Exempt Transaction

Exempt Transaction

A type of securities transaction where a business does not need to file registrations with any regulatory bodies, provided the number of securities involved is relatively minor compared to the scope of the issuer's operations and that no new securities are being issued. Exempt transactions cut down the amount of paperwork needed for relatively minor transactions. For example, it would be a big hassle to perform a filing with the SEC every time a non-executive employee wanted to sell back some of the company's common shares he or she purchased as part of an employee stock purchase plan.

Accelerated Share Repurchase - ASR

Accelerated Share Repurchase - ASR

A specific method by which corporations can repurchase outstanding shares of their stock. The accelerated share repurchase is usually accomplished by the corporation purchasing shares of its stock from an investment bank. The investment bank borrows the shares from clients or share lenders and sells them to the company. The shares are returned to the client through purchases in the open market, often purchased over a period that can range from one day to several months. Accelerated share repurchases allow corporations to transfer the risk of the stock buyback to the investment bank in return for a premium. The corporation is therefore able to immediately transfer a predetermined amount of money to the investment bank in return for its shares of stock. ASRs are often used to buy shares back at a faster pace and reduce the amount of shares outstanding right away.

Core Earnings defined by S&P

Core Earnings defined by S&P

The Standard and Poor's revised version of the measurement of core earnings, which excludes any gains related to pension activities, net revenues from the sale of assets, impairment of goodwill charges, prior-year charge and provision reversals, and settlements related to litigation or insurance claims. Expenses related to employee stock option grants, pensions, restructuring of present operations or any merger and acquisition costs, R&D purchases, write-downs of depreciable or amortizable operating assets, and unrealized gains/losses from hedging activities are all included in the core earnings. This is a new standard created by S&P with the assistance from the financial and investment community. These core earnings provide for transparency and consistency, as well as a more stringent definition of a company's core earnings, clearly setting out exactly what can and cannot be considered earnings and expenses.

Core Deposits

Core Deposits

The deposits made in a bank's natural demographic market. Banks count on core deposits as a stable source of funds for their lending base. Core deposits offer many advantages to banks, such as predictable costs and a measurement of the degree of customer loyalty. In addition to the advantages mentioned above, core deposits are generally less vulnerable to changes in short-term interest rates than core deposits or money market accounts. Core deposits also encompass small denomination time deposits, as well as checking accounts. Banks can increase their core deposits with local marketing and customer incentives.

Share Repurchase

Share Repurchase

A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. Because a share repurchase reduces the number of shares outstanding (i.e. supply), it increases earnings per share and tends to elevate the market value of the remaining shares.

Variable Coupon Renewable Note - VCR

Variable Coupon Renewable Note - VCR

A renewable fixed income security with variable coupon rates that are periodically reset. Usually the coupon is set on a weekly basis at a fixed spread over the T-bill rate.

Bond Market Association (BMA) Swap

Bond Market Association (BMA) Swap

A type of swap arrangement in which two parties agree to exchange interest rates on debt obligations, where the floating rate is based on the bond market association's swap index. One of the parties involved will swap a fixed interest rate for a floating rate, while the other party will swap a floating rate for a fixed rate. The benefits to two parties entering into a interest rate swap arrangement can be significant. Often, each of the two firms involved has a comparative advantage in its fixed or variable interest rate. Consequently, for budgeting or forecasting reasons, a company may wish to enter into a loan with a fixed or variable interest rate in which it does not have a comparative advantage.

Variable Rate Demand Note - VRDN

Variable Rate Demand Note - VRDN

A debt instrument that represents borrowed funds that are payable on demand and accrue interest based on a prevailing money market rate, such as the prime rate. The interest rate applicable to the borrowed funds is specified from the outset of the debt, and is typically equal to the specified money market rate plus an extra margin. Because money market interest rates, such as the bank prime rate, are variable over time, the interest rate applicable to this type of demand note is variable as well. Every time the prevailing money market rate changes, a variable rate demand note's interest rate is adjusted accordingly. As the name implies, these debt instruments are payable on demand. This means that the lender of the funds can request repayment of the entire debt amount at its discretion, and the funds must be repaid once the demand has been made.

