Definitions
Definitions
A
AAA
A rating agency rating that is given to the best quality of debt obligation, usually given if the possibility of principal as well as interest payments default is very low.
AAF (Asset Allocation Fund)
A fund kept by investment companies to support the changes in portfolio positions, by reallocating assets according to changing market conditions.
AAGR (Average Annual Growth Rate)
The arithmetic mean (average) of the growth of investment value (portfolio value), over a period of years, to yield a particular rate that will give growth information at first glance.
AAR (Average Annual Return)
The percentile metric used to measure historical returns on an investment or portfolio and to evaluate the quality of potential investments.
Abandonment Value
This is the liquidation value of a project. In other words, if the project were to be liquidated at this very instant, at this very state of progress, the amount earned on its sale is termed as the abandonment value of the project.
ABB (Activity Based Budgeting)
When the budgetary allocations are activity based, i.e. finances are allotted on the basis of activities, the budget is termed as activity based budgets.
ABM (Activity Based Management)
The management style that identifies and analyzes individual activities, based on their costing, profitability and drivers, is known as activity based management.
ABS (Asset Backed Securities)
These are the securities that derive their values from an underlying asset or pool of assets. In other words, a financial security backed by any other form, like a lease, loan or receivables is an asset backed security.
Absolute Return
This is an assets result or performance, irrespective of any comparisons with other assets in the same asset class.
ACATS (Automated Customer Account Transfer Service)
is a central processing system that supports the timely transfer of customer accounts, between various participant institutions.
ACB (Adjusted Cost Base)
It is the cost calculation used when calculating an asset value for tax debt purposes.
ACRS (Accelerated Cost Recover System)
is the historical calculation of depreciation for tax and accounting purposes. MACRS (Modified ACRS) is a similar system based on the current method.
Accord and Satisfaction
This is the full and final payment, which is incidentally less than the total amount owed, made for the full settlement of an outstanding debt.
Accounting Noise
When the financial situation of a firm is made to look better or worse than it actually is, by twisting the GAAP (Generally Accepted Accounting Principles) rules, it is known as accounting noise.
Accredited Investors
“Refers to an individual whose net worth, or joint net worth with a spouse, exceeds USD 1,000,000; or whose individual income exceeded USD 200,000 or whose joint income with a spouse exceeded USD 300,000 in each of the 2 most recent years and can be expected to meet that income in the current year.” – Campbell R Harvey
Accrued Market Discount
A discount bond that is redeemable at par, rises in its market value as it approaches maturity (keeping market interest rates constant) and this market value rise is termed as accrued market discount.
Accumulation Phase
This is the time period where an accumulated pool of finance is generated by an investor, by building up his savings.
Across the Board
When all the stocks, in all the diverse sectors, move in one direction together, due to a trend or movement, it is termed as an across the board bull or bear run.
Act of God Bond (also referred to as catastrophe bond)
Is an insurance company bond that links its principal and interest to all the losses incurred by the company, because of natural disasters.
Active Bond
When a bond is traded with a relatively high frequency and in relatively higher volumes, the bond is known as an active bond.
Active Bond Crowd
Unlike the cabinet crowd (that do not take active part in the bond market), the active bond crowd comprises all those investors that actively trade in large volumes, in the bond market.
Active Box
When securities are kept aside, to remain available as a collateral for loans or margins, they are termed to be in an active box.
Active Investing
Investing in short or long positions in an ongoing frequency, such that you are never in a ‘non-invested’ state, is termed as active investing.
Active Management
When investments are undertaken with the specific objectives that they should earn higher return than the set benchmark, the investing process is termed as active management.
Active-Participant Status
If you have participated in an employer sponsored retirement plan, you hold an active-participant status.
Adjustment Frequency
The frequency of interest rate change in an adjustable rate mortgage contract is termed as adjustment frequency.
Advance Directive
gives an individual to decide on his own critical care now, for when he may not have the power to do so.
Aggressive Growth Fund
A mutual fund that aims to achieve the highest possible growth rates (by obviously undertaking more risk) is termed as an aggressive growth fund.
Algorithmic Trading
When transnational decisions are made by utilizing very advanced mathematical decision-making models, the policy followed is termed as algorithmic trading.
Alligator Spread
If a spread turns out to be unprofitable even during favorable market movements, usually due to huge commissions, it is called an alligator spread.
Alternative Order
When two separate orders are simultaneously placed on one security, with a caveat that one’s execution automatically cancels the other, the orders are termed as alternative orders.
Angel Bond
Investment grade bonds that pay lower interest rates because the issuing companies have a high credit rating are termed as angel bonds.
Annuity
Investment that grow at a particular interest and pays out amortized payments over a certain period after the investment
period are termed annuities.
Arbitrage Bond
These are municipality issued lower rate debt securities that are issued just before the call dates on their higher rate debt securities, to gain an interest rate advantage.
Assessed Value
These are Rand values of properties used for tax assessments.
Assignable Contract
This futures contract allows the holder to confer his or her rights on another third party.
Axe
Axe is a term used to convey the interest a trader shows in a bond buying or selling process.
B
B-BBEE
Broad-based black economic empowerment.
B2B
B2B stands for business to business and is the terms used to describe two businesses trade with each other.
Bar Chart
This chart is a vertical representation of price activity of a security over a period of time and is a very popular analysis toll with technical analysts.
Barrier Option
This is an option whose payoff depends on whether the underlying stock has crossed or reached a preset barrier price.
Basket Option
When an option is based on a basket of commodities, currencies or securities i.e. the underlying commodity of not one but a basket of many, the option is called a basket option.
Bermuda Option
This is an option that can only be exercised on a predetermined day of every month.
Binomial Option
Pricing Model Developed by Cox, et al., in 1979, this model provides a mathematical valuation of an option at each point in time, under simplified assumptions.
Black Friday
September 24, 1869 was deemed a Black Friday in the pages of stock market history because of a catastrophic stock market crash.
Bond Option
When an option contract is made with bonds as the underlying asset, the contract is termed as a bond option contract.
Bonus Share
When a company decides to allot additional shares to already existing shareholders, instead of a dividend payout, it is termed as a bonus share issue.
Bootstrapping
This is a procedure that uses market figures to calculate zero coupon yield curves.
Bottom Fisher
A bottom fisher is an investor who shops for bargain stocks i.e., the stocks that have seen a significant price drop in recent times.
Bracket Creep
This is the term used to refer to an increase in income taxes without any increase in real incomes, because of inflation.
Bucketing
Also referred to as bucket shop, this is an unscrupulous activity aimed at making short term profit, by a broker confirming the execution of an order without actually doing so in reality.
Bunny Bond
This type of bond gives investors the option to invest the coupon payments in other bonds of same coupon and maturity.
Butterfly Spread
A bull and bear spread combination strategy that uses three strike prices and limits both, the risk and the profit potential, is called a butterfly spread.
C
Calendar
Year Based on the Gregorian calendar, a calendar year refers to the period from January 1 to December 31. A calendar year will be the time period used to determine an individual’s or a corporation’s financial information, in order to calculate taxes.
Call Premium
The amount that is paid by the issuer of a callable fixed-income debt security to the holder of the security, when the issuer calls the security.
Call Ratio
Backspread It is a strategic investment plan wherein, various options are combined in order to have minimum loss potential and mixed profit potential.
