Definition of bar code

bar code

a group of lines and spaces arranged in a special
machine-readable pattern by which a scanner measures the
intensity of the light reflections of the white spaces between
the lines and converts the signal back into the original data

Bar code

Information encoded into a series of bar and spaces of varying widths,
which can be automatically read and converted to text by a scanning device.

Bar

Slang for one million dollars.

Barbell strategy

A strategy in which the maturities of the securities included in the portfolio are concentrated
at two extremes.

Bargain-purchase-price option

Gives the lessee the option to purchase the asset at a price below fair market
value when the lease expires.

BARRA's performance analysis (PERFAN)

A method developed by barRA, a consulting firm in
Berkeley, Calif. It is commonly used by institutional investors applying performance attribution analysis to
evaluate their money managers' performances.

Barrier options

Contracts with trigger points that, when crossed, automatically generate buying or selling of
other options. These are very exotic options.

Barter

A system of exchange in which one good is traded directly for another without the use of money.

Internal Revenue Code

Refers to all federal tax laws as a group.

economic components model

Abrams’ model for calculating DLOM based on the interaction of discounts from four economic components.
This model consists of four components: the measure of the economic impact of the delay-to-sale, monopsony power to buyers, and incremental transactions costs to both buyers and sellers.

All or none

Requirement that none of an order be executed unless all of it can be executed at the specified price.

All-or-none underwriting

An arrangement whereby a security issue is canceled if the underwriter is unable
to re-sell the entire issue.

Asset-backed security

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

Asymmetric information

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

At-the-money

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

Average (across-day) measures

An estimation of price that uses the average or representative price of a
large number of trades.

Back fee

The fee paid on the extension date if the buyer wishes to continue the option.

Back office

Brokerage house clerical operations that support, but do not include, the trading of stocks and
other securities. Includes all written confirmation and settlement of trades, record keeping and regulatory
compliance.
back-end loan fund
A mutual fund that charges investors a fee to sell (redeem) shares, often ranging from
4% to 6%. Some back-end load funds impose a full commission if the shares are redeemed within a
designated time, such as one year. The commission decreases the longer the investor holds the shares. The
formal name for the back-end load is the contingent deferred sales charge, or CDSC.

Back-to-back financing

An intercompany loan channeled through a bank.

Back-to-back loan

A loan in which two companies in separate countries borrow each other's currency for a
specific time period and repay the other's currency at an agreed upon maturity.

Back-up

1) When bond yields and prices fall, the market is said to back-up.
2) When an investor swaps out of one security into another of shorter current maturity he is said to back up.

Backwardation

A market condition in which futures prices are lower in the distant delivery months than in
the nearest delivery month. This situation may occur in when the costs of storing the product until eventual
delivery are effectively subtracted from the price today. The opposite of contango.

Barbell strategy

A strategy in which the maturities of the securities included in the portfolio are concentrated
at two extremes.

Bargain-purchase-price option

Gives the lessee the option to purchase the asset at a price below fair market
value when the lease expires.

BARRA's performance analysis (PERFAN)

A method developed by barRA, a consulting firm in
Berkeley, Calif. It is commonly used by institutional investors applying performance attribution analysis to
evaluate their money managers' performances.

Barrier options

Contracts with trigger points that, when crossed, automatically generate buying or selling of
other options. These are very exotic options.

Bull spread

A spread strategy in which an investor buys an out-of-the-money put option, financing it by
selling an out-of-the money call option on the same underlying.

Buy-back

Another term for a repo.

Call money rate

Also called the broker loan rate , the interest rate that banks charge brokers to finance
margin loans to investors. The broker charges the investor the call money rate plus a service charge.

Capital flight

The transfer of capital abroad in response to fears of political risk.

Conflict between bondholders and stockholders

These two groups may have interests in a corporation that
conflict. Sources of conflict include dividends, distortion of investment, and underinvestment. Protective
covenants work to resolve these conflicts.

Credible signal

A signal that provides accurate Information; a signal that can be distinguish among senders.

Credit spread

Related:Quality spread

Discounted payback period rule

An investment decision rule in which the cash flows are discounted at an
interest rate and the payback rule is applied on these discounted cash flows.

Dividend clawback

With respect to a project financing, an arrangement under which the sponsors of a project
agree to contribute as equity any prior dividends received from the project to the extent necessary to cover
any cash deficiencies.

Dow Jones industrial average

This is the best known U.S.index of stocks. It contains 30 stocks that trade on
the New York Stock Exchange. The Dow, as it is called, is a barometer of how shares of the largest
U.S.companies are performing. There are thousands of investment indexes around the world for stocks,
bonds, currencies and commodities.

