Fastpath

advisory, amortization, analysis, assets, audit, bank, broker, clearing, clearing house, commodity, credit, debt, economics, exchange, Federal Reserve System, financial crimes, fiscal policy, float, foreign currency, fund, futures, hedge, illegal, insurance, interest, international, Internet, law, loan, market, money, mortgage, option, payment system, pension plan, portfolio, real estate, Regulation S, risk, securities, settlement, tariff, tax, trading, transportation, yield,

12L AADS ABA ABMS ABS ACE ACH ACSSS ADR AIBD ALA AMDA AMEX AMOS AMPS APAC APG APR APV ARC ARM ARP ASAM ASO ATI ATMs ATS ATS AVR AVS BBSS BEACON BHC BIF BIS BITS BLS BMA BOTCC BSE BV CAC CADS CAP CAPM CBCH CBI Act CBOE CBOT CBT CCC CCD CCH CD CDB CEA CEA CEBA CEMLA CETA CFATF CFO CFTC CHECCS CHIPS CHX CIE CIF CIF C.I.F. CIIS CMB CME CMO CMS CNS COMB COMEX COT CPA CPI CPO CQS CRA CRA CRD CRF CRR/HHT CSAC CSE CSMA CSP CST CTA CTA CTI CTP CTR CTRS CTS CTX CUSIP DCF DCIA DCM DDA DIDC DIDMCA DINB DIV DM DRR DRT DSRO DTC DTEF DVP EAC EAF-2 ECCB ECCHO ECHO ECN ECP ECR ECU EDBT EDC EDGAR EDS EFAA EFP EFT EFTA EFTS EFTS EIA EMIP EMS EMT EPS ERISA EROC ERTA ERV ESOP ESOP EST ET ETAC ETF FAB FAC FACS FACTS FADA FAN Fannie Mae FASB FATF FBO FCIA FCM FCR FDDI FDI Act FDIC FDICIA FERC FFB FFIEC FHA FHFB FHLB FHLBB FHLMC FIA FIBSEA FIBV FID FinCEN FIRREA FISR FIU FmHA FNMA FOCUS FOMC FORCE Forex FRA FRB FRBC FRBM FRBNY FRBSF Freddie Mac FRN FSC FSF FSLIC FTC FTR G-10 G&A GAAP GAO GATT GCR GDP GEM Ginnie Mae GMBH GNMA GNP GPM GPML GSCC GTC GTC GTW HFT HHD IAIS IANs IB IBCs IBF IBRD IBSGC ICASS ICC ICM ICON ICR ICS ID IDT IGS IIAC IIEDS IMA IMCR IMF INCSR INTERPOL IOSCO IOSCO IPO IRA IRB IRR IRS ISCC ISDA ISG ISIS ITAC ITCV ITDS ITPN ITS JDC KCBT KTT LAAC LAC LAR LCAC LIBOR LLC LOCOM LOX LURA MAX MBS MCA MCR MDA MDS MICR MIDIS MIDS MIT MLAT MMBTU MMDA MPC MPC MPS MSA MSRB MTE NACHA NAIC NASAA NASAA NASD NASD NASDAQ NASS&LS NCUA NFA NIF NMS NOB NOCH NOW NPR NPV NPV NSCC NSTA NSTS NV NWC NYAC NYACH NYCHA NYSE OARS OBA OBU OCC OCC OCC OCO OCO ODFI OECD OFAC OFHEO OFIA OGBS OIG OPEC ORE OTC OTS P&A PACE PAM PAX PBGC PC PCA PCCR PER PERK PHLX PIN PLAM PMAC PMI PMSR PPI Prenote PSE PSS PUD PVP QFC QOMC QT QTI QTL RAC RALA RAM RAP RCMM RCPC RDFI REAS REFCORP REIT REMIC REO REOMS REPO RFAC RFC RICO ROE ROI RP RR RRM RTC RTCCA RTCRRIA RTGS RUF SAIF Sallie Mae SAM SAMA SAMDA SBA SBIC SCOREX SDR's SEA SEC SECTOR SET SFAS S-HTTP SIA SIAC SIMAN SIPC SIPC S&L S&L crisis SMSA SPDC SPEQ SRO SSL SUPER DOT SWIFT TAA TAP TARP TARS TAS T-bills TDPOB TFR TIAC TIES TLA TLS UCC 4A UCC UDAA Un/Edifact UNODC USPAP UTAC UTPR VA WDS

