Definition of LEAPS

LEAPS

Long-term equity anticipation securities. Long-term options.

All equity rate

The discount rate that reflects only the business risks of a project and abstracts from the
effects of financing.

Anticipation

Arrangements whereby customers who pay before the final date may be entitled to deduct a
normal rate of interest.

Asset-Backed Securities

Bond or note secured by assets of company.

Asset/equity ratio

The ratio of total assets to stockholder equity.

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.

Barrier options

Contracts with trigger points that, when crossed, automatically generate buying or selling of
other options. These are very exotic options.

Basket options

Packages that involve the exchange of more than two currencies against a base currency at
expiration. The basket option buyer purchases the right, but not the obligation, to receive designated
currencies in exchange for a base currency, either at the prevailing spot market rate or at a prearranged rate of
exchange. A basket option is generally used by multinational corporations with multicurrency cash flows
since it is generally cheaper to buy an option on a basket of currencies than to buy individual options on each
of the currencies that make up the basket.

Book-entry securities

The Treasury and federal agencies are moving to a book-entry system in which securities are not represented by engraved pieces of paper but are maintained in computerized records at the
Fed in the names of member banks, which in turn keep records of the securities they own as well as those they
are holding for customers. In the case of other securities where a book-entry has developed, engraved
securities do exist somewhere in quite a few cases. These securities do not move from holder to holder but are
usually kept in a central clearinghouse or by another agent.

Bottom-up equity management style

A management style that de-emphasizes the significance of economic
and market cycles, focusing instead on the analysis of individual stocks.

cafeteria plan a “menu” of fringe benefit options that include

cash or nontaxable benefits

Coefficient of determination

A measure of the goodness of fit of the relationship between the dependent and
independent variables in a regression analysis; for instance, the percentage of variation in the return of an
asset explained by the market portfolio return.

coefficient of determination

a measure of dispersion that
indicates the “goodness of fit” of the actual observations
to the least squares regression line; indicates what proportion
of the total variation in y is explained by the regression model

Common stock/other equity

Value of outstanding common shares at par, plus accumulated retained
earnings. Also called shareholders' equity.

Contra-equity account

An account that reduces an equity account. An example is Treasury stock.

Cost of Equity

Same as the cost of common stock. Sometimes viewed as the
rate of return stockholders require to maintain the market value of
the company's common stock.

Credit Terms

Conditions under which credit is extended by a lender to a borrower.

Dealer options

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

Debt/equity ratio

Indicator of financial leverage. Compares assets provided by creditors to assets provided
by shareholders. Determined by dividing Long-term debt by common stockholder equity.

Debt/Equity Ratio

A comparison of debt to equity in a company's capital structure.

Debt securities

IOUs created through loan-type transactions - commercial paper, bank CDs, bills, bonds, and
other instruments.

debt-to-equity ratio

A widely used financial statement ratio to assess the
overall debt load of a business and its capital structure, it equals total liabilities
divided by total owners’ equity. Both numbers for this ratio are
taken from a business’s latest balance sheet. There is no standard, or
generally agreed on, maximum ratio, such as 1:1 or 2:1. Every industry
is different in this regard. Some businesses, such as financial institutions,
have very high debt-to-equity ratios. In contrast, many businesses
use very little debt relative to their owners’ equity.

Deferred equity

A common term for convertible bonds because of their equity component and the
expectation that the bond will ultimately be converted into shares of common stock.

Delivery options

The options available to the seller of an interest rate futures contract, including the quality
option, the timing option, and the wild card option. Delivery options make the buyer uncertain of which
Treasury Bond will be delivered or when it will be delivered.

Deterministic models

Liability-matching models that assume that the liability payments and the asset cash
flows are known with certainty. Related: Compare stochastic models

Discount securities

Non-interest-bearing money market instruments that are issued at a discount and
redeemed at maturity for full face value, e.g. U.S. Treasury bills.

Disintermediation

Withdrawal of funds from a financial institution in order to invest them directly.

Dual syndicate equity offering

An international equity placement where the offering is split into two
tranches - domestic and foreign - and each tranche is handled by a separate lead manager.

