Financial glossary

A     B     C     D     E     F     G     H     I     J     K     L     M     N     O     P     Q     R     S     T     U     V     W     X     Y     Z

Abandonment
Controlling party giving up rights to property voluntarily.

Abandonment option
The option of terminating an investment earlier than originally planned. Financial glossary.

ABC agreement
A contract between an employee and a brokerage firm outlining the rights of the firm purchasing an NYSE membership for that employee. Financial glossary.

Ability to pay
Refers to the borrower's ability to make interest and principal payments on debts. In context of municipal bonds, refers to the issuer's present and future ability to create sufficient tax revenue to fulfill its contractual obligations, accounting for municipal income and property values.

Abnormal returns
The component of the return that is not due to systematic influences (market-wide influences). In other words, the abnormal returns is the difference between the actual return and that is expected to result from market movements (normal return).

Absolute advantage
A person, company or country has an absolute advantage if its output per unit of input of all goods and services produced is higher than that of another person, company or country. Financial glossary.

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.

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. Financial glossary.

Abusive tax shelter
A limited partnership that the IRS judges to be claiming tax deductions illegally. Financial glossary.

Accelerated cost recovery system (ACRS)
Schedule of depreciation rates allowed for tax purposes. Financial glossary.

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. Financial glossary.

Accelerated depreciation
Any depreciation method that produces larger deductions for depreciation in the early years of an asset's life. Accelerated cost recovery system (ACRS), which is a depreciation schedule allowed for tax purposes, is one such example. Financial glossary.

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. Financial glossary.

Accommodative monetary policy
Federal Reserve System policy to increase the amount of money available to banks for lending. Financial glossary.

Account
In the context of book keeping, refers to the ledger pages upon which various assets, liabilities, income and expenses are represented. Financial glossary.

Account Ad Valorem Duty
An imported merchandise tax expressed as a percentage. Financial glossary.

Account balance
Credits minus debits at the end of a reporting period. Financial glossary.

Account executive
The brokerage firm employee who handles stock orders for clients. Financial glossary.

Account Party
Party who applies to open a bank for the issuance of a letter of credit. Financial glossary.

Account reconciliation
The reviewing and adjusting of the balance in a personal check book to match your bank statement. Financial glossary.

Accounting earnings
Earnings of a firm as reported on its income statement. Financial glossary.

Accounting exposure
The change in the value of a firm's foreign currency-denominated accounts due to a change in exchange rates. Financial glossary.

Accounting insolvency
Total liabilities exceed total assets. A firm with a negative net worth is insolvent on the books. Financial glossary.

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. Financial glossary.

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.

Accreting (Swap)
An interest rate swap in which the notional principal amount increases over time, for example as with a construction loan provided in tranches as each stage of the project is completed.

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. Financial glossary.

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 they are earned or incurred, whether or not they have been received or paid.

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. Financial glossary.

Accrued benefits
The pension benefits earned by an employee according 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.

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. Financial glossary.

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
An approximate measure of the liability of a pension plan in the event of a termination at the date the calculation is performed.

Accumulated dividend
A dividend that has reached its due date, but is not paid out. Financial glossary.

Accumulated profits tax
A tax on earnings retained in a firm as a way for the principals to defer personal income taxes.

Accumulation
a. the context of corporate finance, refers to profits that are added to the capital base of the company rather than paid out as dividends.
b. 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.
c. the context of mutual funds, refers to the regular investing of a fixed amount while reinvesting dividends and capital gains. Financial glossary.

Accumulation area
A range within which a buyer accumulates shares of a stock.

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.

Acquisition cost
Refers to the price (including the closing costs) to purchase another company or property.

Across the board
Movement or trend in the stock market that causes all stocks in all sectors to move in the same direction. Financial glossary.

Acting in concert
Investors working together and performing identical actions to attain the same investment goal.

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.

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. Financial glossary.

Active bond crowd
Refers to members of the bond department of the NYSE who trade the most bonds.

Active box
Securities that are held in safe keeping 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.