Terms

10-K

Annual report required by the SEC each year. Provides a comprehensive overview of a company's state of business. Must be filed within 90 days after fiscal year end. A 10Q report is filed quarterly. [Harvey]

12B-1 fees

The percent of a mutual fund's assets used to defray marketing and distribution expenses. The amount of the fee is stated in the fund's prospectus. The SEC has recently proposed that 12B-1 fees in excess of 0.25% be classed as a load. A true ' no load' fund has neither a sales charge nor 12B-1 fee. [Harvey]

12B-1 funds

Mutual funds that do not charge an upfront or back-end commission, but instead take out up to 1.25% of average daily fund assets each year to cover the costs of selling and marketing shares, an arrangement allowed by the SEC's Rule 12b-I (passed in 1980). [Harvey]

48-hour rule

The requirement that all pool information, as specified under the PSA Uniform Practices, in a TBA transaction be communicated by the seller to the buyer before 3 p.m. EST on the business day 48-hours prior to the agreed upon trade date. [Harvey]

ABA number

A nine digit number (eight digits and a check digit) that identifies a specific financial institution. These numbers are assigned by the Thomson Financial Publishing and are listed in its annual publication Key to Routing and Transit Numbers. [ACH] A number, usually placed near the upper right corner of checks, which identifies the financial institution on which the check is drawn. The number is used in sorting and clearing checks. The ABA coding system was designed by the American Bankers Association. [OTS]

abandonment

The act of refusing delivery of a shipment so badly damaged in transit that it is worthless; OR damage to a vessel that is so severe that it is considered a constructive total loss. [ITDS]

abandonment option

The option of terminating an investment earlier than originally planned. [Harvey]

abatement

The reduction or cancellation of an assessed tax. [OTS]

abbrochment

The purchase at wholesale of all merchandise that is intended to be sold in a particular retail market for the purpose of controlling that market. [ITDS]

abnormal returns

Part of the return that is not due to systematic influences (market wide influences). In other words, abnormal returns are above those predicted by the market movement alone. [Harvey]

above par

A higher dollar amount than the face value, or par, of a security. The term is used when a security is sold for a price higher than its face value. [OTS]

absentee landlord

A property owner who does not occupy his or her property, but usually rents it to another or leaves it vacant. [OTS]

absolute advantage

A country has an absolute advantage if its output per unit of input of all goods and services produced is higher than that of another country. [FRBSF] A person, company or country has an absolute advantage if its output per unit of input of all goods and services produced is higher than that of another person, company or country. [FRB][FRBM] An advantage of one nation or area over another in the costs of manufacturing an item in terms of used resources. [ITDS] The ability of a producer to produce a higher absolute quantity of a good with the productive resource available. [FACS]

absolute auction

An open, outcry sale in which assets are sold to the highest bidder regardless of price, with no reserve price and no minimum bid. [FDIC]

absolute priority

Rule in bankruptcy proceedings whereby senior creditors are required to be paid in full before junior creditors receive any payment. [Harvey]

absolute title

A clear title that is free of any liens or judgments. A clear title is normally required before a mortgage is granted. [OTS]

absorption

Investment and consumption purchases by households, businesses and governments both domestic and imported. [ITDS]

abstract of title

A statement usually prepared by an attorney that traces the history of ownership of real property to determine the status of its present title, and includes all items of record that might impair the title, such as liens, charges or encumbrances. [OTS]

abundance

A term that applies when individuals can obtain all the goods they want without cost. If a good is abundant, it is free. [FACS]

academic consultants

An advisory group initiated by the board in the 1960's to provide a forum for the exchange of views between the Federal Reserve Board and members of the academic community in economics and banking. [FRBSF]

accelerated amortization

The restructuring of an existing mortgage loan by increasing the monthly payments in order to pay off the loan in a shorter time than the original maturity. [OTS]

accelerated cost recovery system

Schedule of depreciation rates allowed for tax purposes. [Harvey]

accelerated depreciation

Any depreciation method that produces larger deductions for depreciation in the early years of a project's life. Accelerated cost recovery system (ACRS), which is a depreciation schedule allowed for tax purposes, is one such example. [Harvey] Any depreciation method that produces larger deductions for depreciation in the early years of a project's life; e.g., double-declining-balance depreciation, sum-of-the-years'-digits depreciation [WCSU] The method of speeding up the write-off from income of qualifying investments at a faster than normal rate. Annual tax deductions are higher in the first years and diminish in later years of the write-off. [OTS]

accelerated dividend

A dividend paid to proven creditors of the receivership based on a projection of future funds available. Accelerated dividends are calculated based on estimates of asset collections, less projections of administrative expenses, other liabilities, and contingent liabilities. [FDIC]

