Definition of Reclamation

Reclamation

A claim for the right to return or the right to demand the return of a security that has been
previously accepted as a result of bad delivery or other irregularities in the delivery and settlement process.

CARs (cumulative abnormal returns)

a measure used in academic finance articles to measure the excess returns an investor would have received over a particular time period if he or she were invested in a particular stock.
This is typically used in control and takeover studies, where stockholders are paid a premium for being taken over. Starting some time period before the takeover (often five days before the first announced bid, but sometimes a longer period), the researchers calculate the actual daily stock returns for the target firm and subtract out the expected market returns (usually calculated using the firm’s beta and applying it to overall market movements during the time period under observation).
The excess actual return over the capital asset pricing model-determined expected return market is called an ‘‘abnormal return.’’ The cumulation of the daily abnormal returns over the time period under observation is the CAR. The term CAR(-5, 0) means the CAR calculated from five days before the
announcement to the day of announcement. The CAR(-1, 0) is a control premium, although Mergerstat generally uses the stock price five days before announcement rather than one day before announcement as the denominator in its control premium calculation. However, the CAR for any period other than (-1, 0) is not mathematically equivalent to a control premium.

Abnormal returns

Part of the return that is not due to systematic influences (market wide influences). In
other words, abnormal returns are above those predicted by the market movement alone. Related: excess
returns.

After-tax real rate of return

Money after-tax rate of return minus the inflation rate.

Annualized holding period return

The annual rate of return that when compounded t times, would have
given the same t-period holding return as actually occurred from period 1 to period t.

Appraisal rights

A right of shareholders in a merger to demand the payment of a fair price for their shares, as
determined independently.

Arithmetic average (mean) rate of return

Arithmetic mean return.

Arithmetic mean return

An average of the subperiod returns, calculated by summing the subperiod returns
and dividing by he number of subperiods.

Asset-backed security

A security that is collateralized by loans, leases, receivables, or installment contracts
on personal property, not real estate.

Average accounting return

The average project earnings after taxes and depreciation divided by the average
book value of the investment during its life.

Average rate of return (ARR)

The ratio of the average cash inflow to the amount invested.

Bank for International Settlements (BIS)

An international bank headquartered in Basel, Switzerland, which
serves as a forum for monetary cooperation among several European central banks, the Bank of Japan, and the
U.S. Federal Reserve System. Founded in 1930 to handle the German payment of World War I reparations, it
now monitors and collects data on international banking activity and promulgates rules concerning
international bank regulation.

Bargain-purchase-price option

Gives the lessee the option to purchase the asset at a price below fair market
value when the lease expires.

Cash delivery

The provision of some futures contracts that requires not delivery of underlying assets but
settlement according to the cash value of the asset.

Cash settlement contracts

Futures contracts, such as stock index futures, that settle for cash, not involving
the delivery of the underlying.

Claim dilution

A reduction in the likelihood one or more of the firm's claimants will be fully repaid,
including time value of money considerations.

Claimant

A party to an explicit or implicit contract.

Closing purchase

A transaction in which the purchaser's intention is to reduce or eliminate a short position in
a stock, or in a given series of options.

Common stock/other equity

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

Contingent claim

A claim that can be made only if one or more specified outcomes occur.

Convertible security

A security that can be converted into common stock at the option of the security holder,
including convertible bonds and convertible preferred stock.

Corporate processing float

The time that elapses between receipt of payment from a customer and the
depositing of the customer's check in the firm's bank account; the time required to process customer
payments.

Cum rights

With rights.

Cumulative abnormal return (CAR)

Sum of the differences between the expected return on a stock and the
actual return that comes from the release of news to the market.

Delivery

The tender and receipt of an actual commodity or financial instrument in settlement of a futures contract.

Delivery notice

The written notice given by the seller of his intention to make delivery against an open, short
futures position on a particular date. Related: notice day

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.

Delivery points

Those points designated by futures exchanges at which the financial instrument or
commodity covered by a futures contract may be delivered in fulfillment of such contract.

Delivery price

The price fixed by the Clearing house at which deliveries on futures are in invoiced; also the
price at which the futures contract is settled when deliveries are made.

Delivery versus payment

A transaction in which the buyer's payment for securities is due at the time of
delivery (usually to a bank acting as agent for the buyer) upon receipt of the securities. The payment may be
made by bank wire, check, or direct credit to an account.

