Financial Terms Main Page

This site contains comprehensive definitions for a wide range of terms that cover topics such as financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit...

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Dollar roll

Similar to the reverse repurchase agreement - a simultaneous agreement to sell a security held in a
portfolio with purchase of a similar security at a future date at an agreed-upon price.

Equity swap

A swap in which the cash flows that are exchanged are based on the total return on some stock
market index and an interest rate (either a fixed rate or a floating rate). Related: interest rate swap.

Execution

The process of completing an order to buy or sell securities. Once a trade is executed, it is reported
by a Confirmation Report; settlement (payment and transfer of ownership) occurs in the U.S. between 1
(mutual funds) and 5 (stocks) days after an order is executed. Settlement times for exchange listed stocks are
in the process of being reduced to three days in the U. S.

Inflation uncertainty

The fact that future inflation rates are not known. It is a possible contributing factor to
the makeup of the term structure of interest rates.

Kappa

The ratio of the dollar price change in the price of an option to a 1% change in the expected price volatility.

Pure index fund

A portfolio that is managed so as to perfectly replicate the performance of the market portfolio.

Spread

1) The gap between bid and ask prices of a stock or other security.
2) The simultaneous purchase and sale of separate futures or options contracts for the same commodity for delivery in different months.
Also known as a straddle.
3) Difference between the price at which an underwriter buys an issue from a firm
and the price at which the underwriter sells it to the public.
4) The price an issuer pays above a benchmark fixed-income yield to borrow money.

capital recovery

Refers to recouping, or regaining, invested capital over
the life of an investment. The pattern of period-by-period capital recovery
is very important. In brief, capital recovery is the return of capital—
not the return on capital, which refers to the rate of earnings on the
amount of capital invested during the period. The returns from an
investment have to be sufficient to provide for both recovery of capital
and an adequate rate of earnings on unrecovered capital period by
period. Sorting out how much capital is recovered each period is relatively
easy if you use a spreadsheet model for capital investment analysis.
In contrast, using a mathematical method of analysis does not
provide this period-by-period capital recovery information, which is a
major disadvantage.

quality control

the implementation of all practices and policies
designed to eliminate poor quality and variability in the
production or service process; it places the primary responsibility
for quality at the source of the product or service

National Income and Product Accounts

The national accounting system that records economic activity such as GDP and related measures.

Political Costs

The costs of additional regulation, including higher taxes, borne by large and
high-profile firms.

Nonsignificant part number

An identifying number assigned to a part that conveys
no other information.

Factor

An agent who buys and sells goods on behalf of others for a commission.

Equity investment

Through equity investment, investors gain part ownership of the corporation. The primary type of equity investment is corporate stock.

Waiting Period (Credit Insurance)

A specific time that must pass following the onset of a covered disability before any benefits will be paid under a creditor disability policy. (Also known as an elimination period).