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Definition of NM

NM Image 1


Abbreviation for Not Meaningful.

Related Terms:

Abandonment option

The option of terminating an investment earlier than originally planned.


The receipt of an exercise notice by an options writer that requires the writer to sell (in the case
of a call) or purchase (in the case of a put) the underlying security at the specified strike price.


Mortgage-backed securities (MBS) on which registered holders receive separate principal and
interest payments on each of their certificates, usually directly from the servicer of the MBS pool. GnmA-I
mortgage-backed securities are single-issuer pools.


Mortgage-backed securities (MBS) on which registered holders receive an aggregate principal and
interest payment from a central paying agent on all of their certificates. Principal and interest payments are
disbursed on the 20th day of the month. GnmA-II MBS are backed by multiple-issuer pools or custom pools
(one issuer but different interest rates that may vary within one percentage point). Multiple-issuer pools are
known as "Jumbos." Jumbo pools are generally longer and offer certain mortgages that are more
geographically diverse than single-issuer pools. Jumbo pool mortgage interest rates may vary within one
percentage point.

GNMA Midget

A GnmA pass-through certificate backed by fixed rate mortgages with a 15 year maturity.
GnmA Midget is a dealer term and is not used by GnmA in the formal description of its programs.

Government bond

See: Government securities.

Government National Mortgage Association (Ginnie Mae)

A wholly owned U.S. government corporation
within the Department of Housing & Urban Development. Ginnie Mae guarantees the timely payment of
principal and interest on securities issued by approved servicers that are collateralized by FHA-issued, VAguaranteed,
or Farmers Home Administration (FmHA)-guaranteed mortgages.

NM Image 2

Government sponsored enterprises

Privately owned, publicly chartered entities, such as the Student Loan
Marketing Association, created by Congress to reduce the cost of capital for certain borrowing sectors of the
economy including farmers, homeowners, and students.

Government securities

Negotiable U.S. Treasury securities.


Situation in which a large block of stock is held by an unfriendly company, forcing the target
company to repurchase the stock at a substantial premium to prevent a takeover.

Nonmarketed claims

Claims that cannot be easily bought and sold in the financial markets, such as those of
the government and litigants in lawsuits.

Swap assignment

Related: swap sale.

Unmatched book

If the average maturity of a bank's liabilities is less than that of its assets, it is said to be
running an unmatched book. The term is commonly used with the Euromarket. Term also refers to the
condition when a firm enters into OTC derivatives contracts and chooses to hedge that risk by not making
trades in the opposite direction to another financial intermediary. In this case, the firm with an unmatched
book hedges its net market risk with futures and options, usually.
Related expressions: open book and short book.

cost containment

the practice of minimizing, to the extent
possible, period-by-period increases in per-unit variable
and total fixed costs

environmental constraint

any limitation on strategy options
caused by external cultural, fiscal, legal/regulatory,
or political situations; a limiting factor that is not under the
direct control of an organization’s management; tend to be
fairly long-run in nature


A shipment of goods to a party who agrees to try to sell them to third parties. A
sale is not considered to have taken place until the goods are sold to a third party.

NM Image 3

Nonmarketable Security

A debt or equity security for which there is no posted price or bidand-
ask quotation available on a securities exchange or over-the-counter market.


This is the legal transfer on one person's interest in an insurance policy to another person or entity, such as to a bank to qualify for a loan

Agency cost view

The argument that specifies that the various agency costs create a complex environment in
which total agency costs are at a minimum with some, but less than 100%, debt financing.

Agency pass-throughs

Mortgage pass-through securities whose principal and interest payments are
guaranteed by government agencies, such as the Government National Mortgage Association ("Ginnie Mae"), Federal Home Loan Mortgage Corporation ("Freddie Mac") and Federal National Mortgage Association ("Fannie Mae").


Bonds are debt and are issued for a period of more than one year. The U.S. government, local
governments, water districts, companies and many other types of institutions sell bonds. When an investor
buys bonds, he or she is lending money. The seller of the bond agrees to repay the principal amount of the
loan at a specified time. Interest-bearing bonds pay interest periodically.


A system that monitors and evaluates the performance of a fixed-income portfolio , as well as the
individual securities held in the portfolio. BONDPAR decomposes the return into those elements beyond the
manager's control--such as the interest rate environment and client-imposed duration policy constraints--and
those that the management process contributes to, such as interest rate management, sector/quality allocations,
and individual bond selection.

Budget deficit

The amount by which government spending exceeds government revenues.


The value of assets that can be converted into cash immediately, as reported by a company. Usually
includes bank accounts and marketable securities, such as government bonds and Banker's Acceptances. Cash
equivalents on balance sheets include securities (e.g., notes) that mature within 90 days.

