| Window Dressing |
| A strategy used by mutual fund and portfolio managers near the year or quarter end to improve the appearance of the portfolio/fund performance before presenting it to clients or shareholders. To window dress, the fund manager will sell stocks with large losses and purchase high flying stocks near the end of the quarter. These securities are then reported as part of the fund's holdings. |
| Cookie Jar Accounting |
| An accounting practice in which a company uses generous reserves from good years against losses that might be incurred in bad years. Cookie jar accounting is a sign of misleading accounting practices. |
| Nonforfeiture Clause |
| A clause in an insurance policy that allows for the insured to receive all or a portion of the benefits or a partial refund on the premiums paid if the insured misses premium payments, causing the policy to lapse. The nonforfeiture clause may only be in effect for a limited period of time, and may only kick in after the policy has been active for several years. |
| Agreed Amount Clause |
|
A property insurance provision in which the insurer agrees to waive the co-insurance requirement. To obtain an agreed amount clause, insurers require a statement of property values signed by the insured as a condition of activating or including an agreed value provision in a commercial property policy, otherwise known as an agreed amount clause.
The coinsurance clause requires the insured to have a certain percent of the property value insured, and often provides the insured a substantial reduction in rate, provided he or she maintains insurance equal to the amount agreed upon at the inception of the policy. |
| Intelligent ETF |
|
An exchange-traded fund (ETF) that employs an active investment strategy based on a broad index, such as the S&P 500 or a sector-based index. The fund may choose to exclude some stocks within the index while increasing or decreasing the percentage weighting of other stocks. Most intelligent ETFs carry higher expense ratios than standard ETFs, as well as substantially higher turnover ratios.
Also known as a "smart ETF". |
| Currency Basket |
| A selected group of currencies in which the weighted average is used as a measure of the value or the amount of an obligation. A currency basket functions as a benchmark for regional currency movements - its composition and weighting depends on its purpose. |
| Gift Splitting |
| A 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. |
| Sweep Account |
| A bank account that automatically transfers amounts that exceed (or fall short of) a certain level into a higher interest earning investment option at the close of each business day. Commonly, the excess cash is swept into money market funds. |
| Umbrella Insurance Policy |
|
Extra liability insurance coverage that goes beyond the limits of the insured's home, auto or watercraft insurance. It provides an additional layer of security to those who are at risk for being sued for damages to other people's property or injuries caused to others in an accident. It also protects against libel, vandalism, slander and invasion of privacy.
An umbrella insurance policy is very helpful when the insurance owner is sued and the dollar limit of the original policy has been exhausted. The added coverage provided by liability insurance is most useful to individuals who own a lot of assets or very expensive assets and are at significant risk for being used. |
| Adjusted Closing Price |
|
A stock's closing price on any given day of trading that has been amended to include any distributions and corporate actions that occurred at any time prior to the next day's open.
The adjusted closing price is often used when examining historical returns or performing a detailed analysis on historical returns. |
| Punitive Damages |
|
Legal recompense that is levied as punishment for a wrong or offense committed by the payor. Punitive damages are awarded by a court of law in a lawsuit. They are often required in order to make up for a perceived shortfall in compensatory damages and are merely intended to indemnify the plaintiff.
Punitive damages are generally taxable to the recipient, while compensatory damages are not. Punitive damages are among the most difficult type of financial redress to acquire in court, as they generally require proof of substantial and intentional injuries on the part of the defendant. |
| Treble Damages |
|
A law that permits a court to triple the amount of damages awarded in cases where the defendant willfully acted in a prohibited way. Usually a court will require substantial evidence proving that the defendant's actions were willful in nature or done in bad faith before treble damages are awarded.
In the corporate world treble damages often arise in regard to patent infringement, willful counterfeiting and antitrust lawsuits. Damages are calculated against the financial loss incurred by the plaintiff directly resulting from the actions of the defendant. |
| Price Rigging |
|
An illegal action performed by a group of conspiring businesses that occurs when the firms agree to artificially inflate prices in an attempt to recognize higher profits at the expense of the consumer. Price rigging can be found in any industry and is regulated by the antitrust division of the United States Department of Justice. Also known as "price fixing" or "collusion".
For example, let's assume that the local gas stations agree to artificially inflate the price of gasoline by setting it several cents above where the price would be found under normal competition. This would be deemed price rigging, which is unlawful and can lead to severe criminal charges. |
| Price Fixing |
| Establishing the price of a product or service, rather than allowing it to be determined naturally through free market forces. This procedure is often an illegal practice. Unfortunately, different retailers have been accused of this for a long time. |
| Price Discrimination |
| A pricing strategy that charges customers different prices for the same product or service. In pure price discrimination, the seller will charge each customer the maximum price that he or she is willing to pay. In more common forms of price discrimination, the seller places customers in groups based on certain attributes and charges each group a different price. Price discrimination allows a company to earn higher profits than standard pricing because it allows firms to capture every last dollar of revenue available from each of its customers. |
| Split Adjusted |
|
A modification made to a security's price that takes into consideration the effect
of a split on the total number of shares or units outstanding, in order to compare the
security's current price to its historical price in a consistent form of valuation. In order to
adjust a security's price, the post split price would be multiplied by the split ratio (or
ratios if multiple splits had occurred) in order to get a split-adjusted price.
