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Definition of OTC

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OTC

See: over-the-counter.



Related Terms:

Over-the-counter market (OTC)

A decentralized market (as opposed to an exchange market) where
geographically dispersed dealers are linked together by telephones and computer screens. The market is for
securities not listed on a stock or bond exchange. The NASDAQ market is an otc market for U.S. stocks.


over-the-counter (OTC)

Shares traded off an organized exchange.
Also used to refer to the Nasdaq market.


NASDAQ

National Association of Securities Dealers Automatic Quotation System. An electronic quotation
system that provides price quotations to market participants about the more actively traded common stock
issues in the otc market. About 4,000 common stock issues are included in the NASDAQ system.


Specialist

On an exchange, the member firm that is designated as the market maker (or dealer for a listed
common stock). Only one specialist can be designated for a given stock, but dealers may be specialists for
several stocks. In contrast, there can be multiple market makers in the otc market.


Third market

Exchange-listed securities trading in the otc market.



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.


Accelerated cost recovery system (ACRS)

Schedule of depreciation rates allowed for tax purposes.


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Accounts receivable turnover

The ratio of net credit sales to average accounts receivable, a measure of how
quickly customers pay their bills.


accounts receivable turnover ratio

A ratio computed by dividing annual
sales revenue by the year-end balance of accounts receivable. Technically
speaking, to calculate this ratio the amount of annual credit sales should
be divided by the average accounts receivable balance, but this information
is not readily available from external financial statements. For
reporting internally to managers, this ratio should be refined and finetuned
to be as accurate as possible.


applied overhead

the amount of overhead that has been assigned to Work in Process Inventory as a result of productive activity; credits for this amount are to an overhead account


Asset Coverage

Extent to which a company's net assets cover a particular debt obligation, class of preferred stock, or equity position.


Asset-coverage test

A bond indenture restriction that permits additional borrowing on if the ratio of assets to
debt does not fall below a specified minimum.


Asset turnover

The ratio of net sales to total assets.


asset turnover

a ratio measuring asset productivity and showing the number of sales dollars generated by each dollar of assets


asset turnover ratio

A broad-gauge ratio computed by dividing annual
sales revenue by total assets. It is a rough measure of the sales-generating
power of assets. The idea is that assets are used to make sales, and the
sales should lead to profit. The ultimate test is not sales revenue on
assets, but the profit earned on assets as measured by the return on
assets (ROA) ratio.


Auction markets

markets in which the prevailing price is determined through the free interaction of
prospective buyers and sellers, as on the floor of the stock exchange.


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Bank overdraft

Money owed to the bank in a cheque account where payments exceed receipts.


Bear market

Any market in which prices are in a declining trend.



bear market

A market in which stock or bond prices are generally
falling.


Bear Market

A prolonged period of falling stock market prices.


Black market

An illegal market.


Brokered market

A market where an intermediary offers search services to buyers and sellers.


Bull market

Any market in which prices are in an upward trend.


bull market

A market in which stock or bond prices are generally rising.


Bull Market

A prolonged period of rising stock market prices.


Bulldog market

The foreign market in the United Kingdom.


Capital market

The market for trading long-term debt instruments (those that mature in more than one year).


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Capital market

The market in which investors buy and sell shares of companies, normally associated with a Stock Exchange.



Capital Market

A market that specializes in trading long-term, relatively high risk
securities


Capital Market

The market in which savings are made available to those needing funds to undertake investment projects. A financial market in which longer-term (maturity greater than one year) bonds and stocks are traded.


Capital market efficiency

Reflects the relative amount of wealth wasted in making transactions. An efficient
capital market allows the transfer of assets with little wealth loss. See: efficient market hypothesis.


Capital market imperfections view

The view that issuing debt is generally valuable but that the firm's
optimal choice of capital structure is a dynamic process that involves the other views of capital structure (net
corporate/personal tax, agency cost, bankruptcy cost, and pecking order), which result from considerations of
asymmetric information, asymmetric taxes, and transaction costs.


Capital market line (CML)

The line defined by every combination of the risk-free asset and the market portfolio.


capital markets

markets for long-term financing.


capital recovery

Refers to recouping, or regaining, invested capital over
the life of an investment. The pattern of period-by-period capital recovery
is very important. In brief, capital recovery is the return of capital—
not the return on capital, which refers to the rate of earnings on the
amount of capital invested during the period. The returns from an
investment have to be sufficient to provide for both recovery of capital
and an adequate rate of earnings on unrecovered capital period by
period. Sorting out how much capital is recovered each period is relatively
easy if you use a spreadsheet model for capital investment analysis.
In contrast, using a mathematical method of analysis does not
provide this period-by-period capital recovery information, which is a
major disadvantage.