Equity

Represents ownership interest in a firm. Also the residual dollar value of a futures trading account,
assuming its liquidation at the going market price.

Equity

Funds raised from shareholders.

Equity

Amounts contributed to the company by the owners (contributed capital) plus the residual earnings of the business (retained earnings).

equity

Refers to one of the two basic sources of capital for a business, the
other being debt (borrowed money). Most often, it is called owners’
equity because it refers to the capital used by a business that “beLongs”
to the ownership interests in the business. Owners’ equity arises from
two quite distinct sources: capital invested by the owners in the business
and profit (net income) earned by the business that is not distributed to
its owners (called retained earnings). Owners’ equity in our highly developed
and sophisticated economic and legal system can be very complex—
involving stock options, financial derivatives of all kinds, different
classes of stock, convertible debt, and so on.

Equity

The difference between the total of all recorded assets and liabilities on the balance
sheet.

Equity

Ownership. Common stock represents equity in a corporation.

Equity

The net worth of a business, consisting of capital stock, capital (or paid-in) surplus (or retained earnings), and, occasionally, certain net worth reserves. Common equity is that part of the total net worth beLonging to the common shareholders. Total equity includes preferred shareholders. The terms common stock, net worth, and common equity are frequently used interchangeably.

equity

The net worth of a company. This represents the ownership interest of the shareholders (common and preferred) of a company. For this reason, shares or stocks are often known as equities.

Equity-based insurance

Life insurance or annuity product in which the cash value and benefit level fluctuate according to the performance of an equity portfolio.

Equity Buy-Back

Refers to the investors percentage ownership of a company that can be re-acquired by the company, usually at a pre-determined amount.

Equity cap

An agreement in which one party, for an upfront premium, agrees to compensate the other at
specific time periods if a designated stock market benchmark is greater than a predetermined level.

Equity claim

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

Equity collar

The simultaneous purchase of an equity floor and sale of an equity cap.

Equity contribution agreement

An agreement to contribute equity to a project under certain specified
conditions.

Equity floor

An agreement in which one party agrees to pay the other at specific time periods if a specific
stock market benchmark is less than a predetermined level.

Equity investment

Through equity investment, investors gain part ownership of the corporation. The primary type of equity investment is corporate stock.

Equity kicker

Used to refer to warrants because they are usually issued attached to privately placed bonds.

Equity-linked policies

Related: Variable life

Equity market

Related:Stock market

Equity Method

Accounting method for an equity security in cases where the investor has sufficient
voting interest to have significant influence over the operating and financial policies of an
investee.

Equity multiplier

Total assets divided by total common stockholders' equity; the amount of total assets per
dollar of stockholders' equity.

Equity options

securities that give the holder the right to buy or sell a specified number of shares of stock, at
a specified price for a certain (limited) time period. Typically one option equals 100 shares of stock.

Equity Security

An ownership interest in an enterprise, including preferred and common stock.

Equity swap

A swap in which the cash flows that are exchanged are based on the total return on some stock
market index and an interest rate (either a fixed rate or a floating rate). Related: interest rate swap.

Equityholders

Those holding shares of the firm's equity.

Euro-medium term note (Euro-MTN)

A non-underwritten Euronote issued directly to the market. Euro-
MTNs are offered continuously rather than all at once as a bond issue is. Most Euro-MTN maturities are
under five years.

Euroequity issues

securities sold in the Euromarket. That is, securities initially sold to investors
simultaneously in several national markets by an international syndicate. Euromarket.
Related: external market

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.

Exit Options

A variety of options available to an investor to recover their invested capital and the return on their investment.

Federal agency securities

securities issued by corporations and agencies created by the U.S. government,
such as the Federal Home Loan Bank Board and Ginnie Mae.

Financial intermediaries

Institutions that provide the market function of matching borrowers and lenders or
traders.

financial intermediary

Firm that raises money from many small investors and provides financing to businesses or other
organizations by investing in their securities.

Financial Intermediary

Any institution, such as a bank, that takes deposits from savers and loans them to borrowers.

Financial Intermediation

The process whereby financial intermediaries channel funds from lender/savers to borrower/spenders.

