Definition of Settlement price

Settlement price

A figure determined by the closing range which is used to calculate gains and losses in
futures market accounts. settlement prices are used to determine gains, losses, margin calls, and invoice
prices for deliveries. Related: closing range.

Closing range

Also known as the range. The high and low prices, or bids and offers, recorded during the
period designated as the official close. Related: settlement price.

Pit

A specific area of the trading floor that is designed for the trading of commodities, individual futures, or
option contracts.
Pit committee
A committee of the exchange that determines the daily settlement price of futures contracts.

Wild card option

The right of the seller of a Treasury Bond futures contract to give notice of intent to deliver
at or before 8:00 p.m. Chicago time after the closing of the exchange (3:15 p.m. Chicago time) when the
futures settlement price has been fixed. Related: Timing option.

Arm's length price

The price at which a willing buyer and a willing unrelated seller would freely agree to
transact.

Ask price

A dealer's price to sell a security; also called the offer price.

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.

Basis price

price expressed in terms of yield to maturity or annual rate of return.

Bid price

This is the quoted bid, or the highest price an investor is willing to pay to buy a security. Practically
speaking, this is the available price at which an investor can sell shares of stock. Related: Ask , offer.

Call price

The price, specified at issuance, at which the issuer of a bond may retire part of the bond at a
specified call date.

Call price

The price for which a bond can be repaid before maturity under a call provision.

Cash settlement contracts

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

Clean price

Bond price excluding accrued interest.

Consumer Price Index (CPI)

The CPI, as it is called, measures the prices of consumer goods and services and is a
measure of the pace of U.S. inflation. The U.S.Department of Labor publishes the CPI very month.

Conversion parity price

Related:Market conversion price

Convertible price

The contractually specified price per share at which a convertible security can be
converted into shares of common stock.

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.

Devaluation A decrease in the spot price of the currency

Dirty price

Bond price including accrued interest, i.e., the price paid by the bond buyer.

Dollar price of a bond

Percentage of face value at which a bond is quoted.

Effective call price

The strike price in an optional redemption provision plus the accrued interest to the
redemption date.

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.

Exercise price

The price at which the underlying future or options contract may be bought or sold.

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 price

The equilibrium price for futures contracts. Also called the theoretical futures price, which equals
the spot price continuously compounded at the cost of carry rate for some time interval.

Fair price provision

See:appraisal rights.

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,
usually a premium to the current market price.

Flat price risk

Taking a position either long or short that does not involve spreading.

Flat price (also clean price)

The quoted newspaper price of a bond that does not include accrued interest.
The price paid by purchaser is the full price.

Full price

Also called dirty price, the price of a bond including accrued interest. Related: flat price.

Futures price

The price at which the parties to a futures contract agree to transact on the settlement date.

Good delivery and settlement procedures

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

High price

The highest (intraday) price of a stock over the past 52 weeks, adjusted for any stock splits.

Immediate settlement

Delivery and settlement of securities within five business days.

Invoice price

The price that the buyer of a futures contract must pay the seller when a Treasury Bond is delivered.

Law of one price

An economic rule stating that a given security must have the same price regardless of the
means by which one goes about creating that security. This implies that if the payoff of a security can be
synthetically created by a package of other securities, the price of the package and the price of the security
whose payoff it replicates must be equal.

Limit price

Maximum price fluctuation
Limitation on asset dispositions A bond covenant that restricts in some way a firm's ability to sell major
assets.

Low price

This is the day's lowest price of a security that has changed hands between a buyer and a seller.

Low price-earnings ratio effect

The tendency of portfolios of stocks with a low price-earnings ratio to
outperform portfolios consisting of stocks with a high price-earnings ratio.

Limit price

Maximum price fluctuation

Market conversion price

Also called conversion parity price, the price that an investor effectively pays for
common stock by purchasing a convertible security and then exercising the conversion option. This price is
equal to the market price of the convertible security divided by the conversion ratio.