Cash flow coverage ratio

The number of times that financial obligations (for interest, principal payments,
preferred stock dividends, and rental payments) are covered by earnings before interest, taxes, rental
payments, and depreciation.


Cash markets

Also called spot markets, these are markets that involve the immediate delivery of a security
or instrument.
Related: derivative markets.


Cash Turnover

The number of cash cycles completed in one year.


Common market

An agreement between two or more countries that permits the free movement of capital
and labor as well as goods and services.


Common stock market

The market for trading equities, not including preferred stock.


Complete capital market

A market in which there is a distinct marketable security for each and every
possible outcome.


Corner A Market

To purchase enough of the available supply of a commodity or stock in order to
manipulate its price.


Counter trade

The exchange of goods for other goods rather than for cash; barter.


Countercyclical

Falling during expansions and rising during recessions. A countercyclical policy stimulates during a recession and contracts during an expansion.


Counterpart items

In the balance of payments, counterpart items are analogous to unrequited transfers in the
current account. They arise because the double-entry system in balance of payments accounting and refer to
adjustments in reserves owing to monetization or demonetization of gold, allocation or cancellation of SDRs,
and revaluation of the various components of total reserves.


Counterparties

The parties to an interest rate swap.


Counterparty Party

on the other side of a trade or transaction.


Counterparty risk

The risk that the other party to an agreement will default. In an options contract, the risk
to the option buyer that the option writer will not buy or sell the underlying as agreed.
Country economic risk Developments in a national economy that can affect the outcome of an international
financial transaction.


Cover

The purchase of a contract to offset a previously established short position.


Coverage ratios

Ratios used to test the adequacy of cash flows generated through earnings for purposes of
meeting debt and lease obligations, including the interest coverage ratio and the fixed charge coverage ratio.


Coverdell Education IRA

A form of individual retirement account whose earnings
during the period when funds are stored in the IRA will be tax free at the
time when they are used to pay for the cost of advanced education.


Covered call

A short call option position in which the writer owns the number of shares of the underlying
stock represented by the option contracts. Covered calls generally limit the risk the writer takes because the
stock does not have to be bought at the market price, if the holder of that option decides to exercise it.


Covered call writing strategy

A strategy that involves writing a call option on securities that the investor
owns in his or her portfolio. See covered or hedge option strategies.


Covered interest arbitrage

A portfolio manager invests dollars in an instrument denominated in a foreign
currency and hedges his resulting foreign exchange risk by selling the proceeds of the investment forward for
dollars.


Covered or hedge option strategies

Strategies that involve a position in an option as well as a position in the
underlying stock, designed so that one position will help offset any unfavorable price movement in the other,
including covered call writing and protective put buying. Related: naked strategies


Covered Put

A put option position in which the option writer also is short the corresponding stock or has
deposited, in a cash account, cash or cash equivalents equal to the exercise of the option. This limits the
option writer's risk because money or stock is already set aside. In the event that the holder of the put option
decides to exercise the option, the writer's risk is more limited than it would be on an uncovered or naked put
option.


Crossover rate

The return at which two alternative projects have the same net present value.


Dealer market

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


Debt market

The market for trading debt instruments.


Debt-service coverage ratio

Earnings before interest and income taxes plus one-third rental charges, divided
by interest expense plus one-third rental charges plus the quantity of principal repayments divided by one
minus the tax rate.


Derivative markets

markets for derivative instruments.


Direct search market

Buyers and sellers seek each other directly and transact directly.


DLOM (discount for lack of marketability)

an amount or percentage deducted from an equity interest to reflect lack of marketability.


Doctrine of sovereign immunity

Doctrine that says a nation may not be tried in the courts of another country
without its consent.


Domestic market

Part of a nation's internal market representing the mechanisms for issuing and trading
securities of entities domiciled within that nation. Compare external market and foreign market.


Efficient capital market

A market in which new information is very quickly reflected accurately in share
prices.


efficient capital markets

Financial markets in which security prices rapidly reflect all relevant information about asset values.