CAMEL Rating
System International bank supervisory authorities rate institutions and banks on six factors – Capital adequacy, Asset quality, Management quality, Earnings, Liquidity and Sensitivity to market risks.
Candlestick
It refers to a price chart that will display the high, low, open and close price for every single day over a period of time for a specific security.
Capital
Capital is a vague term that usually refers to the financial resources and assets of a company including the likes of land and buildings and plant and machinery.
Capital Note
These are the fixed income products that companies issue in lieu of short-term debt. These are generally unsecured debts and the company’s credit rating helps in backing these notes.
Captive Fund
These are usually held by investment banks, insurance companies and institutional asset managers. These funds deal solely with the institution that has ownership and provides them with investment services.
Carbon Trade
It is a concept that was developed as a result of the Kyoto Protocol. Carbon trading is the trading of emission rights of Green House Gases (GHG) between nations.
Carried Interest
Without contributing any initial funds, the general partners of private equities and hedge funds receive a share of the profits as compensation. This amount is known as the carried interest.
Carrying Charge
There are certain costs to be incurred while holding a financial instrument. These charges usually include insurance, storage costs and other related costs. The cost associated with holding a financial instrument is known as carrying charge.
Cash Realisation Rate
Cash generated from operating activities divided by profit after tax attributable to equity holders
Casino Finance
Any strategy adopted for investment that is seen to carry high risk is known as casino finance.
Catalyst
As the scientific meaning of the term catalyst, its financial usage also implies something that causes or initiates a particular event to happen.
Chastity Bond
It is a bond that acts as a discouraging agent for unwanted takeovers. Immediately after the takeover, the new company will be forced to pay the bondholders, as the chastity bond matures when a takeover occurs.
Closed End Lease
It is a lease agreement that places no obligation on the lessee to purchase the asset at the end of the lease period. This form of lease is also called “true lease”, “walkaway lease” or “net lease”.
Cold Calling
Cold calling is a technique used by brokers and agents to gain new business opportunities and clients by approaching potential clients randomly.
Commodity Pool
Similar to a mutual fund, a commodity pool collects contributions by investors and uses them in futures and commodity options trading. Investors make small contributions and as a result, bear low risks.
Contract Market
Also known as designated exchange, it refers to any platform of trade that trades in specific options or futures contracts.
Conversion It refers to the exchange of a convertible asset (like a convertible bond) into another type of asset at a fixed price, on or before a fixed date.
Convertible Debenture
A debenture that can be converted into any other asset at some point of time is called a convertible debenture.
Corporate Finance Any activity or task that deals with the financial and monetary dimension of a company is called corporate finance. Mergers and acquisitions to procurement of raw materials can all be included under corporate finance.
Corporate Tax
It is a tax or a levy instilled upon a company, and the amount of the tax will depend on the levels of profit achieved by the firm.
Credit Crunch
Credit crunch refers to a financial scenario wherein investment capital becomes very difficult to obtain. The price of debt products rises up considerably as the banks and lenders become very cautious and conservative, ie post-2008 etc.
Creative Destruction
Joseph Schumpeter came up with this term in his work, “Capitalism, Socialism and Democracy”. He said, “Creative destruction is a process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one”.
Currency
It is issued by the Government of the day and widely accepted as a medium of exchange. It includes coins and paper notes and is circulated freely within an economy. It forms the basis for any form of trade.(T-1,T-2,T-3 etc.)
CPA
Consumer Protection Act
CSI
Corporate Social Investment
D
DAC
It is normally used in the insurance industry where the company defers sales costs related to attaining a new customer over the term of insurance contract.
DAIO
Down-and-In Option Mean is a type of a knock in option where the payoff is decided by the price of the underlying asset falling to the barrier level price.
DAOO
It is a kind of a knock out barrier option that stops its existence when the price of the underlying asset does not reach the barrier level. The investor has the authority to use their European call or put option on the exercised price mentioned in the contract if the price of the underlying asset does not reach the barrier price.
Dark Cloud Cover
It is a pattern where the black candlestick follows a white candlestick in the candlestick charting. It can be a sign of a future bearish trend.
DAT
It means direct access trading where one client can trade directly with another client. It can be called an expert in trading and exchange without any broker or middleman or a market on Nasdaq.
Date Certain
Date certain is considered to be a legal binding which ascertains the date on which the actions specified in the contract can be reasonably accomplished or completed.
Dated Date
It is a date at which the interest begins to accrue or accumulate on a fixed income security. If the issuance date of the fixed income security is the same as the dated date then the dated date is also known as the issue date.
Day Stock Trader
The stock trader makes an abundant amount of trade each day and holds his position for a very short time (from hours to minutes). Most of the trades are entered and closed out within the same day.
Day-Count Convention
Each bond market has its own day-count convention. It is a system which is used to determine the number of days between two coupon dates and is essential in calculating the accrued interest and current value if the next coupon payment is less than a full coupon period away.
Day’s to Cover
Day’s to cover is also known as “Short Interest Ratio”. It can be calculated as: Days To Cover= Current Short Interest/Average Daily Share Volume. It is the measurement of the issued shares of a particular company that are presently shorted and are expressed as number of days necessary to close out all the short positions.
DCF (Discounted Cash Flow)
is a valuation method used to estimate the profitability of a particular investment option. DCF analysis uses future free cash flow projections and discounts them, using weighted average cost of capital, to get the present value used to analyze the competence of investment.
DDM
It is a process to value the price of a stock using estimated dividends and discounting them back to the current value. The stock is considered to be undervalued if the DDM value is higher than the current trading value of the shares. It can be calculated as: Value of Stock = Dividend Per Share/difference of Discount Rate and Dividend Growth Rate.
Dead Cat Bounce
It means a short term or temporary recovery from a long time decline or bear market, after which the market continues to fall.
Dead Flow
Dead flow is the rate at which the new proposals flow to the underwriters of an investment bank. These proposals include takeovers, acquisitions, mergers, public offerings of securities (IPO), etc.
Death Cross
Death Cross is a crossover due the security’s average long haul moving, breaking above its average short term moving or level of support.
Death Spiral
It is a type of loan given to the company by the investors in exchange for convertible debt. The original shareholders might lose the control on the company in this case. Convertible debt is like convertible bonds that allow investors to convert bonds into stocks at a rate lower to the current market rate.
Debit Spread
Debit Spread means when the investor trades on the same fundamental security with two options and different market prices. The lowest premium option is sold and the higher priced option is purchased at the same time.
Debt Equity Ratio
Debt equity ratio is the measurement of the company’s financial position which is calculated by dividing the total liabilities and the shareholder’s equity. It estimates or measures the proportion of debt and equity the company is using, for financing its assets.
DECS (Debt Exchangeable for Common Stock)
DECS is a debt instrument which renders a long call on the company which is issuing the stock and coupon payments consisting of a short put option to the holder.
Debt Overhang
Debt overhang indicates a circumstance when the debt stock of a country surpasses the future capacity of the country to repay it.
Debt Equity Ratio
The ratio of total debt (net of cash on hand) to total equity.
DTI
Department of Trade and Industry
E
E-Mini (Stock Index Futures)
These are electronically traded futures contracts that are available in a wide range of indices and are traded on the Chicago Mercantile Exchange.
Early Exercise
Early exercise is done when an option or a security is exercised before its maturity.
Earmarking
‘Flagged’ or ‘Marked’ funds that are set aside for a particular period of time or for a particular event or purpose are said to be earmarked funds or capital.
Earned Income
Legitimate income that comes from an active participation in trade or business is termed as earned income. Wages, salaries, tips, commissions, and bonuses come under the ‘earned income’ umbrella.
Earnings Retention
Setting aside a percentage of net earnings to be reinvested in the business as opposed to being used to pay out dividends is called earnings retention.
Earning the Points
As opposite to losing the points, earning the points is a term used to describe a situation where, a trader gains through a difference in buy and sell prices, when he agrees to sell at one price now and to buy for less in the future.
Eat Well Sleep Well
This refers to the risk return trade off that every trader must face, the choice of whether he wishes to eat well (high return with high risk borne) or sleep well (low risk borne, yielding lesser return).
Eat Your Own Dog Food
When a company uses its own products (self manufactured) for day-to-day operations, it is said to be eating its own dog food.
EBITDA
Earnings before interest, tax, depreciation and amortisation
Echo Bubble
A smaller bubble that follows an earlier prominent bubble (a post bubble rally) is termed as an echo bubble.
Economic Forecasting
This involves projecting the future state of the economy using various mathematical and statistical models.
Effective Duration
When a bond has embedded option on it, they are valued using their effective duration.
Electronic Commerce
E Commerce This is a business model that allows firms to transact via an electronic network.
Electronic Filing
E File When tax returns are filed over the Internet, using online tax filing forms and tax preparation software, the process is called E Filing.
EME
Exempted Micro Enterprise (B-BBEE Codes of Good Practice)
Embedded Options
A normal option is traded separately from the underlying security but an embedded option is traded together with it, i.e. the option and the underlying security are inseparable.
Employee Contribution Plan
These are company sponsored retirement plans where contributions or deposits are deducted from the employee’s pay and some companies match these payments with the same amount from their own pockets.
Equity Income
Income that is earned through investments in stocks is termed as equity income. In the mutual funds context, equity incomes are incomes earned from investments in high quality companies with a history of rich and reliable dividend distributions.
Equivalent Annual Cost
A cost that is used to evaluate projects with different life spans, equivalent annual cost is the present value of all costs of a project divided by the annuity factor for the project life.
Erasure Guarantee
This guarantee is made by accredited financial institution to lend authenticity and legitimacy to any changes made to bonds and securities.
ESOP (Employee Stock Ownership Plans)
are the employee benefit plans that offer the employer company’s stocks to employees to keep them focused on their company and generate an interest in them to keep the company’s stock value appreciating.
Estate Freeze
When an estate owner transfers his stock to a company in return for preferred shares, with the aim to circumvent tax consequences, the asset management strategy is termed as an estate freeze.
Eurobond
When a bond is issued in a currency other than its home currency (currency of the country from where it is issued), it is termed as a Eurobond.
Eurocredit
When a lending bank issues a loan of large denominations, in a currency other than its national currency, it is said to be giving out
Eurocredit.
Eurodollar
These avoid all Federal Reserve Board regulations as these are the dollar denominated deposits at foreign banks or foreign branches of American banks. These securities allow buyers to benefit, or lose, from variations in currency exchange rates.
European Option
Unlike an American option that can be exercised anytime within its maturity period, European options can only be exercised at the end of their lives.
Exit Strategy
These are the strategies or methods to pull out investment from a certain project.
Exotic Options
When an option differs from standard American or European options on things like underlying asset, payoff calculations, etc., it is termed as an exotic option.
Extrinsic Value
The extrinsic value of an option is nothing but the difference between the actual option price and its intrinsic value.
F
Fair Market Value
The fair price that any asset would fetch in the market place considering that all parties have reasonable knowledge of the asset and a reasonable period is taken for the transaction completion, is termed as that asset’s fair market value.
Fair Weather Fund
Unlike a foul weather fund, a fair weather fund has the tendency to outperform a bull market and under perform in a bear market.
Fairway Bond
Till the embedded index or the underlying interest rate option on a bond remains within a particular range, a fairway bond continues accruing interest.
Family of Funds
A group of mutual funds, covering a wide range of categories as well as investment objectives, all offered by one investment or mutual fund company, is called a family of funds.
Featherbedding
This is the term used to describe a labor union strategy which requires an employer to hire more people than needed for a particular task.
Feeder Fund
A fund which has all of its investing routed via or done by a master fund.
FICA
Financial Intelligence Centre Act, No 38 of 2001
Fifty Percent Principle
This principle predicts a 1/2 or 2/3 of price change correction before an observed trend shows it.
Fill or Kill
FOK This is a type of order or transaction that requires a transaction to be filled completely or be canceled. Examples are market orders or limit orders.
Financial Engineering
This involves creating new financial products by redesigning and repackaging existing financial instruments.
Financial Porn
This is a financial slang, used to describe excessive, sensationalist media coverage of financial news, that triggers excessive buying and affects overall finances of the investors.
Fire Sale
A fire sale is a good time to buy a security as it occurs when the market prices for the security are at a low.
First-Time Home Buyer
is a term used to describe a buyer who’s buying residential property for the first time ever.
Fixed Annuity
This annuity entails the annuitant receiving a fixed dollar payment all through his life, till he dies. Get your fixed annuities explained.
Flat Yield Curve
This yield curve signifies that an investor cannot gain any extra compensation for holding on to an investment as both the short and long term rates are exactly the same.
Floater
Also known as ‘floating rate debt’, floaters are debt instruments with varying coupon rates, that change according to market conditions.
Floating Rate Note (FRN)
Also known as floaters, these are variable interest rate notes, with interest rate adjustments made every 6 months or so.
Flower Bond
These are fixed income products that were purchased at discount with the objective of paying the federal estate taxes when they mature.
Force Majeure
French term with literal translation as ‘greater force’. It is used in contracts to escape the liability for natural and unavoidable disasters.
Foreclosure
A foreclosure entails the seizure and sale of property stipulated in the mortgage loan contract of a debtor who has been unable to pay his principal or interest on time.
Foreign Bond
A bond issued in the domestic market, in domestic currency denominations, but by a foreign country issuer, is termed as a foreign bond.
Fortune 500
An annual list compiled using the latest figures, of the 500 largest companies in the United States.
Free On Board
FOB In a FOB contract, it is the seller’s obligation to deliver goods on board a designated vessel.
FSB
Financial Services Board
Full-Service Broker
A broker that offers a full range of services like research, advice, retirement and tax planning, etc. at a higher price than other normal brokers, is called a full service broker.
Futures Exchange
This is the market place that trades futures contracts and options on futures contracts.
G
G-5
G-5 is the group of 5 most industrialized nations, i.e. France, Germany, Japan, UK and US.
G-7
G-7 is a group of countries which include the G-5 along with Canada and Italy.
Gain
Gain is the excess of income over expenses.
GATT
GATT is the acronym for General Agreement on Tariffs and Trade. GATT was the agreement on trade between countries till 1995. It is now replaced by the WTO.
GDR
GDR is the acronym for Global Depository Receipts. It is a bank certificate which is issued by more than one country for investing in shares of a foreign country.
GIC
GIC is the acronym for Guaranteed Investment Contract.
Gilt Edged Bond
A gilt edged bond is the bond issued by a blue-chip company and is generally assumed to have secured returns.
GIP
GIP is the acronym for Gibraltar Pound.
Global Bond
A global bond is a bond which is issued in more than one country at the same time.
Global Financial System
Global Financial System comprises institutions and regulations which act on an international level as opposed to a regional or a national level.
Global Fund
A Global fund is a type of mutual fund of which at least 25% of the total portfolio is comprised foreign securities.
Golden Handshake
A golden handshake is a severance package given to an employee if the employee loses his job
Go Long
A person is said to be going ‘long’ when he invests in a security or any other financial product and intends to hold on to it, for a longer period of time till its value increases and the investor can sell it off at a profit.
Go Short
Going short is a futures contract which commits you to deliver or sell a product which is underlined in the contract.
Gray Market
Gray market is the sale of securities that are not officially issued to firms other than the underwriting syndicate.
GTM
GTM is the acronym for ‘good this month’. It is an order to buy or sell a security at a certain price. The order expires at the end of that calendar month if the price does not become available.
GTQ
GTQ is the acronym for Guatemala Quetzal.
Guaranteed Bond
A guaranteed bond is a bond issued by one firm, and the payment of interest and principal on the bond is guaranteed by another firm
H
Hard Loan
A hard loan is a foreign loan which is paid in the currency of a nation which has stability and economic strength.
Hedge
Hedge means to invest in a low risk investment option so that the risk of adverse price movement for a high risk asset is reduced.
Heir
Heir is the person appointed to inherit the assets and liabilities of the deceased, as specified in the will of the deceased.
Held to Maturity Securities
Held to maturity are those securities which the firm has the ability and the intent to hold until they mature.
High Beta Index
High beta index is the index which comprises all the high beta companies on the stock market.
HKD
HKD is the acronym for Hong Kong Dollar
HLT
HLT is the acronym for Highly Leveraged Transaction.
HNL
HNL is the acronym for Honduran Lempira.
Hobby Loss
Hobby loss is the non-deductible loss made on activities for personal pleasure and not business activities.
Hockey Stick Bidding
Hockey stick bidding is when a trader offers an extremely high price for small portion of the goods.
Holding Period
A holding period refers to the expected amount of time for which an investor holds on to an investment.
Hot Money
Hot money is the money which flows between the financial markets regularly in the search of the highest short term interest rates.
Hounding Analysts
Hounding analysts is when the hedge fund managers relentlessly persuade the analysts to change the rating on a stock.
House Poor
House poor are those individuals that spend a very large part of their income on home ownership and maintenance.
Household Expense
Household expense is the sum of the total money spent on general living expenses.
Housing Bond
Housing bonds are those bonds which are secured by mortgage repayments on rental properties or homes.
HUF
HUF is the acronym for Hungarian Forint.
Hypothecation
Hypothecation is when a person places a mortgage as a collateral for a loan.
I
IB
IB is the acronym for Introducing Broker
IBES
IBES is the acronym for Institutional Brokers’ Estimate System
Iceberg Order
Iceberg order is a large order which is divided into smaller single lots to hide the actual order quantity.
IMF
IMF is the acronym for International Monetary Fund.
Immediate Payment Annuity
An immediate payment annuity is a contract that is purchased with one payment and has a specified payment plan which starts immediately on purchase.
Impact Fee
An impact fee is a fee which is imposed on property developers by the municipalities for new infrastructure that is being built or increased due to new property development.
Implied Repo Rate
Implied repo rate is the rate of return which is earned by simultaneously selling bond futures or forward contract, and then buying an actual bond of the same amount in the cash market by using borrowed money.
Import
Import are the goods and services purchased by the home country from another country.
Incentive Stock Option
Incentive stock option is the part of the total share capital of the employing company which is given to the employee as a performance bonus.
Income
Income is the money which comes in, on account of selling goods or providing services.
Income Bond
Income bond is a type of bond which only promises to repay the face value of the bond. The coupon payments on this type of bond depend on earnings of the issuing company.
Index Amortization Note
Index amortization note is a financial instrument whose payment schedule is determined by the prevailing interest rates.
Index Arbitrage
Index arbitraging is an investment strategy which aims to profit from the differences between actual and theoretical futures prices of the same stock index. This can be done by simultaneously buying (or selling) a stock index future while selling (or buying) the stocks in the index.
Index Option
Index option is either the call or the put option on a financial index.
Inflation
Inflation is the increase in the prices of goods in a country. It also represents the fall in the purchasing power of a currency.
Inheritance Inheritance is the assets and liabilities which the legal heir inherits from the deceased.
Initial Public Offering (IPO)
Initial public offering is when a business entity offers a share of its ownership to the general public for the first time.
Installment Debt
Installment debt is the debt issued by the lender with the stipulation that a certain part of the principal and interest should be returned periodically in the form of installments.
Insurance
When one entity assumes the risk of a business loss of another entity for a periodic payment, it is known as insurance.
Interest Rate Ceiling
Interest rate ceiling is the maximum interest that one entity can charge another according to the terms specified in the contract.
Internal Revenue Service
Internal revenue service is the department of the RSA government which has the responsibility of enforcing and collecting taxes.
International Bond
International bonds are those bonds which are issued by a non domestic entity.
J
JAJO
An acronym that stands for the names of four months, January, April, July and October. These four months are very important for dividend paying companies, as they announce dividends and also because JAJO is an option cycle as well.
JIC An acronym for ‘just in case’.
In finance, it can signify a strategy of keeping a high inventory level in an attempt to safeguard against the loss of order. It is a precautionary measure to provide safeguard against the loss of sales due to lack of inventory. ‘JIT’, on the other hand is a complete opposite to this strategy, which stands for ‘just in time’. This strategy involves producing goods only when orders for them have been received instead of keeping a high level of inventory of products.
JMD
JMD is the abbreviation or ISO currency code for Jamaican Dollar.
Job Hunting Expenses
These are the expenses incurred in the course of finding a new job, in same or similar line of work. Job hunting expenses are usually deductible from taxable income on fulfilling certain conditions, regardless of the fact whether one finds a new job. But, expenses are not deducted, if it is the first job of the individual after completing education.
Joint and Survivor Annuity Also known as ‘joint life annuity’, it is an annuity that pays a lifetime income to two or more beneficiaries, usually the annuitant and his or her spouse.
Joint Bond
A bond that is guaranteed by the issuer and another party. Generally, the bonds issued by a subsidiary company are also guaranteed by the parent company.
Joint Owned Property
A property owned by more than one party, so that even at the death of one owner, the property does not pass on to the decedent’s heir. Instead, the property continues to be owned by the other owners.
Joint Return
A combined income tax return filing made by a married couple.
JPY
Abbreviation for Japanese Yen, which is the third most traded currency in the foreign exchange market. The first two most traded currencies are U.S. Dollar and Euro.
JSE
Johannesburg Stock Exchange
JTIC
It stands for ‘Joint Tenants In Common’, which refers to a type of brokerage account owned by two or more owners. But, none of the account holders has the rights of survivorship so that a surviving tenant cannot claim the rights of the deceased owner. Instead, the asset is distributed as per the stipulations made in the written will by the deceased person.