While stock prices most often are referred to as split-adjusted, options on underlying split stocks are also split-adjusted by increasing the number of shares covered by the terms of the option. This conversion is done by the same split ratio as the underlying shares, and the strike price is divided by the split ratio. |
| Stock Replacement Strategy |
| An investment strategy that attempts to mimic the returns of a certain asset or group of assets by using a combination of different derivatives rather than buying the individual shares in the market. Traders will attempt to profit from the leverage found in options and futures because they can provide the same type of exposure to the underlying asset for a lower cost than if the trader were to buy the underlying assets outright. |
| Value Added Reseller (VAR) |
| Third-party vendor that enhances or modifies existing hardware or software, adding value to the services provided by the processor or acquirer. |
| Reverse Stock Split |
|
A reduction in the number of a corporation's shares outstanding that increases the par value
of its stock or its earnings per share. The market value of the total number of shares (market
capitalization) remains the same.
For example, a 1-for-2 reverse split means you get half as many shares, but at twice the price. It's usually a bad sign if a company is forced to reverse split - firms do it to make their stock look more valuable when, in fact, nothing has changed. A company may also do a reverse split to avoid being delisted. |
| Universal Life Insurance |
| A type of flexible permanent life insurance offering the low-cost protection of term life insurance as well as a savings element (like whole life insurance) which is invested to provide a cash value buildup. The death benefit, savings element and premiums can be reviewed and altered as a policyholder's circumstances change. In addition, unlike whole life insurance, universal life insurance allows the policyholder to use the interest from his or her accumulated savings to help pay premiums. |
| Equity-Indexed Universal Life Insurance |
| A permanent life insurance policy that allows policyholders to tie accumulation values to a stock market index. Indexed universal life insurance policies typically contain a minimum guaranteed fixed interest rate component along with the indexed account option. Indexed policies give policyholders the security of fixed universal life insurance with the growth potential of a variable policy linked to indexed returns. |
| Variable Universal Life Insurance - VUL |
| A 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. |
| Private Mortgage Insurance - PMI |
|
A 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.
Some of the well-known mortgage-financing companies offering private mortgage insurance products in India are as follows -
|
| An insurance policy designed specifically to repay mortgage debt in the event of the death of the borrower. These policies differ from traditional life insurance policies in that, for a traditional policy, the death benefit is paid out when the borrower dies; however, a mortgage life insurance policy doesn't pay unless the borrower dies while the mortgage itself is still in existence. There are two basic types of mortgage life insurance: decreasing term insurance, where the size of the policy decreases with the outstanding balance of the mortgage until both reach zero; and level term insurance, where the size of the policy does not decrease. Level term insurance would be appropriate for a borrower with an interest-only mortgage. Before buying mortgage life insurance, one should carefully examine and analyze the terms, costs and benefits of the policy and there are two lifespans to consider – borrower’s lifespan and the mortgage's. |
| Fully Funded Documentary Letter Of Credit - FFDLC |
| A written promise of payment provided by a buyer to a seller that is guaranteed to clear by a particular bank. Once an FFDLC document is presented by the seller to the involved bank, the bank is obliged to remit full payment to the seller. The seller may be required to fulfill certain conditions, such as providing proof of shipment of the goods sold to the buyer, before collecting payment from the bank. This method of payment provides assurance to the seller that the buyer has the necessary funds for the transaction and ready for remittance to the seller upon completion of the sale. |
| Sight Letter of Credit |
| A letter of credit that is payable once it is presented along with the necessary documents. These letter of credits require a more stringent process of verification. |
| Irrevocable Letter Of Credit |
| A letter of credit that can't be canceled. This guarantees that a buyer's payment to a seller will be received on time and for the correct amount. This is often used in international transactions. |
| Standby Letter of Credit - 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). |
| Adjuster |
|
An insurance claims agent. A claims adjuster is charged with evaluating an insurance claim to determine the insurance company's liability under the terms of an owner's policy.
There are different types of adjusters. They may represent the insurance company, they may be hired by the claimant (public adjusters) or they may be independent. The two types of claims most frequently investigated are property claims and liability claims. |
| Quitclaim Deed |
| A deed releasing a person's interest in a property without stating the nature of the person's interest or rights, and with no warranties of ownership. While a quitclaim deed neither warrants nor professes that the grantor's claim is valid, it does prevent the grantor from later claiming they have an interest in the property. |
| Cloud On Title |
|
Any document, claim, unreleased lien or encumbrance that might invalidate or impair the title to real property or make the title doubtful. Clouds on title are usually discovered during a title search. Clouds on title are resolved through initiating a quitclaim deed or a commencement of action to quiet title.