Cash and equivalents

The value of assets that can be converted into cash immediately, as reported by a
company. Usually includes bank accounts and marketable securities, such as government bonds and Banker's
Acceptances. Cash equivalents on balance sheets include securities (e.g., notes) that mature within 90 days.

Concession agreement

An understanding between a company and the host government that specifies the
rules under which the company can operate locally.

Conventional pass-throughs

Also called private-label pass-throughs, any mortgage pass-through security not
guaranteed by government agencies. Compare agency pass-throughs.


The degree of freedom to exchange a currency without government restrictions or controls.

Dealer options

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

Debt instrument

An asset requiring fixed dollar payments, such as a government or corporate bond.

Dirty float

A system of floating exchange rates in which the government occasionally intervenes to change
the direction of the value of the country's currency.

Discount window

Facility provided by the Fed enabling member banks to borrow reserves against collateral
in the form of governments or other acceptable paper.

Economic assumptions

Economic environment in which the firm expects to reside over the life of the
financial plan.


Intermediate-term loans of Eurocurrencies made by banking syndicates to corporate and
government borrowers.

Event risk

The risk that the ability of an issuer to make interest and principal payments will change because
of rare, discontinuous, and very large, unanticipated changes in the market environment such as (1) a natural
or industrial accident or some regulatory change or (2) a takeover or corporate restructuring.

Exchange controls

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

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.

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.


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.

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.

Federal credit agencies

Agencies of the federal government set up to supply credit to various classes of
institutions and individuals, e.g. S&Ls, small business firms, students, farmers, and exporters.

Federally related institutions

Arms of the federal government that are exempt from SEC registration and
whose securities are backed by the full faith and credit of the U.S. government (with the exception of the
Tennessee Valley Authority).

Fiscal policy

The use of government spending and taxing for the specific purpose of stabilizing the economy.

Fixed-dollar security

A nonnegotiable debt security that can be redeemed at some fixed price or according to
some schedule of fixed values, e.g., bank deposits and government savings bonds.

Flight to quality

The tendency of investors to move towards safer, government bonds during periods of high
economic uncertainty.

Flower bond

Government bonds that are acceptable at par in payment of federal estate taxes when owned by
the decedent at the time of death.

Foreign bond market

That portion of the domestic bond market that represents issues floated by foreign
companies to governments.

Foreign exchange controls

Various forms of controls imposed by a government on the purchase/sale of
foreign currencies by residents or on the purchase/sale of local currency by nonresidents.

Free float

An exchange rate system characterized by the absence of government intervention. Also known as
clean float.

Fully modified pass-throughs

Agency pass-throughs that guarantee the timely payment of both interest and
principal. Related: modified pass-throughs
Functional currency As defined by FASB No. 52, an affiliate's functional currency is the currency of the
primary economic environment in which the affiliate generates and expends cash.


British and Irish government securities.

Ginnie Mae

See:Government National Mortgage Association.


Tendency toward a worldwide investment environment, and the integration of national capital

Growth rates

Compound annual growth rate for the number of full fiscal years shown. If there is a negative
or zero value for the first or last year, the growth is nm (not meaningful).

Industrial revenue bond (IRB)

Bond issued by local government agencies on behalf of corporations.

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.

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.

Market sectors

The classifications of bonds by issuer characteristics, such as state government, corporate, or utility.

MBS Depository

A book-entry depository for GnmA securities. The depository was initially operated by
MBSCC and is currently in the process of becoming a separately incorporated, participant-owned, limitedpurpose
trust company organized under the State of New York Banking Law.

Monetary gold

Gold held by governmental authorities as a financial asset.

Money market

Money markets are for borrowing and lending money for three years or less. The securities in
a money market can be U.S.government bonds, treasury bills and commercial paper from banks and

Money market fund

A mutual fund that invests only in short term securities, such as bankers' acceptances,
commercial paper, repurchase agreements and government bills. The net asset value per share is maintained at
$1. 00. Such funds are not federally insured, although the portfolio may consist of guaranteed securities
and/or the fund may have private insurance protection.

Multiple-issuer pools

Under the GnmA-II program, pools formed through the aggregation of individual
issuers' loan packages.

Municipal bond

State or local governments offer muni bonds or municipals, as they are called, to pay for
special projects such as highways or sewers. The interest that investors receive is exempt from some income taxes.


A government takeover of a private company.

Nonsystematic risk

Nonmarket or firm-specific risk factors that can be eliminated by diversification. Also
called unique risk or diversifiable risk. Systematic risk refers to risk factors common to the entire economy.

On the run

The most recently issued (and, therefore, typically the most liquid) government bond in a
particular maturity range.

Open book

See: unmatched book.