JTWROS
It an acronym for ‘Joint Tenancy with the Right of Survivorship’. It differs from the joint tenants in common in the sense that survivorship right is granted to the owners of the property. In ‘joint tenancy with right of ownership’, each owner has equal share on the property and he or she has the right to sell his individual share without the approval of the other owners. In case, one of the owner dies, the property does not become part of a decedent’s estate. Instead, it continues to be owned by the other owners and it is divided equally among them.
Junk Bond
A high risk bond, which is ranked below investment good by the major bond rating agencies. Such rating is usually given to the bonds when the bond issuer is undergoing financial problems, for which it may not be able to pay interest or repay the entire loan. The bond issuer usually offers a very high interest rate on such bonds in order to offset the high risk of default.
K
Kangaroos
A term used for Australian stocks.
Kappa
It is the ratio of the Dollar price change in the price of an option to a 1 percent change in the expected price volatility, and is mostly used in regression analysis.
Keepwell Agreement
An agreement between a parent company and its subsidiary, whereby the parent company guarantees financing to the subsidiary for a definite time period. This method helps the subsidiaries to maintain their solvency and increase their creditworthiness in order to borrow from banks and other creditors.
Keiretsu
A Japanese term that is used to refer to a grouping of financial and industrial corporations, which is based on cooperation and cross-shareholding. The members of a keiretsu share knowledge and also own stakes in one another’s corporations in order to ensure mutual security and success. In corporate world, keiretsu is often used for a Japanese form of corporate organization.
Keltner Channel
An indicator named after Chester W. Keltner, a grain trader and author. This is a market analysis indicator, which is used for measuring stock movements in relation to an upper and lower moving-average band and thereby for predicting market trend.
KES
It is the abbreviation or ISO code used for Kenyan Shilling.
Key Rate Duration
Key rate duration is the measure of portfolio or security sensitivity. It basically measures the value of a portfolio or a security’s sensitivity in relation to a 1% change in the yield for a given maturity, while holding all other maturities constant.
Kickback
Kickback refers to payment of something of value, either money or favor to an individual, in order to influence his or her action or decision in the favor of the person paying the kickback. A kickback can be legal or illegal, but usually it is practiced in secret. An example is the reduction in commission charges for investors trading frequently.
Kicker
An additional feature like a right, warrant or equity participation that is added to a debt instrument in addition to usual interest payment so as to make it more marketable and desirable to prospective investors. But, in real estate, kicker can be an additional expense apart from usual interest payment that is required to be paid, for getting a loan approved.
Kicking the Tires
It is a slang used for referring to the act of doing grassroots research before investing. Both investors and fund managers do some preliminary research like calling or visiting a company or questioning a broker or a financial and investment advisor, etc. prior to making any investment. The term got its peculiar name from the common habit of people to kick the front tire of an automobile that they are intending to purchase while the salesperson makes his pitch.
Killer Application
A term used for software applications, which are considered much more effective than their competitors and hence the name ‘killer application’.
Killer Bees
A term used for individuals or organizations like investment bankers that help publicly traded companies to thwart hostile takeover attempts with the help of some defensive strategies.
King III
King Report on Governance for South Africa, 2009
KMF
It is the abbreviation or ISO code for the currency, Comoros Franc.
Knock-In Option
A type of barrier option which remains latent until a certain price level is reached before expiration, after which it becomes a normal option.
Knock-Out Option
An option that loses its value or worth when the price of the underlying asset or currency exceeds a specified price level.
Kondratiev Wave
An economic theory that states that capitalist economies are vulnerable to larger business cycles (or economic fluctuations) with much longer phases than common business cycles. Such large business cycles or ‘supercycles’ can last for 50 to 60 years. This theory was propounded by Soviet economist Nikolai Kondratiev.
KPW
KPW stands for the currency for North Korea, known as North Korean Won.
KRW
It is the currency abbreviation for South Korean Won.
KWD
It is the abbreviation for Kuwaiti Dinar.
KYC
An abbreviation for ‘Know Your Client’, which is a standard form in the investment industry. It enables the investment advisor to know important information about their clients like financial position, risk tolerance, etc., so that advisors can decide what type of investment can suit their clients.
KYD
KYD is the abbreviation for Cayman Islands Dollar, which is the currency of Cayman Islands.
KZT
It is the abbreviation for Kazakhstan Tenge, the currency of Kazakhstan.
L
Ladder Option
An option where investors can lock-in gains on the underlying asset or security, once its price reaches a predetermined price level.
LGAP (Lady Godiva Accounting Principles)
It refers to a theoretical set of accounting principles which require disclosure of all information by the corporations, including those which are usually not reported under the generally accepted accounting principles.
Lady Macbeth Strategy
A corporate merger or takeover strategy, where a third party secures the trust of the targeted company by posing as a white knight, but then joins the hostile acquirer or bidder.
LAK
It is the abbreviation for ‘Lao kip’, which is the currency of Laos.
Lambda
It is the ratio of change in option price to a 1% change in option volatility. Basically, it is the partial derivative of option price with respect to option volatility.
Lame Duck
A term used for an individual who has defaulted or gone bankrupt.
Last Trading Day
The last day for trading or closing a futures contract.
Late-Day Trading
Purchasing or selling securities after the trading day has been closed, but recording them to have occurred before the closing of the market, which is regarded as an unethical practice.
LBO
LBO stands for ‘leveraged buyout’, which is a method of acquiring a company with a substantial amount of borrowed money. Usually, the acquiring company uses its own assets as well as the assets of the acquired company as ‘collateral’ to secure such a large loan.
LBP
An abbreviation for Lebanese Pound, the currency of Lebanon.
Leprechaun Leader
A term used for a mischievous corporate manager or executive, who is believed to possess buried treasure just like the ‘elf leprechaun’ of Irish folklore.
Letter of Credit
A document or letter given by a bank that guarantees that payment will be made to the seller on time. If the buyer fails to make the payment, then the bank that gives the letter of credit has to pay the entire or the remaining amount for the purchase.
LIBOR
An acronym for London Interbank Offered Rate, which is the standard rate for calculating rates for adjustable-rate loans. LIBOR is based on the rate of interest at which borrowing and lending of unsecured funds are carried out by banks among each other.
Lifestyle Fund
An investment fund with an individual specific asset mix, as determined by the factors like level of risk aversion, age, purpose of investment, etc.
Loan Sharking
‘Loan shark’ refers to the person who charges an interest rate that is much higher than the legal rate that is charged for loan. So, loan sharking is the term for act of charging an exorbitant or illegal interest rate on loans. Also known as ‘usury’.
Lobster Trap
A plan or strategy employed for fending off a hostile takeover, whereby the company prevents anyone with more than 10% ownership from converting its convertible securities like convertible bonds, warrants, etc., into voting stocks.
Lump-Sum Distribution
A single payment for the full amount due is termed as lump-sum distribution.
LYON
Liquid yield option note or LYON is the terms used for a zero coupon bond, which is callable, putable as well as convertible.
M
M&M – Modigliani-Miller Theorem
This is a financial theory given by Modigliani and Miller which claims that a firm’s market value depends on its future earning power and risk of underlying assets and not on financing decisions and dividend declaration.
Macaroni Defense
This is a defense against takeover attempts in which the company issues a large number of bonds on the condition of high value redemption if the company is ever taken over. It is also known as poison pill.
Macaulay Duration
This is a specialized formula used for building up an immunization strategy or to measure how sensitive a bond price is to changes in the interest rates.
