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Term or Acronym Description Source
10-K WrapA summary report of a company's annual performance that bundles the 10-K report required by the Securities and Exchange Commission (SEC) with additional commentary from the company, covering such things as the corporate vision, letter to shareholders and business overview among other topics. The 10-K wrap is often released instead of a traditional annual report and generally contains fewer images and comments from management.Investopedia ©
10-Year Treasury NoteA debt obligation issued by the United States government that matures in 10 years. A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturity. An advantage of investing in 10-year Treasury notes, and other federal government securities, is that the interest payments are exempt from state and local income tax. However, they are still taxable at the federal level. The U.S. Treasury also sells notes with two, three, five and seven-year terms. All of these notes, along with Treasury bills and bonds, can be purchased directly from the U.S. government through the TreasuryDirect website via competitive or noncompetitive bidding with a minimum purchase of $100 and in $100 increments. They can also be purchased indirectly through a bank or broker. Investors can choose to hold Treasury notes until maturity or sell early. There is no minimum ownership term.Investopedia ©
1913 Federal Reserve ActThe 1913 U.S. legislation that created the current Federal Reserve System. The Federal Reserve Act intended to establish a form of economic stability through the introduction of the Central Bank, which would be in charge of monetary policy, into the United States. The Federal Reserve Act is perhaps one of the most influential laws concerning the U.S. financial system. Prior to 1913, panics were common occurrences, as investors were unsure about the safety of their deposits. The Federal Reserve Act gave the 12 Federal Reserve banks the ability to print money in order to ensure economic stability. In addition to this task, the Fed had the power to adjust the discount rate/the fed funds rate and buy & sell U.S. treasuries.Investopedia ©
2% RuleA trading practice where an investor should or concentrate more than 2% of available capital on a single trade. To follow the 2% rule an investor first calculates 2% of the available trading capital, called the capital at risk. Brokerage fees for buying and selling shares are then factored into the capital at risk, and this figure is divided by the current share price. The resulting figure is the total amount of shares that can be purchased. If market conditions change and result in the trader losing the total value of that trade the downside exposure is only 2%, since the value of the original trade was limited to 2% of the total amount of trading capital available.Investopedia ©
2011 U.S. Debt Ceiling CrisisA contentious July 2011 debate regarding the maximum amount of borrowing that the United States government should be allowed to undertake. A debt ceiling has been in place since 1917, but the government raises it whenever it comes close to hitting it. Hitting the debt ceiling would mean defaulting on interest payments to creditors. The consequences of such a default could include late, partial or missed payments to federal pensioners, Social Security and Medicare recipients, government employees and government contractors, as well as an increase in interest rate at which the U.S. could undertake further borrowing. The 2011 U.S. debt ceiling crisis was a heated negotiation over how to avoid potential problems like these.Investopedia ©
3PThe total amount of reserves that a company estimates having access to, calculated as the sum of all proved and unproved reserves. Unproved reserves are broken into two segments: those based on geological and engineering estimates from proved sources (probable) and those that are less likely to be extracted due to financial or technical difficulties (possible). Therefore, 3P refers to proved plus probable plus possible reserves.Investopedia ©
401(k) PlanA 401(k) plan is a qualified employer-established plan to which eligible employees may make salary deferral (salary reduction) contributions on a post-tax and/or pretax basis. Employers offering a 401(k) plan may make matching or non-elective contributions to the plan on behalf of eligible employees and may also add a profit-sharing feature to the plan. Earnings in a 401(k) plan accrue on a tax-deferred basis.Investopedia ©
403(b) PlanA retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement income accounts can invest in either annuities or mutual funds. Also known as a "tax-sheltered annuity (TSA) plan".Investopedia ©
500 Shareholder ThresholdLegislation that provided additional standards to Section 12(g) of the Exchange Act to provide adequate disclosure of private companies. The 500 Shareholder Threshold forces companies that have over 499 investors to divulge information about their financial performance. Although the company may still remain private, it must file similar documents to those of public companies. If the number of investors falls back below 500, then the disclosures can be omitted.Investopedia ©
52-Week RangeThe lowest and highest prices at which a stock has traded in the previous 52 weeks. The 52-week range is provided in a stock's quote summary along with information such as today's change and year-to-date change. Companies that have been trading for less than a year will still show a 52-week range even though the actual data available are from fewer than 52 weeks.Investopedia ©
529 PlanA plan that allows for the prepayment of qualified higher education expenses at eligible educational institutions. Also known as a "qualified tuition program," or more fully as a "section 529 plan."Investopedia ©
80-10-10 MortgageA mortgage transaction in which a first and second mortgage are simultaneously originated. The first position lien has an 80% loan-to-value ratio, the second position lien has a 10% loan-to-value ratio and the borrower makes a 10% down payment. 80-10-10 mortgage transactions are piggy-back mortgage transactions, and are frequently used by borrowers to avoid paying private mortgage insurance.Investopedia ©
90/10 StrategyAn investing strategy that involves deploying 90% of one's investment capital in interest-bearing instruments that have a lower degree of risk, and the balance 10% in high-risk investments. This is a relatively conservative investment strategy that aims to generate higher yields on the overall portfolio. Potential losses will typically be limited to the 10% that is invested in the high-risk investments, depending on the quality of bonds purchased.Investopedia ©
AAAThe highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has an exceptional degree of creditworthiness and can easily meet its financial commitments. Ratings agencies such as Standard & Poor's and Fitch Ratings use the AAA nomenclature to indicate the highest credit quality, while Moody's uses Aaa.Investopedia ©
AMEXThe third-largest stock exchange by trading volume in the United States. The AMEX is located in New York City and handles about 10% of all securities traded in the U.S. The AMEX has merged with the NASDAQ.Investopedia ©
AMEX (2)Also used to abbreviate the American Express Credit Cards.World Vision or Others
APYAnnual Percentage Yield. The rate of return on an investment for a one-year period. For an interest-bearing deposit account, such as a savings account, APY is equal to one plus the periodic rate (expressed as a decimal) raised to the number of periods in one year. Due to compounding, the APY will be greater than the periodic interest rate multiplied by the number of periods in the year.Investopedia ©
ARDLCAutomatically Revolving Documentary Letter of Credit (DLC) where the issuing bank restores the credit to its original amount once it has been used or drawn down. Usually, these arrangements limit the number of times the buyer may draw down its line over a predetermined period.World Vision or Others
ARM MarginA fixed percentage rate that is added to an index value to determine the fully indexed interest rate of an adjustable rate mortgage (ARM). The margin is constant throughout the life of the mortgage, while the index value is variable. For example, the index might be the prime rate, which varies according to market conditions, and the margin might be 2%. If the prime rate were 5% and the margin 2%, then the fully indexed interest rate would be 7%. If the prime rate rises to 6% (the margin remains constant), the fully indexed interest rate would be 8%.Investopedia ©
ASWPAny Safe World Port - used to identify the destination port on offers of products or commodities available for sale. If a product is quoted CIF ASWP, it indicates that the offered price, term and conditions will be maintained for any safe port around the globe.Investopedia ©
ATA CarnetAn international customs document that allows its users to eliminate import duties and taxes and clear customs quickly on temporary imports into participating carnet countries and territories. For example, the carnet is helpful to music tour managers who need to bring equipment and merchandise related to a show into a country for a few days or a few weeks. Almost all types of goods can be imported with an ATA carnet except for consumable goods, disposable goods and mail.Investopedia ©
Abatement CostA cost borne by many businesses for the removal and/or reduction of an undesirable item that they have created. Abatement costs are generally incurred when corporations are required to reduce possible nuisances or negative byproducts created during production.Investopedia ©
Absolute InterestTotal and complete ownership of an asset or property. An individual with an absolute interest has both a legal and beneficial possession of said asset or property. The term "absolute interest" indicates that the owner's interest is not diluted by another party's ownership, nor is it dependent on conditions that must be fulfilled.Investopedia ©
Absorption CostingA managerial accounting cost method of expensing all costs associated with manufacturing a particular product. Absorption costing uses the total direct costs and overhead costs associated with manufacturing a product as the cost base. Generally accepted accounting principles (GAAP) require absorption costing for external reporting.
Absorption costing is also known as "full absorption costing".
Investopedia ©
Absorption RateThe rate at which available homes are sold in a specific real estate market during a given time period. It is calculated by dividing the total number of available homes by the average number of sales per month. The figure shows how many months it will take to exhaust the supply of homes on the market. A high absorption rate may indicate that the supply of available homes will shrink rapidly, increasing the odds that a homeowner will sell a piece of property in a shorter period of time.Investopedia ©
Accelerated DepreciationAny method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years of the life of an asset.Investopedia ©
Acceleration PrincipleAn economic concept that draws a connection between output and capital investment. According to the acceleration principle, if demand for consumer goods increases, then the percentage change in the demand for machines and other investment necessary to make these goods will increase even more and vice versa). In other words, if income increases, there will be a corresponding but magnified change in investment.Investopedia ©
Accelerative EndowmentAn option in a whole life insurance policy to use accumulated dividends to convert the policy into an endowment policy prior to its normal maturity date. An endowment policy provides for a lump sum payment to the insured after a certain period.Investopedia ©
Accounts PayableAn accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable entry is found on a balance sheet under the heading current liabilities. Accounts payable are often referred to as "payables". Another common usage of AP refers to a business department or division that is responsible for making payments owed by the company to suppliers and other creditors.Investopedia ©
Accrued BenefitsCoverage earned by an employee on their pension plan based on years of service with their employer. Accrued benefits may include vacation, sick or personal time off, or other related benefits. Employees who are laid off, retire or are fired must receive all unpaid accrued benefits.Investopedia ©
Accrued Monthly BenefitThe earned pension benefit that will be paid to an employee at regular retirement age. The accrued monthly benefit is based on the employee's years of service through the accrual date, and is paid to pension holders each month following retirement.Investopedia ©
Accumulated DepreciationThe cumulative depreciation of an asset up to a single point in its life. Regardless of the method used to calculate it, the depreciation of an asset during a single period is added to the previous period's accumulated depreciation to get the current accumulated depreciation.
An asset's carrying value on the balance sheet is the difference between its purchase price and accumulated depreciation.
Investopedia ©
Acid-Test RatioA stringent test that indicates whether a firm has enough short-term assets to cover its immediate liabilities without selling inventory. The acid-test ratio is far more strenuous than the working capital ratio, primarily because the working capital ratio allows for the inclusion of inventory assets.Investopedia ©
Act of God BondA bond issued by an insurance company, linking principal and interest to a company's losses due to natural disasters. Act of God bonds are issued by insurers to protect against unforeseen events.Investopedia ©
Activity-Based Costing - ABCActivity-based costing (ABC) is an accounting method that identifies the activities that a firm performs and then assigns indirect costs to products. An activity-based costing (ABC) system recognizes the relationship between costs, activities and products, and through this relationship, it assigns indirect costs to products less arbitrarily than traditional methods. Some costs are difficult to assign through this method of cost accounting. Indirect costs, such as management and office staff salaries are sometimes difficult to assign to a particular product produced. For this reason, this method has found its niche in the manufacturing sector.Investopedia ©
Adjustable-Rate Mortgage - ARMA type of mortgage in which the interest rate paid on the outstanding balance varies according to a specific benchmark. The initial interest rate is normally fixed for a period of time after which it is reset periodically, often every month. The interest rate paid by the borrower will be based on a benchmark plus an additional spread, called an ARM margin. An adjustable rate mortgage is also known as a "variable-rate mortgage" or a "floating-rate mortgage".Investopedia ©
Adjusted Net Asset MethodA business valuation procedure used in acquisition accounting that changes the stated values of a company's assets and liabilities to reflect its current fair market values. This accounting technique adjusts asset and liability values either up or down so they reflect their true values on either an going concern, forced liquidation or orderly liquidation basis. Also referred to as "asset accumulation method".Investopedia ©
Admiralty ProceedingAny matter that comes before an admiralty court that involves shipping or a shipping vessel. Admiralty law (also known as maritime law) governs all private legal matters involving events happening in the seas or in bodies of water that have multiple national jurisdictions.Investopedia ©
Advances And DeclinesThe number of stocks that closed at a higher price than the previous day's close, and the number of stocks that closed at a lower price than the previous day's close. Technical analysts looks at advances and declines to analyze the overall behavior of the stock market, in order to discern volatility and to predict whether a price trend is likely to continue or reverse. Typically, a market will be more bullish if more stocks advance than decline.Investopedia ©
Adventure Capitalist1. Another word for "venture capitalist", or someone who invests in start-up companies.
2. A specific type of venture capitalist who is more accessible, but who may be harder to find and whose pockets are not as deep as a traditional venture capitalist, or a specific type of venture capitalist who is willing to invest in endeavors that would be considered too risky for traditional venture capitalists.
3. A wealthy individual who seeks out exciting experiences.
4. The title of a book in which author and former Wall Street financier Jim Rogers describes his three-year, 116-country road trip. Rogers retired at age 37 and has also toured the world by motorcycle, setting Guinness Book records for both trips.
Investopedia ©
Advertising Club Of New YorkThe main organization for communications professionals in New York. It offers its members a forum for career development, networking, exchanging of ideas and the recognition of excellence. The Advertising Club of New York traces its origins back to 1896, when a group of business people who called themselves the Sphinx Club met regularly to discuss the advertising business. It became the Advertising Men's League in 1906, and subsequently the Advertising Club of New York in 1915. Also known as the AD Club.Investopedia ©
AffluenzaA social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses". Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements. People said to be affected by affluenza typically find that the very economic success they have been so vigorously chasing ends up leaving them feeling unfulfilled, and wishing for yet more wealth.Investopedia ©
After-Hours Trading - AHTAfter-hours trading (AHT) is trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks (ECNs) has greatly facilitated after-hours trading, which is no longer restricted only to large institutional investors but is now available to any investor. Also known as the "after-hours market."Investopedia ©
Aged AssetsEquipment that has outlived its useful life. Aged assets might include equipment that is still functional, but is expensive to operate and maintain; equipment that still works, but breaks down frequently, disrupting operations; or equipment that is broken and is too expensive to repair. Proper management of aged assets is a significant issue in industries that rely heavily on equipment, such as the oil and natural gas industry.Investopedia ©
Agency By NecessityA type of relationship whereby one party can make essential decisions for another party. Agency by necessity is recognized in the courts and typically applies when one party is unable to make a decision for themselves. If, for example, an individual is sick and unable to make a critical decision, agency of necessity would allow an attorney, parent or spouse to make decisions on behalf of the incapacitated party.Investopedia ©
Agency MBS PurchaseThe purchase of mortgage-backed securities issued by government-sponsored enterprises such as Ginnie Mae, Fannie Mae or Freddie Mac. The term is most commonly used to refer to the U.S. Federal Reserve's $1.25 trillion program to purchase agency mortgage-backed securities, which commenced on Jan. 5, 2009 and was completed on Mar. 31, 2010.Investopedia ©
Agency TheoryA supposition that explains the relationship between principals and agents in business. Agency theory is concerned with resolving problems that can exist in agency relationships; that is, between principals (such as shareholders) and agents of the principals (for example, company executives). The two problems that agency theory addresses are:

1. the problems that arise when the desires or goals of the principal and agent are in conflict, and the principal is unable to verify (because it difficult and/or expensive to do so) what the agent is actually doing; and

2. the problems that arise when the principal and agent have different attitudes towards risk. Because of different risk tolerances, the principal and agent may each be inclined to take different actions.
Investopedia ©
Aggregate RiskThe exposure of a bank, financial institution, or any type of major investor to foreign exchange contracts - both spot and forward - from a single counterparty or client. Aggregate risk in forex may also be defined as the total exposure of an entity to changes or fluctuations in currency rates.Investopedia ©
Air Cargo InsuranceA type of insurance policy that protects a buyer or seller of goods being transported through the air. Air cargo insurance is designed to protect the insured against items damaged, destroyed or lost. Cargo insurance is offered through insurance companies, some freight forwarders and trade service intermediaries. The amount of coverage and deductible required with this insurance varies with each insurance provider.Investopedia ©
Alligator SpreadAn unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market movements. An alligator spread is usually used in the options market to describe a collection of put and call options that may not be profitable.Investopedia ©
Alpha RiskThe risk in a statistical test that a null hypothesis will be rejected when it is actually true. This is also known as a type I error. The best way to decrease alpha risk is to increase the size of the sample being tested with the hope that the larger sample will be more representative of the population.Investopedia ©
Alphabet RoundsThe early rounds of funding for a startup company, which get their name because the first is known as Series A financing, followed by Series B financing, and so on. Alphabet rounds of financing are provided by early investors and venture capital (VC) firms, which are willing to invest in companies with limited operational histories on the hope of larger future gains. These investors will typically wait until the startup has shown some basic signs of maturity and has exhausted its initial seed capital.Investopedia ©
Alternative AssetsAny non-traditional asset with potential economic value that would not be found in a standard investment portfolio. Due to the unconventional nature of alternative assets, valuation of some of these assets can be difficult.Investopedia ©
Alternative InvestmentAn alternative investment is an asset that is not one of the conventional investment types, such as stocks, bonds and cash. Most alternative investment assets are held by institutional investors or accredited, high-net-worth individuals because of the complex natures and limited regulations of the investments. Alternative investments include private equity, hedge funds, managed futures, real estate, commodities and derivatives contracts.Investopedia ©
Alternative Minimum Tax - AMTAn alternative minimum tax (AMT) is a tax calculation that adds certain tax preference items back into adjusted gross income. Alternative minimum tax (AMT) uses a separate set of rules to calculate taxable income after allowed deductions. Preferential deductions are added back, and then the AMT exemption is subtracted to get the AMT taxable income (AMTI). AMTI is then taxed at the current rate schedule to get tentative minimum tax (TMT). If TMT is higher than the regular tax liability for the year, the regular tax and the amount by which the TMT exceeds the regular tax are paid (i.e. the taxpayer pays the full TMT). Investopedia ©
American DreamThe belief that anyone, regardless of where they were born or what class they were born into, can attain their own version of success in a society where upward mobility is possible for everyone. The American dream is achieved through sacrifice, risk-taking and hard work, not by chance. Both native-born Americans and American immigrants pursue and can achieve the American dream. In contrast to other political and economic systems, such as communist dictatorships, America's free-enterprise system makes possible the circumstances that allow individuals to go beyond meeting their basic needs to achieve self-actualization and personal fulfillment.Investopedia ©
Amortized BondA financial certificate that has been reduced in value for records on accounting statements. An amortized bond is one that is treated as an asset, with the discount amount being amortized to interest expense over the life of the bond. If a bond is issued at a discount - that is, offered for sale below its par (face value) - the discount must be treated either as an expense or it can be amortized as an asset.Investopedia ©
AmplitudeThe difference in price from the midpoint of a trough to the midpoint of a peak of a security. Amplitude is positive when calculating a bullish retracement (when calculating from trough to peak) and negative when calculating a bearish retracement (when calculating from peak to trough).Investopedia ©
Andersen EffectA reference to auditors performing more careful due diligence when auditing companies in order to prevent accounting errors. This extra level of accounting scrutiny often leads to companies restating earnings even though they have not necessarily intentionally misrepresented material accounting information.Investopedia ©
Angel InvestorAn Angel Investor or angel (also known as a business angel or informal investor) is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. A small but increasing number of angel investors organize themselves into angel groups or angel networks to share research and pool their investment capital, as well as to provide advice to their portfolio companies.Wikipedia ©
Angelina Jolie Stock IndexAn index made up of a selection of stocks from companies associated with actress Angela Jolie. Seen as one of the world's most influential celebrities, some analysts believe that companies connected with Jolie will outperform their competition.Investopedia ©
Animal SpiritsA term used by John Maynard Keynes in one of his economics books. In his 1936 publication, "The General Theory of Employment, Interest and Money," the term "animal spirits" is used to describe human emotion that drives consumer confidence. According to Keynes, animal spirits also generate human trust.Investopedia ©
Annual BudgetAny budget that is prepared for a 12-month period. An annual budget outlines both the income and expenditures that are expected to be received and paid over the coming year. Annual budgets are used by individuals, corporations, governments and various other types of organizations.Investopedia ©
AnnuityAn annuity is a contractual financial product sold by financial institutions that is designed to accept and grow funds from an individual and then, upon annuitization, pay out a stream of payments to the individual at a later point in time. The period of time when an annuity is being funded and before payouts begin is referred to as the accumulation phase. Once payments commence, the contract is in the annuitization phase.Investopedia ©
AntitrustAntitrust laws are the laws that apply to virtually all industries and to every level of business, including manufacturing, transportation, distribution and marketing. They prohibit a variety of practices that restrain trade. Examples of illegal practices are price-fixing conspiracies, corporate mergers likely to reduce the competitive vigor of particular markets, and predatory acts designed to achieve or maintain monopoly power.Investopedia ©
Appeal BondAn amount of money placed in holding while the appeal is being decided. An appeal bond is supplied by the appellant (plaintiff) who is appealing the court's judgment and is usually in the amount of the original judgment but could be more. Referred to as a safety net bond which helps protect the court from frivolous appeals that cost the court time and money. An appeal is always posted by the losing party in a court case. In an appeal, a court case is brought before a higher court. The higher court will only review issues objected to in the lower court during the initial trial, not new evidence. The bond is required by the Federal Rule of Appellate Procedure 7.Investopedia ©
Applicable Federal Rate - AFRThe applicable federal rate (AFR) is a group of interest rates published monthly in the United States by the Internal Revenue Service (IRS) for federal income tax purposes. Every month, the IRS publishes these rates in accordance with Section 1274(d) of the Internal Revenue Code. The publication takes the form of a revenue ruling and is available to the public on the IRS website.Investopedia ©
Appraisal ApproachA procedure for determining an asset's value. The appraisal approach values assets based on a number of factors, such as its cost, the income it generates or its fair market value as compared to similar assets. A different dollar value will be assigned to an asset depending on which of these factors the appraiser primarily bases his or her estimate on. Sometimes the appraised value will not coincide with an asset's market value and buyers will often pay more or less than an asset's appraised value based on what the asset is worth to them. No matter which appraisal approach is used, an appraisal is only an educated guess as to what price the asset would fetch in a free market.Investopedia ©
ArbitrageThe simultaneous purchase and sale of an asset in order to profit from a difference in the price. It is a trade that profits by exploiting price differences of identical or similar financial instruments, on different markets or in different forms. Arbitrage exists as a result of market inefficiencies; it provides a mechanism to ensure prices do not deviate substantially from fair value for long periods of time.Investopedia ©
Article 50A settlement clause in the EU's Lisbon Treaty that outlines the steps to be taken for any country that seeks to leave the European Union voluntarily. Article 50 kick-starts the formal exit process for countries that have publicly declared their intention to leave the EU such as the United Kingdom following the Brexit vote.Investopedia ©
Ascending TriangleA bullish chart pattern used in technical analysis that is easily recognizable by the distinct shape created by two trendlines. In an ascending triangle, one trendline is drawn horizontally at a level that has historically prevented the price from heading higher, while the second trendline connects a series of increasing troughs. Traders enter into long positions when the price of the asset breaks above the top resistance.Investopedia ©
Asset AllocationAn investment strategy that aims to balance risk and reward by apportioning a portfolio's assets according to an individual's goals, risk tolerance and investment horizon. The three main asset classes - equities, fixed-income, and cash and equivalents - have different levels of risk and return, so each will behave differently over time.Investopedia ©
Asset ClassA group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations. The three main asset classes are equities (stocks), fixed-income (bonds) and cash equivalents (money market instruments).Investopedia ©
Asset Free DeliveryIt is a process by which a seller of a security or bond (asset) uses the banking system (SWIFT) to deliver the same directly into the buyer's account, free of charges for the receiving account. The information about the security or bond is transferred to the Buyer's bank coordinates containing the conditions for the sale and transfer to the benefit of the Buyer. Normally, the parties sign an agreement to support the transaction and specify the conditions of delivery, liquidation (payment) and transfer of ownership.World Vision or Others
Asset Turnover RatioThe ratio of the value of a company's sales or revenues generated relative to the value of its assets. The Asset Turnover ratio can often be used as an indicator of the efficiency with which a company is deploying its assets in generating revenue.

Asset Turnover = Sales or Revenues / Total Assets

Generally speaking, the higher the asset turnover ratio, the better the company is performing, since higher ratios imply that the company is generating more revenue per dollar of assets. Yet, this ratio can vary widely from one industry to the next. As such, considering the asset turnover ratios of an energy company and a telecommunications company will not make for an accurate comparison. Comparisons are only meaningful when they are made for different companies within the same sector.
Investopedia ©
Asset Valuation Reserve - AVRThese are assets required to be set aside as a reserve in order to cover a company against unexpected debt. The asset valuation reserve serves as a backup for equity and credit losses. A reserve will have capital gains or losses credited or debited against the reserve account. Statistical and mathematical formulas are used to determine the amount that should be kept in a reserve to cover company assets.Investopedia ©
Assets Under Management - AUM Assets under management (AUM) is the total market value of assets that an investment company or financial institution manages on behalf of investors. Assets under management definitions and formulas vary by company. Some financial institutions include bank deposits, mutual funds and cash in their calculations; others limit it to funds under discretionary management, where the investor assigns responsibility to the company. Investopedia ©
Assumable MortgageA type of financing arrangement in which the outstanding mortgage and its terms can be transferred from the current owner to a buyer. By assuming the previous owner's remaining debt, the buyer can avoid having to obtain his or her own mortgage.Investopedia ©
Atlas OptionsAn equity-based exotic option from the family of mountain range options. Atlas options have a payout that is based on the performance of the underlying securities, which are stocks. At maturity, some of the best- and worst-performing stocks are removed from this group of underlying securities, at which point the payout is calculated on the remainder of the securities.Investopedia ©
AtmosphericsThe controllable characteristics of a retail space that entice a customer to enter the store, and which are designed to influence a customer's mood so as to increase the odds of a purchase being made. Atmospherics include the store's layout, noise level, temperature, lighting and decorations. They are designed to set the store apart from its competitors in a positive way. It is part of an overall companies branding and image.Investopedia ©
Auditing EvidenceThe information collected for review of a company's financial transactions, internal control practices, and other factors necessary for the certification of financial statements by a certified public accountant. The amount and type of auditing evidence considered varies considerably based on the type of firm being audited as well as the required scope of the audit.Investopedia ©
Aunt MillieA slang term for an uneducated or unsophisticated investor. The term is considered a derogatory remark in the financial sector, often used to refer to poor investment choices.Investopedia ©
AusterityA state of reduced spending and increased frugality in the financial sector. Austerity measures generally refer to the measures taken by governments to reduce expenditures in an attempt to shrink their growing budget deficits.Investopedia ©
B-NoteThe secondary tranche in a commercial mortgage-backed security. B notes are a component of A/B financing or A/B/C financing. They have a lower credit rating than a class A notes, but a higher credit rating than a class C notes. The financed property serves as collateral for a B note. B-notes are also known as a class B note.Investopedia ©
B-SchoolAbbreviation of business school, an educational institution that focuses on teaching business-related courses. While business schools may offer courses ranging from undergraduate degrees to postdoctoral programs, their prime offering is the Master of Business Administration (MBA) program. Top-tier business schools are usually renowned for the high quality of their graduates, many of whom climb the corporate ladder steadily to eventually become among the highest ranking executives in their organizations.Investopedia ©
B-SharesShares in companies based in mainland China that trade on either the Shanghai or Shenzhen stock exchanges. B-Shares are eligible for foreign investment provided the investment account is in the proper currency (Shanghai B-shares trade in U.S. dollars, while Shenzhen B-shares trade in Hong Kong dollars).Investopedia ©
BACENAcronym standing for the Brazilian Central Bank (Banco Central do Brasil - BACEN)Investopedia ©
BCLBank Comfort Letter is a letter issued by the Buyer's Bank, on their letterhead, attesting the Buyer's financial capability (availability of funds) for the consummation of the proposed business transaction. Also known as Confirmation of Funds Certificate.Investopedia ©
BGBank Guarantee - A guarantee from a lending institution ensuring that the liabilities of a debtor (the Client) will be met. In other words, if the debtor fails to settle a debt, the bank will cover it. A bank guarantee enables the customer (the client) to acquire goods, buy equipment, or draw down loans, and thereby expand business activity.Investopedia ©
BRIC CountriesThe BRIC countries are made up of Brazil, Russia, India and China - although if we were to categorize them by importance, it would actually be CIRB. The BRIC are both the fastest growing and largest emerging markets economies. They account for almost three billion people, or just under half of the total population of the world. In recent times, the BRIC have also contributed to the majority of world GDP growth.EconomyWatch ©
Back Up The TruckSlang that refers to the purchase of a large position in a stock or other financial asset by an investor or trader. Typically, when someone is willing to back up the truck on a financial asset, this implies that they're extremely bullish on that asset's performance.Investopedia ©
Backflip TakeoverAn uncommon type of takeover in which the acquirer becomes a subsidiary of the acquired or targeted company, with business after the takeover conducted in the name of the acquired company. A backflip takeover gets its name from the fact that it runs counter to the norm of a conventional acquisition, where the acquirer is the surviving entity and the acquired company becomes a subsidiary of the acquirer. While the acquired company's assets are subsumed into the acquiring company, control of the combined entity is generally in the hands of the acquirer.Investopedia ©
Bag HolderAn informal investment term used to describe an investor who holds a position in a stock which decreases in value until it is worthless. Typically, the bag holder will hold the position for an extended period of time in which most of the investment is lost.Investopedia ©
Bag ManAny person in charge of organizing, collecting and transporting money, generally in connection with illegal or illicit activities. A bag man is someone who collects and delivers money on behalf of a boss or organization. Nowadays, bag man can be used pejoratively to describe an individual who is in charge of collecting and delivering contributions to political parties or funds gathered for political purposes.Investopedia ©
Bagel LandA slang term that represents a stock or other security that is approaching $0 in price. Arriving in bagel land is usually the result of one or more major business problems that may not be resolvable. This term is typically used to describe an asset that has fallen from grace as opposed to a penny stock or other historically cheap security.Investopedia ©
Bail BondA written promise signed by a defendant and surety to ensure that a criminal defendant will appear in court at the scheduled time and date as ordered by the court. The bail amount is set by the court. The process starts with a defendant being released on bail, the bail is paid by a surety (bail bond agent or bondsman) who usually collects a percentage of the amount of bail. In order to pay the bail so that the defendant can be released while they await trial on criminal charges, the agent might require collateral in the form of valuable property, securities or a statement of creditworthiness.Investopedia ©
Bailard, Biehl And Kaiser Five-Way ModelA model of five investor categories developed by fund managers Tom Bailard, Larry Biehl and Ron Kaiser. The Bailard, Biehl and Kaiser (BB&K) Five-Way Model defines investor personalities based on their confidence level and preferred method of action. The five categories thus defined are - Individualists, Adventurers, Celebrities, Guardians and Straight Arrows.Investopedia ©
BailmentThe contractual transfer of possession of assets or property for a specific objective. In bailment, the deliverer of the asset is the bailor, and the receiver is the bailee. In a bailment transaction, ownership is never transferred, and the bailor is generally not entitled to use the property while it's in possession of the bailee. In these ways, bailment differs from gifting and leasing.Investopedia ©
Bailout TakeoverA scenario in which a government or profitable company acquires control of a financially unstable company with the goal of returning it to a position of financial strength. In a bailout takeover, the government or strong company takes over the weak company by purchasing its shares, exchanging shares or both. The acquiring entity develops a rehabilitation plan for the weak company, describing how it will be managed and by whom, how shareholders will be protected and how its financial position will be turned around.Investopedia ©
Baked In The CakeProjections, expectations and other news items that are already reflected in a security's price. As a phrase, "baked in the cake" is used to indicate that something has already been taken into account, and that an investor just learning of the news is unlikely to be at an advantage by acting on it.Investopedia ©
Balanced Investment StrategyA portfolio allocation and management method aimed at balancing risk and return. Such portfolios are generally divided equally between equities and fixed-income securities.Investopedia ©
Bank DepositsMoney placed into a banking institution for safekeeping. Bank deposits are made to deposit accounts at a banking institution, such as savings accounts, checking accounts and money market accounts. The account holder has the right to withdraw any deposited funds, as set forth in the terms and conditions of the account. The "deposit" itself is a liability owed by the bank to the depositor (the person or entity that made the deposit), and refers to this liability rather than to the actual funds that are deposited.Investopedia ©
Bank DraftA type of check where the payment is guaranteed to be available by issuing bank. Typically, banks will review the bank draft requester's account to see if sufficient funds are available for the check to clear. Once it has been confirmed that sufficient funds are available, the bank effectively sets aside the funds from the person's account to be given out when the bank draft is used.Investopedia ©
Bank For International Settlements - BISAn international organization fostering the cooperation of central banks and international monetary policy makers. Established in 1930, it is the oldest international financial organization, and was created to administer the transaction of monies according to the Treaty of Versailles. Among others, its main goals are to promote information sharing and to be a key center for economic research.Investopedia ©
Bank GuaranteeA guarantee from a lending institution ensuring that the liabilities of a debtor will be met. In other words, if the debtor fails to settle a debt, the bank will cover it.Investopedia ©
Bank Guarantee (BG)Bank Guarantees are issued by international lending institutions and used as a line of credit to accomplish a multiplicity of tasks. Bank Guarantees are generally issued for 1 year and 1 day, with optional renewal periods. (It may be possible to get it for a shorter period of time).Investopedia ©
Bank Levy1. A type of taxation system on financial institutions, in which banks are forced to pay government taxes over and above any normal corporate taxes they may incur. This is done in order to maintain financial discipline and prevent outlandish spending, bonuses or possible overly risky behavior. Bank levies are generally viewed as punishment to financial institutions.
2. When a bank account is frozen due to a creditor trying to get the debtor to repay its debt. A bank levy can occur due to either unpaid taxes or unpaid debt. The IRS usually uses this method the most, but other creditors can use this method as well.
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Banker's Blanket BondA fidelity bond purchased from an insurance broker that protects a bank against losses from a variety of criminal acts carried out by employees. Some states require blanket bond coverage as a condition of operating a bank. Also known as a blanket fidelity bond.Investopedia ©
Bar ChartA style of chart used by some technical analysts, on which, as illustrated below, the top of the vertical line indicates the highest price a security traded at during the day, and the bottom represents the lowest price. The closing price is displayed on the right side of the bar, and the opening price is shown on the left side of the bar. A single bar like the one below represents one day of trading.
Also known as "Black Monday".
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Barefoot PilgrimA slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. A barefoot pilgrim is someone who has taken on more risk than necessary or entered investments carelessly, without doing the proper research. An investor shouldn't take on more risk than necessary to achieve her required return, so someone desiring a 3% return should invest in Treasury securities, not the stock market, and an investor requiring an 8% return should invest in the S&P 500, not in emerging markets.Investopedia ©
Bargain Purchase OptionAn option in a lease agreement that allows the lessee to purchase the leased asset at the end of the lease period at a price substantially below its fair market value. The bargain purchase option is one of four criteria, any one of which, if satisfied, would require the lease to be classified as a capital or financing lease that must be disclosed on the lessee's balance sheet. The objective of this classification is to prevent "off-balance sheet" financing by the lessee.Investopedia ©
Barrel Of Oil Equivalent (BOE)A term used to summarize the amount of energy that is equivalent to the amount of energy found in a barrel of crude oil. There are 42 gallons (approximately 159 liters) in one barrel of oil, which will contain approximately 5.8 million British Thermal Units (MBtus) or 1,700 kilowatt hours (kWh). Also known as crude oil equivalent (COE).Investopedia ©
Base YearThe term 'base year' refers to the first of a series of years in an economic or financial index. It is normally set to an arbitrary level of 100. Any year can be chosen as a base year, but typically recent years are chosen. New, more up-to-date base years are periodically introduced to keep data current in a particular index.Investopedia ©
Basel AccordThe Basel Accords are three sets of banking regulations (Basel I, II and III) set by the Basel Committee on Bank Supervision (BCBS), which provides recommendations on banking regulations in regards to capital risk, market risk and operational risk. The purpose of the accords is to ensure that financial institutions have enough capital on account to meet obligations and absorb unexpected losses.Investopedia ©
Basel IA set of international banking regulations put forth by the Basel Committee on Bank Supervision, which set out the minimum capital requirements of financial institutions with the goal of minimizing credit risk. Banks that operate internationally are required to maintain a minimum amount (8%) of capital based on a percent of risk-weighted assets. The first accord was the Basel I. It was issued in 1988 and focused mainly on credit risk by creating a bank asset classification system. This classification system grouped a bank's assets into five risk categories: a) 0% - cash, central bank and government debt and any OECD government debt b) 0%, 10%, 20% or 50% - public sector debt c) 20% - development bank debt, OECD bank debt, OECD securities firm debt, non-OECD bank debt (under one year maturity) and non-OECD public sector debt, cash in collection d) 50% - residential mortgages e) 100% - private sector debt, non-OECD bank debt (maturity over a year), real estate, plant and equipment, capital instruments issued at other banks The bank must maintain capital (Tier 1 and Tier 2) equal to at least 8% of its risk-weighted assets. For example, if a bank has risk-weighted assets of $100 million, it is required to maintain capital of at least $8 million.Investopedia ©
Basel IIA set of banking regulations put forth by the Basel Committee on Bank Supervision, which regulates finance and banking internationally. Basel II attempts to integrate Basel capital standards with national regulations, by setting the minimum capital requirements of financial institutions with the goal of ensuring institution liquidity.Investopedia ©
Basel IIIA comprehensive set of reform measures designed to improve the regulation, supervision and risk management within the banking sector. The Basel Committee on Banking Supervision published the first version of Basel III in late 2009, giving banks approximately three years to satisfy all requirements. Largely in response to the credit crisis, banks are required to maintain proper leverage ratios and meet certain capital requirements.Investopedia ©
Basis Point (BPS)Basis point (BPS) refer to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 1/100th of 1%, or 0.01% (0.0001), and is used to denote the percentage change in a financial instrument. The relationship between percentage changes and basis points can be summarized as follows: 1% change = 100 basis points, and 0.01% = 1 basis point.Investopedia ©
Bear FlattenerA yield-rate environment in which short-term interest rates are increasing at a faster rate than long-term interest rates. This causes the yield curve to flatten as short-term and long-term rates start to converge.Investopedia ©
Bear HugAn offer made by one company to buy the shares of another for a much higher per-share price than what that company is worth. A bear hug offer is usually made when there is doubt that the target company's management will be willing to sell.Investopedia ©
Bear MarketA market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining. As investors anticipate losses in a bear market and selling continues, pessimism only grows. Although figures can vary, for many, a downturn of 20% or more in multiple broad market indexes, such as the Dow Jones Industrial Average (DJIA) or Standard & Poor's 500 Index (S&P 500), over at least a two-month period, is considered an entry into a bear market. Investopedia ©
Beggar-Thy-NeighborAn international trading policy that utilizes currency devaluations and protective barriers to alleviate a nation's economic difficulties at the expense of other countries. While the policy may help repair an economic hardship in the nation, it will harm the country's trading partners, worsening its economic status.Investopedia ©
Beige BookA commonly used name for the Fed report called the Summary of Commentary on Current Economic Conditions by Federal Reserve District. It is published just before the FOMC meeting on interest rates and is used to inform the members on changes in the economy since the last meeting.Investopedia ©
BellwetherAn event or indicator that shows the possible presence of a trend. The performance of certain companies/stocks and bonds are considered by analysts to indicate the condition of the economy and financial markets because their performance is well-correlated with a trend. Bellwether companies are usually the market leaders in their respective sectors.Investopedia ©
Below Market Interest Rate - BMIRHousing-related programs in the that offer loans to qualified applicants at interest rates that are lower than prevailing market rates. Many cities have programs in effect that extend below market interest rate (BMIR) loans to individuals with limited incomes, either for buying a home or for making home improvements. The Department of Housing and Urban Development (HUD) also has a BMIR-based rental program for HUD-assisted residents.Investopedia ©
Below The Line AdvertisingIn general, an advertising strategy in which a product is promoted in mediums other than radio, television, billboards, print, film and the internet. Types of below the line advertising commonly include direct mail campaigns, trade shows and catalogs; this advertising type tends to be less expensive and more focused.Investopedia ©
BenchmarkA benchmark is a standard against which the performance of a security, mutual fund or investment manager can be measured. Generally, broad market and market-segment stock and bond indexes are used for this purpose.Investopedia ©
Benchmark BondA bond that provides a standard against which the performance of other bonds can be measured. Government bonds are almost always used as benchmark bonds. Also referred to as "benchmark issue" or "bellwether issue".Investopedia ©
Bernard "Bernie" MadoffBernard Lawrence "Bernie" Madoff is an American financier who executed the largest Ponzi scheme in history, defrauding thousands of investors of tens of billions of dollars over the course of at least 17 years, and possibly longer. He was also a pioneer in electronic trading and chair of the Nasdaq in the early 1990s.Investopedia ©
Bespoke CDOA type of collateralized debt obligation (CDO) that a dealer creates for a specific group of investors. The CDO is structured according to the investor's needs. The investor group then typically buys a single tranche of the bespoke CDO. The remaining tranches are then held by the dealer, who will usually attempt to hedge against losses.Investopedia ©
BetaA measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Beta is used in the capital asset pricing model (CAPM), a model that calculates the expected return of an asset based on its beta and expected market returns. Also known as "beta coefficient."Investopedia ©
Bid And AskedA two-way price quotation that indicates the best price at which a security can be sold and bought at a given point in time.The bid price represents the maximum price that a buyer or buyers are willing to pay for a security. The ask price represents the minimum price that a seller or sellers are willing to receive for the security. A trade or transaction occurs when the buyer and seller agree on a price for the security.

The difference between the bid and asked prices, or the spread, is a key indicator of the liquidity of the asset - generally speaking, the smaller the spread, the better the liquidity.

Also known as bid and ask, bid-ask or bid-offer.
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Bid Support1. A manipulative practice employed to prop up a company's stock price on the open market. 2. Bid support may also refer to a substantial number of orders from different market makers on the bid side of a stock, which can signal a trader to buy the stock on the expectation that it will advance. 3. A third meaning of bid support refers to the services provided by accounting and consulting firms to companies making takeover bids for other firms. Bid support, as a form of market manipulation, involves multiple bids for small amounts of a particular stock being placed just below the highest bid price posted by market makers. This has the effect of absorbing sell orders and creating an artificial floor for the stock, while giving the impression that plenty of buyers are waiting in the wings.Investopedia ©
BiflationThe simultaneous existence of inflation and deflation in an economy. Biflation, while seemingly a paradox, results when inflation in commodity assets coexists with deflation in debt-based assets. Biflation typically occurs when a fragile economic recovery causes the central bank to open up the monetary spigots in a bid to stimulate the economy. This may result in higher prices for certain assets such as energy and precious metals, and declining prices for leveraged assets such as real estate and automobiles. The creation of the term "biflation" is attributed to analyst F. Osborne Brown, who introduced it in 2003.Investopedia ©
BifurcationThe splitting of something into two separate pieces. Bifurcation occurs when a company divides into two separate divisions to create two new companies and issue two new shares. Existing shareholders before the split are given shares of the new company though a corporate re-organization.Investopedia ©
Big UgliesOld industrial companies in gritty industries (such as mining, steel and oil) and as a result, they tend to be unpopular stocks with investors.Investopedia ©
Bill and HoldA form of sales arrangement in which a seller of a good bills a customer for products but does not ship the product until a later date. In order for a transfer of ownership to occur, certain conditions must be met. These conditions include: payment for the goods, that the goods be segregated from all other similar goods by the seller, and that the goods be finished and ready for use.Investopedia ©
Binary OptionA type of option in which the payoff is structured to be either a fixed amount of compensation if the option expires in the money, or nothing at all if the option expires out of the money. The success of a binary option is thus based on a yes/no proposition, hence "binary." A binary option automatically exercises, meaning the option holder does not have the choice to buy or sell the underlying asset.Investopedia ©
BitcoinA decentralized digital currency that enables low-cost payments without the need for central authorities and issuers. Bitcoin is a peer-to-peer (P2P) currency system created in open source C++ programming code. Bitcoins can be accessed from anywhere in the world with an internet connection. Once a user has Bitcoins, they are stored in a digital wallet. Bitcoins can then be sent to anyone else who has a Bitcoin address. Bitcoin was developed in 2009 and based on the works of an individual or group of individuals known as Satoshi Nakamoto.Investopedia ©
Black EconomyThe segment of a country's economic activity that is derived from sources that fall outside of the country's rules and regulations regarding commerce. The activities can be either legal or illegal depending on what goods and/or services are involved.Investopedia ©
Black Friday1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold speculators, including Jay Gould and James Fist, who attempted to corner the gold market. The attempt failed and the gold market collapsed, causing the stock market to plummet.
2. The day after Thanksgiving in the United States. Retailers generally see an upward spike in sales and consider this to be the start of the holiday shopping season. It's common for retailers to offer special promotions and to open early to draw in customers.
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Black MondayOctober 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning of a global stock market decline, making Black Monday one of the most notorious days in recent financial history. By the end of the month, most of the major exchanges had dropped more than 20%.Investopedia ©
Black SwanAn event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult to predict. This term was popularized by Nassim Nicholas Taleb, a finance professor and former Wall Street trader.Investopedia ©
Black Thursday Black Thursday is the name given to Thursday, Oct. 24, 1929, when the Dow Jones Industrial Average plunged 11% at the open in very heavy volume, precipitating the Wall Street crash of 1929 and the subsequent Great Depression of the 1930s. More recently, "Black Thursday" is also used to refer to the Thanksgiving holiday in the United States, as more retailers open on Thanksgiving evening in a bid to get an early start on the frenzied shopping of Black Friday.Investopedia ©
Black TuesdayOctober 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million shares were traded in a panic selloff.Investopedia ©
BlacklistA list of persons, organizations or nations suspected or convicted of fraudulent, illegal or criminal activity, and therefore excluded from a service or penalized in some other manner. A blacklist may be maintained by any entity, ranging from a small business enterprise to an inter-governmental body. Depending on the scope of the blacklist, it may either be secret or public. A common misconception held by many people relates to the purported existence of a "credit blacklist" to deny credit facilities to consumers with poor or spotty credit histories. Since a credit blacklist as such does not exist, the reality is that creditors and lending agencies rely on the consumer's credit history rather than a blacklist to guide their loan decisions.Investopedia ©
Blackout Period1. A blackout period is a term that refers to a temporary period in which access is limited or denied.
2. A period of around 60 days during which employees of a company with a retirement or investment plan cannot modify their plans. Notice must be given to employees in advance of a pending blackout.
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Blanket MortgageA mortgage which covers two or more pieces of real estate. The real estate is held as collateral on the mortgage, but the individual pieces of the real estate may be sold without retiring the entire mortgage.Investopedia ©
Blind TrustA trust in which the trustees have full discretion over the assets, and the trust beneficiaries theoretically have no knowledge of the holdings of the trust. The trustor initiates the trust and maintains the ability to terminate the trust, but otherwise exercises no control over the actions taken within the trust and receives no reports from the trustees while the blind trust is in force.Investopedia ©
BlockchainA blockchain is a public ledger of all Bitcoin (note: and other crypto-currencies) transactions that have ever been executed. It is constantly growing as ‘completed’ blocks are added to it with a new set of recordings. The blocks are added to the blockchain in a linear, chronological order. Each node (computer connected to the Bitcoin network using a client that performs the task of validating and relaying transactions) gets a copy of the blockchain, which gets downloaded automatically upon joining the Bitcoin network. The blockchain has complete information about the addresses and their balances right from the genesis block to the most recently completed block.Investopedia ©
Blue ChipA nationally recognized, well-established and financially sound company. Blue chips generally sell high-quality, widely accepted products and services. Blue chip companies are known to weather downturns and operate profitably in the face of adverse economic conditions, which helps to contribute to their long record of stable and reliable growth.Investopedia ©
Blue Chip IndicatorA formal gauge or measure of the performance of a selected group of blue chip securities. Blue chip indicators act much the same way as other indicators or indices, in that they display the performance of a selected group, in this case blue chip securities, over a given period of time, or even in real time. Market observers would most likely use such blue chip indicators to gauge the performance of the most widely-owned companies in an economy.Investopedia ©
Blue Chip Stock or CompanyA nationally recognized, well-established and financially sound company. Blue chips generally sell high-quality, widely accepted products and services. Blue chip companies are known to weather downturns and operate profitably in the face of adverse economic conditions, which helps to contribute to their long record of stable and reliable growth. The name "blue chip" came about because in the game of poker the blue chips have the highest value. Blue chip stocks are seen as a less volatile investment than owning shares in companies without blue chip status because blue chips have an institutional status in the economy. Investors may buy blue chip companies to provide steady growth in their portfolios. The stock price of a blue chip usually closely follows the S&P 500.Investopedia ©
Blue Sky LawsState regulations designed to protect investors against securities fraud by requiring sellers of new issues to register their offerings and provide financial details. This allows investors to base their judgments on trustworthy data.Investopedia ©
Bo Derek InvestmentA slang term used to describe a perfect stock or investment. In the 1979 hit movie "10", actress Bo Derek portrayed the "perfect woman", or "the perfect 10".Investopedia ©
Board of Directors (B Of D)A group of individuals that are elected as, or elected to act as, representatives of the stockholders to establish corporate management related policies and to make decisions on major company issues. Such issues include the hiring/firing of executives, dividend policies, options policies and executive compensation. Every public company must have a board of directors.Investopedia ©
BogeyA buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the investment scope of the funds investment. Comparing a fund's performance to a benchmark index gives investors an idea of how well the fund is doing compared to the market.
Also known referred to as "bogy".
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Boiling The OceanTo undertake an impossible task or project or to make a task or project unnecessarily difficult. Boiling the ocean generally means to go overboard.Investopedia ©
BondA bond is a debt investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate. Bonds are used by companies, municipalities, states and sovereign governments to raise money and finance a variety of projects and activities. Owners of bonds are debtholders, or creditors, of the issuer.Investopedia ©
Bond FundA fund invested primarily in bonds and other debt instruments. The exact type of debt the fund invests in will depend on its focus, but investments may include government, corporate, municipal and convertible bonds, along with other debt securities like mortgage-backed securities.Investopedia ©
Bond LadderA strategy for managing fixed-income investments by which the investor builds a ladder by dividing his or her investment dollars evenly among bonds or CDs that mature at regular intervals such as every six months, once a year or every two years.Investopedia ©
Bond Ladder (2)A bond ladder is a portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of purchasing several smaller bonds with different maturity dates rather than one large bond with a single maturity date is to minimize interest-rate risk, increase liquidity and diversify credit risk.Investopedia ©
Bond LadderingA portfolio management strategy and model for investing in fixed income that involves purchasing multiple bonds, each with different maturity dates, in order to achieve the following goals: - Decrease interest rate risk by holding both short-term and long-term bonds, thereby spreading risk along the interest rate curve. If rates are rising, as one bond matures the funds can be re-invested into higher yield bonds. - Decrease re-investment risk because as one bond in the ladder matures, the cash is re-invested, but it only represents a portion of the total portfolio. Even if prevailing rates at the time of re-investment are lower than the previous bond was returning, the smaller amount of reinvestment dollars mitigates the risk of investing a lot of cash at a low return. - Maintain steady cash flows to encourage regular saving for investors looking for an income-producing portfolio.Investopedia ©
Bond RatingA grade given to bonds that indicates their credit quality. Private independent rating services such as Standard & Poor's, Moody's and Fitch provide these evaluations of a bond issuer's financial strength, or its ability to pay a bond's principal and interest in a timely fashion. Bond ratings are expressed as letters ranging from 'AAA', which is the highest grade, to 'C' ("junk"), which is the lowest grade. Different rating services use the same letter grades, but use various combinations of upper- and lower-case letters to differentiate themselves. To illustrate the bond ratings and their meaning, we'll use the Standard & Poor's format: AAA and AA - High credit-quality investment grade; AA and BBB - Medium credit-quality investment grade; BB, B, CCC, CC, C - Low credit-quality (non-investment grade), or "junk bonds"; D - Bonds in default for non-payment of principal and/or interest.Investopedia ©
BondsBonds are loans that investors make to corporations and governments. The corporations get the cash they need while the investors earn interest. Every bond has a fixed maturity date when the bond matures and the loan must be paid back in full, at face value. Some bonds may have a "call" feature whereby the issuer may redeem or "call" the bond prior to maturity. The interest a bond pays is also set when the bond is issued. The rate is competitive, which means the bond pays interest comparable to what investors can earn elsewhere. As a result, the rate on a new bond is similar to current interest rates, including mortgage rates. Municipal bond rates are an exception because their yields are free from federal taxes. The three different kinds of bonds are Corporate Bonds, U.S. Treasury & Agency Bonds, and Municipal Bonds.Farmers & Merchants Bank ©
Book-To-Market RatioThe book-to-market ratio is a ratio used to find the value of a company by comparing the book value of a firm to its market value. Book value is calculated by looking at the firm's historical cost, or accounting value. Market value is determined in the stock market through its market capitalization.Investopedia ©
Boomer Effect (Baby Boomer Factor)The boomer effect refers to the influence that the generational cluster born between 1946 and 1964 has on most markets. This term first gained traction in technology and generally referred to the importance of simplifying interfaces for consumer electronics to encourage the wealthy baby boomer generation to upgrade. Since then, it has spread to describe everything from the way boomers have changed how food is marketed to the impact on the financial services sector as boomer’s shift priorities late in life. The Boomer effect is sometimes called the boomer factor or the boomer shift.Investopedia ©
BootstrapA situation in which an entrepreneur starts a company with little capital. An individual is said to be boot strapping when he or she attempts to found and build a company from personal finances or from the operating revenues of the new company.Investopedia ©
Border Adjustment TaxAlso called a border-adjusted tax, border tax adjustment or destination tax, this is a tax levied on goods based on where they are sold. Goods that are exported are exempt from tax; goods that are imported and sold in the U.S. are subject to tax.Investopedia ©
Boston Snow IndicatorA market theory that states that a white Christmas in Boston will result in rising stock prices for the following year. For example, in Christmas of 1995, Boston received snow and the following year, the S&P 500 increased by more than 20%.Investopedia ©
Bottom FisherAn investor who looks for bargains among stocks whose prices have recently dropped dramatically. The investor believes that a price drop is temporary or is an overreaction to recent bad news and a recovery is soon to follow.Investopedia ©
Bottom LineRefers to a company`s net earnings, net income or earnings per share (EPS). Bottom line also refers to any actions that may increase/decrease net earnings or a company`s overall profit. A company that is growing its net earnings or reducing its costs is said to be "improving its bottom line".Investopedia ©
BottomryWhen the owner of a ship borrows money and uses the ship itself (referring to the ship's bottom or keel) as collateral. If the ship is lost during the course of the voyage then the creditor will lose on the loan; if the ship survives, the lender will receive the principal plus interest.Investopedia ©
BoutiqueA small financial firm that provides specialized services for a particular segment of the market. Boutique firms are most common in the investment management or investment banking industries. These firms may specialize by industry, client asset size, banking transaction type or by other factors to address a market not well addressed by larger firms.Investopedia ©
Bowie BondAn asset-backed security; which uses the current and future revenue from albums recorded by musician David Bowie as collateral. The 25 albums a Bowie bond uses as their underlying assets were recorded prior to 1990. David Bowie used the proceeds from the bond sale to purchase old recordings of his music. In creating the bonds, he ultimately forfeited royalties for the life of the bond (10 years). Bowie bonds are also known as "Pullman bonds" after David Pullman, the banker who created and sold the first Bowie bonds.Investopedia ©
Brand IdentityA company's brand identity is how that business wants to be perceived by consumers. The components of the brand, (name, logo, tone, tagline, typeface) are created by the business in an attempt to reflect the value the company is trying to bring to the market and to appeal to the customers in the market where the company sells its goods. Brand identity is separate from brand image.Investopedia ©
Brazil, Russia, India And China - BRICThe BRIC thesis posits that China and India will, by 2050, become the world's dominant suppliers of manufactured goods and services, respectively, while Brazil and Russia will become similarly dominant as suppliers of raw materials. Due to lower labor and production costs, many companies also cite BRIC as a source of foreign expansion opportunity, and promising economies in which to invest.Investopedia ©
Break-Even AnalysisAn analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even analysis calculates what is known as a margin of safety, the amount that revenues exceed the break-even point. This is the amount that revenues can fall while still staying above the break-even point.Investopedia ©
Breakup FeeA breakup fee is a common fee used in takeover agreements if the seller backs out of a deal to sell to the purchaser. A breakup fee, or termination fee, is required to compensate the prospective purchaser for the time and resources used to facilitate the deal. Breakup fees are normally 1-3% of the deal's value.Investopedia ©
Bretton Woods AgreementA landmark system for monetary and exchange rate management established in 1944. The Bretton Woods Agreement was developed at the United Nations Monetary and Financial Conference held in Bretton Woods, New Hampshire, from July 1 to July 22, 1944. Major outcomes of the Bretton Woods conference included the formation of the International Monetary Fund and the International Bank for Reconstruction and Development and, most importantly, the proposed introduction of an adjustable pegged foreign exchange rate system. Currencies were pegged to gold and the IMF was given the authority to intervene when an imbalance of payments arose.Investopedia ©
BrexitBrexit is an abbreviation of "British exit" that mirrors the term Grexit. It refers to the possibility that Britain will withdraw from the European Union. The country will hold an in-out referendum on its EU membership on June 23.Investopedia ©
Bridge LoanA short-term loan that is used until a person or company secures permanent financing or removes an existing obligation. This type of financing allows the user to meet current obligations by providing immediate cash flow. The loans are short-term (up to one year) with relatively high interest rates and are backed by some form of collateral such as real estate or inventory. Also known as "interim financing", "gap financing" or a "swing loan".Investopedia ©
BubbleA bubble is an economic cycle characterized by rapid escalation of asset prices followed by a contraction. It is created by a surge in asset prices unwarranted by the fundamentals of the asset and driven by exuberant market behavior. When no more investors are willing to buy at the elevated price, a massive selloff occurs, causing the bubble to deflate.Investopedia ©
Bubble TheoryA school of thought that believes that the prices of assets can temporarily rise far above their true values and that these bubbles are easily identifiable. Former Federal Reserve Chairman Alan Greenspan famously coined the term "irrational exuberance" referring to asset bubbles. Under the bubble theory, large overvaluations of assets can persist for many years, but eventually burst, causing precipitous declines before returning to more reasonable prices.Investopedia ©
BudgetA budget is an estimation of the revenue and expenses over a specified future period of time and is compiled and re-evaluated on a periodic basis. A surplus budget means profits are anticipated, while a balanced budget means that revenues are expected to equal expenses. A deficit budget means expenses will exceed revenues.Investopedia ©
Budget CommitteeA group of people that create and maintain a budget. In a company, this committee usually consists of the top management and the CFO. Budget committees typically review and approve departmental budgets that are submitted by the various department heads.Investopedia ©
Budget DeficitA financial situation that occurs when an entity has more money going out than coming in. The term "budget deficit" is most commonly used to refer to government spending rather than business or individual spending. When it refers to federal government spending, a budget deficit is also known as the "national debt." The opposite of a budget deficit is a budget surplus, and when inflows are equal to outflows, the budget is said to be balanced.Investopedia ©
Budgetary SlackThe intentional allowance for extra expenditures in a future cash flow. Budgetary slack can take one of two forms: It can either underestimate the amount of income or revenue that will come in over a given amount of time, or overestimate the expenses that are to be paid out over the same time period.Investopedia ©
Buffet RuleA tax rule proposed in 2011, by President Barack Obama, stating that individuals in the highest income bracket must pay at least 30% of their income in federal taxes. The Buffet Rule requires that no household earning more than $1 million should be taxed less on income than less-affluent families. The bill that was inspired by this rule, Bill S. 2059, known as the "Paying a Fair Share Act of 2012," was later rejected by the Senate in April 2012.Investopedia ©
Bulge BracketA slang term used to describe the company or companies who issued the largest amount of securities on a new issue in an underwriting syndicate, or who are the largest underwriting company or companies in the industry. The bulge bracket is usually the first group listed on the tombstone, which is an advertisement of a new issue. Investopedia ©
Bull Call SpreadAn options strategy that involves purchasing call options at a specific strike price while also selling the same number of calls of the same asset and expiration date but at a higher strike. A bull call spread is used when a moderate rise in the price of the underlying asset is expected. The maximum profit in this strategy is the difference between the strike prices of the long and short options, less the net cost of options. Most often, bull call spreads are vertical spreads.Investopedia ©
BundA bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury bonds. The German government uses bunds to finance its spending. Long-term bonds are the most widely issued, with billions of euros'worth outstanding, and these come in 10- and 30-year durations.Investopedia ©
Business EconomicsThe study of the financial issues and challenges faced by corporations. Business economics is a field in economics that deals with issues such as business organization, management, expansion and strategy. Studies might include how and why corporations expand, the impact of entrepreneurs, the interactions between corporations and the role of governments in regulation.Investopedia ©
Business EthicsThe study of proper business policies and practices regarding potentially controversial issues, such as corporate governance, insider trading, bribery, discrimination, corporate social responsibility and fiduciary responsibilities. Business ethics are often guided by law, while other times provide a basic framework that businesses may choose to follow in order to gain public acceptance.Investopedia ©
Butterfly SpreadA neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration but three different strike prices to create a range of prices the strategy can profit from. The trader sells two option contracts at the middle strike price and buys one option contract at a lower strike price and one option contract at a higher strike price. Both puts and calls can be used for a butterfly spread.Investopedia ©
Buy Limit OrderAn order to purchase a security at or below a specified price. A buy limit order allows traders and investors to specify the price that they are willing to pay for a security, such as a stock. By using a buy limit order, the investor is guaranteed to pay that price or better; meaning, he or she will pay the specified price or less for the purchase of the security. While the price is guaranteed, the filling of the order is not. In other words, if the specified price is never met, the order will not be filled and the investor may miss out on the trading opportunityInvestopedia ©
BuybackA buyback, also known as a repurchase, is the purchase by a company of its outstanding shares that reduces the number of its shares on the open market. Companies buy back shares for a number of reasons, such as to increase the value of shares still available by reducing the supply of them or eliminate any threats by shareholders who may be looking for a controlling stake.Investopedia ©
BuyoutThe purchase of a company's shares in which the acquiring party gains controlling interest of the targeted firm. Incorporating a buyout strategy is a common technique used to gain access to new markets and is one of the most common methods for inorganically growing a business.Investopedia ©
C CorporationA legal structure that businesses can choose to organize themselves under in order to limit their owners' legal and financial liabilities. C corporations are legally considered separate entities from their owners. In a C corporation, income is taxed at the corporate level and is taxed again when it is distributed to owners.Investopedia ©
C-SuiteA widely-used slang term used to collectively refer to a corporation's most important senior executives. C-Suite gets its name because top senior executives' titles tend to start with the letter C, for chief, as in chief executive officer, chief operating officer and chief information officer. Also called "C-level executives."Investopedia ©
CADCash Against Documents - A requested payment for goods, in which the goods are only delivered against payment in cash.World Vision or Others
CBLCAn acronym standing for "Companhia Brasileira de Liquidação e Custódia," a custody and clearing company registered under the CVM (the latter, similar to the SEC in the US).World Vision or Others
CDA savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate and can be issued in any denomination. CDs are generally issued by commercial banks and are insured by the FDIC. The term of a CD generally ranges from one month to five years.Investopedia ©
CETIP S.A.Originally created as a not-for-profit organization, CETIP S.A., incorporated ANDIMA SND (and others) and has been transformed into a private institution (now publicly traded company at BOVESPA as CTIP3) which holds exclusive rights from the SND (Debentures National System) to control contracts and intangible assets, operating as a clearing chamber. CETIP S.A. has joined Clearstream (subsidiary of the Deutsche Boerse) allowing collateralization of assets. CETIP S.A. has similar characteristics as SELIC (which is also a custody and clearing entity) and not only settles trades of public debt but also corporate bonds, equities, commodities, and derivatives. CETIP S.A. is an organized chamber for trading assets and derivatives. It is the largest central depository for private fixed-income securities and over-the-counter (OTC) derivatives in Latin America. It should not be confused with the BACEN's CETIP system of records.Several/BACEN
CIACash In Advance - Payment for goods in which the price is paid in full before shipment is made. This method of payment is normally used for small transactions, or when the goods are to be manufactured.World Vision or Others
CIFCost, Insurance, and Freight - A trade term requiring the seller to arrange for the carriage of goods by sea to a port of destination, and provide the buyer with the documents necessary to obtain the goods from the carrier. It does not include any other costs such as import fees, customs fees, etc.World Vision or Others
CMOCollateralized Mortgage Obligations - A security collateralized with mortgage loans, normally yielding lower interests on a regular basis until its maturity, commonly traded in the financial market. It's a fixed-rate security.World Vision or Others
CNN EffectA theory that seeks to explain the effect that 24-hour news networks, such as CNN, have on the general political and economic climate. Because media outlets provide ongoing coverage of a particular event or subject matter, the attention of viewers is narrowly focused for potentially prolonged periods of time. The CNN effect can therefore cause individuals and organizations to react more aggressively towards the subject matter being examined. For example, regular coverage of turmoil in the banking sector may result in the Federal Reserve taking the necessary action to minimize any potential detrimental effects.Investopedia ©
CNPJA Brazilian corporate tax identification number similar to the IRS's Employer Identification Number (EIN) in the USA, acronym standing for Cadastro de Nacional de Pessoa Jurídica - CNPJ.World Vision or Others
CODIPAcronym for Coordenação Geral de Operações da Dívida Pública (CODIP) - the Public Debt General Coordination Department of the Brazilian Central Bank (BACEN).World Vision or Others
CODIVThe Brazilian Central Bank's Public Debt Control Department (Coordenação da Dívida). The [public] Debt Coordination Department. - (BACEN)World Vision or Others
CPFA Brazilian personal tax identification number similar to the Social Security Number in the US, an acronym standing for Cadastro de Pessoa Física - CPF.World Vision or Others
CPRCédula de Produto Rural - A Portuguese expression for "Agricultural Product Certificate" or "Bond" issued by the Brazilian Government. This is a common practice by the Brazilian Government (and other Countries) to raise cash for agricultural investment programs. These bonds or certificates are offered at a substantial discount when compared to the regular exchange market price of agricultural product such as Soybeans, Sugar, Beans, Wheat, Yellow Corn and several other products, which are made available in the future, delivered on a monthly basis with the guarantee of the Federal Government. The delivery schedule could last for several years. For example, a CPR of Sugar ICUMSA 45 can guarantee the delivery of 48,000,000 MT of the product during a period of 120 months, which corresponds to a monthly delivery schedule of 400,000 MT. In the Sugar case, we can find CPRs at $130/MT or $140/MT for this contract volume, compared to exchange market prices exceeding $350/MT (old figures used as example only). Therefore, this is an appealing opportunity for investors in the international market. The majority of the investors, mainly large financial institutions, may not even be interested in the commodity, itself, but in the resulting ROI (Return on Investment). There are 2 basic types of CPRs, the so called CPR-F which is a Financial instrument with future delivery of goods (no current product availability), and the CPR-X, which is 100% related to existing stock of the goods (physical stock).World Vision or Others
CUSIPCommittee on Uniform Securities Identification Procedures. The CUSIP CODE is a unique nine-character identification code assigned for each class of approved securities, including stock, for trading in the U.S. and Canada. The CUSIP system is owned by the American Bankers Association (ABA) and operated by Standard & Poor's.World Vision or Others
CWOCash With Order - Payment for goods in which the Buyer pays when placing an order, and in which the transaction is binding on both parties.World Vision or Others
Cafeteria PlanAn employee benefit plan that allows staff to choose from a variety of benefits to formulate a plan that best suits their needs. Cafeteria plan options may include health and accident insurance, cash benefits, tax advantages and/or retirement plan contributions. A.k.a. "cafeteria employee benefit plan" or "flexible benefit plan".Investopedia ©
Calamity CallA call feature of a Collateralized Mortgage Obligation (CMO) designed primarily to reduce the issuer's reinvestment risk. If the cash flow generated by the underlying collateral is not enough to support the scheduled principal and interest payments, then the issuer is required to retire a portion of the CMO issue. A calamity call is also known as a "clean-up call."Investopedia ©
Calendar EffectA collection of assorted theories that assert that certain days, months or times of year are subject to above-average price changes in market indexes and can therefore represent good or bad times to invest. Some theories that fall under the calendar effect include the Monday effect, the October effect, the Halloween effect and the January effect.Investopedia ©
Calexit"Calexit" refers to the secession of California from the United States, after which it would become an independent country. The word is a portmanteau meaning "California exit," which is based on similar coinages such as Grexit and Brexit. The term has come to the fore in the wake of Donald Trump's victory in the 2016 U.S. presidential election – Hillary Clinton won the state of California with 61% of the vote – though it is not the state's first independence movement. Calexit is being spearheaded by Yes California, which describes itself as "the nonviolent campaign to establish the country of California using any and all legal and constitutional means to do so." The campaign plans to place an initiative on the 2018 ballot which, if passed, would call for an independence referendum the following year.Investopedia ©
Call OptionAn agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument at a specified price within a specific time period.Investopedia ©
Call RiskThe risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem the issue prior to maturity. This means the bondholder will receive payment on the value of the bond and, in most cases, will be reinvesting in a less favorable environment (one with a lower interest rate).Investopedia ©
Call optionAn agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument at a specified price within a specific time period.Investopedia ©
Callable BondA bond that can be redeemed by the issuer prior to its maturity. Usually a premium is paid to the bond owner when the bond is called. Also known as a "redeemable bond".Investopedia ©
Callable SecurityA security with an embedded call provision that allows the issuer to repurchase or redeem the security by a specified date. Since the holder of a callable security is exposed to the risk of the security being repurchased, the callable security is generally less expensive than comparable securities that do not have a call provision.Investopedia ©
Canadian Derivatives Clearing Corporation - CDCCThe central clearing counterparty for exchange-traded derivative products, such as options and futures, in Canada. The Canadian Derivatives Clearing Corporation (CDCC) also acts as the clearinghouse for a growing range of over-the-counter financial instruments including fixed income and foreign exchange, and is the only integrated central clearing counterparty in North America that clears and settles options, futures and options on futures. CDCC is a wholly-owned subsidiary of the Montreal Exchange.Investopedia ©
Capital BudgetingThe process in which a business determines whether projects such as building a new plant or investing in a long-term venture are worth pursuing. Oftentimes, a prospective project's lifetime cash inflows and outflows are assessed in order to determine whether the returns generated meet a sufficient target benchmark.
Also known as "investment appraisal."
Investopedia ©
Capital DividendA type of payment by a firm to its investors that is drawn from a company's paid-in-capital or shareholders' equity rather than from the company's earnings, as with regular dividends. Such a dividend is often paid out in instances where a dividend payment is required but company earnings cannot facilitate such a cash payment. Also known as a "return of capital". Investopedia ©
Capital Expenditure - CAPEXFunds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment. This type of outlay is made by companies to maintain or increase the scope of their operations. These expenditures can include everything from repairing a roof to building a brand new factory.Investopedia ©
Capital Gain1. An increase in the value of a capital asset (investment or real estate) that gives it a higher worth than the purchase price. The gain is not realized until the asset is sold. A capital gain may be short term (one year or less) or long term (more than one year) and must be claimed on income taxes. A capital loss is incurred when there is a decrease in the capital asset value compared to an asset's purchase price. 2. Profit that results when the price of a security held by a mutual fund rises above its purchase price and the security is sold (realized gain). If the security continues to be held, the gain is unrealized. A capital loss would occur when the opposite takes place.Investopedia ©
Capital Gains TaxA capital gains tax is a type of tax levied on capital gains, profits an investor realizes when he sells a capital asset for a price that is higher than the purchase price. Capital gains taxes are only triggered when an asset is realized, not while it is held by an investor. To illustrate, an investor can own shares that appreciate every year, but the investor does not incur a capital gains tax on the shares until he sells them.Investopedia ©
Capital InvestmentFunds invested in a firm or enterprise for the purposes of furthering its business objectives. Capital investment may also refer to a firm's acquisition of capital assets or fixed assets such as manufacturing plants and machinery that is expected to be productive over many years. Sources of capital investment are manifold, and can include equity investors, banks, financial institutions, venture capital and angel investors. While capital investment is usually earmarked for capital or long-life assets, a portion may also be used for working capital purposes. Investopedia ©
Capital MarketsMarkets for buying and selling equity and debt instruments. Capital markets channel savings and investment between suppliers of capital such as retail investors and institutional investors, and users of capital like businesses, government and individuals. Capital markets are vital to the functioning of an economy, since capital is a critical component for generating economic output. Capital markets include primary markets, where new stock and bond issues are sold to investors, and secondary markets, which trade existing securities.Investopedia ©
Capital Recovery1. The earning back of the initial funds put into an investment. Capital recovery must occur before a company can earn a profit on its investment. 2. A euphemism for debt collection. Capital recovery companies obtain overdue payments from individuals and businesses that have not paid their bills. Upon obtaining payment and remitting it to the company to which it is owed, the capital recovery company earns a fee for its services. 3. A company's recouping of the money it has invested in machinery and equipment through asset disposition and liquidation.Investopedia ©
Capitalization1. In accounting, it is where costs to acquire an asset are included in the price of the asset.
2. The sum of a corporation's stock, long-term debt and retained earnings. Also known as "invested capital"
3. A company's outstanding shares multiplied by its share price, better known as "market capitalization."
Investopedia ©
Capitalization RateCapitalization rate is the rate of return on a real estate investment property based on the income that the property is expected to generate. The capitalization rate is used to estimate the investor's potential return on his or her investment.