Demand deposits

Checking accounts that pay no interest and can be withdrawn upon demand.

Demand line of credit

A bank line of credit that enables a customer to borrow on a daily or on-demand basis.

Demand master notes

Short-term securities that are repayable immediately upon the holder's demand.

Demand shock

An event that affects the demand for goods in services in the economy.

Derivative security

A financial security, such as an option, or future, whose value is derived in part from the
value and characteristics of another security, the underlying security.

Diffusion process

A conception of the way a stock's price changes that assumes that the price takes on all
intermediate values. dirty price. Related: full price

Direct stock-purchase programs

The purchase by investors of securities directly from the issuer.

Disclaimer of opinion

An auditor's statement disclaiming any opinion regarding the company's financial
condition.

Dividend rights

A shareholders' rights to receive per-share dividends identical to those other shareholders receive.

Dollar return

The return realized on a portfolio for any evaluation period, including (1) the change in market
value of the portfolio and (2) any distributions made from the portfolio during that period.

Dollar-weighted rate of return

Also called the internal rate of return, the interest rate that will make the
present value of the cash flows from all the subperiods in the evaluation period plus the terminal market value
of the portfolio equal to the initial market value of the portfolio.

Equity claim

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

Ex post return

Related: Holding period return

Exante return

The expected return of a portfolio based on the expected returns of its component assets and
their weights.

Excess return on the market portfolio

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

Excess returns

Also called abnormal returns, returns in excess of those required by some asset pricing model.

Exchangeable Security

security that grants the security holder the right to exchange the security for the
common stock of a firm other than the issuer of the security.

Expected future return

The return that is expected to be earned on an asset in the future. Also called the
expected return.

Expected return

The return expected on a risky asset based on a probability distribution for the possible rates
of return. Expected return equals some risk free rate (generally the prevailing U.S. Treasury note or bond rate)
plus a risk premium (the difference between the historic market return, based upon a well diversified index
such as the S&P500 and historic U.S. Treasury bond) multiplied by the assets beta.

Expected return on investment

The return one can expect to earn on an investment. See: capital asset
pricing model.

Expected return-beta relationship

Implication of the CAPM that security risk premiums will be
proportional to beta.

Ex-rights

In connection with a rights offering, shares of stock that are trading without the rights attached.

Ex-rights date

The date on which a share of common stock begins trading ex-rights.

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.

Forward delivery

A transaction in which the settlement will occur on a specified date in the future at a price
agreed upon on the trade date.

Generally Accepted Accounting Principals (GAAP)

A technical accounting term that encompasses the
conventions, rules, and procedures necessary to define accepted accounting practice at a particular time.

Geometric mean return

Also called the time weighted rate of return, a measure of the compounded rate of
growth of the initial portfolio market value during the evaluation period, assuming that all cash distributions
are reinvested in the portfolio. It is computed by taking the geometric average of the portfolio subperiod
returns.

Good delivery

A delivery in which everything - endorsement, any necessary attached legal papers, etc. - is in
order.

Good delivery and settlement procedures

Refers to PSA Uniform Practices such as cutoff times on delivery
of securities and notification, allocation, and proper endorsement.

Growth phase

A phase of development in which a company experiences rapid earnings growth as it produces
new products and expands market share.

Hedging demands

demands for securities to hedge particular sources of consumption risk, beyond the usual
mean-variance diversification motivation.

Holding period return

The rate of return over a given period.

Horizon return

Total return over a given horizon.

Host security

The security to which a warrant is attached.

Hybrid security

A convertible security whose optioned common stock is trading in a middle range, causing
the convertible security to trade with the characteristics of both a fixed-income security and a common stock
instrument.

Immediate settlement

delivery and settlement of securities within five business days.

Incremental internal rate of return

IRR on the incremental investment from choosing a large project
instead of a smaller project.

Internal rate of return

Dollar-weighted rate of return. Discount rate at which net present value (NPV)
investment is zero. The rate at which a bond's future cash flows, discounted back to today, equals its price.

In-house processing float

Refers to the time it takes the receiver of a check to process the payment and
deposit it in a bank for collection.

Irrelevance result

The Modigliani and Miller theorem that a firm's capital structure is irrelevant to the firm's
value.