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. 

Actuals
The physical commodities underlying a futures contract. Cash commodity, physical asset.

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 A-D line indicates whether a strong bull or bear market is under way.

Ad valorem tax
A type of tax calculated based on percentage of gross or stated value. For example, VAT.

Additional bonds test
A test for ensuring that bondissuers can meet the debt service requirements of issuing any new additional bonds.

Additional hedge
A protection against 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. Financial glossary.

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
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.

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.

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
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 Maemortgages.

Adjusted gross income
Gross income less allowable adjustments, which is the income on which an individual is taxed by the federal government. Financial glossary.

Adjusted present value
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.

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. Financial glossary.

Advancement
Money or property given to a person by the deceased before death and intended as an advance against the beneficiary's share in the will.

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

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.

Affidavit of Loss
A sworn statement describing the particulars and circumstances of the loss of securities. This affidavit is required before a Bond of Indemnity can be issued and the securities replaced.

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.

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.

Affirmative obligation
A New York Stock Exchange rule that governs the behavior of specialists. Affirmative obligation is the mandate of the specialists to step in and act as either the buyer or the seller when public investor orders exist do not match up naturally. Also known as positive obligation. Financial glossary.

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.

Aged fail
An account between two broker/dealers that remains intact 30 days after the settlement date. The receiving firm must adjust its capital as it can no longer treat this account as an asset.

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 issuesADRs 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. Financial glossary.

Agency incentive arrangement
A means of compensating the broker of a program trade using bench mark prices for issues to be traded in determining commissions or fees.

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
A party appointed to act on behalf of a principal entity or person. In context of project financing, refers to the bank in charge of administering the project financing.

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 Hedge Fund
In the context of hedge funds, a style of management that focuses primarily on equities that are expected to have strong earnings growth.

Aggressive growth mutual fund
A mutual fund designed for maximum capital appreciation that places its money in companies with high growth rates. Financial glossary.

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.

Agreement corporation
Corporation chartered by a state to engage in international banking: so named because the corporation enters into an "agreement" with the Fed's Board of Governors that it will limit its activities to those permitted by an Edge Act Corporation.

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.

Air Freight Consolidator
An air freight carrier that does not own or operate its own aircraft but ships its cargo with actual equipment operating carriers. Consolidators issue house air waybills to their customers and receive master air waybills from the actual carriers.

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. Financial glossary.

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-in-rate
Rate used in charging customers for accepting banker's acceptances, consisting of the discount interest rate plus the commission.

All Ordinaries Index
The major stock price index in Australia. The capitalization weighted index is made up of the largest 500 companies as measured by market capitalization that are listed on the Australian Stock Exchange. The index was developed with a base value of 500 as of 1979.

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.  Financial glossary.

All-in cost
Total costs, explicit and implicit.

All-or-none underwriting
An arrangement whereby a security issue is cancelled if the underwriter is unable to resell the entire issue.

All Risk Insurance
Marine cargo insurance which covers most perils except strikes, riots, civil unrest, capture, war, seizure, civil war, piracy, loss of market and inherent vice.

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
Measure of risk-adjusted performance. An alpha is usually generated by regressing the security or mutual fund'sexcess 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-terminterest 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. Financial glossary.

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.

Alternative investments
Usually refers to investments in hedge funds. Many hedge funds pursue strategies that are uncommon relative to mutual funds. Examples of alternative investment strategies are: long-short equity, event driven, statistical arbitrage, fixed income arbitrage, convertible arbritage, short bias, global macro and equity market neutral. May also refer to the high frequency style of commodity trading advisors who often employ technical and quantitative tools for intraday investments

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.

Alternative order
Used in context of general equities. Order giving a broker a choice between two courses of action, either to buy or sell, never both. Execution of one course automatically eliminates the other. An example is a combination buy limit/ buy stop order, where the buy limit is below the current market and the buy stop is above. If the order is for one unit of trading, when one part of the order is executed on the occurrence of one alternative, the order on the other alternative is to be treated as cancelled. If the order is for an amount of more than one unit of trading, the number of units executed determines the amount of the alternative order to be treated as cancelled. Sometimes known as One Cancels the Other.

