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COMPLETE STOCK MARKET DICTNOARY

PRESENTED TO YOU BY

VINOD SHARES LTD.

A
A Nasdaq stock symbol specifying that the stocks are Class "A" shares of the company

A Priori Probability
Probability calculated by logically examining existing information.

A Ton Of Money
A slang term used to describe a significant amount of money. The amount implied typically depends
on the person, company or situation.

A-Share
In a family of multi-class mutual funds, this is the class that is characterized by a front load
structure. Not all fund companies follow this class structure however, it is the prominent method of
distinction

AAA
The highest rating given on bonds by bond rating agencies

Abandonment
1. The act of surrendering a claim to, or interest in, a particular asset.
2. The permitted withdrawal from a forward contract that is made for the purchase of deliverable
securities.
3. The act of allowing an option to expire unexercised.

Abandonment Option
A clause granting parties the option of withdrawing from the contract before the fulfillment or
completion of all contractual duties. This clause adds value by giving the parties the ability to end
the obligation if it is unprofitable.
A type of "real option

Abandonment Value
The value of a project or asset if it were immediately liquidated.
Also referred to as the liquidation value.

Abatement
In general, a decrease in the amount of taxation faced by an individual or company

Abatement Cost
A cost borne by many businesses for the removal and/or reduction of an undesirable item that they
have created. Abatement costs are generally incurred when corporations are required to reduce
possible nuisances or negative byproducts created during production.

ABC Agreement
An agreement made between a purchasing member with a seat on the NYSE and the firm in which he
or she works. With the approval of the NYSE, this agreement stipulates that the employee of the firm
may:
a) transfer the seat to another employee of the firm
b) retain ownership and purchase a new seat for another individual designated by the firm
c) sell the seat and transfer any gains to the firm.

Ability to Pay
The principle that taxes should vary according to an individual's level of wealth or income.

Abnormal Return
When the return on an asset or security is in excess of the expected rate of return.

Above the Market


An order to buy or sell at a price set higher than the current market price of the security. Examples
of above the market orders include: a limit order to sell, a stop order to buy, or a stop-limit order to
buy

Above Water
The condition of an asset's actual value when it is greater than the asset's book value
Absolute Advantage
The ability of a country, individual, company, or region to produce a good or service at a lower cost
per unit than the cost at which any other entity produces that good or service.

Absolute Breadth Index - ABI


A market indicator used to determine volatility levels in the market without factoring in price
direction. It is calculated by taking the absolute value of the difference between the number of
advancing issues and the number of declining issues. Typically, large numbers suggest volatility is
increasing which is likely to cause significant changes in stock prices in the coming weeks

Absolute Priority
The principle in bankruptcy proceedings that requires senior creditors to be fully paid before junior
creditors and stockholders may receive any payment.
Also known as 'liquidation preference'
Absolute Rate
The fixed portion of an interest-rate swap, expressed as a percentage rather than as a premium or a
discount to a reference rate.

Absolute Return
The return that an asset achieves over a period of time. This measure simply looks at the
appreciation or depreciation (expressed as a percentage) that an asset - usually a stock or a mutual
fund - faces over a period of time. Absolute return differs from relative return because it is
concerned with the return of the asset being looked at and does not compare it to any other measure

Absorbed
1. In a general business sense, when a cost is treated as an expense instead of being passed on to
the customer in the form of higher prices.
2. In underwriting, when an issue has been completely sold to the public.
3. In mergers, when an acquired firm is folded into the acquiring company.

Accelerated Cost Recovery System - ACRS


A system of depreciation introduced by the Economic Recovery Tax Act of 1981. ACRS depreciation
is based on recovery periods instead of useful life. These periods were predetermined by the IRS.

Accelerated Depreciation
Any method of depreciation used for accounting or income tax purposes that allows greater
deductions in the earlier years of the life of an asset.

Acceleration Covenant
A clause included in certain debt securities and swap agreements stating that the immediate
collection of payment and termination of contract will take place should default or a downgrade of
debt occur.

Accident And Health Benefits


Fringe benefits provided to employees for sickness, accidental injury, or accidental death. These
benefits include payment of hospital and medical expenses as well as income payments.

Account
1. An arrangement by which an organization accepts a customer's financial assets and holds them
on behalf of the customer at his or her discretion.
2. A statement summarizing the record of transactions in the form of credits, debits, accruals and
adjustments that have occurred and have an affect on an asset, equity, liability or past, present or
future revenue.
3. A relaying of happenings from one party to another.

Account Balance
The net of debits and credits for an account at the end of a reporting period.

Accountable Plan
A plan for reimbursing employees for business expenses. Under this plan, the reimbursement that
the employee receives for the expenses is not included in his/her income. Employees are required to
account adequately for expenses with records and return any excess reimbursement within a
reasonable period of time.

Accountant
A professional person who performs accounting functions.

Accountant's Opinion
A statement signed by an independent accountant outlining his or her opinion regarding the quality
of information contained in a company's financial reports and records

Accounting
To provide a record such as funds paid or received for a person or business. Accounting
summarizes and submits this information in reports and statements. The reports are intended both
for the firm itself and for outside parties.

Accounting Earnings
A company's earnings as reported in the income statement.

Accounting Method
In terms of taxation, the method by which income and expenses are determined for taxation
purposes.

Accounting Noise
The effect of complex and extensive accounting rules that regulate financial statement reporting and
are thought to distort a company's true operating performance

Accounting Period
1. In general, the time period reflected by a set of financial statements.
2. In terms of taxation, it is the 12-month period a taxpayer uses to determine his or her income tax.

Accounting Profit
A company's total earnings, calculated according to Generally Accepted Accounting Principles
(GAAP), and includes the explicit costs of doing business, such as depreciation, interest and taxes.
Accounting Rate of Return - ARR
ARR provides a quick estimate of a project's worth over its useful life. ARR is derived by finding
profits before taxes and interest

Accounts Payable - AP
An accounting entry that represents an entity's obligation to pay off a short-term debt to its
creditors. The accounts payable entry is found on a balance sheet under the heading current
liabilities.
Accounts payable are often referred to as "payables".
Another common usage of AP refers to a business department or division that is responsible for
making payments owed by the company to suppliers and other creditors.

Accounts Payable Turnover Ratio


A short-term liquidity measure used to quantify the rate at which a company pays off its suppliers.
Accounts payable turnover ratio is calculated by taking the total purchases made from suppliers and
dividing it by the average accounts payable amount during the same period.

Accounts Receivable - AR
Money owed by customers (individuals or corporations) to another entity in exchange for goods or
services that have been delivered or used, but not yet paid for. Receivables usually come in the form
of operating lines of credit and are usually due within a relatively short time period, ranging from a
few days to a year.
On a public company's balance sheet, accounts receivable is often recorded as an asset because
this represents a legal obligation for the customer to remit cash for its short-term debts

Accounts Receivable Financing


A type of asset-financing arrangement in which a company uses its receivables - which is money
owed by customers - as collateral in a financing agreement. The company receives an amount that is
equal to a reduced value of the receivables pledged. The age of the receivables have a large effect
on the amount a company will receive. The older the receivables, the less the company can expect.
Also referred to as "factoring".

Accredited Investor
A term used by the Securities and Exchange Commission (SEC) under Regulation D to refer to
investors who are financially sophisticated and have a reduced need for the protection provided by
certain government filings.
Also known as "qualified purchaser

Accreting Principal Swap


A swap whereby the notional value is increasing over time.

Accretion
1. Asset growth through addition or expansion.
2. In reference to discount bonds, it describes the accumulation of value until maturity

Accretive Acquisition
An acquisition that will increase the acquiring company's EPS

Accrual Accounting
An accounting method that measures the performance and position of a company by recognizing
economic events regardless of when cash transactions occur. The general idea is that economic
events are recognized by matching revenues to expenses (the matching principle) at the time in
which the transaction occurs rather than when payment is made (or received). This method allows
the current cash inflows/outflows to be combined with future expected cash inflows/outflows to give
a more accurate picture of a company's current financial condition.
Accrual accounting is considered to be the standard accounting practice for most companies, with
the exception of very small operations. This method provides a more accurate picture of the
company's current condition, but its relative complexity makes it more expensive to implement. This
is the opposite of cash accounting, which recognizes transactions only when there is an exchange
of cash.

Accruals
Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-
based accounting. These accounts include, among many others, accounts payable, accounts
receivable, goodwill, future tax liability and future interest expense.

Accrued Expense
An accounting expense recognized in the books before it is paid for. It is a liability, usually current.
These expenses are typically periodic and documented upon a company's balance sheet due to the
high probability of collection.

Accrued Interest
The interest that has accumulated on a bond since the last interest payment up to, but not including,
the settlement date.
There are two methods for calculating accrued interest:
1. 360-day year method, used for corporate and municipal bonds
2. 365-day year method, used for government bonds

Accrued Market Discount


The gain in the value of a discount bond expected from holding it for any duration until its maturity.

Accumulated Earnings Tax


A tax imposed by the federal government upon companies with retained earnings deemed to be
unreasonable and in excess of what is considered ordinary.

Accumulation
1) In the context of individual investing, it is the process of contributing cash to invest in securities
over a period of time in order to build a portfolio of desired value. Dividends and capital gains are
also reinvested during this process.
2) In institutional investing, it is the action of a large investor buying up many shares of a public
company over an extended period of time.
3) In corporate finance, the retention of company profits for reinvestment in business operations, as
opposed to the payout of earnings as dividends to shareholders.

Accumulation Phase
1. A period of time when an annuity investor is in the early stages of building up the cash value of
the annuity. This is followed by the annuitization phase where payments are paid out to the
annuitant.
2. The period of time when an investor builds up the value of their investment through savings.

Accumulation Plan
1) A general financial strategy in which an investor attempts to build the value of their portfolio to a
desired size.
2) In the context of mutual funds, a formal arrangement in which the investor contributes a specified
amount of money to the fund on a periodic basis. By doing so, the investor accumulates a larger and
larger investment in the fund through their contributions and the growth of the fund itself

Accumulation Unit
1) In the case of a variable annuity, a measurement of the value invested in the account during the
accumulation period of the contract. The more funds you contribute to your annuity account, the
more accumulation units you will build.
2) In the case of a unit trust, a type of investment structure where the trust's income is directly
reinvested into the trust, instead of being paid out as cash to the investor.

Accumulation/Distribution
A momentum indicator which tries to gauge supply and demand by discovering if investors are
generally "Accumulating" (buying) or "Distributing" (Selling) a certain stock by identifying
divergences between stock price and volume flow. It is calculated using the following formula:

Acc/Dist = ((Close - Low) - (High - Close)) / (High - Low) * Period's volume

Accumulation/Distribution (Acc/DisTM) Rating


Exclusive rating in Investor's Business Daily. One of the IBD SmartSelect® Corporate Ratings, it
tracks the relative degree of institutional buying (accumulation) and selling (distribution) in a
particular stock over the last 13 weeks. Updated daily, stocks are rated on an A+ to E scale.
A = Heavy buying
B = Moderate buying
C = Equal amount of buying and selling
D = Moderate selling
E = Heavy selling
The rating is enhanced by "+" and "-" signs to show additional detail on institutional activity; a "B+"
indicates greater accumulation than a "B" rating, whereas a "B-" indicates less accumulation than a
"B" rating, and so on.

Acid-Test Ratio
A stringent test that indicates whether a firm has enough short-term assets to cover its immediate
liabilities without selling inventory. The acid-test ratio is far more strenuous than the working capital
ratio, primarily because the working capital ratio allows for the inclusion of inventory assets.
Calculated by:

Acquisition
When one company purchases a majority interest in the acquired

Acquisition Debt
Debt incurred to construct, improve or acquire a principal or secondary residence
Acquisition Fee
Charges and commissions paid out for the selection or purchase of property. Some examples are
real estate commission, acquisition expense, and development/construction fees.

Acquisition Premium
The difference between the actual cost for acquiring a target firm versus the estimate made of its
value before the acquisition

Across The Board


A market-wide directional movement. In other words, a market condition in which most stocks and
sectors are moving in the same direction. These movements are usually caused by market-wide
events.

Act of God Bond


A bond issued by an insurance company, linking principal and interest to the company's losses due
to natural disasters

Active Bond
A term used to describe fixed-income securities that trade frequently on the floor of the NYSE.

Active Bond Crowd


The name given to members of the NYSE and their specific bond trading departments that are
acknowledged as frequent traders in active bonds.

Active Box
This refers to the physical location in a brokerage where securities are kept
Active Income
Income for which services have been performed. This includes wages, tips, salaries, commissions
and income from businesses in which there is material participation.

Active Investing
An investment strategy involving ongoing buying and selling actions of the investor. Active
investors will purchase investments and continuously monitor their activity in order to exploit
profitable conditions

Active Management
An investing strategy that seeks returns in excess of a specified benchmark.

Active-Participant Status
Active-participant status is a reference to an individual's participation in an employer sponsored
retirement plan. The plans which qualify include:
1.Qualified plans, such as profit sharing plans, defined benefit plans, money purchase pension or
target benefit plans and 401(k) plans
2. SEP IRAs
3. SIMPLE IRAs
4. 403(b) plans
5. Qualified annuity plans
6. Employee Funded Pension Trusts (created before June 25, 1959)
7. A plan established for its employees by the United States, by a State or political subdivision of the
United States, or by an agency or instrumentality of the United States or any of its subdivisions

Activities of Daily Living - ADL


Routine activities that people tend do everyday without needing assistance. There are six basic
ADLs: eating, bathing, dressing, toileting, transferring (walking) and continence. An individual's
ability to perform ADLs is important for determining what type of long-term care (e.g. nursing-home
care or home care) and coverage the individual needs (i.e. Medicare, Medicaid or long-term care
insurance

Activity Based Budgeting - ABB


A method of budgeting in which activities that incur costs in each function of an organization are
established and relationships are defined between activities. This information is then used to decide
how much resource should be allocated to each activity.

Activity Based Management - ABM


Using an activity-based costing system to improve the operations of an organization.

Activity Ratio
Accounting ratios that measure a firm's ability to convert different accounts within their balance
sheets into cash or sales

Actual Return
The actual gain or loss of an investor. This can be expressed in the following formula: expected
return (ex-ante) plus the effect of firm-specific and economy-wide news.

Actuals
1. A term used to describe the underlying in future and forward contracts, dealing with commodities
rather than financial instruments.
2. A term used to describe a securities historical volatitity.
Actuarial Analysis
The analysis of an investment's risk done by an actuary.

Actuarial Risk
The risk that the assumptions that actuaries implement into a model to price a specific insurance
policy may turn out wrong or somewhat inaccurate.
Possible assumptions include the frequency of losses, severity of losses and the correlation of
losses between contracts.
Also known as "insurance risk".

Actuary
A professional statistician working for an insurance company. They evaluate your application and
medical records to project how long you will live.

Ad Valorem Tax
A tax based on the assessed value of real estate or personal property. In other words, ad valorem
taxes can be property tax or even duty on imported items. Property ad valorem taxes are the major
source of revenues for state and municipal governments

Adaptive Expectations Hypothesis


A hypothesis stating that individuals make investment decisions based on the direction of recent
historical data, such as past inflation rates, and adjust the data (based on their expectations) to
predict future rates.

Add-On Certificate of Deposit


A certificate of deposit that allows the bearer to deposit additional funds, after the initial purchase
date, that will bear the same rate of interest.

Adding To A Loser
The action of a trader/investor increasing a position in an asset when its price is heading in the
direction that's opposite to what the investor/trader desires. This is generally not a wise investment
decision because unless the asset begins to move in the desired direction, the investor's losses will
increase

ADF
In currencies, this is the abbreviation for the Andorran Franc

Adjustable-Rate Mortgage - ARM


A mortgage that allows adjustments of the loan interest rate at pre-specified regular intervals.

Adjustable-Rate Preferred Stock - ARPS


A type of preferred stock where the dividends issued will vary with a benchmark, most often a T-bill
rate. The value of the dividend from the preferred share is set by a predetermined formula to move
with rates, and because of this flexibility preferred prices are often more stable then fixed-rate
preferred stocks.

Adjusted Balance Method


A finance/accounting method where costs are based on the amount(s) owing at the end of the
current time period (once credits and payments are posted).

Adjusted Basis
The proportionate value of an asset or security that reflects any deductions taken on, or capital
improvements to the asset or security

Adjusted Cost Base - ACB


An income tax term that refers to the change in an asset's book value resulting from improvements,
new purchases, sales, payouts, or other factors.
Adjusted Debit Balance
The amount of money owed by a customer to his/her broker after paper profits and losses are taken
into consideration.

Adjusted Exercise Price


1. An option's strike price after adjustments have been made for stock splits to its underlying
security.
2. A term used to describe the strike prices for options written on Ginnie Mae pass through
certificates.

Adjusted Funds From Operations - AFFO


A financial performance measure primarily used in the analysis of real-estate income trusts (REITs).
The AFFO of a REIT, though subject to varying methods of computation, is generally equal to the
trust's funds from operations (FFO) with adjustments made for recurring capital expenditures used
to maintain the quality of the REIT's underlying assets. The calculation takes in the adjustment to
GAAP straight-lining of rent, leasing costs and other material factors.

Adjusted Gross Income - AGI


Used to determine how much of your income is taxable. AGI consists of gross income from taxable
sources minus your maximum allowable adjustments

Adjusted Present Value - APV


The Net Present Value (NPV) of a project if financed solely by equity plus the Present Value (PV) of
any financing benefits (the additional effects of debt).

Adjustment Bond
Issued by a corporation during a restructuring phase, an adjustment bond is given to the
bondholders of an outstanding bond issue prior to the restructuring. The debt obligation is
consolidated and transferred from the outstanding bond issue to the adjustment bond. This is
effectively a recapitalization of the company's outstanding debt obligations, which is accomplished
by adjusting the terms (such as interest rates and lengths to maturity) to increase the likelihood that
the company will be able to meet its obligations

Adjustment Frequency
How often the interest rate changes or resets on an adjustable-rate mortgage. Different adjustable-
rate mortgages have different adjustment frequencies. Typically, the adjustment frequency is once a
year, but it can be as often as once a month or as infrequent as once every five years

Adjustment in Conversion Terms


A term used to describe the adjustment made to a convertible securities' conversion factor when the
exchangeable stock underlying the convertible undergoes a split

Adjustment Index
A modification made to a piece of numerical data, or a set of numerical data, by a product of some
type of a mathematical formula. There are a number of different types of adjustment indices, ranging
in scale and purpose from mortgage rate adjustment to handicapping a golfer's score

Administrator
1. A person empowered by a court to act for another person who is deemed incapable of acting for
himself/herself.
2. Under the Uniform Securities Act, an entity that enforces the rules and regulations, including
registration requirements and post-registration requirements, of investment advisory professionals.

Adoption Credit
A per-child tax credit for adopting a child under 18.
ADV Form
A form that is kept on file with the Securities & Exchange Commission that contains critical financial
information about a registered investment advisor (RIA).

Advance Directive
A document expressing a person's wishes about critical care when he or she is unable to decide for
him or herself. However, it does not authorize anyone to act on a person's behalf or make decisions
the way a power of attorney would

Advance Rate
A percentage of collateral that determines the loan amount that a lender will issue a company.

Advance Refunding
1. A bond issuance used to pay off another outstanding bond. The new bond will often be issued at a
lower rate than the older outstanding bond.
2. A bond issuance in which new bonds are sold at a lower rate than outstanding ones. The
proceeds are then invested, and when the older bonds become callable they are paid off with the
invested proceeds.

Advance/Decline Index
A technical analysis tool that represents the total difference between the number of advancing and
declining security prices. This index is considered one of the best indicators of market movements
as a whole. Stock indexes such as the Dow Jones Industrial Average only tell us the strength of 30
stocks, whereas the advance/decline index can provide much more insight into the movements of
the market.

Advance/Decline Line - A/D


A technical indicator that plots changes in the value of the advance-decline index over a certain time
period. Each point on the chart is calculated by taking the difference between the number of
advancing/declining issues and adding the result to the previous period's value, as shown by the
following formula:
A/D Line = (# of Advancing Stocks - # of Declining Stocks) + Previous Period's A/D Line Value

Adverse Opinion
A professional opinion made by an auditor indicating that a company's financial statements are
misrepresented, misstated, and do not accurately reflect its financial performance and health.

Adverse Selection
1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance.
2. A situation where sellers have information that buyers don't (or vice versa) about some aspect of
product quality.

Advisor
A person or company responsible for making investments on behalf of, and/or providing advice to,
investors.

AED
In currencies, this is the abbreviation for the U.A.E. Dirham

AFA
In currencies, this is the abbreviation for the Afghanistan Afghani

Affiliate
A type of inter-company relationship in which one of the companies owns less than a majority of the
other company's stock, or a type of inter-company relationship in which at least two different
companies are subsidiaries of a larger company.
Affiliated Companies
A situation that occurs when one company owns a minority interest (less than 50%) in another
company.
Also refers to companies that are related to each other in some way.

Affiliated Person
An individual who is in a position to influence the actions of a corporation. This includes people
such as directors, executives, and owners.

Affinity Fraud
A type of investment scam in which a con artist targets members of an identifiable group based on
things such as race, age, religion, etc. The fraudster either is, or pretends to be, a member of the
group. Often the fraudster will be promoting a ponzi or pyramid scheme.

Affirmative Obligation
An obligation of NYSE specialists to enter the market on a particular security (either by posting or
bidding and ask) when there is not sufficient market demand and supply to efficiently match orders

After Tax Operating Income - ATOI


A company's total operating income after taxes. This non-GAAP measure excludes any after-tax
benefits or charges such as effects from accounting changes.

After The Bell


After the close of the stock market

After-Acquired Clause
A provision included in legal contracts ensuring that subsequent acquisitions of assets will be
included in the debtors liability to the lender.

After-Hours Market Close


The last transaction and final price of a security that is traded in the after-hours market. The after-
hours market is generally more volatile than the regular market, but it can give investors an idea of
what to expect at the start of trading the next day.
Also referred to as "after-hours close

After-Hours Trading - AHT


Trading after regular trading hours on the major exchanges.
Also known as the "after-hours market".

After-Tax Profit Margin


A financial performance ratio, calculated by dividing net income after taxes by net sales. A
company's after-tax profit margin is important because it tells investors the percentage of money a
company actually earns per dollar of sales. This ratio is interpreted in the same way as profit margin
- the after-tax profit margin is simply more stringent because it takes taxes into account.

Against Actual
A transaction generally used by two hedgers who want to exchange futures for cash positions.

Aged Fail
A fail that has occurred between two or more parties to a securities transactions and has lasted for
over 30 days
Agency Bond
A bond issued by a government-sponsored agency. These bonds carry an AAA credit rating from
Standard & Poor’s (the highest).

Agency Costs
The costs resulting from an agent performing services for a principal.

Agency Cross
A trade that has only one agent acting for the buyer and seller.
Also known as Dual Agency

Agency Problem
A conflict of interest arising between creditors, shareholders and management because of differing
goals.

Agency Security
Low risk debt obligations issued by enterprises that the U.S. Government sponsors

Agency Theory
A theory concerning the relationship between a principal (shareholder) and an agent of the principal
(company's managers).

Agent
1. An individual or firm that places securities transactions for clients.
2. A person licensed by a state to sell insurance.
3. A securities salesperson who represents a broker-dealer or issuer when selling or trying to sell
securities to the investing public.

Aggregate Demand
The total amount of goods and services demanded in the economy at a given overall price level and
in a given time period. It is represented by the aggregate-demand curve, which describes the
relationship between price levels and the quantity of output that firms are willing to provide.
Normally there is a negative relationship between aggregate demand and the price level. Also known
as "total spending".

Aggregate Exercise Price


The strike price of a put or call option multiplied by its contract size. Aggregate exercise prices are
used to determine the dollar amount required should the option be exercised.

Aggregation
1. Used in corporate financial planning, aggregation is a process whereby a number of a firm's
smaller projects are combined and treated as an individual project.
2. Used in futures markets, aggregation is a principal involving the combination of all future
positions owned or controlled by a single trader or group of traders.

Aggregate Supply
The total supply of goods and services produced within an economy at a given overall price level in
a given time period. It is represented by the aggregate-supply curve, which describes the
relationship between price levels and the quantity of output that firms are willing to provide.
Normally, there is a positive relationship between aggregate supply and the price level. Rising prices
are usually signals for businesses to expand production to meet a higher level of aggregate demand.
Also known as "total output".

Aggressive Accounting
The practice of inappropriately misconstruing income statements for the purpose of pleasing
investors and inflating stock prices.
Aggressive Growth Fund
A mutual fund that attempts to achieve the highest capital gains. Investments held in these funds are
companies that demonstrate high growth potential, usually accompanied by a lot of share price
volatility. These funds are only for non risk-averse investors willing to accept a high risk-return
trade-off.
Also commonly referred to as a "capital appreciation fund" or "maximum capital gains fund".

Aggressive Growth Funds


A mutual fund that invests in small or emerging growth companies which seeks rapid growth of
capital. Some may be heavily focused in one sector (i.e.-technology

Aggressive Investment Strategy


A method of portfolio management and asset allocation that attempts to achieve maximum return
Aging
A method used by accountants and investors to evaluate and identify any irregularities within a
company's account receivables. Aging is achieved by sorting and inspecting the accounts
according to their length outstanding

Air Pocket Stock


When the price of a stock plunges unexpectedly, similar to an airplane when it hits an air pocket

Airbag Swap
An interest rate swap whose notional value adjusts according to rising interest rates by indexing the
floating portion to a Constant Maturity Swap (CMS

Alan Greenspan
The former chairman of the Board of Governors of the Federal Reserve System as well as the
Federal Open Market Committee (FOMC), the Fed's principal monetary policymaking body. His
tenure at the helm of the Fed lasted 18 years from 1987 until early 2006 when Ben Bernanke replaced
him. He was first appointed to the post by then-president Ronald Reagan and kept at the Fed's helm
by successors George H.W. Bush, Bill Clinton and President George W. Bush.

Algorithmic Trading
A trading system that utilizes very advanced mathematical models for making transaction decisions
in the financial markets. The strict rules built into the model attempt to determine the optimal time
for an order to be placed that will cause the least amount of impact on a stock's price. Large blocks
of shares are usually purchased by dividing the large share block into smaller lots and allowing the
complex algorithms to decide when the smaller blocks are to be purchased.
Alien
Any person who is not a citizen of the country in which he or she lives
Alimony
Payments made to a spouse or former spouse under a separation or divorce agreement.

ALL
In currencies, this is the abbreviation for the Albanian Lek.

All Or None - AON


A condition used on a buy or sell order to instruct the broker to fill the order completely or not at all.

All Weather Fund


A mutual fund that tends to perform well during all economic conditions.

All-Holders Rule
An SEC regulation that requires tender offers to be available to all holders of the identical class of
the security.

All-In Cost
Shorthand for "all-included" costs, which are expressed as the interest paid or received for total
costs of a financial transaction.

Alligator Property
In real estate, when the cost of mortgage payments, property taxes, insurance and maintenance on a
rental property is greater than the income it brings in. If this situation is not corrected, it will eat up
all of the owner's profit, leaving him or her with negative cash flow

Alligator Spread
A term referring to an unprofitable spread regardless of favorable market movements. This loss is
due entirely to large commissions charged upon the transactions.

Allonge
A sheet of paper attached to a bill of exchange for the purpose of documenting endorsements

Allotment
During an IPO, this is the number of shares granted to each participating underwriting firm that they
are permitted to sell. Remaining surpluses are then given to other firms which have won the bid for
the right to sell the IPO.

Allowance for Doubtful Accounts


An estimation made by a company and documented on its balance sheet for receivables that might
go uncollected.

Alpha
An expression of how much a stock would have appreciated or depreciated on average on a daily
basis over the last year, assuming the S&P 500 remained unchanged during the period.

Alternative Asset
A term referring to any non-traditional asset with potential economic value that would not be found
in a standard investment portfolio. Due to the unconventional nature of some of these investment
assets, valuation may be a problem.

Alternative Minimum Tax - AMT


A tax calculation that adds certain tax preference items back into adjusted gross income. If AMT is
higher than the regular tax liability for the year, the regular tax and the amount by which the AMT
exceeds the regular tax are paid.

Alternative Order
A combination order whereby two separate orders are entered on the same security. The execution
of one order cancels the other.

Altman Z-Score
A predictive model created by Edward Altman in the 1960s. This model combines five different
financial ratios to determine the likelihood of bankruptcy amongst companies.

Amended Return
A return filed in order to make corrections to a tax return from a previous year. It can be used to
correct errors and claim a more advantageous filing.

American Callable Bond


A bond that can be redeemed by the issuer at any time prior to its maturity. Usually a premium is
paid to the bondholder when the bond is called

American Currency Quotation


A direct quotation in the foreign exchange markets whereby the value of the American dollar is
stated as a per-unit measure of a foreign currency. This type of quotation shows how much U.S.
currency it takes to purchase one unit of foreign currency.

American Depositary Receipt - ADR


A negotiable certificate issued by a U.S. bank representing a specified number of shares (or one
share) in a foreign stock that is traded on a U.S. exchange. ADRs are denominated in U.S. dollars,
with the underlying security held by a U.S. financial institution overseas. ADRs help to reduce
administration and duty costs that would otherwise be levied on each transaction.

American Depositary Share - ADS


A share issued under deposit agreement that represents an underlying security in the issuer's home
country.

American Option
An option that can be exercised anytime during its life. The majority of exchange-traded options are
American.

American Stock Exchange - AMEX


The third-largest stock exchange by trading volume in the United States. The AMEX is located in
New York City and handles about 10% of all securities traded in the U.S

Amortization
1. The paying off of debt in regular installments over a period of time.
2. The deduction of capital expenses over a specific period of time. Similar to depreciation, it is a
method of measuring the consumption of the value of long-term assets like equipment or buildings

Analyst
A financial professional who has expertise in evaluating investments and puts together buy, sell and
hold recommendations on securities. Also known as a "financial analyst" or a "security analyst".

Anchoring
The use of irrelevant information as a reference for evaluating or estimating some unknown value or
information. When anchoring, people base decisions or estimates on events or values known to
them, even though these facts may have no bearing on the actual event or value.

Ancillary Revenue
Revenue generated from goods or services that differ from or enhance the main services or product
lines of a company. By introducing new products and services or using existing products to branch
into new markets, companies create additional opportunities for growth.

Andersen Effect
A reference to auditors performing more careful due diligence when auditing companies, in order to
prevent accounting errors. This extra level of accounting scrutiny often leads to companies restating
earnings even though they have not necessarily intentionally misrepresented material accounting
information.

Andrew's Pitchfork
A technical indicator that uses three parallel trendlines to identify possible levels of support and
resistance. The trendlines are created by placing three points at the end of identified trends. This is
usually achieved by placing the points in three consecutive peaks or troughs. Once the points have
been placed, a straight line is drawn from the first point that intersects the midpoint of the other two.
Also known as "median line studies".

ANG
In currencies, this is the abbreviation for the Netherlands Antilles Guilder.

Angel Bond
A slang term for investment-grade bonds. This is the opposite of fallen angels, which are bonds that
have a 'junk' rating

Angel Investor
A financial backer providing venture capital funds for small start-ups or entrepreneurs

Ankle Biter
Stock issues with a market capitalization worth less than $500 million.
Also known as "small cap" stocks.

Annual
An event that occurs once a year.

Annual Addition
The maximum dollar amount that may be contributed to a participant's retirement account under a
defined-contribution plan.

Annual earnings
A longer-term indicator of a company's growth. It commonly refers to a company's earnings per
share for a particular year.

Annual Equivalent Rate - AER


Interest calculated under the assumption that interest is paid and compounded per year

Annual General Meeting - AGM


A mandatory yearly meeting of shareholders that allows stakeholders to stay informed and involved
with company decisions and workings.

Annual Percentage Rate - APR


The annual rate that is charged for borrowing (or made by investing), expressed as a single
percentage number that represents the actual yearly cost of funds over the term of a loan. This
includes any fees or additional costs associated with the transaction.

Annual Percentage Yield - APY


The effective annual rate of return taking into account the effect of compounding interest. APY is
calculated by:

The resultant percentage number assumes that funds will remain in the investment vehicle for a full
365 days.

Annual Report
A corporation's annual statement of financial operations. Annual reports include a balance sheet,
income statement, auditor's report, and a description of the company's operations

Annualize
1. To convert a rate of any length into a rate that reflects the rate on an annual (yearly) basis. This is
most often done on rates of less than one year, and usually does not take into account the effects of
compounding. The annualized rate is not a guarantee but only an estimate, and its accuracy
depends on the variance of the rate. This rate is also known as "annualized return" and is similar to
"run rate".
2. To convert a taxation period of less than one year to an annual (yearly) basis. This helps income
earners to set out an effective tax plan and manage any tax implications

Annuitant
1. A person who receives the benefits of an annuity or pension.
2. The person upon whom a life-insurance contract is based
Annuitization
The process of converting an annuity investment into a series of periodic income payments.
Annuities may be annuitized regularly, over a long or short time period, or in some cases, in one
single payment.

Annuitization Method
A type of annuity distribution structure that gives the annuitant periodic income payments for the
rest of his or her life, or a specified period of time. This is different than the systematic withdrawal
method, with which the annuitant chooses the amount he or she would like to receive each month,
which he or she receives until the amount in the account runs out.

Annuitization Phase
The period when the annuitant starts to receive payments from the annuity. This period is after the
accumulation phase where money is invested into the annuity.

Annuity
A series of fixed payments paid at regular intervals over the specified period of the annuity. The
fixed payments are received after a period of investments that are made into the annuity.

Annuity Contract
The written agreement between an insurance company and a customer outlining each party's
obligations in an annuity coverage agreement. This document will include the specific details of the
contract, such as the structure of the annuity (variable or fixed), any penalties for early withdrawal,
spousal provisions such as a survivor clause and rate of spousal coverage, and more.

Annuity Due
An annuity whose payment is to be made immediately, rather than at the end of the period.

Annuity Unit
An accumulation unit for which the annuitant has annuitized their contract. This is a sub-account of
the retiree's total accumulated annuity. These units represent a fixed share of ownership of the
insurer's accounts portfolio.

Anonymous Trading
Visible bids and offers on the market without the identity of the bidder and seller being revealed

Anti-Dilution Provision
A provision in an option or a convertible security. It protects an investor from dilution resulting from
later issues of stock at a lower price than the investor originally paid. Also known as an "anti-
dilution clause".

Anti-Greenmail Provision
A special clause located within a firm's corporate charter that acts as a deterrence against the board
of directors passing a share buy-back.

Anti-Martingale System
A system of position sizing that correlates the levels of investment with the risk and portfolio size.

Anti-Money Laundering - AML


A set of procedures, laws or regulations designed to stop the practice of generating income through
illegal actions. In most cases money launderers hide their actions through a series of steps that
make it look like money coming from illegal or unethical sources was earned legitimately

Anti-Reciprocal Rule
A rule created by the National Association of Securities Dealers (NASD) to protect individual
investors from conflicts of interest that may arise when brokerage firms and mutual funds
collaborate.

Anti-Takeover Measure
Measures taken on a continual or sporadic basis by a firm's management in order to prevent or deter
unwanted takeovers

Anti-Takeover Statute
A set of state regulations that prevent or deter companies from attempting hostile takeovers. These
regulations vary across state lines and typically affect only the companies incorporated within the
state

Antitrust
The antitrust laws apply to virtually all industries and to every level of business, including
manufacturing, transportation, distribution, and marketing. They prohibit a variety of practices that
restrain trade.

Any-and-All Bid
A bid made to purchase all stock being offered at a specific price.

AON
In currencies, this is the abbreviation for the Angolan New Kwanza

APICS Business Outlook Index


A national manufacturing index that surveys several manufacturing firms on a monthly basis. If the
index is above 50 it signals expansion, if it dips below 50 it indicates contraction.

Applicable Federal Rate - AFR


The interest rate published by the U.S. Treasury to calculate imputed interest charges.

Appraisal
A valuation of property (e.g. real estate, a business, an antique) by the estimate of an authorized
person.

Appraisal Ratio
A ratio used to measure the quality of a fund's investment picking ability. It compares the fund's
alpha (or the adjusted return of the fund assuming the market return is zero) to the portfolio's
unsystematic risk (or the risk that could be diversified away).

Appraisal Right
The right of shareholders to demand the fair payment of securities undergoing a merger by a third
party valuator.

Appraiser
A practitioner who has the knowledge and expertise necessary to estimate the value of an asset, or
the likelihood of an event occurring, and the cost of such an occurrence. Ideally, an appraiser acts
independently of the buying and selling parties in a transaction in order to arrive at the fair value of
an asset without bias.

Appreciation
The increase in value of an asset.

Approved Delivery Facility


An exchange authorized facility used as a location for the delivery of commodities tendered upon
future contracts.
Approved Participants
Institutional investors who are allowed direct access to an exchange's trading environment.
Approved participant status usually affords trade execution cost savings and the right to install
trading terminals in client offices.

Arbitrage
The simultaneous purchase and sale of an asset in order to profit from a difference in the price. This
usually takes place on different exchanges or marketplaces.
Also known as a "riskless profit".
Arbitrage Bond
A lower-rate debt security issued by a municipality prior to the call date of the municipality's existing
higher-rate security

Arbitrage Pricing Theory - APT


An alternative to the CAPM, APT differs in its assumptions and explanation of risk factors
associated with the risk of an asset.

Arbitrage Trading Program - ATP


A program used to place simultaneous orders for stock index futures and the underlying stocks.

Arbitrageur
A type of investor who attempts to profit from price inefficiencies in the market by making
simultaneous trades that offset each other and capture risk-free profits. An arbitrageur would, for
example, seek out price discrepancies between stocks listed on more than one exchange, buy the
undervalued shares on the one exchange while short selling the same number of overvalued shares
on the other exchange, thus capturing risk-free profits as the prices on the two exchanges converge.

Arbitration
An informal hearing regarding a dispute. The dispute is judged by a group of people (generally
three) who have been selected by an impartial panel. Once a decision has been reached, there is no
further appeal process.

Arithmetic Mean
A mathematical representation of the typical value of a series of numbers, computed as the sum of
all the numbers in the series divided by the count of all numbers in the series.
Arithmetic mean is commonly referred to as "average" or simply as "mean

Arm's Length Transaction


A transaction in which the buyers and sellers of a product act independently of each other and have
no relationship to each other.

Arms Index - TRIN


A short-term technical analysis breadth indicator calculated as the following

Aroon Indicator
A technical indicator developed by Tushar Chande used for identifying definable trends in an
underlying security. It is made up of two lines: one line is called "Aroon up", which measures the
strength of the uptrend, and the other line is called "Aroon down", which measures the downtrend.
The indicator reports the time it is taking for the price to reach, from a starting point, the highest and
lowest points over a given time period, each reported as a percentage of total time. Both the Aroon
up and the Aroon down fluctuate between zero and 100, with values close to 100 indicating a strong
trend, and zero indicating a weak trend. The lower the Aroon up, the weaker the uptrend and the
stronger the downtrend, and vice versa. The main assumption underlying this indicator is that a
stock's price will close at record highs in an uptrend, and record lows in a downtrend.

ARP
In currencies, this is the abbreviation for the Argentinian peso.
Arrearage
An amount on a loan, cumulative preferred stock, or any credit instrument that is overdue.
Also referred to as "Arrears."

ARS
In currencies, this is the abbreviation for the Argentinian Nuevo Peso.

Articles Of Incorporation
A set of documents filed with a government body for the purpose of legally documenting the
creation of a corporation.
Also referred to as the "corporate charter."

Ascending Channel
An upward moving channel formed with two parallel, upward sloping trendlines. The upper trendline
connects a stock's highs over a period, with each subsequent high price higher than the previous.
Conversely, the lower trendline connects the stock's lows, with each subsequent low price higher
than the previous.

Ascending Tops
This refers to a series of peaks, each peak higher than the previous one on the stock's chart pattern.
The chart below illustrates a series of four ascending tops

Ascending Triangle
A bullish chart pattern used in technical analysis that is easily recognizable by the distinct
shape created by two trendlines. In an ascending triangle, one trendline is drawn
horizontally at a level that has historically prevented the price from heading higher, while
the second trendline connects a series of increasing troughs. Traders enter into long
positions when the price of the asset breaks above the top resistance. The chart below is
an example of an ascending triangle:
Asia Ex-Japan
The region of countries located in Southeast Asia, not including Japan. These countries are
generally considered emerging markets and are of interest to investors looking for high-growth
investment opportunities.

Asian Option
An option whose payoff depends on the average price of the underlying asset over a certain period
of time as opposed to at maturity. Also known as an average option.

Asian Tail
An option feature whereby a reference price is activated at the end of an option should the
underlying fall below a specified average before option expiry.

Ask
The price a seller is willing to accept for a security, also known as the offer price. Along with the
price, the ask quote will generally also stipulate the amount of the security willing to be sold at that
price.
Sometimes called "the ask".

Ask Size
The number of shares a seller is selling at a quoted ask price.

Aspirin Count Theory


A market theory that states stock prices and aspirin production are inversely (opposite) related.

Assay
The act of testing the purity of precious metals.

Assessable Stock
A class of stock in which the issuing company is allowed to impose levies on stockholders for more
funds. In the past, there was no restriction on how much additional money a company could demand
or on how often a company could impose a levy on its stocks.
These are the opposite of non-assessable stocks.

Assessed Value
Dollar value assigned to property for purposes of assessing taxes

Assessor
A local government official who determines the value of a property for taxation purposes.

Asset
1. A resource having economic value that an individual, corporation or country owns or controls
with the expectation that it will provide future benefit.
2. A balance sheet item representing what a firm owns.

Asset Allocation
The process of dividing a portfolio among major asset categories such as bonds, stocks or cash.
The purpose of asset allocation is to reduce risk by diversifying the portfolio.

Asset Allocation Fund - AAF


A mutual fund that splits its investment assets among stocks, bonds and other investment vehicles
in an attempt to provide a consistent return for the investor. Also referred to as a "diversification
fund

Asset Class
A specific category of assets or investments, such as stocks, bonds, cash, international securities
and real estate. Assets within the same class generally exhibit similar characteristics, behave
similarly in the marketplace, and are subject to the same laws and regulations.

Asset Coverage Ratio


A test that determines a company's ability to cover debt obligations with its assets after all liabilities
have been satisfied. It is calculated as the following:

Asset Financing
Using balance sheet assets (such as accounts receivable, short-term investments or inventory) to
obtain a loan or borrow money - the borrower provides a security interest in the assets to the lender.
This differs from traditional financing methods, such as issuing debt or equity securities, as the
company simply pledges some of its assets in exchange for a quick cash loan.

Asset Management
1. The management of a client's investments by a financial services company, usually an investment
bank. The company will invest on behalf of its clients and give them access to a wide range of
traditional and alternative product offerings that would not be to the average investor.
2. An account at a financial institution that includes checking services, credit cards, debit cards,
margin loans, the automatic sweep of cash balances into a money market fund, as well as brokerage
services.
Also known as an "asset management account" or a "central asset account".

Asset Play
An incorrectly valued stock that is attractive because its combined asset value is greater than its
market capitalization.
Asset Redeployment
The strategic relocation of company assets in order to increase profitability

Asset Stripper
An individual who determines if the value of a company is worth more purchased as a whole or
divided into separate assets which are sold off. This is usually done in order to fulfill debt
agreements.

Asset Stripping
The process of buying an undervalued company with the intent to sell off its assets for a profit. The
individual assets of the company, such as its equipment and property, may be more valuable than
the company as a whole due to such factors as poor management or poor economic conditions.

Asset Swap
Similar in structure to a plain vanilla swap, the key difference is the underlying of the swap contract.
Rather than regular fixed and floating loan interest rates being swapped, fixed and floating
investments are being exchanged.

Asset Swapped Convertible Option Transaction - ASCOT


An option on a convertible bond that is used to separate a convertible bond into its two
components: 1) a bond and 2) an option to acquire stock. When the bond is stripped of its
conversion feature, the holder has a bond featuring fairly stable returns on debt, and a volatile - but
potentially very valuable - option

Asset Turnover
The amount of sales generated for every dollar's worth of assets. It is calculated by dividing sales in
dollars by assets in dollars

Asset Valuation
The process of determining the current worth of a portfolio, company, investment, or balance sheet
item

Asset-Backed Security - ABS


A financial security backed by a loan, lease or receivables against assets other than real estate and
mortgage-backed securities. For investors, asset-backed securities are an alternative to investing in
corporate debt.

Asset-Based Finance
A specialized method of providing structured working capital and term loans that are secured by
accounts receivable, inventory, machinery, equipment and/or real estate. This type of funding is
great for startup companies, refinancing existing loans, financing growth, mergers and acquisitions,
and management buy-outs (MBOs) and buy-ins (MBIs

Asset-Based Lending
A business loan secured by collateral (assets). The loan, or line of credit, is secured by inventory,
accounts receivable and/or other balance-sheet assets.
Also known as "commercial finance" or "asset-based financing".

Asset-Conversion Loan
A short-term loan that is typically repaid by converting an asset, usually inventory or receivables,
into cash.

Asset-or-Nothing Call Option


An option payoff that is equal to the asset's price if the asset is above the strike price, otherwise the
payoff is zero.

Asset-or-Nothing Put Option


An option payoff that is equal to the asset's price if the asset is below the strike price, otherwise the
payoff is zero.

Asset/Liability Management
A technique companies employ in coordinating the management of assets and liabilities so that an
adequate return may be earned. Also known as "surplus management."

Assets Under Management - AUM


In general, the market value of assets an investment company manages on behalf of investors.

Assign
The act of clearing houses and brokerages selecting short option and future contract holders to
deliver underlying securities or commodities of maturing or exercised/tendered contracts.

Assignable Contract
A futures contract with a provision permitting the contract holder to convey his or her rights of
assignment to a third party. This enables the contract holder to assign the rights and obligations of
a contract to another to perform and receive the benefits of that contract before it closes

Assignment
1. The transfer of an individual's rights or property to another person or business.
2. A notice received by an option writer stating that the option sold has been exercised by the
purchaser of the option.

Assimilation
The absorption of stock by the public from a new issue.

Associated Person
The name given to participants within the futures market that are involved in the solicitation or
facilitation of transacting customer orders, the maintenance of discretionary accounts, or the true
participatory involvement in the futures market.

Association of Southeast Asian Nations - ASEAN


An organization of countries in southeast Asia set up to promote cultural, economic and political
development in the region. ASEAN was officially formed in 1967 with the signing of the Bangkok
Declaration.

Assumable Mortgage
A type of financing arrangement in which the outstanding mortgage and its terms can be transfered
from the current owner to a buyer. By assuming the previous owner's remaining debt, the buyer can
avoid having to obtain his or her own mortgage.

Assumed Interest Rate - AIR


The rate of interest, or growth rate, selected by an insurance company. The assumed interest rate is
provided to determine the value of an annuity contract and, therefore, the periodic income payment
which can be provided to the annuitant. Combined with other factors such as the annuitant's age
upon annuitization, spousal coverage options and the type of annuity coverage chosen, the AIR
determines the monthly payment the annuitant will receive.

Assurance
Coverage of an event that is certain to happen. Assurance is similar to insurance (and sometimes
the terms are interchangeable) except that insurance protects policy holders from events that might
happen.

Asymmetric Digital Subscriber Line - ADSL


A new technology that provides high transmission speeds for video and voice to homes over
ordinary copper telephone wire. It will be most cost-effective in areas with a low market penetration
of cable TV.

Asymmetric Information
Information available to some people but not others.

At Risk Rules
Tax laws limiting the amount of losses an investor (usually a limited partner) can claim. Only the
amount actually at risk can be deducted.

At The Market
An order to buy or sell a futures contract at the best available price upon entrance into the exchange
for execution

At the Money
An option is at-the-money if the strike price of the option equals the market price of the underlying
security

At-The-Close Order
An order specifying that a trade is to be executed at the close of the market, or as near to the closing
price as possible.

At-The-Opening-Order
An order specifying that a trade is to be executed at the opening of the market, otherwise it's
canceled

Athens Stock Exchange - ATHEX


The stock exchange headquartered in Athens, Greece.

Atlanta Fed Index


A manufacturing survey that covers prominent manufacturing states like Georgia, Alabama, Florida,
Tennessee and Louisiana.

ATS
In currencies, this is the abbreviation for the Austrian Schillings.

Attachment
A legal term referring to the action of seizing property in anticipation of a favorable ruling for a
plaintiff who claims to be owed money by the defendant.

Attestation
The act of witnessing the signing of a document and then also signing it to verify that it was properly
signed by those bound by its contents.

Attornment
The act of granting authority or jurisdiction to a party even though no legal rights exist

Attractiveness Rank
This ranks a stock's Attractiveness Rating within its industry group. If a stock ranks 10th out of 100,
for example, its Attractiveness Rating is in the top 10% of its industry. If 2 or more stocks within a
group have the same 1-99 rating, they will receive the same Attractiveness Rank. For example, if 3
stocks have a 99 Attractiveness Rating, they will all three be ranked best in group. The stock with
the next best rating will be ranked 4th in group.

Attractiveness Rating
This timely rating assesses a stock's attractiveness based on investor demand. It measures current
price and volume gauges for each stock and its industry group, and compares the results to all other
stocks. Rated on a scale from 1 to 99. A 90 rating, for example, indicates the stock’s attractiveness is
greater than 90 percent of all other companies.
The Attractiveness Rating factors in:
•Recent and past price and volume activity
• Alpha
•Up volume vs. down volume
•Recent price performance vs. its industry
•Its industry group’s price performance vs. the S&P 500 index.
Components are not equally weighted.

Attribution Rules
A set of rules created by Canada Customs and Revenue Agency (CCRA) that prevents investors
from transferring assets between family members with the intention of avoiding taxes.

Attrition
The reduction in staff and employees in a company through normal means, such as retirement and
resignation. This is natural in any business and industry.

Auction Market
A market in which buyers enter competitive bids and sellers enter competitive offers at the same
time.

Auction Rate
The interest rate that will be paid on a specific security as determined by the Dutch auction process.
The auctions take place at periodic intervals, and the interest rate is fixed until the next auction is
held. This process is commonly used to determine the interest rate on Treasury bills

AUD
In the currency market, this is the abbreviation for the Australian dollar

Audit
1. An unbiased examination and evaluation of the financial statements of an organization. It can be
done internally (by employees of the organization) or externally (by an outside firm).
2. An IRS examination of a taxpayer's return or other transactions. The IRS performs this
examination to verify the accuracy of these filings.

Audit Trail
A step-by-step record by which accounting data can be traced to their source. The SEC and NYSE
will use this method for the explicit reconstruction of trades when there are questions as to the
validity or accuracy of an accounting figure.

Auditor's Report
Recorded in the annual report, the auditor's report tests to see that a corporation's financial
statements comply with GAAP. This is sometimes referred to as the clean opinion.

Australian Stock Exchange - ASX


The stock exchange headquartered in Sydney, Australia.

Authorized Participant
An entity chosen by an exchange-traded fund's sponsor to undertake the responsibility of obtaining
the underlying assets needed to create an ETF. Authorized participants are typically large
institutional organizations, such as market makers or specialists.

Authorized Stock
The maximum number of shares that a corporation is legally permitted to issue, as specified in its
articles of incorporation. This figure is usually listed in the capital accounts section of the balance
sheet.
Also known as "authorized shares" or "authorized capital stock".

Auto Sales
The major producers of domestic automobiles report sales monthly. These numbers are seasonally
adjusted by the U.S. Department of Commerce and are available to the public one to five business
days after the end of each month.

Autocorrelation
A mathematical representation of the degree of similarity between a given time series and a lagged
version of itself over successive time intervals. It is the same as calculating the correlation between
two different time series, except that the same time series is used twice - once in its original form
and once lagged one or more time periods.
The term can also be referred to as "lagged correlation" or "serial correlation".

Automated Bond System - ABS


The electronic system on the NYSE that records bids and offers for inactively traded bonds until
they are canceled or executed

Automated Clearing House - ACH


An electronic funds-transfer system run by the National Automated Clearing House Association.
This payment system deals with payroll, direct deposit, tax refunds, consumer bills, tax payment,
and many more payment services.

Automated Confirmation Transaction Service - ACT


An automated system designed to document and report the clearing of trades in the Nasdaq market

Automated Customer Account Transfer Service - ACATS


A system that facilitates the transfer of securities from one trading account to another at a different
brokerage firm or bank. The National Securities Clearing Corporation (NSCC) developed the ACATS
system, replacing the previous manual asset transfer system with a fully automated and
standardized one.

Automatic Exercise
A procedure implemented to protect an option holder where the Option Clearing Corporation will
automatically exercise an "in the money" option for the holder

Automatic Investment Plan


An investment program that allows you to contribute small amounts of money (as little as $20 a
month) in regular intervals. Funds are automatically deducted from your checking/savings account
or your paycheck, and invested in a retirement account or mutual fund.

Automatic Reinvestment Plan


An investment program in which capital gains or other income received from investments are
automatically used for reinvestment purposes. In the case of a mutual fund, for example, capital
gains produced by the fund would be used to automatically purchase more shares of the fund,
instead of being distributed to the investor as cash.

Automatic Rollover
A rollover of a participant's qualified-plan balance to an IRA without the participant's authorization.

Automatic Stabilizer
An economic policy or program that increases or decreases automatically to offset the current
economic trend without government assistance.

Automatic Stay
A provision under the U.S. Bankruptcy Code prohibiting creditors from beginning or continuing
proceedings for collecting owed amounts from a firm who files for bankruptcy under Chapter 11

Autoregressive
Using past data to predict future data.

Available Seat Miles - ASM


This refers to how many seat miles were actually available for purchase on an airline. If all of the
seats on the plane are not sold, then the ASM indicates the overall capacity the airline is operating
at.

Aval
A guarantee added to a debt obligation by a third party who ensures payment should the issuing
person default

Average Annual Growth Rate - AAGR


The average increase in the value of a portfolio over the period of a year.

Average Annual Return - AAR


A figure used when reporting the historical return of a mutual fund. The AAR is stated after
expenses have been tallied, including administration fees, 12b-1 fees, and others

Average Daily Balance Method


A finance/accounting method where costs (and interest) are based on the amount(s) owing at the
end of each day.

Average Directional Index - ADX


An indicator used in technical analysis to determine the strength of a prevailing trend. The ADX is
measured on a scale between 0 and 100. Readings below 20 are used to indicate a weak trend, while
readings over 40 indicate a strong trend. ADX is not used to determine the direction of a particular
trend, but only to gauge its strength.

Average Down
The process of buying additional shares in a company at lower prices than you originally purchased.
This brings the average price you've paid for all your shares down

Average Industrial Wage


The mean hourly rate of pay for workforce members of a given geographical area, such as a country
or province, excluding farm employees. This measurement serves as a reasonable proxy for the
wage rate of the average worker in a given country, and is used by labor organizations and
employers as a benchmark.

Average Life
An estimate of the number of terms to maturity, taking the possibility of early payments into
account. Average life is calculated using the weighted average time to the receipt of all future cash
flows.

Average Price Call


A type of option where the payoff is either zero or the amount by which the average price of the
asset exceeds the strike.

Average Price Put


A type of option where the payoff is either zero or the amount by which the strike price exceeds the
average price of the asset.

Average Qualitative Opinion - AQO


AQO is a number that summarizes analysts' ratings for a particular company.

Average Revenue Per Unit - ARPU


A measure of the revenue generated per user or unit. This measure allows for the analysis of a
companies revenue generation and growth at the per unit level, which can identify which products
are high or low revenue-generators.

Average True Range - ATR


A measure of volatility introduced by Welles Wilder in his book: New Concepts in Technical Trading
Systems.
The True Range indicator is the greatest of the following:
-current high less the current low.
-the absolute value of the current high less the previous close.
-the absolute value of the current low less the previous close.
The Average True Range is a moving average (generally 14-days) of the True Ranges.

Average Up
The process of buying additional shares at higher prices. This raises the average price that the
investor pays for all the shares. In the context of short selling, averaging up is achieved by selling
additional shares at a price higher than that of the first transaction.

Average-Cost Method
A costing method by which the value of a pool of assets or expenses is assumed to be equal to the
average cost of the assets or expenses in the pool

Averaging up or down in price


After an initial stock purchase, averaging up is the purchase of additional shares of the stock as it
moves up in price. Additional purchases might be warranted if the stock is originally purchased at a
correct “pivot point” (or buy point) and its price has increased 2% or 3% from the original purchase
price. Averaging down is the purchase of additional stock as it declines in price. This is risky. You
never know how low a stock could drop. Averaging refers to the combination of prices paid for each
purchase of stock divided by the total number of shares purchased. If an initial purchase of 100
shares is made at $50 and a second purchase of 75 shares is made at $51 ½, the average share
price for 175 shares is approximately $50 5/8.

Away From Home


The IRS criteria used to establish whether or not you are within commuting distance from home. If
you work away from home for longer than a normal workday and you require sleep, then the
associated costs are tax deductible.

Away from the Market


When the bid on an order is lower (or the ask price is higher) than the current market price for the
security

AWG
In currencies, this is the abbreviation for the Aruba Guilder.

Ax
The market maker who is most central to the price action of a specific security. The ax can be
identified by spending several days studying level II quotes and noting which market maker seems
to have the greatest effect on the security's price.

Axe
The interest a person or trader shows in buying or selling a bond. A trader may have specific
interest in a certain type of bond based on his or her existing positions.

B
A Nasdaq stock symbol specifying that the stock is Class B shares of the company

B-Share
A class in a family of multi-class mutual funds. This class is characterized by a rear-end load
structure that is paid only when selling the fund.

Baby Bells
A common nickname given to the U.S. regional telephone companies that were formed from the
breakup of AT&T in 1984, which was done to create more competition within the industry

Baby Bills
A nickname given to the hypothetical companies that would have formed if the Justice Department
had broken up Microsoft Corporation.

Baby Bond
Any bond issued with a par value less than $1,000.

Baccalaureate Bond
A zero-coupon bond issued by certain states to assist families save for college tuition by means of
added tax benefits.

Back Door Listing


A strategy of going public used by a company that fails to meet the criteria for listing on a stock
exchange. To get onto the exchange, the company desiring to go public acquires an already listed
company.

Back Fee
The premium charged upon the second term or portion of a compound option.

Back Months
The available futures contracts for a particular commodity that possess expirations or delivery dates
furthest into the future. Also referred to as deferred futures or forward months.
Back Office
Administration and support personnel in a financial services company. They carry out functions like
settlements, clearances, record maintenance, regulatory compliance, and accounting. When order
processing is slow due to high volume, it is commonly referred to as "back office crunch."

Back Stop
The act of providing last-resort support or security in a securities offering for the unsubscribed
portion of shares. A company will try and raise capital through an issuance and to guarantee the
amount received through the issue, the company will get a back stop from an underwriter or major
shareholder to buy any of the unsubscribed shares

Back Up the Truck


The act of a large buyer scooping up huge quantities of a stock

Back-End Load
A fee an investor pays when selling a mutual fund within a certain number of years, usually seven.

Back-End Ratio
A ratio that indicates what portion of a person's monthly income goes toward paying debts. Total
monthly debt includes expenses such as mortgage payments (made up of PITI), credit-card
payments, child support and other loan payments. Lenders use this ratio in conjunction with the
front-end ratio to approve mortgages.
Back-End Ratio = (Total Monthly Debt Expense / Gross Monthly Income) x 100

Back-to-Back Loan
A loan in which two companies in different countries borrow offsetting amounts from one another in
each other's currency. The purpose of this transaction is to hedge against currency fluctuations.
With the advent of currency swaps this type of transaction is no longer used very often
Backdating
Dating any document by a date earlier than the one on which the document was originally drawn up.

Backing Away
The act of a market maker failing to honor a posted bid or ask even though the price and quantity are
valid.
Backlog
The total value of sales orders waiting to be fulfilled.

Backpricing
A pricing method used in specific futures contracts whereby the price of the commodity to be
delivered is priced by the purchaser at some future date after entering into the position.

Backspread
A type of options spread in which a trader holds more long positions than short positions. The
premium collected from the sale of the short option is used to help finance the purchase of the long
options. This type of spread enables the trader to have significant exposure to expected moves in
the underlying asset while limiting the amount of loss in the event prices do not move in the
direction the trader had hoped for. This spread can be created using either all call options or all put
options.

Backtesting
The process of testing a trading strategy on prior time periods. Instead of applying a strategy for the
time period forward, which could take years, a trader can do a simulation of his or her trading
strategy on relevant past data in order to gauge the its effectiveness.
Most technical-analysis strategies are tested with this approach

Backup Withholding
Tax that is levied on investment income, at an established tax rate, as the investor withdraws it.
Backup withholding helps to ensure that government tax-collecting agencies (such as the IRS or
Canada Revenue Agency) will be able to receive income taxes owed to them from investors'
earnings. This tax may be imposed for a variety of reasons. In the U.S., for example, backup
withholding may be applied when an investor has not met rules regarding taxpayer identification
numbers (TIN). At the time the investor withdraws his or her investment income, the amount
mandated by the backup withholding tax is remitted to the government, providing the tax-collecting
body with the required funds immediately, but leaving the investor with less short-term cash flow.

Backward Integration
A form of vertical integration that involves the purchase of suppliers in order to reduce dependency.

Backwardation
The theory that says futures prices will tend to rise over the life of a contract. Therefore the near-
term contracts trade at a higher price than the longer-term contracts.

Bad Debt
A debt that is not collectable and therefore worthless to the creditor

Bag Man
Any person in charge of organizing and collecting contributions to political parties or funds
gathered for political reasons.

Bahrain Stock Exchange - BSE


The stock exchange headquartered in Manama, Bahrain

Balance Of Payments - BOP


A record of all transactions made between one particular country and all other countries during a
specified period of time. BOP compares the dollar difference of the amount of exports and imports,
including all financial exports and imports. A negative balance of payments means that more money
is flowing out of the country than coming in, and vice versa.

Balance Of Trade - BOT


The largest component of a country's balance of payments. It is the difference between exports and
imports. Debit items include imports, foreign aid, domestic spending abroad and domestic
investments abroad. Credit items include exports, foreign spending in the domestic economy and
foreign investments in the domestic economy. A country has a trade deficit if it imports more than it
exports the opposite scenario is a trade surplus.

Balance Sheet
A financial statement that summarizes a company's assets, liabilities and shareholders' equity at a
specific point in time. These three balance sheet segments give investors an idea as to what the
company owns and owes, as well as the amount invested by the shareholders.
The balance sheet must follow the following formula:
Assets = Liabilities + Shareholders' Equity
Each of the three segments of the balance sheet will have many accounts within it that document the
value of each. Accounts such as cash, inventory and property are on the asset side of the balance
sheet, while on the liability side there are accounts such as accounts payable or long-term debt. The
exact accounts on a balance sheet will differ by company and by industry, as there is no one set
template that accurately accommodates for the differences between different types of businesses.

Balanced Fund
A mutual fund that invests its assets into the money market, bonds, preferred stock, and common
stock with the intention to provide both growth and income. Also known as an "asset allocation
fund".

Balanced Investment Strategy


A portfolio allocation and management method aimed at balancing risk and return. Such portfolios
are generally divided equally between equities and fixed-income securities.

Balanced Scorecard
A performance metric used in strategic management to identify and improve various internal
functions and their resulting external outcomes. The balanced scorecard attempts to measure and
provide feedback to organizations in order to assist in implementing strategies and objectives.

Balloon Maturity
1. A repayment schedule for a bond issue where a large number of the bonds come due at a one
time (normally at the final maturity date).

2. A final loan payment that is considerably higher than prior payments.


This is also known as a "balloon payment

Balloon Option
An option whose notional payments increase significantly after a set threshold is broken.

Bancassurance
A French term referring to the selling of insurance through a bank's established distribution
channels.

Bandwidth
The data transfer capacity of a network. It is measured in bits per second.

Bank
A commercial institution licensed as a receiver of deposits. Banks are mainly concerned with
making and receiving payments as well as supplying short-term loans to individuals.
Bank For International Settlements - BIS
An international organization fostering the cooperation of central banks and international monetary
policy makers. Established in 1930, it is the oldest international financial organization, and was
created to administer the transaction of monies according to the Treaty of Versailles. Among others,
its main goals are to promote information sharing and to be a key center for economic research

Bank Guarantee
A guarantee from a lending institution ensuring that the liabilities of a debtor will be met. In other
words, if the debtor fails to settle a debt, the bank will cover it.

Bank Insurance
A guarantee on a specified amount of deposits in a bank.

Bank Investment Contract - BIC


A security with an interest rate guaranteed by a bank. It provides a specific yield on a portfolio over
a specified period.

Bank Of Canada - BOC


The central bank of Canada, that came into existence after the passing of the Bank of Canada Act in
1935, influences the country's economy and money supply

Bank of England - BoE


The Bank of England is the central bank for the United Kingdom. It has a wide range of
responsibilities, similar to those of most central banks around the world. For example, it acts as the
government's bank and the lender of last resort, it issues currency and, most importantly, it
oversees monetary policy.

Bank Of Japan - BoJ


Headquartered in the business district of Nihonbashi in Tokyo, the Bank of Japan is the Japanese
central bank. The bank is responsible for issuing and handling currency and treasury securities,
implementing monetary policy, maintaining the stability of the Japanese financial system, and
providing settling and clearing services.
Like most central banks, the Bank of Japan also compiles and aggregates economic data and
produces economic research and analysis

Bank Rate
The rate at which central banks lend funds to national banks.

Bank Reconciliation Statement


A form that allows individuals to compare their personal bank account records to the bank's records
of the individual's account balance in order to uncover any possible discrepancies.

Bank Restriction Act of 1797


An act passed by the British government in 1797 to free the central Bank of England from converting
bank notes and other financial claims into gold. The act was created in response to the flood of
paper money issued by the British government that resulted in an economic catastrophe

Bank Run
A situation in which numerous bank customers try to withdraw their bank deposits simultaneously
and the bank's reserves are not sufficient to cover the withdrawals

Banker's Acceptance
A short-term credit investment created by a non-financial firm and guaranteed by a bank.

Bankmail
An agreement made between a company planning a takeover and a bank, which prevents the bank
from financing any other potential acquirer's bid.
Bankruptcy
The state of a person or firm unable to repay debts.

Bankruptcy Financing
Financing arranged by a company while under the chapter 11 bankruptcy process. Clearly, such
financing is extremely high risk and is done at a relatively high interest rate.

Bankruptcy Risk
The risk that a company will be unable to meet its debt obligations. Often referred to as "default" or
"insolvency risk".

Banner Advertising
A common form of advertising on the internet. The banner is an advertisement of 460x68 pixels,
usually placed at the top of the page

Baptism of Fire
A difficult situation that a company or individual experiences that will result in either success or
failure. Examples include Initial Public Offerings (IPOs), a new CEO hired to manage a struggling
company, and hostile takeover attempts.

Bar
A graphical representation of a stock's movement that usually contains the open, high, low and
closing prices for a set period of time.

Bar Chart
A style of chart used by some technical analysts, on which, as illustrated below, the top of the
vertical line indicates the highest price a security traded at during the day, and the bottom
represents the lowest price. The closing price is displayed on the right side of the bar, and the
opening price is shown on the left side of the bar. A single bar like the one below represents one day
of trading.

Barbell
A bond investment strategy that concentrates holdings in both very short-term and extremely long-
term maturities. This is also known as the "dumbbell" or "barbelling."

Barefoot Pilgrim
Slang for an unsophisticated investor who loses all of his or her wealth from trading equities in the
stock market.

Barings Bank
A British merchant bank that was started in 1762, and for centuries was considered the largest and
most stable bank in the world. In 1995, Barings - then the oldest bank in Britain - collapsed after it
was unable to meet its cash requirements following unauthorized speculative trading in derivatives
at its Singapore office by then-trader Nick Leeson.

Barometer
An investment instrument whose movements forecast trends

Barometer Stock
A security whose price pattern is regarded as an indicator of the state of the overall market

Barratry
The act of a vessel's captain or crew knowingly endangering the vessel's cargo and/or the vessel
itself.
Barrels Per Day - B/D
A measure of oil output, represented by the number of barrels of oil produced in a single day. For
example, you might hear "country ABC has the potential to produce five million barrels per day".
The abbreviation "bbl/d" can also be used to represent this production measure.

Barrier Option
A type of option whose payoff depends on whether or not the underlying asset has reached or
exceeded a predetermined price

Barriers To Entry
The existence of high start-up costs or other obstacles that prevent new competitors from easily
entering an industry or area of business. Barriers to entry benefit existing companies already
operating in an industry because they protect an established company's revenues and profits from
being whittled away by new competitors

Barron's Confidence Index


A confidence indicator calculated by dividing the average yield on high-grade bonds by the average
yield on intermediate-grade bonds. The discrepancy between the yields is indicative of investor
confidence.
A rising ratio indicates investors are demanding a lower premium in yield for increased risk and so
are showing confidence in the economy.

Barter
The act of trading goods and services between two or more parties without the use of money.
Bartering benefits companies and countries that see a mutual benefit in exchanging goods and
services rather than cash, and it also enables those who are lacking "hard currency" to obtain goods
and services.

Base (and base patterns, base-building, price consolidation area, price pattern)
A term used by technical analysts to refer to an area of consolidation in a stock's chart pattern. It
typically can be an indicator for future price advances. This price consolidation pattern generally
lasts around seven weeks but can last as long as 12 months. (Also, see Cup with handle, Double
bottom, and Flat base.)

Base Currency
The first currency quoted in a currency pair on forex. It is also typically considered the domestic
currency or accounting currency. For accounting purposes, a firm may use the base currency to
represent all profits and losses.
It is sometimes referred to as the "primary currency

Base Period
A particular time period whose data is used for comparative purposes when measuring economic
data of other periods.

Basel Committee On Bank Supervision


A committee established by the central bank governors of the Group of Ten countries in 1974 that
seeks to improve the supervisory guidelines that central banks or similar authorities impose on both
wholesale and retail banks. The committee makes banking policy guidelines for both member and
non-member countries and helps authorities to implement its suggestions.

Baseline
A benchmark used as a basis for comparison.

Basing
A period in which a stock price has very little or no trend. The resulting price pattern is a flat line.

Basis
1. The variation between the spot price of a deliverable commodity and the relative price of the
futures contract for the same actual that has the shortest duration until maturity.
2. A security's basis is the purchase price after commissions or other expenses. Also known as
"cost basis" or "tax basis".
3. In the context of IRAs, basis is the after-tax balance in the IRA, which originates from
nondeductible IRA contributions and rollover of after-tax amounts. Earnings on these amounts are
tax-deferred, similar to earnings on deductible contributions and rollover of pretax amounts.

Basis Grade
The minimum accepted standard that a deliverable commodity must meet to be used as the actual of
a futures contract. Also known as "par grade" or "contract grade."

Basis Point - BPS


A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The
basis point is commonly used for calculating changes in interest rates, equity indexes and the yield
of a fixed-income security.

Basis Price
Price quotation for a security expressed in terms of yield to maturity. This will usually only be
quoted on fixed-income securities such as bonds.

Basis Quote
A method for simplifying and shortening the quoted price of a futures contract. Used in the futures
markets, a basis quote gives the variation above or below the price of a futures contract.

Basis Rate Swap


A type of swap in which two parties swap variable interest rates based on different money markets.
This is usually done to limit interest-rate risk that a company faces as a result of having differing
lending and borrowing rates.

Basis Risk
The risk that offsetting investments in a hedging strategy will not experience price changes in
entirely opposite directions from each other. This imperfect correlation between the two investments
creates the potential for excess gains or losses in a hedging strategy, thus adding risk to the
position

Basket Option
A type of option whose underlying asset is a basket of commodities, securities, or currencies.

Basket Trade
A single order to buy or sell a set of 15 or more securities.

Batch Trading
A method of transacting different security orders that involves the accumulation of orders and their
simultaneous execution.

Bay Street
1.The street in Toronto where the Toronto Stock Exchange (TSE) is located.
2. The collective name for the financial institutions in Toronto including stock exchanges, banks,
commodity markets, money markets, etc

BBD
In currencies, this is the abbreviation for the Barbados Dollar

BCG Growth Share Matrix


A graphical approach to resource allocation within a multi-segmented corporation.

BDT
In currencies, this is the abbreviation for the Bangladesh Taka.

Bear
An investor who believes that a particular security or market is headed downward. Bears attempt to
profit from a decline in prices. Bears are generally pessimistic about the state of a given market.
Bear Call Spread
A type of options strategy used when a decline in the price of the underlying asset is expected. It is
achieved by selling call options at a specific strike price while also buying the same number of calls,
but at a higher strike price. The maximum profit to be gained using this strategy is equal to the
difference between the price paid for the long option and the amount collected on the short option

Bear CD
A certificate of deposit whose interest rate fluctuates in inverse correlation to the value of an
underlying market index. In other words, the interest rate paid on the CD increases as the underlying
market index decreases in value.

Bear Flattener
A yield-rate environment in which short-term interest rates are increasing at a faster rate than long-
term interest rates. This causes the yield curve to flatten as short-term and long-term rates start to
converge.

Bear Hug
An offer made by one company to buy the shares of another for a much higher per-share price than
what that company is worth. A bear hug offer is usually made when there is doubt that the target
company's management will be willing to sell. By offering a price far in excess of the target
company's current value, the offering party can usually obtain an agreement. The target company's
management is essentially forced to accept such a generous offer because it is legally obligated to
look out for the best interests of its shareholders.

Bear Market
A period when market indices (i.e., Dow Jones Industrial Average, S&P 500, Nasdaq Composite)
declines 15% to 25% and in some cases as much as 50%.

