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Definition of Tax-timing option
The option to sell an asset and claim a loss for tax purposes or not to sell the asset and
The option of terminating an investment earlier than originally planned.
The ratio of net income to net sales.
Money after-tax rate of return minus the inflation rate.
An option that may be exercised at any time up to and including the expiration date.
An option that can be exercised any time until its
An option contract that can be exercised at any time between the date of purchase and
Yield curve option-pricing models.
option based on the average price of the asset during the life of the option.
A situation wherein participants in a transaction have different net tax rates.
taxes as a fraction of income; total taxes divided by total taxable income.
Total taxes owed divided by total income.
Gives the lessee the option to purchase the asset at a price below fair market
Contracts with trigger points that, when crossed, automatically generate buying or selling of
Packages that involve the exchange of more than two currencies against a base currency at
The ratio of net income before taxes to net sales.
Binomial option pricing model
An option pricing model in which the underlying asset can take on only two
Black-Scholes option-pricing model
A model for pricing call options based on arbitrage arguments that uses
Break-even tax rate
The tax rate at which a party to a prospective transaction is indifferent between entering
cafeteria plan a “menu” of fringe benefit options that include
cash or nontaxable benefits
Call an option
To exercise a call option.
An option contract that gives its holder the right (but not the obligation) to purchase a specified
A contract that gives the holder the right to buy an asset for a
Right to buy an asset at a specified exercise price on or before the exercise date.
Cash flow after interest and taxes
Net income plus depreciation.
option on an option.
Corporate tax view
The argument that double (corporate and individual) taxation of equity returns makes
Corporate taxable equivalent
Rate of return required on a par bond to produce the same after-tax yield to
Covered or hedge option strategies
Strategies that involve a position in an option as well as a position in the
An option to buy or sell a foreign currency.
Current Income Tax Expense
That portion of the total income tax provision that is based on
Current Tax Payment Act of 1943
A federal Act requiring employers to withhold income taxes from employee pay.
Over-the-counter options, such as those offered by government and mortgage-backed
Deferred Income Tax Expense
That portion of the total income tax provision that is the result
Deferred Tax Asset
Future tax benefit that results from (1) the origination of a temporary difference
Deferred Tax Liability
Future tax obligation that results from the origination of a temporary
A non-cash expense that provides a source of free cash flow. Amount allocated during the
The options available to the seller of an interest rate futures contract, including the quality
Depreciation tax shield
The value of the tax write-off on depreciation of plant and equipment.
depreciation tax shield
Reduction in taxes attributable to the depreciation allowance.
Agreement between two countries that taxes paid abroad can be offset against
A sinking fund provision that may allow repurchase of twice the required number of bonds
Barrier option that comes into existence if asset price hits a barrier.
Barrier option that expires if asset price hits a barrier.
earnings before interest and income tax (EBIT)
A measure of profit that
Earnings before interest and taxes (EBIT)
A financial measure defined as revenues less cost of goods sold
Earnings before interest and taxes (EBIT)
The operating profit before deducting interest and tax.
Earnings before interest, taxes, depreciation and amortization (EBITDA)
The operating profit before deducting interest, tax, depreciation and amortization.
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
An earningsbased measure that, for many, serves as a surrogate for cash flow. Actually consists of working
EBDDT - Earnings before depreciation and deferred taxes
This measure is used principally by
Effective Tax Rate
The total tax provision divided by pretax book income from continuing
Elasticity of an option
Percentage change in the value of an option given a 1% change in the value of the
Electronic Federal Tax Payment Systems (EFTPS)
An electronic funds transfer system used by businesses to remit taxes to the government.
An option that is part of the structure of a bond that provides either the bondholder or
Securities that give the holder the right to buy or sell a specified number of shares of stock, at
Equivalent taxable yield
The yield that must be offered on a taxable bond issue to give the same after-tax
Escalating Price Option
A nonqualified stock option that uses a sliding scale for
option that may be exercised only at the expiration date. Related: american option.
An option that can be exercised only on its expiration date.
An option contract that can only be exercised on the expiration date.
Exercising the option
The act buying or selling the underlying asset via the option contract.
A variety of options available to an investor to recover their invested capital and the return on their investment.
Federal Unemployment Tax Act (FUTA)
A federal Act requiring employers to pay a tax on the wages paid to their employees, which is then used to create a
Foreign currency option
An option that conveys the right to buy or sell a specified amount of foreign
Foreign tax credit
Home country credit against domestic income tax for foreign taxes paid on foreign
An option on a futures contract. Related: options on physicals.
Garmen-Kohlhagen option pricing model
A widely used model for pricing foreign currency options.
option that allows the underwriter for a new issue to buy and resell additional shares.
Heavenly Parachute Stock Option
A nonqualified stock option that allows a deceased option holder’s estate up to three years in which to exercise his or her
Imputation tax system
Arrangement by which investors who receive a dividend also receive a tax credit for
Incentive Stock Option
An option to purchase company stock that is not taxable
What the business paid to the IRS.
A government tax on the income earned by an individual or corporation.
Income Tax Expense
See income tax provision.
Income Tax Provision
The expense deduction from pretax book income reported on the
Index and Option Market (IOM)
A division of the CME established in 1982 for trading stock index
A call or put option based on a stock market index.
taxes paid by consumers when they buy goods and services. A sales tax is an example.
The loss in purchasing power due to inflation eroding the real value of financial assets such as cash.
Interest equalization tax
tax on foreign investment by residents of the U.S. which was abolished in 1974.
One of several investment accounts in which your premiums may be invested within your life insurance policy.
Interest tax shield
The reduction in income taxes that results from the tax-deductibility of interest payments.
interest tax shield
tax savings resulting from deductibility of interest payments.
Intrinsic value of an option
The amount by which an option is in-the-money. An option which is not in-themoney
Investment tax credit
Proportion of new capital investment that can be used to reduce a company's tax bill
Investment Tax Credit
A reduction in taxes offered to firms to induce them to increase investment spending.
Irrational call option
The implied call imbedded in the MBS. Identified as irrational because the call is
Limited-tax general obligation bond
A general obligation bond that is limited as to revenue sources.
Liquid yield option note (LYON)
Zero-coupon, callable, putable, convertible bond invented by Merrill
Liquid yield option note (LYON)
Zero-coupon, callable, putable, convertible bond invented by Merrill Lynch & Co.
An option that allows the buyer to choose as the option strike price any price of the
Margin requirement (Options)
The amount of cash an uncovered (naked) option writer is required to
Margin Tax Rate
The tax rate applicable to the last unit of income.
Marginal tax rate
The tax rate that would have to be paid on any additional dollars of taxable income earned.
marginal tax rate
Additional taxes owed per dollar of additional income.
Marginal Tax Rate
Percent of an increase in income paid in tax.
Asset allocation in which the investment in the market is increased if one forecasts that the
Market timing costs
Costs that arise from price movement of the stock during the time of the transaction
Multi-option financing facility
A syndicated confirmed credit line with attached options.
Naked option strategies
An unhedged strategy making exclusive use of one of the following: Long call
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