Managed Money
To save himself the trouble of buying and selling his own securities, if an investor hires a qualified investment professional to do so for a fee, he is said to have managed money.
Margin of Safety
This is an investing principle that states that an investor should only buy a security if the market price is significantly lower than its intrinsic value.
Marginal Tax Rate
The amount of tax paid on every additional dollar is termed as the marginal tax rate.
Market Arbitrage
Theoretically, earning a riskless profit with zero investment, by simultaneously buying a security in one market and selling the same in another is termed as a market arbitrage.
Market Cannibalization
When a new product of a company eats away the demand of another product of the same company, it is termed as market cannibalization.
Market Jitters
The cautious, wary feeling of nervousness, gripping the investment market in times of uncertainty, is called market jitters.
Market Momentum
This is a measure of market sentiment and is calculated by multiplying the change in market index value with the aggregate trading volumes.
Market Risk Premium
This serves as the slope of the security market line (SML) and is the difference between the expected return on market portfolio and the risk free rate.
Market Timing
This is the act of market direction prediction, using technical analysis of indicators and fundamentals.
Marquee Asset
Also referred to as a trophy asset, a marquee asset is a company’s most profitable asset, i.e. the asset that makes the largest contribution to the company’s bottom line.
Matador Bond
This is a Peseta denominated foreign bond, issued in Spain by a non-Spanish company.
McClellan Oscillator This is an indicator of market breadth from the difference between the number of advancing and declining issues on the NYSE.
Mini Perm
This is a short term financing that is usually payable between 3 to 5 years. It is generally used to pay off income earning commercial and construction properties.
Minus Tick
Also known as downtick or zero minus tick, a minus tick denotes a trade that occurs at a price lower than the immediately preceding one.
MPT (Modern Portfolio Theory)
This is a theory that gives out ways for optimal portfolio construction to give out maximum rewards for a given market risk level.
Monday Effect
This is a theory that holds the thought that stock market behavior on Mondays will show the same trend followed on the previous Friday.
Money Laundering
When large amounts of illegally earned money, e.g., drug trafficking or terrorist activities, is shown as money obtained from legitimate sources, it is called money laundering.
Mortgage Broker
Commercial mortgage brokers facilitate the transactions of mortgage bankers by bringing mortgage borrowers and mortgage lenders together to make a deal.
Mothballing
A production strategy where a production facility is kept functional for whenever a production need arises, even though production is not taking place there, at this point of time.
Moving Average Chart
This is a technical analysis tool that tracks price movements of a security or a commodity.
Municipal Bond Fund
This is a mutual fund that invests in municipal bonds, i.e. bonds issued to finance the expenditures of state, municipality, county or special purpose districts.
Mutual Fund Liquidity Ratio
The cash relative to total assets ratio for a mutual fund that is published monthly by the Investment Company Institute is called mutual fund liquidity ratio.
N
Naked Option
‘Naked puts’ and ‘naked calls’ are both naked option. Naked options are basically, options with no underlying security positions to support them.
NCA
National Credit Act, No 34 of 2005
Negative Amortization
When the installments paid by the debtor, fail to cover the interest on the principal, the principal balance increases and this is termed as negative amortization.
Negative Gearing
When money is borrowed to buy an investment asset, with the investment not making enough money to even cover the interest expenses and other maintenance costs, it is termed as negative gearing.
Negative Pledge Clause
Also called the covenant of equal coverage, this negative covenant stops the corporation from pledging any assets that can lessen the security of its lenders.
Negotiated Market
A secondary market transaction where prices of the securities traded are negotiated between the buyers and the sellers.
Nervous Nellie
A nervous Nellie is a jittery investor who is not comfortable with the risks of investing.
Nest Egg
A nest egg is an accumulation of money, set aside for a specific purpose or event in the future.
Net 30
A term that suggests that the final payment is due within 30 days.
NAV (Net Asset Value)
It gives the fund value, by dividing the total value of all securities in the portfolio (less any liabilities) by the number of outstanding fund shares.
Net Position
The status of the trader’s overall position after netting all his long positions and short positions in various securities is called his net position.
Net Present Value Rule
This is an investment rule that states that, an investment can only be accepted if its net present value (NPV) is greater than 0. An NPV less than 0 signifies that the investment will actually decrease shareholder’s wealth instead of increasing it.
NSV
Net sales value
New Home Sales
This is an economic indicator of the price and quantity statistics of newly built home sales.
Noise Trader Risk
Noise trader risks are the risks associated with market price volatility, faced by the noise trader.
Nominal Yield Spread
The percentile or basis point spread that equates the yield on the Treasury yield curve to the discount factor is known as the nominal yield spread.
Non-recourse
Debt When any debt is free of personal liability and the debtor’s liability is limited to the asset offered as collateral, the debt is called non-recourse debt.
Nostro Account
An account of a local bank in a foreign bank, in a foreign currency is termed as a nostro account. Similarly, a vostro account in an account in a correspondent bank, on behalf of a foreign bank and is also sometimes known as a loro account.
Not-Held Order
A limit order or a market order that gives the broker the freedom to execute the order at his discretion, at a price he considers to be the best possible one.
Nova/Ursa Ratio
This is a sentiment indicator that shows whether a trend is bullish or bearish, and is based on the Nova and Ursa funds of the Rydex Fund Group.
O
Obligation Bond
This is a municipal bond with a face value higher than the value of the asset who’s mortgage it is used to secure.
October Effect
This theory predicts a general stock price decline in the month of October.
Odd Lot Theory
This is a technical analysis tool to predict buy and sell timing. Since the theory assumes that small, individual investors are mostly wrong, it is a buy time when odd lot sales are up and a good sell time when odd lot buys are increasing.
Omega
Omega, the third derivative of the option price and the first derivative of gamma, is a measure of option value changes with respect to changes in the price of the underlying asset.
Open Listing
When a real estate asset or property is listed simultaneously with multiple real estate agents, it is said to be an open listing.
Open-End Indenture
Unlike a closed collateral, where one bond can only be backed by one single collateral, an open end indenture allows one collateral to back many different bond issues.
Optimization
This term is used in technical analysis to signify a trading system adjustment that makes it more efficient and effective.
Option Chain Quotations for a list of all options on one underlying security, when bundled together, are called option chains.
Options Backdating
When an option is dated for a date before the company actually grants it, it is called options backdating.
Ordinary Annuity These signify a steady, fixed cash flow stream, at the end of each period, over a fixed amount of time.
Original Issue Discount Bond (OID Bond)
The discount on par value (difference between the redemption price and issue price) at the time of bond issue is termed as an original issue discount, and such a bond is called an original issue discount bond.
OTC Options
When options are traded in over-the-counter market, with participants given the freedom to choose their characteristics, the options thus traded are called OTC Options.
Outperform
Also known as ‘market outperform’, ‘moderate buy’ and ‘accumulate’, the term outperform is used for a stock that is currently giving more returns than the overall market returns.
OC (Overcollateralization)
As the principal underlying a pool of assets always exceeds the principal on a security by 10 to 20 percent, an over-collateralization is done to get a better debt rating.
Overtrading
Also known as churning, over-trading is the excessive buying and selling of securities on an investor’s behalf, that a broker does in order to increase the commissions he receives.
Overvalued
As a result of an emotional buying push, if a company or stock is valued more in the market, than the valuation that comes from its future income earning potential or its P/E ratio, the company or stock is said to be overvalued.