Bear Put Spread


A type of options strategy used when an option trader expects a decline in the price of the
underlying asset. It is achieved by purchasing put options at a specific strike price while also selling
the same number of puts at a lower strike price. The maximum profit to be gained using this strategy
is equal to the difference between the two strike prices, minus the net cost of the options
Bear Raid
The illegal practice of attempting to push the price of a stock lower by taking large short positions
and spreading unfavorable rumors about the target firm

Bear Spread
1. An option strategy seeking maximum profit when the price of the underlying security declines.
The strategy involves the simultaneous purchase and sale of options puts or calls can be used. A
higher strike price is purchased and a lower strike price is sold. The options should have the same
expiration date.
2. A trading strategy used by futures traders who intend to profit from the decline in commodity
prices while limiting potentially damaging losses

Bear Steepener
A widening of the yield curve caused by long-term rates increasing at a faster rate then short-term
rates. This causes a larger spread between the two rates as the long-term rate moves further away
from the short-term rate.

Bear Trap
A false signal that the rising trend of a stock or index has reversed when it has not.

Bearer Form
A security not registered in the books of issuing corporation but that is payable to its bearer (the
person possessing it). Securities can be issued in two forms: registered or bearer. Registered form
means the issuing firm keeps records of a security's owner and mails out payments to him/her.
Bearer form means the security is traded without any record of ownership, so physical possession
of the security is the sole evidence of ownership. Most securities issued today are in registered
form.

Bearish Belt Hold


A candlestick pattern that forms during an upward trend. This is what happens in the pattern:
following a stretch of bullish trades, a bearish or black candlestick occurs the opening price, which
becomes the high for the day, is higher than the close of the previous day the stock price declines
throughout the day, resulting in a long black candlestick with a short lower shadow and no upper
shadow.

Bearish Engulfing Pattern


A chart pattern that consists of a small white candlestick with short shadows or tails followed by a
large black candlestick that eclipses or "engulfs" the small white one.

Bearish Harami
A trend indicated by a large candlestick followed by a much smaller candlestick whose body is
located within the vertical range of the larger candle's body. Such a pattern is an indication that the
previous upward trend is coming to an end.

Beginning Inventory - BI
The book value of goods, inputs, or materials available for use or sale at the beginning of an
inventory accounting period

Behavioral Economics
A field of economics that studies how the actual decision-making process influences the decisions
that are reached.

Behavioral Finance
A field of finance that proposes psychology-based theories to explain stock market anomalies.
Within behavioral finance, it is assumed that the information structure and the characteristics of
market participants systematically influence individuals' investment decisions as well as market
outcomes

Behaviorist
1. One who accepts or assumes the theory of behaviorism (behavioral finance in investing.)
2. A psychologist who subscribes to behaviorism.

Beige Book
A commonly used name for the Fed report entitled "Summary of Commentary on Current Economic
Conditions by Federal Reserve District." It is published just before the FOMC meeting on interest
rates and is used to inform the members on changes in the economy since the last meeting.

Beirut Stock Exchange - BSE


The stock exchange headquartered in Beirut, Lebanon.

Bell
The ring that marks the open and close of each trading day on many organized financial exchanges,
most notably the NYSE.

Bellwether
A leading indicator of trends.

Below the Market


An order to buy or sell a security at a price lower than the current market price.

Ben Bernanke
The Chairman of the Board of Governors of the U.S. Federal Reserve who took over the helm from
Alan Greenspan on February 1, 2006, ending 18 years of Greenspan's leadership at the Fed. A former
Fed governor, Bernanke was Chairman of the U.S. President's Council of Economic Advisers prior to
being nominated as Greenspan's successor in late 2005

Benchmark
A standard against which the performance of a security, index or investor can be measured.

Benchmark Bond
A bond that provides a standard against which the performance of other bonds can be measured.
Government bonds are almost always used as benchmark bonds. Also referred to as "benchmark
issue" or "bellwether issue".

Beneficial Owner
A person who enjoys the benefits of ownership even though title is in another name.

Beneficiary
A person or entity named in a will or a financial contract as the inheritor of property when the
property owner dies.

Benefit Cost Ratio - BCR


A ratio attempting to identify the relationship between the cost and benefits of a proposed project.

Benefit Offset
A reduction in the amount of benefit payments received by a member of a retirement plan which may
result when the member owes money to the plan.

Benjamin Graham
A scholar and financial analyst who is widely recognized as the father of value investing. His famous
book, "The Intelligent Investor", has gained recognition as one of the best and most important
investment pieces written illustrating the fundamentals of a value-investing strategy.

Bequest
The process of giving stocks, bonds, or any other assets to beneficiaries through the provisions of a
will.

Bermuda Option
A type of option that can only be exercised on predetermined dates, usually every month.

Bermuda Stock Exchange - BSX


The stock exchange headquartered in Hamilton, Bermuda

Bermuda Swaption
A swaption with predefined limitations on exercise.

Berry Ratio
The ratio of a company's gross profits to operating expenses. This ratio is used as an indicator of a
company's profits in a given period of time. A ratio coefficient of 1 or more indicates that the
company is making profit above all variable expenses, whereas a coefficient below 1 indicates that
the firm is losing money.

Best Ask
The lowest quoted ask price for a particular stock among those offered from competing market
makers.

Best Bid
The highest quoted bid for a particular stock among all those offered by competing market makers.

Best Efforts
An agreement an underwriter makes to act as an agent between an issuing company and investors

Best Execution
The responsibility of brokers to provide the most advantageous, or best price, order execution for
customers.

Best Return On Equity Tab


An indicator of a company's financial performance. It measures how efficient a company is with its
money. Presented as a percentage figure, it is derived by dividing annual income (before
extraordinary items, discontinued operations, cumulative accounting adjustments and non-recurring
items) by an average of the latest fiscal year and the prior year's stockholders' equity.

Best-Price Rule - Rule 14D-10


An SEC regulation that stipulates that a tender offer is open to all security holders of that class of
security and the amount paid to the security holder is the highest paid to any other holder of the
same security.

Beta
Measures a stock’s price volatility relative to price performance of the S&P 500 Index, over a 12-
month period.

BGN
In currencies, this is the abbreviation for the Bulgarian Lev.

BHD
In currencies, this is the abbreviation for the Bahraini Dinar.

Bid
1. An offer made by an investor, a trader or a dealer to buy a security. The bid will stipulate both the
price at which the buyer is willing to purchase the security and the quantity to be purchased.
2. The price at which a market maker is willing to buy a security. The market maker will also display
an ask price, or the amount and price at which it is willing to sell.

Bid Price
The price a buyer is willing to pay for a security. This is one part of the bid with the other being the
bid size, which details the amount of shares the investor is willing to purchase at the bid price. The
opposite of the bid is the ask price, which is the price a seller is looking to get for his or her shares.

Bid Size
The number of shares a buyer is willing to purchase at the quoted bid price.

Bid Tick
An indication of whether the latest bid price is higher, lower, or the same as the previous bid.

Bid-Ask Spread
The amount by which the ask price exceeds the bid. This is essentially the difference in price
between the highest price that a buyer is willing to pay for an asset and the lowest price for which a
seller is willing to sell it.

Bid-to-Cover Ratio
A ratio that compares the number of bids received in a Treasury security auction to the number of
bids accepted.

BIF
In currencies, this is the abbreviation for the Burundi Franc.
Bifurcation
A term used in finance that refers to a splitting of something into two separate pieces

Bolsa Boliviana de Valores - BBV


The stock exchange headquartered in La Paz, Bolivia .

Bond
A debt investment with which the investor loans money to an entity (company or government) that
borrows the funds for a defined period of time at a specified interest rate.

Bond Anticipation Note - BAN


A short-term interest-bearing security issued in the anticipation of larger future bond issues.

Bond Attorney
A lawyer who represents the bondholders' interests during a bond offering and who prepares the
legal opinion attesting that the issue is legal, valid and binding.

Bond Equivalent Yield - BEY


A calculation for restating semi-annual, quarterly, or monthly discount-bond or note yields into an
annual yield. For a fixed income security with a par value of $1000, the calculation is as follows:

Bond Fund
A mutual fund whose investment objective is to provide stable income while taking on minimal risk.

Bond Ladder
A strategy for managing fixed-income investments by which the investor builds a ladder by dividing
his or her investment dollars evenly among bonds or CDs that mature at regular intervals
simultaneously (for example, every six months, once a year or every two years).

Bond Market
The environment in which the issuance and trading of debt securities occurs. The bond market
primarily includes government-issued securities and corporate debt securities, and facilitates the
transfer of capital from savers to the issuers or organizations requiring capital for government
projects, business expansions and ongoing operations.

Bond Option
An option contract in which the underlying asset is a bond. Other than the different characteristics
of the underlying assets, there is no significant difference between stock and bond options. Just as
with other options, a bond option allows investors the ability to hedge the risk of their bond
portfolios or speculate on the direction of bond prices with limited risk
Bond Quote
The statement of a bond's price

Bond Rating
A specification of a bond issuer's probability of defaulting based on an analysis of the issuer's
financial condition and profit potential.

Bond Swap
A strategy in which an investor sells a bond and at the same time purchases a different bond with
the proceeds from the sale.

Bonus Issue
An offer of free additional shares to existing shareholders. A company may decide to distribute
further shares as an alternative to increasing the dividend payout. Also known as a "scrip issue" or
"capitalization issue".
Book Building
The process by which an underwriter attempts to determine at what price to offer an IPO based on
demand from institutional investors.

Book Closure
A company's announcement of a dividend or bonus to investors.

Book Runner
The managing or lead underwriter who maintains the books of securities sold for a new issue.

Book Value
1. The value at which an asset is carried on a balance sheet. In other words, the cost of an asset
minus accumulated depreciation.
2. The net asset value of a company, calculated by total assets minus intangible assets (patents,
goodwill) and liabilities.
3. The initial outlay for an investment. This number may be net or gross of expenses such as trading
costs, sales taxes, service charges and so on.
In the U.K., book value is known as "net asset value".

Book Value Per Common Share


A measure used by owners of common shares in a firm to determine the level of safety associated
with each individual share after all debts are paid accordingly

Book-Entry Securities
Securities that are recorded in electronic records called book entries rather than as paper
certificates.
Also referred to as "book-entry receipt."

Book-to-Bill Ratio
The technology industry's demand-to-supply ratio for orders on a "firm's book" to number of orders
filled

Book-To-Market Ratio
A ratio used to find the value of a company by comparing the book value of a firm to its market
value. Book value is calculated by looking at the firm's historical cost, or accounting value. Market
value is determined in the stock market through its market capitalization
Booking the Basis
An arrangement made between a buyer and seller giving either party the ability at some future date
to determine the cash price of the forward sales agreement. Also known as "deferred pricing."

Bookout
The process of closing out a position in a swap contract or another OTC derivative agreement prior
to maturity.

Boom
A period of time during which sales or business activity increases rapidly.

Boomerang
An American slang term that refers to an adult who has moved back in with his or her parents (who
are part of the baby boomer generation) instead of living independently. The phrase, when applied to
an individual, makes reference to the fact that the person lived independently for a period, but
subsequently returned home due to the financial costs associated with maintaining a separate
household.
Boomernomics
An investing strategy that involves buying equities directly related to the spending behavior of baby
boomers (people born between 1946 and 1964).
Boon
A general term that refers to a benefit or improvement for investors. This can include such things as
increased dividends, a stock market rally and stock buybacks

Booster Shot
The name given to the first formal recommendation report issued by an underwriter for an IPO. It is
presented in the process of the public offering.

Boot
Cash or other property added to an exchange or a transaction in order to make the value of traded
goods equal

Bootstrap
A situation in which an entrepreneur starts a company with little capital. An individual is said to be
boot strapping when he or she attempts to found and build a company from personal finances or
from the operating revenues of the new company.

Bootstrapping
1. A procedure used to calculate the zero coupon yield curve from market figures.
2. A situation in which an entrepreneur starts a company with little capital. An individual is said to be
boot strapping when he or she attempts to found and build a company from personal finances or
from the operating revenues of the new company.

Boston Snow Indicator


A market theory stating that a white Christmas in Boston will result in rising stock prices for the
following year.

Bottleneck
A point of congestion in a system that occurs when workloads arrive at a given point more quickly
than that point can handle them. The inefficiencies brought about by the bottleneck often create a
queue and a longer overall cycle time.

Bottom
The lowest point or price reached by a financial security, commodity, index or economic cycle in a
given time period, which is followed by a steady increase.

Bottom Fisher
An investor who looks for bargains among stocks whose prices have recently dropped dramatically.
The investor believes that the recent price drop is temporary and a recovery is soon to follow.

Bottom Line
Slang for net income or profit.

Bottom-Up Investing
An investment approach that de-emphasizes the significance of economic and market cycles. This
approach focuses on the analysis of individual stocks. In bottom-up investing, therefore, the
investor focuses his or her attention on a specific company rather than on the industry in which that
company operates or on the economy as a whole.
Bought Deal
A new share issue that is bought entirely by one underwriter to resell to investors
Bounced Check
A check that cannot be processed because the writer has insufficient funds. Also known as a
"rubber check".
Bourse
Any European stock exchange.

Boutique
A small investment firm specializing in offering specific, but limited services to a select number of
individuals

Box Size
In the context of Point & Figure Charts, the box size is the minimum price change that must occur
for a given period before a mark (an X or an O) is added to the chart.

Box Spread
A dual option position involving a bull and bear spread with identical expiry dates. This investment
strategy provides for minimal risk. Additionally, it can lead to an arbitrage position as an investor
attempts to lock in a small return at expiry.

Box-Top Order
A buy or sell order made at the best market price. If the order cannot be completely filled, a limit
order is placed for the remaining shares at the price at which the filled portion was executed.

Bracket Creep
A situation where inflation pushes income into higher tax brackets. The result is an increase in
income taxes but no increase in real purchasing power

Bracketed Buy Order


A buy order that is accompanied (or "bracketed") by a sell limit order above the buy order's price
and a sell stop order below the buy order's price. These three component orders will all be set at a
price determined by the investor entering the order. The bracketed buy order allows investors to
lock in profits with an upside movement and prevent a downside loss, and does not require
investors to constantly follow the position.
Bracketed Sell Order
A sell order on a short sale that is accompanied (or "bracketed") by a buy stop order above the entry
price of the sell order and a buy limit order below the entry price of the sell order. As the three
component orders are based on set prices, this type of order protects the investor from the
downside but also potentially locks in a gain without the investor constantly monitoring price.

Brady Bonds
Bonds that are issued by the governments of developing countries. Brady Bonds are some of the
most liquid emerging market securities. They are named after former U.S. Treasury Secretary
Nicholas Brady, who sponsored the effort to restructure emerging market debt instruments.

Brand
A distinguishing symbol, mark, logo, name, word, sentence or a combination of these items that
companies use to distinguish their product from others in the market.

Brand Awareness
The likelihood that consumers recognize the existence and availability of a company's product or
service. Creating brand awareness is one of the key steps in promoting a product.

Brand Equity
An intangible value-added aspect of particular goods that are otherwise not considered unique

Brazil, Russia, India and China - BRIC


An acronym for the economies of Brazil, Russia, India and China combined. The general consensus
is that the term was first prominently used in a Goldman Sachs report from 2003, which speculated
that by 2050 these four economies would be wealthier than most of the current major economic
powers.

Bre-X Minerals Ltd.


A company involved in one of the largest stock swindles in history. Its Indonesian gold property,
which reportedly contained over 200 million ounces, was proven fraudulent in May of 1997.
Breadth Indicator
A specific type of indicator that uses advancing and declining issues to determine the amount of
participation in the movement of the stock market.

Breadth of Market Theory


A technical analysis theory that predicts the strength of the market according to the number of
stocks that advance or decline in a particular trading day

Break
A term used in futures markets to describe a rapid and sharp price decline.

Break Fee
1. A fee paid by a target company to bidders (during an acquisition) if the pending deal is terminated.
2. A fee paid by one party of a contract to another in order to terminate or cancel legal obligations.

Break-Even Point - BEP


1. In general, the point at which gains equal losses.
2. In options, the market price that a stock must reach for option buyers to avoid a loss if they
exercise. For a call, it is the strike price plus the premium paid. For a put, it is the strike price minus
the premium paid.

Breakaway Gap
A term used in technical analysis. A breakaway gap represents a gap in the movement of a stock
price supported by levels of high volume.
The image shows a gap at the beginning of a large upward movement.

Breakdown
A price movement through an identified level of support, which is usually followed by heavy volume
and sharp declines. Technical traders will short sell the underlying asset when the price of the
security breaks below a support level because it is a clear indication that the bears are in control
and that additional selling pressure is likely to follow.

Breakout
The action by a stock when it surpasses its resistance level: usually a price ceiling at which the
stock has previously encountered selling. In many cases, but not always, that resistance level is the
highest point in a "handle" portion of a base pattern.

Breakout Trader
A type of trader who uses technical analysis to find potential trading opportunities, identifying
situations where the price of an asset is likely to experience a substantial movement over a short
period of time. Breakout traders generally look for key levels of support and resistance and will
place transactions when the asset's price passes through these levels. Long positions are taken
when the price of an asset breaks through a level of resistance, and short positions are taken when
the price breaks below a level of support.

Breakpoint
A predetermined contribution amount in a mutual fund making the investor eligible for a reduction in
sales charges. Mutual Funds are required to give a description of these breakpoints and the
eligibility requirements in their fund prospectus. It is prudent for investors to be aware of these.

Breakpoint Sale
The sale of a mutual fund at a set dollar amount that allows for the fundholder to move into a lower
sales charge bracket. If an investor is unable at the time of investment to come up with the funds
necessary to qualify for the lower fee they can sign a letter of intent stating they will reach the total
amount, or breakpoint, in a set time period.
Any sales that occur just below a breakpoint are considered unethical and in violation of NASD
rules.

Brent Blend
A type of sweet crude oil that is used as a benchmark for the prices of other crude oils.

Bretton Woods Agreement


A 1944 agreement made in Bretton Woods, New Hampshire, which helped to establish a fixed
exchange rate in terms of gold for major currencies. The International Monetary Fund was also
established at this time.

Brick And Mortar


A traditional "street-side" business that deals with its customers face to face in an office or store
that the business owns or rents. Web-based businesses usually have lower costs and greater
flexibility than brick-and-mortar operations.

Bridge Financing
A method of financing, used by companies before their IPO, to obtain necessary cash for the
maintenance of operations.

Bridge Loan
A short-term loan that is used until a person or company secures permanent financing or removes
an existing obligation. This type of financing allows the user to meet current obligations by
providing immediate cash flow. The loans are short-term (up to one year) with relatively high interest
rates and are backed by some form of collateral such as real estate or inventory.
Also known as "interim financing", "gap financing or a "swing loan".

British Bankers Association - BBA


The leading trade association that represents the views of those involved in the banking and
financial services industry within the U.K.

BRL
In currencies, this is the abbreviation for the Brazilian Real

Broad Liquidity
A category of the money supply which includes: all funds in M3, individual holdings in accounts,
savings bonds, T-bills with maturity of less than one year, commercial papers, and banker's
acceptances.

Broad-Based Index
An index designed to reflect the movement of the entire market. The smallest broad-based index is
the Dow Jones Industrial Average with 30 industrial stocks and the largest is the Wilshire 5000 Total
Market Index. Other examples include the S&P 500, Russell 3000 Index, AMEX Major Market Index
and the Value Line Composite Index.

Broad-Based Weighted Average


An anti-dilution provision used for the benefit of existing preferred shareholders when additional
offerings are made by the corporation. The broad-based weighted average accounts for all equity
previously issued and currently undergoing issue.

Broadband
A high-speed, high-capacity transmission medium that can carry signals from multiple independent
network carriers. This is done on a single coaxial or fiber-optic cable by establishing different
bandwidth channels. Broadband technology can support a wide range of frequencies. It is used to
transmit data, voice and video over long distances simultaneously

Broadening Formation
A pattern used in technical analysis to predict the likelihood of a reversal in the direction of the
current trend. It is identified by finding diverging trendlines that connect a series of widening peaks
and troughs. The most common type of broadening formation is found at the end of a prolonged
uptrend and is used to predict a move lower
Brochure Rule
Under the Investment Advisor's Act of 1940, the Brochure Rule requires federally registered
investment advisors provide a written disclosure statement to their clients at specified times during
the advisory process.

Broker
1. An individual or firm that charges a fee or commission for executing buy and sell orders
submitted by an investor.
2. The role of a firm when it acts as an agent for a customer and charges the customer a commission
for its services.
3. A licensed real estate professional who typically represents the seller of a property. A broker's
duties may include: determining market values, advertising properties for sale, showing properties
to prospective buyers, and advising clients with regard to offers and related matters.

Broker Association
A permitted association between exchange members who have shared responsibility for the
execution of orders placed by their customers. These members thereby gain access to a collective
pool of un-transacted orders, and they share the profits and losses associated with trading
activities.

Broker's Call
The interest rate relative to which margin loans are quoted. Also known as the call loan rate.

Broker-Dealer
A person or firm in the business of buying and selling securities operating as both a broker and a
dealer depending on the transaction.

Broker-Reseller
A type of broker that acts as an intermediary between large brokerages and their clients. Broker-
resellers typically take stock orders from clients and then use major brokerages to execute the
trades

Brokerage Account
An arrangement between an investor and a licensed brokerage firm that allows the investor to
deposit funds with the firm and place investment orders through the brokerage, which then carries
out the transactions on the investor's behalf. The investor owns the assets contained in the
brokerage account and must usually claim as income any capital gains he or she incurs from the
account

Brokered Deposit
A large-denomination deposit similar to a certificate of deposit.

Brought Over The Wall


The situation of an employee in the research department of an investment bank - usually a research
analyst - who has been brought over to work for the underwriting department with a focus on a
particular company. The purpose of this transfer is to add a knowledgeable opinion to the
underwriting process, thereby adding value to it. Also known as "brought over the Chinese Wall

Brown Field Investment


When a company or government entity purchases or leases existing production facilities to launch a
new production activity. This is one strategy used in foreign-direct investment.

BSD
In currencies, this is the abbreviation for the Bahamanian Dollar

BTN
In currencies, this is the abbreviation for the Bhutan Ngultrum
Bubble
1. An economic cycle characterized by rapid expansion followed by a contraction.
2. A surge in equity prices, often more than warranted by the fundamentals and usually in a
particular sector, followed by a drastic drop in prices as a massive selloff occurs.
3. A theory that security prices rise above their true value and will continue to do so until prices go
into freefall and the bubble bursts

Buck
1. Trader's slang for a million dollars.
2. Informal reference to one dollar.

Buck the Trend


When a security goes against the prevailing trend of the overall market.

Bucket Shop
1. A fraudulent brokerage firm that uses aggressive telephone sales tactics to sell securities that the
brokerage owns and wants to get rid of. The securities they sell are typically poor investment
opportunities, and almost always penny stocks.
2. A brokerage that makes trades on a client's behalf and promises a certain price. The brokerage,
however, waits until a different price arises and then makes the trade, keeping the difference as
profit.

Bucketing
A situation where, in an attempt to make a short-term profit, a broker confirms an order to a client
without actually executing it. A brokerage which engages in unscrupulous activities, such as
bucketing, is often referred to as a bucket shop

Budget
An estimation of the revenue and expenses over a specified future period of time. A budget can be
made for a person, a family or a group of people, a business, government, country or multinational
organization or just about anything else that makes and spends money. Budgets are a
microeconomic concept that show the tradeoff made when one good is exchanged for another.

BUGS Index - HUI


An acronmy for "basket of un-hedged gold stocks," the BUGS index is the AMEX's index measuring
gold companies that do not hedge their gold production beyond a year and a half.

Bulge
A slang term used to describe a rapid advance in prices within the commodities market

Bulge Bracket
The group of firms in an underwriting syndicate who sold the largest amount of the issue
Bulk Sales Escrow
A type of escrow agreement placed on the sale of inventory, business assets or an entire company.
The escrow serves to protect the interests of unsecured creditors: it eliminates the risk that the
seller of the assets will use the proceeds from the sale for purposes other than paying debts or
taxes owed.

Bull
An investor who thinks the market, a specific security or an industry will rise.

Bull Call Spread


A type of options strategy used when a moderate rise in the price of the underlying asset is
expected. It is achieved by purchasing call options at a specific strike price while also selling the
same number of calls of the same asset and expiration date but at a higher strike. The maximum
profit in this strategy is the difference between the strike prices of the long and short options, less
the net cost of options. Most often, bull call spreads are vertical spreads.
Bull CD
A certificate of deposit whose interest rate fluctuates in direct correlation to the value of an
underlying market index. In other words, the interest rate paid on the CD increases as the value of
the market index increases during the life of the CD.

Bull Flattener
A yield-rate environment in which long-term rates are decreasing at a rate faster than short-term
rates. This causes the yield curve to flatten as the short-term and long-term rates start to converge.

Bull Market
A financial market of a certain group of securities in which prices are rising or are expected to rise.
The term "bull market" is most often used in respect to the stock market, but really can be applied to
anything that is traded, such as bonds, currencies, commodities, etc.
Bull markets are characterized by optimism, investor confidence and expectations that strong
results will continue. Of course, no bull market can last forever, and sooner or later a bear market (in
which prices fall) will come. It's tough if not impossible to predict consistently when the trends in the
market will change. Part of the difficulty is that psychological effects and speculation can sometimes
play a large (if not dominant) role in the markets. The extreme on the high end is a stock-market
bubble, and on the low end a crash.

Bull Put Spread


A type of options strategy that is used when the investor expects a moderate rise in the price of the
underlying asset. This strategy is constructed by purchasing one put option while simultaneously
selling another put option with a higher strike price. The goal of this strategy is realized when the
price of the underlying stays above the higher strike price, which causes the short option to expire
worthless, resulting in the trader keeping the premium.

Bull Spread
An option strategy in which maximum profit is attained if the underlying security rises in price.
Either calls or puts can be used. The lower strike price is purchased and the higher strike price is
sold. The options have the same expiration date.

Bull Steepener
A change in the yield curve caused by short-term rates falling faster than long-term rates, resulting
in a higher spread between the two rates.

Bull Trap
A false signal indicating that a declining trend in a stock or index has reversed and heading upwards
when, in fact, the security will continue to decline

Bull Vertical Spread


An bullish strategy used by investors who feel that the market price of a commodity will appreciate
but wish to limit the downside potential associated with an incorrect prediction.

Bulldog Bond
A sterling denominated bond that is issued in London by a company that is not British.

Bullet Bond
A noncallable regular coupon paying debt instrument with a single repayment of principal on the
maturity date.

Bullet GIC
A guaranteed investment contract (GIC) is purchased with a single premium and only one payout
that is made at maturity.

Bullet Loan
Any loan that requires a balloon payment at the end of the term and anticipates that the loan will be
refinanced in order to meet the balloon payment obligation.

Bullet Repayment
A single payment for an entire loan amount that is paid at maturity.

Bullet Trade
The act of purchasing an "in the money" put option so that the buyer can capitalize on a bear market
by effectively shorting a stock without waiting for an uptick

Bullion
Gold and silver that is officially recognized as high quality (at least 99.5% pure), and is in the form of
bars rather than coins.

Bullish Belt Hold


A trend in candlestick charting that occurs during a downward movement. After a stretch of bearish
candlesticks, a bullish or white candlestick forms. The opening price, which becomes the low for the
day, is significantly lower then the closing price. This results in a long white candlestick with a short
upper shadow and no lower shadow.

Bullish Engulfing Pattern


A chart pattern that forms when a small black candlestick is followed by a large white candlestick
that completely eclipses or "engulfs" the previous day's candlestick. The shadows or tails of the
small candlestick are short, which enables the body of the large candlestick to cover the entire
candlestick from the previous day.

Bullish Harami
A candlestick chart pattern in which a large candlestick is followed by a smaller candlestick whose
body is located within the vertical range of the larger body. In terms of candlestick colors, the bullish
harami is a downtrend of negative-colored (black) candlesticks engulfing a small positive (white)
candlestick, giving a sign of a reversal of the downward trend.

Bullish Homing Pigeon


A trend indicated by a large candlestick followed by a much smaller candlestick whose body is
located within the vertical range of the larger candle's body. In both candlesticks, the stock price has
to have closed down from the opening price. This pattern may indicate that there is a weakening of
the current downward trend.

Bullpen
A slang term referring to the traditional seating arrangement of younger investment advisors or
brokers in a brokerage house

Bunching
The combining of odd-lot or round-lot orders for the same security so that they may be executed at
the same time.

Bund
The German government's federal bond. The bund is issued to the public as a way for the German
government to finance its spending.

Bundesbank
Refers to the central bank of Germany. This is the U.S. equivalent of the Federal Reserve

Bungalow
A one-story house, cottage or cabin. Bungalows are generally small in terms of square footage, but
it is not uncommon to see very large bungalows. Bungalows were originally designed to provide
affordable, modern housing for the working class.
Bunny Bond
A type of bond that offers investors the option to reinvest coupon payments into additional bonds
with the same coupon and maturity. Also known as a "multiplier bond" or a "guaranteed coupon
reinvestment bond

Buoyant
The term used to describe a commodities market where the prices generally rise with ease when
there are considerable signals of strength.

Bureau of Census
A division of the federal government of the United States Bureau of Commerce that is responsible
for conducting the national census at least once every 10 years, in which the population of the
United States is counted. The Bureau of Census is also responsible for collecting data on the
people, economy and country of the United States. Also known as the "United States Census Bureau

Bureau of Economic Analysis - BEA


A division of the U.S. federal government's Department of Commerce that is responsible for the
analysis and reporting of economic data used to confirm and predict economic trends and business
cycles. Reports from the Bureau of Economic Analysis are the foundation upon which many
economic policy decisions are made by government, and many investment decisions are made in
the private sector by companies and individual investors.

Bureau Of Labor Statistics - BLS


A government agency that produces economic data reflecting the state of the U.S. economy, the
most well-known being the Consumer Price Index, Unemployment Rate, and the Producer Price
Index.

Business
1. An organization or enterprising entity engaged in commercial, industrial or professional activities.
A business can be a for-profit entity, such as a publicly-traded corporation, or a non-profit
organization engaged in business activities, such as an agricultural cooperative.
2. Any commercial, industrial or professional activity undertaken by an individual or a group.
3. A reference to a specific area or type of economic activity.

Business Cycle
The recurring and fluctuating levels of economic activity that an economy experiences over a long
period of time. The five stages of the business cycle are growth (expansion), peak, recession
(contraction), trough and recovery. At one time, business cycles were thought to be extremely
regular, with predictable durations. But today business cycles are widely known to be irregular -
varying in frequency, magnitude and duration.

Business Cycle Indicators - BCI


Composite of leading, lagging and coincident indexes created by the Conference Board and used to
forecast changes in the direction of the overall economy of a country. They can be used to confirm
or predict the peaks and troughs of the business cycle and are published for the U.S., Mexico,
France, the U.K., South Korea, Japan, Germany, Australia and Spain.

Business Development Bank of Canada - BDC


A financial institution that is wholly owned by the government of Canada providing financial and
consulting services to small Canadian businesses.

Business Logic
The specific details and information flow of a particular industry.

Business Model
The plan implemented by a company to generate revenue and make a profit from operations. The
model includes the components and functions of the business, as well as the revenues it generates
and the expenses it incurs.

Business Risk
The risk that a company will not have adequate cash flow to meet its operating expenses.

Business To Business - B To B
Business conducted between companies, rather than between a company and individual
consumers.

Business To Consumer - B To C
Business conducted between companies and individual consumers, rather than between two
companies

Busted Convertible Security


A convertible security that is trading well below its conversion value. The result is that the security
is valued as regular debt because there is very little chance that it will ever reach the convertible
price before maturity.

Busted Takeover
A highly leveraged takeover that, to go through, requires a selling off of some of the acquired
company's assets.

Butterfly Spread
An option strategy combining a bull and bear spread. It uses three strike prices. The lower two strike
prices are used in the bull spread, and the higher strike price in the bear spread. Both puts and calls
can be used.

Buttonwood Agreement
The agreement between 24 of United States' first and most prominent brokers. Rumored to have
occurred under a "Buttonwood" tree, this marked the beginnings of the investment community of
Wall Street.

Buy
1. A recommendation to purchase a specific security.
2. To acquire an asset in exchange for currency.

Buy And Hold


A passive investment strategy in which an investor buys stocks and holds them for a long period of
time, regardless of fluctuations in the market. An investor who employs a buy-and-hold strategy
actively selects stocks, but once in a position, is not concerned with short-term price movements
and technical indicators.

Buy Minus
A type of order where a client instructs the broker to purchase a stock at a price below the current
market price.

Buy Point
Optimal buy point of a stock as it emerges from a sound and proper basing area or chart pattern (the
most common of which include the 'cup with handle,' 'flat base' and 'double bottom') and breaks out
into a new high in price. This is the point of least resistance and has shown, through William J.
O'Neil's research, to have the greatest chance of moving substantially higher based on its current
and historical price and volume activity.

Buy Side
The side of Wall Street comprising the investing institutions such as mutual funds, pension funds
and insurance firms that tend to buy large portions of securities for money-management purposes.
The buy side is the opposite of the sell-side entities, which provide recommendations for upgrades,
downgrades, target prices and opinions to the public market. Together, the buy side and sell side
make up both sides of Wall Street.

Buy Stop Order


An order to buy a security which is entered at a price above the current offering price. It is triggered
when the market price touches or goes through the buy stop price.

Buy To Close
A term used by many brokerages to represent the closing of a short position in option transactions.

Buy To Cover
An order placed to close out a short position in a particular stock.

Buy To Open
A term used by many brokerages to represent the opening of a long position in option transactions

Buy Weakness
A proactive trading strategy in which a trader takes profits by closing out of a short position or
buying into a long position. This strategy is used when the price of the asset being traded is still
falling but is expected to reverse and move against the trader. This is the opposite of "selling into
strength

Buy-In
When an investor is forced to repurchase shares because the seller did not deliver the securities in a
timely fashion, or did not deliver them at all.

Buyback
The buying back of outstanding shares (repurchase) by a company in order to reduce the number of
shares on the market. Companies will buyback shares either to increase the value of shares still
available (reducing supply), or to eliminate any threats by shareholders who may be looking for a
controlling stake.

Buydown
A mortgage-financing technique with which the buyer attempts to obtain a lower interest rate for at
least the first few years of the mortgage, but possibly its entire life. The builder or seller or the
property usually provides payments to the mortgage-lending institution, which, in turn, lowers the
buyer's monthly interest rate and therefore monthly payment. The home seller, however, increases
the purchase price of the home to compensate for the costs of the buydown agreement.

Buyer's Call
An agreement between a buyer and seller whereby a commodity purchase occurs at a specific price
above a futures contract for an identical grade and quantity.
Also known as a call sale, this agreement gives the buyer the option to fix the price of the
commodity by either purchasing a future from the seller or indicating to the seller a time in which the
price of the transaction will be set. A buyer's call is used instead of buying the commodity on the
spot market because of the possibility that its price will depreciate

Buyer's Market
A market condition characterized by an abundance of goods available for sale.

Buying Hedge
A transaction that commodities investors undertake to hedge against possible increases in the
prices of the actuals underlying the futures contracts.

Buying Power
The money an investor has available to buy securities. In a margin account, the buying power is the
total cash held in the brokerage account plus maximum margin available.
Also referred to as "Excess Equity."

Buyout
The purchase of a company or a controlling interest of a corporation's shares

BWP
In currencies, this is the abbreviation for the Botswana Pula.

BZD
In currencies, this is the abbreviation for the Belize Dollar.

C
A Nasdaq stock symbol indicating the issuer has been granted a continuance in Nasdaq
under an exception to the qualification standards for a limited period.

C-Share
In a family of multi-class mutual funds, the class that has a constant load structure
throughout the life of the fund.

Cabinet Crowd
Members of the NYSE that typically trade in inactive bonds. Also known as the inactive
bond crowd or book crowd.

Cabinet Security
A stock or bond that is listed under a major financial exchange, but is not actively traded

Cable
In the context of the forex market, the exchange rate between the U.S. dollar and the
British pound sterling. Because it is the norm in forex for most major currencies to be
quoted against the U.S. dollar on a regular basis, "cable" is a commonly used term.
"Cable" can also be used to refer simply to the British pound sterling.

CAC 40
The French stock market index that tracks the 40 largest French stocks based on market
capitalization on the Paris Bourse (stock exchange).

CAD
In currencies, this is the abbreviation for the Canadian Dollar.

Cafeteria Plan
An employee benefit plan that allows staff to choose from a variety of benefits to formulate
a plan that best suits their needs.
Also known as "cafeteria employee benefit plan" or "flexible benefit plan".
Cage
A term used to describe the department of a brokerage firm that receives and distributes
physical securities.

Caisse Populaire
A cooperative, member-owned financial institution that fulfills traditional banking roles as
well as diverse activities such as lending, insurance, investment dealing. Caisses
Populaires are primarily found in the province of Quebec in Canada, as caisses populaires
are essentially the francophone equivalent of a credit union.

Calculation Agent
An individual who calculates the value of a derivative or the amount owing from each party
in a swap agreement.

Calendar Spread
An options or futures spread established by simultaneously entering a long and short
position on the same underlying asset but with different delivery months. Sometimes
referred to as an inter-delivery, time or horizontal spread.

Calendar Year
The one-year period that begins on Jan 1 and ends on Dec 31, based on the commonly
used Gregorian calendar. For individual and corporate taxation purposes, a calendar year
will generally comprise all of the year's financial information used to calculate income tax
payable.

Call
1. The period of time between the opening and closing of some future markets wherein the
prices are established through an auction process.
2. An option contract giving the owner the right (but not the obligation) to buy a specified
amount of an underlying security at a specified price within a specified time.

Call Date
The date on which a bond can be redeemed before maturity. If the issuer feels there is a
benefit to refinancing the issue, the bond may be redeemed on the call date at par or at a
small premium to par.

Call Loan
A loan provided to a brokerage firm and used to finance margin accounts. The interest rate
on a call loan is calculated daily. The resulting interest rate is referred to as the call loan
rate.

Call Loan Rate


The short term interest rate charged on a secured call loan, usually in margin accounts.
Also known as the broker's call.

Call Option
An agreement that gives an investor the right (but not the obligation) to buy a stock, bond,
commodity, or other instrument at a specified price within a specific time period

Call Premium
1. The dollar amount over the par value of a callable fixed-income debt security that is
given to holders when the security is called by the issuer.
2. The amount the purchaser of a call option must pay to the writer.

Call Price
The price at which a bond or a preferred stock can be redeemed by the issuer. This price
is set at the time the security is issued. Also referred to as "redemption price".

Call Protection
A protective provision of a callable security prohibiting the issuer from calling back the
security for a period early in its life.

Call Ratio Backspread


A very bullish investment strategy that combines options to create a spread with limited
loss potential and mixed profit potential. It is generally created by selling one call option
and then using the collected premium to purchase a greater number of call options at a
higher strike price. This strategy has potentially unlimited upside profit because the trader
is holding more long call options than short ones.

Call Risk
The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the
callable bond feature and redeem the issue prior to maturity. This means the bondholder
will receive payment on the value of the bond and, in most cases, will be reinvesting in a
less favorable environment (one with a lower interest rate).

Call Rule
A exchange rule whereby the official bidding price for a cash commodity is competitively
established at the end of each trading day and held until the opening of the exchange the
following trading day

Call Warrant
A warrant that gives the holder the right to buy the underlying share for an agreed price,
on or before a specified date

Callable Bond
A bond that can be redeemed by the issuer prior to its maturity. Usually a premium is paid
to the bond owner when the bond is called.
Also known as a "redeemable bond".

Callable Common Stock


Common stock that allows the issuer to call back the stock at a specific price.

Callable Preferred Stock


A type of preferred stock that carries the provision that the issuer has the right to call in
the stock at a certain price and retire it. Also known as "redeemable preferred stock".

Called Away
A term used to describe the elimination of a contract due to the obligation of delivery. This
occurs if an option is exercised, if a redeemable bond is called before maturity or if a short
position held in a security requires delivery.

Calmar Ratio
A ratio used to determine return relative to drawdown (downside) risk in a hedge fund.

Cambist
An expert trader who rapidly buys and sells currency throughout the day.

CAMELS Rating System


An international bank-rating system with which bank supervisory authorities rate
institutions according to six factors. The six areas examined are represented by the
acronym "CAMELS."

Camouflage Compensation
Compensation that is granted to upper echelon employees, directors, consultants and
related parties that is not fully disclosed in mandatory company filings. In other cases,
compensation is fully disclosed, but in such a way that it is very difficult for the average
investor to decipher the true value of gross pay compensation.

CAN SLIM®
Acronym for William J. O'Neil's investment strategy. CAN SLIM® is based on the seven
common characteristics found in his study of the greatest stock market winners of the last
45 years. A thorough discussion of CAN SLIM® can be found in William J. O'Neil's book,
How to Make Money in Stocks.
•C = Current Earnings Growth
•A = Annual Earnings Growth
•N = New Products, New Services, New Management, New Price Highs
•S = Supply & Demand
•L = Leader or Laggard
•I = Institutional Sponsorship
•M = Market

Canada Education Savings Grant - CESG


A grant from the Government of Canada paid directly into a beneficiary's Registered
Education Savings Plan (RESP). It adds 20% to the first $2,000 in contributions made into
an RESP on behalf of an eligible beneficiary each year.

Canada Premium Bond - CPB


A debt instrument issued by the Bank of Canada that offers a higher interest rate than a
Canada Savings Bond (CSB) with the same issuance date.
Canada Revenue Agency - CRA
Formerly known as "Revenue Canada", this is Canada's federal agency responsible for
income tax and trade regulations.

Canada Savings Bond - CSB


A financial product issued by the Bank of Canada. It offers a competitive rate of interest
and guarantees a minimum interest rate.

Canadian Dollars
IBD's earnings section contains reports from Canadian companies who report their
quarterly results in Canadian dollars.

Canadian Investor Protection Fund - CIPF


A Canadian not-for-profit organization set up by the investment industry designed to
protect investors from the bankruptcy of an individual investment firm.
Accounts are covered for up to $1 million in shortfall of securities, commodity and futures
contracts, segregated insurance funds and cash. Shortfall is the difference between the
market value of the account and what the insolvent company can return to the customer.

Canadian Mortgage and Housing Corporation - CMHC


A division of the Government of Canada that acts as Canada's national housing agency.
The CMHC's mandate is to help Canadians access a variety of affordable housing options.
It also researches housing and real estate trends in Canada and around the world,
providing research to consumers, businesses and other government divisions. The major
activity of the CMHC, and the one for which it is best known, is mortgage loan insurance,
which insures approved lenders (such as Canada's chartered banks) against borrower
default. Mortgage loan insurance provides approved borrowers access to low-cost
mortgage rates. CMHC approved buyers may purchase property with as little as 5% down
payment.

Canadian Orginated Preferred Securities - COPrS


A long-term subordinated debt instrument, issued in Canada.

Canadian Securities Course - CSC


An entry-level program offered by the Canadian Securities Institute (CSI) that allows an
individual to become a qualified mutual fund representative.

Cancel Former Order - CFO


An order given by an investor instructing his/her broker to cancel a previously placed
order.

Cancellation
A notice informing a customer of the cancellation of an erroneous trade that has been
credited to his or her account by the broker.

Candlestick
A price chart that displays the high, low, open, and close for a security each day over a
specified period of time.

Capital
1. Financial assets or the financial value of assets such as cash.
2. The factories, machinery and equipment owned by a business.

Capital Account
The net result of public and private international investment flowing in and out of a
country.

Capital Adequacy Ratio - CAR


A measure of a bank's capital. It is expressed as a percentage of a bank's risk weighted
credit exposures.

Capital Allocation Line - CAL


A line created in a graph of all possible combinations of risky and risk-free assets. Also
known as the "reward-to-variability ratio".

Capital Appreciation
A rise in the market price of an asset.

Capital Appreciation Fund


A mutual fund that attempts to increase asset value primarily through investments in
growth stocks. The heavy investment in growth stocks increases the risk associated with
these types of funds. Also called "aggressive growth fund".

Capital Asset
A long-term asset that is not bought or sold in the regular course of business.

Capital Asset Pricing Model - CAPM


A model that describes the relationship between risk and expected return and that is used
in the pricing of risky securities.
The general idea behind CAPM is that investors need to be compensated in two ways: time
value of money and risk. The time value of money is represented by the risk-free (rf) rate in
the formula and compensates the investors for placing money in any investment over a
period of time. The other half of the formula represents risk and calculates the amount of
compensation the investor needs for taking on additional risk. This is calculated by taking
a risk measure (beta) that compares the returns of the asset to the market over a period of
time and to the market premium (Rm-rf).

Capital Base
1. The capital acquired during an IPO, or the additional offerings of a company, plus any
retained earnings.
2. An initial investment plus subsequent investments made by an investor into their
portfolio.

Capital Budgeting
The process of determining whether or not projects such as building a new plant or
investing in a long-term venture are worthwhile.
Also known as "investment appraisal".

Capital Cost Allowance - CCA


A rate of depreciation used for income tax purposes only. This term primarily relates to
Canadian taxation.

Capital Dividend Account - CDA


A unique account where untaxed gains are deposited within a private company.

Capital Employed
1. The total amount of capital used for the acquisition of profits.
2. The value of all the assets employed in a business.
3. Fixed assets plus working capital.
4. Total assets less current liabilities.

Capital Expenditure - CAPEX


Funds used by a company to acquire or upgrade physical assets such as property,
industrial buildings or equipment. This type of outlay is made by companies to maintain or
increase the scope of their operation. These expenditures can include everything from
repairing a roof to building a brand new factory.

Capital Flight
The action of investors moving their securities out of a particular country because of a
fear of country-specific risks or political instability, or because of the lure of higher returns
in a different country.

Capital Gain
An increase in the value of a capital asset (investment or real estate) that gives it a higher
worth than the purchase price. The gain is not realized until the asset is sold. A capital
gain may be short term (one year or less) or long term (more than one year) and must be
claimed on income taxes.

Capital Gains Distribution


Distributions that are paid to an investment company's shareholders out of the capital
gains of the company's investment portfolio.

Capital Gains Exposure - CGE


An assessment of the extent to which a stock fund or other similar investment fund's
assets have appreciated or depreciated, which may have tax implications for investors.
Positive exposure would mean that the assets in the fund have appreciated and that
shareholders will have to pay taxes on any realized gains on the appreciated assets.
Negative exposure denotes that the fund has a loss carryforward that can cushion some of
the capital gains.

Capital Gains Treatment


Describes lump-sum distributions of qualified plan balances that accrued before 1974 may
be eligible for capital gains treatment.

Capital Goods
Any goods used by an organization to produce other goods.

Capital Goods Price Index - CGPI


An economic index computed by the New Zealand government that measures the change
in fixed capital-asset prices in the New Zealand economy from one period to another. The
index helps indicate the change in costs for capital assets, which are used by companies
and the New Zealand government to produce other goods. The CGPI is produced every
quarter.

Capital Growth Strategy


An asset allocation strategy that seeks to maximize capital appreciation, or the increase in
value of a portfolio or asset over the long term.

Capital Guaratee Fund


An investment vehicle, offered by certain institutions, that guarantees the investor's initial
capital investment from any losses.

Capital Improvement
The addition of a permanent structural improvement or the restoration of some aspect of a
property that will either enhance the property's overall value or increases its useful life.
Although the scale of the capital improvement can vary, capital improvements can be
made by both individual homeowners and large-scale property owners.

Capital Intensive
A process or industry that requires large sums of financial resources to produce a
particular good.

Capital Lease
A lease considered to have the economic characteristic of asset ownership.

Capital Loss
The loss incurred when a capital asset (investment or real estate) decreases in value. This
loss is not realized until the asset is sold for a price that is lower than the original
purchase price.

Capital Market Line - CML


A line used in the capital asset pricing model to illustrate the rates of return for efficient
portfolios depending on the risk-free rate of return and the level of risk (standard
deviation) for a particular portfolio.

Capital Markets
Markets where capital, such as stocks and bonds, are traded.
Capital Note
Fixed income products issued by companies as a source of short term debt.

Capital Rationing
The act of placing restrictions on the amount of new investments or projects undertaken
by a company. This is accomplished by imposing a higher cost of capital for investment
consideration or by setting a ceiling on the specific sections of the budget.

Capital Risk
1. The risk an investor faces that he or she may lose all or part of the principal amount
invested.
2. The risk a company faces that it may lose value on its capital. The capital of a company
can include equipment, factories and liquid securities.

Capital Share
The class of shares offered by a dual-purpose fund that has opportunity for capital
appreciation but does not offer the holder any portion of the fixed income earned within
the portfolio.

Capital Stock
The common and preferred stock a company is authorized to issue, according to their
corporate charter

Capital Structure
The means by which a firm is financed.

Capital Surplus
Equity which cannot otherwise be classified as capital stock or retained earnings. It's
usually created from a stock issued at a premium over par value.

Capitalism
An economic system based on a free market, open competition, profit motive and private
ownership of the means of production. Capitalism encourages private investment and
business, compared to a government-controlled economy. Investors in these private
companies (i.e. shareholders) also own the firms and are known as capitalists.

Capitalization
1. In accounting, it is where costs to acquire an asset are included in the price of the asset.
2. The sum of a corporation's stock, long-term debt and retained earnings. Also known as
"invested capital".
3. A company's outstanding shares multiplied by its share price, better known as "market
capitalization".

Capitalization Rate
According to the Appraisal Institute, it is a method used to convert an estimate of a single
year's income expectancy into an indication of value in one direct step, by dividing the
income estimate by an appropriate rate.

Capitalize
An accounting method used to delay the recognition of expenses by recording the
expense as a long-term asset.

Capitalized Interest
The amount of accrued interest that is added to an original principal loan amount because
the borrower either has not made large enough payments or has made no payments at all.
In such a situation, the borrower is paying interest on interest.

Capitulation
A military term. Capitulation refers to surrendering or giving up.
In the stock market, capitulation is associated with "giving up" any previous gains in stock
price as investors sell equities in an effort to get out of the market and into less risky
investments. True capitulation involves extremely high volume and sharp declines. It
usually is indicated by panic selling.

Capped Option
An option with a pre-established profit cap. A capped option is automatically exercised
when the underlying security closes at or above (for a call) or at or below (for a put) the
Option's cap price.

Capping
1. The practice of selling large amounts of a commodity or security close to the options
expiry date in order to prevent a rise in market price.
2. An attempt to keep a stock's price low or move its price lower by putting selling
pressure on it.

Captive Finance Company


A subsidiary whose purpose is to provide financing to customers buying the parent
company's product.

Captive Fund
A fund that provides investment services solely to the one firm holding ownership.

Caput
A type of exotic option that consists of a call option on a put option. Essentially it gives
the holder the right to purchase another option. This type of option is also known as a
"compound option".

Carbon Trade
An idea presented in response to the Kyoto Protocol that involves the trading of
greenhouse gas (GHG) emission rights between nations.
Cardboard Box Index
An index used by some investors to gauge industrial production by using the output of
cardboard boxes to predict the purchases of non-durable consumer goods.

Carried Interest
Used for resource companies that have a stake in a resource property. The owner of the
property doesn't have to make a proportionate contribution to the expenses incurred for
the project.

Carrot Equity
Equity which allows for the opportunity to purchase more equity if the company reaches
certain financial goals

Carrying Broker
A term used to refer to a commodities exchange member who elects to clear trades on
behalf of another party.

Carrying Charge
A cost associated with holding a financial instrument or storing a physical commodity
over a defined period of time.

Carrying Charge Market


A futures market where contracts with maturities further into the future have higher future
prices.

Carrying Cost Of Inventory


The cost of maintaining inventory in a company's warehouse.

Carrying Value
An accounting measure of value, where the value of an asset or a company is based on
the figures in the company's balance sheet. For assets, the value is based on the original
cost of the asset less any depreciation, amortization or impairment costs made against the
asset. For a company, carrying value is a company's total assets minus intangible assets
and liabilities such as debt.
Also known as "book value".

Cartel
A small group of producers of a good or service who agree to regulate supply in an effort
to control or manipulate prices.

Carve-out
1. Sometimes known as a partial spinoff, a carve out occurs when a parent company sells
a minority (usually 20% or less) stake in a subsidiary for an IPO or rights offering.
2. Where an established brick-and-mortar company hooks up with venture investors and a
new management team to launch an Internet spinoff.

Cash
Legal tender or coins that can be used in exchange goods, debt, or services. Sometimes
also including the value of assets that can be converted into cash immediately, as
reported by a company

Cash Account
A regular broker account in which the customer is required by Regulation T to pay for
securities within two days after a purchase is made.

Cash Accounting
An accounting method where receipts are recorded during the period they are received,
and the expenses in the period in which they are actually paid.

Cash Advance
A loan taken out against a line of credit or credit card, typically imposing higher-than-
normal interest charges.

Cash and Carry Trade


A trading strategy that involves the simultaneous trading of two similar securities in order
to recognize an arbitrage profit. Also known as "basis trading" or "buying the basis."

Cash And Cash Equivalents - CCE


An item on the balance sheet that reports the value of a company's assets that are cash or
can be converted into cash immediately.

Cash Balance Pension Plan


A pension plan under which an employer credits a participant's account with a set
percentage of his or her yearly compensation plus interest charges. A cash balance
pension plan is a defined-benefit plan. As such, the plan's funding limits, funding
requirements and investment risk are based on defined-benefit requirements: as changes
in the portfolio do not affect the final benefits to be received by the participant upon
retirement or termination, the company solely bears all ownership of profits and losses in
the portfolio.

Cash Basis
A major accounting method that recognizes revenues and expenses at the time physical
cash is actually received or paid out. This contrasts to the other major accounting method,
accrual accounting, which requires income to be recognized in a company's books at the
time the revenue is earned (but not necessarily received) and records expenses when
liabilities are incurred (but not necessarily paid for).

Cash Budget
An estimation of the cash inflows and outflows for a business.

Cash Charge
A charge off made by a company against earnings that requires an initial outlay of cash

Cash Commodity
The actual or physical commodity underlying a futures contract.
Cash Conversion Cycle
The duration between the purchase of a firm's inventory and the collection of accounts
receivable for the sale of that inventory. Also known as cash cycle.

Cash Cost
A cash basis accounting cost recognition process that classifies costs as they are paid for
in cash, and is recognized in the general ledger at the point of sale. This method is
contrary to the accrual cost recognition method, which directly influences the operating
cash flow figure.

Cash Cow
1. One of the four categories (quadrants) in the BCG growth-share matrix that represents
the division within a company that has a large market share within a mature industry.
2. A business, product or asset that, once acquired and paid off will produce consistent
cash flow over its lifespan.

Cash Delivery
1. The same-day settlement of a currency trade in the forex market. This means that
delivery and settlement of the transaction occur on the same date that the currency trade
is made. In order for this to occur, the forex position must be opened and closed within
the same trading day.
Also referred to as "same-day settlement".
2. In the context of futures contracts, a settlement term in a contract that stipulates that
the underlying asset of the contract will not be delivered on the delivery date - rather, the
net cash value of the position will be transferred to the applicable party instead.

Cash Distribution Per Unit - CDPU


A measure, used in Canada, that refers to the amount of cash payments made to individual
unitholders of a specified income trust, as designated by the Canada Revenue Agency.
The ratio is calculated by taking the total amount of cash distributions divided by the total
amount of unit shares issued

Cash Dividend
Money paid to stockholders, normally out of the corporation's current earnings or
accumulated profits. All dividends must be declared by the board of directors and are
taxable as income to the recipients.

Cash Earnings Per Share - Cash EPS


A measure of financial performance that looks at the cash flow generated by a company
on a per share basis. This differs from basic earnings per share (EPS), which looks at the
net income of the company on a per share basis. The higher a company's cash EPS, the
better it is considered to have performed over the period. A company's cash EPS can be
used to draw comparisons to other companies or to the company's own past results

Cash Flow
1. A revenue or expense stream that changes a cash account over a given period. Cash in-
flows usually arise from one of three activities - financing, operations or investing - though
they also occur as a result of donations or gifts in the case of personal finance. Cash out-
flows result from expenses or investments. This holds true for both business and personal
finance.
2. An accounting statement - the statement of cash flows - that shows the amount of cash
generated and used by a company in a given period, calculated by adding non-cash
charges (such as depreciation) to net income after taxes. Cash flow can be attributed to a
specific project, or to a business as a whole. Cash flow can be used as an indication of a
company's financial strength.

Cash Flow After Taxes - CFAT


A measure of financial performance that looks at the company's ability to generate cash
flow through its operations. It is calculated by adding back non-cash accounts such as
amortization, depreciation, restructuring costs and impairments to net income.
Also known as "After-Tax Cash Flow".

Cash Flow from Financing Activities


A category in the cash flow statement that accounts for external activities such as issuing
cash dividends, adding or changing loans, or issuing and selling more stock. The formula
for cash flow from financing activities is as follows:
Cash Received from Issuing Stock or Debt - Cash Paid as Dividends and for Re-
Acquisition of Debt/Stock

Cash Flow From Investing Activities


An item on the cash flow statement that reports the aggregate change in a company's
cash position resulting from any gains (or losses) from investments in the financial
markets and operating subsidiaries, and changes resulting from amounts spent on
investments in capital assets such as plant and equipment.

Cash Flow Loan


Borrowing cash typically to meet day-to-day operations or acquisitions. Reasons for
needing a cash flow loan could be seasonal-demand changes, business expansion or
changes in the business cycle

Cash Flow Per Share


A measure of a firm's financial strength, calculated as follows:

Cash Flow Per Share From Operations


Derived by adding depreciation, depletion and amortization to the company's net income
and dividing this figure by the shares outstanding. Brackets [ ] will surround the Cash
Flow figure if the net income being used to derive the data is not from the most recently
completed fiscal year and will indicate the year the figure corresponds to.

Cash Flow Return on Investment - CFROI


A valuation model that assumes the stock market sets prices based on cash flow, not on
corporate performance and earnings.

Cash Flow Statement


One of the quarterly financial reports any publicly traded company is required to disclose
to the SEC and the public. The document provides aggregate data regarding all cash
inflows a company receives from both its ongoing operations and external investment
sources, as well as all cash outflows that pay for business activities and investments
during a given quarter.

Cash Investment
Short-term obligations, usually ninety days or less, that provide a return in the form of
interest payments

Cash Management Bill - CMB


A short-term security sold by the U.S. Department of the Treasury. The maturity on a CMB
can range from a few days to six months. The money raised through these issues is used
by the Treasury to meet any temporary shortfalls.

Cash Market
The market for a cash commodity or actual, as opposed to the market for its futures
contract.

Cash On Delivery - COD


A type of transaction in which payment for a good is made at the time of delivery. If the
purchaser does not make payment when the good is delivered, then the good will be
returned to the seller.
Payment can be made by cash, certified check or money order, depending on what is
stipulated in the shipping contract.

Cash Price
The price of the purchase and delivery of cash commodities.

Cash Return on Gross Investment - CROGI


A measure of financial performance calculated as gross cash flow after taxes divided by
gross investment.

Cash Settlement
A settlement method used in certain future and option contracts whereby, upon expiry or
exercise, the seller of the financial instrument does not deliver the actual but transfers the
associated cash position.

Cash Surrender Value


The sum of money an insurance company will pay to the policyholder or annuity holder in
the event his or her policy is voluntarily terminated before its maturity or the insured event
occurs. This cash value is the savings component of most permanent life insurance
policies, particularly whole life insurance policies. Also known as "cash value", "surrender
value" and "policyholder's equity".

Cash Transaction
A transaction that is settled with cash on the same day as the trade.

Cash Value Added - CVA


A measure of the amount of cash generated by a company through its operations. It is
computed by subtracting the 'operating cash flow demand' from the 'operating cash flow'
from the cash flow statement.

Cash-on-Cash Return
A rate of return often used in real-estate transactions. The calculation determines the cash
income on the cash invested:

Cash-on-Cash Yield
A comparative measure using the total amount of distributions paid upon an income trust
divided by its market value.

Cash-or-Nothing Call
A type of option whose payoff is set to a specified fixed price if the final asset price is
above the strike price if not, the payoff is set to zero.

Cash-or-Nothing Put
A type of option whose payoff is set to a specified fixed price if the final asset price is
below the strike price if not, the payoff is set to zero.

Cashier's Check
A check written by a financial institution on its own funds. It is then signed by a
representative of the financial institution and made payable to a third party. A customers
who purchases a cashier's check pays for the full face value of the check and usually also
pays a small premium for the service. These checks are secured by the funds of the issuer
- usually
Cashless Exercise
A transaction that is used when exercising employee stock options (ESO). Essentially,
what you do here is borrow enough money from your broker to exercise the options. You
then simultaneously sell enough shares to pay for the purchase, taxes, and broker
commissions.

Casino Finance
Any investment strategy that is classified as extremely high risk.

Casualty Insurance
A broad category of coverage against loss of property, damage or other liabilities,
including such things as vehicle insurance, liability insurance, theft insurance and
elevator insurance.

Catalyst
Something that initiates or causes an important event to happen. Originally a term used in
chemistry for the volatile (active) chemical in a formula.

Catastrophe Bond - CAT


A high-yield debt instrument that is usually insurance linked and meant to raise money in
case of a catastrophe such as a hurricane or earthquake. It has a special condition that
states that if the issuer (insurance or reinsurance company) suffers a loss from a
particular pre-defined catastrophe, then the issuer's obligation to pay interest and/or repay
the principal is either deferred or completely forgiven

Category Killer
Large companies that put less efficient and highly specialized merchants out of business.
Category killers can attain this status by being cheaper, easier, bigger, or more popular
than the competition.

Cats and Dogs


A slang term referring to speculative stocks that have short or suspicious histories for
sales, earnings, dividends, etc.

Caveat Emptor
Another way to say, "let the buyer beware."

CBOE Nasdaq Volatility Index - VXN


A volatility index on the Chicago Board Options Exchange, known by its ticker symbol
VXN. The VXN is a measure of implied volatility for the Nasdaq 100 (NDX).

Ceiling
The highest level of allowance permitted for a certain good, rate, or transaction.

Celtic Tiger
A nickname for Ireland during its boom years of the late 1990s, when it enjoyed an average
annual growth rate of over 6.5%. The first boom was in the late 1990s when investors
(many of them tech firms) poured in, drawn by the country's favorable tax rates - some as
much as 20-50% lower than the rest of Europe. It ended with the bursting of the internet
bubble in 2001.
The second boom in 2004 was largely the result of Ireland opening its doors to workers
from new EU member nations. Increases in house prices, continued investment by
multinationals, growth in jobs and tourism, a resurgence of the IT industry and the U.S.
economic recovery have all been cited as contributing factors for the revival.

Central Bank
The entity responsible for overseeing the monetary system for a nation (or group of
nations). Central banks have a wide range of responsibilities - from overseeing monetary
policy to implementing specific goals such as currency stability, low inflation and full
employment. Central banks also generally issue currency, function as the bank of the
government, regulate the credit system, oversee commercial banks, manage exchange
reserves and act as a lender of last resort.

CEO Confidence Survey


A monthly survey of 100 CEOs from a variety of industries in the U.S. economy. The
survey is conducted, analyzed and reported by the Conference Board, and it seeks to
gauge the economic outlook of CEOs, determining their concerns for their businesses,
and their view on where the economy is headed. A reading above 50 indicates that the
CEOs surveyed are more bullish than bearish on their economic outlook.
CEO, New
The month and year in which a firm appointed a new Chief Executive Officer. Date shown
is based on effective date of the appointment. This is based on changes made within the
past two years. Item appears as "New CEO" on the Datablock of Daily Graphs.

Certainty Equivalent
The return that would be accepted for the chance at a higher, but uncertain, amount.

Certificate Of Deposit - CD
A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a
specified fixed interest rate and can be issued in any denomination. CDs are generally
issued by commercial banks and are insured by the FDIC. The term of a CD generally
ranges from one month to five years.

Certificate of Government Receipts (COUGRs)


U.S. Treasury fixed-income securities stripped of their coupon payments, providing
payment of face value. These are synthetic securities offered by the firm A.G. Becker
Paribas.

Certificate of Indebtedness
A short-term fixed income security issued by the United States Treasury that has a
coupon.

Certificate of Participation - COP


A type of financing where an investor purchases a share of the lease revenues of a
program rather than the bond being secured by those revenues.

Certificated Stock
A stock of commodity that has been inspected by qualified representatives and
determined to be of basis grade.
Certificates of Accrual on Treasury Securities - CATS
Issued by the U.S. Treasury and stripped by a financial intermediary, these products are
sold at a significant discount from face value and pay no interest during their lifetime.
However, they return full face value and cannot be called away.

Certified Annuity Specialist - CAS


A certification indicating expertise and commitment to fixed-rate and variable annuities.
Individuals with the CAS designation offer clients expert advice in regards to investment
opportunities in annuities.

Certified Check
A check certified by a bank to show sufficient funds within the account meet the amount
the check is drawn for.
Certified Financial Planner™ - CFP™
The CFP™ legal team has provided their official definition, along with trademarks: CFP™,
Certified Financial Planner™,and marks are certification marks owned by the Certified
Financial Planner Board of Standards, Inc. These marks are awarded to individuals who
successfully complete the CFP Board's initial and ongoing certification requirements.

Certified Fund Specialist - CFS


A certification indicating an individual's expertise in mutual funds and the mutual fund
industry. These individuals advise clients on which mutual funds best suit their particular
needs. The CFS designation does not license individuals to buy or sell mutual funds
however, in many cases Certified Fund Specialists do have this license, which enables
them to buy and sell the funds for their clients.

Certified Investment Management Consultant - CIMC


CIMC's have completed extensive course work and passed NASD proctored examinations
for Levels I and II of the Institute for Certified Investment Management Consultants'
course. CIMCs must also meet the Institute's requirements concerning experience in
consulting and managed accounts, and adhere to its Code of Ethics and continuing
education requirements.

Certified Investment Management Specialist - CIMS


A designation by the Institute for Investment Management Consultants to associate
members who pass an exam and meet financial services work-experience requirements

Certified Management Accountant - CMA


An accounting designation whose holder has formally demonstrated a mix of expertise in
financial accounting and strategic management. This certification expands on financial
accounting by adding management skills that help to make strategic business decisions
based on financial information.

Certified Public Accountant - CPA


A designation given by the American Institute of Certified Public Accountants to those
who pass an exam and meet work-experience requirements.

Certified Senior Consultant - CSC


A certification indicating knowledge in key issues facing aging members of the population
(individuals in their 50s, 60s and 70s) including Social Security, Medicare, Medicaid
planning, housing and retirement.

Ceteris Paribus
Latin phrase that translates approximately to "holding other things constant" and is
usually rendered in English as "all other things being equal". In economics and finance,
the term is used as a shorthand for indicating the effect of one economic variable on
another, holding constant all other variables that may affect the second variable.

Chaikin Oscillator
An oscillator created by subtracting a 10-day EMA from a 3-day EMA of the
accumulation/distribution line.
Chameleon Option
An option that has the ability to change its structure, should certain pre-determined terms
of the contract be met.

Chande Momentum Oscillator


A technical momentum indicator invented by the technical analyst Tushar Chande. It is
created by calculating the difference between the sum of all recent gains and the sum of
all recent losses and then dividing the result by the sum of all price movement over the
period. This oscillator is similar to other momentum indicators such as the Relative
Strength Index and the Stochastic Oscillator because it is range bounded (+100 and -100).

Change
1. For an option or futures contract, the difference between the current price and the
previous day's settlement price.
2. For an index or average, the difference between the current value and the previous day's
market close.
3. For a stock or bond quote, the difference between the current price and the last trade of
the previous day.

Changer
The name given to a clearing member that is willing to assume the opposite position of a
futures contract within a larger alternative exchange, of which it also is a clearing member.

Channel
1. The system of intermediaries between the producers, suppliers, consumers, etcetera,
for the movement of a good or service.
2. The technical range between support and resistance levels that a stock price has traded
in for a specific period of time.

Channel Check
A method of independent stock analysis whereby company information is supplied by
third parties.

Channel lines (of a stock, upper and lower)


On a stock chart, channel lines are determined by drawing a straight line connecting three
of the price peaks and a somewhat parallel line connecting three of the price lows during
the same period, usually covering a couple of months. Channel lines drawn over too short
a period of time can be premature and incorrect.

Channel Stuffing
A deceptive business practice used by a company to inflate its sales and earnings figures
by deliberately sending retailers along its distribution channel more products than they
are able to sell to the public.

Chaos Theory
Also referred to as non-linear dynamics, chaos theory is a mathematical concept
explaining that it is possible to get random results from normal equations. The main
precept behind this theory is the underlying notion of small occurrences significantly
affecting the outcomes of seemingly unrelated events.

Chapter 10
Named after the U.S. bankruptcy code 10, chapter 10 discusses how a company can file
for court protection.

Chapter 11
Named after the U.S. bankruptcy code 11, Chapter 11 is a form of bankruptcy that involves
a reorganization of a debtor's business affairs and assets. It is generally filed by
corporations which require time to restructure their debts.
Chapter 11 gives the debtor a fresh start, subject to the debtor's fulfillment of its
obligations under its plan of reorganization.

Chapter 13
A U.S. bankruptcy proceeding in which the debtor undertakes a reorganization of his/her
finances under the supervision and approval of the courts. The reorganization must
involve the debtor submitting and following through with a plan to repay outstanding
creditors within three to five years. In most circumstances, the repayment plan must
provide a substantial payback to creditors - at least equal to what they would receive
under other forms of bankruptcy - and it must, if needed, use 100% of the debtor's income
for repayment.

Chapter 7
A bankruptcy proceeding in which a company stops all operations and goes completely
out of business. A trustee is appointed to liquidate (sell) the company's assets, and the
money is used to pay off debt

Charge Card
A card that charges no interest but requires the user to pay his/her balance in full upon
receipt of the statement, usually on a monthly basis. While it is similar to a credit card, the
major benefit offered by a charge card is that it has much higher, often unlimited,
spending limits.

Charge Off
1. A debt that is deemed uncollectable and written off. Also known as a bad debt.
2. A one time expense incurred by a company that negatively affects earnings.

Chargeback
The charge a credit card merchant pays to a customer after the customer successfully
disputes an item on his or her credit card statement.

Charitable Donation
A gift made by an individual or an organization to a nonprofit organization, charity or
private foundation. Charitable donations are commonly in the form of cash, but can also
take the form of real estate, motor vehicles, appreciated securities, clothing and other
assets or services.

Charitable Lead Trust


A trust designed to reduce beneficiaries' taxable income by first donating a portion of the
trust's income to charities and then, after a specified period of time, transferring the
remainder of the trust to the beneficiaries.

Charitable Remainder Trust


A tax-exempt irrevocable trust designed to reduce the taxable income of individuals by
first dispersing income to the beneficiaries of the trust for a specified period of time and
then donating the remainder of the trust to the designated charity.

Charter
A legal document that provides for the creation of a corporate entity. A corporation's
charter is issued by either a federal or a regional government and effectively creates a
legal entity out of the business, which existed only as a partnership, sole proprietorship or
similar business before incorporating.
Also referred to as "articles of incorporation".

Chartered Bank
A financial institution whose primary roles are to accept and safeguard monetary deposits
from individuals and organizations, and to lend money out. The details vary from country
to country, but usually a chartered bank in operation has obtained government permission
on some level to do business in the banking sector.

Chartered Financial Analyst - CFA


A professional designation given by the CFA Institute (formerly AIMR) that measures the
competence and integrity of financial analysts. Candidates are required to pass three
levels of exams covering areas such as accounting, economics, ethics, money
management and security analysis.

Chartered Insurance Professional - CIP


A professional designation granted by the the Insurance Institute of Canada to insurance
agents in the property and casual segments of the industry. The designation was created
to promote a standard in the field and gives agents professional standing in the field for
the benefit of both employers and clients.

Chartered Investment Councelor - CIC


A designation by the Investment Counsel Association to those holding CFAs and currently
working as investment counselors

Chartered Market Technician - CMT


A professional designation given by the Market Technicians Association (MTA) to financial
professionals who prove their proficiency in technical analysis.

Chartist
Another name for a technical analyst. This is a person who uses charts to identify patterns
that can suggest future activity.

Chasing Nickels Around Dollar Bills


A slang term describing what a company's management does when it decides to trim
small, trivial costs instead of cutting larger, more serious costs. All too often, managers
will cut the difficult costs as a last resort, when in fact the company would be much better
off if the larger costs had been dealt with earlier.

Chasing the Market


Entering or exiting of a trend after the trend has already been well established. Investors
are often unaware of the fact that they are chasing the market which can dent the value of
a portfolio. This type of investing is often seen as irrational as decisions are often based
on emotion instead of careful analysis of the value of the investment.

Chastity Bond
A bond designed to prevent unwanted takeovers by having a maturity that is activated
once a takeover is complete.

Chattel Mortgage
A term used when describing a mobile or manufactured home mortgage. Specifically when
the home is not financed with the land.

Cheap Stock
The illegal practice of issuing stock options at artificially low prices shortly before an
initial public offering.
Often underwriters will require a company to have more qualified management before they
can go public. They attract these qualified individuals by giving options with a low
exercise price.

Cheapest to Deliver - CTD


The least expensive underlying product that can be delivered upon expiry to satisfy the
requirements of a derivative contract.

Check
A written, dated, and signed instrument that contains an unconditional order from the
drawer that directs a bank to pay a definite sum of money to a payee.

Check Representment
A method whereby checks from accounts with insufficient funds are repeatedly deposited
until funds are available.

Checking Account
A deposit account for funds intended for quick turnover. Checking accounts offer very low
interest on unused cash balances.

Cherry Picking
1. The act of investors choosing investments that have performed well within another
portfolio in anticipation that the trend will continue.
2. Relating to bankruptcy proceedings whereby the courts uphold contracts favorable to
bankrupt companies, but annul those that are unfavorable.

