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Definition of Collective wisdom
The combination of all of the individual opinions about a stock's or security's value.
Same as PV, but usually includes a subtraction for an initial cash outlay.
the value in today’s dollars of cash flows that occur in different time periods.
A merger or consolidation in which an acquirer purchases the acquiree's stock.
Publicly traded issues that may be collateralized by mortgages and MBSs.
The net present value analysis of an asset if financed solely by equity
The discount rate that reflects only the business risks of a project and abstracts from the
Requirement that none of an order be executed unless all of it can be executed at the specified price.
Total costs, explicit and implicit.
An arrangement whereby a security issue is canceled if the underwriter is unable
The second-largest stock exchange in the United States. It trades
The decision regarding how an institution's funds should be distributed among the
A security that is collateralized by loans, leases, receivables, or installment contracts
Floating rate preferred stock, the dividend on which is adjusted every
Any large principal payment due at maturity for a bond or loan with or without a a sinking
The beta of a stock is determined as follows:
With respect to convertible bonds, the value the security would have if it were not convertible
A company's book value is its total assets minus intangible assets and liabilities, such as debt. A
Book value per share
The ratio of stockholder equity to the average number of common shares. Book value
In the mortgage pipeline, the risk that prospective borrowers of loans committed to be
An option that gives the right to buy the underlying futures contract.
Call an option
To exercise a call option.
A date before maturity, specified at issuance, when the issuer of a bond may retire part of the bond
Call money rate
Also called the broker loan rate , the interest rate that banks charge brokers to finance
An option contract that gives its holder the right (but not the obligation) to purchase a specified
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.
A feature of some callable bonds that establishes an initial period when the bonds may not be
An embedded option granting a bond issuer the right to buy back all or part of the issue prior
The combination of cash flow uncertainty and reinvestment risk introduced by a call provision.
A swaption in which the buyer has the right to enter into a swap as a fixed-rate payer. The
A financial security such as a bond with a call option attached to it, i.e., the issuer has the right to
decision allocation of invested funds between risk-free assets versus the risky portfolio.
An amount the insurance company will pay if the policyholder ends a whole life
Communication barrier between financiers (investment bankers) and traders. This barrier is
Also called horizon matching, a variation of multiperiod immunization and cash
A strategy in which a put and with the same strike price and expiration are either both
These are securities that represent equity ownership in a company. Common shares let an
Common stock/other equity
value of outstanding common shares at par, plus accumulated retained
Common stock equivalent
A convertible security that is traded like an equity issue because the optioned
Common stock market
The market for trading equities, not including preferred stock.
Common stock ratios
Ratios that are designed to measure the relative claims of stockholders to earnings
Conflict between bondholders and stockholders
These two groups may have interests in a corporation that
Also called parity value, the value of a convertible security if it is converted immediately.
Convertible exchangeable preferred stock
Convertible preferred stock that may be exchanged, at the
Convertible preferred stock
Preferred stock that can be converted into common stock at the option of the holder.
A security that can be converted into common stock at the option of the security holder,
A short call option position in which the writer owns the number of shares of the underlying
Covered call writing strategy
A strategy that involves writing a call option on securities that the investor
Cumulative preferred stock
Preferred stock whose dividends accrue, should the issuer not make timely
A provision that prohibits the company from calling the bond before a certain date. During this
A financial security, such as an option, or future, whose value is derived in part from the
Direct stock-purchase programs
The purchase by investors of securities directly from the issuer.
Dividend yield (Stocks)
Indicated yield represents annual dividends divided by current stock price.
Dynamic asset allocation
An asset allocation strategy in which the asset mix is mechanistically shifted in
Effective call price
The strike price in an optional redemption provision plus the accrued interest to the
Employee stock fund
A firm-sponsored program that enables employees to purchase shares of the firm's
Employee stock ownership plan (ESOP)
A company contributes to a trust fund that buys stock on behalf of
Exchange of stock
Acquisition of another company by purchase of its stock in exchange for cash or shares.
security that grants the security holder the right to exchange the security for the
The amount of advantage over a current market transaction provided by an in-the-money
The weighted average of a probability distribution.
Expected value of perfect information
The expected value if the future uncertain outcomes could be known
Extraordinary positive value
A positive net present value.
See: Par value.
A type of mortgage pipeline risk that is generally created when the terms of the loan to be
Federally related institutions
Arms of the federal government that are exempt from SEC registration and
Firm's net value of debt
Total firm value minus total firm debt.
With CMOs, the start of the cash flow cycle for the cash flow window.
A nonnegotiable debt security that can be redeemed at some fixed price or according to
The amount of cash at a specified date in the future that is equivalent in value to a specified
Generally Accepted Accounting Principals (GAAP)
A technical accounting term that encompasses the
A 1933 act in which Congress forbade commercial banks to own, underwrite, or deal in
Common stock of a company that has an opportunity to invest money and earn more than the
The security to which a warrant is attached.
A convertible security whose optioned common stock is trading in a middle range, causing
The right of the homeowner to prepay, or call, the mortgage at any time.
Common stock with a high dividend yield and few profitable investment opportunities.
The sale of an asset in exchange for a specified series of payments (the installments).
Internally efficient market
Operationally efficient market.
Intrinsic value of an option
The amount by which an option is in-the-money. An option which is not in-themoney
Intrinsic value of a firm
The present value of a firm's expected future net cash flows discounted by the
In the mortgage pipeline, risk that occurs when the originator commits loan terms to the
Irrational call option
The implied call imbedded in the MBS. Identified as irrational because the call is
Privately placed common stock, so-called because the SEC requires a letter from the purchaser
Net amount that could be realized by selling the assets of a firm after paying the debt.
stocks that are traded on an exchange.
The amount a policyholder may borrow against a whole life insurance policy at the interest rate
stocks that are traded on an exchange.
Margin account (Stocks)
A leverageable account in which stocks can be purchased for a combination of
A demand for additional funds because of adverse price movement. Maintenance margin
1) The price at which a security is trading and could presumably be purchased or sold.
Market value ratios
Ratios that relate the market price of the firm's common stock to selected financial
Market value-weighted index
An index of a group of securities computed by calculating a weighted average
Related: par value.
Monthly income preferred security (MIP)
Preferred stock issued by a subsidiary located in a tax haven.
Mortgage pass-through security
Also called a passthrough, a security created when one or more mortgage
Mutually exclusive investment decisions
Investment decisions in which the acceptance of a project
Net adjusted present value
The adjusted present value minus the initial cost of an investment.
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