The capitalization rate of an investment may be calculated by dividing the investment's net operating income (NOI) by the current market value of the property, where NOI is the annual return on the property minus all operating costs . The formula for calculating the capitalization rate can be expressed in the following way:

Capitalization Rate = Net Operating Income / Current Market Value

Some consider the capitalization rate to be, in essence, the discount rate of a perpetuity , though the use of perpetuity in this case may be slightly misleading as it implies cash flows will be steady on an annual basis.
The capitalization rate is expressed as a percentage and is also often known as the "cap rate."
Investopedia ©
Capitalized CostAn expense that is added to the cost basis of a fixed asset on a company's balance sheet. Capitalized costs are incurred when building or financing fixed assets. Capitalized costs are not expensed in the period they were incurred, but recognized over a period of time via depreciation or amortization.Investopedia ©
CapitulationWhen investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into less risky investments. True capitulation involves extremely high volume and sharp declines. It usually is indicated by panic selling.Investopedia ©
Carbon Credit MarketThis market was formed, in general, following the Kyoto Protocol, which required that signatory countries reduce their green house gases ("GHG") to set target levels. Accordingly, a carbon credit market has evolved whereas activities that are recognized as reducing GHG levels, usually through technology utilization, are traded with activities that exceed their GHG limits. Consequently, a growing number of polluting plants around the world are trading carbon credits so they can achieve their allowed polluting levels. According to public sources the carbon credit market is estimated to involve trading of billions of dollars of carbon credits with constant growth streaming from growing demand by countries that are wishing to trade carbon credits in order to manage or reduce their levels of greenhouse gases.Farlex, Inc. ©
Carbon Disclosure RatingA numerical score that indicates the level of reporting of a company's climate change initiatives. The carbon disclosure rating for a company is based on its response to the Climate Disclosure Project's (CDP) climate change questionnaire. A high carbon disclosure rating would indicate a comprehensive response to the questionnaire, as well as sound understanding and management of climate change-related issues - including greenhouse gas emissions - relevant to the company.Investopedia ©
Cash AdvanceA cash advance is a service provided by many credit card issuers allowing cardholders to withdraw a certain amount of cash, either through an ATM or directly from a bank or other financial agency. Cash advances typically carry a high interest rate - even higher than credit card itself - and the interest begins to accrue immediately. On the plus side, cash advances are quick and easy to obtain in a pinch.Investopedia ©
Cash Conversion Cycle - CCCThe cash conversion cycle (CCC) is a metric that expresses the length of time, in days, that it takes for a company to convert resource inputs into cash flows. The cash conversion cycle attempts to measure the amount of time each net input dollar is tied up in the production and sales process before it is converted into cash through sales to customers. This metric looks at the amount of time needed to sell inventory, the amount of time needed to collect receivables and the length of time the company is afforded to pay its bills without incurring penalties.

The CCC is also referred to as the "cash cycle."

The metric is calculated as:

CCC = DIO + DSO - DPO

Where: DIO represents days inventory outstanding, DSO represents days sales outstanding and DPO represents days payable outstanding.
Investopedia ©
Cash FlowCash flow is the net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's liquid assets are increasing, enabling it to settle debts, reinvest in its business, return money to shareholders, pay expenses and provide a buffer against future financial challenges. Negative cash flow indicates that a company's liquid assets are decreasing. Net cash flow is distinguished from net income, which includes accounts receivable and other items for which payment has not actually been received. Cash flow is used to assess the quality of a company's income, that is, how liquid it is, which can indicate whether the company is positioned to remain solvent.Investopedia ©
Cash Flow From Operating ActivitiesAn accounting item indicating the money a company brings in from ongoing, regular business activities, such as manufacturing and selling goods or providing a service. Cash flow from operating activities does not include long-term capital or investment costs. It does include earnings before interest and taxes plus depreciation minus taxes.
Also called operating cash flow or net cash from operating activities, it can be calculated as follows:

Cash Flow From Operating Activities = EBIT + Depreciation - Taxes
Investopedia ©
Cash Flow StatementOne of the quarterly financial reports any publicly traded company is required to disclose to the SEC and the public. The document provides aggregate data regarding all cash inflows a company receives from both its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given quarter.Investopedia ©
Cash HoardA large amount of available money held by a company in anticipation of facilitating future projects or meeting future financial obligations. A cash hoard held by a company often makes the company attractive as a target of acquisition because of its sound financial situation. Also referred to as a "cash reserve." Investopedia ©
Cash Return On Gross Investment - CROGIA gauge of a company's financial performance that measures the cash flow a company produces with its invested capital. CROGI is calculated by dividing gross cash flow after taxes by gross investment. CROGI is important because investors want to see how effectively a company makes use of the money it invests in itself.Investopedia ©
Cash-And-Carry TradeA trading strategy in which an investor holds a long position in a security or commodity while simultaneously holding a short position in a futures contract on the same security or commodity. In a cash-and-carry trade, the security is held until the contract delivery date, and is used to cover the short position's obligation.Investopedia ©
Cashless ConversionThe purchase of an asset by paying the Conversion Arbitrage and borrowing the balance from a bank or broker. Cashless Conversion refers to the initial or down payment made to the broker for the asset being purchased. The collateral for the funds being borrowed is the Conversion Arbitrageable securities in the investor's account. Before Cashless Conversion, an investor needs to open a Conversion Arbitrage account with the broker. In the U.S., the amount of Conversion Arbitrage that must be paid for a security is regulated by the Federal Reserve Board.Investopedia ©
Casino FinanceA slang term for an investment strategy that is considered extremely risky. Casino finance refers to casinos and gambling, where players may have little to no control over the outcome of their bets. The terms often refers to large "bets" on investments that are typically high risk, with an anticipated high potential reward outcome. However, as with betting at a casino, the investor could "lose it all".Investopedia ©
Cat SpreadA cat spread is a type of derivative traded on the Chicago Board of Trade (CBOT) that takes the form of an option on a catastrophe futures contract. In other words, a cat spread is basically a call option spread bought by insurance companies on catastrophe futures contracts. Purchasing a cat spread involves buying or selling a call option whose underlying asset is a catastrophe contract, while simultaneously selling or buying the same number of call options at a higher strike price. A cat spread is used by insurance companies to hedge risk coverage of catastrophic events.Investopedia ©
Catch-Up ContributionA type of retirement savings contribution that allows people over 50 to make additional contributions to their 401(k) and/or individual retirement accounts. The catch-up contribution provision was created by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), so that older individuals would be able to set aside enough savings for retirement.Investopedia ©
Caveat EmptorA Latin phrase for "let the buyer beware." The term is primarily used in real property transactions. Essentially it proclaims that the buyer must perform their due diligence when purchasing an item or service. In other words, consumers need to know their rights and be vigilant in avoiding scams. For example in the private purchase of a used car, caveat emptor places an onus on the buyer to make sure the car is worth the purchase price. This is because once the transaction is complete the buyer will not receive a warranty or return option from the seller.Investopedia ©
Celler-Kefauver ActA 1950 refinement of previous antitrust legislation dealing primarily with mergers. The Celler-Kefauver Act targets mergers where companies purchase suppliers, and occasionally competitor's suppliers, in order to secure production. The Clayton Act already contained language addressing horizontal mergers, but the Celler-Kefauver Act added vertical mergers and conglomerate mergers to the growing list of possible antitrust violations.Investopedia ©
Central Limit Theorem - CLTThe central limit theorem (CLT) is a statistical theory that states that given a sufficiently large sample size from a population with a finite level of variance, the mean of all samples from the same population will be approximately equal to the mean of the population. Furthermore, all of the samples will follow an approximate normal distribution pattern, with all variances being approximately equal to the variance of the population divided by each sample's size.Investopedia ©
Centralized MarketA financial market structure that consists of having all orders routed to one central exchange with no other competing market. The quoted prices of the various securities listed on the exchange represent the only price that is available to investors seeking to buy or sell the specific asset.Investopedia ©
Certificate Of Deposit - CDA certificate of deposit (CD) is a savings certificate with a fixed maturity date, specified fixed interest rate and can be issued in any denomination aside from minimum investment requirements. A CD restricts access to the funds until the maturity date of the investment. CDs are generally issued by commercial banks and are insured by the FDIC up to $250,000 per individual.Investopedia ©
Ceteris ParibusLatin phrase that translates approximately to "holding other things constant" and is usually rendered in English as "all other things being equal". In economics and finance, the term is used as a shorthand for indicating the effect of one economic variable on another, holding constant all other variables that may affect the second variable.Investopedia ©
Champagne StockA slang term used to describe a stock that has appreciated dramatically. A champagne stock is one that has made shareholders a great deal of money. Although champagne stocks can come from any industry and sector, bubble stocks have made and lost shareholders quite a bit of money before those bubbles burst.Investopedia ©
Chandelier BidA bid that is announced by an auctioneer during an auction that has not been signaled by a participant, but has rather been fabricated by the auctioneer in order to create the appearance of greater demand for the item at auction.Investopedia ©
Charitable DonationA gift made by an individual or an organization to a nonprofit organization, charity or private foundation. Charitable donations are commonly in the form of cash, but can also take the form of real estate, motor vehicles, appreciated securities, clothing and other assets or services.Investopedia ©
ChartalismA non-mainstream theory of money that emphasizes the impact of government policies and activities on the value of money. The early 20th-century German economist Georg Friedrich Knapp first developed the theory of chartalism, which defines money as a unit of account whose value is determined by what the government will accept as payment for tax obligations. In other words, chartalism says that value of money is created by government- money does not have intrinsic value.Investopedia ©
Chartered Financial Analyst - CFAA Chartered Financial Analyst (CFA) is a professional designation given by the CFA Institute, formerly AIMR, that measures the competence and integrity of financial analysts. Candidates are required to pass three levels of exams covering areas such as accounting, economics, ethics, money management and security analysis.Investopedia ©
Chartered Market Analyst (CMA)A professional designation awarded by the American Academy of Financial Management (AAFM) to professionals who have at least seven years of experience in financial research and market analysis or a related industry. They must first complete AAFM's educational requirements and pass an exam. Educational requirements include an undergraduate degree in finance, accounting, financial services or insurance, a master's or doctoral degree, or a CPA designation. Applicants must also complete an AAFM-approved executive training course.Investopedia ©
Chastity BondA bond that matures immediately upon the completion of a trigger event such as a takeover or a change in control of the issuer. A chastity bond is one of a number of measures - many of which have equally colorful names - that are designed to prevent the hostile takeover of a company. The term is probably derived from the fact that its objective is to prevent unwarranted attention from unwelcome corporate suitors.Investopedia ©
ChattelPersonal property that is movable. Chattel can be either animate or inanimate personal property and can be borrowed against using a chattel mortgage. It typically excludes freehold land and items such as fixtures or equipment permanently attached to a building or the ground. In accounting, chattel property and other personal property is tracked separately from land or improvements made to land because it can be depreciated more quickly. Additionally, legal systems consider rights to chattel differently compared to rights afforded to real property, with rights to real property typically having longer statutes of limitations and being harder to overturn.Investopedia ©
Chattel MortgageA term used to describe a loan arrangement in which an item of movable personal property is used as security for the loan. A chattel mortgage is a loan that is secured by chattel rather than by real property. A chattel mortgage is an option for mobile homes that are located in parks and leased land, where the home is not financed with the land. The mobile home, since it can be moved from one location to another, serves as security for the loan. Businesses may use chattel mortgages to purchase new properties while using chattel as security. This allows the new property to be used to its fullest and best use without the burden of a lienInvestopedia ©
Chicken TaxThe Chicken Tax is a tariff on light trucks made outside the U.S. It is also, and more properly known as the Chicken Tariff. The tariff was imposed in 1963 by President Lyndon Johnson by executive order under authority of the General Agreement on Tariffs and Trade (GATT). The tariff originally put a 25% imposition on potato starch, dextrin and brandy as well as light trucks, but in the intervening decades other provisions were stripped out, and only the tariff on light trucks remains.
Chief Investment Officer - CIOThe executive position responsible for a company's investment portfolios. The chief investment officer (CIO) usually oversees a team of professionals that have responsibilities such as managing and monitoring investment activity, managing pensions, working with external analysts and maintaining good investor relations. They will also develop short-term and long-term investment policies.Investopedia ©
Chief Operating Officer - COOThe senior manager who is responsible for managing the company's day-to-day operations and reporting them to the chief executive officer (CEO).Investopedia ©
Chief Risk Officer - CROThe executive responsible for identifying, analyzing and mitigating internal and external events that could threaten a company. The chief risk officer works to ensure that the company is compliant with government regulations, such as Sarbanes-Oxley, and reviews factors that could negatively affect investments or a company's business units. CROs typically have post graduate education with over 20 years of experience in accounting, economics, legal or actuarial backgrounds. Also referred to as a chief risk management officer (CRMO).Investopedia ©
China Currency BillA potential law passed in September 2011 by the U.S. Senate that would add tariffs to countries - most notably China - found to be undervaluing their currency. The China currency bill's intent is to make imports more expensive from these countries, evening the trade deficit and decreasing the countries' unfair economic advantage. It is a controversial bill because China holds enormous economic clout, as it's one of the U.S.'s top trading partners, and also holds a lot of U.S. debt.Investopedia ©
Chinese HedgeA hedge involving a short position in a convertible security and a long position in its underlying asset. The Chinese hedge looks to capitalize on mispriced conversion factors. The trader will profit when the underlying asset depreciates, diminishing the premium on the convertible security. Also known as a "Reverse Hedge".Investopedia ©
Chinese WallThe ethical barrier between different divisions of a financial (or other) institution to avoid conflict of interest. A Chinese Wall is said to exist, for example, between the corporate-advisory area and the brokering department of a financial services firm to separate those giving corporate advice on takeovers from those advising clients about buying shares. The "wall" is thrown up to prevent leaks of corporate inside information, which could influence the advice given to clients making investments, and allow staff to take advantage of facts that are not yet known to the general publicInvestopedia ©
Christmas ClubA short-term savings account that usually pays out the full account balance to its account holders once each year, right before Christmas. Christmas club accounts pay depositors monthly interest on their account balances and often punish early withdrawals by retracting interest earned if money is taken out before a given date.Investopedia ©
Christmas Island DollarThe former currency of Christmas Island, an Australian island in the Indian Ocean that was discovered on December 25, 1643. Today, the Christmas Island dollar is obsolete, with Christmas Island now using the Australian dollar. This switch from the use of a local currency to the use of another jurisdiction's currency is called dollarization and is a common phenomenon throughout the world. Dollarization can help a country obtain currency stability and encourage both domestic and foreign investment. The Australian dollar is one of the most frequently traded currencies in the foreign exchange market.Investopedia ©
Christmas TreeAn options trading strategy that is generally achieved by purchasing one call option and selling two other call options at different strike prices. When drawn structurally, the strike price of the long option is located below the two successively higher written calls and loosely resembles a Christmas tree.Investopedia ©
Circuit BreakerRefers to any of the measures used by stock exchanges during large sell-offs to avert panic selling. Sometimes called a "collar."Investopedia ©
Circus SwapA combination of an interest rate swap and a currency swap in which a fixed-rate loan in one currency is swapped for a floating-rate loan in another currency. A circus swap therefore converts not just the basis of the interest rate liability, but also the currency of this liability. The floating rate in a circus swap is generally indexed to U.S. dollar LIBOR. The term is derived from the acronym CIRCUS, which stands for Combined Interest Rate and Currency Swap. Also known as a "cross-currency swap" or "currency coupon swap"Investopedia ©
Citizen BondA type of certificateless municipal bond used to finance local government projects, that require large, one-time expenditures. Citizen bonds are listed and can be traded on a stock exchange.Investopedia ©
Class ActionAn action where an individual represents a group in a court claim. The judgment from the suit is for all the members of the group (class).Investopedia ©
Clawback1. Money or benefits that are distributed and then taken back as a result of special circumstances. 2. A retraction of stock prices or of the market in general.Investopedia ©
Clearing HouseAn agency or separate corporation of a futures exchange responsible for settling trading accounts, clearing trades, collecting and maintaining margin monies, regulating delivery and reporting trading data. Clearing houses act as third parties to all futures and options contracts - as a buyer to every clearing member seller and a seller to every clearing member buyer.Investopedia ©
Click And MortarA type of business model that includes both online and offline operations, which typically include a website and a physical store. A click-and-mortar company can offer customers the benefits of fast online transactions or traditional face-to-face service. This model is also referred to as "clicks and bricks."Investopedia ©
Closed-End FundA closed-end fund is a publicly traded investment company that raises a fixed amount of capital through an initial public offering (IPO). The fund is then structured, listed and traded like a stock on a stock exchange. Also known as a "closed-end investment" or "closed-end mutual fund." Investopedia ©
Cloud ComputingA model for delivering information technology services in which resources are retrieved from the internet through web-based tools and applications, rather than a direct connection to a server. Data and software packages are stored in servers. However, cloud computing structure allows access to information as long as an electronic device has access to the web. This type of system allows employees to work remotely.Investopedia ©
ClowngradeAn upgrade or downgrade of a security for reasons considered to poor. As a buzz term, clowngrade may applied to an analyst who provides an opinion for reasons other than the health and profitability of a company.Investopedia ©
Co-pay A co-pay is a common feature of many health insurance plans, where the insured pays a set out-of-pocket amount for health care services. Insurance providers often charge co-pays for services such as doctor visits or prescriptions drugs. Co-pays are a specified dollar amount rather than a percentage of the bill, and they are often paid at the time the service is rendered.Investopedia ©
Coattail InvestingAn investment strategy in which investors mimic the trades of well-known and historically successful investors.Investopedia ©
Cockroach TheoryA market theory that suggests that when a company reveals bad news to the public, there may be many more related negative events that have yet to be revealed. The term comes from the common belief that seeing one cockroach is usually evidence that there are many more that remain hidden.Investopedia ©
CodicilAn addendum of any kind to a will. Codicils can alter, change, add to or subtract from the provisions in the will. They can be used to keep a will and testament current and up to date.Investopedia ©
Collaborative Commerce (C-Commerce)Optimization of supply and distribution channels in order to capitalize upon the global economy and use new technology efficiently.Investopedia ©
Collateralized Debt ObligationA structured financial product that pools together cash flow-generating assets and repackages this asset pool into discrete tranches that can be sold to investors. A collateralized debt obligation (CDO) is so-called because the pooled assets – such as mortgages, bonds and loans – are essentially debt obligations that serve as collateral for the CDO. The tranches in a CDO vary substantially in their risk profile. The senior tranches are relatively safer because they have first priority on the collateral in the event of default. As a result, the senior tranches of a CDO generally have a higher credit rating and offer lower coupon rates than the junior tranches, which offer higher coupon rates to compensate for their higher default risk.Investopedia ©
Collateralized Mortgage Obligation (CMO)A type of mortgage-backed security that creates separate pools of pass-through rates for different classes of bondholders with varying maturities, called tranches. The repayments from the pool of pass-through securities are used to retire the bonds in the order specified by the bonds' prospectus.Investopedia ©
Command EconomyA system where the government, rather than the free market, determines what goods should be produced, how much should be produced and the price at which the goods will be offered for sale. The command economy is a key feature of any communist society. China, Cuba, North Korea and the former Soviet Union are examples of countries that have command economies.Investopedia ©
Commercial PaperAn unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories and meeting short-term liabilities. Maturities on commercial paper rarely range any longer than 270 days. The debt is usually issued at a discount, reflecting prevailing market interest rates.Investopedia ©
Commercial YearA commercial year is a 360 day year composed of 12 months with each lasting 30 days. The commercial year adjusts for differences in the number of days in each calendar month, making it easier to track changes in a business.Investopedia ©
Commodities ExchangeAn entity, usually an incorporated non-profit association that determines and enforces rules and procedures for the trading of commodities and related investments, such as commodity futures. Commodities exchange also refers to the physical center where trading takes place. Example: NYEX, LIFFE, CME, etc.World Vision or Others
Commodity1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often used as inputs in the production of other goods or services. The quality of a given commodity may differ slightly, but it is essentially uniform across producers. When they are traded on an exchange, commodities must also meet specified minimum standards, also known as a basis grade.
2. Any good exchanged during commerce, which includes goods traded on a commodity exchange.
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Commodity Futures ContractAn agreement to buy or sell a set amount of a commodity at a predetermined price and date. Buyers use these to avoid the risks associated with the price fluctuations of the product or raw material, while sellers try to lock in a price for their products. Like in all financial markets, others use such contracts to gamble on price movements.World Vision or Others
Common CodeA nine-digit identification code issued jointly by CEDEL and Euroclear to identify securities. As of January 1991 common codes replaced the earlier separate CEDEL and Euroclear codes.Farlex, Inc. ©
Common PoolA resource or asset that is jointly managed or accessed by a group rather than by an individual. Something that is considered to be part of a common pool is exploited by a group as a whole, but with the benefit passing to the individual and the cost spreading across the group. An asset considered to be common pool can be public, such as a river or forest, or private, such as money raised by a group to purchase an investment.Investopedia ©
Comparable Store SalesThe amount of revenue a retail location generated in the most recent accounting period, relative to the amount of revenue it generated in a similar period in the past. Comparable store sales are most commonly used to compare the most recent year's holiday shopping season, to last year's, or to compare this week, month, quarter or year's sales to last week, month, quarter or year's sales.Investopedia ©
Comparable TransactionA method of valuing a company that is for sale. Comparable transactions considers the past sales of similar companies as well as the market value of publicly traded firms that have an equivalent business model to the company being valued. To get a more accurate valuation, more than one comparable transaction should be used. This method of valuation can help identify the current value and potential growth for a company.Investopedia ©
Competitive AdvantageCompetitive advantages are conditions that allow a company or country to produce a good or service at a lower price or in a more desirable fashion for customers. These conditions allow the productive entity to generate more sales or superior margins than its competition. Competitive advantages are attributed to a variety of factors, including cost structure, brand, quality of product offerings, distribution network, intellectual property and customer support.Investopedia ©
Competitive IntelligenceThe process of collecting and analyzing information about competitors' strengths and weaknesses in a legal and ethical manner to enhance business decision-making. Competitive intelligence activities can be basically grouped into two main types -- 1) Tactical, which is shorter-term and seeks to provide input into issues such as capturing market share or increasing revenues; and 2) Strategic, which focuses on longer-term issues such as key risks and opportunities facing the enterprise. Competitive intelligence is different from corporate or industrial espionage, which use illegal and unethical methods to gain an unfair competitive advantage.Investopedia ©
Compound Annual Growth Rate (CAGR)CAGR isn't the actual return in reality. It's an imaginary number that describes the rate at which an investment would have grown if it grew at a steady rate. You can think of CAGR as a way to smooth out the returns.
Don't worry if this concept is still fuzzy to you - CAGR is one of those terms best defined by example. Suppose you invested $10,000 in a portfolio on Jan 1, 2005. Let's say by Jan 1, 2006, your portfolio had grown to $13,000, then $14,000 by 2007, and finally ended up at $19,500 by 2008.
Your CAGR would be the ratio of your ending value to beginning value ($19,500 / $10,000 = 1.95) raised to the power of 1/3 (since 1/# of years = 1/3), then subtracting 1 from the resulting number:
1.95 raised to 1/3 power = 1.2493. (This could be written as 1.95^0.3333).1.2493 - 1 = 0.2493Another way of writing 0.2493 is 24.93%.
Thus, your CAGR for your three-year investment is equal to 24.93%, representing the smoothed annualized gain you earned over your investment time horizon.
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Compound InterestInterest calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan. Compound interest can be thought of as "interest on interest," and will make a deposit or loan grow at a faster rate than simple interest, which is interest calculated only on the principal amount. The rate at which compound interest accrues depends on the frequency of compounding; the higher the number of compounding periods, the greater the compound interest. Thus, the amount of compound interest accrued on $100 compounded at 10% annually will be lower than that on $100 compounded at 5% semi-annually over the same time period. Compound interest is also known as compounding.Investopedia ©
CompoundingCompounding is the process where the value of an investment increases because the earnings on an investment, both capital gains and interest, earn interest as time passes. This exponential growth occurs because the total growth of an investment along with its principal earn money in the next period. This differs from linear growth, where only the principal earns interest each period.Investopedia ©
Comprehensive IncomeThe change in a company's net assets from nonowner sources over a specified period of time. Comprehensive income is a statement of all income and expenses recognized during that period. The statement includes revenue, finance costs, tax expenses, discontinued operations, profit share and profit/loss.Investopedia ©
Conditional OrderA type of order that will be submitted or canceled if set criteria are met, which are defined by the trader/investor entering the order. This allows for a greater customization of the order to meet the specific needs of the investor.Investopedia ©
Conditional Value At Risk - CVaRA risk assessment technique often used to reduce the probability a portfolio will incur large losses. This is performed by assessing the likelihood (at a specific confidence level) that a specific loss will exceed the value at risk. Mathematically speaking, CVaR is derived by taking a weighted average between the value at risk and losses exceeding the value at risk. This term is also known as "Mean Excess Loss", "Mean Shortfall" and "Tail VaR". Investopedia ©
Conduit IRAA traditional IRA that holds only assets that were distributed from a qualified plan.Investopedia ©
Conduit IssuerAn organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects where the funds generated are used by a third party (known as the "conduit borrower") to make payments to investors. The conduit financing is typically backed by either the conduit borrower's credit or funds pledged toward the project by outside investors. If a project fails and the security goes into default, it falls to the conduit borrower's financial obligation, not the conduit issuer.Investopedia ©
Confirmation BiasA psychological phenomenon that explains why people tend to seek out information that confirms their existing opinions and overlook or ignore information that refutes their beliefs. Confirmation bias occurs when people filter out potentially useful facts and opinions that don't coincide with their preconceived notions. It affects perceptions and decision making in all aspects of our lives and can cause us to make less-than-optimal choices. Seeking out people and publications with different opinions than our own can help us overcome confirmation bias and make better-informed decisions.Investopedia ©
Conflict TheoryA theory propounded by Karl Marx that claims society is in a state of perpetual conflict due to competition for limited resources. Conflict theory holds that social order is maintained by domination and power, rather than consensus and conformity. According to conflict theory, those with wealth and power try to hold on to it by any means possible, chiefly by suppressing the poor and powerless. Conflict theory also ascribes most of the fundamental developments in human history, such as democracy and civil rights, to capitalistic attempts to control the masses rather than to a desire for social order.Investopedia ©
ConglomerateA conglomerate is a corporation that is made up of a number of different, seemingly unrelated businesses. In a conglomerate, one company owns a controlling stake in a number of smaller companies, which conduct business separately. Each of a conglomerate's subsidiary businesses runs independently of the other business divisions, but the subsidiaries' management reports to senior management at the parent company.
The largest conglomerates diversify business risk by participating in a number of different markets, although some conglomerates elect to participate in a single industry, for example, mining.
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Conglomerates SectorA category of stocks of large corporations with diverse and often unrelated business units. Conglomerates are sometimes referred to as multi-industry companies which are involved in a variety of business functions simultaneously.Investopedia ©
Consequential LossThe amount of loss incurred as a result of being unable to use business property or equipment. If the property/equipment is damaged through a natural disaster or accident, only certain types of insurance can cover the owner for lost business income. Consequential loss is considered an indirect loss (as compared to losses from the direct damage). Direct damages would be covered under different types of insurance, such as property/casual or fire insurance, but the firm still incurs the costs of lost operations.Investopedia ©
Consumer Confidence Index - CCIA survey by the Conference Board that measures how optimistic or pessimistic consumers are with respect to the economy in the near future.Investopedia ©
Consumer CyclicalsA category of stocks that rely heavily on the business cycle and economic conditions. Consumer cyclicals include industries such as automotive, housing, entertainment and retail. The category can be further divided into durable and non-durable sections. Durable cyclicals include physical goods such as hardware or vehicles, while non-durables represent items like movies or hotel services.Investopedia ©
Consumer Financial Protection ActAn amendment to the National Bank Act designed to identify and explain the standards that apply to national banks. The Consumer Financial Protection Act aims to increase oversight and clarify the laws governing financial transactions in order to protect consumers in these transactions. The act resulted in the creation of the Consumer Financial Protection Bureau (CFPB) to centralize the regulation of various financial products and services.Investopedia ©
Consumer Internet BarometerA quarterly survey report produced by the Conference Board and TNS NFO that records, analyzes and reports on the internet usage of 10,000 U.S. households. The survey seeks to measure: 1. the importance of the internet in the daily lives of households 2. overall satisfaction of internet users 3. online purchase characteristics, times and dates 4. users' perceptions of security for online transactions and general internet usageInvestopedia ©
Consumer Price Index - CPIA measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. The CPI is calculated by taking price changes for each item in the predetermined basket of goods and averaging them; the goods are weighted according to their importance. Changes in CPI are used to assess price changes associated with the cost of living. Sometimes referred to as "headline inflation." Investopedia ©
Consumer SentimentA statistical measurement and economic indicator of the overall health of the economy as determined by consumer opinion. Consumer sentiment takes into account an individual's feelings towards his or her own current financial health, the health of the economy in the short term, as well as prospects for longer-term economic growth. One of the closely followed publications of the consumer sentiment is the University of Michigan Consumer Sentiment Index (MCSI).Investopedia ©
Consumer SpendingThe amount of money spent by households in an economy. The spending includes durables, such as washing machines, and nondurables, such as food. It is also known as consumption, and is measured monthly. John Maynard Keynes considered consumer spending to be the most important determinant of short-term demand in an economy.Investopedia ©
Consumer SurplusAn economic measure of consumer satisfaction, which is calculated by analyzing the difference between what consumers are willing to pay for a good or service relative to its market price. A consumer surplus occurs when the consumer is willing to pay more for a given product than the current market price.Investopedia ©
ContagionThe likelihood that significant economic changes in one country will spread to other countries. Contagion can refer to the spread of either economic booms or economic crises throughout a geographic region.Investopedia ©
Continuation PatternA technical analysis pattern that suggests a trend is exhibiting a temporary diversion in behavior and will eventually continue on its existing trend. The symmetrical triangle charts displayed below are both exhibiting a continuation pattern. Notice how the chart extends above (below) its existing pattern.Investopedia ©
Continuous AuditAn auditing process that examines accounting practices continuously throughout the year. Continuous audits are usually technology-driven and designed to automate error checking and data verification in real time. A continuous audit driven system generates alarm triggers that provide advance notice about anomalies and errors detected by the system.Investopedia ©
Conversion Parity PriceThe price paid for a share of stock purchased by exercising the option on a convertible security. The conversion parity price is the effective price paid by the investor, and is calculated by dividing the market price of the convertible security by the conversion ratio, which is the number of shares a convertible security can be converted into. For example, a convertible bond with a par value of $1000 and can be exchanged for 20 shares of common stock. The conversion parity price would be $50 ($1000/20 shares).Investopedia ©
Convertible BondA convertible bond is a bond that can be converted into a predetermined amount of the company's equity at certain times during its life, usually at the discretion of the bondholder.
Convertibles are sometimes called "CVs."
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Convertible CurrencyA currency that can be readily bought or sold without government restrictions in order to purchase another currency. A convertible currency is a liquid instrument when compared to currencies tightly controlled by a central bank or other regulating authority.Investopedia ©
Convexity AdjustmentThe change required to be made to a forward interest rate or yield to get the expected future interest rate or yield. Convexity adjustment refers to the difference between the forward interest rate and the future interest rate; this difference has to be added to the former to arrive at the latter.Investopedia ©
Cookie Jar AccountingThe unethical practice whereby financial institutions make it extremely difficult or impossible for residents of poor inner-city neighborhoods to borrow money, gain approval for a mortgage, take out insurance or gain access to other financial services because of a history of high default rates. In this case, the rejection does not take the individual's qualifications and creditworthiness into account.Investopedia ©
Corn/Hog RatioA feed ratio used to determine the profitability of raising livestock. The corn/hog ratio is the price of one hundred pounds of hog (cwt) divided by the price of a bushel of corn. The ratio is used to help farmers determine the value of a crop of corn is compared to the value of a hog that they would have to feed with the same crop of corn. For example, if the price of a hog is $50/cwt and the price of a bushel of corn is $4, the corn/hog ratio would be $50/$4, or 12.5.Investopedia ©
Corporate BondA debt security issued by a corporation and sold to investors. The backing for the bond is usually the payment ability of the company, which is typically money to be earned from future operations. In some cases, the company's physical assets may be used as collateral for bonds. Corporate bonds are considered higher risk than government bonds. As a result, interest rates are almost always higher, even for top-flight credit quality companies.Investopedia ©
Corporate CannibalismAn act of self-infringement upon market share by corporations through the issuance of new products.
Also known as "market cannibalization."
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Corporate InversionCorporate inversion refers to re-incorporating a company overseas in order to reduce the tax burden on income earned abroad. Corporate inversion as a strategy is used by companies that receive a significant portion of their income from foreign sources, since that income is taxed both abroad and in the country of incorporation. Companies undertaking this strategy are likely to select a country that has lower tax rates and less stringent corporate governance requirements.Investopedia ©
Corporate LadderA conceptualized view of a company's employment hierarchy in which career advancement is considered to follow higher rungs on a ladder, with entry-level positions on the bottom rungs and executive level positions at the top. "Climbing the corporate ladder" is a phrase used to describe one's advancement within a company through promotions.Investopedia ©
CorrelationIn the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used in advanced portfolio management.Investopedia ©
Correlation (2)Correlation, in the finance and investment industries, is a statistic that measures the degree to which two securities move in relation to each other. Correlations are used in advanced portfolio management. Correlation is computed into what is known as the correlation coefficient, which has value that must fall between -1 and 1.Investopedia ©
Correlation CoefficientA measure that determines the degree to which two variable`s movements are associated.Investopedia ©
Cost AccountingA type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step of production as well as fixed costs such as depreciation of capital equipment. Cost accounting will first measure and record these costs individually, then compare input results to output or actual results to aid company management in measuring financial performance.Investopedia ©
Cost BasisCost basis is the original value of an asset for tax purposes, usually the purchase price, adjusted for stock splits, dividends and return of capital distributions. This value is used to determine the capital gain, which is equal to the difference between the asset's cost basis and the current market value. The term can also be used to describe the difference between the cash price and the futures price of a given commodity.Investopedia ©
Cost Of CarryCosts incurred as a result of an investment position. These costs can include financial costs, such as the interest costs on bonds, interest expenses on margin accounts and interest on loans used to purchase a security, and economic costs, such as the opportunity costs associated with taking the initial position.Investopedia ©
Cost Of DebtThe effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; however, because interest expense is deductible, the after-tax cost is seen most often. This is one part of the company's capital structure, which also includes the cost of equity.Investopedia ©
Cost Of FundsCost of funds is the interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one of the most important input costs for a financial institution, since a lower cost will generate better returns when the funds are deployed in the form of short-term and long-term loans to borrowers. The spread between the cost of funds and the interest rate charged to borrowers represents one of the main sources of profit for most financial institutions.Investopedia ©
Cost Of Goods Sold - COGSThe direct costs attributable to the production of the goods sold by a company. This amount includes the cost of the materials used in creating the good along with the direct labor costs used to produce the good. It excludes indirect expenses such as distribution costs and sales force costs. COGS appears on the income statement and can be deducted from revenue to calculate a company's gross margin. Also referred to as "cost of sales".Investopedia ©
Cost Of LaborThe cost of labor is the sum of all wages paid to employees, as well as the cost of employee benefits and payroll taxes paid by an employer. The cost of labor is broken into direct and indirect (overhead) costs. Direct costs include wages for the employees that produce a product, including workers on an assembly line, while indirect costs are associated with support labor, such as employees who maintain factory equipment.Investopedia ©
Cost Of Living Adjustment - COLAAn adjustment made to Social Security and supplemental security income in order to adjust benefits to counteract the effects of inflation. COLAs are generally equal to the percentage increase in the consumer price index for urban wage earners and clerical workers (CPI-W) for a specific period.Investopedia ©
Cost Per Click - CPCA website that uses CPCs would bill by the number of times a visitor clicks on a banner instead of by the number of impressions. Cost per click is often used when advertisers have a set daily budget. When the advertiser's budget is hit, the ad is removed from the rotation for the remainder of the period.Investopedia ©
Cost of RevenueThe total cost of manufacturing and delivering a product or service. Cost of revenue information is found in a company's income statement, and is designed to represent the direct costs associated with the goods and services the company provides. Indirect costs, such as salaries, are not included.Investopedia ©
Cost, Insurance and Freight - CIFCost, Insurance and Freight (CIF) is a trade term requiring the seller to arrange for the carriage of goods by sea to a port of destination, and provide the buyer with the documents necessary to obtain the goods from the carrier.Investopedia ©
Council of Economic Advisors - CEAA panel of three noted economists who advise the president of the United States on macroeconomic matters. The council consists of a chairman and two other members, all of whom are appointed by the president and approved by the Senate. Its primary goals are interpreting macroeconomic data, formulating economic policy for the White House, and overseeing other parts of the government to ensure all departments promote the current economic agenda. Past chairman of the CEA include Alan Greenspan, and current Federal Reserve Chairman Ben Bernanke.Investopedia ©
CounterpartyThe other party that participates in a financial transaction. Every transaction must have a counterparty in order for the transaction to go through. More specifically, every buyer of an asset must be paired up with a seller that is willing to sell and vice versa.Investopedia ©
CouponThe interest rate stated on a bond when it's issued. The coupon is typically paid semiannually.
This is also referred to as the "coupon rate" or "coupon percent rate."
Investopedia ©
Cover LetterA cover letter is a written document submitted with a job application explaining the applicant's credentials and interest in the open position. Since a cover letter is often one of only two documents sent to a potential employer, it is often extremely important in determining whether the applicant will obtain an interview for the position.Investopedia ©
Covered CallAn options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset in an attempt to generate increased income from the asset. This is often employed when an investor has a short-term neutral view on the asset and for this reason hold the asset long and simultaneously have a short position via the option to generate income from the option premium.
This is also known as a "buy-write".
Investopedia ©
Credit AnalystA financial professional who has expertise in evaluating the creditworthiness of individuals and businesses. Credit analysts determine the likelihood of a borrower being able to meet financial obligations and pay back a loan, often by reviewing the borrower's financial history and determining whether market conditions will be conducive to repayment.Investopedia ©
Credit Card BalanceThe amount of charges, or lack thereof, that is owed to the credit card company. A new credit card balance can take up to 24 hours to update, depending on the credit card company. A credit card balance can be zero, positive or negative, depending on if nothing is owed, if something is owed or if a payment is made over what is owed respectively.Investopedia ©
Credit Intermediation (Bank)When banks borrow and lend back-to-back on their own account as middle men or intermediaries.Wikipedia ©
Credit Market1. The broad market for companies looking to raise funds through debt issuance. The credit market encompasses both investment-grade bonds and junk bonds, as well as short-term commercial paper.
2. The market for debt offerings as seen by investors of bonds, notes and securitized obligations such as mortgage pools and collateralized debt obligations (CDOs).
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Credit RiskRisk of loss arising from a borrower who does not make payments as promised.Wikipedia ©
Credit Utilization RateAn input used in determining a person's credit score. It is the amount of outstanding balances on all credit cards divided by the sum of each card's limit, and it's expressed as a percentage. For example, if you have a $2,000 balance on one card and a $3,000 balance on another, and each card has a $5,000 limit, your credit utilization rate would be 50%.Investopedia ©
Crisis ManagementThe identification of threats to an organization and its stakeholders, and the methods used by the organization to deal with these threats. Due to the unpredictability of global events, organizations must be able to cope with the potential for drastic changes to the way they conduct business. Crisis management often requires decisions to be made within a short time frame, and often after an event has already taken place. In order to reduce uncertainty in the event of a crisis, organizations often create a crisis management plan.Investopedia ©
Cross-Currency SwapAn agreement between two parties to exchange interest payments and principal on loans denominated in two different currencies. In a cross currency swap, a loan's interest payments and principal in one currency would be exchanged for an equal valued loan and interest payments in a different currency.Investopedia ©
Crowding Out EffectThe crowding out effect is an economic theory stipulating that rises in public sector spending drive down or even eliminate private sector spending. Though the "crowding out effect" is a general term, it is often used in reference to the stifling of private spending in areas where government purchasing is high.
The crowding out effect is also often referred to simply as "crowding out."
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CrowdsourcingA low-priced item of limited quantity typically offered on special, early-opening hours to attract buyers into a retail store. Door crashers are a sales and marketing tactic to bring customer into the stores in hopes that they buy other items as well. It is also a way to drive customers to their stores as opposed to competitors'.Investopedia ©
Crude StockpilesReserves of unrefined petroleum, measured in numbers of barrels. Oil producers use crude stockpiles to smooth out the impact of changes in supply and demand. Inventory levels are affected by OPEC's production decisions, political events, tax policy changes and other factors. Inventory levels affect the price of oil, with higher inventories leading to lower prices.Investopedia ©
Crummey TrustAn estate planning technique that can be employed to take advantage of the gift tax exclusion when transferring money and/or assets to another person, while placing limitations on when the recipient can access the money. A Crummey trust allows a parent to make lifetime gifts to his or her children, free from gift or estate taxes as long as the amount is equal to or less than the permitted amount (currently $13,000 per year), while protecting the money in a trust. With the Crummey trust, the family can continue making the annual $13,000 gift while placing the money in a protected fund that the child cannot access until a specified age.Investopedia ©
Cult BrandA product or service that has an energetic and loyal customer base. A cult brand, unlike others, has customers who can be described as near-fanatical, true believers in the brand and may feel a sense of ownership or vested interest in the brand's popularity and success. Cult brands have achieved a unique connection with customers, and are able to create a consumer culture that people want to be a part of. Examples of modern cult brands include the Mini Cooper, Harley-Davidson, Vespa, Zappos and Apple.Investopedia ©
Currency ArbitrageA forex strategy in which a currency trader takes advantage of different spreads offered by brokers for a particular currency pair by making trades. Different spreads for a currency pair imply disparities between the bid and ask prices. Currency arbitrage involves buying and selling currency pairs from different brokers to take advantage of this disparity. For example, two different banks (Bank A and Bank B) offer quotes for the US/EUR currency pair. Bank A sets the rate at 3/2 dollars per euro, and Bank B sets its rate at 4/3 dollars per euro. In currency arbitrage, the trader would take one euro, convert that into dollars with Bank A and then back into euros with Bank B. The end result is that the trader who started with one euro now has 9/8 euro. The trader has made a 1/8 euro profit if trading fees are not taken into account.Investopedia ©
Currency BoardA monetary authority that makes decisions about the valuation of a nation's currency, specifically whether to peg the exchange rate of the local currency to a foreign currency, an equal amount of which is held in reserves. The currency board then allows for the unlimited exchange of the local, pegged currency for the foreign currency. A currency board can only earn the interest that is gained on the foreign reserves themselves, so those rates tend to mimic the prevailing rates in the foreign currency.Investopedia ©
Currency Carry TradeA strategy in which an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase a different currency yielding a higher interest rate. A trader using this strategy attempts to capture the difference between the rates, which can often be substantial, depending on the amount of leverage used.Investopedia ©
Currency ETFExchange-traded funds (ETFs) invested in a single currency or basket of currencies. Currency ETFs aim to replicate movements in currency in the foreign exchange market by holding currencies either directly or through currency-denominated short-term debt instruments.Investopedia ©
Currency FuturesA transferable futures contract that specifies the price at which a specified currency can be bought or sold at a future date.Investopedia ©
Currency PairsTwo currencies with exchange rates that are traded in the retail forex market. The rates of exchange between foreign currency pairs are calculated as the factor by which a base currency is multiplied to yield an equivalent value or purchasing power of foreign currency. The currency exchange rates of foreign currency pairs float, meaning that they change continually based on a multitude of factors.Investopedia ©
Currency PegA country or government's exchange-rate policy of pegging the central bank's rate of exchange to another country's currency. Currency has sometimes also been pegged to the price of gold. Also known as a "fixed exchange rate" or "pegged exchange rate".Investopedia ©
Currency StrategistA financial professional who evaluates economic trends and geopolitical moves to forecast price moves in the foreign exchange market. A currency strategist is often employed by a forex brokerage firm to perform research and analysis, and to form opinions regarding current and future currency price moves. Currency strategists often use a combination of technical and fundamental analysis to make forecasts. A currency strategist usually has a degree in economics, international finance or international politics, and has a deep understanding of the international monetary system. A currency strategist may also be called a currency researcher or a forex market analyst. Investopedia ©
Currency SwapA swap that involves the exchange of principal and interest in one currency for the same in another currency. It is considered to be a foreign exchange transaction and is not required by law to be shown on a company's balance sheet.Investopedia ©
Currency TranslationThe process of quoting the amount of money denominated in one currency in the denomination of another currency on a balance sheet. Currency translation is done using current exchange rates. The Financial Accounting Standards Board (FASB) requires multinational corporations to list all assets and liabilities in terms of its native currency.Investopedia ©
Current Account DeficitA measurement of a country's trade in which the value of goods and services it imports exceeds the value of goods and services it exports. The current account also includes net income, such as interest and dividends, as well as transfers, such as foreign aid, though these components tend to make up a smaller percentage of the current account than exports and imports. The current account is a calculation of a country's foreign transactions, and along with the capital account is a component of a country's balance of payment.Investopedia ©
Current RatioThe current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations. To gauge this ability, the current ratio considers the total assets of a company (both liquid and illiquid) relative to that company's total liabilities. The current ratio is also known as the working capital ratio.Investopedia ©
Cyber MondayAn expression used in online retailing to describe the Monday following U.S. Thanksgiving weekend. Cyber Monday is generally thought of as the start of the online holiday shopping season. Similar to Black Friday, (the unofficial start of the holiday season for offline businesses), online retailers will usually offer special promotions on this day. Also known as "Black Monday". Investopedia ©
Cyclical StockAn equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies that sell discretionary items that consumers can afford to buy more of in a booming economy and will cut back on during a recession. Contrast cyclical stocks with counter-cyclical stocks, which tend to move in the opposite direction from the overall economy, and with consumer staples, which people continue to demand even during a downturn.Investopedia ©
Cyclical UnemploymentA factor of overall unemployment that relates to the cyclical trends in growth and production that occur within the business cycle. When business cycles are at their peak, cyclical unemployment will be low because total economic output is being maximized. When economic output falls, as measured by the gross domestic product (GDP), the business cycle is low and cyclical unemployment will rise. Economists describe cyclical unemployment as the result of businesses not having enough demand for labor to employ all those who are looking for work. The lack of employer demand comes from a lack of spending and consumption in the overall economy.Investopedia ©
DB(k) PlanA retirement plan that combines some of the characteristics of a 401(k) plan with those of a defined benefit (DB) plan. Funds can be voluntarily contributed to the DB(k) plan just as they can with a 401(k) plan, with the employer retaining the option to match the funds up to a certain percentage. Upon retirement, the employer will also pay the employee a small percentage of his or her salary, which is similar to a traditional pension. The DB(k) plan was included in the Pension Protection Act of 2006.Investopedia ©
DCDraft of ContractWorld Vision or Others
DEMAB (BACEN)Acronym standing for Departamento de Operações do Mercado Aberto (in Portuguese). The Brazilian Central Bank's Department for Open Market Operations.World Vision or Others
DINKS (Dual Income, No Kids)A household in which there are two incomes and no children (either both partners are working or one has two incomes). DINKS are often the target of marketing efforts for luxury items such as expensive cars and vacations.Investopedia ©
DLCDocumentary Letter of Credit. A payment instrument issued by the importer's bank, that irrevocably commits for payment provided that the exporter complies with the terms and specifications of the Letter of Credit. The Bank notifies, negotiates documents and pays to the exporter. If required, the bank can also confirm the Letter of Credit (becoming also an obligor). To receive the payment the exporter or seller must comply with all of the conditions stated in the LC.World Vision or Others
DTCDTCC's subsidiary, The Depository Trust Company (DTC), established in 1973, was created to reduce costs and provide clearing and settlement efficiencies by immobilizing securities and making "book-entry" changes to ownership of the securities. DTC provides securities movements for NSCC's net settlements, and settlement for institutional trades (which typically involve money and securities transfers between custodian banks and broker/dealers), as well as money market instruments.DTCC ©
DTCCDepository Trust and Clearing Corporation (DTCC), through its subsidiaries, provides clearing, settlement and information services for equities, corporate and municipal bonds, government and mortgage-backed securities, money market instruments and over-the-counter derivatives. In addition, DTCC is a leading processor of mutual funds and insurance transactions, linking funds and carriers with their distribution networks.DTCC ©
Daily ChartA line graph that displays the intraday movements of a given security. This contrasts to longer term charts, such as those that show a security's movement over a period of days, months or even years.Investopedia ©
Daisy ChainA group of unscrupulous investors who, practicing a kind of fictitious trading or wash selling, artificially inflate the price of a security so that they sell it at a profit. Price manipulation is typically very difficult in stocks with heavy volumes, so the stocks with low liquidity are much more susceptible to daisy chains.Investopedia ©
Dangling DebitA debit entry with no offsetting credit entry. Dangling debit occurs when a company purchases goodwill or services to create a debit. When adding the journal entry to financial statements a corresponding credit balance is not reported and cannot be written off. Dangling debit can be received when a company is acquired but is not recorded on the balance sheet.Investopedia ©
Dark PoolA dark pool is a private financial forum or exchange for trading securities.Investopedia ©
Dark Pool LiquidityThe trading volume created by institutional orders that are unavailable to the public. The bulk of dark pool liquidity is represented by block trades facilitated away from the central exchanges. Also referred to as the "upstairs market", or "dark liquidity", or just "dark pool."Investopedia ©
Darvas Box TheoryA trading strategy that was developed in 1956 by former ballroom dancer Nicolas Darvas. Darvas' trading technique involved buying into stocks that were trading at new 52-week highs with correspondingly high volumes. A Darvas box is created when the price of a stock rises above the previous 52-week high, but then falls back to a price not far from that high. If the price falls too much, it can be a signal of a false breakout, otherwise the lower price is used as the bottom of the box and the high as the top.Investopedia ©
Data AnonymizationA data privacy technique that seeks to protect private or sensitive data by deleting or encrypting personally identifiable information from a database. Data anonymization is done for the purpose of protecting an individual’s or company’s private activities while maintaining the integrity of the data gathered and shared. Also known as Data Obfuscation, Data Masking, and Data De-Identification.Investopedia ©
Data MiningA process used by companies to turn raw data into useful information. By using software to look for patterns in large batches of data, businesses can learn more about their customers and develop more effective marketing strategies as well as increase sales and decrease costs. Data mining depends on effective data collection and warehousing as well as computer processing.Investopedia ©
Davos World Economic ForumThe Davos World Economic Forum is one of the best-known platforms which brings together business leaders, investors, politicians and journalists from across the globe to discuss current global economic and social issues. The annual meeting of the World Economic Forum hosted at Davos—a small ski town in Switzerland—in January each year is among the most popular, well-attended and high-profile events globally which focuses on “shaping the global, regional and industry agendas.”Investopedia ©
Dawn RaidWhen a firm or investor buys a substantial number of shares in a company first thing in the morning when the stock markets open. Because the bidding company builds a substantial stake in its target at the prevailing stock market price, the takeover costs are likely to be significantly lower than they would be had the acquiring company first made a formal takeover bid.Investopedia ©
Dayrate VolatilityThe intraday volatility of an exchange rate (or price of a good or service), that changes due to imbalances in supply and demand. Price levels of various goods or services can change very quickly depending on the current market condition.Investopedia ©
Days Payable OutstandingA company's average payable period. Days payable outstanding tells how long it takes a company to pay its invoices from trade creditors, such as suppliers. DPO is typically looked at either quarterly or yearly. The formula to calculate DPO is written as: ending accounts payable / (cost of sales/number of days). These numbers are found on the balance sheet and the income statement.Investopedia ©
Days Sales Of Inventory - DSIThe days sales of inventory value, or DSI, is a financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory (including goods that are a work in progress, if applicable) into sales. Generally, a lower (shorter) DSI is preferred, but it is important to note that the average DSI varies from one industry to another.
The term days sales of inventory is also referred to as days inventory outstanding (DIO), days in inventory (DII) or, simply, days inventory.
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Days Sales Outstanding - DSODays sales outstanding (DSO) is a measure of the average number of days that a company takes to collect revenue after a sale has been made. DSO is often determined on a monthly, quarterly or annual basis and can be calculated by dividing the amount of accounts receivable during a given period by the total value of credit sales during the same period, and multiplying the result by the number of days in the period measured.

The formula for calculating days sales outstanding can be represented with the following formula:

DSO = (Accounts Receivable / Total Credit Sales) * Number of Days

Or

DSO = Accounts Receivable / (Total Credit Sales / Number of Days)

A low DSO value means that it takes a company fewer days to collect its accounts receivable. A high DSO number shows that a company is selling its product to customers on credit and taking longer to collect money.

Days sales outstanding is also often referred to as "days receivables" and is an element of the cash conversion cycle.
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Days Sales of InventoryA financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory (including goods that are work in progress, if applicable) into sales. Generally, the lower (shorter) the DSI the better, but it is important to note that the average DSI varies from one industry to another.Investopedia ©
Dead Cat BounceA temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce is a small, short-lived recovery in the price of a declining security, such as a stock. Frequently, downtrends are interrupted by brief periods of recovery - or small rallies - where prices temporarily rise. This can be a result of traders or investors closing out short positions or buying on the assumption that the security has reached a bottom. A dead cat bounce is a price pattern that is usually identified in hindsight. Analysts may attempt to predict that the recovery will be only temporary by using certain technical and fundamental analysis tools.Investopedia ©
Dead PresidentsSlang referring to U.S. paper currency. Dead presidents can refer to any unit of currency, but most often refers to George Washington, whose picture is on the $1 bill. Therefore an item that costs six dead presidents would mean that it costs $6.Investopedia ©
Death By A Thousand CutsA failure that occurs as a result of many smaller problems. Death by a thousand cuts could refer to the termination of a proposed deal as a result of several small issues rather than one major cause. This term can also apply to a product or idea that is destroyed by too many minor changes or the failure of a plan as a result of a cumulative chain of events.Investopedia ©
Death Star IPOA company's highly anticipated initial public offering (IPO) that becomes a blockbuster with investors. The Death Star IPO is a reference to the DS-1 Orbital Battle Station, also more popularly known as the "Death Star," from the movie "Star Wars." This planetary weapon had the ability to destroy entire planets with a single beam, resulting in a massive explosion. In the stock market, stocks that have the ability to explode out of the gate are usually highly anticipated tech stocks, although stocks from other sectors can also fit the bill.Investopedia ©
Death TaxesTaxes imposed by the federal and/or state government on someone's estate upon their death. These taxes are levied on the beneficiary that receives the property in the deceased's will; the tax amount is based on the property's value at the time of the owner's death. Also called death duties or inheritance tax.Investopedia ©
Debit SpreadTwo options with different market prices that an investor trades on the same underlying security. The higher priced option is purchased and the lower premium option is sold - both at the same time. The higher the debit spread, the greater the initial cash outflow the investor will incur on the transaction.Investopedia ©
Debt BombThis occurs when a major financial institution, such as a multinational bank, defaults on its obligations that causes disruption not only in the financial system of the institution's home country, but also in the global financial system as a whole.Investopedia ©
Debt CeilingThe maximum amount of monies the United States can borrow. The debt ceiling was created under the Second Liberty Bond Act of 1917, putting a "ceiling" on the amount of bonds the United States can issue. As of the end of July, 2011 the debt ceiling was set at $14.3 trillion. Also known as the "debt limit" or "statutory debt limit."Investopedia ©
Debt FinancingWhen a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise that the principal and interest on the debt will be repaid.Investopedia ©
Debt For Bond SwapA debt swap involving the exchange of a new bond issue for similar outstanding debt or vice versa. Debt for bond swap transactions are usually executed to take advantage of an interest rate change and/or for tax write-off purposes.Investopedia ©
Debt RatioA financial ratio that measures the extent of a company's or consumer's leverage. The debt ratio is defined as the ratio of total debt to total assets, expressed in percentage, and can be interpreted as the proportion of a company's assets that are financed by debt. The higher this ratio, the more leveraged the company and the greater its financial risk. Debt ratios vary widely across industries, with capital-intensive businesses such as utilities and pipelines having much higher debt ratios than other industries like technology. In the consumer lending and mortgage businesses, debt ratio is defined as the ratio of total debt service obligations to gross annual income.Investopedia ©
Debt SecurityDebt security refers to a debt instrument, such as a government bond, corporate bond, certificate of deposit (CD), municipal bond or preferred stock, that can be bought or sold between two parties and has basic terms defined, such as notional amount (amount borrowed), interest rate, and maturity and renewal date. It also includes collateralized securities, such as collateralized debt obligations (CDOs), collateralized mortgage obligations (CMOs), mortgage-backed securities issued by the Government National Mortgage Association (GNMAs) and zero-coupon securities.Investopedia ©
Debt-Service Coverage Ratio (DSCR)In corporate finance, the Debt-Service Coverage Ratio (DSCR) is a measure of the cash flow available to pay current debt obligations. The ratio states net operating income as a multiple of debt obligations due within one year, including interest, principle, sinking-fund and lease payments.
In government finance, it is the amount of export earnings needed to meet annual interest and principal payments on a country's external debts.
In personal finance, it is a ratio used by bank loan officers to determine income property loans.
A DSCR greater than 1 means the entity, whether a person, company or government, has sufficient income to pay its current debt obligations. A DSCR less than 1 means it does not.
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Debt-Service Coverage Ratio - DSCRIn corporate finance, it is the amount of cash flow available to meet annual interest and principal payments on debt, including sinking fund payments. In government finance, it is the amount of export earnings needed to meet annual interest and principal payments on a country's external debts. In personal finance, it is a ratio used by bank loan officers in determining income property loans. This ratio should ideally be over 1. That would mean the property is generating enough income to pay its debt obligations.Investopedia ©
Debt-To-GDP RatioA measure of a country's federal debt in relation to its gross domestic product (GDP). By comparing what a country owes and what it produces, the debt-to-GDP ratio indicates the country's ability to pay back its debt. The ratio is a coverage ratio on a national level.Investopedia ©
Debt/Equity RatioA measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets.
Note: Sometimes only interest-bearing, long-term debt is used instead of total liabilities in the calculation.
Also known as the Personal Debt/Equity Ratio, this ratio can be applied to personal financial statements as well as corporate ones.
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Debt/Equity SwapA transaction in which the obligations (debts) of a company or individual are exchanged for something of value (equity). In the case of a publicly-traded company, this would generally entail an exchange of bonds for stock. The value of the stocks and bonds being exchanged are typically determined by the market at the time of the swap.Investopedia ©
Decision TreeA schematic tree-shaped diagram used to determine a course of action or show a statistical probability. Each branch of the decision tree represents a possible decision or occurrence. The tree structure shows how one choice leads to the next, and the use of branches indicates that each option is mutually exclusive.Investopedia ©
Deed of AssignmentA document which legally transfers a property from a debtor to a creditorLaw-Glossary.com ©
Deep LearningAn artificial intelligence function that imitates the workings of the human brain in processing data and creating patterns for use in decision making. Deep learning is a subset of machine learning in Artificial Intelligence (AI) that has networks which are capable of learning unsupervised from data that is unstructured or unlabeled.Investopedia ©
Default RiskThe risk that companies or individuals will be unable to make the required payments on their debt obligations. Lenders and investors are exposed to default risk in virtually all forms of credit extensions. To mitigate the impact of default risk, lenders often charge rates of return that correspond the debtor's level of default risk. The higher the risk, the higher the required return and vice versa.Investopedia ©
Deferred InterestA deferred interest is the amount of interest that is added to the principal balance of a loan when the contractual terms of that loan allow for a scheduled payment to be made that is less than the interest due. When a loan's principal balance increases because of deferred interest, it is known as negative amortization.Investopedia ©
Deferred RevenueAdvance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been rendered or products have been delivered. Deferred revenue is a liability because it refers to revenue that has not yet been earned, but represents products or services that are owed to the customer. As the product or service is delivered over time, it is recognized as revenue on the income statement.Investopedia ©
Deferred Tax LiabilityAn account on a company's balance sheet that is a result of temporary differences between the company's accounting and tax carrying values, the anticipated and enacted income tax rate, and estimated taxes payable for the current year. This liability may or may not be realized during any given year, which makes the deferred status appropriate.Investopedia ©
Deficit HawkA paradox in decision analysis in which two individuals acting in their own best interest pursue a course of action that does not result in the ideal outcome. The typical prisoner's dilemma is set up in such a way that both parties choose to protect themselves at the expense of the other participant. As a result of following a purely logical thought process to help oneself, both participants find themselves in a worse state than if they had cooperated with each other in the decision-making process.Investopedia ©
DeflationA general decline in prices, often caused by a reduction in the supply of money or credit. Deflation can be caused also by a decrease in government, personal or investment spending. The opposite of inflation, deflation has the side effect of increased unemployment since there is a lower level of demand in the economy, which can lead to an economic depression. Central banks attempt to stop severe deflation, along with severe inflation, in an attempt to keep the excessive drop in prices to a minimum.Investopedia ©
Deflation (2)A general decline in prices, often caused by a reduction in the supply of money or credit. Deflation can be caused also by a decrease in government, personal or investment spending. The opposite of inflation, deflation has the side effect of increased unemployment since there is a lower level of demand in the economy, which can lead to an economic depression. Central banks attempt to stop severe deflation, along with severe inflation, in an attempt to keep the excessive drop in prices to a minimum.
The decline in prices of assets, is often known as Asset Deflation.
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Degree Of Financial Leverage - DFLA ratio that measures the sensitivity of a company's earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).Investopedia ©
Delivered Duty Paid (DDP)A transaction in which the seller must pay for all of the costs related to transporting the goods and is responsible in full for the goods until they have been received and transferred to the buyer. This includes paying for the shipping, the duties and any other expenses incurred while shipping the goods.Investopedia ©
DeltaThe ratio comparing the change in the price of the underlying asset to the corresponding change in the price of a derivative. Sometimes referred to as the "hedge ratio."Investopedia ©
Delta-Gamma HedgingAn options hedging strategy that combines a delta hedge and a gamma hedge. A delta-gamma hedge is designed to reduce or eliminate the risk created by changes in the underlying asset's price, as well as variances in how much the price changes.Investopedia ©
Demand CurveThe demand curve is a graphical representation of the relationship between the price of a good or service and the quantity demanded for a given period of time. In a typical representation, the price will appear on the left vertical axis, the quantity demanded on the horizontal axis.Investopedia ©
Demand ElasticityDemand elasticity refers to how sensitive the demand for a good is to changes in other economic variables, such as the prices and consumer income. Demand elasticity is calculated by taking the percent change in quantity of a good demanded and dividing it by a percent change in another economic variable. A higher demand elasticity for a particular economic variable means that consumers are more responsive to changes in this variable, such as price or income.Investopedia ©
DemonetizationDemonetization is the act of stripping a currency unit of its status as legal tender. Demonetization is necessary whenever there is a change of national currency. The old unit of currency must be retired and replaced with a new currency unit.Investopedia ©
Denial Of Service Attack (DoS)An intentional cyberattack carried out on networks, websites and online resources in order to restrict access to its legitimate users. Denial of Service (DoS) attacks is a highly noticeable event that may last from a few hours to many months. A type of DoS attack that is prevalent on the web is called the Distributed Denial of Service (DDoS) attack.Investopedia ©
Depreciation1. A method of allocating the cost of a tangible asset over its useful life. Businesses depreciate long-term assets for both tax and accounting purposes.
2. A decrease in an asset's value caused by unfavorable market conditions.
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Depth of MarketA measure of the number of open buy and sell orders for a security or currency at different prices. The depth of market measure provides an indication of the liquidity and depth for that security or currency. The higher the number of buy and sell orders at each price, the higher the depth of the market. Depth of market data is also known as the order book, since it shows pending orders for a security or currency. This data is available from most exchanges for a fee.Investopedia ©
DerivativeA derivative is a security with a price that is dependent upon or derived from one or more underlying assets. The derivative itself is a contract between two or more parties based upon the asset or assets. Its value is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes.
Derivatives either be traded over-the-counter (OTC) or on an exchange. OTC derivatives constitute the greater proportion of derivatives in existence and are unregulated, whereas derivatives traded on exchanges are standardized. OTC derivatives generally have greater risk for the counterparty than do standardized derivatives.
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Detection RiskThe level of chance that an auditor will not find material misstatements relating to an assertion in an entity's financial statements through substantive tests and analysis. Detection risk is the risk that the auditor concludes, after inspection, that no material errors are present when in fact there are. Detection risk is one of the three elements that comprise audit risk, the other two being inherent risk and control risk.Investopedia ©
Deutscher Aktienindex 100 - DAX 100A former price-weighted index that represented Germany's top traded 100 stocks. DAX is an abbreviation for Deutscher Aktienindex. The DAX 100 was formed using the 30 DAX equities and the 70 MDAX equities listed on the Frankfurt Stock Exchange. Since March 24, 2003, the MDAX has included 50 equities and the former DAX 100 switched to the HDAX. The HDAX index reflects the price development of all shares in the DAX 30 (commonly referred to as the DAX), MDAX and TecDAX.Investopedia ©
DevaluationA deliberate downward adjustment to the value of a country's currency, relative to another currency, group of currencies or standard. Devaluation is a monetary policy tool of countries that have a fixed exchange rate or semi-fixed exchange rate. It is often confused with depreciation, and is in contrast to revaluation.Investopedia ©
Developed EconomyWhile there is no one, set definition of a developed economy it typically refers to a country with a relatively high level of economic growth and security. Some of the most common criteria for evaluating a country's degree of development are per capita income or gross domestic product (GDP), level of industrialization, general standard of living and the amount of widespread infrastructure.
Increasingly other non-economic factors are included in evaluating an economy or country's degree of development, such as the Human Development Index (HDI) which reflects relative degrees of education, literacy and health.
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Digital MoneyAny means of payment that exists purely in electronic form. Digital money is not tangible like a dollar bill or a coin. It is accounted for and transferred using computers. Digital money is exchanged using technologies such as smartphones, credit cards and the internet. It can be turned into physical money by, for example, withdrawing cash at an ATM.Investopedia ©
Digital TransactionA seamless and non-traditional system involving one or more participants, where transactions are effected without the need for cash. Digital transaction involves a constantly evolving way of doing things where financial technology companies (Fintech) collaborate with various sectors of the economy for the purpose of meeting the increasingly sophisticated demands of the growing tech-savvy users.Investopedia ©
Dim Sum BondA bond denominated in Chinese yuan and issued in Hong Kong. Dim sum bonds are attractive to foreign investors who desire exposure to yuan-denominated assets, but are restricted by China's capital controls from investing in domestic Chinese debt. The issuers of dim sum bonds are largely entities based in China or Hong Kong, and occasionally foreign companies. The term is derived from the Chinese cuisine that involves serving a variety of small delicacies and is especially popular in Hong Kong.Investopedia ©
Direct Consolidation LoanA loan that combines two or more federal education loans into a single loan. A Direct Consolidation Loan allows the borrower to make a single monthly payment. The loan is facilitated by the U.S. Department of Education and does not require borrowers to pay an application fee.Investopedia ©
Direct Participation Program - DPPA business venture designed to let investors participate directly in the cash flow and tax benefits of the underlying investment. DPPs are generally passive investments that invest in real estate or energy-related ventures. Also known as a "direct participation plan".Investopedia ©
Disaster LossA special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President. Disaster losses can arise from such phenomena as floods, forest fires and earthquakes.Investopedia ©
Discount BondA bond that is issued for less than its par (or face) value, or a bond currently trading for less than its par value in the secondary market. A bond is considered a discount bond when it has a lower interest rate than the current market rate, and consequently is sold at a lower price. This interest rate, also called a coupon, is usually paid semiannually. As interest rates go up, bond prices go down. Discount bonds are similar to zero-coupon bonds, which are also sold at a discount, but the difference is that they don't pay interest. Common examples of discount bonds are U.S. Treasury bills and U.S. savings bonds.
A deep-discount bond is sold at a significantly lower price than par value, usually 20% or more.
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Discount RateThe discount rate is essentially the interest rate that banks and other depository institutions are charged to borrow from the Federal Reserve. Under the federal program, qualified depository institutions can receive credit under three different facilities: primary credit, secondary credit and seasonal credit. Each form of credit has its own interest rate, but the primary rate is generally referred to as the discount rate. The primary rate is used for short-term loans, which are basically extended overnight to banking and depository facilities with a solid financial reputation. This rate is usually put above the short-term market-rate levels. The secondary credit rate is slightly higher than the primary rate and is extended to facilities that have liquidity problems or severe financial crises. Finally, seasonal credit is for institutions that need extra support on a seasonal basis, such as a farmer's bank. Seasonal credit rates are established from an average of chosen market rates.Investopedia ©
Discount Rate (2)The interest rate charged to commercial banks and other depository institutions for loans received from the Federal Reserve Bank's discount window. The discount rate also refers to the interest rate used in discounted cash flow (DCF) analysis to determine the present value of future cash flows. The discount rate in DCF analysis takes into account not just the time value of money, but also the risk or uncertainty of future cash flows; the greater the uncertainty of future cash flows, the higher the discount rate. A third meaning of the term ""discount rate"" is the rate used by pension plans and insurance companies for discounting their liabilities.Investopedia ©
Discounted Cash Flow (DCF)A discounted cash flow (DCF) is a valuation method used to estimate the attractiveness of an investment opportunity. DCF analysis uses future free cash flow projections and discounts them to arrive at a present value estimate, which is used to evaluate the potential for investment. If the value arrived at through DCF analysis is higher than the current cost of the investment, the opportunity may be a good one.
DCF is also known as the Discounted Cash Flows Model.
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Discouraged WorkerA person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment in the last four weeks. Discouraged workers have usually given up on searching for a job because they found no suitable employment options and/or were met with lack of success when applying.Investopedia ©
DisinflationA slowing in the rate of price inflation. Disinflation is used to describe instances when the inflation rate has reduced marginally over the short term. Although it is used to describe periods of slowing inflation, disinflation should not be confused with deflation.Investopedia ©
Dismal ScienceA term coined by Scottish writer, essayist and historian Thomas Carlyle to describe the discipline of economics. The term dismal science was inspired by T. R. Malthus' gloomy prediction that population would always grow faster than food, dooming mankind to unending poverty and hardship.Investopedia ©
Disposable IncomeThe amount of money that households have available for spending and saving after income taxes have been accounted for. Disposable personal income is often monitored as one of the many key economic indicators used to gauge the overall state of the economy.Investopedia ©
DivergenceWhen the price of an asset and an indicator, index or other related asset move in opposite directions. In technical analysis, traders make transaction decisions by identifying situations of divergence, where the price of a stock and a set of relevant indicators, such as the money flow index (MFI), are moving in opposite directions.Investopedia ©
DiversificationDiversification is a risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique contends that a portfolio of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio.

Diversification strives to smooth out unsystematic risk events in a portfolio so that the positive performance of some investments will neutralize the negative performance of others. Therefore, the benefits of diversification will hold only if the securities in the portfolio are not perfectly correlated.
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Dividend AristocratA company that has continuously increased the amount of dividends it pays to its shareholders. To be considered a dividend aristocrat, a company must typically have raised dividends for at least 25 years. More specifically, the company needs to have a managed dividend policy that increased its dividend every year for those 25 years. Companies that are able to maintain high dividend yields are often considered to be more stable than others, and because stocks maintaining this association must keep yields consistently high, the list of aristocrats is often under 100 companies.Investopedia ©
Dividend Discount Model - DDMA procedure for valuing the price of a stock by using predicted dividends and discounting them back to present value. The idea is that if the value obtained from the DDM is higher than what the shares are currently trading at, then the stock is undervalued.Investopedia ©
Dividend ETFAny exchange-traded fund that seeks to provide high dividend yields by investing in a basket of high-dividend paying common stocks, preferred stocks or REITs. There are dividend ETFs that contain only U.S. domestic stocks and global dividend ETFs, which have an international focus. The indexes used to create dividend ETFs vary by fund manager or custodian, but most contain stocks with a high level of liquidity and above-market dividend yields.Investopedia ©
Dividend Payout RatioThe percentage of earnings paid to shareholders in dividends.Investopedia ©
Dividend Reinvestment Plan - DRIPA dividend reinvestment plan (DRIP) is offered by a corporation that allows investors to reinvest their cash dividends by purchasing additional shares or fractional shares on the dividend payment date. A DRIP is an excellent way to increase the value of an investment. Most DRIPs allow investors to buy shares commission-free and at a significant discount to the current share price, and do not allow reinvestments much lower than $10. This term is sometimes abbreviated as "DRP."Investopedia ©
DiworsificationThe process of adding investments to one's portfolio in such a way that the risk/return trade-off is worsened. Diworsification is investing in too many assets with similar correlations that will result in an averaging effect. It occurs where risk is at its lowest level and additional assets reduce potential portfolio returns, as well as the chances of outperforming a benchmark. The term was coined by legendary investor Peter Lynch in his book, "One Up Wall Street," where he suggested that a business that diversifies too widely, risks destroying their original business, because management time, energy and resources are diverted from the original investment.Investopedia ©
Dodd-Frank Financial Regulatory Reform BillA piece of legislation that increased government oversight of trading in complex financial instruments such as derivatives. The Dodd-Frank Financial Regulatory Reform Bill was named after Senator Christopher J. Dodd and U.S. Representative Barney Frank. It restricts the types of proprietary trading activities that financial institutions will be allowed to practice. The Dodd-Frank Financial Regulatory Reform Bill was passed with the intent of preventing the collapse of major financial institutions such as Lehman Brothers from happening again.Investopedia ©
Dodd-Frank Wall Street Reform and Consumer Protection ActA compendium of federal regulations, primarily affecting financial institutions and their customers, that the Obama administration passed in 2010 in an attempt to prevent the recurrence of events that caused the 2008 financial crisis. The Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly referred to as simply "Dodd-Frank", is supposed to lower risk in various parts of the U.S. financial system. It is named after U.S. Senator Christopher J. Dodd and U.S. Representative Barney Frank because of their significant involvement in the act's creation and passage.Investopedia ©
Dog And Pony ShowA colloquial term that generally refers to a presentation or seminar to market new products or services to potential buyers. A dog and pony show, in the financial context, refers to presentations to institutional and retail investors by executives of a company that is issuing securities as an initial public offering or on a secondary basis. It also means presentations by financial institutions to pitch a new product or service. The term is believed to have originated in the late 19th century to describe traveling circuses that featured performing dogs and ponies, and toured rural areas across the United States.
Also known as a "road show."
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Dogs of the DowAn investing strategy that consists of buying the 10 DJIA stocks with the highest dividend yield at the beginning of the year. The portfolio should be adjusted at the beginning of each year to include the 10 highest yielding stocks.Investopedia ©
Dollar BearAn investor or speculator who is negative on the outlook for the U.S. dollar against other currencies. A dollar bear expects the U.S. dollar to decline against major currencies over time, and will take this factor into consideration when positioning investment portfolios.Investopedia ©
Dollar-Cost Averaging - DCADollar-cost averaging (DCA) is an investment technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price. The investor purchases more shares when prices are low and fewer shares when prices are high. The premise is that DCA lowers the average share cost over time, increasing the opportunity to profit.Investopedia ©
Dollar-Value LIFOAn accounting method used for inventory that follows the last in, first out model. Dollar value LIFO uses this approach with all figures in dollar amounts, rather than in inventory units. It provides a different view of the balance sheet than other accounting methods such as first in, first out (FIFO).Investopedia ©
Door CrasherA low-priced item of limited quantity typically offered on special, early-opening hours to attract buyers into a retail store. Door crashers are a sales and marketing tactic to bring customer into the stores in hopes that they buy other items as well. It is also a way to drive customers to their stores as opposed to competitors'.Investopedia ©
Double Declining Balance Depreciation MethodThe double declining balance depreciation method is one of two common methods a business uses to account for the expense of a long-lived asset. The double declining balance depreciation method is an accelerated depreciation method that counts twice as much of the asset’s book value each year as an expense compared to straight-line depreciation. The formula is: Depreciation for a period = 2 x straight-line depreciation percent x book value at beginning of period.Investopedia ©
Double Dip RecessionWhen gross domestic product (GDP) growth slides back to negative after a quarter or two of positive growth. A double-dip recession refers to a recession followed by a short-lived recovery, followed by another recession.Investopedia ©
Double EntryThe fundamental concept underlying present-day bookkeeping and accounting. Double entry accounting is based on the fact that every financial transaction has equal and opposite effects in at least two different accounts. It is used to satisfy the equation Assets = Liabilities + Equity, whereby each entry is recorded so as to maintain the relationship.Investopedia ©
Double Gold ETFAn exchange traded fund that tracks the value of gold and responds to movements in the same manner as an otherwise similar double leveraged ETF. A double gold ETF is one in which the spot value of gold or a basket of gold companies acts as the underlying for the fund. The ETF attempts to deliver price movements equal to double the movements of the underlying gold value.Investopedia ©
Double Irish With A Dutch SandwichA tax avoidance technique employed by certain large corporations, involving the use of a combination of Irish and Dutch subsidiary companies to shift profits to low or no tax jurisdictions. The double Irish with a Dutch sandwich technique involves sending profits first through one Irish company, then to a Dutch company and finally to a second Irish company headquartered in a tax haven. This technique has allowed certain corporations to dramatically reduce their overall corporate tax rates.Investopedia ©
Double Net LeaseAn agreement in which the tenant is responsible for both property taxes and premiums for insuring the building. Unlike a single net lease, which only requires the tenant to pay property taxes, a double net lease passes more expenses along in the form of insurance payments. The landlord is still held responsible for structural maintenance expenses. Each month, the landlord receives the base rent plus the additional payments. Double net leases are most commonly found in commercial real estate.Investopedia ©
Double TaxationA taxation principle referring to income taxes that are paid twice on the same source of earned income. Double taxation occurs because corporations are considered separate legal entities from their shareholders. As such, corporations pay taxes on their annual earnings, just as individuals do. When corporations pay out dividends to shareholders, those dividend payments incur income-tax liabilities for the shareholders who receive them, even though the earnings that provided the cash to pay the dividends were already taxed at the corporate level.Investopedia ©
DoveAn economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that inflation and its negative effects will have a minimal impact on society. This term is derived from the docile and placid nature of the bird of the same name, and is the opposite of the term "hawk".
Statements that suggest that inflation will have a minimal impact are called "dovish".
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Dow Jones Sustainability United States IndexA free-float market capitalization weighted index that captures the U.S.-based companies in the Dow Jones Sustainability North America Index, which contains the top 20% of the largest U.S., Canadian and Mexican companies from the Dow Jones Global Index based on economic and social sustainability. The index is reviewed quarterly for possible weighting changes (based on free-float share counts) and reconstituted each year based on the updated results of comprehensive sustainability surveys, as compiled by research firm SAM Group. The surveys measure company efforts in energy conservation, corporate governance, shareholder relations and knowledge management, among many others.Investopedia ©
Down RoundA down round is a round of financing where investors purchase stock from a company at a lower valuation than the valuation placed upon the company by earlier investors.Investopedia ©
DowngradeA negative change in the rating of a security. This situation occurs when analysts feel that the future prospects for the security have weakened from the original recommendation, usually due to a material and fundamental change in the company's operations, future outlook or industry.Investopedia ©
DownstreamDownstream operations are oil and gas operations that take place after the production phase, through to the point of sale. Downstream operations can include refining crude oil and distributing the byproducts, such as gasoline, natural gas liquids, diesel and a variety of other energy sources, down to the retail level. The closer an oil and gas company is to the process of providing consumers with petroleum products, the further downstream the company is said to be.Investopedia ©
Draghi EffectThe calming effect of European Central Bank President, Mario Draghi, on global financial markets. When the Draghi effect is at play, yields on bonds of embattled European nations, such as Greece and Spain, recede from historic high levels, reducing their cost of borrowing and indicating that there is buyer demand for their sovereign bonds. The euro also tends to rise under the Draghi effect, while risk appetite returns and equity markets rally. In short, the Draghi effect causes the European sovereign debt crisis to look less gloomy and the global macroeconomic more positive.Investopedia ©
DrawdownThe peak-to-trough decline during a specific record period of an investment, fund or commodity. A drawdown is usually quoted as the percentage between the peak and the trough.Investopedia ©
Drop Dead DateA provision in a contract or agreement that stipulates a finite deadline which, if not met, will automatically trigger adverse consequences. The drop dead date is the last possible date on which something must be completed. In most circumstances an extension is not possible.Investopedia ©
DuPont AnalysisThe DuPont analysis is a method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are measured at their gross book value rather than at net book value in order to produce a higher return on equity (ROE). It is also known as "DuPont identity".