A title search and title insurance are generally required by lenders as protection from any third-party claims, or clouds on title, to property that is used as collateral. Title searches and title insurance are required in the mortgage origination process. |
| Deed Of Release |
|
A legal document that removes a previous claim or lien on an asset. A deed of release is usually issued once a mortgage or other type of debt, previously secured against the asset, has been paid in full. After the deed of release is written, the asset is owned free and clear by the owner, and any previous claims against the asset that the lender may have had are dissolved. AFor example, when most individuals purchase a home, they do so with the help of a mortgage offered by a financial institution. When a home buyer obtains a mortgage to finance the purchase of real estate, the bank providing the funds for the mortgage doesn't just lend them the money in good faith - the bank takes a legal claim against the house as collateral. Once the home owner pays off all the money the bank lent them for the mortgage, the bank would write a deed of release, ending their claim against the house. |
| Due-On-Sale Clause |
|
A provision in a mortgage contract that requires that the mortgage be repaid in full upon a sale or conveyance of interest in the property that secures the mortgage. Mortgages with a due-on-sale clause are not assumable. A due-on-sale clause helps to protect the lender, or the ultimate holder of the mortgage, from the risk that the mortgage may be transferred to the new owner of a property when the rate on the mortgage is below current market interest rates. This would extend the life of the mortgage; the holders of a below-market-interest-rate mortgage - or a mortgage-backed security, asset-backed security, or collateralized debt obligation backed by a below-market-interest-rate mortgage - generally favor the early retirement of that mortgage. |
| ETF Wrap |
| A 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. |
| Wrap-Around Loan |
| A loan that is most commonly used with property with an outstanding loan. The seller lends the buyer the difference between the existing loan and the purchase price. The buyer's periodic loan payments are sufficient to repay the existing loan as well as the seller's loan to the buyer. When the loan involves mortgage loans, it is also referred to as a wrap-around mortgage. |
| Wrap Account |
| An account in which a brokerage manages an investor's portfolio for a flat quarterly or annual fee. This fee covers all administrative, commission, and management expenses. The advantage of a wrap is that it protects you from overtrading. This is when your broker trades your account excessively to make more commission. Furthermore, because the broker gets a flat annual fee, then he or she only trades when it is advantageous to you. A traditional wrap typically requires an initial investment of at least $50,000 to $100,000. |
| Card Not Present (CNP) |
| That class of payment card transactions where the physical card's magnetic stripe (or chip) is not read at the point of acceptance. Mail Order / Telephone Order (MO/TO) and eCommerce merchants are typically CNP merchants. |
| Wrap Fee |
| A comprehensive charge levied by an investment manager or investment advisor to a client for providing a bundle of services, such as investment advice, investment research and brokerage services. Wrap fees allow an investment advisor to charge one straightforward fee to their clients, simplifying the process for both the advisor and the customer. |
| Gross Margin Return On Investment - GMROI |
|
An inventory profitability evaluation ratio that analyzes a firm's ability to turn inventory into cash above the cost of the inventory. It is
calculated by dividing the gross margin by the average inventory cost and is used often in the retail industry.
This is a useful measure as it helps the investor, or management, see the average amount that the inventory returns above its cost. A ratio higher than 1 means the firm is selling the merchandise for more than what it costs the firm to acquire it. The opposite is true for a ratio below 1. |
| Check Guarantee |
| A service that guarantees the checkwriter's payment and assumes the collections risk of check payments for a merchant. |
| Gross Invested Capital - ROGIC |
| The amount that a company earns on the total investment it has made in its business. Total gross invested capital is equal to all of the shareholders' equity (both common and preferred shares) plus the total gross debt that the company has accumulated before making any payments on the debt. |
| Return On New Invested Capital - RONIC |
| A calculation used, either by a firm or investors, to determine the amount of return that a firm could earn on additional contributed capital. The calculation measures the return generated when a company converts its capital into capital expenditures, which generate revenues from core operations. A higher RONIC equates to a relatively efficient firm. |
| Weighted Average Cost Of Capital - WACC |
| A calculation of a firm's cost of capital in which each category of capital is proportionately weighted. All capital sources - common stock, preferred stock, bonds and any other long-term debt - are included in a WACC calculation. All else help equal, the WACC of a firm increases as the beta and rate of return on equity increases, as an increase in WACC notes a decrease in valuation and a higher risk. |
| Daylight Overdraft |
| A negative position in an institution's Federal Reserve account. |
| Weighted Average Cost of Equity - WACE |
|
A way to calculate the cost of a company's equity that gives different weight to different aspects of the equities. Instead of lumping retained earnings,
common stock, and preferred stock together, WACE provides a more accurate idea of a companies total cost of equity. Determining an accurate cost of equity
for a firm is integral for the firm to be able to calculate its cost of capital.
In turn, an accurate measure of the cost of capital is essential when a firm is trying to decide if a future project will be profitable or not. |
| No-Cost Mortgage |
| A mortgage refinancing situation in which the lender pays the borrower's loan settlement costs and then extends a new mortgage loan. A lender does this in exchange for charging the borrower a higher interest rate. When the lender then sells this mortgage into the secondary mortgage market, the price it will receive for the mortgage is based on the interest rate on the mortgage. A mortgage broker would do the same based on the size of the rebate they might receive from a lender. |
| Piggyback Mortgage |
|
A type of mortgage where a second mortgage or home equity loan is taken out by a borrower at the same time the first mortgage is started or refinanced.
Piggyback mortgages are frequently used to lower the loan-to-value ratio (LTV) of a first position mortgage to under 80%, thereby eliminating the need for
private mortgage insurance (PMI).
"80-10-10" is a common form of piggyback mortgage: where 80% of the property is covered by the first mortgage, 10% of the property's value is derived from the second loan and the final 10% is covered by the borrower's down payment. |
| Hybrid Settlement System |
| A combination of a real-time gross settlement system and a multilateral net settlement system. Some deferred net settlement systems have incorporated mechanisms for making irrevocable and unconditional funds transfers during the day rather than only at the end of the day. In some cases this has resulted in hybrid systems which combine features, including risk control measures, of gross and net settlement systems. |
| Private Mortgage Insurance - PMI |
| A 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. |
| Rate-Improvement Mortgage |
|
A type of fixed-rate mortgage, which contains a clause that entitles the borrower to reduce the fixed-interest-rate charge on the mortgage once, and
early in the mortgage. The option will be exercised when interest rates fall lower than the borrowers initial mortgage rate.