CHF
In currencies, this is the abbreviation for the Swiss Franc.

Chicago Board Of Trade - CBOT


A commodity exchange established in 1848 that today trades in both agricultural and
financial contracts. The CBOT originally traded only agricultural commodities such as
wheat, corn and soybeans. Now, the CBOT offers options and futures contracts on a wide
range of products including gold, silver, U.S. Treasury bonds and energy.

Chicago Board Options Exchange - CBOE


Founded in 1973, the CBOE is an exchange that focuses on options contracts for
individual equities, indexes and interest rates. The CBOE is the world's largest options
market. It captures a majority of the options traded. It is also a market leader in developing
new financial products and technological innovation, particularly with electronic trading.
The CBOE is also referred to as the "See-bo".

Chicago Mercantile Exchange - CME


The world's second-largest exchange for futures and options on futures and the largest in
the U.S. Trading involves mostly futures on interest rates, currency, equities, stock indices
and a small amount on agricultural products.

Chief Executive Officer - CEO


This is the senior manager who is responsible for overseeing the activities of an entire
company.

Chief Financial Officer - CFO


This is the senior manager who is responsible for overseeing the financial activities of an
entire company. This includes signing checks, monitoring cash flow, and financial
planning

Chief Information Officer - CIO


A company executive who is responsible for the management, implementation and
usability of information and computer technologies. The CIO will analyze how these
technologies can benefit the company or improve an existing business process and will
then integrate a system to realize that benefit or improvement.

Chief Operating Officer - COO


The senior manager who is responsible for managing the company's day-to-day
operations and reporting them to the chief executive officer (CEO).

Chief Security Officer - CSO


The company executive responsible for the security of personnel, physical assets and
information in both physical and digital form. The importance of this position has
increased in the age of information technology as it has become easier to steal sensitive
company information.

Child Tax Credit


A credit given to taxpayers for each dependent child that is under the age of 17 at the end
of the tax year.

Chill
Special restrictions that can be placed on a given security by the Depository Trust
Company (DTC). Chill restrictions are intended to limit the potential for problems within
the financial marketplace, and they can be placed on a security for various reasons.

China Concepts Stock


The stock of a company whose assets or earnings have significant activities in China.

Chinese Wall
The ethical (not physical) barrier between different divisions of a financial (or other)
institution to avoid conflict of interest. A Chinese Wall is said to exist, for example,
between the corporate-advisory area and the brokering department to separate those
giving corporate advice on takeovers from those advising clients about buying shares.
The "wall" is thrown up to prevent leaks of corporate inside information, which could
influence the advice given to clients making investments, and allow staff to take
advantage of facts that are not yet known to the general public.

Choice Market
A market in which the spread between the bid and the ask for a given financial instrument
is zero - meaning that, at any point in time, the instrument can be bought for the same
price as it can be sold in the market. This type of market only occurs when there is
extreme liquidity and a limited number of intermediaries.

Choke Price
An economic term used to describe the price at which the quantity demanded of a good is
equal to zero.

Chooser Option
An option where the investor has the opportunity to choose whether the option is a put or
call at a certain point in time during the life of the option.
Choppy Market
A stock market condition whereby prices swing up and down considerably but with no
resulting overall price movement in either direction

Christmas Club
A type short-term savings account that usually pays out the full account balance to its
account holders once each year - right before Christmas. These accounts pay depositors
monthly interest on their account balances and often punish early withdrawals by
forfeiting interest earned if money is taken out before a given date.

Christmas Tree
An options trading strategy that is generally achieved by purchasing one call option and
selling two other call options at different strike prices. When drawn structurally, the strike
price of the long option is located below the two successively higher written calls.

Churn Rate
The percentage of subscribers to a service that discontinue their subscription to that
service in a given time period.
In order for a company to expand its clientele, its growth rate (i.e. its number of new
customers) must exceed its churn rate.

Churning
1. An unethical practice employed by some brokers to increase their commissions by
excessively trading in a client's account. This practice violates the NASD Fair Practice
Rules. It is also referred to as "churn and burn", "twisting" and "overtrading".
2. A period of heavy trading with few sustained price trends and little movement in stock
market indexes

CINS Number
An acronym standing for the "CUSIP International Numbering System," which provides
identification of international securities.

Circuit Breaker
Refers to any of the measures used by stock exchanges during large sell-offs to avert
panic selling. Sometimes called a "collar."

Circular Trading
A fraudulent trading scheme where sell orders are entered by a broker who knows that
offsetting buy orders, the same number of shares at the same time and at the same price,
either have been or will be entered.

Circus Swap
A swap with the features of both a currency swap and an interest rate swap.

Civil Money Penalty - CMP


A punitive fine imposed by a civil court on an entity that has profited from illegal or
unethical activity. The Securities and Exchange Commission imposes civil money
penalties that are usually equal to the gains made from whatever activity it has deemed to
be illegal or unethical.

Class
In the most general form, a class is a group of securities with similar features.

Class A Shares
A classification of common stock that may be accompanied by more or less voting rights
than Class B shares. Although Class A shares are often thought to carry more voting
rights than Class B shares, this is not always the case. Companies will often try to
disguise the disadvantages associated with owning shares with less voting rights by
naming those shares "Class A", and those with more voting rights "Class B".

Class Action
An action where an individual represents a group in a court claim. The judgment from the
suit is for all the members of the group (class).

Class B Shares
A classification of common stock that may be accompanied by more or less voting rights
than Class A shares. Although Class A shares are often thought to carry more voting
rights than Class B shares, this is not always the case. Companies will often try to
disguise the disadvantages associated with owning shares with less voting rights by
naming those shares "Class A", and those with more voting rights "Class B".

Classical Economics
Classical Economics refers to work done by a group of economists in the 18th and 19th
centuries. They developed theories about the way markets and market economies work.
The study was primarily concerned with the dynamics of economic growth. It stressed
economic freedom and promoted ideas such as laissez-faire and free competition.

Classified Board
A structure for a board of directors in which a portion of the directors serve for different
term lengths, depending on their particular classification. Under a classified system,
directors serve terms usually lasting between one and eight years; longer terms are often
awarded to more senior board positions (i.e. chairman of the corporate governance
committee).
Classified boards are often referred to as "staggered boards", although staggered boards
and classified boards have somewhat different structures. Staggered boards need not be
classified, but classified boards are inherently staggered.

Classified Shares
The separation of company equity into more than one class of common shares, usually
called "Class A" and "Class B."

Clawback
1. Previously given monies or benefits that are taken back due to specially arising
circumstances.
2. A retraction of stock prices or of the market in general.

Clean Balance Sheet


Refers to a company whose balance sheet has very little or no debt.

Clean Price
The price quoted for a bond excluding accrued interest.

Clean Sheeting
The fraudulent act of purchasing a life insurance policy without disclosing a pre-existing
terminal illness or disease. This type of fraud is often done with both the knowledge of the
purchaser and the agent involved.

Clearing
The procedure by which an organization acts as an intermediary and assumes the role of a
buyer and seller for transactions in order to reconcile orders between transacting parties.

Clearing Corporation
An organization associated with an exchange to handle the confirmation, settlement and
delivery of transactions, fulfilling the main obligation of ensuring transactions are made in
a prompt and efficient manner. They are also referred to as "clearing firms" or "clearing
houses".

Clearing Fee
A fee charged by clearing corporations for their services provided to investment firms.

Clearing House
An agency or separate corporation of a futures exchange responsible for settling trading
accounts, clearing trades, collecting and maintaining margin monies, regulating delivery
and reporting trading data. Clearing houses act as third parties to all futures and options
contracts - as a buyer to every clearing member seller and a seller to every clearing
member buyer.

Clearing Member Trade Agreement - CMTA


An agreement by which an investor may enter derivative trades with a limited number of
different brokers and later consolidate these trades with one brokerage house for clearing.

Clearing Price
The specified monetary value assigned to a security or asset. This price is determined by
the bid and ask process of buyers and sellers interested in trading the security

Clearstream International
A European clearing corporation, this organization supports over 2500 different
companies in 80 locations worldwide

Cleave
The occurrence of a gemstone breaking into two or more pieces during the cutting or
polishing process. Naturally occurring impurities in the stones increase the likelihood that
a stone will break apart.

Click Through Rates


The percent of individuals viewing a Web page who click on a specific banner ad
appearing on the page.

Clientele Effect
The theory that a company's stock price will move according to the demands and goals of
investors in reaction to a tax, dividend or other policy change affecting the company. The
clientele effect assumes that investors are attracted to different company policies, and
that when a company's policy changes, investors will adjust their stock holdings
accordingly. As a result of this adjustment, the stock price will move.

Cliff Vesting
A type of vesting that occurs entirely at a specified time rather than gradually.

Climax
Following a protracted period of selling or buying, a point wherein market trends are
retarded or discontinued.

Climax Top
When a stock suddenly advances at a much faster rate for one or two weeks after an
advance of many months. Generally occurs in the final “stages†of a stock's price
advance, indicating a leveling off or decrease in future price movements. Often
accompanied by a gap up in price. Based on William J. O'Neil's research, many big market
leaders top in this fashion. (Also, see Gap and Exhaustion gap)

Clinton Bond
A bond that is said to have no principal, no interest and no maturity

Cliquet
An extended option that periodically settles and resets its strike price at the level of the
underlying during the time of settlement.

Clone Fund
A mutual fund that replicates the performance or strategy of an existing mutual fund or
index through the use of derivatives.

Close
1. The end of a trading session. The closing price is quoted in the newspaper.
2. The final procedure in a home sale in which documents are signed and recorded. This is
the time when the ownership of the property is transferred.

Close Period
The time period between the completion of a company's balance sheet and the
announcing of the results to the public

Close Position
The act of taking the opposite position of the current position thereby getting out of a
position in a particular stock or security.
Also referred to as "Closing Transaction."

Closed-End Funds
Closed-end investment companies have a fixed number of shares to sell. Their shares are
traded on the major exchanges and fluctuate according to supply and demand in the
market. You do not have a guarantee that you can sell your shares at net asset value like
you do in open-end mutual funds.

Closed-end Indenture
A term in a bond contract that guarantees that the collateral used to back the bond issue
cannot be used again to back another bond issue. This is the opposite of an open-end
indenture in which more than one bond can be backed by a single collateral.

Closed-End Investment
When an investment company issues a fixed number of shares in an actively managed
portfolio of securities. The shares are traded in the market just like common stock.

Closed-End Lease
A rental agreement that puts no obligation on the lessee (the person making periodic lease
payments) to purchase the leased asset at the end of the agreement. Also called a "true
lease", "walkaway lease" or "net lease".

Closed-End Management Company


An investment-management company that sells a limited number of shares to investors on
an exchange by way of an initial public offering. For investors to sell the shares they
purchased from the closed-end management company, there must be buyers willing to
buy the shares at a price determined by the market. The most common type of closed-end
management company is a closed-end mutual fund.

Closed-Market Transaction
An order placed by a company's insider to buy or sell restricted securities from within the
company's own treasury. Appropriate documentation must be filed before the order can be
placed.

Closely Held Shares


A term referring to shares held by individuals closely related to a company

Closet Indexing
A portfolio strategy used by some portfolio managers to achieve returns similar to those
of their benchmark index, without exactly replicating the index.

Closing
1. The end of a trading session. The closing price is quoted in the newspaper.
2. The final procedure in a home sale in which documents are signed and recorded. This is
the time when the ownership of the property is transferred.

Closing Bell
A bell that rings to signify the end of a trading session.

Closing Costs
The numerous expenses (over and above the price of the property) that buyers and sellers
normally incur to complete a real estate transaction. Costs incurred include loan
origination fee, discount points, appraisal fee, title search, title insurance, survey, taxes,
deed-recording fee and credit report charges. Also known as "settlement costs".

Closing Statement
A document commonly used in real estate transactions, detailing the fees, commissions,
insurance, etc. that must be transacted for a successful transfer of ownership to take
place. This document is prepared by a closing agent and is also known as a "settlement
sheet".

Closing Tick
The number of stocks which closed higher than their previous trade minus the number of
stocks whose closing prices were lower than their previous trade. A positive closing tick
means that there was buying at the close and indicates strength, the opposite is true for a
down closing tick.

CLP
In currencies, this is the abbreviation for the Chili Peso.

Club Deal
A syndicated loan agreement in which the participants in the syndicate are specifically
requested by the borrower

CNN Effect
The temporary shifting of consumer spending that occurs as a result of gripping news.

CNY
In currencies, this is the abbreviation for the China Yuan Renminbi.

Co-pay
A type of insurance policy where the insured pays a specified amount of out-of-pocket
expenses for health-care services such as doctor visits and prescriptions drugs at the
time the service is rendered, with the insurer paying the remaining costs. However, unlike
coinsurance, where the insured is required to pay a certain percentage of the covered
costs, co-pay plans require the insured to pay a specified dollar amount.

Coattail Investing
An investment strategy where investors mimic the trades of well-known and historically
successful investors.

Cockroach Theory
A market theory that states bad news tends to be released in bunches.

Coefficient Of Variation - CV
A statistical measure of the dispersion of data points in a data series around the mean. It
is calculated as follows:
The coefficient of variation represents the ratio of the standard deviation to the mean, and
it is a useful statistic for comparing the degree of variation from one data series to
another, even if the means are drastically different from each other

Coincident Indicator
An economic factor that varies directly and simultaneously with the business cycle, thus
indicating the current state of the economy.

Coinsurance
A co-sharing agreement between the insured and the insurer under a health-insurance
policy which provides that the insured will cover a set percentage of the covered costs
after the deductible has been paid. Similar to co-pay insurance plans except co-pays
require the insured to pay a set dollar amount at the time the service is rendered.

Cold Calling
A method used by brokers to obtain new business by making unsolicited calls to potential
clients.

Collaborative Commerce - C-commerce


Optimization of supply and distribution channels in order to capitalize upon the global
economy and use new technology efficiently.

Collar
1. A protective options strategy that is implemented after a long position in a stock has
experienced substantial gains. It is created by purchasing an out of the money put option
while simultaneously writing an out of the money call option.

Collateral
Properties or assets that are offered to secure a loan or other credit. Collateral becomes
subject to seizure on default.

Collateral Trust Bond


A bond that is secured by a financial asset - such as stock or other bonds - that is
deposited and held by a trustee for the holders of the bond.

Collateralized Bond Obligation - CBO


An investment-grade bond backed by a pool of junk bonds. Junk bonds are typically not
investment grade, but because they pool several types of credit quality bonds together,
they offer enough diversification to be "investment grade."

Collateralized Debt Obligation - CDO


An investment-grade security backed by a pool of bonds, loans and other assets. CDOs do
not specialize in one type of debt but are often non-mortgage loans or bonds.

Collateralized Loan Obligation - CLO


A special purpose vehicle (SPV) with securitization payments in the form of different
tranches. Financial institutions back this security with receivables from loans

Collateralized Mortgage Obligation - CMO


A type of mortgage backed security that creates separate pools of pass-through rates for
different classes of bondholders with varying maturities, called tranches. The repayments
from the pool of pass-through securities are used to retire the bonds in the order specified
by the bonds prospectus.

Collection Agency
A company hired by lenders to recover funds that are past due or accounts that are in
default. The lending company itself may also have a division or subsidiary that acts as its
collection agency. A collection agency is hired after a company has made multiple
attempts to collect what is owed to it

Collective Fund
An investment vehicle that combines tax exempt assets of various individuals and
organizations in order to create a well diversified portfolio.

Com-Dev Company
Short form for "Commercial Development Company." These companies build and
sell/lease commercial real-estate, software, or applications for wide-scale commercial use.

Combat Zone
An area designated as a war zone during a specified period. Members of the military do
not need to claim taxable income they earn while working in a combat zone.

Combination
When an investor holds a position in both call and put options on the same asset.

Combined Loan To Value Ratio - CLTV Ratio


A ratio used by lenders to determine the risk of default by prospective homebuyers when
more than one loan is used. In general, lenders are willing to lend at CLTV ratios of 80%
and above to borrowers with a high credit rating.

Commerce
The buying and selling of goods, especially on a large scale.

Commercial
A term used to refer to any party or organization involved in producing, transporting, or
merchandising a commodity.

Commercial Bank
A financial institution that provides services such as a accepting deposits and giving
business loans.
Commercial Grain Stock
A term used to describe any grain stored within U.S. Borders.

Commercial Mortgage-Backed Securities - CMBS


Similar to a mortgage-backed security, but secured by loans with commercial property
instead of residential property.

Commercial Paper
An unsecured, short-term debt instrument issued by a corporation, typically for the
financing of accounts receivable, inventories and meeting short-term liabilities. Maturities
on commercial paper rarely range any longer than 270 days. The debt is usually issued at
a discount, reflecting prevailing market interest rates.

Commercial Real Estate


Property that is solely used for business purposes.

Commercial Trader
A classification used by the Commodity Futures Trading Commission (CFTC) for traders
that use the futures market primarily to hedge their business activities.

Commingled Fund
A type of mutual fund consisting of assets from several accounts that are blended
together. Sometimes called a "pooled fund."

Commingling (Commingled)
1. In securities, it is the mixing of customer-owned securities with brokerage-owned
securities.
2. In trust banking, it is the pooling of individual customer accounts into a fund, a share of
which is owned by each contributing customer. This is similar to a mutual fund.
3. In real estate, it is the illegal act of a broker combining clients' funds with personal
funds because, by law, a broker is required to use a separate trust or escrow fund to
temporarily hold a client's funds.

Commission
A service charge assessed by an agent in return for arranging the purchase or sale of a
security or real estate. The commission must be fair and reasonable, considering all the
relevant factors of the transaction. Commissions vary widely from broker to broker.

Commission House
A brokerage or merchant firm which buys and sells futures contracts for customer
accounts.

Commitment Fee
A fee lenders charge their borrowers for unused credit or credit that has been promised at
a specified future date.
Commitments of Traders Report - COT
A report published every Friday by the Commodity Futures Trading Commission (CFTC)
that seeks to provide investors with up-to-date information on futures market operations
and increase the transparency of these complex exchanges.

Committed Facility
A credit facility whereby terms and conditions are clearly defined by the lending institution
and imposed upon the borrowing company.

Commodities Exchange
An entity, usually an incorporated non-profit association, that determines and enforces
rules and procedures for the trading of commodities and related investments, such as
commodity futures. Commodities exchange also refers to the physical center where
trading takes place.

Commoditization
1. A situation when illiquid financial contracts are changed or modified in a way that
promotes trading and results in a more liquid market.
2. Making a product into a commodity.

Commodity
1. A basic good used in commerce that is interchangeable with other commodities of the
same type. Commodities are most often used as inputs in the production of other goods
or services. The quality of a given commodity may differ slightly, but it is essentially
uniform across producers. When they are traded on an exchange, commodities must also
meet specified minimum standards, also known as a basis grade.
2. Any good exchanged during commerce, which includes goods traded on a commodity
exchange.

Commodity Block Currency


A currency that belongs to a country whose economy is strongly correlated with the price
fluctuations of a certain commodity.

Commodity Channel Index - CCI


An oscillator used in technical analysis to help determine when an investment vehicle has
been overbought and oversold. The Commodity Channel Index, first developed by Donald
Lambert, quantifies the relationship between the asset's price, a moving average (MA) of
the asset's price, and normal deviations (D) from that average. It is computed with the
following formula:

Commodity Exchange Act - CEA


An act passed in 1936 by the U.S. Government that provides federal regulation of all
futures trading activities. This act replaced the Grain Futures Act of 1922.

Commodity Futures Contract


An agreement to buy or sell a set amount of a commodity at a predetermined price and
date. Buyers use these to avoid the risks associated with the price fluctuations of the
product or raw material, while sellers try to lock in a price for their products. Like in all
financial markets, others use such contracts to gamble on price movements.

Commodity Futures Modernization Act - CFMA


An act passed in 2000 by the U.S Government that reaffirmed the authority of the
Commodity Futures Trading Commission for five years as the regulatory body of the
American futures markets. The most significant outcome from this act was the allowance
for the trading of single stock futures.

Commodity Futures Trading Commission - CFTC


A U.S. federal agency established by the Commodity Futures Trading Commission Act of
1974. It ensures the open and efficient operation of the futures markets. There are five
futures markets commissioners who are appointed by the president (subject to Senate
approval).

Commodity Index
An index that tracks a basket of commodities to measure their performance. These
indexes will often be traded on exchanges, allowing investors to gain easier access to
commodities without having to enter the futures market. The value of these indexes
fluctuates based on the underlying commodities, and this value can be trade on the
exchange much in the same way as stock-index futures.

Commodity Pool
A fund that collects investor contributions for use in future and commodity option trading.

Commodity Pool Operator - CPO


Persons or limited partnerships responsible for investing a commodity pool's assets in
commodity-futures and options positions.

Commodity Research Bureau Index - CRB


An index that measures the overall direction of commodity sectors. The CRB was
designed to isolate and reveal the directional movement of prices in overall commodity
trades.

Commodity Selection Index - CSI


A technical momentum indicator that attempts to identify which commodities are the most
suitable for short-term trading. The larger the CSI value, the stronger is the trend and
volatility characteristics associated with the asset. This indicator should only be used by
traders who can handle large amounts of volatility as it indicates strong trending, but
reversals are always possible.

Commodity Swap
A swap where exchanged cash flows are dependent on the price of an underlying
commodity. This is usually used to hedge against the price of a commodity.

Commodity Trading Advisor - CTA


An individual or a firm, registered with the Commodity Futures Trading Commission, that
receives compensation for giving people advice on options, futures and the actual trading
of managed futures accounts. Registration for CTAs is done through the National Futures
Association, a self-regulated organization responsible for reviewing and accepting
registrations.

Common Gap
A price gap found on a price chart for an asset. These gaps are brought about by normal
market forces and, as the name implies, are very common. They are represented
graphically by a non-linear jump or drop from one point on the chart to another point.

Common Size Balance Sheet


A company balance sheet that displays all items as percentages of a common base figure.
This type of financial statement can be used to allow for easy analysis between companies
or between time periods of a company.

Common Size Financial Statement


A company financial statement that displays all items as percentages of a common base
figure. This type of financial statement allows for easy analysis between companies or
between time periods of a company.

Common Size Income Statement


An income statement in which each account is expressed as a percentage of the value of
sales. This type of financial statement can be used to allow for easy analysis between
companies or between time periods of a company.

Common Stock
A security that represents ownership in a corporation. Holders of common stock exercise
control by electing a board of directors and voting on corporate policy. Common
stockholders are on the bottom of the priority ladder for ownership structure. In the event
of liquidation, common shareholders have rights to a company's assets only after
bondholders, preferred shareholders and other debtholders have been paid in full.
In the U.K., these are called "ordinary shares

Community Property
A U.S. state-level legal distinction of a married individual's assets. Property acquired by
either spouse during the course of a marriage is considered community property. For
example, an IRA in the name of an individual with a spouse, accumulated during the
course of the marriage, would be considered community property.

Company Description
A brief description of the company's operations. This summarized item is based on the
information provided in the company's annual report or 10K. It is updated annually or
when major changes in company operations occur.

Company Name
The name a stock is registered with the Securities & Exchange Commission. The
displayed name may not match its registered name due to space limitations.
Company Owned Life Insurance - COLI
A type of life insurance policy taken out by a company on the lives of employees that the
company believes to be of vital importance to the operations of the firm. Under these
plans, the company pays the premium on the insurance but is also the plan's primary
beneficiary.

Comparables
A valuation technique in which a recently sold asset is used to determine the value of a
similar asset. This technique is often used in real estate to determine the initial sale price
of a property

Comparative Advantage
A situation in which a country, individual, company or region can produce a good at a
lower opportunity cost than that of a competitor.

Competitive Bid
A process whereby an underwriter submits a sealed bid to the issuer. The issuer awards
the contract to the underwriter with the best price and contract terms.

Competitive Tender
A method of distributing debt issues. Bids are submitted by primary distributors and those
who bid the highest receive the debt issue.

Compliance Department
The department within a brokerage firm that oversees the trading and market-making
activities of the firm.

Composite
A grouping of equities, indexes or other factors combined in a standardized way,
providing a useful statistical measure of overall market or sector performance over time.
Also known as a "composite index".

Composite Index
A grouping of equities, indexes or other factors combined in a standardized way,
providing a useful statistical measure of overall market or sector performance over time.
Also known simply as a "composite".

Composite Index of Coincident Indicators


An index published by the Conference Board that is a broad-based measurement of
current economic conditions, helping economists and investors to determine which phase
of the business cycle the economy is currently experiencing.. The Composite Index of
Coincident Indicators comprises four cyclical economic data sets:
1. the number of employees on non-agricultural payrolls (released by the Bureau of Labor
Statistics)
2. the Index of Industrial Production
3. the level of manufacturing and trade sales
4. the aggregate amount of personal income excluding transfer payments
Composite Index of Lagging Indicators
An index published monthly by the Conference Board that is used to confirm the direction
of the economy's movements in past months. The index is made up of the following seven
economic components, whose changes tend to come after changes in the overall
economy:
1. the value of outstanding commercial and industrial loans
2. the change in the consumer price index for services from the previous month
3. the change in labor cost per unit of labor output
4. the ratio of manufacturing and trade inventories to sales made
5. the ratio of consumer credit outstanding to personal income
6. the average prime rate charged by banks
7. the inverted average length of employment

Composite Index of Leading Indicators


An index published monthly by the Conference Board used to predict the direction of the
economy's movements in the months to come. The index is made up of 10 economic
components, whose changes tend to precede changes in the overall economy. These 10
components include:
1. the average weekly hours worked by manufacturing workers
2. the average number of initial applications for unemployment insurance
3. the amount of manufacturers' new orders for consumer goods and materials
4. the speed of delivery of new merchandise to vendors from suppliers
5. the amount of new orders for capital goods unrelated to defense
6. the amount of new building permits for residential buildings
7. the S&P 500 stock index
8. the inflation-adjusted monetary supply (M2)
9. the spread between long and short interest rates
10. consumer sentiment

Composite Rating, SmartSelect®


The IBD SmartSelect Composite Rating combines all 5 SmartSelect Ratings into one easy-
to-use rating. More weight is placed on EPS and RS Rating, and the stock's percent off its
52-week high is also included in the formula. Results are then compared to all other
companies, and each company is assigned a rating from 1-99 with 99 being the best. A 90
rating means that the stock has outperformed 90% of all other stocks in terms of its
combined SmartSelect Ratings

Compound
The ability of an asset to generate earnings that are then reinvested and generate their
own earnings.

Compound Annual Growth Rate - CAGR


The year-over-year growth rate of an investment over a specified period of time.
The compound annual growth rate is calculated by taking the nth root of the total
percentage growth rate, where n is the number of years in the period being considered.

Compound Option
An option for which the underlying is another option. Therefore, there are two strike prices
and two exercise dates. These are the four types of compound options:
- Call on a call
- Put on a put
- Call on a put
- Put on a call

Compounding
The ability of an asset to generate earnings, which are then reinvested in order to generate
their own earnings. In other words, compounding refers to generating earnings from
previous earnings.
Also known as "compound interest".

Comprehensive Income
Equals net income minus all recognized changes in equity during a period.

Comps
Another term for "same store sales," which helps investors determine how well a
company's brand is doing and how the stores are increasing revenue.

Concentration Ratio
In economics, a ratio that indicates the relative size of firms in relation to their industry as
a whole.

Concession
A selling group's compensation in a stock or bond underwriting agreement.

Concession Agreement
A right granted by a government to a corporation. It specifies rules under which the
company can operate locally.

Conditional Order
A type of order that will be submitted or canceled if set criteria are met, which are defined
by the trader/investor entering the order. This allows for a greater customization of the
order to meet the specific needs of the investor.

Condominium
A large property complex that is divided into individual units and sold. Ownership usually
includes a non-exclusive interest in certain "common properties" controlled by the
condominium management.

Condor Spread
Similar to a butterfly spread, a condor is an options strategy that also has a bear and a bull
spread, except that the strike prices on the short call and short put are different.

Conduit Financing
A financing arrangement involving a government or other qualified agency using its name
in an issuance of fixed income securities for a non-profit organization's large capital
project.
Conduit IRA
A traditional IRA that holds only assets that were distributed from a qualified plan.

Conduit Theory
A theory stating that an investment firm passing all capital gains, interest, and dividends
onto their customers/shareholders shouldn't be levied at the corporate level like most
regular companies are.

Conference Call
An event during which investors can call in to a special phone number and hear company
management report its quarterly results as well as forward, or projected, earnings. While
the average investor can only listen to the call, the reporting company will often field
questions from analysts. Also known as "earnings conference call", "analyst call" and
"earnings call".

Confirmation
1. The occurrence of two or more indicators corresponding with one another and thereby
corroborating the predicted trend.
2. The written acknowledgment provided by a broker indicating that a trade has been
completed. This includes details such as the date, price, commission, fees and settlement
terms of the trade.

Conforming Loan
A conventional mortgage under $203,150 that conforms to the loan amounts and mortgage
guidelines used by Fannie Mae and/or Freddie Mac.

Congestion
1. A market situation whereby the demand of contract holders wishing to exit their existing
positions exceeds the supply of willing participants wishing to enter into the offsetting
position.
2. A period of time when a stock trades either below resistance or above support, or both.

Conglomerate
A corporation that is made up of a number of different, seemingly unrelated businesses. In
a conglomerate, one company owns a controlling stake in a number of smaller companies,
which conduct business separately. Each of a conglomerate's subsidiary businesses runs
independently of the other business divisions, but the subsidiaries' management reports
to senior management at the parent company.
The largest conglomerates diversify business risk by participating in a number of different
markets, although some conglomerates elect to participate in a single industry - for
example, mining.

Conglomerate Discount
A reference to the tendency of the stock market to undervalue the stocks of conglomerate
businesses. Conglomerate discount is calculated by adding an estimation of the intrinsic
value of each of the subsidiary companies in a conglomerate and subtracting the
conglomerate's market capitalization from that value.
Conglomerate Merger
A merger between firms that are involved in totally unrelated business activities. There are
two types of conglomerate mergers: pure and mixed. Pure conglomerate mergers involve
firms with nothing in common, while mixed conglomerate mergers involve firms that are
looking for product extensions or market extensions.

Consensus Estimate
A figure based on the combined estimates of the analysts covering a public company.
Generally, analysts give a consensus for a company's earnings per share and revenue
these figures are most often made for the quarter, fiscal year and next fiscal year. The size
of the company and the number of analysts covering it will dictate the size of the pool
from which the estimate is derived.

Consent Solicitation
A solicitation by one party to the stakeholders of a particular security for the consent of a
material change.

Conservative Growth
A method of allocating investments with the goal of growing invested capital over the long
term. This investment strategy focuses on minimizing risk by making long-term
investments in companies that show consistent growth over time. Conservative growth
portfolios feature low asset turnover, or a high percentage of fixed assets on their balance
sheets, and should employ a buy-and-hold investment philosophy

Conservative Investing
An investing strategy that seeks to preserve an investment portfolio's value by investing
in lower risk securities such as fixed-income and money market securities, and often blue-
chip or large-cap equities.

Conservatorship
A circumstance in which the court declares an individual unable to take care of legal
matters and appoints another individual, known as a conservator, to do so.

Consignment
When goods are delivered to another company with the understanding that payment for
the goods is only made once the goods are sold.

Consolidate
To combine the assets, liabilities and other financial items of two or more entities into one.

Consolidated Financial Statements


The combined financial statements of a parent company and its subsidiaries.

Consolidated Omnibus Budget Reconciliation Act - COBRA


A COBRA health plan states that if you leave your job for any reason and were an active
participant in the company's health plan prior to your departure date, you have the right, if
you wish, to continue the health insurance coverage you and your family received, for 18
months.
Consolidated Tape
An electronic system that continuously reports data on the sales volume and price of
exchange traded securities.

Consolidation
In technical analysis, the movement of an asset's price within a well-defined pattern or
barrier of trading levels. Consolidation is generally regarded as a period of indecision,
which ends when the price of the asset breaks beyond the restrictive barriers. Periods of
consolidation can be found in charts covering any time interval (i.e. hours, days, etc.), and
these periods can last for minutes, days, months or even years. Lengthy periods of
consolidation are often known as a base.

Consolidation Phase
A stage in the life of a company or an industry in which components in the company or
industry start to merge to form fewer components. These components can include product
lines at the company level or companies themselves at the industry level. The
consolidation of companies differs from mergers in that consolidations create new entities
while mergers do not.

Constant Currencies
An exchange rate that eliminates the effects of exchange rate fluctuations and that is used
when calculating financial performance numbers. Companies with major foreign
operations often use constant currencies when calculating their yearly performance
measures.

Constant Dollar
An adjusted value of currency used to compare dollar values from one period to another.
Due to inflation, the purchasing power of the dollar changes over time, so in order to
compare dollar values from one year to another they need to be converted to constant
dollar values.

Constant Maturity
Used by the Federal Reserve Board to quote the yields on various treasury securities,
adjusted to an equivalent maturity.
Constant Maturity Swap - CMS
A variation of the regular interest rate swap. In a constant maturity swap, the floating
interest portion is reset periodically according to a fixed maturity market rate of a product
with a duration extending beyond that of the swap's reset period.

Construction Loan Note - CLN


A short-term obligation in the form of a note, used for the funding of construction projects
such as housing developments. In most cases, the note issuers will repay the note
obligation by issuing a longer term bond and using the proceeds from the bond to pay
back the note.

Construction Spending
An economic indicator that measures the amount of spending towards new construction.
Released monthly by the U.S. Department of Commerce's Census Bureau, it looks at
residential and non-residential construction in the private sector, and state and federal at
the public level.

Constructive Sale Rule - Section 1259


A section of the Internal Revenue Code that expands the types of transactions that are
considered to be sales and are subject to capital gains tax. According to this rule,
transactions that effectively take an offsetting position to an already owned position are
considered to be constructive sales. The purpose of the constructive sale rule is to
prevent investors from locking in investment gains without paying capital gains and to
limit their ability to transfer gains from one tax period to another.
This rule is Section 1259 of the Code. It is also referred to as "Constructive Sales
Treatment for Appreciated Financial Positions".

Consumer Confidence Index - CCI


A survey by the Conference Board that measures how optimistic or pessimistic
consumers are with respect to the economy in the near future.

Consumer Credit
A debt that someone incurs for the purpose of purchasing a good or service.

Consumer Internet Barometer


A quarterly survey report produced by the Conference Board and TNS NFO that records,
analyzes and reports on the internet usage of 10,000 U.S. households. The survey seeks to
measure:
1. the importance of the internet in the daily lives of households
2. overall satisfaction of internet users
3. online-purchase characteristics, times and dates
4. users' perceptions of security for online transactions and general internet usage

Consumer Price Index - CPI


A measure that examines the weighted average of prices of a basket of consumer goods
and services, such as transportation, food and medical care. The CPI is calculated by
taking price changes for each item in the predetermined basket of goods and averaging
them the goods are weighted according to their importance. Changes in CPI are used to
assess price changes associated with the cost of living.
Sometimes referred to as "headline inflation".

Consumer Staples
The industries that manufacture and sell food/beverages, tobacco, prescription drugs and
household products.

Contagion
The likelihood of significant economic changes in one country spreading to other
countries. This can refer to either economic booms or economic crises.

Contango
When the futures price is above the expected future spot price. Consequently, the price
will decline to the spot price before the delivery date.

Contestable Market Theory


An economic concept that refers to a market in which there are only a few companies that,
because of the threat of new entrants, behave in a competitive manner.

Contingency
An economic event, usually negative, that is in the process of occurring and, therefore,
has not yet been resolved.
Contingency Order
An order that is executed only when certain conditions of the security being traded, or
another security, have been fulfilled. Such prerequisite conditions range in scope and
depth. In a simple case, a contingency order may depend on the potential purchaser's
ability to sell a different security in his or her portfolio to free the funds to make the
purchase. In a more complicated situation, an options contingency order's execution may
depend on the share price of the options' underlying stock

Contingent Asset
An asset in which the possibility of an economic benefit depends solely upon future
events that can't be controlled by the company. Due to the uncertainty of the future
events, these assets are not placed on the balance sheet. However, they can be found in
the company's financial statement notes.

Contingent Convertibles - CoCos


A security similar to a traditional convertible bond in that there is a strike price (the cost of
the stock when the bond converts into stock). What differs is that there is another price,
even higher than the strike price, which the company's stock price must reach before an
investor has the right to make that conversion (known as the "upside contingency").

Contingent Deferred Sales Charge - CDSC


In the context of mutual funds, it is a back-end load charged only when a special
circumstance occurs.

Contingent Guarantee
A guarantee of payment that is dependent on one or more future events.

Contingent Immunization
A method of fixed income portfolio management, whereby managers are granted
significant powers of control over the selection of products to be added and removed from
the portfolio, as long as the products remain profitable. Should these products become
unprofitable past a set threshold, the manager must then capitalize the security under
immunization procedures.

Contingent Liability
1. The possibility of an obligation to pay certain sums dependent on future events.
2. Defined obligations by a company that must be met, but the probability of payment is
minimal.
Contingent Order
1. An order involving the simultaneous execution of two or more transactions.
2. An order whose execution depends upon the execution and/or price of another security

Continuation Pattern
A technical analysis pattern that suggests a trend is exhibiting a temporary diversion in
behavior and will eventually continue on its existing trend.
The symmetrical triangle charts displayed below are both exhibiting a continuation
pattern. Notice how the chart extends above (below) its existing pattern.

Continuous Compounding
The process of earning interest on top of interest. The interest is earned constantly, and
immediately begins earning interest on itself.

Continuous Net Settlement – CNS


An automated book-entry accounting system. CNS centralizes the settlement of compared
transactions and maintains an efficient flow of security and money balances.

Continuous Trading
A method of transacting different securities orders. Continuous trading involves the
immediate execution of orders upon their reception by market makers and specialists.

Contra Account
An account on the balance sheet of a corporation or entity that offsets the balance of a
related and corresponding account

Contra Broker
A term used to describe the broker participating on the opposite side of a transaction.
Contract For Differences - CFD
An arrangement made in a futures contract whereby differences in settlement are made
through cash payments, rather than the delivery of physical goods or securities.

Contract Holder
An owner of a segregated fund contract.

Contract Market
Any board of trade designated to trade a specific options or futures contract. Basically it's
another word for "designated exchange".

Contract Size
The deliverable quantity of goods or commodities underlying futures, forward, and option
contracts.

Contract Unit
The actual amount of commodities represented by a single futures contract.
Contraction
A period of general economic decline. It is one of the four stages of the business cycle.

Contraction Risk
The risk of a security shortening in duration due to the acceleration of prepayments.

Contrarian
An investment style that goes against prevailing market trends by buying assets that are
performing poorly and then selling when they perform well.

Contrarian indicators
Specific psychological indicators used by investors who subscribe to contrarian
strategies. Historically, when these indicators reach one extreme or another, this
foreshadows contrary market activity. For example, some Contrarian investors believe that
when a large majority of market analysts are bullish, it is likely that the market is about to
top. Likewise, when most market analysts are bearish, they believe that the market is
preparing for another advance. (Also, see Psychological market indicators).

Contributed Surplus
The amount of money a company earns from sources other than its main business
operation.

Contribution Margin
A cost accounting concept that allows a company to determine the profitability of
individual products.

Contributory Value
A real estate term that refers to the contribution a particular component has to the value of
the whole property.

Control Stock
1. Equity shares owned by major shareholders of a publicly traded corporation. These
shareholders have either a majority of the shares outstanding or a portion of the shares
that is significant enough to allow them to exert a controlling influence on the firm's
decisions.
2. In situations where companies have more than one class of common shares, shares
with superior voting power or vote weighting are considered to be "control stock", relative
to the inferior class.

Controller
In most organizations the controller is the top managerial and financial accountant. The
controller supervises the accounting department and assists management in interpreting
and utilizing managerial accounting information.

Convenience Yield
The benefit or premium associated with holding an underlying product or physical good,
rather than the contract or derivative product.
Convention Expenses
Any travel expenses incurred while at a business convention. These expenses are tax
deductible if they are business or job related.

Conventional Mortgage
A mortgage that falls within Fannie Mae guidelines, and covers loans up to predetermined
amount.

Convergence
A movement in the price of a futures contract toward the price of the underlying cash
commodity. At the start, the contract price is higher because of the time value.

Conversion
The exchange of a convertible type of asset into another type of asset, usually at a
predetermined price, on or before a predetermined date. The conversion feature is a
financial derivative instrument that is valued separately from the underlying security.
Therefore, an embedded conversion feature adds to the overall value of the security.

Conversion Premium
The amount by which the price of a convertible security exceeds the current market value
of the common stock into which it may be converted.

Conversion Price
The price per share at which a convertible security, such as corporate bonds or preferred
shares, can be converted into common stock.

Conversion Ratio
The number of common shares received at the time of conversion for each convertible
security. It is calculated by using this formula:

Convertible Adjustable Preferred Stock - CAPS


A preferred, floating rate issue, whose interest rate is tied to Treasury security rates. They
can be exchanged for common stock or cash after the next period's dividend rates are
announced. The shares received upon conversion are equal in market value to the par
value of the preferred.
Convertible Arbitrage
An investing strategy that involves the long position on a convertible security and a short
position in its converting common stock.

Convertible Bond
A bond that can be converted into a predetermined amount of the company's equity at
certain times during its life, usually at the discretion of the bondholder.
Convertibles are sometimes called "CVs".

Convertible Debenture
Any type of debenture that can be converted into some other security.
Convertible Preferred Stock
Preferred stock that includes an option for the holder to convert the preferred shares into
a fixed number of common shares, usually anytime after a predetermined date.
Also known as "convertible preferred shares".

Convertible Subordinate Note


A short-term debt security (note), that can be changed into common stock (convertible)
and ranks below other loans (subordinate).

Convertibles
Securities, usually bonds or preferred shares, that can be converted into common stock.

Convexity
A measure of the curvature in the relationship between bond prices and bond yields

Conveyance
A written instrument, such as a deed or lease, that transfers some ownership interest in
real property from one person to another
Conveyance Tax
A tax imposed on the transfer of real estate property.

Cook The Books


A buzzword describing fraudulent activities performed by corporations in order to falsify
their financial statements. Typically, cooking the books involves augmenting financial data
to yield previously non-existent earnings.
Examples of techniques used to cook the books involve accelerating revenues, delaying
expenses, manipulating pension plans and implementing synthetic leases.

Cookie Jar Accounting


An accounting practice where a company uses generous reserves from good years
against losses that might be incurred in bad years.

Cooling Degree Day - CDD


The number of degrees that a day's average temperature is above 65

Cooling-Off Rule
A term referring to law pertaining to newly-entered contracts that allows both sides of the
party a period of time (after the contract has been signed) to release themselves from any
obligations without penalty.

COP
In currencies, this is the abbreviation for the Colombian Peso.

Coppock Curve
A long-term price momentum indicator used primarily to recognize major bottoms in the
stock market. It is calculated as a 10-month weighted moving average of the sum of the 14-
month rate of change and the 11-month rate of change for the index.
Also known as the "Coppock Guide".

Copula
A statistical measure that represents a multivariate uniform distribution, which examines
the association or dependence between many variables. Although, the statistical
calculation of a copula was invented in 1957, its application to financial markets and
finance was not implemented until the late 1990s.

Core Earnings
The revenue derived from a company's main or principal business less all associated
expenses.

Core Holding
An investment that you plan on keeping in your portfolio for a very long period of time,
sometimes permanent.

Core Inflation
A measure of inflation that excludes certain items which face volatile price movements.
Core inflation eliminates products that can have temporary price shocks because these
shocks can diverge from the overall trend of inflation and give a false measure of inflation.
Core Inflation is thought to be an indicator of underlying long-term inflation.

Core Plus
A fixed-income style that permits managers to add instruments with greater risk and
greater potential return, such as high yield, global, and emerging market debt, to their core
portfolios of investment-grade bonds.

Corner
1. The act of securing enough controlling interest or ownership within a single security so
that manipulation of price can occur.
2. A rare situation occurring in commodity markets wherein the quantity of underlying
securities and commodities available are exceeded by the commitments of delivery
quantities on future contracts.

Corner A Market
To acquire enough shares of a particular security in order to manipulate its price.

Corporate Action
Any event that brings material change to a company and affects its stakeholders. This
includes shareholders, both common and preferred, as well as bondholders. These events
are generally approved by the company's board of directors; shareholders are permitted to
vote on some events as well.

Corporate Bond
A debt security issued by a corporation, as opposed to those issued by the government.

Corporate Cannibalism
An act of self-infringement upon market share by corporations through the issuance of
new products.
Also known as market cannibalization.

Corporate Charter
A written document filed with a U.S. state by the founders of a corporation detailing the
major components of a company such as its objectives, its structure and its planned
operations. If the charter is approved by the state government, the company becomes a
legal corporation.
Also referred to as "charter" and "articles of incorporation".

Corporate Citizenship
The extent to which businesses are socially responsible in meeting legal, ethical and
economic responsibilities placed on them by shareholders. The aim it to create higher
standards of living and quality of life in the community in which it operates, while
preserving the profitability of the company for its stakeholders both within and outside the
company.

Corporate Event
Abbreviation of a corporate action will appear near the price line with an arrow indicating
the date it occurred.
•ASE = Date stock switched to listed exchange
•CO = Cash offer
•IPO = Initial public offering
•NEW = New issue and price
•NYSE = Date stock switched to listed exchange
•PM = Proposed merger
•PO = Primary offer
•PPO = Proposed primary offering
•PSO = Proposed secondary offering
•PSOF = Partial spin-off
•REORG = Reorganization
•SDIS = Stock distribution
•SO = Secondary offer
•SOF = Spin-off
•TO = Tender offer
•$DIS = Cash distribution

Corporate Finance
Any financial or monetary activity that deals with a company and its money.

Corporate Governance
The relationship between all the stakeholders in a company. This includes the
shareholders, directors, and management of a company, as defined by the corporate
charter, bylaws, formal policy, and rule of law.
Corporate Inflation-Linked Securities
Corporate debt financing securities that offer their holders protection against fluctuations
in the rate of inflation as measured by the consumer price index (CPI). The yields of these
securities adjust monthly with respect to the current rate of inflation.

Corporate Inversion
The act of a parent company, whose headquarters are located within U.S. borders,
switching registration with their offshore subsidiary in order to take advantage of foreign
tax benefits.

Corporate Kleptocracy
Buzzword that describes the greed of corporate executives who use underhanded tactics
to siphon off wealth at the expense of shareholders. This buzzword is attributed to how ex-
Hollinger CEO, Conrad Black, and his fellow associates allegedly embezzled Hollinger for
hundreds of millions of dollars over a seven-year period.

Corporate Pension Plan


A formal arrangement between a company and its employees - or the employees' union -
that provides funding for the employees' retirement. This pool of funds can be financed in
several ways and will eventually be used to make periodic payments to retired employees.
In most cases, both employer and employees make regular contributions to the plan. In
the past, employers were wholly responsible for contributing to the plan based on an
employee's work, length of employment and position held.

Corporate Resolution
A written statement made by the board of directors detailing which officers are authorized
to act on behalf of the corporation. The corporate resolution will be found in the board
minutes detailing decisions made by the board during the meeting.

Corporate Tax
A levy placed on the profit of a firm different rates are used for different levels of profits

Corporation
A legal entity that is separate and distinct from its owners. Corporations enjoy most of the
rights and responsibilities that an individual possesses that is, a corporation has the right
to enter into contracts, loan and borrow money, sue and be sued, hire employees, own
assets and pay taxes.
The most important aspect of a corporation is limited liability. That is, shareholders have
the right to participate in the profits, through dividends and/or the appreciation of stock,
but are not held personally liable for the company's debts.
Corporations are often called "C Corporations".

Correction
A reverse movement, usually negative, of at least 10% in a stock, bond, commodity or
index. Corrections are generally temporary price declines, interrupting an uptrend in the
market or asset

Correlation
In the world of finance, a statistical measure of how two securities move in relation to each
other. Correlations are used in advanced portfolio management.
Correlation Coefficient
A measure that determines the degree to which two variable's movements are associated.

Correspondent
The name given to a bank, broker, dealer, or financial institution that acts on behalf of
another financial institution with limited or restricted access to the financial markets
where a transaction must occur.

Cost and Freight - CFR


A trade term requiring the seller to arrange for the carriage of goods by sea to a port of
destination, and provide the buyer with the documents necessary to obtain the goods
from the carrier. Under CFR, the seller does not have to procure marine insurance against
the risk of loss or damage to the goods during transit.

Cost Basis
1. The original value of an asset for tax purposes (usually the purchase price), adjusted for
stock splits, dividends and return of capital distributions. This value is used to determine
the capital gain, which is equal to the difference between the asset's cost basis and the
current market value. Also known as "tax basis".
2. The difference between the cash price and the futures price of a given commodity.

Cost Of Capital
The required return necessary to make a capital budgeting project - such as building a
new factory - worthwhile. Cost of capital would include the cost of debt and the cost of
equity.

Cost Of Carry
Costs incurred as a result of an investment position. These costs can include financial
costs, such as the interest costs on bonds, interest expenses on margin accounts and
interest on loans used to purchase a security, and economic costs, such as the
opportunity costs associated with taking the initial position.

Cost Of Debt
The effective rate that a company pays on its current debt. This can be measured in either
before- or after-tax returns however, because interest expense is deductible, the after-tax
cost is seen most often. This is one part of the company's capital structure, which also
includes the cost of equity.

Cost Of Equity
In financial theory, the return that stockholders require for a company. The traditional
formula is the dividend capitalization model:
A firm's cost of equity represents the compensation that the market demands in exchange
for owning the asset and bearing the risk of ownership.

Cost Of Funds
The interest rate paid on an outstanding loan
Cost Of Goods Sold - COGS
A figure reflecting the cost of the product or good that a company sells to generate
revenue, appearing on the income statement as an expense unto itself. Also referred to as
"cost of sales".

Cost Of Tender
The total charges associated with the delivery and certification of commodities underlying
a futures contract.

Cost Per Click - CPC


A web site which uses CPCs would bill by the number of times a visitor clicks on a banner,
instead of by the number of impressions.

Cost Per Thousand - CPM


Web sites that sell advertising will guarantee an advertiser a certain number of
impressions quoted at X dollars per CPM.

Cost Synergy
In the context of mergers, cost synergy is the savings in operating costs expected after
two companies, who compliment each other's strengths, join.

Cost, Insurance and Freight - CIF


A trade term requiring the seller to arrange for the carriage of goods by sea to a port of
destination, and provide the buyer with the documents necessary to obtain the goods
from the carrier.

Cost-Push Inflation
A phenomenon where general level of prices rise (inflation) due to increases in the cost of
wages and raw materials.

Council of Petroleum Accountants Societies - COPAS


A council created to discuss and solve the difficulties inherent in accounting in the oil and
gas industry.

Count
A trend analysis using point and figure charts to estimate the vertical movement of prices

Counter-Cyclical Stock
A stock whose price will tend to move in the opposite direction of the general economic
trend.

Counterparty Risk
The risk to each party of a contract that the counterparty will not live up to its contractual
obligations.

Counterpurchase
An exchange of goods between two parties that, by means of two contracts, agree to act
as purchaser and supplier to each other and to purchase all goods in cash.

Countertrade
A trade between two countries by which goods are exchanged for other goods rather than
for hard currency

Countertrend Strategy
A trading strategy where an investor attempts to make small gains through a series of
trades against the current trend. It is also known as "counter-trend trading".

Country Basket
A derivative security designed to mimic the major index of an international exchange

Country Risk
The risk that a country will not be able to honor its financial commitments.

Coupon
The interest rate stated on a bond when it's issued. The coupon is typically paid
semiannually.
This is also referred to as the "coupon rate" or "coupon percent rate".

Coupon Bond
A debt obligation with coupons attached that represent semiannual interest payments.
Also known as a "bearer bond".

Coupon Equivalent Rate - CER


A alternative calculation of coupon rate used to compare zero-coupon and coupon fixed-
income securities.

Coupon Equivalent Yield - CEY


A method of calculation used to calculate the yield on bonds with maturities of less than
one year and which normally sell at a discount and do not pay coupons.

Coupon Pass
The purchase of treasury notes or bonds from dealers, by the Federal Reserve.

Covariance
A measure of the degree to which returns on two risky assets move in tandem. A positive
covariance means that asset returns move together. A negative covariance means returns
vary inversely.
One method of calculating covariance is by looking at return surprises (deviations from
expected return) in each scenario. Another method is to multiply correlation between the
two variables by the standard deviation of each variable.
Covenant
A promise in an indenture, or any other formal debt agreement, that certain activities will
or will not be carried out.

Cover
The act of completing a transaction in order to remove any obligations.

Coverage Initiated
When a brokerage or analyst issues his/her first rating on a particular stock.

Coverage Ratio
A type of accounting ratio that helps measure a company's ability to meet its obligations
satisfactorily.

Coverdell Education Savings Account - ESA


A tax-deferred account created by the U.S. government to assist families in funding
educational expenses.

Covered Call
An options strategy whereby an investor holds a long position in an asset and writes
(sells) call options on that same asset in an attempt to generate increased income from the
asset. This is often employed when an investor has a short-term neutral view on the asset
and for this reason hold the asset long and simultaneously have a short position via the
option to generate income from the option premium.
This is also known as a "buy-write".

Covered Security
A class of securities, created by the NSIMA, that enjoys federally imposed exemptions
from state restrictions and regulations. Most stocks trading in the US are covered
securities

Covered Warrant
A type of warrant that allows the holder to buy or sell a specific amount of equities,
currency or other financial instruments from the issuer, usually a bank or a similar
financial institution, at a specific price and time.

Crack
A trading strategy used in energy futures to establish a refining margin.

Crack Spread
In commodity markets, the spread created by purchasing oil futures and offsetting the
position by selling gasoline and heating oil futures. This investment alignment allows the
investor to hedge against risk due to the offsetting nature of the securities.

Crammed Down
1. A situation in which venture capitalists refuse to invest in a new project unless the
preceding investors of the company lower the value of their original investment.
2. A bankruptcy procedure that allows a bankruptcy court to initiate a reorganization plan
for a company despite objections from creditors. The creditors will still maintain collateral
on the company as long as the firm offers repayment of the "secured portion" or fair
market value of the collateral in their repayment plan.

Crash
A major decline in a financial market.

Crawling Peg
A system of exchange rate adjustment in which a currency with a fixed exchange rate is
allowed to fluctuate within a band of rates. The par value of the stated currency is also
adjusted frequently due to market factors such as inflation. This gradual shift of the
currency's par value is done as an alternative to a sudden and significant devaluation of
the currency.

CRC
In currencies, this is the abbreviation for the Costa Rican Colon

Creation Unit
A set of shares or securities that makes up one unit of the fund held by the trust that
underlies an exchange-traded fund (ETF). One creation unit is the denomination of
underlying assets that can be redeemed for a certain number of ETF shares.

Creative Destruction
A term coined in 1942 by Joseph Schumpeter in his work, Capitalism, Socialism and
Democracy, to denote a "process of industrial mutation that incessantly revolutionizes the
economic structure from within, incessantly destroying the old one, incessantly creating a
new one."

Credit
1. A contractual agreement in which a borrower receives something of value now, with the
agreement to repay the lender at some date in the future. Also, the borrowing capacity of
an individual or company.
2. An accounting entry system that either decreases assets or increases liabilities.

Credit Balance
In a margin account, the amount of funds deposited in the customer's account following
the successful execution of a short sale order. The credit balance amount includes both
the proceeds of the short sale itself and the specified margin amount the customer is
required to deposit under Regulation T.

Credit Bureau
An agency that researches and collects individual credit information and sells it for a fee
to creditors so they can make a decision on granting loans. Typical clients include banks,
mortgage lenders, credit card companies and other financing companies. Also commonly
referred to as consumer reporting agency or credit reporting agency.
Credit Card
A card allowing someone to make a purchase on borrowed money. Credit cards are one of
the most popular forms of payment for consumer goods and services in the United States.

Credit Cliff
A slang term referring to the compounding of a company's credit deterioration caused by
provisions such as financial covenants, or events that trigger a change in the company's
credit rating. These can put pressure on the company's liquidity or its business to a
material extent.

Credit Crunch
An economic condition whereby investment capital is difficult to obtain. Banks and
investors become weary of lending funds to corporations thereby driving up the price of
debt products for borrowers.

Credit Default Swap


A swap designed to transfer the credit exposure of fixed income products between parties.

Credit Derivative
Privately held negotiable bilateral contracts that allow users to manage their exposure to
credit risk. Credit derivatives are financial assets like forward contracts, swaps, and
options for which the price is driven by the credit risk of economic agents (private
investors or governments).

Credit Enhancement
A method whereby a company attempts to improve its debt or credit worthiness.

Credit Linked Note - CLN


A security with an embedded credit default swap allowing the issuer to transfer a specific
credit risk to credit investors.
CLNs are created through a Special Purpose Company (SPC), or trust, which is
collateralized with AAA-rated securities. Investors buy securities from a trust that pays a
fixed or floating coupon during the life of the note. At maturity, the investors receive par
unless the referenced credit defaults or declares bankruptcy, in which case they receive
an amount equal to the recovery rate. The trust enters into a default swap with a deal
arranger. In case of default, the trust pays the dealer par minus the recovery rate in
exchange for an annual fee which is passed on to the investors in the form of a higher
yield on the notes.

Credit Netting
A system whereby the number of credit checks on financial transactions is reduced by
entering into agreements that simply net all transactions. These agreements are made
between large banks and other financial institutions and place all current and future
transactions into one agreement, removing the need for credit checks on each transaction.

Credit Rating
An assessment of the credit worthiness of individuals and corporations. It is based upon
the history of borrowing and repayment, as well as the availability of assets and extent of
liabilities

Credit Report
A detailed report of an individual's credit history prepared by a credit bureau and used by
a lender to in determining a loan applicant's creditworthiness, including:
1. Personal data (current and previous addresses, social security number, employment
history)
2. Summary of credit history (number and type of accounts that are past-due or in good
standing)
3. Detailed account information
4. Inquires into applicant's credit history (number and type of inquiries into applicant's
credit report)
5. Details of any accounts turned over to credit agency (such as information about liens,
wages garnishments via federal, state or county records)
6. Information on how to dispute any of the above information.

Credit Risk
The possibility of a loss occurring due to the failure to meet contractual debt obligations.

Credit Shelter Trust - CST


A type of trust that allows a married investor to avoid estate taxes when passing assets on
to heirs. The trust is structured so that, upon the death of the investor, the assets
specified in the trust agreement (up to a specified maximum dollar value) are transferred
to the beneficiaries named in the trust (normally the couple's children). However, a key
benefit to this type of trust is that the spouse maintains rights to the trust assets and the
income they generate during the remainder of his or her lifetime.
This type of trust is also referred to as an "AB Trust".

Credit Spread
1. The spread between Treasury securities and non-Treasury securities that are identical
in all respects except for quality rating.
2. An options strategy where a high premium option is sold and a low premium option is
bought on the same underlying security.

Credit Union
Member-owned financial co-operative. These institutions are created and operated by its
members and profits are shared amongst the owners

Creditor
An entity (person or institution) that extends credit by giving another entity permission to
borrow money if it is paid back at a later date. Creditors can be classified as either
"personal" or "real". Those people who loan money to friends or family are personal
creditors. Real creditors (i.e. a bank or finance company) have legal contracts with the
borrower granting the lender the right to claim any of the debtor's real assets (e.g. real
estate or car) if he or she fails to pay back the loan.

Credo
A Latin word which means "a set of fundamental beliefs or a guiding principle.” For a
company, a credo is like a mission statement.

Critical Mass
A very important or crucial stage in a company's development.

Crop Year
A time period for a agricultural commodity it is the duration from one years harvest to the
next.

Cross
When a broker receives a buy and sell order for the same stock at the same price, and
subsequently makes a simultaneous trade between two separate customers.

Cross Currency
A pair of currencies traded in forex that does not include the U.S. dollar. One foreign
currency is traded for another without having to first exchange the currencies into
American dollars.

Cross Default
A provisions in a bond indenture or loan agreement that puts the borrower in default if the
borrower defaults on another obligation.
Also known as "cross acceleration".

Cross Hedge
The act of hedging ones position by taking an offsetting position in another good with
similar price movements.

Cross Holding
When listed corporations own securities issued by other listed corporations.

Cross Margining
An offsetting position where market participants are able to transfer excess margin from
one account to another account whose margin is under the required maintenance margin.

Cross Trade
A practice outlawed on most major stock exchanges in which buy and sell orders for the
same stock are offset without recording the trade on the exchange.

Cross-Correlation
A statistical measure timing the movements and proximity of alignment between two
different information sets of a series of information.

Crossed Market
A situation arising when the bid price of a security exceeds the ask price.
Crossover
The point on a stock chart when a security and an indicator intersect. Crossovers are used
by technical analysts to aid in forecasting the future movements in the price of a stock. In
most technical analysis models, a crossover is a signal to either buy or sell.
Below we have a stock that falls below its 20-day moving average - a bearish sign.

Crossover Fund
An investment fund that invests in both public and private equity.

Crossover Investor
An investor who invests prior to, during and following a company's initial public offering.

Crossover Refunded
The revenue stream pledged to secure "securities being refunded" is being used to payoff
debt on the refunded securities until they mature.

Crowding Out Effect


An economic theory explaining an increase in interest rates due to rising government
borrowing in the money market.

Crown Corporation
Any corporation that is established and regulated by a country's government.

Crown Jewels
The most valuable unit of a corporation because of profitability, asset value, future
prospects, etc.

Crush Spread
A trading strategy used in the soybean futures market to establish a processing margin.

Crystallization
The act of selling and buying stocks almost instantaneously in order to increase or
decrease book value. This is a routine method used by many investors and companies to
change book values without changing beneficial ownership.

Cum Dividend
When a buyer of a security is entitled to receive a dividend that has been declared, but not
paid.

Cum Rights
A situation in which the shares held by holders of record are qualified for a rights offering
declared by a company
Cum Warrant
A condition in which the buyer of a security is entitled to a warrant that has been declared,
but not distributed.

Cumulative Dividend
A limitation placed upon corporations ensuring the payment of preferred dividends before
distributions are made to common shareholders.

Cumulative Volume Index - CVI


A momentum indicator that gauges the movement of funds into and out of the entire stock
market by adding the difference between advancing and declining stocks to a running
total.

Cumulative Voting
The procedure of voting for a company's directors each shareholder is entitled one vote
per share times the number of directors to be elected.
This is sometimes known as 'proportional voting'.

CUP
In currencies, this is the abbreviation for the Cuban Peso.

Cup with handle


Technical charting pattern coined by IBD founder William J. O'Neil. It is one of three
positive chart patterns to look for when doing technical analysis of a stock. It is named
such because it resembles the outline of a coffee cup with a handle.
The pattern can last from seven weeks to as long as a year, but most are three to six
months. The decline is usually 12% to 35% from the stock's high. The handle area should
slant lower as the last remaining sellers exit the stock. The buy point is 10 cents above the
high point of the handle.

Curb Trading
Trading that occurs outside of general market regulations, commonly through computers
or telephones after the official exchanges have closed.

Currency
A generally accepted form of money, including coins and paper notes, which is issued by
a government and circulated within an economy. Used as a medium of exchange for
goods and services, currency is the basis for trade.

Currency Basket
A selected group of currencies whose weighted average is used as a measure of the value
or the amount of an obligation. A currency basket functions as a benchmark for regional
currency movements - its composition and weighting depends on its purpose.

Currency Carry Trade


A strategy in which an investor sells a certain currency with a relatively low interest rate
and uses the funds to purchase a different currency yielding a higher interest rate. A
trader using this strategy attempts to capture the difference between the rates - which can
often be substantial, depending on the amount of leverage the investor chooses to use.

Currency Convertibility
The ease with which a country's currency can be converted into gold or another currency.
Convertibility is extremely important for international commerce. When a currency in
inconvertible, it poses a risk and barrier to trade with foreigners who have no need for the
domestic currency.

Currency Forward
A forward contract in the forex market that locks in the price at which an entity can buy or
sell a currency on a future date. Also known as "outright forward currency transaction",
"forward outright" or "FX forward".

Currency Futures
A transferable futures contract that specifies the price at which a specified currency can
be bought or sold at a future date.

Currency Option
A contract that grants the holder the right, but not the obligation, to buy or sell currency at
a specified exchange rate during a specified period of time. For this right, a premium is
paid to the broker, which will vary depending on the number of contracts purchased.
Currency options are one of the best ways for corporations or individuals to hedge against
adverse movements in exchange rates

Currency Overlay
The outsourcing of currency risk management to a specialist firm, known as the overlay
manager. This is used in international investment portfolios to separate the management
of currency risk from the asset allocation and security selection decisions of the investor's
money managers.

Currency Pair
The quotation and pricing structure of the currencies traded in the forex market: the value
of a currency is determined by its comparison to another currency. The first currency of a
currency pair is called the "base currency", and the second currency is called the "quote
currency". The currency pair shows how much of the quote currency is needed to
purchase one unit of the base currency.

Currency Risk
A form of risk that arises from the change in price of one currency against another.
Whenever investors or companies have assets or business operations across national
borders, they face currency risk if their positions are not hedged.

Currency Swap
A swap that involves the exchange of principal and interest in one currency for the same
in another currency. It is considered to be a foreign exchange transaction and is not
required by law to be shown on the balance sheet.

Current Account
The difference between a nation's total exports of goods, services and transfers, and its
total imports of them. Current account balance calculations exclude transactions in
financial assets and liabilities.

Current Account Deficit


Occurs when a country's total imports of goods, services and transfers is greater than the
country's total export of goods, services and transfers. This situation makes a country a
net debtor to the rest of the world

Current Assets
1. A balance sheet account that represents the value of all assets that are reasonably
expected to be converted into cash within one year in the normal course of business.
Current assets include cash, accounts receivable, inventory, marketable securities,
prepaid expenses and other liquid assets that can be readily converted to cash.
2. In personal finance, current assets are all assets that a person can readily convert to
cash to pay outstanding debts and cover liabilities without having to sell fixed assets.
In the United Kingdom, current assets are also known as "current accounts".

Current Cost of Supplies - CCS


This refers to the net income of a company after taking into account the increase (or
decrease) in expenses over the reporting period. It is typically used by commodity reliant
businesses.

Current Delivery
A type of futures contract that requires the delivery of the underlying commodity in the
current or following month before other futures contracts of the same commodity with
other delivery dates.

Current Exposure Method


A method of measuring the cost of default within a swap agreement.

Current Income
The investment objective for a portfolio of securities to achieve a steady income.

Current Liabilities
A company's debts or obligations that are due within one year. Current liabilities appear
on the company's balance sheet and include short term debt, accounts payable, accrued
liabilities and other debts.

Current Market Value - CMV


The resale valuation attached to a security held long in an investor's margin account. The
current market value is usually taken as the closing price for listed securities or the bid
price offered for over-the-counter (OTC) securities.
Current Maturity
The interval between the present date and the maturity date of a bond.

Current Portion Of Long-Term Debt


A portion of the balance sheet that represents the total amount of long-term debt that must
be paid within the next year. The balance sheet has a liability section, which is broken
down into long-term and current debt. When a debt payment is set to be made in longer
than a year's time, it is recorded in the long-term debt section, and when that payment
becomes due within a year, it moves to the "current portion of long-term debt" section

Current Price
The amount of money a security most recently traded for.

Current Ratio
A liquidity ratio that measures a company's ability to pay short-term obligations.
Calculated as:
Also known as "liquidity ratio", "cash asset ratio" and "cash ratio".

Current Yield
Annual income (interest or dividends) divided by the current price of the security. This
measure looks at the current price of a bond instead of its face value and represents the
return an investor would expect if he or she purchased the bond and held it for a year.
This measure is not an accurate reflection of the actual return that an investor will receive
in all cases because bond and stock prices are constantly changing due to market factors.
Also referred to as "bond yield", or "dividend yield" for stocks.

Curtailment
The act of contracting or reducing operations of a company in the hope of bringing it
financial or operational stability. This management technique is often used when a
company has grown too fast and is unable to effectively manage its operations

Cushion Bond
A type of callable bond that sells at a premium because the issued coupon payments are
above market interest rates.

CUSIP Number
An identification number assigned to all stocks and registered bonds. The Committee on
Uniform Securities Identification Procedures (CUSIP) oversees the entire CUSIP system.

Custodial Account
1. An account created at a bank, brokerage firm or mutual fund company that is managed
by an adult for a minor that is under the age of 18 to 21 (depending on state legislation).
2. A retirement account managed for eligible employees by a custodian.
Custodial Care
Non-medical care that helps individuals with his or her activities of daily living,
preparation of special diets and self-administration of medication not requiring constant
attention of medical personnel. Providers of custodial care are not required to undergo
medical training.

Custodian
A financial institution that has the legal responsibility for a customer's securities. This
implies management as well as safekeeping.
Also known as "custody".

Custody-Only Trading
A system in which shares must be registered to the holder by name and can only be
traded in physical form.

Customer Type Indicator Codes - CTI


A system that uses four different codes to indicate the types of transactions that, on
futures exchanges, are made by brokers on behalf of different clients and themselves.

Cutoff Point
The point at which an investor decides whether or not a particular security is worth
purchasing. The cutoff point is very subjective and will be based on the personal
characteristics of the individual investor. Some examples of personal characteristics that
may determine the cutoff point include the investor's required rate of return and his or her
risk aversion level.

Cutting a Melon
A declaration of a large stock or cash dividend that is in addition to the regular
distribution.

CVE
In currencies, this is the abbreviation for the Cape Verde Escudo.

Cyber Monday
An expression used in online retailing to describe the Monday following U.S. Thanksgiving
weekend. Cyber Monday is generally thought of as the start of the online holiday shopping
season. Similar to Black Friday, (the unofficial start of the holiday season for offline
businesses), online retailers will usually offer special promotions on this day.
Also known as "Black Monday".

Cyclical Industry
A term describing an industry that is sensitive to the business cycle and price changes.
Many cyclical industries produce durable goods such as raw materials and heavy
equipment.

Cyclical Stock
A stock that rises quickly when economic growth is strong and falls rapidly when growth
is slowing down

Cyclical Unemployment
Unemployment resulting from changes in the business cycle.

Cylinder
A term used to describe a transaction, involving two derivatives, where there is no initial
cost bourne by the investor when entering into the position.

CYP
In currencies, this is the abbreviation for the Cyprus Pound.

CZK
In currencies, this is the abbreviation for the Czech Koruna

D
A Nasdaq stock symbol specifying that the stock is a new issue.
Daily Cut-Off
In the forex market, a particular point in time specified by a forex dealer to stand as the
end of the current trading day and the beginning of a new trading day. This is done for
primarily administrative and logistical reasons, because although the forex market trades
24 hours a day, the market and its intermediaries require a specified beginning and end to
each trading day in order to record trade dates and define settlement periods.

Daily Graphs (and Daily Graphs Online)


Print and online (www.dailygraphs.com) charting services that provide extensive
fundamental and technical indicators on thousands of stocks for the individual investor.

Daisy Chain
A group of unscrupulous investors who, practicing a kind of fictitious trading or wash
selling, artificially inflate the price of a security so that they sell it at a profit.

Dalal Street
A term that refers to the Bombay Stock Exchange, the major stock exchange in India. The
street is home not only the Bombay Stock Exchange but also a large number of other
financial institutions.

Dark Cloud Cover


In candlestick charting, a pattern where a black candlestick follows a long white
candlestick. It can be an indication of a future bearish trend.

Data Mining
A type of database application that looks for hidden patterns in large groups of data.

Date Certain
A term identifying the date on/by which the specified actions of a contract can be
reasonably completed. This date is important, as it is generally considered legally binding.

Date of Chart
Date on chart reflects the most recent market activiity. It is displayed in the lower right
corner of the chart.

Date Scale
Calendar information used to indicate the date of price and volume data on a chart. The
vertical line to the immediate left of the month or day indicates its precise reference point
on the chart grid.
To determine an exact date on a chart, utilize the Track Price tool by clicking the right-
hand mouse button while the cursor is over the point of interest

Dawn Raid
The action of a firm or investor buying a substantial amount of shares in a company
(making it a target firm) first thing in the morning when the stock markets open. This is
done by a stock broker acting on behalf of a company. Because the bidding company
builds a substantial stake in its target at the prevailing stock market price, the takeover
costs are likely to be significantly lower than they would be had the acquiring company
first made a formal takeover bid.

DAX
An index of 30 top German Stocks.

Day Order
Any order to buy or sell a security that automatically expires if not executed on the day the
order is placed.

Day Trader
A stock trader who holds positions for a very short time (from minutes to hours) and
makes numerous trades each day. Most trades are entered and closed out within the same
day.

Day-Count Convention
A system used to determine the number of days between two coupon dates, which is
important in calculating accrued interest and present value when the next coupon
payment is less than a full coupon period away. Each bond market has its own day-count
convention.

Days Payable Outstanding - DPO


A company's average payable period. Calculated as:
Notice that the formula may also be written as: accounts payable / (cost of sales/number
of days).

Days Sales Of Inventory - DSI


A financial measure of a company's performance that gives investors an idea of how long
it takes a company to turn its raw materials into sales. The lower (shorter) the DSI the
better, but it is important to note that the typical DSI will vary from one industry to another.
Here is how the DSI is calculated:

Days To Cover
A measurement of a company's issued shares that are currently shorted, expressed as the
number of days required to close out all of the short positions. For example, if a company
has 10 million shares outstanding and 2 million shares are currently short sold, the shares
have a days to cover rate of 2 (2M/10M).
Also referred to as the "short-interest ratio".

De-merger
A corporate strategy to sell off subsidiaries or divisions of a company.
Dead Cat Bounce
A temporary recovery from a prolonged decline or bear market, after which the market
continues to fall.