DuPont analysis tells us that ROE is affected by three things: - Operating efficiency, which is measured by profit margin - Asset use efficiency, which is measured by total asset turnover - Financial leverage, which is measured by the equity multiplier

ROE = Profit Margin (Profit/Sales) * Total Asset Turnover (Sales/Assets) * Equity Multiplier (Assets/Equity)
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Dual Currency BondA debt instrument in which the coupon and principal payments are made in two different currencies. The currency the bond is issued in, which is called the base currency, will be the currency the interest payments are made in. The principal currency and amount are fixed when the bond is issued.Investopedia ©
Dual ListingWhen a company's securities are listed on more than one exchange for the purpose of adding liquidity to the shares and allowing investors greater choice in where they can trade their shares. Investopedia ©
Dual-Class OwnershipA type of share division in which companies issue shares that have differing rights. In a dual class ownership structure, the company can issue two classes of shares, Class A and Class B. These classes may have different voting rights, but they represent the same underlying ownership in the company.Investopedia ©
Due DiligenceA process by which assets are submitted to verify its legitimacy, authenticity, current value and other characteristics that would correspond to the claimed values, ownership and other properties before its investment or negotiation in the financial market. The Owner of the such asset is also subject to verification and accreditation. Since the majority of the transactions are in one way or another subject to the control of the Federal Reserve, all requirements of the U.S. Patriot Act are strictly verified.World Vision or Others
Due Diligence - DD1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to a sale.
2. Generally, due diligence refers to the care a reasonable person should take before entering into an agreement or a transaction with another party.
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Dummy ShareholderAn entity that holds shares in a public company on behalf of an individual or firm, the latter being the real or true owner of these shares. A dummy shareholder will therefore have no beneficial interest in the account where these shares are being held. Decisions with regard to the disposition or tendering of these shares may also be made by the real owner, rather than the dummy shareholder.Investopedia ©
DurationA measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. Duration is expressed as a number of years. Rising interest rates mean falling bond prices, while declining interest rates mean rising bond prices.Investopedia ©
Durbin AmendmentA part of the Dodd Frank Wall Street Reform and Consumer Protection Act that limits transaction fees imposed upon merchants by debit card issuers. The Durbin Amendment, named after U.S. Sen. Richard J. Durbin and introduced in 2010, proposed to restrict these interchange fees, which averaged 44 cents per transaction based on 1 to 3% of the transaction amount, to 12 cents per transaction for banks with $10 billion or more in assets.Investopedia ©
Dutch DiseaseNegative consequences arising from large increases in a country's income. Dutch disease is primarily associated with a natural resource discovery, but it can result from any large increase in foreign currency, including foreign direct investment, foreign aid or a substantial increase in natural resource prices.Investopedia ©
DwarfA slang term used to describe a pool of mortgage backed securities (MBSs) that have been issued by Fannie Mae and have a maturity of 15 years.Investopedia ©
Dynasty TrustLong-term trusts created to pass wealth from generation to generation without incurring transfer taxes such as estate and gift tax. The dynasty trust's defining characteristic is its term. The trust can survive for 21 years after the death of the last beneficiary who was alive when the trust was set up, and it can theoretically last for more than 100 years. The beneficiaries of a dynasty trust are usually the grantor's children, and after the death of the last child, the grantor's grandchildren or great-grandchildren generally become the beneficiaries. The trust's operation is controlled by the trustee who is appointed by the grantor. The dynasty trust is irrevocable, which means that once it is funded, the grantor will not have any control over the assets or be permitted to amend the trust terms.Investopedia ©
E&O InsuranceErrors and omssions (E&O) is the insurance that covers your company, or you individually, in the event that a client holds you responsible for a service you provided, or failed to provide, that did not have the expected or promised results. For doctors, dentists, chiropractors, etc., it is often called malpractice insurance. For lawyers, accountants, architects or engineers, it may be called professional liability. Whatever you call it, it covers you for errors (or omissions) that you have made or that the client perceives you have made. Most E&O policies cover judgments, settlements and defense costs. Even if the allegations are found to be groundless, thousands of dollars may be needed to defend the lawsuit. They can bankrupt a smaller company or individual and have a lasting effect on the bottom line of larger companies. In short, E&O coverage provides protection for you in the event that an error or omission on your part has caused a financial loss for your client.Wells Publishing, Inc. (Insurance Journal) ©
E-MiniAn electronically traded futures contract on the Chicago Mercantile Exchange that represents a portion of the normal futures contracts. E-mini contracts are available on a wide range of indexes such as the NASDAQ 100, S&P 500, S&P MidCap 400 and Russell 2000.Investopedia ©
E4EIt indicates the finishing of lumber products. All 4 Edges eased, meaning the lumber has been sanded in the edges to make the edges smooth (not sharp)World Vision or Others
EBITAEBITA is an acronym for earnings before interest, taxes and amortization. To calculate a company's EBITA, start with its earnings before tax (EBT), which can be found on the income statement, and add interest and amortization expenses back in. EBITA is a variation of the more commonly used EBITDA, which deducts depreciation expenses. Both are used to gauge a company's operating profitability, that is, the earnings it generates in the normal course of doing business, ignoring capital expenditures and financing costs. Both measures are sometimes considered indications of cash flow.
Since certain industries require significant investment in fixed assets, EBITDA can distort a company's profitability by ignoring depreciation. In such cases, EBITA is a more appropriate measure.
When amortization is equal to zero, EBITA is equal to EBIT.
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EBITDA - Earnings Before Interest, Taxes, Depreciation and AmortizationEBITDA - Earnings before interest, taxes, depreciation and amortization is an indicator of a company's financial performance which is calculated in the following manner:
EBITDA = Revenue - Expenses (excluding tax, interest, depreciation and amortization).
EBITDA is essentially net income with interest, taxes, depreciation, and amortization added back to it, and can be used to analyze and compare profitability between companies and industries because it eliminates the effects of financing and accounting decisions.
If you're interested in learning how to calculate EBITDA using MS Excel we've got it covered.
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EBITDA MarginEBITDA margin is a measurement of a company's operating profitability as a percentage of its total revenue. It is equal to earnings before interest, tax, depreciation and amortization (EBITDA) divided by total revenue. Because EBITDA excludes interest, depreciation, amortization and taxes, EBITDA margin can provide an investor, business owner or financial professional with a clear view of a company's operating profitability and cash flow.Investopedia ©
ECPThe Euro Commercial Paper (ECP) market is a short-term debt market which allows issuers to raise working capital and other short-term funding as well as enables institutional investors to make varied and short-term investments. Since the introduction of the euro, The ECP market has grown strongly since its creation in 1999 (at a JVA yearly growth), There are EURO 600 billion equivalent of short-term notes outstanding, currently.World Vision or Others
EGPThe currency code for the Egyptian pound, the official currency of Egypt. The EGP replaced the Egyptian piastre in 1834. The pound was tied first to the gold standard and then the British pound, until 1962 when the country moderately devalued the pound and pegged it to the U.S. dollar. The EGP is unofficially used by residents of the Gaza Strip.Investopedia ©
ETF - Leveraged ETFAn exchange-traded fund (ETF) that utilizes financial derivatives and debt to amplify the returns of an underlying index. Leveraged ETFs are available for most indexes, such as the NASDAQ-100 and the Dow Jones Industrial Average. These funds aim to keep a constant amount of leverage during the investment time frame, such as a 2:1 or 3:1 ratio.Investopedia ©
ETF - Passive ETFOne of two types of exchange-traded funds (ETFs) available for investors. Passive ETFs are index funds that track a specific benchmark, such as an SPDR. Unlike actively-managed ETFs, passive ETFs are not managed by a fund manager on a daily basis.Investopedia ©
ETF - Sector ETFA class of exchange-traded fund that invests in the stocks and securities of a specific sector, typically identified in the fund title. Most sector ETFs focus on U.S.-based stocks, but several will invest globally in an attempt to capture the worldwide performance of the given sector. Assets will be passively managed around an underlying index; several use indexes provided from data services like S&P and Dow Jones. Leveraged sector ETFs are also available, which aim to achieve double the return of the underlying index, both on advancing and declining trading days.Investopedia ©
ETF - Ultra ETFA class of exchange-traded funds (ETF) that employs leverage in an effort to achieve double the return of a set benchmark. The first ultra ETFs were launched in 2006 and the class has grown to include different ETFs with underlying benchmarks ranging from broad market indexes, such as the S&P 500 and Russell 2000, to specific sectors, such as technology, healthcare and basic materials.Investopedia ©
ETF Futures And OptionsA variety of derivative products based on exchange-traded funds. ETF futures are contracts that represent an agreement to buy (or sell) the underlying ETF shares at an agreed-upon price on or before a specified date in the future. ETF options, on the other hand, are contracts that give the holder the right, but not the obligation, to buy (or sell) the underlying ETF shares at an agreed-upon price on or before a specified date in the future. These products are typically used when you adopt a bullish or bearish outlook on the economy or an industry as a whole, over individual stocks.Investopedia ©
ETF WrapA type of special investment portfolio where an investor, with or without the aid of an investment advisor, invests solely in exchange traded funds (ETFs). The composition of each ETF class is initially based on a preselected asset allocation model, and will periodically need to be rebalanced in response to changes in market values.Investopedia ©
ETF of ETFsAn exchange-traded fund (ETF) that tracks other ETFs rather than stocks, bonds or derivatives. These ETFs track the performance of other ETFs which may have direct exposure to these underlying securities.Investopedia ©
EV/R - Enterprise-Value-To-RevA measure of the value of a stock that compares a company's enterprise value to its revenue. EV/R is one of several fundamental indicators that investors use to determine whether a stock is priced well. The EV/R multiple is also often used in consideration of how much a company should be valued at in the case of a potential acquisition. Other valuation multiples that investors looking at EV/R would likely consider include EV/EBITDA, P/E and P/BV. EV/revenue is most commonly expressed as a number in decimal form followed by an x, as in 2.6x.Investopedia ©
Early ExerciseThe exercise of an option prior to its expiration date. Early exercise is only possible with American-style option contracts, which can be exercised at any time up to expiration, as opposed to European options, for which early exercise is not possible as they can only be exercised on the expiration date. Early exercise of a call option enables the call option buyer to purchase the underlying security at the strike price before expiration, while early exercise of a put option enables the put option buyer to sell the underlying security at the strike price before expiration.Investopedia ©
Earned Income Credit - EICA tax credit in the United States which benefits certain taxpayers who have low incomes from work in a particular tax year. The earned income credit (EIC) reduces the amount of tax owed on a dollar-for-dollar basis, and may result in a refund to the taxpayer if the amount of the credit is greater than the amount of tax owed. Investopedia ©
Earning YieldsThe earnings per share for the most recent 12-month period divided by the current market price per share. The earnings yield (which is the inverse of the P/E ratio) shows the percentage of each dollar invested in the stock that was earned by the company. The earnings yield is used by many investment managers to determine optimal asset allocation.Investopedia ©
Earnings Before Interest & Tax - EBITAn indicator of a company's profitability, calculated as revenue minus expenses, excluding tax and interest. EBIT is also referred to as "operating earnings", "operating profit" and "profit before interest and taxes (PBIT)."Investopedia ©
Earnings Before Interest After Taxes - EBIATA financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT measures a company's profitability without taking into account the capital structure, i.e., the ratio of debt to equity. EBIAT takes taxes into account because they are viewed as an ongoing expense that is beyond a company's control, especially if it is profitable. EBIAT is not as commonly used in financial analysis as the EBITDA measure. EBIAT is calculated as: EBIT x (1 - Tax rate).Investopedia ©
Earnings Before Interest, Taxes, Depreciation and Amortization - EBITDA EBITDA is essentially net income with interest, taxes, depreciation, and amortization added back to it, and can be used to analyze and compare profitability between companies and industries because it eliminates the effects of financing and accounting decisions.Investopedia ©
Earnings CallA conference call between the management of a public company, analysts, investors and the media to discuss the financial results during a given reporting period such as a quarter or a fiscal year. An earnings call is usually preceded by an earnings report, which contains summary information on financial performance for the period.Investopedia ©
Earnings MultiplierAn adjustment made to a company's P/E ratio that takes into account current interest rates. The earnings multiplier is used to discount future earnings, and allows investors to compare expected growth to an amount of money invested over the same period at current rates.Investopedia ©
Earnings Per Share - EPSThe portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company's profitability.Investopedia ©
Earnings SeasonThe months of the year in which a majority of quarterly corporate earnings are released to the public. Earnings season is generally accepted as the months immediately following the quarter-ends of the year, which means that earnings seasons would fall in January, April, July and October. This is due to the lag between quarter-end periods and the time in which firms are able to release their earnings following their accounting periods.Investopedia ©
Earnings StrippingEarnings Stripping is a commonly-used tactic used by multinational corporations to escape high domestic taxation by using interest deductions to their foreign headquarters in a friendly tax regime to lower their corporate taxes. It is commonly used during corporate inversions.Investopedia ©
Easement in GrossAn easement that attaches a particular right to an individual rather than to the property itself. The easement in gross is often considered irrevocable for the life of the individual, but can be revoked if the individual sells the property that grants him or her that easement. For example, a homeowner may have an easement in gross with a neighbor allowing the homeowner to use a path through the neighbor's woods to reach the property. If the homeowner then sells the property, he or she cannot pass the easement in gross to the next property owner.Investopedia ©
Eating Someone's LunchThe act of an aggressive competition that results in one company taking portions of another company's market share. Market share is the percentage of an industry or market's total sales that is achieved by one company during a specified time period. A more aggressive company "eats the lunch" of another company when it take some of its competitor's market share. This can be achieved through the release of a better or newer product, aggressive pricing or marketing strategies or other competitive advantages. When these strategies result in one company having a bigger market share for a particular product or service, the company enjoying the larger market share is said to be eating someone's lunch.Investopedia ©
Eating StockThe forced purchase of a security when there are insufficient buyers. Eating stock often applies to underwriters of an initial public offering (IPO), if a certain level of subscription is guaranteed but is not met. This allows the company going public to have a better approximation for the amount of capital it will raise from the offering.Investopedia ©
Eclectic ParadigmA theory that provides a three-tiered framework for a company to follow when determining if it is beneficial to pursue direct foreign investment. The eclectic theory paradigm is based on the assumption that institutions will avoid transactions in the open market when internal transactions carry lower costs.Investopedia ©
EconometricianAn economics term referring to a person who utilizes statistics and mathematics in the study, modeling and predicting of economic principles and outcomes. Econometricians use statistical measures and mathematical formulas to produce objective results in the study of economics.Investopedia ©
Economic DepreciationA measure of the decrease in value of an asset over a specific period of time. This usually pertains to property such as real estate that can lose value due to indirect causes such as the addition of new construction in close proximity to the property, road additions or closures, a decline in the quality of the neighborhood, or other external factors.Investopedia ©
Economic DerivativeA relatively new form of derivative contract (the first ones were traded in 2002) that is based on the future value of some national economic indicator, such as non-farm payrolls, the purchasing manager's index, retail sales levels and the gross domestic product. Most of these economic derivatives are in the form of binary or "digital" options, whereby the only payout options are full payout (in the money) or nothing at all (out of the money). Other types of contracts currently traded include capped vanilla options and forwards. Economic derivatives have become attractive for their ability to mitigate some of the market and basis risks found in standard investment vehicles.Investopedia ©
Economic ForecastingThe process of attempting to predict the future condition of the economy. This involves the use of statistical models utilizing variables sometimes called indicators. Some of the most well-known economic indicators include inflation and interest rates, GDP growth/decline, retail sales and unemployment rates.Investopedia ©
Economic GrowthAn increase in the capacity of an economy to produce goods and services, compared from one period of time to another. Economic growth can be measured in nominal terms, which include inflation, or in real terms, which are adjusted for inflation. For comparing one country's economic growth to another, GDP or GNP per capita should be used as these take into account population differences between countries.Investopedia ©
Economic MoatEconomic moat is the competitive advantage that one company has over other companies in the same industry. This term was coined by renowned investor Warren Buffett.Investopedia ©
Economic RecoveryA period of increasing business activity signaling the end of a recession. Much like a recession, an economic recovery is not always easy to recognize until at least several months after it has begun. Economists use a variety of indicators, including GDP, inflation, financial markets and unemployment to analyze the state of the economy and determine whether a recovery is in progress.Investopedia ©
Economic Think TankAn economic think tank is an organization whose mission it is to study and reflect on economic issues. Economic think tanks are essentially economic policy institutes that work to develop and propose economic strategies and policies to benefit the overall economy. Economic think tanks can be privately funded, and as such can be under scrutiny for being biased towards the needs or special interests of the donor(s).Investopedia ©
Economies Of ScaleEconomies of scale is the cost advantage that arises with increased output of a product. Economies of scale arise because of the inverse relationship between the quantity produced and per-unit fixed costs; i.e., the greater the quantity of a good produced, the lower the per-unit fixed cost because these costs are spread out over a larger number of goods. Economies of scale may also reduce variable costs per unit because of operational efficiencies and synergies. Economies of scale can be classified into two main types: Internal - arising from within the company; and External - arising from extraneous factors such as industry size.Investopedia ©
Economy MoatThe competitive advantage that one company has over other companies in the same industry. This term was coined by renowned investor Warren Buffett.Investopedia ©
Effective Annual Interest RateAn investment's annual rate of interest when compounding occurs more often than once a year.Investopedia ©
Effective Tax RateThe effective tax rate is the average rate at which an individual or corporation is taxed. The effective tax rate for individuals is the average rate at which their earned income is taxed, and the effective tax rate for a corporation is the average rate at which its pre-tax profits are taxed.Investopedia ©
Efficiency RatioRatios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios can calculate the turnover of receivables, the repayment of liabilities, the quantity and usage of equity and the general use of inventory and machinery.Investopedia ©
ElasticityA measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which individuals (consumers / producers) change their demand/amount supplied in response to price or income changes.Investopedia ©
ElephantsSlang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants deal in, any investment decisions that they make will have a large influence on the price of the underlying financial asset.Investopedia ©
ElvesA slang term for the technical analysts who appeared on the PBS television show "Wall Street Week", which aired from 1970 to 2005. The elves attempted to predict the direction of the market in the coming months and gained popularity due to their inability to make accurate predictions.Investopedia ©
Emergency Banking Act Of 1933The Emergency Banking Act Of 1933 is a bill passed during the administration of U.S. President Franklin D. Roosevelt in reaction to the financially adverse conditions of the Great Depression. The measure, which called for a four-day mandatory shutdown of U.S. banks for inspections before they could be reopened, sought to re-instill investor confidence and stability in the banking system. Banks were only allowed to re-open once they were deemed financially sound. The act was passed during this shutdown, in hopes that Americans would renew their confidence by the time the banks re-opened. It also extended the power of the president during this time of hardship, allowing him the executive power to make the decisions necessary to salvage the economy. The first banks to re-open were the 12 regional Federal Reserve banks, on March 13. These were followed the next day by banks in cities with federal clearing houses, and the remaining banks deemed fit to operate were allowed to re-open on March 15.Investopedia ©
Emerging Market EconomyA nation's economy that is progressing toward becoming advanced, as shown by some liquidity in local debt and equity markets and the existence of some form of market exchange and regulatory body. Emerging markets generally do not have the level of market efficiency and strict standards in accounting and securities regulation to be on par with advanced economies (such as the United States, Europe and Japan), but emerging markets will typically have a physical financial infrastructure including banks, a stock exchange and a unified currency.Investopedia ©
Emerging Market FundA mutual fund or exchange-traded fund that invests the majority of its assets in the financial markets of a single developing country or a group of developing countries. For the most part, these countries are in Eastern Europe, Africa, the Middle East, Latin America, the Far East and Asia.Investopedia ©
Emotional NeutralityThe concept of removing greed, fear and other human emotions from financial or investment decisions. The goal of emotional neutrality is to remove any weight that emotions may play in the process of making objective financial decisions, so that the best possible decision can be made, in spite of whatever emotions those decisions may trigger.Investopedia ©
Employee Stock Option - ESOAn employee stock option (ESO) is a stock option granted to specified employees of a company. ESOs offer the options holder the right to buy a certain amount of company shares at a predetermined price for a specific period of time. An employee stock option is slightly different from an exchange-traded option, because it is not traded between investors on an exchange.Investopedia ©
Employment Cost Index - ECIA quarterly report from the U.S. Department of Labor that measures the growth of employees' compensation (wages and benefits). The index is based on a survey of employer payrolls in the final month of each quarter. The ECI tracks movement in the cost of labor, including wages, fringe benefits and bonuses for employees at all levels of a company.Investopedia ©
Employment Situation ReportA monthly report compiling a set of surveys in an attempt to monitor the labor market. The Employment Situation Report, released by the Bureau of Labor Statistics, by the U.S. Department of Labor, consists of: - The unemployment rate - the number of unemployed workers expressed as a percentage of the labor force. - Non-farm payroll employment - the number of employees working in U.S. business or government. This includes either full-time or part-time employees. - Average workweek - the average number of hours per week worked in the non-farm sector. - Average hourly earnings - the average basic hourly rate for major industries.Investopedia ©
EncumbranceAn encumbrance is a claim against a property by a party that is not the owner. An encumbrance can impact the transferability of the property and restrict its free use until the encumbrance is lifted. The most common types of encumbrance apply to real estate; these include mortgages, easements and property tax liens. Not all forms of encumbrance are financial, easements being an example of non-financial encumbrances. An encumbrance can also apply to personal - as opposed to real - property.
The term is used in accounting to refer to restricted funds inside an account that are reserved for a specific liability.
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Endogenous VariableA classification of a variable generated by a statistical model that is explained by the relationships between functions within the model. For example, the equilibrium price of a good in a supply and demand model is endogenous because it is set by a producer in response to consumer demand. It is the opposite of an exogenous variable.Investopedia ©
EndowmentAn endowment is a financial asset, in the form of a donation made to a non-profit group, institution or individual consisting of investment funds or other property that may or may not have a stated purpose at the bequest of the donor. Most endowments are designed to keep the principal amount intact while using the investment income from dividends for charitable efforts.Investopedia ©
Endowment EffectIn behavioral finance, the endowment effect describes a circumstance in which an individual values something which they already own more than something which they do not yet own. Sometimes referred to as divestiture aversion, the perceived greater value occurs merely because the individual possesses the object in question. Investors, therefore, tend to stick with certain assets because of familiarity & comfort, even if they are inappropriate or become unprofitable. The endowment effect is an example of an emotional bias.Investopedia ©
EnronA U.S. energy-trading and utilities company that housed one of the biggest accounting frauds in history. Enron's executives employed accounting practices that falsely inflated the company's revenues, which, at the height of the scandal, made the firm become the seventh largest corporation in the United States. Once the fraud came to light, the company quickly unraveled and filed for Chapter 11 bankruptcy on Dec. 2, 2001.Investopedia ©
Enterprise MultipleAn enterprise multiple is a ratio used to determine the value of a company. The enterprise multiple looks at a firm as a potential acquirer would, because it takes debt into account - an item which other multiples like the P/E ratio do not include. Enterprise multiple is calculated as:

Enterprise Multiple = Enterprise Value / EBITDA

Also known as the EBITDA Multiple.
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Enterprise Value (EV)Enterprise Value, or EV for short, is a measure of a company's total value, often used as a more comprehensive alternative to equity market capitalization. The market capitalization of a company is simply its share price multiplied by the number of shares a company has outstanding. Enterprise value is calculated as the market capitalization plus debt, minority interest and preferred shares, minus total cash and cash equivalents. Often times, the minority interest and preferred equity is effectively zero, although this need not be the case.Investopedia ©
Enterprise Value - EVA measure of a company's value, often used as an alternative to straightforward market capitalization. Enterprise value is calculated as market cap plus debt, minority interest and preferred shares, minus total cash and cash equivalents.Investopedia ©
Environmental Protection AgencyThe Environmental Protection Agency (EPA) was established in December 1970 under United States President Richard Nixon. The EPA is an agency of the United States federal government whose mission is to protect human and environmental health. Headquartered in Washington, D.C., the EPA is responsible for conducting environmental assessment, research and education to create and enforce standards and laws that will promote the health of individuals and the environment.Investopedia ©
Environmental, Social And Governance (ESG) CriteriaA set of standards for a company's operations that socially conscious investors use to screen investments. Environmental criteria looks at how a company performs as a steward of the natural environment. Social criteria examines how a company manages relationships with its employees, suppliers, customers and the communities where it operates. Governance deals with a company's leadership, executive pay, audits and internal controls, and shareholder rights. Investors who want to purchase securities that have been screened for ESG criteria can do so through socially responsible mutual funds and exchange-traded funds.Investopedia ©
Equilibrium QuantityEconomic quantity is the quantity of an item that will be demanded at the point of economic equilibrium. This point is determined by observing the intersection of supply and demand curves.

Basic micro-economic theory provides a path for finding the optimal quantity and price of a good or service. This theory is based on the supply and demand model, which is the fundamental basis of market capitalism. This theory rests on some caveats:

1. That producers and consumers behave predictably and consistently.
2. That neither of these agents have other factors influencing their decisions.
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EquityOwnership interest in a corporation in the form of common stock or preferred stock. It also refers to total assets minus total liabilities, in which case it is also referred to as shareholder's equity or net worth or book value. In real estate, it is the difference between what a property is worth and what the owner owes against that property (i.e. the difference between the house value and the remaining mortgage or loan payments on a house). In the context of a futures trading account, it is the value of the securities in the account, assuming that the account is liquidated at the going price. In the context of a brokerage account, it is the net value of the account, i.e. the value of securities in the account less any margin requirements.Investopedia ©
Equity FinancingThe process of raising capital through the sale of shares in an enterprise. Equity financing essentially refers to the sale of an ownership interest to raise funds for business purposes. Equity financing spans a wide range of activities in scale and scope, from a few thousand dollars raised by an entrepreneur from friends and family, to giant initial public offerings (IPOs) running into the billions by household names such as Google and Facebook. While the term is generally associated with financings by public companies listed on an exchange, it includes financings by private companies as well. Equity financing is distinct from debt financing, which refers to funds borrowed by a business.Investopedia ©
Equity MarketThe market in which shares are issued and traded, either through exchanges or over-the-counter markets. Also known as the stock market, it is one of the most vital areas of a market economy because it gives companies access to capital and investors a slice of ownership in a company with the potential to realize gains based on its future performance.Investopedia ©
Equity Risk PremiumEquity risk premium, also referred to as simply equity premium, is the excess return that investing in the stock market provides over a risk-free rate, such as the return from government treasury bonds. This excess return compensates investors for taking on the relatively higher risk of equity investing. The size of the premium will vary depending on the level of risk in a particular portfolio and will also change over time as market risk fluctuates. As a rule, high-risk investments are compensated with a higher premium.Investopedia ©
Equity StrippingThe process of reducing the overall equity in a property in order to avoid creditors. The theory behind equity stripping is simply that by reducing your interest in a given property, thereby reducing any equity, creditors will not go to great lengths to include the property in any claims.Investopedia ©
EquivolumeA chart that compares price and volume and plots them together as one piece of data. The height of each bar represents the high and low for each period and the width represents the volume relative to the total shares traded over the time period being analyzed.Investopedia ©
Escalator PitchA slang term used to describe the quick delivery of a presentation outlining an idea for a product, service or project. The name comes from the notion that the pitch should be succinct enough to be delivered to another party while riding an escalator. An escalator pitch should last no more than 60 seconds.Investopedia ©
EscheatThe transfer of title of property or an estate to the state when an individual dies without a will and legal heirs. Escheat ensures that property always has a recognized owner, which would be the state or government if no other claimants to ownership exist. Most jurisdictions have their own laws and regulations defining escheat and the circumstances under which it can be invoked. Escheat is usually done on a revocable basis, which means that ownership of the estate or property would revert to a rightful heir should one turn up.Investopedia ©
Estate PlanningEstate planning is the collection of preparation tasks that serve to manage an individual's asset base in the event of their incapacitation or death, including the bequest of assets to heirs and the settlement of estate taxes. Most estate plans are set up with the help of an attorney experienced in estate law.

Some of the major estate planning tasks include:

- Creating a will
- Limiting estate taxes by setting up trust accounts in the name of beneficiaries
- Establishing a guardian for living dependents
- Naming an executor of the estate to oversee the terms of the will
- Creating/updating beneficiaries on plans such as life insurance, IRAs and 401(k)s
- Setting up funeral arrangements
- Establishing annual gifting to reduce the taxable estate
- Setting up durable power of attorney (POA) to direct other assets and investments.
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EstoppelA legal defense tool used when someone reneges on or contradicts a previous agreement or claim. Estoppel prevents someone from arguing something contrary to a claim made or act performed by that person previously. Conceptually, estoppel is meant to prevent people from being unjustly wronged by the inconsistencies of another person's words or actions.Investopedia ©
EthereumLaunched in 2015, Ethereum is a decentralized software platform that enables SmartContracts and Distributed Applications (ĐApps) to be built and run without any downtime, fraud, control or interference from a third party. Ethereum is not just a platform but also a programming language (Turing complete) running on a blockchain, helping developers to build and publish distributed applications. The potential applications of Ethereum are wide ranging.Investopedia ©
EuroThe official currency of the European Union's (EU) member states. The euro was introduced by the EU in to the financial community in 1999 and physical euro coins and paper notes were introduced in 2002. Euros are printed and managed by the European System of Central Banks (ESCB). The euro is abbreviated by the symbol "EUR".Investopedia ©
Euro ETFAn exchange-traded fund that invests in the euro currency, either directly or through the holding of euro-denominated short-term debt instruments. Euro ETFs are often set up as currency trusts or grantor trusts, meaning that stakeholders have a specific claim to a set amount of euros per share.Investopedia ©
European Central BankThe central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed in Germany in June 1998 and works with the other national banks of each of the EU members to formulate monetary policy that helps maintain price stability in the European Union.Investopedia ©
European Central Bank - ECBThe central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed in Germany in June 1998 and works with the other national banks of each of the EU members to formulate monetary policy that helps maintain price stability in the European Union.Investopedia ©
European Financial Stability Facility - EFSFAn organization created by the European Union to provide assistance to member states with unstable economies. The European Financial Stability Facility is a special purpose vehicle (SPV) managed by the European Investment Bank, a lending institution. The fund raises money by issuing debt, and distributes the funds to eurozone countries whose lending institutions need to be recapitalized, who need help managing their sovereign debt or who need financial stabilization.Investopedia ©
European Sovereign Debt CrisisA period of time in which several European countries faced the collapse of financial institutions, high government debt and rapidly rising bond yield spreads in government securities. The European sovereign debt crisis started in 2008, with the collapse of Iceland's banking system, and spread primarily to Greece, Ireland and Portugal during 2009. The debt crisis led to a crisis of confidence for European businesses and economies. It also led to political unrest by populations facing austerity measures designed to bring public spending under control.Investopedia ©
European Union - EUThe European Union (EU) is a group of 27 countries that operates as a cohesive economic and political block. Nineteen of the countries use the euro as their official currency. The EU grew out of a desire to form a single European political entity to end the centuries of warfare among European countries that culminated with World War II, which decimated much of the continent. The European Single Market was established by 12 countries in 1993 to ensure the so-called four freedoms: the movement of goods, services, people and money.Investopedia ©
EurozoneThe Eurozone is a geographic and economic region that consists of all the European Union countries that have fully incorporated the euro as their national currency.
Also referred to as "euroland".
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Ex Works (EXW)Ex Works (EXW) is an international trade term that describes an agreement in which the seller is required to make goods ready for pickup at his or her own place of business. All other transportation costs and risks are assumed by the buyer.Investopedia ©
Ex-DividendEx-dividend is a classification of trading shares when a declared dividend belongs to the seller rather than the buyer. A stock will be given ex-dividend status if a person has been confirmed by the company to receive the dividend payment.

A stock trades ex-dividend on or after the ex-dividend date (ex-date). At this point, the person who owns the security on the ex-dividend date will be awarded the payment, regardless of who currently holds the stock. After the ex-date has been declared, the stock will usually drop in price by the amount of the expected dividend.
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Excess Margin DepositFunds deposited in a trading account beyond what is required to fund basic margin requirements. The total balance on the account equals excess margin deposits plus margin. Investors can typically open an account and start trading with only a percentage of the total security value deposited. This is called trading on margin.Investopedia ©
Exchange-Traded Binary OptionsExchange-traded binary options, regulated by the CFTC, let you speculate on the price of some of the most heavily traded forex, commodities and stock indices markets with short-term hourly, daily or weekly expirations. The all-or-nothing trade (hence the term binary) is a derivative, meaning you don't actually buy or sell the asset itself. Binary options have a fixed payout, so you know your potential profit or loss ahead of time. Exchange-traded binary options have transparent pricing and no counter-party risk, unlike those traded over-the-counter.Investopedia ©
Exchange-Traded Fund (ETF)An ETF, or exchange traded fund, is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ETFs experience price changes throughout the day as they are bought and sold. ETFs typically have higher daily liquidity and lower fees than mutual fund shares, making them an attractive alternative for individual investors. Because it trades like a stock, an ETF does not have its net asset value (NAV) calculated once at the end of every day like a mutual fund does. An ETF is a type of fund which owns the underlying assets (shares of stock, bonds, oil futures, gold bars, foreign currency, etc.) and divides ownership of those assets into shares. The actual investment vehicle structure (such as a corporation or investment trust) will vary by country, and within one country there can be multiple structures that co-exist. Shareholders do not directly own or have any direct claim to the underlying investments in the fund; rather they indirectly own these assets. ETF shareholders are entitled to a proportion of the profits, such as earned interest or dividends paid, and they may get a residual value in case the fund is liquidated. The ownership of the fund can easily be bought, sold or transferred in much the same was as shares of stock, since ETF shares are traded on public stock exchanges.Investopedia ©
Exchange-Traded Mutual Funds (ETMF)An ETMF, or exchange-traded mutual fund, is an exchange-traded security that is a hybrid between an exchange-traded fund (ETF) and an actively managed open-ended mutual fund. It allows a standard net asset value (NAV)-based mutual fund to trade in real-time on a stock exchange, similar to the trading of a stock or ETF.
ETMF intraday trading prices will be directly linked to the fund's next end-of-day NAV. All bids, offers, and trade prices will be quoted in terms of premium or discount to the end-of-day NAV (like NAV+$0.02, or NAV-$0.05). For each trade, the premium or discount to NAV is locked-in at trade execution time, and the final transaction price is determined once NAV is calculated at the end of the day.
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Exit Strategy1. The method by which a venture capitalist or business owner intends to get out of an investment that he or she has made in the past. In other words, the exit strategy is a way of "cashing out" an investment. Examples include an initial public offering (IPO) or being bought out by a larger player in the industry. Also referred to as a "harvest strategy" or "liquidity event".
2. In the context of an active trader, a plan as to when a trade will be closed out.
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Expansionary PolicyA macroeconomic policy that seeks to expand the money supply to encourage economic growth or combat inflation (price increases). One form of expansionary policy is fiscal policy, which comes in the form of tax cuts, rebates and increased government spending. Expansionary policies can also come from central banks, which focus on increasing the money supply in the economy.Investopedia ©
Expatriation TaxAn expatriation tax is a tax on someone who renounces their citizenship. In the United States, the expatriation tax provisions under Section 877 and Section 877A of the Internal Revenue Code (IRC) apply to U.S. citizens who have renounced their citizenship, and long-term residents who have ended their U.S. resident status for federal tax purposes. Different rules apply, according to the date upon which one expatriated.Investopedia ©
Expense RatioThe expense ratio is a measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual calculation, where a fund's operating expenses are divided by the average dollar value of its assets under management (AUM). Operating expenses are taken out of a fund's assets and lower the return to a fund's investors. It is also known as the management expense ratio (MER).Investopedia ©
Exploding WarrantAn equity derivative investment instrument that gives that holder the right, but not the obligation, to acquire the underlying instrument, and which is exercised only if the issuing company does not meet certain specified goals. An exploding warrant becomes exercisable only in the event that the issuing company fails to meet certain goals, such as sales targets, product goals or EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) values. If the specified goals are met, however, the warrant "explodes" and is not exercisable. Also known as a "springing warrant." Investopedia ©
Exploration & Production E&PAn intermediate good is a good or service that is used in the eventual production of a final good, or finished product. These goods are sold by industries to one another for the purpose of resale or producing other goods. An example of an intermediate good would be sugar, which is directly consumed but is also used to manufacture food products.Investopedia ©
FCOFull Corporate Offer - a document issued by the Seller of a commodity or product attesting its characteristics, specifications, quantity available, price terms and conditions required for successful negotiation, bearing full corporate responsibility.World Vision or Others
FFDLCFully Funded Documentary Letter of Credit. A documentary Letter of Credit guaranteed by cash, Please refer to DLC.World Vision or Others
FHA LoanAn FHA loan is a mortgage issued by federally qualified lenders and insured by the Federal Housing Administration (FHA). FHA loans are designed for low-to-moderate income borrowers who are unable to make a large down payment. As of 2016, these loans allow the borrower to borrow up to 96.5% of the value of the home; the 3.5% down payment requirement can come from a gift or a grant, which makes FHA loans popular with first-time homebuyers.Investopedia ©
FOBFree on Board - A trade mode in which the exporter delivers goods on board of a vessel designated by the buyer, normally at the exporter's country port (loading port). The sale price for the goods includes all expenses, logistics, eventual taxes and port authority costs up to the loading of the vessel. Any other expenses for shipping, insurance, etc., are not included.World Vision or Others
FTSE NASDAQ 500 IndexIntroduced in July 2005, the FTSE NASDAQ 500 is one of four indexes in the FTSE NASDAQ Index Series. It includes the 500 largest NASDAQ companies by market capitalization with an emphasis on technology stocks. Its holdings encompass the holdings of two other indexes, the FTSE NASDAQ Large Cap and the FTSE NASDAQ Mid Cap.Investopedia ©
Fabless CompanyThe Fabless Semiconductor Association (FSA) defines fabless as follows: Fabless (without fab) refers to the business methodology of outsourcing the manufacturing of silicon wafers, which hundreds of semiconductor companies have adopted. Fabless companies focus on the design, development and marketing of their products and form alliances with silicon wafer manufacturers, or foundries. Investopedia ©
Factors Of ProductionAn economic term to describe the inputs that are used in the production of goods or services in the attempt to make an economic profit. The factors of production include land, labor, capital and entrepreneurship.Investopedia ©
Failed BreakA price movement through an identified level of support or resistance that does not have enough momentum to maintain its direction. Since the validity of the breakout (or breakdown) is compromised, many traders close their positions and the price fails to make the sharp move that many were expecting. A failed break is also commonly referred to as a "false breakout".Investopedia ©
Failure To DeliverAn outcome in a transaction where one of the counterparties in the transaction fails to meet their respective obligations. When failure to deliver occurs, either the party with the long position does not have enough money to pay for the transaction, or the party in the short position does not own the underlying assets that are to be delivered. Failure to deliver can occur in both equity and derivatives markets.Investopedia ©
Fair Value1. The estimated value of all assets and liabilities of an acquired company used to consolidate the financial statements of both companies.
2. In the futures market, fair value is the equilibrium price for a futures contract. This is equal to the spot price after taking into account compounded interest (and dividends lost because the investor owns the futures contract rather than the physical stocks) over a certain period of time.
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Falling KnifeA slang phrase for a security or industry in which the current price or value has dropped significantly in a short period of time. A falling knife security can rebound, or it can lose all of its value, such as in the case of company bankruptcy where equity shares become worthless. A falling knife situation can occur because of actual business results (such as a big drop in net earnings) or because of increasingly negative investor sentiment.Investopedia ©
False SignalIn technical analysis, a false signal refers to an indication of future price movements which gives an inaccurate picture of the economic reality. False signals may arise due to a number of factors, including timing lags, irregularities in data sources, smoothing methods or even the algorithm by which the indicator is calculated.Investopedia ©
Family Limited Partnership - FLPA type of partnership designed to centralize family business or investment accounts. FLPs pool together a family's assets into one single family-owned business partnership that family members own shares of. FLPs are frequently used as an estate tax minimization strategy, as shares in the FLP can be transferred between generations, at lower taxation rates than would be applied to the partnership's holdings.Investopedia ©
Fast Market RuleA rule in the United Kingdom that permits market makers to trade outside quoted ranges, when an exchange determines that market movements are so sharp that quotes cannot be kept current. The purpose of the fast market rule is to maintain an orderly market during a time of chaos. Under the rule, market makers must turn off their computerized trading systems, called black boxes. They do not have to quote share prices based on the London Stock Exchange's screen prices while the fast market is in effect, but they are still required to make firm quotes.Investopedia ©
Fat Finger ErrorA human error caused by pressing the wrong key when using a computer to input data. Fat finger errors are often harmless but can sometimes have significant consequences for example, if the wrong number is entered in performing a mathematical calculationInvestopedia ©
Fat Man StrategyA takeover defense tactic that involves the acquisition of a business or assets by a target company. The strategy is based on the premise that the bulked-up company - the "fat man" - would have reduced appeal to a hostile bidder, especially if the acquisition increases the acquirer's debt load or decreases available cash.Investopedia ©
Federal DebtThe Federal debt is the total amount of money that the United States federal government owes to creditors. The government's creditors include all individuals, businesses, governments and other organizations that own U.S. government debt securities. The federal debt exists as a result of federal government shortfalls, or deficit budgets in which the government's expenses exceed its revenues. The federal debt does not include any debts in the name of individuals, corporations and state or municipal governments.Investopedia ©
Federal Direct Loan ProgramA program that provides low-interest loans to postsecondary students and their parents. The William D. Ford Federal Direct Loan Program is issued and managed by the U.S. Department of Education and is the only government-backed student loan program in the United States. Students who wish to apply for funding must first submit the Free Application for Federal Student Aid (FAFSA).Investopedia ©
Federal Employee Retirement System (FERS)A system that became effective in 1987 and replaced the Civil Service Retirement System (CSRS) as the primary retirement plan for U.S. federal civilian employees. Retirement benefits under FERS are accumulated in three ways: a) through Social Security benefits, b) through a basic benefit plan for which the employee is charged a nominal amount and c) through a Thrift Savings Plan (TSP), which comprises automatic government contributions, voluntary employee contributions and matching government contributions.Investopedia ©
Federal Funds RateThe interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution overnight. The federal funds rate is generally only applicable to the most creditworthy institutions when they borrow and lend overnight funds to each other. The federal funds rate is one of the most influential interest rates in the U.S. economy, since it affects monetary and financial conditions, which in turn have a bearing on key aspects of the broad economy including employment, growth and inflation. The Federal Open Market Committee (FOMC), which is the Federal Reserve's primary monetary policymaking body, telegraphs its desired target for the federal funds rate through open market operations. Also known as the "fed funds rate".Investopedia ©
Federal Insurance Contributions Act - FICAA U.S. law requiring a deduction from paychecks and income that goes toward the Social Security program and Medicare. Both employees and employers are responsible for sharing the FICA payments.Investopedia ©
Federal Reserve BankThe central bank of the United States and the most powerful financial institution in the world. The Federal Reserve Bank was founded by the U.S. Congress in 1913 to provide the nation with a safe, flexible and stable monetary and financial system. It is based on a federal system that comprises a central governmental agency (the Board of Governors) in Washington, DC and 12 regional Federal Reserve Banks that are each responsible for a specific geographic area of the U.S. The Federal Reserve Bank is considered to be independent because its decisions do not have to be ratified by the President or any other government official. However, it is still subject to Congressional oversight and must work within the framework of the government's economic and financial policy objectives. Often known simply as "the Fed". The Federal Reserve Bank's creation was precipitated by repeated financial panics that afflicted the U.S. economy over the previous century, leading to severe economic disruptions due to bank failures and business bankruptcies. An acute crisis in 1907 led to calls for an institution that would prevent panics and disruptions. The 12 regional Feds are based in Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas and San Francisco. The Federal Reserve's duties can be categorized into four general areas: Conducting national monetary policy by influencing monetary and credit conditions in the U.S. economy to ensure maximum employment, stable prices and moderate long-term interest rates. Supervising and regulating banking institutions to ensure safety of the U.S. banking and financial system and to protect consumers' credit rights. Maintaining financial system stability and containing systemic risk. Providing financial services -- including a pivotal role in operating the national payments system -- to depository institutions, the U.S. government and foreign official institutions. The Federal Reserve's main monetary policymaking body is the Federal Open Market Committee (FOMC), which includes the Board of Governors, president of the Federal Reserve Bank of New York, and presidents of four other regional Federal Reserve Banks who serve on a rotating basis. The FOMC oversees open market operations, the main tool used by the Fed to influence monetary and credit conditions. The Fed's main income source is interest on U.S. government securities it has acquired throughInvestopedia ©
Federal Reserve NoteThe most accurate term used to describe the paper currency (dollar bills) circulated in the United States. These Federal Reserve Notes are printed by the U.S. Treasury at the instruction of the Federal Reserve member banks, who also act as the clearinghouse for local banks that need to increase or reduce their supply of cash on hand. This term is often confused with Federal Reserve Bank Notes, which were issued and redeemable only by each individual member bank, but phased out in the mid-1930s.Investopedia ©
Federal Reserve SystemThe central bank of the United States. The Fed, as it is commonly called, regulates the U.S. monetary and financial system. The Federal Reserve System is composed of a central governmental agency in Washington, D.C. (the Board of Governors) and twelve regional Federal Reserve Banks in major cities throughout the United States.
You can divide the Federal Reserve's duties into four general areas:
1. Conducting monetary policy
2. Regulating banking institutions and protecting the credit rights of consumers
3. Maintaining the stability of the financial system
4. Providing financial services to the U.S. government.
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Federal Trade Commission - FTCAn independent federal agency whose main goals are to protect consumers and to ensure a strong competitive market by enforcing a variety of consumer protection and antitrust laws. These laws guard against harmful business practices and protect the market from anti-competitive practices such as large mergers and price-fixing conspiracies. The Federal Trade Commission deals with complaints that are filed regarding unfair business practices such as scams, deceptive advertising and monopolistic practices. It reviews these complaints to determine if businesses are in fact engaging in harmful practices. The FTC is also responsible for reviewing mergers in the market to ensure that they do not hurt competition in the market and potentially harm consumers. Generally speaking, the FTC does not have the ability to directly enforce its rulings, but it can go to the courts to have them enforced.Investopedia ©
Fedwire Funds Service (RTGS)The Fedwire Funds Service, owned and operated by the Federal Reserve Banks, provides a centralized, electronic, real-time, gross settlement system (RTGS). RTGS means that the Fedwire application processes and settles transactions individually as they occur. Participants use Fedwire to send payments to other Fedwire participants. During a typical transaction the sending participant initiates the funds transfer message. The Fedwire application: (1) authenticates the sender, (2) edits the message for proper syntax, (3) debits the payment amount from the sender's reserve account and credits the same amount to the receiver's reserve account, (4) sends an acknowledgement to the sender to confirm the outgoing payment, and (5) sends an advice to the receiver for notification of the incoming payment. Payments processed over Fedwire are final and irrevocable.Federal Reserve Bank Services ©
Fiat MoneyCurrency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat money is derived from the relationship between supply and demand rather than the value of the material that the money is made of. Historically, most currencies were based on physical commodities such as gold or silver, but fiat money is based solely on faith. Fiat is the Latin word for "it shall be".Investopedia ©
Fibonacci NumbersFibonacci numbers/lines were discovered by Leonardo Fibonacci, who was an Italian mathematician born in the 12th century. These are a sequence of numbers where each successive number is the sum of the two previous numbers. e.g. 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc. These numbers possess a number of interrelationships, such as the fact that any given number is approximately 1.618 times the preceding number.Investopedia ©
Fidelity BondA form of business insurance that offers an employer protection against losses - either monetary or physical - caused by its employees' fraudulent or dishonest actions. Fidelity bonds are often held by insurance companies and brokerage firms, which are specifically required to carry protection proportional to their net capital. Among the possible forms of loss a fidelity bond covers include fraudulent trading, theft and forgery.Investopedia ©
FiduciaryA fiduciary is responsible for managing the assets of another person, or of a group of people. Asset managers, bankers, accountants, executors, board members, and corporate officers can all be considered fiduciaries when entrusted in good faith with the responsibility of managing another party's assets.Investopedia ©
Fiduciary RuleFiduciary rule requires retirement advisors to put their clients' needs and best interests before their own. This rule is regulated by the Department of Labor (DOL), and it was enacted to prevent financial advisors from taking advantage of their clients by giving them bad retirement advice. This bad advice tends to result in the financial firm benefiting from hidden fees that are granted through fine print.Investopedia ©
Fifth-Letter IdentifierAn additional letter added onto four-letter ticker symbols to signify to market participants that there is additional information about a specific company's stock. Also known as fifth-letter codes, this applies to stocks listed on the Nasdaq and Over-The-Counter Bulletin Board (OTCBB). There are several different fifth-letter identifiers, ranging from A to Z, and each letter represents something different.Investopedia ©
Financial CrisisA situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated with a panic or a run on the banks, in which investors sell off assets or withdraw money from savings accounts with the expectation that the value of those assets will drop if they remain at a financial institution.Investopedia ©
Financial InclusionThe pursuit of making financial services accessible at affordable costs to all individuals and businesses, irrespective of net worth and size respectively. Financial inclusion strives to address and proffer solutions to the constraints that exclude people from participating in the financial sector. Also called Inclusive Financing.Investopedia ©
Financial InnovationAdvances over time in the financial instruments and payment systems used in the lending and borrowing of funds. These changes, which include innovations in technology, risk transfer and credit and equity generation, have increased available credit for borrowers and given banks new and less costly ways to raise equity capital.Investopedia ©
Financial PrivacyA term used to encompass a wide variety of privacy issues. It relates to not only the use of information within financial institutions but also externally. Full financial privacy prohibits the selling of consumer''s information to companies who wish to use it for telemarketing, marketing or soliciting customers without their consent. It also prohibits the sharing of client information to affiliates of the institution as well. For example: A customer holds a checking account at a bank. The bank has an investment division as well as an insurance division. The bank may give information to the client about the other needs served by their external divisions, but not vice versa.Investopedia ©
Financial Services Agency - FSAThe Japanese government entity responsible for overseeing banking, insurance and securities and exchange. The role of the Financial Services Agency is to ensure the stability of Japan's financial system; the protection of depositors, insurance policyholders and securities investors; and the inspection, supervision and surveillance and transparency of the financial system. The FSA was established in July of 2000 under the jurisdiction of the Financial Reconstruction Commission through the reorganization of the Financial Supervisory Agency. It is headquartered in Tokyo, Japan.Investopedia ©
Financial StatementsFinancial statements for businesses usually include income statements, balance sheets, statements of retained earnings and cash flows. It is standard practice for businesses to present financial statements that adhere to generally accepted accounting principles (GAAP) to maintain continuity of information and presentation across international borders. Financial statements are often audited by government agencies, accountants, firms, etc. to ensure accuracy and for tax, financing or investing purposes.Investopedia ©
Financing EntityThe party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed entity. A financing entity receives a fee for providing financing, and is linked to the financed entity through a chain of financing transactions across all intermediaries.Investopedia ©
Fine PaperHigh-quality securities that are assumed to be risk free, or commercial paper that is issued by solid blue-chip companies that have minimal risk of default. Fine paper will trade at a small spread over government issued fixed-income securities to reflect their marginal risk over truly risk-free debt.
Fine paper, by virtue of its sterling credit quality, generally offers yields that are lower than those of lower rated securities. In the fourth quarter of 2008, however, the credit crunch resulted in a near-total freeze of the U.S. commercial paper market, and even the finest of paper was subject to financial uncertainty.
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Finite ReinsuranceA type of reinsurance that transfers over only a finite or limited amount of risk. Risk is reduced through accounting or financial methods, along with the actual transfer of economic risk. By transferring less risk to the reinsurer, the insurer receives coverage on its potential claims at a lower cost than traditional reinsurance.Investopedia ©
FintechFintech is a portmanteau of financial technology that describes an emerging financial services sector in the 21st century. Originally, the term applied to technology applied to the back-end of established consumer and trade financial institutions. Since the end of the first decade of the 21st century, the term has expanded to include any technological innovation in the financial sector, including innovations in financial literacy and education, retail banking, investment and even crypto-currencies like bitcoin.Investopedia ©
Fire SaleSelling goods or assets at heavily discounted prices. Fire sale originally referred to the discount sale of goods that were damaged by fire; it may now refer to any sale where the seller is in financial distress. In the context of the financial markets, fire sale refers to securities that are trading well below their intrinsic value, such as during prolonged bear markets.Investopedia ©
FirewallLegal barriers that prevent both the transference of inside information and the performance of financial transactions between commercial and investment banks. Restrictions placed on collaborations between banks and brokerage firms under the Glass-Steagall Act of 1933, acted as a form of firewall.Investopedia ©
Firm QuoteA price quote on a security, made by a dealer or market maker, that guarantees a bid or ask price up to the amount quoted. This differs from a nominal quote wherein the price and quantity of a bid or ask quote are not firmly posted.Investopedia ©
Fiscal CliffA combination of expiring tax cuts and across-the-board government spending cuts scheduled to become effective Dec. 31, 2012. The idea behind the fiscal cliff was that if the federal government allowed these two events to proceed as planned, they would have a detrimental effect on an already shaky economy, perhaps sending it back into an official recession as it cut household incomes, increased unemployment rates and undermined consumer and investor confidence. At the same time, it was predicted that going over the fiscal cliff would significantly reduce the federal budget deficit.Investopedia ©
Fiscal DeficitWhen a government's total expenditures exceed the revenue that it generates (excluding money from borrowings). Deficit differs from debt, which is an accumulation of yearly deficits.Investopedia ©
Fiscal LocalismInstitutionalized monetary exchange focused upon local and regional aspects. Fiscal localism can refer to different theologies, but the most basic and easily recognizable form of fiscal localism would be the idea of buying locally. Advocates of the practice believe that fiscal localism allows communities to grow organically and more efficiently, as local merchants and consumers work together to further their resident economy.Investopedia ©
Fiscal NeutralityFiscal neutrality occurs when taxes and government spending are neutral, with neither having an effect on demand. Fiscal neutrality creates a condition where demand is neither stimulated nor diminished by taxation and government spending.Investopedia ©
Fiscal Year - FYA period that a company or government uses for accounting purposes and preparing financial statements. The fiscal year may or may not be the same as a calendar year. For tax purposes, companies can choose to be calendar-year taxpayers or fiscal-year taxpayers. The default IRS system is based on the calendar year, so fiscal-year taxpayers have to make some adjustments to the deadlines for filing certain forms and making certain payments. In many instances, even fiscal year taxpayers must adhere to the calendar-year deadlines.Investopedia ©
Fiscal Year-EndThe completion of a one-year, or 12-month, accounting period. A firm's fiscal year-end does not necessarily need to fall on December 31, and can actually fall on any day throughout the year.Investopedia ©
Fisher EffectAn economic theory proposed by economist Irving Fisher that describes the relationship between inflation and both real and nominal interest rates. The Fisher effect states that the real interest rate equals the nominal interest rate minus the expected inflation rate. Therefore, real interest rates fall as inflation increases, unless nominal rates increase at the same rate as inflation.Investopedia ©
Five Cs Of CreditThe five C's of credit is a system used by lenders to gauge the creditworthiness of potential borrowers. The system weighs five characteristics of the borrower and conditions of the loan, attempting to estimate the chance of default. The five C's of credit are character, capacity, capital, collateral and conditions.Investopedia ©
Five Hundred Dollar RuleAn old rule that prevents a bank or firm from liquidating a client's account to cover a margin call if the amount of the margin call is equal to or less than $500, this was changed to $1,000. The five hundred dollar rule is mandated by the Federal Reserve, and is used to keep relatively small financial deficiencies, that could be readily solved, from resulting in the automatic sale of an investment position.Investopedia ©
Five Percent RuleA regulation that requires a broker to use fair practices and ethical guidelines when setting the commission rates. The five percent rule stipulates that the broker can change the commission percentage by 5%, either up or down, but can only do so if the change can be legally justified. The rule also applies to other transactions, including proceeds sales and riskless transactions.Investopedia ©
Fixed AssetA long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be consumed or converted into cash any sooner than at least one year's time. Fixed assets are sometimes collectively referred to as "plant".Investopedia ©
Fixed CostA cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses that have to be paid by a company, independent of any business activity. It is one of the two components of the total cost of a good or service, along with variable cost.Investopedia ©
Fixed IncomeA type of investing or budgeting style for which real return rates or periodic income is received at regular intervals at reasonably predictable levels. Fixed-income budgeters and investors are often one and the same - typically retired individuals who rely on their investments to provide a regular, stable income stream. This demographic tends to invest heavily in fixed-income investments because of the reliable returns they offer.Investopedia ©
Fixed-Charge Coverage RatioA ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases.Investopedia ©
Fixed-Income SecurityAn investment that provides a return in the form of fixed periodic payments and the eventual return of principal at maturity. Unlike a variable-income security, where payments change based on some underlying measure such as short-term interest rates, the payments of a fixed-income security are known in advance.Investopedia ©
Fixed-Income Style BoxCreated by Morningstar, a fixed-income style box is designed to visually represent the investment characteristics of bonds and bond mutual funds. This is a valuable tool for investors to use to determine the risk-return structures of their bonds/ bond portfolios and/or how these investments fit into their investing criteria.Investopedia ©
Flash CrashThe quick drop and recovery in securities prices that occurred shortly after 2:30 pm Eastern Standard Time on May 6, 2010. Initial reports that the crash was caused by a mistyped order proved to be erroneous, and the causes of the flash crash remain unknown. Both the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have investigated the incident. The SEC and CFTC released a preliminary report on the flash crash incident on May 18, 2010. The report gave several working hypotheses, but failed to identify a single cause for the incident. Securities exchanges canceled 21,000 trades that were executed at unexpectedly low prices during the crash. On June 10, 2010, the SEC voted unanimously to enact new rules which automatically stop trading for any stock in the S&P 500 whose price changes by more than 10% in any five-minute period.Investopedia ©
Flat TaxA system that applies the same tax rate to every taxpayer regardless of income bracket. A flat tax applies the same tax rate to all taxpayers, with no deductions or exemptions allowed. Supporters of a flat tax system propose that it would give taxpayers incentive to earn more because they would not be penalized with a higher tax bracket. In addition, supporters argue that a flat tax system is fairer because it imposed the tax on all taxpayers regardless of income.Investopedia ©
Flight To QualityThe action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This flight is usually caused by uncertainty in the financial or international markets. However, at other times, this move may be an instance of investors cutting back on the more volatile investments for the conservative ones (i.e. diversifying) without much consideration of the international markets.Investopedia ©
Flight to QualityThe action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This flight is usually caused by uncertainty in the financial or international markets. However, at other times, this move may be an instance of investors cutting back on the more volatile investments for the conservative ones (i.e. diversifying) without much consideration of the international markets.Investopedia ©
Float ShrinkA strategy for reducing or'shrinking' the number of a company's outstanding shares currently trading in the market. Float shrink can occur when a company buys back its own stocks or when demand for the position increases and drives down the available shares, which will in turn increase the stock's price.Investopedia ©
Floating Exchange RateA country's exchange rate regime where its currency is set by the foreign-exchange market through supply and demand for that particular currency relative to other currencies. Thus, floating exchange rates change freely and are determined by trading in the forex market. This is in contrast to a "fixed exchange rate" regime.Investopedia ©
Flow of CostsRefers to the manner in which costs move through the firm. Typically the flow of costs is relevant to a manufacturing environment where accountants must quantify what costs are in raw materials, work in process, finished goods inventory and cost of goods sold. Flow of costs does not only apply to inventory but factors in other processes to which a cost is attached such as labor and overhead.Investopedia ©
Food and Drug Administration (FDA)A government agency established in 1906 with the passage of the Federal Food and Drugs Act. The agency is currently separated into five centers, which oversee a majority of the organization's obligations involving food, drugs, cosmetics, animal food, dietary supplements, medical devices, biological goods and blood products.Investopedia ©
Fool in the ShowerThe notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once. This phrase describes a scenario where a central bank, such as the Federal Reserve acts to stimulate or slow down an economy. The phrase is attributed to Nobel laureate Milton Friedman, who likened a central bank that acted too forcefully to a fool in the shower. When the fool realizes that the water is too cold, he turns on the hot water. However, the hot water takes a while to arrive, so the fool simply turns the hot water up all the way, eventually scalding himself.Investopedia ©
Fool's GoldAlso known as iron pyrite, fool's gold is a gold-colored mineral that is often mistaken for real gold. Fool's gold is also a common term used to describe any item which has been believed to be valuable to the owner, only to end up being not so. Investments in hot stocks that seemed too good to be true, only to crash and burn, can be referred to as investing in fool's gold.Investopedia ©
Footprint ChartsA group of charts that provide price and volume activity together on one data point over a specified time frame. Footprint charts, provided by MarketDelta, attempt to provide traders with increased price transparency and a clearer picture of market activity, similar to that of a level II quote or depth-of-market order book.Investopedia ©
Forced IPOAn instance in which a company is forced into issuing shares to the public for the first time. Forced IPOs occur when a company goes public due to certain conditions being met which are set by the securities regulatory body of the country. Initial public offerings (IPOs) are usually conducted at the discretion of the current management and/or owners of the private company.Investopedia ©
Foreclosure FilingThe initial legal process of selling a mortgaged property that is in default. When a borrower defaults in making mortgage payments or otherwise fails to fulfill the terms of the mortgage agreement, the lender can enforce its rights through the foreclosure process. This can be a judicial foreclosure, where the lender files a case known as foreclosure filing to obtain an order requiring the borrower to vacate the property; or a non-judicial foreclosure, where the lender's first step in the foreclosure filing is the notice of default (NOD). Foreclosure filings refer to the statutory procedural requirements followed by the lender and all involved parties, including any documentation and court hearings. The procedure depends on state laws.Investopedia ©
Foreign AidForeign aid is money that one country voluntarily transfers to another, which can take the form of a gift, a grant or a loan. In the United States, the term usually refers only to military and economic assistance the federal government gives to other governments. Broader definitions of aid include money transferred across borders by religious organizations, non-government organizations (NGOs) and foundations. Some have argued that remissions should be included, but they are rarely assumed to constitute aid.Investopedia ©
Foreign Currency EffectsThe gain or loss on foreign investments due to changes in the relative value of assets denominated in a currency other than the principal currency with which a company normally conducts business. A rising domestic currency means foreign investments will result in lower returns when converted back to the domestic currency. The opposite is true for a declining domestic currency.Investopedia ©
Foreign Currency Fixed DepositA fixed investment instrument in which a specific sum of money with an agreed upon time and interest rate is deposited into a bank. Although fixed deposits have virtually no risk, foreign currency fixed deposits introduce an element of risk because investors must exchange their currency into the target currency and then covert it back again once the term is over.Investopedia ©
Foreign ExchangeThe exchange of one currency for another, or the conversion of one currency into another currency. It also refers to the global market where currencies are traded virtually around-the-clock. The term foreign exchange is usually abbreviated as "forex" and occasionally as "FX."Investopedia ©
Foreign Exchange ReservesForeign exchange reserves are reserve assets held by a central bank in foreign currencies, used to back liabilities on their own issued currency as well as to influence monetary policy.Investopedia ©
Forward ContractA customized contract between two parties to buy or sell an asset at a specified price on a future date. A forward contract can be used for hedging or speculation, although its non-standardized nature makes it particularly apt for hedging. Unlike standard futures contracts, a forward contract can be customized to any commodity, amount and delivery date. A forward contract settlement can occur on a cash or delivery basis. Forward contracts do not trade on a centralized exchange and are therefore regarded as over-the-counter (OTC) instruments. While their OTC nature makes it easier to customize terms, the lack of a centralized clearinghouse also gives rise to a higher degree of default risk. As a result, forward contracts are not as easily available to the retail investor as futures contracts.Investopedia ©
Forward Start OptionThe advance purchase of a put or call option with a strike price that will be determined at a later date, typically when the option becomes active. A forward start option becomes active at a specified date in the future; however, the premium is paid in advance, and the time to expiration and the underlier are established at the time the forward start option is purchased.Investopedia ©
Four CsThe four characteristics used to determine the value of a diamond. The Four Cs of diamonds correspond to the carat, cut, clarity and color. The characteristics of a diamond are graded and categorized by the diamond industry to establish its retail value.
Cut refers to the diamond's reflective properties.
Clarity refers to the occurrence of inner flaws or inclusions in the diamond.
Color refers to the presence or absence of a diamond's color. Colorless diamonds allow more light to pass through than colored diamonds.
Carat refers to the weight of the diamond. Larger diamonds are exponentially more valuable because of their rarity.
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Four Percent RuleThe four percent rule is a rule of thumb used to determine the amount of funds to withdraw from a retirement account each year. This rule seeks to provide a steady stream of funds to the retiree, while also keeping an account balance that allows funds to be withdrawn for a number of years. The 4% rate is considered a "safe" rate, with the withdrawals consisting primarily of interest and dividends.Investopedia ©
FrackingA slang term for hydraulic fracturing. Fracking refers to the procedure of creating fractures in rocks and rock formations by injecting fluid into cracks to force them further open. The larger fissures allow more oil and gas to flow out of the formation and into the wellbore, from where it can be extracted. Fracking has resulted in many oil and gas wells attaining a state of economic viability, due to the level of extraction that can be reached.Investopedia ©
Fractional GiftA gift that provides a fractional interest in an artwork today, while providing the rest of the interest over a period of time. A fractional gift may allow the donor to still display the work at a non-museum location for a period of time, possibly by alternating time periods with its display at the museum.Investopedia ©
Fractional Reserve BankingA banking system in which only a fraction of bank deposits are backed by actual cash-on-hand and are available for withdrawal. This is done to expand the economy by freeing up capital that can be loaned out to other parties. Most countries operate under this type of system. Also known as "fractional deposit lending". Many U.S. banks were forced to shut down during the Great Depression because so many people attempted to withdraw assets at the same time. Today there are many safeguards in place to prevent such an instance from occurring again, but the fractional-reserve banking system remains in place.Investopedia ©
Frame DependenceThe human tendency to view a scenario differently depending on how it is presented. Frame dependence is based on emotion, not logic, and can explain why people sometimes make irrational choices. For example, when presented with a scenario in which a sweater is being offered at its full price of $50 and a scenario in which the same sweater is regularly priced at $75 but on sale for $50, many consumers would perceive the latter as a better value even though in both situations they are being asked to pay the same price for the same sweater. Thus a real-life application of frame dependence is the use of strategic pricing by retail stores to influence consumers' purchasing behavior.Investopedia ©
FranchiseA franchise is a type of license that a party (franchisee) acquires to allow them to have access to a business's (the franchiser) proprietary knowledge, processes and trademarks in order to allow the party to sell a product or provide a service under the business's name. In exchange for gaining the franchise, the franchisee usually pays the franchisor initial start-up and annual licensing fees.Investopedia ©
Freddie Mac - Federal Home Loan Mortgage Corp - FHLMCA stockholder-owned, government-sponsored enterprise (GSE) chartered by Congress in 1970 to keep money flowing to mortgage lenders in support of homeownership and rental housing for middle income Americans. The FHLMC purchases, guarantees and securitizes mortgages to form mortgage-backed securities. The mortgage-backed securities that it issues tend to be very liquid and carry a credit rating close to that of U.S. Treasuries. Also known as "Freddie Mac". Investopedia ©
Free Carrier - FCAA trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. Costs for transportation and risk of loss transfer to the buyer after delivery to the carrier. When used in trade terms, the word "free" means the seller has an obligation to deliver goods to a named place for transfer to a carrier.Investopedia ©
Free Cash Flow (FCF)A measure of financial performance calculated as operating cash flow minus capital expenditures. Free cash flow (FCF) represents the cash that a company is able to generate after laying out the money required to maintain or expand its asset base. Free cash flow is important because it allows a company to pursue opportunities that enhance shareholder value. Without cash, it's tough to develop new products, make acquisitions, pay dividends and reduce debt. FCF is calculated as:EBIT(1-Tax Rate) + Depreciation & Amortization - Change in Net Working Capital - Capital Expenditure. It can also be calculated by taking operating cash flow and subtracting capital expenditures.Investopedia ©
Free MarketA market economy based on supply and demand with little or no government control. A completely free market is an idealized form of a market economy where buyers and sells are allowed to transact freely (i.e. buy/sell/trade) based on a mutual agreement on price without state intervention in the form of taxes, subsidies or regulation. In financial markets, free market stocks are securities that are widely traded and whose prices are not affected by availability. In foreign-exchange markets, it is a market where exchange rates are not pegged (by government) and thus rise and fall freely though supply and demand for currency. Investopedia ©
Free On Board - FOBFree on board (FOB) is a trade term requiring the seller to deliver goods on board a vessel designated by the buyer. The seller fulfills its obligations to deliver when the goods have passed over the ship's rail.