Efficient Market Hypothesis

In general the hypothesis states that all relevant information is fully and
immediately reflected in a security's market price thereby assuming that an investor will obtain an equilibrium
rate of return. In other words, an investor should not expect to earn an abnormal return (above the market
return) through either technical analysis or fundamental analysis. Three forms of efficient market hypothesis
exist: weak form (stock prices reflect all information of past prices), semi-strong form (stock prices reflect all
publicly available information) and strong form (stock prices reflect all relevant information including insider
information).


Efficient Markets Hypothesis

The hypothesis that securities are typically in equilibrium--that they are fairly priced in the sense that the price reflects all publicly available information on the security.


Either-way market

In the interbank Eurodollar deposit market, an either-way market is one in which the bid
and offered rates are identical.


Emerging markets

The financial markets of developing economies.


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.


Equity market

Related:Stock market


Eurocurrency market

The money market for borrowing and lending currencies that are held in the form of
deposits in banks located outside the countries of the currencies issued as legal tender.


Excess return on the market portfolio

The difference between the return on the market portfolio and the
riskless rate.


External market

Also referred to as the international market, the offshore market, or, more popularly, the
Euromarket, the mechanism for trading securities that (1) at issuance are offered simultaneously to investors
in a number of countries and (2) are issued outside the jurisdiction of any single country. Related: internal
market


Factory overhead

All the costs incurred during the manufacturing process, minus the
costs of direct labor and materials.


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 market value

The price that an asset or service will fetch on the open market.


Fair Market Value

The highest price available, expressed in terms of cash, in an open and unrestricted market between informed, prudent parties acting at arm's length and under no compulsion to transact.


Farm Improvement and Marketing Cooperatives Loans Act

See here


Federal funds market

The market where banks can borrow or lend reserves, allowing banks temporarily
short of their required reserves to borrow reserves from banks that have excess reserves.


Federal Open Market Committee (FOMC)

Fed committee that makes decisions about open-market operations.


Financial market

An organized institutional structure or mechanism for creating and exchanging financial assets.


financial markets

markets in which financial assets are traded.


First To Die Coverage

This means that there are two or more life insured on the same policy but the death benefit is paid out on the first death only. If two or more persons at the same address are purchasing life insurance at the same time, it is wise to compare the cost of this kind of coverage with individual policies having a multiple policy discount.


Fixed asset turnover ratio

The ratio of sales to fixed assets.


Fixed Assets Turnover Ratio

A measure of the utilization of a company's fixed assets to
generate sales. It is calculated by dividing the sales for the period
by the book value of the net fixed assets.


Fixed-charge coverage ratio

A measure of a firm's ability to meet its fixed-charge obligations: the ratio of
(net earnings before taxes plus interest charges paid plus long-term lease payments) to (interest charges paid
plus long-term lease payments).


Fixed Charge Coverage Ratio

A measure of how well a company is able to meet its fixed
charges (interest and lease payments) based on the cash
generated by its operations. It is calculated by dividing the
earnings before interest and taxes by the total interest charges
and lease payments incurred by the firm.


Fixed-income market

The market for trading bonds and preferred stock.


Fixed overhead

That portion of total overhead costs which remains constant in size
irrespective of changes in activity within a certain range.


fixed overhead spending variance

the difference between the total actual fixed overhead and budgeted fixed overhead;
it is computed as part of the four-variance overhead analysis


fixed overhead volume variance

see volume variance


Foreign banking market

That portion of domestic bank loans supplied to foreigners for use abroad.


Foreign bond market

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


Foreign equity market

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


Foreign Exchange Market

A worldwide market in which one country's currency is bought or sold in exchange for another country's currency.


Foreign market

Part of a nation's internal market, representing the mechanisms for issuing and trading
securities of entities domiciled outside that nation. Compare external market and domestic market.


Foreign market beta

A measure of foreign market risk that is derived from the capital asset pricing model.


Forward cover

Purchase or sale of forward foreign currency in order to offset a known future cash flow.


Forward Exchange Market

A market in which foreign exchange can be bought or sold for delivery (and payment) at some specified future date but at a price agreed upon now.


Forward market

A market in which participants agree to trade some commodity, security, or foreign
exchange at a fixed price for future delivery.


Fourth market

Direct trading in exchange-listed securities between investors without the use of a broker.


Futures market

A market in which contracts for future delivery of a commodity or a security are bought or sold.



 

 

 

 

 

 

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