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Definition of Issue Age
age of an insured as at the policy issue date, using "age nearest" next birthday formula.
Federal agency securities.
A form of organization commonly used by foreign banks to enter the U.S. market. An agency
A means of compensating the broker of a program trade solely on the basis of commission
The argument that specifies that the various agency costs create a complex environment in
The incremental costs of having an agent make decisions for a principal.
Mortgage pass-through securities whose principal and interest payments are
Conflicts of interest among stockholders, bondholders, and managers.
The analysis of principal-agent relationships, wherein one person, an agent, acts on behalf of
The decision-maker in a principal-agent relationship.
Variations of mortgage instruments such as adjustable-rate and variablerate
The periodic rate times the number of periods in a year. For example, a 5%
The effective, or true, annual rate of return. The APY is the rate actually
The simultaneous buying and selling of a security at two different prices in two different markets,
An alternative model to the capital asset pricing model developed by
Yield curve option-pricing models.
People who search for and exploit arbitrage opportunities.
Arithmetic average (mean) rate of return
Arithmetic mean return.
Also called surplus management, the task of managing funds of a financial
A bond indenture restriction that permits additional borrowing on if the ratio of assets to
An arithmetic mean of selected stocks intended to represent the behavior of the market or some
Average accounting return
The average project earnings after taxes and depreciation divided by the average
Average age of accounts receivable
The weighted-average age of all of the firm's outstanding invoices.
Average collection period, or days' receivables
The ratio of accounts receivables to sales, or the total
Average cost of capital
A firm's required payout to the bondholders and to the stockholders expressed as a
Also referred to as the weighted-average life (WAL). The average number of years that each
The average time to maturity of securities held by a mutual fund. Changes in interest rates
Average (across-day) measures
An estimation of price that uses the average or representative price of a
Average rate of return (ARR)
The ratio of the average cash inflow to the amount invested.
Average tax rate
Taxes as a fraction of income; total taxes divided by total taxable income.
Also called on-the-run or current coupon issues or bellwether issues. In the secondary
Bottom-up equity management style
A management style that de-emphasizes the significance of economic
agency banks established by Canadian banks in the U.S.
Cash flow coverage ratio
The number of times that financial obligations (for interest, principal payments,
Cash management bill
Very short maturity bills that the Treasury occasionally sells because its cash
Cheapest to deliver issue
The acceptable Treasury security with the highest implied repo rate; the rate that a
Mortgage against which no additional debt may be issued.
Collateralized mortgage obligation (CMO)
A security backed by a pool of pass-throughs , structured so that
A loan based on the credit of the borrower and on the collateral for the mortgage.
Corporate financial management
The application of financial principals within a corporation to create and
Ratios used to test the adequacy of cash flows generated through earnings for purposes of
Covered interest arbitrage
A portfolio manager invests dollars in an instrument denominated in a foreign
Taking advantage of divergences in exchange rates in different money markets by
In Treasury securities, the most recently auctioned issue. Trading is more active in current
Related: Benchmark issues
The amplification of the return earned on equity when an investment or firm is financed
Debt-service coverage ratio
Earnings before interest and income taxes plus one-third rental charges, divided
Dow Jones industrial average
This is the best known U.S.index of stocks. It contains 30 stocks that trade on
Eurobonds that pay coupon interest in one currency but pay the principal in a different
Securities sold in the Euromarket. That is, securities initially sold to investors
Federal agency securities
Securities issued by corporations and agencies created by the U.S. government,
Federal credit agencies
agencies of the federal government set up to supply credit to various classes of
Use of debt to increase the expected return on equity. Financial leverage is measured by
Financial leverage clientele
A group of investors who have a preference for investing in firms that adhere to
Financial leverage ratios
Related: capitalization ratios.
Fiscal agency agreement
An alternative to a bond trust deed. Unlike the trustee, the fiscal agent acts as an
Fixed-charge coverage ratio
A measure of a firm's ability to meet its fixed-charge obligations: the ratio of
Freddie Mac (Federal Home Loan Mortgage Corporation)
A Congressionally chartered corporation that
Garmen-Kohlhagen option pricing model
A widely used model for pricing foreign currency options.
GEMs (growing-equity mortgages)
Mortgages in which annual increases in monthly payments are used to
GMCs (guaranteed mortgage certificates)
First issued by Freddie Mac in 1975, GMCs, like PCs, represent
Government National Mortgage Association (Ginnie Mae)
A wholly owned U.S. government corporation
Graduated-payment mortgages (GPMs)
A type of stepped-payment loan in which the borrower's payments
Group rotation manager
A top-down manager who infers the phases of the business cycle and allocates
A money manager who seeks to buy stocks that are typically selling at relatively high P/E
Highly leveraged transaction (HLT)
Bank loan to a highly leveraged firm.
Idea that as long as individuals borrow (or lend) on the same terms as the firm, they can
An investment/trading strategy that exploits divergences between actual and theoretical
Interest coverage ratio
The ratio of the earnings before interest and taxes to the annual interest expense. This
Interest coverage test
A debt limitation that prohibits the issuance of additional long-term debt if the issuer's
Also called a portfolio manager and money manager, the individual who manages a
A particular financial asset.
Issued share capital
Total amount of shares that are in issue. Related: outstanding shares.
An entity that issues a financial asset.
The commercial or investment bank with the primary responsibility for organizing syndicated
Release of information to some persons before official public announcement.
The use of debt financing.
A group of shareholders who, because of their personal leverage, seek to invest in
Measures of the relative contribution of stockholders and creditors, and of the firm's ability
Making transactions to adjust (rebalance) a firm's leverage ratio back to its target.
The beta of a leveraged required return; that is, the beta as adjusted for the degree of
Leveraged buyout (LBO)
A transaction used for taking a public corporation private financed through the use
Stock in a firm that relies on financial leverage. Holders of leveraged equity face the
A lease arrangement under which the lessor borrows a large proportion of the funds needed
A portfolio that includes risky assets purchased with funds borrowed.
Leveraged required return
The required return on an investment when the investment is financed partially by debt.
he use of debt financing.
A portfolio that includes risky assets purchased with funds borrowed.
Also known as "dirty" float, this is a system of floating exchange rates with central bank
Management/closely held shares
Percentage of shares held by persons closely related to a company, as
Management buyout (MBO)
Leveraged buyout whereby the acquiring group is led by the firm's management.
An investment advisory fee charged by the financial advisor to a fund based on the fund's
Decisions concerning the operation of the firm, such as the choice of firm size, firm
Related: Investment management.
Related: Investment manager.
A loan secured by the collateral of some specified real estate property which obliges the borrower
A bond in which the issuer has granted the bondholders a lien against the pledged assets.
A modification of standard duration to account for the impact on duration of MBSs of
Mortgage pass-through security
Also called a passthrough, a security created when one or more mortgage
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