Accelerated Resolution Program (ARP)

A means of resolving a failed thrift institution in which there is an expedited transfer of the insolvent thrift's assets and deposit liabilities to a healthy institution, without first placing the failed thrift in conservatorship. This approach, initiated jointly by the OTS and the RTC in 1990, was similar to FDIC resolutions at the time. The program was designed to allow thrifts that were below FIRREA-mandated capital levels, but that otherwise were perceived as having substantial franchise value, to continue to operate throughout the resolution process. [FDIC]

acceleration

A common security document remedy by which the Trustee may declare all future payments of principal immediately due and payable after the occurrence of certain events set forth in the security document as prerequisites to acceleration, generally the events of default. Once acceleration, has been declared, there is generally no preference or priority of one bond, one maturity or one payment of principal or interest over another unless the security document otherwise provides. [EPA]

acceleration clause

A clause commonly included in mortgages and bonds that gives the holder the right to demand the entire outstanding balance be paid in the event of default. Without this clause, the mortgagee may have to file separate foreclosure suits as each installment of the mortgage debt falls due and is in default. [OTS]

accelerator

The casual relationship between changes in consumption and changes in investment. [FACS]

acceptance

A time draft (bill of exchange or usance draft) drawn by one party and acknowledged by a second party. The drawee, known as the 'acceptor', stamps or writes the word 'accepted' on the face of the draft and above his or her signature the place and date of payment. Once the draft is accepted it carries an unconditional obligation on the part of the acceptor to pay the drawer the amount of the draft on the date specified. A 'bank acceptance' is a draft drawn on and accepted by a bank. A 'trade acceptance' is a draft drawn by the seller of goods on the buyer, and accepted by the buyer. [FDIC] A written agreement, usually in the form of a draft, in which one party, the drawee, accepts the obligation to pay a specified amount of money to another party at a specified place and time. The drawee is also known as the acceptor, and writes the word 'accepted' over his or her signature. A bank acceptance is a draft drawn on and accepted by a bank. [OTS] An unconditional assent to an offer; OR An assent to an offer conditioned on only minor changes that do not affect any material terms of the offer; OR Receipt by the consignee of a shipment thus terminating the common carrier liability. [ITDS]

accepted draft

A bill of exchange accepted by the drawee (acceptor) by putting his signature (acceptance) on its face. In doing so, he commits himself to pay the bill upon presentation at maturity. [ITDS]

accepting bank

A bank who by signing a time draft accepts responsibility to pay when the draft becomes due. In this case the bank is the drawee (party asked to pay the draft), but only becomes the acceptor (party accepting responsibility to pay) upon acceptance (signing the draft). See acceptance; bill of exchange. [ITDS]

acceptor

The party that signs a draft or obligation, thereby agreeing to pay the stated sum at maturity. [ITDS]

access

The right to enter and leave a tract of land from a public road, often used when an owners' property is accessible only by crossing property owned by another party. [OTS]

access savings account

A type of savings account in which funds are accessible to the account holder by check, telephone order, debit card or similar device in addition to in-person withdrawals. NOW accounts are a type of access savings account. [OTS]

accessions

Goods that are affixed to and become part of other goods. [ITDS] The process by which a country becomes a member of an international agreement, such as the General Agreement on Tariffs and Trade (GATT). [ITDS]

accessorial charges

Charges made for additional, special, or supplemental services, normally over and above the line haul services. [ITDS]

accessorial services

Services performed by a shipping line or airline in addition to the normal transportation service. [ITDS]

accommodation

An action by one individual or legal entity that is taken as a favor, without any consideration, for another individual or legal entity. [ITDS] The lending of one person's good name or credit standing to a second person with no compensation in order that the second person may borrow money from a third person. Historically, accommodation meant the making of a loan by one person to a second person who lacks sufficient collateral but has the backing of a third person. [OTS]

accommodation check

A check written by a thrift institution on its account with a bank, payable to a third party named by a customer withdrawing funds to cover the check from his or her account at the thrift institution. [OTS]

accommodation trading

accord and satisfaction

A means of discharging a contract or cause of action by which the parties agree (the accord) to alter their obligations and then perform (the satisfaction) the new obligations. [ITDS]

account

(1) an on-going business relationship in which a depository institution accepts, holds, invests, processes or disburses funds owned by a customer according to the customer's wishes within a framework of preestablished rules and procedures. (2) any continuing business relationship between two parties in which funds or debt is held and processed to compensate the parties for transactions between them. [OTS]

account authority digital signature (AADS)

relying party obtains public key from its own account registery record for digital signature authentication [misc]