Dead Hand Provision


A stipulation on a defense mechanism or poison pill used by companies in order to
protect against a merger or takeover by another company. The dead hand provision
prevents the removal of the poison pill even if shareholders of the target company favor
the takeover.

Deadweight Loss
The costs to society created by an inefficiency in the market.

Deal Flow
The rate at which new proposals are flowing to the underwriters of an investment bank.

Dealer
1. An individual or firm willing to buy or sell securities for their own account.
2. One who purchases goods or services for resale to consumers.

Dealer Market
A market where dealers are assigned for specific securities. The dealers create liquid
markets by purchasing and selling against personal inventory.

Dealer Option
An option created upon physical commodities, outside of regular exchange regulations.
Dear Money
A situation in which money or loans are very difficult to obtain in a given country. If you do
have the opportunity to secure a loan, then interest rates are usually extremely high. Also
known as "tight money".

Death Benefit
The amount on a life insurance policy or pension that is payable to the beneficiary when
the annuitant passes away.
Also known as "survivor benefit".

Death Cross
A crossover resulting from a security's long-term moving average breaking above its
short-term moving average or support level.

Death Put
An optional redemption feature on a debt instrument allowing the beneficiary of the estate
of the deceased to put (sell) the bond (back to the issuer) in the event of the beneficiary's
death or legal incapacitation. Also known as a "survivor's option".

Death Spiral
A type of loan investors lend to a company in exchange for convertible debt, which, like a
convertible bond, typically has provisions that allow the investors to convert the bonds
into stock at below-market prices. This can lead to the original shareholders losing control
of the company.

Debasement
1. To lower the value, quality or status of something or someone.
2. To lower the value (of a coin) by adding metal of inferior value.

Debenture
A type of debt instrument that is not secured by physical asset or collateral. Debentures
are backed only by the general creditworthiness and reputation of the issuer. Both
corporations and governments frequently issue this type of bond in order to secure
capital. Like other types of bonds, debentures are documented in an indenture.

Debit
An accounting entry which results in either an increase in assets or a decrease in
liabilities on a company's balance sheet or in your bank account.

Debit Balance
In a margin account, money owed by the customer to the broker for funds advanced to
purchase securities. The debit balance is the amount of funds the customer must put into
his or her margin account, following the successful execution of a security purchase
order, in order to properly settle the transaction.

Debit Card
An electronic card issued by a bank which allows bank clients access to their account to
withdraw cash or pay for goods and services. This removes the need for bank clients to go
to the bank to remove cash from their account as they can now just go to an ATM or pay
electronically at merchant locations. This type of card, as a form of payment, also removes
the need for checks as the debit card immediately transfers money from the client's
account to the business account.

Debt
Expressed in percentage, this figure is based on fiscal year-end values of total debt to
shareholder's equity.

Debt Assignment
A transfer of debt from a creditor to a third party.

Debt Bomb
This occurs when a major financial institution, such as a multinational bank, defaults on
its obligations that causes disruption not only in the financial system of the institution's
home country, but also in the global financial system as a whole.

Debt Consolidation
The action of combining several loans or liabilities into one loan. Put another way, debt
consolidation is the process of taking out a new loan to pay off a number of other debts.
Most people who consolidate their debt are usually doing it to attain a lower interest rate,
or the simplicity of a single loan. Also known as a "consolidation loan".

Debt Deflation
A situation in which the collateral used to secure a loan, or another form of debt,
decreases in value. This can be detrimental to the borrower, as it may lead to a
restructuring of the loan agreement or even a loan recall.
Also known as "worst deflation" and "collateral deflation".

Debt Exchangeable for Common Stock - DECS


A debt instrument that provides the holder with coupon payments in addition to an
embedded short put option and a long call on the issuing company's stock.
Debt Financing
When a firm raises money for working capital or capital expenditures by selling bonds,
bills, or notes to individual and/or institutional investors. In return for lending the money,
the individuals or institutions become creditors and receive a promise that the principal
and interest on the debt will be repaid.

Debt Instrument
A paper or electronic obligation that enables the issuing party to raise funds by promising
to repay a lender in accordance with terms of a contract. Types of debt instruments
include notes, bonds, certificates, mortgages, leases or other agreements between a
lender and a borrower.

Debt Overhang
A situation where the debt stock of a country exceeds the country's future capacity to
repay it.

Debt Restructuring
A method used by companies with outstanding debt obligations to alter the terms of the
debt agreements in order to achieve some advantage.

Debt Security
A security representing a loan given by an investor to an issuer. In return for the loan, the
issuer promises to pay interest and to repay the debt on a specified date.

Debt Service
Cash required over a given period for the repayment of interest and principal on a debt.

Debt-Service Coverage Ratio - DSCR


1. In corporate finance, it is the amount of cash flow available to meet annual interest and
principal payments on debt, including sinking fund payments.
2. In government finance, it is the amount of export earnings needed to meet annual
interest and principal payments on a country's external debts.
3. In personal finance, it is a ratio used by bank loan officers in determining income
property loans. This ratio should ideally be over 1. That would mean the property is
generating enough income to pay its debt obligations.
In general, it is calculated by:

Debt-To-Capital Ratio
A measurement of a company's financial leverage, calculated as long-term debt divided by
long-term capital. Total debt includes all short-term and long-term obligations. Total
capital includes all common stock, preferred stock and long-term debt.

Debt-To-Income Ratio - DTI


A personal-finance measure that compares an individual's debt payments to the income
he or she generates. This measure is important in the lending industry as it gives lenders
an idea of how likely they will receive payments from the borrower.

Debt/Equity Ratio
A measure of a company's financial leverage calculated by dividing long-term debt by
stockholder equity. It indicates what proportion of equity and debt the company is using to
finance its assets.
Note: Sometimes only interest-bearing long-term debt is used instead of total liabilities in
the calculation.
Debt-To-GDP Ratio
A measure of a country's federal debt in relation to its gross domestic product (GDP). By
comparing what a country owes and what it produces, the debt-to-GDP ratio indicates the
country's ability to pay back its debt. The ratio is a coverage ratio on a national level.

Debt/Equity Swap
A refinancing deal in which a debt holder gets an equity position in exchange for
cancellation of the debt.

Debtor in Possession - DIP


A company that continues to operate while under the Chapter 11 bankruptcy process.

Debtor-in-Possession Financing - DIP Financing


Financing arranged by a company while under the Chapter 11 bankruptcy process. DIP
financing is unique from other financing methods in that it usually has priority over
existing debt, equity and other claims.

Deceased Alert
A notification on a person's credit report that alerts credit agencies that the person is
deceased and should not be issued credit in the future. Upon a person's death, a family
member or friend must request the credit reporting agencies to send out the deceased
alert. The purpose of the deceased alert is to prevent identity thieves from stealing and
abusing the name of the deceased person.

Decimalization
The process of changing the prices that securities trade at from fractions to decimals.

Deck
A term used to refer to the open orders held by floor brokers on futures exchanges.

Declaration Date
1. The date on which the next dividend payment is announced by the directors of a
company. This statement includes the dividend's size, ex-dividend date and payment date.
It is also referred to as the "announcement date".
2. The last day on which the holder of an option must indicate whether they will exercise
the option. Also known as the "expiration date".

Declining Balance Method


A common depreciation-calculation system that involves applying the depreciation rate
against the non-depreciated balance. Instead of spreading the cost of the asset evenly
over its life, this system expenses the asset at a constant rate, which results in declining
depreciation charges each successive period.

Declining Industry
An industry where growth is either negative or is not growing at the broader rate of
economic growth. There are many reasons for a declining industry: consumer demand
may be steadily evaporating, the depletion of a natural resource may be occurring, or
there may be the emergent substitutes because of technological innovation.

Decoupling
The occurrence of returns on asset classes diverging from their normal pattern of
correlation.
Dedicated Portfolio
A passive form of portfolio management that involves the matching of future cash flows
with future liabilities.

Dedicated Short Bias


A hedge fund strategy with which the fund manager takes more short positions than long
positions.

Deductible
1. The amount you have to pay out-of-pocket for expenses before the insurance company
will cover the remaining costs.
2. An amount subtracted from an individual's adjusted gross income to reduce the amount
of taxable income.
Also known as "tax deductible".

Deduction
Any item or expenditure subtracted from gross income to reduce the amount of income
subject to tax.
Also referred to as "allowable deduction".

Deed
A legal document that grants the bearer a right or privilege, provided that he or she meets
a number of conditions. In order to receive the privilege - usually ownership, the bearer
must be able to do so without causing others undue hardship. A person who poses a risk
to society as a result of holding a deed may be restricted in his or her ability to use the
property.
Deeds are most known for being used to transfer the ownership of automobiles or land
between two parties.

Deep In The Money


An option with an exercise price, or strike price, significantly below (for a call option) or
above (for a put option) the market price of the underlying asset. Significantly,
below/above is considered one strike price below/above the market price of the underlying
asset. For example, if the current price of the underlying stock was $10, a call option with
a strike price of $5 would be considered deep in the money.

Deep-Discount Bond
1. A bond that sells at a significant discount from par value.
2. A bond that is selling at a discount from par value and has a coupon rate significantly
less than the prevailing rates of fixed-income securities with a similar risk profile.

Deer Market
A flat market. Neither a bull or bear market, a deer market is characterized by low activity,
with timid investors waiting for a sign of which way the market is going to end up moving.

Default
1. The failure to promptly pay interest or principal when due.
2. The failure to perform on a futures contract as required by an exchange.

Default Premium
The additional amount a borrower must pay to compensate the lender for assuming
default risk.

Default Risk
The risk that companies or individuals will be unable to pay the contractual interest or
principal on their debt obligations.
Defeasance
A provision that voids a bond or loan when the borrower sets aside cash or bonds
sufficient enough to service the borrower's debt.
Also referred to as "defease."

Debtor
A company or individual who owes money. If the debt is in the form of a loan from a
financial institution, the debtor is referred to as a borrower. If the debt is in the form of
securities, such as bonds, the debtor is referred to as an issuer.

Defensive Buy
An investment that is an attractive buy because it is low risk, not because of its return
potential.

Defensive Company
A company whose sales and earnings remain relatively stable during both economic
upturns and downturns.

Defensive Investment Strategy


A method of portfolio allocation and management aimed at minimizing the risk of losing
principal. Defensive investors place a high percentage of their investable assets in bonds,
cash equivalents, and stocks that are less volatile than average.

Defensive Stock
A stock that provides a constant dividend and stable earnings regardless of the state of
the overall stock market.
This is not to be confused with a "defense stock", which refers to stock in companies
which manufacture things like weapons, ammunition and fighter jets.

Defensive Stocks/Industry Groups/Sectors


Usually considered more stable and relatively safer by most investors. They include
utilities, tobacco, food, soap, soft drinks, supermarkets, etc. They represent industries of
staple goods and repeat purchase items.

Deferment Period
The period after the issue of callable security during which it cannot be called by the
issuer.

Defensive Acquisition
The act of firms acquiring other firms and assets as a defense against market downturns
or possible takeovers. A defensive acquisition contrasts with the normal impetus for an
acquisition, which is usually increased market share or revenue.
Deferred Account
An account that postpones tax liabilities until a later date. Deferred accounts are usually retirement
accounts

Deferred Acquisition Costs - DAC


Typically used in the insurance industry, this is when a company defers the sales costs that are
associated with acquiring a new customer over the term of the insurance contract.

Deferred Annuity
A type of annuity contract that delays payments of income, installments or a lump sum until the
investor elects to receive them. This type of annuity has two main phases, the savings phase in
which you invest money into the account, and the income phase in which the plan is converted into
an annuity and payments are received.
A deferred annuity can be either variable or fixed.

Deferred Charge
A prepaid expense that is recognized on the balance sheet as an asset until it is used.

Deferred Income Tax


A liability that results from income already earned, is recognized for accounting but not tax
purposes and is recorded on the balance sheet.

Deferred Interest Bond


A debt instrument that pays no interest until a date specified in the future.

Deferred Payment Option


An option with all the characteristics of an American vanilla option, with one exception: payment is
deferred until the original expiration date.

Deferred Profit Sharing Plan - DPSP


An employer-sponsored Canadian profit sharing plan that is registered with the Canadian Revenue
Agency. On a periodic basis, the employer shares the profits made from the business with all
employees or a designated group of employees. Employees receiving a share of the profits paid out
by the employer do not have to pay federal taxes on the money received from the DPSP until it is
withdrawn.

Deferred Revenue
A liability account used to collect deposits and other cash receipts prior to the completion of the
sale.

Deferred Share
1. A share that does not have any rights to the assets of a company undergoing bankruptcy until all
common and preferred shareholders are paid.
2. A method of stock payment to directors and executives of a company through the deposit of
shares into a locked account. The value of these shares fluctuate with the market and cannot be
accessed by the beneficiary for the purpose of liquidation until they are no longer employees of the
company.
3. A share generally issued to company founders that restricts their receipt of dividends until
dividends have been distributed to all other classes of shareholders

Deficit
A situation in which liabilities exceed assets, expenditures exceed income, imports exceed exports,
or losses exceed profits.

Defined-Benefit Plan
An employer-sponsored retirement plan for which retirement benefits are based on a formula
indicating the exact benefit that one can expect upon retiring. Investment risk and portfolio
management are entirely under the control of the company. There are restrictions on when and how
you can withdraw these funds without penalties.

Defined-Contribution Plan
A retirement plan wherein a certain amount or percentage of money is set aside each year for the
benefit of the employee. There are restrictions as to when and how you can withdraw these funds
without penalties.

Deflation
A general decline in prices, often caused by a reduction in the supply of money or credit. Deflation
can be caused also by a decrease in government, personal or investment spending. The opposite of
inflation, deflation has the side effect of increased unemployment since there is a lower level of
demand in the economy, which can lead to an economic depression.

Defunct
The condition of a company, whether publicly traded or private, that has gone bankrupt and ceased
to exist. If the company was publicly traded, it will be delisted from the exchange where it was listed,
and its stock will be worth nothing.
This term also applies to currencies that are no longer in circulation

Degearing
The action of a company altering its capital structure by replacing long-term debt with equity,
thereby easing the burden of interest payments and also increasing management's flexibility

Deleted
A security that is no longer included on a specified market. Sometimes referred to as "delisted

Deleverage
The reduction of financial instruments or borrowed capital previously used to increase the potential
return of an investment. It is the opposite of leverage.

Deleveraged Floater
A fixed-income investment with a floating rate tied to a specific index with less than a one for one
payback ratio.

Delinquent
A term describing the failure to meet required obligations according to schedule.

Delisting
The removal of a listed security from the exchange on which it trades. Stock is removed from an
exchange because the company for which the stock is issued, whether voluntarily or involuntarily, is
not in compliance with the listing requirements of the exchange.

Delivered Ex Ship - DES


A trade term requiring the seller to deliver goods to a buyer at an agreed port of arrival. The seller
remains responsible for the goods until they are delivered.

Delivery
The action by which an underlying commodity, security, cash value, or delivery instrument covering
a contract is tendered and received by the contract holder.

Delivery Date
1. The final date by which the underlying commodity for a futures contract must be delivered in
order for the terms of the contract to be fulfilled.

2. The maturity date of a currency forward contract.

Delivery Instrument
A document that, during the delivery of the futures contract, stands in lieu of the physical asset
underlying the contract.

Delivery Month
The month in which a contract expires and delivery of the underlying asset or cash is required.

Delivery Notice
A notice written by the holder of the short position in a futures contract informing the clearing house
of the intent and details of delivering a commodity for settlement.

Delivery Option
A feature added to some futures contracts permitting the short position to determine the
combination of timing, location, quantity, and quality of the underlying commodity stated in the
delivery notice.

Delivery Price
The price for the delivery of underlying commodities occurring upon the expiration of a futures
contract.
Delivery Versus Payment - DVP
A securities industry procedure in which the buyer's payment for securities is due at the time of
delivery. Security delivery and payment are simultaneous.

Delta
The ratio comparing the change in the price of the underlying asset to the corresponding change in
the price of a derivative. Sometimes referred to as the "hedge ratio".

Delta Hedging
An options strategy that aims to reduce (hedge) the risk associated with price movements in the
underlying asset by offsetting long and short positions. For example, a long call position may be
delta hedged by shorting the underlying stock. This strategy is based on the change in premium
(price of option) caused by a change in the price of the underlying security. The change in premium
for each basis-point change in price of the underlying is the delta and the relationship between the
two movements is the hedge ratio.

Delta Neutral
A portfolio consisting of positions with offsetting positive and negative deltas. The deltas balance
out to bring the net change of the position to zero.

Demand
A consumer's desire and willingness to pay for a good or service.

Demand Deposit
An account from which deposited funds can be withdrawn at any time without any notice to the
depository institution.

Demand Note
A loan with no fixed term or set duration of repayment. It can be recalled upon the lenders request,
assuming the notice required by the provisions of the loan are met.

Demand Shock
A sudden surprise event that temporarily increases or decreases demand for goods or services. A
positive demand shock increases demand, while a negative demand shock decreases demand. Both
positive and negative demand shock have an effect on the prices of goods and services.

Demand-Pull Inflation
A situation in which inflation increases because of a continual increase in consumer demand.

Demarker Indicator
An indicator used in technical analysis that compares the most recent price action to the previous
period's price in an attempt to measure the demand of the underlying asset. This indicator is
generally used to identify price exhaustion and can also be used to identify market tops and
bottoms. This oscillator is bounded between -100 and +100 and, unlike many other oscillators, it
does not use smoothed data.

Dematerialization - DEMAT
The move from physical certificates to electronic book keeping. Actual stock certificates are slowly
being removed and retired from circulation in exchange for electronic recording.

Demutualization
The process of changing corporate structure from a mutual fund company to some other form, such
as a limited liability or corporation.

Denomination
The stated value found on financial instruments.

Department of Labor - DOL


A U.S Government cabinet body responsible for standards in occupational safety, wages and
number of hours worked, unemployment insurance benefits, re-employment services and a portion
of the country's economic statistics.

Dependency Ratio
A measure showing the number of dependents (aged 0-14 and over the age of 65) to the total
population (aged 15-64). Also referred to as the "total dependency ratio".

Dependent
A person who relies on someone else for financial support. The taxpayer supporting the dependent
is allowed to claim dependency exemptions.

Depletion
An accounting term describing the amortization of assets that can be physically reduced.

Deposit
1. A transaction involving a transfer of funds to another party for safekeeping.
2. A portion of funds that is used as security or collateral for the delivery of a good.

Deposit/Withdrawal at Custodian - DWAC


The automated system for deposits and withdrawals of securities from the Depository Trust
Company (DTC).

Depositary Receipt
A negotiable financial instrument issued by a bank to represent a foreign company's publicly traded
securities. The depositary receipt trades on a local stock exchange

Depository Trust & Clearing Corporation - DTCC


Established in 1999, the DTCC is a holding company consisting of 5 clearing corporations and 1
depository, making it the world's largest financial services corporation dealing in post trade
transactions.

Depository Trust Company - DTC


One of the world's largest securities depositories, it holds in excess of US$10 trillion worth of
securities in custody. The DTC acts like a clearinghouse to settle trades in corporate and municipal
securities

Depository Trust Company Tracking - DTCT


A service, used by underwriting firms, that provides a method of tracking the exact path of
purchases and sales of newly issued securities.

Depreciated Cost
Calculated by subtracting the amount of depreciation claimed from the original cost of an asset.

Depreciation
1. In accounting, an expense recorded to allocate a tangible asset's cost over its useful life. Since it
is a non-cash expense, it increases free cash flow while decreasing reported earnings.
2. A decrease in the value of a particular currency relative to other currencies.

Depressed
A description of a market, security, or product that is experiencing weak demand and lowering
prices.

Depression
A severe and prolonged recession characterized by inefficient economic productivity, high
unemployment, and falling price levels.

Depth
The ability of a security to absorb buy and sell orders without the stock price dramatically moving in
either direction.
Deregulation
The reduction or elimination of government power in a particular industry, usually enacted to create
more competition within the industry.

Derivative
In finance, a security whose price is dependent upon or derived from one or more underlying assets.
The derivative itself is merely a contract between two or more parties. Its value is determined by
fluctuations in the underlying asset. The most common underlying assets include stocks, bonds,
commodities, currencies, interest rates and market indexes. Most derivatives are characterized by
high leverage.

Descending Channel
A downward moving channel formed by two parallel, downward sloping trendlines. The upper
trendline connects a stock's highs over a period of time, with each subsequent high price lower than
the previous. Conversely, the lower trendline connects the stock's lows, with each subsequent low
price lower than the previous.

Descending Tops
A pattern in charts where each peak in price is lower then the previous peak in price. The pattern
signals a bearish trend in the security.
The above is an example of descending tops.

Descending Triangle
A bearish chart pattern used in technical analysis that is created by drawing one trendline that
connects a series of lower highs and a second trendline that has historically proven to be a strong
level of support. Traders watch for a move below support, as it suggests that downward momentum
is building. Once the breakdown occurs, traders enter into short positions and aggressively push
the price of the asset lower. The chart below is an example of a descending triangle:

Designated Order Turnaround - DOT (SuperDOT)


An electronic system that increases order efficiency by routing orders for listed securities directly to
a specialist on the trading floor, instead of through a broker.

Desk Trader
A trader who is restricted to instituting trades for a firm's clients and who is unable to trade with
his/her firm's own accounts.

Detrend
In forecasting models, the process of removing the effects of accumulating data sets from a trend to
show only the absolute changes in values and to allow potential cyclical patterns to be identified.
This is done using regression and other statistical techniques.

Devaluation
A deliberate downward adjustment to a country's official exchange rate relative to other currencies.
In a fixed exchange rate regime, only a decision by a country's government (i.e central bank) can
alter the official value of the currency. Contrast to "revaluation".

Development Stage
A company that is focusing a majority of its attention on research & development.

Dhaka Stock Exchange - DSE


The stock exchange headquartered in Dhaka, Bangladesh.

Diagonal Spread
An options strategy established by simultaneously entering into a long and short position in two
options of the same type (two call options or two put options) but with different strike prices and
expiration dates.

Diamond Top Formation


A technical analysis reversal pattern that is used to signal the end of an uptrend. This relatively
uncommon pattern is found by identifying a period in which the price trend of an asset starts to
widen and then starts to narrow. This pattern is called a diamond because of the shape it creates on
a chart.

Dialing and Smiling


A slang term for the practice of cold calling.

Diamonds
1. An extremely hard gemstone used mainly for jewelry and tools.
2. An exchange traded security, issued by the American Stock Exchange, that replicates the
movements in the Dow Jones Industrial Average

Differential
The amount of adjustment of the delivery location and grade of deliverables that a futures contract
permits. Also known as "allowance. "

Diffusion Index
1. A measure of the percentage of stocks that have advanced in price or are showing a positive
momentum over a defined period. It is used in the technical analysis of stocks.
2. A measure of the breadth of a move in any of the Conference Boards Business Cycle Indicators
(BCI), showing how many of an indicators components are moving together with the overall
indicator index.

Digital Option
An option whose payout is fixed after the underlying stock exceeds the predetermined threshold or
strike price.
Also referred to as "binary" or "all-or-nothing option."

Diluted Earnings Per Share - Diluted EPS


A performance metric used to gauge the quality of a company's earnings per share (EPS) if all
convertible securities were exercised. Convertible securities refers to all outstanding convertible
preferred shares, convertible debentures, stock options (primarily employee based) and warrants.
Unless the company has no additional potential shares outstanding (a relatively rare circumstance)
the diluted EPS will always be lower than the simple EPS.

Diluted Founders
A slang term often used by venture capitalists to describe the process by which the founders of a
startup gradually lose ownership of the company they founded. As a startup that is using venture
capital for funding progresses through multiple rounds of financing, the venture capitalists
providing the financing will often want more and more ownership of the company.
In other words, the founders dilute their ownership in the company in exchange for capital to grow
their business.

Dilution
A reduction in earnings per share of common stock that occurs through the issuance of additional
shares or the conversion of convertible securities

Dilutive Acquisition
An acquisition that will decrease the acquiring company's EPS.

Direct Access Trading - DAT


A system that allows a client to trade directly with another client, a market maker on Nasdaq, or a
specialist on the floor of an exchange without broker interference

Direct Cost
A cost that can be directly traced to producing specific goods or services.
Direct Deposit
1. When the tax authorities deposit your tax refund directly into your bank account rather than
mailing you a check.

2. When your employer deposits your paycheck directly into your bank account rather than issuing
you a physical check.

Direct Participation Program - DPP


A business venture designed to let investors participate directly in the cash flow and tax benefits of
the underlying investment. DPPs are generally passive investments that invest in real estate or
energy-related ventures.
Also known as a "direct participation plan".

Direct Public Offering - DPO


Where a company raises capital by marketing its shares directly to its own customers, employees,
suppliers, distributors and friends in the community. DPOs are an alternative to underwritten public
offerings by securities broker-dealer firms where a company's shares are sold to the broker's
customers and prospects
Direct Quote
A foreign exchange rate quoted as the domestic currency per unit of the foreign currency. In other
words, it involves quoting in fixed units of foreign currency against variable amounts of the
domestic currency.

Direct Repurchase
A company's plan to buy back its own shares from the marketplace, thereby reducing the number of
outstanding shares.

Direct Rollover
A distribution of eligible rollover assets from a qualified plan, 403(b) plan, or a governmental 457
plan to a Traditional IRA, qualified plan, 403(b) plan, or a governmental 457 plan or a distribution
from an IRA to a qualified plan, 403(b) plan or a governmental 457 plan

Direct Stock Purchase Plan


A plan in which shares are sold directly to investors, instead of through a broker.

Direct Tax
A tax that cannot be shifted onto others.

Direct-Access Broker
A stockbroker that concentrates on speed and order execution - unlike a full-service broker that
focuses on research and advice. Direct-access brokers usually use complicated computer software
that allows clients to trade directly with an exchange or with other individuals via electronic
communication networks (ECN).

Directed Order
A customer order where the customer gives specific instructions to the broker concerning the
orders routing destination

Directional Movement Index - DMI


An indicator developed by J. Welles Wilder for identifying when a definable trend is present in an
instrument. That is, the DMI tells whether an instrument is trending or not.

Directional Trading
A general term referring to the strategy used by investors that open positions, either long or short,
on the belief that they are able to correctly predict the movement of price in a security.

Dirty Float
A system of floating exchange rates in which the government or the country's central bank
occasionally intervenes to change the direction of the value of the country's currency. In most
instances, the intervention aspect of a dirty float system is meant to act as a buffer against an
external economic shock before its effects become truly disruptive to the domestic economy.

Dirty Price
A bond price that includes accrued interest

Disability-Income (DI) Insurance


An insurance product that provides supplementary income in the event of an illness or accident
resulting in a disability that prevents the insured from working at their regular employment. Benefits
are usually provided on a monthly basis so that the individual can maintain their standard of living
and continue to pay their regular expenses.

Discharge in Bankruptcy
When a bankrupt person or company is legally free and clear of any obligation to repay certain
debts.

Disclaim
To renounce an interest or obligation by way of a legal instrument - usually a written disclaimer, or a
disclaiming trust. Property may be disclaimed for several reasons: because it is unwanted, because
it carries heavy liabilities, because of tax reasons, or because the intended beneficiary wants to pass
the property to another beneficiary. Liabilities, obligations, beneficial ownership, or rights may also
be disclaimed.

Disclaimer Trust
A trust that has embedded provisions (usually contained in a will) which allow a surviving spouse to
put specific assets under the trust by disclaiming ownership of a portion of the estate. Disclaimed
property interests are transferred to the trust, without being taxed.
Provisions can be written into the trust that provide for regular payouts from the trust to support
survivors. Surviving minor children can also be provided for, as long as the surviving spouse elects
to disclaim inherited assets, passing them on to the trust.

Disclosure
The act of releasing all relevant information pertaining to a company that may influence an
investment decision. In order to be listed on major U.S. stock exchanges, companies must follow all
of the Securities and Exchange Commission's disclosure requirements and regulations.

Disclosure Statement
1. A document explaining the rules of an IRA in plain, nontechnical language. This must be provided
to the IRA owner at least seven days before the IRA is established, or it can be provided to the IRA
owner at the time the IRA is being established providing the IRA owner is given seven days within
which he/she may revoke the IRA.
2. A document outlining the specific terms and conditions of a loan, including the interest rate of the
loan, any loan fees, the amount borrowed, insurance, prepayment rights and the responsibilities of
the borrower.

Discount
The condition of the price of a bond that is lower than par. The discount equals the difference
between the price paid for a security and the security's par value.

Discount Bond
A bond that is valued at less than its face amount
Discount Broker
A stockbroker who carries out buy and sell orders at a reduced commission, compared to a full-
service broker, but provides no investment advice.

Discount Margin - DM
The return earned in addition to the index underlying the floating rate security.

Discount Note
An unsecured corporate debt that is issued at a discount and matures at par. It is similar to a zero
coupon bond or T-bill. Discount notes give institutional and retail investors convenient choices with
respect to the investment size and maturity date for a short-term investment.

Discount Rate
1. The interest rate that an eligible depository institution is charged to borrow short-term funds
directly from a Federal Reserve Bank.
2. The interest rate used in determining the present value of future cash flows.

Discount Window
The location at the Federal Reserve where financial institutions go to borrow money at the discount
rate.
Discounted Cash Flow - DCF
A valuation method used to estimate the attractiveness of an investment opportunity. Discounted
cash flow (DCF) analysis uses future free cash flow projections and discounts them (most often
using the weighted average cost of capital) to arrive at a present value, which is used to evaluate the
potential for investment. If the value arrived at through DCF analysis is higher than the current cost
of the investment, the opportunity may be a good one.

Discretionary Account
An account that allows a broker to buy and sell securities without the client's consent. Sometimes
referred to as a managed account. The client must sign a discretionary disclosure with the broker as
documentation of the clients consent.

Discretionary Income
The amount of an individual's income that is left for spending after the essentials have been taken
care of.

Discretionary Order
An order giving a broker the ability to decide when to buy/sell securities at the best possible price
for the customer. Some discretionary orders place restrictive terms to limit the amount of discretion
the broker has.

Diseconomies of Scale
An economic concept referring to a situation in which economies of scale no longer function for a
firm. Rather than experiencing continued decreasing costs per increase in output, firms see an
increase in marginal cost when output is increased.

Disgorgement
A repayment of ill-gotten gains that is imposed on wrongdoers by the courts. Funds that were
received through illegal or unethical business transactions are disgorged, or paid back, with interest
to those affected by the action. Disgorgement is a remedial civil action, rather than a punitive civil
action.

Disinflation
A slowing of the rate at which prices increase. Typically, this occurs during a recession as sales
drop and retailers are not able to pass on higher prices to customers.
Disintermediation
1. In finance, withdrawal of funds from intermediary financial institutions, such as banks and
savings and loan associations, in order to invest them directly.
2. Generally, removing the middleman or intermediary.

Disinvestment
1. The action of an organization or government selling or liquidating an asset or subsidiary. Also
known as "divestiture".
2. A reduction in capital expenditure, or the decision of a company not to replenish depleted capital
goods.

Dismal Science
A slang term used to describe the discipline of economics. It was given this description by Thomas
Carlyle, who was inspired to coin the phrase by T. R. Malthus's gloomy prediction that population
would always grow faster than food, dooming mankind to unending poverty and hardship.

Disparity Index
A technical indicator that measures the relative position of the most recent closing price to a
selected moving average and reports the value as a percentage. A value greater than zero suggests
that the asset is gaining upward momentum, while a value less than zero can be interpreted as a
sign that selling pressure is increasing.

Dispersion
A term used in statistics that refers to the location of a set of values relative to a mean or average
level.

Displaced Moving Average


A moving average that has been adjusted forward or back in time in order to forecast trends.
Displaced moving averages are constructed by taking the moving average and shifting it by a
number of intervals, either positive or negative. If the number is negative, the displaced moving
average will lag the original moving average, and if the number is positive the displaced moving
average will lead the original moving average.

Disposable Income
The amount of after-tax income that is available to divide between spending and personal savings.

Disposition
Getting rid of an asset or security through a direct sale or some other method.

Distressed Sale
An urgent sale of assets because of negative conditions.

Distressed Securities
A financial instrument in a company that is near or is currently going through bankruptcy. This
usually results from a company's inability to meet its financial obligations. As a result, these
financial instruments have suffered a substantial reduction in value. Distressed securities can
include common and preferred shares, bank debt, trade claims (goods owed) and corporate bonds.

Distributable Net Income - DNI


An amount that is transferable to unitholders, in the case of an income trust, or the amount to be
distributed to a beneficiary, in the case of an estate trust. Distributable net income is the maximum
amount a unitholder or beneficiary will receive that is taxable any amount above this figure will be
tax free.

Distribution
1. An occurrence where trading volume is, without any price appreciation, higher than that of the
previous day.
2. A removal of assets from a retirement account that is paid to the retirement account owner or
beneficiary.
3. A company's payment of cash, stock or physical products to their shareholders.

Distribution In Kind
A distribution made in the form of stock rather than cash.
Also referred to as a "distribution in specie

Divergence
A situation in which the price of an asset and an indicator, index or other related asset move in
opposite directions. In technical analysis traders make transaction decisions by identifying
situations of divergence, where the price of a stock and a set of relevant indicators, such as the
MACD, are moving in opposite directions.

Diversification
A risk-management technique that mixes a wide variety of investments within a portfolio. The
rationale behind this technique contends that a portfolio of different kinds of investments will, on
average, yield higher returns and pose a lower risk than any individual investment found within the
portfolio.
Diversification strives to smooth out unsystematic risk events in a portfolio so that the positive
performance of some investments will neutralize the negative performance of others. Therefore, the
benefits of diversification will hold only if the securities in the portfolio are not perfectly correlated.

Diversified Common Stock Fund


A mutual fund that invests its assets in a wide range of common stocks. The fund's objectives can
be growth, income, or a combination of both.

Diversified Fund
A type of investment fund that contains a wide array of securities and is adequately diversified. A
mutual fund classified as a "diversified fund" will actively maintain a high level of diversification in
its holdings, thus reducing the amount of risk in the fund, since events that affect one sector won't
have the same effect on other sectors. For example, the fund may restrict its purchases so it is not
dominated by companies from one industry or representing one market capitalization size.

Diversity Score
A measure, created by Moody's Investors Service, to estimate the diversification in a portfolio,
specifically in the context of a collateralized debt obligation (CDO). The calculation methodology for
a diversification score takes into account the extent to which a portfolio is diversified by industry.

Divestiture
The partial or full disposal of an investment or asset through sale, exchange, closure or bankruptcy.
Divestiture can be done slowly and systematically over a long period of time, or in large lots over a
short time period.

Divestment
The process of selling an asset. Also known as divestiture, it is made for either financial or social
goals. Divestment is the opposite of investment

Dividend
Distribution of a portion of a company's earnings, decided by the board of directors, to a class of its
shareholders. The dividend is most often quoted in terms of the dollar amount each share receives
(i.e. dividends per share or DPS). It can also be quoted in terms of a percent of the current market
price, referred to as dividend yield.

Dividend Clawback
An arrangement under which those financing a project agree to contribute, as equity, any prior
dividends received from the project to cover any cash shortages.

Dividend Discount Model - DDM


A procedure for valuing the price of a stock by using predicted dividends and discounting them
back to present value. The idea is that if the value obtained from the DDM is higher than what the
shares are currently trading at, then the stock is undervalued.

Dividend Enhanced Convertible Stock - DECS


Preferred stock that provides the holder with premium dividends in addition to an embedded short
put option and a long call on the issuing company's stock.

Dividend Imputation
An arrangement in Australia that eliminates the double taxation of dividends.
Dividend Irrelevance Theory
A theory that investors are not concerned with a company's dividend policy since they can sell a
portion of their portfolio of equities if they want cash
Dividend Modification
An abbreviation will appear on a chart when the company announces a change (increase or
decrease) or omission in a quarterly dividend pay-out:
•Div Incr = Dividend increase
•Div Decr = Dividend decrease
•Div Initl = Dividend initialized
•Div Rsum = Dividend resume
•Div Omit = Omission of payment
•Div Spec = Special dividend
•Div Extra = Extra dividend
Dividend Payout Ratio
The percentage of earnings paid to shareholders in dividends.
Dividend Policy
The policy a company uses to decide how much it will pay out to shareholders in dividends.
Dividend Reinvestment Plan - DRIP
A plan offered by a corporation allowing investors to reinvest their cash dividends by purchasing
additional shares or fractional shares on the dividend payment date.

Dividend Tax Credit


The amount a Canadian resident applies against their tax owing on the grossed up portion of
dividends received from Canadian corporations.

Dividend Yield
A financial ratio that shows how much a company pays out in dividends each year relative to its
share price. In the absence of any capital gains, the dividend yield is the return on investment for a
stock. Dividend yield is calculated as follows:

Dividend, Quarterly Distribution


Amount distributed for each share of company stock.

Dividends Received Deduction - DRD


A tax deduction received by a corporation on the dividends paid to it by companies in which it has
an ownership stake. The purpose of this deduction is to soften the consequences of triple taxation.
Triple taxation occurs because the company paying the dividend does so with after-tax money and
the receiving company is subject to income tax on the dividends. Therefore, if the company that
receives the dividends decides to pay out its shareholders, the money will have been taxed three
times.

Diworsification
The process of adding to one's portfolio in such a way that the risk/return tradeoff is worsened.

DJF
In currencies, this is the abbreviation for the Djibourti Franc.

DKK
In currencies, this is the abbreviation for the Danish Krone.
Do Not Increase - DNI
Instructions on a good-till-cancelled buy-limit or stop order that tell a broker not to increase the
number of shares bought or sold in the event of a stock dividend or stock split.

Do Not Reduce - DNR


A trade type used on an buy or sell order. It tells the broker not to decrease the limit price on buy-
limit and sell-stop orders on the record date of a cash dividend.

Dog
One of the four categories (quadrants) of the BCG growth-share matrix that represents the division
within a company that has a small market share in a mature industry.

Dog And Pony Show


A slang term referring to a financial seminar that presents new products or issues of securities to
potential buyers.

Dog Eat Dog


When the market for a good or service is ruthlessly competitive.

Dogs Of The Dow


An investing strategy that consists of buying the 10 DJIA stocks with the highest dividend yield at
the beginning of the year. The portfolio should be adjusted at the beginning of each year to include
the 10 highest yielding stocks

Doing the Reverse Desk


A slang phrase referring to a tactic a hedge fund would use to try to mislead other funds that attempt
to mimic its trades.

Doji
A name for candlesticks that provide information on their own and also feature in a number of
important patterns. Dojis form when a security's open and close are virtually equal.

Dollar Drain
A situation that occurs when a country imports more goods and services from another country than
it exports back to the same country. The net effect of spending more money importing than is
received from exporting causes a net reduction in the importing country's reserves of the exporting
country's currency.

Dollar Price
Percentage of par, or face value, that a bond is quoted at. The other way bonds are often quoted is in
terms of their yield.

Dollar Roll
A special type of repurchase agreement in which the security, transferred to the investor as
collateral, is a mortgage-backed security. The investor who sells the security gives up the cash
flows during the roll period, but has use of the proceeds.

Dollar-Cost Averaging - DCA


The technique of buying a fixed dollar amount of a particular investment on a regular schedule,
regardless of the share price. More shares are purchased when prices are low, and fewer shares are
bought when prices are high.
Also referred to as "constant dollar plan".

Domicile
The location where an individual, partnership, or corporation establishes permanent residence as
per legal obligations.

Don't Know - DK
A slang expression for an out trade that is used when there is a discrepancy in the details of a trade.
Also known as a "DK'd trade."

Donchian Channels
A moving average indicator developed by Richard Donchian. It plots the highest high and lowest low
over the last period time intervals.

Donor Advised Fund


A private fund administered by a third party and created for the purpose of managing charitable
donations on behalf of an organization, family, or individual.

Doomsday Call
A call provision added to fixed income securities that allows for early redemption by the issuer if
certain conditions are favorable.

DOP
In currencies, this is the abbreviation for the Dominican Republic Peso.

Dotcom
A company that embraces the internet as the key component in its business.

Double Barreled
Bonds secured by the pledge of two or more sources of repayment.

Double Barrier Option


An option with two distinct triggers that define the allowable range for the price fluctuation of the
underlying asset. In order for the investor to receive a payout, one of two situations must occur the
price must reach the range limits (for a knock-in) or the price must avoid touching either limit (for a
knock-out).

Double Bottom
A William J. O'Neil chart pattern resembling a 'W.' One of the three positive chart patterns to look for
when doing technical analysis of a stock.

Double Dip Recession


When the gross domestic product (GDP) growth slides back to negative after a quarter or two of
brief positive growth. In other words, a recession followed by a short-lived recovery, followed by
another recession.

Double Dipping
For brokerage firms, when a broker puts commissioned products into a fee-based account. The
broker makes money from both the client and the commission.

Double Gearing
Used to describe situations where multiple companies are using shared capital to buffer against risk
occurring in separate entities without the proper documentation of exposure.

Double No-Touch Option


A type of exotic option that gives an investor an agreed upon payout if the price of the underlying
asset does

Double Top
A term used in technical analysis to describe the rise of a stock, a drop, another rise to the same
level as the original rise, and finally another drop.

Double Witching
Similar to triple witching, but instead of three classes of options or futures expiring on the same day,
double witching is when only two classes (any two) are expiring. The three classes are stock
options, index options, and index futures.
Dove
An economic policy advisor who promotes monetary policies that involve the maintenance of low
interest rates, believing that inflation and its negative effects will have minimal impact on society.
This term is derived from the docile and placid nature of the bird of the same name.

Dow Divisor
A number used in the calculation of the Dow Jones Industrial Average that accounts for stock splits
and stock dividends

Dow Jones AIG Commodity Index - DJ-AIGCI


A rolling commodities index composed of futures contracts on 19 physical commodities traded on
U.S. exchanges. The index serves as a liquid and diversified benchmark for the commodities' asset
class.

Dow Jones CDX Indexes


A series of indices that track North American and emerging market credit derivative indexes. The
purpose of the combined indexes is to track the performance of the various segments of credit
derivatives so that the overall return can be benchmarked against funds that invest in similar
products.

Dow Jones Industrial Average - DJIA


The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the
New York Stock Exchange and the Nasdaq. The DJIA was invented by Charles Dow back in 1896.

Dow Jones Transportation Average - DJTA


The Dow Jones Transportation Average is a price-weighted average of 20 transportation stocks
traded in the United States. The average was started back in 1884.

Dow Jones Utility Average - DJUA


The Dow Jones Utility Average is a price-weighted average of 15 utility stocks traded in the United
States. The DJUA was started back in 1929.

Dow Theory
A theory which says the market is in an upward trend if one of its averages (industrial or
transportation) advances above a previous important high, it is accompanied or followed by a
similar advance in the other.

Down Round
A round of financing where investors purchase stock from a company at a lower valuation than the
valuation placed upon the company by earlier investors.
Down Volume
A stock volume that closes at a price lower than the previous day's close.

Down-and-In Option
A form of a knock-in option whose payoff is determined by the price of the underlying asset sinking
to the barrier price level.

Down-and-Out Option
A type of knock-out barrier option that ceases to exist when the price of the underlying security hits
a specific barrier price level. If the price of the underlying does not reach the barrier level, the
investor has the right to exercise their European call or put option at the exercise price specified in
the contract.

Downgrade
A negative change in the rating of a security.

Downside
The dollar amount by which the market or a stock has the potential to fall.
Downside Risk
An estimation of a security's potential to suffer a decline in price if the market conditions turn bad.

Downsize
Reducing the size of a company by eliminating workers and/or divisions within the company.

Downstream
The oil and gas operations that take place after the production phase through to the point of sale.

Downtick
A transaction on an exchange that occurs at a price below the previous transaction.
In order for a downtick to occur, a transaction price must be followed by a decreased transaction
price. This is commonly used in reference to stocks, but it can also be extended to commodities and
other forms of securities.

Downtick Volume
The share volume of a security that trades at a price lower than its previous price.

Drag-Along Rights
A right that enables a majority shareholder to force a minority shareholder to join in the sale of a
company. The majority owner doing the dragging must give the minority shareholder the same price,
terms, and conditions as any other

Dragon Bond
A bond that is issued in Asia but denominated in U.S. dollars.

Drawdown
The peak-to-trough decline during a specific record period of an investment or fund. It is usually
quoted as the percentage between the peak and the trough.

Dread Disease Rider


A special addition to a life insurance policy that gives a percentage of the death benefit to the policy
holder if he or she is diagnosed with a serious disease (such as cancer or heart disease).

Drill-Bit Stock
A term used to describe shares that trade for prices less than one dollar. The fractional prices are
comparable to the diameter measures of drill-bits found in a hardware store.

Drip Feed
1) The process of investing on an ongoing basis in a small but growing firm over a period of time.
Essentially, a drip feed results in a startup company receiving capital contributions as the need for
capital arises, rather than getting a lump sum capital contribution at the company's inception.
2) The process of retail investors contributing small amounts of their savings to their investment
pool on a periodic basis, such as $200/month, for example.

Drive-By Deal
Slang referring to a deal in which a venture capitalist invests in a startup with the goal of a quick exit
strategy. The VC takes little to no role in the management and monitoring of the startup.

Drop Lock
An arrangement whereby the interest rate on a floating rate note or preferred stock becomes fixed if
it falls to a specified level.

Drought Sale
When a farmer is forced to sell more animals than in a typical year because of poor weather
conditions. The profits from the livestock sales can be deferred to the following year, even if the
proceeds exceed the losses.
Dry Powder
A slang term for cash reserves kept on hand to cover future obligations.

Du Pont Analysis
A method of performance measurement that was started by the DuPont Corporation in the 1920s,
and has been used by them ever since. With this method, assets are measured at their gross book
value rather than at net book value in order to produce a higher ROI.

Du Pont Identity
An expression breaking down return on equity (ROE) into three parts: profit margin, total asset
turnover and financial leverage.
The Du Pont identity tells us that ROE is affected by three things:
-Operating efficiency (as measured by profit margin)
-Asset use efficiency (as measured by total asset turnover)
-Financial leverage (as measured by the equity multiplier)

Dual Class Stock


Dual stock issued for a single company with varying classes indicating the different voting rights
and dividend payments

Dual Currency Deposit


A fixed deposit with variable terms for the currency of payment. Deposits are made in one currency,
but withdrawals at maturity occur either in the currency of the initial deposit or in another agreed
upon currency.

Dual Currency Issue


A bond that pays interest in one currency but pays the principal in a different currency. The amount
of the principal repayment is set at initiation and paid at maturity. This principal amount usually
allows for some appreciation in the exchange rate of the stronger currency. These issues are
common in the Eurobond market and are a useful source of capital for multinational companies.
Dual Exchange Rate
A situation in which there is a fixed official exchange rate and an illegal market-determined parallel
exchange rate. The different exchange rates are used in different situations, either in exchanges or
evaluations, as mandated by the government.

Dual Income, No Kids - DINKS


A household in which there are two incomes and no children (either both partners are working or
one has two incomes). DINKS are often the target of marketing efforts for luxury items such as
expensive cars and vacations.

Dual Listing
A company's securities are listed on more than one exchange for the purpose of adding liquidity to
the shares and allow investors greater choice in where they can trade their shares.

Dual Purpose Fund


A fund created by a closed-ended investment company that offers two classes of stock. Each class
offers entitlements to either income or capital appreciation.

Dual Trading
When a broker simultaneously executes customer orders and places trades in his or her own
account, or one in which he or she has a beneficial interest, on the same trading day. This is also
known as acting as both an agent and a dealer at the same time. Dual trading is prevalent in the
futures market.

Dually Employed With Kids - DEWKS


A household in which there are children and both partners earn an income.

Due Bill
A financial instrument used to document and identify the seller's obligation to deliver securities sold
to the buyer.

Due Bill Period


In the context of corporate actions (such as dividends, issuance of rights and warrants, splits, etc.),
the period during which remittances to investors are due - once stockholders of record are checked
on the record date. In the case of a common stock dividend, for example, the due bill period is the
time between the record date for a security and a date four days after the ex-date.

Due Diligence - DD
1. An investigation or audit of a potential investment. Due diligence serves to confirm all material
facts in regards to a sale.
2. Generally, due diligence refers to the care a reasonable person should take before entering into an
agreement or a transaction with another party.

Dumbbell
An investment strategy, used mainly for bonds, where holdings are heavily concentrated in both
very short and long term maturities.

Due Diligence Meeting


The process of careful investigation by an underwriter to ensure that all material information
pertinent to a security issue has been disclosed to prospective investors

Dummy Director
A person on a company's board of directors who votes and acts on the wishes of a non board
member.

Dummy Shareholder
A person who holds shares in his or her name, but the shares are really owned by someone else.

Dumping
1. In international trade, this occurs when one country exports a significant amount of goods to
another country at prices much lower than in the domestic market.
2. A slang term for selling a stock with little regard for price.

Dunning
The process of communicating with customers to ensure the collection of accounts receivable.
Duopoly
A situation in which two companies own all or nearly all of the market for a given type of product or
service.

Durables
A category of consumer goods, durables are products that do not have to be purchased frequently.
Some examples of durables are appliances, home and office furnishings, lawn and garden
equipment, consumer electronics, toy makers, small tool manufacturers, sporting goods,
photographic equipment, and jewelry.

Duration
The measure of the price sensitivity of a fixed-income security to an interest rate change of 100
basis points. Calculation is based on the weighted average of the present values for all cash flows.

Dutch Auction
An auction where the price on an item is lowered until it gets its first bid, and then the item is sold at
that price.

Dutch Disease
An economic condition that, in its broadest sense, refers to negative consequences arising from
large increases to a country's income. Dutch disease is primarily associated with a natural resource
discovery, but it can result from any large increase in foreign currency, including foreign direct
investment, foreign aid or a substantial increase in natural resource prices.
This condition arises when foreign currency inflows cause an increase in the affected country's
currency. This has two main effects for the country with Dutch disease:
1. A decrease in the price competitiveness, and thus the exports, of its manufactured goods
2. An increase in imports
In the long run, both these factors can contribute to manufacturing jobs being moved to lower-cost
countries. The end result is that non-resource industries are hurt by the increase in wealth
generated by the resource-based industries.

Dwarf
A name given to a pool of mortgage-backed securities, issued by Fannie Mae, with a maturity of 15
years

Dynamic Momentum Index


An indicator used in technical analysis that determines overbought and oversold conditions of a
particular asset. This indicator is very similar to the relative strength index (RSI). The main
difference between the two is that the RSI uses a fixed number of time periods (usually 14), while the
dynamic momentum index uses different time periods as volatility changes.

A Nasdaq stock symbol specifying that the stock has been delinquent in required filings
with the SEC.
E-mini (Stock Index Futures)
An electronically traded futures contract on the Chicago Mercantile Exchange that
represents a portion of the normal futures contracts. E-mini contracts are available on a
wide range of indices such as the Nasdaq 100, S&P 500, S&P MidCap 400 and Russell
2000.

Early Exercise
When an option or other security is exercised prior to its maturity date.

Early Withdrawal
The removal of funds from a fixed-term investment before the maturity date, or the
removal of funds from a tax-deferred investment account or retirement savings account
(such as an IRA) before a prescribed time, such as the account owner's attainment of a
minimum age requirement.

Earned Income
Income derived from active participation in a trade or business, including wages, salary,
tips, commissions and bonuses. This is the opposite of unearned income.

Earned Income Credit - EIC


A tax credit for low-income workers. Even workers whose incomes are too small to have
paid taxes can get EIC

Earning Assets
Any income-earning asset owned by a company.

Earnings (and Earnings Growth)


Analyzed on both a quarterly and annual basis. Earnings are a basic measurement of a
company's ability to make a net profit and grow.
Earnings Before Interest & Tax - EBIT
An indicator of a company's profitability, calculated as revenue minus expenses,
excluding tax and interest. EBIT is also referred to as "operating earnings", "operating
profit" and "operating income", as you can re-arrange the formula to be calculated as
follows:
Earnings Before Interest After Taxes - EBIAT
An indicator of a company's financial performance calculated as:

= Revenue - COGS - Expenses (including taxes and excluding interest)


Earnings Before Interest, Tax, and Depreciation - EBITD
An indicator of a company's financial performance calculated as:
= Revenue - Expenses (excluding tax, interest, and depreciation)

Earnings Before Interest, Taxes, Depreciation and Amortization - EBITDA


An indicator of a company's financial performance which is calculated as follows:

EBITDA can be used to analyze and compare profitability between companies and
industries because it eliminates the effects of financing and accounting decisions.
However, this is a non-GAAP measure that allows a greater amount of discretion as to
what is (and is not) included in the calculation. This also means that companies often
change the items included in their EBITDA calculation from one reporting period to the
next.

Earnings Estimate
An analyst's estimate for a company's future quarterly or annual earnings.

Earnings Estimate Percentage Change


Percentage increase/decrease in earnings estimates compared to William O'Neil + Co
Research Department's prior year annual EPS data.

Earnings Multiplier
The estimated price-earnings ratio adjusted for the current level of interest rates.

Effective Tax Rate


The rate a taxpayer would be taxed at if taxing was done at a constant rate, instead of
progressively.
Calculated as total tax paid divided by taxable income.

Earnings Per Share


Calculated by dividing a company's total after-tax profits by the company's number of
common shares outstanding. Can be used as an indicator of growth and profitability.

Earnings Per Share (EPS) Rating


Exclusive rating found in Investor's Business Daily's SmartSelect® Corporate Ratings.
Stocks are rated on a 1 to 99 scale (with 99 being best) comparing a company's earnings
per share growth on both a current and annual basis with all other publicly traded
companies in the William O'Neil + Co database. Stocks with EPS Ratings of 80 or above
have outperformed 80% of all publicly traded companies in earnings. The EPS Rating
combines each company's most recent two quarters of earnings-per-share growth with its
three- to five-year annual growth rate.

Earnings Per Share - EPS


The portion of a company's profit allocated to each outstanding share of common stock.
EPS serves as an indicator of a company's profitability.
Calculated as:
(Net Income - Dividends on Preferred Stock) / Average Outstanding Shares
In the EPS calculation, it is more accurate to use a weighted-average number of shares
outstanding over the reporting term, because the number of shares outstanding can
change over time.However, data sources sometimes simplify the calculation by using the
number of shares outstanding at the end of the period.
Diluted EPS expands on the basic EPS by including the shares of convertibles or warrants
outstanding in the outstanding shares number.

Earnings Per Share, Annual Results


When available, up to seven years of annual earnings per share results will be displayed.
Results are adjusted for stock splits, restatement of earnings, and/or related items in order
to provide truly comparable data. A blue triangle to the right of the figure denotes pre-tax,
non-recurring items were included.

Earnings Per Share Percentage Change


Percentage change in earnings per share compared to the same quarter of the previous
year. Figures in blue represents an increase in earnings from prior year quarter, whereas
figures in red indicate a decrease in earnings per share.
A "#" (pound sign) signifies that the comparison quarter was negative and the calculation
is based on a change in absolute numbers.

Earnings Per Share, Quarterly Comparison


Quarterly earnings per share compared to earnings in the same quarter of the previous
year. Amount is based on continuing operations. A blue triangle to the right of the figure
indicates pre-tax, non-recurring items were included (where possible, such items are
normally removed to provide data better suited for comparison).
Certain utilities use running four-quarters' value, and publicly traded investment
companies report net asset value (NAV) instead of earnings. Real Estate Invest Trusts
report a similar item referred to as funds from operations. While it incorporates the same
financial concept, it is not directly comparable to an EPS figure.

Earnings Report Due Date


Anticipated date a company will release its next earnings report.
A red asterisk - * to the right of this date indicates earnings are expected to be reported
within the next four weeks.
This data item is based on the date a company reported the same quarter earnings in prior
year. While most companies report earnings on the same date each year, latest
information should be available from firm's web site in the form of a news release.
EPS Due will not display a date under one of the following conditions:
Historical earnings/sales data is gathered from a prospectus (i.e. company recently started
trading publicly); or
A firm has not reported its earnings information more than 21 calendar days after the
expected reporting date.

Earnings Season
The months in which a majority of quarterly corporate earnings are released to the public.

Earnings Stability
Indicates in percentage from one standard deviation of the variability around the trend line
fitted through 3 to 5 years of earnings' history with a scale ranging from 1 to 99. Lower
numbers represent more stable company earnings history.

Earnings Surprise
When the earnings reported in a company's quarterly or annual report are above or below
analysts' earnings estimates.
Earnings Yield
The earnings per share for the most recent 12 months divided by market price per share.

Earnout
A contractual provision stating that the seller of a business is to obtain additional future
compensation based on the business achieving certain future financial goals.

Ease Of Movement
A technical momentum indicator that is used to illustrate the relationship between the rate
of an asset's price change and its volume. This indicator attempts to identify the amount
of volume required to move prices. Generally a value greater than zero is an indication that
the stock is being accumulated (bought) and negative values are used to signal increased
selling pressure.
A high positive value appears when prices move upward on low volume. Strong negative
numbers indicate that price is moving downward on low volume.

Easy-To-Borrow List
A list of securities deemed to be available for borrowing in short selling transactions
because their delivery is assured. Availability is usually due to their accessible nature
and/or high number of outstanding shares

Eat Well, Sleep Well


An adage that, referring to the risk/return trade-off, says that the type of security an
investor chooses depends on whether he or she wants to eat well or sleep well.

Eat Your Own Dog Food


An expression describing the act of a company using its own products for day-to-day
operations.

Eating Someone's Lunch


Aggressive competition that results in one company taking portions of another company's
market share.

Eating Stock
Purchasing stock not because you desire it but because you are forced to do so.

EBITDA-To-Interest Coverage Ratio


A ratio that is used to assess a company's financial durability by examining whether it is at
least profitably enough to pay off its interest expenses. A ratio greater than 1 indicates
that the company has more than enough interest coverage to pay off its interest expenses.
The ratio is calculated as follows:

Echo Bubble
A post-bubble rally that becomes another, smaller bubble.

Eclectic Paradigm
A theory that provides a three-tiered framework for a company to follow when determining
if it is beneficial to pursue direct foreign investment

Econometrics
The application of statistical theories to economic ones for the purpose of forecasting
future trends.
Economic Exposure
An exposure to fluctuating exchange rates, which affects a company's earnings, cash flow
and foreign investments. The extent to which a company is affected by economic
exposure depends on the specific characteristics of the company and its industry.

Economic Growth
An increase in the capacity of an economy to produce goods and services, compared from
one period of time to another. Economic growth can be measured in nominal terms, which
include inflation, or in real terms, which are adjusted for inflation.
For comparing one country's economic growth to another, GDP or GNP per capita should
be used as these take into account population differences between countries.

Economic Growth And Tax Relief Reconciliation Act of 2001 - EGTRRA


A U.S. tax law, effective for tax years beginning 2002, that made some of the most
important changes to retirement plans, including increased contributions and deductibility
limits for IRA and employer-sponsored plans, and expanded the portability rules for
retirement plans in general. EGTRRA also increased the estate-tax exclusion and
increased the generation-skipping transfer-tax exemption amounts.

Economic Growth Rate


A measure of economic growth from one period to another in percentage terms. This
measure does not adjust for inflation, it is expressed in nominal terms.
In practice, it is a measure of the rate of change that a nation's gross domestic product
goes through from one year to another. Gross national product can also be used if a
nation's economy is heavily dependent on foreign earnings.

Economic Moat
The competitive advantage that one company has over other companies in the same
industry. This term was coined by renowned investor Warren Buffett.

Economic Profit (or Loss)


The difference between the revenue received from the sale of an output and the
opportunity cost of the inputs used. This can be used as another name for "economic
value added" (EVA).

Economic Refugee
A person seeking refugee status in another country for purely economic reasons.

Economic Spread
1. A performance metric that is equal to the difference between a company's weighted
average cost of capital (WACC) and its return on invested capital (ROIC).
2. The difference between the real rate of return on an investment and the rate of inflation
in the economy

Economic Spread
1. A performance metric that is equal to the difference between a company's weighted
average cost of capital (WACC) and its return on invested capital (ROIC).
2. The difference between the real rate of return on an investment and the rate of inflation
in the economy

Economies Of Scale
The increase in efficiency of production as the number of goods being produced
increases. Typically, a company that achieves economies of scale lowers the average cost
per unit through increased production since fixed costs are shared over an increased
number of goods.
There are two types of economies of scale:
External economies - the cost per unit depends on the size of the industry, not the firm.
Internal economies - the cost per unit depends on size of the individual firm.

Economy
The large set of inter-related economic production and consumption activities which aid in
determining how scarce resources are allocated.

Economies of Scope
An economic theory stating that the average total cost of production decreases as a result
of increasing the number of different goods produced.

Edge Act Corporation


A federally-chartered U.S. corporation that is only allowed to engage in international
banking or other financial transactions related to international business.

Effective Annual Interest Rate


An investment's annual rate of interest when compounding occurs more often than once a
year. Calculated as the following:

Effective Duration
A duration calculation for bonds with embedded options. Effective duration takes into
account that expected cash flows will fluctuate as interest rates change

. Effective Date
The date, declared by the Securities & Exchange Commission (SEC), on which shares can
start trading. This usually refers to the date when shares become available for sale in an
initial public offering.

Effective Yield
The yield of a bond, assuming that you reinvest the coupon (interest payments) once you
have received payment.

Effective Tax Rate


The rate a taxpayer would be taxed at if taxing was done at a constant rate, instead of
progressively.
Calculated as total tax paid divided by taxable income.

EEK
In currencies, this is the abbreviation for the Estonian Kroon.

Efficient Frontier
A line created from the risk-reward graph, comprised of optimal portfolios.

Efficiency Ratio
A ratio used to calculate a bank's efficiency. Not all banks calculate the efficiency ratio the
same way. We've seen the ratio calculated as all of the following:
1. Non-interest expense divided by total revenue less interest expense
2. Non-interest expense divided by net interest income before provision for loan losses
3. Non-interest expense divided into revenue
4. Operating expenses divided by fee income plus tax equivalent net interest income.
For all versions of the ratio, an increase means the company is losing a larger percentage
of its income to expenses. If it is getting lower, it is good for the bank and its
shareholders.

Efficient Market Hypothesis - EMH


An investment theory that states that it is impossible to "beat the market" because stock
market efficiency causes existing share prices to always incorporate and reflect all
relevant information. According to the EMH, this means that stocks always trade at their
fair value on stock exchanges, and thus it is impossible for investors to either purchase
undervalued stocks or sell stocks for inflated prices. Thus, the crux of the EMH is that it
should be impossible to outperform the overall market through expert stock selection or
market timing, and that the only way an investor can possibly obtain higher returns is by
purchasing riskier investments.

EGP
In currencies, this is the abbreviation for the Egyptian Pound.

Elasticity
A measure of sensitivity of one variable to another. More specifically, the degree to which
consumers respond to price changes.
Elder-Ray Index
A technical indicator developed by Alexander Elder that measures the amount of buying
and selling pressure in the market. This indicator consists of two separate indicators
known as "bull power" and "bear power". These figures allow a trader to determine the
position of the price relative to a certain exponential moving average (EMA).
Bull Power = Daily High - n-period EMA
Bear Power = Daily Low - n-period EMA

Electronic Commerce - eCommerce


When a person or business uses the Internet as part of their business model.

Electronic Data Gathering, Analysis and Retrieval - EDGAR


The electronic filing system created by the Securities and Exchange Commission for the
purpose of increasing efficiency and accessibility to corporate filings. This system is used
by all publicly traded companies when submitting required documents to the SEC.
Corporate documents are time sensitive, and the creation of EDGAR has greatly
decreased the time it takes for corporate documents to become publicly available.
Electronic Communication Network - ECN
An electronic system that attempts to eliminate the role of a third party in the execution of
orders entered by an exchange market maker or an over-the-counter market maker, and
permits such orders to be entirely or partly executed.

Electronic Filing - e-File


The process of submitting your tax forms over the Internet, using computers and tax
preparation software.
Elective-Deferral Contribution
A contribution arrangement of an employer-sponsored retirement plan under which
participants can choose to set aside part of their pre-tax compensation as a contribution
to the plan. Also known as "salary-deferral" or "salary-reduction contributions".

Elephants
Slang for large institutions that make trades in very high volumes.
Elevator Pitch
A slang term referring to the 20-60 seconds an entrepreneur has to interest a venture
capitalist (VC) in his or her business idea.
Eligible Rollover Distribution
A distribution from an IRA, qualified plan, 403(b) plan or 457 plan that is eligible to be
rolled over to another eligible retirement plan.

Election Period
The period of time during which an investor who owns an extendable or retractable bond
must indicate to the issuer whether or not he or she will exercise his or her option.

Elliott Wave Theory


Theory named after Ralph Nelson Elliott, who concluded that the movement of the stock
market could be predicted by observing and identifying a repetitive pattern of waves.

Elves
A slang term for guests appearing on the PBS television show "Wall Street Week."

Embedded Option
An option that is an inseparable part of another instrument. Compare this to a normal (or
bare) option, which trades separately from the underlying security.

Embedded Value
A common valuation measure used outside North America, particularly in the insurance
industry. It is calculated by adding the adjusted net asset value and the present value of
future profits of a firm. The present value of future profits considers the potential profits
that shareholders will receive in the future, while adjusted net asset value considers the
funds belonging to shareholders that have been accumulated in the past.

Elimination Period
The length of time between when an injury or illness begins and receiving benefit
payments from an insurer. Also known as the "waiting" or "qualifying" period,
policyholders must in the interim pay for these services and can be thought of as a
deductible.

Emergency Banking Act of 1933


A bill passed during the administration of former U.S. President Franklin D. Roosevelt in
reaction to the financially adverse conditions of the Great Depression. The measure, which
called for a four-day mandatory shutdown of U.S. banks for inspections before they could
be reopened, sought to re-instill investor confidence in the banking system and thus,
stability.

Emerging Industry
An industry, usually formed by a new product or idea, that is in the early stages of
development.

Emerging Issues Task Force - EITF


An organization formed in 1984 by the Financial Accounting Standards Board (FASB) to
provide assistance with timely financial reporting. The EITF holds public meetings in order
to identify and resolve accounting issues occurring in the financial world.
Emerging Market Fund
A mutual fund investing a majority of its assets in the financial markets of a developing
country, typically a small market with a short operating history.

Emirates Interbank Offered Rate - EIBOR


The interest rate charged by banks in the United Arab Emirates for interbank transactions.
In most cases, EIBOR is the reference rate most commonly used by borrowers and lenders
to conduct financial transactions in Dubai and the surrounding Emirates.

Empire Building
The act of attempting to increase the size and scope of an individual or organization's
power and influence. In the corporate world, this is seen when managers or executives are
more concerned with expanding their business units, their staffing levels and the dollar
value of assets under their control than they are with developing and implementing ways
to benefit shareholders.

Employee Benefits Security Administration - EBSA


A division of the Department of Labor (DOL) charged with enforcing the rules governing
the conduct of plan managers, the investment of plan assets, the reporting and disclosure
of plan information, the fiduciary provisions of the law, and workers' benefit rights.

Employee Contribution Plan


A company-sponsored retirement plan where employees make deposits (contributions) to
an account. Contributions are deducted from employee's pay some companies match
those payments.

Employee Retirement Income Security Act - ERISA


The Employee Retirement Income Security Act of 1974 (ERISA) protects the retirement
assets of Americans, by implementing rules that qualified plans must follow to ensure that
plan fiduciaries do not misuse plan assets.

Employee Share Ownership Trust - ESOT


A program that facilitates the acquisition and distribution of a company's shares to its
employees.

Employee Stock Option - ESO


A stock option granted to specified employees of a company. ESOs carry the right, but not
the obligation, to buy a certain amount of shares in the company at a predetermined price.
An employee stock option is slightly different from a regular exchange-traded option
because it is not generally traded on an exchange, and there is no put component.
Furthermore, employees typically must wait a specified vesting period before being
allowed to exercise the option.

Emerging Market Economy


Countries that are starting to participate globally by implementing reform programs and
undergoing economic improvement.

Employee Stock Purchase Plan - ESPP


A company-run program in which participating employees can purchase company shares
at a discounted price. Employees contribute to the plan through payroll deductions, which
build up between the offering date and the purchase date. At the purchase date, the
company uses the accumulated funds to purchase shares in the company on behalf of the
participating employees. The amount of the discount depends on the specific plan but can
be as much as 15% lower than the market price.

Employment Cost Index - ECI


A quarterly report from the U.S. Department of Labor that measures the growth of
employees' compensation (wages and benefits). The index is based on a survey of
employer payrolls in the final month of each quarter. The ECI tracks movement in the cost
of labor, including wages, fringe benefits and bonuses for employees at all levels of a
company.

Encumbered Securities
Securities that are owned by one entity, but subject to a legal claim by another.
When an entity borrows from another, legal claim on the securities owned by the borrower
can be taken as security by the lender should the borrower default on its obligation. The
securities' owner still has title to the securities, but the claim or lien remains on record. In
the event that the securities are sold, the party with the legal claim on them must be given
first opportunity to be paid back. In some cases, encumbered securities cannot be sold
until any outstanding debts belonging to the owner of the securities are paid to the lender
who holds claim against the securities.

Encumbrance
A claim against a property by another party. Encumbrance usually impacts the
transferability of the property.

Ending Inventory
A book value of goods, inputs, or materials available for use or sale at the end of an
inventory accounting period.

Employee Stock Ownership Plan - ESOP


A qualified, defined contribution, employee benefit (ERISA) plan designed to invest
primarily in the stock of the sponsoring employer. ESOPs are "qualified" in the sense that
the ESOP's sponsoring company, the selling shareholder and participants receive various
tax benefits. ESOPs are often used as a corporate finance strategy and are also used to
align the interests of a company's employees with those of the company's shareholders.

Endorsement
1. A legal term that refers to the signing of a document which allows for the legal transfer
of a negotiable from one party to another.
2. An attachment to a document that amends or adds to it. Typically, it is an added
provision to an insurance policy. Also referred to as a "rider".

Endowment
Assets, funds, or property donated to an institution, individual, or group as a source of
income.

Enduring Purpose
Similar to a corporate mission statement, enduring purpose is a combination of a
company's goals, attitudes, and beliefs.

Enron
A U.S. energy-trading and utilities company that housed one of the biggest accounting
frauds in history. Enron's executives employed accounting practices that falsely inflated
the company's revenues, which, at the height of the scandal, made the firm become the
seventh largest corporation in the United States. Once the fraud came to light, the
company quickly unraveled and filed for Chapter 11 bankruptcy on Dec. 2, 2001.
Enronomics
A fraudulent accounting technique that involves a parent company making artificial paper-
only transactions with its subsidiaries to hide losses the parent company has incurred
through business activities.
By transferring losses to off-book entities or wholly-owned subsidiaries, the now-bankrupt
energy corporation Enron created one of the largest accounting scandals and securities
frauds in history.

Enterprise Multiple
A ratio used to determine the value of a company. The enterprise multiple looks at a firm
as a potential acquirer would, because it takes debt into account - an item which other
multiples like the P/E ratio do not include. Enterprise multiple is calculated as:

Enterprise Resource Planning - ERP


A process by which a company (often a manufacturer) manages and integrates the
important parts of its business. An ERP management information system integrates areas
such as planning, purchasing, inventory, sales, marketing, finance, human resources, etc.

Enterprise Value - EV
A measure of a company's value, often used as an alternative to straightforward market
capitalization. EV is calculated as market cap plus debt, minority interest and preferred
shares, minus total cash and cash equivalents.

Enterprise-Value-To-Sales - EV/Sales
A valuation measure that compares the enterprise value of a company to the company's
sales. EV/sales gives investors an idea of how much it costs to buy the company's sales.
This measure is an expansion of the price-to-sales valuation, which uses market
capitalization instead of enterprise value. EV/sales is seen as more accurate because
market capitalization does not take into account as well as enterprise value the amount of
debt a company has, which needs to be paid back at some point. Generally the lower the
EV/sales the more attractive or undervalued the company is believed to be.

Entrepôt
A seaport or warehouse where goods are stored until they are shipped. The goods do not
face any import or export duties upon shipment from the port or warehouse.

Entrepreneur
An individual who, rather than working as an employee, runs a small business and
assumes all the risk and reward of a given business venture, idea, or good or service
offered for sale. The entrepreneur is commonly seen as a business leader and innovator of
new ideas and business processes.

Envelope
A trading band composed of two moving averages, one of which is shifting upwards and
the other shifting downwards.

EPS Growth Rate, 3 Year


The compound 3-year growth rate calculated using the least squares fit over the latest two
to three years’ earnings per share on a running 12-month basis. Growth rate will be
calculated only if there is a minimum of eight trailing 4-quarter periods of positive
earnings (uses a minimum of 11 quarters of data).

EPS Rating
Exclusive rating found in Investor’s Business Daily's SmartSelect® Corporate Ratings.
Stocks are rated on a 1 to 99 scale (with 99 being best) comparing a company’s earnings
per share growth on both a current and annual basis with all other publicly traded
companies in the William O’Neil + Co database. Stocks with EPS Ratings of 80 or above
have outperformed 80% of all publicly traded companies in earnings. The EPS Rating
combines each company’s most recent two quarters of earnings-per-share growth with its
three- to five-year annual growth rate.

Equalization Reserve
A long-term reserve that an insurance company keeps for the purpose of preventing cash-
flow depletion in the event of a significant unforeseen catastrophe.
Equalizing Dividend
An additional dividend paid to eligible stockholders when their divided income is reduced
due to a change the board of directors makes to the dividend payment schedule.

Equilibrium
The state in which market supply and demand balance each other and, as a result, prices
become stable.

