Definition of Export-Import Bank (Ex-Im Bank)

Export-Import Bank (Ex-Im Bank)

The U.S. federal government agency that extends trade credits to U.S.
companies to facilitate the financing of U.S. exports.

Accounting exposure

The change in the value of a firm's foreign currency denominated accounts due to a
change in exchange rates.

Agency bank

A form of organization commonly used by foreign banks to enter the U.S. market. An agency
bank cannot accept deposits or extend loans in its own name; it acts as agent for the parent bank.

American Stock Exchange (AMEX)

The second-largest stock exchange in the United States. It trades
mostly in small-to medium-sized companies.

Annual fund operating expenses

For investment companies, the management fee and "other expenses,"
including the expenses for maintaining shareholder records, providing shareholders with financial statements,
and providing custodial and accounting services. For 12b-1 funds, selling and marketing costs are included.

Arms index

Also known as a trading index (TRIN)= (number of advancing issues)/ (number of declining
issues) (Total up volume )/ (total down volume). An advance/decline market indicator. Less than 1.0 indicates
bullish demand, while above 1.0 is bearish. The index often is smoothed with a simple moving average.

Balance sheet exposure

See:accounting exposure.

BAN (Bank anticipation notes)

Notes issued by states and municipalities to obtain interim financing for
projects that will eventually be funded long term through the sale of a bond issue.

Bank collection float

The time that elapses between when a check is deposited into a bank account and when the funds are available to the depositor, during which period the bank is collecting payment from the payer's bank.

Bank discount basis

A convention used for quoting bids and offers for treasury bills in terms of annualized
yield , based on a 360-day year.

Bank draft

A draft addressed to a bank.

Bank line

Line of credit granted by a bank to a customer.

Bank wire

A computer message system linking major banks. It is used not for effecting payments, but as a
mechanism to advise the receiving bank of some action that has occurred, e.g. the payment by a customer of
funds into that bank's account.

Banker's acceptance

A short-term credit investment created by a non-financial firm and guaranteed by a
bank as to payment. Acceptances are traded at discounts from face value in the secondary market. These
instruments have been a popular investment for money market funds. They are commonly used in
international transactions.

Bank for International Settlements (BIS)

An international bank headquartered in Basel, Switzerland, which
serves as a forum for monetary cooperation among several European central banks, the bank of Japan, and the
U.S. Federal Reserve System. Founded in 1930 to handle the German payment of World War I reparations, it
now monitors and collects data on international banking activity and promulgates rules concerning
international bank regulation.

Bankruptcy

State of being unable to pay debts. Thus, the ownership of the firm's assets is transferred from
the stockholders to the bondholders.

Bankruptcy cost view

The argument that expected indirect and direct bankruptcy costs offset the other
benefits from leverage so that the optimal amount of leverage is less than 100% debt finaning.

Bankruptcy risk

The risk that a firm will be unable to meet its debt obligations. Also referred to as default or insolvency risk.

Bankruptcy view

The argument that expected bankruptcy costs preclude firms from being financed entirely
with debt.

Biased expectations theories

Related: pure expectations theory.

Bill of exchange

General term for a document demanding payment.

Bond indexing

Designing a portfolio so that its performance will match the performance of some bond index.

Break-even time

Related: Premium payback period.

Buy limit order

A conditional trading order that indicates a security may be purchased only at the designated
price or lower.
Related: Sell limit order.

Buying the index

Purchasing the stocks in the S&P 500 in the same proportion as the index to achieve the
same return.

Capital expenditures

Amount used during a particular period to acquire or improve long-term assets such as
property, plant or equipment.

Capital market imperfections view

The view that issuing debt is generally valuable but that the firm's
optimal choice of capital structure is a dynamic process that involves the other views of capital structure (net
corporate/personal tax, agency cost, bankruptcy cost, and pecking order), which result from considerations of
asymmetric information, asymmetric taxes, and transaction costs.

Cash flow time-line

Line depicting the operating activities and cash flows for a firm over a particular period.

Chicago Mercantile Exchange (CME)

A not-for-profit corporation owned by its members. Its primary
functions are to provide a location for trading futures and options, collect and disseminate market information,
maintain a clearing mechanism and enforce trading rules.

Claim dilution

A reduction in the likelihood one or more of the firm's claimants will be fully repaid,
including time value of money considerations.

Claimant

A party to an explicit or implicit contract.

Clearing House Interbank Payments System (CHIPS)

An international wire transfer system for high-value
payments operated by a group of major banks.

Committee, AIMR Performance Presentation Standards Implementation Committee

The Association for Investment Management and Research (AimR)'s Performance Presentation Standards implementation
Committee is charged with the responsibility to interpret, revise and update the AimR Performance
Presentation Standards (AimR-PPS(TM)) for portfolio performance presentations.

