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Definition of Kappa
The ratio of the dollar price change in the price of an option to a 1% change in the expected price volatility.
The option of terminating an investment earlier than originally planned.
Also called the quick ratio, the ratio of current assets minus inventories, accruals, and prepaid
An option that may be exercised at any time up to and including the expiration date.
The second-largest stock exchange in the United States. It trades
An option contract that can be exercised at any time between the date of purchase and
The signal-to-noise ratio of an analyst's forecasts. The ratio of alpha to residual standard
Yield curve option-pricing models.
The price at which a willing buyer and a willing unrelated seller would freely agree to
Legal document establishing a corporation and its structure and purpose.
option based on the average price of the asset during the life of the option.
A dealer's price to sell a security; also called the offer price.
The ratio of total assets to stockholder equity.
ratios that measure how effectively the firm is managing its assets.
Gives the lessee the option to purchase the asset at a price below fair market
Contracts with trigger points that, when crossed, automatically generate buying or selling of
price expressed in terms of yield to maturity or annual rate of return.
Packages that involve the exchange of more than two currencies against a base currency at
This is the quoted bid, or the highest price an investor is willing to pay to buy a security. Practically
Bill of exchange
General term for a document demanding payment.
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
Call an option
To exercise a call option.
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.
Placing one or more limits on the amount of new investment undertaken by a firm, either
Also called financial leverage ratios, these ratios compare debt to total capitalization
Cash flow coverage ratio
The number of times that financial obligations (for interest, principal payments,
Cash flow from operations
A firm's net cash inflow resulting directly from its regular operations
The proportion of a firm's assets held as cash.
Changes in Financial Position
Sources of funds internally provided from operations that alter a company's
Chicago Mercantile Exchange (CME)
A not-for-profit corporation owned by its members. Its primary
Bond price excluding accrued interest.
Commodities Exchange Center (CEC)
The location of five New York futures exchanges: Commodity
Common stock ratios
ratios that are designed to measure the relative claims of stockholders to earnings
option on an option.
A single centralized account into which funds collected at regional locations
Movement of cash from different lockbox locations into a single concentration
Consumer Price Index (CPI)
The CPI, as it is called, measures the prices of consumer goods and services and is a
Controlled foreign corporation (CFC)
A foreign corporation whose voting stock is more than 50% owned
Conversion parity price
Related:Market conversion price
The contractually specified price per share at which a convertible security can be
The number of shares of common stock that the security holder will receive from
Convertible exchangeable preferred stock
Convertible preferred stock that may be exchanged, at the
A legal "person" that is separate and distinct from its owners. A corporation is allowed to own
The net present value of an investment divided by the investment's initial cost. Also called
ratios used to test the adequacy of cash flows generated through earnings for purposes of
Covered or hedge option strategies
Strategies that involve a position in an option as well as a position in the
An option to buy or sell a foreign currency.
Indicator of short-term debt paying ability. Determined by dividing current assets by current
Customary payout ratios
A range of payout ratios that is typical based on an analysis of comparable firms.
Days' sales in inventory ratio
The average number of days' worth of sales that is held in inventory.
Over-the-counter options, such as those offered by government and mortgage-backed
Indicator of financial leverage. Compares assets provided by creditors to assets provided
Total debt divided by total assets.
Debt-service coverage ratio
Earnings before interest and income taxes plus one-third rental charges, divided
The date on which a firm's directors meet and announce the date and amount of the next
The options available to the seller of an interest rate futures contract, including the quality
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
Bond price including accrued interest, i.e., the price paid by the bond buyer.
Dividend payout ratio
Percentage of earnings paid out as dividends.
Municipal revenue bonds for which quotes are given in dollar prices. Not to be confused with
The product of modified duration and the initial price.
Dollar price of a bond
Percentage of face value at which a bond is quoted.
The return realized on a portfolio for any evaluation period, including (1) the change in market
Similar to the reverse repurchase agreement - a simultaneous agreement to sell a security held in a
Dollar safety margin
The dollar equivalent of the safety cushion for a portfolio in a contingent immunization
Dollar-weighted rate of return
Also called the internal rate of return, the interest rate that will make the
Domestic International Sales Corporation (DISC)
A U.S. corporation that receives a tax incentive for
A sinking fund provision that may allow repurchase of twice the required number of bonds
Barrier option that comes into existence if asset price hits a barrier.
Barrier option that expires if asset price hits a barrier.
A common gauge of the price sensitivity of an asset or portfolio to a change in interest rates.
Earnings retention ratio
Specialized banking institutions, authorized and chartered by the Federal Reserve Board
Effective call price
The strike price in an optional redemption provision plus the accrued interest to the
The duration calculated using the approximate duration formula for a bond with an
Elasticity of an option
Percentage change in the value of an option given a 1% change in the value of the
Electronic data interchange (EDI)
The exchange of information electronically, directly from one firm's
An option that is part of the structure of a bond that provides either the bondholder or
Equilibrium market price of risk
The slope of the capital market line (CML). Since the CML represents the
Securities that give the holder the right to buy or sell a specified number of shares of stock, at
This is an American dollar that has been deposited in a European bank or an U.S. bank branch
Eurobonds denominated in U.S.dollars.
option that may be exercised only at the expiration date. Related: american option.
An option contract that can only be exercised on the expiration date.
The marketplace in which shares, options and futures on stocks, bonds, commodities and indices
A nickname for the New York stock exchange. Also known as the Big Board. More than
Governmental restrictions on the purchase of foreign currencies by domestic citizens or
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.
An offer by the firm to give one security, such as a bond or preferred stock, in exchange for
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
Exchange rate risk
Also called currency risk, the risk of an investment's value changing because of currency
The variability of a firm's value that results from unexpected exchange rate changes or the
Security that grants the security holder the right to exchange the security for the
The price at which the underlying future or options contract may be bought or sold.
Exercising the option
The act buying or selling the underlying asset via the option contract.
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