When used in trade terms, the word 'free' means the seller has an obligation to deliver goods to a named place for transfer to a carrier.
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Free TradeFree trade is the economic policy of not discriminating against imports from and exports to foreign jurisdictions. Buyers and sellers from separate economies may voluntarily trade without the domestic government applying tariffs, quotas, subsidies or prohibitions on their goods and services. Free trade is the opposite of trade protectionism or economic isolationism.Investopedia ©
FrexitFrexit - short for "French exit" - is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to leave the European Union in June of 2016. Other countries with fringe parties that have similarly acknowledged the possibility of leaving the EU include the Netherlands (Nexit), Italy (Italeave) and Austria (Auxit or Oexit). The specific terms of referendum differ depending on each country''s interests.Investopedia ©
Fringe BenefitsA collection of various benefits provided by an employer, which are exempt from taxation as long as certain conditions are met. Any employee who receives taxable fringe benefits will have to include the fair market value of the benefit in their taxable income for the year, which will be subject to tax withholdings, and social security benefits payments.Investopedia ©
Front RunningFront running is the unethical practice of a broker trading an equity in his personal account based on advanced knowledge of pending orders from the brokerage firm or from clients, allowing him to profit from the knowledge. It can also occur when a broker buys shares in his personal account ahead of a strong buy recommendation that the brokerage firm is going to make to its clients.Investopedia ©
FudgetA falsified statement of income and expenses. A fudget or "fudget budget" fudges the numbers to present a more attractive picture of a budget than the financial situation that really exists. An example of a fudget would be one that presents balanced income and expenses, when expenses actually exceed income.Investopedia ©
Fully VestedRefers to a person's right to the full amount of some benefit, most commonly to employee benefits such as stock options, profit sharing or retirement benefits. These benefits often accrue to employees each year, but they only become fully the employee's property according to a vesting schedule. Vesting may occur on a gradual schedule, such as 25% per year, or on a "cliff" schedule where 100% of benefits vest at a set time, such as four years after the award date.Investopedia ©
FuturesA financial contract obligating the buyer to purchase an asset (or the seller to sell an asset), such as a physical commodity or a financial instrument, at a predetermined future date and price. Futures contracts detail the quality and quantity of the underlying asset; they are standardized to facilitate trading on a futures exchange. Some futures contracts may call for physical delivery of the asset, while others are settled in cash. The futures markets are characterized by the ability to use very high leverage relative to stock markets. Futures can be used either to hedge or to speculate on the price movement of the underlying asset. For example, a producer of corn could use futures to lock in a certain price and reduce risk (hedge). On the other hand, anybody could speculate on the price movement of corn by going long or short using futures.Investopedia ©
GBPGBP is the abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories of South Georgia, the South Sandwich Islands and British Antarctic Territory and the U.K. crown dependencies: the Isle of Man and the Channel Islands. The African country of Zimbabwe also uses the pound. The British pound is pegged to the Falkland Islands pound, Gibraltar pound, Saint Helenian pound, Jersey pound (JEP), Guernsey pound (GGP), Manx pounds, Scotland notes and Northern Ireland notes. Investopedia ©
GadflyA slang term for an investor who attends the annual shareholders meeting to criticize the corporation's executives. A gadfly addresses many issues for the shareholders, often grilling the management by asking difficult or embarrassing questions.Investopedia ©
Gambler's FallacyWhen an individual erroneously believes that the onset of a certain random event is less likely to happen following an event or a series of events. This line of thinking is incorrect because past events do not change the probability that certain events will occur in the future.Investopedia ©
Gantt ChartA Gantt chart is a visual representation of a project schedule. A type of bar chart, a Gantt charts show the start and finish dates of the different required elements of a project. Henry Laurence Gantt, an American mechanical engineer, is recognized for developing the Gantt chart.Investopedia ©
GarbatrageAn increase in price and trading volume in a particular sector of the economy that occurs as a result of a recent takeover, which initiates a change in sentiment toward the sector. Garbatrage is also known as "rumortrage".Investopedia ©
GazumpThe practice of raising the price of a previously agreed-upon real estate transaction. A gazump refers to a situation where a seller and buyer of a piece of real estate (such as a parcel of land or a house) have in place a verbal agreement regarding price, but where the price is suddenly raised shortly before or at the signing...Investopedia ©
GazunderA colloquial term used in the United Kingdom for the practice of a buyer lowering his real estate purchase offer below his previous offer when the transaction is already well under way. A gazunder typically happens when the market is weak and/or when the seller is coming from a position of weakness. "Gazundering" is not illegal, but many people consider it unethical. The seller may be forced to accept the lower price if it is a better option than continuing to pay the carrying costs on the property or continuing to hold it in a declining market.Investopedia ©
General LedgerA company's main accounting records. A general ledger is a complete record of financial transactions over the life of a company. The ledger holds account information that is needed to prepare financial statements, and includes accounts for assets, liabilities, owners' equity, revenues and expenses.Investopedia ©
Generalized AutoRegressive Conditional Heteroskedasticity (GARCH) ProcessAn econometric term developed in 1982 by Robert F. Engle, an economist and 2003 winner of the Nobel Memorial Prize for Economics to describe an approach to estimate volatility in financial markets. There are several forms of GARCH modeling. The GARCH process is often preferred by financial modeling professionals because it provides a more real-world context than other forms when trying to predict the prices and rates of financial instruments.Investopedia ©
Generally Accepted Accounting Principles - GAAPGenerally Accepted Accounting Principles (GAAP) are a common set of accounting principles, standards and procedures that companies use to compile their financial statements. GAAP are a combination of authoritative standards (set by policy boards) and simply the commonly accepted ways of recording and reporting accounting information.Investopedia ©
Genuine Progress Indicator - GPIA metric used to measure the economic growth of a country. It is often considered as a replacement to the more well known gross domestic product (GDP) economic indicator. The GPI indicator takes everything the GDP uses into account, but also adds other figures that represent the cost of the negative effects related to economic activity (such as the cost of crime, cost of ozone depletion and cost of resource depletion, among others). The GPI nets the positive and negative results of economic growth to examine whether or not it has benefited people overall.Investopedia ©
George Bailey EffectA feeling of increased gratefulness for what one has upon considering how much worse off one might be if a critical event or events had not occurred. The George Bailey Effect is a reference to the experience of protagonist, George Bailey, in the movie "A Wonderful Life." In the movie, Bailey considers suicide before a supernatural experience shows him that his community would be much worse off if he had not lived.Investopedia ©
GhostingAn illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. Ghosting is used by corrupt companies to affect stock prices so they can profit from the price movement.Investopedia ©
GiftProperty, money or assets that one person transfers to another while receiving nothing or less than fair market value in return. Under certain circumstances, the IRS collects a tax on gifts. Transfers of money or property that are given freely or exchanged for less than market value may be subject to the gift tax if the donor has exceeded the annual or lifetime gift exemption.Investopedia ©
Gift SplittingA taxation rule that allows a married couple to split a gift's total value as if each contributed half of the amount. Gift splitting allows a couple to increase their total gift tax exemption amount by combining individual allowances.Investopedia ©
Gilt-Edged SwitchingThe selling and repurchasing of certain high-grade stocks or bonds to capture profits. Gilt-edged switching involves gilt-edged security, which can be high-grade stock or bonds issued by a financially stable company such as the Blue Chip companies or by certain governments. They are considered to be low-risk investments because they are backed by strong, established entities. Gilt-edged securities are generally inversely linked to interest rates, and therefore experience price fluctuations.Investopedia ©
Glass-Steagall ActAn act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment banking business. The Glass-Steagall Act was sponsored by Senator Carter Glass, a former Treasury secretary, and Senator Henry Steagall, a member of the House of Representatives and chairman of the House Banking and Currency Committee. The Act was passed as an emergency measure to counter the failure of almost 5,000 banks during the Great Depression. The Glass-Steagall lost its potency in subsequent decades and was finally repealed in 1999.Investopedia ©
Global FundA type of mutual fund, closed-end fund or exchange-traded fund that can invest in companies located anywhere in the world, including the investor's own country. These funds provide more global opportunities for diversification and act as a hedge against inflation and currency risks.Investopedia ©
Global Industry Classification Standard - GICSA standardized classification system for equities developed jointly by Morgan Stanley Capital International (MSCI) and Standard & Poor's. The GICS methodology is used by the MSCI indexes, which include domestic and international stocks, as well as by a large portion of the professional investment management community. The GICS hierarchy begins with 10 sectors and is followed by 24 industry groups, 67 industries and 147 sub-industries. Each stock that is classified will have a coding at all four of these levels.Investopedia ©
GlobalizationThe tendency of investment funds and businesses to move beyond domestic and national markets to other markets around the globe, thereby increasing the interconnectedness of different markets. Globalization has had the effect of markedly increasing not only international trade, but also cultural exchange.Investopedia ©
GlocalizationA combination of the words "globalization" and "localization" used to describe a product or service that is developed and distributed globally, but is also fashioned to accommodate the user or consumer in a local market. This means that the product or service may be tailored to conform with local laws, customs or consumer preferences. Products or services that are effectively "glocalized" are, by definition, going to be of much greater interest to the end user.Investopedia ©
Gnomes15-year, fixed-rate, pass-through securities offered by the Federal Home Loan Mortgage Corporation, or Freddie Mac's, cash program. The securities offered under this program have a maturity of 15 years. A pass-through security pools debt obligations and passes income obligations from the person or entity that owes the debt, to the shareholders. A mortgage-backed certificate is an example of a pass through.Investopedia ©
Godfather OfferAn irrefutable takeover offer made to a target company by an acquiring company. Typically, the acquisition price's premium is extremely generous compared to the prevailing market price. Therefore, if the target company's management refuses the offer, shareholders may initiate lawsuits or other forms of revolt against the target company for not performing their fiduciary duty of looking out for the best interests of the shareholders.Investopedia ©
Going PublicIt is said of a private company that decides to offer shares to general investors (public). Please refer to IPO (Initial Public offering).World Vision or Others
Gold BugAn individual who is bullish on gold. Gold bugs believe that gold is still a stable source of wealth like it was during the years of the gold standard international currency system. A gold bug invests in gold for what he or she perceives as financial security in the event of a currency devaluation, and often also believes that the price of gold will continue to rise in the future. The term also refers to analysts who consistently recommend gold buys.Investopedia ©
Gold FixThe twice-daily act of setting gold prices by the five members of the London gold pool. This rate is used as a benchmark for pricing the majority of global gold products and derivatives.Investopedia ©
Gold/Silver RatioA ratio, x:1, demonstrating how many ounces of silver (x) it takes to purchase one ounce of gold - the fixed variable. The ratio fluctuates, standing at 12.5 in 323 BC compared to 51 in 2007. Investors use the ratio to evaluate the relative value of silver and to decide if it's an optimal time to purchase gold or silver and how to diversify their precious-metal holdings.Investopedia ©
GoldbrickerAnything of limited or no worth that is passed off as genuine or valuable. A goldbricker is sometimes used to refer to someone who attempts to avoid work and/or responsibilities - in other words, a "slacker." The term originates from the unscrupulous practice of coating worthless metals with gold. Today, it is most often used to describe employees who use company time to scour the internet or perform other personal tasks.Investopedia ©
Golden GeeseA source of lots of money, such as shoppers who are expected to spend a lot or high-income earners who are expected to pay a lot in taxes. Golden geese could also refer to hot investments that are expected to yield a high return and into which investors might jump without thinking rationally.Investopedia ©
Golden ParachuteSubstantial benefits given to a top executive (or top executives) in the event that the company is taken over by another firm and the executive is terminated as a result of the merger or takeover. Golden parachutes are contracts given to key executives and can be used as a type of antitakeover measure taken by a firm to discourage an unwanted takeover attempt. Benefits include items such as stock options, cash bonuses, generous severance pay or any combination of these benefits. Also known as "change-in-control benefits."Investopedia ©
Goldilocks EconomyAn economy that is not so hot that it causes inflation, and not so cold that it causes a recession. There are no exact markers of a Goldilocks economy, but it is characterized by a low unemployment rate, increasing asset prices (stocks, real estate, etc.), low interest rates, brisk but steady GDP growth and low inflation.Investopedia ©
GoodwillGoodwill is an intangible asset that arises as a result of the acquisition of one company by another for a premium value. The value of a company's brand name, solid customer base, good customer relations, good employee relations and any patents or proprietary technology represent goodwill. Goodwill is considered an intangible asset because it is not a physical asset like buildings or equipment. The goodwill account can be found in the assets portion of a company's balance sheet. Investopedia ©
Gordon Growth ModelA model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. Given a dividend per share that is payable in one year, and the assumption that the dividend grows at a constant rate in perpetuity, the model solves for the present value of the infinite series of future dividends.Investopedia ©
GorillaA company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing and availability of its products, relative to its competitors in the industry. This often forces competitors to resort to other tactics to compete, such as clever marketing or differentiating their offerings.Investopedia ©
Graduate Management Admission Test - GMATA standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most commonly used as the primary exam reviewed by business schools to gain entrance into an MBA program. The exam is generally offered by computer only; in areas of the world where computer networks are limited, the exam may be given as a paper-based test.Investopedia ©
Graduate Record Examination - GREA standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics and vocabulary. The GRE is commonly used by many graduate schools to determine an applicant's eligibility for the program. The GRE is only offered via computer, however in areas which lack the appropriate computer networks, a paper-based exam may be given.Investopedia ©
Grahan NumberA figure that measures a stock's fundamental value by taking into account the company's earnings per share and book value per share. The Graham number is the upper bound of the price range that a defensive investor should pay for the stock. According to the theory, any stock price below the Graham number is considered undervalued, and thus worth investing in. The formula is as follows: SQR(22.5 * (Earninig per Share) * (Book Value per Share))Investopedia ©
Grandfathered ActivitiesNonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United States, but which were acquired or engaged in before a particular date and are therefore subject to the older rules. Such activities may be continued under the "grandfather" clauses of the Bank Holding Company Act and the International Banking Act of 1978.Investopedia ©
Grant DeedA legal document used to transfer ownership of real property. A grant deed contains the name of the person or entity transferring the property (the grantor); the legal description of the property being transferred (i.e., lot number, tract number, city, county and state); and the name of the person or entity that the property is being transferred to (the grantee). The grant deed shows that the title has not already been granted to another person.Investopedia ©
Graveyard MarketThe period near the end of a prolonged bear market. In a graveyard market, long-time investors have taken large losses, while new investors prefer to stay liquid by sitting on the sidelines and keeping their money in cash or cash-equivalent securities until market conditions improve.Investopedia ©
Graveyard Market (2)A prolonged bear market where existing investors want to get out and new investors do not want to get in. A graveyard market is so called because it is an undesirable situation in which to be trapped. Existing investors want to exit the market but cannot because it would mean crystallizing their large unrealized losses. At the same time, new investors are very reluctant to get in because they prefer sitting on the sidelines, rather than risk being sucked into the morass.
The term "graveyard market" can also refer to securities that are infrequently traded because of a lack of investor interest.
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Great Leap ForwardAn economic and social campaign that intended to change China from an agrarian economy into a modern society. The Great Leap Forward was an effort made by the Communist Party of China (CPC) under the leadership of Mao Zedong (also known as Mao Tse-tung) to transform China into a society capable of competing with other industrialized nations, within a short, five-year time period. In January 1958, the Great Leap Forward, the second Five-Year Plan, was launched, and between 1958 and 1960, millions of Chinese citizens were moved to communes to work on farms or in manufacturing. Private farming was prohibited.Investopedia ©
Green MondayThe second Monday in December, which is one of the most lucrative days in December for retail companies. Green Monday is a popular shopping day for last-minute holiday shoppers. The term was coined in 2007 by the website Shopping.com when it referred to its highest sales day as Green Monday.Investopedia ©
Gresham's LawA monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new coin ("bad money") is assigned the same face value as an older coin containing a higher amount of precious metal ("good money"), then the new coin will be used in circulation while the old coin will be hoarded and will disappear from circulation.Investopedia ©
GrexitGrexit, an abbreviation for "Greek exit," refers to Greece's potential withdrawal from the eurozone, after which it would most likely revert to using the drachma, its currency until 2001.Investopedia ©
Gross Debt Service Ratio - GDSA debt service measure that financial lenders use as a rule of thumb to give a preliminary assessment about whether a potential borrower is already in too much debt. Receiving a ratio of less than 30% means that the potential borrower has an acceptable level of debt.Investopedia ©
Gross Domestic Product - GDPGross domestic product (GDP) is the monetary value of all the finished goods and services produced within a country's borders in a specific time period. Though GDP is usually calculated on an annual basis, it can be calculated on a quarterly basis as well. GDP includes all private and public consumption, government outlays, investments and exports minus imports that occur within a defined territory. Put simply, GDP is a broad measurement of a nation's overall economic activity.Investopedia ©
Gross National HappinessAn aggregate measure of a country's national production, in the vein of the gross national product or gross domestic product. Gross national happiness (GNH) attempts to measure the sum total not only of economic output, but also of net environmental impacts, the spiritual and cultural growth of citizens, mental and physical health and the strength of the corporate and political systems.Investopedia ©
Gross National Product - GNPAn economic statistic that includes GDP, plus any income earned by residents from overseas investments, minus income earned within the domestic economy by overseas residents.Investopedia ©
Gross ProfitA company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services. Gross profit will appear on a company's income statement or can be calculated with this formula: Gross profit = revenue - cost of goods sold Also called "gross margin," "sales profit" and "gross income".Investopedia ©
Gross Profit MarginGross profit margin is a financial metric used to assess a firm's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold. Gross profit margin serves as the source for paying additional expenses and future savings.
Calculated as:

Where:

COGS = Cost of Goods Sold

Also known as "gross margin."
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Gross Rate Of ReturnThe total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted over a specific period of time, such as a month, quarter or year. It is often quoted as the rate of return on an investment in advertising flyers and commercials.Investopedia ©
Group of 22 (G22)An international summit formed by representatives from 22 countries. Each of the 22 countries sends representatives, such as central bankers or finance ministers, to attend the summit to strategize on global finance. The goal of the G22 is to stabilize the global financial systems and avoid global economic crises through international policies and cooperation.Investopedia ©
GroupthinkA phenomenon developed in groups and marked by the consensus of opinion without critical reasoning or evaluation of consequences or alternatives. Groupthink evolves around a common desire to not upset the balance of a group of people by creating conflict, with creativity and individuality considered potentially harmful traits that should be avoided.Investopedia ©
Growing-Equity MortgageA fixed rate mortgage on which the monthly payments increase over time according to a set schedule. The interest rate on the loan does not change, and there is never any negative amortization. In other words, the first payment is a fully amortizing payment. As the payments increase, the additional amount above and beyond what would be a fully amortizing payment is applied directly to the remaining balance of the mortgage, shortening the life of the mortgage and increasing interest savings.Investopedia ©
Guarantee FeesFees charged by mortgage-backed securities (MBS) providers, such as Freddie Mac and Fannie Mae, to lenders for bundling, servicing, selling and reporting MBS to investors. The main component of the guarantee fee is charged to protect against credit-related losses in the mortgage portfolio (think of it like MBS insurance), but small sub-fees are also deducted to cover internal expenses for such services as:
-Managing and administering the securitized mortgage pools
-Selling the MBS to investors
-Reporting to investors and the SEC
-Maintaining the MBS on the open market, and selling, general and administrative expense
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Guerrilla TradingA very short-term trading technique that aims to generate small profits while taking on very little risk per trade and repeating this multiple times in a trading session. Guerrilla trades typically have a shorter duration than scalping or day trades and seldom last for more than a few minutes, at the most. Because of its high trading volume and limited return nature, low commissions and tight trading spreads are prerequisites for successful guerrilla trading. As it also demands considerable trading expertise, guerrilla trading is generally not recommended for novice traders.Investopedia ©
Gulf TigerA colloquial term for the glittering city and emirate of Dubai in the Middle East nation of the United Arab Emirates (UAE). Dubai staked its claim as a tiger economy following several years of double-digit economic growth from the mid-1990s onwards. While oil exports formed the initial foundation for the economy, over the decades, Dubai has diversified into other areas of economic activity such as real estate, construction, trade and financial services. Also known as Arab Gulf Tiger.Investopedia ©
Guns and Butter CurveThe classic economic example of the production possibility curve, which demonstrates the idea of opportunity cost. In a theoretical economy with only two goods, a choice must be made between how much of each good to produce. As an economy produces more guns (military spending) it must reduce its production of butter (food), and vice versa.Investopedia ©
Gut SpreadAn option strategy created by buying or selling an in-the-money put at the same time as an in-the-money call. Long gut spreads are used by option traders in instances where they believe that the underlying stock will move significantly, but are unsure whether it will be up or down. In contrast, a short gut spread is used when the underlying stock isn't expected to make any significant movement.Investopedia ©
H-SharesA share of a company incorporated in the Chinese mainland that is listed on the Hong Kong Stock Exchange or other foreign exchange. H-shares are still regulated by Chinese law, but they are denominated in Hong Kong dollars and trade the same as other equities on the Honk Kong exchange. H-shares on the exchange are automatically included in the Hang Seng China Enterprise Index, provided that they maintain the Hong Kong exchange regulatory requirements.Investopedia ©
HacktivismA social or political activist plan that is carried out by breaking into and wreaking havoc on a secure computer system. Hacktivism may be directed at corporate or government targets. Examples of hacktivism include denial of service attacks, which shut down a system to prevent customer access, software that enables users to access censored web pages, and the leaking of sensitive information.Investopedia ©
Half Commission ManA half commission man is an individual who introduces clients to stock brokers or other market professionals in exchange for an agreed upon percentage of any commissions earned as a result of the new client. Although a stock broker must share some of his or her commissions, the theory is that the broker will come out ahead due to an increase in the number or quality of clients.Investopedia ©
Halloween MassacreCanada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, announced that all income trusts would be taxed in a similar manner as corporations at a rate over 30% on taxable income, causing unit holders' values to decrease dramatically virtually overnight.Investopedia ©
Halloween StrategyAn investment technique in which an investor sells stocks before May 1 and refrains from reinvesting in the stock market until October 31, in order to increase capital gains. The Halloween strategy is based on the premise that most capital gains are made between October 31 (Halloween) and May 1, and that the other six months of the year should be spent investing in other investment types or not at all.Investopedia ©
Halo EffectThe halo effect is a term used in marketing to explain the bias shown by customers towards certain products because of a favorable experience with other products made by the same manufacturer or maker. Basically, the halo effect is driven by brand equity. The opposite of the halo effect is "cannibalization".Investopedia ©
Halted IssueA planned security offering that does not go forward as planned. A halted issue can relate to an initial public offering (IPO) that will no longer occur, or to a bond issue that has been canceled, along with any other form of security offering that does not go on as originally expected. While an issue may be halted for any variety of reasons, a halted issue is often the result of an unexpected event that the market perceives as negative for the issuer.Investopedia ©
HammerA price pattern in candlestick charting that occurs when a security trades significantly lower than its opening, but rallies later in the day to close either above or close to its opening price. This pattern forms a hammer-shaped candlestick.Investopedia ©
Hamptons EffectThe Hamptons Effect refers to a dip in trading prior to the Labor Day weekend followed by increased trading volume as traders and investors return from the long weekend. The term implies that many of the large scale traders on Wall Street spend the last days of summer in the Hamptons, a traditional summer destination for the wealthy of New York City. The increased volume of the Hamptons Effect can be positive in the form of a rally as portfolio managers place trades to firm up overall returns going into the end of the year or it can be on the negative side if those same portfolio managers decide to take profits rather than opening or adding to positions. The Hamptons Effect is a calendar effect based on a combination of statistical analysis and anecdotal evidence.Investopedia ©
Hanging ManA bearish candlestick pattern that forms at the end of an uptrend. It is created when there is a significant sell-off near the market open, but buyers are able to push this stock back up so that it closes at or near the opening price. Generally the large sell-off is seen as an early indication that the bulls (buyers) are losing control and demand for the asset is waning.Investopedia ©
Happiness EconomicsThe formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth. Happiness economics attempts to use econometric analysis to discover what factors increase and decrease human well-being and quality of life. One major study of happiness economics has been conducted by the Europe-based Organization for Economic Cooperation and Development. The OECD ranked happiness in its 34 member countries, based on factors such as housing, income, jobs, education, environment, civic engagement and health. The study's purpose is to help governments design better public policies. Investopedia ©
Hard DollarsSee Soft DollarsInvestopedia ©
Hard ForkAs it relates to blockchain technology, a hard fork (or sometimes hardfork) is a radical change to the protocol that makes previously invalid blocks/transactions valid (or vice-versa), and as such requires all nodes or users to upgrade to the latest version of the protocol software. Put differently, a hard fork is a permanent divergence from the previous version of the blockchain, and nodes running previous versions will no longer be accepted by the newest version. This essentially creates a fork in the blockchain, one path which follows the new, upgraded blockchain, and one path which continues along the old path. Generally, after a short period of time, those on the old chain will realize that their version of the blockchain is outdated or irrelevant and quickly upgrade to the latest version.Investopedia ©
Hard LandingAn economic state wherein the economy is slowing down sharply or is tipped into outright recession after a period of rapid growth, due to government attempts to rein in inflation. A hard landing may be the undesirable consequence of efforts by a nation's central bank to tighten monetary policy, so as to slow down growth and keep inflation in check. While a soft landing is generally the objective of such tightening measures, a hard landing may be the occasional - and unfortunate - result.Investopedia ©
Harvest StrategyA strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by additional investment would not warrant the expense. A harvest strategy is employed when a line of business is considered to be a cash cow, meaning that the brand is mature and is unlikely to grow if more investment is added. The company will instead siphon off the revenue that the cash cow brings in until the brand is no longer profitable.Investopedia ©
HawkA hawk is a policymaker or advisor who is predominantly concerned with interest rates as they relate to fiscal policy. A hawk generally favors relatively high interest rates in order to keep inflation in check. In other words, they are less concerned with economic growth than they are with recessionary pressure brought to bear by high inflation rates.

Also known as 'inflation hawk.'
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Hawthorne EffectThe inclination of people who are the subjects of an experimental study to change or improve the behavior being evaluated only because it is being studied, and not because of changes in the experiment parameters or stimulus. The Hawthorne Effect refers to the fact that people will modify their behavior simply because they are being observed. The effect gets its name from one of the most famous industrial history experiments that took place at Western Electric's factory in the Hawthorne suburb of Chicago in the late 1920s and early 1930s. However, subsequent analysis on the effect by University of Chicago economists in 2009 revealed that the original results were likely overstated.Investopedia ©
Headline InflationThe raw inflation figure as reported through the Consumer Price Index (CPI) that is released monthly by the Bureau of Labor Statistics. The CPI calculates the cost to purchase a fixed basket of goods as a way of determining how much inflation is occurring in the broad economy. The CPI uses a base year and indexes current year prices based on the base year's values. The headline figure is not adjusted for seasonality or for the often volatile elements of food and energy prices, which are removed in the Core CPI. Headline inflation will usually be quoted on an annualized basis, meaning that a monthly headline figure of 4\% inflation equates to a monthly rate that, if repeated for 12 months, would create 4\% inflation for the year. Comparisons of headline inflation are typically made on a year-over-year basis. Also known as "top-line inflation".Investopedia ©
Headline RiskThe possibility that a news story will adversely affect a stock's price. For example, in the aftermath of the housing crisis, mortgage lenders such as Bank of America, JP Morgan Chase and CitiGroup faced significant headline risk. Headline risk can also impact the performance of the stock market as a whole. For example, negative news about a foreign country's nuclear weapons program might scare investors and cause the market to drop.Investopedia ©
Health Savings Account - HSAA Health Savings Account (HSA) is an account created for individuals who are covered under high-deductible health plans (HDHPs) to save for medical expenses that HDHPs do not cover. Contributions are made into the account by the individual or the individual's employer and are limited to a maximum amount each year. The contributions are invested over time and can be used to pay for qualified medical expenses, which include most medical care such as dental, vision and over-the-counter drugs.Investopedia ©
Heath-Jarrow-Morton Model - HJM ModelA model that applies forward rates to an existing term structure of interest rates to determine appropriate prices for securities that are sensitive to changes in interest rates.Investopedia ©
HeatmapA visual representation of data using colors. A heatmap can be used with all sorts of data, from representing the number of foreclosures to the spreads of credit default swaps.
For example, a heatmap of foreclosures data could show parts of the U.S. experiencing high rates of foreclosure in a dark color and states with low foreclosure rates in lighter colors. A color-gradient legend typically accompanies a heatmap to specify the data.
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HedgeA hedge is an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security, such as a futures contract.Investopedia ©
Hedge FundAn aggressively managed portfolio of investments that uses advanced investment strategies such as leveraged, long, short and derivative positions in both domestic and international markets with the goal of generating high returns (either in an absolute sense or over a specified market benchmark). Legally, hedge funds are most often set up as private investment partnerships that are open to a limited number of investors and require a very large initial minimum investment. Investments in hedge funds are illiquid as they often require investors keep their money in the fund for at least one year. Investopedia explains Hedge Fund. For the most part, hedge funds (unlike mutual funds) are unregulated because they cater to sophisticated investors. In the U.S., laws require that the majority of investors in the fund be accredited. That is, they must earn a minimum amount of money annually and have a net worth of more than $1 million, along with a significant amount of investment knowledge. You can think of hedge funds as mutual funds for the super rich. They are similar to mutual funds in that investments are pooled and professionally managed, but differ in that the fund has far more flexibility in its investment strategies.Investopedia ©
Hedge Fund ManagerThe individual who oversees and makes decisions about the investments in a hedge fund. Managing a hedge fund can be an attractive career option because of its potential to be extremely lucrative. To be successful, a hedge fund manager must consider how to have a competitive advantage, a clearly defined investment strategy, adequate capitalization, a marketing and sales plan and a risk management strategy.Investopedia ©
Hedge Ratio1. A ratio comparing the value of a position protected via a hedge with the size of the entire position itself. 2. A ratio comparing the value of futures contracts purchased or sold to the value of the cash commodity being hedged.Investopedia ©
HedgingHedging is actually the practice of attempting to reduce risk, but the goal of most hedge funds is to maximize return on investments.Investopedia ©
Hedging TransactionA type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging transactions purchase opposite positions in the market in order to ensure a certain amount of gain or loss on a trade. They are employed by portfolio managers to reduce portfolio risk and volatility or lock in profits.Investopedia ©
Helicopter DropA hypothetical, unconventional tool of monetary policy that involves printing large sums of money and distributing it to the public in order to stimulate the economy. Helicopter drop is largely a metaphor for unconventional measures to jumpstart the economy during deflationary periods. While "helicopter drop" was first mentioned by noted economist Milton Friedman, it gained popularity after Ben Bernanke made a passing reference to it in a November 2002 speech, when he was a new Federal Reserve governor. That single reference earned Bernanke the sobriquet of "Helicopter Ben," a nickname that stayed with him during much of his tenure as a Fed member and Fed chairman. Investopedia ©
Help-Wanted Index - HWIThe U.S. job market index, published monthly by the Conference Board that monitors the number of help wanted advertisements in major newspapers across the country. The help wanted index, is an indicator of strength or weakness in the national labor markets, by providing information on how many positions need to be filled.Investopedia ©
Herd InstinctA mentality characterized by a lack of individual decision-making or thoughtfulness, causing people to think and act in the same way as the majority of those around them. In finance, a herd instinct would relate to instances in which individuals gravitate to the same or similar investments, based almost solely on the fact that many others are investing in those stocks. The fear of regret of missing out on a good investment is often a driving force behind herd instinct.Investopedia ©
Herfindahl-Hirschman Index - HHIThe Herfindahl-Hirschman index (HHI) is a commonly accepted measure of market concentration. It is calculated by squaring the market share of each firm competing in a market, and then summing the resulting numbers, and can range from close to zero to 10,000. The U.S. Department of Justice uses the HHI for evaluating potential mergers issues.Investopedia ©
Hidden TaxesTaxes that are indirectly assessed upon consumer goods without the consumer's knowledge. Hidden taxes are levied upon the goods at some point during the production process and therefore raise the cost of the goods sold. However, this tax is never revealed directly to the consumer, who simply pays a higher price for the good, not knowing that part of that price is due to this tax.Investopedia ©
High Earners, Not Rich Yet - HENRYsA buzzword coined in a 2003 Fortune Magazine article to refer to a segment of families earning between $250,000 and $500,000, but not having much left after taxes, schooling, housing and family costs - not to mention saving for an affluent retirement. The original article in which the "high earners, not rich yet (HENRYs)" term appeared discussed the alternative minimum tax (AMT) and how hard it hits this group of people.Investopedia ©
High-Frequency Trading - HFTA program trading platform that uses powerful computers to transact a large number of orders at very fast speeds. High-frequency trading uses complex algorithms to analyze multiple markets and execute orders based on market conditions. Typically, the traders with the fastest execution speeds will be more profitable than traders with slower execution speeds.Investopedia ©
Hindenburg OmenA technical indicator named after the famous crash of the German airship of the late 1930s. The Hindenburg omen was developed to predict the potential for a financial market crash. It is created by monitoring the number of securities that form new 52-week highs relative to the number of securities that form new 52-week lows - the number of securities must be abnormally large. This criteria is deemed to be met when both numbers are greater than 2.2% of the total number of issues that trade on the NYSE (for that specific day).Investopedia ©
Hockey Stick BiddingAn anti-competitive bidding practice in which a market participant (or trader) offers an extremely high price for a small portion of a good. The name derives from the price curve of this practice, which resembles a hockey stick.Investopedia ©
Hockey Stick ChartA line chart in which a sharp increase or decrease occurs over a period of time. The line connecting the data points resembles a hockey stick, with the "blade" formed from data points shifting diagonally and the "shaft" formed from the horizontal data points. Hockey stick charts have been used as a visual to show dramatic shifts, such as global temperatures and poverty.Investopedia ©
Holding CostsThe associated price of storing inventory or assets that remain unsold. Holding costs are a major component of supply chain management, since businesses must determine how much of a product to keep in stock. This represents an opportunity cost, as the presence of the goods means that they are not being sold while that money could be deployed elsewhere. In addition, holding costs include the costs of goods being damaged or spoiled over time and the general costs, such as space, labor and other direct expenses.Investopedia ©
Holding Period A holding period is the real or expected period of time during which an investment is attributable to a particular investor. In a long position, the holding period refers to the time between an asset's purchase and its sale. In a short sale, the holding period is the time between when a short seller initially borrows an asset from a brokerage and when he sells it back; in other words, it is the length of time for which the short position is held.Investopedia ©
Hollywood Stock Exchange - HSXAn online prediction market where "investors" bet on the performance of various components of the entertainment industry through Moviestocks, Starbonds, TVStocks, Movie Funds, Idol Warrants and derivatives. Trades are made in "Hollywood dollars," which players receive when they open an account, make successful trades and participate in the website's quizzes. Each "investment" has a ticker-like symbol: for example, the symbol for "Ironman 3" is IRNM3.Investopedia ©
Home Equity Line Of Credit - HELOCA home equity line of credit (HELOC) is a line of credit extended to a homeowner that uses the borrower's home as collateral. Once a maximum loan balance is established, the homeowner may draw on the line of credit at his or her discretion. Interest is charged on a predetermined variable rate, which is usually based on prevailing prime rates.
Once there is a balance owing on the loan, the homeowner can choose the repayment schedule as long as minimum interest payments are made monthly. The term of a HELOC can last anywhere from less than five to more than 20 years, at the end of which all balances must be paid in full.
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Home-Equity LoanA consumer loan secured by a second mortgage, allowing home owners to borrow against their equity in the home. The loan is based on the difference between the homeowner's equity and the home's current market value. The mortgage also provides collateral for an asset-backed security issued by the lender and sometimes tax deductible interest payments for the borrower. Also known as "equity loan" or "second mortgage".Investopedia ©
Honey Badger Stock MarketA play on an Internet meme of 2011 made to relate to the stock market. The honey badger stock market is a stock market which continually gains in value and pushes past any technical or economic indicators that suggest that the stock market should not be performing as well as it is. "The honey badger stock market don't care." Investopedia ©
Hook ReversalA short-term candlestick pattern, occurring in either an uptrend or a downtrend, that is used to predict a reversal in the trend's direction. The pattern is identified when a candlestick has a higher low and a lower high compared to the previous day's candlestick. This pattern is unique because the difference in size between the first and second bar's body is small, compared to that seen in other types of engulfing patterns.Investopedia ©
Horizontal AcquisitionsThe acquisition of one company by another in the same industry. The new combined entity may be in a better competitive position than the standalone companies that were combined to form it. Horizontal acquisitions expand the capacity of the acquirer, but the basic business operations remain the same.Investopedia ©
Hot HandThe notion that because one has had a string of successes, he or she is more likely to have continued success. For example, if one flipped a (fair) coin and guessed correctly that it would land on heads three times in a row, it might be said that they have a "hot hand." Under such circumstances, a person believes that their odds of guessing which side the coin will land on next are greater than the 50% they actually are.Investopedia ©
Hot Waitress Economic IndexAn index that indicates the state of the economy by measuring the number of attractive people working as waiters/waitresses. According to the hot waitress index, the higher the number of good looking servers, the weaker the current state of the economy. It is assumed that attractive individuals do not tend to have trouble finding high-paying jobs during good economic times. During poor economic times, these jobs will be more difficult to find and therefore more attractive people will be forced to work in lower paying jobs such as being waiters/waitresses.Investopedia ©
House Money EffectThe tendency for investors to take more and greater risks when investing with profits. The house money effect gets its name from the casino phrase "playing with the house's money." The house money effect was first described by Richard H. Thaler and Eric J. Johnson of the Johnson Graduate School of Management of Cornell University.Investopedia ©
House PoorA situation that describes a person who spends a large proportion of his or her total income on home ownership, including mortgage payments, property taxes, maintenance and utilities. House poor individuals are short of cash for discretionary items and tend to have trouble meeting other financial obligations like vehicle payments.Investopedia ©
Hung ConversionConvertible securities that are very unlikely to be converted into common stock of the underlying issuer, usually because the share price is well below the conversion price. Hung convertibles can also result if the issuer is unable to force conversion until the underlying common stock reaches a pre-defined price level, or because the call date is still far away.Investopedia ©
Hung ConvertiblesConvertible securities that are very unlikely to be converted into common stock of the underlying issuer, usually because the share price is well below the conversion price. Hung convertibles can also result if the issuer is unable to force conversion until the underlying common stock reaches a pre-defined price level, or because the call date is still far away. Because of their limited prospects for conversion, hung convertibles trade as debt instruments rather than quasi-equity.Investopedia ©
Hurdle RateThe minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, the riskier the project, the higher the hurdle rate.
In the hedge fund world, hurdle rate refers to the rate of return that the fund manager must beat before collecting incentive fees.
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Hurricane DeductibleAn amount a homeowner must pay before insurance will cover the damage caused by a hurricane. Hurricane deductibles are separate from regular homeowners insurance deductibles and are based on a percentage of the home's value. While a regular homeowners insurance policy deductible is a fixed dollar amount, like $500 or $2,000, a hurricane deductible might be 1% to 5% of a home's value, or $1,000 to $5,000 for every $100,000 in home value.Investopedia ©
Hybrid SecuritiesA security that combines two or more different financial instruments. Hybrid securities generally combine both debt and equity characteristics. The most common example is a convertible bond that has features of an ordinary bond, but is heavily influenced by the price movements of the stock into which it is convertible. Often referred to as "hybrids".Investopedia ©
HyperinflationExtremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is a situation where the price increases are so out of control that the concept of inflation is meaningless.Investopedia ©
HypothecationThe established practice of a borrower pledging an asset as collateral for a loan, while retaining ownership of the assets and enjoying the benefits therefrom. With hypothecation, the lender has the right to seize the asset if the borrower cannot service the loan as stipulated by the terms in the loan agreement. Hypothecation also refers to securities in a margin account that an investor uses as collateral to borrow funds from a brokerage. Also known as a "brand advocate."Investopedia ©
ICPOIrrevocable Corporate Purchase Order - A purchase order issued by the Buyer or importer of goods, on his corporate letterhead indicating type and quantity of products being ordered from a supplier, according to the terms of the agreement.World Vision or Others
ICPO with Banking CoordinatesAn Irrevocable Corporate Purchase Order containing the buyer's bank account information, authorizing the seller to run a soft probe at his bank for confirming the availability of funds for the consummation of the business transaction.World Vision or Others
ICUMSAInternational Commission for Uniform Methods of Sugar Analysis - is a world-wide body which brings together the activities of the National Committees for Sugar Analysis in more than thirty member countries. Work is carried out under various Subjects each headed by a Referee.World Vision or Others
ILOCIrrevocable Letter of Credit - A letter of credit that cannot be canceled. This guarantees that a Buyer's payment to a Seller will be received on time and for the correct amount.World Vision or Others
IMFPAIrrevocable Master Fee Protection Agreement or Payment Agreement. Please refer to MFPA.World Vision or Others
INRINR is the International Organization for Standardization currency code for the Indian rupee, the currency of India. The rupee is made up of 100 paise and its currency symbol is _. The rupee derives its name from the rupiya, a silver coin first issued by Sultan Sher Shah Suri in the 16th century.Investopedia ©
IPO - Initial Public OfferingThe first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the capital to expand, but can also be done by large privately owned companies looking to become publicly traded.
In an IPO, the issuer obtains the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), the best offering price and the time to bring it to market.
Also referred to as a "public offering".
Investopedia ©
IPO ETFAn exchange-traded fund that focuses on stocks that have recently held an initial public offering (IPO). The underlying indexes tracked by IPO ETFs vary from one fund manager to another, but index IPO ETFs are usually passively managed and contain equities that have recently been offered to the public. By investing in an IPO ETF, investors hope to gain exposure to IPOs during their initial introduction to the market, while diversifying their investment across a pool of IPOs from varying sectors and industries.Investopedia ©
IRA TransferThe transfer of funds from an Individual Retirement Account (IRA) to another type of retirement account or bank account. IRA transfers are split into two categories: direct and indirect. A direct transfer involves moving the assets, such as stocks and mutual funds, currently held in an IRA account and moving them to a different account without liquidating them. An indirect transfer involves liquidating the assets in the current IRA account and using the cash to open another IRA account.Investopedia ©
IRS Notice 433 - Interest and Penalty InformationA document published by the Internal Revenue Service that outlines the interest rate applied to overpaid or underpaid taxes, as well as the interest rate applied to the underpayment of estimated taxes. The interest rate can vary from time period to time period, but typically ranges from 4-10%. Federal law requires the IRS to determine the interest rate on a quarterly basis, and interest is typically compounded daily (except on late or underpaid estimated taxes).Investopedia ©
IRS Publication 970A document published by the Internal Revenue Service (IRS) that provides information on tax benefits available to students and families saving for college. It explains the tax treatment for the most common forms of college funding types, such as scholarships, fellowships and grants.

The document outlines three tax credits that can be taken advantage of: the American Opportunity Tax Credit, the Hope Credit and the Lifetime Learning Credit. In addition, IRS Publication 970 covers additional tax benefits, including student loan interest deductions and Coverdell education savings accounts (ESAs).
Investopedia ©
ISINAn International Securities Identification Number (ISIN) uniquely identifies a security. Its structure is defined in ISO 6166. Securities for which ISINs are issued include bonds, commercial paper, equities and warrants. The ISIN code is a 12-character alpha-numerical code that does not contain information characterizing financial instruments but serves for uniform identification of a security at trading and settlement.Wikipedia ©
ISPInternational Standby Practices.World Vision or Others
ITINAn Individual Taxpayer Identification Number (ITIN) is a tax processing number issued by the Internal Revenue Service. It is a nine-digit number that always begins with the number 9 and has a range of 70-88 in the fourth and fifth digit. Effective April 12, 2011, the range was extended to include 900-70-0000 through 999-88-9999, 900-90-0000 through 999-92-9999 and 900-94-0000 through 999-99-9999. IRS issues ITINs to individuals who are required to have a U.S. taxpayer identification number but who do not have, and are not eligible to obtain a Social Security Number (SSN) from the Social Security Administration (SSA). ITINs are issued regardless of immigration status because both resident and nonresident aliens may have a U.S. filing or reporting requirement under the Internal Revenue Code. Individuals must have a filing requirement and file a valid federal income tax return to receive an ITIN, unless they meet an exception. Source: IRS.GOVWorld Vision or Others
Icahn LiftThe name given to the rise in stock price that occurs when Carl Icahn begins to purchase shares in a company. The Icahn lift occurs because of Mr. Icahn's reputation for creating value for the shareholders of the companies in which he takes an interest.Investopedia ©
Icarus FactorThe term Icarus factor describes a situation where managers or executives initiate an overly ambitious project which then fails. Fueled by excitement for the project, the executives are unable to reign in their misguided enthusiasm before it is too late to avoid the failure.Investopedia ©
Iceberg OrderA large single order that has been divided into smaller lots, usually through the use of an automated program, for the purpose of hiding the actual order quantity.Investopedia ©
Idiosyncratic RiskRisk that is specific to an asset or a small group of assets. Idiosyncratic risk has little or no correlation with market risk, and can therefore be substantially mitigated or eliminated from a portfolio by using adequate diversification. Research suggests that idiosyncratic risk, rather than market risk, accounts for most of the variation in the risk of an individual stock over time. Similar to unsystematic risk.Investopedia ©
Impact DayThe date on which a corporation makes a secondary offering of its shares available for sale to the public. Such a secondary offering increases the total number of outstanding shares, therefore, existing shareholders will own a smaller percentage of the company and earnings per share will decline. As a result of these changes, the stock's price may decline on, or shortly after, impact day.Investopedia ©
Impact InvestingImpact investing is investing that aims to generate specific beneficial social or environmental effects in addition to financial gain. Impact investing is a subset of socially responsible investing (SRI), but while the definition of socially responsible investing encompasses avoidance of harm, impact investing actively seeks to make a positive impact by investing, for example, in non-profits that benefit the community or in clean technology enterprises.Investopedia ©
Implied Volatility - IVImplied volatility is the estimated volatility of a security's price. In general, implied volatility increases when the market is bearish, when investors believe that the asset's price will decline over time, and decreases when the market is bullish, when investors believe that the price will rise over time. This is due to the common belief that bearish markets are more risky than bullish markets. Implied volatility is a way of estimating the future fluctuations of a security's worth based on certain predictive factors.
Weighted Average Cost Of Capital - WACC
Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is proportionately weighted.
All sources of capital, including common stock, preferred stock, bonds and any other long-term debt, are included in a WACC calculation. A firm's WACC increases as the beta and rate of return on equity increase, as an increase in WACC denotes a decrease in valuation and an increase in risk.
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Imputed ValueThe value of an item for which actual values are not available. Imputed values are a logical or implicit value for an item, or time set, wherein a "true" value has yet to be ascertained. It would be a best guess estimate, in order to accurately estimate a larger set of values or series of data points. Also known as "estimated imputation." Investopedia ©
In EscrowAn item such as money or a piece of property that has been transferred to a third party with the intentions of delivery to a grantee as part of a binding agreement. Valuables in escrow are delivered, generally by an escrow agent, to a grantee upon satisfaction of outlined terms.Investopedia ©
In The Money1. For a call option, when the option`s strike price is below the market price of the underlying asset.
2. For a put option, when the strike price is above the market price of the underlying asset. Being in the money does not mean you will profit, it just means the option is worth exercising. This is because the option costs money to buy.
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In The Penalty BoxA phrase referring to a company whose stock has plummeted with no rebound in sight. A company in the penalty box is often one that has received some bad news, ensuring the future lethargy of its stock. An example of this is a drug company with a key drug that doesn't get FDA approval. These types of companies will often stay in the penalty box for a long period of time.Investopedia ©
Inbound Cash FlowAny currency that a company or individual receives through conducting a transaction with another party. Inbound cash flow can include sales revenue generated through business operations, refunds received from suppliers, financing transactions and amounts won through legal proceedings.Investopedia ©
Incentive FeeA fee paid to a fund manager by investors. Incentive fees are typically dependent upon the manager's performance over a given period and are usually taken in relation to a benchmark index. For instance, a fund manager may receive an incentive fee if his or her fund outperforms the S&P 500 Index over a calendar year, and may increase as the level of outperformance grows.Investopedia ©
Incidents Of OwnershipAny interests or rights that an individual maintains in an asset, including property and insurance, that allow the person to change, modify, use or benefit from that asset. This is important for determining estate taxes. An individual can reduce the size of his or her estate by gifting assets to beneficiaries, but, to avoid estate tax on the gift, the original owner must not retain any incidents of ownership in the gifted assets.Investopedia ©
Income EffectIn the context of economic theory, the income effect is the change in an individual's or economy's income and how that change will impact the quantity demanded of a good or service. The relationship between income and the quantity demanded is a positive one, as income increases, so does the quantity of goods and services demanded.Investopedia ©
Income From Operations - IFOThe profit realized from a business' own operations. Income from operations is generated from running the primary business and excludes income from other sources. For example, this would exclude income generated from selling the property of a manufacturing company.Investopedia ©
IncotermsIncoterms are trade terms published by the International Chamber of Commerce (ICC) that are commonly used in both international and domestic trade contracts. Incoterms, which is short for "international commercial terms," are used to make international trade easier by helping traders who are in different countries to understand one another.Investopedia ©
Incremental Capital Output Ratio - ICORA metric that assesses the marginal amount of investment capital necessary for an entity to generate the next unit of production. Overall, a higher ICOR value is not preferred because it indicates that the entity's production is inefficient. The measure is used predominantly in determining a country's level of production efficiency.Investopedia ©
IndemnityIndemnity is compensation for damages or loss. Indemnity in the legal sense may also refer to an exemption from liability for damages.
The concept of indemnity is based on a contractual agreement made between two parties, in which one party agrees to pay for potential losses or damages caused by the other party. A typical example is an insurance contract, whereby one party (the insurer,or the indemnitor) agrees to compensate the other (the insured, or the indemnitee) for any damages or losses, in return for premiums paid by the insured to the insurer.
In Canada, indemnity refers to the salary received by a member of Parliament or a legislature.
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Independent 401(k)A 401(k) plan set up for an individual running a sole proprietorship or a small business with a spouse/immediate family member. Plan contribution limits for the individual are equal to a typical company-sponsored 401(k), but the sole proprietor can also make an employer contribution to an independent 401(k), thereby raising the total contribution allowed.
The independent 401(k) may also be called a "solo 401(k)" or an "indie K".
Investopedia ©
IndexAn index is an indicator or measure of something, and in finance, it typically refers to a statistical measure of change in a securities market. In the case of financial markets, stock and bond market indices consist of a hypothetical portfolio of securities representing a particular market or a segment of it. (You cannot invest directly in an index.) The S&P 500 and the US Aggregate Bond Index are common benchmarks for the American stock and bond markets, respectively. In reference to mortgages, it refers to a benchmark interest rate created by a third party.Investopedia ©
Index FundA type of mutual fund with a portfolio constructed to match or track the components of a market index, such as the Standard & Poor`s 500 Index (S&P 500). An index mutual fund is said to provide broad market exposure, low operating expenses and low portfolio turnover.Investopedia ©
Index InvestingA form of passive investing that aims to generate the same rate of return as an underlying market index. Investors that use index investing seek to replicate the performance of a specific index -- generally an equity or fixed-income index -- by investing in an investment vehicle such as index funds or exchange-traded funds that closely track the performance of these indexes.Investopedia ©
Index of Economic FreedomA ranking of countries or states based on the number and intensity of government regulations on wealth-creating activity. Metrics that an economic freedom index evaluates include international trade restrictions, government spending relative to GDP, occupational licensing requirements, private property rights, minimum wage laws and other government-controlled factors that affect people's ability to earn a living and keep what they earn. Such indexes are usually produced by economic think tanks.Investopedia ©
Indirect QuoteA foreign exchange rate quoted as the foreign currency per unit of the domestic currency. In an indirect quote, the foreign currency is a variable amount and the domestic currency is fixed at one unit.Investopedia ©
Individual Retirement Account - IRAAn individual retirement account is an investing tool used by individuals to earn and earmark funds for retirement savings. There are several types of IRAs as of 2016: Traditional IRAs, Roth IRAs, SIMPLE IRAs and SEP IRAs. Sometimes referred to as individual retirement arrangements, IRAs can consist of a range of financial products such as stocks, bonds or mutual funds.Investopedia ©
Industrial EspionageThe theft of trade secrets by the removal, copying or recording of confidential or valuable information in a company for use by a competitor. Industrial espionage is conducted for commercial purposes rather than national security purposes (espionage), and should be differentiated from competitive intelligence, which is the legal gathering of information by examining corporate publications, websites, patent filings and the like, to determine a corporation's activities.Investopedia ©
Ineligible AccountsMoney that a company counts as an asset but that a lender will not count as collateral. Ineligible accounts might include accounts receivable that are more than 90 days past due, foreign accounts and illiquid investments. Assets that a lender is likely to accept as collateral include inventory, equipment and accounts receivable that have been due for fewer than 90 days.Investopedia ©
InflationInflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. Central banks attempt to limit inflation, and avoid deflation, in order to keep the economy running smoothly. Investopedia ©
Inflation HedgeAn investment that is considered to provide protection against the decreased value of a currency. An inflation hedge typically involves investing in an asset that is expected to maintain or increase its value over a specified period of time. Alternatively, the hedge could involve taking a higher position in assets which may decrease in value less rapidly than the value of the currency.Investopedia ©
Inflation TargetingA central banking policy that revolves around meeting preset, publicly displayed targets for the annual rate of inflation. The benchmark used for inflation targeting is typically a price index of a basket of consumer goods, such as the Consumer Price Index (CPI) in the United States. Along with inflation target rates and calendar dates to be used as performance measures, an inflation targeting policy may also have established steps that are to be taken depending on how much the actual inflation rate varies from the targeted level, such as cutting lending rates or adding liquidity to the economy. Investopedia ©
Inflation-Linked Savings Bonds (I Bonds)U.S. government-issued debt securities similar to regular savings bonds, except they offer an investor inflationary protection, as their yields are tied to the inflation rate.Investopedia ©
Initial Public OfferingAn initial public offering (IPO) is the first time that the stock of a private company is offered to the public. IPOs are often issued by smaller, younger companies seeking capital to expand, but they can also be done by large privately owned companies looking to become publicly traded. In an IPO, the issuer obtains the assistance of an underwriting firm, which helps determine what type of security to issue, the best offering price, the amount of shares to be issued and the time to bring it to market.Investopedia ©
Insider TradingThe buying or selling of a security by someone who has access to material, nonpublic information about the security. Insider trading can be illegal or legal depending on when the insider makes the trade: it is illegal when the material information is still nonpublic--trading while having special knowledge is unfair to other investors who don't have access to such knowledge. Illegal insider trading therefore includes tipping others when you have any sort of nonpublic information. Directors are not the only ones who have the potential to be convicted of insider trading. People such as brokers and even family members can be guilty. Insider trading is legal once the material information has been made public, at which time the insider has no direct advantage over other investors. The SEC, however, still requires all insiders to report all their transactions. So, as insiders have an insight into the workings of their company, it may be wise for an investor to look at these reports to see how insiders are legally trading their stock.Investopedia ©
Institutional Buyout - IBOWhen an institutional investor, such as a private equity firm or a venture capitalist firm, acquires a controlling interest in a separate company. Institutional buyouts are the opposite of management buyouts (MBO), in which a business's current management acquires a large part of the company. Typically, the investor in an IBO will look to dispose of its stake in the company within a certain time frame.Investopedia ©
InsuranceInsurance is a contract, represented by a policy, in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. The company pools clients' risks to make payments more affordable for the insured. Insurance policies are used to hedge against the risk of financial losses, both big and small, that may result from damage to the insured or her property, or from liability for damage or injury caused to a third party.Investopedia ©
Intangible AssetAn asset that is not physical in nature. Corporate intellectual property (items such as patents, trademarks, copyrights, business methodologies), goodwill and brand recognition are all common intangible assets in today's marketplace. An intangible asset can be classified as either indefinite or definite depending on the specifics of that asset. A company brand name is considered to be an indefinite asset, as it stays with the company as long as the company continues operations. However, if a company enters a legal agreement to operate under another company's patent, with no plans of extending the agreement, it would have a limited life and would be classified as a definite asset. While intangible assets don't have the obvious physical value of a factory or equipment, they can prove very valuable for a firm and can be critical to its long-term success or failure. For example, a company such as Coca-Cola wouldn't be nearly as successful were it not for the high value obtained through its brand-name recognition. Although brand recognition is not a physical asset you can see or touch, its positive effects on bottom-line profits can prove extremely valuable to firms such as Coca-Cola, whose brand strength drives global sales year after year.Investopedia ©
Intangible Asset (2)An intangible asset is an asset that is not physical in nature. Corporate intellectual property (items such as patents, trademarks, copyrights, business methodologies), goodwill and brand recognition are all common intangible assets in today's marketplace. An intangible asset can be classified as either indefinite or definite depending on the specifics of that asset. A company brand name is considered to be an indefinite asset, as it stays with the company as long as the company continues operations. However, if a company enters a legal agreement to operate under another company's patent, with no plans of extending the agreement, it would have a limited life and would be classified as a definite asset.Investopedia ©
IntaxificationThe feeling of satisfaction and joy that a tax refund creates in a person. This feeling is somewhat misguided because the tax is only refunded because the person paid too much tax during the previous year.Investopedia ©
Interest Coverage RatioA debt ratio and profitability ratio used to determine how easily a company can pay interest on outstanding debt. The interest coverage ratio may be calculated by dividing a company's earnings before interest and taxes (EBIT) during a given period by the amount a company must pay in interest on its debts during the same period. Interest coverage ratio is also often called "times interest earned."Investopedia ©
Interest Rate ParityA theory that the interest rate differential between two countries is equal to the differential between the forward exchange rate and the spot exchange rate. Interest rate parity plays an essential role in foreign exchange markets, connecting interest rates, spot exchange rates and foreign exchange rates.Investopedia ©
Interest Rate Reduction Refinance Loan (IRRRL)A mortgage refinancing program offered by the U.S. Department of Veterans Affairs (VA) to homeowners with VA loans. The VA Interest Rate Reduction Refinance Loan (IRRRL) is a VA-loan-to-VA-loan process, designed to allow homeowners to refinance a fixed loan at a lower interest rate or to convert an adjustable rate mortgage (ARM) into a fixed rate mortgage.Investopedia ©
Interest Rate RiskThe risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between two rates, in the shape of the yield curve or in any other interest rate relationship. Such changes usually affect securities inversely and can be reduced by diversifying (investing in fixed-income securities with different durations) or hedging (e.g. through an interest rate swap).Investopedia ©
Interest Rate Risk (Bank)The possibility that the bank will become unprofitable, if rising interest rates force it to pay relatively more on its deposits than it receives on its loans.Wikipedia ©
Interest Rate SwapAn interest rate swap is an agreement between two counterparties in which one stream of future interest payments is exchanged for another based on a specified principal amount. Interest rate swaps usually involve the exchange of a fixed interest rate for a floating rate, or vice versa, to reduce or increase exposure to fluctuations in interest rates or to obtain a marginally lower interest rate than would have been possible without the swap.Investopedia ©
Interest ShortfallAny interest that has not been paid after the loan payments have been paid. An interest shortfall occurs when the loan accrues interest that has not been figured into the actual immediate payment. Adjustable-rate mortgages have interest shortfalls if their payments or interest rates are capped, leading to negative amortization.Investopedia ©
Interest-Rate DerivativeA financial instrument based on an underlying financial security whose value is affected by changes in interest rates. Interest-rate derivatives are hedges used by institutional investors such as banks to combat the changes in market interest rates. Individual investors are more likely to use interest-rate derivatives as a speculative tool -- they hope to profit from their guesses about which direction market interest rates will move.Investopedia ©
Interlocking DirectoratesA common business practice where a member of a company's board of directors also serves on another company's board or within another company's management. Under antitrust legislation, interlocking directorates are not illegal as long as the corporations involved do not compete with each other.Investopedia ©
Interlocking ShareholdingsA method of creating a unified business group by exchanging shares. By exchanging shares, a business group remains composed of a variety of distinct legal entities, rather than all being part of the same legal entity. This method of business organization has advantages in defending against hostile takeovers, since the business is composed of many legal entities. However, this system can complicate the ownership position structure of the group, especially when there are many shareholders.Investopedia ©
Intermediate GoodAn intermediate good is a good or service that is used in the eventual production of a final good, or finished product. These goods are sold by industries to one another for the purpose of resale or producing other goods. An example of an intermediate good would be sugar, which is directly consumed but is also used to manufacture food products.Investopedia ©
Internal Rate Of Return - IRRA metric used in capital budgeting measuring the profitability of potential investments. Internal rate of return is a discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero. IRR calculations rely on the same formula as NPV does.
Generally speaking, the higher a project's internal rate of return, the more desirable it is to undertake the project. IRR is uniform for investments of varying types and, as such, IRR can be used to rank multiple prospective projects a firm is considering on a relatively even basis. Assuming the costs of investment are equal among the various projects, the project with the highest IRR would probably be considered the best and undertaken first.
IRR is sometimes referred to as "economic rate of return" (ERR).
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Internal Rate of Return (IRR)The discount rate often used in capital budgeting that makes the net present value of all cash flows from a particular project equal to zero. Generally speaking, the higher a project's internal rate of return, the more desirable it is to undertake the project. As such, IRR can be used to rank several prospective projects a firm is considering. Assuming all other factors are equal among the various projects, the project with the highest IRR would probably be considered the best and undertaken first. IRR is sometimes referred to as "economic rate of return (ERR)." Investopedia ©
International Financial Reporting Standards - IFRSA set of international accounting standards stating how particular types of transactions and other events should be reported in financial statements. IFRS are issued by the International Accounting Standards Board.
IFRS are sometimes confused with International Accounting Standards (IAS), which are the older standards that IFRS replaced. (IAS were issued from 1973 to 2000.)
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International Monetary Fund - IMFAn international organization created for the purpose of:
1. Promoting global monetary and exchange stability.
2. Facilitating the expansion and balanced growth of international trade.
3. Assisting in the establishment of a multilateral system of payments for current transactions.
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International PortfolioA grouping of investment assets, such as stocks, bonds and mutual funds, that focuses on securities from foreign markets rather than on domestic ones. An international portfolio is designed to give the investor exposure to growth in emerging and international markets and offers a form of diversification.Investopedia ©
IntestacyThe condition of an estate of an individual who dies with property valued greater than outstanding debts, but in which there is not a valid will present. Intestacy may also exist if an existing will does not cover an entire estate. In common law systems, property of an estate in intestacy will typically first go to a spouse, then to children and descendants.Investopedia ©
IntrapreneurAn inside entrepreneur, or an entrepreneur within a large firm, who uses entrepreneurial skills without incurring the risks associated with those activities. Intrapreneurs are usually employees within a company who are assigned a special idea or project, and are instructed to develop the project like an entrepreneur would. Intrapreneurs usually have the resources and capabilities of the firm at their disposal. The intrapreneur's main job is to turn that special idea or project into a profitable venture for the company.Investopedia ©
Inventory Write-OffAn accounting term for the formal recognition that a portion of a company's inventory no longer has value. An inventory write-off may be handled in the company's books by charging it to the cost of goods sold or by offsetting the obsolete inventory allowance. Most inventory write-offs are small, annual expenses...Investopedia ©
Inverse CorrelationA contrary relationship between two variables such that they move in opposite directions. In an inverse correlation with variables A and B, as A increases, B would decrease; as A decreases, B would increase. In statistical terminology, an inverse correlation is denoted by the correlation coefficient r having a value between -1 and 0, with r = -1 indicating perfect inverse correlation. Also known as negative correlation.Investopedia ©
InvestmentAn investment is an asset or item that is purchased with the hope that it will generate income or will appreciate in the future. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or will be sold at a higher price for a profit.Investopedia ©
Investment Advisors Act Of 1940A piece of legislation passed in 1940 that, among other things, defined the role and responsibilities of an investment advisor. The Investment Advisors Act of 1940 was largely drafted as a response to the stock market crash 11 years earlier, as well as the subsequent depression. The Act originated from a report on investment trusts and investment companies that the Securities And Exchange Commission (SEC) prepared for Congress in 1935. The SEC report warned of the dangers posed by certain investment counselors and advocated the regulation of those who provided investment advice. Based on this recommendation, Congress began work on the bill that eventually became the Investment Advisors Act of 1940. A subsequent amendment to the act further stipulated that individuals designated as investment advisors with more than $25 million under management are required to register with the SEC; lower, and advisors only have to register with their state. The act also states the liability of investment advisors have and provides guidelines regarding the fees and commissions they can collect.Investopedia ©
Investment BankerAn investment banker is an individual who works in a financial institution that is in the business primarily of raising capital for companies, governments and other entities, or who works in a large bank's division that is involved with these activities, often called an investment bank. Investment bankers may also provide other services to their clients such as mergers and acquisition advice, or advice on specific transactions, such as a spin-off or reorganization. In smaller organizations that do not have a specific investment banking arm, corporate finance staff may fulfill the duties of investment bankers.Investopedia ©
Investment BankingA specific division of banking related to the creation of capital for other companies. Investment banks underwrite new debt and equity securities for all types of corporations. Investment banks also provide guidance to issuers regarding the issue and placement of stock.Investopedia ©
Investment Corporation Of Dubai (ICD)The Investment Corporation of Dubai (ICD) is a government-owned investment organization that manages a sovereign wealth fund for Dubai, United Arab Emirates. The ICD's mandate is to generate investment returns while also benefiting Dubai. The fund is invested wholly in government-owned businesses.Investopedia ©
Investment FundA supply of capital belonging to numerous investors that is used to collectively purchase securities while each investor retains ownership and control of his or her own shares. An investment fund provides a broader selection of investment opportunities, greater management expertise and lower investment fees than investors might be able to obtain on their own. Types of investment funds include mutual funds, exchange traded funds, money market funds and hedge funds.Investopedia ©
Investment GradeA rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such as Standard & Poor's, use different designations consisting of upper- and lower-case letters 'A' and 'B' to identify a bond's credit quality rating. 'AAA' and 'AA' (high credit quality) and 'A' and 'BBB' (medium credit quality) are considered investment grade. Credit ratings for bonds below these designations ('BB' 'B' 'CCC' etc.) are considered low credit quality, and are commonly referred to as "junk bonds."Investopedia ©
Investment ThesisThe beliefs that investors decide to use when determining what investments to purchase or sell, when to take an action and why. An investment thesis helps investors establish goals for their investments and measure whether they have achieved them. It can be in written form or just an idea. A sound investment thesis can be a foundation for a profitable portfolio, on the other hand, an incorrect investment thesis can result in sub par returns or losses. Investopedia ©
InvestopediaOne of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers and financial professionals who seek guidance or research on various topics. The website publishes articles on investments, insurance, retirement, estate and college planning, consumer debt and an assortment of other educational material.Investopedia ©
InvestotainmentTelevision reporting about the stock market, the economy and other business and financial matters that appears to be news but may have more entertainment value than factual value. As such, it is generally not a good tool to use in making financial decisions. Investotainment seeks to entertain viewers with tactics such as fiery debates between talking heads and alarmist coverage of short-term fluctuations in stock prices.Investopedia ©
Invisible TradeBusiness transactions that occur with no exchange of tangible goods. Invisible trade involves the transfer of non-tangible goods and/or services, including customer service, intellectual property and patents. The items involved in invisible trade are associated with a value and can be exchanged for tangible goods.Investopedia ©
Invitation For Bid - IFBWhen a company or organization provides detailed project specifications, and allows contractors to send in their proposals indicating how much the project will cost to complete. Because the focus of the invitation for bid is on the bidder's price for project completion, there is less emphasis on the bidder introducing its own ideas. This separates the IFB from a request for proposal (RFP).Investopedia ©
Inward InvestmentThe opposite of outward investment, an inward investment involves an external or foreign entity either investing in or purchasing the goods of a local economy. A common type of inward investment is a foreign direct investment (FDI). This occurs when one company purchases another business or establishes new operations for an existing business in a country different than the investing company's origin.Investopedia ©
Irrevocable TrustA trust that can't be modified or terminated without the permission of the beneficiary. The grantor, having transferred assets into the trust, effectively removes all of his or her rights of ownership to the assets and the trust.
This is the opposite of a "revocable trust," which allows the grantor to modify the trust.
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Italexit (Italeave)Italexit, short for "Italy exit," also known as Italeave, is an Italian derivative of the term Brexit, which refers to the June 2016 United Kingdom vote to leave the European Union. Other countries with extremist parties that have acknowledged their own versions of the possibility of leaving the EU include France (Frexit), Austria (Oustria) and the Czech Republic (Czech-out). Each country''s specific political interests depend on the country''s situation and the extremist part''s values.Investopedia ©
J-Curve EffectA type of diagram where the curve falls at the outset and eventually rises to a point higher than the starting point, suggesting the letter J. While a J-curve can apply to data in a variety of fields, such as medicine and political science, the J-curve effect is most notable in both economics and private equity funds; after a certain policy or investment is made, an initial loss is followed by a significant gain.Investopedia ©
JGBJapanese Government Bond - A bond issued by the government of Japan. The government pays interest on the bond until the maturity date. At the maturity date, the full price of the bond is returned to the bondholder. Japanese government bonds play a key role in the financial securities market in Japan.Investopedia ©
JVAJoint Venture Agreement. A commercial agreement established between two or more parties towards achieving a specific goal, normally for a limited period of time,Investopedia ©
January BarometerA theory stating that the movement of the S&P 500 during the month of January sets the stock market's direction for the year (as measured by the S&P 500). The January Barometer states that if the S&P 500 was up at the end of January compared to the beginning of the month, proponents would expect the stock market to rise during the rest of the year.Investopedia ©
January EffectA general increase in stock prices during the month of January. This rally is generally attributed to an increase in buying, which follows the drop in price that typically happens in December when investors, seeking to create tax losses to offset capital gains, prompt a sell-off.Investopedia ©
Japan Credit Rating Agency - JCROne of the key credit rating agencies in Japan. JCR provides a number of services, including rating debt securities of all types, as well as financial market and industry research. JCR also offers political and economic research and various publication and informational services for its data.Investopedia ©
Japanese HousewivesIn the foreign exchange world, a collective term for the legions of Japanese housewives who resorted to currency trading in the first decade of the new millennium. With Japanese interest rates near zero percent for most of the decade, their motivation for currency trading was to increase the low returns on their portfolios. These homemaker-traders are also called "Mrs. Watanabes."Investopedia ©
Jeff BezosSelf-made billionaire Jeff Bezos is the founder of online retail giant Amazon.com. Born in 1964 in Albuquerque, New Mexico, Bezos was raised by his mother and stepfather. One of his earliest entrepreneurial ventures was a children's education camp that he ran as a teenager with his girlfriend one summer.Investopedia ©
Jekyll and Hyde1. A slang term referring to the strengths and weaknesses of a company's financial statements.
2. An asset that suddenly increases or decreases in value.
3. A senior manager's good and bad qualities, or the polarized views between two key officers within a corporation.
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Jensen's MeasureA risk-adjusted performance measure that represents the average return on a portfolio over and above that predicted by the capital asset pricing model (CAPM), given the portfolio's beta and the average market return. This is the portfolio's alpha. In fact, the concept is sometimes referred to as "Jensen's alpha."Investopedia ©
Job MarketA market in which employers search for employees and employees search for jobs. The job market is not a physical place as much as a concept demonstrating the competition and interplay between different labor forces. The job market can grow or shrink depending on the labor demand and supply within the overall economy, specific industries, for specific education levels or specific job functions.Investopedia ©
Job Openings and Labor Turnover Survey - JOLTSA survey done by the United States Bureau of Labor Statistics to help measure job vacancies. It collects data from employers including retailers, manufacturers and different offices each month. Respondents to the survey answer quantitative and qualitative questions about their businesses' employment, job openings, recruitment, hires and separations. The JOLTS data is published monthly and by region and industry.Investopedia ©
Joint And Survivor AnnuityAn insurance product that continues regular payments as long as one of the annuitants is alive. A joint and survivor annuity must have two or more annuitants, and is often purchased by married couples who want to guarantee that a surviving spouse will receive regular income for life. Annuities are generally used to provide a steady income during retirement.Investopedia ©
Joint CreditCredit issued to two or more people based on their combined incomes, assets and credit histories. Joint credit can be issued to multiple individuals or organizations. The parties involved accept joint responsibility for repaying the debt.Investopedia ©
Joint Tenants with Right of Survivorship (JTWROS) A type of brokerage account which is owned by at least two people, where all tenants have an equal right to the account's assets and are afforded survivorship rights in the event of the death of another account holder.Investopedia ©
Joint Venture - JVA business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. In a joint venture (JV), each of the participants is responsible for profits, losses and costs associated with it. However, the venture is its own entity, separate and apart from the participants' other business interests.Investopedia ©
Jones Act, TheLegislation that regulates maritime commerce between U.S. cities. The Jones Act is found in Section 27 of the Merchant Marine Act of 1920. The act required that goods and passengers transported by water between U.S. ports be done so in U.S.-made ships, owned by U.S. citizens and crewed by U.S. citizens. The Jones Act also provided sailors with additional rights, including the ability to seek damages from the crew, captain or ship owner in the case of injury.Investopedia ©
Judo Business StrategyA plan for managing a business by using speed and agility to mitigate the effect of its competitors, as well as to anticipate and take advantage of changes in the market through new product offerings. The judo business strategy consists of three components: Movement (using the smaller size to act quickly and neutralize a larger competitor's advantages), balance (to absorb and counter the competitor's moves) and leverage (using the competitor's strengths against it).Investopedia ©
Jumbo CDA certificate of deposit (CD) with a minimum denomination of $100,000. Jumbo CDs have higher denominations than regular certificate of deposits, and allow investors to deposit a certain amount of money and receive interest. These investments are considered low-risk, stable investments for large investors. They typically pay interest at a higher rate than lower denomination CDs.Investopedia ©
Jumbo LoanA mortgage with a loan amount exceeding the conforming loan limits set by the Office of Federal Housing Enterprise Oversight (OFHEO), and therefore, not eligible to be purchased, guaranteed or securitized by Fannie Mae or Freddie Mac. OFHEO sets the conforming loan limit size on an annual basis.Investopedia ©
Jumbo PoolA pass-through Ginnie Mae II mortgage-backed security that is collateralized by multiple-issuer pools. These pools combine loans with similar characteristics and are generally larger than single-issuer pools. The mortgages contained in jumbo pools are more diverse on a geographical basis than single-issuer pools.Investopedia ©
Jumpstart Our Business Startups ActAn act signed into law on April 5, 2012 that allays the regulations instituted by the Securities And Exchange Commission on small businesses. The Jumpstart Our Business Startups Act, or JOBS Act, loosens restrictions on capital raising for small businesses, such as allowing them to go public with less than $1 billion in annual gross revenue and giving more legitimacy to the practice of crowd-funding (where firms can solicit publicly for investments.)Investopedia ©
Jumpstart Our Business Startups Act - JOBSAn act signed into law on April 5, 2012 that allays the regulations instituted by the Securities And Exchange Commission on small businesses. The Jumpstart Our Business Startups Act, or JOBS Act, loosens restrictions on capital raising for small businesses, such as allowing them to go public with less than $1 billion in annual gross revenue and giving more legitimacy to the practice of crowd-funding (where firms can solicit publicly for investments.)Investopedia ©
Junior CompanyA small company that is currently developing or seeking to develop a natural resource deposit or field. A junior company will first conduct a resource study and either provide the results to shareholders or to the public at large to prove there is assets available and because developing natural resources is often a capital-intensive process. If the study provides positive results, the junior company will either raise capital or attempt to be bought out by a larger company.Investopedia ©
Junior MortgageA mortgage that is subordinate to a first or prior (senior) mortgage. A junior mortgage often refers to a second mortgage, but it could also be a third or fourth mortgage. In the case of foreclosure, the senior mortgage will be paid down first.Investopedia ©
Junk BondA junk bond is a colloquial term for a high-yield or non-investment grade bond. Junk bonds are fixed-income instruments that carry a rating of 'BB' or lower by Standard & Poor's, or 'Ba' or below by Moody's. Junk bonds are so called because of their higher default risk in relation to investment-grade bonds. Investopedia ©
K-Percent RuleA theory of macroeconomic money-supply growth first postulated by Nobel Prize-winning economist Milton Friedman. The theory states that the best way to control inflation over the long term is to have central banking authorities automatically grow the money supply by a set amount (the "k" variable) each year, regardless of the cyclical state of the economy. The k-percent rule proposes to set the growth variable at a rate equal to the growth of real GDP each year. This would typically be in the range of 2-4%, based on averages seen in the United States.Investopedia ©
Keogh PlanA tax deferred pension plan available to self-employed individuals or unincorporated businesses for retirement purposes. A Keogh plan can be set up as either a defined-benefit or defined-contribution plan, although most plans are defined contribution. Contributions are generally tax deductible up to 25% of annual income with a limit of $47,000 (as of 2007). Keogh plan types include money-purchase plans (used by high-income earners), defined-benefit plans (which have high annual minimums) and profit-sharing plans (which offer annual flexibility based on profits)...Investopedia ©
Key Performance Indicators - KPIA set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their strategic and operational goals. KPIs vary between companies and industries, depending on their priorities or performance criteria. Also referred to as "key success indicators (KSI)".Investopedia ©
Keynesian EconomicsAn economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed by the British economist John Maynard Keynes during the 1930s in an attempt to understand the Great Depression. Keynes advocated increased government expenditures and lower taxes to stimulate demand and pull the global economy out of the Depression. Subsequently, the term "Keynesian economics" was used to refer to the concept that optimal economic performance could be achieved - and economic slumps prevented - by influencing aggregate demand through activist stabilization and economic intervention policies by the government. Keynesian economics is considered to be a "demand-side" theory that focuses on changes in the economy over the short run.Investopedia ©
KiasuA Chinese adjective used to describe a person's fear of losing out (to someone else). Kiasu is a traditional Chinese word, but is most popular in Singapore. It translates roughly as "scared to lose".Investopedia ©
Kicking The TiresA slang term for researching an investment before putting any money into it. The process of kicking the tires for a stock might include reading the company's annual report, examining the company's management, looking at its historical performance, considering the company's competitors and reading news articles about the company.Investopedia ©
Kids In Parents' Pockets Eroding Retirement Savings - KIPPERSA slang term referring to adult children who are out of school and in their working years, but are still living at home with their parents. These parents face the challenge of managing their own finances and planning for retirement while dealing with the added expense of providing for adult offspring.Investopedia ©
Kiting1. The act of misrepresenting the value of a financial instrument for the purpose of extending credit obligations or increasing financial leverage.
2. A fraudulent act involving the alteration or issuance of a check or draft with insufficient funds.
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Knock-Out OptionA knock-out option is an option with a built-in mechanism to expire worthless if a specified price level is exceeded. A knock-out option sets a cap to the level an option can reach in the holder''s favor. As knock-out options limit the profit potential for the option buyer, they can be purchased for a smaller premium than an equivalent option without a knock-out stipulation.Investopedia ©
Knowledge CapitalAn intangible asset a company has comprising of information and skills of its employees, their experience with business processes, group work and on-the-job learning. Knowledge capital is not like the physical factors of production - land, labor and capital - in that it is based on skills that employees share with each other in order to improve efficiencies, more than physical items. Having employees with skills and access to knowledge capital puts a company at a comparative advantage to competitors.Investopedia ©
Knowledge EconomyA system of consumption and production that is based on intellectual capital. The knowledge economy commonly makes up a large share of all economic activity in developed countries. In a knowledge economy, a significant part of a company's value may consist of intangible assets such as the value of its workers' knowledge (intellectual capital). However, generally accepted accounting principles do not allow companies to include these assets on their balance sheets.Investopedia ©
Knowledge Process Outsourcing (KPO)A form of outsourcing in which knowledge- and information-related work is carried out by workers in a different company or by a subsidiary of the same organization. This subsidiary may be in the same country or in an offshore location to save costs or other resources. Companies resort to knowledge process outsourcing when they have a shortage of skilled professionals and have the opportunity to hire skilled workers earning lower wages in another location for a lower overall cost.Investopedia ©
Kondratieff WaveA long-term cycle present in capitalist economies that represents long-term, high-growth and low-growth economic periods. This theory was founded by Nikolai D. Kondratieff (also spelled "Kondratiev"), a Communist Russia era economist who noticed an approximately 50-year cycle in European agricultural commodity prices and copper prices. Kondratieff believed that these long cycles were a feature of the economic activity of capitalist nations, and that they involved periods of evolution and self-correction. Also known as "Kondratiev waves", "supercylces", "K-waves", "surges" or "long waves".Investopedia ©
KremlinomicsA financial buzz word used to describe economic policies which some view to be overly leftist. Kremlinomics alludes to the communist policies of the Russian government during the Cold War and is by all accounts considered an unwanted connotation in industrialized nations.Investopedia ©
Kyoto ProtocolThe Kyoto Protocol is a protocol to the United Nations Framework Convention on Climate Change (UNFCCC or FCCC), aimed at fighting global warming. The UNFCCC is an international environmental treaty with the goal of achieving the "stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system. The Protocol was initially adopted on 11 December 1997 in Kyoto, Japan and entered into force on 16 February 2005. As of April 2010, 191 states have signed and ratified the protocol. Under the Protocol, 37 countries ("Annex I countries") commit themselves to a reduction of four greenhouse gases (GHG) (carbon dioxide, methane, nitrous oxide, sulphur hexafluoride) and two groups of gases (hydro fluorocarbons and perfluorocarbons) produced by them, and all member countries give general commitments.Investopedia ©
L-Shaped RecoveryA type of economic recession and recovery that resembles an "L" shape in charting. An L-shaped recovery represents the shape of the chart of certain economic measures, such as employment, GDP and industrial output. An L-shaped recovery involves a sharp decline in these metrics followed by a long period of flat or stagnant growth.Investopedia ©
L/CAcronym standing for Line of Credit (L/C). See also references to Letters of Credit.World Vision or Others
LC or LOCLetter of Credit - A letter from the Buyer's bank guaranteeing that a payment to a seller will be received on time, and for the correct amount. The bank will be required to cover the full or remaining amount of the purchase, in the event that the buyer is unable to make payment on the purchase, Letters of credit are often used in international transactions to ensure that payment will be received. Due to the nature of international dealings including factors such as distance, differing laws in each country and difficulty in knowing each party personally, the use of letters of credit has become a very important aspect of international trade. The bank also acts on behalf of the buyer (holder of letter of credit) by ensuring that the supplier will not be paid until the bank receives a confirmation that the goods have been shipped.World Vision or Others
LOIA Letter Of Intent, issued by the buyer on corporate letter head indicating his willingness and ability to undergo the business transaction with the seller. A letter of intent is not a contract and cannot be enforced (it is not legally binding), it is just a document stating serious intent to carry out certain business activities.World Vision or Others
LTNLetra do Tesouro Nacional (LTN) - A Brazilian Government Treasury Note. Please note that there are current LTNs and historical LTNs. The majority of the bonds traded in the international market are the historical ones originally issued in 1970 and 1972, which were considered null and void by the Brazilian Government. However, these notes may be subject of revalidation before the Brazilian Treasury and the Brazilian Central Bank (BACEN), which are assigned a future maturity, some 2036 and forward, if accepted by the financial authorities. The revalidated notes are automatically registered at the BACEN's CETIP, and can be further registered as a listed security at CETIP S.A., SELIC, EUROCLEAR, DTC, CLEARSTREAM and others, having high value in the financial market for private placement programs, company investments and other uses.
Some of the LTN types (Series) are: "0001" - Face Value Cr$ 100M (a.k.a. Blue or Azul); H - Face Value Cr$ 1.2 B (a.k.a. Purple or Roxa); I - Face Value Cr$ 1.5 B (a.k.a Semi-Gold); J - Face Value Cr$ 2.0 B (a.k.a. Gold) and, K - Face value Cr$ 2.4 B (a.k.a. Diamond or Diamante).
World Vision or Others
Labor IntensiveA process or industry that requires a large amount of labor to produce its goods or services. The degree of labor intensity is typically measured in proportion to the amount of capital required to produce the goods/services; the higher the proportion of labor costs required, the more labor intensive the business. Labor intensive industries include restaurants, hotels, agriculture and mining.Investopedia ©
Labor MarketThe labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. It is a major component of any economy, and is intricately tied in with markets for capital, goods and services.Investopedia ©
Labor Market FlexibilityA firms' ability to make changes to its workforce in terms of the number of employees they hire and the number of hours worked by the employees. Labor market flexibility also includes areas such as wages and unions. A flexible labor market is one where firms are under fewer regulations regarding the labor force and can therefore set wages (i.e. no minimum wage), fire at will and change the hours worked for each employee. A labor market with low flexibility is bound by rules and regulations such as minimum wage restrictions and requirements from trade unions.Investopedia ©
Lady Macbeth StrategyA corporate-takeover strategy with which a third party poses as a white knight to gain trust, but then turns around and joins with unfriendly bidders.Investopedia ©
LaggardA stock or security that is underperforming. A laggard will have lower-than-average returns compared to the market. A laggard is the opposite of a leader.Investopedia ©
Lagging Indicator1. A measurable economic factor that changes after the economy has already begun to follow a particular pattern or trend.
2. A technical indicator that trails the price action of an underlying asset, and is used by traders to generate transaction signals or to confirm the strength of a given trend. Since these indicators lag the price of the asset, a significant move will generally occur before the indicator is able to provide a signal.
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Lakshmi MittalThe chairman and CEO of ArcelorMittal and one of the world's wealthiest billionaires. Mittal is credited with helping to globalize the steel industry's business model.Investopedia ©
LandProperty or real estate, not including buildings or equipment, that does not occur naturally. Depending on the title, land ownership may also give the holder the rights to all natural resources on the land. These may include water, plants, human and animal life, fossils, soil, minerals, electromagnetic features, geographical location, and geophysical occurrences.Investopedia ©
Land FlipA fraudulent practice in the real estate business of selling undeveloped land at highly inflated prices. A land flip occurs when a group of dishonest buyers trades the land among its members, increasing the price with each transaction. The group will then finally unload the property onto an unsuspecting outside buyer at a price that the buyer will likely never be able to recoup from its own sale of the land.Investopedia ©
Land RehabilitationA re-engineering process that attempts to restore an area of land back to its natural state after it has been damaged as a result of some sort of disruption. The process involves such things as removing all man-made structures, toxins and other dangerous substances, improving the soil conditions and adding new flora.Investopedia ©
Land TrustA legal agreement where a trustee is appointed to maintain ownership of a piece of real property for the benefit of another party: namely, the beneficiary of the trust. Land trusts are used by several different types of organizations for several reasons; nonprofit entities use them to hold conservation easements, and corporations and investment groups use them to accumulate large portions of land.
These agreements can also be known as Illinois-type land trusts.
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Last Fiscal Year - LFYThe most recent 12-month accounting period that a business uses when determining its annual financial performance. The SEC requires businesses to list their last fiscal year's revenue (in addition to other financial figures) in their 10-Q filings. Analysts and management will often use figures and metrics from a company's last fiscal year in order to forecast whether or not a business's current performance will outdo that of the previous fiscal year.Investopedia ©
Last In, First Out - LIFOAn asset-management and valuation method that assumes that assets produced or acquired last are the ones that are used, sold or disposed of first.Investopedia ©
Last MileA phrase used in the telecommunications and technology industries to describe the technologies and processes used to connect the end customer to a communications network. The last mile is often stated in terms of the "last-mile problem", because the end link between consumers and connectivity has proved to be disproportionately expensive to solve.Investopedia ©
Last Will And TestamentA legal document that communicates a person's final wishes, as pertaining to possessions and dependents. A person's last will and testament will outline what to do with possessions, whether they are being left to another person, group or donated to charity, and what will happen to other things for which they are responsible, such as custody of dependents and accounts and interests management.Investopedia ©
Laughing HeirA distant relative who has inheritance rights despite not having a close, personal relationship with the decedent. In most jurisdictions, the law requires that the property of a person who passed away without leaving a will be given first to members of the decendent's immediate family, such as a spouse, children, etc. Under common law, this familial hierarchy extends as far back as it can be traced, giving folks who may have never even heard of the decedent - much less known him/her - inheritance rights.Investopedia ©
Law Of DemandA microeconomic law that states, all other factors being equal, as the price of a good or service increases, consumer demand for the good or service will decrease, and vice versa. The law of demand says that the higher the price, the lower the quantity demanded, because consumers' opportunity cost to acquire that good or service increases, and they must make more tradeoffs to acquire the more expensive product.Investopedia ©
Law Of SupplyA microeconomic law that states, all other factors being equal, as the price of a good or service increases, the quantity of goods or services that suppliers offer will increase, and vice versa. The law of supply says that as the price of an item goes up, suppliers will attempt to maximize their profits by increasing the quantity offered for sale.Investopedia ©
Law of 29A belief held by some marketers that on average a prospective customer will not purchase a good or service until they have been exposed to a marketing message 29 times. While the number of messages can differ a great deal when courting prospective clients, advocates of the law of 29 believe that a constant, "in your face" approach to marketing is the best way to sell a product or service.Investopedia ©
Lawful MoneyAny form of currency issued by the United States Treasury and not the Federal Reserve System, including gold and silver coins, Treasury notes, and Treasury bonds. Lawful money stands in contrast to fiat money, to which the government assigns value although it has no intrinsic value of its own and is not backed by reserves. Fiat money includes legal tender such as paper money, checks, drafts and bank notes. Also known as "specie", which means "in actual form." Investopedia ©
LayawayA purchasing method that allows a consumer to put a product on hold by placing a deposit on the item. Layaway allows the customer to make smaller payments on the product until the purchase price is paid in full, rather than paying for the item with credit and adding interest to the cost. A layaway plan ensures that the chosen merchandise will be in stock and ready for pick-up when the final payment is made.Investopedia ©
Leading IndicatorA measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators are used to predict changes in the economy, but are not always accurate.Investopedia ©
Lease To OwnAn arrangement where an individual enters into a lease agreement with an owner with the inclusion of a clause that typically gives the individual the right, but not the obligation, to purchase the item leased at a predefined price and time. More often than not, a portion of the total rental payment goes toward paying down the value of the item leased in the event that the renter wishes to exercise the option.Investopedia ©
Lease UtilizationLease utilization is a financial ratio which measures how much the company uses leasing arrangements to acquire its fixed assets. The two types of leases are operating leases and capital leases. Correspondingly, there are two types of lease utilization ratios: Operating Lease Utilization and Capital Lease Utilization.Investopedia ©
Leased Bank GuaranteeA bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years. The issuing bank will send the guarantee to the borrower's main bank, and the issuing bank then becomes a backer for debts incurred by the borrower, up to the guaranteed amount.Investopedia ©
Legal MonopolyA company that is operating as a monopoly under a government mandate. A legal monopoly offers a specific product or service at a regulated price and can either be independently run and government regulated, or government run and regulated. Also known as a "statutory monopoly."Investopedia ©
Legend A statement on a stock certificate noting restrictions on the transfer of the stock, often due to SEC requirements for unregistered securities. A legend may or may not be legally required on the certificate itself, depending on state laws. Restrictions on the sale or transfer of share ownership are common among privately held corporations.Investopedia ©
Lehman BrothersA firm that was once considered one of the major players in the global banking and financial services industries, but declared bankruptcy on September 15, 2008, after a catastrophic collapse caused by a mix of subprime mortgage exposure as well as negative rumors and alleged short selling in the market. The fall of Lehman Brothers marked the beginning of the public's awareness of the forthcoming credit crisis and recession of the late 2000s.Investopedia ©
Lemon LawsRegulations that attempt to protect consumers in the event that they purchase a defective vehicle. Lemon laws apply to defects that affect the use, safety or value of a vehicle. If the vehicle cannot be repaired successfully after a reasonable number of attempts, the manufacturer must repurchase or replace it.Investopedia ©
Lending FreezeA period of time when banks either do not have excess money to loan or implement strict rules regarding loan qualification so that less lending is approved. This is a protective measure by the banks to ensure that they do not run out of capital or expose themselves to increased risk. The result is that borrowers have less access to loans, and therefore are unable to secure a mortgage, an automobile loan or business loans, which can negatively impact hiring and expansion.Investopedia ©
Leprechaun LeaderA corporate manager or an executive who, like the fabled Irish elf, is a mischievous and elusive creature said to possess buried treasures of money and gold. Also spelled "Lepre-con Leader". According to Irish folklore, the location of hidden treasure is revealed only when the leprechaun is caught. In the case of a leprechaun leader, the "buried treasure" is not usually buried, but protected in an offshore account! Examples of leprechaun leaders are the executives of Enron, who stowed away millions of dollars until they were finally caught.Investopedia ©
Letter of CreditA standard, commercial letter of credit is a document issued mostly by a financial institution, used primarily in trade finance, which provides an irrevocable payment undertaking.World Vision or Others
Letter of Credit (2)A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. In the event that the buyer is unable to make payment on the purchase, the bank will be required to cover the full or remaining amount of the purchase.Investopedia ©
Letter of Intent - LOIUsed in most major business transactions, a letter of intent (LOI) outlines the terms of a deal and serves as an agreement to agree between two parties. An LOI is similar to a term sheet in it's content, but differs in structure, (one formatted as a letter, another as a list of terms).Investopedia ©
LeverageLeverage --
1. The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment.
2. The amount of debt used to finance a firm's assets. A firm with significantly more debt than equity is considered to be highly leveraged. Leverage is most commonly used in real estate transactions through the use of mortgages to purchase a home.
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Leveraged BenefitsThe use -- by a business owner or professional practitioner -- of their company's receivables or current income to secure a loan whose proceeds then indirectly fund a retirement plan. In a leveraged benefit program, also called a leveraged planning program, the participant purchases a large guaranteed annuity (such as an equity-indexed annuity) or a large cash-value life insurance policy (such as a single premium indexed universal life policy) that helps provide secure retirement income that falls outside ERISA regulations and matches the high income of the participant's working years. The plan can be established through a financial planner or specialized insurance agency.Investopedia ©
Leveraged Buyout - LBOThe acquisition of another company using a significant amount of borrowed money (bonds or loans) to meet the cost of acquisition. Often, the assets of the company being acquired are used as collateral for the loans in addition to the assets of the acquiring company. The purpose of leveraged buyouts is to allow companies to make large acquisitions without having to commit a lot of capital.Investopedia ©
Life InsuranceLife insurance is a protection against financial loss that would result from the premature death of an insured. The named beneficiary receives the proceeds and is thereby safeguarded from the financial impact of the death of the insured. The death benefit is paid by a life insurer in consideration for premium payments made by the insured.
Lifetime Learning CreditA provision of the U.S. federal income tax code that lets parents and students lower their tax liability by up to $2,000 to help offset higher education expenses. The Lifetime Learning Credit matches dollar for dollar, up to the $2,000 limit, the amount that the parent or student spends on qualified education expenses for a student enrolled at an eligible post-secondary educational institution. This credit may be claimed year after year, but it cannot be combined with the Hope Credit or American Opportunity Credit in the same tax year.Investopedia ©
Lifetime Payout AnnuityA type of insurance product that pays out a portion of the underlying portfolio of assets over the life of the investor. A lifetime payout annuity can provide fixed or variable payments. In a fixed payout scheme, the investor receives a fixed dollar amount for each payment, potentially with cost of living adjustments (COLA). Payouts under a variable payout scheme will fluctuate because payments are based on the value of the investments held in the annuity's portfolio.Investopedia ©
Like-For-Like SalesA comparison of this year's sales to last year's sales in a particular company, taking into consideration only those activities that were in effect during both time periods. Like-for-like sales is a method of valuation that attempts to exclude any effects of expansion, acquisition or any other event that artificially enlarge a company's sales. Companies may disclose like-for-like sales for various time periods, such as quarterly and yearly.Investopedia ©
Limit OrderA limit order is a take-profit order placed with a bank or brokerage to buy or sell a set amount of a financial instrument at a specified price or better; because a limit order is not a market order, it may not be executed if the price set by the investor cannot be met during the period of time in which the order is left open. Limit orders also allow an investor to limit the length of time an order can be outstanding before being canceled.Investopedia ©
Limit-On-Oper Order - LOOA type of limit order to buy or sell shares at the market open if the market price meets the limit condition. This type of order is good only for the market opening and does not last for the whole trading day.Investopedia ©
Line Of Best FitA straight line drawn through the center of a group of data points plotted on a scatter plot. Scatter plots depict the results of gathering data on two variables; the line of best fit shows whether these two variables appear to be correlated. A more precise method for determining the line of best fit is a mathematical calculation called the least squares method. The line of best fit is used in regression analysis, and is a key input in statistical calculations such as the sum of squares. It can also be used as a tool for analyzing investment risk or trading activity.Investopedia ©
Linear RelationshipLinear relationship is a statistical term used to describe the relationship between a variable and a constant. Linear relationships can be expressed in a graphical format where the variable and the constant are connected via a straight line or in a mathematical format where the independent variable is multiplied by the slope coefficient, added by a constant, which determines the dependent variable.Investopedia ©
Lion economiesA nickname given to Africa's growing economies, which had a collective GDP of $1.6 trillion in 2008, close to Russia's or Brazil's. Key sectors contributing to Africa's collective GDP growth include natural resources, retail, agriculture, finance, transportation and telecommunications. Improvements in political stability and economic reforms have aided growth. (For more, search Investopedia for: "Why You Should Pay Attention To Africa Right Now.")Investopedia ©
Liquid AssetAn asset that can be converted into cash quickly and with minimal impact to the price received. Liquid assets are generally regarded in the same light as cash because their prices are relatively stable when they are sold on the open market.Investopedia ©
Liquidity Coverage Ratio - LCRThe liquidity coverage ratio (LCR) refers to highly liquid assets held by financial institutions in order to meet short-term obligations. The Liquidity coverage ratio is designed to ensure that financial institutions have the necessary assets on hand to ride out short-term liquidity disruptions. Banks are required to hold an amount of highly-liquid assets, such as cash or Treasury bonds, equal to or greater than their net cash over a 30 day period (having at least 100% coverage). The liquidity coverage ratio started to be regulated and measured in 2011, but the full 100% minimum won't be enforced until 2015. Investopedia ©
Liquidity EventAn event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an exit strategy for an illiquid investment. Liquidity events are typically used in conjunction with venture capital/angel investors or private equity firms, which will aim to reach one within a reasonable amount of time after initially making an investment.