Account Balance Monitoring System (ABMS)

Fedwire system allowing Reserve Banks to monitor depository institutions' account positions and payment activity on a real-time basis. Reserve Banks can hold or reject funds transfers that may cause account holders to exceed their net debit caps. [GAO]

account executive

The agent of a commission house who serves customers/traders by entering their commodity futures and options orders, reporting trade executions, advising on trading strategies, etc. [NYMEX]

account hold

A warning placed on a savings, loan or other account to indicate the need for special handling when transactions are made. [OTS]

Account Management Profile System (AMPS)

Provides access to information helpful to the NYSE staff in managing day-to-day relationships with listed companies, member firms, and institutions. [NYSE]

account number

An identifying number issued by a carriers accounting office to identify a shipper and/or consignee. [ITDS]

account or underwriting account

An association of underwriters (headed by a manager or joint co-managers) formed in accordance with an agreement among underwriters for the purpose of purchasing an issue from an issuer and reoffering it or sale to investors. the members of the account may have joint and several liability, or merely several liability, for the entire principal amount of bonds depending upon the terms of the agreement among underwriters and the bond purchase agreement. Often referred to as a 'syndicate'. [EPA]

account party

Buyer/importer or applicant who arranges for the establishment of a letter of credit. [FDIC]

accountant

A person who performs accounting work. [OTS]

accountant's opinion

accounting

The process of systematically recording, classifying, verifying and summarizing business transactions, and presenting this information in periodic, interpretative financial statements and reports. [OTS]

accounting earnings

Earnings of a firm as reported on its income statement. [Harvey]

accounting equation

The basic equation of double-entry accounting that reflects the relationship of assets, liabilities and net worth (reserves + stockholders equity + retained earnings). The equation may be expressed in its simplest form as: assets = liabilities + net worth. [OTS]

accounting exposure

The change in the value of a firm's foreign currency denominated accounts due to a change in exchange rates. [Harvey]

accounting insolvency

Total liabilities exceed total assets. A firm with a negative net worth is insolvent on the books. [Harvey]

accounting liquidity

The ease and quickness with which assets can be converted to cash. [Harvey]

accounting period

A period at the end of which and for which financial statements are prepared. [EPA]

accounting procedures

All processes which discover, record, classify, and summarize financial information to produce financial reports and to provide internal control. [EPA]

accounting system

(A) The total structure of records and procedures which discover, record, classify, summarize, and report information on the financial position and results of operations of a government or any of its funds, fund types, balance account groups, or organizational components . (B) The total structure of records and procedures which discover, record, classify, summarize and report information on the financial position and results of operations of a government or any of its funds, fund types, balanced account groups, or organizational components. [EPA]

accounts payable

A current liability representing the amount owed by an individual or a business to a creditor(s) for merchandise or services purchased on an open account or short-term credit. [ITDS] A liability account reflecting amounts on open account owing to private persons or organizations for foods and services furnished by a government (but not including amounts due from other funds of the same government or to other governments). [EPA] Money a company owes for services and supplies. For example, a record company would list as accounts payable the bill from a wax company that supplied the raw material for making records. [NYSE] Money owed to suppliers. [Harvey][WCSU] amounts recorded as liabilities on the books of a company, institution or individual that are owed, but have not yet been paid, to a creditor for previously purchased merchandise or services. [OTS]

accounts receivable

An asset account reflecting amounts owing on open account from private persons or organizations for goods and services furnished by a government (but not including amounts due from other funds of the same government). Although taxes and special assessments receivable are covered, by this term, they should be recorded and reported separately in Taxes Receivable and Special Assessments Receivable accounts respectively. Amounts due from other funds or from other governments should also be reported separately. [EPA] Money owed a business enterprise for merchandise or services bought on open account. [ITDS] Money owed by customers. [Harvey][WCSU] amounts recorded as assets on the books of a company, institution or individual that are due, but have not yet been collected, from a debtor for the previous purchase of merchandise or services. [OTS]