There is typically a fee associated with exercising this option, and the initial mortgage might have a higher-than market-interest rate and/or high costs. However, the rate reduction option could save the borrower the costs of refinancing which might be more than the cost of using their rate improvement option. |
| Fixed-Rate Mortgage |
| A mortgage that has a fixed interest rate for the entire term of the loan. The distinguishing factor of a fixed-rate mortgage is that the interest rate over every time period of the mortgage is known at the time the mortgage is originated. The benefit of a fixed-rate mortgage is that the homeowner will not have to contend with varying loan payment amounts that fluctuate with interest rate movements. |
| Junior Mortgage |
|
A mortgage which is subordinate to a first or prior (senior) mortgage. Frequently called a second mortgage, this could also be a third or fourth mortgage,
etc. In the case of foreclosure, the senior mortgage will be paid down first.
Common uses of junior mortgages include piggy-back mortgages (80-10-10 mortgages) and home equity loans. Piggy-back mortgages provide a way for borrowers with less than a 20% down payment to avoid costly private mortgage insurance. Home equity loans are frequently used to extract equity for a home to pay down other debts or make additional purchases. Every borrowing scenario should be carefully and thoroughly analyzed. |
| MasterCard SecureCode |
| MasterCard payer authentication technology that runs on a Web-browser and verifies that a MasterCard cardholder is authorized to use the card. SecureCode qualifies the transaction for a guaranteed payment that protects against cardholder unauthorized chargebacks. PPI BuyerAuth is an optional product feature that implements MasterCard SecureCode, as well as Verified by Visa and JCB J/Secure. |
| Junior Security |
|
A security that ranks lower than other securities in regards to the owner's claims on assets and income in the event of the issuer becoming insolvent.
When bankruptcy occurs, holders of both preferred shares and debt securities have first claim on the remaining assets. Only after preferred shareholders have been paid back, remaining assets (if any) are divided among common shareholders. |
| Senior Issue |
| An issue of bonds, preferred stock or other securities that represents the first priority lien on the issuer's assets or earnings. Senior issues have a higher priority claim on a firm's dividends, interest payments, or in case of a bankruptcy, the value salvaged from a liquidation. |
| Tap Issue |
| A procedure that allows borrowers to sell bonds or other short-term debt instruments from past issues. The bonds are issued at their original face value, maturity and coupon rate, but sold at the current market price. |
| Original Face |
| The par value of a mortgage-backed security at the time it is issued. Unlike most other types of bonds, mortgage-backed securities return both principal and interest to the holder in periodic payments (usually monthly). Over time, the outstanding principal balance of a mortgage-backed security will be reduced. The original face remains an important and distinguishing piece of information associated with a mortgage-backed security. |
| Memo Posting |
| A notation posted to an account which indicates a credit has been received, but has not yet been posted to the account. |
| Current Face |
|
The current par value of a mortgage-backed security (MBS). Current face is determined by multiplying the current pool factor by the mortgage-backed
security's original face value. A mortgage-backed security's current face represents the outstanding principal balance (or its outstanding face value) of the
mortgage's underlying the security.
If the MBS pays interest and principal on payment dates, the current face will decline after each payment is made. |
| MBS Pool Number |
|
A number or alphanumeric character assigned to a mortgage-backed security (MBS) by the issuer as an identifier of that security. Pool numbers are typically
six digits in length. Different issuers such as Freddie Mac , Fannie Mae and Ginnie Mae use different alpha characters as the initial digit in their pool
numbers to identify the pool as their issue.
RFor example, a Freddie Mac 30-year pool number might be D54321 while a Fannie Mae 30-year pool number might be F54321. |
| Trading Channel |
|
When charting the price of an asset, this is the space on the chart between an asset's support and resistance levels. The price of the asset will stay within the support and resistance levels until a breakout occurs.
Range traders will buy an asset when its price is near the bottom of the trading channel and sell it when the price gets close to the top of the trading channel, making a profit on the price spread. Trading channels may be flat, ascending or descending. |
| Trading Desk |
|
A desk where transactions for buying and selling securities occur. Trading desks can be found in most organizations (banks, finance companies, etc.) involved in trading investment instruments such as equities, fixed-income securities, futures, commodities and foreign exchange. A trading desk provides traders with access to instantaneous trade executions. Also known as "dealing desk".
Trading desks can be either large or small depending on the organization and are occupied by licensed traders, usually specializing in trading one particular type of investment product (e.g. forex traders, commodities traders, stock traders, etc.). The instantaneous trade executions can be particularly important for day traders looking for arbitrage opportunities that usually last only minutes or even seconds. |
| Term Securities Lending Facility |
|
A lending facility through the Federal Reserve that allows primary dealers to borrow Treasury securities on a 28-day term by pledging eligible collateral. The eligible securities under the term securities lending facility include 'AAA' to 'Aaa' rated mortgage-backed securities (MBS) not under review for downgrade, and all securities eligible for tri-party repurchase agreements.
In exchange for this collateral, the primary dealers receive a basket of Treasury general collateral, which includes Treasury bills, notes, bonds and inflation-indexed securities form the Fed's system open market account. |
| Trading Range |
|
The spread between the high and low prices traded during a period of time.
When a stock breaks through or falls below its trading range after several days of trading in a range, it usually means there is momentum (positive or negative) building. |
| Trading Ahead |
|
A trade transacted from a specialist's account even though there is a public order that offsets the trade.