The most common liquidity events are initial public offerings (IPOs) and direct acquisitions by other corporations or private equity firms.
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Liquidity RiskRisk that a given security or asset cannot be traded quickly enough in the market to prevent a loss (or make the required profit). When many depositors may request withdrawals in excess of available funds.Wikipedia ©
Listed OptionAn option that is sold on a registered exchange, such as the Chicago Board Options Exchange (CBOE) or Euronext. Listed options cover securities such as common stocks, ETFs, market indexes and commodities. All listed options have stated exercise prices and expiration dates. Also known as "exchange-traded options".Investopedia ©
Load FundA mutual fund that comes with a sales charge or commission. The fund investor pays the load, which goes to compensate a sales intermediary (broker, financial planner, investment advisor, etc.) for his or her time and expertise in selecting an appropriate fund for the investor.Investopedia ©
Loan-To-Value Ratio - LTV RatioA lending risk assessment ratio that financial institutions and others lenders examine before approving a mortgage. Typically, assessments with high LTV ratios are generally seen as higher risk and, therefore, if the mortgage is accepted, the loan will generally cost the borrower more to borrow or he or she will need to purchase mortgage insurance.Investopedia ©
Lobster TrapA strategy used by a target firm to prevent a hostile takeover. A lobster trap anti-takeover strategy involves the target company passing a provision that prevents any shareholder, with an ownership stake of over 10%, from converting convertible securities into voting stock. This prevents large shareholders from adding to their voting stock position and facilitating the takeover of the target company. "Lobster Trap", yet another colorful entry in the lexicon of anti-takeover terminology, is derived from the fact that such traps are aimed at catching large lobsters but not small ones.Investopedia ©
London Business SchoolA school of international business in London. The London Business School is also a constituent college of the University of London. The school is consistently ranked as one of the top business schools in the world and offers a very prestigious MBA program.Investopedia ©
London Metal Exchange - LMEA commodities exchange in London, England, that deals in metal futures. Contracts on the exchange include aluminum, copper and zinc. Trading on the LME can be done in three main ways: through open outcry, a telephone system between member companies or the LME Select, an electronic trading platform. The LME is a non-ferrous exchange, which means that iron and steel are not traded on the exchange.Investopedia ©
Long (or Long Position)1. The buying of a security such as a stock, commodity or currency, with the expectation that the asset will rise in value. 2. In the context of options, the buying of an options contract. Opposite of "short" (or short position).Investopedia ©
Long Jelly RollAn option strategy that aims to profit from a time value spread through the sale and purchase of two call and two put options, each with different expiration dates.Investopedia ©
Long RunA period of time in which all factors of production and costs are variable. In the long run, firms are able to adjust all costs, whereas in the short run firms are only able to influence prices through adjustments made to production levels. Additionally, whereas firms may be a monopoly in the short-term they may expect competition in the long-term. In economics, long-run models may shift away from short-turn equilibriums, in which supply and demand react to price levels with more flexibility.Investopedia ©
Long-Run Average Total Cost - LRATCA business metric that represents the average cost per unit of output over the long run, where all inputs are considered to be variable. Long-term unit costs are almost always less than short-term unit costs because in a long-term time frame, companies have the flexibility to change big components of their operations, such as factories, to achieve optimal efficiency. A goal of both company management and investors is to determine the lower bounds of LRATC.Investopedia ©
LoopholeA technicality that allows a person or business to avoid the scope of a law or restriction without directly violating the law. Used often in discussions of taxes and their avoidance, loopholes provide ways for individuals and companies to remove income or assets from taxable situations into ones with lower taxes or none at all. Loopholes are most prevalent in complex business deals involving tax issues, political issues and legal statutes. They can be found within contract details, building codes, tax codes, among others. Investopedia ©
Love MoneySeed money or capital given by family or friends to an entrepreneur to start a business. The decision to lend money and the terms of the agreement are usually based on qualitative factors and the relationship between the two parties, rather than on a formulaic risk analysis.Investopedia ©
Low Volume PullbackA technical correction toward an area of support that occurs on lower-than-average volume. The low volume is a signal to traders that the trend is not reversing and that it is only the weak longs looking to lock in a quick profit. Frequent moves that occur in the opposite direction of a trend, which are accompanied by low volume, are normal fluctuations and generally deemed to be insignificant. On the other hand, a large spike in volume in the opposite direction of the trend could be used to signal that the smart money is starting to look for the exits and that the trend is getting ready to reverse.Investopedia ©
M&ATerm used to indicate Mergers and Acquisitions (M&A).World Vision or Others
M1A measure of the money supply that includes all physical money, such as coins and currency, as well as demand deposits, checking accounts and Negotiable Order of Withdrawal (NOW) accounts. M1 measures the most liquid components of the money supply, as it contains cash and assets that can quickly be converted to currency. It does not contain "near money" or "near, near money" as M2 and M3 do.Investopedia ©
MAR RatioA measurement of returns adjusted for risk that can be used to compare the performance of commodity trading advisors, hedge funds and trading strategies. The MAR Ratio is calculated by dividing the compound annual growth rate (CAGR) of a fund or strategy since inception by its biggest drawdown. The higher the ratio, the better the risk-adjusted returns. The MAR Ratio gets its name from the Managed Accounts Report newsletter, which developed this metric.Investopedia ©
MBA Purchase IndexThe Mortgage Bankers Association's weekly measurement of nationwide home loan applications based on a sample of about 75% of U.S. mortgage activity. Contrary to its name, the MBA Purchase Index does not measure the number of homes purchased or mortgage loans closed. Analysts consider the MBA Purchase Index to be a leading indicator of the housing market.Investopedia ©
MFPAMaster Fee Protection Agreement - frequently referred to as Irrevocable Master Fee Protection Agreement (IMFPA) - The Agreement signed between the Seller and the Beneficiaries, Intermediaries or Brokers in a transaction. It defines the terms or rules for paying the agreed commission to the parties involved in a specific transaction. Normally, this agreement is lodged at the Seller's Bank along with the contract and other documents related to the transaction. As a funds transfer occurs in favor of the Seller, the agreed commission is also credited to the beneficiaries listed in the MFPA.World Vision or Others
MOQMinimum Order Quantity - The minimum quantity to be ordered, as indicated by the Seller. For example, a 20-foot container load, 1,000 metric tons, etc.World Vision or Others
MSCI Emerging Markets IndexAn index created by Morgan Stanley Capital International (MSCI) that is designed to measure equity market performance in global emerging markets. The Emerging Markets Index is a float-adjusted market capitalization index. As of May 2005, it consisted of indices in 26 emerging economies: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Jordan, Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, Turkey and Venezuela. Investopedia ©
MTMetric Ton (1,000 kilograms), which is also referred to as "tonnes" in the U.K. Please refer to comments under "Short Ton."World Vision or Others
MTNMedium Term Notes (MTN) -
1. Notes range in maturity from one to 10 years. By knowing that a note is medium term, investors have an idea of what its maturity will be when they compare its price to that of other fixed-income securities. All else being equal, the coupon rate on medium-term notes will be higher than those achieved on short-term notes.
2. This type of debt program is used by a company so it can have constant cash flows coming in from its debt issuance; it allows a company to tailor its debt issuance to meet its financing needs. Medium-term notes allow a company to register with the SEC only once, instead of every time for differing maturities.
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Macaroni DefenseAn approach taken by a company that does not want to be taken over. The company issues a large number of bonds with the condition they must be redeemed at a high price if the company is taken over.Investopedia ©
Machine LearningThe concept that a computer program can learn and adapt to new data without human interference. Machine learning is a field of artificial intelligence that keeps a computer’s built-in algorithms current regardless of changes in the worldwide economy.Investopedia ©
MacromarketingThe effect that marketing policies and strategies have on the economy and society as a whole. Specifically, macromarketing refers to how product, price, place and promotion strategies - the four P's of marketing - create demand for goods and services, and thus influence what is produced and sold in an economy.Investopedia ©
Mad HatterA CEO or managerial team whose ability to lead a company is highly suspect. A mad hatter CEO will often make puzzling decisions which many, inside and outside the firm, may question. These types of CEOs are also known for making spontaneous decisions with little thought for the consequences. Sometimes these decisions are driven by personal incentives rather than the motivation to improve the overall performance of the company.Investopedia ©
Magna Cum LaudeMagna cum laude is an academic level of distinction used by educational institutions to signify an academic degree that was received "with great honor."

Magna cum laude is one of three commonly used types of Latin honors that are recognized in the United States, the other two being summa cum laude and cum laude. Magna cum laude is typically more prestigious than cum laude honors but less prestigious than summa cum laude honors.
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Magnet EmployerA popular business or businessperson to whom job candidates naturally gravitate. Magnet employers often have brand name recognition behind them, and they typically offer higher pay or better benefits than their competitors, thus making them a "magnet" for job seekers looking for superior compensation.Investopedia ©
Maintenance BondA type of surety bond purchased by a contractor that protects the owner of a completed construction project for a specified time period against defects and faults in materials, workmanship and design that could arise later if the project was done incorrectly. A maintenance bond is not technically insurance, but basically functions as an insurance policy on a construction project to make sure a contractor will either correct any defects that arise or that the owner is compensated for those defects. Pricing a maintenance bond is very different from pricing regular coupon paying bonds.Investopedia ©
Maintenance MarginThe minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account. Keep in mind that this level is a minimum, and many brokerages have higher maintenance requirements of 30-40%. Also referred to as "minimum maintenance" or "maintenance requirement."Investopedia ©
Major Fraud Act of 1988A piece of legislation passed during the Reagan administration that modified and strengthened previous fraud legislation. Among the many changes, the Major Fraud Act of 1988 increased the maximum penalties for fraud, added protection for employees who assist the prosecution of fraud cases and introduced mandatory annual reports on fraud investigations by the attorney general.Investopedia ©
Majority ShareholderA person or entity that owns more than 50% of a company's outstanding shares. The majority shareholder is often the founder of the company, or in the case of long-established businesses, the founder's descendants. By virtue of controlling more than half of the voting interests in the company, the majority shareholder has a very significant influence in the business operations and strategic direction of the company.Investopedia ©
MalfeasanceUsed in regards to performance on a contract, malfeasance is an act of outright sabotage in which one party to the contract commits an act which causes intentional damage. A party that incurs damages by malfeasance is entitled to settlement through a civil law suit.Investopedia ©
Man-YearA method of describing the amount of work done by an individual throughout the entire year. The man-year takes the amount of hours worked by an individual during the week and multiplies it by 52 (or the number of weeks worked in a year). The man-year calculated will be different for various industries depending on the average number of hours worked each week and the number of weeks worked per year.Investopedia ©
MancessionWhen the unemployment rate is substantially higher among men than women. The term mancession was coined during the financial crisis of 2008-2009, during which men bore the brunt of the job losses in the United States, at times at rates close to 50% higher than women.Investopedia ©
Manual TradingA trading system that involves human decision-making for entering and exiting trades. This is in contrast to automatic trading, which employs programs linked to market data, which are able to originate trades based on human instructional criteria. Manual traders often employ computer programs in order to consolidate information. In some cases, they may also set automated indicators to alert them to potential trading opportunities. However, in all cases, human input is required to authorize trades.Investopedia ©
Margin CallA margin call is a broker's demand on an investor using margin to deposit additional money or securities so that the margin account is brought up to the minimum maintenance margin. Margin calls occur when your account value depresses to a value calculated by the broker's particular formula.

This is sometimes called a "fed call" or "maintenance call."
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Margin CreepMargin creep refers to the behavior of a company that chooses to focus only on the high-end, high-margin products, even if customers show an inclination towards more value-oriented products and/or services. A product`s margin is the difference between the cost of the good or service and the retail price; the greater the difference, the higher the margin.Investopedia ©
Marginal AnalysisAn examination of the additional benefits of an activity compared to the additional costs of that activity. Companies use marginal analysis as a decision-making tool to help them maximize their profits. Individuals unconsciously use marginal analysis to make a host of everyday decisions. Marginal analysis is also widely used in microeconomics when analyzing how a complex system is affected by marginal manipulation of its comprising variables.Investopedia ©
Marginal Propensity To Consume - MPCThe proportion of an aggregate raise in pay that a consumer spends on the consumption of goods and services, as opposed to saving it. Marginal propensity to consume is a component of Keynesian macroeconomic theory and is calculated as the change in consumption divided by the change in income. MPC is depicted by a consumption line- a sloped line created by plotting change in consumption on the vertical y axis and change in income on the horizontal x axis.Investopedia ©
Marginal Revenue - MRThe increase in revenue that results from the sale of one additional unit of output. Marginal revenue is calculated by dividing the change in total revenue by the change in output quantity. While marginal revenue can remain constant over a certain level of output, it follows the law of diminishing returns and will eventually slow down as the output level increases. Perfectly competitive firms continue producing output until marginal revenue equals marginal cost.Investopedia ©
Marginal Utility The additional satisfaction a consumer gains from consuming one more unit of a good or service. Marginal utility is an important economic concept because economists use it to determine how much of an item a consumer will buy. Positive marginal utility is when the consumption of an additional item increases the total utility. Negative marginal utility is when the consumption of an additional item decreases the total utility.World Vision or Others
Marginal VaRThe additional amount of risk that a new investment position adds to a portfolio. Marginal VaR (value at risk) allows risk managers to study the effects of adding or subtracting positions from an investment portfolio. Since value at risk is affected by the correlation of investment positions, it is not enough to consider an individual investment's VaR level in isolation. Rather, it must be compared with the total portfolio to determine what contribution is makes to the portfolio's VaR amount.Investopedia ©
Maritime LawA body of laws, conventions and treaties that governs international private business or other matters involving ships, shipping or crimes occurring on open water. Laws between nations governing such things as national versus international waters are considered public international law and are known as the Law of the Seas. Also known as "admiralty law". Investopedia ©
Market CapitalizationThe total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determine a company's size, as opposed to sales or total asset figures. Frequently referred to as "market cap". Investopedia ©
Market FailureAn economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers does not equate to the quantity supplied by suppliers. This is a direct result of a lack of certain economically ideal factors, which prevents equilibrium.Investopedia ©
Market IndexAn aggregate value produced by combining several stocks or other investment vehicles together and expressing their total values against a base value from a specific date. Market indexes are intended to represent an entire stock market and thus track the market's changes over time.Investopedia ©
Market PortfolioA theoretical bundle of investments that includes every type of asset available in the world financial market, with each asset weighted in proportion to its total presence in the market. The expected return of a market portfolio is identical to the expected return of the market as a whole. Because a market portfolio is completely diversified, it is subject only to systematic risk (risk that affects the market as a whole) and not to unsystematic risk (the risk inherent to a particular asset class).Investopedia ©
Market RiskRisk that the value of a portfolio, either an investment portfolio or a trading portfolio, will decrease due to the change in value of the market risk factors.Wikipedia ©
Market SegmentationA marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will respond similarly to a marketing action. Market segmentation enables companies to target different categories of consumers who perceive the full value of certain products and services differently from one another. Generally three criteria can be used to identify different market segments:

1) Homogeneity (common needs within segment)
2) Distinction (unique from other groups)
3) Reaction (similar response to market)
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Market ShareThe percentage of an industry or market's total sales that is earned by a particular company over a specified time period. Market share is calculated by taking the company's sales over the period and dividing it by the total sales of the industry over the same period. This metric is used to give a general idea of the size of a company to its market and its competitors.Investopedia ©
Market ValueThe price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization of a publicly-traded company, and is obtained by multiplying the number of its outstanding shares by the current share price. Market value is easiest to determine for exchange-traded instruments such as stocks and futures, since their market prices are widely disseminated and easily available, but is a little more challenging to ascertain for over-the-counter instruments like fixed income securities. However, the greatest difficulty in determining market value lies in estimating the value of illiquid assets like real estate and businesses, which may necessitate the use of real estate appraisers and business valuation experts respectively.Investopedia ©
Marketable SecurityAny equity or debt instrument that it readily salable and can be converted into cash, or exchanged with ease. Stocks, bonds, short-term commercial paper and certificates of deposit are all considered marketable securities because there is a public demand for them and because they can be readily converted into cash.Investopedia ©
Marlboro FridayA reference to Friday, Apr 2, 1993, when Philip Morris, the maker of Marlboro cigarettes, announced that it would be cutting the price of Marlboros to compete with generic cigarette makers. The company's stock tanked 26% following the announcement, losing about $10 billion off its market cap in a single day. The day is remembered as a landmark moment in the 1990s consumer movement away from name brand products in favor of cheaper generic products with prices 50% lower than their branded competitors. In its wake, money managers moved cash from name brand consumer goods makers like Coca-Cola and Tambrands (the former maker of Tampax tampons) to technology stocks and generic consumer goods producers.Investopedia ©
Martingale SystemA money management system of investing in which the dollar values of investments continually increase after losses, or the position size increases with lowering portfolio size.Investopedia ©
Master Limited Partnership - MLPA type of limited partnership that is publicly traded. There are two types of partners in this type of partnership: The limited partner is the person or group that provides the capital to the MLP and receives periodic income distributions from the MLP's cash flow, whereas the general partner is the party responsible for managing the MLP's affairs and receives compensation that is linked to the performance of the venture.Investopedia ©
Master Of Business Administration - MBAA graduate degree achieved at a university or college that provides theoretical and practical training to help graduates gain a better understanding of general business management functions. The MBA degree can have a specific focus such as accounting, finance or marketing.Investopedia ©
Master Of Business Administration - MBA (2)A master of business administration (MBA) is a graduate degree achieved at a university or college that provides theoretical and practical training to help graduates gain a better understanding of general business management functions. The MBA degree can have a specific focus, such as accounting, finance or marketing.

An MBA is a level up from an undergraduate business degree. An MBA generally places the graduate well above those with only undergraduate degrees. Most major universities and colleges provide MBA programs, which usually last two years. To get into an MBA program, an applicant needs to take the Graduate Management Admission Test (GMAT) and be accepted by the program based on its selection criteria.
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Maturity Transformation (Bank)When banks borrow more on demand debt and short term debt, but provide more long term loans. In other words, they borrow short and lend long. With a stronger credit quality than most other borrowers, banks can do this by aggregating issues (e.g. accepting deposits and issuing banknotes) and redemptions (e.g. withdrawals and redemptions of banknotes), maintaining reserves of cash, investing in marketable securities that can be readily converted to cash if needed, and raising replacement funding as needed from various sources (e.g. wholesale cash markets and securities markets).Wikipedia ©
Max PainThe point at which options expire worthless. The term, max pain, stems from the Maximum Pain theory, which states that most traders who buy and hold options contracts until expiration will lose money. According to the theory, this is due to the tendency for the price of a underlying stock to gravitate towards its "maximum pain strike price" - the price where the greatest number of options (in dollar value) will expire worthless.Investopedia ©
Maximum WageA ceiling imposed on how much income a worker can earn in a given period of time. A maximum wage is an economic tool used to temper a distressed economy or control spiraling wage inequality in a country.Investopedia ©
May DayRefers to May 1, 1975, when brokerages changed from a fixed commission for securities transactions to a negotiated one. Previous to this, commissions were standard from broker to broker.Investopedia ©
McMansionA slang term that describes a large, opulent house that may be generic in style and represents a good value for a homebuyer in terms of its size. This type of home is built to provide middle and/or upper middle class homeowners with the luxurious housing experience that was previously only available to high-net-worth individuals. The McMansion term is as a play on McDonald's fast food restaurants, as these homes also represent the pervasiveness and excessive consumption that critics often associate with Mcdonald's.Investopedia ©
Mega CapThe biggest companies in the investment universe, as measured by market capitalization. While there is no exact definition of the term, mega cap generally refers to companies with a market cap exceeding $100 billion. Mega caps are usually household names with strong brand recognition and global operations, such as Exxon Mobil, Apple, Microsoft, Nestle and IBM.Investopedia ©
MercantilismThe main economic system used during the sixteenth to eighteenth centuries. The main goal was to increase a nation`s wealth by imposing government regulation concerning all of the nation`s commercial interests. It was believed that national strength could be maximized by limiting imports via tariffs and maximizing exports.Investopedia ©
MerchandisingMerchandising is the promotion of goods and/or services that are available for retail sale. Merchandising includes the determination of quantities, setting prices for goods and services, creating display designs, developing marketing strategies, and establishing discounts or coupons.
Merger ArbitrageA hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless profit. A merger arbitrageur looks at the risk that the merger deal will not close on time, or at all. Because of this slight uncertainty, the target company's stock will typically sell at a discount to the price that the combined company will have when the merger is closed. This discrepancy is the arbitrageur's profit.Investopedia ©
Merger DeficitAn accounting term used to describe the situation when the total value of the share capital used to purchase another company is less than the total value of the equity purchased. The merger does not necessarily have to be an all-stock acquisition.Investopedia ©
Merger ManiaA period of time with significant merger and acquisition activity in the corporate world. While merger mania can refer to merger and acquisition activity in general, it often refers to increased merger and acquisition activity within a certain industry, such as with the airline or telephone company industries.Investopedia ©
Mergers And Acquisitions - M&AA general term used to refer to the consolidation of companies. A merger is a combination of two companies to form a new company, while an acquisition is the purchase of one company by another in which no new company is formed.Investopedia ©
Mexican Stock Exchange (MEX) .MXMexico's only securities market, the Mexican Stock Exchange (in Spanish, la Bolsa Mexicana de Valores, or BMV) has its headquarters in Mexico City.
Established in 1886 as the Mexican Mercantile Exchange, it adopted its current name in 1975 and is the second-largest stock exchange in Latin America (after Brazil). Its trading system is fully electronic, and its main index is the IPC.
Investopedia ©
Mezzanine DebtWhen a hybrid debt issue is subordinated to another debt issue from the same issuer. Mezzanine debt has embedded equity instruments (usually warrants) attached, which increase the value of the subordinated debt and allow for greater flexibility when dealing with bondholders. Mezzanine debt is frequently associated with acquisitions and buyouts, where it may be used to prioritize new owners ahead of existing owners in case of bankruptcy.Investopedia ©
Mezzanine FinanceA hybrid of debt and equity financing that is typically used to finance the expansion of existing companies. Mezzanine financing is basically debt capital that gives the lender the rights to convert to an ownership or equity interest in the company if the loan is not paid back in time and in full. It is generally subordinated to debt provided by senior lenders such as banks and venture capital companies. Since mezzanine financing is usually provided to the borrower very quickly with little due diligence on the part of the lender and little or no collateral on the part of the borrower, this type of financing is aggressively priced with the lender seeking a return in the 20-30% range.Investopedia ©
Mezzanine FinancingMezzanine financing is a hybrid of debt and equity financing that gives the lender the rights to convert to an ownership or equity interest in the company in case of default, after venture capital companies and other senior lenders are paid. Mezzanine financing, usually completed with little due diligence on the part of the lender and little or no collateral on the part of the borrower, is treated like equity on a company's balance sheet.Investopedia ©
Michael S. DellA long-time CEO and chairman of Texas-based computer company, Dell. Dell was born in 1965 in Houston. He never completed his undergraduate degree. After becoming proficient in computers as a teenager, he started his computer company in 1984 under the name PCs Limited. The company grew rapidly and competed heavily with IBM, becoming a Fortune 500 company in 1992. His company, now called Dell, distinguishes itself from other computer manufacturers by allowing customers to order computers with customized specifications directly from the company rather than purchasing premade computers off the shelf in retail stores. It also developed a strategy to limit the company's inventory so it could rapidly and profitably adapt to changing technology. This business model allows Dell to be highly competitive both in price and in customer service.Investopedia ©
MicroeconomicsThe branch of economics that analyzes the market behavior of individual consumers and firms in an attempt to understand the decision-making process of firms and households. It is concerned with the interaction between individual buyers and sellers and the factors that influence the choices made by buyers and sellers. In particular, microeconomics focuses on patterns of supply and demand and the determination of price and output in individual markets (e.g. coffee industry).Investopedia ©
Mid CapA mid-cap company is a company with a market capitalization between $2 billion and $10 billion. As the name implies, a mid-cap company falls in the middle of the pack between large-cap and small-cap companies. Classifications such as large-cap, mid-cap and small-cap are only approximations and may change over time.Investopedia ©
Military ClauseA clause found in most residential leases that permits military personnel to get out of their rental lease. The military clause allows military personnel that are called up to get back their security deposit if they are called into duty. This eliminates a worrisome headache for armed forces personnel.Investopedia ©
Minimum Guaranteed Fill Order - MGFA service provided by market makers in its assigned stocks to maintain fair and orderly markets. Minimum guaranteed fill (MGF) orders are a guaranteed fill for small market orders from retail clients up to a specific size at the best posted bid or ask price. Each stock has a MGF volume that depends on its liquidity. Clients who place market orders or limit orders can benefit from MGF orders.Investopedia ©
Minority Interest1. A significant but non-controlling ownership of less than 50% of a company's voting shares by either an investor or another company.
2. A non-current liability that can be found on a parent company's balance sheet that represents the proportion of its subsidiaries owned by minority shareholders.
Investopedia ©
Mint Ratio1. The price of an ounce of gold divided by the price of an ounce of silver. The min ratio aims to examine the relationship between gold and silver prices.
2. A fixed rate of exchange for gold and silver.
Investopedia ©
Misery IndexA measure of economic well-being for a specified economy, computed by taking the sum of the unemployment rate and the inflation rate for a given period. An increasing index means a worsening economic climate for the economy in question, and vice versa.Investopedia ©
Mixed Economic SystemAn economic system that features characteristics of both capitalism and socialism. A mixed economic system allows a level of private economic freedom in the use of capital, but also allows for governments to interfere in economic activities in order to achieve social aims. This type of economic system is less efficient than capitalism, but more efficient than socialism.Investopedia ©
Mobile WalletA virtual wallet that stores payment card information on a mobile device. Mobile wallets provide a convenient way for a user to make in-store payments and can be used at merchants listed with the mobile wallet service provider.Investopedia ©
Modern Portfolio Theory - MPTModern portfolio theory (MPT) is a theory on how risk-averse investors can construct portfolios to optimize or maximize expected return based on a given level of market risk, emphasizing that risk is an inherent part of higher reward. According to the theory, it's possible to construct an "efficient frontier" of optimal portfolios offering the maximum possible expected return for a given level of risk. This theory was pioneered by Harry Markowitz in his paper "Portfolio Selection," published in 1952 by the Journal of Finance.Investopedia ©
Modified Book ValueAn asset-based method of determining how much a business is worth by adjusting the value of its assets and liabilities according to their fair market value. This technique also includes the value of all of the business's intangible assets and liabilities, such as goodwill and pending litigation.Investopedia ©
Modified Internal Rate Of Return - MIRRWhile the internal rate of return (IRR) assumes the cash flows from a project are reinvested at the IRR, the modified IRR assumes that positive cash flows are reinvested at the firm's cost of capital, and the initial outlays are financed at the firm's financing cost. Therefore, MIRR more accurately reflects the cost and profitability of a project.Investopedia ©
Mom And PopA colloquial term for a small, independent, family-owned business. Unlike franchises and large corporations, which have multiple operations in various locations, mom and pop shops usually have a single location that often occupies a physically small space. The "shop" could be any type of business, such as an auto repair garage, bookstore or restaurant.
"Mom and pop" can also refer to inexperienced investors who play the market casually and do not rely on trading to significantly supplement their income.
Investopedia ©
Momentum InvestingAn investment strategy that aims to capitalize on the continuance of existing trends in the market. The momentum investor believes that large increases in the price of a security will be followed by additional gains and vice versa for declining values.Investopedia ©
Momentum InvestmentAn investment strategy that aims to capitalize on the continuance of existing trends in the market. The momentum investor believes that large increases in the price of a security will be followed by additional gains and vice versa for declining values.Investopedia ©
Momo PlayA slang term used to describe an advanced trading strategy based purely on momentum. In a momo play, the trader is not interested in the company's fundamentals, only in the short-term direction of a security's price movement. As such, momo plays are used solely by day traders, not by buy-and-hold investors.Investopedia ©
MompreneurA slang term describing women who run their own businesses while also acting as a full time parent. Mompreneurs are more likely to run a business out of the home than out of a commercial building. Because of family obligations mompreneurs have to balance the requirements of running a business with the demands of their children, and may do the bulk of their work during the time when their children do not require as much attention. Mompreneur is a portmanteau of the words "mom" and "entrepreneur".Investopedia ©
Monday EffectA theory that states that returns on the stock market on Mondays will follow the prevailing trend from the previous Friday. Therefore, if the market was up on Friday, it should continue through the weekend and, come Monday, resume its rise.Investopedia ©
Monetary PolicyThe actions of a central bank, currency board or other regulatory committee that determine the size and rate of growth of the money supply, which in turn affects interest rates. Monetary policy is maintained through actions such as increasing the interest rate, or changing the amount of money banks need to keep in the vault (bank reserves).Investopedia ©
Monetary ReservesA nation's assets in foreign currency and/or commodities like gold and silver, which are used to back up the national currency. Monetary reserves also provide a cushion for executing central banking functions like adding to the money supply and settling foreign exchange contracts in local currencies.Investopedia ©
MonetizationA process of converting a security or financial instrument into cash (or another cash-backed financial instrument, such as a Bank Guarantee, letter of credit or a bank credit line) with the intent of investing. The risk and/or profit from the original document is transferred to the monetization agent for a discount fee, which varies according to its own yielding, risk, maturity, etc.World Vision or Others
Money LaunderingMoney laundering is the process of creating the appearance that large amounts of money obtained from serious crimes, such as drug trafficking or terrorist activity, originated from a legitimate source.Investopedia ©
Money MarketThe money market is where financial instruments with high liquidity and very short maturities are traded. It is used by participants as a means for borrowing and lending in the short term, with maturities that usually range from overnight to just under a year. Among the most common money market instruments are eurodollar deposits, negotiable certificates of deposit (CDs), bankers acceptances, U.S. Treasury bills, commercial paper, municipal notes, federal funds and repurchase agreements (repos).Investopedia ©
Money Market FundAn investment fund that holds the objective to earn interest for shareholders while maintaining a net asset value (NAV) of $1 per share. Mutual funds, brokerage firms and banks offer these funds. Portfolios are comprised of short-term (less than one year) securities representing high-quality, liquid debt and monetary instruments.Investopedia ©
Money SupplyMoney supply is the entire stock of currency and other liquid instruments circulating in a country's economy as of a particular time. Also referred to as money stock, money supply includes safe assets, such as cash, coins, and balances held in checking and savings accounts that businesses and individuals can use to make payments or hold as short-term investments.Investopedia ©
Monopolistic MarketA type of market that features one, if not all, of the traits of a monopoly such as high price levels, supply constraints, or excessive barriers to entry. Because this type of market would be comprised of one supplying firm, consumers would have no choice but to purchase solely from this firm. Without proper legislation or controls, this firm possesses the power to raise prices without adversely affecting demand for its products/services. This type of market stands in contrast to a perfectly competitive market.Investopedia ©
MonopolyA situation in which a single company or group owns all or nearly all of the market for a given type of product or service. By definition, monopoly is characterized by an absence of competition, which often results in high prices and inferior products. According to a strict academic definition, a monopoly is a market containing a single firm. In such instances where a single firm holds monopoly power, the company will typically be forced to divest its assets. Antimonopoly regulation protects free markets from being dominated by a single entity. Investopedia ©
Moody'sAn independent, unaffiliated research company that rates fixed income securities. Moody's assigns ratings on the basis of risk and the borrower's ability to make interest payments. Moody's backs its ratings with exhaustive financial research and unbiased commentary and analysis.Investopedia ©
Mortgage RecastA feature in some types of mortgages where the remaining scheduled principal and interest payments are recalculated based on a new amortization schedule. Some mortgages may allow for a recast in order to help a financially distressed borrower, in which case the interest rate might be reduced and/or the remaining term of the mortgage extended. Most often, a recast is associated with a negative amortization mortgage which must recast at some point so that the mortgage will be paid off by the end of its scheduled term.Investopedia ©
Mortgage-Backed NoteA type of promissory note that is associated with a particular mortgage loan. Mortgage-backed notes represent the legal promise to repay a mortgage loan. These notes specify the terms of the loan, including the amount of interest and principal that must be repaid. They also obligate the borrower to make the payments.Investopedia ©
Mortgage-Backed Security (MBS)A type of asset-backed security that is secured by a mortgage or collection of mortgages. These securities must also be grouped in one of the top two ratings as determined by a accredited credit rating agency, and usually pay periodic payments that are similar to coupon payments. Furthermore, the mortgage must have originated from a regulated and authorized financial institution. Also known as a "mortgage-related security" or a "mortgage pass through."Investopedia ©
Moving Average - MAA widely used indicator in technical analysis that helps smooth out price action by filtering out the "noise" from random price fluctuations. A moving average (MA) is a trend-following or lagging indicator because it is based on past prices. The two basic and commonly used MAs are the simple moving average (SMA), which is the simple average of a security over a defined number of time periods, and the exponential moving average (EMA), which gives bigger weight to more recent prices. The most common applications of MAs are to identify the trend direction and to determine support and resistance levels. While MAs are useful enough on their own, they also form the basis for other indicators such as the Moving Average Convergence Divergence (MACD).Investopedia ©
Mt. GoxOne of the world's leading Bitcoin exchanges, launched in July of 2010. Mt. Gox allows users to buy, sell and trade Bitcoins on its exchange while offering support for U.S. dollars, euros and Canadian dollars. Members of the Mt. Gox exchange consider their Bitcoin holdings to be housed in a sort of e-wallet, allowing for quick trading of the digital currency with other traders on the exchange. Mt. Gox charges a commission for all trades executed through the exchangeInvestopedia ©
Multi Index OptionA type of investment in which the payoff depends on the difference in performance between two indexes or other financial assets. The payoff from the option is governed by the change in the spread between the indexes or assets. These options are generally settled in cash. Also known as a Margrave option, outperformance option or rainbow option.Investopedia ©
Multi-Callable BondA bond that allows the issuer to call or redeem it on particular future dates that are specified at the time of issuance. Since the issuer benefits by gaining flexibility with regard to the bond's maturity, the issuer may pay a coupon on the bond that is higher than the prevailing market interest rate.Investopedia ©
Multicurrency Note FacilityA credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. This type of credit facility allows the borrower to choose which currency to use in each rollover period when the loan is refinanced, but allows the lender to choose the currency the loan is to be repaid in.Investopedia ©
Multinational Corporation (MNC)A corporation that has its facilities and other assets in at least one country other than its home country. Such companies have offices and/or factories in different countries and usually have a centralized head office where they co-ordinate global management. Very large multinationals have budgets that exceed those of many small countries. Sometimes referred to as a "transnational corporation".Investopedia ©
Multiplier EffectThe expansion of a country's money supply that results from banks being able to lend. The size of the multiplier effect depends on the percentage of deposits that banks are required to hold as reserves. In other words, it is money used to create more money and is calculated by dividing total bank deposits by the reserve requirement.Investopedia ©
Municipal BondsMunicipal Bonds are used 1) to pay for a wide variety of public projects such as schools, highways, stadiums, sewage systems and bridges; and 2) to supplement their operating budgets. States, cities, counties and towns issue bonds. Be aware that income from Municipal Bonds may be subject to state and local taxes and if applicable the Alternative Minimum Tax.Farmers & Merchants Bank ©
Muppet BaitNaive investors who are lured into buying hot stocks or securities that the smart money and/or insiders are selling. "Muppet bait" was popularized by Henry Blodget, a former Wall Street analyst and co-founder of news site Business Insider. Individuals and groups who fall under this category often follow news and hype behind initial public offerings, rather than perform their own research.Investopedia ©
Mutilated SecurityA stock or bond certificate on which the owner's details or other identifying information cannot be read. A mutilated security can be the result of damage, negligence, being printed incorrectly or other reasons, and must receive a guarantee of ownership from a third party to ensure there is no fraud.Investopedia ©
Mutual FundA mutual fund is an investment vehicle made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by money managers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus.Investopedia ©
NCND Agreement (NCNDA)A Non-Circumvention and Non-Disclosure Agreement. An agreement between parties involved in a commercial or financial transaction in which they commit to maintain its secrecy and not to bypass any of the other parties to take advantage of or somehow increase its profits by avoiding to pay commissions, facilitation fees, etc. A basic text for such an agreement has been disclosed by the International Chamber of Commerce (ICC), which is in use worldwide.World Vision or Others
NINJA LoanA slang term for a loan extended to a borrower with "no income, no job and no assets". Whereas most lenders require the borrower to show a stable stream of income or sufficient collateral, a NINJA loan ignores the verification process.Investopedia ©
NY Empire State IndexAn index based on the monthly survey of manufacturers in New York State -- known as the Empire State Manufacturing Survey -- conducted by the Federal Reserve Bank of New York. The headline number for the NY Empire State Index refers to the survey's main index, which summarizes general business conditions in New York State. The index is based on survey responses to a questionnaire sent out on the first day of each month to an unchanged pool of about 200 top manufacturing executives, generally the president or CEO. The questionnaire seeks their opinion on the change in a number of business indicators from the previous month, and also the likely direction of these indicators six months into the future. Also known as the Empire State Manufacturing Index.Investopedia ©
NYSENew York Stock Exchange - A corporation, operated by a board of directors, responsible for listing securities, setting policies and supervising the stock exchange and its member activities. The NYSE also oversees the transfer of members' seats on the Exchange, judging whether a potential applicant is qualified to be a specialist.World Vision or Others
NadexNadex stands for the North American Derivatives Exchange, a regulated Chicago-based exchange where retail traders can buy and sell binary options directly on the exchange without a broker. Nadex, which is subject to oversight by the Commodity Futures Trading Commission, offers binary option contracts and spreads in equity indexes, commodities, forex and economic events.Investopedia ©
Naked WarrantA warrant that is issued without a host bond. Like a normal warrant, a naked warrant allows the holder to buy or sell a particular financial instrument, such as a bond or shares. Unlike a normal warrant, it is not sold with an accompanying bond. Also unlike a normal warrant they are typically issued by banks or other financial institutions that are not also issuing a bond, and can be traded in the stock market.Investopedia ©
Naked WriterAn options seller who does not own the underlying security for the options contract he or she is offering. Options are contracts that give the buyer the right but not the obligation to buy (call) or sell (put) shares at a particular price and future date. Since a naked writer does not hold a position in the underlying security represented in the options contract, the investor is exposed to more risk. Also called uncovered writer or uncovered options writer. Investopedia ©
Nanny TaxA federal tax that must be paid by people who hire household help (a babysitter, maid, gardener, etc.) and pay them a total of more than a specified threshold amount during the tax year. The reason the IRS charges the nanny tax is because it considers an ongoing household helper to be the taxpayer's employee. As such, the taxpayer becomes an employer and must pay Social Security, Medicare and federal unemployment taxes on the wages paid to that employee. There may be state-level nanny taxes as well.Investopedia ©
Nasdaq Composite IndexA market-capitalization weighted index of the more than 3,000 common equities listed on the Nasdaq stock exchange. The types of securities in the index include American depositary receipts, common stocks, real estate investment trusts (REITs) and tracking stocks. The index includes all Nasdaq listed stocks that are not derivatives, preferred shares, funds, exchange-traded funds (ETFs) or debentures.Investopedia ©
National Best Bid and Offer - NBBOThe best (lowest) available ask price and the best (highest) available bid price to investors when they buy and sell securities. National Best Bid and Offer is the bid and ask price the average person will see. The Securities and Exchange Commission's Regulation NMS requires that brokers must guarantee customers this price.Investopedia ©
National CurrencyThe currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is usually the predominant currency used for most financial transactions in that country.Investopedia ©
National Quotation Bureau - NQBA company established in 1913 to compile and publish price information on stocks and bonds traded in the over-the-counter market. The National Quotation Bureau (NQB) was formed by financial book publisher Arthur F. Elliot and financier Roger Ward Babson. NQB was sold to Commerce Clearing House in 1963, which sold it in 1997 to a group of investors led by Cromwell Coulson. In 1999, the NQB introduced its real-time Electronic Quotation System for trading OTC securities, completing its transition from the print medium to the electronic one. The NQB was renamed Pink Sheets LLC in 2000, which in turn became Pink OTC in 2008. Eventually, it changed the name to OTC Market Group in 2011.Investopedia ©
Natural MonopolyA type of monopoly that exists as a result of the high fixed or start-up costs of operating a business in a particular industry. Because it is economically sensible to have certain natural monopolies, governments often regulate those in operation, ensuring that consumers get a fair deal.Investopedia ©
Negative AmortizationAn increase in the principal balance of a loan caused by making payments that fail to cover the interest due. The remaining amount of interest owed is added to the loan's principal, which ultimately causes the borrower to owe more money.Investopedia ©
Negative ArbitrageThe opportunity lost when municipal bond issuers assume proceeds from debt offerings and then invest that money for a period of time (ideally in a safe investment vehicle) until the money is used to fund a project, or to repay investors. The lost opportunity occurs when the money is reinvested and the debt issuer earns a rate or return that is lower than what must actually be paid back to the debt holders.Investopedia ©
Negative CarryA situation in which the cost of holding a security exceeds the yield earned. A negative carry situation is typically undesirable because it means the investor is losing money. An investor might, however, achieve a positive after-tax yield on a negative carry trade if the investment comes with tax advantages, as might be the case with a bond whose interest payments were nontaxable.Investopedia ©
NegotiationA strategic discussion that resolves an issue in a way that both parties find acceptable. In a negotiation, each party tries to persuade the other to agree with his or her point of view. In advance of the negotiation, participants learn as much as possible about the other party's position and what the strengths and weaknesses of that position are, and are prepared to defend their positions and counter the arguments the other party will likely make to defend their position. Investopedia ©
Nellie MaeA non-profit organization that provides education loans in the United States. Nellie Mae was founded in Massachusetts and is the largest non-profit provider of student loans in the United States, helping student across the country pay for their education. It has been a wholly owned subsidiary of SLM Corporation, known as Sallie Mae, since 1999. Nellie Mae stands for New England Education Loan Marketing Corporation.Investopedia ©
NeoliberalismAn approach to economics and social studies in which control of economic factors is shifted from the public sector to the private sector. Drawing upon principles of neoclassical economics, neoliberalism suggests that governments reduce deficit spending, limit subsidies, reform tax law to broaden the tax base, remove fixed exchange rates, open up markets to trade by limiting protectionism, privatize state-run businesses, allow private property and back deregulation.Investopedia ©
Nest Egg A substantial sum of money that has been saved or invested for a specific purpose. A nest egg is generally earmarked for longer-term objectives, the most common being retirement, buying a home and education. It can also refer to money kept aside as a reserve to deal with unexpected emergencies such as a medical problem or urgent housing repairs. “Nest egg” has been used to refer to savings since the late 17th century. The term is believed to have been derived from poultry farmers’ tactic of placing eggs – both real and fake – in hens’ nests to induce them to lay more eggs, which meant more income for these farmers.Investopedia ©
Net Asset Value - NAVNet asset value (NAV) is value per share of a mutual fund or an exchange-traded fund (ETF) on a specific date or time. With both security types, the per-share dollar amount of the fund is based on the total value of all the securities in its portfolio, any liabilities the fund has and the number of fund shares outstanding.Investopedia ©
Net Borrowed ReservesA statistic released in weekly Federal Reserve data showing the difference between the amount of money a bank has borrowed from the Fed and the cash reserves the bank holds above the required minimum. Net borrowed reserves is expressed as a negative number. Deposit banks are required to keep a certain amount of cash on hand at all times. If these banks don't have enough cash, they will borrow it from a Federal Reserve bank. Net borrowed reserves can indicate a tight credit environment relative to the demand for loans and rising interest rates. Conversely, if there is an excess of reserves in the banking system, the statistic will show net free reserves, which will be expressed as a positive number.Investopedia ©
Net DebtA metric that shows a company's overall debt situation by netting the value of a company's liabilities and debts with its cash and other similar liquid assets.Investopedia ©
Net Operating Income - NOIA calculation used to analyze real estate investments that generate income. Net operating income equals all revenue from the property minus all reasonably necessary operating expenses. Aside from rent, a property might also generate revenue from parking and service fees, like vending and laundry machines. Operating expenses are those required to run and maintain the building and its grounds, such as insurance, property management fees, utilities, property taxes, repairs and janitorial fees. NOI is a before-tax figure; it also excludes principal and interest payments on loans, capital expenditures, depreciation and amortization.Investopedia ©
Net Operating Loss - NOLA net operating loss (NOL) is a loss taken in a period where a company's allowable tax deductions are greater than its taxable income. When more expenses than revenues are incurred during the period, the net operating loss for the company can generally be used to recover past tax payments. The reasoning behind this is that corporations deserve some form of tax relief when they lose money, so they may apply the net operating loss to future income tax payments, reducing the need to make payments in future periods.Investopedia ©
Net Present Value - NPVNet Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows. NPV is used in capital budgeting to analyze the profitability of a projected investment or project.
A positive net present value indicates that the projected earnings generated by a project or investment (in present dollars) exceeds the anticipated costs (also in present dollars). Generally, an investment with a positive NPV will be a profitable one and one with a negative NPV will result in a net loss. This concept is the basis for the Net Present Value Rule, which dictates that the only investments that should be made are those with positive NPV values.
When the investment in question is an acquisition or a merger, one might also use the Discounted Cash Flow (DCF) metric.
Apart from the formula itself, net present value can often be calculated using tables, spreadsheets such as Microsoft Excel or Investopedia's own NPV calculator.
Investopedia ©
Net Present Value Of Growth Opportunities - NPVGOA calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. The net present value of growth opportunities is used to determine the intrinsic value of a new project or acquisition at a given point in time, based on projected amounts. NPVGO is calculated by taking the net cash inflow, discounted at the firm's cost of capital, less the purchase price of the additional asset. It is also referred to simply as the present value of growth opportunities (PVGO).Investopedia ©
Net Profit MarginNet profit margin is the ratio of net profits to revenues for a company or business segment . Typically expressed as a percentage, net profit margins show how much of each dollar collected by a company as revenue translates into profit. The equation to calculate net profit margin is: net margin = net profit / revenue.Investopedia ©
Net SalesThe amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any discounts allowed. The sales number reported on a company's financial statements is a net sales number, reflecting these deductions.Investopedia ©
Net WorthThe amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure of how much an entity is worth. A consistent increase in net worth indicates good financial health; conversely, net worth may be depleted by annual operating losses or a substantial decrease in asset values relative to liabilities. In the business context, net worth is also known as book value or shareholders'equity.Investopedia ©
Network EffectA phenomenon whereby a good or service becomes more valuable when more people use it. The Internet is a good example. Initially, there were few users of the Internet, and it was of relatively little value to anyone outside of the military and a few research scientists. As more users gained access to the Internet, however, there were more and more websites to visit and more people to communicate with. The Internet became extremely valuable to its users.Investopedia ©
NetworkingA process that fosters the exchange of information and ideas among individuals or groups that share a common interest. Networking may fall into one of two categories - social or business. In the latter category, one of the implicit objectives is to form professional relationships that may boost one's future business and employment prospects. Less commonly in finance, the term "networking" may also refer to the setting up and operation of a computer network. Investopedia ©
New Alternative Transportation to Give Americans Solutions Act of 2011A bipartisan proposal introduced in April, 2011 that amends the Internal Revenue Code of 1986 to encourage more domestic production, alternative energy investments and corresponding job creation. The New Alternative Transportation to Give Americans Solutions Act (NATGAS) of 2011 would: - Create an excise tax credit through 2016 for alternative fuels involving compressed or liquefied natural gas - Create an income tax credit through 2016 for vehicles powered by compressed or liquefied natural gas - Change the tax credit percentage for vehicles fueled by natural gas or liquefied natural gas - Allow a new tax credit for the production of certain vehicles - Extend tax credits through 2016 for property used in refueling vehicles fueled by compressed or liquefied natural gas Investopedia ©
No Dealing DeskA way of forex trading that provides immediate access to the interbank market. The interbank market is where foreign currencies are traded. This is different than trading through the dealing desks that are found in many banks and financial institutions. By using a dealing desk, a forex broker who is registered as a Futures Commission Merchant (FCM) can offset trades. If a no dealing desk system is used, positions are automatically offset and then transmitted directly to the interbank.Investopedia ©
No Shop ClauseA clause in an agreement between a seller and a potential buyer that bars the seller from soliciting a purchase proposal from any other party. In other words, the seller cannot "shop" the business or asset around once a letter of intent or agreement in principle is entered into between the seller and the potential buyer. The no shop clause generally has a finite period during which it is in effect.Investopedia ©
Non-Deliverable Swaps (NDS)A currency swap between major and minor currencies that is restricted or not convertible. A non-deliverable swap (NDS) is so-called because there is no delivery of the two currencies involved in the swap, unlike a typical currency swap where there is physical exchange of currency flows. Periodic settlement of an NDS is done on a cash basis, generally in U.S. dollars. The settlement value is based on the difference between the exchange rate specified in the swap contract and the spot rate, with one party paying the other the difference. A non-deliverable swap can be viewed as a series of non-deliverable forwards bundled together.Investopedia ©
Non-Farm Payroll (NFP) ReportThe non-farm payroll (NFP) report is a key economic indicator for the United States. The NFP report causes one of the consistently largest rate movements of any news announcement in the forex market. As a result, many analysts, traders, funds, investors and speculators anticipate the NFP number - and the directional movement it will cause.Investopedia ©
Non-Performing Asset (NPA)A nonperforming asset (NPA) refers to a classification for loans on the books of financial institutions that are in default or are in arrears on scheduled payments of principal or interest. In most cases, debt is classified as nonperforming when loan payments have not been made for a period of 90 days. While 90 days of nonpayment is the standard period of time for debt to be categorized as nonperforming, the amount of elapsed time may be shorter or longer depending on the terms and conditions set forth in each loan.Investopedia ©
Non-Recourse Loan or DebtNonrecourse debt or a nonrecourse loan (unlike lawsuit funding, or lawsuit loans) is a secured loan (debt) that is secured by a pledge of collateral, typically real property, but for which the borrower is not personally liable. If the borrower defaults, the lender/issuer can seize the collateral, but the lender's recovery is limited to the collateral. If the property is insufficient to cover the outstanding loan balance (for example, if real estate prices have dropped), the difference between the value of the collateral and the loan value becomes a loss for the lender. Thus, non-recourse debt is typically limited to 50% or 60% loan-to-value ratios, so that the property itself provides "overcollateralization" of the loan. NRLWikipedia ©
Non-Traded REITA form of real estate investment method that is designed to reduce or eliminate tax while providing returns on real estate. A non-traded REIT does not trade on a securities exchange, and because of this it is quite illiquid for long periods of time. Front-end fees can be as much as 15%, much higher than a traded REIT due to its limited secondary market.Investopedia ©
Noncurrent AssetsA company's long-term investments, whose full value will not be realized within the accounting year. Examples of noncurrent assets include investments in another company; intangible assets such as goodwill, brand recognition and intellectual property; and property, plant and equipment. Noncurrent assets appear on the company's balance sheet.Investopedia ©
Nonfarm PayrollA statistic researched, recorded and reported by the U.S. Bureau of Labor Statistics intended to represent the total number of paid U.S. workers of any business, excluding the following employees: - general government employees - private household employees - employees of nonprofit organizations that provide assistance to individuals - farm employees This monthly report also includes estimates on the average work week and the average weekly earnings of all non-farm employees. Investopedia ©
Nonmonetary AssetsAssets in which the right to receive a fixed or determinable amount of currency is absent. This feature distinguishes nonmonetary assets from monetary assets - which are assets that can be converted into a fixed or determinable amount of currency - such as cash, bank deposits, and accounts and notes receivable. Nonmonetary assets include intangible assets such as copyrights and patents, goodwill, inventories, property, plant and equipment.Investopedia ©
Nonrecourse LoansA non-recourse loan does not allow the lender to pursue anything other than collateral. For example, if you default on your non-recourse home loan, the bank can only foreclose on the home. They generally cannot take further legal actions against you. The bank is out of luck even if the sale proceeds do not repay the loan. Non-recourse loans create the most risk for lenders. Because they can only collect the collateral - and nothing else, they want to see lower loan to value ratios to reduce their risk. These loans may have higher interest rates than recourse loans.About.com ©
Noon RateA term used by the Bank of Canada to describe the foreign exchange rate between the U.S. dollar and the Canadian dollar. The rate is released by 12:45pm EST by the Bank of Canada on any given day, and is based on the trading that takes place from 11:59am to 12:01pm on that day. The noon rate is often used by companies as a benchmark for translating financial statements.Investopedia ©
Normal ProfitNormal profit is an economic condition occurring when the difference between a firm's total revenue and total cost is equal to zero. Simply put, normal profit is the minimum level of profit needed for a company to remain competitive in the market.Investopedia ©
Normative EconomicsA perspective on economics that incorporates subjectivity within its analyses. It is the study or presentation of "what ought to be" rather than what actually is. Normative economics deals heavily in value judgments and theoretical scenarios. It is the opposite of positive economics.Investopedia ©
North American Free Trade Agreement - NAFTAA regulation implemented January 1, 1994 in Mexico, Canada and the United States to eliminate most tariffs on trade between these nations. The three countries phased out numerous tariffs, (with a particular focus on those related to agriculture, textiles and automobiles), between the agreement's implementation and January 1, 2008. NAFTA's purpose is to encourage economic activity between the United States, Mexico and Canada.Investopedia ©
Notice of TerminationGenerally refers to the notice provided by an employer stating the date on which an employee's or employees' contract of employment will end. While a notice of termination may usually be provided to an employee for reasons unrelated to his or her job performance - for example, because business conditions necessitate layoffs or downsizing - it may also be given to an employee for poor job performance or misconduct.Investopedia ©
Notional ValueThe total value of a leveraged position's assets. This term is commonly used in the options, futures and currency markets because a very small amount of invested money can control a large position (and have a large consequence for the trader).Investopedia ©
Nuncupative WillA verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will is considered a "deathbed" will, meaning that it is a safety for people struck with a terminal illness and robbed of the ability or time to draft a proper written will.Investopedia ©
OTC Markets Group Inc.The owner and operator of the leading U.S. inter-dealer electronic quotation and trading system for over-the-counter (OTC) securities. OTC Markets Group provides marketplaces for trading 10,000 OTC securities, making it the third-largest U.S. equity trading forum. It provides services in three core areas that are essential for better-informed and more efficient financial markets -- Issuer Services, Trading Services and Market Data Services. Most OTC securities trading in the U.S. is conducted on the company's OTC Link platform, an alternative trading system registered with the SEC as a broker-dealer. OTC Markets Group has its headquarters in New York City and is publicly traded on OTCQX under the symbol OTCM.Investopedia ©
ObamanomicsA buzzword that describes the economic philosophy of U.S President Barack Obama. Obamanomics calls for lower tax rates for companies that meet certain criteria, such as providing decent healthcare and maintaining a U.S. workforce and headquarters. Obama's economic platform also calls for higher taxes for high-income families and investment in education, healthcare and the sciences.Investopedia ©
October EffectThe theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological expectation rather than an actual phenomenon. Most statistics go against the theory.Investopedia ©
Odious DebtMoney borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious debt when government leaders use borrowed funds in ways that don't benefit or even oppress citizens. Some legal scholars argue that successor governments should not be held accountable for odious debt incurred by earlier regimes, but there is no consensus on how odious debt should actually be treated. In practice, countries often end up repaying it to uphold their ability to borrow at favorable interest rates.Investopedia ©
Offering MemorandumA legal document stating the objectives, risks and terms of investment involved with a private placement. This includes items such as the financial statements, management biographies, detailed description of the business, etc. An offering memorandum serves to provide buyers with information on the offering and to protect the sellers from the liability associated with selling unregistered securities. Also known as a "private placement memorandum" (PPM). Investopedia ©
Oil ReservesAn estimate of the amount of crude oil located in a particular economic region. Oil reserves must have the potential of being extracted under current technological constraints. For example, if oil pools are located at unattainable depths, they would not be considered part of the nation's reserves. Reserves are calculated based on a proven/probably basis.Investopedia ©
Okun's LawThe relationship between an economy's unemployment rate and its gross national product (GNP). Twentieth-century economist Arthur Okun developed this idea, which states that when unemployment falls by 1%, GNP rises by 3%. However, the law only holds true for the U.S. economy, and only applies when the unemployment rate falls between 3-7.5%. Other version of Okun's Law focus on a relationship between unemployment and GDP, whereby a percentage increase in unemployment causes a 2% fall in GDP.Investopedia ©
OligopolyOligopoly is a market structure in which a small number of firms has the large majority of market share. An oligopoly is similar to a monopoly, except that rather than one firm, two or more firms dominate the market. There is no precise upper limit to the number of firms in an oligopoly, but the number must be low enough that the actions of one firm significantly impact and influence the others.Investopedia ©
Omnibus AccountAn omnibus account is an account between two futures merchants (brokers). It involves the transaction of individual accounts that are combined in this type of account, allowing for easier management by the futures merchant. This protects the identities of the individual account holders, because the futures merchant transacts for them.Investopedia ©
One Night Stand InvestmentBuying a security with the intention of holding it for the long term, but subsequently panicking and selling it the following day. An investor sells out the following day typically because of bad news or a sudden change in long-term expectations.Investopedia ©
One Touch OptionA type of exotic option that gives an investor a payout once the price of the underlying asset reaches or surpasses a predetermined barrier. This type of option allows the investor to set the position of the barrier, the time to expiration and the payout to be received once the barrier is broken.Investopedia ©
Open KimonoTo reveal what is being planned or to share important information freely. Similar to''open the books'' or an "open door policy," opening the kimono means revealing the inner workings of a project or company to an outside party. Also referred to as "open (up) one's kimono."Investopedia ©
Open Market Operations - OMOOpen market operations are essentially the buying and selling of government-issued securities (such as U.S. T-bills) by the Federal Reserve. It is the primary method by which monetary policy is formulated. The short-term purpose of these operations is to obtain a preferred amount of reserves held by the central bank and/or to alter the price of money through the federal fund rate. When the Federal Reserve decides to buy T-bills from the market, its aim is to increase liquidity in the market, or the supply of money, which decreases the cost of borrowing, or the interest rate. Learn which homeowners insurance carrier offers the best coverage and lowest rates On the other hand, a decision to sell T-bills to the market is a signal that the interest rate will be increased. This is because the action will take money out of the market (too much liquidity can result in inflation), therefore increasing the demand for money and its cost of borrowing.Investopedia ©
Open PositionIn investing, and trade that has been established, or entered, that has yet to be closed with an opposing trade. An open position can exist following a buy (long) position, or a sell (short) position. In either case, the position will remain open until an opposing trade has taken place.Investopedia ©
Operating Cash Flow - OCFThe cash generated from the operations of a company, generally defined as revenues less all operating expenses, but calculated through a series of adjustments to net income. The OCF can be found on the statement of cash flows. Also known as "cash flow provided by operations" or "cash flow from operating activities".Investopedia ©
Operating CostOperating costs are expenses associated with the maintenance and administration of a business on a day-to-day basis. The operating cost is a component of operating income and is usually reflected on a company's income statement. While operating costs generally do not include capital outlays, they can include many components of operating a business. The formula for operating cost can be expressed in the following way: Operating Cost = Cost of Goods Sold - Operating ExpensesInvestopedia ©
Operating MarginOperating margin is a margin ratio used to measure a company's pricing strategy and operating efficiency. Operating margin is a measurement of what proportion of a company's revenue is left over after paying for variable costs of production such as wages, raw materials, etc. It can be calculated by dividing a company's operating income (also known as "operating profit") during a given period by its net sales during the same period. "Operating income" here refers to the profit that a company retains after removing operating expenses (such as cost of goods sold and wages) and depreciation. "Net sales" here refers to the total value of sales minus the value of returned goods, allowances for damaged and missing goods, and discount sales. Operating margin is also often known as "operating profit margin," "operating income margin," "return on sales" or as "net profit margin." However, "net profit margin" may be misleading in this case because it is more frequently used to refer to another ratio, net margin.Investopedia ©
Operating RatioThe operating ratio shows the efficiency of a company's management by comparing operating expense to net sales. The smaller the ratio, the greater the organization's ability to generate profit if revenues decrease. When using this ratio, however, investors should be aware that it doesn't take debt repayment or expansion into account.Investopedia ©
Operation TwistThe name given to a Federal Reserve monetary policy operation that involves the purchase and sale of bonds. "Operation Twist" describes a monetary process where the Fed buys and sells short-term and long-term bonds depending on their objective. For example, in September 2011, the Fed performed Operation Twist in an attempt to lower long-term interest rates. In this operation, the Fed sold short-term Treasury bonds and bought long-term Treasury bonds, which pressured the long-term bond yields downward.Investopedia ©
Operational RiskRisk arising from execution of a company's business functions.Wikipedia ©
Options Industry Council - OICA cooperative formed in 1992 by U.S. options exchanges and Options Clearing Corporation (OCC) to educate investors and financial advisers regarding the benefits and risks of exchange-traded equity options. The Options Industry Council (OIC) serves as the industry resource for equity options education, and it is sponsored by a variety of corporations including BATS Options, the Boston Options Exchange, C2 Options Exchange Inc, the Chicago board Options Exchange, the international Securities Exchange, NASDAQ OMX PHLX, NASDAQ Options Market, NYSE Ames, NYSE Arca and Options Clearing Corporation.Investopedia ©
Order Driven MarketA financial market where all buyers and sellers display the prices at which they wish to buy or sell a particular security, as well as the amounts of the security desired to be bought or sold. This is the opposite of a quote driven market, which is one that only displays bids and asks of designated market makers and specialists for a specific security.Investopedia ©
Ordinary SharesAny shares that are not preferred shares and do not have any predetermined dividend amounts. An ordinary share represents equity ownership in a company and entitles the owner to a vote in matters put before shareholders in proportion to their percentage ownership in the company.
Ordinary shareholders are entitled to receive dividends if any are available after dividends on preferred shares are paid. They are also entitled to their share of the residual economic value of the company should the business unwind; however, they are last in line after bondholders and preferred shareholders for receiving business proceeds.
As such, ordinary shareholders are considered unsecured creditors.
Also known as "common stock".
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Organic GrowthThe growth rate that a company can achieve by increasing output and enhancing sales. This excludes any profits or growth acquired from takeovers, acquisitions or mergers. Takeovers, acquisitions and mergers do not bring about profits generated within the company, and are therefore not considered organic.Investopedia ©
Organization Of Petroleum Exporting Countries - OPECAn organization consisting of the world's major oil-exporting nations. The Organization of Petroleum Exporting Countries (OPEC) was founded in 1960 to coordinate the petroleum policies of its members, and to provide member states with technical and economic aid. OPEC is a cartel that aims to manage the supply of oil in an effort to set the price of oil on the world market, in order to avoid fluctuations that might affect the economies of both producing and purchasing countries.Investopedia ©
OsMAAn abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an oscillator from its moving average, over a given period of time.
Typically the primary line of the MACD will serve as the oscillator, with the signal line of the MACD then acting as the moving average. The OsMA relationship is one of the most fundamental in technical analysis.
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Other Real Estate Owned - OREOIn bank accounting, this term refers to real property owned by a banking institution which is not directly related to its business. In balance sheet terms, other real estate owned (OREO) assets are considered non-earning assets for purposes of regulatory accounting.Investopedia ©
OustriaOustria, short for "Oust Austria," is an Austrian version of the term Brexit, which originated in June of 2016 when the United Kingdom voted to leave the European Union. Other countries in the EU have similarly adopted nicknames for the possibility of their breaking away from the EU, including France (Frexit), Italy (Italexit or Italeave), the Czech Republic (Czech-out) and Portugal (Departugal).Investopedia ©
OutperformOutperform is when a stock is expected to do slightly better than the market return.
Also known as "market outperform", "moderate buy", or "accumulate".
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Outstanding SharesOutstanding shares refer to a company's stock currently held by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company's officers and insiders. Outstanding shares are shown on a company's balance sheet under the heading "Capital Stock." The number of outstanding shares is used in calculating key metrics such as a company's market capitalization, as well as its earnings per share (EPS) and cash flow per share (CFPS).
A company's number of outstanding shares is not static, but may fluctuate widely over time. Also known as "shares outstanding."
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Over-The-Counter - OTCA security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" can be used to refer to stocks that trade via a dealer network as opposed to on a centralized exchange. It also refers to debt securities and other financial instruments such as derivatives, which are traded through a dealer network.Investopedia ©
OverleveragedOccurs when a business is carrying too much debt, and is unable to pay interest payments from loans. Overleveraged companies are unable to pay their expenses because of over excessive costs. This is the formula for financial leverage. FINANCIAL LEVERAGE = OPERATING INCOME / NET INCOMEInvestopedia ©
Overnight PositionTrading positions not closed by the end of the trading day and held overnight. For securities trading, overnight positions expose the investor to risk because a number of events can negatively impact a position during a time in which the trading floor is closed.Investopedia ©
OverreactionA market hypothesis stating that investors and traders react disproportionately to new information about a given security. This will cause the security's price to change dramatically, so that the price will not fully reflect the security's true value immediately following the event. Typically, the price swing from overreaction is not long lasting, as the stock price will tend to return back to its true value over time. The overreaction hypothesis is not consistent with the efficient market hypothesis.Investopedia ©
PATRIOT Act (USA)The USA PATRIOT Act (commonly known as the "Patriot Act") is an Act of the U.S. Congress that was signed into law by President George W. Bush on October 26, 2001. The title of the act is a ten letter acronym (USA PATRIOT) that stands for: Uniting (and) Strengthening America (by) Providing Appropriate Tools Required (to) Intercept (and) Obstruct Terrorism Act of 2001. The act, a response to the terrorist attacks of September 11th, dramatically reduced restrictions on law enforcement agencies' ability to search telephone, e-mail communications, medical, financial, and other records; eased restrictions on foreign intelligence gathering within the United States; expanded the Secretary of the Treasury's authority to regulate financial transactions, particularly those involving foreign individuals and entities; and broadened the discretion of law enforcement and immigration authorities in detaining and deporting immigrants suspected of terrorism-related acts. The act also expanded the definition of terrorism to include domestic terrorism, thus enlarging the number of activities to which the USA PATRIOT Act's expanded law enforcement powers can be applied. On May 26, 2011, President Barack Obama signed a four-year extension of three key provisions in the USA PATRIOT Act: roving wiretaps, searches of business records (the "library records provision"), and conducting surveillance of "lone wolves" - individuals suspected of terrorist-related activities not linked to terrorist groups.Wikipedia ©
PBOCEstablished on December 1, 1948, the People's Bank of China (PBC or PBOC) is the central bank of the People's Republic of China with the power to control monetary policy and regulate financial institutions in mainland China. The People's Bank of China has the most financial assets of any single public finance institution in history.Wikipedia ©
PIIGSAn acronym used to refer to the five Eurozone nations, which were considered weaker economically following the financial crisis: Portugal, Italy, Ireland, Greece and Spain. Since the nations use the euro as their currency, they were unable to employ independent monetary policy in order to help battle the economic downturn.Investopedia ©
PLUS LoanA low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, the parent borrows money on the student's behalf. To be eligible for a PLUS Loan, a student must be enrolled at least part-time, and the parent has to pass a standard credit check.Investopedia ©
POFProof of Funds - Is a process by which the availability of funds required to consummate a given transaction is perpetrated. It can be presented as a letter issued by the Buyer's Bank officials, in the Bank's letterhead, normally designated as Bank Comfort Letter (BCL), or as a SWIFT transaction or sting the availability of funds in the Buyer's account, necessary to complete the business transaction. Refer to BLC.World Vision or Others
POPProof of Product - Is a process by which the availability of the product to be exported is confirmed (normally based on survey information carried by independent and reputable international surveyors such as SGS, Lloyds, and transmitted to the importer or Buyer via bank, before a payment instrument to pay for the goods is issued.World Vision or Others
PRAM ModelA four-step model for negotiation that results in a win-win situation for both parties. PRAM is an acronym for plans, relationships, agreement and maintenance. The four sequential steps in the PRAM model are - adequate planning, building relationships, reaching agreements and maintaining these relationships.Investopedia ©
Pac ManA form of defense used in a hostile takeover situation. The target firm turns around and tries to take over the company that has made the hostile bid.Investopedia ©
Paid-Up CapitalThe amount of a company's capital that has been funded by shareholders. Paid-up capital can be less than a company's total capital because a company may not issue all of the shares that it has been authorized to sell. Paid-up capital can also reflect how a company depends on equity financing.Investopedia ©
Painting The TapeA form of market manipulation whereby market players attempt to influence the price of a security by buying and/or selling it among themselves so as to create the appearance of substantial trading activity in the security. Painting the tape is an illegal activity that is prohibited by the Securities and Exchange Commission because it creates an artificial price for a security. The term originated in a bygone era when stock prices were largely transmitted on a "ticker tape."Investopedia ©
Panel BankThe name given to the group of banks contributing to the Euro Interbank Offer Rate (EURIBOR). This group is made up of the largest participants within the Euro money market. The panel bank complies daily quotes on the interest rates that banks offer one another for overnight loans. The resulting figure, the EURIBOR, is similar to London Interbank Offered Rate (LIBOR). The EURIBOR is used as a reference rate for bonds, swaps, loans and other instruments. Investopedia ©
Panic SellingWide-scale selling of an investment, causing a sharp decline in price. In most instances of panic selling, investors just want to get out of the investment, with little regard for the price at which they sell.Investopedia ©
Paper DealerA market maker that buys and sells extremely short-term corporate bonds called commercial paper. A paper dealer is typically a large financial firm that has the capital and sophistication to distribute commercial paper to investors on behalf of borrowing corporations and to make a market in commercial paper, setting prices at which it is willing to buy and sell.
Paper dealers are used by corporations that wish to access the public markets for their short-term borrowing needs. By issuing commercial paper, a corporation may be able to obtain a larger amount of financing and/or obtain a lower interest rate on its short-term borrowings, as compared to seeking a bank loan or other short-term credit facility.
Commercial paper is offered in a range of maturities, from a few days to several months. Occasionally, individual investors can buy commercial paper directly from the issuing corporation. However, it is more common for retail investors to invest in commercial paper through a money market fund or short-term bond fund.
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ParShort for 'par value,' par can refer to bonds, preferred stock, common stock or currencies, with different meanings depending on the context. Par most commonly refers to bonds, in which case it means the face value, or value at which the bond will be redeemed at maturity. This is usually $1,000 for corporate issues and can be more for government issues. A bond can trade above or below par, reflecting the broader interest rate environment and the issuer's perceived credit worthiness.Investopedia ©
Parasitic AdvertisingA type of marketing that promotes one product at the cost of lost sales for another product. Parasitic advertising often occurs when two products are close substitutes for one another. Firms generally attempt to avoid parasitic advertising within their own product offerings because it is not the most effective way of maximizing the return on ad spending.Investopedia ©
Pareto PrincipleA principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The principle states that, for many phenomena, 20% of invested input is responsible for 80% of the results obtained. Put another way, 80% of consequences stem from 20% of the causes. Also referred to as the "Pareto rule" or the "80/20 rule".Investopedia ©
Pari-passuA Latin phrase meaning "equal footing" that describes situations where two or more assets, securities, creditors or obligations are equally managed without any display of preference. An example of pari-passu occurs during bankruptcy proceedings when a verdict is reached, all creditors can be regarded equally, and will be repaid at the same time and at the same fractional amount as all other creditors. Treating all parties the same means they are pari-passu.Investopedia ©
Paris ClubAn informal group of creditor nations whose objective is to find workable solutions to payment problems faced by debtor nations. The Paris Club has 19 permanent members, including most of the western European and Scandinavian nations, the United States of America, the United Kingdom and Japan. The Paris Club stresses the informal nature of its existence and deems itself a "non-institution." As an informal group, it has no official statutes and no formal inception date, although its first meeting with a debtor nation was in 1956, with Argentina.Investopedia ©
ParityParity refers to two things being equal to each other. The term "par value" for a bond is similar to parity. Parity can also refer to two securities having equal value, such as a convertible bond and the value of the stock if the bondholder chooses to convert into common stock.Investopedia ©
Parity PriceWhen the price of an asset is directly linked to another price. Examples of parity price are:
1. Convertibles - the price at which a convertible security equals the value of the underlying stock.
2. Options - when an option is trading at its intrinsic value ("trading at parity").
3. International parity - official rates for a currency in terms of other pegged currencies, typically the U.S. dollar.
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Parsonage AllowanceAn allowance designated by a church or other organization for its church professionals (clergy) for the expenses of providing and maintaining a home. This is basically a housing allowance for ministers. Parsonage allowance is excluded from gross income, but it is included under a self-employment tax.Investopedia ©
Participation RateA measure of the participating portion of an economy's labor force. The participation rate refers to the number of people who are either employed or are actively looking for work. During an economic recession, many workers often get discouraged and stop looking for employment. As a result, the participation rate decreases. The participation rate is an important metric to note when looking at unemployment data because unemployment figures reflect the number of people who are looking for jobs but are unable to secure employment. The number of people who are no longer actively searching would not be considered for unemployment statistics.Investopedia ©
Partnership A business organization in which two or more individuals manage and operate the business. Both owners are equally and personally liable for the debts from the business.Investopedia ©
Party WallIn real estate, a shared wall that separates housing units. Party walls are most commonly found in apartments, condominiums and office complexes where different tenants share a common structure. Party walls can be a non-structural wall, but laws in various jurisdictions outline requirements for how party walls must be constructed.Investopedia ©
Pass-Through RateThe rate on a securitized asset pool - such as a mortgage-backed security (MBS) - that is "passed-through" to investors once management fees and guarantee fees have been paid to the securitizing corporation. The pass-through rate (also known as the coupon rate for the MBS) will be lower than the interest rate on the individual securities within the offering.Investopedia ©
Passbook LoanA personal loan extended to a savings-account holder by the custodial bank. Passbook loans use the balance of the savings account as collateral for the loan. The amount of the loan therefore cannot exceed the savings-account balance.Investopedia ©
Passive ETFOne of two types of exchange-traded funds (ETFs) available for investors. Passive ETFs are index funds that track a specific benchmark, such as a SPDR. Unlike actively managed ETFs, passive ETFs are not managed by a fund manager on a daily basis.Investopedia ©
Passive Income Earnings an individual derives from a ren​tal property, limited partnership or other enterprise in which he or she is not materially involved. As with non-passive income, passive income is usually taxable; however it is often treated differently by the Internal Revenue Service (IRS). Portfolio income is considered passive income by some analysts, in which case dividends and interest would be considered passive.Investopedia ©
Passive ManagementPassive management is a style of management associated with mutual and exchange-traded funds (ETF) where a fund's portfolio mirrors a market index. Passive management is the opposite of active management in which a fund's manager(s) attempt to beat the market with various investing strategies and buying/selling decisions of a portfolio's securities. Passive management is also referred to as "passive strategy," "passive investing" or " index investing."Investopedia ©
Past Due Balance MethodA system for calculating interest charges based on any outstanding loan or credit charges that remain unpaid after a certain date. The past due balance method is used by credit companies whereby credit card holders have until a specified date to pay balances off before beginning to accrue interest fees. For example, if a credit card holder uses their card for daily purchases, the credit card company will offer a grace period during which no interest accrues. If balances are paid by this date, no interest accrues; if balances or a portion of the balance is not paid by this date, interest will begin to accrue.Investopedia ©
Patent CliffA colloquialism to denote the potential sharp decline in revenues upon patent expiry of one or more leading products of a firm. A patent cliff is when a firm's revenues could "fall off a cliff" when one or more established products go off-patent, since these products can be replicated and sold at much cheaper prices by competitors. While it is applicable to any industry, in recent years the term "patent cliff" has come to be associated almost exclusively with the pharmaceutical industry.Investopedia ©
Pattern Day TraderAn SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.Investopedia ©
Pay As You Earn - PAYEA system of income tax withholding that requires employers to deduct income tax, and in some cases, the employee portion of social benefit taxes, from each paycheck delivered to employees. The pay as you earn (PAYE) system requires that employers then must remit the deducted amount to the proper government authority. The PAYE system was developed in 1944 by Sir Paul Chambers in the United Kingdom.Investopedia ©
Payback PeriodThe length of time required to recover the cost of an investment. The payback period of a given investment or project is an important determinant of whether to undertake the position or project, as longer payback periods are typically not desirable for investment positions.Investopedia ©
Payday LoanA type of short-term borrowing where an individual borrows a small amount at a very high rate of interest. The borrower typically writes a post-dated personal check in the amount they wish to borrow plus a fee in exchange for cash. The lender holds onto the check and cashes it on the agreed upon date, usually the borrower's next payday. These loans are also called cash advance loans or check advance loans.Investopedia ©
Peak GlobalizationPeak globalization is a theoretical point at which the trend towards more integrated world economies reverses or halts. Peak globalization is a conceptual cousin to peak oil, which is the point where global oil production enters a permanent decline. Unlike oil, globalization is an economic trend rather than a commodity, so there are no hard physical limits on the level of globalization in the world. Instead, peak globalization would be caused by a collection of factors including domestic pushback against the loss of jobs in export hurt industries, increased nationalism and overall anger at unfair trade practices like dumping and currency manipulation.Investopedia ©
Peak OilA hypothetical date referring to the world''s peak crude oil production, whereby following this day, production rates will begin to diminish. This concept is derived from geophysicist Marion King Hubbert''s ""peak theory"", which proclaims that oil production follows a bell-shaped curve.Investopedia ©
Penetration PricingA marketing strategy used by firms to attract customers to a new product or service. Penetration pricing is the practice of offering a low price for a new product or service during its initial offering in order to attract customers away from competitors. The reasoning behind this marketing strategy is that customers will buy and become aware of the new product due to its lower price in the marketplace relative to rivals.Investopedia ©
Penny StockA stock that trades at a relatively low price and market capitalization, usually outside of the major market exchanges. These types of stocks are generally considered to be highly speculative and high risk because of their lack of liquidity, large bid-ask spreads, small capitalization and limited following and disclosure. They will often trade over the counter through the OTCBB and pink sheets.Investopedia ©
Perfect CompetitionA market structure in which the following five criteria are met: 1) All firms sell an identical product; 2) All firms are price takers - they cannot control the market price of their product; 3) All firms have a relatively small market share; 4) Buyers have complete information about the product being sold and the prices charged by each firm; and 5) The industry is characterized by freedom of entry and exit. Perfect competition is sometimes referred to as "pure competition".Investopedia ©
Perfect HedgeA position undertaken by an investor that would eliminate the risk of an existing position, or a position that eliminates all market risk from a portfolio. In order to be a perfect hedge, a position would need to have a 100% inverse correlation to the initial position. As such, the perfect hedge is rarely found.Investopedia ©
Performance BondPerformance Bond - A bond issued by an insurance company to guarantee satisfactory completion of a project by the seller. A bond issued to one party of a contract as a guarantee against the failure of the other party to meet obligations specified in the contract. In the case of commodity trading, it is required of the seller to guarantee the buyer that the contract will be performed according to the terms agreed upon.World Vision or Others
Period CertainAn annuitization-method option with which the annuitant selects a specific time period for which the annuity income payments will last. This is unlike the more commonly selected life option, with which the annuitant receives an income payment for the rest of his or her life, regardless of how long (or short) their retirement years end up lasting.Investopedia ©
Periodic Interest RateThe periodic interest rate is the interest rate charged on a loan or realized on an investment over a specific period of time. Typically, lenders quote interest rates on an annual basis, but in most cases, the interest compounds more frequently than annually. As a result, the periodic interest rate is the annual interest rate divided by the number of compounding periods.Investopedia ©
Perkins LoanA loan program that provides low-interest student loans to undergraduate and graduate students who demonstrate exceptional financial need. The Perkins Loan is made through the student's school's financial aid office. The school is the lender, and therefore the loan is repaid to the school. The loan is paid either directly to the student (usually by a check) or the loan amount is applied towards school charges and expenses. Repayment on the loan begins nine months after the student graduates, leaves school or drops below half-time status.Investopedia ©
Perp WalkA slang term that describes the practice sometimes employed by law enforcement authorities, notably in the U.S., of parading an arrested suspect in public, with members of the media usually in attendance. Short for "perpetrator walk," the alleged suspect is usually a white-collar or high-profile criminal. The perp walk often takes place either shortly after the suspect is first arrested at his or her residence or workplace, or when the suspect is on the way to court for an arraignment.Investopedia ©
Perpetual BondA perpetual bond is a bond with no maturity date. Perpetual bonds are not redeemable but pay a steady stream of interest forever. Some of the only notable perpetual bonds in existence are those that were issued by the British Treasury to pay off smaller issues used to finance the Napoleonic Wars (1814). Some in the U.S. believe it would be more efficient for the government to issue perpetual bonds, which may help it avoid the refinancing costs associated with bond issues that have maturity dates.