Equipment Trust Certificate


A debt instrument that allows a company to take possession of an asset and pay for it
over time. The debt issue is secured by the equipment or physical assets, as the title for
the equipment is held in trust for the holders of the issue. When the debt is paid off, the
equipment becomes the property of the issuer, as the title is transfered to the company.

Equity
1. Stock or any other security representing an ownership interest.
2. On the balance sheet, the amount of the funds contributed by the owners (the
stockholders) plus the retained earnings (or losses). Also referred to as "shareholder's
equity".
3. In the context of margin trading, the value of securities in a margin account minus what
has been borrowed from the brokerage.
4. In the context of real estate, the difference between the current market value of the
property and the amount the owner still owes on the mortgage. Thus, it is the amount, if
any, the owner would receive after selling a property and paying off the mortgage.

Equity Accounting
A method of accounting whereby a corporation will document a portion of the
undistributed profits for an affiliated company in which they own a position

Equity Financing
The act of raising money for company activities by selling common or preferred stock to
individual or institutional investors. In return for the money paid, shareholders receive
ownership interests in the corporation.

Equity Fund
A mutual fund that invests in a broad, well-diversified group of stocks.

Equity Income
1. Income that is earned through an investment in equity.
2. A type of mutual fund whose portfolio is invested in companies that are determined to
be of high quality and have a strong history of dividend growth.

Equity Linked Foreign Exchange Option - ELF-X


A put or call option that protects an investor from foreign-exchange risk for a future sale
or purchase of a specified foreign-equity portfolio.

Equity Linked Note - ELN


An instrument whose return is determined by the performance of a single equity security,
a basket of equity securities, or an equity index.

Equity Market
The market in which shares are issued and traded, either through exchanges or over-the-
counter markets. Also known as the stock market, it is one of the most vital areas of a
market economy because it gives companies access to capital and investors a slice of
ownership in a company with the potential to realize gains based on its future
performance.

Equity Market Capitalization


A measure of the total market value of an equity market. The measure is calculated by
taking the market capitalization of all companies in the equity market and adding them
together to arrive at the capitalization for the market as a whole.

Equity Market Neutral


A hedge fund strategy that seeks to exploit differences in stock prices by being long and
short in stocks within the same sector, industry, market capitalization, country, etc. This
strategy creates a hedge against market factors.

Equity Method
An accounting technique used by firms to assess the profits earned by their investments
in other companies. The firm reports the income earned on the investment on its income
statement and the reported value is based on the firm's share of the company assets. The
reported profit is proportional to the size of the equity investment. This is the standard
technique used when one company has significant influence over another.

Equity Multiplier
A measure of financial leverage. Calculated as:
Total Assets / Total Stockholders' Equity
Like all debt management ratios, the equity multiplier is a way of examining how a
company uses debt to finance its assets. Also known as the financial leverage ratio or
leverage ratio.

Equity Risk Premium


The excess return that an individual stock or the overall stock market provides over a risk-
free rate. This excess return compensates investors for taking on the relatively higher risk
of the equity market. The size of the premium will vary as the risk in a particular stock, or
in the stock market as a whole, changes high-risk investments are compensated with a
higher premium.
Also referred to as "equity premium".

Equity Unit Investment Trust


A registered trust in which investors purchase units from a fixed portfolio of equities,
which are chosen and managed by a professional money manager. Securities in the trust
remain there for the life of the trust, which is most often one year. At that point they can
either be liquidated at market value or rolled over into a newer, current version of the trust.

Equivalent Annual Cost - EAC


The annual cost of owning an asset over the its entire life. Calculated as:
Equivolume
A chart that compares price and volume and plots them together as one piece of data. The
height of each bar represents the high and low for each period, and the width represents
the volume relative to the total shares traded over the time period being viewed

Erasure Guarantee
A guarantee made by accredited institutions assuring the legitimacy and accuracy of
changes made to bonds and securities.

Escheat
When property and/or an estate is transferred to the government because a person has
died without a will or an heir to his or her estate.

Escrow
A financial instrument held by a third party on behalf of the other two parties in a
transaction. The funds are held by the escrow service until it receives the appropriate
written or oral instructions or until obligations have been fulfilled. Securities, funds and
other assets can be held in escrow.

Escrow Agreement
A certificate provided by an approved bank that guarantees the indicated securities are
deposited at that particular bank.

Escrow Receipt
A bank guarantee that an option writer has the underlying security on deposit and that the
underlying security is readily available for delivery if the option is exercised.

Escrowed Shares
Shares held in an escrow account and in most cases cannot be traded or transfered until
certain circumstances like time horizon have been reached. The use of escrow for holding
shares is often done during acquisitions and for performance-based executive incentives.

Escrowed To Maturity
The condition of a bond that has been repaid in advance by means of an escrow account,
which holds the funds needed to pay the periodic coupon payments and the principal.

Estate
All of the valuable things an individual owns, such as real estate, art collections,
collectibles, antiques, jewelry, investments and life insurance.

Estate Planning
The overall planning of a person's wealth, including the preparation of a will and the
planning of taxes after the individual's death

Estate Tax
A tax levied on an heir's inherited portion of an estate if the value of the estate exceeds an
exclusion limit set by law. The estate tax is mostly imposed on assets left to heirs, but it
does not apply to the transfer of assets to a surviving spouse. The right of spouses to
leave any amount to one another is known as the "unlimited marital deduction".

ETB
In currencies, this is the abbreviation for the Ethiopian Birr.
EUR
In currencies, this is the abbreviation for the euro.

EUREX
The largest futures and options market in the world, dealing primarily with European-
based derivatives. The products that trade on this exchange range from German and
Swiss debt instruments to European stocks and STOXX indexes. Along with facilitating
trade, EUREX also provides settlement of the contracts.

Euro Interbank Offer Rate - EURIBOR


The rate of interest at which panel banks borrow funds from other panel banks, in
marketable size, in the EU interbank market.

Euro LIBOR
London Interbank Offer Rate denominated in euros. This is the interest rate that banks
offer each other for large short-term loans in euros. The rate is fixed once a day by a small
group of large London banks but fluctuates throughout the day. This market makes it
easier for banks to maintain liquidity requirements because they are able to quickly
borrow from other banks that have surpluses

Euro Medium Term Note - EMTN


A flexible medium-term debt instrument that is issued and traded outside of Canada and
the United States and requires fixed dollar payments. EMTNs are issued directly to the
market with maturities of less than five years and are offered continuously rather than all
at once like a bond issue.

Exchange of Futures for Cash


A method by which opposite parties of a futures contract that has underlying cash
commodities aim to close out their positions simultaneously. Also know as exchange for
physicals (EFP).

Euro Overnight Index Average - EONIA


The weighted average of overnight Euro Interbank Offer Rates for inter-bank loans.

Eurobank
A financial institution that readily accepts foreign currency denominated deposits and
makes foreign currency loans.
Eurobond
A bond issued in a currency other than the currency of the country or market in which it is
issued.

Eurocheck
A check from a European bank that can be cashed at over 200,000 banks around the world
displaying the "European Union" crest.

Euroclear
One of two principal clearing houses for securities traded in the Euromarket. Euroclear
specializes in verifying information supplied by two brokers in a securities transaction and
the settlement of securities. Euroclear is market owned and governed and was recently
renamed Euroclear Belgium.

Eurocommercial Paper
An unsecured, short-term loan issued by a bank or corporation in the international money
market, denominated in a currency that differs from the corporation's domestic currency.
Eurocredit
A type of loan whose denominated currency is not the lending bank's national currency.

Eurocurrency
Currency deposited by national governments or corporations in banks outside their home
market. This applies to any currency and to banks in any country. For example, South
Korean won deposited at a bank in South Africa, is considered eurocurrency.
Also known as "euromoney".

Eurocurrency Market
The money market in which Eurocurrency, currency held in banks outside of the country
where it is legal tender, is borrowed and lent by banks in Europe.
The Eurocurrency market allows for more convenient borrowing, which improves the
international flow of capital for trade between countries and companies.

Eurodollar
U.S.-dollar denominated deposits at foreign banks or foreign branches of American banks.
By locating outside of the United States, eurodollars escape regulation by the Federal
Reserve Board.

Eurodollar Bond
A U.S.-dollar denominated bond issued by an overseas company and held in a foreign
institution outside both the U.S. and the issuer's home nation. Eurodollar bonds are an
important source of capital for multinational companies and foreign governments.
A eurodollar bond is a type of Eurobond.

Euroequity
A term used to describe an IPO occurring simultaneously on more than one national
market.

Euromarket
The market that includes all of the European Union member countries - many of which use
the same currency, the euro. All tariffs between Euromarket member countries have been
abolished, and import duties from all non-member countries have been fixed for all of the
member countries. The Euromarket also has one central bank for all of the member
countries, the European Central Bank (ECB).
Also known as "the Common Market".
Euronext
A cross-border European stock exchange, originally created in 2000 from the merger of
the Amsterdam, Brussels and Paris stock exchanges. In 2001 and 2002, respectively,
Euronext acquired the London International Financial Futures and Options Exchange
(LIFFE) and the Portuguese stock exchange, Bolsa de Valores de Lisboa e Porto (BVLP), in
order to become the world's fifth-largest exchange. In addition to being an equities market,
Euronext is also a derivatives market and a provider of clearing and information services.

Europe, Middle East and Africa - EMEA


The region classification for a division of an international company that operates in
Europe, the Middle East and Africa. The division that operates in the EMEA will often be
run by a separate executive and focus the international brand towards the needs of the
EMEA region.

European Callable Bond


A bond that can be redeemed by the issuer at a predetermined date prior to maturity.
European Central Bank - ECB
The central bank responsible for the monetary system of the European Union (EU) and the
euro currency. The bank was formed in Germany in June 1998 and works with the other
national banks of each of the EU members to formulate monetary policy that helps
maintain price stability in the European Union.

European Currency Quotation


An indirect quotation in the foreign exchange markets whereby the value of a foreign
currency is stated as a per-unit measure of the U.S. dollar. This type of quotation shows
how much foreign currency it takes to purchase one U.S. dollar.

European Monetary System - EMS


A 1979 arrangement between several European countries to link their currencies in an
attempt to stabilize the exchange rate. This system was succeeded by the European
Monetary Union (EMU), an institution of the European Union (EU), which established a
common currency called the euro.

European Union - EU
A group of European countries that participates in the world economy as one economic
unit and operates under one official currency, the euro. The EU's goal is to create a
barrier-free trade zone and to enhance economic wealth by creating more efficiency within
its marketplace.

European Option
An option that can only be exercised at the end of its life.

Euroyen
Japanese yen-denominated deposits held in banks outside Japan. Also a term that refers
to yen traded in the Eurocurrency market.

Euroyen Bond
A Eurobond that is denominated in Japanese yen and issued by a non-Japanese company
outside of Japan. Despite what the name suggests, Euroyen bonds can be found in bond
markets around the world, not just in European markets.

Eurozone
A geographic and economic region that consists of all the European Union countries that
have fully incorporated the euro as their national currency.
Also referred to as "Euroland".

Even Lot
Quantities established by futures exchanges as benchmarks for quoting commodity prices

Evening Star
A bearish candlestick pattern consisting of three candles that have demonstrated the
following characteristics:
1. The first bar is a large white candlestick located within an uptrend.
2. The middle bar is a small-bodied candle (red or white) that closes above the first white
bar.
3. The last bar is a large red candle that opens below the middle candle and closes near
the center of the first bar's body.
As shown by the chart below, this pattern is used by traders as an early indication that the
uptrend is about to reverse.
Event Driven Strategy
A hedge fund strategy in which the manager takes significant positions in a certain
number of companies with "special situations."

Event Risk
1. The risk due to unforeseen events partaken by or associated with a company.
2. The risk associated with a changing portfolio value due to large swings in market
prices. Also referred to as "jump risk" or "fat-tails".

Evergreen Funding
1. A British term that describes a revolving credit arrangement in which the borrower
periodically renews the debt financing rather than having the debt reach maturity.
2. The gradual infusion of capital into a new or recapitalized enterprise. This type of
funding differs from the situation in which the aggregate capital required for a business
venture is supplied up-front, in which case the company invests in short-term, low-risk
securities until it is ready to use the money for business operations.

Evergreen Option
An employee option plan that grants additional shares to the plan every year. Also known
as an "evergreen plan".

Ex Works - EXW
A trade term requiring the seller to deliver goods at his or her own place of business. All
other transportation costs and risks are assumed by the buyer.

Ex-Ante
A term that refers to future events, such as future returns or prospects of a company.
Using ex-ante analysis helps to give an idea of future movements in price or the future
impact of a newly implemented policy.

Ex-Date
The date on or after which a security is traded without a previously declared dividend or
distribution. After the ex-date, a stock is said to trade ex-dividend.
Ex-Dividend
The trading of shares when a declared dividend belongs to the seller rather than the buyer.

Ex-Legal
Municipal bonds that are delivered without a legal opinion from a bond law firm.

Ex-Post
Another term for actual returns. Ex-post translated from Latin means "after the fact". The
use of historical returns has traditionally been the most common way to predict the
probability of incurring a loss on any given day. Ex-post is the opposite of ex-ante, which
means "before the event".

Ex-Post Risk
A type of risk measurement technique that uses historic returns to predict the riskiness of
a certain investment in the future. This type of risk measure is the equivalent of the
statistical variance of an asset's returns relative to its mean.

Ex-Warrant
The trading of shares when a warrant has been declared but not distributed.
Exceptional Item
Charges incurred that must be noted on a company's balance sheet, in accordance with
GAAP principles. Even though they are considered to be part of ordinary business
charges, exceptional items must be disclosed due to their sheer size or frequency.

Excess Capacity
A situation in which actual production is less than what is achievable or optimal for a firm.
This often means that the demand in the market for the product is below what the firm
could potentially supply to the market.

Excess Returns
Returns in excess of the risk-free rate or in excess of a market measure (such as an index
fund).

Excess Spread
Remaining net interest payments from the underlying assets of an asset-backed security,
after all payables and expenses are covered.

Excess-Accumulation Penalty
The penalty a retirement account owner or the beneficiary of a retirement account must
pay when he or she fails to distribute a minimum amount due for a year from the
retirement account.

Exchange
A market in which securities, commodities, options or futures are traded.

Exchange Control
Types of controls that governments put in place to ban or restrict the amount of foreign
currency or local currency that is allowed to be traded or purchased. Common exchange
controls include banning the use of foreign currency and restricting the amount of
domestic currency that can be exchanged within the country.

Exchange Rate
The price of one country's currency expressed in another country's currency. In other
words, the rate at which one currency can be exchanged for another. For example, the
higher the exchange rate for one euro in terms of one yen, the lower the relative value of
the yen.

Exchange Stabilization Fund - ESF


Money available to the U.S. Treasury Department primarily used for participating in the
foreign-exchange market in an attempt to maintain currency stability. It holds U.S. dollars,
foreign currencies and special drawing rights.

Exchange-Traded Fund - ETF


A security that tracks an index, a commodity or a basket of assets like an index fund, but
trades like a stock on an exchange, thus experiencing price changes throughout the day
as it is bought and sold.

Exchange-Traded Option
An option traded on a regulated exchange where the terms of each option are
standardized by the exchange. The contract is standardized so that underlying asset,
quantity, expiration date and strike price are known in advance. Over-the-counter options
are not traded on exchanges and allow for the customization of the terms of the option
contract.
Exchange-traded options are also known as "listed options".

Exchangeable Debt
Similar to convertibles, except this type of debt can be converted into the shares of a
company other than the issuing company (usually a subsidiary).

Exchangeable Security
A security that grants its holder the right to exchange it for the common stock of a firm
other than the issuer.

Excise Tax
1. An indirect tax charged on the sale of a particular good.
2. A penalty tax applied to ineligible transactions in retirement accounts. This penalty is
assessed by and paid to the IRS.

Exclusion Ratio
The portion of the return on investments that is income tax exempt. It represents a
payback of initial investments rather than capital gains.

Execution
The completion of a buy or sell order for a security.

Executor
An individual appointed to administrate the estate of a deceased person. The executor's
main duty is to carry out the instructions and wishes of the deceased. The executor is
appointed either by the testator of the will (the individual who makes the will) or by a court,
in cases where there was no prior appointment.

Exempt Income
Certain types of income that are not subject to income tax.

Exemption
A deduction allowed by law to reduce the amount of income that would otherwise be
taxed. An exemption is based on a status or circumstance rather than economic standing.

Exemption Trust
A trust whose purpose is to drastically reduce or eliminate federal estate taxes for a
married couple's estate. This type of estate plan sets up an irrevocable trust that will hold
the assets of the first spouse to die.

Exercise
An action by a stockholder taking advantage of a privilege offered by a company or other
financial institution. This includes warrants, options and other exotic financial
instruments.

Exercise Limit
A restriction on the amount of option contracts of a single class that any one person or
company can exercise within a fixed time period (usually a period of five business days).
This limit is in place so that no one person or company can corner or greatly impact the
option market.

Exercise Price
The price at which the underlying security can be purchased (call option) or sold (put
option). The exercise price is determined at the time the option contract is formed.
Also known as the "strike price".

Exhaustion
Situation in which a majority of participants trading in the same asset are either long or
short, leaving few investors to take the other side of the transaction when participants
wish to close their positions. Exhaustion signals the reversal of the current trend because
it illustrates excess levels of supply or demand.

Exhaustion Gap
A technical term describing that the stock's price opens up on a gap from the prior day's
high close.

Existing Home Sales


An economic indicator of both the number and prices of existing single family houses,
condos and co-op sales over a one-month period. Released monthly by the U.S. National
Association of Realtors, it is a lagging indicator as it tends to react after a change in
mortgage rates.

Exit Strategy
1. The method by which a venture capitalist or business owner intends to get out of an
investment that he or she has made in the past. In other words, the exit strategy is a way
of "cashing out" an investment. Examples include an initial public offering (IPO) or being
bought out by a larger player in the industry. Also referred to as a "harvest strategy" or
"liquidity event".
2. In the context of an active trader, a plan as to when a trade will be closed out.

Exordium Clause
A clause most often at the opening of a will that declares that the document is a will and
effectively lays out to the readers a few basic premises upon which the rest of the
document is based. Contents of an exordium clause are likely to include:
1. Identity of the person who has left the will.
2. The name of the place of residence of that person.
3. A revocation of all previous wills made by that person existing before the date that the
current will was produced.
4. Declaration that the current document is the will belonging to the named person.

Exotic Option
A type of option that differs from common American or European options in terms of the
underlying asset or the calculation of how or when the investor receives a certain payoff.
These options are more complex than options that trade on an exchange, and generally
trade over the counter.

Expansion
The phase of the business cycle when the economy moves from a trough to a peak. It is a
period when business activity surges and gross domestic product expands until it reaches
a peak.
Also known as an "economic recovery".

Expectations Index
A sub-index that measures overall consumer sentiments toward the short-term (6-month)
future economic situation, and is used to derive (about 60% of) the Consumer Confidence
Index, a widely used economic indicator. The sub-index is compiled from data gathered
from a survey of 5,000 households on questions regarding expected business and
employment conditions as well as expected income in the near term.
Expectations Theory
A theory proposing that long-term interest rates can act as a predictor of future short-term
interest rates.

Expected Return
The average of a probability distribution of possible returns, calculated by using the
following formula:

Expense Ratio
The percentage of total fund assets that is used to cover expenses associated with the
operation of a mutual fund. This amount is taken out of the fund's assets and lowers the
return that fund holders achieve. These expenses include management fees and operating
expenses. The management fee is the fee that is charged to the fund by the portfolio
manager, and it is often a fixed percentage. The operating expenses are the expenses that
the fund incurs through operation and this can include brokerage fees, taxes, investor
services and interest expenses.
Also known as the "management expense ratio" (MER).

Expenses
1. Money spent by a firm to continue its ongoing operations.
2. Money spent or costs incurred that are deductible and reduce your taxable income.

Expiration Date
The day on which an options or futures contract is no longer valid and, therefore, ceases
to exist.

Exponential Moving Average - EMA


A type of moving average that is similar to a simple moving average, except that more
weight is given to the latest data. Also known as "exponentially weighted moving
average".

Export
In international trade, goods that are shipped from one country to another.
Expropriation
The act of removing property from an owner.

Extendable Bond
A bond issue with a maturity that can be extended to a longer period at the option of the
issuer.

Extended (in price)


A technical term used to describe the point at which a stock is up in price over its 'pivot'
or buy point and is considered riskier to buy.

Extended IRA
An IRA that allows a second-generation beneficiary to continue to distribute the assets
over the life expectancy used by the first-generation beneficiary, thereby extending the
IRA.

Extension Risk
The risk of a security lengthening in duration due to the deceleration of prepayments.
Externality
A consequence of an economic activity that is experienced by unrelated third parties. An
externality can be either positive or negative.
Extra Dividend
A non-recurring distribution of company assets, usually in the form of cash, to
shareholders which is of unusually large size or different date of issue compared to
normal dividends paid out by the given company. Also referred to as a "special dividend".

Extraordinary General Meeting - EGM


A meeting other than the annual general meeting between a company's shareholders,
executives and any other members. An EGM is usually called on short notice and deals
with an urgent matter.

Extraordinary Item
Gains or losses included in a company's financial statements, which are infrequent and
unusual in nature. These are usually explained further in the "notes to the financial
statements."
Extraordinary Redemption
A provision which gives a bond issuer the right to call the bonds due to a one-time
occurrence, as specified in the offering statement. The circumstances could range from
natural disasters and cancelled projects to almost anything else.
Also known as an "extraordinary call" or "extraordinary redemption provision".

Extrinsic Value
The difference between an option's price and the intrinsic value.

F
A Nasdaq stock symbol specifying that the stock is a foreign company.

Fabless Company
The Fabless Semiconductor Association (FSA) defines fabless as follows:
Fabless (without fab) refers to the business methodology of outsourcing the manufacturing of
silicon wafers, which hundreds of semiconductor companies have adopted. Fabless companies
focus on the design, development and marketing of their products and form alliances with silicon
wafer manufacturers, or foundries.

Face Value
The nominal value or dollar value of a security stated by the issuer. For stocks, it is the original cost
of the stock shown on the certificate. For bonds, it is the amount paid to the holder at maturity
(generally $1,000). Also known as "par value" or simply "par".

Face-Amount Certificate Company


A type of investment firm that issues debt securities to its investors. These securities are called
face-amount certificates and are backed by security interest on assets such as real property or other
securities. This is similar in nature to mortgage bond debt financing.

Facility
A term used to describe financial assistance programs offered by lending institutions to help
companies requiring capital

Factor
1. A financial intermediary that purchases receivables from companies.
2. In terms of mortgages, the ratio of principal outstanding to the original balance.

Fade
1. A contrarian investment strategy used to trade against the prevailing trend. "Fading the market" is
typically very high risk, requiring the trader to have a high risk tolerance. A fade trader would sell
when a price is rising and buy when it's falling. Also known as "fading".
2. In a dealer market, it is the failure of a dealer to honor a quote when a customer or another dealer
wants to trade.

Fail
A transaction that has not been settled before a deadline.

Failed Break
A price movement through an identified level of support or resistance that does not have enough
momentum to maintain its direction. Since the validity of the breakout (or breakdown) is
compromised, many traders close their positions and the price fails to make the sharp move that
many were expecting.
A failed break is also commonly referred to as a "false breakout".

Fair Funds for Investors


Provision introduced in 2002, under Section 308(a) of the Sarbanes-Oxley Act. Fair Funds for
Investors was put into place to benefit those investors who have lost money because of the illegal or
unethical activities of individuals or companies that violate securities regulations. Essentially, this
provision enabled the Securities and Exchange Commission (SEC) to add civil money penalties to
disgorgement funds for the relief of the victims of stock swindles.

Fair Market Value


The price that a given property or asset would fetch in the marketplace, subject to the following
conditions:
1. Prospective buyers and sellers are reasonably knowledgeable about the asset they are behaving
in their own best interests and are free of undue pressure to trade.
2. A reasonable time period is given for the transaction to be completed.
Given these conditions, an asset's fair market value should represent an accurate valuation or
assessment of its worth.

Fair Value
1. The estimated value of all assets and liabilities of an acquired company used to consolidate the
financial statements of both companies.
2. In the futures market, fair value is the equilibrium price for a futures contract. This is equal to the
spot price after taking into account compounded interest (and dividends lost because the investor
owns the futures contract rather than the physical stocks) over a certain period of time.

Fair Weather Fund


A mutual fund that tends to perform well during favorable economic conditions.

Fairness Opinion
A report put together by qualified analysts or advisors providing to key decision makers an
evaluation of and facts about a merger or acquisition.

Fairway Bond
A type of bond that accrues interest if the embedded index or interest-rate option underlying the
bond remains within a specified range.

Fakeout
A term used in technical analysis that refers to a situation in which a trader enters into a position in
anticipation of a future transaction signal or price movement, but the signal or movement never
develops and the asset moves in the opposite direction.

Fallen Angel
1. A bond that was once investment grade but has since been reduced to junk bond status.
2. A stock that has fallen substantially from its all time highs.

Falling Knife
A stock whose price has fallen significantly in a short period of time.
False Market
A market where prices are manipulated and impacted by erroneous information, preventing the
efficient negotiation of prices. These types of markets will often be marred by volatile swings
because the true value of the market is clouded by the misinformation.

Fama and French Three Factor Model


An asset pricing model (actually a modification of CAPM) designed by Gene Fama and Ken French.
This model considers the fact that two particular types of stocks outperform markets on a regular
basis: value and small-caps.

Fama and French Three Factor Model


An asset pricing model (actually a modification of CAPM) designed by Gene Fama and Ken French.
This model considers the fact that two particular types of stocks outperform markets on a regular
basis: value and small-caps.

Family Limited Partnership - FLP


A type of partnership designed to centralize family business or investment accounts. FLPs pool
together a family's assets into one single family-owned business partnership that family members
own shares of. FLPs are frequently used as an estate tax minimization strategy, as shares in the FLP
can be transferred between generations, at lower taxation rates than would be applied to the
partnership's holdings

Family of Funds
A group of mutual funds offered by one investment or fund company. Each mutual fund has different
characteristics and can range depending on investment objective.
Also referred to as a "Mutual Fund Family" or simply a "Fund Family".

Fannie Mae - Federal National Mortgage Association - FNMA


A publicly traded company working to assure that mortgage money is readily available for existing
and potential homeowners in the United States.

Fast Market
A financial market that has a combination of high volatility and heavy trading

Fast Market Rule


In the United Kingdom, the exchange may determine that a market movement is so sharp that quotes
cannot practically be kept current. Under the Fast Market Rule, market makers may be permitted to
trade outside quoted ranges where updating quotes is deemed impractical.

Fast Tape
A type of futures market that occurs when a single traded price is unavailable because of the rapid
and large number of transactions occurring in the pit or ring.

Fastest Growing EPS Tab (Best 3 Year Fundamental Rating)


Calculated by dividing a company's total after-tax profits by the company's number of common
shares outstanding. Can be used as an indicator of growth and profitability. This tab in IBD's "Top
Rated Stocks Under $10" product screens stocks for Annual EPS Growth Rate of 30% or higher, over
the last 3 years.

Featherbedding
Term used to describe the practice of a labor union requiring an employer to hire more workers than
necessary for a particular task.

Fed Model
A model thought to be used by the Federal Reserve that hypothesizes a relationship between long-
term treasury notes and the market return of equities.
Federal Covered Advisor
An investment advisor that manages over $25 million in assets for other investors.

Federal Debt
The total amount of money that the United States federal government owes to creditors. The
government's creditors include all individuals, businesses, governments and other organizations
that own U.S. government debt securities. The federal debt exists as a result of federal government
shortfalls, or deficit budgets in which the government's expenses exceed its revenues. The federal
debt does not include any debts in the name of individuals, corporations, and state or municipal
governments.

Federal Deposit Insurance Corporation - FDIC


The U.S. corporation insuring deposits in the U.S. against bank failure. The FDIC was created in 1933
to maintain public confidence and encourage stability in the financial system through the promotion
of sound banking practices.

Federal Farm Credit System - FFCS


In the United States, a network of federally chartered financial institutions designed to provide
credit-related services to the agricultural and farming sectors of the economy. In total, this
government-sponsored enterprise comprises approximately 100 financial institutions that serve all
50 states and Puerto Rico.

Federal Funds
Funds deposited to regional Federal Reserve Banks by commercial banks, including funds in excess
of reserve requirements.

Federal Funds
Funds deposited to regional Federal Reserve Banks by commercial banks, including funds in excess
of reserve requirements.

Federal Funds Rate


The interest rate at which a depository institution lends immediately available funds (balances at the
Federal Reserve) to another depository institution overnight.

Federal Home Loan Bank System (FHLB)


Created by the Federal Home Loan Bank Act of 1932 in response to the depressive economic
conditions of the era which had impaired the U.S. banking system. Its primary purpose was to
increase the amount of funds available for lending institutions who provide mortgages and similar
loan agreements to individuals. Also referred to as the "FHL Bank System".

Federal Insurance Contributions Act - FICA


A law in the U.S. requiring a deduction from paychecks and income that goes toward the Social
Security program and Medicare. Both employees and employers are responsible for sharing the
FICA payments. The act stipulates that there is a maximum that can be allocated to Social Security,
while there is no maximum on what can go toward Medicare. Once the maximum to Social Security
is achieved, the contributor's FICA payment will not increase the Social Security portion but will
continue to increase the contribution to Medicare. The amount of the FICA payment depends on the
income of the contributor, so the higher the income, the higher the FICA payment.

Federal Open Market Committee - FOMC


The branch of the Federal Reserve Board that determines the direction of monetary policy. The
FOMC is composed of the Board of Governors, which has seven members, and five reserve-bank
presidents. The president of the Federal Reserve Bank of New York serves continuously, while the
presidents of the other reserve banks rotate in their service of one-year terms.
Federal Poverty Level - FPL
The set minimum amount of income that a family needs for food, clothing, transportation, shelter
and other necessities. In the United States, this level is determined by the Department of Health and
Human Services. FPL varies according to family size. The number is adjusted for inflation and
reported annually in the form of poverty guidelines. Public assistance programs, such as Medicaid
in the U.S., define eligibility income limits as some percentage of FPL.

Federal Reserve Bank


The banks that carry out Fed operations, including controlling the money supply and regulating
member banks. There are 12 District Feds, headquartered in Boston, New York, Philadelphia,
Cleveland, St. Louis, San Francisco, Richmond, Atlanta, Chicago, Minneapolis, Kansas City and
Dallas.
They are also known as "district Feds".

Federal Reserve Board - FRB


The governing body of the Federal Reserve System. The seven members of the Board of Governors
are appointed by the president, subject to confirmation by the Senate.

Federal Reserve Board's Discount Rate


An important market variable representing what it costs member banks to borrow money from the
Fed. A cut in the rate encourages borrowing and increases money supply; whereas a hike in the rate
does the opposite.

Federal Reserve System


The central bank of the United States. The Fed, as it is commonly called, regulates the U.S. monetary
and financial system. The Federal Reserve System is composed of a central governmental agency in
Washington, D.C. (the Board of Governors) and twelve regional Federal Reserve Banks in major
cities throughout the United States.

Federal Trade Commission - FTC


An independent federal agency whose main goals are to protect consumers and to ensure a strong
competitive market by enforcing a variety of consumer protection and antitrust laws. These laws
guard against harmful business practices and protect the market from anti-competitive practices
such as large mergers and price-fixing conspiracies

Fee-Based Investment
An investment account in which the advisor's compensation is based on a set percentage of the
client's assets instead of on commissions. Contrast this to commission-based investment, in which
the advisor makes money based on the amount of trades made or the amount of assets sold to the
client.

Feed Ratio
A ratio used in futures markets to express the profit margin associated with the feeding and selling
of animals.

Feeder Fund
A fund that conducts virtually all of its investing through another fund (called the master fund).

Fiat Money
Money that a government has declared to be legal tender, despite the fact that it has no intrinsic
value and is not backed by reserves.

Fibonacci Arc
A charting technique consisting of three curved lines that are drawn for the purpose of anticipating
key support and resistance levels, and areas of ranging.

Fibonacci Channel
A variation of the Fibonacci retracement pattern in which the trendlines run diagonally rather than
horizontally. These channels are used to estimate areas of support and resistance in the same way
as the horizontal Fibonacci retracement levels.

Fibonacci Clusters
A tool used in technical analysis that combines various numbers of Fibonacci retracements, all of
which are drawn from different highs and lows. Fibonacci clusters are indicators which are usually
found on the side of a price chart and look like a series of horizontal bars with various degrees of
shading. Each retracement level that overlaps with another makes the horizontal bar on the side
darker at that price level. The most significant levels of support and resistance are found where the
Fibonacci cluster is the darkest.

Fibonacci Extensions
Levels used in Fibonacci retracement to forecast areas of support or resistance. Extensions consist
of all levels drawn beyond the standard 100% level and are used by many traders to determine areas
where they will wish to take profits. The most popular extension levels are 161.8%, 261.8% and
423.6%.

Fibonacci Fan
A charting technique consisting of three diagonal lines that use Fibonacci ratios to help identify key
levels of support and resistance.

Fibonacci Numbers/Lines
Leonardo Fibonacci was an Italian mathematician born in the 12th century. He is known to have
discovered the "Fibonacci numbers," which are a sequence of numbers where each successive
number is the sum of the two previous numbers.
e.g. 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc.
These numbers possess a number of interrelationships, such as the fact that any given number is
approximately 1.618 times the preceding number.

Fibonacci Retracement
A term used in technical analysis that refers to the likelihood that a financial asset's price will retrace
a large portion of an original move and find support or resistance at the key Fibonacci levels before
it continues in the original direction. These levels are created by drawing a trendline between two
extreme points and then dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%,
50%, 61.8% and 100%.

Fibonacci Time Zones


An indicator used by technical traders to identify periods in which the price of an asset will
experience a significant amount of movement. This charting technique consists of a series of
vertical lines that correspond to the sequence of numbers known as Fibonacci numbers (1, 2, 3, 5, 8,
13, 21, 34, etc.). Once a trader chooses a starting position (most commonly following a major move)
on the chart, a vertical line is placed on every subsequent day that corresponds to the position in
the Fibonacci number sequence.

FICO Score
A standard credit score which makes up a substantial portion of a credit report that credit bureaus
sell to lenders so they can asses an applicant's credit risk and whether to extend them credit.
It is an acronym for the creators of the FICO score, Fair Isaac Credit Organization.

Fiduciary
1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary
manages the assets for the benefit of the other person rather than for his or her own profit.
2. A loan made on trust rather than against some security or asset.

Fifty Percent Principle


A principle that predicts that, before the observed trend continues forward, a price correction of
approximately 1/2 to 2/3 of the change in price will occur.

Fifty Percent Principle


A principle that predicts that, before the observed trend continues forward, a price correction of
approximately 1/2 to 2/3 of the change in price will occur.

Fighting the Tape


The action of placing a trade or trades that go against the ticker tape.

Filing Status
The category defining the type of tax-return form an individual will use. The filing status is closely
tied to marital status. These are five filing statuses:
1. Single individual.
2. Married persons filing jointly or surviving spouse.
3. Married persons filing separately.
4. Head of households.
5. Qualifying window(er) with dependent child.

Fill
The action of completing or satisfying an order for a security or commodity. It is the basic act in
transacting stocks, bonds or any other type of security.

Fill Or Kill - FOK


An order to fill a transaction immediately and completely or not at all.

Filter
A set of criteria used to help an investor narrow down which financial instruments or conditions of
financial instruments are the most profitable.

Filter Rule
Rules that attempt to guide investors towards buying and selling patterns that will be the most
profitable.

Final Dividend
The final dividend declared at a company's Annual General Meeting (AGM) for any given year. This
amount is calculated after all financial statements are recorded and the directors are aware of the
company's profitability and financial health.

Final Prospectus
A legal document stating the price of a newly issued security, the delivery date and other facts that
are important for investors.

Finance
The science that describes the management of money, banking, credit, investments, and assets.

Financial Accounting
Reporting of the financial position and performance of a firm through financial statements issued to
external users on a periodic basis.

Financial Accounting Standards Board - FASB


A seven-member independent board consisting of accounting professionals who establish and
communicate standards of financial accounting and reporting in the United States. FASB standards,
known as generally accepted accounting principles (GAAP), govern the preparation of corporate
financial reports and are recognized as authoritative by the Securities and Exchange Commission.

Financial Asset
An asset that derives value because of a contractual claim. Stocks, bonds, bank deposits, and the
like are all examples of financial assets.
Financial Crimes Enforcement Network - FinCEN
A network administered by the United States Department of the Treasury whose goal it is to prevent
and punish criminals and criminal networks that participate in money laundering. FinCEN operates
domestically and internationally, and it consists of three major players: law-enforcement agencies,
the regulatory community and the financial-services community.
Financial Engineering
The creation of new and improved financial products through innovative design or repackaging of
existing financial instruments.

Financial Instrument
A real or virtual document representing a legal agreement involving some sort of monetary value. In
today's financial marketplace, financial instruments can be classified generally as equity based,
representing ownership of the asset, or debt based, representing a loan made by an investor to the
owner of the asset. Foreign exchange instruments comprise a third, unique type of instrument.
Different subcategories of each instrument type exist, such as preferred share equity and common
share equity, for example.

Financial Intermediary
An institution that acts as the middleman between investors and firms raising funds. Often referred
to as financial institutions.

Financial Performance
A company's ability to generate new resources, from day-to-day operations, over a given period of
time.

Financial Planner
A qualified investment professional who assists individuals and corporations meet their long-term
financial objectives by analyzing the client's status and setting a program to achieve these goals.
They are specialized in tax planning, asset allocation, risk management, retirement and/or estate
planning.
Also referred to as a "Registered Financial Planner," when the financial planner is registered with
the Registered Financial Planner Institute (RFPI).

Financial Porn
A slang term used to describe sensationalist reports of financial news and products causing
irrational buying that can be detrimental to investors' financial health. Short-term focus by the media
on a financial topic can create excitement that does little to help investors make smart, long-term
financial decisions, and in many cases clouds investors' decision-making ability.

Financial Portal
A website that provides a variety of financial data and information, acting as an information hub for
clients who are individual investors requiring timely financial news and data to make their
investment decisions.

Financial Risk
The risk that a company will not have adequate cash flow to meet financial obligations.

Financial Supermarket
A company offering a wide range of financial services (e.g. stock, insurance and real-estate
brokerage).

Financing
The act of providing funds for business activities, making purchases or investing. Financial
institutions and banks are in the business of financing as they provide capital to businesses,
consumers and investors to help them achieve their goals.

Financing
The act of providing funds for business activities, making purchases or investing. Financial
institutions and banks are in the business of financing as they provide capital to businesses,
consumers and investors to help them achieve their goals.

Financing
The act of providing funds for business activities, making purchases or investing. Financial
institutions and banks are in the business of financing as they provide capital to businesses,
consumers and investors to help them achieve their goals.

Fine Print
Non-standard terms included in a contract, often in a small font.

Finite Reinsurance
A type of reinsurance that transfers over only a finite or limited amount of risk. Risk is reduced
through accounting or financial methods, along with the actual transfer of economic risk. By
transferring less risk to the reinsurer, the insurer receives coverage on its potential claims at a lower
cost than traditional reinsurance.

Finmins
A term used to refer to the financial ministers that head the federal banks of major economic
powers. Depending on the country, a financial minister is responsible for implementing the
monetary policy of a country, mainly through the adjustment of borrowing rates.

Fire Sale
A situation in which the prices of securities in the financial markets are considered to be very low.

Firewall
Legal barriers that prevent both the transference of inside information and the performance of
financial transactions between commercial and investment banks.

Firm Commitment
1. A lending institution's promise to enter into a loan agreement with a specific entity, within a
certain period of time.
2. An underwriter's agreement to assume all inventory risk and purchase all securities directly from
the issuer for sale to the public at the price specified.

Firm Quote
A price quote on a security, made by a dealer or market maker, that guarantees a bid or ask price up
to the amount quoted. This differs from a nominal quote wherein the price and quantity of a bid or
ask quote are not firmly posted.

First Call
A company that gathers research notes and earnings estimates from brokerage analysts. The
estimate is compared to the actual reported earnings, and then the difference between the two is the
earnings surprise.

First In, First Out - FIFO


An asset-management and valuation method in which the assets produced or acquired first are sold,
used or disposed of first. FIFO may be used by a individual or a corporation

First In, Still Here - FISH


An accounting buzzword that describe when companies still have inventory on hand that is not
being sold due to inattention or obsolescence. While not an official type of accounting treatment, the
term is named after the LIFO and FIFO accounting methods.
First Notice Day
The first day that a notice of intent to deliver a commodity can be made by a clearinghouse to a
buyer in fulfillment of a given month's futures contract.

First-Time Homebuyer
An IRA owner who is exempt from the early-distribution penalty (which applies to IRA distributions
that occur before the IRA owner reaches age 59.5) for distributing funds from his or her IRA to buy,
build, or rebuild a home when having had no interest in a main home during the two-year period
ending on the date of acquisition of the home for which the distribution is being made.

Fiscal Agent
An organization, such as a bank or trust company, that takes responsibility for the fiscal duties of an
unrelated party.

Fiscal Capacity
In economics, the ability of groups, institutions, etc. to generate revenue. The fiscal capacity of
governments depends on a variety of factors including industrial capacity, natural resource wealth
and personal incomes.

Fiscal Deficit
When a government's total expenditures exceed the revenue that it generates (excluding money
from borrowings). Deficit differs from debt, which is an accumulation of yearly deficits.

Fiscal Policy
Government spending policies that influence macroeconomic conditions. These policies affect tax
rates, interest rates and government spending, in an effort to control the economy.

Fiscal Policy
Government spending policies that influence macroeconomic conditions. These policies affect tax
rates, interest rates and government spending, in an effort to control the economy.

Fiscal Quarter End


The date in which a company's fiscal quarter ends. On a Daily Graph, this is noted by month, day
and year. The fiscal quarter that marks the company's fiscal year end is presented with its date in
blue. To determine the fiscal quarter number of a particular item, use the fiscal year end quarter and
count backward (right to left).

* Indicates quarterly earnings were reported within the last 14 days.

Fiscal Year - FY
Any 12-month period that a company uses for accounting purposes.

Fiscal Year-End
The completion of a one-year, or 12-month, accounting period.

Fisher Effect
A theory describing the long-run relationship between inflation and interest rates.

Fisher Effect
A theory describing the long-run relationship between inflation and interest rates.

Fisher's Separation Theorem


A theory stating that:
1. A firm's choice of investments are separate from its owner's attitudes towards the investments.
2. It is possible to separate a firm's investment decisions from the firm's financial decisions.
Five Against Bond Spread - FAB
A spread in the futures markets created by taking offsetting positions in futures contracts for five-
year treasury bonds and long-term (15-30 year) treasury bonds.

Five Against Note Spread - FAN


A spread in the futures markets created by taking offsetting positions in futures contracts for five-
year treasury notes and ten-year treasury bonds.

Five-Year Rule
If a retirement account owner dies before the required beginning date for receiving distributions, the
beneficiary may distribute the inherited assets over his/her (the beneficiary's) life expectancy or
distribute the assets under the five-year rule. Under the five-year rule, the assets must be distributed
by December 31 of the fifth year since the retirement account owner's death.

Fixed Annuity
An insurance contract in which the insurance company makes fixed dollar payments to the
annuitant for the term of the contract, usually until the annuitant dies. The insurance company
guarantees both earnings and principal.

Fixed Asset
A long-term tangible piece of property that a firm owns and uses in the production of its income and
is not expected to be consumed or converted into cash any sooner than at least one year's time.

Fixed Asset
A long-term tangible piece of property that a firm owns and uses in the production of its income and
is not expected to be consumed or converted into cash any sooner than at least one year's time.

Fixed Cost
A cost that remains constant, regardless of any change in a company's activity.

Fixed Exchange Rate


A country's exchange rate regime under which the government or central bank ties the official
exchange rate to another country's currency (or the price of gold). The purpose of a fixed exchange
rate system is to maintain a country's currency value within a very narrow band. Also known as
pegged exchange rate.

Fixed Income
A type of investing or budgeting style for which real return rates or periodic income is received in
regular intervals at reasonably predictable levels. Fixed-income budgeters and investors are often
one and the same - typically, retired individuals who rely on their investments to provide a regular,
stable income stream. This demographic tends to invest heavily in fixed-income investments
because of the reliable returns they offer.

Fixed Income Clearing Corporation - FICC


An agency that deals with the confirmation, settlement and delivery of fixed-income assets in the
U.S. The agency ensures the systematic and efficient settlement of U.S. Government securities and
mortgage-backed security transactions in the market.

Fixed Interest Rate


A loan or mortgage with an interest rate that will remain at a predetermined rate for the entire term of
the loan.

Fixed Term
Describes an investment vehicle, usually some kind of debt instrument, that has a fixed time period
of investment. With a fixed-term investment, the investor parts with his or her money for a specified
period of time and is repaid his or her principal investment only at the end of the investment period.
Fixed-Charge Coverage Ratio
A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases.
It is calculated as the following:

Fixed-For-Fixed Swaps
An arrangement between two parties (known as counterparties) in which both parties pay a fixed
interest rate that they could not otherwise obtain outside of a swap arrangement.

Fixed-For-Fixed Swaps
An arrangement between two parties (known as counterparties) in which both parties pay a fixed
interest rate that they could not otherwise obtain outside of a swap arrangement.

Fixed-For-Floating Swap
An advantageous arrangement between two parties (counterparties), in which one party pays a fixed
rate, while the other pays a floating rate.

Fixed-Income Arbitrage
An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities.
When using a fixed-income arbitrage strategy, the investor assumes opposing positions in the
market to take advantage of small price discrepancies while limiting interest rate risk.

Fixed-Income Security
An investment that provides a return in the form of fixed periodic payments and eventual return of
principal at maturity. Unlike a variable-income security, where payments change based on some
underlying measure such as short-term interest rates, the payments of a fixed-income security are
known in advance.

Fixed-Income Style Box


A nine-box matrix that displays the characteristics of international and domestic fixed-income
investment funds. On the horizontal axis, funds are separated into one of three categories - either
short term, intermediate term, or long term, depending upon the average effective duration of the
bonds contained in the fund. On the vertical axis, funds are separated into one of three categories
depending upon the average investment grade of the bonds in the fund. Bond funds with average
ratings from 'AAA' to 'AA' are considered high quality. Funds with average ratings from 'A' to 'BBB'
are considered medium quality. Those with average ratings below 'BB' are considered low quality.

Fixed-Rate Capital Securities


A security issued by a corporation that has a $25 par value (although some are issued with a $1,000
par value) and offers investors a combination of the features of corporate bonds and preferred
stock. These securities provide the benefits of attractive yields, fixed monthly, quarterly or
semiannual income, investment time frames that are generally predictable (20-49 years, although
some are perpetual), liquidity and investment-grade credit quality (in most cases).

FJD
In currencies, this is the abbreviation for the Fiji Dollar.

FKP
In currencies, this is the abbreviation for the Falkland Islands Pound.

Flag
A technical charting pattern that looks like a flag with a mast on either side. Flags result from price
fluctuations within a narrow range and mark a consolidation before the previous move resumes.
Likewise, "pennant" formations are usually treated like flag formations because they are very similar
in appearance, tend to show up at the same place in an existing trend, and have the same volume
and measuring criteria.
Flash Price
Ticker tape display designation used when volume on an exchange is so heavy that the tape runs
more than five minutes behind. The "flash price" interrupts the delayed prices to show the current
price of a heavily traded stock.

Flat
1. A price that is neither rising nor declining.
2. In forex, the condition of being neither long nor short in a particular currency. Also referred to as
'being square'.
3. A bond that is trading without accrued interest.

Flat base
One of three positive chart patterns to look for when doing technical analysis. It usually occurs after
a stock has advanced off of a 'cup with handle' or 'double bottom' pattern. The 'flat base' moves
straight sideways in a fairly tight price range for at least five weeks and does not correct more than
8% to 12%.

Flat base
One of three positive chart patterns to look for when doing technical analysis. It usually occurs after
a stock has advanced off of a 'cup with handle' or 'double bottom' pattern. The 'flat base' moves
straight sideways in a fairly tight price range for at least five weeks and does not correct more than
8% to 12%.

Flat Benefit Formula


A method of calculating an employer's contribution to an employee's defined benefit plan whereby
the employer multiplies an employee's months of service by a predetermined flat monthly rate.

Flat Benefit Formula


A method of calculating an employer's contribution to an employee's defined benefit plan whereby
the employer multiplies an employee's months of service by a predetermined flat monthly rate.

Flat Benefit Formula


A method of calculating an employer's contribution to an employee's defined benefit plan whereby
the employer multiplies an employee's months of service by a predetermined flat monthly rate.

Flat Tax
A system that taxes everyone at the same rate, regardless of their income bracket.

Flat Yield Curve


A yield curve in which there is little difference between short-term and long-term rates for bonds of
the same credit quality. This type of yield curve is often seen during transitions between normal and
inverted curves.

Flat Yield Curve


A yield curve in which there is little difference between short-term and long-term rates for bonds of
the same credit quality. This type of yield curve is often seen during transitions between normal and
inverted curves.

Flexible Exchange Option - FLEX


An option, generally written by a clearing house, whose expiration date, strike price, and exercising
style can be modified.
Flight to Quality
The action of investors moving their capital away from riskier investments to the safest possible
investment vehicles. This flight is usually caused by uncertainty in the financial or international
markets. However, at other times, this move may be an instance of investors cutting back on the
more volatile investments for the conservative ones (i.e. diversifying) without much consideration of
the international markets.

Flight to Quality
The action of investors moving their capital away from riskier investments to the safest possible
investment vehicles. This flight is usually caused by uncertainty in the financial or international
markets. However, at other times, this move may be an instance of investors cutting back on the
more volatile investments for the conservative ones (i.e. diversifying) without much consideration of
the international markets

Flight to Quality
The action of investors moving their capital away from riskier investments to the safest possible
investment vehicles. This flight is usually caused by uncertainty in the financial or international
markets. However, at other times, this move may be an instance of investors cutting back on the
more volatile investments for the conservative ones (i.e. diversifying) without much consideration of
the international markets.

Flip
A point when traders shift from having more long positions to having more short positions.

Flipper
A short-term investor or day trader who buys pre-IPO shares, swiftly spinning them out into public
markets for a quick profit.

Float
The total number of shares publicly owned and available for trading. The float is calculated by
subtracting restricted shares from outstanding shares.
Also known as "free float".

Floater
A bond or other type of debt whose coupon rate changes with market conditions (short-term interest
rates). Also known as "floating-rate debt".

Floater Insurance
A type of insurance policy that covers property that is easily movable and provides additional
coverage over what normal insurance policies do not. This can cover anything from jewelery to
expensive stereo equipment.

Floating Exchange Rate


A country's exchange rate regime where its currency is set by the foreign-exchange market through
supply and demand for that particular currency relative to other currencies. Thus, floating exchange
rates change freely and are determined by trading in the forex market. This is in contrast to a "fixed
exchange rate" regime.

Floating-Rate Note - FRN


A note with a variable interest rate. The adjustments to the interest rate are usually made every six
months and are tied to a certain money-market index. Also known as a "floater".

Floor
The lowest acceptable limit as restricted by controlling parties.

Floor Broker - FB
An employee of a member firm who executes trades on the exchange floor on behalf of the firm's
clients
Floor Trader - FT
An exchange member who executes transactions from the floor of the exchange exclusively for their
own account.

Floortion
A type of option that gives the holder the right, but not the obligation, to purchase or sell an interest
rate floor at a specific price during a predetermined period of time. The only upfront cost to the
holder is the premium the holder has to pay to purchase the option.
Floortion
A type of option that gives the holder the right, but not the obligation, to purchase or sell an interest
rate floor at a specific price during a predetermined period of time. The only upfront cost to the
holder is the premium the holder has to pay to purchase the option.

Flotation
The process of changing a private company into a public company by issuing shares and soliciting
the public to purchase them.

Flotation
The process of changing a private company into a public company by issuing shares and soliciting
the public to purchase them.

Flotation Cost
The costs associated with the issuance of new securities.

Flower Bond
Fixed income products that were originally purchased by investors at a discount for the purpose of
paying federal estate taxes upon their maturity.

FMAN
An acronym representing the months February, May, August, and November.

Focus List
A list of recommended stocks published by an investment firm's research department. Focus lists
generally consist of a small number of stocks that the firm believes are the most attractive
opportunities at the time.

Focused Fund
Funds that contain a large holding of a small amount of stocks.

Follow-On Offering
An offering of additional shares after a company has had an initial public offering.

Follow-Through Day Concept


System developed by William J. O'Neil to identify an important change in general market direction
from a definite downtrend to a new uptrend. From the beginning of any attempted rally during a
definite downtrend, a 'follow-through' day is identified when the index closes up 1.7% or more for the
day on a significant increase in volume from the day before. The first two or three days of a rally are
normally disregarded as it has not yet proven it will succeed and 'follow-through' with power and
conviction. 'Follow-through' days therefore generally occur the fourth through seventh day of the
attempted rally. They serve as a confirmation that the market has really changed direction and is in a
new uptrend.

Fool's Gold
Also known as Iron Pyrite, fool's gold is a gold colored mineral that is often mistaken for real gold.

Footnote
Additional information provided in a company's financial statements. Footnotes report the details
and additional information that are left out of the main reporting documents, such as the balance
sheet and income statement. This is done mainly for the sake of clarity because footnotes can be
quite long, and if they were included, they would cloud the data reported in the financial statements.

Footsie
A slang term for the FTSE 100 index.

Forbearance
A postponement of loan payments, granted by a lender or creditor, for a temporary period of time.
This is done to give the borrower time to make up for overdue payments.

Force Majeure
A French term literally translated as "greater force", this clause is included in contracts to remove
liability for natural and unavoidable catastrophes that interrupt the expected course of events and
restrict participants from fulfilling obligations.

Forced Conversion
The occurrence of an issuer of a convertible security exercising the right to call the issue, forcing
investors to convert their securities into the predetermined number of shares.

Forced Liquidation
An action taken by brokerage houses that offsets and closes all positions within delinquent
customer accounts in order to reduce exposure.

Forecasting
The process of analyzing current and historical data to determine future trends

Foreclosure
A situation in which a homeowner is unable to make principal and/or interest payments on his or her
mortgage, so the lender, be it a bank or building society, can seize and sell the property as
stipulated in the terms of the mortgage contract.

Foreign
1. A non-U.S. company with securities trading on the North American market.
2. In general, any corporation organized under the laws of another country.

Foreign Bond
A bond that is issued in a domestic market by a foreign entity, in the domestic market's currency.

Foreign Branch Bank


A type of foreign bank that is obligated to follow the regulations of both the home and host
countries. Because the foreign branch banks' loan limits are based on the parent bank's capital,
foreign banks can provide more loans than subsidiary banks.

Foreign Currency Convertible Bond - FCCB


A type of convertible bond issued in a currency different than the issuer's domestic currency. In
other words, the money being raised by the issuing company is in the form of a foreign currency. A
convertible bond is a mix between a debt and equity instrument. It acts like a bond by making
regular coupon and principal payments, but these bonds also give the bondholder the option to
convert the bond into stock.

Foreign Currency Effects


The gain or loss on foreign investments due to changes in the relative value of assets denominated
in a currency other than the principal currency with which a company normally conducts business.
A rising domestic currency means foreign investments will result in lower returns when converted
back to the domestic currency. The opposite is true for a declining domestic currency.
Foreign Direct Investment - FDI
An investment abroad, usually where the company being invested in is controlled by the foreign
corporation.

Foreign Institutional Investor - FII


An investor or investment fund that is from or registered in a country outside of the one in which it
is currently investing. Institutional investors include hedge funds, insurance companies, pension
funds and mutual funds.

Foreign Institutional Investor - FII


An investor or investment fund that is from or registered in a country outside of the one in which it
is currently investing. Institutional investors include hedge funds, insurance companies, pension
funds and mutual funds.

Foreign Official Dollar Reserves - FRODOR


A term coined by economist Ed Yardeni relating international liquidity to the effect of foreign central
banks on U.S. monetary policy. It is measured as the sum of U.S. Treasury and U.S. agency
securities held by foreign banks.

Foreign Plan
A retirement savings plan created by a person or a company to benefit individuals who are not
Canadian residents. These beneficiaries may or may not be Canadian citizens, but the plan applies
to income they earn for services they perform outside of Canada.

Foreign-Exchange Risk
1. The risk of an investment's value changing due to changes in currency exchange rates.
2. The risk that an investor will have to close out a long or short position in a foreign currency at a
loss due to an adverse movement in exchange rates. Also known as "currency risk" or "exchange-
rate risk".

Forensic Accounting
Forensic Accounting utilizes accounting, auditing, and investigative skills to conduct an
examination into a company's financial statements. Thus, providing an accounting analysis that is
suitable for court.

Forex - FX
The foreign exchange (also known as "forex" or "FX") market is the place where currencies are
traded. The overall forex market is the largest, most liquid market in the world with an average
traded value that exceeds $1.9 trillion per day and includes all of the currencies in the world.

Forex Futures
An exchange-traded contract to buy or sell a specified amount of a given currency at a
predetermined price on a set date in the future. All forex futures are written with a specific
termination date, at which point delivery of the currency must occur unless an offsetting trade is
made on the initial position.

Forfaiting
The purchasing of an exporter's receivables (the amount importers owe the exporter) at a discount
by paying cash. The forfaiter, the purchaser of the receivables, becomes the entity to whom the
importer is obliged to pay its debt.

Forfeiture
The loss of an asset, or rights to an asset, as a result of defaulting on contractual obligations or
conditions.

Form 1099-DIV
A form sent to investors by investment fund companies. The form is a record of all taxable capital
gains and dividends paid to an investor, including those that have been re-invested in a given
taxation year. The amounts stated on the form represent the amounts that fund companies are
attributing to each investor's investment return for the year and reporting to the IRS. Investors use
Form 1099-DIV to help report income received from investments on their tax return each year.

Form 1099-R
An Internal Revenue Service (IRS) form with which an individual reports his or her distributions from
annuities, profit-sharing plans, retirement plans, IRAs, insurance contracts and/or pensions. The
following are some of the items included on the form: the gross distribution paid during the given
tax year, the amount of the distribution that is taxable, the federal income tax that has been withheld,
the contributions made to the investment or premiums paid, and a code that represents the type of
distributions made to the holder of the plan.

Form 13F
An SEC reporting form filed by institutional investment managers in accordance with the provisions
of section 13(f) of the Securities and Exchange Act of 1934, which states that all institutional
investment managers who are managing over $100 million on the last trading day of any month of
the calendar year must disclose their holdings on a quarterly basis.

Form 144
A form that must be filed with the SEC when an executive officer, director, or affiliate of a company
places an order to sell that company's stock. Also known as Rule 144.

Form 3
A document that must be filed with the Securities and Exchange Commission (SEC) by an insider
affiliated with a public company's operation or by any investor owning 10% or more of the
company's outstanding shares.

Form 4
A document that must be filed with the Securities and Exchange Commission (SEC) whenever there
is a material change in the holdings of company insiders (including shareholders owning 10% or
more of the company's outstanding stock).

Form 5
A document that must be filed with the Securities and Exchange Commission (SEC) by an insider
who has conducted insider transactions during the year which were not previously reported via a
Form 4 submission.

Form S-4
A form that must be submitted to the Securities and Exchange Commission in the event of a merger
or acquisition between two companies. The form must also be submitted for exchange offers.

Form T
A form required by the NASD for reporting an equity trade executed after normal market hours.
Formal Tax Legislation
The steps required to propose a new tax law or a change to an existing one. The process involves
the President and Congress.

Fortune 500
An annual list of the 500 largest companies in the United States. The list is compiled using the most
recent figures for revenue
Forward Averaging
Treating lump-sum retirement-plan distributions as if they occurred over a five- or ten-year period.
Forward averaging is available only to qualified plan participants who were born before 1936 and
meet certain requirements.

Forward Averaging
Treating lump-sum retirement-plan distributions as if they occurred over a five- or ten-year period.
Forward averaging is available only to qualified plan participants who were born before 1936 and
meet certain requirements.

Forward Contract
A cash market transaction in which delivery of the commodity is deferred until after the contract has
been made. Although the delivery is made in the future, the price is determined on the initial trade
date.

Forward Earnings
A company's forecasted, or estimated, earnings made by analysts or by the company itself. Forward
earnings differ from trailing earnings (which is the figure that is quoted more often) in that they are a
projection and not a fact. There is are many methods used to calculate forward earnings and no
single established way.

Forward Integration
A business strategy that involves a form of vertical integration whereby activities are expanded to
include control of the direct distribution of its products.

Forward Market
The over-the-counter trading of forward contracts.

Forward Points
The number of basis points added to or subtracted from the current spot rate to determine the
forward rate. When points are added to the spot rate, there is a forward points premium when points
are subtracted from the spot rate, there is a points discount.

Forward Price To Earnings - Forward P/E


A measure of the price-to-earnings ratio (P/E) using forecasted earnings for the P/E calculation.
While the earnings used are just an estimate and are not as reliable as current earnings data, there is
still benefit in estimated P/E analysis. The forecasted earnings used in the formula can either be for
the next 12 months or for the next full-year fiscal period.
Also referred to as "estimated price to earnings".

Forward Pricing
A Securities and Exchange Commission regulation that requires that investment companies price all
of their buy and sell orders of fund shares according to the next net asset value (NAV). This
valuation process is for open-end mutual fund transactions in which the mutual fund itself is
constantly issuing and redeeming mutual fund shares at the most recent NAV per share.

Forward Rate
The amount that it will cost to deliver a currency, commodity, or some other asset some time in the
future.

Forward Rate Agreement - FRA


An over-the-counter contract that determines the rate of interest, or the currency exchange rate, to
be paid or received on an obligation beginning at some future start date. Agreements pertaining to
interest rates are normally done using LIBOR.
Also known as a "future rate agreement".

Forward Swap
A swap agreement created through the synthesis of two swaps differing in duration for the purpose
of fulfilling the specific time-frame needs of an investor. Also referred to as a "forward start swap",
"delayed start swap", and a "deferred start swap."

Forward Triangular Merger


A type of merger that occurs when the subsidiary of the acquiring corporation merges with the
target firm.
Foul Weather Fund
A mutual fund that tends to perform well during poor economic conditions.

Found Money
Money or funds that an investor possesses but just discovers.

Four Cs
Short for carat, cut, clarity and color. These four characteristics are the main determinants of a
diamond's value.

Fourier Analysis
A type of mathematical analysis that attempts to identify patterns or cycles in a time series data set
which has already been normalized. By first removing any effects of trends or other complicating
factors from the data set, the effects of periodic cycles or patterns can be identified more accurately,
leaving the analyst with a good estimate of the direction that the data under analysis will take in the
future. Named after the nineteenth-century French mathematician and physicist Joseph Fourier.

Fourth Market
The trading of exchange-listed securities between institutions on a private over-the-counter
computer network, rather than over a recognized exchange such as the New York Stock Exchange
(NYSE) or Nasdaq. Trades between institutions will often be made in large blocks and without a
broker, allowing the institutions to avoid brokerage fees.

Fox-Trot Economy
A term coined by investment strategist Jeffery Saut that describes a period in which "fast-fast"
growth economic figures are expected to be followed by periods of "slow-slow" figures.

Fractal
A type of pattern used in technical analysis to predict a reversal in the current trend. A fractal
pattern consists of five bars and is identified when the price meets the following characteristics:
1. A shift from a downtrend to an uptrend occurs when the lowest bar is located in the middle of the
pattern and two bars with successively higher lows are positioned around it.
2. A shift from an uptrend to a downtrend occurs when the highest bar is located in the middle of the
pattern and two bars with successively lower highs are positioned around it.

Fractional Share
A share of equity that is less than one full share. Fractional shares usually come about from stock
splits, dividend reinvestment plans (DRIPs) and similar corporate actions. Normally, fractional
shares cannot be acquired from the market.

Fractional Share
A share of equity that is less than one full share. Fractional shares usually come about from stock
splits, dividend reinvestment plans (DRIPs) and similar corporate actions. Normally, fractional
shares cannot be acquired from the market.

Franked Dividend
An arrangement in Australia that elimintates the double taxation of dividends. Dividends are
dispersed with tax imputations attached to them. The shareholder is able to reduce the tax paid on
the dividend by an amount equal to the tax imputation credits. Basically taxation of dividends has
been partially paid by the company issuing the dividend.

Franked Income
After-tax investment income that is distributed by one U.K. company to another. This income is often
distributed in the form of dividends. The idea behind franked income is to prevent double taxation.

Fraption
A type of option that gives the option holder the opportunity to enter into a forward rate agreement
at a specific strike price during a predetermined amount of time. Buyers use fraptions to protect
against falls in interest rates at the cost of a slight premium.
Also known as an "interest rate guarantee".

Fraudulent Conveyance
The illegal transfer of property to another party in order to defer, hinder or defraud creditors.

Freddie Mac - Federal Home Loan Mortgage Corp - FHLMC


A congressionally chartered institution that buys mortgages from lenders and resells them as
securities on the secondary mortgage market.

Free Alongside - FAS


A trade term requiring the seller to deliver goods to a named port alongside a vessel designated by
the buyer. "Alongside" means that the goods are within reach of a ship's lifting tackle.
When used in trade terms, the word "free" means the seller has an obligation to deliver goods to a
named place for transfer to a carrier.

Free and Clear


A slang phrase describing the situation of someone when he or she gains outright ownership of an
asset, such as when it is completely paid off and no creditor has a claim on the property.

Free Asset Ratio - FAR


The market value of an insurance company's assets in excess of its policy liabilities

Free Carrier - FCA


A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where
the carrier operates. Costs for transportation and risk of loss transfer to the buyer after delivery to
the carrier.
When used in trade terms, the word "free" means the seller has an obligation to deliver goods to a
named place for transfer to a carrier.

Free Cash Flow To Equity - FCFE


This is a measure of how much cash can be paid to the equity shareholders of the company after all
expenses, reinvestment and debt repayment.

Free Credit Balance


The cash held by a broker in a customer's margin account that can be withdrawn by the customer at
any time without restriction. This balance is calculated as the total remaining money in a margin
account after margin requirements, short sale proceeds and special miscellaneous accounts are
taken into consideration.

Free Market
A market economy based on supply and demand with little or no government control. A completely
free market is an idealized form of a market economy where buyers and sells are allowed to transact
freely (i.e. buy/sell/trade) based on a mutual agreement on price without state intervention in the
form of taxes, subsidies or regulation.
In financial markets, free market stocks are securities that are widely traded and whose prices are
not affected by availability.
In foreign-exchange markets, it is a market where exchange rates are not pegged (by government)
and thus rise and fall freely though supply and demand for currency.

Free Market
A market economy based on supply and demand with little or no government control. A completely
free market is an idealized form of a market economy where buyers and sells are allowed to transact
freely (i.e. buy/sell/trade) based on a mutual agreement on price without state intervention in the
form of taxes, subsidies or regulation.
In financial markets, free market stocks are securities that are widely traded and whose prices are
not affected by availability.
In foreign-exchange markets, it is a market where exchange rates are not pegged (by government)
and thus rise and fall freely though supply and demand for currency.

Free On Board - FOB


A trade term requiring the seller to deliver goods on board a vessel designated by the buyer. The
seller fulfills its obligations to deliver when the goods have passed over the ship's rail.
When used in trade terms, the word "free" means the seller has an obligation to deliver goods to a
named place for transfer to a carrier.

Free-Crowd System
A system of commodity trading in which floor members can make bids and offers simultaneously for
personal or customer accounts, which is common in the U.S.

Free-Crowd System
A system of commodity trading in which floor members can make bids and offers simultaneously for
personal or customer accounts, which is common in the U.S.

Freeriding
1. An illegal practice in which an underwriting syndicate member withholds part of a new securities
issue and later sells it at a higher price.
2. The illegal activity of buying a stock and selling it before paying for the purchase.

Friction Cost
The implicit and explicit costs associated with market transactions.

Frictional Unemployment
Unemployment that is always present in the economy, resulting from temporary transitions made by
workers and employers or from workers and employers having inconsistent or incomplete
information.

Frictionless Market
A theoretical trading environment where all costs and restraints associated with transactions are
non-existent.

Friendly Hands
A nickname for investors in an IPO who will likely hold onto the security for a long time.

Friends and Family Shares


When a company gives pre-IPO shares to friends and family members.

Front Fee
The premium charged upon the initial purchase of a compound option.

Front Office
The sales personnel and corporate finance employees in a financial services company. It's in the
front office where revenues are generated.

Front Running
The unethical practice of a broker trading an equity based on information from the analyst
department before his or her clients have been given the information.

Front-End Load
A commission or sales fee charged at the time of the initial purchase for an investment, usually
mutual funds and insurance policies. It is deducted from the investment amount and thus, lowers
the size of the investment. For mutual funds, the use of loads is suggested to prevent frequent
trading of the fund, which can hurt a fund if it has to hold large cash reserves to meet payouts.

Front-End Ratio
A ratio that indicates what portion of an individual's income is used to make mortgage payments. It
is calculated as an individual's monthly housing expenses divided by his or her monthly gross
income and is expressed as a percentage. Monthly gross income is simply annual income divided by
12 (months). Lenders use the front-end ratio in conjunction with the back-end ratio to approve
mortgages.
Calculated as:
Front-End Ratio = Monthly Housing Expenses / Monthly Income

Frontspread
A type of options spread in which a trader holds more short positions than long positions. This type
of spread has unlimited risk of loss while also limiting profit potential. This type of trade is often
implemented by professional traders who believe that the price of an underlying asset will make a
calculated move higher or that volatility will decrease.
Also known as a "ratio vertical spread".

Frozen Account
An account to which no withdrawals or purchases can be charged. This usually occurs when the
account holder fails to pay promptly for purchases charged to the account. For example, cash
accounts are frozen for 90 days until the full purchase price of the intended order is paid in full.

FTSE
A company that specializes in index calculation. Although not part of a stock exchange, co-owners
include the London Stock Exchange and the

Fulcrum Fee
An additional, performance-based fee an advisor charges a client. The advisor charges the fee when
he or she achieves a return above a specified benchmark.

Fulcrum Point
A point of inflection (POI) on a graph where the pattern of the financial instrument's payout changes
direction.

Full Carry
A futures market in which the price difference between contracts with two different delivery months
equals the full cost of carrying the commodity from the delivery month of the first contract to the
next. Carrying costs include interest, insurance and storage. Also known as "full carry market" or
"full carrying charge market".

Full Charge
The event in which the price of a futures contract covers all of the carrying charges of the underlying
asset, such as storage and insurance. Also referred to as a "full carry".

Full Ratchet
An anti-dilution provision that, for any shares of common stock sold by a company after the issuing
of an option (or convertible security), applies the lowest sale price as being the adjusted option price
or conversion ratio for existing shareholders.

Full Stock
A stock with a par value of $100 per share. This can be either a preferred or common share.

Full-Service Broker
A broker that provides a large variety of services to its clients, including research and advice,
retirement planning, tax tips, and much more. Of course, this all comes at a price, as commissions at
full-service brokerages are much higher than those at discount brokers.
Full-Time Student
A status that is important for determining dependency exemptions. An individual enrolled in a post-
secondary institution may be eligible for certain tax breaks.

Fully Diluted Shares


The total number of shares that would be outstanding if all possible sources of conversion (such as
convertible bonds and stock options) were exercised. Companies often release specific financial
figures in terms of fully diluted shares outstanding (such as the company's profits reported on a
fully diluted per share basis) to allow investors the ability to properly assess the company's financial
situation.

Fully Subscribed
A situation in which an underwriting firm has successfully sold to investors all of its available issues
of a public offering of securities. When the issue is fully subscribed, the underwriter's risk of being
undersubscribed (being unable to sell its allotment of the issue) is completely removed.
Also referred to in slang terms as "pot is clean".

Fully Valued
A stock whose price analysts believe reflects the market's recognition of the company's underlying
fundamental earnings power and therefore is unlikely to rise further in price. If the stock goes up
from that price, it is called overvalued. If the stock goes down, it is termed undervalued.

Fund of Funds
A mutual fund that invests in other mutual funds

Fundamental Analysis
A method of evaluating a stock by attempting to measure its intrinsic value. Fundamental analysts
study everything from the overall economy and industry conditions, to the financial condition and
management of companies.

Fundamental Rank
This compares a stock's Fundamental Rating to the other stocks in its industry group. For example,
5th out of 100 indicates a stock's Fundamental Rating is better than 95% of its group. If 2 or more
stocks within a group have the same 1-99 rating, they will receive the same Fundamental Rank. For
example, if 3 stocks have a 99 Fundamental Rating, they will all three be ranked best in group. The
stock with the next best rating will be ranked 4th in group.

Fundamental Rating
This rating examines vital fundamental data for each company and compares it to over 10,000
stocks. Ratings are on a 1 to 99 scale, with 99, for example, representing companies outperforming
99% of all other stocks based on key fundamental factors.
These factors include:
• Annual and quarterly sales and earnings growth rates
•Sales and earnings acceleration
•Earnings stability
•Profit margins and return on equity (ROE)
Components are not equally weighted.
This rating should not be considered a sole indicator to buy or sell a stock but should be
used along with the other Stock Checkup Ratings, as well as price and volume charts.

Fundamentals
Information relating to the economic well-being of a company such as revenue, earnings, assets,
liabilities and growth. These factors are used to determine the worth of an investment in
fundamental analysis.
Funded Debt
Long-term debt that matures after more than one year.

Funding Agreement
Illiquid insurance contracts that provide guaranteed principal repayment and interest payments for a
predetermined period of time.

Funds From Operations - FFO


A figure used by real estate investment trusts (REITS) to define the cash flow from their operations.
It is calculated by adding depreciation and amortization expenses to earnings, and sometimes
quoted on a per share basis.