Trading ahead is a violation of a specialist's negative obligation to New York Stock Exchange customers. By trading from his or her own account rather than letting public orders match one another, the specialist is robbing the public of its opportunity to transact the security. |
| Stock Ahead |
|
A situation in which an order is placed, but not executed, because of a previously sent order involving the same price. Depending on the exchange's priority rules, this can also happen when two bids are made at the same time with identical prices; only the larger order will be executed.
For example, if two orders - one for 1,000 shares, the other for 500 shares - are placed for XYZ stock at the same price, the order for 1,000 shares would be executed and the order for 500 shares would not be made because there was a "stock ahead". |
| Payment Concentration |
| The process that takes payments from multiple banks and payment networks and consolidates them into one bank. |
| 100 Fastest-growing companies | |
| 1. | Research In Motion |
| 2. | Sigma Designs |
| 3. | Sohu.com |
| 4. | Ebix |
| 5. | DG FastChannel |
| For Complete Detailed List... | |
| Backtesting |
|
The process of testing a trading strategy on prior time periods. Instead of applying a strategy for the time period forward, which could take years, a trader can do a simulation of his or her trading strategy on relevant past data in order to gauge the its effectiveness. Most technical-analysis strategies are tested with this approach.
When you backtest a theory, the results achieved are highly dependent on the movements of the tested period. Backtesting a theory assumes that what happens in the past will happen in the future, and this assumption can cause potential risks for the strategy. For example, say you want to test a strategy based on the notion that Internet IPOs outperform the overall market. If you were to test this strategy during the dotcom boom years in the late 90s, the strategy would outperform the market significantly. However, trying the same strategy after the bubble burst would result in dismal returns. As you'll frequently hear: "past performance does not necessarily guarantee future returns". |
| Paper Trade |
|
Simulated trading that investors use to practice mimicking trades (buys and sells) without actually entering into any monetary transactions.
Paper trading is a good way to learn the ropes without risking any money. You can do it simply by pretending to buy and sell stock, bonds, commodities and mutual funds and keeping notes of paper profits or losses. Or you can open an account with an online market simulator. |
| Pairs Trade |
|
The strategy of matching a long position with a short position in two stocks of the same sector. This creates a hedge against the sector and the overall market that the two stocks are in. The hedge created is essentially a bet that you are placing on the two stocks; the stock you are long in versus the stock you are short in.
It's the ultimate strategy for stock pickers, because stock picking is all that counts. What the actual market does won't matter (much). If the market or the sector moves in one direction or the other, the gain on the long stock is offset by a loss on the short. |
| Post-Trade Processing |
|
After a trade is complete, it goes through post-trade processing, where the buyer and the seller compare trade details, approve the transaction, change records of ownership and arrange for the transfer of securities and cash. Post-Trade processing is especially important in markets that are not standardized such as the over-the-counter (OTC) market.
Post-trade processing is important in that it verifies the details of a transactions. Markets and prices move fast so at the time transactions must be executed quickly. Since many securities trades are done over the phone from party to party the ability for mistakes and human error exists. Post-trade processing allows the buyer and seller of securities to verify trade details or sort out any mistakes. |
| Out Trade |
|
A trade that cannot be cleared by the associated exchange clearing house because of discrepancies between the data submitted by both parties on the opposite sides of a transaction.
When an out trade occurs, it is returned to the two parties affected in order to have the inconsistency reconciled. Should the matter be resolved, the trade is resubmitted to the clearing house. If the matter cannot be resolved, it is then forwarded to the appropriate exchange committee for dispute settlements. |
| Regular-Way Trade - RW |
| A type of trade that is settled through the regular settlement cycle required for the particular investment being traded. The settlement cycle is the time that the regulations of the securities market allows for the buyer to complete payment and for the seller to deliver the goods being purchased. The settlement cycle differs for different assets. Most trades are regular-way trades. |
| Sector ETF |
| A 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. |
| Correction |
| A reverse movement, usually negative, of at least 10% in a stock, bond, commodity or index. Corrections are generally temporary price declines, interrupting an uptrend in the market or asset. |
| Trade Resumption |
|
To resume trading activities after having been shut down (halted) for some period of time. This can relate to trading between nations, or the resumption of open-market trading in a security such as a common stock or even an entire exchange.
Trading will be halted in a security if there is material information that needs time to disseminate, or fundamental questions have been raised about the reliability of previously-released information. |
| UN/EDIFACT |
| The United Nation's body that sets and administers international standards for Electronic Data Interchange usage. |
| Liquidity Path |
|
The path taken by a company to provide liquidity for company founders or owners. The most common liquidity paths are through mergers and acquisitions to a larger company, and through initial public offerings (IPOs) of stock to investors.
This is a way of referring to the process of taking a company public. Without a path to liquidity, private company owners may not be able to convert their ownership in the company to any other means of currency or investment. |
| Panic Buying |
| A situation in which prevailing interest rates are low and savings rates are high, making monetary policy ineffective. In a liquidity trap, consumers choose to avoid bonds and keep their funds in savings because of the prevailing belief that interest rates will soon rise. Because bonds have an inverse relationship to interest rates, many consumers do not want to hold an asset with a price that is expected to decline. |
| Loose Credit |
|
The practice of making credit easy to come by, either through relaxed lending criteria or by lowering interest rates for borrowing. Loose credit often refers to central banking monetary policy and whether it is looking to expand the money supply (loose credit) or contract it (tight credit).