Commodities Exchange Center (CEC)

The location of five New York futures exchanges: Commodity
exchange, Inc. (COMex), the New York Mercantile exchange (NYMex), the New York Cotton exchange,
the Coffee, Sugar and Cocoa exchange (CSC), and the New York futures exchange (NYFE). common size
statement A statement in which all items are expressed as a percentage of a base figure, useful for purposes of
analyzing trends and the changing relationship between financial statement items. For example, all items in
each year's income statement could be presented as a percentage of net sales.

Consortium banks

A merchant banking subsidiary set up by several banks that may or may not be of the
same nationality. Consortium banks are common in the Euromarket and are active in loan syndication.

Consumer Price Index (CPI)

The CPI, as it is called, measures the prices of consumer goods and services and is a
measure of the pace of U.S. inflation. The U.S.Department of Labor publishes the CPI very month.

Contingent claim

A claim that can be made only if one or more specified outcomes occur.

Contingent immunization

An arrangement in which the money manager pursues an active bond portfolio
strategy until an adverse investment experience drives the then-available potential return down to the safetynet
level. When that point is reached, the money manager is obligated to pursue an immunization strategy to
lock in the safety-net level return.

Convertible exchangeable preferred stock

Convertible preferred stock that may be exchanged, at the
issuer's option, into convertible bonds that have the same conversion features as the convertible preferred
stock.

Convex

Bowed, as in the shape of a curve. Usually referring to the price/required yield relationship for
option-free bonds.

Cost of limited partner capital

The discount rate that equates the after-tax inflows with outflows for capital
raised from limited partners.

Debt limitation

A bond covenant that restricts in some way the firm's ability to incur additional indebtedness.

Direct estimate method

A method of cash budgeting based on detailed estimates of cash receipts and cash
disbursements category by category.

Disclaimer of opinion

An auditor's statement disclaiming any opinion regarding the company's financial
condition.

Discriminant analysis

A statistical process that links the probability of default to a specified set of financial ratios.

Dividend limitation

A bond covenant that restricts in some way the firm's ability to pay cash dividends.

Doctrine of sovereign immunity

Doctrine that says a nation may not be tried in the courts of another country
without its consent.

EAFE index

The European, Australian, and Far East stock index, computed by Morgan Stanley.

Economic exposure

The extent to which the value of the firm will change because of an exchange rate change.

Effective convexity

The convexity of a bond calculated with cash flows that change with yields.

Eligible bankers' acceptances

In the BA market, an acceptance may be referred to as eligible because it is
acceptable by the Fed as collateral at the discount window and/or because the accepting bank can sell it
without incurring a reserve requirement.

Enhanced indexing

Also called indexing plus, an indexing strategy whose objective is to exceed or replicate
the total return performance of some predetermined index.

Equity claim

Also called a residual claim, a claim to a share of earnings after debt obligation have been
satisfied.

Eurobank

A bank that regularly accepts foreign currency denominated deposits and makes foreign currency loans.

Ex post return

Related: Holding period return

Exact matching

A bond portfolio management strategy that involves finding the lowest cost portfolio
generating cash inflows exactly equal to cash outflows that are being financed by investment.

Exante return

The expected return of a portfolio based on the expected returns of its component assets and
their weights.

Except for opinion

An auditor's opinion reflecting the fact that the auditor was unable to audit certain areas
of the company's operations because of restrictions imposed by management or other conditions beyond the
auditor's control.

Excess reserves

Any excess of actual reserves above required reserves.

Excess return on the market portfolio

The difference between the return on the market portfolio and the
riskless rate.

Excess returns

Also called abnormal returns, returns in excess of those required by some asset pricing model.

Exchange

The marketplace in which shares, options and futures on stocks, bonds, commodities and indices
are traded. Principal US stock exchanges are: New York Stock exchange (NYSE), American Stock exchange
(AMex) and the National Association of Securities Dealers (NASDAQ)

The Exchange

A nickname for the New York stock exchange. Also known as the Big Board. More than
2,000 common and preferred stocks are traded. The exchange is the oldest in the United States, founded in
1792, and the largest. It is located on Wall Street in New York City.

Exchange controls

Governmental restrictions on the purchase of foreign currencies by domestic citizens or
on the purchase of the local domestic currency by foreigners.

Exchange of assets

Acquisition of another company by purchase of its assets in exchange for cash or stock.

Exchange of stock

Acquisition of another company by purchase of its stock in exchange for cash or shares.

Exchange offer

An offer by the firm to give one security, such as a bond or preferred stock, in exchange for
another security, such as shares of common stock.

Exchange rate

The price of one country's currency expressed in another country's currency.