Fungibility
The interchangeability of listed options, futures contracts, and other instruments dependent upon
identical terms.

Fungibles
Goods, securities or instruments that are equivalent and, therefore, interchangeable. In other words,
they are goods that consist of many identical parts which can be easily replaced by other, identical
goods. If the goods are sold by weight or number, this is a good sign that they are fungible

Furniture, Fixtures & Equipment - FF&E


Movable furniture, fixtures or other equipment that are have no permanent connection to the
structure of a building or utilities. These items depreciate substantially but definitely are important
costs to consider when valuing a company, especially in liquidation.

Furthest Out
Mainly pertaining to options and futures, this is the options or futures contract that has the most
distant deliverly month or expiration.

Future Income Tax


Income tax that is deferred because of discrepancies between a company's tax return and the tax
calculated on the company's financial statements. Future income tax occurs when there is a greater
amount of deductions on taxable income than on the net income that is calculated on a company's
income statement.

Future Value - FV
The value of an asset or cash at a specified date in the future that is equivalent in value to a
specified sum today. There are two ways to calculate FV:
1) For an asset with simple annual interest: = Original Investment x (1+(interest rate*number of
years))
2) For an asset with interest compounded annually: = Original Investment x ((1+interest
rate)^number of years)

Futures
A financial contract obligating the buyer to purchase an asset (or the seller to sell an asset), such as
a physical commodity or a financial instrument, at a predetermined future date and price. Futures
contracts detail the quality and quantity of the underlying asset they are standardized to facilitate
trading on a futures exchange. Some futures contracts may call for physical delivery of the asset,
while others are settled in cash. The futures markets are characterized by the ability to use very high
leverage relative to stock markets.
Futures can be used either to hedge or to speculate on the price movement of the underlying asset.
For example, a producer of corn could use futures to lock in a certain price and reduce risk (hedge).
On the other hand, anybody could speculate on the price movement of corn by going long or short
using futures.

Futures Bundle
A type of futures order that enables an investor to purchase a predefined number of futures
contracts in each consecutive quarterly delivery month for a period of two or more years.
Futures Commission Merchant - FCM
A merchant involved in the solicitation or acceptance of commodity orders for future delivery of
commodities related to the futures contract market.

Futures Contract
A contractual agreement, generally made on the trading floor of a futures exchange, to buy or sell a
particular commodity or financial instrument at a pre-determined price in the future. Futures
contracts detail the quality and quantity of the underlying asset they are standardized to facilitate
trading on a futures exchange. Some futures contracts may call for physical delivery of the asset,
while others are settled in cash.

Futures Equivalent
The number of futures contracts needed to be associated with a speculative option position.

Futures Exchange
Traditionally, a term referring to a central marketplace where futures contracts and options on
futures contracts are traded. More recently, with the growth in electronic trading, it is also used to
describe the activity of futures trading itself.

Futures Market
An auction market in which participants buy and sell commodity/future contracts for delivery on a
specified future date. Trading is carried on through open yelling and hand signals in a trading pit.

Futures Pack
A type of futures order enabling purchase of a predefined number of futures contracts in four
consecutive delivery months.

Futures Spread
An arbitrage technique whereby you buy one commodity and sell another contract of the same
commodity to capitalize on a discrepancy in prices.

A Nasdaq stock symbol specifying that it is the first preferred bond of the company.

Gain
An increase in the value of an asset or property. A gain is measured as the amount of capital
realized from selling a good at a price higher than the original purchase price.

Gambling Income
Any income that is the result of games of chance or wagers upon events with uncertain outcomes
(gambling). This income is subject to taxation.

Gambling Loss
A loss resulting from games of chance or wagers upon events with uncertain outcomes (gambling).
These losses can only be claimed against gambling income.

Game Theory
A model of optimality taking into consideration not only benefits less costs, but also the interaction
between participants.

Gamma
The rate of change for delta with respect to the underlying asset's price

Gamma Neutral
An asset portfolio whose delta rate of change is zero.

Gann Angles
Created by W.D. Gann, a method of predicting price movements through the relation of geometric
angles in charts depicting time and price.

Gap
A break between prices on a chart that occurs when the price of a stock makes a sharp move up or
down with no trading occurring in between. Gaps can be created by factors such as regular buying
or selling pressure, earnings announcements, a change in an analyst's outlook or any other type of
news release.

Gap (in Price)


It denotes a day where the stock opens and trades several points above or below the previous day's
trading range. It can be identified on a daily chart of a stock's price changes. There are two kinds of
gaps: a break away that occurs just after a stock breaks out of a base, and an exhaustion gap that
occurs after a stock has advanced for many weeks and is very extended from its most recent base
and is close to topping in price. (Also, see Exhaustion gap)

Gap Risk
The risk that an investment's price will change from one level to another with no trading in between.
Usually such movements occur when there are adverse news announcements, which can cause a
stock price to drop substantially from the previous day's closing price.

Garbatrage
An increase in price and trading volume in a particular sector of the economy that results from a
recent takeover creating a change in sentiment towards the sector. Also known as rumortrage.

Garnishment
Money withheld from an individual's paycheck and remitted to another party, usually a creditor.

Gartley Pattern
In technical analysis, it is a complex price pattern based on Fibonacci numbers/ratios. It is used to
determine buy and sell signals by measuring price retracements of a stock's up and down
movement in stock price.

Gas Guzzler Tax


An additional tax on the sale of vehicles that have poor fuel economy.

Gatekeeper
Requirements that must be met before an individual can qualify for a long-term care plan. A person
must qualify for the plan's benefits before he or she can be paid out.

Gather In The Stops


A trading strategy of driving down a stock's price by selling large amounts of stock in order to
trigger preset stop-loss orders, which in turn enhances the decline of the stock.

Gazelle Company
A company growing at an annual rate of 20% or more.

Gazump
A situation in which the price for real estate or land is raised to a higher price than what was
previously verbally agreed upon.
Gazunder
When a buyer reduces his or her bid for a property before the transaction has been signed and
finalized

GBP
In the currency market, this is the abbreviation for the British pound.

GDP Gap
The forfeited output of a country's economy resulting from the failure to create sufficient jobs for all
those willing to work.

GDP Price Deflator


An economic metric that accounts for inflation by converting output measured at current prices into
constant-dollar GDP. The GDP deflator shows how much a change in the base year's GDP relies
upon changes in the price level. Also known as the "GDP implicit price deflator".

Gearing
A fundamental analysis ratio of a company's level of long-term debt to its equity capital and is
expressed in percentage form.
A company with a high gearing - more long-term liabilities than shareholder equity - are considered
speculative.

Gearing Ratio
A general term describing a financial ratio that compares some form of owner's equity (or capital) to
borrowed funds. Gearing is a measure of financial leverage, demonstrating the degree to which a
firm's activities are funded by owner's funds versus creditor's funds.

Gemology
The combined art and science of studying, cutting, valuing, buying and selling precious stones.
Some of the most precious stones that gemologists deal in include diamonds, rubies, sapphires and
emeralds.
Gemology is spelled gemmology outside of North America.

General Agreement On Tariffs And Trade - GATT


An agreement signed in 1947 whose purpose was to promote global trade between members
through a reduction in tariffs.

General Collateral Financing Trades - GCF


General collateral repurchase agreements executed on a blind broker basis through the Government
Securities Clearing Corporation.

General Depreciation System - GDS


The most commonly used modified accelerated cost recovery system (MACRS) for calculating
depreciation. A general depreciation system uses the declining-balance method to depreciate
personal property.

General Ledger
A company's accounting records. This formal ledger contains all the financial accounts and
statements of a business.

General Market & Sectors Page


Found exclusively in Investor's Business Daily, this page includes large graphs of each of the major
market indices, stacked on top of each other so you can easily identify trends and market
divergences. Also included on this page are 'The Big Picture,' sector charts, and the IBD Mutual
Fund Index.
General Market (and General Market Averages, General Market Indices)
Indices that represent the overall picture of the stock market's health. The most commonly known
general market indices are the Dow Jones Industrial Average, the Nasdaq Composite, and the S&P
500.

General Market (and General Market Averages, General Market Indices)


Indices that represent the overall picture of the stock market's health. The most commonly known
general market indices are the Dow Jones Industrial Average, the Nasdaq Composite, and the S&P
500.

General Obligation Bond - GO


A municipal bond backed by the credit and "taxing power" of the issuing jurisdiction rather than the
revenue from a given project.

General Partner
A partner in a business who has unlimited liability.

General Partnership
A arrangement by which partners conducting a business jointly have unlimited liability, which
means their personal assets are liable to the partnership's obligations.

General Public Distribution


A type of primary market offering in which the securities being issued are available to anyone who
has the ability to purchase them. This differs from conventional public distributions of securities in
which underwriting investment banks sell large blocks of the issued securities to large investors.

Generally Accepted Accounting Principles - GAAP


The common set of accounting principles, standards and procedures that companies use to compile
their financial statements. GAAP are a combination of authoritative standards (set by policy boards)
and simply the commonly accepted ways of recording and reporting accounting information.

Generally Accepted Auditing Standards - GAAS


A set of systematic guidelines used by auditors when conducting audits on companies' finances,
ensuring the accuracy, consistency and verifiability of auditors' actions and reports.

Generation-Skipping Trust
A type of legally binding trust agreement in which the contributed assets are passed down to the
grantor's grandchildren, not the grantor's children. The generation to which the grantor's children
belong skips the opportunity to receive the assets in order to avoid the estate taxes that would apply
if the assets were transferred to them.

Gentleman's Agreement
An unwritten agreement or transaction backed only by the integrity of the counterparty to actually
abide by the terms of the agreement. An agreement like this is not legally binding and could have a
negative effect on business relationships if one party decides to default on their promise.

George Soros
Born in Budapest, Hungary, in 1930, George Soros is considered by many to be one of the world's
greatest investors. A famous hedge fund manager, Soros managed the Quantum Fund, a fund that
achieved an average annual return of 30% from 1970-2000. Besides his investing prowess, Soros is
also known for his vast philanthropic activities, donating billions of dollars to various causes
through the Soros Foundation.

GHC
In currencies, this is the abbreviation for the Ghanian Cedi.

Ghosting
An illegal practice whereby two or more market makers collectively attempt to influence and change
the price of a stock. Ghosting is used by corrupt companies to affect stock prices so they can profit
from the price movement.

Gibson's Paradox
An economic observation made by J. M. Keynes during the period of the gold standard that there is
a correlation between interest rates and the general price level. Keynes' finding, which he discusses
in "A Treatise on Money" (1930), is a paradox because it is contrary to the view generally held by
economists at the time, which was that interest rates are correlated to the rate of inflation.

Gift
Property, money or asset that one person transfers to another while receiving nothing in return.

Gift Tax
A federal tax applied to an individual giving anything of value to another person. For something to
be considered a gift, the receiving party cannot pay the giver full value for the gift, but may pay an
amount less than its full value. It is the giver of the gift who is required to pay the gift tax. The
receiver of the gift may pay the gift tax, or a percentage of it, on the giver's behalf in the event that
the giver has exceeded his/her annual personal gift tax deduction limit.

Gifting Phase
The stage in an investor's life where he or she seeks to use his or her accumulated wealth to provide
for the current and future needs of family and friends, as well as to leave a mark on the world by
funding charities of his or her choice through philanthropy. The investor's concerns during this
phase shift from matters of capital accumulation to estate planning and tax minimization.

Gilt Edged Bond


A bond that is issued by a blue chip company. These bonds are considered to be high grade, with
little risk of interest payment interruption or default.

Gilt Fund
A mutual fund that invests in several different types of medium and long-term government securities
in addition to top quality corporate debt. Gilts originated in Britain.

Gilts
Risk-free bonds issued by the British government. They are the equivalent of U.S. Treasury
securities.

Ginnie Mae - Government National Mortgage Association - GNMA


A wholly-owned U.S. government corporation within the U.S. Department of Housing and Urban
Development (HUD). The main focus of Ginnie Mae is to ensure liquidity for U.S. government-insured
mortgages including those insured by the Federal Housing Administration (FHA), the Veterans
Administration (VA) and the Rural Housing Administration (RHA). The majority of mortgages
securitized as Ginnie Mae mortgage-backed securities are those guaranteed by FHA, which are
typically mortgages for first-time home buyers and low-income borrowers.

Ginzy Trading
An illegal trading practice used by floor brokers. It is considered to be non-competitive, as it
involves the execution of large trades at different prices.

GIP
In currencies, this is the abbreviation for the Gibraltar Pound.
Give Up
A procedure in securities or commodities trading where the executing broker places a trade on
behalf of another broker as if he/she actually executed the trade. This is usually done because a
broker is too busy to place a trade for a client and asks another broker to place the trade for him/her.
On the record books, the trade will not show the executing broker's information, but the broker to
whom the client belongs. Thus, the broker of the client and the broker on the other side of the trade
will receive the commission, while the executing trader will get nothing. This is a grey area of law
governing reimbursement of brokers for services (e.g. research).

Glass-Steagall Act
An Act passed by Congress in 1933, that prohibited commercial banks from collaborating with full-
service brokerage firms or participating in investment banking activities.

Global Bond
Bonds that can be offered within the euromarket and several other markets simultaneously.

Global Crossing
A communication services company that filed for bankruptcy protection amid an accounting scandal
where it had allegedly inflated earnings by using capacity swaps, among other things. Capacity
swaps are the exchange of telecommunications capacity between carriers that is booked as revenue
without money ever being exchanged.

Global Depositary Receipt - GDR


1. A bank certificate issued in more than one country for shares in a foreign company. The shares
are held by a foreign branch of an international bank. The shares trade as domestic shares, but are
offered for sale globally through the various bank branches.
2. A financial instrument used by private markets to raise capital denominated in either U.S. dollars
or euros.

Global Fund
A mutual fund that can invest in companies located anywhere in the world, including your own
country.

Global Investment Performance Standards - GIPS


Ethical standards to be used by investment managers for creating performance presentations that
ensure fair representation and full disclosure of investment performance results.

Global Macro Strategy


A hedge fund strategy that bases its holdings--such as long and short positions in various equity,
fixed income, currency, and futures markets--primarily on overall economic and political views of
various countries (macroeconomic principles).

Global Registered Share


A share issued and registered in multiple markets around the world. Global registered shares
represent the same class of shares. Also known as a "global share".

Globalization
The tendency of investment funds and businesses to move beyond domestic and national markets
to other markets around the globe, thereby increasing the interconnectedness of different markets.
Globalization has had the effect of markedly increasing not only international trade, but also cultural
exchange.

Globex
An electronic trading platform used for derivative, futures, and commodity contracts. Globex runs
continuously, so it is not restricted by borders or time zones.

GMD
In currencies, this is the abbreviation for the Gambian Dalasi.

GNF
In currencies, this is the abbreviation for the Guinea Franc.

GNF
In currencies, this is the abbreviation for the Guinea Franc.

Gnomes of Zurich
A term used by British labor ministers during the 1964 Sterling Crisis to refer to Swiss banks.

Gnomes of Zurich
A term used by British labor ministers during the 1964 Sterling Crisis to refer to Swiss banks.

Going Concern
A term for a company that has the resources needed in order to continue to operate. If a company is
not a going concern, it means the company has gone bankrupt.

Going Public
The process of selling shares that were formerly privately held to new investors for the first time.
Otherwise known as an initial public offering (IPO).

Going-Concern Value
The value of a company as an ongoing entity. This value differs from the value of a company's
assets if they were to be liquidated in that an ongoing operation has the ability to continue to earn
profit, while a liquidated company does not.

Gold Bug
A person who is bullish on gold. Gold bugs believe that gold is still a stable source of wealth like it
was during the years of the gold standard international currency system. A gold bug invests in gold
for (what they perceive) as financial security in the event of a currency devaluation, and often also
believe that the price of gold will continue to rise in the future. The term also refers to analysts who
consistently recommend gold buys.

Gold Certificate
A certificate of ownership that gold investors hold instead of storing the actual gold bullion.

Gold Fix
The setting of gold prices, twice a day, by the five members of the London gold pool. This rate is
used as a benchmark for pricing the majority of global gold products and derivatives.

Gold Standard
A monetary system in which a country's government allows its currency unit to be freely converted
into fixed amounts of gold and vice versa. The exchange rate under the gold standard monetary
system is determined by the economic difference for an ounce of gold between two currencies. The
gold standard was mainly used from 1875 to 1914 and also during the interwar years.

Goldbrick Shares
A stock that bears the surface appearance of quality and worth, but is in fact worth very little.

Golden Boot
An inducement, using maximum incentives and financial benefits, for an older worker to take
"voluntary" early retirement.

Golden Cross
A crossover involving a security's short-term moving average (such as 15-day moving average)
breaking above its long-term moving average (such as 50-day moving average) or resistance level.

Golden Handcuffs
An incentive given to existing employees in hopes that they will decide to stay with the company.

Golden Hello
A signing bonus offered by a securities firm to a key executive from a competing firm.

Golden Life Jacket


An exceptional compensation package offered by the acquiring company to the top executives of
the company being bought. The offer is meant to keep those executives interested in retaining their
positions.

Golden Parachute
Lucrative benefits given to top executives in the event that a company is taken over by another firm,
resulting in the loss of their job. Benefits include items such as stock options, bonuses, severance
pay, etc

Golden Share
A type of share that gives its shareholder veto power over changes to the company's charter.

Goldilocks Economy
An economy that is not so hot that it causes inflation, and not so cold that it causes a recession.
This term is used to describe the U.S. economy of the mid- to late-1990s - it was "not too hot, not too
cold, but just right."

Goldman Sachs Commodity Index - GSCI


A composite index of commodity sector returns which represents a broadly diversified, unleveraged,
long-only position in commodity futures

Good 'Till Canceled - GTC


An order to buy or sell a security at a set price that is active until the investor decides to cancel it or
the trade is executed. If an order does not have a good 'till canceled instruction then the order will
expire at the end of the trading day the order was placed.

Good Delivery
The status of a security traded on an exchange when it meets a set of requirements for being in
proper form for transfer of title to the buyer.

Good Faith Money


The deposit of money into an account by a buyer to show that they have the intention of completing
the deal. In most cases, the deposit amount will be a percent of the amount owed.
The money in an account can also be known as "margin" or a "performance bond", depending on
the type of transaction.

Good This Month - GTM


A limit order placed with a broker that will last until the end of the current month.

Good This Month - GTM


A limit order placed with a broker that will last until the end of the current month.

Goodwill
The excess of the purchase price over the fair market value of an asset. Accountants record this as a
'write off' in the financial report.

Gordon Growth Model


A model for determining the intrinsic value of a stock, based on a future series of dividends that
grow at a constant rate. Given a dividend per share that is payable in one year, and the assumption
that the dividend grows at a constant rate forever (in perpetuity), the model solves for the present
value of the infinite series of future dividends.
Where:
D = Expected dividend per share one year from now.
k = Required rate of return for equity investor.
G = Growth rate in dividends (in perpetuity).

Gorilla
A company that dominates an industry without having a complete monopoly.

Government Purchases
Expenditures made in the private sector by all levels of government, such as when a government
entity contracts a construction company to build office space or pave highways.

Government Security
A government debt obligation (local or national) backed by the credit and taxing power of a country
with very little risk of default.

Government-Sponsored Enterprise - GSE


Privately held corporations with public purposes created by the U.S. Congress to reduce the cost of
capital for certain borrowing sectors of the economy. Members of these sectors include students,
farmers and homeowners.

Government-Sponsored Retirement Arrangement - GSRA


A Canadian retirement plan for individuals who are not employees of a local, provincial or federal
government body, but who are paid for their services from public funds. This type of retirement plan
is not registered with the Canadian Revenue Agency and therefore does not qualify for tax-deferred
status.

Grading Certificate
A document, issued by inspectors or approved graders, that formally signifies the quality of a
commodity.

Graduated Lease
A lease (usually long-term) that is periodically adjusted to reflect the appraised value of the asset
being leased.

Grain Futures Act of 1922


A federal statute passed in 1922 by the U.S Government that established the restriction that all grain
futures need to be traded on regulated futures exchanges. The act also required exchanges to make
more information public and limit the amount of market manipulation.

Grandfather Clause
An exemption that allows persons or entities to continue with an activity they were engaging in
before it became illegal through a change in regulation.

Grantor
1. A seller of either call or put options who profits from the premium for which the options are sold.
Synonymous with option writer.
2. The creator of a trust, meaning the individual whose assets are put into the trust.
Graveyard Market
The period near the end of a prolonged bear market. In a graveyard market, long-time investors have
taken large losses, while new investors prefer to stay liquid by sitting on the sidelines and keeping
their money in cash or cash-equivalent securities until market conditions improve.

Gray Knight
A second, unsolicited bidder in a corporate takeover. A gray knight enters the scene in order to take
advantage of any problems between the first bidder and the target company

Gray Market
1. An unofficial market where new issues of shares are bought and sold before they become
officially available for trading on the stock exchange.
2. The sale or import of goods by unauthorized dealers.

Greater Fool Theory


A theory that it is possible to make money by buying securities, whether overvalued or not, and later
selling them at a profit because there will always be someone (a bigger fool) who is willing to pay the
higher price.

Greeks
Refers to the Greek letters used in options trading.

Green Field Investment


A financial investment by a company or a government to construct a project in basic components.

Greenback
A slang term for U.S. paper dollars.

Greenmail
A situation in which a large block of stock is held by an unfriendly company. This forces the target
company to repurchase the stock at a substantial premium to prevent a takeover. It is also known as
a "Bon Voyage Bonus" or a "Goodbye Kiss".

Greensheet
An information circular prepared by an underwriter that summarizes the main components of a new
issue's prospectus.
Greenshoe Option
Legally referred to as an over-allotment option, a provision contained in an underwriting agreement
which gives the underwriter the right to sell investors more shares than originally planned by the
issuer. This would normally be done if the demand for a security issue proves higher than expected.
A greenshoe option can provide additional price stability to a security issue, since the underwriter
has the ability to increase supply and smooth out price fluctuations if demand surges too high.

Greenspan Put
A description of the perceived attempt of then-chairman of the Federal Reserve Board, Alan
Greenspan, of propping up the securities markets by lowering interest rates and thereby helping
money flow into the markets.
Investors assumed that they would be able to liquidate their stocks at a set price at or before a
future date as if there was a built-in put option. They believed that Greenspan would manipulate
monetary policy and continue to maintain market stability. While the former Fed chair's actions did
have an effect on the markets, it was not necessarily his objective.

Grey Market
1. A market where a product is bought and sold outside of the manufacturer's authorized trading
channels.
2. The unofficial trading of a company's shares, usually before they are issued in an initial public
offering (IPO).

Gridlock
A government, business or institution's inability to function at a normal level due either to complex
or conflicting procedures within the administrative framework or to impending change in the
business.

Grinder
A slang term for a person who works in the investment industry and makes small amounts of money
at a time on small investments, over and over again.

Gross Debt Service Ratio - GDS


A debt service measure that financial lenders use as a rule of thumb to give a preliminary
assessment about whether a potential borrower is already in too much debt. Receiving a ratio of less
than 30% means that the potential borrower has an acceptable level of debt.

Gross Domestic Product - GDP


The monetary value of all the finished goods and services produced within a country's borders in a
specific time period, though GDP is usually calculated on an annual basis. It includes all of private
and public consumption, government outlays, investments and exports less imports that occur
within a defined territory.
GDP = C + G + I + NX
where:
"C" is equal to all private consumption, or consumer spending, in a nation's economy
"G" is the sum of government spending
"I" is the sum of all the country's businesses spending on capital
"NX" is the nation's total net exports, calculated as total exports minus total imports. (NX = Exports -
Imports)

Gross Estate
The total dollar value of all property and assets in which an individual had an interest at the time of
his or her death.

Gross Income
1. An individual's total personal income before taking taxes or deductions into account.
2. A company's revenue minus cost of goods sold. Also called "gross margin" and "gross profit".

Gross Margin
1) A company's total sales revenue minus its cost of goods sold.
2) A company's total sales revenue minus cost of goods sold, divided by the total sales revenue,
expressed as a percentage.
3) In the case of an adjustable-rate mortgage, the interest rate (expressed as a percentage) that is
added on to the base index rate in order to establish the actual interest rate the borrower will pay on
the loan.

Gross Margin Return On Investment - GMROI


An inventory profitability evaluation ratio that analyzes a firm's ability to turn inventory into cash
above the cost of the inventory. It is calculated by dividing the gross margin by the average
inventory cost and is used often in the retail industry. To illustrate:
Gross margin return on investment is also know as the "gross margin return on inventory
investment" (GMROII).

Gross National Product - GNP


An economic statistic that includes GDP, plus any income earned by residents from overseas
investments, minus income earned within the domestic economy by overseas residents.
Gross Processing Margin - GPM
The difference between the cost of a raw commodity and the income it generates once sold as a
finished product.

Gross Production Tax


A state tax imposed primarily on mining companies for each unit mined

Gross Revenue Pledge


A stipulation in a municipal bond indenture that requires the issuer (the municipality selling the
bonds to fund a given development project) first to use revenues to pay down the issue's debt-
servicing costs, delegating operating costs as second priority and likely funding them from other
revenue sources. These bonds are most often tax free at the federal level.

Gross Sales
A measure of overall sales that isn't adjusted for customer discounts or returns, calculated simply
by adding all sales invoices, and not including operating expenses, cost of goods sold, payment of
taxes, or any other charge.

Gross Spread
The difference between the underwriting price received by the issuing company and the actual price
offered to the public.

Group Fundamental Rating


This rating compares the overall fundamental quality of a stock’s industry group to the other 196
industry groups tracked by Investor’s Business Daily. This rating is on a 1 to 99 scale, 99 being best.
A Group Fundamental Rating of 90, for example, indicates a stock’s industry group has stronger
fundamentals than 90% of all other groups. This rating measures key fundamental data affecting a
group’s overall move.
These measurements include:
•Two and three year earnings growth rates
• Average stability of profit margins
• Average trend of return on equity
• Average Earnings Per Share Rating
Components are not equally weighted.
This rating should not be considered a sole indicator to buy or sell a stock but should be used along with the other Stock
Checkup Ratings, as well as price and volume charts.

Group of Eight - G-8


Eight of the world's economically leading countries that in a cooperative effort meet periodically to
address international economic and monetary issues.

Group of Five - G-5


Name given to the five industrialized nations that meet periodically to achieve a cooperative effort on
international economic and monetary issues.

Group Of Seven - G-7


Seven of the world's leading countries that meet periodically to achieve a cooperative effort on
international economic and monetary issues.

Group of Ten - G10


Eleven industrialized nations that meet on an annual basis to consult each other, debate and
cooperate on international financial matters. The member countries are: France, Germany, Belgium,
Italy, Japan, the Netherlands, Sweden, the United Kingdom, the United States and Canada, with
Switzerland playing a minor role.
Group Performance vs. Index
This performance data compares your stock’s industry group’s price performance to the
performance of four major market indexes: the Dow Jones Industrial Average, Nasdaq 100, S & P 500
and Russell 2000. See how your stock’s group as a whole has compared to the general market
indexes over the last four weeks, twelve months and year to date. For example, -10% indicates the
stock’s industry group has underperformed the market index by 10% during the specified time
period.

Group Technical Rating


This rating compares an industry group’s technical strength to the other 196 industry groups
tracked by Investor’s Business Daily. It is rated on a scale of 1 to 99, 99 being best. A company with
a Group Technical Rating of 95, for example, is in an industry that is technically outperforming 95%
of the other industry groups, based on several key measurements.
Factors evaluated include:
•The industry group’s price performance rank for the last 26 weeks
•The group’s percent off its 52-week high
•Percentage of stocks in the group making recent new 52-week highs
•Moving averages and other price trends
• Accumulation/Distribution Ratings
•Relative Price Strength Ratings
Components are not equally weighted.

Group-Home Care
Care given to a group of people with similar disabilities within a residence. Those in a group home
receive both custodial care and care that is provided by skilled and medically trained professionals.
A common disability of people in group homes is Alzheimer's disease.

Groups With the Greatest % of Stocks Making New Highs List


Found on the 'Industry Groups' page of Investor's Business Daily, it is a quick way to recognize the
top four or five sectors that are the real leaders in the overall market.

Growth Accounting
A method whereby a set of economic techniques or theories are used to determine what specific
factor, or factors, contributed to an economy's growth.

Growth At A Reasonable Price - GARP


An approach to investing that combines the two popular strategies of value and growth investing. It
seeks stock that has both growth potential and a reasonable price.

Growth Company
Any firm whose business generates significant positive cash flows or earnings, which increase at
significantly faster rates than the overall economy. A growth company tends to have very profitable
reinvestment opportunities for its own retained earnings. Thus, it typically pays little to no dividends
to stockholders, opting instead to plow most or all of its profits back into its expanding business.

Growth Fund
A diversified portfolio of stocks that has capital appreciation as its primary goal, and thereby invests
in companies that reinvest their earnings into expansion, acquisitions, and/or research and
development.

Growth Industry
A sector of the economy experiencing a higher-than-average growth rate.

Growth Investing
A strategy whereby an investor seeks out stocks with what they deem good growth potential. In
most cases a growth stock is defined as a company whose earnings are expected to grow at an
above-average rate than its industry or the overall market.
Growth Rates
The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other
figures

Growth Stock
Shares in a company whose earnings are expected to grow at an above average rate relative to the
market.
Also known as a "glamor stock".

GTQ
In currencies, this is the abbreviation for the Guatemala Quetzal.

Guaranteed Bond
A type of bond in which the interest and principal on the bond are guaranteed to be paid by a firm
other than the issuer of the bond.

Guaranteed Death Benefit


A benefit term that guarantees that the beneficiary, as named in the contract, will receive a death
benefit if the annuitant dies before the annuity begins paying benefits. The benefit received differs
among companies and contracts, but the beneficiary is guaranteed an amount equal to what was
invested or the value of the contract on the most recent policy anniversary statement, whichever is
higher.

Guaranteed Investment (Interest) Certificate - GIC


A deposit investment security sold by Canadian banks and trust companies. They are often bought
for retirement plans because they provide a low-risk fixed rate of return. The principal is at risk only
if the bank defaults.

Guaranteed Investment Contract - GIC


Insurance contracts that guarantee the owner principal repayment and a fixed or floating interest
rate for a predetermined period of time.

Guaranteed Lifetime Withdrawal Benefit - GLWB


A rider on a variable annuity that allows minimum withdrawals from the invested amount without
having to annuitize the investment. The amount that can be withdrawn is based on a percentage of
the total amount invested in the annuity.

Guaranteed Stock
Common or preferred stock whose dividends are guaranteed.

Guarantor
A person who guarantees to pay for someone else's debt if he or she should default on a loan
obligation.

Guardian
An individual who has been given the legal responsibility to care for a child or adult who is
incapable of taking care of themselves due to age or lack of capacity. The appointed individual is
often responsible for both the care of the ward (the child or incapable adult) and their affairs.
Also referred to as a "conservator" when referring to an adult in need of care.

Guardian IRA
An IRA held in the name of a legal guardian or parent on behalf of either a child under the age of 18-
21 (depending on state legislation) or an individual who is incapable of handling finances due to
physical or mental disability.
Guidance
Information that a company provides as an indication or estimate of their future earnings. Also
known as "earnings guidance."

Guide to Markets
(See Investor's Business Daily Guide to the Markets)

Guilder Share - New York Share


Shares representing Dutch companies that are not permitted to trade outside of national borders.
Also known as a "New York share".

Guilt-Edged Investment
A transaction that makes money by unethical means. Culprits supposedly feel guilty having made
money in such an unscrupulous way.

H
A Nasdaq stock symbol specifying that it is the second preferred bond of the company

H-Shares
A share of a Chinese company listed on the Hong Kong Stock Exchange.

Haircut
1. The difference between prices at which a market maker can buy and sell a security.
2. The percentage by which an asset's market value is reduced for the purpose of calculating capital
requirement, margin and collateral levels.

Half Stock
A stock with a par value of $50.

Hammer
A price pattern in candlestick charting that occurs when a security trades significantly lower than its
opening, but rallies later in the day to close either above or close to its opening price. This pattern
forms a hammer-shaped candlestick.

Hammering
The rapid and concentrated sale of a stock thought to be overvalued by the market. It performed by
investors and speculators who beleive that prices are inflated and that a period of liquidation is
imminent.

Handle
Component of William J. O'Neil's 'cup with handle' chart pattern.

Hands-Off Investor
An investor who accepts a passive management role in a company, even while holding a large
portion of the company's stock.

Hands-On Investor
An investor who holds a large portion of a company's shares and takes an active management role.

Hang Seng
An index of the leading stocks on the Hong Kong stock market.
Hang Seng Index
A market-cap weighted index of the stock prices of the 33 largest companies in Hong Kong.

Hanging Man
A bearish candlestick pattern that forms at the end of an uptrend. It is created when there is a
significant sell-off near the market open, but buyers are able to push this stock back up so that it
closes at or near the opening price. Generally the large sell-off is seen as an early indication that the
bulls (buyers) are losing control and demand for the asset is waning.

Harami Cross
A trend indicated by a large candlestick followed by a doji that is located within the top and bottom
of the candlestick's body. This indicates that the previous trend is about to reverse.

Harami Cross
A trend indicated by a large candlestick followed by a doji that is located within the top and bottom
of the candlestick's body. This indicates that the previous trend is about to reverse.

Hard Currency
A currency, usually from a highly industrialized country, that is widely accepted around the world as
a form of payment for goods and services. A hard currency is expected to remain relatively stable
through a short period of time, and to be highly liquid in the forex market.

Hard Dollars
Fees or payments paid to brokerage firms in return for their services.

Hard Landing
A term used to describe an economy going into recession as the government attempts to slow down
inflation.

Hard Loan
A foreign loan that must be paid in the currency of a nation that has stability and a reputation abroad
for economic strength (a hard currency).

Hard Money
1. Funding by a government or organization that is repetitive, rather than a one-time grant. Examples
include ongoing government daycare subsidies or firms that pay annual scholarships to post-
secondary students.
2. Describes gold/silver/platinum (bullion) coins. A government that uses a hard money policy backs
the value of the currency it uses with a hard, tangible and lasting material that will retain its relative
value over time.

Hard-To-Borrow List
A list used by brokerages to indicate securities considered difficult or unavailable to borrow for
short selling transactions.

Hardening
1. A term used to describe a price of commodity or futures contracts that is gradually stabilizing.
2. A futures market that is slowly advancing in prices.

Harmonic Average
The mean of a set of positive variables. Calculated by dividing the number of observations by the
reciprocal of each number in the series.
Also known as 'harmonic mean'.

Harmonized Index of Consumer Prices - HICP


An inflation indicator used by the European Central Bank.
Harry Markowitz
A Nobel prize winning economist who devised the modern portfolio theory in 1952. Markowitz's
theories emphasized the importance of portfolios, risk, the correlations between securities and
diversification. His work changed the way that people invested.

Haurlan Index
A technical analysis indicator, developed by P.N. Haurlan, that is used to detect market breadth.
There are three components of the Haurlan index:

Short Term: a 3-day exponential moving average is taken of the net NYSE advances over declines.

Intermediate Term: same, using a 20-day exponential moving average.

Long Term:same, using a 200-day exponential moving average.

Hawk
An economic policy advisor who has a negative view toward inflation and its effects on society.
Also known as "inflation hawk".

Hazard Insurance
Insurance protecting a property owner against damages caused by fires or severe storms. If the
owner lives in an area that is prone to natural disasters, like earthquakes and floods, he or she may
need a separate policy.

Head and Shoulders Pattern


A technical analysis term used to describe a chart formation in which a stock's price:
1. Rises to a peak and subsequently declines.
2. Then, the price rises above the former peak and again declines.
3. And finally, rises again, but not to the second peak, and declines once more.
The first and third peaks are shoulders, and the second peak forms the head.

Head Of Household
Someone who is unmarried and resides with a dependent.

Headline Earnings
A basis for measuring earnings per share implemented by the Institute of Investment Management
and Research. This method accounts for all the profits and losses from operational, trading, and
interest activities, that have been discontinued or acquired at any point during the year. Excluded
from this figure are profits or losses associated with the sale or termination of discontinued
operations, fixed assets or related businesses, or from any permanent devaluation or write off of
their values

Headline Effect
The effect that negative news in the popular press has on a corporation or an economy. Whether it is
justified or not, the investing public's reaction to various headlines can be very dramatic. Many
economists believe that negative news headlines make consumers more reluctant to spend money.

Headquarters
The location of a company's main offices, presented as “city, state” when based in the United
States. International listings will also display relevant headquarter information.

Heads of Agreement
A non-binding document outlining the main issues relevant to a tentative partnership agreement.
Health Savings Account - HSA
An account created for individuals who are covered under high-deductible health plans (HDHPs) to
save for medical expenses that HDHPs do not cover. Contributions are made into the account by the
individual or the individual's employer and are limited to a maximum amount each year. The
contributions are invested over time and can be used to pay for qualified medical expenses, which
include most medical care such as dental, vision and over-the-counter drugs.

Heath-Jarrow-Morton Model - HJM Model


A model that applies forward rates to an existing term structure of interest rates to determine
appropriate prices for securities that are sensitive to changes in interest rates.

Heating Degree Day - HDD


The number of degrees that a day's average temperature is below 65

Heavy
A term used to describe a futures market showing difficulty in advancing or a tendency to decline.

Hedge
Making an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge
consists of taking an offsetting position in a related security, such as a futures contract.

Hedge Fund
An aggressively managed portfolio of investments that uses advanced investment strategies such
as leverage, long, short and derivative positions in both domestic and international markets with the
goal of generating high returns (either in an absolute sense or over a specified market benchmark).
Legally, hedge funds are most often set up as private investment partnerships that are open to a
limited number of investors and require a very large initial minimum investment. Investments in
hedge funds are illiquid as they often require investors keep their money in the fund for a minimum
period of at least one year.

Hedge Ratio
1. A ratio comparing the value of a position protected via a hedge with the size of the entire position
itself.
2. A ratio comparing the value of futures contracts purchased or sold to the value of the cash
commodity being hedged.

Hedged Tender
A strategy in a tender offer where an investor short sells a portion of the shares they own. This is to
protect against the risk of loss in the event that the tender offer does not go through.

Hedgelet
A simplified derivative instrument that allows investors to hedge or speculate on economic events
such as housing prices, commodity prices, interest rates, currencies and economic indicators.
The price for a hedgelet contract is based on the prevailing market price determined by participants
in the market. Every contract has the same defined payout scheme: $10 for a correct contract and $0
for an incorrect one. Each hedgelet contract is set so that investors must make a decision on
whether an economic event will occur or not occur.

Hedonic Pricing
A model identifying price factors according to the premise that price is determined both by internal
characteristics of the good and external factors affecting it.

Heikin-Ashi Technique
A type of candlestick chart that shares many characteristics with standard candlestick charts, but
differs because of the values used to create each bar. Instead of using the open-high-low-close
(OHLC) bars like standard candlestick charts, the Heikin-Ashi technique uses a modified formula:
Close = (Open+High+Low+Close)/4
Open = [Open (previous bar) + Close (previous bar)]/2
High = Max (High,Open,Close)
Low = Min (Low,Open, Close)

Heir
A person who inherits some or all of the estate of a recently deceased person. The legal
successor is usually selected because they are related to the deceased by a direct
bloodline or have been designated in a will or by a legal authority.

A Nasdaq stock symbol specifying that it is the third preferred bond of the company.

IBD® 100 Index


The IBD 100, which runs every Monday in the IBD newspaper, is a computer-generated ranking of
leading companies trading in the U.S. Rankings are based on a combination of each company's
recent profit growth record; IBD's Composite Rating, which includes key measures such as return
on equity, sales growth and profit margins; and relative price performance in the last 12 months.
"Quarters of rising sponsorship" counts quarters in a row in which more mutual funds have
purchased a company's shares than have sold shares. A company's inclusion in the list should not
be viewed as a recommendation. Many are newer, smaller and highly volatile companies that require
further research due to their speculative nature.

IBD® 85-85 Index


The 85-85 Index is a computer-generated stock list published in the IBD paper every Friday. The
stock list is generated based on the following criteria: 1) price above $15; 2) stock price within 15%
of its 52-week high; 3) EPS and relative strength rating of 85 or greater; 4) average daily trading
volume of 10,000 shares or more. Thus the number of stocks in the list varies week-to-week
according to the number of stocks that meet the list's criteria.

IBD® Big Cap 20


The IBD Big Cap 20 is a computer-generated ranking of the leading large-capitalization companies
trading in the U.S. The list is featured in the IBD paper every Tuesday. Rankings are based on a
combination of each company's profit growth; IBD's Composite Rating, which includes key
measures such as return on equity, sales growth and profit margins; and relative price strength in
the past 12 months. Some of the companies also appear on the IBD 100, which features a blend of
small- mid- and large-cap names. For investors who prefer less volatile investments with greater
liquidity, the Big Cap 20 offers more mature yet still vibrant enterprises. Companies must have a
minimum market value of $15 billion and trade more than 300,000 shares a day.

IBD Charts
These price and volume charts are in color to help you more easily identify current base patterns
and trends. Just right click on a chart to receive the daily price track box, which provides day’s high,
low, last price and volume.

IBD® New America Index


The IBD New America Index tracks the stocks of all companies covered in "The New America" for six
months. The stocks that comprise this index will change slightly each day, as we add to the index
any new stocks covered in the current day's "The New America" section, and delete any stocks that
we featured exactly six months ago.

IBD SmartSelect® Ratings


Six proprietary and exclusive research ratings designed to screen out deficient stocks, identity
potential market leaders, save time, and significantly improve stock selection. They include:
• Earnings Per Share (EPS) Rating
• Relative Price Strength (RS) Rating
• Industry Group Relative Strength Rating
• Sales+Profit Margins+ROE (SMR) Rating
• Accumulation/Distribution Rating
• Composite Rating
IBD Stock Checkup®
IBD’s Stock Doctor diagnoses the overall strength of your stock after an expert examination of its
technical and fundamental characteristics. Your diagnosis is based on fact of what works in the
market. Stock Checkup also identifies how strong your company’s industry group is. You’ll also find
out whether there are better stocks in the group you might want to consider. This is one Doctor’s
appointment you can’t afford to miss.

Iceberg Order
A large single order that has been divided into smaller lots, usually by the use of an automated
program, for the purpose of hiding the actual order quantity.

Ichimoku Chart
A chart that provides a glance at equilibrium prices for specified securities.

Identity Theft
The crime of obtaining the personal or financial information of another person for the purpose of
assuming that person's name to make transactions or purchases.

Idiosyncratic Risk
Risk that affects a very small number of assets, and can be almost eliminated with diversification.
Similar to unsystematic risk.

Idle Funds
Money that is not invested and, therefore, earning no income. For example, funds in a checking
account.

Idle Time
Unproductive time spent by employees due to factors beyond their control.

IDR
In currencies, this is the abbreviation for the Indonesian Rupiah.

Illiquid
An asset or security that cannot be converted into cash very quickly (or near prevailing market
prices).

ILS
In currencies, this is the abbreviation for the Israeli New Shekel.

Imbalance of Orders
A situation when too many orders of a particular type - either buy, sell or limit - for listed securities
and not enough of the other, matching orders are received by an exchange. Also referred to as
"order imbalance".

ImClone - IMCL
A publicly-traded biotechnology company marketing products in the field of oncology. The company
made international headlines in 2002 after ImClone's founder and CEO Sam Waksal was indicted for
attempting an insider trade of the company's stock. Shortly after Waksal's indictment, "domestic
diva" Martha Stewart was also indicted for insider trading of the same stock. Stewart received
information from Waksal and her own broker that Waksal had been trying to dump $5 million worth
of his shares in the company on insider information, and she sold her shares on the knowledge that
Waksal had tried to sell his.

Immediate Or Cancel Order - IOC


An order requiring that all or part of the order be executed immediately after it has been brought to
the market. Any portions not executed immediately are automatically cancelled.

Immediate Payment Annuity


An annuity contract that is purchased with one payment and has a specified payment plan which
starts immediately.

Immunization
A strategy that matches the durations of assets and liabilities, thereby minimizing the impact of
interest rates on the net worth.

Impact Day
The day that a corporation has a secondary offering of shares to the public.

Impaired Asset
An asset with a market value that is worth less than its book value.

Impaired Credit
The deterioration of a borrower's credit rating.

Impairment
1. A reduction in a company's stated capital.

2. The total capital that is less than the par value of the company's capital stock.

Implicit Cost
A cost that is represented by lost opportunity in the use of a company's own resources, excluding
cash.

Implied Rate
An interest rate that is determined by the difference between the spot rate and the forward/futures
rate. The degree of relative costliness of a future rate can be assessed by comparing the implied rate
with the spot rate.
Calculated as:

Implied Volatility - IV
The estimated volatility of a security's price.

Import
In reference to international trade, these are goods brought into one country from another.

Impression
An advertisement's (usually a banner ad) appearance on a web page. Ad space is often sold on a
CPM basis.

Impulse Wave Pattern


In technical analysis, it is a term used in the Elliott Wave Theory to describe the strong move in a
stock's price coinciding with the main direction of the underlying trend. These impulse waves are
shown in the illustration below as wave 1, wave 3 and wave 5. Impulse waves also refer to the strong
downward movements in a down trend.

Imputed Interest
A term used to describe interest considered to be paid, even through no interest payment has been
made.

In And Out
The purchase and sale of a security within a short period of time, usually on the same day.
In Sight
A term describing deliverable grades of commodities underlying futures contracts that are held in
approved delivery facilities near terminals, centralized locations or production areas.

In Street Name
A brokerage account where the customer's securities and assets are held in the name of the
brokerage firm, rather than you holding the stock certificate yourself. The customer is still listed as
the real or beneficial owner.

In The Money
1. For a call option, when the option's strike price is below the market price of the underlying asset.
2. For a put option, when the strike price is above the market price of the underlying asset.

In the Penalty Box


When a company's stock price is in the doldrums and has yet to rebound because of poor earnings,
government regulation, or some other reason.

In the Pink
An informal expression used to describe a situation in which an investor or an economy is in a good
financial position. More generally, it refers to being in the best of health or condition.

In-Service Withdrawal
A withdrawal made from a plan account before the holder experiences a triggering event.

In-Service Withdrawal
A withdrawal made from a plan account before the holder experiences a triggering event.

Inactivity Fee
A fee charged to investors whose trading activity meets their brokerages' criteria for an inactive
account.

Incentive Stock Option - ISO


A type of employee stock option with a tax benefit, when you exercise, of not having to pay ordinary
income tax. Instead, the options are taxed at a capital gains rate.

Incentive Trust
A legally binding fiduciary relationship in which the trustee holds and manages the assets
contributed to the trust by the grantor. In an incentive trust arrangement, the trustee must adhere to
specific requirements set out by the grantor regarding what conditions the trust's beneficiaries must
meet in order to receive funds from the trust.

Incidents Of Ownership
Any interests or rights that an individual maintains on an asset, including property and insurance,
that allow the person to change, modify, use or benefit from the asset. This is important for
determining estate taxes. An individual can reduce the size of his or her estate by gifting assets to
beneficiaries but, to avoid estate tax on the gift, the original owner must not retain any incidents of
ownership in the gifted assets.

Income
Money received by a person or organization because of effort (work) or from return on investments.

Income Bond
A type of debt security in which only the face value of the bond is promised to be paid to the
investor, with any coupon payments being paid only if the issuing company has enough earnings to
pay for the coupon payment.

Income Deposit Security - IDS


A security that combines common stock and notes of the issuer to provide regular income payments
to the holder of the security. The holder of the income deposit security receives dividends from the
common stock, and fixed income from the debt instrument in the IDS.

Income Elasticity Of Demand


A measure of the relationship between a change in income and a change in quantity of a good
demanded:

Income From Operations - IFO


The profit realized from a business' own operations.

Income Fund
A mutual fund that seeks to provide stable current income by investing in securities that pay interest
or dividends.

Income Share
A class of shares offered by a dual purpose fund that has little room for capital appreciation but
gives the holder a portion of all income earned in the portfolio.

Income Shifting
A strategy of moving a person's income from a high income bracket or tax rate to a lower one.

Income Splitting
A tax reduction strategy employed by families living in areas that are subject to bracketed tax
regulations. The goal of using an income-splitting strategy is to reduce the family's gross tax level,
at the expense of some family members paying higher taxes than they otherwise would.

Income Spreading
A tax reduction strategy that is typically used by people with highly volatile incomes to reduce the
overall marginal tax rate paid on a large sum of income. This strategy involves taking the particularly
large source of income and dividing the amount realized over a period of years in order to reduce
the overall amount of taxes paid.

Income Statement
A financial report that - by summarizing revenues and expenses, and showing the net profit or loss
in a specified accounting period - depicts a business entity's financial performance due to
operations as well as other activities rendering gains or losses. Also known as the "profit and loss
statement" or "statement of revenue and expense".

Income Stock
A stock with a history of regular dividend payments that constitute the largest portion of the stock's
overall return.

Income Tax
A tax on any money earned during a fiscal year, usually filed on a yearly basis. All businesses
except partnerships must file an annual income tax return. Partnerships file an information return.

Income Trust
An investment trust that holds assets which are income producing. The income is passed on to the
unit holders.

Incoterms
Trade terms, published by the International Chamber of Commerce (ICC), that are commonly used in
international contracts.

Incremental Cash Flow


The additional operating cash flow that an organization receives from taking on a new project. A
positive incremental cash flow means that the company's cash flow will increase with the
acceptance of the project.

Incremental Cost
The encompassing change that a company experiences within its balance sheet due to one
additional unit of production.

Also referred to as "marginal cost".

Incumbency Certificate
An official document that lists the names of incumbent individuals and their respective corporate
office within an organization.

Incumbent
An individual that is responsible for a specific office within a corporation.

Indemnity
A contractual agreement made between different parties to compensate for any damages or losses.

Indenture
A contract between an issuer of bonds and the bondholder stating the time period before repayment,
amount of interest paid, if the bond is convertible (and if so, at what price or what ratio), if the bond
is callable and the amount of money that is to be repaid.

Independent Auditor
An external auditor with a certified public accounting designation that qualifies him or her to provide
an auditor's report.

Index
A statistical measure of change in an economy or a securities market. In the case of financial
markets, an index is essentially an imaginary portfolio of securities representing a particular market
or a portion of it. Each index has its own calculation methodology and is usually expressed in terms
of a change from a base value. Thus, the percentage change is more important than the actual
numeric value. For example, knowing that a stock exchange is at, say, 5,000 doesn't tell you much.
However, knowing that the index has risen 30% over the last year to 5,000 gives a much better
demonstration of performance.
The plural of index can be either "indexes" or "indices".

Index Amortizing Note - IAN


A type of structured note whose payment schedule is determined by the behavior of interest rates.

Index Amortizing Swap


A swap whereby the notional principal amount of the agreement is amortized according to the
movement of an underlying rate.

Index Arbitrage
An investment strategy that attempts to profit from the differences between actual and theoretical
futures prices of the same stock index. This is done by simultaneously buying (or selling) a stock
index future while selling (or buying) the stocks in that index.
Index Fund
A portfolio of investments that is weighted the same as a stock-exchange index in order to mirror its
performance.
This process is also referred to as "indexing".

Index Futures
A futures contract on a stock or financial index. For each index there may be a different multiple for
determining the price of the futures contract.

Index Hugger
A mutual fund that tends to perform very similar to a benchmark index like the S&P 500.

Index Option
A call or put option on a financial index.

Index Percentage
The weight an individual stock holds in an index, expressed as a percentage.

Index-Linked Bond
A bond in which payment of income on the principal is related to a specific price index, often the
Consumer Price Index. This feature provides protection to investors by shielding them from changes
in the underlying index. The bond's cash flows are adjusted to ensure that the holder of the bond
receives a known real rate of return.
In Canada, they also referred to as "real return bonds".

Indexing
1. The adjustment of the weights of assets in an investment portfolio so that its performance
matches that of an index.
2. Linking movements of rates to the performance of an index.

Indicated Dividend
The total dividends that would be paid on a share of stock throughout the next year if each dividend
is the same amount as the previous payment.

Indicated Yield
The yield that a share of stock would return based on its current indicated dividend. It is calculated
by dividing the indicated dividend by the current share price. It is usually quoted as a percentage.

Indication of Interest - IOI


An underwriting expression showing a conditional, non-binding interest in buying a security that is
currently in registration (awaiting effectiveness by the SEC). The investor's broker is required to
provide the investor with a preliminary prospectus.

Indicative Quote
In forex trading, a currency quote that is provided by a market maker to a trading party but that is
not firm. In other words, when a market maker provides an indicative quote to a trader, the market
maker is not obligated to trade the given currency pair at the price or the quantity stated in the
quote. Contrast this to a firm quote, in which a market maker guarantees a specified bid or ask price
to a trader up to the maximum quantity specified in the quote.

Indicator
Statistics used to measure current conditions as well as to forecast financial or economic trends.
Indicators are use extensively in technical analysis to predict changes in stock trends or price
patterns. In fundamental analysis, economic indicators that quantify current economic and industry
conditions are used to provide insight into the future profitability potential of public companies.
Indifference Curve
A diagram depicting equal levels of utility (satisfaction) for a consumer faced with various
combinations of goods

Indirect Quote
A foreign exchange rate quoted as the foreign currency per unit of the domestic currency. In an
indirect quote, the foreign currency is a variable amount and the domestic currency is fixed at one
unit.

Indirect Tax
A tax that increases the price of a good so that consumers are actually paying the tax by paying
more for the products.

Individual Development Account - IDA


A savings account for lower income individuals. An IDA is used for a specific purpose such as
education, purchasing a first home, or starting a business. Savings are matched by private or public
funds.

Individual Retirement Account - IRA


An IRA is a retirement investing tool that can be either an "individual retirement account" or an
"individual retirement annuity". There are several types of IRAs: Traditional IRAs, Roth IRAs,
SIMPLE IRAs and SEP IRAs.
Traditional and Roth IRAs are established by individual taxpayers, who are allowed to contribute
100% of compensation (self-employment income for sole proprietors and partners) up to a set
maximum dollar amount. Contributions to the Traditional IRA may be tax-deductible depending on
the taxpayer's income, tax-filing status, and coverage by an employer-sponsored retirement plan.
Roth IRA contributions are not tax-deductible.
SEPs and SIMPLEs are retirement plans established by employers. Individual participant's
contributions are made to SEP IRAs and SIMPLE IRAs.

Industrial Development Revenue Bonds - IDRBs


Municipal debt securities issued by a government agency on behalf of a private sector company and
intended to build or acquire factories or other heavy equipment and tools.

Industry
A category used to describe a company's primary business activity, usually determined by the
largest source of a company's revenues.

Industry Bet
When an investor or portfolio manager increases (or decreases) holdings in a particular industry.

Industry Group
A William O’Neil + Company Inc. proprietary classification of stocks into 197 groups, based on a
company's major source of revenue, competitors, products, markets served, etc.

Industry Group and Ticker Symbol Index


Published by Investor's Business Daily, this book lists the stocks in each of the 197 industry
groups*, sorted three ways (by company name, ticker symbol, and industry group).

*The William O'Neil + Co. 197 Industry Groups is a Trademark owned by William O'Neil + Co., Inc.
and is used by IBD under license agreement.

Industry Group Performance


This measures your stock’s industry group’s percentage change over the last four weeks, twelve
months and year to date. 50%, for example, indicates the industry group as a whole has increased
50% in value within that time period.

Industry Group Rank


A proprietary number obtained by calculating the least-squares curve fit of summed prices on
certain stocks within that industry. Another calculation is then done using all companies in the
group. Separate weightings are used for different time periods. Groups are ranked from 1 (best) to
197.

Industry Group Relative Strength Letter Rating (Group RS)


A measurement of a stock's industry group performance over the past six months utilizing an A+ to
E scale. All 197 groups are compared and distributed into 13 rating groupings: 12 of near equal size
and one comprised of industry groups with "E" ratings. An "A+" rating indicates the best performing
group; an "E" rating indicates the poorest price performing group.

Industry Group Relative Strength Numeric Rating (Group RS)


A percentile-based version of Industry Group Rank, a proprietary number obtained by calculating
the least-squares curve fit of summed prices on certain stocks within that industry. Another
calculation is then done using all companies in the group. Separate weightings are used for different
time periods. Industry groups are ranked in value from 99 (highest) to 1 (lowest).

Inefficient Market
A theory which asserts that the market prices of common stocks and similar securities are not
always accurately priced and tend to deviate from the true discounted value of their future cash
flows. This theory opposes the efficient market hypothesis.
The phrase is also used to refer to a market which is not operating efficiently for example, it could be
argued that the low-volume stocks traded over the counter comprise an inefficient market compared
to blue chip stocks.

Inelastic
An economic term used to describe the situation in which the supply and demand for a good are
unaffected when the price of that good or service changes.

Infant-Industry Theory
A school of thought that believes emerging domestic industries should be protected until they
become stable and mature.

Inflation
The rate at which the general level of prices for goods and services is rising, and, subsequently,
purchasing power is falling.

Inflation-Indexed Security
A security that guarantees a return higher than the rate of inflation if it is held to maturity.

Inflation-Linked Certificates of Deposit


Federally insured debt securities that are similar to regular certificates of deposit (CDs), but provide
investors with inflationary protection via annually variable interest rates that increase or decrease
with changes in the consumer price index, a measure of inflation.

Inflation-Linked Savings Bonds (I Bonds)


U.S. government-issued debt securities similar to regular savings bonds, except they offer an
investor inflationary protection, as their yields are tied to the inflation rate.

Inflation-Protected Annuity - IPA


An annuity investment that guarantees a real rate of return at or above inflation. The real rate of
return is the nominal return, less the inflation rate, thus protecting annuitants and beneficiary
investors from inflation.

Inflation-Protected Security - IPS


A type of fixed-income investment that guarantees a real rate of return. The real rate of return is the
nominal return, less the inflation rate, thus protecting investors from inflation.

Inflationary Psychology
The relationship between inflation and individuals' behavior.

Inflationary Risk
The uncertainty over the future real value (after inflation) of your investment.

Inflection Point
An event that changes the way we think and act.
-Andy Grove, Founder of Intel.

Information Circular
A document sent to shareholders outlining important matters to be discussed at the annual
shareholders' meeting.

Information Ratio
A measure of portfolio management's performance against risk and return relative to a benchmark
or alternative measure.

Infrastructure
The basic physical systems of a business or nation

Ingot
Gold in bar form.

Inheritance
All or part of a person's estate/assets that is given to an heir once the person is deceased.

Inheritance Tax
In some states in the U.S. (and in the United Kingdom), a tax imposed on those who inherit assets
from a deceased person. The tax rate for inheritance taxes depends on the value of the property
received by the heir or beneficiary and his/her relationship to the decedent.
Inheritance tax is known in some countries as a "death duty" and is occasionally called "the last
twist of the taxman's knife".

Initial Claims
A measurement of the number of jobless claims filed by individuals seeking to receive state jobless
benefits. This number is watched closely by financial analysts because it provides insight into the
direction of the economy. Higher initial claims positively correlate with a weakening economy, and
vice versa for lower initial claims.

Initial Margin
The percentage of the purchase price of securities (that can be purchased on margin) that the
investor must pay for with his or her own cash or marginable securities.
Also called the "initital margin requirement".

Initial Public Offering - IPO


The first sale of stock by a private company to the public. IPOs are often issued by smaller, younger
companies seeking capital to expand, but can also be done by large privately-owned companies
looking to become publicly traded.
In an IPO, the issuer obtains the assistance of an underwriting firm, which helps it determine what
type of security to issue (common or preferred), best offering price and time to bring it to market.
Also referred to as a "public offering".

INR
In currencies, this is the abbreviation for the Indian Rupee.

Inside Market
The highest quoted bid and the lowest offer price among competing market makers in a security
trading on the Nasdaq market.

Inside Quote
The highest bid and lowest offer price for a security quoted among all of the market makers
competing in a security.

Insider
Any person who has knowledge of, or access to, valuable nonpublic information about a
corporation.

Insider Information
Material information about a company's activities that has not been disclosed to the public.

Insider Trading
The buying or selling of a security by someone who has access to material, nonpublic information
about the security.

Insolvency
When a company can no longer meet its debt obligations with another firm or institution.

Inspectorial Powers
A state administrator's or other regulatory entity's power to initiate investigations to determine
whether provisions of the Uniform Securities Act have been violated or are about to be violated.

Installment Debt
Debt issued with the condition of regularly occurring intervals for payment by the debtor, until the
principal and interest are paid in full.

Installment Receipt
A debt or equity issuance in which the purchaser does not pay the full value of the issue up front. In
the purchase of an installment receipt, an initial payment is made to the issuer at the time the issue
closes the remaining balance must be paid in installments, usually within a two-year period .
Although the purchaser has not paid the full value of the issue, he or she is still entitled to full voting
rights and dividends.

Instinet
An electronic securities order-matching (trading) and information system that allows members
(primarily professional traders and investors) to display bid and offer quotes for stocks, and to
transact between themselves using brokers. As a global securities broker, Instinet enables over
1,500 institutional customers to trade securities in over 40 global markets.

Institutional Brokers' Estimate System - IBES


A system that gathers and compiles the different estimates made by stock analysts on the future
earnings for the majority of U.S. publicly traded companies.

Institutional Fund
A mutual fund targeting high value investors with low fees, but high minimum requirements.

Institutional Investor
A non-bank person or organization that trades securities in large enough share quantities or dollar
amounts that they qualify for preferential treatment and lower commissions. Institutional investors
face less protective regulations because it is assumed that they are more knowledgeable and better
able to protect themselves.

Institutional Investors
Mutual funds, banks, pension funds, insurance companies, etc. engaged in investing. They are
responsible for most of the trading that occurs in the market, and their impact on both an individual
stock's price movement as well as the movement of the general market is tremendous

Institutional Sponsorship (or Sponsorship)


Refers to the shares of a company owned by an institution. The largest sources of demand for
stocks are mutual funds and other institutional buyers;

Insurance
A contract (policy) in which an individual or entity receives financial protection or reimbursement
against losses from an insurance company. The company pools clients' risks to make payments
more affordable for the insured.

Insurance Score
A rating computed and used by insurance companies that represents the probability of a client filing
an insurance claim during his or her coverage. The score is based on the client's credit rating and
will impact the premiums he or she pays for the insurance coverage - a higher score will result in
lower premiums, and vice versa.

Intangible Asset
An asset that is not physical in nature. Corporate intellectual property (items such as patents,
trademarks, copyrights, business methodologies), goodwill and brand recognition are all common
intangible assets in today's marketplace. An intangible asset can be classified as either indefinite or
definite depending on the specifics of that asset. A company brand name is considered to be an
indefinite asset, as it stays with the company as long as the company continues operations.
However, if a company enters a legal agreement to operate under another company's patent, with no
plans of extending the agreement, it would have a limited life and would be classified as a definite
asset.

Inter-dealer Broker
1. A brokerage firm operating in the bond or OTC derivatives market that acts as an intermediary
between major dealers to facilitate inter-dealer trades.
2. A member of the London Stock Exchange who is only permitted to deal with market makers,
rather than the public.

Inter-Vivos Trust
A trust created during the lifetime of the trustor.

Interbank Market
The financial system and trading of currencies among banks and financial institutions, excluding
retail investors and smaller trading parties. While some interbank trading is performed by banks on
behalf of large customers, most interbank trading takes place from the banks' own accounts.

Interbank Rate
The rate of interest charged on short-term loans made between banks. Banks borrow and lend
money in the interbank market in order to manage liquidity and meet the requirements placed on
them. The interest rate charged depends on the availability of money in the market, on prevailing
rates and on the specific terms of the contract, such as term length.
Intercommodity Spread
Going long on one futures market in a given delivery month and simultaneously going short on the
same commodity and delivery month but a different futures market but with similar underlying asset.
Interdealer Quotation System
The exchange system comprised of the Nasdaq (National Association of Securities Dealers
Automatic Quotation), Nasdaq small-cap market and the Over-the-Counter Bulletin Board (OTCBB)
exchange platforms.

Interdelivery Spread
Simultaneously entering a long and short on the same futures contract but with different delivery
months in the hopes that the price difference between the two months widens or narrows,
depending on the underlying investment.

Interest
1. The charge for the privilege of borrowing money, typically expressed as an annual percentage
rate.
2. The amount of ownership a stockholder has in a company, usually expressed as a percentage.

Interest Coverage Ratio


A ratio used to determine how easily a company can pay interest on outstanding debt. The ratio is
calculated by dividing a company's earnings before interest and taxes (EBIT) of one period by the
company's interest expenses of the same period:

Interest Expense
The amount reported by a company or individual as an expense for borrowed money.

Interest Only (IO) Strips


A security based solely on interest payments from a bond.

Interest Rate
The monthly effective rate paid (or received, if you are a creditor) on borrowed money. Expressed as
a percentage of the sum borrowed.

Interest Rate Ceiling


The absolute maximum rate of interest that a financial institution can charge for an adjustable rate
mortgage or loan.

Interest Rate Floor


An over-the-counter investment instrument that protects the floor buyer from losses resulting from a
decrease in interest rates. The floor seller compensates the buyer with a payoff when the reference
interest rate falls below the floor's strike rate.

Interest Rate Options


An investment tool whose payoff depends on the future level of interest rates. Interest rate options
are both exchange traded and over-the-counter instruments.

Interest Rate Options


An investment tool whose payoff depends on the future level of interest rates. Interest rate options
are both exchange traded and over-the-counter instruments.

Interest Rate Parity


A theory that the interest rate differential between two countries is equal to the differential between
the forward exchange rate and the spot exchange rate. Interest rate parity plays an essential role in
foreign exchange markets, connecting interest rates, spot exchange rates and foreign exchange
rates.

Interest Rate Risk


The risk that an investment's value will change due to a change in the absolute level of interest
rates, in the spread between two rates, in the shape of the yield curve or in any other interest rate
relationship. Such changes usually affect securities inversely and can be reduced by diversifying
(investing in fixed-income securities with different durations) or hedging (e.g. through an interest
rate swap).

Interest Rate Swap


An agreement between two parties (known as counterparties) where one stream of future interest
payments is exchanged for another based on a specified principal amount. Interest rate swaps often
exchange a fixed payment for a floating payment that is linked to an interest rate (most often the
LIBOR). A company will typically use interest rate swaps to limit, or manage, its exposure to
fluctuations in interest rates, or to obtain a marginally lower interest rate than it would have been
able to get without the swap.

Interest Sensitive Stock


Any stock whose price is extremely sensitive to changes in interest rates.

Interested Shareholder
A shareholder or association with beneficial ownership, whether direct or indirect, of enough voting
stock to affect company decisions

Interim Dividend
A dividend payment made before a company's AGM and final financial statements. This declared
dividend usually accompanies the company's interim financial statements.

Intermarket Sector Spread


The yield spread between two fixed-income securities in different sectors with the same maturity.

Intermarket Spread
The simultaneous purchase of a given delivery month of a futures contract on one exchange, and
the simultaneous sale of the same delivery month of the same futures contract on another exchange
in the hope the sale price is greater than the purchase price.

Intermarket Spread Swap


A swap transaction meant to capitalize on a yield discrepancy between bond market sectors.

Internal Audit
An audit performed by a person (or persons) employed by the firm being audited.

Internal Growth Rate


The highest level of growth achievable for a business without obtaining outside financing.

Internal Rate Of Return - IRR


Often used in capital budgeting, it's the interest rate that makes net present value of all cash flow
equal zero.

Internal Revenue Service - IRS


A United States government agency established in 1862 by President Lincoln. The IRS is responsible
for the collection and enforcement of tax collection and operates under the authority of the United
States Department of the Treasury. It is primarily engaged in the collection of individual income
taxes and employment taxes, but also handles corporate, gift, excise and estate taxes.
The IRS is sometimes referred to as the "taxman".

Internalization
A decision by a brokerage to fill an order with the firm's own inventory of stock.
International Accounting Standards - IAS
An older set of standards stating how particular types of transactions and other events should be
reflected in financial statements. In the past, international accounting standards (IAS) were issued
by the Board of the International Accounting Standards Committee (IASC).
Since 2001, the new set of standards has been known as the international financial reporting
standards (IFRS) and has been issued by the International Accounting Standards Board (IASB).

International Association of Financial Engineers - IAFE


An organization comprised of scholars and specialists from various areas of financial concern.

International Bank Account Number - IBAN


A standard numbering system developed to identify bank accounts from around the world. It was
originally developed by banks in Europe to simplify transactions involving bank accounts from other
countries.

International Banking Facility - IBF


Facilities that accept deposits and offer loans to foreign customers and businesses.

International Bond
Bonds that are issued in a country by a non-domestic entity.

International Depository Receipt - IDR


A negotiable, bank-issued certificate representing ownership of stock securities by an investor
outside the country of origin.

International Equity Style Box


A nine-box matrix that displays the characteristics of international stock funds. On the horizontal
axis, funds are separated into one of three categories - either value, blend or growth. On the vertical
axis, funds are separated into one of three categories - small, medium or large market capitalization.

International Financial Reporting Standards - IFRS


A set of international accounting standards stating how particular types of transactions and other
events should be reported in financial statements. IFRS are issued by the International Accounting
Standards Board.
IFRS are sometimes confused with International Accounting Standards (IAS), which are the older
standards that IFRS replaced. (IAS were issued from 1973 to 2000.)

International Fisher Effect - IFE


An economic theory that states that an expected change in the current exchange rate between any
two currencies is approximately equivalent to the difference between the two countries' nominal
interest rates for that time.
Calculated as:
Where:
"E" represents the % change in the exchange rate
"i

International Fund
A mutual fund that can invest in companies located anywhere outside of your own country.

International Fund
A mutual fund that can invest in companies located anywhere outside of your own country.

International Monetary Fund - IMF


An international organization created for the purpose of:
1. Promoting global monetary and exchange stability.
2. Facilitating the expansion and balanced growth of international trade.
3. Assisting in the establishment of a multilateral system of payments for current transactions.

International Monetary Market - IMM


A division of the Chicago Mercantile Exchange (CME) that deals with the trading of currency and
interest rate futures and options. Trading on the IMM started in May 1972 when the CME and the IMM
merged.

International Securities Identification Number - ISIN


A code that uniquely identifies a specific securities issue. The organization that allocates ISINs in
any particular country is the National Numbering Agency (NNA)

International Swaps and Derivatives Association - ISDA


An association created by the private negotiated derivatives market that represents participating
parties. This association helps to improve the private negotiated derivatives market by identifying
and reducing risks in the market.

Internet Service Provider - ISP


A company that furnishes corporations and individual consumers with various services, mainly
access to the internet.

Interpolation
A method of estimating an unknown price or yield of a security. This is achieved by using other
related known values that are located in sequence with the unknown value.

Interpositioning
An illegal action of a specialist or broker-dealer unnecessarily inserting him/herself into a natural
transaction between a buyer and seller in order to pocket an improper profit.

Intertemporal Choice
An economic term describing how an individual's current decisions affect what options become
available in the future. Theoretically, by not consuming today, consumption levels could increases
significantly in the future, and vice versa.

Interval Fund (Scheme)


A fund that combines the features of open-ended and closed-ended schemes, making the fund open
for sale or redemption during pre-determined intervals.

Intestacy
The act of dying without a legal will.

Intestate
The act of dying without a legal will. Determining the distribution of the deceased's assets then
becomes the responsibility of a probate court.

Intraday
Another way of saying "within the day". Intraday price movements are particularly important to
short-term traders looking to make many trades over the course of a single trading session. The
term intraday is occasionally used to describe securities that trade on the markets during regular
business hours, such as stocks and ETFs, as opposed to mutual funds, which must be bought from
a dealer.
Intraday High and Low Price
This represents a day's price action in terms of three variables. The top of the bar signifies the
highest price the stock traded for the day: this is the intra-day high price. The bottom of the bar
marks the low price of the day: this is the intra-day low price. The horizontal intersecting slash
shows where the stock closed for the day.

Intraday Intensity Index


A volume based indicator that depicts the flow of funds for a security according to where it closes in
its high and low range. Calculated as:

Intramarket Sector Spread


The yield spread between two fixed-income securities with the same maturity within the same
sector.

Intrastate Offering
In the United States, a securities offering that can only be purchased in the state in which it is being
issued. Because the offering does not include more than one state, it does not fall under the
jurisdiction of the Securities and Exchange Commission and therefore does not need to be
registered with the SEC. The offering does, however, fall under the jurisdiction of state regulators.

Intrinsic Value
1. The value of a company or an asset based on an underlying perception of the value.
2. For call options, this is the difference between the underlying stock's price and the strike price.
For put options, it is the difference between the strike price and the underlying stock's price. In the
case of both puts and calls, if the difference between the underlying stock's price and the strike
price is negative, the value is given as zero.

Introducing Broker - IB
A futures broker who has a direct relationship with a client, but delegates the work of the floor
operation and trade execution to another futures merchant. The merchant firm is usually a close
partner of the IB.

Inventory
Inventory can be either raw materials, finished items already available for sale, or goods in the
process of being manufactured. Inventory is recorded as an asset on a company's balance sheet.

Inventory Accounting
The body of accounting that deals with valuing and accounting for changes in inventoried assets.
Changes in value can occur for a number of reasons including depreciation, deterioration,
obsolescence, change in customer taste, increased demand, decreased market supply and so on.

Inventory Reserve
An accounting entry that represents a deduction from earnings for the purpose of fairly and
reasonably representing the value of inventoried assets on a balance sheet. The inventory reserve is
used to make up for the fact that all inventory will not be sold at the cost to the firm.

Inventory Turnover
A ratio showing how many times a company's inventory is sold and replaced over a period.