Loose credit environments may also be called "accommodative monetary policy" or "loose monetary policy". Central banks differ on the mechanisms they have at their disposal to create loose or tight credit environments. Most have a central borrowing rate (such as the Fed funds rate or discount rate) that affects the largest banks and borrowers first; they in turn pass the rate changes along to their customers. The changes eventually work their way down to the individual consumer via credit card interest rates, mortgage loan rates and rates on basic investments like money market funds and certificates of deposit (CDs). |
| Sweet Spot |
| The point at which an indicator or policy provides the optimal balance of costs and benefits. This term is often used to refer to situations where economic data, such as interest rates or employment numbers, are currently or expected to lead to the best overall economic situation. For example, the current level of interest rates can be considered to be in a sweet spot if they keep inflationary pressures in check, but don't do so at the cost of the overall market. Similarly, when the current level of employment in an economy is enough to stimulate economic growth without leading to higher levels of inflation through wage pressures, this could also be referred to as a sweet spot. |
| Federal Funds Rate |
| The interest rate at which a depository institution lends immediately available funds (balances at the Federal Reserve) to another depository institution overnight. |
| Falling Knife |
| A 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. |
| True Cost Economics |
| An 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 direct or indirectly cause harmful consequences to living beings and/or the environment should be accordingly taxed to reflect the somewhat hidden costs. |
| MICR Line |
| Numbers printed in magnetic ink near the bottom on the front of a check to facilitate automated processing. These numbers identify the financial institution on which the check is drawn, the account at that institution, the amount of the check and other identifying information. The position and content of the MICR line are governed by industry standards. |
| Unlimited Liability Corporation |
| A corporate structure that permits a company to be incorporated and flow all profits and losses to shareholders. An unlimited liability corporation (ULC) shelters shareholders from liability in most circumstances except upon liquidation of the company. Shareholders or past shareholders that disposed of their shares less than one year before liquidation become liable for the debts of the company. |
| Zero Liability |
| Policy of some card networks that protects consumers so that they pay only for purchases which they have authorized. |
| Liability Insurance |
| Any type of insurance policy that protects an individual or business from the risk that they may be sued and held legally liable for something such as malpractice, injury or negligence. Liability insurance policies cover both legal costs and any legal payouts for which the insured would be responsible if found legally liable. Intentional damage and contractual liabilities are typically not covered in these types of policies. |
| Errors And Omissions Insurance |
| A professional liability insurance that protects companies and individuals against claims made by clients for inadequate work or negligent actions. Errors and omissions insurance often covers both court costs and any settlements up to the amount specified on the insurance contract. |
| Decoupled Debit Card |
| A payment card that is accepted by merchants as a network-issued debit card but where the funding for the purchase amount is obtained from the consumer's checking account via Automated Clearing House (ACH). Capital One introduced a Decoupled Debit product in June 2007. |
| Growth Recession |
| An expression coined by economists to describe an economy that is growing at such a slow pace that more jobs are being lost than are being added. The lack of job creation makes it "feel" as if the economy is in a recession, even though the economy is still advancing. |
| Portfolio Pumping |
| The illegal act of bidding up the value of a fund's holdings right before the end of a quarter, when the fund's performance is measured. This is done by placing a large number of orders on existing holdings, which drives up the value of the fund. |
| Check Truncation |
| The conversion of a check to an electronic debit or an image of the check by someone in the payment system other then the paying bank. The transaction may be governed by check law (UCC, Reg CC and Clearing house rules) or by electronic banking law (Electronic Fund Transfer Act). |
| 401(k) Plan |
| A qualified plan established by employers 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 accrue on a tax-deferred basis. |
| Phantom Stock Plan |
| An 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." |
| Price Level Targeting |
| A monetary policy goal of keeping overall price levels stable, or meeting a pre-determined price level target. The price level used as a barometer is the Consumer Price Index (CPI), or some similarly broad measure of cost inputs. A central bank or monetary authority operating under a price level targeting system raises or lowers interest rates in order to keep the index level consistent from year to year. |
| Faith and Attitude keeps you going |
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Arthur Ashe, the legendary Wimbledon player was dying of AIDS which he got due to infected blood he received during a heart surgery in 1983.