P
Package Deal
It is an order that contains many exchange or deposit items that are completed simultaneously or individually. It helps the traders to ensure specific prices or times to mature for multiple assets.
Paired Shares
These are stocks of two sister concern companies, that is, different companies under the same management. There shares are sold as one unit and mostly appear on the same certificate.
Paper Millionaire
The large total market value of the assets owned by an individual that helps achieve a high net worth is known as a paper millionaire. This is a phenomenon that is observed when investors buy marketable securities which are later on bid up to a much higher price on the open market. Although, called paper millionaire, the individual is not safe until the shares are liquidated.
Pari-passu
This is a Latin term which is translated as ‘without partiality’. This term is used to describe two securities or obligations that have equal rights to payments.
Participating Preferred Stock
The type of stock where an additional dividend based on predetermined conditions, that is paid along with the normally specified rate that are to be received by preferred dividends, is known as participating preferred stock. The additional dividends are paid only to preferred shareholders, if the common shareholders receive dividends that exceed a specified per-share amount. The preferred stock holders also have a right to receive the stock’s purchasing price and also the pro-rata share of any remaining proceeds that the common shareholder’s receive in case of liquidation.
Payout Ratio
The shareholders receiving an earning paid out in dividends is known as payout ratio. The payout ratio is used by the investors to determine what the company does with their earnings. The pay out ratio is calculated as: Payout Ratio = Dividends per Share/ Earnings per Share
Peer Perform
The investment rating in which a security that is expected to provide returns which are consistent with the securities provided by other companies within its sector and is used by analyst is known as peer perform. This is a neutral assessment and can predict the movement of security along with similar companies.
Penalty Bid
The part of early IPO trading that is provided by the lead underwriter or other members of a syndicate with a bid or offer to purchase securities. There are restrictions imposed on the bids and when used, the broker that offers shares back to the underwriter, is assessed for penalty. Thus, penalty bid is created to avoid and deter investors to ‘flip’ IPO shares soon after start of trading.
Penny Stock
The stocks that trade at comparatively low price and market capitalization, mainly outside the major market exchanges are known as penny stock. These are the types of stocks that are speculative and high risk due to their lack of liquidity, large bid-ask spreads, small capitalization and limited following and disclosure. These stocks are mostly traded over the counter through the pink sheets and OTCBB.
Performance Based Index
The stock index in which all dividends and other cash events are paid out to shareholders is known as performance based index. The performance based index added in any dividend amounts to the net share price before calculating the index return, during the performance measurements over a given period of time.
Pricing Power
The change in a firm’s product price that leads to an effect on the quantity demand of that product is known as pricing power. This economic term is based on the ‘Price Elasticity of Demand’.
Profit Warning
The advice issued by a company regarding the earnings that won’t be meeting the exceptions of the analysts is known as profit warnings.
Proxy Materials
The documents related to the methods and procedures outlined by a public company, regulated by the Securities and Exchange Commission is known as proxy materials. The shareholders and solicit votes are kept informed about the corporate decisions like election of directors and other corporate actions with the help of these documents.
Pullback
The movement of a price when it falls from its peak is known as pullback. The fall back is seen as a reversal of the prevailing upward trend and a signal of slight pause in the upward momentum.
Pure Play
The company that concentrates on only one line of business or the stock prices of a company that mutually relate to the fortunes of a specific investing strategy are known as pure play.
Puttable Common Stock
The option given to investors by the common stock to put the stock back into the company at a predetermined rate is known as puttable common stock.
Q
QQQQ
This is a Nasdaq ticker symbol for the Nasdaq 100 trust. This is an ETF trading with the Nasdaq. The tech sector is offered broad exposure by this security tracking the Nasdaq 100 Index. This index consists of 100 actively traded and the largest non-financial stocks on the Nasdaq. QQQQ was formerly known as the QQQ, and is also known as the ‘cubes’ or ‘quadruple-Qs’.
Quadrix
The variables (more than 100) used in a stock valuation system in seven major categories, to help determine the value of a stock. A weighted average of all 100 variables is used to determine the overall score for a particular stock.
Qualified Dividend
This is a type of dividend that applies the capital gains tax rates. The regular income tax rates are usually higher than these tax rates.
Qualified Domestic
Institutional Investor (QDII) A qualified domestic institutional investor is an institutional investor that has met certain qualifications to be able to invest in securities that are outside the home country.
Qualifying Disposition
A sale, transfer or exchange of stock, qualifying for favorable tax treatment for the employee selling the stock that are obtained through a qualified stock option incentive plan, like the incentive stock option (ISO) plans and employee stock purchase plans (ESPP) is known as qualifying disposition. The employee should sell the stock at least one year after receiving the stock and two years after receiving the incentive stock option (ISO) or at the start of the ESPP offering period to gain a qualifying disposition.
Quarter On Quarter (QOQ)
This is a measuring technique used to calculate the change occurring between one financial quarter and the previous financial quarter. This helps give an idea to the investors regarding the growth of a company over each quarter.
Quarter To Date (QTD)
The capturing of all the necessary company activities in a time interval, that occurs between the beginning of the current quarter and the time in which the data is gathered. This technique allows the company management to understand the shaping up of the quarter before the end of entire quarter period.
Quarterly Earnings Report
The quarterly filings by the public companies that include earning reports like net income, earnings per share, earnings from continuing operations and net sales, to report their performance. The quarterly earnings report are filed before the end of each quarter. January, April, July and October are the months when companies usually file their quarterly earnings report.
Quarterly Income Preferred Securities
The limited partnership shares that exist only for the purpose of issuing preferred securities and lending the proceeds of the sales towards the parent company are known as Quarterly Income Preferred Securities.
Quorum
The level of an individual with a vested interest in a company to make proceedings that are accepted by the corporate charter is known as quorum.
Quote
The price at which a security or commodity is traded that is mutually agreed by the buyer and seller and at which transaction of some amount takes place. Definition no.2: It is the current price of a bid or ask quote that is used to buy or sell shares. The quality and the price are shown using the bid quote, at which a current buyer is willing to purchase shares. The ask quote is used to show the amount that current participant is willing to sell shares for. It is also known as ‘quoted price’ for an asset.
R
R
This is a Nasdaq stock symbol. It specifies that the stock has rights.
Random Walk Theory
This is a theory that states that stock price changes have same distribution and are independent of each other. The past trends of a stock price or market cannot be applied in prediction of the future trend of the stock.
Reaction
The typical downward movement in the price of security once the price rises previously is known as reaction.
Real Time Quote
The actual price of a security quoted at the moment in time is known as real time quote. They are instantaneous without any delay, whereas, the quotes displayed on various websites are delayed by 15 to 20 minutes. These quotes are known as delayed quotes.
Record High
The highest price level reached by a security, commodity or index during trading that will go down in history are known as record high. The measurement of record high starts with trading and is updated whenever the last record high is exceeded. These are nominal values that do not account for inflation.
Record Low
The lowest price level reached by a security, commodity or index during trading that will be mentioned in history is known as record low. The record low is reached during a trading day. It is recorded even if it was the closing price. These are nominal values that do not account for inflation.
Repackaging
The purchase of all the public firm common stocks with a leverage loan into private stocks by a private equity firm is known as repackaging. The company is ‘dressed up’ by the private equity firm before making it public again via an initial public offering.