Inverse Floater
A bond or other type of debt whose coupon rate has an inverse relationship to short-term interest
rates.

Inverse Saucer
A technical chart formation that indicates the stock's price has reached its high and that the upward
trend has come to an end. An inverse saucer is characterized by a steady flattening of the uptrend to
such a degree that the market at one moment enters a sideways range, but then slowly starts to fall
slowly and finally accelerates downward. This rare formation provides no clear price target but
usually implies quite a lot of potential since 50% or more retracement of the preceding uptrend can
be expected. Also known as "rounded top".

Inverted Market
In the context of options and futures, this is when the current (or short-term) contract prices are
higher than the long-term contracts.

Inverted Spread
A situation in which the yield difference between a longer term financial instrument and a shorter
term instrument is negative. This is calculated by subtracting the longer term by the shorter term. In
effect, the shorter term instrument is yielding a higher rate of return than the longer term instrument.
This is in contrast to what is considered a normal market, where longer term instruments should
yield higher returns to compensate for time.

Inverted Yield Curve


An interest rate environment in which long-term debt instruments have a lower yield than short-term
debt instruments of the same credit quality. This type of yield curve is the rarest of the three main
curve types and is considered to be a predictor of economic recession.
Partial inversion occurs when only some of the short-term Treasuries (five or 10 years) have higher
yields than the 30-year Treasuries do. An inverted yield curve is sometimes referred to as a
"negative yield curve".

Invest, then Investigate


An investment strategy where investors immediately purchase a stock and then do research and due
diligence afterwards.

Investability Quotient - IQ
A term used by Standard and Poor's to describe how good a company's medium to long-term return
potential is. While medium to long-term return potential is the major contributor to IQ, other factors
are also considered. The scale ranges from a minimum of 0 to a maximum of 250.

Investing
The act of committing money or capital to an endeavor (a business, project, real estate, etc.) with the
expectation of obtaining an additional income or profit.

Investing Sage
An investor who is seen to be extremely knowledgeable about the markets, and to have much
experience at making successful investments. These investors are widely known to the investing
public and generate double-digit returns.

Investment
An asset or item that is purchased with the hope that it will generate income or appreciate in the
future. In an economic sense, an investment is the purchase of goods that are not consumed today
but are used in the future to create wealth. In finance, an investment is a monetary asset purchased
with the idea that the asset will provide income in the future or appreciate and be sold at a higher
price.

Investment Advisor
1. A person making investment recommendations in return for a flat fee or percentage of assets
managed, known as a commission.
2. For mutual fund companies, it is the individual who has the day-to-day responsibility of investing
and monitoring the cash and securities within the fund's portfolio in order to achieve the fund's
objectives.
Also referred to as a "financial advisor".
Investment Advisor's Act of 1940
The federal law enforced and interpreted by the Securities and Exchange Commission (SEC) that
governs investment advisors.

Investment Bank - IB
A financial intermediary that performs a variety of services. This includes underwriting, acting as an
intermediary between an issuer of securities and the investing public, facilitating mergers and other
corporate reorganizations, and also acting as a broker for institutional clients.

Investment Banker
A person representing a financial institution that is in the business of raising capital for corporations
and municipalities.

Investment Climate
The general economic conditions affecting the financial markets.

Investment Club
A group of people who pool their money to make investments. Usually, investment clubs are
organized as partnerships and after the members study different investments, the group decides to
buy or sell based on a majority vote of the members. Club meetings may be educational and each
member may actively participate in investment decisions.

Investment Company
A corporation or trust engaged in the business of investing the pooled capital of shareholders in the
financial instruments of other companies. This is most often done either through a closed-end fund
or an open-end fund (also referred to as a "mutual fund"). In the U.S., most investment companies
are registered with and regulated by the Securities & Exchange Commission under the Investment
Company Act of 1940.

Investment Company Act of 1940


Created in 1940 through an act of Congress, this piece of legislation clearly defines the
responsibilities and limitations placed upon fund companies that offer investment products to the
public.

Investment Consultant
An advisor who helps investors with their long-term investment planning. An investment consultant,
unlike a broker, does more in-depth work on formulating clients' investment strategies, helping them
fulfill their needs and goals.

Investment Consultant
An advisor who helps investors with their long-term investment planning. An investment consultant,
unlike a broker, does more in-depth work on formulating clients' investment strategies, helping them
fulfill their needs and goals.

Investment Farm
A farm owned solely for investment purposes.

Investment Grade
1. In the case of a stock, a firm that has a strong balance sheet, considerable capitalization, and is
recognized as a leader in its industry.
2. In the case of fixed income, a bond with a rating of BBB or higher.

Investment Income
Income coming from interest payments, dividends, capital gains collected upon the sale of a
security or other assets, and any other profit that is made through an investment vehicle of any kind.
Investment Policy Statement - IPS
A document drafted between a portfolio manager and a client that outlines general rules for the
manager.
This statement provides the general investment goals and objectives of a client and describes the
strategies that the manager should employ to meet these objectives. Specific information on matters
such as asset allocation, risk tolerance, and liquidity requirements would also be included in an IPS.

Investment Pyramid
A portfolio strategy that allocates assets according to the relative safety and soundness of
investments. The bottom of the pyramid is comprised of low-risk investments, the mid-portion is
composed of growth investments and the top is speculative investments.

Investment Real Estate


Real estate that generates income or is otherwise intended for investment purposes rather than as a
primary residence. It is common for investors to own multiple pieces of real estate, one of which
serves as a primary residence, while the others are used to generate rental income and profits
through price appreciation. The tax implications for investment real estate are often different than
those for residential real estate.

Investment Strategy
An investor's plan of attack to guide their investment decisions based on individual goals, risk
tolerance and future needs for capital. The components of most investment strategies include asset
allocation, buy and sell guidelines, and risk guidelines.

Investment Vehicle
In general, any method by which to invest.

Investor Relations - IR
A department, present in most medium to large public companies, that provides investors with an
accurate account of the company's affairs. This helps investors to make informed buy or sell
decisions.

Investor's Business Daily


A time-saving research tool utilizing computerized data to help people make smarter investing
decisions. The proprietary information is the result of a comprehensive '45-Year Study of the
Greatest Stock Market Winners.' Investor's Business Daily also provides educational and
motivational features to help individuals in their career and personal life.

Investor's Business Daily Guide To the Markets


Five proprietary and exclusive research ratings designed to screen out deficient stocks, identity
potential market leaders, save time, and significantly improve stock selection. They include:
1.Earnings Per Share (EPS) Rating
2.Relative Price Strength (RS) Rating
3.Industry Group Relative Strength Rating
4.Sales+Profit Margins+ROE (SMR) Rating
5.Accumulation/Distribution Rating

Invisible Hand
A term coined by economist Adam Smith in his 1776 book "An Inquiry into the Nature and Causes of
the Wealth of Nations". In his book he states:
"Every individual necessarily labours to render the annual revenue of the society as great as he can.
He generally neither intends to promote the public interest, nor knows how much he is promoting
it... He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand
to promote an end which was no part of his intention. Nor is it always the worse for society that it
was no part of his intention. By pursuing his own interest he frequently promotes that of the society
more effectually than when he really intends to promote it. I have never known much good done by
those who affected to trade for the public good."
Thus, the invisible hand is essentially a natural phenomenon that guides free markets and capitalism
through competition for scarce resources.

Invisible Supply
Physical stocks of a commodity that are available for delivery upon futures contracts, but whose
quantities cannot be accurately identified.

Involuntary Cash-Out
Distributing the balance of a participant's retirement account under a qualified plan without the
written consent of the participant, the participant's spouse or beneficiary.

IOU
An abbreviation of the phrase "I owe you."

IPO Date
The Initial Public Offering date is the day a stock first traded shares on the AMEX, NASDAQ or NYSE
exchange. It is presented in the format of Month/Day/Year.
The IPO Date is available for stocks whose initial public offering was held in 1971 or later. This data
item is not presented for stocks that traded before 1971, were spin-offs from another publicly traded
stock, switched to a major exchange from the Bulletin Board or Over-the-Counter exchanges, or for
stocks that traded in foreign markets prior to their listing with the U.S. exchanges.

IPO Lock-Up
A legally binding contract between the underwriters and insiders of the company undergoing an
initial public offering (IPO). The contract prevents them from selling any shares of stock for a
specified period of time.

IQD
In currencies, this is the abbreviation for the Iraqi Dinar.

IRA Adoption Agreement and Plan Document


A contract between the IRA holder and the financial institution, the IRA plan document explains the
provisions of the IRA.

Iridium
A corrosive resistant element that is sometimes used to harden platinum.

Iron Butterfly
An options strategy that is created with four options at three consecutively higher strike prices. The
two options located at the middle strike create a long or short straddle (one call and one put with the
same strike price and expiration date) depending on whether the options are being bought or sold.
The "wings" (options at the higher and lower strike prices) of the strategy are created by the
purchase or sale of a strangle (one call and one put at different strike prices but the same expiration
date). This strategy differs from the butterfly spread because it uses both calls and puts, as opposed
to all calls or all puts.

Iron Condor
An advanced options strategy that involves buying and holding four different options with different
strike prices. The iron condor is constructed by holding a long and short position in two different
strangle strategies. A strangle is created by buying or selling a call option and a put option with
different strike prices, but the same expiration date. The potential for profit or loss is limited in this
strategy because an offsetting strangle is positioned around the two options that make up the
strangle at the middle strike prices.
IRR
In currencies, this is the abbreviation for the Iranian Rial.

Irrational Exuberance
An infamous phrase uttered by Alan Greenspan in 1996 to describe the overvalued market at the
time.

Irrelevant Cost
A managerial accounting term that represents a cost, either positive or negative, that does not relate
to a situation requiring management's decision.
Irrevocable Beneficiary
A beneficiary in a life insurance policy or segregated fund contract whose compensation cannot be
changed without his or her consent.

Irrevocable Letter Of Credit - ILOC


A letter of credit that can't be canceled. This guarantees that a buyer's payment to a seller will be
received on time and for the correct amount.

Irrevocable Trust
A trust that can't be modified or terminated without the permission of the beneficiary. The grantor,
having transferred assets into the trust, effectively removes all of his or her rights of ownership to
the assets and the trust.
This is the opposite of a "revocable trust", which allows the grantor to modify the trust.

iShares
Index funds that trade like stocks on stock markets. Each share represents a proportion of
ownership in each stock that makes up an index.

ISK
In currencies, this is the abbreviation for the Iceland Krona.

Islamic Banking
A banking system that is based on the principles of Islamic law (also known as Sharia, or Shariah)
and guided by Islamic economics. Two basic principles behind Islamic banking are the sharing of
profit and loss and, significantly, the prohibition of the collection and payment of interest. Collecting
interest is not permitted under Islamic law.

Island Reversal
An occurrence in technical analysis where a stock price will gap up/down, trade higher than this
price, and then gap down/up below the initial price.

ISO Currency Code


The internationally standardized three-letter abbreviation for a country's currency.

Isoquant Curve
A graph of all possible combinations of inputs that result in the production of a given level of output.
Used in the study of microeconomics to measure the influence of inputs on the level of production
or output that can be achieved.

Issued Shares
The amount of authorized shares that are sold to and held by the shareholders of a company.Also
known as "issued stock".

Issuer
A legal entity that develops, registers and sells securities for the purpose of financing its operations.
Issuers may be domestic or foreign governments, corporations or investment trusts. Issuers are
legally responsible for the obligations of the issue and for reporting financial conditions, material
developments and any other operational activities as required by the regulations of their
jurisdictions. The most common types of securities issued are common and preferred stocks,
bonds, notes, debentures, bills and derivatives.

Itayose
A clearing method used by Japanese commodity exchanges to set prices. It is a form of auction
market in which the time of order entry is not distinguished, and an opening price is derived on the
principle of price priority requiring that the following occurs:
1. All market orders are executed first.
2. Next, all limit orders are executed to sell/buy at prices lower/higher than the execution price.
3. Finally, the following amounts of limit orders to sell or buy are at the execution price:
- the entire amount of all either sell or buy orders, and
- at least one trading unit from the opposite side of the order book.

Itemized Deduction
A deduction from a taxpayer's taxable adjusted gross income that is made up of deductions for
money spent on certain goods and services throughout the year. The specific deductions that are
allowed are outlined by the IRS and include such expenses as mortgage interest, state and local
taxes, gifts, and medical expenses.

J
A Nasdaq stock symbol specifying that the stock has voting rights.

J Curve
A theory stating that a country's trade deficit will worsen initially after the depreciation of its
currency because higher prices on foreign imports will be greater than the reduced volume of
imports.

JAJO
An acronym representing the months January, April, July, and October.

Just In Time - JIT


An inventory strategy companies employ to increase efficiency and decrease waste by receiving
goods only as they are needed in the production process, thereby reducing inventory costs.
This method requires that producers are able to accurately forecast demand.

Japan Inc.
A nickname for the corporate world of Japan that came about during the 1980s boom, when Western
business people saw how closely the Japanese government worked with its nation's business
sector.

January Effect
A general increase in stock prices during the month of January. This rally is generally attributed to
investors buying stocks that have dropped in price following a sell-off at the end of December by
investors seeking to create tax losses to offset any capital gains.

Jarrow Turnbull Model


A credit pricing model that utilizes multi-factor and dynamic analysis of interest rates

Java
A programming language developed by Sun Microsystems to support widespread software
distribution, in particular over the Web. It is a smaller and more secure version of the C++
programming language.

Jekyll and Hyde


1. A slang term referring to the strengths and weaknesses of a company's financial statements.
2. An asset that suddenly increases or decreases in value.
3. A senior manager's good and bad qualities, or the polarized views between two key officers within
a corporation.

Jennifer Lopez - J.Lo


A slang technical analysis term referring to a rounding bottom in a stock's price pattern.

Just In Time - JIT


An inventory strategy companies employ to increase efficiency and decrease waste by receiving
goods only as they are needed in the production process, thereby reducing inventory costs.
This method requires that producers are able to accurately forecast demand.

Jensen's Measure
A risk-adjusted performance measure that represents the average return on a portfolio over and
above that predicted by the capital asset pricing model (CAPM), given the portfolio's beta and the
average market return. This is the portfolio's alpha. In fact, the concept is sometimes referred to as
"Jensen's alpha."

Jitney
1. A situation in which one broker who has direct access to a stock exchange performs trades for a
broker who does not have access.
2. A fraudulent activity in the penny stock market involving two brokers trading a stock back and
forth to rack up commissions and give the impression of trading volume

Jumbo CD
A certificate of deposit (CD) with a minimum denomination of $100,000.

Just In Case - JIC


An inventory strategy in which companies keep large inventories on hand. This type of inventory
management strategy aims to minimize the probability that a product will sell out of stock. A
company practicing this strategy essentially incurs higher inventory holding costs in return for a
reduction in the number of sales lost due to sold out inventory.

Junior Security
A security that ranks lower than other securities in regards to the owner's claims on assets and
income in the event of the issuer becoming insolvent.

Junior Capital Pool - JCP


A corporate structure whereby companies can issue shares to the public before actually
establishing a line of business. The purpose of such a capital structure was to provide an easy way
for early-stage companies to raise capital. With a minimum investment from founders of $100,000,
the junior capital pool company could get a listing and exposure to public markets.

Junior (Issue)
Generally speaking, any issue that ranks lower in claim to another issue in terms of dividends,
interest, principal, etc.

Jumbo Loan
Any residential or commercial mortgage with a loan amount exceeding the guidelines of Fannie Mae
and Freddie Mac.

Judgment
A court order to pay a party a certain amount of money.

JPY
In currencies, this is the abbreviation for the Japanese Yen.

Joseph Effect
The idea that movements in a time series tend to be part of larger trends and cycles more often than
they are completely random. The Joseph Effect is quantified by the Hurst component, where
movements fall between a Hurst range of 0 to 1. The term was coined by Benoit Mandelbrot.

Jonestown Defense
A defensive strategy by which the target company engages in an activity that might actually ruin the
company rather than prevent the hostile takeover. Also known as a "suicide pill."

Jointly and Severally


1. A legal term describing a partnership in which individual decisions are bound to all parties
involved and thus undivided.
2. A term used in underwriting syndicates to refer to the distinct responsibility of individual
companies to sell a certain portion of unsold new issue.

Joint Venture - JV
The cooperation of two or more individuals or businesses--each agreeing to share profit, loss and
control--in a specific enterprise.

Joint Tenants with Right of Survivorship - JTWROS


A type of brokerage account which is owned by at least two people, where all tenants have an equal
right to the account's assets and are afforded survivorship rights in the event of the death of another
account holder.

Joint Tenants in Common - JTIC


A type of brokerage account which is owned by at least two people with no rights of survivorship
afforded to any of the account holders.

Joint Stock Company


An organization that falls between the definitions of a partnership and corporation. This type of
company issues stock and allows for secondary market trading however, stockholders are liable for
company debts.

Joint Return
A tax return filed on behalf of both the husband and wife, resulting in a combined tax liability

Joint Owned Property


Any property held in the name of two or more parties.

Joint Life With Last Survivor Annuity


An insurance product that, when annuitized, makes payments to the annuitant, the annuitant and
his/her spouse, or the annuitant and another beneficial party until both the annuitant and his/her
spouse have passed away. These annuities are not term certain, so they continue paying out to the
annuitant, and whoever he or she designates to receive payments, until the death of the annuitant
and the designated third party. The annuitant may also designate a beneficiary, who can, but doesn't
have to be the same person as the designated third party

Joint Bond
A bond that is guaranteed by a party other than the issuer. Also called a "joint-and-several bond."

Joint and Survivor Annuity


A type of annuity that makes payments for the lifetime of two or more beneficiaries.

Joint Account
A brokerage or bank account that is owned together (jointly) by two or more people.

Joint
In general, a legal term describing a transaction in which two or more parties act together.

JOD
In currencies, this is the abbreviation for the Jordanian Dina.

Jobs And Growth Tax Relief Reconciliation Act of 2003 - JGTRRA


A U.S. tax law, passed by Congress on May 23, 2003, that lowered the maximum individual income
tax rate on corporate dividends to 15%. The act also reduced the long-term individual income tax
rate on capital gains to 15%. The act was signed by President George W. Bush on May 28, 2003, and
was intended to amplify the effects of the

Jobs And Growth Tax Relief Reconciliation Act of 2003


An act passed by congress that was intended to improve the economy of the United States by
reducing the taxes collected, giving the population more money to spend. The act was passed in
May 2003 and signed into law shortly after.

Jobber
A slang term for a market maker on the London stock exchange.

Job Openings and Labor Turnover Survey - JOLTS


A survey done by the United States Bureau of Labor Statistics to help measure job vacancies. It
collects data from employers including retailers, manufacturers and different offices each month.
Respondents to the survey answer quantitative and qualitative questions about their businesses'
employment, job openings, recruitment, hires and separations. The JOLTS data is published
monthly and by region and industry.

Job Lot
A futures contract with a minimum trading unit smaller than the levels required in regular contracts.

Job Hunting Expenses


Deductible expenses incurred while searching for a job in the same or similar line of work. These
expenses are deductible regardless of whether you find a new job.

JMD
In currencies, this is the abbreviation for the Jamaican Dollar.

January Barometer
A theory stating that the movement of the S&P 500 during the month of January sets the stock
market's direction for the year (as measured by the S&P 500). In other words, if the S&P 500 was up
at the end of January compared to the beginning of the month, proponents would expect the stock
market to rise during the rest of the year.

K
A Nasdaq stock symbol specifying that the stock has no voting rights

Kagi Chart
A type of chart developed by the Japanese in the 1870s that uses a series of vertical lines to
illustrate general levels of supply and demand for certain assets. Thick lines are drawn when the
price of the underlying asset breaks above the previous high price and is interpreted as an increase
in demand for the asset. Thin lines are used to represent increased supply when the price falls
below the previous low.

Kaizen
A philosophy that recognizes improvement in productivity as a gradual and methodical process.
Kaizen is a Japanese term that literally means "change for the better". The concept of Kaizen
encompasses a wide scope of ideas it involves making the work environment more efficient and
effective by creating a team atmosphere, improving everyday procedures, ensuring employee
satisfaction and making a job more fulfilling, less tiring and safer.

Kangaroos
Slang term for Australian stocks, it refers mostly to the stocks on the All Ordinaries index, which is
composed of 280 of the most active Australian companies.

Kappa
Used in regression analysis, Kappa represents the ratio of the dollar price change in the price of an
option to a 1% change in the expected price volatility.
Katie Couric Clause
A slang term for a proposed new Securities and Exchange Commission rule, formally known as the
Executive Compensation and Related Party Disclosure, that would require publicly traded
companies to disclose not only the salaries of their top five executives, but also those of top earning
non-executives, including actors, directors and TV news anchors.
The term refers to former "Today Show" host Katie Couric, who became CBS's highest paid
newscaster in April 2006, with a reported salary of US$15 million over five years. As of April 2006,
this proposed rule has not been approved by the SEC.

Keepwell Agreement
A contract between a parent company and its subsidiary to maintain solvency and financial backing
throughout the term set in the agreement.

Keiretsu
A Japanese term describing a loose conglomeration of firms sharing one or more common
denominators. The companies don't necessarily need to own equity in each other.
Keltner Channel
A volatility based 'envelope' indicator that measures the movement of stocks in relation to an upper
and lower moving-average band.

Keogh Plan
A defined-benefit plan or defined-contribution plan established by a self-employed individual for
him/herself and his/her employees.

KES
In currencies, this is the abbreviation for the Kenyan Shilling.

Key Performance Indicators - KPI


A set of quantifiable measures that a company or industry uses to gauge or compare performance in
terms of meeting their strategic and operational goals. KPIs vary between companies and industries,
depending on their priorities or performance criteria. Also referred to as "key success indicators
(KSI)"

Key Person Insurance


A type of life insurance policy that a company purchases on the life of the company's key executive.

Key Rate Duration


Holding all other maturities constant, this measures the sensitivity of a security or value of a
portfolio to a 1% change in yield for a given maturity.
The calculation is as follows:

Keynesian Economics
An economic theory stating that active government intervention in the marketplace and monetary
policy is the best method of ensuring economic growth and stability.

KHR
In currencies, this is the abbreviation for the Cambodian Riel.

Kickback
A slang term used to describe the payment of something of value to another individual with the goal
of persuading or influencing their decision or performance in certain situations.

Kicker
A right, warrant, or some other feature added to a debt instrument to make it more desirable to
potential investors.
Kicker Pattern
A two-bar candlestick pattern that is used to predict a change in the direction of the trend for an
asset's price. This pattern is characterized by a very sharp reversal in price over the span of two
candlesticks traders use it to determine which group of market participants is in control of the
direction.

Kicking the Tires


Slang for doing the grassroots research of a prospective investment.

Kiddie Tax
A tax on children under 14 years old who earn income over $1,200. The extra income is taxed at the
guardian's rate.

Kids In Parents' Pockets Eroding Retirement Savings - KIPPERS


A slang term referring to the predicament of individuals whose adult children are out of school and
in their working years, but still living at home with the folks. These older parents face the challenge
of managing their own finances and planning for retirement while dealing with the added expense of
adult offspring living at home.

Kill
To cancel a trade or order that has been placed, but not filled.

Killer Application
Killer application or "killer app" is a buzzword that describes a software application that surpasses
all of its competitors.

Killer Bees
Those who help a company fend off a takeover attempt with the use of defensive strategies.

Kiting
1. The act of misrepresenting the value of a financial instrument for the purpose of extending credit
obligations or increasing financial leverage.

2. A fraudulent act involving the alteration or issuance of a check or draft with insufficient funds.

Kiwi
A slang term for the New Zealand dollar (NZD). It derives its name from New Zealand's national icon -
a flightless bird called a kiwi - which is pictured on one side of the country's $1 coin.

Klinger Oscillator
A technical indicator developed by Stephen Klinger that is used to determine long-term trends of
money flow while remaining sensitive enough to short-term fluctuations to enable a trader to predict
short-term reversals. This indicator compares the volume flowing in and out of a security to price
movement, and it is then turned into an oscillator

KMF
In currencies, this is the abbreviation for the Comoros Franc.

Knock-In Option
A latent option contract that begins to function as a normal option ("knocks in") only once a certain
price level is reached before expiration.

Knock-Out Option
An option with a built in mechanism to expire worthless should a specified price level be exceeded.

Know Your Client - KYC


A standard form in the investment industry that ensures investment advisors know detailed
information about their clients' risk tolerance, investment knowledge and financial position.

Kondratiev Wave
An economic theory created by Soviet economist Nikolai Kondratiev that states that Western
capitalist economies are susceptible to high performance volatility.

Korean Composite Stock Price Indexes - KOSPI


A series of indexes that track the overall Korean Stock Exchange and its components. These
indexes use a weighted average based on market calculation to calculate the value of the indexes.

KPW
In currencies, this is the abbreviation for the North Korean Won.

KRW
In currencies, this is the abbreviation for the Korean Won.

Kurtosis
A statistical measure used to describe the distribution of observed data around the mean

KWD
In currencies, this is the abbreviation for the Kuwaiti Dinar.

KYD
In currencies, this is the abbreviation for the Cayman Islands Dollar

KZT
In currencies, this is the abbreviation for the Kazakhstan Tenge

L
A Nasdaq stock symbol specifying that it is a miscellaneous situation such as a depositary receipt,
stub, additional warrant or unit.

Labor Intensive
A process or industry that requires large amounts of human effort to produce goods.

Lessee
The person who rents land or property from a lessor.

Leprechaun Leader
A corporate manager or an executive who, like the fabled Irish elf, is a mischievous and elusive
creature said to possess buried treasures of money and gold.

Lemming
The act of following the crowd into an investment that will inevitably head for disaster.

Leasehold Improvement
Improvements on a leased asset that increase the value of the asset.

Labour-Sponsored Venture Capital Corporations - LSVCC


A type of Canadian corporation created by a labor union that deals exclusively with providing
venture capital. Unlike other venture capital corporations, LSVCCs are subject to tight regulations.
The investment funds from LSVCCs are called labor-sponsored investment funds (LSIFs).

Leg
1. Term describing an order entry technique used by brokers. A leg occurs when a broker executes
contingent orders in separate phases, thus increasing the risk for price swings through time delays.
2. A description of different aspects in a combination
Ladder Option
An option that locks-in gains once the underlying reaches predetermined price levels or "rungs,"
guaranteeing some profit even if the underlying security falls back below these levels before the
option expires.

Lender of Last Resort


An institution, usually a country's central bank, that offers loans to banks or other eligible
institutions that are experiencing financial difficulty or are considered highly risky or near collapse.
In the U.S. the Federal Reserve acts as the lender of last resort to institutions that do not have any
other means of borrowing and whose failure to obtain credit would dramatically affect the economy.

Lemon
A very disappointing investment. Your expected return wasn't even close to being achieved.

Lehman Formula
A compensation formula developed by Lehman Brothers for investment banking services. The
structure is as follows:

-5% of the first million dollars involved in the transaction


-4% of the second million
-3% of the third million
-2% of the fourth million
-1% of everything thereafter (above $4 million)

Lehman Aggregate Bond Index


An index used by bond funds as a benchmark to measure their relative performance. The index
comprises government securities, mortgage-backed securities, asset-backed securities and
corporate securities to simulate the universe of bonds in the market. The maturity of the bonds in
the index are over one year.

Legislative Overkill
A law enacted to stop or prevent the abuse of a loophole, but ends up imposing more restrictions
than are necessary for reasonable prevention.

Legend
A notification placed on certain stock certificates describing the terms and conditions of sale and
ownership.

Legal List
A selection of eligible companies and investments, determined by local state governments, for
institutions such as insurance companies and pension plans.

Leaseback
An arrangement where the seller of an asset leases back the same asset from the purchaser.

Lease
An agreement in which one party gains a long-term rental agreement, and the other party receives a
form of secured long-term debt.

Leakage
A release of information to certain people before the official public announcement.

Leads And Lags


The alteration of normal payment or receipts in a foreign exchange transaction because of an
expected change in exchange rates. An expected increase in exchange rates is likely to speed up
payments, while an expected decrease in exchange rates will probably slow them down.

Leading Lipstick Indicator


An indicator based on the theory that a consumer turns to less-expensive indulgences, such as
lipstick, when she (or he) feels less than confident about the future. Therefore, lipstick sales tend to
increase during times of economic uncertainty or a recession.

Leading Indicator
A measurable economic factor that changes before the economy starts to follow a particular pattern
or trend. Leading indicators are used to predict changes in the economy, but are not always
accurate.

Leader or Laggard
Refers to a company that is either outperforming or underperforming the general market. To look for
top stocks in leading industry groups, refer to the Relative Price Strength Rating and Industry Group
Relative Strength Rating in Investor's Business Daily.

Lady Godiva Accounting Principles - LGAP


A theoretical set of accounting principles under which corporations would have to fully disclose all
information, including that which often doesn't get reported to investors under generally accepted
accounting principles (GAAP).
These principles include disclosure of the following:
-all off-balance sheet items
-how new goodwill accounting rules (introduced in 2002) impact earnings per share (EPS)
-the impact on EPS of stock options issued in lieu of salaries
-how pension expenses are accounted for

Laddering
The promotion of inflated pre-IPO prices for the sake of obtaining a greater allotment of the offering.

Lady Macbeth Strategy


A corporate-takeover strategy with which a third party poses as a white knight to gain trust, but then
turns around and joins with unfriendly bidders.

Laffer Curve
Invented by Arthur Laffer, this curve shows the relationship between tax rates and tax revenue
collected by governments. The chart below shows the Laffer Curve:

The curve suggests that, as taxes increase from low levels, tax revenue collected by the government
also increases. It also shows that tax rates increasing after a certain point (T*) would cause people
not to work as hard or not at all, thereby reducing tax revenue. Eventually, if tax rates reached 100%
(the far right of the curve), then all people would choose not to work because everything they earned
would go to the government.

Lead Time
In terms of a supply chain, the total time needed for an order to be processed.

LBP
In currencies, this is the abbreviation for the Lebanese Pound

Layoff
1. When a company eliminates jobs regardless of how good the employees' performance. 2. A risk
reduction, made by investment bankers, that minimizes the potential downside associated with a
commitment to purchase and sell a stock issue unsubscribed by stockholders holding rights.

Law of Supply
A microeconomic law stating that, all other factors being equal, as the price of a good or service
increases, the quantity of goods or services offered by suppliers increases, and vice versa.

Law of Diminishing Marginal Utility


A law of economics stating that as a person increases consumption of a product--while keeping
consumption of other products constant--there is a decline in the marginal utility that person derives
from consuming each additional unit of that product.
Law of Diminishing Marginal Returns
A law of economics stating that, as the number of new employees increases, the marginal product of
an additional employee will at some point be less than the marginal product of the previous
employee.

Late-Stage Base
A base that forms after a stock has staged a series of technical breakouts from prior bases. They
usually occur near a stock's top and are often referred to as fourth- or fifth-stage bases. Late-stage
bases often show erratic, wide-and-loose trading.

Lagging Indicator
1. A measurable economic factor that changes after the economy has already begun to follow a
particular pattern or trend.
2. A technical indicator that trails the price action of an underlying asset and is used by traders to
generate transaction signals or to confirm the strength of a given trend. Since these indicators lag
the price of the asset, a significant move will generally occur before the indicator is able to provide a
signal.

Laissez Faire
An economic theory from the 18th century that is strongly opposed to any government intervention
in business affairs. Sometimes referred to as "Let it be economics."

Late-Day Trading
An unethical (if not illegal) practice of a hedge fund purchasing and then selling securities (usually
shares of a mutual fund) after the close of a trading day, but making the transactions appear as
though they occurred before the market close.

Last-Sale Reporting
An electronic entry, to the Nasdaq Stock Market, of the amount and price of shares involved in a
transaction's not less than a board lot.

Last Twelve Months - LTM


A term used to describe financial results during the period of the last 12 months.

Last Trading Day


The final day that a futures or options contract may trade or be closed out before delivery of the
underlying asset must occur.

Last In, First Out - LIFO


An asset-management and valuation method that assumes that assets produced or acquired last are
the ones that are used, sold or disposed of first.

Large Value Transfer System - LVTS


An electronic wire payment system in Canada, facilitating the transfer of funds between large
financial institutions, including the central Bank of Canada.
Large Trader
A futures trader who holds or controls a single position that is equal to or greater than the CFTC
specified reporting levels.

Large Cap (Big Cap)


Companies with a market capitalization between $10 billion and $200 billion.

Landominium
A type of residential property in which the owner owns both the home and the land on which the
home is built. The home is a part of a community, like a condominium, where the landscaping,
maintenance and other services are provided by a homeowners' association

Land Value
The total value of the land, including any upgrades or improvements to the land
Land
Property or real estate, not including buildings or equipment, that does not occur naturally.
Depending on the title, land ownership may also give the holder the rights to all natural resources on
the land. These may include water, plants, human and animal life, fossils, soil, minerals,
electromagnetic features, geographical location, and geophysical occurrences.

Lame Duck
A person who has defaulted on his or her debts or has gone bankrupted due to the stock market.
The financial use of the term is most commonly used in Europe.

Lambda
A ratio comparing change in option price to a 1% change in option volatility.

LAK
In currencies, this is the abbreviation for the Laos Kip.

Large Value Transfer System - LVTS


An electronic wire payment system in Canada, facilitating the transfer of funds between large
financial institutions, including the central Bank of Canada.

Law of Diminishing Marginal Returns


A law of economics stating that, as the number of new employees increases, the marginal product of
an additional employee will at some point be less than the marginal product of the previous
employee.

Late-Stage Base
A base that forms after a stock has staged a series of technical breakouts from prior bases. They
usually occur near a stock's top and are often referred to as fourth- or fifth-stage bases. Late-stage
bases often show erratic, wide-and-loose trading.

Lease
An agreement in which one party gains a long-term rental agreement, and the other party receives a
form of secured long-term debt.

Leakage
A release of information to certain people before the official public announcement.

Lender of Last Resort


An institution, usually a country's central bank, that offers loans to banks or other eligible
institutions that are experiencing financial difficulty or are considered highly risky or near collapse.
In the U.S. the Federal Reserve acts as the lender of last resort to institutions that do not have any
other means of borrowing and whose failure to obtain credit would dramatically affect the economy.

Lemon
A very disappointing investment. Your expected return wasn't even close to being achieved.

Leads And Lags


The alteration of normal payment or receipts in a foreign exchange transaction because of an
expected change in exchange rates. An expected increase in exchange rates is likely to speed up
payments, while an expected decrease in exchange rates will probably slow them do

Last-Sale Reporting
An electronic entry, to the Nasdaq Stock Market, of the amount and price of shares involved in a
transaction's not less than a board lot.

Last Twelve Months - LTM


A term used to describe financial results during the period of the last 12 months.
Leprechaun Leader
A corporate manager or an executive who, like the fabled Irish elf, is a mischievous and elusive
creature said to possess buried treasures of money and gold.

Lessee
The person who rents land or property from a lessor.

Layoff
1. When a company eliminates jobs regardless of how good the employees' performance. 2. A risk
reduction, made by investment bankers, that minimizes the potential downside associated with a
commitment to purchase and sell a stock issue unsubscribed by stockholders holding rights.

Lehman Formula
A compensation formula developed by Lehman Brothers for investment banking services. The
structure is as follows:

-5% of the first million dollars involved in the transaction


-4% of the second million
-3% of the third million
-2% of the fourth million
-1% of everything thereafter (above $4 million)

Lehman Aggregate Bond Index


An index used by bond funds as a benchmark to measure their relative performance. The index
comprises government securities, mortgage-backed securities, asset-backed securities and
corporate securities to simulate the universe of bonds in the market. The maturity of the bonds in
the index are over one year.

LBP
In currencies, this is the abbreviation for the Lebanese Pound.

Lead Time
In terms of a supply chain, the total time needed for an order to be processed

Legend
A notification placed on certain stock certificates describing the terms and conditions of sale and
ownership.

Leader or Laggard
Refers to a company that is either outperforming or underperforming the general market. To look for
top stocks in leading industry groups, refer to the Relative Price Strength Rating and Industry Group
Relative Strength Rating in Investor's Business Daily.

Leading Indicator
A measurable economic factor that changes before the economy starts to follow a particular pattern
or trend. Leading indicators are used to predict changes in the economy, but are not always
accurate.

Leading Lipstick Indicator


An indicator based on the theory that a consumer turns to less-expensive indulgences, such as
lipstick, when she (or he) feels less than confident about the future. Therefore, lipstick sales tend to
increase during times of economic uncertainty or a recession.

Leaseback
An arrangement where the seller of an asset leases back the same asset from the purchaser.

Leasehold Improvement
Improvements on a leased asset that increase the value of the asset.
Leg
1. Term describing an order entry technique used by brokers. A leg occurs when a broker executes
contingent orders in separate phases, thus increasing the risk for price swings through time delays.
2. A description of different aspects in a combination option.

Legal List
A selection of eligible companies and investments, determined by local state governments, for
institutions such as insurance companies and pension plans.

Lemming
The act of following the crowd into an investment that will inevitably head for disaster.

Legislative Overkill
A law enacted to stop or prevent the abuse of a loophole, but ends up imposing more restrictions
than are necessary for reasonable prevention.

Lessor
The person who rents land or property to a lessee.

Let Your Profits Run


A saying often used in investing that acknowledges the tendency among investors to sell winning
positions too early. Most traders tend to take gains off the table early out of fear that they will
evaporate quickly, while they also tend to hold onto large losing positions in the hope that they will
turn around. The key to letting your profits run is to not panic when volatility increases and to
maintain your convictions about why you entered into the trade.

Letter of Comfort
A letter issued to a lending institution by a parent company acknowledging the approval of a
subsidiary company's attempt for financing.

Letter Of Credit
A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for
the correct amount. In the event that the buyer is unable to make payment on the purchase, the bank
will be required to cover the full or remaining amount of the purchase.

Letter of Indemnity
1. A letter guaranteeing that contractual provisions will be met, otherwise financial reparations will
be made.
2. A letter requesting replacements for lost shares from a company's treasury.

Letter of Intent - LOI


1. A letter that describes in detail a corporation's intention to act on something.
2. It is also a way to protect your son or daughter from unnecessary chaos and turmoil when he or
she must depend upon someone other than you for care and support (if you suddenly pass away).

Letter Security
A security that is not registered with the SEC, and so cannot be sold publicly in the marketplace.

Level 1
A trading service consisting of real-time bid/ask quotes for securities trading on the Nasdaq stock
market and comparable information for securities quoted in the OTC Bulletin Board Service.

Level 2
A trading service consisting of real-time access to the quotations of individual market makers
registered in every Nasdaq listed security, as well as market makers' quotes in OTC Bulletin Board
securities.
Level 3
A trading service consisting of everything in Level 2, plus the ability to enter quotes, execute orders,
and send information. This service is restricted to NASD member firms that function as registered
market makers.

Level Load
An annual load charged to a mutual fund holder for the time he or she is invested in the fund

Level-Premium Insurance
A type of term life insurance for which the premiums remain the same throughout the duration of the
contract. The premium paid on this type of policy will be higher at the beginning of its life but lower
towards the end of its life as compared to term policies that have rising premium rates.

Leverage
1. The use of various financial instruments or borrowed capital, such as margin, to increase the
potential return of an investment.
2. The amount of debt used to finance a firm's assets. A firm with significantly more debt than equity
is considered to be highly leveraged.
Leverage helps both the investor and the firm to invest or operate. However, it comes with greater
risk. If an investor uses leverage to make an investment and the investment moves against the
investor, his or her loss is much greater than it would've been if the investment had not been
leveraged - leverage magnifies both gains

Leverage Ratio
1. Any ratio used to calculate the financial leverage of a company to get an idea of the company's
methods of financing or to measure its ability to meet financial obligations. There are several
different ratios, but the main factors looked at include debt, equity, assets and interest expenses.
2. A ratio used to measure a company's mix of operating costs, giving an idea of how changes in
output will affect operating income. Fixed and variable costs are the two types of operating costs
depending on the company and the industry, the mix will differ.

Leveraged Buyout - LBO


A strategy involving the acquisition of another company using a significant amount of borrowed
money (bonds or loans) to meet the cost of acquisition. Often, the assets of the company being
acquired are used as collateral for the loans in addition to the assets of the acquiring company. The
purpose of leveraged buyouts is to allow companies to make large acquisitions without having to
commit a lot of capital.

Leveraged Lease
A lease agreement wherein the lessor, by borrowing funds from a lending institution, finances the
purchase of the asset being leased.

Liquidated Damages
Present in certain legal contracts, this provision allows for the payment of a specified sum should
one of the parties be in breach of contract.

Leveraged Recapitalization
A strategy where a company takes on significant additional debt with the purpose of either paying a
large dividend or repurchasing shares. The result is a far more financially leveraged company.

Levy
To collect or assess money that is due.

Liability
A company's legal debts or obligations that arise during the course of business operations. These
are settled over time through the transfer of economic benefits including money, goods or services.

Liability Driven Investment - LDI


A form of investing in which the main goal is to gain sufficient assets to meet all liabilities, both
current and future. This form of investing is most prominent with defined-benefit pension plans,
whose liabilities can often reach into the billions of dollars for the largest of plans.

Lien
When a creditor or bank has the right to sell the mortgaged or collateral property of those who fail to
meet the obligations of a loan contract.

Life Annuity
An insurance product that features a predetermined periodic payout amount until the death of the
annuitant. These products are most frequently used to help retirees budget their money after
retirement. Typically, the annuitant pays into the annuity on a periodic basis when he or she is still
working. However, annuitants may also buy the annuity product in one large purchase. When the
annuitant retires, the annuity makes periodic (usually monthly) payouts to the annuitant, providing a
reliable source of income. When a triggering event (such as death) occurs, the periodic payments
from the annuity usually cease.

Liquid Market
A market with many bid and ask offers. The market is characterized by high liquidity, low spreads,
and low volatility.

Lintner's Model
A model stating that dividend policy has two parameters: (1) the target payout ratio and (2) the
speed at which current dividends adjust to the target.

Linear Price Scale


A type of scale used on a chart that is plotted in such a way that the values on the scale are spaced
equidistantly. Each unit change is represented by the same vertical distance on the chart, regardless
of what price level the asset is at when the change occurs. This price scale is mainly used in short-
term trading, and it is often used by traders of commodity futures. Contrast this to "logarithmic price
scale".

Life Expectancy
1. The age until which a person is expected to live.
2. The remaining number of years an individual is expected to live, based on IRS issued life
expectancy tables. The life expectancy, for required minimum distribution (RMD) calculation
purposes, is determined by the current age of the individual.

Life Insurance
A protection against the loss of income that would result if the insured passed away. The named
beneficiary receives the proceeds and is thereby safeguarded from the financial impact of the death
of the insured.

Life Option
An annuitization-method option for a typical annuity offered by an insurance company with which
the annuitant chooses to receive regular income payments from his or her annuity account for life.
The insurance company guarantees that the annuitant will receive payments for the rest of his or her
life, and structures the payment amounts to provide room for the insurance company's profit
margin.

Life With Guaranteed Term


An annuitization-method option with which the annuitant chooses to receive regular income
payments that are guaranteed to last the rest of his or her life but also guarantees income payments
for a minimum number of years (the term) following the start of the annuitization period - even if the
annuitant dies before the end of the term.

Lifelong Learning Plan


A provision applicable to the Canadian Registered Retirement Savings Plan (RRSP). The plan allows
RRSP contributors a non-taxable temporary withdrawal of up to $20,000 from their accounts in order
to finance their education or that of their spouse. The provision is subject to limitations, such as a
$10,000 annual withdrawal limit and a maximum repayment period of 10 years, after which the ability
to recontribute the borrowed sum is lost.

Lifestyle Fund
An investment fund featuring an asset mix determined by the level of risk and return that is
appropriate for an individual investor. Factors that determine this mix include an investor's age,
level of risk aversion, the investment's purpose and the length of time until the principal will be
withdrawn.

Lifetime Learning Credit


A federal initiative whereby a person is eligible for a non-refundable credit for a specific amount
spent on higher education tuition and fees during the year.

LIFO Liquidation
When a company using the LIFO (Last In, First Out) method of inventory costing liquidates their
older LIFO inventory. A LIFO liquidation would occur if current sales are higher than current
purchases, as a result, any inventory not sold in previous periods must be liquidated.

Like-for-Like Sales
The portion of current sales achieved through activities that are comparable to the activities of the
previous year.

Like-Kind Property
Any two assets or properties that are considered to be the same type, making an exchange between
them tax free. To qualify as like kind, two assets must be of the same type (e.g. two pieces of
residential real estate), but do not have to be of the same quality.

Limit Down
The maximum amount by which the price of a commodity futures contract may decline in one
trading day.

Limit Order
An order placed with a brokerage to buy or sell a set number of shares at a specified price or better.
Limit orders also allow an investor to limit the length of time an order can be outstanding before
being canceled.

Limit Order Book


A record of unexecuted limit orders maintained by the specialist.
Limit Up
The maximum amount by which the price of a commodity futures contract may advance in one
trading day.

Limit-On-Close Order
A type of limit order to buy or sell shares near the market close only if the closing price is trading
better than the limit price. This order is an expansion of the market-on-close order, adding to it a
limit condition, which places a maximum on the entry price and minimum on the selling price.

Line Of Credit - LOC


An arrangement between a financial institution (usually a bank) and a customer establishing a
maximum loan balance that the bank will permit the borrower to maintain

Limit-On-Open Order
A type of limit order to buy or sell shares at the market open if the market price meets the limit
condition. This type of order is good only for the market opening and does not last for the whole
trading day.

Limited Liability
A type of liability that does not exceed the initial amount a person invested into a partnership.

Limited Liability Company - LLC


A corporate structure whereby the shareholders of the company have a limited liability to the
company's actions.

Limited Partnership - LP
Two or more partners formed to conduct a business jointly, and in which one or more of the partners
is liable only to the extent of the amount of money they have invested. Limited partners do not
receive dividends, but enjoy direct access to the flow of income and expenses.

Limited Partnership Unit


An ownership unit in a publicly traded limited partnership, or master limited partnership (MLP). This
trust gives the unit holder a stake in the income generated by the partnership company. A MLP often
distributes all available cash flow from operations to unit holders after the deduction of maintenance
capital.
Also referred to as "master limited partnership units" and "limited partner units".

Limited Risk
The risk of an investment that has a predetermined maximum downside potential, which is usually
the initial amount invested.

Liquidate
1. To convert assets into cash or equivalents by selling them on the open market.
2. When an entity chooses or is forced by a legal judgment or contract to turn assets into a "liquid"
form (cash).

Liquid Yield Option Note - LYON


A zero coupon bond that is callable (by issuer), putable (by investor), and convertible. LYONs are
synthetic products that are financially engineered by Merrill Lynch.

Liquidating Dividend
Payment by a firm to its owners from capital rather than from earnings.

Liquidation
1. When a business or firm is terminated or bankrupt, its assets are sold and the proceeds pay
creditors. Any leftovers are distributed to shareholders.
2. Any transaction that offsets or closes out a long or short position.

Liquidation Level
In forex trading, the specific value of a trader's account below which the liquidation of the trader's
positions is automatically triggered and executed at the best available exchange rate at the time. The
liquidation level is expressed as a percentage value of assets. If a forex trader's positions go against
him or her, his or her account will eventually reach the liquidation level, unless the trader
contributes further margin to top up his or her account.

Liquidity
1. The degree to which an asset or security can be bought or sold in the market without affecting the
asset's price. Liquidity is characterized by a high level of trading activity.
2. The ability to convert an asset to cash quickly. Also known as "marketability

Liquidity Cushion
A reserve fund for a company or person containing money market and highly liquid investments.

Liquidity Path
A way of referring to the process of taking a company public.

Liquidity Preference Theory


The hypothesis that forward rates offer a premium over expected future spot rates.
Liquidity Risk
The risk stemming from the lack of marketability of an investment that cannot be bought or sold
quickly enough to prevent or minimize a loss.

Liquidity Trap
A situation in which prevailing interest rates are low and savings rates are high. As a result,
monetary policy is ineffective.

Listed
Being included and traded on a given exchange. Most exchanges have specific requirements which
companies must meet in order to be listed and continue to stay listed.

Listed Security
Securities that have been accepted for trading purposes by a recognized and regulated exchange.

Living Will
A legal document that sets out the medical care an individual, or the principal, wants or does not
want in the event that he or she becomes incapable of communicating his or her wishes.

LKR
In currencies, this is the abbreviation for the Sri Lankan Rupee.

Load
A fee or commission charged to an investor when buying or redeeming shares in a mutual fund. The
fee may be charged at the time the investor buys into the mutual fund (called a front-end load) or
when the investor redeems his/her mutual fund shares (called a back-end load).

Load Fund
A mutual fund with shares sold at a price including a large sales charge. This sales fee may range
from 3% to as high as 8% of the full purchase.

Load Spread Option


A method of collecting the annual fees from investors in load funds through periodic deductions.
These periodic deductions often are taken off of regular investor contributions to the fund to spread
out the burden of the load fees over time.

Loan
When a lender gives money or property to a borrower, and the borrower agrees to return the
property or repay the borrowed money, along with interest, at a predetermined date in the future.

Loan Constant
The required annual cash flow needed to service both the principal and interest upon a loan
obligation.

Loan Loss Provision


An expense set aside as an allowance for bad loans (customer defaults, or terms of a loan have to
be renegotiated, etc).

Loan Sharking
When a borrower is charged interest above an established legal rate. Depending on where you live,
lenders typically cannot charge more than 60% interest per annum.

Loan Syndication
The process of involving numerous different lenders in providing various portions of a loan

Loan To Value Ratio - LTV Ratio


A lending risk assessment ratio that financial institutions and others lenders examine before
approving a mortgage. Typically, assessments with high LTV ratios are generally seen as higher risk
and, therefore, if the mortgage is accepted, the loan will generally cost the borrower more to borrow
or he or she will need to purchase mortgage insurance.
Lobster Trap
A strategy used by a target firm to prevent a hostile takeover. In a lobster trap, the company passes
a provision preventing anyone with more than 10% ownership from converting convertible securities
into voting stock.

Local
Traders on future exchanges who occasionally fill public orders, but mainly buy and sell for their
own personal accounts.

Local Tax
An additional tax on top of federal and state taxes, usually collected in the form of property taxes.
Also called municipal tax.

Lock Limit
Commonly associated with the futures market, a lock limit occurs when the trading price of a futures
contract arrives at the exchanges predetermined limit price. At the lock limit, trades above or below
the lock price are not executed.

Lock-Up Agreement
A legally binding contract between the underwriters and insiders of a company prohibiting these
individuals from selling any shares of stock for a specified period of time. Lock-up periods typically
last 180 days (six months) but can on occasion last for as little as 120 days or as long as 365 days
(one year).

Lock-Up Option
A stock option offered by a target company to a white knight for additional equity or for the
purchase of a valuable portion of their company.

Lockdown
A specified period when an employee of a public company is barred from selling - and occasionally
buying - their company's stock.

Locked Market
A short-term situation occurring within a market where both the bid and ask are identical, resulting
in no bid-ask spread.

Logarithmic Price Scale


A type of scale used on a chart that is plotted in such a way that two equivalent percent changes are
represented by the same vertical distance on the scale, regardless of what the price of the asset is
when the change occurs. The distance between the numbers on the scale decreases as the price of
the underlying asset increases. This is the case because a $1 increase in price becomes less
influential as the price heads higher since it now corresponds to less of a percentage change than it
did when the price of the asset was at a lower level. Also referred to as a "log scale".

Logistics
The overall management of the way resources are moved to the areas where they are required.

Lombard Rate
The rate charged to banks by the German central bank for collateralized loan obligations.

London Interbank Bid Rate - LIBID


This is the rate bid by banks on eurocurrecy deposits.
London Interbank Offered Rate - LIBOR
An interest rate at which banks can borrow funds, in marketable size, from other banks in the
London interbank market. The LIBOR is fixed on a daily basis by the British Bankers' Association.
The LIBOR is derived from a filtered average of the world's most creditworthy banks' interbank
deposit rates for larger loans with maturities between overnight and one full year.

London International Financial Futures And Options Exchange - LIFFE


A futures and options exchange in London, England that was modeled after the Chicago Board of
Trade and the Chicago Mercantile Exchange. Similar to its American counterparts, this exchange
used to deal with futures, options and commodities contracts. However, in 2002, LIFFE was acquired
by Euronext as part of its strategy to increase its presence as a derivatives market. LIFFE has been
renamed Euronext.liffe.

London Metal Exchange - LME


A commodities exchange in London, England, that deals in metal futures. Contracts on the
exchange include aluminum, copper and zinc. Trading on the LME can be done in three main ways:
through open outcry, a telephone system between member companies or the LME Select, an
electronic trading platform. The LME is a non-ferrous exchange, which means that iron and steel are
not traded on the exchange.

London Stock Exchange - LSE


The primary stock exchange in the U.K. and the largest in Europe. Originated in 1773, the regional
exchanges were merged in 1973 to form the Stock Exchange of Great Britain and Ireland, later
renamed the London Stock Exchange (LSE). The Financial Times Stock Exchange (FTSE) 100 Share
Index, or "Footsie", is the dominant index, containing 100 of the top blue chips on the LSE.

Long (or Long Position)


1. The buying of a security such as a stock, commodity or currency, with the expectation that the
asset will rise in value.
2. In the context of options, the buying of an options contract.
Opposite of "short (or short position)".

Long Bond
A bond that matures in more than 10 years. When people refer to "the long bond," this typically is
the 30-year U.S. treasury.

Long Jelly Roll


An option strategy that aims to profit from a time value spread through the sale and purchase of two
call and two put options, each with different expiration dates.

Long Market Value


The aggregate worth, in dollars, of a group of securities held in a cash or margin brokerage account,
calculated using the prior trading day's closing prices of each security in the account.
Long Run
In terms of operating activities, a period of time in which all costs are variable.

Long Run Incremental Cost - LRIC


Forward-looking incremental costs that can be accounted for by a company.
Long Term
Holding an asset for an extended period of time. Depending on the type of security, a long-term
asset can be held for as little as one year or for as long as 30 years or more.

Long-Term Assets
1. Reported on the balance sheet, it's the value of a company's property, equipment and other capital
assets, less depreciation.
2. A stock, bond or other asset that you plan on holding in your portfolio for a lengthy period of time.

Long-Term Capital Management - LTCM


A large hedge fund led by Nobel Prize-winning economists and renowned Wall Street traders that
nearly collapsed the global financial system in 1998 as a result of high-risk arbitrage trading
strategies.
The fund formed in 1993 and was founded by renowned Salomon Brothers bond trader John
Meriwether.

Long-Term Care (LTC) Insurance


Coverage that provides nursing-home care, home-health care, personal or adult day care usually for
individuals above the age of 65 or with a chronic or disabling condition that needs constant
supervision. LTC insurance offers more flexibility and options than many public assistance
programs.

Long-Term Debt
Loans and financial obligations lasting over one year.
In the U.K., long-term debts are known as "long-term loans."

Long-Term Debt/Capitalization
A ratio showing the financial leverage of a firm, calculated by dividing long-term debt by the amount
of capital available:

Long-Term Equity Anticipation Securities - LEAPS


An options contract that expires more than nine months in advance, and can last as long as two
years. Normal options tend to last no longer than nine months.
Long-Term Liabilities
Recorded on the balance sheet, a company's liabilities for leases, bond repayments and other items
due in more than one year.

Long/Short Equity
A hedge fund strategy that involves buying certain stocks long and selling others short. There
usually isn't a restriction on the country that the stocks trade in either.

Long/Short Fund
A type of mutual fund that mimics some of the trading strategies typically employed by a hedge
fund. Unlike most mutual funds, long/short funds use leverage, derivatives and short positions in an
attempt to maximize total returns, regardless of market conditions. The amount of leverage used and
the number of derivatives and short positions that long/short funds may contain are limited by law.
These funds invest primarily in stocks.

Look Thru
An accounting method for calculating taxes owed on income from controlled foreign corporations.

Look-Ahead Bias
Bias created by the use of information or data in a study or simulation that would not have been
known or available during the period being analyzed. This will usually lead to inaccurate results in
the study or simulation.

Lookback Option
An exotic option that allows investors to "look back" at the underlying prices occurring over the life
of the option, and then exercise based on the underlying asset's optimal value.

Loonie
A slang term for a Canadian dollar. It is derived from the picture of a loon on one side of the coin.

Loophole
A technicality that allows a person or business to avoid the scope of a law without directly violating
the law.

Losing Your Shirt


In the investment world, this expression is used to describe a very bad investment that causes an
investor to lose everything he or she has invested (and more, in some cases).

Loss Carryback
An accounting technique with which a company retroactively applies net operating losses to a
preceding year's income in order to reduce tax liabilities present in that previous year.

Loss Carryforward
An accounting technique that applies the current year's net operating losses to future years' profits
in order to reduce tax liability. Generally accepted accounting principles (GAAP) specify that loss
carryforwards can be used in any one of the seven years following the loss.

Loss Leader Strategy


The strategy of offering a product or service at a considerable discount and loss of profit in order to
attract future business

Lot
In general, any group of goods or services making up a transaction. In the financial markets, a lot
represents the standardized quantity of a financial instrument as set out by an exchange or similar
regulatory body. For exchange-traded securities, a lot may represent the minimum quantity of that
security that may be traded

Lottery Bond
A bond issued in the U.S. and U.K. with a rate of return dependent upon a lottery style payout.

Love Money
Seed money or capital given by family or friends to an entrepreneur to start a business. In this type
of situation, the decision to lend money and the terms of the agreement are usually based on
qualitative factors and the relationship between the two parties, rather than on a formulaic risk
analysis

Low
The lowest price a security traded at within that trading day.

Low Ball
A slang term for an offer that is significantly below the fair value of an asset or group of assets.

Lower of Cost and Market Method


A requirement of GAAP in the United States that inventory be recorded at the lower of either the cost
to produce it, the cost to repurchase it or the market value of the inventory.

Lowest Price/Earnings (P/E) Ratio Tab (Best Value Rating)


Theoretically measures the value of a stock by dividing the current price by its earnings per share
over the last twelve months. When a stock's P/E ratio is high, it is considered by the majority of
investors as pricey or overvalued. Stocks with low P/Es are typically considered a good value.
This tab in IBD's "Top Rated Stocks Under $10" product screens stocks for a P/E of under 10, and
minimum of 25,000 shares traded per day (Filtering for a minimum daily quantity traded allows us to
provide "Top Rated" users with better overall quality stocks.)

LRD
In currencies, this is the abbreviation for the Liberian Dollar

LSL
In currencies, this is the abbreviation for the Lesotho Loti.

LTL
In currencies, this is the abbreviation for the Lithuanian Litas.

LYD
In currencies, this is the abbreviation for the Libyan Dinar.

Lump-Sum Distribution
A one-time payment for the entire amount due, rather than breaking payments into smaller
installments. Some lump-sum distributions receive special tax treatment.
M1
The category of the money supply that includes all physical money like coins and
currency. It also includes demand deposits, which are checking accounts and NOW
accounts.

M2
A category within the money supply that includes M1 in addition to all time-related
deposits, savings deposits, and non-institutional money-market funds.

M3
The category of the money supply that includes M2 as well as all large time deposits,
institutional money-market funds, short-term repurchase agreements, along with other
larger liquid assets.

Macaroni Defense
An approach taken by a company that does not want to be taken over. The company
issues a large number of bonds with the condition they must be redeemed at a high price
if the company is taken over.

Macaulay Duration
The weighted-average term to maturity of the cash flows from a bond. The weight of each
cash flow is determined by dividing the present value of the cash flow by the price.

Macro Risk
A type of political risk in which political actions in a host country can adversely affect all
foreign operations. Macro risk can come about from events that may or may not be in the
reigning government's control.

Macro-Hedge
An investment technique used to eliminate the risk of a portfolio of assets. In most cases,
this would mean taking a position that offsets the whole portfolio. But this technique is
difficult in practice because there is rarely one asset that will offset the risk of a broader
portfolio, so applying a macro-hedge most likely requires taking an offsetting position in
each individual asset.

Macroeconomics
The field of economics that studies the behavior of the aggregate economy.
Macroeconomics examines economy-wide phenomena such as changes in
unemployment, national income, rate of growth, gross domestic product, inflation and
price levels

MAD
In currencies, this is the abbreviation for the Moroccan Dirham.

Mad Hatter
A CEO or managerial team whose ability to lead a company is highly suspect.

Main Home
A person's regular or permanent place of residence.

Main Street
Shorthand for "the investing public"--in the same way that "Wall Street" is used to refer to
investment professionals and brokers.

Maintenance Margin
The minimum amount of equity that must be maintained in a margin account. In the
context of the NYSE and NASD, after an investor has bought securities on margin, the
minimum required level of margin is 25% of the total market value of the securities in the
margin account. Keep in mind that this level is a minimum, and many brokerages have
higher maintenance requirements of 30-40%.
Also referred to as "minimum maintenance" or "maintenance requirement".

Majority Shareholder
A person or conglomerate who owns more than 50% of the outstanding shares of a
corporation.

Make A Market
An action whereby a dealer stands by ready, willing and able to buy or sell a particular
security at the quoted bid and ask price.

Make Whole Call (Provision)


A type of call provision on a bond allowing the borrower to pay off remaining debt early.
The borrower has to make a lump sum payment derived from a formula based on the net
present value (NPV) of future coupon payments will not be paid because of the call.

Managed Account
An investment account that is owned by an individual investor and looked after by a hired
professional money manager. In contrast to mutual funds (which are professionally
managed on behalf of many mutual-fund holders), managed accounts are personalized
investment portfolios tailored to the specific needs of the account holder.

Managed Futures Account


An account that is like a mutual fund, except that positions in government securities,
futures contracts and options on futures contracts are used to manage the portfolio.

Managed Money
A means of investment where the investor, rather than buying and selling their own
securities, places their investment funds in the hands of a qualified investment
professional for a predetermined annual fee

Management Buyin - MBI


When a group of investors outside of a company purchase a controlling block of shares
and keep the existing management

Management Discussion and Analysis - MD&A


A section of a company's annual report in which management discusses numerous
aspects of the company, both past and present.

Management Fee
A fixed fee that a mutual fund manager charges investors for his services and work with
the fund.

Management Ownership
Percent of common stock which is owned by the company's management; a higher
percentage generally assumes an increased level of commitment.

Management Risk
The risks associated with ineffective, destructive or underperforming management, which
hurts shareholders and the company or fund being managed. This term refers to the risk
of the situation in which the company and shareholders would have been better off
without the choices made by management.

Manager Universe (Benchmark)


The comparison of an account's performance to that of a representative peer group of
money managers.

Managerial Accounting
The process of identifying, measuring, analyzing, interpreting, and communicating
information for the pursuit of an organization's goals

Mandatory Convertible
A type of convertible bond that has a required conversion or redemption feature. Either on
or before a contractual conversion date, the holder must convert the mandatory
convertible into the underlying common stock.
These securities provide investors with higher yields to compensate holders for the
mandatory conversion structure.

Manipulation
The act of artificially inflating or deflating the price of a security. In most cases,
manipulation is illegal. It is much easier to manipulate the share price of smaller
companies, such as penny stocks, because they are not as closely watched by analysts as
the medium- and large-sized firms.
Also known as "price manipulation".

Manufactured Payment
A tax concept whereby the lender of a stock receives the equivalent dividend payment
from the borrower of the stock.

Margin
1. Borrowed money that is used to purchase securities. This practice is referred to as
"buying on margin".
2. The amount of equity contributed by a customer as a percentage of the current market
value of the securities held in a margin account.
3. In a general business context, the difference between a product's (or service's) selling
price and the cost of production.
4. The portion of the interest rate on an adjustable-rate mortgage that is over and above
the adjustment-index rate. This portion is retained as profit by the lender.

Margin Account
A brokerage account in which the broker lends the customer cash to purchase securities.
The loan in the account is collateralized by the securities and cash. If the value of the
stock drops sufficiently, the account holder will be required to deposit more cash or sell a
portion of the stock.

Margin Call
A broker's demand on an investor using margin to deposit additional money or securities
so that the margin account is brought up to the minimum maintenance margin. This is
sometimes called a "fed call" or "maintenance call".

Margin Of Safety
A principle of investing in which an investor only purchases securities when the market
price is significantly below its intrinsic value. In other words, when market price is
significantly below your estimation of the intrinsic value, the difference is the margin of
safety. This difference allows an investment to be made with minimal downside risk.
The term was popularized by Benjamin Graham (known as "the father of value investing")
and his followers, most notably Warren Buffett. Margin of safety doesn't guarantee a
successful investment, but it does provide room for error in an analyst's judgment.
Determining a company's "true" worth (its intrinsic value) is highly subjective. Each
investor has a different way of calculating intrinsic value which may or may not be correct.
Plus, it's notoriously difficult to predict a company's earnings. Margin of safety provides a
cushion against errors in calculation.

Marginal Propensity To Consume - MPC


A component of Keynesian theory, MPC represents the proportion of an aggregate raise in
pay that is spent on the consumption of goods and services, as opposed to being saved.

Marginal Tax Rate


The amount of tax paid on an additional dollar of income. As income rises, so does the tax
rate.

Marginal Utility
The additional satisfaction a consumer gains from consuming one more unit of a good or
service.

Marital Deduction
A tax reduction that is mainly used for the purposes of estate and gifts. It allows an
individual to transfer some assets to his or her spouse tax free, creating a deduction in
taxable income.

Marital Property
A U.S. state-level legal distinction of a married individual's assets. Property acquired by
either spouse during the course of a marriage is considered marital property. For example,
an IRA in the name of an individual with a spouse, which is accumulated during the course
of the marriage, would be considered marital property.

Mark To Market - MTM


1. The act of recording the price or value of a security, portfolio or account to reflect its
current market value rather than its book value.
2. In terms of mutual funds, a MTM is when the net asset value (NAV) of the fund is valued
upon the most current market values.

Markdown
The difference between the highest current bid price among broker-dealers in the market
and the lower price that a dealer charges a customer.

Market
1. Typically refers to the equity market where stocks are traded, but can also refer to the
bond, options, or commodity market.
2. People with the desire and ability to buy a specific product.
Market Arbitrage
Purchasing and selling the same security at the same time in different markets to take
advantage of a price difference between the two separate markets.

Market Average
A measure of the overall price level of a given market, as defined by a specified group of
stocks or other securities. A market average equals the sum of all current values of stocks
in the group divided by the total number of shares in the group.

Market Bottom
Term that refers to the overall general market making a low point and then turning around
for a period of improvement.

Market Cannibalization
The negative impact of a company's new product on the sales performance of its existing
related products.

Market Capitalization
Total market value of company. Calculated by multiplying shares outstanding by the stock
price.

Market Disruption
A situation where markets cease to function in a regular manner, typically characterized
by rapid and large market declines. Market disruptions can result from both physical
threats to the stock exchange or a unusual trading (as in a crash). In either case, the
disruption creates widespread panic and results in disorderly market conditions.

Market Economy
An economic system in which economic decisions and the pricing of goods and services
are guided solely by the aggregate interactions of a country's citizens and businesses and
there is little government intervention or central planning. This is the opposite of a
centrally planned economy, in which government decisions drive most aspects of a
country's economic activity.

Market Efficiency
The degree to which stock prices reflect all available, relevant information.

Market Exposure
The amount of funds invested in a particular type of security and/or market sector or
industry and usually expressed as a percentage of total portfolio holdings. Thus, it is the
amount an investor has at risk or the amount he/she can lose. Also known as "exposure".

Market If Touched - MIT


An order to purchase or sell a security as soon as a specific price is reached.

Market Index
An aggregate value produced by combining several stocks or other investment vehicles
together and expressing their total value against a base value from a specific date. Market
indexes are intended to represent an entire stock market and thus track the market's
changes over time.

Market Is Off
A common phrase meaning that the market (or a major market index) is trading below the
previous closing price.

Market Is Up
A common phrase meaning the market (or a major market index) is trading higher than the
previous closing price

Market Jitters
Feelings of nervousness created by uncertainty or fear about the current investment
environment

Market Maker
A broker-dealer firm that accepts the risk of holding a certain number of shares of a
particular security in order to facilitate trading in that security. Each market maker
competes for customer order flow by displaying buy and sell quotations for a guaranteed
number of shares. Once an order is received, the market maker immediately sells from its
own inventory or seeks an offsetting order. This process takes place in mere seconds.

Market Maker Spread


The difference between the price at which a Market Maker is willing to buy a security and
the price at which the firm is willing to sell it (the difference between the bid and ask for a
given security). Since each market maker can either buy or sell a stock at any given time,
the spread represents the market maker's profit on each trade.

Market Maven
Slang used to describe a good investor who is "in-the-know." It also implies opinion
leadership.

Market Momentum
A measure of overall market sentiment, calculated as the change in the value of a market
index multiplied by the aggregate trading volume occurring within the index components.

Market Neutral
A strategy undertaken by an investor or an investment manager that seeks to profit from
both increasing and decreasing prices in a single and numerous markets. Market-neutral
strategies are often attained by taking matching long and short positions in different
stocks to increase the return from making good stock selections and decreasing the
return from broad market movements. Market neutral strategists may also use other tools
such as merger arbitrage, shorting sectors, and so on. There is no single accepted method
of employing a market-neutral strategy.

Market On Close - MOC


A market order to be executed as near to the end of the exchange day as possible. Also
known as an "at-the-close order."

Market Order
An order to buy or sell a stock immediately at the best available current price.

Market Out Clause


A clause in an underwriting agreement allowing the underwriter to cancel the agreement
for certain specified reasons without penalty.

Market Risk
The day-to-day potential for an investor to experience losses from fluctuations in
securities prices. This risk cannot be diversified away. Also referred to as "systematic
risk".

Market Risk Premium


The difference between the expected return on a market portfolio and the risk-free rate.

Market Sector Indexes


Small daily industry sector charts in Investor's Business Daily located on the 'General
Market & Sectors' and 'Industry Groups' pages. Includes such major sectors as Dow Jones
Utilities, High Tech and Defensive. Listed in order of sector relative strength performance.
Useful in determining leading sectors in the current market.

Market Segmentation
A marketing term referring to the aggregating of prospective buyers into groups
(segments) that have common needs and will respond similarly to a marketing action.

Market Sentiment
The feeling or tone of a market (i.e. crowd psychology). It is shown by the activity and
price movement of securities.

Market Share
The percentage of total industry sales that is made up by a particular company's individual
sales.

Market Surveillance
A department responsible for investigating and preventing abusive, manipulative, or illegal
trading practices on the NASDAQ.

Market Technicians Association - MTA


A not-for-profit organization located in the US that promotes ethical trading practices
among technical analysts.

Market Timing
1. The act of attempting to predict the future direction of the market, typically through the
use of technical indicators or economic data.
2. The practice of switching among mutual fund asset classes in an attempt to profit from
the changes in their market outlook.

Market Value
1. The current quoted price at which investors buy or sell a share of common stock or a
bond at a given time.
2. The market capitalization plus the market value of debt. Sometimes referred to as "total
market value".

Market versus Quote - MVQ


A comparison between the last price at which a security traded and the current bid/ask
prices

Market-With-Protection Order
A type of market order that is canceled and re-submitted as a limit order if the price of the
asset moves dramatically after the investor places the order. The limit on the limit order is
placed at around the current market price as determined by a broker. This type of order
adds a protective measure, helping the investor ensure his or her market order will not be
completed at a price that is far off from the market price at the time of the order.
Marketable Securities
Very liquid securities that can be converted into cash quickly at a reasonable price.
Marketable securities are very liquid as they tend to have maturities of less than one year.
Furthermore, the rate at which these securities can be bought or sold has little effect on
their prices.

Marketing
The activities of a company associated with buying and selling a product or service. It
includes advertising, selling and delivering products to people. People who work in
marketing departments of companies try to get the attention of target audiences by using
slogans, packaging design, celebrity endorsements and general media exposure. The four
'Ps' of marketing are product, place, price and promotion.

Markup
The difference between an investment's lowest current offering price among dealers and
the higher price a dealer charges a customer. Markups occur when dealers act as
principals (buying and selling securities from their own accounts, at their own risk), as
opposed to brokers (receiving a fee for facilitating a transaction).

Marlboro Friday
A reference to Friday, Apr 2, 1993, when Philip Morris, the maker of Marlboro cigarettes,
announced that it would be cutting the price of Marlboros to compete with generic
cigarette makers. The company's stock tanked 26% following the announcement, losing
about $10 billion off its market cap in a single day.
The day is remembered as a landmark moment in the 1990s consumer movement away
from name brand products in favor of cheaper generic products with prices 50% lower
than their branded competitors. In its wake, money managers moved cash from name
brand consumer goods makers like Coca-Cola and Tambrands (the former maker of
Tampax tampons) to technology stocks and generic consumer goods producers.

Marquee Asset
A company's most appealing asset. Also referred to as a trophy asset.

Married Filing Jointly


A filing status for married couples that have wed before the end of the tax year. They can
record their respective incomes, exemptions and deductions on the same tax return.
Married filing jointly is best if only one spouse has a significant income. However, if both
spouses work and the income and itemized deductions are large and very unequal, it may
be more advantageous to file separately.

Married Filing Separately


A filing status for married couples who choose to record their respective incomes,
exemptions and deductions on separate tax returns. In most cases, "married filing jointly"
offers the most tax savings, especially when the spouses have different income levels.
However, there is a potential tax advantage to filing separately when one spouse has
significant medical expenses or miscellaneous itemized deductions.

Married Put
An option strategy whereby an investor, holding a long position in stock, purchases a put
on the same stock to protect against a depreciation in the stock's price.
Martingale System
A money management system of investing in which the dollar values of investments
continually increase after losses, or the position size increases with lowering portfolio
size.

