Definition of Hit

Hit

A dealer who agrees to sell at the bid price quoted by another dealer is said to "hit" that bid.

White knight

A friendly potential acquirer of a firm sought out by a target firm that is threatened by a less
welcome suitor.

white knight

Friendly potential acquirer sought by a target company threatened by an unwelcome suitor.

Down-and-in option

Barrier option that comes into existence if asset price hits a barrier.

Down-and-out option

Barrier option that expires if asset price hits a barrier.

Multirule system

A technical trading strategy that combines mechanical rules, such as the CRISMA
(cumulative volume, relative strength, moving average) Trading System of Pruitt and White.

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

Acquirer

A firm or individual that is acquiring something.

Affirmative covenant

A bond covenant that specifies certain actions the firm must take.

Arm's length price

The price at which a willing buyer and a willing unrelated seller would freely agree to
transact.

Ask price

A dealer's price to sell a security; also called the offer price.

Bargain-purchase-price option

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

Basis price

price expressed in terms of yield to maturity or annual rate of return.

Bid price

This is the quoted bid, or the highest price an investor is willing to pay to buy a security. Practically
speaking, this is the available price at which an investor can sell shares of stock. Related: Ask , offer.

Bid-asked

spread The difference between the bid and asked prices.

Bidder

A firm or person that wants to buy a firm or security.

Blue-chip company

Large and creditworthy company.

Borrower fallout

In the mortgage pipeline, the risk that prospective borrowers of loans committed to be
closed will elect to withdraw from the contract.

Breakout

A rise in a security's price above a resistance level (commonly its previous high price) or drop
below a level of support (commonly the former lowest price.) A breakout is taken to signify a continuing
move in the same direction. Can be used by technical analysts as a buy or sell indicator.

Buyout

Purchase of a controlling interest (or percent of shares) of a company's stock. A leveraged buy-out is
done with borrowed money.

Call price

The price, specified at issuance, at which the issuer of a bond may retire part of the bond at a
specified call date.

Call price

The price for which a bond can be repaid before maturity under a call provision.

Cashout

Refers to a situation where a firm runs out of cash and cannot readily sell marketable securities.

Clean price

Bond price excluding accrued interest.

Company-specific risk

Related: Unsystematic risk

Competitive bidding

A securities offering process in which securities firms submit competing bids to the
issuer for the securities the issuer wishes to sell.

Confirmation

he written statement that follows any "trade" in the securities markets. Confirmation is issued
immediately after a trade is executed. It spells out settlement date, terms, commission, etc.

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.

Conversion parity price

Related:Market conversion price

Convertible price

The contractually specified price per share at which a convertible security can be
converted into shares of common stock.

Cost company arrangement

Arrangement whereby the shareholders of a project receive output free of
charge but agree to pay all operating and financing charges of the project.

Customary payout ratios

A range of payout ratios that is typical based on an analysis of comparable firms.

Days' sales outstanding

Average collection period.

Dealer

An entity that stands ready and willing to buy a security for its own account (at its bid price) or sell
from its own account (at its ask price).

Dealer loan

Overnight, collateralized loan made to a dealer financing his position by borrowing from a
money market bank.

Dealer market

A market where traders specializing in particular commodities buy and sell assets for their
own accounts.

Dealer options

Over-the-counter options, such as those offered by government and mortgage-backed
securities dealers.

Delivery price

The price fixed by the Clearing house at which deliveries on futures are in invoiced; also the
price at which the futures contract is settled when deliveries are made.

Depository Trust Company (DTC)

DTC is a user-owned securities depository which accepts deposits of
eligible securities for custody, executes book-entry deliveries and records book-entry pledges of securities in
its custody, and provides for withdrawals of securities from its custody.

Devaluation A decrease in the spot price of the currency

Dirty price

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.

Down-and-out option

Barrier option that expires if asset price hits a barrier.

Effective call price

The strike price in an optional redemption provision plus the accrued interest to the
redemption date.

Equilibrium market price of risk

The slope of the capital market line (CML). Since the CML represents the
return offered to compensate for a perceived level of risk, each point on the line is a balanced market
condition, or equilibrium. The slope of the line determines the additional return needed to compensate for a
unit change in risk.

Exercise price

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
knowledge of the relevant facts. Also referred to as market price.

Fair price

The equilibrium price for futures contracts. Also called the theoretical futures price, which equals
the spot price continuously compounded at the cost of carry rate for some time interval.

Fair price provision

See:appraisal rights.

Fallout risk

A type of mortgage pipeline risk that is generally created when the terms of the loan to be
originated are set at the same time as the sale terms are set. The risk is that either of the two parties, borrower
or investor, fails to close and the loan "falls out" of the pipeline.

Feasible target payout ratios

Payout ratios that are consistent with the availability of excess funds to make
cash dividend payments.

Firm

Refers to an order to buy or sell that can be executed without confirmation for some fixed period. Also,
a synonym for company.

Firm commitment underwriting

An undewriting in which an investment banking firm commits to buy the
entire issue and assumes all financial responsibility for any unsold shares.

Firm's net value of debt

Total firm value minus total firm debt.

Firm-specific risk

See:diversifiable risk or unsystematic risk.

First-In-First-Out (FIFO)

A method of valuing the cost of goods sold that uses the cost of the oldest item in
inventory first.