American Association of Individual Investors
A not-for-profit organization to educate individual investors about stocks, bonds, mutual funds and other financial instruments. Financial glossary.

American Depositary Receipt Fees
Fees associated with the creating or releasing of ADRs from ordinary shares, charged by the commercial banks with correspondent banks in the international sites.

American Depositary Receipt Ratio
The number of ordinary shares into which an ADR can be converted.

American Depositary Share (ADS)
Foreign stock issued in the US and registered in the ADR system.

American option
An option that may be exercised at any time up to and including the expiration date.

American shares
Securities certificates issued in the US by a transfer agent acting on behalf of the foreign issuer. The certificates represent claims to foreign equities.

American-style option
An option contract that can be exercised at any time between the date of purchase and the expiration date. Most exchange-traded equity options are American style.

Amman Financial Market (AFM)
Established in 1976, the AFM is the only stock exchange in Jordan.

Amman Stock Exchange
The only agency authorized as a formal market for trading securities in Jordan.

Amortization
The repayment of a loan by installments. Financial glossary.

Amortization factor
The pool factor implied by the scheduled amortization assuming no prepayments.

Amortizing interest rate swap
Swap in which the principal or notional amount declines over time.

Amount outstanding and in circulation
All currency issued by the Bureau of the Mint and intended as a medium of exchange. Coins sold by the Bureau of the Mint at premium prices are not included; uncirculated coin sets sold at face value plus handling charge are included.

AMTEL
Used in context of general equities. In-house message system entered and displayed through Quotron A page.

Analyst
Employee of a brokerage or fund management house who studies companies and makes buy-and-sell recommendations on stocks of these companies. Most specialize in a specific industry.

Angel
An investment-grade bond. In the context of venture capital, the first investor.

Angels
Individuals providing venture capital.

Ankle biter
Stock issued with a market capitalization of less than $500 million.

Announcement date
Date on which particular news concerning a given company is announced to the public. Used in event studies, which researchers use to evaluate the economic impact of events of interest. Financial glossary.

Annual basis
The technique in statistics of taking a figure covering a period of less than one year and extrapolating it to cover a full one year period. The process is known as annualizing.

Annual exclusion
A tax rule allowing the deduction of certain income from taxation.

Annual meeting
Meeting of stockholders held once a year at which the managers of a company report to the stockholders on the year's results.

Annual percentage rate (APR)
The periodic rate times the number of periods in a year. For example, a 6% quarterly return has an APR of 24%.

Annual percentage yield (APY)
The effective, or true annual rate of return. The APY is the rate actually earned or paid in one year, taking into account the effect of compounding. The APY is calculated by taking one plus the periodic rate, raising it to the number of periods in a year and then subtracting one.

Annual rate of return
There are many ways of calculating the annual rate of return. If the rate of return is calculated on a monthly basis, we sometimes multiply this by 12 to express an annual rate of return. This is often called the annual percentage rate (APR). The annual percentage yield (APY) includes the effect of compounding interest.

Annual report
Yearly record of a publicly held company's financial condition. It includes a description of the firm's operations, as well as balance sheet, income statement and cash flow statement information. SEC rules require that it be distributed to all shareholders. A more detailed version is called a 10-K. Financial glossary.

Annuitant
An individual who receives benefits from an annuity.

Annuitize
To commence a series of payments from the capital that has accumulated in an annuity. The payments may be a fixed amount, for a fixed period of time or for a lifetime.

Annuity
A regular periodic payment made by an insurance company to a policyholder for a specified period of time.

Annuity certain
An annuity that pays a specific amount on a monthly basis for a set amount of time.

Annuity factor
Present value of $1 paid for each of t periods.

Annuity in arrears
An annuity with a first payment one full period hence, rather than immediately.

Annuity starting date
The date when an annuitant starts receiving payments from an annuity.

