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Definition of scattergraph
a graph that plots all known activity observations
Abrams’ model for calculating DLOM based on the interaction of discounts from four economic components.
The incremental costs of having an agent make decisions for a principal.
The discount rate that reflects only the business risks of a project and abstracts from the
Requirement that none of an order be executed unless all of it can be executed at the specified price.
Total costs, explicit and implicit.
An arrangement whereby a security issue is canceled if the underwriter is unable
Ratios that measure how effectively the firm is managing its assets.
The decision regarding how an institution's funds should be distributed among the
Any large principal payment due at maturity for a bond or loan with or without a a sinking
In the mortgage pipeline, the risk that prospective borrowers of loans committed to be
An option that gives the right to buy the underlying futures contract.
To exercise a call option.
A date before maturity, specified at issuance, when the issuer of a bond may retire part of the bond
Also called the broker loan rate , the interest rate that banks charge brokers to finance
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.
A feature of some callable bonds that establishes an initial period when the bonds may not be
An embedded option granting a bond issuer the right to buy back all or part of the issue prior
The combination of cash flow uncertainty and reinvestment risk introduced by a call provision.
A swaption in which the buyer has the right to enter into a swap as a fixed-rate payer. The
A financial security such as a bond with a call option attached to it, i.e., the issuer has the right to
decision allocation of invested funds between risk-free assets versus the risky portfolio.
costs that increase with increases in the level of investment in current assets.
Communication barrier between financiers (investment bankers) and traders. This barrier is
Continuous random variable
A random value that can take any fractional value within specified ranges, as
A short call option position in which the writer owns the number of shares of the underlying
Covered call writing strategy
A strategy that involves writing a call option on securities that the investor
A provision that prohibits the company from calling the bond before a certain date. During this
Discrete random variable
A random variable that can take only a certain specified set of discrete possible
Dynamic asset allocation
An asset allocation strategy in which the asset mix is mechanistically shifted in
Effective call price
The strike price in an optional redemption provision plus the accrued interest to the
A value determined within the context of a model.
The difference between the execution price of a security and the price that would have
A variable whose value is determined outside the model in which it is used. Also called
A type of mortgage pipeline risk that is generally created when the terms of the loan to be
Federally related institutions
Arms of the federal government that are exempt from SEC registration and
Financial distress costs
Legal and administrative costs of liquidation or reorganization. Also includes
With CMOs, the start of the cash flow cycle for the cash flow window.
Long-lived property owned by a firm that is used by a firm in the production of its income.
Fixed asset turnover ratio
The ratio of sales to fixed assets.
A cost that is fixed in total for a given period of time and for given production levels.
Annuity contracts in which the insurance company or issuing financial institution pays a
Fixed-charge coverage ratio
A measure of a firm's ability to meet its fixed-charge obligations: the ratio of
In the Euromarket the standard periods for which Euros are traded (1 month out to a year out) are
Conventional bonds for which the coupon rate is set as a fixed percentage of the par value.
A nonnegotiable debt security that can be redeemed at some fixed price or according to
A country's decision to tie the value of its currency to another country's currency, gold
Also called a busted convertible, a convertible security that is trading like a straight
Assets that pay a fixed-dollar amount, such as bonds and preferred stock.
The market for trading bonds and preferred stock.
Fixed price basis
An offering of securities at a fixed price.
Fixed-price tender offer
A one-time offer to purchase a stated number of shares at a stated fixed price,
A loan on which the rate paid by the borrower is fixed for the life of the loan.
In an interest rate swap the counterparty who pays a fixed rate, usually in exchange for a
costs, both implied and direct, associated with a transaction. Such costs include time, effort,
Generally Accepted Accounting Principals (GAAP)
A technical accounting term that encompasses the
Risk that arises when an issuer has policies concentrated within certain geographic areas,
A 1933 act in which Congress forbade commercial banks to own, underwrite, or deal in
The right of the homeowner to prepay, or call, the mortgage at any time.
Incremental costs and benefits
costs and benefits that would occur if a particular course of action were
Transaction costs that include the assessment of the investment merits of a financial asset.
The sale of an asset in exchange for a specified series of payments (the installments).
Internally efficient market
Operationally efficient market.
In the mortgage pipeline, risk that occurs when the originator commits loan terms to the
Irrational call option
The implied call imbedded in the MBS. Identified as irrational because the call is
John Lintner's work (1956) suggested that dividend policy is related to a target level of
A demand for additional funds because of adverse price movement. Maintenance margin
Market impact costs
Also called price impact costs, the result of a bid/ask spread and a dealer's price concession.
Market timing costs
costs that arise from price movement of the stock during the time of the transaction
Mutually exclusive investment decisions
Investment decisions in which the acceptance of a project
Non-parallel shift in the yield curve
A shift in the yield curve in which yields do not change by the same
Normal random variable
A random variable that has a normal probability distribution.
Operationally efficient market
Also called an internally efficient market, one in which investors can obtain
The difference in the performance of an actual investment and a desired investment
A process whereby two companies in different countries borrow each other's currency for a
Parallel shift in the yield curve
A shift in the yield curve in which the change in the yield on all maturities is
Policy asset allocation
A long-term asset allocation method, in which the investor seeks to assess an
Price impact costs
Related: market impact costs
Provisional call feature
A feature in a convertible issue that allows the issuer to call the issue during the noncall
Put-call parity relationship
The relationship between the price of a put and the price of a call on the same
An upward movement of prices. Opposite of reaction.
A function that assigns a real number to each and every possible outcome of a random experiment.
Round-trip transactions costs
costs of completing a transaction, including commissions, market impact
costs associated with locating a counterparty to a trade, including explicit costs (such as
The risk of falling short of any investment target.
The tendency of small firms (in terms of total market capitalization) to outperform the
Small issues exemption
Securities issues that involve less than $1.5 million are not required to file a
costs that have been incurred and cannot be reversed.
Tactical Asset Allocation (TAA)
An asset allocation strategy that allows active departures from the normal
costs of buying and selling marketable securities and borrowing. Trading costs include
The time, effort, and money necessary, including such things as commission fees and the
A short call option position in which the writer does not own shares of underlying stock
A value determined within the context of a model. Also called endogenous variable.
Annuity contracts in which the issuer pays a periodic amount linked to the investment
A cost that is directly proportional to the volume of output produced. When production is zero,
Variable life insurance policy
A whole life insurance policy that provides a death benefit dependent on the
Variable price security
A security, such as stocks or bonds, that sells at a fluctuating, market-determined price.
Variable rate CDs
Short-term certificate of deposits that pay interest periodically on roll dates. On each roll
Variable rated demand bond (VRDB)
Floating rate bond that can be sold back periodically to the issuer.
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