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,
usually a premium to the current market 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.
The price paid by purchaser is the full price.

Foreign exchange dealer

A firm or individual that buys foreign exchange from one party and then sells it to
another party. The dealer makes the difference between the buying and selling prices, or spread.

Full price

Also called dirty price, the price of a bond including accrued interest. Related: flat price.

Full-payout lease

See: financial lease.

Futures price

The price at which the parties to a futures contract agree to transact on the settlement date.

Harmless warrant

Warrant that allows the user to purchase a bond only by surrendering an existing bond
with similar terms.

High price

The highest (intraday) price of a stock over the past 52 weeks, adjusted for any stock splits.

Holding company

A corporation that owns enough voting stock in another firm to control management and
operations by influencing or electing its board of directors.

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.

Input-output tables

Tables that indicate how much each industry requires of the production of each other
industry in order to produce each dollar of its own output.

Intercompany loan

Loan made by one unit of a corporation to another unit of the same corporation.

Intercompany transaction

Transaction carried out between two units of the same corporation.

Intrinsic value of a firm

The present value of a firm's expected future net cash flows discounted by the
required rate of return.

Investor fallout

In the mortgage pipeline, risk that occurs when the originator commits loan terms to the
borrowers and gets commitments from investors at the time of application, or if both sets of terms are made at closing.

Invoice price

The price that the buyer of a futures contract must pay the seller when a Treasury Bond is delivered.

Last-In-First-Out (LIFO)

A method of valuing inventory that uses the cost of the most recent item in
inventory first.

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.

Lessee

An entity that leases an asset from another entity.

Lessor

An entity that leases an asset to another entity.
Letter of comment A communication to the firm from the SEC that suggests changes to its registration
statement.

Leveraged buyout (LBO)

A transaction used for taking a public corporation private financed through the use
of debt funds: bank loans and bonds. Because of the large amount of debt relative to equity in the new
corporation, the bonds are typically rated below investment grade, properly referred to as high-yield bonds or
junk bonds. Investors can participate in an LBO through either the purchase of the debt (i.e., purchase of the
bonds or participation in the bank loan) or the purchase of equity through an LBO fund that specializes in
such investments.

LIFO (Last-in-first-out)

The last-in-first-out inventory valuation methodology. A method of valuing
inventory that uses the cost of the most recent item in inventory first.

Limit price

Maximum price fluctuation
Limitation on asset dispositions A bond covenant that restricts in some way a firm's ability to sell major
assets.

Lock-out

With PAC bond CMO classes, the period before the PAC sinking fund becomes effective. With
multifamily loans, the period of time during which prepayment is prohibited.

Low price

This is the day's lowest price of a security that has changed hands between a buyer and a seller.

Low price-earnings ratio effect

The tendency of portfolios of stocks with a low price-earnings ratio to
outperform portfolios consisting of stocks with a high price-earnings ratio.

Lessor

An entity that leases an asset to another entity.

Limit price

Maximum price fluctuation

Management buyout (MBO)

Leveraged buyout whereby the acquiring group is led by the firm's management.

Market conversion price

Also called conversion parity price, the price that an investor effectively pays for
common stock by purchasing a convertible security and then exercising the conversion option. This price is
equal to the market price of the convertible security divided by the conversion ratio.

Market price of risk

A measure of the extra return, or risk premium, that investors demand to bear risk. The
reward-to-risk ratio of the market portfolio.

Market prices

The amount of money that a willing buyer pays to acquire something from a willing seller,
when a buyer and seller are independent and when such an exchange is motivated by only commercial
consideration.

Marketplace price efficiency

The degree to which the prices of assets reflect the available marketplace
information. Marketplace price efficiency is sometimes estimated as the difficulty faced by active
management of earning a greater return than passive management would, after adjusting for the risk
associated with a strategy and the transactions costs associated with implementing a strategy.

Maximum price fluctuation

The maximum amount the contract price can change, up or down, during one
trading session, as fixed by exchange rules in the contract specification. Related: limit price.

Minimum price fluctuation

Smallest increment of price movement possible in trading a given contract. Also
called point or tick. The zero-beta portfolio with the least risk.

Neglected firm effect

The tendency of firms that are neglected by security analysts to outperform firms that
are the subject of considerable attention.

Netting out

To get or bring in as a net; to clear as profit.

Nominal price

price quotations on futures for a period in which no actual trading took place.

Noncompetitive bid

In a Treasury auction, bidding for a specific amount of securities at the price, whatever it
may turn out to be, equal to the average price of the accepted competitive bids.

Odd lot dealer

A broker who combines odd lots of securities from multiple buy or sell orders into round lots
and executes transactions in those round lots.

Open-outcry

The method of trading used at futures exchanges, typically involving calling out the specific
details of a buy or sell order, so that the information is available to all traders.

Opening price

The range of prices at which the first bids and offers were made or first transactions were
completed.

Option price

Also called the option premium, the price paid by the buyer of the options contract for the right
to buy or sell a security at a specified price in the future.

Option seller

Also called the option writer , the party who grants a right to trade a security at a given price in
the future.

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.

Outright rate

Actual forward rate expressed in dollars per currency unit, or vice versa.
outsourcing
he practice of purchasing a significant percentage of intermediate components from outside suppliers.

Outstanding share capital

Issued share capital less the par value of shares that are held in the company's treasury.

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