Anticipated holding period
The period of time an individual expects to hold an asset.

Anticipation
Paying what is owed before it is due (usually to save interest charges).

Antidilutive effect
Result of a transaction that increases earnings per common share (e.g. by decreasing the number of shares outstanding).

Anti-Persistence
In R/S Analysis, an anti-persistent time series reverses itself more often than a random series would. If the system had been up in the previous period, it is more likely that it will be down in the next period and vice versa.

Antigreenmail
Greenmail refers to the agreement between a large shareholder and a company in which the shareholder agrees to sell his stock back to the company, usually at a premium, in exchange for the promise not to seek control of the company for a specified period of time. Antigreenmail provisions prevent such arrangements unless the same repurchase offer is made to all shareholders or approved by shareholder vote. There are some states that have antigreenmail laws. Financial glossary.

Antitrust laws
Legislation established by the federal government to prevent the formation of monopolies and to regulate trade.

Any-or-all bid
Often used in risk arbitrage. Takeover bid in which the acquirer offers to pay a set price for all outstanding shares of the target company or any part thereof; contrasts with two-tier bid.

Appraisal ratio
The signal-to-noise ratio of an analyst's forecasts. The ratio of alpha to residual standard deviation.

Appraisal rights
A right of shareholders in a merger to demand the payment of a fair price for their shares, as determined independently.

Appreciation
Increase in the value of an asset.

Appropriation request
Formal request for funds for capital investment project.

Approved list
A list of equities and other investments that a financial institution or mutual fund is allowed to invest in.

Arbitrage
The simultaneous buying and selling of a security at two different prices in two different markets, resulting in profits without risk. Perfectly efficient markets present no arbitrage opportunities. Perfectly efficient markets seldom exist, but, arbitrage opportunities are often precluded because of transactions costs. Financial glossary.

Arbitrage bonds
Municipality issued bonds issued intended to gain an interest rate advantage by refunding a higher-rate bond in ahead of their call date. Lower-rate refunding issue proceeds are invested in Treasuries until the first call date of the higher-rate issue.

Arbitrage-free option-pricing models
Yield curve option-pricing models.

Arbitrage Pricing Theory (APT)
An alternative model to the capital asset pricing model developed by Stephen Ross and based purely on arbitrage arguments. The APT implies that there are multiple risk factors that need to be taken into account when calculating risk-adjusted performance or alpha.

Arbitrageur
One who profits from the differences in price when the same or extremely similar, security, currency or commodity is traded on two or more markets. The arbitrageur profits by simultaneously purchasing and selling these securities to take advantage of pricing differentials (spreads) created by market conditions.

Are you open?
Used in context of general equities. "Can a new customer still participate on opposing side of the trade from that which the first customer initiated?", Inquiring as to whether any portion of that trade is still available.

Arithmetic mean return
An average of the subperiod returns, calculated by summing the subperiod returns and dividing by the number of subperiods.

Arizona Stock Exchange
A single price auction exchange for equity trading that allows anonymous buyers and sellers to trade at low transaction costs.

Arm's length price
The price at which a willing buyer and a willing unrelated seller would freely agree to transact or a trade between related parties that is conducted as if they were unrelated, so that there is no conflict of interest in the transaction. Financial glossary.

Arms index
Also known as a TRading INdex (TRIN). The index is usually calculated as the number of advancing issues divided by the number of declining issues. This, in turn, is divided by the advancing volume divided by the declining volume. If there is considerably more advancing volume relative to declining volume this will tend to reduce the index (i.e. increase the denominator). Hence, a value less than 1.0 is bullish while values greater than 1.0 indicate bearish demand. The index often is smoothed with a simple moving average.

Arranger
The senior tier of a syndication. This implies the entity that agreed and negotiated the project financing structure. Also refers to the bank or underwriter entitled to syndicate the loan or bond issue. Also known as the lead underwriter.

Arrearage
In the context of investments, refers to the amount by which interest on bonds or dividends on cumulative preferred stock is due and unpaid.