Exchange Rate Mechanism (ERM)

The methodology by which members of the EMS maintain their
currency exchange rates within an agreed upon range with respect to other member countries.

Exchange rate risk

Also called currency risk, the risk of an investment's value changing because of currency
exchange rates.

Exchange risk

The variability of a firm's value that results from unexpected exchange rate changes or the
extent to which the present value of a firm is expected to change as a result of a given currency's appreciation
or depreciation.

Exchangeable Security

Security that grants the security holder the right to exchange the security for the
common stock of a firm other than the issuer of the security.

Exclusionary self-tender

The firm makes a tender offer for a given amount of its own stock while excluding
targeted stockholders.

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.

Execution costs

The difference between the execution price of a security and the price that would have
existed in the absence of a trade, which can be further divided into market impact costs and market timing
costs.

Exempt securities

Instruments exempt from the registration requirements of the Securities Act of 1933 or the
margin requirements of the SEC Act of 1934. Such securities include government bonds, agencies, munis,
commercial paper, and private placements.

Exercise

To implement the right of the holder of an option to buy (in the case of a call) or sell (in the case of
a put) the underlying security.

Exercise price

The price at which the underlying future or options contract may be bought or sold.

Exercise value

The amount of advantage over a current market transaction provided by an in-the-money
option.

Exercising the option

The act buying or selling the underlying asset via the option contract.

Exogenous variable

A variable whose value is determined outside the model in which it is used. Also called
a parameter.

Expectations hypothesis theories

Theories of the term structure of interest rates which include the pure
expectations theory, the liquidity theory of the term structure, and the preferred habitat theory. These theories
hold that each forward rate equals the expected future interest rate for the relevant period. These three theories
differ, however, on whether other factors also affect forward rates, and how.
expectations theory of forward exchange rates A theory of foreign exchange rates that holds that the
expected future spot foreign exchange rate t periods in the future equals the current t-period forward exchange
rate.

Expected future cash flows

Projected future cash flows associated with an asset of decision.

Expected future return

The return that is expected to be earned on an asset in the future. Also called the
expected return.

Expected return

The return expected on a risky asset based on a probability distribution for the possible rates
of return. expected return equals some risk free rate (generally the prevailing U.S. Treasury note or bond rate)
plus a risk premium (the difference between the historic market return, based upon a well diversified index
such as the S&P500 and historic U.S. Treasury bond) multiplied by the assets beta.

Expected return on investment

The return one can expect to earn on an investment. See: capital asset
pricing model.

Expected return-beta relationship

implication of the CAPM that security risk premiums will be
proportional to beta.

Expected value

The weighted average of a probability distribution.

Expected value of perfect information

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

Expense ratio

The percentage of the assets that were spent to run a mutual fund (as of the last annual
statement). This includes expenses such as management and advisory fees, overhead costs and 12b-1
(distribution and advertising ) fees. The expense ratio does not include brokerage costs for trading the
portfolio, although these are reported as a percentage of assets to the SEC by the funds in a Statement of
Additional Information (SAI). the SAI is available to shareholders on request. Neither the expense ratio or the
SAI includes the transaction costs of spreads, normally incurred in unlisted securities and foreign stocks.
These two costs can add significantly to the reported expenses of a fund. The expense ratio is often termed an
Operating expense Ratio (OER).

Expensed

Charged to an expense account, fully reducing reported profit of that year, as is appropriate for
expenditures for items with useful lives under one year.

Expiration

The time when the option contract ceases to exist (expires).

Expiration cycle

An expiration cycle relates to the dates on which options on a particular security expire. A
given option will be placed in 1 of 3 cycles, the January cycle, the February cycle, or the March cycle. At any
point in time, an option will have contracts with 4 expiration dates outstanding, 2 in near-term months and 2
in far-term months.

Expiration date

The last day (in the case of American-style) or the only day (in the case of European-style)
on which an option may be exercised. For stock options, this date is the Saturday immediately following the
3rd Friday of the expiration month; however, brokerage firms may set an earlier deadline for notification of
an option holder's intention to exercise. If Friday is a holiday, the last trading day will be the preceding
Thursday.

Exposure netting

Offsetting exposures in one currency with exposures in the same or another currency,
where exchange rates are expected to move in such a way that losses or gains on the first exposed position
should be offset by gains or losses on the second currency exposure.

Expropriation

The official seizure by a government of private property. Any government has the right to
seize such property, according to international law, if prompt and adequate compensation is given.

Extendable bond

Bond whose maturity can be extended at the option of the lender or issuer.

Extendable notes

Note the maturity of which can be extended by mutual agreement of the issuer and
investors.

Extension

Voluntary arrangements to restructure a firm's debt, under which the payment date is postponed.

Extension date

The day on which the first option either expires or is extended.

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