Open-market operation

Purchase or sale of government securities by the monetary authorities to increase or
decrease the domestic money supply.

Pecking-order view (of capital structure)

The argument that external financing transaction costs, especially
those associated with the problem of adverse selection, create a dynamic environment in which firms have a
preference, or pecking-order of preferred sources of financing, when all else is equal. Internally generated
funds are the most preferred, new debt is next, debt-equity hybrids are next, and new equity is the least
preferred source.

Perfect competition

An idealized market environment in which every market participant is too small to affect
the market price by acting on its own.

Perfect market view (of dividend policy)

Analysis of a decision on dividend policy, in a perfect capital
market environment, that shows the irrelevance of dividend policy in a perfect capital market.

Perfected first lien

A first lien that is duly recorded with the cognizant governmental body so that the lender
will be able to act on it should the borrower default.


ealers in government bonds normally give price quotes in 32nds. To quote a bid or offer in 64ths, they
use pluses; a dealer who bids 4+ is bidding the handle plus 4/32 + 1/64, which equals the handle plus 9/64.

Price compression

The limitation of the price appreciation potential for a callable bond in a declining interest
rate environment, based on the expectation that the bond will be redeemed at the call price.

Public Securities Administration (PSA)

The trade association for primary dealers in U.S. government
securities, including MBSs.

Refunded bond

Also called a prerefunded bond, one that originally may have been issued as a general
obligation or revenue bond but that is now secured by an "escrow fund" consisting entirely of direct U.S.
government obligations that are sufficient for paying the bondholders.

Reserve currency

A foreign currency held by a central bank or monetary authority for the purposes of
exchange intervention and the settlement of inter-governmental claims.

Riskless or risk-free asset

An asset whose future return is known today with certainty. The risk free asset is
commonly defined as short-term obligations of the U.S. government.


The process of creating a passthrough, such as the mortgage pass-through security, by which
the pooled assets become standard securities backed by those assets. Also, refers to the replacement of
nonmarketable loans and/or cash flows provided by financial intermediaries with negotiable securities issued
in the public capital markets.

Short book

See: unmatched book.

Sovereign risk

The risk that a central bank will impose foreign exchange regulations that will reduce or
negate the value of FX contracts. Also refers to the risk of government default on a loan made to it or
guaranteed by it.


All parties that have an interest, financial or otherwise, in a firm - stockholders, creditors,
bondholders, employees, customers, management, the community, and the government.

Swap sale

Also called a swap assignment, a transaction that ends one counterparty's role in an interest rate
swap by substituting a new counterparty whose credit is acceptable to the other original counterparty.

Tax-exempt sector

The municipal bond market where state and local governments raise funds. Bonds issued
in this sector are exempt from federal income taxes.

Top-down equity management style

A management style that begins with an assessment of the overall
economic environment and makes a general asset allocation decision regarding various sectors of the financial
markets and various industries. The bottom-up manager, in contrast, selects the specific securities within the
favored sectors.

U.S. Treasury bill

U.S. government debt with a maturity of less than a year.

U.S. Treasury bond

U.S. government debt with a maturity of more than 10 years.

U.S. Treasury note

U.S. government debt with a maturity of one to 10 years.

Workout period

Realignment period of a temporary misaligned yield relationship that sometimes occurs in
fixed income markets.

Lifecycle costing

An approach to costing that estimates and accumulates the costs of a product/service over
its entire lifecycle, i.e. from inception to abandonment.

Payroll tax expense

The amount of tax associated with salaries that an employer pays to governments (federal, state, and local).

Payroll taxes payable

The amount of payroll taxes owed to the various governments at the end of a period.

unit-driven expenses

Expenses that vary in close proportion to changes
in total sales volume (total quantities of sales). Examples of these types of
expenses are delivery costs, packaging costs, and other costs that depend
mainly on the number of products sold or the number of customers
served. These expenses are one of the key factors in a profit model for
decision-making analysis. Segregating these expenses from other types
of expenses that behave differently is essential for management decisionmaking
analysis. The cost-of-goods-sold expense depends on sales volume
and is a unit-driven expense. But product cost (i.e., the cost of
goods sold) is such a dominant expense that it is treated separately from
other unit-driven operating expenses.


the systematic assignment of an amount to a recipient
set of categories annuity a series of equal cash flows (either positive or negative) per period

backflush costing

a streamlined cost accounting method that speeds up, simplifies, and reduces accounting effort in an environment that minimizes inventory balances, requires
few allocations, uses standard costs, and has minimal variances
from standard

cost accounting

a discipline that focuses on techniques or
methods for determining the cost of a project, process, or
thing through direct measurement, arbitrary assignment, or
systematic and rational allocation

cost allocation

the assignment, using some reasonable basis,
of any indirect cost to one or more cost objects







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