Articles of incorporation
Legal document establishing a corporation and its structure and purpose.

Artificial currency
A currency substitute, e.g. special drawing rights.

Ascending tops
A chart pattern that depicts that each peak in a security's price over a period of time is higher than the preceding peak.

Asian Currency Units
Dollar deposits held in Singapore or other Asian centers.

Asian Development Bank
A financial institution established in 1966 to reduce poverty in the Asia-Pacific region. The bank is headquartered in Manila, Philippines and consists of 61 member countries.

Asian dollar market
Asian banks that collect deposits and make loans denominated in US dollars.

Asian option
Option based on the average price of the underlying assets during the life of the option.

Ask
This is the quoted ask or the lowest price an investor will accept to sell a stock. Practically speaking, this is the quoted offer at which an investor can buyshares of stock; also called the offer price. Financial glossary.

Asked price
In context of general equities, price at which a security or commodity is offered for sale on an exchange or in the OTCMarket.

Asked to bid/offer
Used in context of general equities. Usually a seller (buyer) looking to aggressively sell (buy) stock, usually asking for a capital commitment from an investment bank.

Aspirin
Australian Stock Price Riskless Indexed Notes. Zero-coupon four-year bonds repayable at face value plus the percentage increase by which the Australian stock index of all ordinaries (common stocks) rises above a predefined level during the given period.

Assay
Metal purity test to confirm that the metal meets the standards for trading on a commodities exchange (commodities exchange center).

Assessed valuation
The value assigned to property by a municipality for the purpose of tax assessment. Such an assessed valuation is important to investors in municipal bonds that are backed by property taxes.

Asset
Any possession that has value in an exchange.

Asset activity ratios
Ratios that measure how effectively the firm is managing its assets.

Asset allocation decision
The decision regarding how an institution's funds should be distributed among the major classes of assets in which it may invest.

Asset allocation mutual fund
A mutual fund that rotates among stocks, bonds and money market securities to maximize return on investment and minimize risk.

Asset-backed security
A security that is collateralized by loans, leases, receivables or installment contracts on personal property, not real estate. Financial glossary.

Asset-based financing
Methods of financing in which lenders and equity investors look principally to the cash flow from a particular asset or set of assets for a return on and the return of, their financing.

Asset classes
Categories of assets, such as stocks, bonds, real estate and foreign securities.

Asset-coverage test
A bond indenture restriction that permits additional borrowing if the ratio of assets to debt does not fall below a specified minimum.

Asset Depreciation Range System
A range of depreciable lives the IRS allows for particular classes of assets.

Asset/equity ratio
The ratio of total assets to stockholder equity.

Asset for asset swap
Creditors exchange the debt of one defaulting borrower for the debt of another defaulting borrower.

Asset/liability management
The task of managing the funds of a financial institution to accomplish two goals: (a) to earn an adequate return on funds invested and (b) to maintain a comfortable surplus of assets beyond liabilities. Also called surplus management.

Asset management account
Account at a brokerage house, bank or savings institution that integrates banking services and brokerage features.

Asset play
A company with assets that are not believed to be accurately reflected in its stock price, making it an attractive buy or play. Financial glossary.

Asset pricing model
A model for determining the required or expected rate of return on an asset.

Asset stripper
A corporate raider (company A) that takes over a target company (company B) in order to sell large assets of company B to repay debt. Company A calculates that the net, selling off the assets and paying off the debt, will leave the raider with assets that are worth more than what it paid for company B.

Asset substitution
Occurs when a firm invests in assets that are riskier than those that the debtholders expected.

Asset substitution problem
Arises when the stockholders substitute riskier assets for the firm's existing assets and expropriate value from the debtholders.

Asset swap
An interest rate swap used to alter the cash flow characteristics of an institution's assets in order to provide a better match with its liabilities.

Asset turnover
The ratio of net sales to total assets.

Asset value
The net market value of a corporation's assets on a per-share basis, not the market value of the shares. A company is undervalued in the market when asset value exceeds market value.

Assets
A firm's productive resources.

Assets-in-place
Property in which a firm has already invested.

Assets requirements
A common element of a financial plan that describes projected capital spending and the proposed uses of net working capital.

Assignment
The receipt of an exercise notice by an options writer that requires the writer to sell (in the case of a call) or purchase (in the case of a put) the underlying security at the specified strike price.

Assignment of proceeds
Arrangement that allows the original beneficiary of a letter of credit to pledge or turn over proceeds to another, typically end supplier.

Assimilation
The public absorption of a new issue of stocks once the stock has been completely sold by underwriter.

Association of Southeast Asian Nations
A loose economic and geopolitical affiliation that includes Singapore, Brunei, Malaysia, Thailand, the Philippines, Indonesia and Vietnam. Future members are likely to include Burma, Laos and Cambodia.

Assumed interest rate
Rate of interest used by an insurance company to calculate the payout on an annuity contract.

Assumption
Becoming responsible for the liabilities of another party.

Asymmetric information
Information that is known to some people but not to other people.

Asymmetric taxes
When participants in a transaction have different net tax rates.

Asymmetric volatility
Phenomenon that volatility is higher in down markets than in up markets.

"At"/"for"
Used in context of general equities. Paramount terms used to differentiate an offering. Stock is offered at; stock is bid for. In an offering, the trading syntax followed is "Quantity-at-Price"; in a bid, the syntax followed is "Price-for-Quantity."

Athens Stock Exchange
Greece's only major securities market. Greek language only.

At par
A price equal to nominal or face value of a security.

At risk
The exposure to the danger of economic loss. Frequently used in the context of claiming tax deductions. For example, a person can claim a tax deduction in a limited partnership if the taxpayer can show it is at risk of never realizing a profit and of losing its initial investment.

At the bell
In context of general equities, at the opening or close of the market. Financial glossary.

At the close order
In the context of securities, an all or nonemarket order that is to be executed at the closing price of the security on the exchange. If the execution cannot be made under this condition, the order is to be treated as cancelled.

At the figure
In context of general equities, at the whole integer price (excluding the fraction) closest to the side of the market (bid/ask) being discussed. At the full.

At the full
Used in context of general equities. At the figure.

At-the-money
An option is at the money if the strike price of the option is equal to the market price of the underlying security. For example, if xyz stock is trading at 54, then the xyz 54 option is at the money.

At the opening order
In context of general equities, market order or limited price order that is to be executed at the opening (and corresponding price) of the stock or not at all and any such order or portion thereof not so executed is to be treated as cancelled.

Attractor
In non-linear dynamic series, an attractor defines the equilibrium level of the system.

Attribute bias
The tendency of stocks preferred by the dividend discount model to share certain equity attributes such as low price-earnings ratios, high dividend yield, high book value ratio or membership in a particular industry sector. Financial glossary.

Auction Market Preferred Stock
A type of Dutch Auction Preferred Stock.

Auction markets
Markets in which the prevailing price is determined through the free interaction of prospective buyers and sellers, as on the floor of the stock exchange.

Auction rate preferred stock
Floating rate preferred stock, whose dividend is adjusted every seven weeks through a Dutch auction.

Audit
An examination of a company's accounting records and books conducted by an outside professional in order to determine whether the company is maintaining records according to generally accepted accounting principles. Financial glossary.

Audit trail
Resolves the validity of an accounting entry by a step-by-step record by which accounting data can be traced to their source.

Aunt Millie
An unsophisticated investor.

Australian Stock Exchange
Australia's major securities market, formed when the six state stock exchanges (Adelaide, Brisbane, Hobart, Melbourne, Perth and Sydney stock exchanges) were merged in 1987.

Autarky
Absence of a cross-border trade in models of international trade.