A perpetual bond is also known as a 'consol'.
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PetrodollarsThe money earned from the sale of oil. The term "petrodollars" was coined when the price of oil rose sharply in the 1970s. It resurfaced in the new millennium, when prices rose once again. Although petrodollars initially referred primarily to money that Middle Eastern countries and members of OPEC received, the definition has broadened in recent years.Investopedia ©
Phantom Stock PlanAn employee benefit plan that gives selected employees (senior management) many of the benefits of stock ownership without actually giving them any company stock. Sometimes referred to as "shadow stock."Investopedia ©
Phases of RetirementA six-stage process described by researcher Robert Atchley that includes pre-retirement, retirement, contentment, disenchantment, reorientation and routine. Not all individuals will experience all of these stages, but the underlying idea is to provide a framework for thinking of retirement as a process that involves both emotional and financial adjustments rather than as just a one-time event.Investopedia ©
PhishingA method of identity theft carried out through the creation of a website that seems to represent a legitimate company. The visitors to the site, thinking they are buying something from a real business, submit their personal information to the site. The criminals then use the personal information for their own purposes, or sell the information to other criminal parties.Investopedia ©
Physical CapitalPhysical capital is one of the three main factors of production in economic theory. It consists of manmade goods that assist in the production process, like machinery, office supplies, transportation and computers.Investopedia ©
Pick-And-Shovel PlayA strategy where investments are made in companies that are providers of necessary equipment for an industry, rather than in the industry's end product. A pick-and-shovel play, in practice, could be within the oil industry; an investor would purchase stock in a company that manufactures seismic data equipment that exploration and production (E&P) companies need to find new oil and gas deposits, rather than on the E&P company itself.Investopedia ©
Piggyback Registration RightsA form of registration rights that grants the investor the right to register his or her unregistered stock when either the company or another investor initiates a registration. This type of registration right is seen as inferior to demand registration rights, because this class of right-holders cannot initiate the registration process.Investopedia ©
Pink Slip PartyA party that brings together professionals and recruiters who have recently been laid off. Pink slip parties are usually held during tough economic times, when unemployment is rising and businesses are closing. Often, these casual gatherings will raise money for charity, and provide job search advice to the attendees.Investopedia ©
PipThe smallest price change that a given exchange rate can make. Since most major currency pairs are priced to four decimal places, the smallest change is that of the last decimal point - for most pairs this is the equivalent of 1/100 of one percent, or one basis point. For example, the smallest move the USD/CAD currency pair can make is $0.0001, or one basis point. The smallest move in a currency does not always need to be equal to one basis point, but this is generally the case with most currency pairs.Investopedia ©
Plain Vanilla SwapsThe most basic type of forward claim that is traded in the over-the-counter market between two private parties, usually firms or financial institutions. There are several types of plain vanilla swaps, such as the plain vanilla interest rate swap, the plain vanilla commodity swap and the plain vanilla foreign currency swap.Investopedia ©
PlutocracyA government controlled exclusively by the wealthy either directly or indirectly. A plutocracy allows, either openly or by circumstance, only the wealthy to rule. This can then result in policies exclusively designed to assist the wealthy, which is reflected in its name (comes from the Greek words "ploutos" or wealthy, and "kratos" - power, ruling).Investopedia ©
Point & Figure ChartA chart that plots day-to-day price movements without taking into consideration the passage of time. Point and figure charts are composed of a number of columns that either consist of a series of stacked X's or O's. A column of X's is used to illustrate a rising price, while O's represent a falling price. As you can see from the chart below, this type of chart is used to filter out non-significant price movements, and enables the trader to easily determine critical support and resistance levels. Traders will place orders when the price moves beyond identified support/resistance levels.Investopedia ©
Point of SaleThe place where sales are made. On a macro-level, a point of sale may be a mall, market or city. On a micro-level, retailers consider a point of sale to be the area surrounding the counter where customers pay. Also known as "point of purchase".Investopedia ©
Poison PillA strategy used by corporations to discourage hostile takeovers. With a poison pill, the target company attempts to make its stock less attractive to the acquirer. There are two types of poison pills:
1. A "flip-in" allows existing shareholders (except the acquirer) to buy more shares at a discount.
2. A "flip-over" allows stockholders to buy the acquirer's shares at a discounted price after the merger.
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Policy MixA government's combined use of fiscal policy and monetary policy to attempt to manage the economy. Monetary and fiscal policies affect each other, and the right policy mix is supposed to achieve desirable macroeconomic outcomes such as price stability, credit availability, economic growth and financial stability.Investopedia ©
Ponzi SchemeA fraudulent investing scam promising high rates of return with little risk to investors. The Ponzi scheme generates returns for older investors by acquiring new investors. This scam actually yields the promised returns to earlier investors, as long as there are more new investors. These schemes usually collapse on themselves when the new investments stop.Investopedia ©
PoopA slang term often used to describe inside information or people with insider information. A poop has access to nonpublic information, which can be used to their advantage. Investors are not allowed to trader on material insider information. If they do, they could face penalties or even jail time.Investopedia ©
Poop and ScoopA highly illegal practice occurring mainly on the internet. A small group of informed people attempt to push down a stock by spreading false information and rumors. If they are successful, they can purchase the stock at bargain prices. Poop and scoop is the opposite of pump and dump. Investopedia ©
Pop-Up RetailA retail store that is opened temporarily to take advantage of a trend or a seasonal product. Demand for products sold in pop-up retail is typically short-lived. Pop-up retail stores are found most often in the apparel and toy industries.Investopedia ©
Pork-Barrel PoliticsA slang term used when politicians or governments "unofficially" undertake projects that benefit a group of citizens in return for that group's support or campaign donations. This spending mostly benefits the needs of a small select group despite the fact that the entire community's funds are being used.
Also referred to as "patronage".
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Portable AlphaA strategy in which portfolio managers separate alpha from beta by investing in securities that differ from the market index from which their beta is derived. Alpha is the return achieved over and above the return that results from the correlation between the portfolio and the market (beta). In simple terms, portable alpha is a strategy that involves investing in areas that have little to no correlation with the market.Investopedia ©
Porter DiamondThe Porter Diamond, properly referred to as the Porter Diamond Theory of National Advantage, is a model that is designed to help understand the competitive advantage nations or groups possess due to certain factors available to them, and to explain how governments can act as catalysts to improve a country's position in a globally competitive economic environment. The model was created by Michael Porter, a recognized authority on corporate strategy and economic competition, and founder of The Institute for Strategy and Competitiveness at the Harvard Business School. It is a proactive economic theory, rather than one that simply quantifies comparative advantages that a country or region may have.Investopedia ©
Porter's 5 ForcesNamed after Michael E. Porter, this model identifies and analizes 5 competitive forces that shape every industry, and helps determine an industry's weaknesses and strengths.
1. Competition in the industry
2. Potential of new entrants into industry
3. Power of suppliers
4. Power of customers
5. Threat of substitute products
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Portfolio InvestmentA portfolio investment is a hands-off or passive investment of securities in a portfolio, and it is made with the expectation of earning a return. This expected return is directly correlated with the investment's expected risk. Portfolio investment is distinct from direct investment, which involves taking a sizable stake in a target company and possibly being involved with its day-to-day management.Investopedia ©
Portfolio ManagementPortfolio management is the art and science of making decisions about investment mix and policy, matching investments to objectives, asset allocation for individuals and institutions, and balancing risk against performance. Portfolio management is all about determining strengths, weaknesses, opportunities and threats in the choice of debt vs. equity, domestic vs. international, growth vs. safety, and many other trade-offs encountered in the attempt to maximize return at a given appetite for risk.Investopedia ©
Portfolio TurnoverA measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by taking either the total amount of new securities purchased or the amount of securities sold - whichever is less - over a particular period, divided by the total net asset value (NAV) of the fund. The measurement is usually reported for a 12-month time period.Investopedia ©
Post-9/11 GI BillA United States law that provides benefits to military veterans who have taken part in active duty service after September 11, 2001. To be eligible for the Post-9/11 G.I. Bill, an applicant must have served for at least 90 days and still be on active duty, or been honorably discharged or discharged for a disability related to serving. It was passed into law in 2008.Investopedia ©
Power BrokerAn individual who, through his or her connections, is able to influence the decisions of other parties. A power broker is typically an industry insider, and is familiar with other individuals and groups able to exert influence or make decisions. Power brokers may be elected officials, business leaders or individuals who are "connected".Investopedia ©
Pre-ForeclosureThe status of a property which is in the early stages of being foreclosed upon due to the property owner's inability to pay an outstanding mortgage obligation. Reaching a pre-foreclosure status begins when the lender, such as a bank, files a default notice on the property, which informs the property owner that the lender will proceed with pursuing legal action if the debt is not taken care of. At this point the property owner has the opportunity to pay off the outstanding debt or sell the property before it is foreclosed.Investopedia ©
Precious MetalsA classification of metals that are considered to be rare and/or have a high economic value. The higher relative values of these metals are driven by various factors including their rarity, uses in industrial processes and use as an investment commodity. Precious metals include, but are not limited to: gold, silver, platinum, iridium, rhodium and palladium.Investopedia ©
Precision ScoreA number used by the TransUnion Credit Bureau to quantify the credit worthiness of borrowers. Precision scores used to be called Empirica scores before TransUnion started using the NextGen scoring model. These scores will determine how risky it is for a lending institution to lend money to borrowers. Don't be fooled by the name though, there are many companies that use this score but call it something else. They include: - Experian, who uses the term "FICO Advanced Risk Score". - TransUnion, who uses the term "Precision". - Equifax, who uses the term "Pinnacle". Investopedia ©
Predator's BallAn annual convention held by Drexel Burnham Lambert for the purpose of matching high-risk companies searching for financing with investors who wanted the high rewards that can come with higher risk. After the first convention in 1979, these conventions became increasingly focused on setting up leveraged buyouts and hostile takeovers using junk bonds.Investopedia ©
Predatory DumpingA type of anti-competitive event in which foreign companies or governments price their products below market values in an attempt to drive out domestic competition. This may lead to conditions where one company has a monopoly in a certain product or industry. Antitrust or competition laws forbid predatory dumping in many countries such as the U.S. and the European Union. Also referred to as "predatory pricing"Investopedia ©
Preference SharesCompany stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a company bankruptcy, preferred stock shareholders have a right to be paid company assets first. Preference shares typically pay a fixed dividend, whereas common stocks do not. And unlike common shareholders, preference share shareholders usually do not have voting rights.
Also referred to as preferred stock.
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Premium1. The total cost of an option. 2. The difference between the higher price paid for a fixed-income security and the security's face amount at issue. 3. The specified amount of payment required periodically by an insurer to provide coverage under a given insurance plan for a defined period of time. The premium is paid by the insured party to the insurer, and primarily compensates the insurer for bearing the risk of a payout should the insurance agreement's coverage be required.Investopedia ©
Prepaid ExpenseA type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received in the near future. While prepaid expenses are initially recorded as assets, their value is expensed over time as the benefit is received onto the income statement, because unlike conventional expenses, the business will receive something of value in the near futureInvestopedia ©
Prepaid Finance ChargeCharges on a loan agreement which are not included as part of the principle amount being borrowed. Prepaid finance charges can include such things as administration fees, loan insurance and discount points. As these expenses are not a part of the "asking amount," they are considered to be prepaid in nature. These expenses typically must be paid by the borrower at the time of loan closing.Investopedia ©
Present Value - PVThe current worth of a future sum of money or stream of cash flows given a specified rate of return. Future cash flows are discounted at the discount rate, and the higher the discount rate, the lower the present value of the future cash flows. Determining the appropriate discount rate is the key to properly valuing future cash flows, whether they be earnings or obligations.
Also referred to as "discounted value".
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Presidential Election Cycle (Theory)A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a new U.S. president. According to this theory, after the first year, the market improves until the cycle begins again with the next presidential election.Investopedia ©
Price CeilingA maximum price a seller is allowed to charge for a product or service. Price ceilings are usually set by law and limit the seller pricing system to ensure fair and reasonable business practices. Price ceilings are usually set for essential expenses; for example, some areas have "rent ceilings" to protect renters from climbing rent prices.Investopedia ©
Price ControlsGovernment mandated minimum or maximum prices that can be charged for specified goods - also known as price floors and price ceilings. Governments sometimes implement price controls when prices on essential items, such as food or oil, are rising rapidly. History has shown that price controls are, at best, effective on a very short-term basis. After that, they have negative side effects such as shortages, rationing, quality deterioration and black markets.Investopedia ©
Price Elasticity Of DemandPrice elasticity of demand is a measure of the relationship between a change in the quantity demanded of a particular good and a change in its price. Price elasticity of demand is a term in economics often used when discussing price sensitivity. The formula for calculating price elasticity of demand is:

Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price

If a small change in price is accompanied by a large change in quantity demanded, the product is said to be elastic (or responsive to price changes). Conversely, a product is inelastic if a large change in price is accompanied by a small amount of change in quantity demanded.
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Price LeadershipWhen a firm that is the leader in its sector determines the price of goods or services. Price leadership can leave the leader's rivals with little choice but to follow its lead and match these prices if they are to hold onto their market share. Alternatively, competitors may also choose to lower their prices in the hope of gaining market share as discounters.Investopedia ©
Price PersistenceThe tendency of a security's cost to continue moving in its present direction. A stock that has been in a strong upward or downward trend for weeks will display a high degree of price persistence. Conversely, a stock that has been trading in a choppy manner for an extended period of time will display a low degree of price persistence.Investopedia ©
Price-Earnings Ratio (P/E Ratio)For example, if a company is currently trading at $43 a share and earnings over the last 12 months were $1.95 per share, the P/E ratio for the stock would be 22.05 ($43/$1.95).
EPS is usually from the last four quarters (trailing P/E), but sometimes it can be taken from the estimates of earnings expected in the next four quarters (projected or forward P/E). A third variation uses the sum of the last two actual quarters and the estimates of the next two quarters.
Also sometimes known as "price multiple" or "earnings multiple."
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Price-Earnings Ratio - P/E RatioThe Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative to its per-share earnings. The price-earnings ratio can be calculated as: Market Value per Share / Earnings per Share For example, suppose that a company is currently trading at $43 a share and its earnings over the last 12 months were $1.95 per share. The P/E ratio for the stock could then be calculated as 43/1.95, or 22.05. EPS is most often derived from the last four quarters. This form of the price-earnings ratio is called trailing P/E, which may be calculated by subtracting a company's share value at the beginning of the 12-month period from its value at the period's end, adjusting for stock splits if there have been any. Sometimes, price-earnings can also be taken from analysts' estimates of earnings expected during the next four quarters. This form of price-earnings is also called projected or forward P/E. A third, less common variation uses the sum of the last two actual quarters and the estimates of the next two quarters. The price-earnings ratio is also sometimes known as the price multiple or the earnings multiple.Investopedia ©
Price-To-Sales Ratio - PSRA valuation ratio that compares a company's stock price to its revenues. The price-to-sales ratio is an indicator of the value placed on each dollar of a company's sales or revenues. It can be calculated either by dividing the company's market capitalization by its total sales over a 12-month period, or on a per-share basis by dividing the stock price by sales per share for a 12-month period. Like all ratios, the price-to-sales ratio is most relevant when used to compare companies in the same sector. A low ratio may indicate possible undervaluation, while a ratio that is significantly above the average may suggest overvaluation. Abbreviated as the P/S ratio or PSR, this ratio is also known as a "sales multiple" or "revenue multiple."Investopedia ©
Price/Earnings To Growth - PEG RatioThe price/earnings to growth ratio (PEG ratio) is a stock's price-to-earnings ratio divided by the growth rate of its earnings for a specified time period. The PEG ratio is used to determine a stock's value while taking the company's earnings growth into account, and is considered to provide a more complete picture than the P/E ratio. While a low P/E ratio may make a stock look like a good buy, factoring in the company's growth rate to get the stock's PEG ratio can tell a different story. The lower the PEG ratio, the more the stock may be undervalued given its earnings performance. The calculation is as follows:
P/E ratio / Annual EPS Growth
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Priced OutThe state of being unable to invest in a particular market or purchase a particular product or service. When someone is priced out of a market, their choices are to simply remain out of the market, to wait for the market to become more affordable, to improve their own financial situation to the point where they can afford to buy, or, if possible, to consider a different market. For example, someone who was priced out of the luxury car market could look at economy cars instead.Investopedia ©
Primary Earnings Per Share (EPS)One of two methods for categorizing shares outstanding. The other method is fully diluted earnings per share (EPS). The term "basic EPS" is more commonly used instead of "primary EPS." Basic EPS is the simpler method to categorize outstanding shares, as it uses the number of shares currently available for trading. To calculate basic EPS, divide net income by the number of shares outstanding.Investopedia ©
Principal-Agent ProblemThe principal-agent problem develops when a principal creates an environment in which an agent's incentives don't align with its own. Generally, the onus is on the principal to create incentives for the agent to ensure they act as the principal wants. This includes everything from financial incentives to avoidance of information asymmetry.Investopedia ©
Prisoner''s DilemmaThe prisoner''s dilemma is a paradox in decision analysis in which two individuals acting in their own best interest pursue a course of action that does not result in the ideal outcome. The typical prisoner''s dilemma is set up in such a way that both parties choose to protect themselves at the expense of the other participant. As a result of following a purely logical thought process to help oneself, both participants find themselves in a worse state than if they had cooperated with each other in the decision-making process.Investopedia ©
Prisoner's DilemmaA paradox in decision analysis in which two individuals acting in their own best interest pursue a course of action that does not result in the ideal outcome. The typical prisoner's dilemma is set up in such a way that both parties choose to protect themselves at the expense of the other participant. As a result of following a purely logical thought process to help oneself, both participants find themselves in a worse state than if they had cooperated with each other in the decision-making process. Investopedia ©
Private EquityEquity capital that is not quoted on a public exchange. Private equity consists of investors and funds that make investments directly into private companies or conduct buyouts of public companies that result in a delisting of public equity. Capital for private equity is raised from retail and institutional investors, and can be used to fund new technologies, expand working capital within an owned company, make acquisitions, or to strengthen a balance sheet. The majority of private equity consists of institutional investors and accredited investors who can commit large sums of money for long periods of time. Private equity investments often demand long holding periods to allow for a turnaround of a distressed company or a liquidity event such as an IPO or sale to a public company.Investopedia ©
Private Mortgage Insurance - PMIA policy provided by private mortgage insurers to protect lenders against loss if a borrower defaults. Most lenders require PMI for loans with loan-to-value (LTV) percentages in excess of 80%. This allows the borrower to make a smaller down payment of as low as 3%, instead of about 20%, and usually requires an initial premium payment and possibly an additional monthly fee depending on the loan's structure.Investopedia ©
Private PlacementThe sale of securities to a relatively small number of select investors as a way of raising capital. Investors involved in private placements are usually large banks, mutual funds, insurance companies and pension funds. Private placement is the opposite of a public issue, in which securities are made available for sale on the open market.Investopedia ©
Private SectorThe part of the economy that is not state controlled, and is run by individuals and companies for profit. The private sector encompasses all for-profit businesses that are not owned or operated by the government. Companies and corporations that are government run are part of what is known as the public sector, while charities and other nonprofit organizations are part of the voluntary sector.Investopedia ©
Pro FormaPro forma, a Latin term, literally means "for the sake of form" or "as a matter of form." In the world of investing, pro forma refers to a method by which financial results are calculated. This method of calculation places emphasis on present or projected figures.

Financial statements that utilize the pro forma method of calculation are often designed to draw focus to specific figures when an earnings announcement is issued by a company and made available to the public, particularly potential investors. These pro forma statements may also be designed to indicate a change proposed by a company, such as an acquisition or a merger. Investors should be aware a company's pro forma financial statements may hold figures or calculations that are not in compliance with generally accepted accounting principles (GAAP). In some instances, pro forma figures are vastly different than those generated with GAAP.
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ProFormaA Latin term meaning "for the sake of form". In the investing world, it describes a method of calculating financial results in order to emphasize either current or projected figures.Investopedia ©
ProcyclicA condition of positive correlation between the value of a good, a service or an economic indicator and the overall state of the economy. In other words, the value of the good, service or indicator tends to move in the same direction as the economy, growing when the economy grows and declining when the economy declines.Investopedia ©
Producer SurplusAn economic measure of the difference between the amount that a producer of a good receives and the minimum amount that he or she would be willing to accept for the good. The difference, or surplus amount, is the benefit that the producer receives for selling the good in the market.Investopedia ©
Product LineA group of related products manufactured by a single company. For example, a cosmetic company's makeup product line might include foundation, concealer, powder, blush, eyeliner, eyeshadow, mascara and lipstick products that are all closely related. The same company might also offer more than one product line. The cosmetic company might have a special product line geared toward teenagers and another line geared toward women older than 60, in addition to its regular product line, that can be used by women of any age.Investopedia ©
Product RecallThe process of retrieving defective goods from consumers and providing those consumers with compensation. Recalls often occur as a result of safety concerns over a manufacturing defect in a product that may harm its user.Investopedia ©
Production Possibility Frontier - PPFThe production possibility frontier (PPF) is a curve depicting all maximum output possibilities for two goods, given a set of inputs consisting of resources and other factors. The PPF assumes that all inputs are used efficiently.

Factors such as labor, capital and technology, among others, will affect the resources available, which will dictate where the production possibility frontier lies. The PPF is also known as the production possibility curve or the transformation curve.
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Professional Risk Manager - PRA professional designation awarded by the Professional Risk Managers International Association to financial risk managers who pass four exams of one to two hours each. The four exams cover financial theory, financial instruments and markets, mathematical foundations of risk measurement, risk management practices and case studies, best practices, conduct, ethics and bylaws. Successful applicants earn the right to use the PRM designation with their names, which can improve job opportunities, professional reputation and payInvestopedia ©
Profit MarginProfit margin is part of a category of profitability ratios calculated as net income divided by revenue, or net profits divided by sales. Net income or net profit may be determined by subtracting all of a company's expenses, including operating costs, material costs (including raw materials) and tax costs, from its total revenue. Profit margins are expressed as a percentage and, in effect, measure how much out of every dollar of sales a company actually keeps in earnings. A 20% profit margin, then, means the company has a net income of $0.20 for each dollar of total revenue earned. While there are a few different kinds of profit margins, including "gross profit margin," "operating margin," (or "operating profit margin") "pretax profit margin" and "net margin" (or "net profit margin") the term "profit margin" is also often used simply to refer to net margin. Other types of profit margins have different ways of calculating net income so as to break down a company's earnings in different ways and for different purposes. Profit margin is similar but distinct from the term "profit percentage," which divides net profit on sales by the cost of goods sold to help determine the amount of profit a company makes on selling its goods, rather than the amount of profit a company is making relative to its total expenditures.Investopedia ©
Profit and Loss StatementA profit and loss statement (P&L) is a financial statement that summarizes the revenues, costs and expenses incurred during a specific period of time, usually a fiscal quarter or year. These records provide information about a company's ability – or lack thereof – to generate profit by increasing revenue, reducing costs, or both. The P&L statement is also referred to as "statement of profit and loss", "income statement," "statement of operations," "statement of financial results," and "income and expense statement."Investopedia ©
Profitability IndexThe profitability index is an index that attempts to identify the relationship between the costs and benefits of a proposed project through the use of a ratio calculated as: Profitability Index = PV of future cash flows / Initial Investment A ratio of 1.0 is logically the lowest acceptable measure on the index, as any value lower than 1.0 would indicate that the project's PV is less than the initial investment. As values on the profitability index increase, so does the financial attractiveness of the proposed project.Investopedia ©
Profitability RatiosA class of financial metrics that are used to assess a business's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time. For most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a previous period is indicative that the company is doing well.Investopedia ©
Proof of WorkProof of work describes a system that requires a not-insignificant but feasible amount of effort in order to deter frivolous or malicious uses of computing power, such as sending spam emails or launching denial of service attacks. The concept was adapted to money by Hal Finney in 2004 through the idea of "reusable proof of work." Following its introduction in 2009, bitcoin became the first widely adopted application of Finney's idea (Finney was also the recipient of the first bitcoin transaction). Proof of work forms the basis of most, though not all, other cryptocurrencies as well.Investopedia ©
Prop ShopA proprietary trading group that usually trades electronically at a physical facility. Prop shops supply their traders with the education and capital resources to engage in a large number of deals each day.Investopedia ©
Property InsuranceA policy that provides financial reimbursement to the owner or renter of a structure and its contents in the event of damage or theft. Property insurance can include homeowners insurance, renters insurance, flood insurance and earthquake insurance. Personal property is generally covered by a homeowners or renters policy unless it is of particularly high value, in which case it can usually be covered by purchasing an addition to the policy called a "rider". If a claim is filed, the property insurance policy will either reimburse the policyholder for the actual value of the damage or the replacement cost to remedy the damage.Investopedia ©
ProspectusA formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details about an investment offering for sale to the public. A prospectus should contain the facts that an investor needs to make an informed investment decision.
Also known as an "offer document."
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ProtectionismProtectionism refers to government actions and policies that restrict or restrain international trade, often done with the intent of protecting local businesses and jobs from foreign competition. Typical methods of protectionism are tariffs and quotas on imports and subsidies or tax cuts granted to local businesses. The primary objective of protectionism is to make local businesses or industries more competitive by increasing the price or restricting the quantity of imports entering the country.Investopedia ©
Prudent Expert ActA measure contained in section 404(a)(1)(B) of the Employee Retirement Income Security Act (ERISA). The prudent expert act requires the fiduciary of a defined contribution retirement plan to use "care, skill, prudence and diligence" and to act in the same way that someone "familiar with such matters" would act. The "familiar with such matters" language has been interpreted to mean "expert." This language creates an important distinction from the earlier prudent person guideline in that it holds fiduciaries to a stricter standard. This principle is also called the prudent expert rule or prudent expert standard.Investopedia ©
Prudent Investor ActThis U.S. Act sets the standard of fiduciary duty for those entrusted with the responsibility of managing others' money, such as trustees and estate administrators. It requires that a fiduciary weigh risk versus reward when making investment decisions, taking into account the income that may be generated by the investment as well as the probable safety of the invested capital.Investopedia ©
Pull-Through ProductionA method used in just-in-time manufacturing processes to order production inputs and schedule manufacturing at the time a customer places an order. By basing purchase orders and manufacturing schedules on actual rather than anticipated orders, pull-through production helps control inventory costs. Pull-through production also facilitates product customization. Since products are made as they are ordered, it may be possible to cost-effectively tailor an order to a customer's specific needs, instead of only offering a generic product. Investopedia ©
Pulling In Their HornsA collective shift by investors towards a less bullish stance after a substantial run-up in prices of financial assets. Since it involves a lesser degree of buying by investors, or even active selling by them, asset prices generally decline as investors pull in their horns in favor of a more bearish stance.Investopedia ©
Purchasing PowerPurchasing power is the value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing power is important because, all else being equal, inflation decreases the amount of goods or services you would be able to purchase. In investment terms, purchasing power is the dollar amount of credit available to a customer to buy additional securities against the existing marginable securities in the brokerage account.Investopedia ©
Put On A CallOne of the four types of compound options, this is a put option on an underlying call option. The buyer of a put on a call has the right but not the obligation to sell the underlying call option on the expiration date. This type of option is used when leverage is desired, and the trader is bearish on the underlying asset. The value of a put on a call changes in inverse proportion to the price of the underlying asset, i.e. it decreases as the asset price increases, and increases as the asset price decreases. Also known as a split-fee option.Investopedia ©
Put OptionAn option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time. This is the opposite of a call option, which gives the holder the right to buy shares.Investopedia ©
Pyramid SchemeA pyramid scheme is an illegal investment scam based on a hierarchical setup. New recruits make up the base of the pyramid and provide the funding, or so-called returns, the earlier investors/recruits above them receive. A pyramid scheme does not involve the selling of products. Rather, it relies on the constant inflow of money from additional investors that works its way to the top of the pyramid.Investopedia ©
QQQQFormerly the QQQ, this is the ticker symbol for the Nasdaq 100 Trust, which is an ETF that trades on the Nasdaq. This security offers broad exposure to the tech sector by tracking the Nasdaq 100 Index, which consists of the 100 largest and most actively traded non-financial stocks on the Nasdaq. It is also known as "cubes" or the "quadruple-Qs".Investopedia ©
Quadruple WitchingThe expiration date of various stock index futures, stock index options, stock options and single stock futures. All stock options contracts expire on the third Friday of each month and once every quarter - on the third Friday of March, June, September and December - all four asset classes expire on the same day. Because futures and options investors must close out of their positions on those days, they often witness increased trading volume. Investopedia ©
Qualified Retirement PlanA type of retirement plan established by an employer for the benefit of the company's employees. Qualified retirement plans give employers a tax break for the contributions they make for their employees. Qualified plans that allow employees to defer a portion of their salaries into the plan also reduce employees' present income-tax liability by reducing taxable income. Qualified retirement plans help employers attract and retain good employees.Investopedia ©
Quant FundAn investment fund that selects securities based on quantitative analysis. In a quant fund, the managers build computer-based models to determine whether an investment is attractive. In a pure "quant shop" the final decision to buy or sell is made by the model; however, there is a middle ground where the fund manager will use human judgment in addition to a quantitative model.Investopedia ©
Quantitative EasingA government monetary policy occasionally used to increase the money supply by buying government securities or other securities from the market. Quantitative easing increases the money supply by flooding financial institutions with capital, in an effort to promote increased lending and liquidity.Investopedia ©
Quantitative TradingQuantitative trading consists of trading strategies based on quantitative analysis, which rely on mathematical computations and number crunching to identify trading opportunities. As quantitative trading is generally used by financial institutions and hedge funds, the transactions are usually large in size and may involve the purchase and sale of hundreds of thousands of shares and other securities. However, quantitative trading is becoming more commonly used by individual investors.Investopedia ©
Quanto SwapA swap with varying combinations of interest rate, currency and equity swap features, where payments are based on the movement of two different countries' interest rates. This is also referred to as a differential or "diff" swap. Investopedia ©
Quarter - Q1, Q2, Q3, Q4A quarter (Q1, Q2, Q3, Q4) is a three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends. A quarter refers to one-fourth of a year and is typically expressed as "Q." The four quarters that make up the year are: January, February and March (Q1); April, May and June (Q2); July, August and September (Q3); and October, November and December (Q4). A quarter is often shown with its relevant year, as in Q1 2015 or Q1/15, which represents the first quarter of the year 2015.Investopedia ©
Quasi ContractA legal agreement created by the courts between two parties who did not have a previous obligation to each other. A normal contract requires two parties to consent to mutually agreeable terms. Under a quasi contract, neither party is originally intended to create an agreement. Instead, an arrangement is imposed by a judge to rectify an occurrence of unjust enrichment.Investopedia ©
Quasi-ReorganizationA relatively obscure provision under U.S. GAAP which provides that under certain circumstances, a firm may eliminate a deficit in its retained earnings account by restating assets, liabilities and equity in a manner similar to a bankruptcy. A firm's stockholders must agree to allow the accounting change, which essentially resets the firm's books as though a new company had incurred the assets and liabilities of the old firm.Investopedia ©
Quick RatioThe quick ratio is an indicator of a company's short-term liquidity. The quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets. For this reason, the ratio excludes inventories from current assets, and is calculated as follows:
Quick ratio = (current assets - inventories) / current liabilities, or
= (cash and equivalents + marketable securities + accounts receivable) / current liabilities
The quick ratio measures the dollar amount of liquid assets available for each dollar of current liabilities. Thus, a quick ratio of 1.5 means that a company has $1.50 of liquid assets available to cover each $1 of current liabilities. The higher the quick ratio, the better the company's liquidity position. Also known as the "acid-test ratio" or "quick assets ratio."
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Quote StuffingA tactic of quickly entering and withdrawing large orders in an attempt to flood the market with quotes that competitors have to process, thus causing them to lose their competitive edge in high frequency trading. This tactic is made possible by high-frequency trading programs that can execute market actions with incredible speed. Only market makers and other large players in the market are capable of executing these tactics, since they require a direct link to the exchange in order to be effective.Investopedia ©
RMARelationship Management Application (RMA) is a service provided by SWIFT to manage the business relationships between financial institutions. RMA operates by managing which message types are permitted to be exchanged between users of a SWIFT service. The receiver specifies which message types are permitted, and sends this permission data to the sender; the sender checks the message type against the permission data before sending a message to the receiver. RMA uses a SWIFTNet InterAct Store and Forward service to exchange the permission data between financial institutionsWikipedia ©
RacketeeringRacketeering refers to criminal activity that is performed to benefit an organization such as a crime syndicate. Examples of racketeering activity include extortion, money laundering, loan sharking, obstruction of justice and bribery. The Racketeer Influenced and Corrupt Organizations (RICO) Act became U.S. law in 1970, permitting law enforcement to charge individuals or groups with racketeering.Investopedia ©
Radner EquilibriumA theory suggesting that if economic decision makers have unlimited computational capacity for choice among strategies, then even in the face of uncertainty about the economic environment, an optimal allocation of resources based on competitive equilibrium can be achieved. Radner Equilibrium was introduced by American economist Roy Radner in 1968, and explores the condition of competitive equilibrium under uncertainty.Investopedia ©
RallyA period of sustained increases in the prices of stocks, bonds or indexes. This type of price movement can happen during either a bull or a bear market, when it is known as either a bull market rally or a bear market rally, respectively. However, a rally will generally follow a period of flat or declining prices.Investopedia ©
Ratchet EffectRatchet effect refers to escalations in production or price that tend to self-perpetuate. Once productive capacities have been added or prices have been raised, it is difficult to reverse these changes, because people tend to be influenced by the previous best or highest level of production.Investopedia ©
Ratio SpreadAn options strategy in which an investor simultaneously holds an unequal number of long and short positions. A commonly used ratio is two short options for every option purchased.Investopedia ©
Re-frackingRe-fracking is the practice of returning to older shale oil and gas wells that had been fracked in the recent past to capitalize on newer, more effective extraction technology. Re-fracking can be effective on especially tight deposits -- where the shale produces low yields -- to expand their productivity and extend their life.Investopedia ©
Readvanceable MortgageA mortgage feature that allows the borrower to re-borrow the principal amount of the original mortgage that has been paid down. A readvanceable mortgage consists of a mortgage and a Line of Credit (LoC) packaged together. With every monthly mortgage payment made by the borrower, the mortgage principal is reduced by a certain amount; the funds available to the borrower under the LoC go up by the same amount and are generally re-borrowed automatically. While the borrower's net debt remains the same, the interest payments on the LoC are tax-deductible in Canada if the borrowed amount is used for investment purposes. The readvanceable mortgage forms part of a tax strategy called the "Smith Maneuver" that is designed to make interest payments on Canadian home mortgages tax-deductible.Investopedia ©
Real Bills DoctrineAn economic theory that surmises that, when central banks loan money only for "productive" projects, the loans would not be inflationary. The Federal Reserve Act of 1913 was based in part on the Real Bills Doctrine, which asserted that the creation of money would automatically be directed to real goods and services if the central bank and banks provided credit only to short-term, self-liquidating loans. The Real Bills Doctrine has been completely discredited since 1945 by most economists.Investopedia ©
Real Estate Investment Trust - REITA security that sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages. REITs receive special tax considerations and typically offer investors high yields, as well as a highly liquid method of investing in real estate. Equity REITs: Equity REITs invest in and own properties (thus responsible for the equity or value of their real estate assets). Their revenues come principally from their properties' rents. Mortgage REITs: Mortgage REITs deal in investment and ownership of property mortgages. These REITs loan money for mortgages to owners of real estate, or purchase existing mortgages or mortgage-backed securities. Their revenues are generated primarily by the interest that they earn on the mortgage loans. Hybrid REITs: Hybrid REITs combine the investment strategies of equity REITs and mortgage REITs by investing in both properties and mortgages.Investopedia ©
Real Rate Of ReturnA real rate of return is the annual percentage return realized on an investment, which is adjusted for changes in prices due to inflation or other external effects. This method expresses the nominal rate of return in real terms, which keeps the purchasing power of a given level of capital constant over time.Investopedia ©
Recapture ClauseA provision usually found in percentage leases, especially in shopping-center leases, giving the landlord the right to terminate the lease - thereby recapturing the premises - in the event the tenant does not maintain a specified minimum amount of business. For example, a poorly performing retail shop in a shopping center can damage the shopping center's image and therefore the bottom line of all tenants and the landlord.Investopedia ©
Recast TriggerA clause in a loan contract that causes an unscheduled recasting of the loan's remaining amortization schedule if and when certain conditions are met. A recast trigger is most often associated with negative amortization mortgages, which typically have a trigger that recasts the remaining amortization schedule when the mortgage's outstanding principal balance reaches a certain percentage - usually 110-125% of the mortgage's original principal balance.Investopedia ©
Receivables Turnover RatioAn accounting measure used to quantify a firm's effectiveness in extending credit and in collecting debts on that credit. The receivables turnover ratio is an activity ratio measuring how efficiently a firm uses its assets. Receivables turnover ratio can be calculated by dividing the net value of credit sales during a given period by the average accounts receivable during the same period. Average accounts receivable can be calculated by adding the value of accounts receivable at the beginning of the desired period to their value at the end of the period and dividing the sum by two. The receivables turnover ratio is most often calculated on an annual basis, though this can be broken down to find quarterly or monthly accounts receivable turnover as well.Investopedia ©
ReceivershipA type of corporate bankruptcy in which a receiver is appointed by bankruptcy courts or creditors to run the company. The receiver may be appointed by a bankruptcy court, as a matter of private proceedings, or by a governing body. In most cases the receiver is given ultimate decision-making powers and has full discretion in deciding how the received assets will be managed.Investopedia ©
RecessionA significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, employment, real income and wholesale-retail trade. The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country's gross domestic product (GDP); although the National Bureau of Economic Research (NBER) does not necessarily need to see this occur to call a recession.Investopedia ©
Recession ProofA term used to describe an asset, company, industry or other entity that is believed to be economically resistant to the outcomes of a recession. Oftentimes, recession-proof stocks are added to many investment portfolios during times of economic decline, which may be the onset of a recession. Securities that are believed to be recession proof often have a negative beta values, which would indicate an inverse relationship to the greater market.Investopedia ©
ReclamationThe right to reclaim property in the event of non-payment, fraud or other irregularities. Reclamation in the financial context generally refers to the right to demand a repayment of monies paid if there has been a bad delivery of a stock or security. It may also refer to the right of the seller to reclaim the property and assume ownership if the buyer does not pay or fails to meet the terms of the purchase agreement. Reclamation also refers to the process of reconverting previously unusable lands such as closed mine sites or defunct industrial areas to productive uses.Investopedia ©
Record DateThe record date is the cut-off date established by a company in order to determine which shareholders are eligible to receive a dividend or distribution. The determination of a record date is required to ascertain who the company's shareholders are as of that date, since the shareholders of an actively traded stock are continually changing. The shareholders of record as of the record date will be entitled to receive the dividend or distribution declared by the company. Also known as the date of record.Investopedia ©
RecouplingWhen returns on asset classes revert back to their historical or traditional patterns of correlation. This is in contrast to decoupling, which occurs when asset classes break away from their traditional correlations. Recoupling occurs after a period in which the asset classes have been generating a return that shows little correlation.Investopedia ©
Recourse LoansRecourse loans are loans that allow the lender to come after you in case you default. You can contrast recourse loans with non-recourse loans, which create more risk for lenders. For better understanding, please check other definitions under "Non-Recourse Loans".About.com ©
RedemptionThe return of an investor's principal in a fixed income security, such as a preferred stock or bond; or the sale of units in a mutual fund. A redemption occurs, in a fixed income security at par or at a premium price, upon maturity or cancellation by the issuer. Redemptions occur with mutual funds, at the choice of the investor, however limitations by the issuer may exist, such as minimum holding periods.Investopedia ©
RedliningThe unethical practice whereby financial institutions make it extremely difficult or impossible for residents of poor inner-city neighborhoods to borrow money, gain approval for a mortgage, take out insurance or gain access to other financial services because of a history of high default rates. In this case, the rejection does not take the individual's qualifications and creditworthiness into account.Investopedia ©
Regulation T - Reg TRegulation T is a collection of provisions established by the Federal Reserve Board that govern investors' cash accounts and the amount of credit that brokerage firms and dealers may extend to customers for the purchase of securities. According to Regulation T, an investor may borrow up to 50% of the purchase price of securities that can be bought using a loan from a broker or dealer. The remaining 50% of the price must be funded with cash.Investopedia ©
ReinsuranceThe practice of insurers transferring portions of risk portfolios to other parties by some form of agreement in order to reduce the likelihood of having to pay a large obligation resulting from an insurance claim. The intent of reinsurance is for an insurance company to reduce the risks associated with underwritten policies by spreading risks across alternative institutions. Also known as "insurance for insurers" or "stop-loss insurance".Investopedia ©
Relationship TestOne of several tests that a person must pass in order to be claimed as a dependent on someone else's tax return. The relationship test has several criteria, and as long as any one of them is met, the person in question is eligible to be claimed as a dependent by another. The relationship test mandates that the person in question must be either a lineal descendant or ancestor, sibling, in-law, niece, nephew, aunt, uncle or anyone other than the taxpayer's spouse who lived in the taxpayer's household during the entire year. There is a separate relationship test to see if someone is a qualifying child. Subject: IRS Investopedia ©
Relative Strength Index - RSIA technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset. It is calculated using the following formula:

RSI = 100 - 100/(1 + RS*)