From world over, he received letters from his fans, one of which conveyed: "Why does God have to select you for such a bad disease"? To this Arthur Ashe replied: "The world over - 50 million children start playing tennis, - 5 million learn to play tennis, - 500,000 learn professional tennis, - 50,000 come to the circuit, - 5000 reach the grand slam, - 50 reach Wimbledon, - 4 to semi final, - 2 to the finals, when I was holding a cup I never asked God ‘Why me?’ And today in pain I should not be asking God ‘Why me?' " "Happiness keeps you Sweet, Trials keep you Strong, Sorrow keeps you Human, Failure keeps you humble and Success keeps you glowing… but only Faith & Attitude keeps you going!” |
| Push On A String |
| When monetary policy cannot entice consumers into spending more money or investing in an economy, even if monetary policy is loosened to put more money into peoples' hands. This term is often attributed to noted economist John Maynard Keynes. If the core demand doesn't exist to induce people to part with their money, it can't be forced through monetary policy. Trying to do so is like trying to "push on a string". |
| Father of Accounting |
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Luca Pacioli (1445 – c.1514), an Italian mathematician and Franciscan friar, is credited with being the inventor of double-entry bookkeeping, and thus the 'Father of Accounting'. Pacioli described (rather than invented) the double-entry method of keeping accounts used by Venetian merchants in his: Summa de arithmetica, geometrica, proportioni et proportionalita (1494). |
| Keynesian Economics |
| intervention in the marketplace and monetary policy is the best method of ensuring economic growth and stability. A supporter of Keynesian economics believes it is the government's job to smooth out the bumps in business cycles. Intervention would come in the form of government spending and tax breaks in order to stimulate the economy, and government spending cuts and tax hikes in good times, in order to curb inflation. |
| Sector ETF |
| A 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. |
| Sector Rotation |
| The action of a mutual fund or portfolio manager shifting investment assets from one sector of the economy to another. |
| Lucas Wedge |
| The aggregate amount of loss in output for an economy that is the result of a slowdown in the growth rate of the real gross domestic product (GDP). The Lucas wedge is a visual representation of where a given economy would be in terms of economic output if there hadn't been a slowdown. |
| Deadweight Loss |
| The costs to society created by an inefficiency in the market. Mainly used in economics, the term "deadweight loss" can be applied to any deficiency due to an inefficient allocation of resources. Lost production due to inaccurate forecasting for labor is an example of a deadweight loss. |
| Business Cycle |
| The recurring and fluctuating levels of economic activity that an economy experiences over a long period of time. The five stages of the business cycle are growth (expansion), peak, recession (contraction), trough and recovery. At one time, business cycles were thought to be extremely regular, with predictable durations, but today they are widely believed to be irregular, varying in frequency, magnitude and duration. |
| Recession |
| A 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. |
| Gross Domestic Product - GDP |
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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 includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory. GDP = C + G + I + NX where: "C" is equal to all private consumption, or consumer spending, in a nation's economy "G" is the sum of government spending "I" is the sum of all the country's businesses spending on capital "NX" is the nation's total net exports, calculated as total exports minus total imports. (NX = Exports - Imports) |
| Thin Consolidation |
| For bill presentment, a type of third party consolidation where the bill summary is available at the consolidator's web server and the bill detail is available at the Biller's web server. |
| Real Gross Domestic Product (GDP) |
| This inflation-adjusted measure that reflects the value of all goods and services produced in a given year, expressed in base-year prices. Often referred to as "constant-price", "inflation-corrected" GDP or "constant dollar GDP". |
| Lucas Wedge |
| The aggregate amount of loss in output for an economy that is the result of a slowdown in the growth rate of the real gross domestic product (GDP). The Lucas wedge is a visual representation of where a given economy would be in terms of economic output if there hadn't been a slowdown. |
| Embargo |
| A government order that restricts commerce or exchange with a specified country. An embargo is usually created as a result of unfavorable political or economic circumstances between nations. The restriction looks to isolate the country and create difficulties for its governing body, forcing it to act on the underlying issue. |
| Reserve Account |
| A non-interest earning balance that depository institutions maintain with the Federal Reserve Bank or with a correspondent bank to satisfy the Fed's reserve requirements. Reserve account balances play a central role in the exchange of funds between depository institutions. |
| Quantity-Adjusting Option - Quanto Option |
| A cash-settled, cross-currency derivative in which the underlying asset is denominated in a currency other than the currency in which the option is settled. Quantos are settled at a fixed rate of exchange, providing investors with shelter from exchange-rate risk. At the time of expiration, the option's value is calculated in the amount of foreign currency and then converted at a fixed rate into the domestic currency. |
| Asian Option |
| An option whose payoff depends on the average price of the underlying asset over a certain period of time as opposed to at maturity. This type of option contract is attractive because it tends to cost less than regular American options. Also known as an average option. |
| Digital Option |
| An option whose payout is fixed after the underlying stock exceeds the predetermined threshold or strike price. The value of the payout is determined at the onset of the contract and doesn't depend on the magnitude by which the price of the underlying moves. |
| Caput |
| A type of exotic option that consists of a call option on a put option. The holder of a caput option has the right to purchase a specific put option in the event that the price of the underlying asset declines. The disadvantage of a caput option is that it only trades over the counter, so it is not as easy to get into a position with caput options as with regular vanilla options. |
| Payer Authentication |
| A means of verifying the identity of a cardholder who is making an online purchase. Payer Authentication products, such as PPI BuyerAuth, implement credit card vendor verification technology, such as MasterCard SecureCode, Verified by Visa, and JCB J/Secure. Merchants using payer authentication are guaranteed payment on authenticated transactions. Payer authentication reduces fraud related losses, such as chargebacks. |
| Shout Option |
| An exotic option that allows the holder to lock in a defined profit while maintaining the right to continue participating in gains without a loss of locked-in monies. |
| Quantity-Adjusting Option |
| A cash-settled, cross-currency derivative in which the underlying asset is denominated in a currency other than the currency in which the option is settled. Quantos are settled at a fixed rate of exchange, providing investors with shelter from exchange-rate risk. At the time of expiration, the option's value is calculated in the amount of foreign currency and then converted at a fixed rate into the domestic currency. |