accounts receivable turnover

The ratio of net credit sales to average accounts receivable, a measure of how quickly customers pay their bills. [Harvey]

accreting swap

A swap with a notional principal amount which decreases over time. [TMAC]

accretion of discount

A straight-line accumulation of capital gains on discount bonds in anticipation of being paid par at maturity. [FRBSF] In portfolio accounting, a straight-line accumulation of capital gains on discount bond in anticipation of receipt of par at maturity. [Harvey]

accrual basis

The basis of accounting under which transactions are recognized when they occur, regardless of the timing of related cash flows. [EPA]

accrual basis accounting

A method of accounting whereby income and expense items are recognized and recorded when income is earned and expense is incurred, regardless of when cash is actually received or paid. [OTS]

accrual bond

A bond on which interest accrues, but is not paid to the investor during the time of accrual. The amount of accrued interest is added to the remaining principal of the bond and is paid at maturity. [Harvey]

accrual of obligation

The time at which an obligation matures or vests, requiring the obligor to perform. [ITDS]

accrue

to increase or accumulate. Commonly used in reference to depreciation, expense, income, interest and other accounting factors. [OTS]

accrued expense

Expenses incurred but not due until a later date. [EPA] costs that have been incurred during an accounting period but have not yet been paid. [OTS]

accrued interest

Interest earned between the most recent interest payment and the present date but not yet paid to the lender. [CBOT][MIDAM] Interest that has been earned but not yet paid. [WCSU] The accumulated coupon interest earned but not yet paid to the seller of a bond by the buyer (unless the bond is in default). [Harvey] The dollar amount of interest accrued on a bond issue from its date to the date of delivery to the original purchaser. This is usually paid (and is required to be paid in most competitively bid sales) by the original purchaser to the issuer as part of the purchase price of the issue. Note that a security usually bears interest from its date. The dollar amount of unpaid interest that has accrued to a certain date, such as to a call date. [EPA] The interest due on a bond since the last interest payment was made. The buyer of the bond pays the market price plus accrued interest. [NYSE] interest that has been earned but which has not been paid or credited since the last time that interest was paid. [OTS]

accrued interest on securities issued

Interest for the period between the date of issue (dated date) and the settlement date. [EPA]

accrued-benefit cost method

Method for estimating thenormal costs of a pension plan. Its principle is that that company should contribute each year the present value of any benefits that have accrued. [WCSU]

accumulated benefit obligation

An approximate measure of the liability of a plan in the event of a termination at the date the calculation is performed. [Harvey]

accumulated depreciation

A valuation account to record the accumulation of periodic credits made to record the expiration of the estimated service life of fixed assets. [EPA]

ACH Association

An organization formed by financial institutions to regulate and support the exchange of electronic transactions among member institutions. [ACH]

ACH credit

A transaction through the ACH network originated to pay a receiver (deposit funds into an account). [ACH]

ACH debit

A transaction through the ACH network originated to remove funds from the receiver (withdrawal from account). [ACH]

ACH operator/processor

An ACH operator/processor is a central clearing facility that receives batches of ACH credit and debit transactions from originating depository institutions; edits, sorts, and distributes the transactions to receiving depository institutions; and facilitates the settlement among participants. [GAO]

acid-test ratio

Also called the quick ratio, the ratio of current assets minus inventories, accruals, and prepaid items to current liabilities. [Harvey]

acquiree

A firm that is being acquired. [Harvey]

acquirer

A firm or individual that is acquiring something. [Harvey]

acquiring institution

A healthy bank or thrift institution that purchases some or all of the assets and assumes some or all of the liabilities of a failed institution in a purchase and assumption transaction. The acquiring institution is also referred to as the assuming institution. [FDIC]

acquiring processor

The processor provides credit card processing, billing, reporting and settlement and operational services to acquiring and issuing banks. Many financial institutions don't do their own bankcard processing because it's more cost-effective to let someone else invest in the equipment and people and do it for them. [GAO]

acquisition

Acquiring control of one corporation by another. In 'unfriendly' take-over attempts, the potential buying company may offer a price well above current market values, new securities and other inducements to stockholders. The management of the subject company might ask for a better price or try to join up with a third company. [NYSE] The purchase of complete or majority ownership in a business enterprise, usually by another business enterprise. [ITDS]