Flexible Term

Optional periods of time which the conditions of a contract will be carried out.

Foreign equity market

That portion of the domestic equity market that represents issues floated by foreign companies.

GEMs (growing-equity mortgages)

Mortgages in which annual increases in monthly payments are used to
reduce outstanding principal and to shorten the term of the loan.

Government securities

Negotiable U.S. Treasury securities.

Intermarket sector

spread The spread between the interest rate offered in two sectors of the bond market for
issues of the same maturity.

Intermarket spread swaps

An exchange of one bond for another based on the manager's projection of a
realignment of spreads between sectors of the bond market.

Intermediary

An independent third party that may act as a mediator during negotiations.

Intermediate Good

A good used in producing another good.

Intermediate-term

Typically 1-10 years.

Intermediation

Investment through a financial institution. Related: disintermediation.

Investor's equity

The balance of a margin account. Related: buying on margin, initial margin requirement.

Leveraged equity

Stock in a firm that relies on financial leverage. Holders of leveraged equity face the
benefits and costs of using debt.

Liquidity theory of the term structure

A biased expectations theory that asserts that the implied forward
rates will not be a pure estimate of the market's expectations of future interest rates because they embody a
liquidity premium.

Long

One who has bought a contract(s) to establish a market position and who has not yet closed out this
position through an offsetting sale; the opposite of short.

Long bonds

Bonds with a Long current maturity. The "Long bond" is the 30-year U.S. government bond.

Long bonds

Bonds with a Long current maturity. The "Long bond" is the 30-year U.S. government bond.

Long coupons

1) Bonds or notes with a Long current maturity.
2) A bond on which one of the coupon periods, usually the first, is Longer than the other periods or the standard period.

Long coupons

1) Bonds or notes with a Long current maturity.
2) A bond on which one of the coupon
periods, usually the first, is Longer than the other periods or the standard period.

Long hedge

The purchase of a futures contract(s) in anticipation of actual purchases in the cash market. Used
by processors or exporters as protection against an advance in the cash price. Related: Hedge, short hedge

Long position

An options position where a person has executed one or more option trades where the net
result is that they are an "owner" or holder of options (i. e. the number of contracts bought exceeds the
number of contracts sold).
Occurs when an individual owns securities. An owner of 1,000 shares of stock is said to be "Long the stock."
Related: Short position

Long position

Outright ownership of a security or financial instrument. The
owner expects the price to rise in order to make a profit on some future sale.

long position

Purchase of an investment.

Long rate

The yield on a zero-coupon Treasury bond.

Long run

A period of time in which all costs are variable; greater than one year.
Long straddle A straddle in which a Long position is taken in both a put and call option.

Long run

A period of time in which all costs are variable; greater than one year.

Long straddle

A straddle in which a Long position is taken in both a put and call option.

Long-term

In accounting information, one year or greater.

Long-term assets

Value of property, equipment and other capital assets minus the depreciation. This is an
entry in the bookkeeping records of a company, usually on a "cost" basis and thus does not necessarily reflect
the market value of the assets.

Long-term debt

An obligation having a maturity of more than one year from the date it was issued. Also
called funded debt.

Long-term debt

A debt for which payments will be required for a period of more than
one year into the future.

Long Term Debt

Liability due in a year or more.

Long-term debt/capitalization

Indicator of financial leverage. Shows Long-term debt as a proportion of the
capital available. Determined by dividing Long-term debt by the sum of Long-term debt, preferred stock and
common stockholder equity.

Long-term debt ratio

The ratio of Long-term debt to total capitalization.

Long-term debt to equity ratio

A capitalization ratio comparing Long-term debt to shareholders' equity.

Long-term financial plan

Financial plan covering two or more years of future operations.

Long-term liabilities

Amount owed for leases, bond repayment and other items due after 1 year.

LONG-TERM LIABILITIES

Bills that are payable in more than one year, such as a mortgage or bonds.

Long-term liabilities

Amounts owing after more than one year.

Longer-Term Fixed Assets

Assets having a useful life greater than one year but the duration of the 'Long term' will vary with the context in which the term is applied.

Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit.