| 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 |
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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 |
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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 |
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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 |
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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 |
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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 |
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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 |
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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 |
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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 |
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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. |
