Loose Credit

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

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

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

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

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

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

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

Zero Liability

Policy of some card networks that protects consumers so that they pay only for purchases which they have authorized.

 

Liability Insurance

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

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

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

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

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

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

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

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

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

Faith and Attitude keeps you going

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

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

Father of Accounting

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

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

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

Sector Rotation

The action of a mutual fund or portfolio manager shifting investment assets from one sector of the economy to another.

 

Lucas Wedge

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

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

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

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

Gross Domestic Product - GDP

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

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)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.