Reprice
Exchange of stocks that no longer are in for money, with stocks that are currently at the money is known as reprice. Investors are helped by exchanging worthless options for options that have high value.
Restricted Stock
The kind of sales restrictions on insider holdings is known as restricted stocks. The trading of such stocks should be carried out in compliance with the special SEC regulations. The section 1244 of the Internal Revenue Code outlines the regulations to be followed.
Return On Average Equity (ROAE)
The adapted version of the return on equity (ROE) where the shareholder’s equity is changed to average shareholder’s equity is known as Return On Average Equity (ROAE)
Risk Measures
The historical predictors of investment risk and volatility and the components in the modern portfolio theory (MPT) statistical measures is known as risk measures.
Reverse Stock Split
The increase in par value of stocks or earnings per share by reduction in the number of a corporation’s shares outstanding. The market value of the total number of shares does not change.
Revlon Rule
During the forthcoming sale of a company, the company’s board of directors should conduct the proceedings in a manner that will be able to yield the maximum benefits for the shareholders. According to the legal precedence, once the number of situations like cash based acquisitions and the requisite financing available with the bidding parties are fulfilled, the highest bid should be chosen by the board of directors.
Rights
The entitlement of stockholder’s to purchase new shares issued by the corporation at a predetermined price less than the current market price in proportion to the number of shares already owned is known as rights. The rights issued have a short validity period, after which they expire.
S
SARB
South African Reserve Bank
Sales per Share
The ratio of total revenue earned per share over 12 months. The total revenue earned in a fiscal year by the weighted average of shares outstanding for the fiscal year is used to calculate the sales per share. It is also known as ‘revenue per share’. Sales per Share= (Total Revenue/Sales)/ Average Shares Outstanding.
Seasoned Issue
An established company that has earned a good reputation with its existing shares that have stable price movements and substantial trading volume, issues securities that are known as seasoned issue.
Secondary Liquidity
The public offering as a part of liquidity when shares are distributed to retail and institutional investors, is known as secondary liquidity. The shares are then sold off to other interested buyers by these secondary parties.
Secular Market
The rise and fall of particular investment or asset class over a period of time caused by a market that is driven by forces that are in place over many years. The strong investor sentiment drives prices higher in a secular bull market and weal sentiment causes selling pressure in a secular bear market.
Securities Fraud
The misrepresentation of the investments by a person or company that help investors make decisions is known as securities fraud. False information, bad advice, withholding information, etc. is used to misinterpret information in this type of white collar crime.
Seed Capital
The fund raised from company founder’s personal assets, friends, family, etc. to start a new business is known as seed capital.
Settlement Period
The time period given to parties that is required to satisfy the transaction’s obligations between the settlement date and the transaction date. The seller must deliver the security within the settlement period and the buyer must settle all payments within the settlement period.
Share Capital
The cash or other considerations that help raise funds by issue of shares is known as share capital. The share capital increases every time the company sells new shares to public in return for cash.
Short Selling
The sale of security that is not owned by the seller or the sale that is completed by the delivery of a security borrowed by the seller, is called short selling.
Speculative Capital
The investors earmarking funds for the purpose of speculation is known as speculative capital. Extreme volatility and a high probability of loss is associated with speculative capital.
Split Off
The stock of a subsidiary that is exchanged for shares on a parent company in a type of corporate reorganization is known as split off.
STC
Secondary tax on companies
Stock
A security type which can signify the ownership in a capital and claim on corporation’s assets and earnings is known as stocks.
Synthetic Dividend
The dividend-like payment stream that resembles the periodic cash receipts from a dividend-paying stock that is created by an investor with certain financial securities is known as a synthetic dividend.
T
Takeover
When a corporate company makes a bid for an acquiree, it is known as takeover. The acquiring company makes an offer for the outstanding shares of the targeted company that are publicly traded.
Technical Bankruptcy
It is a condition in which a company or a person, that has defaulted on financial obligations, would be declared bankrupt, if the creditors move to the court.
Tender Offer
The offer of purchasing a few or all the shareholder’s shares in a corporation is known as a tender offer. The price offered is mostly slightly higher than the market price.
Transparency
The ready access to any financial information regarding a company, related to its price levels, market depth and audited financial reports available to the investors is known as transparency.
Trend Trading
The strategy to gain control using the analysis of an asset’s momentum in a particular direction is known as trend trading.
Turnover
The number of times an asset is replaced during one financial year is known as turnover in the books of accounting. It is also the number of shares traded over a period of time, as the total shares percentage in a portfolio or of an exchange is known as turnover.
U
UCITS
UCITS stands for ‘Undertakings for the Collective Investment of Transferable Securities’. The distribution and management of unit trusts among the European countries is taken care of, by this public limited company.
Unadjusted Basis
Unadjusted basis is used such that the original cost of the property is considered, leaving out the salvage. This basis is basically used for depreciation purposes.
Uncommitted Facility
It is one of the most sought after credit facility. In the uncommitted facility, the institution lending the credit is under no restriction regarding the same.
Under Reporting
It is an illegal process that is done to avoid payment of taxes. Under reporting is the deliberate showing of income less than what has been actually earned.
Under Capitalization
A company is said to be in under capitalization when it does not have sufficient cash to conduct its business smoothly. It is also not in a condition to pay its creditors. When a company goes through under capitalization, the chances of it going bankrupt increases.
Universe of Securities
A set of securities with a common feature is called the universe of securities. The common feature can be the index, the market capitalization or the industry.
Unsecured Creditor
An unsecured creditor is one who lends out capital without specified assets as collateral. This is one of the most unsecured ways of lending out the loan as the borrower has nothing to lose if he defaults on the loan.
Usury
Usury is the illegal practice of lending out money at a rate higher than that allowed by the law.
UT
A UT or Unit Trust is an unincorporated mutual fund structure that allows funds to hold assets and pass profits to the individual owners, rather than reinvesting them back into the fund.
V
Valuation
The process of determining the value of an asset is called valuation. There are various processes for doing the same. These process can be subjective as well as objective.
VAT Value
Added Tax or VAT is the tax that is paid by the consume on purchasing a product. It is a type of consumption tax, which includes value added to the product at any stage of its production.
Venture Capital
The type of capital that is provided for early-stage, high-potential, growth companies is referred to as venture capital.
Vulture Capitalist
Vulture capitalist is the slang for venture capitalist. It is used when an investor deprives the inventor of an invention for what he has created using the capital from the capitalist.
Vulture Fund
When a fund buys securities in distressed investments, it is referred to as vulture fund. The distressed investments can include equities that are in or near bankruptcy.
W
Working Capital
The difference between a company’s assets and liabilities at a point of time is referred to as the working capital. This amount gives an idea of the company’s financial health at that point of time.
WTO
WTO stands for the World Trade Organization. This is an international organization that handles or deals with the rules for the trades between different nations.
X Y Z
X
X is the NASDAQ stock symbol for mutual fund.
YOY
A YOY or Year over Year is a method of evaluating two or more investments to see their year wise performance. This method is generally applied at the same time period every year to see if the company’s performance is improving or degrading.
Zero-Coupon Bond
Zero-coupon bond is also referred to as Accrual bond. The debt security which does not pay any interest, but is traded at a discount, such that at the maturity of the bond it renders profit