| Ladder Option |
| An option that locks-in gains once the underlying reaches predetermined price levels or "rungs," guaranteeing some profit even if the underlying security falls back below these levels before the option expires. |
| Outperformance Option |
| An exotic call option that's value is determined by the differing performance of two underling assets or securities. The holder gains on the amount one asset outperforms another, both of which are pre-determined. These options are typically European-style, settled in cash, and traded in the over-the-counter market. |
| Binary Option |
| A 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. |
| Trend Trading |
| A trading strategy that attempts to capture gains through the analysis of an asset's momentum in a particular direction. The trend trader enters into a long position when a stock is trending upward (successively higher highs). Conversely, a short position is taken when the stock is in a down trend (successively lower highs). |
| Suspended Trading |
| A stoppage in the trading of a security for an extended period of time that normally occurs when there is a lack of material financial information on the security. Once the security is suspended, shares of that security cannot be traded on the market until the suspension is lifted or lapses. The exact amount of time for the suspension will be determined on a case-by-case basis. |
| No Preset Spending Limit |
| No Preset Spending Limit rewards consumers who have established a good credit history. The card's spending limit is not predetermined. Instead, it is set by the card's issuer, based on account history, spending patterns, payment history and other personal variables. |
| Matrix Trading |
| A fixed income trading strategy that looks for discrepancies in the yield curve on which an investor can capitalize by instituting a bond swap. Discrepancies come about when current yields on a particular class of bond (corporate, municipal, etc.) don't match up with the rest of the yield curve or its historical norms. |
| Spot Trade |
| The purchase or sale of a foreign currency or commodity for immediate delivery. Spot trades are settled "on the spot", as opposed to at a set date in the future. Futures transactions that expire in the current month are also considered spot trades. |
| Spot Next |
| The purchase of a currency that is to be delivered the day after the spot date. The delivery price is adjusted to account for the change in delivery date. For example, a spot one-week contract will result in the delivery of a currency one week after the spot date. |
| Interdelivery Spread |
| Simultaneously entering a long and short on the same futures contract but with different delivery months in the hopes that the price difference between the two months widens or narrows, depending on the underlying investment. |
| Thin Consolidation |
| For bill presentment, a type of third party consolidation where the bill summary is available at the consolidator's web server and the bill detail is available at the Biller's web server. |
| Goods and Services Tax - GST |
| A Canadian value-added tax levied on most goods and services sold for domestic consumption. The tax is levied in order to provide revenue for the federal government. The Goods and Services Tax is paid by consumers, but it is levied and remitted to the government by businesses. |
Does management know their staff?
On walking into the factory, the MD noticed a young guy leaning against a wall, doing nothing. He approached the young man and calmly said to him, "How much do you earn?"
The young man was quite amazed that he was asked such a personal question, he replied none the less, "I earn $2000 a month, Sir. Why?"
Without answering, the MD took out his wallet and removed $ 6000 cash and gave it to the young man and said, "Around here I pay people for working, not for standing around looking pretty! Here is 3 months' salary, now GET OUT and don't come back".
The young man turned around and was quickly out of sight.
Noticing a few onlookers, the MD said in a very upset manner, "And that applies for everybody in this company".
He approached one of the onlookers and asked him, "Who's the young man that I just fired?"
To which an amazing reply came of,
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.........
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........
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"He was the pizza delivery man, Sir!!!"
A lecturer was giving a lecture to his student on stress management.
He raised a glass of water and asked the audience, "How heavy do you think this glass of water is?" The students' answers ranged from 20g to 500gm.
“It does not matter on the absolute weight. It depends on how long you hold it. If I hold it for a minute, it is alright. If I hold it for an hour, I will have an ache in my right arm. If I hold it for a day, you will have to call an ambulance.
It is the exact same weight, but the longer I hold it, the heavier it becomes. If we carry our burdens all the time, sooner or later, we will not be able to carry on, the burden becoming increasingly heavier.
What you have to do is to put the glass down, rest for a while before holding it up again. We have to put down the burden periodically, so that we can be refreshed and are ! able to carry on.
So before you return home from work tonight, put the burden of work down. Don't carry it back home. You can pick it up tomorrow. Whatever burden you are having now on your shoulders, let it down for a moment if you can. Pick it up again later when you have rested.”
Rest and relax, enjoy life !
| Producer Price Index - PPI |
| A family of indexes that measures the average change in selling prices received by domestic producers of goods and services over time. PPIs measure price change from the perspective of the seller. |
| Wealth Added Index |
| A metric designed by Stern Stewart & Co consulting firm that attempts to measure wealth created (or destroyed) for shareholders by a company. The WAI takes into account more variables than just the profits or share growth of a company. According to this theory, wealth is created only if the returns of a company exceed its cost of equity. |
| Value Added Monthly Index - VAMI |
| The value-added monthly index charts the total return gained by an investor from reinvestment of any dividends and additional interest gained through compounding. The VAMI index is sometimes used to evaluate the performance of a fund manager. An index that tracks the monthly performance of a hypothetical investment. |
| Yupcap |
| A 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 |
| Index |
| The 12-month moving average of the one-year constant maturity treasury (CMT) used as an index for adjustable rate mortgages. The index is calculated by adding the 12 most recent monthly CMT values and dividing by 12. Since the MTA index is a moving average it has a lag effect. In other words, when the 12 monthly CMT values used to calculate the average are sequentially increasing, the current MTA value will not be as high as the current CMT value, and visa versa when the CMT values are sequentially falling. |
| Spot Trade |
| The purchase or sale of a foreign currency or commodity for immediate delivery. Spot trades are settled "on the spot", as opposed to at a set date in the future. Futures transactions that expire in the current month are also considered spot trades. |
| Transportation Sector |
| A category of stocks relating to the transportation of goods or customers. The transportation sector is made up of airlines, railroads and trucking companies. |