Marubozo
A type of candlestick charting formation that appears when a security's price does not
trade outside the range of the opening and closing prices.

Mass Customization
The process of delivering wide-market goods and services that are customized to satisfy a
specific customer need.

Master Fund
In general, an investment vehicle that enables individual investors to invest money into
one or more underlying investments that are operated by professional managers.

Master Limited Partnership - MLP


A limited partnership that is publicly traded.

Master Notes
High-quality debt instruments offered by the Federal Farm Credit Bank (FFCB) with a
minimum face value of $25 million.

Master of Business Administration - MBA


A graduate degree achieved at a university or college that provides theoretical and
practical training to help graduates gain a better understanding of general business
management functions. The MBA degree can have a specific focus such as accounting,
finance or marketing.

Master Trust
A collection of funds from individual investors that are pooled together in order to obtain
wholesale prices and rates unavailable for regular investors.

Matador Bond
A foreign bond denominated in pesetas and issued in Spain by a non-Spanish company.

Match-Rate Funds
When the interest rate on a loan matches (or is extremely close to) the interest rate on the
source of the funds loaned out. An example of this would be if a bank accepted a $100,000
deposit and agreed to pay 5% interest on it for five years, then loaned the $100,000 out at
5.25%.
A securitization lender would be a typical user of match-rate funds.

Matched Book
A bank is running a matched book when the maturities of its assets and liabilities are
equally distributed. Also known as "asset/liability management".

Matching Contribution
A type of contribution an employer chooses to make to his or her employee's employer-
sponsored retirement plan. The contribution is based on elective deferral contributions
made by the employee.
Matching Orders
Entering identical buy and sell orders at the same time to create the appearance of active
trading in that security.

Matching Strategy
A strategy of creating investment portfolios that meet the individual needs of investors
through tiered investment durations.

Material Insider Information


Material information, about certain aspects of a company, that has not yet been made
public but that will have at least a small impact on the company's share price once
released. It is illegal for holders of material insider information to use the information -
however it was received - to their advantage in trading stock, or to provide the information
to family members or friends so they can use it to make trades.

Material Weakness
When one or more of a company's internal controls, put in place to prevent significant
financial statement irregularities, is considered to be ineffective. If a deficiency in an
internal control is thought to be of material weakness, this means that it could lead to a
material misstatement in a company's financial statements.

Matilda Bond
An bond denominated in the Australian dollar and issued on the Australian market by a
foreign entity.

Mature Industry
An industry which has passed both the emerging and the growth phases of industry
growth. Earnings and sales grow slower in mature industries than in growth and emerging
industries.
As can be seen above, the third phase is the mature industry phase.

Matured RRSP
A Canadian retirement savings vehicle that is registered with the Canadian government
and is being used to produce retirement income for the beneficiary

Maturity
1. The length of time until the principal amount of a bond must be repaid.
2. The end of the life of a security.

Maturity by Maturity Bidding - MBM


A bond auction that allows bidders (who are underwriters) to submit bids for selected
maturities in its issue, rather than requiring buyers to bid for the entire issue on an all-or-
none (AON) basis.

Maturity Date
The date on which the principal amount of a note, draft, acceptance bond or other debt
instrument becomes due and is repaid to the investor and interest payments stop. It is
also the termination or due date on which an installment loan must be paid in full.
Maturity Guarantee
The dollar amount of a contract (such as a life insurance policy or segregated fund
contract) that is guaranteed after a certain amount of time has elapsed

Max Pain (TM)


The point at which options expire worthless.

Maximizer™
A brand of customer relationship management software popularly used by brokers and
investment advisors for tracking clients and leads.

May Day
Refers to May 1st, 1975, when brokerages changed from a fixed commission for securities
transactions to a negotiated one.

McClellan Oscillator
A market breadth indicator that is based on the difference between the number of
advancing and declining issues on the NYSE. It is primarily used for short and
intermediate term trading.

To calculate subtract a 39 day EMA (of advancing issues - declining issues) from a 19 day
EMA (of advancing issues - declining issues).

Simplified, it looks as follows: (19 Day EMA of Advances - Declines) - (39 Day EMA of
Advances - Declines)

McClellan Summation Index


The McClellan Summation Index is a long-term version of the McClellan Oscillator. It is a
market breadth indicator, and interpretation is similar to that of the McClellan Oscillator,
except that it is more suited to major trends.

Mean
The simple mathematical average of a set of two or more numbers. The mean for a given
set of numbers can be computed in more than one way, including the arithmetic mean
method, which uses the sum of the numbers in the series, and the geometric mean
method. However, all of the primary methods for computing a simple average of a normal
number series produce the same approximate result most of the time.

Mean Return
1. In securities analysis, it is the expected value, or mean, of all the likely returns of
investments comprising a portfolio. It is also known as "expected return".

Mean Reversion
A theory suggesting that prices and returns eventually move back towards the mean or
average. This mean or average can be the historical average of the price or return or
another relevant average such as the growth in the economy or the average return of an
industry.

Mechanical Investing
Buying and selling stocks according to a screen based on predetermined criteria, usually
ranking stocks using relative strength or momentum as the central indicator, but other
indicators can also be used.
Medallion Signature Guarantee
A guarantee seal applied to securities, in the process of transfer, by member institutions
of the Medallion program.

Median
The midpoint of the range numbers that are arranged in order of value.

Medicaid
A joint federal and state program that helps low-income individuals or families pay for the
costs associated with long-term medical and custodial care, provided they qualify.
Although largely funded by the federal government, Medicaid is run by the state where
coverage may vary.

Medicare
A U.S. federal health program that subsidizes people who meet one of the following
criteria:
1. An individual over the age of 65 who has been a U.S. citizen or permanent legal resident
for five years.
2. An individual who is disabled and has collected Social Security for a minimum of two
years.
3. An individual who is undergoing dialysis for kidney failure or who is in need of a kidney
transplant.
4. An individual who has Amyotrophic Lateral Sclerosis (ALS-Lou Gehrig's disease).
Medicare helps out people at a time in their lives when they may have serious health
problems but lack the funding for treatment.

Medicare Part D
A prescription drug benefit program that was created through the U.S. Medicare
Prescription Drug, Improvement, and Modernization Act of 2003. The "D" stands for
"drugs". The program gives Medicare recipients these basic choices: stay in traditional
Medicare without signing up for the prescription drug benefit outlined in the Act, stay in
traditional Medicare and enroll in a Medicare drug plan, enroll in other Medicare plans, or
enroll in a comprehensive private health plan (which may or may not cover prescription
costs). The program began providing coverage for users on Jan 1, 2006.

Medicare Wages
The portion of a person's earnings that are subject to "Medicare tax."

Medium Of Exchange
An intermediary instrument used to facilitate the sale, purchase or trade of goods between
parties. In modern economies the medium of exchange is currency.

Medium Term
An intermediate period of time to hold an asset.

Medium Term Note - MTN


1. A note that usually matures in five to 10 years.
2. A corporate note continuously offered by a company to investors through a dealer.
Investors can choose from differing maturities, ranging from nine months to 30 years.
Mega Cap
Companies having a market capitalization greater than $200 billion

Mello-Roos
In the U.S., a form of financing that can be used by cities, counties and special districts
(such as school districts) to finance major improvements and services within the
particular district. Special taxes and bonds used for Mello-Roos financing can only be
issued by counties or districts in which two-thirds of the voters in the area have voted in
favor of becoming a Mello-Roos district.

Member
1. In the most general context, a brokerage firm (or broker) holding membership on an
organized stock or commodities exchange. Membership is generally required in order to
fill trades for clients on the exchange.
2. For the New York Stock Exchange, one of over 1300 individuals or firms owning a seat
on the exchange.
3. For the National Association of Securities Dealers (NASD), any broker-dealer admitted
to membership in the association.

Member Firm
A broker-dealer in which at least one of the principal officers is a member of either the
NYSE, another major stock exchange, a self-regulatory organization or a clearing house
corporation.
Also referred to as "clearing member".

Member Of Household
A person who is claimed as a dependent when filing year-end tax forms. Such a dependent
allows a taxpayer to qualify for the dependency exemption. A member of household can
be a relative or a non-relative, but in order for a non-relative to be claimed as a member of
household, he or she must meet the relationship requirements outlined by the IRS.

Member Short-Sales Ratio


A ratio comparing the number of short sales transacted on behalf of NYSE members to the
entire number of short sells transacted on the exchange.

Memorandum of Understanding - MOU


A legal document outlining the terms and details of an agreement between parties,
including each parties requirements and responsibilities.

Mental Accounting
An economic concept established by economist Richard Thaler, which contends that
individuals divide their current and future assets into separate, non-transferable portions.
The theory purports individuals assign different levels of utility to each asset group, which
affects their consumption decisions and other behaviors.

Merchant Bank
A bank that deals mostly in (but is not limited to) international finance, long-term loans for
companies and underwriting. Merchant banks do not provide regular banking services to
the general public.

Merger
The combining of two or more companies, generally by offering the stockholders of one
company securities in the acquiring company in exchange for the surrender of their stock.

Merger Arbitrage
A hedge fund strategy with which the stocks of two merging companies are
simultaneously bought and sold to create a risk less profit.

Mergers And Acquisitions - M&A


A general term used to refer to the consolidation of companies. A merger is a combination
of two companies to form a new company, while an acquisition is the purchase of one
company by another with no new company being formed.

Merrill Lynch & Co.


One of the better known management and advisory companies. Merrill Lynch provides a
wide range of services to both individual and institutional investors.

Mezzanine Financing
A hybrid of debt and equity financing that is is typically used to finance the expansion of
existing companies. Mezzanine financing is basically debt capital that gives the lender the
rights to convert to an ownership or equity interest in the company if the loan is not paid
back in time and in full. It is generally subordinated to debt provided by senior lenders
such as banks and venture capital companies.
Since mezzanine financing is usually provided to the borrower very quickly with little due
diligence on the part of the lender and little or no collateral on the part of the borrower,
this type of financing is aggressively priced with the lender seeking a return in the 20-30%
range.

Mgmt
Represents the amount of the total outstanding stock (capitalization) that is held by
management. Figure is expressed as a percentage.

Michael Milken
As an executive at investment bank Drexel Burnham Lambert Inc during the 1980s, Milken
used high-yield junk bonds for corporate financing and mergers and acquisitions. He
amassed an enormous personal fortune, but in 1989 he was indicted by a federal grand
jury and eventually spent nearly two years in prison after pleading guilty to charges of
securities fraud. While he is credited with founding the high-yield debt market, he was
banned for life from the securities industry.

Michigan Consumer Sentiment Index - MCSI


A survey of consumer confidence conducted by the University of Michigan. The
preliminary report is released on the tenth (except on weekends) of each month. A final
report for the prior month is released on the first of the month.

Micro Cap
Companies having a market capitalization between $50 million and $300 million.

Micro Risk
A type of political risk that refers to political actions in a host country that can adversely
affect selected foreign operations. Micro risk can come about from events that may or may
not be in the reigning government's control

Micro-Hedge
An investment technique used to eliminate the risk of a single asset. In most cases, this
means taking an offsetting position in that single asset.
If this asset is part of a larger portfolio, the hedge will eliminate the risk of the one asset
but will have less of an effect on the risk associated with the portfolio.

Micro credit
An extremely small loan given to impoverished people to help them become self
employed. Also known as "micro lending."

Microeconomics
The branch of economics that analyzes the market behavior of individual consumers and
firms in an attempt to understand the decision-making process of firms and households. It
is concerned with the interaction between individual buyers and sellers and the factors
that influence the choices made by buyers and sellers. In particular, microeconomics
focuses on patterns of supply and demand and the determination of price and output in
individual markets (e.g. coffee industry).

Microfinance
A type of banking service that is provided to unemployed or low-income individuals or
groups who would otherwise have no other means of gaining financial services.
Ultimately, the goal of microfinance is to give low income people an opportunity to
become self-sufficient by providing a means of saving money, borrowing money and
insurance.

Mid-Atlantic Option
An option that can be exercised at different times during the life of the option. The various
times set for exercise are written within the option and allow for flexibility for both the
writer and holder of the option.

Middle Office
The group of employees in a financial services company that manages risk, calculates
profits and losses, and (generally) is in charge of information technology. The middle
office draws on the resources of both the front and the back offices.

Mileage Allowance
A deduction of automobile expenses for people using their vehicles for business, charity,
moving, medical or any other purpose that qualifies for a deduction.

Mill Rate
The amount of tax paid per dollar of the assessed property value.

Mine and Yours


Terms used by floor traders to signify buying and selling. Mainly used in forex
transactions.

Mini Perm
Short-term financing used to pay off income-producing construction or commercial
properties, usually payable in three to five years.

Mini-Sized Dow Options


A type of option for which the underlying assets are Dow Jones Industrial Average futures
contracts. The option has a 5 times multiplier, which means that each option contract on
the index controls 5 times the value of the index. This gives the option holder more
leverage on his/her investment compared to cash index options at a lower cost. The option
is traded on the Chicago Board of Trade.

Minimum Margin
The initial amount required to be deposited in a margin account before trading on margin
or selling short. For example, the NYSE and the NASD require investors to deposit a
minimum of $2,000 in cash or securities to open a margin account. Keep in mind that this
amount is only a minimum - some brokerages may require you to deposit more than
$2,000.

Minimum Price Contract


A forward contract with a provision guaranteeing a minimum price at delivery of the
underlying agricultural commodity.
Minority Interest
A significant but non-controlling ownership of less than 50% of a company's voting shares
by either an investor or another company.

Minus Tick
Designates a trade that occurs at a lower price than the immediately preceding trade. Also
referred to as "downtick" or "zero minus tick".

Mirror Fund
A type of mutual fund, typically run by a life insurance company, that enables an investor
to access another company's mutual fund through his or her life insurance policies.

Misery Index
A measure of economic well-being for a specified economy, computed by taking the sum
of the unemployment rate and the inflation rate for a given period. An increasing index
means a worsening economic climate for the economy in question, and vice versa.

Mismatch Risk
1) A category of risk that refers to the possibility that a swap dealer will be unable to find a
suitable counterparty for a swap transaction for which it is acting as an intermediary.
2) The risk that an investor has chosen investments that are not suitable for his or her
circumstances.

MJSD
An acronym representing the months March, June, September, and December.

MMK
In currencies, this is the abbreviation for the Myanmar Kyat.

MNT
In currencies, this is the abbreviation for the Mongolian Tughrik.

MOB (Municipals-over-Bonds) Spread


The difference in yields between a municipal bond and a Treasury bond with the same
time to maturity. The MOB is sometimes used for determining tax strategies.

Mode
A statistical term referring to the most frequently occurring term in a set of numbers.
Modern Portfolio Theory - MPT
A theory on how risk-averse investors can construct portfolios in order to optimize market
risk for expected returns, emphasizing that risk is an inherent part of higher reward. Also
called portfolio theory or portfolio management theory.

Modified Accelerated Cost Recovery System - MACRS


The new accelerated cost recovery system, created after the release of the Tax Reform Act
of 1986, which allows for greater accelerated depreciation over longer time periods.

Modified Adjusted Gross Income - MAGI


The amount of income that determines how much of an individual's IRA contribution is
deductible. The modified adjusted gross income is found by taking the individual's
adjusted gross income and adding back certain items such as foreign income, foreign-
housing deductions, student-loan deductions, IRA-contribution deductions and
deductions for higher-education costs.
Modified Dietz Method
A method of evaluating a portfolio's return based upon a time weighted analysis.

Modified Duration
A formula that expresses the measurable change in the value of a security in response to
a change in interest rates. Calculated as the following:
Where:
n = number of coupon periods per year
YTM = the bond's yield to maturity

Modified Internal Rate Of Return - MIRR


While the internal rate of return (IRR) assumes the cash flows from a project are
reinvested at the IRR, the modified IRR assumes that all cash flows are reinvested at the
firm's cost of capital. Therefore, MIRR more accurately reflects the profitability of a project

Modigliani-Miller Theorem - M&M


A financial theory stating that the market value of a firm is determined by its earning
power and the risk of its underlying assets, and is independent of the way it chooses to
finance its investments or distribute dividends. Remember, a firm can choose between
three methods of financing: issuing shares, borrowing or spending profits (as opposed to
dispersing them to shareholders in dividends). The theorem gets much more complicated,
but the basic idea is that, under certain assumptions, it makes no difference whether a
firm finances itself with debt or equity.

Mom and Pop

An adjective denoting a small-scale and family-like atmosphere, often used to describe


these types of businesses and investors.

Momentum
The rate of acceleration of a security's price or volume.

Momentum Fund
Investment funds that invest in companies based on current trends in such things as
earnings or price movement. The portfolio manager will look for companies that have been
trending in a certain direction (e.g. a series of extremely positive earnings releases or
upward price momentum in the short term). The manager will then take positions in the
same direction as the trend and attempt to ride the wave and sell once it has peaked.
These funds are also known as "momo funds".

Momo Play
A slang term used to describe an investment purely as a momentum play, not worrying
about the company's fundamentals.

Monday Effect
A theory that returns on the stock market on Mondays will follow the prevailing trend from
the previous Friday. Therefore, if the market was up on Friday, it should continue through
the weekend and, come Monday, resume its rise.

Monetarism
A set of views based on the belief that inflation depends on how much money the
government prints. It is closely associated with Milton Friedman, who argued, based on
the Quantity Theory of Money, that the government should keep the money supply fairly
steady, expanding it slightly each year mainly to allow for the natural growth of the
economy.

Monetarist
An economist who holds the strong belief that the economy's performance is determined
almost entirely by changes in the money supply.

Monetarist Theory
An economic concept which contends that changes in the money supply are the most
significant determinants of the rate of economic growth and the behavior of the business
cycle.

Monetary Base
The total amount of a currency that is either circulated in the hands of the public or in the
commercial bank deposits held in the central bank's reserves. This measure of the money
supply typically only includes the most liquid currencies.
Also known as the "money base".

Monetary Conditions Index - MCI


A measure of monetary conditions in the Canadian economy, giving an idea of the relative
ease or tightness of monetary policy. MCI gauges the effect that Canada's monetary policy
has on the Canadian economy through changes in the exchange rate and interest rates.

Monetary Policy
The actions of a central bank, currency board or other regulatory committee, that
determine the size and rate of growth of the money supply, which in turn affects interest
rates.

Monetary Union Index of Consumer Prices - MUICP


An average measure of inflation for all countries located in the Euro-zone. It is a statistical
indicator whose objective is to facilitate making comparisons of inflation between the
European Union and other economies such as the U.S.

Monetize
1. To convert into money.
2. To convert from securities into currency that can be used to purchase goods and
services.

Money
1. A commodity or asset, such as gold, an officially issued currency, coin or paper note,
that can be legally exchanged for something equivalent, such as goods or services.
2. As defined by common law: a medium of exchange that is authorized or adopted by a
domestic or foreign government and includes a monetary unit of account established by
an intergovernmental organization or by agreement between two or more nations.

Money Flow
Calculated by averaging the high, low, and closing prices, and multiplying by the daily
volume. Comparing that result with the number for the previous day tells you whether
money flow was positive or negative for the current day.

Money Flow Index - MFI


A momentum indicator that measures the strength of money in and out of a security. A
divergence between the MFI and price trend can be interpreted as a possible trend
reversal.

Money Laundering
The process of creating the appearance that large amounts of money obtained from
serious crimes, such as drug trafficking or terrorist activity, originated from a legitimate
source.

Money Management
The process of budgeting, saving, investing, spending or otherwise in overseeing the cash
usage of an individual or group. The predominant use of the phrase in financial markets is
that of an investment professional making investment decisions for large pools of funds,
such as mutual funds or pension plans.
Also referred to as "investment management" and/or "portfolio management".

Money Manager
A business or bank responsible for managing the securities portfolio of an individual or
institutional investor. Typically, a money manager employs people with various expertise
ranging from research and selection of investment options to monitoring the assets and
deciding when to sell them. In return for a fee, the money manager has the fiduciary duty
to choose and manage investments prudently for his or her clients, including developing
an appropriate investment strategy, buying and selling securities to meet those goals.
Also known as "portfolio manager" or "investment manager".

Money Market
The securities market dealing in short-term debt and monetary instruments. Money market
instruments are forms of debt that mature in less than one year and are very liquid.

Money Market Account


A savings account that offers the competitive rate of interest (real rate) in exchange for
larger-than-normal deposits.
Also known by the acronym "MMDA", which stands for "money market demand account"
or "money market deposit account".

Money Market Fund


A mutual fund that invests in short-term debt instruments. The fund's objective is to earn
interest for shareholders while maintaining a net asset value of $1 per share.

Money Supply
The entire quantity of bills, coins, loans, credit, and other liquid instruments in a country's
economy.

Money Zero Maturity - MZM


A measure of the liquid money supply within an economy. MZM represents all money in
M2 less the time deposits, plus all money market funds.

Money-Purchase Pension Plan


A defined-contribution plan to which employer contributions are fixed

Money-Purchase Provisions
The terms of a registered pension plan that detail the specific amounts that an employer
and employee contribute to the plan. The amounts may be stated in dollars or
percentages. The provisions of the pension plan states the maximum amount of the
employee's contribution that can be matched by the employer. Money-purchase
provisions for registered plans must fall under the governing requirements outlined by the
Government of Canada

Monopolist
A person, group or organization with a monopoly. In other words, an individual or
company that controls all of the market for a particular good or service.

Monopolistic Competition
A type of competition within an industry where:
1. All firms produce similar yet not perfectly substitutable products.
2. All firms are able to enter the industry if the profits are attractive.
3. All firms are profit maximizers.
4. All firms have some market power, which means none are price takers.

Monopoly
A situation in which a single company or group owns all or nearly all of the market for a
given type of product or service. By definition, monopoly is characterized by an absence
of competition - which often results in high prices and inferior products.
For a strict academic definition, a monopoly is a market containing a single firm.

Monopsony
A market similar to a monopoly except that a large buyer not seller controls a large
proportion of the market and drives the prices down. Sometimes referred to as the buyer's
monopoly.

Monte Carlo Simulation


A problem solving technique used to approximate the probability of certain outcomes by
running multiple trial runs, called simulations, using random variables.

Monthly Income Preferred Securities - MIPS


Shares that are an interest in a limited partnership existing solely for the purpose of
issuing preferred securities and lending the proceeds of the sales to its parent company.
MIPS usually have a $25 par value, NYSE listing and cumulative monthly distributions.

Montreal Exchange
A Canadian derivatives exchange that facilitates the trading of stock options, interest rate
futures and options, as well as index options and futures. Located in Montreal, Quebec, it
is the country's main financial derivative market, while the Winnipeg Commodities
Exchange in Manitoba is the home to Canadian commodity derivative trading.

Moody's Bond Survey


A weekly publication that reports changes in corporate bond quality ratings for publicly
traded companies, lists new debt registrations and provides market commentary. Also
known as "Moody's Credit Survey".

Moore's Law
An observation, In 1965, by Intel co-founder Gordon Moore. He noticed the number of
transistors per square inch on integrated circuits had doubled every year since their
invention. Moore predicted the trend would continue for the foreseeable future.
Although the pace has slowed, the number of transistors per square inch has since
doubled approximately every 18 months. This is used as the current definition of Moore's
Law.

MOP
In currencies, this is the abbreviation for the Macau Pataca.
Moral Hazard
The risk that a party to a transaction has not entered into the contract in good faith, has
provided misleading information about its assets, liabilities or credit capacity, or has an
incentive to take unusual risks in a desperate attempt to earn a profit before the contract
settles.

Moral Obligation Bond


A type of revenue bond issued by a municipality or similar government body. A moral
obligation bond not only gives investors the tax exemption benefits inherent in a
municipal bond, but also provides an additional moral pledge of commitment against
default. The issuing body's commitment is supported by a reserve fund established to
meet any debt service costs the government may be unable to make.

Moral Suasion
A persuasion tactic used by an authority (i.e. Federal Reserve Board) to influence and
pressure, but not force, banks into adhering to policy. Tactics used are closed-door
meetings with bank directors, increased severity of inspections, appeals to community
spirit, or vague threats. A good example of moral suasion is when Fed Chairman Alan
Greenspan speaks on the markets - his opinion on the overall economy can send financial
markets falling or flying.

Moratorium
1) A period of time in which there is a suspension of a specific activity until future events
warrant a removal of the suspension or issues regarding the activity have been resolved.
2) In bankruptcy law, a legally binding halt of the right to collect debt.
Morgan Stanley Capital International - MSCI
A series of indexes constructed by Morgan Stanley to help institutional investors
benchmark their returns. These indexes are also used for investment purposes - in the
form of exchanged-traded funds - by all types of investors. There are a wide range of
indexes created by Morgan Stanely covering a wide range of developed and emerging
economies and a wide range of economic sectors.

Morning Star
A bullish candlestick pattern that consists of three candles that have demonstrated the
following characteristics:
1. The first bar is a large red candlestick located within a defined downtrend.
2. The second bar is a small-bodied candle (either red or white) that closes below the first
red bar.
3. The last bar is a large white candle that opens above the middle candle and closes near
the center of the first bar's body.
As shown by the chart, this pattern is used by traders as an early indication that the
downtrend is about to reverse.

Morningstar Risk Rating


A rating system that measures how often a fund loses money compared to the risk-free
rate of return (T-bill return

Mortality And Expense Risk Charge


A variable annuity fee included in certain annuity or insurance products which serves to
compensate the insurance company for various risks it assumes under the annuity
contract

Mortgage
A debt instrument, secured by the collateral of specified real estate property, that the
borrower is obliged to pay back with a predetermined set of payments. Mortgages are
used by individuals and businesses wishing to make large value purchases of real estate
without paying the entire value of the purchase up front.
Mortgages are also known as liens against property, or claims on property.

Mortgage Banker
A company, individual or institution that originates, sells and services mortgage loans.

Mortgage Broker
The matchmaker between a homebuyer and a lender whose goal is to originate a mortgage
loan. The broker draws from a pool of various lenders to find the right match.

Mortgage-Backed Securities - MBS


An investment instrument that represents ownership of an undivided interest in a group of
mortgages. Principal and interest from the individual mortgages are used to pay investors'
principal and interest on the MBS. Also known as "mortgage pass-through".

Mortgagee
An entity that lends money to a borrower for the purpose of purchasing a piece of real
property. By accepting a mortgage on the real property, the lender creates security in the
full repayment of the loan in the future.

Mortgagor
An individual or company who borrows money to purchase a piece of real property. By
granting the lender an interest in the property, which allows it to lend the funds with an
accurate assessment of risk, the mortgagor provides the lender with a guarantee for the
full repayment of the loan. Also known as a "chargor".

Most Active
The stocks on an exchange that had the highest volume over a given period. The most
common time period used is a single trading day.

Most Recent Quarter - MRQ


The previous quarter

Mothballing
The preservation of a production facility without using it to produce. Machinery in a
mothballed facility is kept in working order so that production may be restored quickly if
needed.

Moving Average - MA
An indicator frequently used in technical analysis showing the average value of a
security's price over a set period. Moving averages are generally used to measure
momentum and define areas of possible support and resistance.

Moving Average Chart


A tool used by technical analysts to track the price movements of a security or
commodity. It plots average daily settlement prices over a defined period of time,
anywhere from a few days to a couple years.

Moving Average Convergence Divergence - MACD


A trend-following momentum indicator that shows the relationship between two moving
averages of prices. The MACD is calculated by subtracting the 26-day exponential moving
average (EMA) from the 12-day EMA. A nine-day EMA of the MACD, called the "signal line",
is then plotted on top of the MACD, functioning as a trigger for buy and sell signals.
Moving Average Ribbon
A technique used in technical analysis to identify changing trends. It is created by placing
a large number of moving averages onto the same chart. When all the averages are
moving in the same direction, the trend is said to be strong. Reversals are confirmed when
the averages crossover and head in the opposite direction.
The moving averages used in the diagram start with the 50-day moving average and
increase by 10-day periods up to the final average of 200. (50, 60, 70, 80 ... 190, 200)

Moving Expenses
Deductible expenses that are related to moving an individual and/or his or her family and
possessions for employment reasons

Mr. Copper
Otherwise known as Yasuo Hamanaka, Mr. Copper was a trader in the copper market who
lost over $2.5 Billion for his employer, Sumitomo Corp. (in Japan). The losses amassed
from unauthorized trading in secret accounts between 1985 and 1996.

MRO
In currencies, this is the abbreviation for the Mauritanian Ouguiya.

MSCI Emerging Markets Index


An index created by Morgan Stanley Capital International (MSCI) that is designed to
measure equity market performance in global emerging markets.
The Emerging Markets Index is a float-adjusted market capitalization index. As of May
2005, it consisted of indices in 26 emerging economies: Argentina, Brazil, Chile, China,
Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Jordan, Korea,
Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa,
Taiwan, Thailand, Turkey and Venezuela

MTL
In currencies, this is the abbreviation for the Maltese Lira.

Multi-Advisor Fund
An investment fund that is managed by more than one investment manager, each with a
particular specialty. The goal of the multi-advisor fund is to make investment decisions
based on multiple professional opinions, rather than relying on a single person to have
comprehensive knowledge of investment options.

Multi-Discipline Account
A type of investment account that allows access by several specialized investment
managers within one main account. The account is split into several sub-accounts that are
separately run by managers with relevant expertise. The multi-discipline account provides
investors with an efficient way to get professional investment management and asset
diversification. It is also referred to as a "multi-style" and "multi-strategy account".

Multinational Corporation - MNC


A corporation that has its facilities and other assets in at least one country other than its
home country. Such companies have offices and/or factories in different countries and
usually have a centralized head office where they co-ordinate global management. Very
large multinationals have budgets that exceed those of many small countries.
Sometimes referred to as a "transnational corporation".
Multiple Compression
The effect that arises when a stock trades at a certain multiple and, while earnings may be
strong, the stock price doesn't move up (or even goes down). The result is that the given
multiple (P/E ratio) is reduced even though nothing is fundamentally wrong with the
company. Compression of a company's multiple can be interpreted as the valuation being
called into question.

Multiples Approach
A valuation theory based on the idea that similar assets sell at similar prices. This
assumes that a ratio comparing value to some firm-specific variable (operating margins,
cash flow, etc.) is the same across similar firms.
Multiplier
In Keynesian economic theory, a factor that quantifies the change in total income as
compared to the injection of capital deposits or investments which originally fueled the
growth. It is usually used as a measurement of the effects of government spending on
income, and it can be calculated as one divided by the marginal propensity to save.

Multiplier Effect
The expansion of a country's money supply that results from banks being able to lend.
The size of the multiplier effect depends on the percentage of deposits that banks are
required to hold on reserves. In other words, it is money used to create more money and
calculated by dividing total bank deposits by the reserve requirement.

Municipal Bond
A debt security issued by a state, municipality, or county, in order to finance its capital
expenditures. Municipal bonds are exempt from federal taxes and from most state and
local taxes, especially if you live in the state the bond is issued.

Municipal Bond Fund


A mutual fund that invests in municipal bonds, operating either as an investment trust or
as an open-end fund.

Municipal Convertible
A zero-coupon municipal bond that can be converted into an interest-bearing bond under
certain circumstances.

Municipal Inflation-Linked Securities


Investment vehicles issued by various levels of governments containing variable coupon
payments that increase and decrease with changes in the consumer price index (CPI).

Municipal Securities Rulemaking Board - MSRB


A regulating body that creates rules and policies for investment firms and banks in the
issuing and sale of municipal bonds, notes and other municipal securities by states, cities
and counties. Activities regulated by the MSRB include the underwriting, trading and
selling of municipal securities financing public projects.

Munifacts
A newswire service for municipal bonds that provides information on new municipal bond
issues in the primary market and secondary market.

MUR
In currencies, this is the abbreviation for the Mauritius Rupee.

Mutual Company
A private company whose ownership base is made of customers. Also referred to as a
"co-operative".

Mutual Fund Custodian


A trust company, bank or similar financial institution responsible for holding and
safeguarding the securities owned within a mutual fund. A mutual fund's custodian may
also act as the mutual fund's transfer agent, maintaining records of shareholder
transactions and balances.
Also referred to as a "mutual fund corporation".

Mutual Fund Index, IBD


Proprietary index of domestic growth stock funds located every day on Investor's
Business Daily's 'General Market & Sectors' page. Can be used along with other key
indices as a general market indicator.

Mutual Fund Liquidity Ratio


A ratio published monthly by the Investment Company Institute that compares the amount
of cash relative to total assets held by a mutual fund.

Mutual Fund Timing


A legal but frowned-upon practice whereby traders attempt to profit from the short-term
differences between the daily closing prices of a mutual fund.
Timing occurs when investors attempt to gain short-term profits from buying and selling
mutual funds. This has a negative effect on the fund's long-term holders, as they will be
subjugated to higher fees due to the short-term trading. In order to prevent this, many
mutual funds will impose a short term trading penalty upon the sale of funds that are not
held for a minimum period of time. This transfers the short-term costs of buying and
selling new shares within the fund's portfolio to those investors not planning to stay with
the fund for the long-term. Don't confuse market timing with mutual fund timing. Market
timing is a practice of trying to predict the best time to buy and sell stocks for the purpose
of a short-term gain. Mutual fund timing is an practice publicly frowned upon by many
mutual fund companies in their prospectuses.

Mutual-Fund Advisory Program


A portfolio of mutual funds that are selected to match a pre-set asset allocation model
based on the investor's objectives and offered in a single investment account together
with the services of a professional investment advisor. Typically, investors won't be
charged separate transaction fees, but periodic (i.e. monthly/quarterly/yearly) asset-
management fees based on the average value of assets held within the account. Also
known as a "mutual fund wrap".

MVR
In currencies, this is the abbreviation for the Maldive Rufiyaa.

MWK
In currencies, this is the abbreviation for the Malawi Kwacha.

MXN
In the currency market, this is the abbreviation for the Mexican peso

My Stock Lists
My Stock Lists tracks those stocks you want to keep a close eye on. Besides providing
price and price change, My Stock Lists also tracks Volume % Change and IBD’s
unique Earnings Per Share and Relative Strength Ratings for up to 80 stocks (2 lists of up
to 40 each). Links are also provided for easy access to the IBD Investing Tools.

MYR
In currencies, this is the abbreviation for the Malaysian Ringgit

MZM
In currencies, this is the abbreviation for the Mozambique Metical

N
A Nasdaq stock symbol specifying that it is the company's third class of preferred shares.
NAD
In currencies, this is the abbreviation for the Namibia Dollar.

Naked Call
A call option position held by a writer who does not hold a long position in the stock on which the
call has been written. Sometimes referred to as an "uncovered call".

Naked Option
An option position where the buyer or seller has no underlying security position.

Naked Position
A securities position that is not hedged from market risk. Both the potential gain and the potential
risk are greater when a position is naked instead of covered (a covered position is hedged from
market risk).

Naked Put
A put option whose writer does not have a short position in the stock on which he or she has written
the put. Sometimes referred to as an "uncovered put."

Naked Put
A put option whose writer does not have a short position in the stock on which he or she has written
the put. Sometimes referred to as an "uncovered put."

Naked Shorting
The illegal practice of short selling shares that have not been affirmatively determined to exist.
Ordinarily, traders must borrow a stock, or determine that it can be borrowed, before they sell it
short. However, some professional investors and hedge funds take advantage of loopholes in the
rules to sell shares without making any attempt to borrow the stock.

Nano Cap
Small public companies having a market capitalization below $50 million.

Narrow Basis
A condition found in futures markets in which the spot price of underlying commodities is close to
the futures price of the same contract.

Narrow Money
Another term for M1, the category of the money supply that includes all physical money like coins
and currency. It also includes demand deposits, which include checking accounts and NOW
accounts.

Narrow-Based Weighted Average


An anti-dilution provision used to ensure that investors are not penalized when companies are
undergoing additional financing or issuing new shares. A narrow-based weighted average takes into
account only the total number of outstanding preferred shares for determining the new weighted
average price for the old shares.

Nasdaq
Created in 1971, the Nasdaq was the world's first electronic stock market. The Nasdaq is a
computerized system that facilitates trading and provides price quotations on some 5,000 of the
more actively traded over-the-counter stocks.

Nasdaq 100 Index


An index composed of the 100 largest, most actively traded U.S companies listed on the Nasdaq
stock exchange. This index includes companies from a broad range of industries with the exception
of those that operate in the financial industry, such as banks and investment companies.

Nasdaq Composite Index


A market-capitalization weighted index of the more than 3,000 common equities listed on the Nasdaq
stock exchange. The types of securities in the index include American depository receipts, common
stocks, real estate investment trusts (REITs) and tracking stocks. The index includes all Nasdaq
listed stocks that are not derivatives, preferred shares, funds, exchange-traded funds (ETFs) or
debentures.

Nasdaq National Market Securities - Nasdaq-NM


The Nasdaq National Market consists of over 3000 companies that have a national or international
shareholder base, meet stringent financial requirements, and agree to specific corporate governance
standards.

National Association of Securities Dealers - NASD


A self-regulatory organization of the securities industry responsible for the operation and regulation
of the Nasdaq stock market and over-the-counter markets. It also administrates exams for
investment professionals, such as the Series 7 exam.

National Best Bid and Offer - NBBO


A term applying to the SEC requirement that brokers must guarantee customers the best available
ask price when they buy securities and the best available bid price when they sell securities.
National Bureau of Economic Research - NBER
This private, non-profit, non-partisan research organization's main aim is to promote greater
understanding of how the economy works. It disseminates economic research among public
policymakers, business professionals and the academic community.

National Commodities And Derivatives Exchange - NCDEX


India's largest and most recognized commodities exchange, which was established in 2003. The
exchange was founded by some of India's leading financial institutions such as ICICI Bank Limited,
the National Stock Exchange of India and the National Bank for Agricultural and Rural Development,
among others.

National Futures Association - NFA


An independent self-regulatory non-profit organization that regulates the futures market.

National Market System - NMS


A system with two main functions: 1. To facilitate trading of OTC stocks whose size, profitability,
and trading activity meet specific criteria.
2. To post prices for securities on the NYSE and other regional exchanges simultaneously, allowing
investors to obtain the best price.

National Registration Database - NRD


A Canadian database, launched in 2003 to replace the old paper form system, that allows security
dealers and investment advisors to file registration forms electronically.
National Securities Clearing Corporation - NSCC
A subsidiary of the DTCC that provides centralized clearing, information, and settlement services to
the financial industry.

National Securities Markets Improvement Act - NSMIA


Passed by the U.S. Congress in 1996, the NSMIA was an attempt to update and amend previous
security acts and create one uniform code that companies and regulators could follow.

National Treatment
A concept of international laws that declares that if a state provides certain rights and privileges to
its own citizens, it should also provide equivalent rights and privileges to foreigners who are
currently in the country. This concept of equality can be found in bilateral tax treaties and also in
most World Trade Organization agreements.

Natural Unemployment
The lowest rate of unemployment that an economy can sustain over the long run. Keynesians
believe that a government can lower the rate of unemployment (i.e. employ more people) if it were
willing to accept a higher level of inflation (the idea behind the Phillips Curve). However, critics of
this say that the effect is temporary and that unemployment would bounce back up but inflation
would stay high. Thus, the natural, or equilibrium, rate is the lowest level of unemployment at which
inflation remains stable. Also known as the "non-accelerating inflation rate of unemployment"
(NAIRU).

Near Term - NT
Another word for "short term."

Nearby Month
In the context of options and futures, it's the month closest to delivery (futures) or expiration
(options).

Needs Approach
A method of calculating how much life insurance is required by an individual/family to cover their
needs (i.e. expenses). These include things like funeral expenses, legal fees, estate and gift taxes,
business buyout costs, probate fees, medical deductibles, emergency funds, mortgage expenses,
rent, debt and loans, college, child care, private schooling and maintenance costs. The needs
approach contrasts the human-life approach.

Negative Amortization
The increase in the balance of a loan caused by interest payments being larger than the re-payments
made on the loan. On adjustable-rate mortgages, if the monthly payments are not enough to cover
both the interest and principal payments on the loan, the shortage is added to the principal. This
situation occurs when the mortgage payments reach the maximum (as defined by the loan
agreement) while the interest rate on the loan is increasing.

Negative Butterfly
A non-parallel yield curve shift in which long- and short-term yields decrease by a greater degree
than intermediate rates. This yield curve shift effectively humps the curve, adding to the curvature of
the yield curve.

Negative Carry
A situation in which the cost of financing a securities or financial futures position exceeds the yield
earned.

Negative Covenant
A bond covenant preventing certain activities, unless agreed to by the bondholders. Negative
covenants are written directly into the agreement creating the bond issue, are legally binding on the
issuer, and exist to protect the best interests of the bondholders. Also referred to as "restrictive
covenant".

Negative Goodwill
A gain occurring when the price paid for an acquisition is less than the fair value of its net assets.

Negative Income Tax


A taxation system where income subsidies are given to persons or families that are below the
poverty line.

Negative Obligation
An obligation of NYSE specialists to remain on the sidelines and refrain from acting as principal
when there is sufficient market demand and supply to efficiently match orders.

Negative Pledge Clause


A negative covenant in an indenture stating that the corporation will not pledge any of its assets if
doing so gives the lenders less security. Also be referred to as a "covenant of equal coverage".

Negative Volume Index - NVI


An index that focuses on days where the volume has significantly decreased from the previous
day's trading.

Neglected Firm Effect


The phenomenon of less-known firms producing abnormally high returns on their stocks.

Negotiable
1. Describing the price of a good or security that is not firmly established.

2. Describing a good or security whose ownership is easily transferable from one party to another.

Negotiable Certificate Of Deposit - NCD


A certificate of deposit with a minimum face value of $100,000. These are guaranteed by the bank
and can usually be sold in a highly liquid secondary market, but they cannot be cashed-in before
maturity

Negotiable Order of Withdrawal (NOW) Account


An interest-earning bank account with which the customer is permitted to write drafts against money
held on deposit. Also known as a "NOW account".

Negotiated Market
A type of secondary market exchange in which the prices of each security are bargained out
between buyers and sellers.

Negotiated Sale
A method of offering municipal bonds or similar financial instruments in which the issuing entity
and a selected underwriter negotiate the terms of the issue, as opposed to having multiple
underwriting groups competitively bidding on the issue to establish its terms.

Negotiated Underwriting
A process in which both the purchase price and the offering price for a new issue are negotiated
between the issuer and a single underwriter.

Neoclassical Economics
An approach to economics that relates supply and demand to an individual's rationality and his or
her ability to maximize utility or profit. Neoclassical economics also increased the use of
mathematical equations in the study of various aspects of the economy. This approach was
developed in the late-nineteenth century, based on books by William Stanley Jevons, Carl Menger
and Leon Walras.

Nervous Nellie
An investor who isn't comfortable with investing and the risks associated with it.

Nest Egg
A special sum of money saved or invested for one specific future purpose.

Net Advantage To Leasing - NAL


The total monetary savings that would result from a person or a business choosing to lease an
asset, as opposed to purchase it outright. The benefit of leasing is determined by comparing the net
present value of purchasing the asset outright to the net present value of leasing it

Net Asset Value - NAV


1. In the context of mutual funds, the total value of the fund's portfolio less liabilities. The NAV is
usually calculated on a daily basis.
2. In terms of corporate valuations, the book value of assets less liabilities.

Net Change
The difference between the closing price of a security on the day's trading and the previous day's
closing price. Net change can be positive or negative and is quoted in terms of dollars. This is what
the newspaper stock tables quote

Net Debt Per Capita


A measurement of the value of a government's debt expressed in terms of the amount attributable to
each citizen under the government's jurisdiction. It is commonly computed using the following
formula:

Net Debt To Assessed Valuation


In a municipal bond issue, a ratio measuring the value of the municipality's net debt compared to the
specified value of the real property being purchased as assessed for tax purposes.

Net Debt To Estimated Valuation


A ratio comparing the net value of a municipal bond issue to the estimated market value of the
property secured by the debt. This ratio can differ significantly from a municipal bond's net debt to
assessed valuation if real-estate prices for the municipality's holdings incur large increases or
decreases.

Net Domestic Product


An annual measure of the economic output of a nation that is adjusted to account for depreciation,
calculated by subtracting depreciation from the gross domestic product (GDP).

Net Exporter
A country or territory whose value of exported goods is higher than its value of imported goods over
a given period of time.
A net exporter is the opposite of a net importer.

Net Exports
The value of a country's total exports minus the value of its total imports. It is used to calculate a
country's aggregate expenditures, or GDP, in an open economy.

Net Importer
A country or territory whose value of imported goods is higher than its value of exported goods over
a given period of time.
A net importer is the opposite of a net exporter.

Net Income - NI
1. A company's total earnings (or profit). Net income is calculated by taking revenues and adjusting
for the cost of doing business, depreciation, interest, taxes and other expenses. This number is
found on a company's income statement and is an important measure of how profitable the
company is over a period of time. The measure is also used to calculate earnings per share.
Often referred to as "the bottom line" since net income is listed at the bottom of the income
statement. In the U.K., net income is known as "profit attributable to shareholders".
2. An individual's income after deductions, credits and taxes are factored into gross income.
Deductions and credits are subtracted from gross income to arrive at taxable income, which is used
to calculate income tax. Net income is income tax subtracted from taxable income.

Net Interest Margin Securities - NIMS


A type of security that allows holders to access excess cash flows resulting from securitized
mortgage loan pools.

Net Investment
A measure of a company's investment in capital, found by subtracting non-cash depreciation from
capital expenditures. This measure helps to give a sense of how much money a company is
spending on capital items (such as property, plants and equipment), which are used for operations.

Net Investment Income


Income received from investment assets (before taxes) such as bonds, stocks, mutual funds, loans
and other investments (less related expenses). The individual tax rate on net investment income
depends on whether it is interest income, dividend income or capital gains.

Net Long
A condition in which an investor has more long positions than short positions in a given asset,
market, portfolio or trading strategy. Investors who are net long will benefit when the price of the
asset increases.

Net Loss
The result that occurs when expenses exceed the income produced.

Net Operating Income - NOI


A company's operating income after operating expenses are deducted, but before income taxes and
interest are deducted. If this is a positive value, it is referred to as net operating income, while a
negative value is called a net operating loss (NOL).

Net Operating Loss - NOL


A period in which a company's allowable tax deductions are greater than its taxable income,
resulting in a negative taxable income. This generally occurs when a company has incurred more
expenses than revenues during the period.
The net operating loss for the company can generally be used to recover past tax payments or
reduce future tax payments. The reasoning behind this is that because corporations are required to
pay taxes when it earns money, it deserves some form of tax relief when it loses money.

Net Operating Profit After Tax - NOPAT


A company's potential cash earnings if its capitalization were unleveraged (that is, if it had no debt).
NOPAT is frequently used in economic value added (EVA) calculations.
Calculated as:
NOPAT = Operating Income x (1 - Tax Rate)

Net Operating Profit Less Adjusted Taxes - NOPLAT


Total operating profits for a firm with adjustments made for taxes.
Net Present Value - NPV
The difference between the present value of cash inflows and the present value of cash outflows.
NPV is used in capital budgeting to analyze the profitability of an investment or project.
NPV analysis is sensitive to the reliability of future cash inflows that an investment or project will
yield.
Net Proceeds
The amount received after all costs are deducted from the sale of a piece of property or security.

Net Realizable Value - NRV


The value of an asset that can be realized by a company or entity upon the sale of the asset, less a
reasonable prediction of the costs associated with either the eventual sale or the disposal of the
asset in question.

Net Receivables
A company's accounts receivable (money owed to the company) minus bad debts.

Net Revenue Pledge


A provision in a municipal bond issue that requires the issuing municipality to use net revenues
(revenues left after expenses) from the project being financed to pay first the debt service costs of
the issue

Net Sales
The amount a seller receives from the buyer after costs associated with the sale are deducted.

Net Short
A condition in which an investor has more short positions than long positions in a given asset,
market, portfolio or trading strategy. Investors who are net short will benefit when the price of the
underlying asset decreases.

Net Tangible Assets


Calculated as the total assets of a company, minus any intangible assets such as goodwill, patents
and trademarks, less all liabilities and the par value of preferred stock. Also known as "net asset
value" or "book value".

Net Unrealized Appreciation - NUA


The difference in value between the average cost basis of shares and the current market value of the
shares held in a tax-deferred account.

Net Volume
A security's uptick volume minus its downtick volume over a specified period. An indicator very
similar to money flow.

Net Worth
The amount by which a company or individual's assets exceed their liabilities.

Netback
A summary of all the costs associated with bringing one unit of oil to the marketplace, and all of the
revenues from the sale of all the products generated from that same unit. The netback is calculated
by taking all of the revenues from the oil, less all costs associated with getting the oil to a market.
These costs can include, but are not limited to, importing, transportation, production and refining
costs, and royalty fees.

Netscaped
A slang term referring to an instance in which a company gets hurt materially or put out of business
as a result of head-to-head competition with Microsoft. Microsoft's size, resources and expertise
mean there is always a risk that the company will steal market share. Many competitors have tried to
beat the software giant and ended up suffering serious damage.
Netting
1. Settling mutual obligations at the net value of a contract as opposed to its gross dollar value.
2. Reducing the transfer of funds between subsidiaries to a net amount.

Neutral
1) A term that describes an option on a security or market that is neither bullish nor bearish.
2) A term that describes a person who is non-biased in the case of a dispute, such as an arbitrator.

New Economy
A buzzword describing the new, high growth industries that are on the cutting edge of technology
and are the driving force of economic growth.

New Highs
Refers to a stock attaining a new price high when compared to its old price high of the last 52 weeks

New Highs List


Found daily on Investor's Business Daily's ‘Industry Group’ page. Identifies both the top industry
sectors with the greatest number of stocks making new price highs as well as lists the individual
stocks hitting new highs within that sector (‘New Highs’ list).

New Home Sales


An economic indicator that measures sales of newly built homes. Released by the U.S. Department
of Commerce's Census Bureau, it includes both quantity and price statistics. It is considered to be a
lagging indicator of demand in the market and to affect mortgage rates.
New Issue
A reference to a security that has been registered, issued and is being sold on a market to the public
for the first time. New issues are sometimes referred to as primary shares or new offerings. The term
does not necessarily refer to newly issued stocks, although initial public offerings are the most
commonly known new issues. Securities that can be newly issued include both debt and equity.

New Paradigm
In the investing world, a totally new way of doing things that has a huge effect on business.

New York Mercantile Exchange - NYMEX


The world's largest physical commodity futures exchange. Trading is conducted through two
divisions: the NYMEX Division, which is home to the energy, platinum and palladium markets, and
the COMEX Division, where metals like gold, silver and copper and the FTSE 100 index options are
traded. The NYMEX uses an outcry trading system during the day and an electronic trading system
after hours

New York Stock Exchange - NYSE


A corporation, operated by a board of directors, responsible for listing securities, setting policies
and supervising the stock exchange and its member activities. The NYSE also oversees the transfer
of members' seats on the Exchange, judging whether a potential applicant is qualified to be a
specialist.

News Item
Summary of the most recent news event. News items are obtained from several sources, including
all major news wires and company press releases

NGN
In currencies, this is the abbreviation for the Nigerian Naira.

Nifty 50
The 50 stocks that were most favored by institutional investors in the 1960s and 1970s. Companies
in this group were usually characterized by consistent earnings growth and high P/E ratios.

Nigerian Scam
A scam most often perpetrated by email. In a Nigerian scam, the sender requests help in facilitating
the transfer of a substantial sum of money. In return, the sender offers a commission, usually in the
range of several million dollars. The scammers then request that money be sent to pay for some of
the costs associated with the transfer. If money is sent to the scammers, they will either immediately
disappear or try to get more money with claims of continued problems with the transfer.

Nikkei
Short for Japan's Nikkei 225 Stock Average, the leading and most-respected index of Japanese
stocks. It is a price-weighted index comprised of Japan's top 225 blue-chip companies on the Tokyo
Stock Exchange. The Nikkei is equivalent to the Dow Jones Industrial Average Index in the U.S. In
fact, it was called the Nikkei Dow Jones Stock Average from 1975 to 1985.

Nil-Paid
Security that are tradeable but originally posed no cost to the seller. For example, a renounceable
right being sold by the original owner to another investor is considered nil-paid. A right is an
opportunity to purchase more shares, usually at discount, given to shareholders by a corporation.
The shareholders receive these rights at no cost, and if the rights are renounceable, the
shareholders can choose to sell them on the market

Nine-Bond Rule
The NYSE requirement that all orders for nine bonds or less be sent to the floor for one hour, in
which time a market is sought. The rule doesn't apply if the customer directs the broker to go to the
OTC market. Also known as "Rule 396".

NIO
In currencies, this is the abbreviation for the Nicaraguan Cordoba.

NMF
An abbreviation for "no meaningful figure". You'll often see this when comparing financial data
among companies where a certain ratio or figure isn't applicable.

No Quote
A designation indicating that no market makers are making an inside market at this time.

No-Load Fund
A mutual fund whose shares are sold without a commission or sales charge. The reason for this is
that the shares are distributed directly by the investment company, instead of going through a
secondary party. This is the opposite of a load fund, which charges a commission upon the initial
purchase at the time of sale.

No-Par Value Stock


Stock that is issued without the specification of a par value indicated in the company's articles of
incorporation or on the stock certificate itself.

Noise
Price and volume fluctuations in the market that can confuse one's interpretation of market
direction. Used in the context of equities, it is stock market activity caused by program trading,
dividend payments or other phenomena that is not reflective of overall market sentiment. Also
known as "market noise".
Noise Trader
The term used to describe an investor who makes decisions regarding buy and sell trades without
the use of fundamental data. These investors generally have poor timing, follow trends, and over-
react to good and bad news.
Noise Trader Risk
A form of market risk associated with the investment decisions of noise traders. The higher the
volatility in market price for a particular security, the greater the associated noise trader risk

NOK
In currencies, this is the abbreviation for the Norwegian Krone.

Nominal
An unadjusted rate, value or change in value. This type of measure often reflects the current
situation, such as the current price of a car, and doesn't make adjustments to reflect factors such as
seasonality or inflation, which provide a more accurate measure in real terms.

Nominal Effective Exchange Rate - NEER


The unadjusted weighted average value of a country's currency relative to all major currencies being
traded within an index or pool of currencies. The weights are determined by the importance a home
country places on all other currencies traded within the pool, as measured by the balance of trade.

Nominal GDP
A gross domestic product (GDP) figure that has not been adjusted for inflation.
Also known as "current dollar GDP" or "chained dollar GDP".

Nominal Interest Rate


The interest rate unadjusted for inflation.

Nominal Quotation
A quote generated by a futures exchange or broker for contracts that have not traded for a specific
period of time.
Also referred to as a "nominal quote" or "nominal price".

Nominal Value
The stated value of an issued security that remains fixed, as opposed to its market value, which
fluctuates.

Nominal Yield
The interest rate stated on the face of a bond, it represents the percentage of interest to be paid by
the issuer on the face value of the bond.

Nominalism
The principle of keeping the amount of a debt obligation fixed despite fluctuations in the money's
purchasing power or exchange rate.

Nominee
A person or firm into whose name securities or other properties are transferred in order to facilitate
transactions, while leaving the customer as the actual owner.

Nominee Dividend
A dividend that a person receives on behalf of someone else. If you pass the dividends on to another
person, then you must file a Form 1099-DIV to get a dividend adjustment and thereby reduce your
taxable dividend interest.

Nominee Interest
Interest that a person receives on behalf of someone else. If you pass the interest on to another
person, then you must file a Form 1099-INT to get an interest adjustment and thereby reduce your
taxable interest.

Non Performing Asset


Any asset that is not effectively producing income.

Non Performing Loan - NPL


Loans that are in default or close to being in default.

Non-Accredited Investor
An investor who does not meet the net worth requirements for an accredited investor under the
Securities & Exchange Commission's Regulation D. A non-accredited individual investor is one who
has a net worth of less than $1 million (including spouse) and who earned less than $200,000
annually ($300,000 with spouse) in the last two years.

Non-Assessable Stock
A class of stock in which the issuing company is not allowed to impose levies on its shareholders
for additional funds for further investment. Non-assessable stocks typically have the words "fully
paid and non-assessable" printed on the stock certificate.
These are the opposite of assessable stocks.

Non-Cash Charge
A charge off, made by a company against earnings, that does not require an initial outlay of cash.

Non-Client Order
An order on an exchange made by a participant firm or on behalf of a partner, officer, director or
employee of the participant firm. Where a participant firm is a firm that is entitled to trade on the
exchange, it also known as a member firm. While these orders are allowed, priority must be given to
client orders for the same securities.

Non-Competitive Tender
One of the two bid processes for buying debt issuances. Non-competitive tender is for small
investors, while competitive tender is for large institutional investors. The price that a non-
competitive bidder receives is the average bid price of all competitive bids.
Also known as a "non-competitive bid".

Non-Contestability Clause
1. A provision in a person's will designed to stop beneficiaries from contesting the will. The
provision states that if beneficiaries try to contest the will, their potential inheritances will be
effectively redistributed to other beneficiaries.
2. A provision in a life insurance policy designed to stop life insurance companies from refusing to
pay out a claim to individuals because of fraud or error.

Non-Deliverable Forward - NDF


A cash-settled, short-term forward contract on a thinly traded or non-convertible foreign currency,
where the profit or loss at the time at the settlement date is calculated by taking the difference
between the agreed upon exchange rate and the spot rate at the time of settlement, for an agreed
upon notional amount of funds

Non-Deliverable Swap - NDS


A swap that is similar to a non-deliverable forward, with the only difference being that settlement for
both parties is done through a major currency. Non-deliverable swaps are used when the swap
includes a major currency, such as the U.S. dollar, and a restricted currency, such as the Philippine
peso or South Korean won.

Non-Directed Order
A customer order where specific instructions are not given, by the customer to the broker,
pertaining to its routing destination.

Non-Equity Option
A term for option contracts whose underlying securities are instruments other than equities.
Non-Farm Payroll
A statistic researched, recorded and reported by the U.S. Bureau of Labor Statistics intended to
represent the total number of paid U.S. workers of any business, excluding the following employees:
- general government employees
- private household employees
- employees of nonprofit organizations that provide assistance to individuals
- farm employees
This monthly report also includes estimates on the average work week and the average weekly
earnings of all non-farm employees.

Non-Financial Asset
An asset with a physical value such as land, property or some type of object.

Non-Fluctuating
The characteristic of constancy in a security or measurement's value, rate of change or other metric.

Non-Interest-Bearing Current Liability - NIBCL


A category of debt entered on the liabilities side of a balance sheet under current liabilities. While a
NIBCL is debt, representing a sum of money that the company owes and must pay within one year, it
does not require interest payments.

Non-Negotiable
1. A term relating to the price of a good or security which is firmly established and cannot be
adjusted.
2. A term relating to a good or security whose ownership is not easily transferable from one party to
another.

Non-Operating Asset
Assets that are unnecessary to the ongoing operations of a business.

Non-Operating Cash Flows


Cash inflows and outflows related to non-current investments, financing, and dividends.

Non-Qualified Deferred Compensation - NQDC


Compensation that has been earned by an employee, but not yet received from the employer.
Because the ownership of the compensation - which may be monetary or otherwise - has not been
transferred to the employee, it is not yet part of the employee's earned income and is not counted as
taxable income.

Non-Qualified Distribution
1) A distribution from a Roth IRA that occurs before the Roth IRA owner meets certain requirements
(see definition for qualified distributions).
2) A distribution from an education savings account that exceeds the amount used for qualified
education expenses.

Non-Qualified Stock Option - NSO


A type of employee stock option where you pay ordinary income tax on the difference between the
grant price and the price at which you exercise the option.

Non-Qualifying Investment
An investment that does not qualify for any level of tax-deferred or tax-exempt status. Investments
of this sort are made with after-tax money. They are purchased and held in tax-deferred accounts,
plans or trusts. Returns from these investments are taxed on an annual basis.
Non-Recourse Debt
A loan that is secured by some sort of collateral, usually property. The issuer can seize the collateral
if the borrower defaults.

Non-Recourse Finance
A loan where the lending bank is only entitled to repayment from the profits of the project the loan is
funding, not from other assets of the borrower.

Non-Recurring Item
Indicates pre-tax, non-recurring items were included in calculation. Daily Graphs Online uses a blue
delta (triangle) to denote non-recurring items.

Non-Renounceable Rights
An offer issued by a corporation to shareholders to purchase more shares of the corporation
(usually at a discount). Unlike a renounceable right, a non-renounceable right is not transferable,
and therefore cannot be bought or sold.

Non-Resident
An individual who mainly resides in one region or jurisdiction but has interests in another region. In
the region where he or she does not mainly reside, he or she will be classified by government
authorities as a non-resident. The classification itself will be determined in each region based on set
circumstances such as the amount of time spent within the region during the calendar year. This
classification is focused on where the person resides and does not focus on citizenship.

Non-Resident Alien
A non-U.S. citizen who doesn't pass the green card test or the substantial presence test. If a non-
citizen currently has a green card or has had a green card in the past calender year, he or she would
pass the green card test and would be classified as a resident alien. If the individual has resided in
the U.S. for more than 31 days in the current year and has resided in the U.S. for more than 183 days
over a three-year period, including the current year, he or she would pass the substantial presence
test and also be classified as a resident alien.

Noncallable
Securities that cannot be called by the issuer prior to maturity.

Noncommercial Trader
A classification used by the Commodity Futures Trading Commission (CFTC) to identify traders that
use the futures market for speculative purposes.

Nonconvertible Currency
Any currency that is used primarily for domestic transactions and is not openly traded on a forex
market. This usually is a result of government restrictions, which prevent it from being exchanged
for foreign currencies.
Also known as a "blocked currency".

Noncumulative
A type of preferred stock that does not pay the holder any unpaid or omitted dividends. If the
corporation chooses to not pay dividends in a given year, the investor does not have the right to
claim any of those forgone dividends in the future.

Nonelective Contribution
A type of contribution an employer chooses to make to each of his or her eligible employee's
employer-sponsored retirement plan. The contribution is not based on salary reduction
contributions made by the employee.
Nonprofit Organization
An association that is given tax-free status. Donations to a nonprofit organization are often tax
deductible as well.

Nonrecurring Charge
An expense occurring only once on a company's financial statement.

Nontaxable Dividends
Dividends from a mutual fund or some other regulated investment company that are not taxed.
Taxes are not paid out because the fund invests in municipal and other tax exempt investments.

Normal Market Size


A share classification structure based on the number of shares outstanding. This determines the
number of shares that a market maker can trade at the quoted price.

Normal Market Size


A share classification structure based on the number of shares outstanding. This determines the
number of shares that a market maker can trade at the quoted price.

Normal Yield Curve


A yield curve in which short-term debt instruments have a lower yield than long-term debt
instruments of the same credit quality. This gives the yield curve an upward slope. This is the most
often seen yield curve shape.
Sometimes referred to as "positive yield curve".

Normal-Course Issuer Bid-NCIB


The action of a company buying back its own outstanding shares from the markets so it can cancel
them.

Normalized Earnings
1. Earnings adjusted for cyclical ups and downs in the economy.
2. On the balance sheet, earnings adjusted to remove unusual or one-time influences.

North American Free Trade Agreement - NAFTA


A trade agreement between Canada, the United States and Mexico that encourages free trade
between these North American countries.

North American Securities Administrators Association - NASAA


A voluntary organization, established in 1919, of securities regulators whose aim is to protect
investors who buy securities or investment advice by educating the public, investigating violations
of state and provincial law and filing enforcement actions. Membership includes securities
regulators from all 50 U.S. states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands,
Canada and Mexico.

North Sea Brent Crude


A type of oil that is sourced from the North Sea. This type of oil is used as a benchmark to price
European, African and Middle Eastern oil that is exported to the West.

Nostro Account
An account that a bank holds with a foreign bank.

Not-Held Order
A market or limit order that gives the broker or floor trader both time and price discretion to attempt
to get the best possible price.

Note
A debt security, usually maturing in one to 10 years.

Note Against Bond Spread - NOB


A spread within futures contracts created by offsetting positions in 30-year treasury bond futures
with positions in 10-year treasury note contracts.

Note Issuance Facility - NIF


A syndicate of commercial banks that have agreed to purchase any short to medium-term notes that
a borrower is unable to sell in the eurocurrency market.

Notice Of Assessment - NOA


An annual statement sent by revenue authorities to taxpayers detailing the amount of income tax
they owe. It includes the amount of their tax refund, tax credit and income tax already paid.

Notice Of Seizure
A letter or written notice from the Internal Revenue Service (IRS) informing the recipient that
authorization has been given to liquidate his or her assets in order to cover the income taxes due.

Notional Principal Amount


In an interest rate swap, the predetermined dollar amount on which the exchanged interest
payments are based.

Notional Value
The total value of a leveraged position's assets. This term is commonly used in the options, futures
and currency markets because in them a very little amount of invested money can control a large
position (have a large consequence for the trader).

Novation
1.The act of replacing one participating member of a contract with another.
2. The exchange of new debts or obligations for older existing ones

NPR
In currencies, this is the abbreviation for the Nepal Rupee.

Numeraire
An economic term that represents a unit of account. In French, the term means counting or
measuring. Usually a numeraire is applied to a single good, which becomes the base good. All other
similar goods are then valued and priced against the base good. This comparison makes it possible
to identify which goods are worth more than others.

Nuncupative Will
A verbal will that must have two witnesses and can only deal with the distribution of personal
property. A nuncupative will is considered a "deathbed" will, meaning that it is a safety for people
struck with a terminal illness and robbed of the ability or time to draft a proper written will.

NY Empire State Index


A seasonally-adjusted index that tracks the results of the Empire State Manufacturing Survey. The
survey is distributed to roughly 175 manufacturing executives and asks questions intended to gauge
both the current sentiment of the executives and their six-month outlook on the sector.

NYSE Composite Index


Measures all common stocks listed on the New York Stock Exchange and four subgroup indexes:
Industrial, Transportation, Utility, and Finance. The index tracks the change in market value of NYSE
common stocks, adjusted to eliminate the effects of new listings and de-listings. The market value of
each stock is calculated by multiplying its price per share by the number of shares listed.
NZD
In the currency market, this is the abbreviation for the New Zealand dollar.

O
A Nasdaq stock symbol specifying that it is the company's second class of preferred shares.

Obligation Bond
A municipal bond used to secure a mortgage on property or other physical assets that can be
liquidated. The face value of the bond is greater than the value of the property itself.

Obligation
The legal responsibility to meet the terms of a contract. If the obligation is not met there is often
recourse for the other party to the contract.

Obligor
An entity that has an obligation to pay all principal and interest payments on a debt.

Obsolete Inventory
Term that refers to inventory that is at the end of its product life cycle and has not seen any sales or
usage for a set period of time usually determined by the industry. This type of inventory has to be
written down and can cause large losses for a company.
Also referred to as "dead inventory" or "excess inventory".

October Effect
A theory that postulates that stocks will tend to decline during the month of October.

Odd Lot
An amount of a security that is less than the normal unit of trading for that particular security.

Odd Lot Theory


A technical analysis theory/indicator based on the assumption that the small individual investor is
always wrong. Therefore, if odd lot sales are up - that is small investors are selling stock - it is
probably a good time to buy.

Odd Lotter
An individual investor who buys securities, usually stocks, in odd lots. This is the opposite of
someone who buys securities in round lots.

OEX
The ticker symbol for the Standard & Poor's 100 Index.

Off-Balance-Sheet Financing
A form of financing in which large capital expenditures are kept off of a company's balance sheet
through various classification methods. Companies will often use off-balance-sheet financing to
keep their debt to equity (D/E) and leverage ratios low, especially if the inclusion of a large
expenditure would break negative debt covenants.

Off-The-Run Treasuries
All Treasury bonds and notes issued before the most recently issued bond or note of a particular
maturity. These are the opposite of "on-the-run treasuries".
Offering
In the most general sense, the issue or sale of a security by a company. It is often used in reference
to an initial public offering (IPO) when a company's stock is made available for purchase by the
public but it can also be used in the context of a bond issue.

Offering Circular
An abbreviated prospectus for a new security listing. Delivered to individuals and brokerage houses,
these documents are issued to arouse interest in the new issue.

Offering Memorandum
A legal document stating the objectives, risks and terms of investment involved with a private
placement. This includes items such as the financial statements, management biographies, detailed
description of the business, etc. An offering memorandum serves to provide buyers with information
on the offering and to protect the sellers from the liability associated with selling unregistered
securities.
Also known as a "private placement memorandum (PPM)".

Offering Price
The price at which publicly issued securities are made available for purchase by the investment
bank underwriting the issue. A security's offering price includes the underwriter's fee and any
management fees applicable to the issue.

Office Audit
An examination of documents by the Internal Revenue Service (IRS) for a matter that is considered
to be reasonably simple.

Office of Foreign Asset Control - OFAC


A department of the U.S. Treasury that enforces economic and trade sanctions against countries
and groups of individuals involved in terrorism, narcotics and other disreputable activities.

Office Of Thrift Supervision - OTS


The bureau of the U.S. Treasury Department that is responsible for issuing and enforcing
regulations governing the nation's savings and loan industry

Offline Debit Card


A card that combines characteristics of both a traditional (online) debit card and a credit card,
allowing the cardholder to pay for goods and services directly from his or her bank account. As with
a traditional debit card, a transaction using the offline debit card creates a debit against the
cardholder's bank account. But unlike with a traditional debit card, no PIN is required during the
transaction - all that is required is the user's signature. These cards are generally issued by credit
card companies in association with the bank in which the account is held.
Also known as "check cards".

Offset
1. To liquidate a futures position by entering an equivalent, but opposite, transaction which
eliminates the delivery obligation.
2. To reduce an investor's net position in an investment to zero, so that no further gains or losses
will be experienced from that position.

Offshore
Located or based outside of one's national boundaries.

Offshore Mutual Fund


A mutual fund that is managed and housed in a foreign country, usually outside the U.S.

Offshore Portfolio Investment Strategy - OPIS


A tax shelter product designed to create large, seemingly real losses to be used for tax sheltering.
This tax shelter involves creating a shell company, which enters into a long chain of sophisticated
and complex financial investments. These investments usually create fake accounting losses that
are more than 100 times larger than the real financial loss. Ultimately, these large losses are then
used to offset legitimate capital gains, allowing the tax shelter's creators to pay less tax.

OHLC Chart
Short for "Open, High, Low, Close chart." This is a securities chart that clearly shows the opening,
high, low and closing prices for a security.

Oil Sands
Sand and rock material which contains crude bitumen (a heavy, viscous form of crude oil). Oil sands
are found primarily in the Athabasca region of northern Alberta, Canada, and in areas of Venezuela.
Bitumen is extracted and processed using two methods:
1. Mining - Large areas of land are cleared of trees and brush, then the top soil and clay are removed
to expose the oil sand. This surface mining method uses large trucks and shovels to remove the
sand, which can have a volume of anywhere from 1-20% of actual bitumen. After processing and
upgrading, the end result is sent to refineries, where it's made into gasoline, jet fuel and other
petroleum products.
2. In situ - This relatively new method is mainly used to get bitumen in oil sand that is buried too
deep below the earth's surface to be recovered with a truck and shovel. In situ technology injects
steam deep beneath the earth to separate the viscous bitumen from the sand and pump it up to the
surface. The bitumen then goes through the same upgrading process as it would in the mining
method.

Okun's Law
A relationship between an economy's GDP gap and the actual unemployment rate.

Old Age, Survivors and Disability Insurance Program - OASDI


The official name for Social Security in the United States.

Old Economy
A term describing the old blue chip industries which enjoyed fabulous growth during the early parts
of the century. These companies are usually very traditional in their ways of doing business.

Oligopoly
A situation in which a particular market is controlled by a small group of firms.
An oligopoly is much like a monopoly, in which only one company exerts control over most of a
market. In an oligopoly, there are at least two firms controlling the market

Oligopsony
Similar to an oligopoly (few sellers), this is a market in which there are only a few large buyers for a
product or service. This allows the buyers to exert a great deal of control over the sellers and can
effectively drive down prices.

Omega
A measure of the change in an option's value with respect to the percentage change in the
underlying price. The omega gives option investors an idea of how the option price and the stock
price that underlies it move together.
Omega is the third derivative of the option price, and the derivative of gamma.

Omnibus Account
An account between two futures merchants (brokers). It involves the transaction of individual
accounts which are combined in this type of account, allowing for easier management by the futures
merchant.

OMR
In currencies, this is the abbreviation for the Oman Rial.

On Stream
An investment that is on track to earn its expected return.

On Track
1. A type of commodities delivery for futures contracts that is deferred and priced according to the
seller's location FOB.

2. A physical commodity that is already loaded on railroad cars or trucks and ready for delivery.

On-Balance Volume - OBV


A method used in technical analysis to detect momentum, the calculation relates volume to price
change. OBV provides a running total of volume and shows if this volume is flowing in or out. This
indicator was developed by Joe Granville.

On-The-Run Treasuries
The most recently issued U.S. Treasury bond or note of a particular maturity. These are the opposite
of "off-the-run treasuries".

One Night Stand Investment


Buying a security with the intention of holding it for the long term, but subsequently panicking and
selling it the following day.

One-Cancel-All Order
A type of order comprising several limit orders for several companies, but in the event that one gets
filled, the rest are canceled. This type of order allows a trader to buy one out of a number of potential
stocks at the best price in the shortest amount of time.

One-Cancels-the-Other Order - OCO


An order stipulating that if one part of the order is executed, then the other part is automatically
canceled.

One-sided Market
When the market for a security only shows either one bid or one ask.

One-Stop Shop
A company or a location that offers a multitude of services to a client or a customer. The idea is to
provide convenient and efficient service and also to create the opportunity for the company to sell
more products to clients and customers.

One-Touch Option
A type of exotic option that gives an investor a payout once the price of the underlying asset
reaches or surpasses a predetermined barrier. This type of option allows the investor to set th