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Variable price security

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Definition of Variable price security

Variable Price Security Image 1

Variable price security

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



Related Terms:

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.


Asset-backed security

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


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.


Variable Price Security Image 2

Call price

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


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.


Continuous random variable

A random value that can take any fractional value within specified ranges, as
contrasted with a discrete variable.


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.


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.


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.


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.


Variable Price Security Image 3

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.



Discrete random variable

A random variable that can take only a certain specified set of discrete possible
values - for example, the positive integers 1, 2, 3, . . .


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.


Endogenous variable

A value determined within the context of a model.


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.


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.


Exercise price

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


Exogenous variable

A variable whose value is determined outside the model in which it is used. Also called
a parameter.


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-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.


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.


High price

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


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.


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.


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.


Nominal price

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


Normal random variable

A random variable that has a normal probability distribution.


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.


Primitive security

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


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.


Random variable

A function that assigns a real number to each and every possible outcome of a random experiment.


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.


Security

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
the excess return on the market.


Security deposit (initial)

Synonymous with the term margin. A cash amount of funds that must be deposited
with the broker for each contract as a guarantee of fulfillment of the futures contract. It is not considered as
part payment or purchase. Related: margin


Security deposit (maintenance)

Related: Maintenance margin security market line (SML). A description of
the risk return relationship for individual securities, expressed in a form similar to the capital market line.


Security market line

Line representing the relationship between expected return and market risk.
security market plane A plane that shows the equilibrium between expected return and the beta coefficient
of more than one factor.
security selection
See: security selection decision.


Security selection decision

Choosing the particular securities to include in a portfolio.


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.


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.


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.


Underlying security

Options: the security subject to being purchased or sold upon exercise of an option
contract. For example, IBM stock is the underlying security to IBM options. Depository receipts: The class,
series and number of the foreign shares represented by the depository receipt.


Variable

A value determined within the context of a model. Also called endogenous variable.


Variable annuities

Annuity contracts in which the issuer pays a periodic amount linked to the investment
performance of an underlying portfolio.


Variable cost

A cost that is directly proportional to the volume of output produced. When production is zero,
the variable cost is equal to zero.


Variable life insurance policy

A whole life insurance policy that provides a death benefit dependent on the
insured's portfolio market value at the time of death. Typically the company invests premiums in common
stocks, and hence variable life policies are referred to as equity-linked policies.


Variable rate CDs

Short-term certificate of deposits that pay interest periodically on roll dates. On each roll
date, the coupon on the CD is adjusted to reflect current market rates.


Variable rated demand bond (VRDB)

Floating rate bond that can be sold back periodically to the issuer.


Variable rate loan

Loan made at an interest rate that fluctuates based on a base interest rate such as the
Prime Rate or LIBOR.


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.



 

 

 

 

 

 

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