Leveraged required return

The required return on an investment when the investment is financed partially by debt.

Liquidation rights

The rights of a firm's securityholders in the event the firm liquidates.

Making delivery

Refers to the seller's actually turning over to the buyer the asset agreed upon in a forward contract.

Market return

The return on the market portfolio.

Marketed claims

claims that can be bought and sold in financial markets, such as those of stockholders and
bondholders.

Maturity phase

A phase of company development in which earnings continue to grow at the rate of the
general economy. Related: Three-phase DDM.

Minimum purchases

For mutual funds, the amount required to open a new account (Minimum Initial
Purchase) or to deposit into an existing account (Minimum Additional Purchase). These minimums may be
lowered for buyers participating in an automatic purchase plan

Money market demand account

An account that pays interest based on short-term interest rates.

Money purchase plan

A defined benefit contribution plan in which the participant contributes some part and
the firm contributes at the same or a different rate. Also called and individual account plan.

Money rate of return

Annual money return as a percentage of asset value.

Monthly income preferred security (MIP)

Preferred stock issued by a subsidiary located in a tax haven.
The subsidiary relends the money to the parent.

Mortgage pass-through security

Also called a passthrough, a security created when one or more mortgage
holders form a collection (pool) of mortgages sells shares or participation certificates in the pool. The cash
flow from the collateral pool is "passed through" to the security holder as monthly payments of principal,
interest, and prepayments. This is the predominant type of MBS traded in the secondary market.

Multiple rates of return

More than one rate of return from the same project that make the net present value
of the project equal to zero. This situation arises when the IRR method is used for a project in which negative
cash flows follow positive cash flows. For each sign change in the cash flows, there is a rate of return.

Nonmarketed claims

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

Open-market purchase operation

A systematic program of repurchasing shares of stock in market
transactions at current market prices, in competition with other prospective investors.

Opening purchase

A transaction in which the purchaser's intention is to create or increase a long position in
a given series of options.

Other capital

In the balance of payments, other capital is a residual category that groups all the capital
transactions that have not been included in direct investment, portfolio investment, and reserves categories. It
is divided into long-term capital and short-term capital and, because of its residual status, can differ from
country to country. Generally speaking, other long-term capital includes most non-negotiable instruments of a
year or more like bank loans and mortgages. other short-term capital includes financial assets of less than a
year such as currency, deposits, and bills.

Other current assets

Value of non-cash assets, including prepaid expenses and accounts receivable, due
within 1 year.

Other long term liabilities

Value of leases, future employee benefits, deferred taxes and other obligations
not requiring interest payments that must be paid over a period of more than 1 year.

Other sources

Amount of funds generated during the period from operations by sources other than
depreciation or deferred taxes. Part of Free cash flow calculation.

Outright rate

Actual forward rate expressed in dollars per currency unit, or vice versa.
Outsourcing
he practice of purchasing a significant percentage of intermediate components from outside suppliers.

Overnight delivery risk

A risk brought about because differences in time zones between settlement centers
require that payment or delivery on one side of a transaction be made without knowing until the next day
whether the funds have been received in an account on the other side. Particularly apparent where delivery
takes place in Europe for payment in dollars in New York.

Portfolio internal rate of return

The rate of return computed by first determining the cash flows for all the
bonds in the portfolio and then finding the interest rate that will make the present value of the cash flows
equal to the market value of the portfolio.

Precautionary demand (for money)

The need to meet unexpected or extraordinary contingencies with a
buffer stock of cash.

Preemptive right

Common stockholder's right to anything of value distributed by the company.

Price discovery process

The process of determining the prices of the assets in the marketplace through the
interactions of buyers and sellers.

Primitive security

An instrument such as a stock or bond for which payments depend only on the financial
status of the issuer.

Property rights

rights of individuals and companies to own and utilize property as they see fit and to receive
the stream of income that their property generates.

Purchase

To buy, to be long, to have an ownership position.

Purchase accounting

Method of accounting for a merger in which the acquirer is treated as having purchased
the assets and assumed liabilities of the acquiree, which are all written up or down to their respective fair
market values, the difference between the purchase price and the net assets acquired being attributed to goodwill.

Purchase agreement

As used in connection with project financing, an agreement to purchase a specific
amount of project output per period.

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