Effective spread

The gross underwriting spread adjusted for the impact of the announcement of the common
stock offering on the firm's share price.

Electronic data interchange (EDI)

The exchange of Information electronically, directly from one firm's
computer to another firm's computer, in a structured format.

Euro lines

lines of credit granted by banks (foreign or foreign branches of U.S. banks) for Eurocurrencies.

European Monetary System (EMS)

An exchange arrangement formed in 1979 that involves the currencies
of European Union member countries.

Expected value of perfect information

The expected value if the future uncertain outcomes could be known
minus the expected value with no additional Information.

Extra or special dividends

A dividend that is paid in addition to a firm's "regular" quarterly dividend.

Flight to quality

The tendency of investors to move towards safer, government bonds during periods of high
economic uncertainty.

Gross spread

The fraction of the gross proceeds of an underwritten securities offering that is paid as
compensation to the underwriters of the offering.

Group of five (G5/G-5)

The five leading countries (France, Germany, Japan, United Kingdom, and the U.S.) that
meet periodically to achieve some cooperative effort on international economic issues. When currency issues
are discussed, the monetary authorities of these nations hold the meeting.

Group of seven (G7/G-7)

The G-5 countries plus Canada and Italy.

Group rotation manager

A top-down manager who infers the phases of the business cycle and allocates
assets accordingly.

Horizontal spread

The simultaneous purchase and sale of two options that differ only in their exercise date.

Hot money

Money that moves across country borders in response to interest rate differences and that moves
away when the interest rate differential disappears.

Information asymmetry

A situation involving Information that is known to some, but not all, participants.

Information Coefficient (IC)

The correlation between predicted and actual stock returns, sometimes used to
measure the value of a financial analyst. An IC of 1.0 indicates a perfect linear relationship between predicted
and actual returns, while an IC of 0.0 indicates no linear relationship.

Information costs

Transaction costs that include the assessment of the investment merits of a financial asset.
Related: search costs.

Information services

Organizations that furnish investment and other types of Information, such as
Information that helps a firm monitor its cash position.

Information-content effect

The rise in the stock price following the dividend signal.

Informational efficiency

The speed and accuracy with which prices reflect new Information.

Informationless trades

Trades that are the result of either a reallocation of wealth or an implementation of an
investment strategy that only utilizes existing Information.

Information-motivated trades

Trades in which an investor believes he or she possesses pertinent
Information not currently reflected in the stock's price.

Insider information

Relevant Information about a company that has not yet been made public. It is illegal for
holders of this Information to make trades based on it, however received.

Intermarket spread swaps

An exchange of one bond for another based on the manager's projection of a
realignment of spreads between sectors of the bond market.

International Monetary Fund

An organization founded in 1944 to oversee exchange arrangements of
member countries and to lend foreign currency reserves to members with short-term balance of payment
problems.

International Monetary Market (IMM)

A division of the CME established in 1972 for trading financial
futures. Related: Chicago Mercantile Exchange (CME).

In-the-money

A put option that has a strike price higher than the underlying futures price, or a call option
with a strike price lower than the underlying futures price. For example, if the March COMEX silver futures
contract is trading at $6 an ounce, a March call with a strike price of $5.50 would be considered in-the-money
by $0.50 an ounce.
Related: put.

Intramarket sector spread

The spread between two issues of the same maturity within a market sector. For
instance, the difference in interest rates offered for five-year industrial corporate bonds and five-year utility
corporate bonds.

Law of one price

An economic rule stating that a given security must have the same price regardless of the
means by which one goes about creating that security. This implies that if the payoff of a security can be
synthetically created by a package of other securities, the price of the package and the price of the security
whose payoff it replicates must be equal.

Limitation on sale-and-leaseback

A bond covenant that restricts in some way a firm's ability to enter into
sale and lease-back transactions.

Lookback option

An option that allows the buyer to choose as the option strike price any price of the
underlying asset that has occurred during the life of the option. If a call, the buyer will choose the minimal
price, whereas if a put, the buyer will choose the maximum price. This option will always be in the money.

Maturity spread

The spread between any two maturity sectors of the bond market.

Monetary gold

Gold held by governmental authorities as a financial asset.

Monetary policy

Actions taken by the Board of Governors of the Federal Reserve System to influence the
money supply or interest rates.

Monetary / non-monetary method

Under this translation method, monetary items (e.g. cash, accounts
payable and receivable, and long-term debt) are translated at the current rate while non-monetary items (e.g.
inventory, fixed assets, and long-term investments) are translated at historical rates.

Money base

Composed of currency and coins outside the banking system plus liabilities to the deposit money banks.

