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Definition of Circle
Underwriters, actual or potential, often seek out and "circle" investor interest in a new issue before
the combined discounts for lack of control and marketability. g the constant growth rate in cash flows or net income used in the ADF, Gordon model, or present value factor.
The accumulated coupon interest earned but not yet paid to the seller of a bond by the
The physical commodity underlying a futures contract. Cash commodity, physical.
IRS rules used to allocate income on export sales to a foreign sales corporation.
A promise to sell an asset before the seller has lined up purchase of the asset. This
Swap in which the principal or national amount rises (falls) as interest rates
An alternative model to the capital asset pricing model developed by
Yield curve option-pricing models.
The price at which a willing buyer and a willing unrelated seller would freely agree to
A dealer's price to sell a security; also called the offer price.
A model for determining the required rate of return on an asset.
A model, such as the Capital Asset pricing Model (CAPM), that determines the required
Gives the lessee the option to purchase the asset at a price below fair market
Related: Benchmark interest rate.
price expressed in terms of yield to maturity or annual rate of return.
Before-tax profit margin
The ratio of net income before taxes to net sales.
Benchmark interest rate
Also called the base interest rate, it is the minimum interest rate investors will
Also called on-the-run or current coupon issues or bellwether issues. In the secondary
The requirement that a claim holder voting against a plan of reorganization
This is the quoted bid, or the highest price an investor is willing to pay to buy a security. Practically
Binomial option pricing model
An option pricing model in which the underlying asset can take on only two
Black-Scholes option-pricing model
A model for pricing call options based on arbitrage arguments that uses
In the mortgage pipeline, the risk that prospective borrowers of loans committed to be
A rise in a security's price above a resistance level (commonly its previous high price) or drop
purchase of a controlling interest (or percent of shares) of a company's stock. A leveraged buy-out is
The price, specified at issuance, at which the issuer of a bond may retire part of the bond at a
The price for which a bond can be repaid before maturity under a call provision.
Capital asset pricing model (CAPM)
An economic theory that describes the relationship between risk and
interest that is not immediately expensed, but rather is considered as an asset and is then
Cash flow after interest and taxes
Net income plus depreciation.
A public equity issue that is sold to all interested investors.
Refers to a situation where a firm runs out of cash and cannot readily sell marketable securities.
Cheapest to deliver issue
The acceptable Treasury security with the highest implied repo rate; the rate that a
Bond price excluding accrued interest.
A transaction in which the purchaser's intention is to reduce or eliminate a short position in
A trader is said to have a commitment when he assumes the obligation to accept or make
A fee paid to a commercial bank in return for its legal commitment to lend funds that have
Common stock/other equity
Value of outstanding common shares at par, plus accumulated retained
An offering of securities through competitive bidding.
interest paid on previously earned interest as well as on the principal.
Consumer Price Index (CPI)
The CPI, as it is called, measures the prices of consumer goods and services and is a
Conversion parity price
Related:Market conversion price
The contractually specified price per share at which a convertible security can be
The periodic interest payment made to the bondholders during the life of the bond.
Coupon equivalent yield
True interest cost expressed on the basis of a 365-day year.
A bond's interest payments.
In bonds, notes or other fixed income securities, the stated percentage rate of interest, usually
Covered interest arbitrage
A portfolio manager invests dollars in an instrument denominated in a foreign
A bond selling at or close to par, that is, a bond with a coupon close to the yields currently
In Treasury securities, the most recently auctioned issue. Trading is more active in current
Related: Benchmark issues
Customary payout ratios
A range of payout ratios that is typical based on an analysis of comparable firms.
Days' sales outstanding
Average collection period.
The price fixed by the Clearing house at which deliveries on futures are in invoiced; also the
Devaluation A decrease in the spot price of the currency
Direct stock-purchase programs
The purchase by investors of securities directly from the issuer.
Bond price including accrued interest, i.e., the price paid by the bond buyer.
Dividend payout ratio
Percentage of earnings paid out as dividends.
Dollar price of a bond
Percentage of face value at which a bond is quoted.
Barrier option that expires if asset price hits a barrier.
Dual syndicate equity offering
An international equity placement where the offering is split into two
Eurobonds that pay coupon interest in one currency but pay the principal in a different
Dupont system of financial control
Highlights the fact that return on assets (ROA) can be expressed in terms
Earnings before interest and taxes (EBIT)
A financial measure defined as revenues less cost of goods sold
Effective annual interest rate
An annual measure of the time value of money that fully reflects the effects of
Effective call price
The strike price in an optional redemption provision plus the accrued interest to the
Equilibrium market price of risk
The slope of the capital market line (CML). Since the CML represents the
Equilibrium rate of interest
The interest rate that clears the market. Also called the market-clearing interest
Securities sold in the Euromarket. That is, securities initially sold to investors
An offer by the firm to give one security, such as a bond or preferred stock, in exchange for
The price at which the underlying future or options contract may be bought or sold.
Fair market price
Amount at which an asset would change hands between two parties, both having
The equilibrium price for futures contracts. Also called the theoretical futures price, which equals
Fair price provision
A type of mortgage pipeline risk that is generally created when the terms of the loan to be
Feasible target payout ratios
Payout ratios that are consistent with the availability of excess funds to make
Firm commitment underwriting
An undewriting in which an investment banking firm commits to buy the
First notice day
The first day, varying by contracts and exchanges, on which notices of intent to deliver
With CMOs, the start of the cash flow cycle for the cash flow window.
A method of valuing the cost of goods sold that uses the cost of the oldest item in
A time series regression to estimate the betas of securities portfolios.
Fixed price basis
An offering of securities at a fixed price.
Fixed-price tender offer
A one-time offer to purchase a stated number of shares at a stated fixed price,
Flat price risk
Taking a position either long or short that does not involve spreading.
Flat price (also clean price)
The quoted newspaper price of a bond that does not include accrued interest.
Forward interest rate
interest rate fixed today on a loan to be made at some future date.
Full coupon bond
A bond with a coupon equal to the going market rate, thereby, the bond is selling at par.
Also called dirty price, the price of a bond including accrued interest. Related: flat price.
See: financial lease.
The price at which the parties to a futures contract agree to transact on the settlement date.
Garmen-Kohlhagen option pricing model
A widely used model for pricing foreign currency options.
General cash offer
A public offering made to investors at large.
interest earned before taxes are deducted.
A phase of development in which a company experiences rapid earnings growth as it produces
High-coupon bond refunding
Refunding of a high-coupon bond with a new, lower coupon bond.
The highest (intraday) price of a stock over the past 52 weeks, adjusted for any stock splits.
Sale of some shares of stock to get cash that would be similar to receiving a cash dividend.
Idea that as long as individuals borrow (or lend) on the same terms as the firm, they can
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