* - where RS = Average of x days' up closes / Average of x days' down closes.
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Relief RallyA relief rally is an increase in market prices that occurs because expected negative news does not end up materializing, or is less severe than anticipated. Poor economic data, corporate earnings or political outcomes are all events that may be "priced in to" a market. If these data or events actually turn out to be less poor, or even positive, a relief rally can take place. Relief rallies can occur in many asset classes, including the stock market, bond market, commodities such as oil, and others.Investopedia ©
RemittanceA remittance most commonly refers to the funds an expatriate sends to their country of origin via wire, mail, or online transfer. These peer to peer transfers of funds across borders are economically significant for many countries that receive them.Investopedia ©
Rent-A-CrowdA group of people rented to make a business appear busy. Rent-a-crowds are sometimes employed on the grand openings of a new business to give the appearance that something is attracting people to the store, which then potentially attracts real customers, who come to see why the crowd has gathered.Investopedia ©
RepatriationRepatriation, in financial terms, is the process of converting a foreign currency into the currency of one's own country. The dollar amount resulting from the repatriation of funds depends on the exchange rate between the two currencies at the settlement time of the conversion. For example, Americans returning from the United Kingdom repatriate their currency by converting British pounds back to U.S. dollars.Investopedia ©
Repeat-Sales MethodA way of calculating changes in the sales price of the same piece of real estate over time. Housing market analysts use repeat sales to estimate changes in home prices over a period of months or years. Various housing price indexes use the repeat-sales method to provide information about the housing market to home buyers and sellers, housing market investors, and those working in the housing and housing finance industries.Investopedia ©
Repo 105An accounting trick in which a company classifies a short-term loan as a sale and subsequently uses the cash proceeds from said sale to reduce its liabilities. In the repo market, companies are able to gain access to the excess funds of other firms for short periods in exchange for collateral (usually a bond). The company that borrows the funds will promise to pay back the short-term loan with a small amount of interest and the collateral typically never changes hands. This is what allows firms to record the incoming cash as a sale; the collateral is assumed to have been "sold off" and bought back later.Investopedia ©
RepudiationDisputing the validity of a contract and refusing to honor its terms. In investing, repudiation is most relevant in fixed income securities, particularly sovereign debt. Fixed income instruments are fundamentally contracts where the borrower lends a certain amount of principal in return for payments of interest and principal on a preset schedule. Repudiation occurs if the borrower refuses to honor this contract and stops making the agreed upon payments.Investopedia ©
Repurchase Agreement - RepoA form of short-term borrowing for dealers in government securities. The dealer sells the government securities to investors, usually on an overnight basis, and buys them back the following day. For the party selling the security (and agreeing to repurchase it in the future) it is a repo; for the party on the other end of the transaction, (buying the security and agreeing to sell in the future) it is a reverse repurchase agreement.Investopedia ©
Resale of Rule 144 Securities There are five conditions that must be met for restricted, unregistered and control securities to be sold or resold:
First, the prescribed holding period must be met. For a public company, the holding period is six months, and it begins from the date a holder purchased and fully paid for securities. For a company that does not have to make filings with the SEC, the holding period is one year. The holding period requirements apply primarily to restricted securities, while resale of control securities is subject to the other requirements under Rule 144.
Second, there must be adequate current public information available to investors about a company, including historic financial statements, information about officers and directors, and a business description.
Third, if a selling party is an affiliate of a company, he cannot resell more than 1% of the total outstanding shares during any three-month period. If a company's stock is listed on a stock exchange, only the greater of 1% of total outstanding shares, or the average of the previous four-week trading volume. can be sold. For over-the-counter stocks, only the 1% rule applies.
Fourth, all of the normal trading conditions that apply to any trade must be met. In particular, brokers cannot solicit buy orders, and they are not allowed to receive commissions in excess of their normal rates.
Fifth, the SEC requires an affiliated seller to file a proposed sale notice, if the sale value exceeds $50,000 during any three-month period, or if there are more than 5,000 shares proposed for sale.
If the seller is not associated with the company that issued the shares and has owned the securities for more than one year, the seller does not have to meet any of the five conditions and can sell the securities without restrictions. Also, non-affiliated parties may sell their securities, if they held them for less than a year, but greater than six months, provided the current public information requirement is met.
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Research AnalystA person who prepares investigative reports on equity securities. The research conducted by the research analyst is in an effort to inquire, examine, find or revise facts, principles and theories. The report that this analyst prepares could include an analysis of equity securities of companies or industries. If the research analyst is involved with an investment bank or a securities firm who is controlled by a member organization of the Financial Industry Regulatory Authority (FINRA), he may be required to take certain exam(s).Investopedia ©
Research ReportA document prepared by an analyst or strategist who is a part of the investment research team in a stock brokerage or investment bank. A research report may focus on a specific stock or industry sector, or a currency, commodity or fixed-income instrument, or even on a geographic region or country. Research reports generally, but not always, have "actionable" recommendations (i.e. investment ideas that investors can act upon).Investopedia ©
Reserve CurrencyA foreign currency held by central banks and other major financial institutions as a means to pay off international debt obligations, or to influence their domestic exchange rate. A large percentage of commodities, such as gold and oil, are usually priced in the reserve currency, causing other countries to hold this currency to pay for these goods. Holding currency reserves, therefore, minimizes exchange rate risk, as the purchasing nation will not have to exchange their currency for the current reserve currency in order to make the purchase.Investopedia ©
Reserve RequirementsThe reserve requirement is the amount of money that a depository institution is obligated to keep in Federal Reserve vaults, in order to cover its liabilities against customer deposits. The Board of Governors decides the ratio of reserves that must be held against liabilities that fall under reserve regulations. Thus, the actual dollar amount of reserves held in the vault depends on the amount of the depository institution's liabilities. Liabilities that must have reserves against them include net transactions accounts, non-personal time deposits and euro-currency liabilities; however, as of Dec. 1990, the latter two have had reserve ratio requirements of zero (meaning no reserves have to be held for these types of accounts).Investopedia ©
Reset DateThe point in time when the initial fixed interest rate on an adjustable rate mortgage changes to an adjustable rate. This date is commonly one to five years from the start date of the mortgage. After the initial reset date, the interest rate will continue to reset as often as once a month.Investopedia ©
Resident AlienA foreigner who is a permanent resident of the country in which he or she resides but does not have citizenship. To fall under this classification in the U.S., you need to either currently have a green card or have had one in the last calendar year. You also fall under the U.S. classification of resident alien if you have been in the U.S. for more than 31 days during the current year along with having been in the U.S. for at least 183 days over a three-year period that includes the current year.Investopedia ©
Resource CurseA paradoxical situation in which countries with an abundance of non-renewable resources experience stagnant growth or even economic contraction. The resource curse occurs as a country begins to focus all of its energies on a single industry, such as mining, and neglects other major sectors. As a result, the nation becomes overly dependent on the price of commodities, and overall gross domestic product becomes extremely volatile. Additionally, government corruption often results when proper resource rights and an income distribution framework is not established in the society, resulting in unfair regulation of the industry. The resource curse is most often witnessed in emerging markets following a major natural resource discovery. Also known as the paradox of plenty. Investopedia ©
Respondeat SuperiorA legal concept where the company and the company's management are held responsible for the actions of employees. The phrase "respondeat superior" is Latin for "let the superior respond." Respondeat superior prevents employers from profiting from the illegal acts of their employees while avoiding the legal repercussions. For respondeat superior to apply to a legal case, an employee of the company must have committed the crime for the benefit of the company - not for his or her own benefit.Investopedia ©
Restricted Stock UnitCompensation offered by an employer to an employee in the form of company stock. The employee does not receive the stock immediately, but instead receives it according to a vesting plan and distribution schedule after achieving required performance milestones or upon remaining with the employer for a particular length of time. The restricted stock units (RSU) are assigned a fair market value when they vest. Upon vesting, they are considered income, and a portion of the shares are withheld to pay income taxes. The employee receives the remaining shares and can sell them at any time.Investopedia ©
Retail SalesAn aggregated measure of the sales of retail goods over a stated time period, typically based on a data sampling that is extrapolated to model an entire country. In the U.S., the retail sales report is a monthly economic indicator compiled and released by the Census Bureau and the Department of Commerce. The report covers the previous month, and is released about two weeks after the month-end. Comparisons are made against historical data; year-over-year comparisons are the most-reported metric because they account for the seasonality of consumer-based retail.Investopedia ©
Retained EarningsRetained earnings refer to the percentage of net earnings not paid out as dividends, but retained by the company to be reinvested in its core business, or to pay debt. It is recorded under shareholders' equity on the balance sheet. The formula calculates retained earnings by adding net income to, or subtracting any net losses from, beginning retained earnings, and subtracting any dividends paid to shareholders.Investopedia ©
Retirement PlannerA practicing professional who helps individuals prepare a retirement plan. A retirement planner identifies sources of income, estimates expenses, implements a savings program and helps manage assets. Estimating future cash flows and assets is also a central part of a retirement planner's work. He or she may use a web-based calculator or software program that will predict future cash flows and assets based on the data entered.Investopedia ©
Return On Capital Employed (ROCE)A financial ratio that measures a company's profitability and the efficiency with which its capital is employed. Return on Capital Employed (ROCE) is calculated as: ROCE = Earnings Before Interest and Tax (EBIT) / Capital Employed "Capital Employed" as shown in the denominator is the sum of shareholders' equity and debt liabilities; it can be simplified as (Total Assets -- Current Liabilities). Instead of using capital employed at an arbitrary point in time, analysts and investors often calculate ROCE based on "Average Capital Employed," which takes the average of opening and closing capital employed for the time period. A higher ROCE indicates more efficient use of capital. ROCE should be higher than the company's capital cost; otherwise it indicates that the company is not employing its capital effectively and is not generating shareholder value.Investopedia ©
Return On Invested Capital - ROICA calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. Return on invested capital gives a sense of how well a company is using its money to generate returns. Comparing a company's return on capital (ROIC) with its weighted average cost of capital (WACC) reveals whether invested capital is being used effectively.Investopedia ©
Return On Investment - ROIA performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. ROI measures the amount of return on an investment relative to the investment's cost. To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment, and the result is expressed as a percentage or a ratio.Investopedia ©
Return on Market Value of Equity - ROMEReturn on market value of equity (ROME) is a comparative measure typically used by analysts to identify companies that generate positive returns on book value and trade at otherwise low valuations. The market value of equity is generally accepted to be synonymous with a company's market capitalization, and the return on market value of equity is effectively the profit yield on a company's stock price.Investopedia ©
RevenueThe amount of money that a company actually receives during a specific period, including discounts and deductions for returned merchandise. It is the "top line" or "gross income" figure from which costs are subtracted to determine net income. Revenue is calculated by multiplying the price at which goods or services are sold by the number of units or amount sold. Revenue is also known as "REVs."Investopedia ©
Revenue Ton MileA single ton of goods that are transported for one mile. Revenue ton miles are used to determine the total amount of freight that is shipped by a transportation company. Railroads determine revenue ton miles by multiplying the weight of paid tonnage by the total number of miles that has been transported.Investopedia ©
Reverse Convertible Note - RCNA synthetic instrument that shares characteristics with both bonds and stocks. Reverse convertible notes typically provide high coupon payments and final payoffs that depend on the performance of an underlying stock.Investopedia ©
Reverse Gold ETFExchange traded funds that are designed to trade in a direction that is diametrically opposite to gold bullion. Reverse gold ETFs, or inverse gold ETFs as they are better known, are generally used by investors to hedge against a downward move in gold prices, or by speculators to execute a bearish trade in gold. They typically deliver the inverse of the daily return of physical gold; leveraged inverse gold ETFs deliver a multiple (2x or 3x) of the daily inverse return of gold.Investopedia ©
Reverse HedgeA hedge involving a short position in a convertible security and a long position in its underlying asset. The Chinese hedge looks to capitalize on mispriced conversion factors. The trader will profit when the underlying asset depreciates, diminishing the premium on the convertible security. Also known as a "Chinese Hedge".Investopedia ©
Reverse Morris TrustA tax-avoidance strategy, in which a corporation wanting to dispose of unwanted assets can do so while avoiding taxes on any gains from those assets. The Reverse Morris Trust starts with a parent company looking to sell assets to a smaller external company. The parent company then creates a subsidiary, and that subsidiary and a smaller external company merge and create an unrelated company. The unrelated company then issues shares to the shareholders of the original parent company. If those shareholders control over 50% of the voting right and economic value in the unrelated company, the Reverse Morris Trust is complete. The parent company has effectively transferred the assets, tax-free, to the smaller external company.Investopedia ©
Reverse MortgageA type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage (principal or interest) is required until the borrower dies or the home is sold. After accounting for the initial mortgage amount, the rate at which interest accrues, the length of the loan and rate of home price appreciation, the transaction is structured so that the loan amount will not exceed the value of the home over the life of the loan. Often, the lender will require that there can be no other liens against the home. Any existing liens must be paid off with the proceeds of the reverse mortgage.Investopedia ©
Right of EgressThe legal right to exit or leave a property. Right of egress is usually used in conjunction with the right of ingress, which means the legal right to enter a property. The right of egress is most commonly found in real estate law. The rights of ingress and egress apply regardless of the type of property - owner-occupied, rental or land. They are generally used in the context of an easement, which is the right to use someone's property for a specific purpose. For example, ingress and egress easements may govern the use of a shared driveway or the use of a private road to reach one's property.Investopedia ©
Risk ManagementRisk management is the process of identification, analysis and either acceptance or mitigation of uncertainty in investment decision-making. Essentially, risk management occurs anytime an investor or fund manager analyzes and attempts to quantify the potential for losses in an investment and then takes the appropriate action (or inaction) given their investment objectives and risk tolerance. Inadequate risk management can result in severe consequences for companies as well as individuals. For example, the recession that began in 2008 was largely caused by the loose credit risk management of financial firms.Investopedia ©
Risk ParityA portfolio allocation strategy based on targeting risk levels across the various components of an investment portfolio. The risk parity approach to asset allocation allows investors to target specific levels of risk and to divide that risk equally across the entire investment portfolio in order to achieve optimal portfolio diversification for each individual investor. Risk parity strategies are in contrast to traditional allocation methods that are based on holding a certain percentage of investment classes, such as 60% stocks and 40% bonds, within one's investment portfolio.Investopedia ©
Risk PremiumThe return in excess of the risk-free rate of return that an investment is expected to yield. An asset's risk premium is a form of compensation for investors who tolerate the extra risk - compared to that of a risk-free asset - in a given investment.Investopedia ©
Risk-Adjusted ReturnRisk-adjusted return refines an investment's return by measuring how much risk is involved in producing that return, which is generally expressed as a number or rating. Risk-adjusted returns are applied to individual securities, investment funds and portfolios. Some common risk measures include alpha, beta, R-squared, standard deviation and the Sharpe ratio. When comparing two or more potential investments, an investor should always compare the same risk measures to each different investment to get a relative performance perspective.Investopedia ©
Risk-Free Rate of ReturnThe theoretical rate of return of an investment with zero risk. The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time.Investopedia ©
Risk-On Risk-OffAn investment setting in which price behavior responds to, and is driven by, changes in investor risk tolerance. Risk-on risk-off refers to changes in investment activity in response to global economic patterns. During periods when risk is perceived as low, risk-on risk-off theory states that investors tend to engage in higher-risk investments. When risk is perceived as high, investors have the tendency to gravitate toward lower-risk investments.Investopedia ©
Risk-Return TradeoffThe principle that potential return rises with an increase in risk. Low levels of uncertainty (low risk) are associated with low potential returns, whereas high levels of uncertainty (high risk) are associated with high potential returns. According to the risk-return tradeoff, invested money can render higher profits only if it is subject to the possibility of being lost.Investopedia ©
Rival GoodA type of good that may only be possessed or consumed by a single user. Using a rival good prevents its use by other possible users. Rival goods can be durable, where users may use them one at a time, or nondurable, where consumption destroys the good, allowing only one user to enjoy it.Investopedia ©
Robin Hood effectA phenomenon where the less well-off gain at the expense of the better-off. The Robin Hood effect gets its name from the folkloric outlaw Robin Hood, who, according to legend, stole from the rich to give to the poor. A reverse Robin Hood effect occurs when the better-off gain at the expense of the less well-off.Investopedia ©
Rogue TraderA trader who acts independently of others - and, typically, recklessly - usually to the detriment of both the clients and the institution that employs him or her. In most cases this type of trading is high risk and can create huge losses.Investopedia ©
Rolling OptionA contract that offers a buyer the right to purchase something at a future date as well as the choice to extend that right, for a fee. Rolling options are commonly used in real estate construction and development. They allow builders to reduce the risk of buying and holding large tracts of land before they know if anyone will be interested in purchasing whatever they construct.Investopedia ©
RolloutA slang term for the introduction of a new product or service to the market. A rollout often refers to a significant product release, often accompanied by a strong marketing campaign to generate a large amount of consumer hype.Investopedia ©
RolloverA rollover occurs when reinvesting funds from a mature security into a new issue of the same or a similar security; transferring the holdings of one retirement plan to another without suffering tax consequences; or moving a forex position to the following delivery date. The distribution from a retirement plan is reported on IRS Form 1099-R and may be limited to one per annum for each IRA. The forex rollover fee arising from the difference in interest rates between the two currencies underlying a transaction is paid to the broker.Investopedia ©
Rollover Rate (Forex)The net interest return on a currency position held by a trader. The rollover rate converts net currency interest rates, which are given as a percentage, into a cash return for the position. Since a trader is long one currency and short another, the net effect of both interest rates has to be calculated. In forex, a rollover means that a position is extended at the end of the trading day without settling.Investopedia ©
Rollover and ExtensionsAn option commonly referred to in contracts and offers that allows the conditions set for a specific transaction to be extended to additional purchases or negotiations of the same product, commodity or assets. If conditions are not the same the expression should not be used but otherwise mentioned that extensions would be subject to revision of conditions, price, terms, etc.World Vision or Others
RothschildA prominent family of German bankers that established banking and finance houses in Europe. The Rothschild family molded the way the international world works today. They were the pioneers in international high finance and were critical in supporting the railway systems in Europe and supplying financing for projects such as the Suez Canal. During the Napoleonic Wars they are known to have almost single handedly financed the British War effort and it is also believed the Rothschild Family has the largest net worth in modern history.Investopedia ©
Round-Trip TradingAn action that attempts to inflate transaction volumes through the continuous and frequent purchase and sale of a particular security, commodity or asset. Round-trip trading can be used to refer to the practice of a business selling an unused asset to another company while agreeing to buy back the same asset for about the same price. This type of market manipulation has been seen in the energy and telecom business.Investopedia ©
Rounding BottomA chart pattern used in technical analysis, which is identified by a series of price movements that, when graphed, form the shape of a "U". Rounding bottoms are found at the end of extended downward trends and signify a reversal in long-term price movements. This pattern's time frame can vary from several weeks to several months and is deemed by many traders as a rare occurrence.Investopedia ©
Roy's Safety-First Criterion - SFRatioAn approach to investment decisions that sets a minimum required return for a given level of risk. The Roy's safety-first criterion allows portfolios to be compared based on the probability that their returns will fall below this minimum desired threshold. It is calculated by subtracting the minimum desired return from the expected return of the portfolio and dividing the result by the standard deviation of portfolio returns. The optimal portfolio will be the one that minimizes the probability that the portfolio's return will fall below a threshold level. Also known as the "SFRatio". Investopedia ©
Royalty Income TrustA type of special-purpose financing created to hold investments or their cash flows in operating companies. These trusts are neither stocks nor bonds but investment trusts (a legal entity). Royalty trusts buy the right to royalties on the production and sale of a natural resource company and pass on the profits to trust unit holders.Investopedia ©
Rule 144AA Securities & Exchange Commission rule modifying a two-year holding period requirement on privately placed securities to permit qualified institutional buyers to trade these positions among themselves. This has substantially increased the liquidity of the securities affected because institutions can trade these securities amongst themselves, side-stepping limitations that are imposed to protect the public.Investopedia ©
Rule 72(t)Rule 72(t), issued by the Internal Revenue Service (IRS), permits penalty-free withdrawals from IRA accounts, provided the owner takes at least five substantially equal periodic payments (SEPPs), with the amount depending on the owner’s life expectancy as calculated through IRS-approved methods. This rule permits IRA owners to benefit from their retirement savings before retirement age, through early withdrawal, without the otherwise required 10% penalty. The withdrawals are still taxed at the owner’s normal income tax rate.
Rule Of 70A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate the number of years for a variable to double, take the number 70 and divide it by the growth rate of the variable. This rule is commonly used with an annual compound interest rate to quickly determine how long it would take to double your money.Investopedia ©
Rule Of 72A rule stating that in order to find the number of years required to double your money at a given interest rate, you divide the compound return into 72. The result is the approximate number of years that it will take for your investment to double.Investopedia ©
Run RateThe run rate refers to the financial performance of a company based on using current financial information as a predictor of future performance. The run rate functions as an extrapolation of current financial performance and is based on the assumption that current conditions will continue. The run rate can also refer to the average annual dilution from company stock option grants over the most recent three-year period recorded in the annual report.Investopedia ©
Russell 3000 IndexA market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of the entire U.S. stock market. More specifically, this index encompasses the 3,000 largest U.S.-traded stocks, in which the underlying companies are all incorporated in the U.S.Investopedia ©
S&PStandard & Poor's is known to investors worldwide as a leader of financial-market intelligence," and "strives to provide investors who want to make better informed investment decisions with market intelligence in the form of credit ratings, indices, investment research and risk evaluations and solutions. Standard & Poor's is also widely known for maintaining one of the most widely followed indices of large-cap American stocks: the S&P 500. Moreover, Standard & Poor's independent equity research business is among the world's leading providers of independent investment information, offering fundamental coverage on approximately 2,000 stocks" and it is "also a leader in mutual fund information and analysis."Standard & Poor's ©
S4SIt indicates the finishing of lumber products. In this case all 4 sides have been surfaced, i.e., the cross section of the lumber has 90 degree angles. Lumberyards and home improvement stores use a certain code to let customers know how many sides of a particular piece of lumber have been surfaced. A piece of lumber marked S4S has been Surfaced on 4 Sides, in the same way that S1S wood has been surfaced on one side and S2S wood has been surfaced on two sides. Because S4S wood has been planed or surfaced on all four sides, it will be noticeably less than the advertised dimensions. A two by four (2" x 4") piece of lumber designated S4S may be closer to 1 7/8ths by 3 7/8ths or less.QandA.com ©
SBLCStand By Letter of Credit (SBLC) are financial instruments that can reserve, confirm or promise funds from one institution to another or to a business. This can be used for credit enhancement or as collateral. Banks and/or financial institutions may lease SBLCs so one can pay for the costs of it with the profit arising from a transaction. A SBLC can be used to secure a variety of transactions where a third party guarantee of payment may replace a cash or bond deposit. When a company applies for a Standby Letter of Credit, it allows the corporation to pledge securities in its eligible account as collateral, replacing the traditional cash or bond deposit. SBLCs are issued on a Bank-to-Bank Basis only. Standby Letters of Credit are subject to collateral maintenance requirements and, once drawn, are demand loans. If a draw is made under a Letter of Credit, the bank can demand repayment at any time without notice. If the required collateral value is not maintained, the bank can require the client to post additional collateral, repay part or all of any amount outstanding under the Letter of Credit and/or sell the companies securities. Failure to promptly meet a request for additional collateral or repayment or other circumstances (e.g., a rapidly declining market) could cause the bank to liquidate some or all of the collateral supporting the Letters of Credit. NOTE: Many commodity Sellers DO NOT accept SBLC as an acceptable payment instrument."World Vision or Others
SEC Form 13FThe SEC Form 13F is a filing with the Securities and Exchange Commission (SEC) also known as the Information Required of Institutional Investment Managers Form. It is a quarterly filing required of institutional investment managers with over $100 million in qualifying assets. Companies required to file SEC Form 13F may include insurance companies, banks, pension funds, investment advisers and broker-dealers.Investopedia ©
SEC Rule 144 Rule 144 is a regulation enforced by the U.S. Securities and Exchange Commission that sets the conditions under which restricted, unregistered and control securities can be sold or resold. Rule 144 provides an exemption from registration requirements to sell the securities through public markets if a number of specific conditions are met. The regulation applies to all types of sellers, in addition to issuers of securities, underwriters and dealers.Investopedia ©
SELICAcronym standing for "Sistema Especial de Liquidação e Custódia" (in Portuguese), or Custody and Clearance Special System, which is the Brazilian Central Bank's (BACEN) system for performing open market operations in execution of monetary policy. It also establishes the Central Bank's overnight lending rate and other interest indicators for long term notes. Please refer to "SELIC Rates."World Vision or Others
SELIC RateAlso known as "Taxa SELIC", is an average rate of daily financing guaranteed by the Brazilian Federal Government verified on the SELIC System (Brazilian Central Bank - BACEN). This rate operates as an indexing factor for the majority of the financial operations in the Country, basically covering the inflation/deflation plus official interest.World Vision or Others
SPASales and Purchase Agreement (SPA)World Vision or Others
SWIFTSociety for Worldwide Interbank Financial Telecommunication - supplies secure messaging services and interface software to wholesale financial entities.Investopedia ©
SWIFT via TCPWhen the Issuer sends the SWIFT via TCP (Transmission Control Protocol), they are immediately notified of the entry of the data transmitted in the system or database of the receptor by the ACKNOWLEDGEMENT NETWORK - ACK, with a confirmation of receipt in the Message Reference Output Code. The transmission format of TCP financial data together with the ACK and its KEY are highly recoverable data on your receiver that should follow its internal procedures to access the database of international or domestic financial transmissions depending on the used model, in transitory accounts. The operator or financial analyst responsible for the operation through a simple search in the transmission database of his institution and using the Message Input Reference described in the ACK, can locate this transmission using the ACK KEY, complete the transmission, opening it and effectively receive the MT for the Asset. The TCP format is currently the safest and most effective for this type of operation, preventing fraud or transmission error, because it has parameters that allow to indicate the free space, availability, capacity and competence of the current Receiver. This model was inserted in the global financial market by the Basel Committee II and defined as an effective way for international operations by the Basel Committee III fully replacing any other ways of transmission used before.World Vision or Others
SWOT Analysis DefinitionA tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, straightforward model that assesses what an organization can and cannot do as well as its potential opportunities and threats. The method of SWOT analysis is to take the information from an environmental analysis and separate it into internal (strengths and weaknesses) and external issues (opportunities and threats). Once this is completed, SWOT analysis determines what may assist the firm in accomplishing its objectives, and what obstacles must be overcome or minimized to achieve desired results.Investopedia ©
Sacred CowA firmly held mainstream belief that is considered to be true without independent verification. In finance, and in particular in investing, there are many sacred cows that are thought to be true, but are difficult to prove scientifically.Investopedia ©
Safe HavenAn investment that is expected to retain its value or even increase its value in times of market turbulence. Safe havens are sought after by investors to limit their exposure to losses in the event of market downturns. However, what are considered safe havens alter over time as market conditions change, and what appears to be a safe investment in one down market could be a disastrous investment in another down market.Investopedia ©
Salad Oil ScandalOne of the worst corporate scandals of its time. It occurred when Allied Crude Vegetable Oil Company discovered that banks would make loans secured by its salad oil inventory. When the ships full of salad oil would arrive in the docks, inspectors would test it and confirm that the ship was full of salad oil. However, the company didn't remind anyone that oil floats on water. They had filled salad oil tanks with water and put a few feet of oil on top, fooling everyone. The company would even transfer oil to different tanks while taking inspectors out to lunch. In 1963, the scam was busted and over $175 million worth of salad oil was missing.Investopedia ©
Sallie Mae - Student Loan Marketing AssociationA publicly traded company that is the largest provider of educational loans in the U.S. Along with providing student loans, Sallie Mae purchases student loans from the original lenders and provides financing to state student-loan agencies.Investopedia ©
Salomon BrothersSalomon Brothers, founded in 1910 was once one of the largest Wall Street bulge bracket financial service companies. In 1981, it was acquired by Phibro Corporation and became known as Phibro-Salomon. In 1997, the bank merged with Smith Barney, a subsidiary of Travelers Group to form Salomon Smith Barney. Immediately following, the bank merged with Citigroup, where Salomon Smith Barney served as the investment banking arm. In 2003, the Citigroup name was adopted.Investopedia ©
Same-Store SalesA statistic used in retail industry analysis that compares the sales of stores that have been open for at least one year. Same-store sales compare revenues earned by a retail chain's established outlets over a certain time period, such as a fiscal quarter or on a seasonal basis, for the current period and the same period in the past (usually the same period of the previous year.) Same-store sales allow investors to determine what portion of new sales has come from sales growth and what portion can be attributed to the opening of new stores. Same-store sales are also called "S.S.S.," "comps," "comparable store sales," "identical store sales" or "like-store sales."Investopedia ©
Samurai BondA yen-denominated bond issued in Tokyo by a non-Japanese company and subject to Japanese regulations. Other types of yen-denominated bonds are Euroyens issued in countries other than Japan.Investopedia ©
Samurai MarketA slang term for the stock market in Japan. Samurai market is usually used by non-residents of Japan, with a reference to the iconic Japanese warrior - the samurai.Investopedia ©
Sandwich GenerationThe generation of middle-aged individuals who are pressured to support both aging parents and growing children. The sandwich generation is named so because they are effectively "sandwiched" between the obligation to care for their aging parents - who may be ill, unable to perform various tasks or in need of financial support - and children, who require financial, physical and emotional support. The trends of increasing lifespans and having children at an older age have contributed to the sandwich generation phenomenon.Investopedia ©
Santa Claus RallyA surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations for the Santa Claus Rally phenomenon, including tax considerations, happiness around Wall Street, people investing their Christmas bonuses and the fact that the pessimists are usually on vacation this week.Investopedia ©
Sarbanes--Oxley ActSarbanes--Oxley, Sarbox or SOX, is a United States federal law that set new or enhanced standards for all U.S. public company boards, management and public accounting firms. It is named after sponsors U.S. Senator Paul Sarbanes (D-MD) and U.S. Representative Michael G. Oxley (R-OH). The bill was enacted as a reaction to a number of major corporate and accounting scandals including those affecting Enron, Tyco International, Adelphia, Peregrine Systems and WorldCom. These scandals, which cost investors billions of dollars when the share prices of affected companies collapsed, shook public confidence in the nation's securities markets.Wikipedia ©
Saturday Night SpecialAn obsolete takeover strategy where one company attempted a takeover of another company by making a sudden public tender offer, usually over the weekend. This merger and acquisition (M&A) technique was popular in the early 1970s when the Williams Act required only seven calendar days between the time that a tender was publicly announced and its deadline. Catching the target company off guard and over the weekend, effectively reducing its time for a response, often afforded the acquiring company an advantage.Investopedia ©
ScalpingA trading strategy that attempts to make many profits on small price changes. Traders who implement this strategy will place anywhere from 10 to a couple hundred trades in a single day in the belief that small moves in stock price are easier to catch than large ones.Investopedia ©
ScarcityThe basic economic problem that arises because people have unlimited wants but resources are limited. Because of scarcity, various economic decisions must be made to allocate resources efficiently.Investopedia ©
Schedule K-1Schedule K-1 is a tax document used to report the incomes, losses and dividends of a partnership. The Schedule K-1 document is prepared for each individual partner and is included with the partner’s personal tax return. An S corporation reports activity on Form 1120S, while a partnership reports transactions on Form 1065.Investopedia ©
Scrap ValueThe worth of a physical asset's individual components when the asset itself is deemed no longer usable. The individual components, known as "scrap," are worth something if they can be put to other uses. Sometimes scrap materials can be used as is; other times they must be processed before they can be reused. An item's scrap value is determined by the supply and demand for the materials it can be broken down into.Investopedia ©
Sealed-Bid AuctionA type of auction process in which all bidders simultaneously submit sealed bids to the auctioneer, so that no bidder knows how much the other auction participants have bid. The highest bidder is usually declared the winner of the bidding process.Investopedia ©
Search CostThe time, energy and money expended by a consumer who is researching a product or service for purchase. Search costs include the opportunity cost of the time and energy spent on searching - time and energy that could have been devoted to other activities - and perhaps the money spent to travel between stores examining different options, purchase research data or consult an expert for purchasing advice.Investopedia ©
Section 1231 Property1231 property is real or depreciable business property held for over a year. Section 1231 property includes buildings, machinery, land, timber and other natural resources, unharvested crops, cattle, livestock and leaseholds that are at least a year old, but does not include poultry, trademarks, or inventory.Investopedia ©
Secured LoansSecured loans are loans that are backed by an asset, like a house in the case of a mortgage loan or a car with an auto loan. This piece of property is collateral for the loan. When you agree to the loan, you agree that the lender can repossess the collateral if you don't repay the loan as agreed.About.com ©
Securities And Exchange Commission (SEC) DefinitionA government commission created by Congress to regulate the securities markets and protect investors. In addition to regulation and protection, it also monitors the corporate takeovers in the U.S. The SEC is composed of five commissioners appointed by the U.S. President and approved by the Senate. The statutes administered by the SEC are designed to promote full public disclosure and to protect the investing public against fraudulent and manipulative practices in the securities markets. Generally, most issues of securities offered in interstate commerce, through the mail or on the internet must be registered with the SEC.Investopedia ©
SecuritizationThe process through which an issuer creates a financial instrument by combining other financial assets and then marketing different tiers of the repackaged instruments to investors. The process can encompass any type of financial asset and promotes liquidity in the marketplace.Investopedia ©
SecurityA United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits include retirement income, disability income, Medicare and Medicaid, and death and survivorship benefits. Social Security is one of the largest government programs in the world, paying out hundreds of billions of dollars per year.
Based on the year someone was born, retirement benefits may begin as early as age 62 and as late as age 67. The amount of income received is based on the average wages earned over the worker's lifetime, with a maximum calculable amount of $102,000 as of 2008. Spouses are also eligible to receive Social Security benefits, even if they have limited or non-existent work histories.
Investopedia ©
Security (2)A security is a financial instrument that represents an ownership position in a publicly-traded corporation (stock), a creditor relationship with governmental body or a corporation (bond), or rights to ownership as represented by an option. A security is a fungible, negotiable financial instrument that represents some type of financial value. The company or entity that issues the security is known as the issuer.Investopedia ©
Security Market Line - SMLA line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky marketable securities.
Also refered to as the "characteristic line".
Investopedia ©
Seed CapitalThe initial capital used to start a business. Seed capital often comes from the company founders' personal assets or from friends and family. The amount of money is usually relatively small because the business is still in the idea or conceptual stage. Such a venture is generally at a pre-revenue stage and seed capital is needed for research & development, to cover initial operating expenses until a product or service can start generating revenue, and to attract the attention of venture capitalists.Investopedia ©
Seed StockA buzzword describing an investment security that is based on shares of a publicly traded, agriculture-based company, specifically one that is involved in plant research and development. A seed stock is any stock that represents a company that researches and produces seeds for planting crops and develops new seed products to increase farmers' yields or otherwise improve seed performance.Investopedia ©
SeigniorageThe difference between the value of money and the cost to produce it - in other words, the economic cost of producing a currency within a given economy or country. If the seigniorage is positive, then the government will make an economic profit; a negative seigniorage will result in an economic loss.Investopedia ©
Self-Directed IRA - SDIRAA retirement account in which the individual investor is in charge of making all investment decisions. The self-directed IRA provides the investor with greater opportunity for asset diversification outside of the traditional stocks bonds and mutual funds, as real estate, private tax liens and notes can be purchased. All securities and investments are held in an account administered by a custodian or trustee.Investopedia ©
Sell In May And Go AwayA well-known trading adage that warns investors to sell their stock holdings in May to avoid a seasonal decline in equity markets. The "sell in May and go away" strategy is that an investor who sells his or her stock holdings in May and gets back into the equity market in November - thereby avoiding the typically volatile May-October period - would be much better off than an investor who stays in equities throughout the year.Investopedia ©
Sell-OffSell-off is the rapid selling of securities such as stocks, bonds and commodities. The increase in supply leads to a decline in the value of the security. A sell-off may occur for many reasons, such as the sell-off of a company''s stock after a disappointing earnings report, or a sell-off in the broad market when oil prices surge, causing increased fear about the energy costs that companies will face.Investopedia ©
Senior NotesA debt security, or bond, that takes precedence over other unsecured notes and must be repaid in the event of bankruptcy. Senior notes are relatively secure because of their priority status in the event of liquidation. With this added security comes a reduced interest or coupon rate as compared to junior bonds.Investopedia ©
SensexSensex is an abbreviation of the Bombay Exchange Sensitive Index (Sensex) - the benchmark index of the Bombay Stock Exchange (BSE). It is composed of 30 of the largest and most actively-traded stocks on the BSE. Initially compiled in 1986, the Sensex is the oldest stock index in India.Investopedia ©
Series 34An exam required for individuals seeking to engage in off-exchange forex transactions with retail customers. The Series 34 exam is part of a regulatory forex registration process for most forex managers, dealers and intermediaries. In addition to taking the Series 34 exam, applicants are also required to satisfy the Series 3 exam or Series 32 proficiency requirement in order to be granted approval as a forex professional.Investopedia ©
Series 7The Series 7 is the general securities registered representative license administered by the Financial Industry Regulatory Authority (FINRA) that entitles the holder to sell all types of securities products with the exception of commodities and futures. The bulk of the Series 7 exam focuses on investment risk, taxation, equity and debt instruments, packaged securities, options, retirement plans and interactions with clients.Investopedia ©
Series A FinancingThe first round of financing undergone for a new business venture after seed capital. Generally, this is the first time that company ownership is offered to external investors. Series A financing may be provided in the form of preferred stock and may offer anti-dilution provisions in the event that further financing through preferred or common stock occurs in the future. Also known as "A round" or "A round financing." Investopedia ©
Series B Financing The second round of financing for a business by private equity investors or venture capitalists. Successive rounds of financing or funding a business are termed Series A, Series B (and so on) financing. The Series B round will generally take place when the company has accomplished certain milestones in developing its business. Investopedia ©
Shadow Banking SystemThe financial intermediaries involved in facilitating the creation of credit across the global financial system, but whose members are not subject to regulatory oversight. The shadow banking system also refers to unregulated activities by regulated institutions.Investopedia ©
Shadow MarketAn unregulated private market in which investors can purchase shares in companies that are not currently publicly traded. Shadow markets in stocks give investors an opportunity to invest in companies prior to their initial public offering (IPO). However, the SEC requires investors to have a net worth greater than $1 million in order to participate in this nontransparent market. These people are what the SEC refers to as'accredited investors'.Investopedia ©
Shanghai Stock ExchangeThe largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities Regulatory Commission (CSRC). Stocks, funds and bonds are all traded on the exchange, which has listing requirements including that a company must be in business and be earning a profit for at least three years before joining the exchange.Investopedia ©
Share Premium AccountUsually found on the balance sheet, this is the account to which the amount of money paid (or promised to be paid) by a shareholder for a share is credited to, only if the shareholder paid more than the cost of the share. Investopedia ©
Share RepurchaseA program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. Share repurchase is usually an indication that the company's management thinks the shares are undervalued. The company can buy shares directly from the market or offer its shareholder the option to tender their shares directly to the company at a fixed price.Investopedia ©
Shariah-Compliant FundsAn investment fund which meets all of the requirements of Shariah law and the principles articulated for "Islamic finance." Shariah-Compliant Funds must follow a variety of rules, including investing only in Shariah-compliant companies, appointing a Shariah board, carrying out an annual Shariah audit and purifying certain prohibited types of income, such as interest, by donating them to a charity.Investopedia ©
Shark WatcherA firm specializing in the early detection of takeovers. The firm's primary business is usually the solicitation of proxies for client corporations.Investopedia ©
Sharpe RatioThe Sharpe Ratio is a measure for calculating risk-adjusted return, and this ratio has become the industry standard for such calculations. It was developed by Nobel laureate William F. Sharpe. The Sharpe ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Subtracting the risk-free rate from the mean return, the performance associated with risk-taking activities can be isolated. One intuition of this calculation is that a portfolio engaging in "zero risk" investment, such as the purchase of U.S. Treasury bills (for which the expected return is the risk-free rate), has a Sharpe ratio of exactly zero. Generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return. Investopedia ©
Short Gold ETFAn exchange traded fund that seeks to profit from negative changes in the price of gold. Each day, a short gold ETF's price is adjusted by -100% of the daily percentage change in the price of gold. The price of gold may be based on the price of a gold index, physical gold, gold futures contracts or gold mining stocks for a short gold ETF's purposes. An investor would buy a short gold ETF if he or she expected the price of gold to decline. A short gold ETF may also be called an inverse gold ETF or a gold bear ETF.Investopedia ©
Short HedgeAn investment strategy that is focused on mitigating a risk that has already been taken. The "short" portion of the term refers to the act of shorting a security, usually a derivatives contract, that hedges against potential losses in an investment that is held long. If a short hedge is executed well, gains from the long position will be offset by losses in the derivatives position, and vice versa.Investopedia ©
Short LegThe short position in an option spread. The short leg in an option spread is any contract in which the individual holds a short position. If a trader has created an option spread by purchasing a put option and selling a call option, the trader's short position on the call would be considered the short leg.Investopedia ©
Short SaleA market transaction in which an investor sells borrowed securities in anticipation of a price decline and is required to return an equal number of shares at some point in the future. The payoff to selling short is the opposite of a long position. A short seller will make money if the stock goes down in price, while a long position makes money when the stock goes up. The profit that the investor receives is equal to the value of the sold borrowed shares less the cost of repurchasing the borrowed shares.Investopedia ©
Short Sell Against the BoxThe act of short selling securities that you already own. This results in a neutral position where your gains in a stock are equal to the losses. For example, if you own 100 shares of ABC and you tell your broker to sell short 100 shares of ABC, you have shorted against the box. An alternative to short selling against the box is to buy a put on your stock. This may or may not be less expensive than doing the short sale. Also known as "shorting against the box". Investopedia ©
Short SqueezeA situation in which a heavily shorted stock or commodity moves sharply higher, forcing more short sellers to close out their short positions and adding to the upward pressure on the stock. A short squeeze implies that short sellers are being squeezed out of their short positions, usually at a loss. A short squeeze is generally triggered by a positive development that suggests the stock may be embarking on a turnaround. Although the turnaround in the stock''s fortunes may only prove to be temporary, few short sellers can afford to risk runaway losses on their short positions and may prefer to close them out even if it means taking a substantial loss.Investopedia ©
Short TonThe short ton is a unit of weight equal to 2,000 pounds (907.18474 kg). In the United States it is often called simply ton without distinguishing it from the metric ton (tonne, 1,000 kilograms) or the long ton (2,240 pounds / 1,016.0469088 kilograms); rather, the other two are specifically noted. There are, however, some U.S. applications for which unspecified tons normally means long tons (for example, Navy ships) or metric tons (world grain production figures). Canada follows US practice in using the word "ton" to refer to the short ton, and "hundredweight" to mean short hundredweight. In the UK, short tons are rarely used. The word "ton" is taken to refer to a long ton, and metric tons are distinguished by using the alternative "tonne" spelling.Wikipedia ©
Short-Term InvestmentsAn account in the current assets section of a company's balance sheet. This account contains any investments that a company has made that will expire within one year.
For the most part, these accounts contain stocks and bonds that can be liquidated fairly quickly.
Investopedia ©
Sight LC or LOCA Letter Of Credit that is payable at sight (against presentation of required documents). Depending upon the conditions of the L/C the presentation can take place at the exporter''s bank or the importer''s bank. When agreeing on payment terms one must be aware of these terms as it could imply in additional costs and time for the exporter to be paid.World Vision or Others
Signaling ApproachThe idea that insiders have information not available to the market. Moves made by insiders can signal information to outsiders and change the stock price.Investopedia ©
Silent Bank RunWhen a bank's depositors withdraw funds en masse without physically entering the bank. A silent bank run is much like a normal bank run except that withdrawals are made by customers in the form of electronic fund transfers and wire transfers, rather than going into the bank and withdrawing cash or a bank draft. As banking has become more and more automated and computerized, the electronic movement of funds from one institution to another has become the norm.Investopedia ©
Silver StandardA monetary system in which a country's government allows its currency to be freely converted into fixed amounts of silver, and vice versa. Under the silver standard, an exchange rate would be determined by the economic difference for a fixed amount of silver between two currencies. The use of a silver standard was widespread over centuries before being abandoned globally in the early 20th Century.Investopedia ©
Simple InterestA quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate by the principal by the number of periods.Investopedia ©
Simple Moving Average - SMAA simple moving average (SMA) is an arithmetic moving average calculated by adding the closing price of the security for a number of time periods and then dividing this total by the number of time periods.Investopedia ©
Sin StockA stock of a company either directly involved in or associated with activities widely considered to be unethical or immoral. Sin stocks are found in sectors whose activities are frowned upon by some or most of society, because they are perceived as making money from exploiting human weaknesses and frailties. Sin stock sectors therefore include alcohol, tobacco, gambling, sex-related industries, weapons manufacturers and the military. Also known as ""sinful stocks"", they are the polar opposite of ethical investing and socially responsible investing, whose proponents emphasize investments that benefit society.Investopedia ©
Sin TaxA state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. These type of taxes are levied by governments to discourage individuals from partaking in such activities without making the use of the products illegal. These taxes also provide a source of government revenue.Investopedia ©
Sinful StockStock from companies that are associated with (or are directly involved in) activities that are widely considered to be unethical or immoral. Also known as "sin stock".Investopedia ©
Sinking FundA means of repaying funds that were borrowed through a bond issue. The issuer makes periodic payments to a trustee who retires part of the issue by purchasing the bonds in the open market.Investopedia ©
Sinking Fund MethodA technique for depreciating an asset in bookkeeping records while also generating money to purchase a replacement for the asset when it reaches the end of its useful life. Under the sinking fund method, the business sets aside an amount of money to invest annually so that the principal plus the interest earned in the fund will be enough to replace the asset.Investopedia ©
Sleeping BeautyA company that is considered prime for takeover, but has not yet been approached by an acquiring company. A company may be considered a sleeping beauty for a variety of reasons, including large cash reserves, undervalued real estate, undervalued share price, attractive assets or strong growth and earnings potential. A takeover, or acquisition, is typically characterized by the purchase of a smaller company by a larger firm. The acquiring company generally offers a cash price per share, thereby purchasing the target outright for its own shareholders.Investopedia ©
Small Business Development Center - SBDCA partnership between the U.S. Small Business Administration (SBA) and typically a local college or university designed to help foster small businesses by providing educational resources to business owners and those looking to start a business. Small Business Development Centers provide free marketing, financing and business-related activities to local entrepreneurs. They are found in all states, as well as Washington, D.C., Puerto Rico and U.S. territories.Investopedia ©
Small CapRefers to stocks with a relatively small market capitalization. The definition of small cap can vary among brokerages, but generally it is a company with a market capitalization of between $300 million and $2 billion.Investopedia ©
Smart Beta ETFA smart Beta ETF is a type of exchange-traded fund that uses alternative index construction rules instead of the typical cap-weighted index strategy, in a transparent way. It takes into account factors such as size, value and volatility. It utilizes both passive and active methods of investing ... passive because it follows an index, but active because it considers alternative factors. Smart Beta ETFs are ideal for investors hoping to maximize their income and returns and minimize risk.Investopedia ©
Smart HomeA convenient home setup where appliances and devices can be automatically controlled remotely from anywhere in the world using a mobile or other networked device. A smart home has its devices interconnected through the Internet, which control functions such as security access to the home, temperature, lighting, and home theater.Investopedia ©
SmurfColloquial term for a money launderer. Also refers to one who seeks to evade scrutiny from government agencies by breaking up a transaction involving a large amount of money into smaller transactions that are below the reporting threshold. The term is derived from the cartoon characters known as The Smurfs.Investopedia ©
Soccer Mom IndicatorAn economic indicator based on the theory that listening to what people are talking about at their children's soccer games (or similar event) is one of the best ways to find out how the economy or investing environment was doing.Investopedia ©
Social CommerceA type of electronic commerce that employs social media to promote online transactions. Social commerce employs such tools as; shared pick lists and ratings posted by previous users to assist online buyers with their transactions. It also encompasses other social shopping tools, such as forums and communities that allow buyers and sellers to discuss their online shopping experiences and compare transactional information.Investopedia ©
Social FinanceSocial finance typically refers to investments made in social enterprises including charitable organizations and some cooperatives. Rather than a charitable donation, these investments take the form of equity or debt financing where the investor seeks both a financial reward as well as a social gain.Investopedia ©
Social Host LiabilityA legal term and area of law that deals with the liability of a person who supplies liquor to a guest. Under social host liability laws, the host shares any liability incurred as a result of actions by an intoxicated guest to whom he or she has served liquor. This law can have important implications for businesses that serve alcohol.Investopedia ©
Social Impact Bond - SIBA contract with the public sector or governing authority, whereby it pays for better social outcomes in certain areas and passes on part of the savings achieved to investors. A social impact bond (SIB) is not a bond, per se, since repayment and return on investment are contingent upon the achievement of desired social outcomes; if the objectives are not achieved, investors receive neither a return nor repayment of principal. SIBs derive their name from the fact that their investors are typically those who are interested in not just the financial return on their investment, but also in its social impact.Investopedia ©
Socially Responsible InvestingAn investment that is considered socially responsible because of the nature of the business the company conducts. Common themes for socially responsible investments include avoiding investment in companies that produce or sell addictive substances (like alcohol, gambling and tobacco) and seeking out companies engaged in social justice, environmental sustainability and alternative energy/clean technology efforts. Socially responsible investments can be made in individual companies or through a socially conscious mutual fund or exchange-traded fund (ETF).Investopedia ©
Society for Worldwide Interbank Financial Telecommunications - SWIFTA member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the Society for Worldwide Interbank Financial Telecommunication (SWIFT) uses a standardized proprietary communications platform to facilitate the transmission of information about financial transactions. This information, including payment instructions, is securely exchanged between financial institutions.Investopedia ©
Soft CommoditiesA commodity such as coffee, cocoa, sugar and fruit. This term generally refers to commodities that are grown, rather than mined.World Vision or Others
Soft CurrencyAnother name for "weak currency". The values of soft currencies fluctuate often, and other countries do not want to hold these currencies due to political or economic uncertainty within the country with the soft currency.Investopedia ©
Soft DollarsA means of paying brokerage firms for their services through commission revenue, as opposed to through normal direct payments (hard dollar fees). The investing public tends to have a negative perception of soft dollar arrangements because they believe that buy-side firms should pay expenses out of their profits, rather than from investors' pockets. As such, the use of hard dollar compensation is becoming more common.Investopedia ©
Soft LandingA term used to describe a rate of economic growth high enough to avoid recession, but slow enough to avoid high inflation. A soft landing is typically defined as an economy that has avoided a strong contraction, often made evident by recessionary events, through government intervention by way of fiscal or monetary policies, in many cases.Investopedia ©
Soft SkillsThe character traits and interpersonal skills that characterize a person's relationships with other people. In the workplace, soft skills are considered a complement to hard skills, which refer to a person's knowledge and occupational skills. Sociologists may use the term soft skills to describe a person's "EQ" or " Emotional Intelligence Quotient" (as opposed to "IQ").Investopedia ©
Solow ResidualSolow residual is an economics term representing a measure of the empirical productivity growth in an industry or macro-economy over comparable time periods, such as from year to year and decade to decade. Productivity growth refers to rising output occurring with constant labor and capital input. The measure is deemed residual since its growth is not explained by capital accumulation or any increase in labor.Investopedia ©
Sovereign DebtBonds issued by a national government in a foreign currency to finance the issuing country's growth. Sovereign debt is guaranteed by the issuing government, so it is generally a riskier investment when it comes from a developing country and a safer investment when it comes from a developed country. The stability of the issuing government is an important factors in assessing the risk of investing in sovereign debt. Sovereign credit ratings help investors weigh this risk.Investopedia ©
Sovereign DefaultA default on the repayment of a county's government debts. Countries are often hesitant to default on their debts, since it will be difficult and expensive to borrow funds after a default event. However, sovereign countries are not subject to normal bankruptcy laws and have the potential to escape responsibility for debts without legal consequences.Investopedia ©
Sovereign RiskProbability that the government of a country (or an agency backed by the government) will refuse to comply with the terms of a loan agreement during economically difficult or politically volatile times. Although sovereign nations don't "go broke," they can assert their independence in any manner they choose, and cannot be sued without their assent. Sovereign risk was a significant factor during 1970s after the oil shock when Argentina and Mexico almost defaulted on their loans which had to be rescheduled.BusinessDictionary.com ©
Sovereign StateThat possesses full sovereignty over its affairs, existence, and territory and is complete in itself.BusinessDictionary.com ©
Sovereign Wealth Funds - SWFPools of money derived from a country's reserves, which are set aside for investment purposes that will benefit the country's economy and citizens. The funding for a sovereign wealth fund (SWF) comes from central bank reserves that accumulate as a result of budget and trade surpluses, and even from revenue generated from the exports of natural resources. The types of acceptable investments included in each SWF vary from country to country; countries with liquidity concerns limit investments to only very liquid public debt instruments. Some countries have created SWFs to diversify their revenue streams. For example, the United Arab Emirates (UAE) relies on oil exports for its wealth; therefore, it devotes a portion of its reserves to an SWF that invests in other types of assets that can act as a shield against oil-related risk. The amount of money in these SWF is substantial. As of May 2007, the UAE's fund was worth more than $875 billion. The estimated value of all SWFs is pegged at $2.5 trillion.Investopedia ©
Special Administrative Region - SARUnique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative Regions (SAR) of Hong Kong and Macau, which were formerly British and Portuguese colonies until 1997 and 1999 respectively, were set up in accordance with the "one country, two systems" concept proposed by Deng Xiaoping. The two SARs enjoy a great deal of autonomy, with responsibility for most areas of government - including executive, legislative and judicial - except for defense and diplomatic relations.Investopedia ©
Special Drawing Rights - SDRAn international type of monetary reserve currency, created by the International Monetary Fund (IMF) in 1969, which operates as a supplement to the existing reserves of member countries. Created in response to concerns about the limitations of gold and dollars as the sole means of settling international accounts, SDRs are designed to augment international liquidity by supplementing the standard reserve currencies.Investopedia ©
Special Needs TrustA legal arrangement and fiduciary relationship that allows a physically or mentally disabled or chronically ill person to receive income without reducing their eligibility for the public assistance disability benefits provided by Social Security, Supplemental Security Income, Medicare or Medicaid. It covers the percentage of a person's financial needs that are not covered by public assistance payments. The assets held in the trust do not count for the purposes of qualifying for public assistance, as long as they are not used for certain food or shelter expenditures. Assets originally belonging to the disabled individual that are placed into the trust may be subject to Medicaid's repayment rules, but assets provided by third parties such as parents are not. Also called "supplemental needs trust".Investopedia ©
Special Purpose Vehicle/Entity - SPV/SPE1. Also referred to as a "bankruptcy-remote entity" whose operations are limited to the acquisition and financing of specific assets. The SPV is usually a subsidiary company with an asset/liability structure and legal status that makes its obligations secure even if the parent company goes bankrupt. 2. A subsidiary corporation designed to serve as a counterparty for swaps and other credit sensitive derivative instruments. Also called a "derivatives product company."Investopedia ©
Special Revenue FundAn account established by a government to collect money that must be used for a specific project. Special revenue funds provide an extra level of accountability and transparency to taxpayers that their tax dollars will go toward an intended purpose. Governments must rely on operating and capital budgets to pay for their other expenses.Investopedia ©
Special Warranty DeedA special warranty deed is a deed in which the seller warrants or guarantees the title only against defects arising during the period of his or her tenure or ownership of the property. The grantor makes no warranty against defects existing before the time of his or her ownership.Investopedia ©
SpeculatorA speculator is a person who trades derivatives, commodities, bonds, equities or currencies with a higher than average risk in return for a higher-than-average profit potential. Speculators take large risks, especially with respect to anticipating future price movements, in the hopes of making quick, large gains.
Speculators are typically sophisticated risk-taking investors with expertise in the markets in which they are trading; they usually use highly leveraged investments, such as futures and options.
Investopedia ©
Spiders - SPDRA short form of Standard & Poor's depositary receipt, an exchange-traded fund (ETF) managed by State Street Global Advisors that tracks the Standard & Poor's 500 Index (S&P 500). Each share of spider contains one-tenth of the S&P index and trades at roughly one-tenth of the dollar-value level of the S&P 500. Spiders can also refer to the general group of ETFs to which the Standard & Poor's depositary receipt belongs.Investopedia ©
Spillover DividendA special type of dividend where the payment year and the taxable year for it are at different times. Most often this occurs in a situation when the dividend has been declared near the end of the calendar year (during the fourth quarter), but the actual distribution date of the dividend payment does not occur until the first quarter of the following year.Investopedia ©
SpinoffThe creation of an independent company through the sale or distribution of new shares of an existing business or division of a parent company. A spinoff is a type of divestiture. Businesses wishing to streamline their operations often sell less productive or unrelated subsidiary businesses as spinoffs. For example, a company might spin off one of its mature business units that is experiencing little or no growth so it can focus on a product or service with higher growth prospects. The spun-off companies are expected to be worth more as independent entities than as parts of a larger business.Investopedia ©
SpoofingA type of deception where an intruder attempts to gain unauthorized access to a user's system or information via pretending to be the user. In email spoofing (or phishing), the user receives an email that appears to be from a legitimate source but actually it is sent by someone else. The main purpose is to trick the user into releasing sensitive information such as passwords, so that the malicious spoofer can continue to pretend to be the user and use his or her accounts.Investopedia ©
Squawk BoxAn intercom speaker often used on brokers' trading desks in investment banks and stock brokerages. A squawk box allows a firm's analysts and traders to communicate with the firm's brokers.Investopedia ©
Staggers ActA federal law that greatly deregulated the American railroad industry. The Staggers Rail Act was passed in 1980 and was intended to replace the highly-regulated structure of the American rail shipping system which had existed since the passing of the Interstate Commerce Act of 1887. The Act was named after its sponsor, congressman Harley Staggers who was the chair of the House Interstate and Foreign Commerce Committee.Investopedia ©
Stalking-Horse BidAn initial bid on a bankrupt company's assets from an interested buyer chosen by the bankrupt company. From a pool of bidders, the bankrupt company chooses the stalking horse to make the first bid.Investopedia ©
Stand By Letters of Credit (SBLC or SLOC)A guarantee of payment issued by a bank on behalf of a client that is used as "payment of last resort" should the client fail to fulfill a contractual commitment with a third party. Standby letters of credit are created as a sign of good faith in business transactions, and are proof of a buyer's credit quality and repayment abilities. The bank issuing the SLOC will perform brief underwriting duties to ensure the credit quality of the party seeking the letter of credit, then send notification to the bank of the party requesting the letter of credit (typically a seller or creditor). Also known as a "non-performing letter of credit".Investopedia ©
Standard & Poor''s 500 Index - S&P 500The Standard & Poor''s 500 Index (S&P 500) is an index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe.Investopedia ©
Standard DeviationStandard deviation is a measure of the dispersion of a set of data from its mean. If the data points are further from the mean, there is higher deviation within the data set. Standard deviation is calculated as the square root of variance by determining the variation between each data point relative to the mean.Investopedia ©
Standard ErrorThe standard deviation of the sampling distribution of a statistic. Standard error is a statistical term that measures the accuracy with which a sample represents a population. In statistics, a sample mean deviates from the actual mean of a population; this deviation is the standard error.Investopedia ©
Staple ThesisA theory of economic growth that emphasizes the role traditional commodities, or staples, play in the shaping of a resource-rich economy. The staple thesis was created by Canadian economic historian Harold Innis and economist W.A Mackintosh as an explanation for how the pattern of settlement and economic development of Canada was influenced by the exploitation and export of natural resources. Though its original purpose was to model Canada's historical economic evolution, the staple thesis can be applied to any country with a successful, export-heavy economy.Investopedia ©
StartupA company that is in the first stage of its operations. These companies are often initially bank rolled by their entrepreneurial founders as they attempt to capitalize on developing a product or service for which they believe there is a demand. Due to limited revenue or high costs, most of these small scale operations are not sustainable in the long term without additional funding from venture capitalists.Investopedia ©
Stick SandwichA technical trading pattern in which three candlesticks form what appears to be a sandwich on the trader's screen. Stick sandwiches will have the middle candlestick oppositely colored of the candlesticks on either side of it, both of which will have a larger trading range than the middle candlestick. Stick sandwich patterns can occur in both bearish and bullish indications.Investopedia ©
Sticky Wage TheoryAn economic hypothesis theorizing that the pay of employed workers tends to have a slow response to the changes in the performance of a company or of the broader economy. According to the theory, when unemployment rises, the wages of those workers that remain employed tend to stay the same or grow at a slower rate than before rather than falling with the decrease in demand for labor. Specifically, wages are often said to be sticky-down, meaning that they can move up easily but move down only with difficulty.
The Sticky Wage Theory develops when a principal creates an environment in which an agent's incentives don't align with its own. Generally, the onus is on the principal to create incentives for the agent to ensure they act as the principal wants. This includes everything from financial incentives to avoidance of information asymmetry.
Investopedia ©
Stochastic OscillatorA technical momentum indicator that compares a security's closing price to its price range over a given time period. The oscillator's sensitivity to market movements can be reduced by adjusting the time period or by taking a moving average of the result.Investopedia ©
Stock Market CrashA rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, economic crisis or the collapse of a long-term speculative bubble. Well-known U.S. stock market crashes include the market crash of 1929 and Black Monday (1987).Investopedia ©
Stock SplitA corporate action in which a company divides its existing shares into multiple shares. Although the number of shares outstanding increases by a specific multiple, the total dollar value of the shares remains the same compared to pre-split amounts, because the split did not add any real value. The most common split ratios are 2-for-1 or 3-for-1, which means that the stockholder will have two or three shares for every share held earlier. Also known as a "forward stock split."Investopedia ©
Stock SwapA hazard or condition that has either a high likelihood of loss, or where the insurance would be considered against the law. An uninsurable risk is a risk that an insurance company is unwilling to undertake because the probability of loss is high, or because the coverage would be related to illegal or criminal activity, or be an activity that is prohibited by public policy. Insurance companies limit their losses by not taking on certain risks that are very likely to soon result in a loss.Investopedia ©
Stock TraderAn investor in the financial markets. Stock or equity traders can either partake in the practice casually or as a full time profession. Those working at the institutional level are often employed by hedge funds, mutual funds, portfolio managers or pension funds. Stock traders are not limited to trade only stocks, but can invest with other financial instruments as well.Investopedia ©
StockalypseAn abrupt and steep decline in the price of a stock or equity index. A stockalypse can wipe out tens of millions in market capitalization when it slams an individual stock, and billions in market value when its impact is felt across the broad markets. The length of a stockalypse can vary from a few weeks to many months, depending on the factors that have precipitated it. A broad stockalypse can exert a substantial drag on an economy, as the destruction of stock market value causes a negative wealth effect that in turn impacts consumer spending. The term is a combination of "stock" and "apocalypse".Investopedia ©
Stop Trading On Congressional Knowledge Act - STOCK ActA bipartisan bill signed into law Apr. 4, 2012 by President Barack Obama that prevents members of congress from trading stocks based on nonpublic information gathered on Capitol Hill. The Stop Trading on Congressional Knowledge (STOCK) Act elucidates that congressional members and staff owe a duty to United States citizens not to misappropriate nonpublic information to make a profit. In addition to banning insider trading for members and Congressional staff, the STOCK Act provides for increases transparency in financial disclosure reporting, and requires members of Congress and government employees to report certain investment transactions within 45 days.Investopedia ©
Stop-Limit OrderAn order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will be executed at a specified price (or better) after a given stop price has been reached. Once the stop price is reached, the stop-limit order becomes a limit order to buy (or sell) at the limit price or better.Investopedia ©
Stop-Loss OrderAn order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit an investor's loss on a position in a security. Although most investors associate a stop-loss order only with a long position, it can also be used for a short position, in which case the security would be bought if it trades above a defined price. A stop-loss order takes the emotion out of trading decisions and can be especially handy when one is on vacation or cannot watch his/her position. However, execution is not guaranteed, particularly in situations where trading in the stock is halted or gaps down (or up) in price. Also known as a "stop order" or "stop-market order."Investopedia ©
Story StockA stock whose value reflects expected future potential (or favorable press coverage) rather than its assets and income. A story stock trades markedly higher on optimistic expectations about its potential profits down the road. A story stock's valuations are generally out of line with its fundamentals, since investors are willing to pay a hefty premium for the stock to participate in its future prospects. Most, but not all, story stocks tend to be clustered in dynamic sectors such as technology or biotechnology, since the lure of owning a piece of a company that discovers the cure for cancer or invents a new fuel source is one that few investors can resist.Investopedia ©
StraddleA straddle is an options strategy in which the investor holds a position in both a call and put with the same strike price and expiration date, paying both premiums. This strategy allows the investor to make a profit regardless of whether the price of the security goes up or down, assuming the stock price changes somewhat significantly.Investopedia ©
Strategic Asset AllocationA portfolio strategy that involves setting target allocations for various asset classes, and periodically rebalancing the portfolio back to the original allocations when they deviate significantly from the initial settings due to differing returns from various assets. In strategic asset allocation, the target allocations depend on a number of factors -- such as the investor's risk tolerance, time horizon and investment objectives -- and may change over time as these parameters change. Strategic asset allocation is compatible with a "buy and hold" strategy, as opposed to tactical asset allocation which is more suited to an active trading approach. Strategic and tactical asset allocation are based on modern portfolio theory, which emphasizes diversification in order to reduce risk and improve portfolio returns.Investopedia ©
Stratified Random SamplingA method of sampling that involves the division of a population into smaller groups known as strata. In stratified random sampling, the strata are formed based on members` shared attributes or characteristics. A random sample from each stratum is taken in a number proportional to the stratum`s size when compared to the population. These subsets of the strata are then pooled to form a random sample.Investopedia ©
Straw BuyerA person who makes a purchase on behalf of another person. A straw buyer is used when the real buyer cannot complete the transaction for some reason. It is not necessarily illegal to use a straw buyer, except where the transaction involves fraud or purchasing goods for someone who is legally barred from making the purchase themselves.Investopedia ©
Structured FinanceA service that generally involves highly complex financial transactions offered by many large financial institutions for companies with very unique financing needs. These financing needs usually don't match conventional financial products such as a loan.Investopedia ©
Structured NoteA debt obligation that also contains an embedded derivative component with characteristics that adjust the security's risk/return profile. The return performance of a structured note will track that of the underlying debt obligation and the derivative embedded within it.Investopedia ©
Structured UnemploymentUnemployment resulting from changes in the basic composition of the economy. These changes simultaneously open new positions for trained workers.Investopedia ©
Student Loan ForgivenessUnder certain circumstances, federally backed student loans - such as Direct Subsidized Loans and Federal Perkins Loans - can be discharged or forgiven. For a loan to be discharged, circumstances beyond the borrower''s control that prohibit the repayment of the loan must be identified. Requirements for student loan forgiveness vary depending on the type of loan, but most offer forgiveness for those employed in certain public-service occupations.Investopedia ©
StuffingThe act of selling undesirable securities from the broker-dealer's account to client accounts. Stuffing allows broker-dealer firms to avoid taking losses on securities that are expected to decline in value. Instead, client accounts take the losses. Stuffing can also be used as a means to raise cash quickly when securities are relatively illiquid and difficult to sell in the market.Investopedia ©
Subordinated DebtA loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings.
Also known as a "junior security" or "subordinated loan."
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Subprime Auto LoanA type of auto loan approved for people with substandard credit scores or limited credit histories. There is no official cutoff score for prime versus subprime, but it should be noted that these loans carry higher interest rates than equivalent prime loans, and may also come with prepayment penalties if the borrower chooses to pay off the loan early.Investopedia ©
Subprime MarketThe market for lenders and borrowers of subprime credit, a credit that is lent to people of questionable or limited credit histories. Includes the business of subprime mortgages, subprime auto loans and subprime credit cards, as well as various securitization products that use subprime debt as collateral.
Subprime borrowing comes with a higher interest rate than for borrowers with good credit ratings, as the risk of default is much higher.
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Subprime RatesInterest rates charged to subprime borrowers, such as on loans to people with poor credit scores from one or more credit bureau. Subprime rates will be higher than prime rates for the same type of loan, although there is no exact amount or spread that constitutes subprime.Investopedia ©
SubsidyA benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy is usually given to remove some type of burden and is often considered to be in the interest of the public.
Politics play an important part in subsidization. In general, the left is more in favor of having subsidized industries, while the right feels that industry should stand on its own without public funds.
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SubstituteA "substitute" or "substitute good" in economics and consumer theory is a product or service that a consumer sees as the same or similar to another product. In the formal language of economics, X and Y are substitutes if the demand for X increases when the price of Y increases, or a positive cross elasticity of demand.Investopedia ©
SuccessionThe action of one party, person or product being replaced by another that has become obsolete, incapacitated, retired or deceased. Ideally, a successor will fill the role of its predecessor, being fully compatible with all other entities in place and perfectly functional without any interruption in service.Investopedia ©
Sucker RallyA temporary rise in a specific stock or the market as a whole. A sucker rally occurs with little fundamental information to back the movement in price. This rally may continue just long enough for the "suckers" to get on board, after which the market or specific stock falls. Also known as a "dead cat bounce" or a "bull trap".Investopedia ©
Sudden Wealth Syndrome (SWS)A syndrome afflicting individuals who suddenly come into large sums of money. Becoming suddenly wealthy can cause an individual stress. Its symptoms include: feeling isolated from former friends, feelings of guilt over their good fortune, and an extreme fear of losing all their money.Investopedia ©
Suicide PillA defensive strategy by which a target company engages in an activity that might actually ruin the company rather than prevent the hostile takeover. Suicide pills are extreme actions that differ from situation to situation, some of which result in dissolving the company; however, the underlying intent is to avoid the hostile takeover of the firm by any means necessary. Also known as the "Jonestown Defense." Investopedia ©
Sunk CostA cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business may face, such as inventory costs or R&D expenses, because it has already happened. Sunk costs are independent of any event that may occur in the future.Investopedia ©
Sunk Cost TrapThe tendency of people to irrationally follow through on an activity that is not meeting their expectations because of the time and/or money they have already spent on it. The sunk cost trap explains why people finish movies they aren't enjoying, finish meals that taste bad, hold on to investments that are under-performing and keep clothes in their closet that they've never worn. The sunk cost trap is also called the Concorde fallacy after the failed supersonic Concorde jet program that funding governments insisted on completing despite the jet's poor outlook.Investopedia ©
Super Bowl IndicatorAn indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in the stock market for the coming year, and that a win for a team from the old NFL (NFC division) means the stock market will be up for the year.Investopedia ©
SupplyA fundamental economic concept that describes the total amount of a specific good or service that is available to consumers. Supply can relate to the amount available at a specific price or the amount available across a range of prices if displayed on a graph. This relates closely to the demand for a good or service at a specific price; all else being equal, the supply provided by producers will rise if the price rises because all firms look to maximize profits.Investopedia ©
Supply ChainA supply chain is a network between a company and its suppliers to produce and distribute a specific product, and the supply chain represents the steps it takes to get the product or service to the customer. Supply chain management is a crucial process, because an optimized supply chain results in lower costs and a faster production cycle.Investopedia ©
Survivor BondA type of bond whose future coupons are based on the percentage of a stated population group who are still alive - the survivors, in other words - on the future coupon payment dates. As mortality increases and survivors of the group decrease over time, coupon payments decline until they eventually reach zero. Survivor bonds are used by annuity providers and pension plan managers to hedge aggregate longevity risk.Investopedia ©
SwapA swap is a derivative contract through which two parties exchange financial instruments. These instruments can be almost anything, but most swaps involve cash flows based on a notional principal amount that both parties agree to. Usually, the principal does not change hands. Each cash flow comprises one leg of the swap. One cash flow is generally fixed, while the other is variable, that is, based on a a benchmark interest rate, floating currency exchange rate or index price.
The most common kind of swap is an interest rate swap. Swaps do not trade on exchanges, and retail investors do not generally engage in swaps. Rather, swaps are over-the-counter contracts between businesses or financial institutions.
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Swing TradingSwing trading attempts to capture gains in a stock (or any financial instrument) within an overnight hold to several weeks. Swing traders use technical analysis to look for stocks with short-term price momentum. These traders may utilize fundamental or intrinsic value of stocks in addition to analyzing the price trends and patterns.Investopedia ©
Symmetrical DistributionA situation in which the values of variables occur at regular frequencies, and the mean, median and mode occur at the same point. Unlike asymmetrical distribution, symmetrical distribution does not skew. A symmetrical distribution, also called a symmetric or normal distribution, is commonly shaped like a bell curve when depicted on a graph. If you drew a line down the middle of the graph, the two sides would mirror each other.Investopedia ©
SyntheticA financial instrument that is created artificially by simulating another instrument with the combined features of a collection of other assets.Investopedia ©
Synthetic CDOA form of collateralized debt obligation (CDO) that invests in credit default swaps (CDSs) or other non-cash assets to gain exposure to a portfolio of fixed income assets. Synthetic CDOs are typically divided into credit tranches based on the level of credit risk assumed. Initial investments into the CDO are made by the lower tranches, while the senior tranches may not have to make an initial investment. All tranches will receive periodic payments based on the cash flows from the credit default swaps. If a credit event occurs in the fixed income portfolio, the synthetic CDO and its investors become responsible for the losses, starting from the lowest rated tranches and working its way up.Investopedia ©
Systematic RiskThe risk inherent to the entire market or an entire market segment. Systematic risk, also known as "undiversifiable risk," "volatility" or "market risk," affects the overall market, not just a particular stock or industry. This type of risk is both unpredictable and impossible to completely avoid. It cannot be mitigated through diversification, only through hedging or by using the right asset allocation strategy.Investopedia ©
Systematic SamplingSystematic sampling is a type of probability sampling method in which sample members from a larger population are selected according to a random starting point and a fixed periodic interval. This interval, called the sampling interval, is calculated by dividing the population size by the desired sample size. Despite the sample population being selected in advance, systematic sampling is still thought of as being random if the periodic interval is determined beforehand and the starting point is random.Investopedia ©
TIMP'TIMP' is an acronym that stands for 'Turkey, Indonesia, Mexico and Philippines.' Similar to BRICS (Brazil, Russia, India, China and South Africa), the acronym was coined by and investor/economist to group fast-growing emerging market economies in similar states of economic development.Investopedia ©
TMX GroupAn exchange group that owns and operates of several businesses involved in trading in Canada. The TMX Group, through its subsidiaries, operates derivative, energy, cash and equity trading facilities. The group also provides other financial services such as data products and clearing facilities. It is headquartered in Toronto, but has several offices throughout Canada.World Vision or Others
TRRAcronym standing for "Termo de Reconhecimento e Repactuação" (Portuguese - Brazil) - A certificate issued by the Brazilian Central Bank (BACEN) and the Brazilian Treasury recognizing the validity of a Government Bond (LTN 001 Series, a.k.a. Blue LTN) issued in 1972 in the face amount of Cr$ 100 Million. Since then, Brazil has changed its currency several times. The Current Brazilian currency is called Real (represented as R$).World Vision or Others
Taft-Hartley ActA Federal law that was enacted in 1947 that prohibited certain union practices and required improvement in union disclosure of financial and political dealings.Investopedia ©
Tail RiskA form of portfolio risk that arises when the possibility that an investment will move more than three standard deviations from the mean is greater than what is shown by a normal distribution.Investopedia ©
Take A BathA slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative position. Investors whose shares have declined significantly are said to have taken a bath.Investopedia ©
Take A FlierThe slang term for a decision to invest in highly speculative investments.Investopedia ©
Takeout ValueThe estimated value of a company if it were to be taken private or acquired. A firm's takeout value considers various metrics, such as cash flows, assets, earnings and multiples used in similar takeovers. The current mergers and acquisitions environment can also affect the takeout value of a company. There is not an exact formula for takeout valuation, since a variety of metrics, such as EBIDTA multiple, P/E ratio and even firm-specific information can be taken into account.Investopedia ©
TakeoverWhen an acquiring company makes a bid for a target company. If the takeover goes through, the acquiring company becomes responsible for all of the target company's operations, holdings and debt. When the target is a publicly traded company, the acquiring company will make an offer for all of the target's outstanding shares.Investopedia ©
Tangible AssetAssets that have a physical form. Tangible assets include both fixed assets, such as machinery, buildings and land, and current assets, such as inventory. The opposite of a tangible asset is an intangible asset. Nonphysical assets, such as patents, trademarks, copyrights, goodwill and brand recognition, are all examples of intangible assets.Investopedia ©
Tangible Common Equity - TCEA measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. Tangible common equity (TCE) is calculated by subtracting intangible assets, goodwill and preferred equity from the company's book value. Measuring a company's TCE is particularly useful for evaluating companies that have large amounts of preferred stock, such as U.S. banks that received federal bailout money in the 2008 financial crisis. In exchange for bailout funds, those banks issued large numbers of shares of preferred stock to the federal government. A company can boost TCE by converting preferred shares to common shares.Investopedia ©
Tangible Net WorthA measure of the physical worth of a company, which does not include any value derived from intangible assets such as copyrights, patents and intellectual property. Tangible net worth is calculated by taking a firm's total assets and subtracting the value of all liabilities and intangible assets.Investopedia ©
TaperingA gradual winding down of central bank activities used to improve the conditions for economic growth. Tapering activities is primarily aimed at interest rates and investor expectations of what those rates will be in the future. These can include conventional central bank activities, such as adjusting the discount rate or reserve requirements, or more unconventional ones, such as quantitative easing (QE).Investopedia ©
Tariff WarAn economic battle between two countries in which Country A raises tax rates on Country B's exports and Country B then raises taxes on Country A's exports in retaliation. The increased tax rate is designed to hurt the other country economically since tariffs discourage people from buying products from outside sources by raising the total cost on those products. One reason why a country might incite a tariff war is because it is unhappy with one of its trading partners' political decisions. It hopes that by putting enough economic pressure on the country, it can force a change in the opposing government's behavior. This type of tariff war is also known as a "customs war".Investopedia ©
Tatra TigerA nickname or colloquial term for the central European nation of Slovakia. It became known as the Tatra Tiger following economic growth rates that were among the highest in Europe in the first decade of the 21st century. Following its separation from the Czech Republic in 1993, Slovakia embarked on significant economic reforms that spurred growth, and enabled it to join the European Union in 2004. The term "Tatra Tiger" is derived from the Tatra mountain range that straddles the border between Slovakia and Poland.Investopedia ©
Tax AccountingTax accounting consists of accounting methods that focus on taxes rather than the appearance of public financial statements. Tax accounting is governed by the Internal Revenue Code which dictates the specific rules that companies and individuals must follow when preparing their tax returns. Tax principles often differ from generally accepted accounting principles.Investopedia ©
Tax AvoidanceThe use of legal methods to modify an individual's financial situation in order to lower the amount of income tax owed. This is generally accomplished by claiming the permissible deductions and credits. This practice differs from tax evasion, which is illegal.Investopedia ©
Tax CheatAn individual or group who, through fraud, dishonesty or avoidance, does not pay the amount of tax that would be obligated if tax rules were properly followed. A tax cheat may improperly use tax shelters or purposefully miscategorize earnings and expenses under the pretense that the government will not miss the lost revenue because of the obligation's size relative to all taxes collected. Those found to be cheating on their taxes may be subject to fines, penalties or imprisonment.Investopedia ©
Tax DeferredInvestment earnings such as interest, dividends or capital gains that accumulate tax free until the investor withdraws and takes possession of them. The most common types of tax-deferred investments include those in individual retirement accounts (IRAs) and deferred annuities.Investopedia ©
Tax DragThe reduction of potential income due to taxes. Drag describes the loss in returns owing to taxation, usually on an investment. Tax drag is commonly used when describing the difference between an investment vehicle that is tax-sheltered and one that is not. For many individuals, tax drag can have a significant effect on overall investment performance.Investopedia ©
Tax EfficiencyTax efficiency is an attempt to minimize tax liability when given many different financial decisions. There are a variety of ways to obtain tax efficiency, including selecting tax efficient vehicles such as many exchange traded funds (ETFs) and municipal bonds, locating assets in the accounts such as Traditional or Roth IRAs and offsetting taxable capital gains with capital losses.