Money center banks

Banks that raise most of their funds from the domestic and international money markets, relying less on depositors for funds.

Money management

Related: Investment management.

Money manager

Related: Investment manager.

Money market

Money markets are for borrowing and lending money for three years or less. The securities in
a money market can be U.S.government bonds, treasury bills and commercial paper from banks and
companies.

Money market demand account

An account that pays interest based on short-term interest rates.

Money market fund

A mutual fund that invests only in short term securities, such as bankers' acceptances,
commercial paper, repurchase agreements and government bills. The net asset value per share is maintained at
$1. 00. Such funds are not federally insured, although the portfolio may consist of guaranteed securities
and/or the fund may have private insurance protection.

Money market hedge

The use of borrowing and lending transactions in foreign currencies to lock in the
home currency value of a foreign currency transaction.

Money market notes

Publicly traded issues that may be collateralized by mortgages and MBSs.

Money purchase plan

A defined benefit contribution plan in which the participant contributes some part and
the firm contributes at the same or a different rate. Also called and individual account plan.

Money rate of return

Annual money return as a percentage of asset value.

Money supply

M1-A: Currency plus demand deposits
M1-B: M1-A plus other checkable deposits.
M2: M1-B plus overnight repos, money market funds, savings, and small (less than $100M) time deposits.
M3: M-2 plus large time deposits and term repos.
L: M-3 plus other liquid assets.

Mortgage-Backed Securities Clearing Corporation

A wholly owned subsidiary of the Midwest Stock
Exchange that operates a clearing service for the comparison, netting, and margining of agency-guaranteed
MBSs transacted for forward delivery.

Mortgage-backed securities

Securities backed by a pool of mortgage loans.

New money

In a Treasury auction, the amount by which the par value of the securities offered exceeds that of
those maturing.

Normal backwardation theory

Holds that the futures price will be bid down to a level below the expected
spot price.

One man picture

The picture quoted by a broker is said to be a one-man picture if both the bid and offered
prices come from the same source.

One-factor APT

A special case of the arbitrage pricing theory that is derived from the one-factor model by
using diversification and arbitrage. It shows the expected return on any risky asset is a linear function of a
single factor.

One-way market

1) A market in which only one side, the bid or asked, is quoted or firm.
2) A market that is moving strongly in one direction.

Option-adjusted spread (OAS)

1) The spread over an issuer's spot rate curve, developed as a measure of
the yield spread that can be used to convert dollar differences between theoretical value and market price.
2) The cost of the implied call embedded in a MBS, defined as additional basis-yield spread. When added to the
base yield spread of an MBS without an operative call produces the option-adjusted spread.

Original face value

The principal amount of the mortgage as of its issue date.

Original issue discount debt (OID debt)

Debt that is initially offered at a price below par.

Original margin

The margin needed to cover a specific new position. Related: Margin, security deposit (initial)

Original maturity

Maturity at issue. For example, a five year note has an original maturity of 5 years; one
year later it has a maturity of 4 years.

Out-of-the-money option

A call option is out-of-the-money if the strike price is greater than the market price
of the underlying security. A put option is out-of-the-money if the strike price is less than the market price of
the underlying security.

Payback

The length of time it takes to recover the initial cost of a project, without regard to the time value of money.

Payments pattern

escribes the lagged collection pattern of receivables, for instance the probability that a
72-day-old account will still be unpaid when it is 73-days-old.

Phone switching

In mutual funds, the ability to transfer shares between funds in the same family by
telephone request. There may be a charge associated with these transfers. Phone switching is also possible
among different fund families if the funds are held in street name by a participating broker/dealer.

Plowback rate

Related: retention rate.

Postponement option

The option of postponing a project without eliminating the possibility of undertaking it.

Precautionary demand (for money)

The need to meet unexpected or extraordinary contingencies with a
buffer stock of cash.

Quality spread

Also called credit spread, the spread between Treasury securities and non-Treasury securities
that are identical in all respects except for quality rating. For instance, the difference between yields on
Treasuries and those on single A-rated industrial bonds.

Relative yield spread

The ratio of the yield spread to the yield level.

Risk prone

Willing to pay money to transfer risk from others.

Sale and lease-back

Sale of an existing asset to a financial institution that then leases it back to the user.
Related: lease.

Seasoned datings

Extended credit for customers who order goods in periods other than peak seasons.

Seasoned issue

Issue of a security for which there is an existing market. Related: Unseasoned issue.

Seasoned new issue

A new issue of stock after the company's securities have previously been issued. A
seasoned new issue of common stock can be made by using a cash offer or a rights offer.

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