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Definition of Backdating
A procedure for making the effective date of a policy earlier than the application date. backdating is often used to make the age of the consumer at policy issue lower than it actually was in order to get a lower premium.
the additional value inherent in the control interest as contrasted to a minority interest, which reflects its power of control
Federal agency securities.
A form of organization commonly used by foreign banks to enter the U.S. market. An agency
A means of compensating the broker of a program trade solely on the basis of commission
Agency cost view
The argument that specifies that the various agency costs create a complex environment in
The incremental costs of having an agent make decisions for a principal.
Mortgage pass-through securities whose principal and interest payments are
Conflicts of interest among stockholders, bondholders, and managers.
The analysis of principal-agent relationships, wherein one person, an agent, acts on behalf of
The decision-maker in a principal-agent relationship.
Alternative mortgage instruments
Variations of mortgage instruments such as adjustable-rate and variablerate
date on which particular news concerning a given company is announced to the public.
Annual percentage rate (APR)
The periodic rate times the number of periods in a year. For example, a 5%
Annual percentage yield (APY)
The effective, or true, annual rate of return. The APY is the rate actually
The simultaneous buying and selling of a security at two different prices in two different markets,
Arbitrage Pricing Theory (APT)
An alternative model to the capital asset pricing model developed by
Arbitrage-free option-pricing models
Yield curve option-pricing models.
People who search for and exploit arbitrage opportunities.
Arithmetic average (mean) rate of return
Arithmetic mean return.
Also called surplus management, the task of managing funds of a financial
A bond indenture restriction that permits additional borrowing on if the ratio of assets to
An arithmetic mean of selected stocks intended to represent the behavior of the market or some
Average accounting return
The average project earnings after taxes and depreciation divided by the average
Average age of accounts receivable
The weighted-average age of all of the firm's outstanding invoices.
Average collection period, or days' receivables
The ratio of accounts receivables to sales, or the total
Average cost of capital
A firm's required payout to the bondholders and to the stockholders expressed as a
Also referred to as the weighted-average life (WAL). The average number of years that each
The average time to maturity of securities held by a mutual fund. Changes in interest rates
Average (across-day) measures
An estimation of price that uses the average or representative price of a
Average rate of return (ARR)
The ratio of the average cash inflow to the amount invested.
Average tax rate
Taxes as a fraction of income; total taxes divided by total taxable income.
Also called on-the-run or current coupon issues or bellwether issues. In the secondary
Bottom-up equity management style
A management style that de-emphasizes the significance of economic
A detailed schedule of financial activity, such as an advertising budget, a sales budget, or a capital budget.
The amount by which government spending exceeds government revenues.
Buy limit order
A conditional trading order that indicates a security may be purchased only at the designated
A date before maturity, specified at issuance, when the issuer of a bond may retire part of the bond
agency banks established by Canadian banks in the U.S.
A firm's set of planned capital expenditures.
The process of choosing the firm's long-term capital assets.
A forecasted summary of a firm's expected cash inflows and cash outflows as well as its
Cash flow coverage ratio
The number of times that financial obligations (for interest, principal payments,
Cash management bill
Very short maturity bills that the Treasury occasionally sells because its cash
Cheapest to deliver issue
The acceptable Treasury security with the highest implied repo rate; the rate that a
Mortgage against which no additional debt may be issued.
Collateralized mortgage obligation (CMO)
A security backed by a pool of pass-throughs , structured so that
procedures followed by a firm in attempting to collect accounts receivables.
Credit granted by a firm to consumers for the purchase of goods or services. Also called
Consumer Price Index (CPI)
The CPI, as it is called, measures the prices of consumer goods and services and is a
A loan based on the credit of the borrower and on the collateral for the mortgage.
The percentage by which the conversion price in a convertible security exceeds the
Corporate financial management
The application of financial principals within a corporation to create and
Ratios used to test the adequacy of cash flows generated through earnings for purposes of
Covered interest arbitrage
A portfolio manager invests dollars in an instrument denominated in a foreign
Refers to the volatility of returns on international investments caused by events associated
Taking advantage of divergences in exchange rates in different money markets by
In Treasury securities, the most recently auctioned issue. Trading is more active in current
Related: Benchmark issues
Date of payment
date dividend checks are mailed.
Date of record
date on which holders of record in a firm's stock ledger are designated as the recipients of
Treating cash flows as being received on exact dates - date 0, date 1, and so forth - as
An order to buy or sell stock that automatically expires if it can't be executed on the day it is entered.
The amplification of the return earned on equity when an investment or firm is financed
Debt-service coverage ratio
Earnings before interest and income taxes plus one-third rental charges, divided
The date on which a firm's directors meet and announce the date and amount of the next
A differential in promised yield that compensates the investor for the risk inherent in
An established guide for the firm to determine the amount of money it will pay as dividends.
Dow Jones industrial average
This is the best known U.S.index of stocks. It contains 30 stocks that trade on
Eurobonds that pay coupon interest in one currency but pay the principal in a different
Economic order quantity (EOQ)
The order quantity that minimizes total inventory costs.
Effective annual interest rate
An annual measure of the time value of money that fully reflects the effects of
Effective annual yield
Annualized interest rate on a security computed using compound interest techniques.
Effective call price
The strike price in an optional redemption provision plus the accrued interest to the
The convexity of a bond calculated with cash flows that change with yields.
In an interest rate swap, the date the swap begins accruing interest.
The duration calculated using the approximate duration formula for a bond with an
Effective margin (EM)
used with SAT performance measures, the amount equaling the net earned spread, or
A measure of the time value of money that fully reflects the effects of compounding.
The gross underwriting spread adjusted for the impact of the announcement of the common
Securities sold in the Euromarket. That is, securities initially sold to investors
The last day (in the case of American-style) or the only day (in the case of European-style)
The day on which the first option either expires or is extended.
The first day of trading when the seller, rather than the buyer, of a stock will be entitled to
The date on which a share of common stock begins trading ex-rights.
Feasible target payout ratios
Payout ratios that are consistent with the availability of excess funds to make
Federal agency securities
Securities issued by corporations and agencies created by the U.S. government,
Federal credit agencies
agencies of the federal government set up to supply credit to various classes of
Fill or kill order
A trading order that is canceled unless executed within a designated time period.
Use of debt to increase the expected return on equity. Financial leverage is measured by
Financial leverage clientele
A group of investors who have a preference for investing in firms that adhere to
Financial leverage ratios
Related: capitalization ratios.
Fiscal agency agreement
An alternative to a bond trust deed. Unlike the trustee, the fiscal agent acts as an
The use of government spending and taxing for the specific purpose of stabilizing the economy.
Fixed-charge coverage ratio
A measure of a firm's ability to meet its fixed-charge obligations: the ratio of
In the Euromarket the standard periods for which Euros are traded (1 month out to a year out) are
Government bonds that are acceptable at par in payment of federal estate taxes when owned by
A currency trades at a forward premium when its forward price is higher than its spot price.
Freddie Mac (Federal Home Loan Mortgage Corporation)
A Congressionally chartered corporation that
Garmen-Kohlhagen option pricing model
A widely used model for pricing foreign currency options.
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