Variable-Rate Certificate Of Deposit

Variable-Rate Certificate Of Deposit

certificate of deposit (CD) with a variable interest rate. The rate can be determined by a number of mediums, such as the prime rate, consumer price index, treasury bills or a market index. The amount paid out is usually based on a percentage difference between the beginning index and the final index. A certificate of deposit is generally considered to be one of the safer ways to invest your money. It is the perfect choice for the conservative investor, or to diversify the risk of your portfolio. When looking to step up the risk just a little bit, considering a variable rate CD may be a good place to start.

Uninsured Certificate Of Deposit

Uninsured Certificate Of Deposit

A certificate of deposit (CD) which is not insured against losses. Due to the lack of insurance, these CDs yield a higher interest rate, as the purchaser assumes all of the risk. In the event that the financial institution that issued the CD goes bankrupt, the purchaser loses the investment. Most certificates of deposit are insured twice over. Once, by the Federal Deposit Insurance Corporation (FDIC), and also by the National Credit Union Association (NCUA). These institutions would take care of the investment in the event that the lending financial institution was incapable.

Inflation-Protected Annuity - IPA

Inflation-Protected Annuity - IPA

An annuity investment that guarantees a real rate of return at or above inflation. The real rate of return is the nominal return, less the inflation rate, thus protecting annuitants and beneficiary investors from inflation. Inflation-protected annuities are becoming more popular with annuity investors who are worried about the risk of inflation decreasing the purchasing power of their money as they age.

Corporate Inflation-Linked Securities

Corporate Inflation-Linked Securities

Corporate debt financing securities that offer their holders protection against fluctuations in the rate of inflation as measured by the consumer price index (CPI). The yields of these securities adjust monthly with respect to the current rate of inflation. Although they are not as common as conventional debt instruments, inflation-protected corporate debt can provide an investor with a balanced risk exposure: these securities pose all of the normal risks associated with regular corporate debt securities - such as default risk - but they remove the possibility of inflationary changes eroding their real returns.

Zero Basis Risk Swap - ZEBRA

Zero Basis Risk Swap - ZEBRA

A swap agreement between a municipality and a financial intermediary. The municipality pays a fixed rate of interest to the financial intermediary and receives a floating rate of interest in return. The floating rate received is equal to the floating rate on the outstanding floating rate debt initially issued by the municipality to the public.

Structured Investment Products - SIPS

Structured Investment Products - SIPS

A type of investment specifically designed to meet an investor's financial needs by customizing the product mix to adhere to the investor's risk tolerance. SIPs are generally created by varying the amount of exposure to risky investments and often include the use of various derivatives. A structured investment will vary depending on the risk tolerance of the investor. SIPs typically involve various exposures to fixed income markets and various derivatives. Conservative investors will have a higher exposure to the fixed income markets, while risk averse investors will have a higher exposure to equities and derivatives.

Dividend Rollover Plan

Dividend Rollover Plan

An investment strategy in which a dividend-paying stock is purchased right before the ex-dividend date, which gives the purchaser the right to the divided, with the position being sold off shortly after the ex-dividend date. The sole intention of this practice is to reap the value of the dividends while breaking even on the shares. Ideally, this strategy is designed to maximize short-term return on shares while minimizing risk. Proponents of dividend rollover planning argue that immediate returns on investments are made while reducing risk. However, opponents of the strategy believe that the expected dividend value is already incorporated into the stock before the ex-dividend date because the market anticipates the dividend payout.

Treasury DRIP

Treasury DRIP

A dividend reinvestment plan that uses dividends to purchase more shares directly from the company's treasury stock. Oftentimes, because the company is issuing the shares, it will offer the shareholder a small discount on the share price; this discount typically ranges from 2-4%. The other common type of dividend reinvestment plan is the market DRIP. In a market drip, a company uses its cash dividends to purchase shares on the open market, rather than from its treasury. Using a DRIP can help companies to develop investor loyalty and a stable shareholder base. The advantages to shareholders include convenience and a lack of commission charges on acquiring new shares through a DRIP program.

Gypsy Swap

Gypsy Swap

An exchange of restricted shares for freely exchangeable shares between two separate parties. This generally occurs when companies exchange restricted treasury shares with stockholders in order to liquidate a position.