Autex
Video communication network through which brokerage houses alert institutional investors of their desire to transact block business (a purchase or sale) in a given security. Indications transmit small, medium and large sizes only, with occasional limits mentioned. Supers are messages with specific size and price included. Both "indications" and "supers" can be only seen by customers (institutional subscribers to Autex). Trade recaps, advertised block trades entered by the dealer/subscribers, are also displayed, but can be seen by both institutions and dealers. Financial glossary.

Authentication
In the context of bonds, refers to the validation of a bond certificate.

Authority bond
A bond issued by a government agency or a corporation created to manage a revenue-producing public enterprise. The difference between an authority bond and a municipal bond is that margin protections may be incorporated in the authority bond contract as well as in the legislation that enables the authority.

Authorized shares
Number of shares authorized for issuance by a firm's corporate charter.

Autocorrelation
The correlation of a variable with itself over successive time intervals. Sometimes called serial correlation. Financial glossary.

Automated bond system
The computerized system that records bids and offers for inactively traded bonds until they are cancelled or executed on the NYSE.

Automated Clearing House
A collection of 32 regional electronic interbank networks used to process transactions electronically with a guaranteed one-day bank collection float.

Automated Customer Account Transfer
For transfers of securities from a non-equity trading account to your equity trading account with your broker.

Automated Export System
Electronic filing of Shippers Export Declaration (SEDs) with US Customs prior to departure. Financial glossary.

Automated Order System
Investment bank computerized order entry system that sends single order entries to DOT (Odd-Lot) or to investment banks floor brokers on the exchange.

Automated Pit Trading (APT)
Introduced in 1989, APT is the LIFFE screen-based trading system that replicates the open outcry method of trading on screen. APT is used to extend the trading day for the major futures contracts as well as to provide a daytime trading environment for non-floor trading products.

Automated teller machine (ATM)
Computer-controlled terminal located on the premises of financial institutions or elsewhere, though which customers may make deposits, withdrawals or other transactions as they would through a bank teller. Other terms sometimes used to describe such terminals are customer-bank communications terminal (CBCT) and remote service unit (RSU). Groups of banks sometimes share ATMs.

Automatic Data Processing (ADP)
A private company that acts as an intermediary to perform proxy services for several banks and brokers. Distributes proxy material to beneficial owners, tabulates the returned proxies and provides the Corporation or its tabulator compiled reports of the tabulation results. ADP also distributes quarterly reports and other corporate information to the beneficial owners. Financial glossary.

Automatic exercise
A protection procedure whereby the Options Clearing Corporation attempts to protect the holder of an expiring in-the-money option by automatically exercising the option on behalf of the holder.

Automatic extension
An automatic extension of time granted to a taxpayer to file a tax return.

Automatic funds transfer
A transfer of funds from one account or investment vehicle to another using electronic or telecommunications technology. Financial glossary.

Automatic investment program
A program in which an investor can invest or withdraw funds automatically. A mutual fund, for example, automatically withdraws a pre determined specified amount from the investor's bank account on a regular basis.

Automatic stay
The restricting of liability holders from collection efforts related to collateral seizure. Automatically imposed when a firm files for bankruptcy under Chapter 11.

Automatic transfer service  account
A depositor's saving account from which funds may be transferred automatically to the same depositor's checking account to cover a check written or to maintain a minimum balance.

Automatic withdrawal
A mutual fund that gives shareholders the right to receive a fixed payment from dividends on a quarterly or monthly basis. Financial glossary.

Autoquote
Autoquote indicative prices are generated for many of the financial options contracts traded at LIFFE using standard mathematical models as derived by Black and Scholes and Cox, Ross, Rubinstein. Autoquote calculates prices for all series by processing variables captured in real-time from other systems and trading members each time the underlying price changes. Autoquotes indicate where a series may trade, given the current level of the underlying instrument.

Autoregressive
Using past data or variable of interest to predict future values of the same variable.

Auto-Regressive (AR) Process
A stationary stochastic process where the current value of the time series is related to the past p values, where p is any integer, is called an AR(p) process. When the current value is related to the previous two values, it is an AR(2) process. An AR(1) process has an infinite memory. Financial glossary.

