)

A checking Account in which zero balance is maintained by transfers of funds from a master account in an amount only large enough to Cover checks presented.

Zero-base budgeting (ZBB)

Budgeting method that disregards the previous year`s Budget in setting a new budget, since circumstances may have changed. Each and every expense must be justified in this system.

Zero-beta portfolio

A Portfolio constructed to have zero Systematic risk, similar to the risk-free asset, that is, having a Beta of zero.

Zero-bracket amount

The standard Deduction portion of income which is not taxed for taxpayers choosing not to itemize deductions.

Zero-coupon bond

A Bond in which no periodic Coupon is paid over the life of the contract. Instead, both the Principal and the Interest are paid at the maturity date.

Zero-coupon convertible security

A Zero-coupon bond convertible into the Common stock of the issuing Company after the stock reaches a certain price, using a put option inherent in the security. Also refers to zero-coupon bonds, which are convertible into an Interest bearing bond at a certain time before maturity.

Zero-investment portfolio

A Portfolio of zero Net value established by buying and shorting component securities, usually in the context of an Arbitrage strategy.

Zero-minus tick

Sale that takes Place at the same price as the previous sale, but at a lower price than the last different price. Antithesis of zero-plus tick.

Zero-one integer programming

An analytical method that can be used to determine the solution to a Capital rationing problem.

Zero-plus tick

Used for listed Equity securities. Transaction at the same price as the preceding trade, but higher than the preceding Trade at a different price. Antithesis of zero-minus tick. See: Short sale.

Zeta

The percentage change in an options price per 1% change in implied volatility.

Zigzag

In a Bull market, an Elliott three-wave Pattern that subdivides into a 5-3-5 pattern with the Top of Wave B noticeably lower than the start of wave A. In a Bear market, this pattern will be inverted.

Zombies

Companies that continue operation while they await Merger or closure, even though they are Insolvent and bankrupt.

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