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Definition of Underlying security
Options: the security subject to being purchased or sold upon exercise of an option
The receipt of an exercise notice by an options writer that requires the writer to sell (in the case
An option is at-the-money if the strike price of the option is equal to the market price of the
A financial security, such as an option, or future, whose value is derived in part from the
An option that is part of the structure of a bond that provides either the bondholder or
To implement the right of the holder of an option to buy (in the case of a call) or sell (in the case of
An unhedged strategy making exclusive use of one of the following: Long call
The percentage increase in an option's value given a 1% change in the value of the
A call option is out-of-the-money if the strike price is greater than the market price
A strategy that involves buying a put option on the underlying security that is
The relationship between the price of a put and the price of a call on the same
An instrument with a value that is derived from the value of the
The rate of change of the price of a derivative security relative to the
The percentage change in the price of an option relative to a 1%
The rate of change in the price of a derivative security relative to the
A security that is collateralized by loans, leases, receivables, or installment contracts
A security that can be converted into common stock at the option of the security holder,
security that grants the security holder the right to exchange the security for the
A nonnegotiable debt security that can be redeemed at some fixed price or according to
The security to which a warrant is attached.
A convertible security whose optioned common stock is trading in a middle range, causing
Monthly income preferred security (MIP)
Preferred stock issued by a subsidiary located in a tax haven.
Mortgage pass-through security
Also called a passthrough, a security created when one or more mortgage
An instrument such as a stock or bond for which payments depend only on the financial
Piece of paper that proves ownership of stocks, bonds and other investments.
Security characteristic line
A plot of the excess return on a security over the risk-free rate as a function of
Security deposit (initial)
Synonymous with the term margin. A cash amount of funds that must be deposited
Security deposit (maintenance)
Related: Maintenance margin security market line (SML). A description of
Security market line
Line representing the relationship between expected return and market risk.
Security selection decision
Choosing the particular securities to include in a portfolio.
The asset that an option gives the option holder the right to buy or to sell.
Variable price security
A security, such as stocks or bonds, that sells at a fluctuating, market-determined price.
Security Market Line
A graph illustrating the equilibrium relationship between the
A security that pays a specified cash flow over a
Rho - The rate of change in a derivative’s price relative to the underlying
security’s risk-free interest rate.
An easily traded investment, such as treasury bills, which is
Either the collateral on a loan, or some type of equity ownership or debt, such
security paying dividends or interest that vary with short-term interest rates.
security market line
Relationship between expected return and beta.
Employee Retirement Income Security Act of 1974 (ERISA)
A federal Act that sets minimum operational and funding standards for employee benefit
Social Security Act of 1935
A federal Act establishing Old Age and Survivor’s
A debt or equity security not classified as a held-to-maturity security or a trading security. Can be classified as a current or noncurrent investment depending on the intended holding period.
A security representing a debt relationship with an enterprise, including a government
An ownership interest in an enterprise, including preferred and common stock.
A debt security for which the investing entity has both the positive
A debt or equity security for which there is no posted price or bidand-
A share or an interest in a property or an enterprise such as a stock certificate or a bond.
A debt or equity security bought and held for sale in the near term to generate income on short-term price changes.
Earnings after removing the effects of nonrecurring or nonoperating items.
Collateral offered by a borrower to a lender to secure a loan.
The monetary value placed on security by a lender in determining the extent to which it can make loans against such security.
Collateralized mortgage obligation (CMO)
A security backed by a pool of pass-throughs , structured so that
Principal only (PO)
A mortgage-backed security in which the holder receives only principal cash flows on
A security entitling the holder to buy a proportionate amount of stock at some specified future date
The rate of change of delta for a derivative security relative to the
A strategy used in trading options or futures. It involves
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