Other options to reduce tax liability include tax-efficient mutual funds, irrevocable trusts and tax-exempt commercial paper.
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Tax FraudTax fraud occurs when an individual or business entity willfully and intentionally falsifies information on a tax return in order to limit the amount of tax liability. Tax fraud essentially entails cheating on a tax return in an attempt to avoid paying the entire tax obligation. Examples of tax fraud include claiming false deductions; claiming personal expenses as business expenses; and not reporting income.Investopedia ©
Tax Lien ForeclosureThe sale of a property resulting from the property owner's failure to pay tax liabilities. A tax lien foreclosure occurs when the property owner has not paid the required taxes, including property taxes, and federal and state income taxes. A statutory lien is first placed against the property of the person who has failed to pay taxes. The government that is owed the taxes (for example, the federal government in the case of unpaid federal income, self-employment, gift or estate taxes) will move to repossess the property in an attempt to recover the debt.Investopedia ©
Tax RefundThe return of excess amounts of income tax that a taxpayer has paid to the state or federal government throughout the past year. In certain cases, taxpayers may even receive a refund if they owed no taxes, because certain tax credits are fully refundable.Investopedia ©
Tax ShieldA reduction in taxable income for an individual or corporation achieved through claiming allowable deductions such as mortgage interest, medical expenses, charitable donations, amortization and depreciation. These deductions reduce taxpayers' taxable income for a given year or defer income taxes into future years. Tax shields vary from country to country, and their benefits will depend on the taxpayer's overall tax rate and cash flows for the given tax year.Investopedia ©
Tax YearThe period of time which is covered by a particular tax return. Many firms simply use the calendar year as their tax year, however this is not always required. When a firm begins or ends operations, it often needs to file a tax return for a shorter time period than a full 12 months. During normal operations, a firm may elect different dates for its tax year in the same way that it may elect different fiscal years. This is typically a simple operation requiring only that certain forms be completed.Investopedia ©
Tax-Sheltered AnnuityA type of annuity that allows an employee to make contributions from his or her income into a retirement plan. The contributions are deducted from the employee's income and, as a result, the contributions and related benefits are not taxed until the employee withdraws them from the plan. Because the employer can also make direct contributions to the plan, the employee gains the benefit of having additional tax-free funds accruing.Investopedia ©
Tax-To-GDP RatioThe ratio of tax collection against the national gross domestic product (GDP). Some states increase the tax-to-GDP ratio by a certain percentage in order to cover deficiencies in the state budget revenue. In states where the tax revenue has gone up significantly, the percentage of tax revenue that is applied towards state revenue and foreign debt is sometimes higher.Investopedia ©
Taxable IncomeTaxable income is the amount of income used to calculate an individual's or a company's income tax due. Taxable income is generally described as gross income or adjusted gross income minus any deductions or exemptions allowed in that tax year. Taxable income includes wages, salaries, bonuses and tips, as well as investment income and unearned income.Investopedia ©
TeaserA document circulated to potential buyers of a specific security that may be offered for sale in the future. The document, often prepared by the investment bank representing the company, details information that is designed to entice potential buyers to buy the security.Investopedia ©
Tech StreetA term used in the financial markets and the press to refer to the technology sector. Companies like Intel, Microsoft, Apple and Dell are all considered to be part of Tech Street.Investopedia ©
Technical AnalysisA method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity.Investopedia ©
Technical DefaultA deficiency in a loan agreement that arises not from a failure to make payments as promised but from a failure to uphold some other aspect of the loan terms. Technical default indicates that the borrower may be in financial trouble and can trigger in increased in a loan's interest rate, foreclosure or other negative events.Investopedia ©
Technical Skills1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as well as other specific tasks. Those with technical skills are often referred to as "technicians" in their chosen field, i.e. audio technicians, electronics technicians, engineering technicians, etc. Microsoft Corporation even offers accreditation as a Microsoft Certified Desktop Support Technician (MCDST).
2. Technical skills could also refer to the ability of a certain type of stock trader which uses technical analysis to buy and sell stocks. Technical analysis uses charts and trends to look at historical prices. Technical skills in this context would be a slang phrase meaning the person was skilled at technical analysis.
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TechnocracyA form of government where decision-makers are chosen for a governing office based on their technical expertise and background. A technocracy differs from a traditional democracy in that individuals elected to a leadership role are chosen through a process that emphasizes their relevant skills and proven performance, as opposed to whether or not they fit the majority interests of a population. Decisions made by technocrats are based on information derived from methodology rather than opinion.Investopedia ©
Temporal MethodA method of foreign currency translation that uses exchange rates based on the time assets and liabilities are acquired or incurred. The exchange rate used also depends on the method of valuation that is used. Assets and liabilities valued at current costs use the current exchange rate and those that use historical exchange rates are valued at historical costs.Investopedia ©
Temporary DefaultA bond rating that suggests the issuer might not make all of the required interest payments, but is taking actions to avoid a full default. Temporary default describes the credit worthiness of a debt issuer that has a high likelihood of defaulting on the debt, but is working to meet the payment obligations in the contract. This situation indicates a potential default of principal, interest or both. Investors in these bonds might only see a delay in payment. However, if the temporary default continues for long enough, the credit rating of the issuer could be negatively affected in a permanent manner.Investopedia ©
Tenants in Common (TIC)The co-owners of an undivided interest in real property. Tenants in common each own a separate and undivided interest in the same real property and each has an equal right to the possession and use of the property. Upon the death of one tenant, his or her undivided interest passes to heirs through a probate proceeding; the interest does not pass to another tenant in common unless the surviving co-owner is an heir or a purchaser.Investopedia ©
TenbaggerA stock whose value increases 10 times its purchase price. This expression was coined by Peter Lynch, one of the greatest investors of all time, in his book "One Up On Wall Street" (1989).Investopedia ©
Tequila EffectInformal name given to the impact of the 1994 Mexican economic crisis on the South American economy. The Tequila Effect occurred because of a sudden devaluation in the Mexican peso, which then caused other currencies in the region (the Southern Cone and Brazil) to decline. The falling peso was propped up by US$50 billion loan granted by then U.S. President Bill Clinton. Also referred to as the "Mexican Shock".Investopedia ©
Term DepositA term deposit is a deposit held at a financial institution that has a fixed term. These are generally short-term with maturities ranging anywhere from a month to a few years. When a term deposit is purchased, the lender (the customer) understands that the money can only be withdrawn after the term has ended or by giving a predetermined number of days notice. These types of financial products are sold by banks, thrift institutions and credit unions.Investopedia ©
Terminal Value - TVThe value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as interest rates and the current value of the asset, and assuming a stable growth rate. In addition to bond and asset applications, terminal value can also refer to the value of an entire company at a specified future valuation date. Two common approaches are used to evaluate the terminal value of an asset: the "perpetuity growth model" and the "exit approach."
Also called continuing value or horizon value.
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Terminal YearThe year in which an individual dies, in the context of estate planning and taxation. Terminal year is used in estate planning and taxation because special tax rules and handling of income and assets may apply during the taxpayer's final year. In Canada, the terminal year refers to the portion of the calendar year during which the individual was living, from the first of the calendar year (January 1) up to the person's date of death.Investopedia ©
Texas RatioA ratio developed by Gerald Cassidy and other analysts at RDC Capital Markets to measure the credit problems of particular banks or regions of banks. The Texas ratio takes the amount of a bank's non-performing assets and loans, as well as loans delinquent for more than 90 days, and divides this number by the firm's tangible capital equity plus its loan loss reserve. A ratio of more than 100 (or 1:1) is considered a warning sign.Investopedia ©
There Ain't No Such Thing As A Free Lunch - TANSTAAFLAn acronym that attempts to describe the cost of decision making and consumption. "There ain't no such thing as a free lunch" (TANSTAAFL) expresses the idea that even if something seems like it is free, there is always a cost, no matter how indirect or hidden. In finance, TANSTAAFL refers to the opportunity cost paid to make a decision. The decision to consume one product usually comes with the trade-off of giving up the consumption of something else. Also known as "there is no such thing as a free lunch" (TINSTAAFL).Investopedia ©
Three-Year RuleSection 2035 of the tax code, which stipulates that assets that have been gifted through an ownership transfer, or assets for which the original owner has relinquished power, are to be included in the gross value of the original owner's estate if the transfer took place within three years of his or her death. If gifted assets do not meet the necessary requirements, the value of the assets is added to the value of the estate at the time of the original owner's death, increasing its value and the estate taxes imposed on it.Investopedia ©
Through FundA type of target-date retirement fund whose asset allocation includes higher risk and potentially higher return investments "through" the fund's target date and beyond. A "through" fund might make sense for individuals who only need to sell a small percentage of their investments each year to meet their retirement living expenses and who want to continue investing during their retirement years.Investopedia ©
ThroughputIn business, the rate at which an organization reaches a given goal. Throughput is generally viewed as the rate a business is able to produce a product or service for a given unit of time. Businesses with high throughput (output) levels are able to be more competitive than lower throughput firms because they are able to produce a given product or service more efficiently.Investopedia ©
Tier 1 CapitalA term used to describe the capital adequacy of a bank. Tier I capital is core capital, this includes equity capital and disclosed reserves. Equity capital includes instruments that can't be redeemed at the option of the holder.Investopedia ©
Tier 1 Leverage RatioThe relationship between a banking organization's core capital and total assets. The Federal Reserve develops capital adequacy guidelines for bank holding companies. The Tier 1 leverage ratio is calculated by dividing Tier 1 capital ratio by the firm's average total consolidated assets. The Tier 1 leverage ratio is an evaluative tool to help determine the capital adequacy and to place constraints on the degree to which a banking firm can leverage its capital base.Investopedia ©
Tier 2 CapitalOne of two categories by which a bank's capital is divided. Tier 2 capital is supplementary bank capital that includes items such as revaluation reserves, undisclosed reserves, hybrid instruments and subordinated term debt. A bank's reserve requirements include its Tier 2 capital in its calculation, but it is considered less reliable than its Tier 1 capital. In the United States, the capital requirement for banks is, in part, based on the weighted risk associated with the bank's assets. Components of Tier 2 Capital can be split into two levels: upper and lower. Upper Tier 2 maintains characteristics of being perpetual, senior to preferred capital and equity; having deferrable and cumulative coupons; and its interest and principal can be written down. Lower Tier 2 is relatively cheap for banks to issue; has coupons not deferrable without triggering default; and has subordinated debt with a maturity of a minimum of 10 years.Investopedia ©
Tier 3 CapitalTertiary capital held by banks to meet part of their market risks, that includes a greater variety of debt than tier 1 and tier 2 capitals. Tier 3 capital debts may include a greater number of subordinated issues, undisclosed reserves and general loss reserves compared to tier 2 capital. Tier 3 capital is used to support market risk, commodities risk and foreign currency risk. To qualify as tier 3 capital, assets must be limited to 250% of a bank's tier 1 capital, be unsecured, subordinated and have a minimum maturity of two years.Investopedia ©
Tiger Cub EconomiesThe four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that these economies are on a similar, albeit slower, growth trajectory as the original Asian tigers: Hong Kong, Singapore, South Korea and Taiwan.Investopedia ©
Tiger EconomyA nickname given to the economies of Southeast Asia. Some of the tigers are Indonesia, Singapore, Malaysia, Thailand, South Korea and China.Investopedia ©
Time DecayThe ratio of the change in an option's price to the decrease in time to expiration. Since options are wasting assets, their value declines over time. As an option approaches its expiry date without being in the money, its time value declines because the probability of that option being profitable (in the money) is reduced. Also known as "theta" and "time-value decay".Investopedia ©
Times Interest Earned - TIEA metric used to measure a company's ability to meet its debt obligations. It is calculated by taking a company's earnings before interest and taxes (EBIT) and dividing it by the total interest payable on bonds and other contractual debt. It is usually quoted as a ratio and indicates how many times a company can cover its interest charges on a pretax basis. Failing to meet these obligations could force a company into bankruptcy. Also referred to as "interest coverage ratio" and "fixed-charged coverage".Investopedia ©
Tip From A DipAdvice from a person who claims to have inside information, such as substantially higher than expected earnings or government approval of corporate mergers, that will materially impact a stock's price but actually doesn't.Investopedia ©
Tobin TaxA means of taxing spot currency conversions that was originally suggested by American economist James Tobin (1918-2002). The Tobin tax was developed with the intention of penalizing short-term currency speculation, and to place a tax on all spot conversions of currency. Rather than a consumption tax paid by consumers, the Tobin tax was meant to apply to financial sector participants as a means of controlling the stability of a given country's currency.Investopedia ©
Toehold PurchaseA purchase of less than 5% of a target company's outstanding stockmade by an acquiring company. A toehold purchase of just under 5%, while not a significant stake in a firm, allows the shareholders a "toe-holds" grip on the company and its decision making. In the instance of a shareholdervote, toehold shareholders hold a significant place in such votesInvestopedia ©
TombstoneA written advertisement placed by investment bankers in a public offering of a security. It gives basic details about the issue and, in order of importance, the underwriting groups involved in the deal.Investopedia ©
TontineA system for raising capital in which individuals pay into a common pool of money, and then receive a dividend based upon their share and the performance of investments made with the pooled money. The principle invested in the tontine is never paid back to the investor; rather the investor receives dividends until death. If a "shareholder" dies, his or her shares are divided up among the surviving investors.Investopedia ©
Too Big To FailThe idea that a business has become so large and ingrained in the economy that a government will provide assistance to prevent its failure. "Too big to fail" describes the belief that if an enormous company fails, it will have a disastrous ripple effect throughout the economy.Investopedia ©
Top HoldingsThe highest volume of publicly traded assets held by an individual, company or fund. These publicly traded assets may include company stock, mutual funds or other investment vehicles. Top holdings are typically determined by what percentage their value represents within the portfolio. By looking at the top holdings of, say, a mutual fund, investors can often gain insights into the trading strategy that is being employed.Investopedia ©
Top-Down InvestingAn investment approach that involves looking at the "big picture" in the economy and financial world and then breaking those components down into finer details. After looking at the big picture conditions around the world, the different industrial sectors are analyzed in order to select those that are forecasted to outperform the market. From this point, the stocks of specific companies are further analyzed and those that are believed to be successful are chosen as investments.Investopedia ©
Topless MeetingA meeting in which participants are not allowed to use laptops. A topless meeting organizer can also ban the use of smartphones, cellphones and other electronic devices. The purpose of this is to create an environment free from distraction, to foster enhanced focus and to generate more discussions.Investopedia ©
Tortoise EconomyAn economy that is growing slowly or not at all over time. The classic example of a tortoise economy is the Japanese economy during the Lost Decade in the 1990s. During that time, interest rates remained near 0% while economic expansion was non-existent.Investopedia ©
Tortoise RallyIn financial markets, a tortoise rally is a slow and steady appreciation of prices over time. This is in contrast to more volatile rallies where prices rise and fall quickly while maintaining a general upward trend.Investopedia ©
Total ReturnTotal return, when measuring performance, is the actual rate of return of an investment or a pool of investments over a given evaluation period. Total return includes interest, capital gains, dividends and distributions realized over a given period of time. Total return accounts for two categories of return: income including interest paid by fixed-income investments, distributions or dividends and capital appreciation, representing the change in the market price of an asset.Investopedia ©
Tracking ErrorA divergence between the price behavior of a position or a portfolio and the price behavior of a benchmark. This is often in the context of a hedge or mutual fund that did not work as effectively as intended, creating an unexpected profit or loss instead.Investopedia ©
Trade CreditAn agreement where a customer can purchase goods on account (without paying cash), paying the supplier at a later date. Usually when the goods are delivered, a trade credit is given for a specific amount of days such as 30, 60 or 90 days. Jewelry businesses sometimes extend credit to 180 days or longer. Basically, this is a credit a company gives to another for the purchase of goods and services.Investopedia ©
Trade SanctionA trade penalty imposed by one nation onto one or more other nations. Sanctions can be unilateral, imposed by only one country on one other country, or multilateral, imposed by one or more countries on a number of different countries. Often allies will impose multilateral sanctions on their foes.Investopedia ©
Trade Volume Index - TVIA technical indicator that measures the amount of money flowing in and out of an asset. Unlike many technical indicators, the TVI is generally created using intraday price data. The underlying assumption of this indicator is that there is buying pressure when the price trades near the asking price and selling pressure when it trades near the bid.Investopedia ©
Trading HaltA temporary suspension in the trading of a particular security on one or more exchanges, usually in anticipation of a news announcement or to correct an order imbalance. A trading halt may also be imposed for purely regulatory reasons. During a trading halt, open orders may be canceled and options may be exercised.Investopedia ©
Trailing Twelve Months - TTMThe timeframe of the past 12 months used for reporting financial figures. A company's trailing 12 months is a representation of its financial performance for a 12-month period, but typically not at its fiscal year end. Since quarterly reports rarely report how the company has done in the past 12 months, TTM tends to be calculated manually or found on various websites.Investopedia ©
Trans-Pacific Partnership (TPP)The Trans-Pacific Partnership is a proposed free trade agreement linking the United States and 11 other Pacific Rim economies. While all 12 nations have signed the agreement and the U.S. Congress narrowly granted the president fast-track authority in 2015, the current outlook for the deal's ratification is uncertain, as domestic politics in the U.S. and elsewhere is increasingly sour on trade. Investopedia ©
Transatlantic Trade and Investment Partnership (TTIP)The proposed Transatlantic Trade and Investment Partnership is a comprehensive trade deal between the European Union and the United States, with the aim to promote trade and boost economic growth. If the partnership is finalized, it will open a market among over 800 million consumers and become the biggest trade agreement ever negotiated. The negotiations by the European Commission and the Executive Branch in the U.S. are ongoing, and few specifics about the deal have been made public, aside from the general objectives. The agreement was set to be finalized in 2014, but is now estimated to take until 2019-2020, which means the next President of the United States will inherit the negotiations.Investopedia ©
Transfer PriceA transfer price is the price at which divisions of a company transact with each other, such as the trade of supplies or labor between departments. Transfer prices are used when individual entities of a larger multi-entity firm are treated and measured as separately run entities. A transfer price can also be known as a transfer cost.Investopedia ©
Treasury Bill - T-BillA Treasury bill (T-Bill) is a short-term debt obligation backed by the U.S. government with a maturity of less than one year, sold in denominations of $1,000 up to a maximum purchase of $5 million. T-bills have various maturities and are issued at a discount from par. When an investor purchases a T-Bill, the U.S. government writes an IOU; investors do not receive regular payments as with a coupon bond, but a T-Bill pays an interest rate.Investopedia ©
Treasury Bond - T-BondA marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest payments semi-annually and the income that holders receive is only taxed at the federal level.Investopedia ©
Treasury BudgetData released by the U.S. Treasury on a monthly basis that accounts for the surpluses or deficits of the federal government. Treasury budget data tracks the changes in monthly balances as an indicator of budget trends and the direction of fiscal policy. The annual Treasury budget process starts in January and is usually proposed in April as the President's Budget.Investopedia ©
Treasury Inflation Protected Securities - TIPSA treasury security that is indexed to inflation in order to protect investors from the negative effects of inflation. TIPS are considered an extremely low-risk investment since they are backed by the U.S. government and since their par value rises with inflation, as measured by the Consumer Price Index, while their interest rate remains fixed. Interest on TIPS is paid semiannually. TIPS can be purchased directly from the government through the TreasuryDirect system in $100 increments with a minimum investment of $100 and are available with 5-, 10-, and 20-year maturities.Investopedia ©
Treasury Note (US)A marketable U.S. government debt security with a fixed interest rate and a maturity between one and 10 years. Treasury notes can be bought either directly from the U.S. government or through a bank. When buying Treasury notes from the government, you can either put in a competitive or noncompetitive bid. With a competitive bid, you specify the yield you want; however, this does not mean that your bid will be approved. With a noncompetitive bid, you accept whatever yield is determined at auction.Investopedia ©
Treasury Stock (Treasury Shares)The portion of shares that a company keeps in their own treasury. Treasury stock may have come from a repurchase or buyback from shareholders; or it may have never been issued to the public in the first place. These shares don't pay dividends, have no voting rights, and should not be included in shares outstanding calculations.Investopedia ©
Treasury YieldThe return on investment, expressed as a percentage, on the U.S. government's debt obligations (bonds, notes and bills). Looked at another way, the Treasury yield is the interest rate the U.S. government pays to borrow money for different lengths of time. Treasury yields don't just influence how much the government pays to borrow and how much investors earn by investing in this debt, however; they also influence the interest rates individuals and businesses pay to borrow money to buy real estate, vehicles and equipment. Treasury yields also tell us how investors feel about the economy. The higher the yields on 10-, 20- and 30-year Treasuries, the better the economic outlook.Investopedia ©
TriageA process-management term predominantly seen in hospital and healthcare settings that can also apply to different types of business process or workflow situations. Triage refers to the practice of dividing incoming work or customers into different levels of priority so that the highest-priority issues are handled first, while lower-priority issues are stationed lower on the to-do list.Investopedia ©
Trial or Test ShipmentA request made by importers or traders to "test" the product made under the first shipment of a contract. Many suppliers do not accept this request as it can camouflage the buyer's intention to get better prices on small quantities ordered, which would be followed by a formal cancellation of the contract. If the test or trial shipment is really justifiable, smart sellers would price the shipments differently offering a price compensation or discount upon the delivery of the last shipment in the contract. This practice would discourage "sting" operations and real importers would not reject the proposition of different prices.World Vision or Others
Trickle-Down EffectA phenomenon where an advertisement is rapidly disseminated by word of mouth or by viral marketing. The trickle-down effect works when an ad is so compelling, either because of its uniqueness, humor, entertainment value or other outstanding trait, that people are excited to share it with their friends, family and coworkers.Investopedia ©
Trickle-Down TheoryTrickle-down economics, or "trickle-down theory," argues for income and capital gains tax breaks or other financial benefits to large businesses, investors and entrepreneurs in order to stimulate economic growth. The argument hinges on two assumptions: all members of society benefit from growth; and growth is most likely to come from those with the resources and skills to increase productive output.Investopedia ©
Trillion Dollar CoinA trillion dollar coin is a theoretical coin that could be legally minted because of a United States law that allows the Treasury to produce platinum coins of any denomination. The concept of creating this platinum coin first came about in 2011 in an effort to solve the issue of the debt crisis in the U.S.Investopedia ©
Triple WitchingAn event that occurs when the contracts for stock index futures, stock index options and stock options all expire on the same day. Triple witching days happen four times a year on the third Friday of March, June, September and December. This phenomenon is sometimes referred to as "freaky Friday".Investopedia ©
Troubled Asset Relief Program - TARPA government program created for the establishment and management of a Treasury fund, in an attempt to curb the ongoing financial crisis of 2007-2008. The TARP gives the U.S. Treasury purchasing power of $700 billion to buy up mortgage backed securities (MBS) from institutions across the country, in an attempt to create liquidity and un-seize the money markets. The fund was created by a bill that was made law on October 3, 2008 with the passage of H.R. 1424 enacting the Emergency Economic Stabilization Act of 2008. The Treasury will be given $250 billion immediately, and the President must certify additional funds as they are needed. The additional funds will be distributed as $100 billion, and then as the final $350 billion is given, Congress has the right to not approve the additional amounts.Investopedia ©
True Cost EconomicsAn economic model that seeks to include the cost of negative externalities into the pricing of goods and services. Supporters of this type of economic system feel products and activities that directly or indirectly cause harmful consequences to living beings and/or the environment should be accordingly taxed to reflect the somewhat hidden costs.Investopedia ©
TrumpcareTrumpcare is the colloquial name for the American Health Care Act (AHCA), a proposed replacement for the Affordable Care Act – commonly known as Obamacare – that House Republican leadership unveiled on March 6, 2017. This proposal was also known as "Ryancare," since it was initially spearheaded by Republican Speaker of the House Paul Ryan. President Donald Trump lent his support of the plan the day after it was made public, and he pressured wavering Republican lawmakers to vote for it. That push was unsuccessful, however. The House delayed a vote on the bill on March 23, the seventh anniversary of Obamacare's signing, when Republicans were unable to gain sufficient support for it; they indefinitely pulled the proposal the following day. Speaker Paul Ryan told reporters following the decision, "Obamacare is the law of the land" and said the party would "move on to the rest of our agenda." Obamacare passed in 2010 without a single Republican vote in the House or Senate, and Republicans tried an estimated 62 times – according to MSNBC – to repeal the law during the Obama administration. Trump campaigned on a promise to "repeal and replace" the law, calling it "dead" and "a disaster." Despite their unified determination to replace Obamacare, however, Republicans had trouble building support for concrete legislation. Trump campaigned on promises that were apparently drawn from a bill drafted by Health and Human Services Secretary Tom Price. Some of these did not appear in the AHCA bill, however, leading Trump to tweet on March 7, "Don't worry, getting rid of state lines, which will promote competition, will be in phase 2 & 3 of healthcare rollout." The AHCA met with stiff opposition from the ultraconservative House Freedom caucus, whose 29 members could easily defeat the bill (the Republicans could only lose between 21 and 23 votes and still win the vote, depending on the count). Party leaders amended the bill to reflect some of the caucus' demands, running the risk of alienating moderate Republicans by doing so. The Koch brothers, influential Republican donors, promised to donate only to 2018 campaigns of representatives who vote against the AHCA.Investopedia ©
TrumpflationTrumpflation is the inflation that might appear during Donald J. Trump's U.S. presidential administration. Though Trumpflation is still only speculative, markets have already signaled they believe Trump will spur inflation in the U.S. dollar.Investopedia ©
TrumponomicsTrumponomics describes the economic policies of U.S. President-elect Donald Trump. Trump won the November 8, 2016 presidential election on the back of bold economic plans that include large personal and corporate tax cuts, restructuring of U.S. trade deals and large fiscal stimulus for the U.S. economy on infrastructure and defense.Investopedia ©
Trust FundA trust fund is a fund comprised of a variety of assets intended to provide benefits to an individual or organization. The trust fund is established by a grantor to provide financial security to an individual, most often a child or grandchild - or organizations, such as a charity or other non-profit organization.Investopedia ©
Truth in Lending Act (TILA)A federal law enacted in 1968 with the intention of protecting consumers in their dealings with lenders and creditors. The Truth in Lending Act was implemented by the Federal Reserve through a series of regulations. The most important aspects of the act concern the pieces of information that must be disclosed to a borrower prior to extending credit: annual percentage rate (APR), term of the loan and total costs to the borrower. This information must be conspicuous on documents presented to the consumer before signing, and also possibly on periodic billing statements.Investopedia ©
Turing TestA measure of determining whether a machine can demonstrate human intelligence in thoughts, words, or actions. The Turing Test was proposed by Alan Turing in 1950 and is the basis for the philosophy behind Artificial Intelligence (AI).Investopedia ©
TurkeySlang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities that realize significant losses and unsuccessful initial public offerings (IPOs) could all be called "turkeys".Investopedia ©
Turkmenistan Manat- TMTThe official currency of the country of Turkmenistan. The Turkmenistan manat is divided into 100 tennesi. The manat was introduced in 1993 to replace the prior unit of currency used in Turkmenistan, the Russian ruble. Later in 2009, the new manat was placed into circulation, with an exchange rate of 5,000 old manat to one new manat.Investopedia ©
Turnkey CostCosts and expenditures that must be covered before a product or service is ready to be sold and used. A turnkey cost may be a direct cost, such as materials, or an indirect cost, such as administrative expenses and product engineering. Turnkey costs are often quoted by manufacturers and real estate developers to describe the costs required to complete a particular project.Investopedia ©
TwinternshipAn internship in which the intern is charged with using social media to drive attention to a company and its products. A twinternship is usually an unpaid, temporary position in which a "twintern" will use popular social media outlets, such as Facebook and Twitter, to publicize products and promotions for a business. Also known as a "brand advocate." Investopedia ©
Two And TwentyTwo and twenty is a type of compensation structure that hedge fund managers typically employ in which part of compensation is performance-based. This phrase refers to how hedge fund managers charge a flat 2% of total asset value as a management fee and an additional 20% of any profits earned.Investopedia ©
U-Shaped RecoveryA type of economic recession and recovery that resembles a "U" shape in charting. Specifically, a U-shaped recovery represents the shape of the chart of certain economic measures, such as employment, GDP and industrial output. A U-shaped recovery involves a gradual decline in these metrics followed by a gradual rise back to its previous peak. Compared to a V-shaped recovery, the U-shaped recovery takes longer to reach levels seen prior to the start of the recession.Investopedia ©
U.S. Government Credit ScoreGenerally speaking, the United States has a very good record of paying its bills on time. The national government has defaulted on its debts just twice - back in 1790 (under the huge burden of debts incurred in the war for independence) and again in 1933 when the government explicitly changed the rules and unilaterally decided it did not have to honor the obligation to repay its debts in gold. Along the way, the federal government has faced a few moments where creative accounting had to be employed. Nevertheless, for all of its faults and flaws, the United States scores well in terms of paying what it owes in interest and principal and doing so on time. The larger the amount of outstanding debt, the worse the score, though this is mitigated by a borrower's ability to pay. By absolute standards, the United States has a huge amount of debt (over $14 trillion at the national level). However, looking at public debt as a percentage of GDP, the U.S. clocks in at about 59% - in the upper third of countries, but much better off than the likes of Japan, France, Singapore, Canada and even Germany. It should be noted, though, that this figure refers to debt held by the public, and does not include external debt. Using some of the online credit score estimators, and making some assumptions about how to translate government performance into numbers that make sense for applications designed for regular people, it is possible to at least estimate a score. In particular, it was assumed that the United States would have a tremendously large amount of outstanding debt and debt instruments, but a long history of paying on time. Perhaps shockingly, most of these estimators come up with a score of around 650 (with a range of 625 to 720). That is basically in the middle of the range, and consistent with the recent rating on U.S. debt of A+ by China's Dagong Global, the only non-U.S. credit rating agency that seems to draw much interest or credibility. By comparison, countries like Norway, Switzerland and Singapore score an AAA from Dagong, and the United States is largely on par with Japan, France and Britain in Dagong's scoring.Investopedia ©
U.S. House Financial Services CommitteeThe congressional committee responsible for monitoring, writing legislation and enforcing existing laws that affect the financial services and housing-related industries in the U.S. Committee members - who are elected members of the U.S. House of Representatives - oversee all businesses and organizations involved in securities, insurance, banking, housing and real estate. It also has oversight for several federal departments, agencies, government-sponsored enterprises (GSEs) and internationally-affiliated organizations including: Fannie Mae (Federal National Mortgage Association), Federal Deposit Insurance Corporation (FDIC), Federal Reserve Bank, Freddie Mac (Federal Home Loan Mortgage Corporation), International Monetary Fund and the U.S. Department of Housing and Urban Development.Investopedia ©
U.S. Treasury & Agency BondsU.S. Treasury & Agency Bonds are used 1) to pay for a wide range of government activities; and 2) to pay off national debt.Farmers & Merchants Bank ©
UCPThe Uniform Customs and Practice for Documentary Credits (UCP) is a set of rules on the issuance and use of letters of credit. This practice has been standardized by the ICC (International Chamber of Commerce) by publishing the UCP in 1933 and subsequently updating it throughout the years. The ICC has developed and molded the UCP by regular revisions, the current version being the UCP600Wikipedia ©
USDA Streamlined RefinancingA mortgage-refinancing option offered by the United States Department of Agriculture (USDA). USDA streamlined refinancing is available to homeowners who purchased their home using a Section 502 loan, which is a loan available to low-income individuals and households in rural areas. The refinancing option is available in all U.S. states and territories.Investopedia ©
UltimogenitureA system of inheritance whereby the youngest son gains possession of his deceased father's estate. Ultimogeniture was popular in many rural areas of medieval England, as well as parts of France, but it is rare today. Much more common is/was the tradition of primogeniture, or inheritance by the firstborn son.Investopedia ©
Ultra ETFA class of exchange-traded funds (ETF) that employs leverage in an effort to achieve double the return of a set benchmark. The first ultra ETFs were launched in 2006 and the class has grown to include different ETFs with underlying benchmarks ranging from broad market indexes, such as the S&P 500 and Russell 2000, to specific sectors, such as technology, healthcare and basic materials.Investopedia ©
Unamortized Bond DiscountAn accounting methodology for certain bonds. The unamortized bond discount is the difference between the par of a bond - the value of the bond at maturity - and the proceeds from the sale of the bond by the issuing company, less the portion that has already been amortized on the profit and loss statement.Investopedia ©
UnbankedA slang term for people who do not use banks or banking institutions in any capacity. Unbanked persons generally pay for things in cash or else purchase money orders. Unbanked persons also typically do not have insurance, pensions or any other type of professional money-related services.Investopedia ©
Unconsolidated SubsidiaryA company that is owned by a parent company, but whose individual financial statements are not included in the consolidated or combined financial statements of the parent company to which it belongs. Instead, this type of company appears in the combined financial statement as an investment.Investopedia ©
Underground EconomyThe underground economy refers to illegal economic activity. Transactions in the underground economy are illegal either because the good or service being traded is itself illegal or because an otherwise licit transaction does not comply with government reporting requirements. The first category includes drugs and prostitution in most jurisdictions. The second includes untaxed labor and sales, as well as smuggling goods to avoid duties. The underground economy is also referred to as the shadow economy, black market (not gray market) and informal economy.Investopedia ©
Underwater MortgageA home purchase loan with a higher balance than the free-market value of the home. This situation prevents the homeowner from selling the home unless s/he has cash to pay the loss out of pocket. It also prevents the homeowner from refinancing in most cases. Thus, if the homeowner wants to sell the home because s/he can't afford the mortgage payments anymore, perhaps because of a job loss, the home will fall into foreclosure unless the borrower is able to renegotiate the loan.Investopedia ©
UnderweightUnderweight refers to a situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security''s weight in the underlying benchmark portfolio. This often occurs when a portfolio is actively managed and underweighting a security may allow the portfolio manager to achieve returns greater than that of the benchmark.

2. An analyst''s opinion regarding the future performance of a security. Underweight will usually mean that the security is expected to underperform either its industry, sector, or even the market altogether.
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UnderwriterA company or other entity that administers the public issuance and distribution of securities from a corporation or other issuing body. An underwriter works closely with the issuing body to determine the offering price of the securities, buys them from the issuer and sells them to investors via the underwriter's distribution network.Investopedia ©
Underwriting1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt).
2. The process of issuing insurance policies.
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Undisclosed ReservesThe unpublished or hidden reserves of a financial institution that may not appear on publicly available documents such as a balance sheet, but are nonetheless real assets, which are accepted as such by most banking institutions. Undisclosed Reserves are generally described as such only in the banking industry as it applies to capital requirements and are designated as Tier 2 capital along with revaluation reserves and general provisions. Tier 1 or, core, capital is mainly composed of stockholders' equity in the company.Investopedia ©
Unearned InterestInterest that has been collected on a loan by a lending institution but has not yet been counted as income (or earnings). Instead, it is initially recorded as a liability. If the loan is paid off early, the unearned interest portion must be returned to the borrower.Investopedia ©
Unearned RevenueWhen an individual or company receives money for a service or product that has yet to be fulfilled. Unearned revenue can be thought of as a "pre-payment" for goods or services which a person or company is expected to produce to the purchaser. As a result of this prepayment, the seller now has a liability equal to the revenue earned until delivery of the good or service.Investopedia ©
Unfair Claims PracticeThe improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims practices an insurer tries to reduce its costs. However, this is illegal in many jurisdictions.Investopedia ©
UnicornA unicorn is a start-up company valued at over $1 billion.Canadian tech unicorns are known as narwhals. A decacorn is a word used for those companies over $10 billion, while hectocorn is the appropriate term for such a company valued over $100 billion. According to VentureBeat, there were 229 unicorns as of January 2016. The largest unicorns included Uber, Xiaomi, Airbnb, Palantir, Snapchat, Dropbox and Pinterest. As of October 2015, Uber was valued by Fortune at US$51 billion.
Bill Gurley, a partner at Benchmark predicted in March 2015 and earlier that the rapid increase in the number of unicorns may presage what he has termed a "risk bubble" that will eventually burst, leaving in its wake what he terms dead unicorns.
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Uninsurable RiskA hazard or condition that has either a high likelihood of loss, or where the insurance would be considered against the law. An uninsurable risk is a risk that an insurance company is unwilling to undertake because the probability of loss is high, or because the coverage would be related to illegal or criminal activity, or be an activity that is prohibited by public policy. Insurance companies limit their losses by not taking on certain risks that are very likely to soon result in a loss.Investopedia ©
Unissued StockStock that a company is authorized to issue but has never been sold to investors. Unissued stock is typically not relevant to current stockholders, except that it presents the possibility of dilution of existing ownership if additional stock is sold in the future. Unissued stock is different from treasury stock, since treasury stock has been sold to investors but has subsequently been bought back by the company.Investopedia ©
Unit Investment Trust - UITAn investment company that offers a fixed, unmanaged portfolio, generally of stocks and bonds, as redeemable "units" to investors for a specific period of time. It is designed to provide capital appreciation and/or dividend income. Unit investment trusts are one of three types of investment companies; the other two are mutual funds and closed-end fundsInvestopedia ©
Universal Healthcare CoverageAn organized healthcare system that provides healthcare benefits to all persons in a specified region. Many countries, such as Canada and Germany, provide universal coverage to all of the country's inhabitants, meaning that all residents are covered for basic healthcare services. In addition, an individual cannot be denied healthcare as long as he or she is a legal resident of the country that offers the universal coverage. Also called universal healthcare, or just universal coverage. Investopedia ©
Unlevered BetaA type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta of a company without any debt. Unlevering a beta removes the financial effects from leverage.Investopedia ©
Unlimited Tax BondA municipal bond that is backed by the pledge of the issuer (generally a city or municipality) to raise taxes, without limit, to service the debt until it is repaid. Because of this feature, unlimited tax bonds may have higher credit ratings and offer lower yields than other comparable municipal bonds of the same maturity.Investopedia ©
Unlisted SecurityA financial instrument that is not traded on an exchange, but through the over-the-counter (OTC) market. Unlisted securities are also called OTC securities. Market makers facilitate the buying and selling of unlisted securities in the OTC market. Because they are not exchange traded, unlisted securities can be less liquid than listed securities.Investopedia ©
Unregistered Shares Unregistered shares have fewer investor protections and different risks compared to registered securities. As a result, companies can only sell unregistered shares to ""qualified investors."" Qualified investors are comprised of high net worth ($1 million or more) and/or high-income ($200,000/yr. or more for individuals, $300,000/yr. or more for married couples) investors that the SEC considers savvy enough to make such investments. In the past, soliciting or advertising unregistered shares was prohibited, but in 2013, the SEC adopted Rule 506(c), allowing certain unregistered securities to be solicited and advertised.Investopedia ©
Unsecured DebtA loan not backed by an underlying asset. Unsecured debt includes credit card debt, medical bills, utility bills and any other type of loan or credit that was extended without a collateral requirement. It presents a high risk for lenders since they may have to sue to get the money they're owed if the borrower doesn't repay the full amount owed. As a result of this high risk, unsecured debt tends to come with a high interest rate. Unsecured debt can be wiped out by bankruptcy, but taking this dramatic step makes it more difficult to obtain financing for the next seven to 10 years.Investopedia ©
Unsystematic RiskCompany- or industry-specific hazard that is inherent in each investment. Unsystematic risk, also known as "nonsystematic risk," "specific risk," "diversifiable risk" or "residual risk," can be reduced through diversification. By owning stocks in different companies and in different industries, as well as by owning other types of securities such as Treasuries and municipal securities, investors will be less affected by an event or decision that has a strong impact on one company, industry or investment type. Examples of unsystematic risk include a new competitor, a regulatory change, a management change and a product recall.Investopedia ©
Upside Gap Two CrowsA bearish market reversal signal in technical analysis. The upside gap two crows pattern is a three-day formation on candlestick charts that typically develops in the following manner:
Day 1 - A bullish day that continues the uptrend, represented by a long white candlestick, which indicates that the closing price of the index or security is well above the opening price.
Day 2 - A bearish day despite the index or security gapping higher at the open, represented by a small black or colored candlestick.
Day 3 - A second bearish day, with the index or security opening higher than the Day 2 open, but closing below the Day 2 close and above the Day 1 close. This is visually represented by a bigger black or colored candlestick that "engulfs" the Day 2 candlestick.
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Upstairs DealA business deal that is made by upper management, and is generally unknown to lower-level employees until it is publicly announced. The deal is referred to as an "upstairs deal" because executives typically have their offices in the higher floors of an office building. In mergers and acquisitions, an upstairs deal between two companies is more likely to result in a friendly takeover, as opposed to a hostile takeover.Investopedia ©
UpstartAn individual who has risen in social rank and/or economic status but who has yet to be accepted by other individuals in his or her newly found social and economic class. Upstart refers to a person who has had a sudden rise to a new class and lacks the social skills and grace that would be appropriate to the new position. It often implies arrogance or presumptuousness.Investopedia ©
Urban Development Act Of 1970Legislation through the U.S. Department of Housing and Urban Development that introduced the Federal Experimental Housing Allowance Program and Community Development Corporation. The Urban Development Act of 1970 was enacted to establish a national growth policy in the U.S.; to encourage and support sensible growth and development in states, metropolitan regions, counties, cities and towns highlighting new community and inner-city growth; and to amend certain laws regarding housing and urban development. Also known as the Housing and Urban Development Act of 1970. Investopedia ©
Usury LawsRegulations governing the amount of interest that can be charged on a loan. Usury laws specifically target the practice of charging excessively high rates on loans by setting caps on the maximum amount of interest that can be levied. These laws are designed to protect consumers.Investopedia ©
VINX 30A stock index that tracks the 30 largest companies with the most heavily-traded stocks on the Nordic stock exchanges. VINX 30 is denominated in Euros and is an adjustable free-floating index. It tracks stocks that trade on the exchanges in Helsinki, Copenhagen and Stockholm.Investopedia ©
VIX - CBOE Volatility IndexThe ticker symbol for the Chicago Board Options Exchange (CBOE) Volatility Index, which shows the market's expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. This volatility is meant to be forward looking and is calculated from both calls and puts. The VIX is a widely used measure of market risk and is often referred to as the "investor fear gauge". There are three variations of volatility indexes: the VIX tracks the S&P 500, the VXN tracks the Nasdaq 100 and the VXD tracks the Dow Jones Industrial Average.Investopedia ©
VIX OptionA type of non-equity option that uses the CBOE Volatility Index as the underlying asset. This is the first exchange-traded option that gives individual investors the ability to trade market volatility. Trading VIX options can be a useful tool for investors wanting to hedge their portfolios against sudden market declines, as well as to speculate on future moves in volatility.Investopedia ©
Validation PeriodThe amount of time necessary for the premium on an insurance policy to cover the commissions, the cost of investigation, medical exams and other expenses associated with the issuance of the policy. The validation period is the period of time that passes before an insurance product becomes profitable or until the product can start to contribute to surplus. Also known as the break-even period.Investopedia ©
Valium PicnicA market holiday or a slow trading day. A valium picnic, also called a valium holiday, is a slang word used to describe the pace of the day. It is named after Valium, the proprietary name for diazepam, which is a pharmaceutical drug known for causing drowsiness.Investopedia ©
ValuationThe process of determining the current worth of an asset or company. There are many techniques that can be used to determine value, some are subjective and others are objective.Investopedia ©
Valuation PremiumThe rate set by a life insurance company based on the value of the company's policy reserves. The valuation premium is calculated by an insurance company. The company ensures that, first and foremost, it has adequate policy reserves to cover payouts. Once the value of the policy reserves is determined, the insurance company can calculate the valuation premium that will cover its liabilities. In this manner, the insurance company can make sure that it will have the assets necessary to cover all of its policies.Investopedia ©
Value At Risk - VaRValue at risk (VaR) is a statistical technique used to measure and quantify the level of financial risk within a firm or investment portfolio over a specific time frame. This metric is most commonly used by investment and commercial banks to determine the extent and occurrence ratio of potential losses in their institutional portfolios. VaR calculations can be applied to specific positions or portfolios as a whole or to measure firm-wide risk exposure.Investopedia ©
Value InvestingValue investing is an investment strategy where stocks are selected that trade for less than their intrinsic values. Value investors actively seek stocks they believe the market has undervalued. Investors who use this strategy believe the market overreacts to good and bad news, resulting in stock price movements that do not correspond with a company's long-term fundamentals, giving an opportunity to profit when the price is deflated.Investopedia ©
Value PropositionA business or marketing statement that summarizes why a consumer should buy a product or use a service. This statement should convince a potential consumer that one particular product or service will add more value or better solve a problem than other similar offerings.Investopedia ©
Value StockA value stock is a stock that tends to trade at a lower price relative to its fundamentals (e.g., dividends, earnings and sales) and thus considered undervalued by a value investor. Common characteristics of such stocks include a high dividend yield, low price-to-book ratio and/or low price-to-earnings ratio. An easy way to attempt to find value stocks is to use the "Dogs of the Dow" investing strategy by purchasing the 10 highest dividend-yielding stocks on the Dow Jones at the beginning of each year and adjusting the portfolio every year thereafter.Investopedia ©
Vandalism EndorsementAn optional type of coverage that can be added to a basic hazard or property and casualty insurance policy to provide remuneration to the policy holder if his or her property is intentionally damaged by criminals. Vandalism endorsement is designed to protect the property owner and/or tenant against perils such as graffiti and damage caused by forced entry. Buildings that are unoccupied for long periods of time, such as vacant commercial properties and schools, are more susceptible to vandalism and more likely to need this coverage.Investopedia ©
Variable AnnuityAn insurance contract in which, at the end of the accumulation stage, the insurance company guarantees a minimum payment. The remaining income payments can vary depending on the performance of the managed portfolio.Investopedia ©
Variable Universal Life Insurance - VULA form of cash-value life insurance that offers both a death benefit and an investment feature. The premium amount for variable universal life insurance (VUL) is flexible and may be changed by the consumer as needed, though these changes can result in a change in the coverage amount. The investment feature usually includes "sub-accounts," which function very similar to mutual funds and can provide exposure to stocks and bonds. This exposure offers the possibility of an increased rate of return over a normal universal life or permanent insurance policy.Investopedia ©
Veblen GoodGoods that are perceived to be exclusive as long as prices remain high or increase. Veblen goods get their name from economist Thorstein Veblen, who was one of the first to look into and write about conspicuous consumption and the concept of seeking status through consumption. Veblen goods are often referred to as "status symbols".Investopedia ©
Velocity of MoneyThe rate at which money is exchanged from one transaction to another, and how much a unit of currency is used in a given period of time. Velocity of money is usually measured as a ratio of GNP to a country's total supply of money.Investopedia ©
Venture CapitalMoney provided by investors to startup firms and small businesses with perceived long-term growth potential. This is a very important source of funding for startups that do not have access to capital markets. It typically entails high risk for the investor, but it has the potential for above-average returns.Investopedia ©
Venture Capital Trust - VCTA type of publicly listed closed-end fund found in the United Kingdom. A venture capital trust is designed as a way for individual investors to gain access to venture capital investments via the capital markets. A venture capital trust's mandate is to seek out potential venture capital investments in small unlisted firms to generate higher than average risk-adjusted returns for its investors. VCT can be bought sold and subscribed by investors. Numerous venture capital trust are listed on the London Stock Exchange. Investopedia ©
Venture PhilanthropyVenture philanthropy is the application or redirection of principles of traditional venture capital financing to achieve philanthropic endeavors.Investopedia ©
Vertical AnalysisA method of financial statement analysis in which each entry for each of the three major categories of accounts (assets, liabilities and equities) in a balance sheet is represented as a proportion of the total account. The main advantages of vertical analysis is that the balance sheets of businesses of all sizes can easily be compared. It also makes it easy to see relative annual changes within one business.Investopedia ©
Vested Benefit Obligation - VBOThe actuarial present value of pension plan benefits that have vested in employees of an organization. The vested benefit obligation (VBO) is one measure of a pension fund's liability. The VBO only considers benefits that have vested in an employee, as opposed to the accumulated benefit obligation (ABO) which represents the present value of any benefits whether vested or not.Investopedia ©
VestingVesting is the process by which an employee accrues non-forfeitable rights over employer-provided stock incentives or employer contributions made to the employee's qualified retirement plan account or pension plan. Vesting gives an employee rights to employer-provided assets over time, which gives the employee an incentive to perform well and remain with the company. The vesting schedule set up by the company determines when the employee acquires full ownership of the asset. Generally, non-forfeitable rights accrue based on how long the employee has worked there.Investopedia ©
Vice FundA mutual fund that invests in gaming, such as casino operators and gaming equipment, alcohol, tobacco and aerospace/defense sectors. The fund invests in both domestic and foreign-based equities, and holdings range from small cap to mega cap companies. The fund has been in operation since 2002 and focuses on so-called "vices" that are considered by many to be socially irresponsible investments, or "sin stocks". Investopedia ©
VintageA slang term used by mortgage-backed securities (MBS) traders and investors to refer to an MBS that is seasoned over some time period. MBSs typically have maturities around 30 years, and a particular issue's "vintage" will expose the holder to less prepayment and default risk, although this decreased risk also limits price appreciation.Investopedia ©
Vintage YearThe year in which the first influx of investment capital is delivered to a project or company. This marks when capital is contributed by venture capital, private equity fund or a partnership drawing down from its investors.Investopedia ©
Volatility1. A statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security. 2. A variable in option pricing formulas showing the extent to which the return of the underlying asset will fluctuate between now and the option's expiration. Volatility, as expressed as a percentage coefficient within option-pricing formulas, arises from daily trading activities. How volatility is measured will affect the value of the coefficient used.Investopedia ©
Volatility ArbitrageTrading strategies that attempt to exploit differences between the forecasted future volatility of an asset and the implied volatility of options based on that asset. Because options pricing is determined by the volatility of the underlying asset, if the forecasted and implied volatilities differ, there will be a discrepancy between the expected price of the option and its actual market price.Investopedia ©
Volatity RatioA technical indicator used to identify price ranges and breakouts. The volatility ratio uses a true price range to determine a stock's true trading range and is able to identify situations where the price has moved out of this true range.Investopedia ©
Volcker RuleA trading restriction that separates investment banking, private equity, and proprietary trading sections of financial institutions from their consumer lending arms.Investopedia ©
Volumetric Production Payment - VPPA type of structured investment that involves the owner of an oil and gas interest selling a specific volume production in that field or property. The investor receives a stated monthly quota -- often in raw output, which is then marketed by the VPP buyer -- or a specified percentage of the monthly production achieved at the given property. A VPP deal is typically set to expire after a certain length of time or after a specified aggregate total volume of the commodity has been delivered. A VPP interest is considered a non-operating asset, akin to a royalty-payment system. If the producer can't meet the supply quota for a given month (or whatever schedule is used), the unmet portion will be made up for in the next cycle, and so on until the buyer is made financially whole. Buyers could include investment banks, hedge funds, energy companies and insurance companies.Investopedia ©
VommaThe rate at which the vega of an option will react to volatility in the underlying market. It is the second order derivative of the option value with respect to volatility. It demonstrates the convexity of vega. A positive value for vomma indicates that a percentage point increase in volatility will result in an increased option value, known as positive vega convexity. Vomma is part of the group of measures known as the "Greeks" (other measures include delta, gamma and vega) which are used in options pricing. Investopedia ©
Voodoo AccountingAny form of accounting that does not follow principles of conservatism. While there are many methods by which financial statements can be fudged, it always comes down to inflating revenue or hiding expenses. Examples of accounting shenanigans include the big bath, cookie jar accounting and improper recognition of revenue.Investopedia ©
Voodoo Accounting (2)Creative rather than conservative accounting practices. Voodoo accounting employs numerous accounting gimmicks to artificially boost the bottom line by inflating revenue or concealing expenses or both. The origin of the term "voodoo accounting" probably lies in the fact that once the accounting gimmicks come to light, the purported profits disappear like magic. Investor reaction to news that a company has been engaged in voodoo accounting depends on the magnitude of the offense. While minor, one-time accounting gimmicks may be ignored by investors, substantial repeat offenses would affect the company's market value and reputation.Investopedia ©
Vulture Capitalist1. A slang word for a venture capitalist who deprives an inventor of control over his or her own innovations and most of the money the inventor should have made from the invention. 2. A venture capitalist who invests in floundering firms in the hopes that the firms will turn around.Investopedia ©
W-Shaped RecoveryAn economic cycle of recession and recovery that resembles a "W" in charting. A W-shaped recovery represents the shape of the chart of certain economic measures such as employment, GDP, industrial output, etc. A W-shaped recovery involves a sharp decline in these metrics followed by a sharp rise back to the previous peak, followed again by a sharp decline and ending with another sharp rise. The middle section of the W can represent a significant bear market rally or a recovery that was stifled by an additional economic crisis.Investopedia ©
WGC - World Gold CouncilA nonprofit association of the world's leading gold producers, established to promote the use of, and thus demand for, gold through marketing, research and lobbying. Headquartered in Geneva, Switzerland, the WGC covers the markets which comprise about three-quarters of the world's annual gold consumption.Investopedia ©
WSJ Prime RateThe initials stand for the Wall Street Journal, which surveys large banks and publishes the consensus prime rate. The Journal surveys the 30 largest banks, and when three-quarters of them (23) change, the Journal changes its rate, effective on the day the Journal publishes the new rate. It's the most widely quoted measure of the prime rate, which is the rate at which banks will lend money to their most-favored customers. The prime rate will move up or down in lock step with changes by the Federal Reserve BoardInvestopedia ©
Wage-Price SpiralA macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. The wage-price spiral suggests that rising wages increase disposable income, thus raising the demand for goods and causing prices to rise. Rising prices cause demand for higher wages, which leads to higher production costs and further upward pressure on prices.Investopedia ©
Waiver Of SubrogationA special type of endorsement on a property-casualty insurance policy. The Waiver of Subrogation prohibits the insurer from attempting to seek restitution from a third party who causes any kind of loss to the insured. This type of arrangement is allowable under certain circumstances where the insured could be held liable for a claim that is paid.Investopedia ©
Wal-Mart EffectThe economic impact felt by local businesses when a large firm such as Wal-Mart opens a location in the area. The Wal-Mart effect usually manifests itself by forcing smaller retail firms out of business and reducing wages for employees of competitors. Many local businesses oppose the introduction of Wal-Marts into their territories for this reason.Investopedia ©
Walk-Away LeaseA common type of car lease in which the lessee returns the car at the end of the lease period, ending the lease agreement. The lessee bears very little risk under this type of lease agreement because the total costs of ownership (minus maintenance and repair costs) are known in advance. In other words, the lessee does not bear the risk of selling the vehicle at the current market price when the lease is over. Also known as a "closed-end lease".Investopedia ©
Wall Street1. A street in lower Manhattan that is the original home of the New York Stock Exchange. The street is the historic headquarters of the largest U.S. brokerages and investment banks. Many have since relocated to other areas of Manhattan and the United States. Wall Street was named after the wooden wall Dutch colonists built in this area in 1653 to defend themselves from the British and Native Americans. 2. The collective name for the financial and investment community, which includes stock exchanges and large banks, brokerages, securities and underwriting firms, and big businesses. Some people believe that the interests of these big firms contrast those of smaller businesses, or "Main Street".Investopedia ©
Walras' LawAn economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another market so that it balances out. So when examining a specific market, if all other markets are in equilibrium, Walras' Law asserts that the examined market is also in equilibrium. Keynesian economics, by contrast, assumes that it is possible for just one market to be out of balance without a "matching" imbalance elsewhere.Investopedia ©
Wanton DisregardA standard of severe negligence. Wanton disregard is a very serious accusation that indicates that a person behaved extremely recklessly. Wanton disregard is not malicious, but it is more serious than carelessness. Wanton disregard can be used as evidence of gross negligence. In a lawsuit, wanton disregard might result in punitive damages depending on the severity of the situation and state laws.Investopedia ©
War Risk InsuranceA policy that provides financial protection against losses sustained from occurrences such as invasion, insurrection, revolution, military coup and terrorism. Auto, homeowners, renters, commercial property and life insurance policies often have act-of-war exclusions, meaning that they will not pay for losses caused by war-related events. Because war risk may be specifically excluded from a basic insurance policy, it is sometimes possible to purchase a separate war risk insurance policy.Investopedia ©
Wash-Sale RuleAn Internal Revenue Service (IRS) rule that prohibits a taxpayer from claiming a loss on the sale or trade of a security in a wash sale. The rule defines a wash sale as one that occurs when an individual sells or trades a security at a loss, and within 30 days before or after this sale, buys a "substantially identical" stock or security, or acquires a contract or option to do so. A wash sale also results if an individual sells a security, and the spouse or a company controlled by the individual buys a substantially equivalent security.Investopedia ©
Water ETFAn exchange-traded fund that invests in companies operating in industries such as water treatment and purification, water utilities, water monitoring, and broader distribution and retail companies. Water ETFs invest the majority of their assets into publicly traded equities based on an underlying index, which may be created in house or by a third-party market service.Investopedia ©
Waterfall PaymentA type of payment scheme in which higher-tiered creditors receive interest and principal payments, while the lower-tiered creditors receive only interest payments. When the higher tiered creditors have received all interest and principal payments in full, the next tier of creditors begins to receive interest and principal payments.Investopedia ©
Weak ShortsTraders or investors who hold a short position in a stock or other financial asset who will close it out at the first indication of price strength. Weak shorts are typically investors with limited financial capacity, which may preclude them from taking on too much risk on a single short position. A weak short will generally have a tight stop-loss order in place on the short position to cap the loss on the short trade in case it goes against the trader. Weak shorts are conceptually similar to weak longs, but the latter employ long positions.Investopedia ©
Weak SisterAn element that undermines the entire system. Weak sister can either refer to a single individual or a specialized group considered to be the weak link in an integrated process.Investopedia ©
Wealth ManagementWealth management is a high-level professional service that combines financial and investment advice, accounting and tax services, retirement planning and legal or estate planning for one set fee. Clients work with a single wealth manager who coordinates input from financial experts and can include coordinating advice from the client's own attorney, accountants and insurance agent. Some wealth managers also provide banking services or advice on philanthropic activities.Investopedia ©
Wealth PsychologistA wealth psychologist is a mental health professional who specializes in issues relating specifically to wealthy individuals. Wealth psychologists are also called money psychologists or wealth counselors. Wealth psychologists help their ultra-rich clients deal with issues such as the guilt they feel about being wealthy, or advise on inheritance issues and counsel parents on how to raise children who are not spoiled by money.Investopedia ©
Wealth TaxIt is a tax based on the market value of assets that are owned. These assets include, but are not limited to, cash, bank deposits, shares, fixed assets, private cars, assessed value of real property, pension plans, money funds, owner occupied housing and trusts. An ad valorem tax on real estate and an intangible tax on financial assets are both examples of a wealth tax. Although many developed countries choose to tax wealth, the United States has generally favored taxing income.Investopedia ©
Weather DerivativeAn instrument used by companies to hedge against the risk of weather-related losses. The investor who sells a weather derivative agrees to bear this risk for a premium. If nothing happens, the investor makes a profit. However, if the weather turns bad, then the company who buys the derivative claims the agreed amount.Investopedia ©
Weather InsuranceA type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable temperatures or other adverse, measurable weather conditions. Weather insurance is used to insure an expensive event that could be ruined by bad weather, like an outdoor wedding or an outdoor film production.Investopedia ©
Wedding WarrantA warrant that can only be exercised if the host asset, typically a bond or preferred stock, is surrendered. Until the call date of the host asset is reached, the warrant can only be exercised if the holder surrenders an equal amount of host asset. The time period in which the investor has to surrender the equal amount of host asset is set in the warrant itself. After that time has passed, the warrant's holder can buy non-callable bonds. Also known as "harmless warrant" or "wedded warrant."Investopedia ©
Weekend EffectA phenomenon in financial markets in which stock returns on Mondays are often significantly lower than those of the immediately preceding Friday. Some theories that explain the effect attribute the tendency for companies to release bad news on Friday after the markets close to depressed stock prices on Monday. Others state that the weekend effect might be linked to short selling, which would affect stocks with high short interest positions. Alternatively, the effect could simply be a result of traders' fading optimism between Friday and Monday.Investopedia ©
Weight Of Ice, Snow Or Sleet InsuranceFinancial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because of the weight of ice, snow or sleet. This type of coverage is available through a residential or commercial real estate insurance policy. Depending on the insurer, this coverage may be included in a basic insurance policy, or it may need to be purchased separately.Investopedia ©
Weighted Average Cost Of Capital - WACCWeighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is proportionately weighted.
All sources of capital, including common stock, preferred stock, bonds and any other long-term debt, are included in a WACC calculation. A firm''s WACC increases as the beta and rate of return on equity increase, as an increase in WACC denotes a decrease in valuation and an increase in risk.
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Weighted Average Life - WALThe weighted average life (WAL) is the average length of time that each dollar of unpaid principal on a loan, a mortgage or an amortizing bond remains outstanding. Calculating the WAL shows an investor, an analyst or a portfolio manager how many years it will take to receive half the amount of the outstanding principal.Investopedia ©
Weighted Average Market CapitaA stock market index weighted by the market capitalization of each stock in the index. In such a weighting scheme, larger companies account for a greater portion of the index. Most indexes are constructed in this manner, with the best example being the S&P 500.Investopedia ©
Welfare StateA concept of government in which the state plays a key role in the protection and promotion of the economic and social well-being of its citizens. A welfare state is based on the principles of equality of opportunity, equitable distribution of wealth and public responsibility for those unable to avail themselves of the minimal provisions of a good life. Under this system, the welfare of its citizens is the responsibility of the state.Investopedia ©
What-If CalculationCalculations for testing a financial model using different assumptions and scenarios. What-if' calculations enable the forecaster to check the variance in end results for a financial model using various hypothetical levels for inputs such as interest rates and exchange rates. These calculations are generally performed with spreadsheet software. What-if calculations can also be referred to as sensitivity analysis or stress testing.Investopedia ©
White CollarA working class that is known for earning high average salaries and not performing manual labor at their jobs. White collar workers historically have been the "shirt and tie" set, defined by office jobs and not "getting their hands dirty" (or their white collar dress shirts). This class of worker stands in contrast to blue collar workers, who traditionally wore blue shirts and worked in plants, mills and factories. Investopedia ©
White KnightA white knight is an individual or company that acquires a corporation on the verge of being taken over by forces deemed undesirable by company officials (sometimes referred to as a "black knight"). While the target company doesn't remain independent, a white knight is viewed as a preferred option to the hostile company completing their takeover. Unlike a hostile takeover, current management typically remains in place in a white knight scenario, and investors receive better compensation for their shares.Investopedia ©
White SquireVery similar to a 'white knight', but instead of purchasing a majority interest, the squire purchases a lesser interest in the target firm.Investopedia ©
White-Collar CrimeWhite-collar crime is a nonviolent crime committed for financial gain. Securities fraud, embezzlement, corporate fraud and money laundering are examples of white-collar crime, and these acts are usually investigated by the FBI, the Securities and Exchange Commission (SEC) and the National Association of Securities Dealers (NASD). Some high-profile individuals convicted of white-collar crimes include Kenneth Lay, Bernard Madoff and Bernard Ebbers.Investopedia ©
Whitewash ResolutionA European term used in conjunction with the Companies Act Of 1985, which refers to a resolution that must be passed before a target company in a buyout situation can give financial assistance, forgive debts or provide other financial dealings to the buyer of the acquiring entity. A whitewash resolution occurs when directors of the target company must swear that the company will be able to pay its debts for a period of at least 12 months. Oftentimes, an auditor must then confirm the company's solvency. Only after this takes place may a target company give the purchasing company any type of financial assistance.Investopedia ©
Widow's ExemptionIn general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing her tax burden. In the U.S., it usually refers to the amount exempt from state inheritance taxes on a widow's share of her husband's estate. Since it is claimed as a deduction by the widow, it has the effect of reducing her inheritance taxes.Investopedia ©
Wildcat BankingThe banking industry in parts of the United States from 1837 to 1865, when banks were established in remote and inaccessible locations. During this period, banks were chartered by state law without any federal oversight. Less stringent regulations on the banking industry at the time led to this period also being referred to as the "free banking" era.Investopedia ©
Winding UpWinding up is the process of selling all the assets of a business, paying off creditors, distributing any remaining assets to the principals or parent company, and then dissolving the business. Winding up can refer to such a process either for a specific business line of a corporation or to the dissolution of a corporation itself.

Also known as liquidation.
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Winner's CurseA tendency for the winning bid in an auction to exceed the intrinsic value of the item purchased. Because of incomplete information, emotions or any other number of factors regarding the item being auctioned, bidders can have a difficult time determining the item's intrinsic value. As a result, the largest overestimation of an item's value ends up winning the auction. Originally, the term was coined as a result of companies bidding for offshore oil drilling rights in the Gulf of Mexico. In the investing world, the term often applies to initial public offerings.Investopedia ©
Winter Range FormA type of insurance that covers livestock, including cattle and sheep, on the range in Western states, from the seven months beginning of October, and ending at the beginning of May. The winter range form provides coverage against losses arising from weather (including freezing), most natural disasters, collisions with motorized vehicles, riots, civil commotion and theft.Investopedia ©
Witching HourThe last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled by large professional traders, program traders and large institutional traders, and can be characterized by higher-than-average volatility.Investopedia ©
Wool Growers FloaterA type of insurance policy that provides coverage for sheep owners and to warehouse owners who store and transport wool. A wool growers floater is a type of inland marine insurance which provides coverage for property damage and liability exposure during transportation - specifically for sheep in this case. Most inland marine insurance policies cover properties that are on land, as opposed to on the ocean as the name suggests.Investopedia ©
Working CapitalWorking capital is a measure of both a company's efficiency and its short-term financial health. Working capital is calculated as: Working Capital = Current Assets - Current Liabilities The working capital ratio (Current Assets/Current Liabilities) indicates whether a company has enough short term assets to cover its short term debt. Anything below 1 indicates negative W/C (working capital). While anything over 2 means that the company is not investing excess assets. Most believe that a ratio between 1.2 and 2.0 is sufficient. Also known as "net working capital".Investopedia ©
Workout MarketA market maker prediction as to the trading price range that a security will occupy within a reasonable period of time. The characteristics of a workout market are seen prevalently in thin markets.Investopedia ©
Wrongful DishonorA bank's failure to honor a valid negotiable instrument such as a check or draft that has been presented to it for payment. If the check is valid and there are sufficient funds in the account to cover it, a bank's failure to honor it within the time period stipulated by the Uniform Commercial Code would constitute wrongful dishonor.Investopedia ©
X-Mark SignatureAn X-mark made by a person in lieu of a signature. Due to illiteracy or disability, a person may be unable to append a full signature to a document as attestation that he or she has reviewed and approved its contents. In order to be legally valid, the X-mark signature must be witnessed.Investopedia ©
XWA symbol used to signify that a security is trading ex-warrant. XW is one of many alphabetic qualifiers that act as a shorthand to tell investors key information about a specific security in a stock quote. These qualifiers should not be confused with ticker symbols, some of which, like qualifiers, are just one or two letters. The qualifier will follow the ticker symbol and be preceded by a space or hyphen.Investopedia ©
XenocurrencyA currency that trades in markets outside of its domestic borders. The term "xenocurrency" is derived from the prefix "xeno," which literally means foreign or strange.Investopedia ©
XetraAn all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Borse, the Xetra platform offers increased flexibility for seeing order depth within the markets and offers trading in stocks, funds, bonds, warrants and commodities contracts.
The Xetra system was originally created for use on the Frankfurt Stock Exchange, but has expanded to be used by various stock exchanges throughout Europe.
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YAWN - Young and Wealthy but NormalA class of self-made millionaires that live relatively modest lives. Instead of spending wealth on gaining luxurious items and living expensive lifestyles, these individuals prefer to make contributions to charitable causes and spend time with their families.Investopedia ©
Yankee BondA bond denominated in U.S. dollars that is publicly issued in the U.S. by foreign banks and corporations. According to the Securities Act of 1933, these bonds must first be registered with the Securities and Exchange Commission (SEC) before they can be sold. Yankee bonds are often issued in tranches and each offering can be as large as $1 billion.Investopedia ©
Yearly Probability Of DyingA numerical figure that depicts the likelihood of someone dying per year. The yearly probability of dying is determined by looking at a mortality table which shows the rate of death at each age in terms of the number of deaths per thousand. The data in the chart is determined by dividing the number of people dying during a given year by the number of people alive at the beginning of that same year.Investopedia ©
Yellow KnightA company that was once making a takeover attempt but ends up discussing a merger with the target company. Yellow knights have various reasons for backing out of the takeover attempt, but frequently are attributable to the target company's ability to fend off takeover. The "yellow" in "yellow knight" may refer to the color's association with cowardice. Since a yellow knight backs down from a takeover attempt and retreats to merger discussions, a yellow knight may be viewed as weak.Investopedia ©
Yellow SheetsA United States bulletin that provides updated bid and ask prices as well as other information on over-the-counter (OTC) corporate bonds (also called "corporate"). Companies issue corporate bonds to raise money for capital expenditures, operations and acquisitions. Similar to the Pink Sheets that track non-exchange-traded OTC micro-cap stocks, the yellow sheets are a key source of information for investors who follow OTC bonds or fixed income securities. The yellow sheets also provide a list of brokerages that make a market in the particular bonds. Today's investors can still receive hard copies of the yellow sheets. However, the information is also available in electronic formInvestopedia ©
Yemeni Rial - YERThe official currency of the country of Yemen. The Yemeni Rial is divided into 100 fils, however the fil coins have not been issued since 1990 following Yemeni unification. However, beginning in 1993, the Central Bank of Yemen began introducing coins in one-, five-, 10- and most recently 20-rial denominations.Investopedia ©
Yield BurningThe illegal practice of underwriters marking up the prices on bonds for the purpose of reducing the yield on the bond. This practice, referred to as "burning the yield," is done after the bond is placed in escrow for an investor who is awaiting repayment.Investopedia ©
Yield CurveA yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity dates. The most frequently reported yield curve compares the three-month, two-year, five-year and 30-year U.S. Treasury debt. This yield curve is used as a benchmark for other debt in the market, such as mortgage rates or bank lending rates. The curve is also used to predict changes in economic output and growth.Investopedia ©
Yield ElbowThe point on the yield curve indicating the year in which the economy's highest interest rates occur. The yield elbow is the peak of the yield curve, signifying where the highest interest rates occurred. The yield curve is the graphical relationship between the yield and maturity of bonds with different maturities and equal credit quality. Yield curves play an important role in the pricing of bonds, and are referenced by investors and analysts to identify opportunities for realizing high rates of return on certain investments. The yield elbow typically occurs when there are concerns about current or future inflation, and can correspond to low prices for bonds.Investopedia ©
Yield To Maturity (YTM)The total return anticipated on a bond if the bond is held until the end of its lifetime. Yield to maturity is considered a long-term bond yield, but is expressed as an annual rate. In other words, it is the internal rate of return of an investment in a bond if the investor holds the bond until maturity and if all payments are made as scheduled.Investopedia ©
Yield To Maturity - YTMThe rate of return anticipated on a bond if held until the end of its lifetime. YTM is considered a long-term bond yield expressed as an annual rate. The YTM calculation takes into account the bond's current market price, par value, coupon interest rate and time to maturity. It is also assumed that all coupon payments are reinvested at the same rate as the bond's current yield. YTM is a complex but accurate calculation of a bond's return that helps investors compare bonds with different maturities and coupons.Investopedia ©
Yield to Worst - YTWThe lowest potential yield that can be received on a bond without the issuer actually defaulting. The yield to worst is calculated by making worst-case scenario assumptions on the issue by calculating the returns that would be received if provisions, including prepayment, call or sinking fund, are used by the issuer. This metric is used to evaluate the worst-case scenario for yield to help investors manage risks and ensure that specific income requirements will still be met even in the worst scenarios.Investopedia ©
Yonder 40 Index - Yonder 40A list of 40 publicly traded companies chosen for their ties to rural areas. The Yonder 40 is designed to reflect the economies of non-urban areas, and includes companies that are involved in agriculture and livestock raising, in addition to heavier industries such as construction. The index is not widely-followed.Investopedia ©
YupcapA slang term for a young urban professional who cannot afford property. Yupcaps are individuals in their late twenties or early thirties with a post secondary educations and a well-paying jobs who are unable to purchase a property due to factors such as high real estate prices, limited personal savings and limited credit history, all of which can make it difficult to get approved for a mortgage.Investopedia ©
YuppieYuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, affluence and business success.Investopedia ©
Zero Coupon Inflation SwapAn exchange of cash flows that allows investors to reduce or increase their exposure to the risk of a decline in the purchasing power of money. In a zero coupon inflation swap, which is a basic type of inflation derivative, an income stream that is tied to the rate of inflation is exchanged for an income stream with a fixed interest rate. However, instead of actually exchanging payments periodically, both income streams are paid as one lump-sum payment when the swap reaches maturity and the inflation level is known.Investopedia ©
Zero Day AttackZero Day is an attack that exploits a potentially serious software security weakness (zero day attack or zero day exploit) that the vendor or developer may be unaware of (zero day vulnerability). The software developer must rush to resolve the weakness as soon as it is discovered in order to limit the threat to software users. The solution is called a software patch. Zero-day attacks can also be used to attack the internet of things (IoT) and supervisory control and data acquisition (SCADA). A zero-day attack gets its name from the number of days the software developer has known about the problem. Also called Day Zero.Investopedia ©
Zero UptickA transaction executed at the same price as the trade immediately preceding it, but at a price higher than the transaction before that. For example, if shares are bought and sold at $47, followed by $48 and $48, the last trade at $48 is considered to be a zero uptick. This distinction can be important for short sellers trying to avoid shorting an ascending stock. Also known as a zero-plus tick.Investopedia ©
Zero-Based Budgeting - ZBBZero-based budgeting (ZBB) is a method of budgeting in which all expenses must be justified for each new period. Zero-based budgeting starts from a "zero base," and every function within an organization is analyzed for its needs and costs. Budgets are then built around what is needed for the upcoming period, regardless of whether the budget is higher or lower than the previous one.Investopedia ©
Zero-Sum GameZero-sum is a situation in game theory in which one person's gain is equivalent to another's loss, so the net change in wealth or benefit is zero. A zero-sum game may have as few as two players, or millions of participants. Zero-sum games are found in game theory, but are less common than non-zero sum games. Poker and gambling are popular examples of zero-sum games since the sum of the amounts won by some players equals the combined losses of the others. Games like chess and tennis, where there is one winner and one loser, are also zero-sum games. In the financial markets, options and futures are examples of zero-sum games, excluding transaction costs. For every person who gains on a contract, there is a counter-party who loses.Investopedia ©
Zombie BankA bank or financial institution with negative net worth. Although zombie banks typically have a net worth below zero, they continue to operate as a result of government backings or bailouts that allow these banks to meet debt obligations and avoid bankruptcy. Zombie banks often have a large amount of nonperforming assets on their balance sheets which make future earnings very unpredictable.Investopedia ©
ZombiesCompanies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to the high costs associated with certain operations, such as research and development. Most analysts expect zombie companies to be unable to meet their financial obligations. Also known as the "living dead" or "zombie stocks".Investopedia ©
ZommaAn options greek used to measure the change in gamma in relation to changes in the volatility of the underlying asset. Zomma, though considered a third level greek, is a first derivative of volatility, a second degree derivative of an underlying asset and third as it is related to the value of that underlying asset.Investopedia ©
Zoning OrdinanceThe laws that define how the property in each zone can be used. Zoning consists of dividing a particular region of land into districts or zones and specifying the types of land uses that are allowed and prohibited for each zone. This is performed by a municipal corporation or county and is typically specific to certain city regions. Zoning, in its basic form, attempts to separate residential property use from commercial property use. The zoning ordinances are the written regulations and laws that specify zoning decisions.Investopedia ©

Note: Number of entries: 1842 -- Our sincere thanks to Investopedia, Wikipedia and other websites for many of the definitions compiled and presented above. The information is presented along with the corresponding sources and for a thorough explanation please check the respective websites.
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