Market price of risk

A measure of the extra return, or risk premium, that investors demand to bear risk. The
reward-to-risk ratio of the market portfolio.

Market prices

The amount of money that a willing buyer pays to acquire something from a willing seller,
when a buyer and seller are independent and when such an exchange is motivated by only commercial
consideration.

Marketplace price efficiency

The degree to which the prices of assets reflect the available marketplace
information. Marketplace price efficiency is sometimes estimated as the difficulty faced by active
management of earning a greater return than passive management would, after adjusting for the risk
associated with a strategy and the transactions costs associated with implementing a strategy.

Maximum price fluctuation

The maximum amount the contract price can change, up or down, during one
trading session, as fixed by exchange rules in the contract specification. Related: limit price.

Minimum price fluctuation

Smallest increment of price movement possible in trading a given contract. Also
called point or tick. The zero-beta portfolio with the least risk.

Nominal price

price quotations on futures for a period in which no actual trading took place.

Opening price

The range of prices at which the first bids and offers were made or first transactions were
completed.

Option price

Also called the option premium, the price paid by the buyer of the options contract for the right
to buy or sell a security at a specified price in the future.

Price/book ratio

Compares a stock's market value to the value of total assets less total liabilities (book
value). Determined by dividing current stock price by common stockholder equity per share (book value),
adjusted for stock splits. Also called Market-to-Book.

Price/earnings ratio (PE ratio)

Shows the "multiple" of earnings at which a stock sells. Determined by dividing current
stock price by current earnings per share (adjusted for stock splits). Earnings per share for the P/E ratio is
determined by dividing earnings for past 12 months by the number of common shares outstanding. Higher
"multiple" means investors have higher expectations for future growth, and have bid up the stock's price.

Price/sales ratio (PS Ratio)

Determined by dividing current stock price by revenue per share (adjusted for stock splits).
Revenue per share for the P/S ratio is determined by dividing revenue for past 12 months by number of shares
outstanding.

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.

Price discovery process

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

Price elasticities

The percentage change in the quantity divided by the percentage change in the price.

Price impact costs

Related: market impact costs

Price momentum

Related: Relative strength

Price persistence

Related: Relative strength

Price risk

The risk that the value of a security (or a portfolio) will decline in the future. Or, a type of
mortgage-pipeline risk created in the production segment when loan terms are set for the borrower in advance
of terms being set for secondary market sale. If the general level of rates rises during the production cycle, the
lender may have to sell his originated loans at a discount.

Price takers

Individuals who respond to rates and prices by acting as though they have no influence on them.

Priced out

The market has already incorporated information, such as a low dividend, into the price of a stock.

Price value of a basis point (PVBP)

Also called the dollar value of a basis point, a measure of the change in
the price of the bond if the required yield changes by one basis point.

Prices

price of a share of common stock on the date shown. Highs and lows are based on the highest and
lowest intraday trading price.

Price-specie-flow mechanism

Adjustment mechanism under the classical gold standard whereby
disturbances in the price level in one country would be wholly or partly offset by a countervailing flow of
specie (gold coins) that would act to equalize prices across countries and automatically bring international
payments back in balance.

Price-volume relationship

A relationship espoused by some technical analysts that signals continuing rises
and falls in security prices based on accompanying changes in volume traded.

Put price

The price at which the asset will be sold if a put option is exercised. Also called the strike or
exercise price of a put option.

Regular way settlement

In the money and bond markets, the regular basis on which some security trades are
settled is that the delivery of the securities purchased is made against payment in Fed funds on the day
following the transaction.

Reverse price risk

A type of mortgage-pipeline risk that occurs when a lender commits to sell loans to an
investor at rates prevailing at application but sets the note rates when the borrowers close. The lender is thus
exposed to the risk of falling rates.

Settlement

When payment is made for a trade.

Settlement date

The date on which payment is made to settle a trade. For stocks traded on US exchanges,
settlement is currently 3 business days after the trade. For mutual funds, settlement usually occurs in the
U.S.the day following the trade. In some regional markets, foreign shares may require months to settle.