Autoregressive Conditional Heteroskedasticity (ARCH)
A nonlinear stochastic process, where the variance is time-varying and a function of the past variance. ARCH processes have frequency distributions which have high peaks at the mean and fat-tails, much like fractal distributions. The ARCH model was invented by Robert Engle. The Generalized ARCH (GARCH) model is the most widely used and was pioneered by Tim Bollerslev.

Availability float
Checks deposited by a company that have not yet been cleared. Financial glossary.

Available cash flow
Total cash sources less total cash uses before payment of debt service.

Available on the way in
In context of general equities, stock is available to new customer as trade initiated by another customer is about to be consummated (on the exchange floor). Usually said to an inquiring salesperson. Financial glossary.

Aval
Term meaning inseparable from the financial instrument. This gives a guarantee and is abstracted from the performance of the underlying trade contract: Article 31 of the 1930 Geneva Convention of the Bills Of Exchange states that the aval can be written on the bill itself or on an allonge. US Banks are prohibited from avalizing drafts.

Avalizor
An institution or person who gives the aval.

Average
An arithmetic mean return of selected stocks intended to represent the behavior of the market or some component of it. One good example is the widely quoted Dow Jones Industrial Average, which adds the current prices of the 30 DJIA stocks and divides the results by a predetermined number, the divisor. Financial glossary.

Average accounting return
The average project earnings after taxes and depreciation divided by the average book value of the investment during its life.

Average (across-day) measures
An estimation of price that uses the average or representative price of a large number of trades. Financial glossary.

Average age of accounts receivable
The weighted-average age of all the firm's outstanding invoices.

Average collection period or days' receivables
The ratio of accounts receivables to sales or the total amount of credit extended per dollar of daily sales (average AR/sales 365).

Average cost of capital
A firm's required payout to bondholders and stockholders expressed as a percentage of capital contributed to the firm. Average cost of capital is computed by dividing the total required cost of capital by the total amount of contributed capital. Financial glossary.

Average daily balance
A method for calculating interest in which the balance owed each day by a customer is divided by the number of days.

Average down
A strategy used by investors to reduce the average cost of shares, in which the investor purchases more shares with a fixed amount of capital as the price of the shares decreases. The investor receives more shares per dollar and decreases the average price per share.

Average equity
A customer's average daily balance in a trading account at a brokerage firm. Financial glossary.

Average life
Also referred to as the weighted-average life (WAL). The average number of years that each dollar of unpaid principal due on the mortgage remains outstanding. Average life is computed as the weighted-average time to the receipt of all future cash flows, using as the weights the dollar amounts of the principal paydowns. Financial glossary.

Average maturity
The average time to maturity of securities held by a mutual fund. Changes in interest rates have greater impact on funds with longer average maturity. Financial glossary.

Average rate of return
The ratio of the average cash inflow to the amount invested. Financial glossary.

Average tax rate
Taxes as a fraction of income; total taxes divided by total taxable income. Financial glossary.

Average up
A strategy used by investors to lower the overall cost of shares by buying as many shares with a given amount of capital in an increasing market. Buying $1000 worth of shares at $30, $35, $40 and $45, for instance, will make the average cost of the sharesx $36.65, lower than the average price of $37.50. Financial glossary.

Avoided cost
In context of project financing, the capital and expense that would have to be spent if the project did not proceed. Financial glossary.

Away
A trade, quote or market that does not originate with the dealer in question, e.g. "the bid is 98-10 away from me." Financial glossary.

Away from the market
In context of general equities, out of line with the inside market at this time, such as when a bid on a limit order is lower or the offer price is higher than the current market price for the security; held by the specialist for later execution unless FOK.  Financial glossary.

Away from us
Used in context of general equities, to characterize role of a competing broker/dealer. Trading away from us signifies that stock is bought and/or sold with institutions using other trading firms. Financial glossary.

Away from you
Used for listed equity securities. Financial glossary.

Axe to grind
Used in context of general equities. Involvement in a security, whether through a position, order or inquiry. Financial glossary.