Settlement rate

The rate suggested in Financial Accounting Standard Board (FASB) 87 for discounting the
obligations of a pension plan. The rate at which the pension benefits could be effectively settled off the
pension plan wished to terminate its pension obligation.

Skip-day settlement

The trade is settled one business day beyond what is normal.

Spot price

The current marketprice of the actual physical commodity. Also called cash price.

Stated conversion price

At the time of issuance of a convertible security, the price the issuer effectively
grants the security holder to purchase the common stock, equal to the par value of the convertible security
divided by the conversion ratio.

Strike price

The stated price per share for which underlying stock may be purchased (in the case of a call) or
sold (in the case of a put) by the option holder upon exercise of the option contract.

Structured settlement

An agreement in settlement of a lawsuit involving specific payments made over a
period of time. Property and casualty insurance companies often buy life insurance products to pay the costs
of such settlements.

Subscription price

price that the existing shareholders are allowed to pay for a share of stock in a rights offering.

Theoretical futures price

Also called the fair price, the equilibrium futures price.

Transfer price

The price at which one unit of a firm sells goods or services to another unit of the same firm.

Variable price security

A security, such as stocks or bonds, that sells at a fluctuating, market-determined price.

SPECIFIC INVOICE PRICES

An inventory valuation method in which a company values the items in its ending inventory based
on the specific invoices on which they were bought.

Optimum selling price

The price at which profit is maximized, which takes into account the cost behaviour of fixed and variable costs and the relationship between price and demand for a product/service.

Transfer price

The price at which goods or services are bought and sold within divisions of the same organization, as opposed to an arm’s-length price at which sales may be made to an external customer.

price/earnings ratio (price to earnings ratio, P/E ratio, PE ratio)

This key ratio equals the current market price
of a capital stock share divided by the earnings per share (EPS) for the
stock. The EPS used in this ratio may be the basic EPS for the stock or its
diluted EPS—you have to check to be sure about this. A low P/E may signal
an undervalued stock or may reflect a pessimistic forecast by
investors for the future earnings prospects of the business. A high P/E
may reveal an overvalued stock or reflect an optimistic forecast by
investors. The average P/E ratio for the stock market as a whole varies
considerably over time—from a low of about 8 to a high of about 30.
This is quite a range of variation, to say the least.

Price to Earnings Ratio (P/E, PE Ratio)

A measure of how much investors are willing to pay for each dollar
of a company's reported profits. It is calculated by dividing the
market price per share by the earnings per share.

material price variance

total actual cost of material purchased
minus (actual quantity of material  standard
price); it is the amount of money spent below (favorable)
or in excess (unfavorable) of the standard price for the
quantity of materials purchased; it can be calculated based
on the actual quantity of material purchased or the actual
quantity used

negotiated transfer price

an intracompany charge for goods
or services set through a process of negotiation between
the selling and purchasing unit managers

price fixing

a practice by which firms conspire to set a products
price at a specified level

transfer price

an internal charge established for the exchange
of goods or services between organizational units
of the same company

Exercise price

The price set for buying an asset (call) or selling an asset (put).
The strike price.

Purchase price

price actually paid for a security. Typically the purchase
price of a bond is not the same as the redemption value.

Rho - The rate of change in a derivative’s price relative to the underlying

security’s risk-free interest rate.

Settlement date

The date when money first changes hands; i.e., when a buyer
actually pays for a security. It need not coincide with the issue date.

Strike price

See Exercise price.

Materials price variance

The difference between the actual and budgeted cost to
acquire materials, multiplied by the total number of units purchased.

Selling price variance

The difference between the actual and budgeted selling price for
a product, multiplied by the actual number of units sold.

Transfer price

The price at which one part of a company sells a product or service to
another part of the same company.

law of one price

Theory that prices of goods in all countries should be equal when translated to a common currency.

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