acquisition credit

fees other than interest charged by a thrift institution for making, refinancing or changing a loan or a loan commitment. Acquisition credits are sometimes referred to as loan origination fees. [OTS]

acquisition discount

The difference between the amount of unpaid principal of a mortgage and the price paid for the mortgage in the secondary market. [OTS]

acquisition loan

A loan for purchasing raw, or yet to be developed, land. [OTS]

acquisition of assets

A merger or consolidation in which an acquirer purchases the selling firm's assets. [Harvey]

acquisition of stock

A merger or consolidation in which an acquirer purchases the acquiree's stock. [Harvey]

acquisition, development and construction loan

A loan package to finance acquiring, developing and constructing real estate. [OTS]

acre

A tract of land containing 43,560 square feet, or 0.0016 square miles of land. An acre measures 208.71 feet on each side. In the metric system, one acre equals 0.4047 hectare or 40.47 ares. [OTS]

act of God

An act of nature beyond mans control such as lightning, flood, earthquake or hurricane. Many shipping and other performance contracts include a 'force majeure' clause which excuses a party who breaches the contract due to acts of God. [ITDS]

act of state doctrine

This doctrine says that a nation is sovereign within its own borders and its domestic actions may not be questioned in the courts of another nation. [Harvey]

action ex contractu

A legal action for breach of a promise stated in an express or implied contract. [ITDS]

action ex delicto

(a) A legal action for a breach of a duty that is not stated in a contract but arises from the contract. (b) A legal action that arises from a wrongful act, such as fraud. [ITDS]

active

A market in which there is much trading. [Harvey]

active portfolio strategy

A strategy that uses available information and forecasting techniques to seek a better performance than a portfolio that is simply diversified broadly. [Harvey]

activist fiscal policy

Use of the federal governments taxing, spending and borrowing powers in order to stimulate economic growth and employment. [FACS]

actual thrift investment percentage

A ratio whose numerator is housing-related investments, called qualified thrift investments, and whose denominator is portfolio assets. The ratio is used to determine whether a savings association meets the qualified thrift lender test. [OTS]

actual turnover

The number of times individuals actually spend their average money holding over a given period of time. Actual turnover is determined by the proportion of income that people receive and actually retain as money balances over a given period of time. [FACS]

actuals

Physical cash commodities as opposed to futures contracts. [NYMEX] Refers to debt securities, currencies, physical commodities and equity securities (versus derivatives) [TMAC] The physical commodity underlying a futures contract. Cash commodity, physical. [Harvey] physical or cash commodities, as distinguished from commodity futures contracts. [OTS]

ad valorem (property) tax

A direct tax based 'according to value' of property. Counties and school districts and municipalities usually are, and special tax districts may be, authorized by law to levy ad valorem taxes on property other than intangible personal property. Local governmental bodies with taxing powers may issue bonds or short-term certificates payable from ad valorem taxation. [EPA]

ad valorem duty

A U.S. Customs duty assessed as a percentage rate or value of the imported merchandise. [ITDS]

ad valorem real property taxes

Taxes imposed on real property based on its value. [FDIC]

ad valorem tax

A tax measured or based on the value of the property being taxed. [EPA] property taxes on the assessed value of a property. Ad valorem is Latin for 'according to value.' [OTS]

add

Antidumping duties which are assessed when merchandise is sold to purchases in the US at less than fair value resulting in material injury to a US industry. [ITDS]

add-on interest

A procedure in which the interest payable during the term of the loan is added to the principal of the loan. The borrower signs a note promising to repay principal plus interest, although only the principal is initially disbursed to the borrower. [OTS]

add-on method

A method of paying interest where the interest is added onto the principal at maturity or interest payment dates. [CBOT][MIDAM]

addenda record

An ACH record type that carries the supplemental data needed to completely identify an account holder(s) or provide information concerning a payment to the Receiving Depository Financial Institution and the Receiver. [ACH]

additional bonds

Revenue bonds issued after the first issue in accordance with authorization and upon conditions specified in the security documents for the first issue. The conditions often include an historic and forecasted earnings coverage of debt service on the outstanding and the additional bonds. Additional bonds are usually, but not necessarily, on a parity with outstanding bonds. [EPA]

additional hedge

A protection against borrower fallout risk in the mortgage pipeline. [Harvey]

additional settlement obligation (ASO)

NYCHA loss-sharing arrangement to ensure that CHIPS settles even if a participant fails. Each CHIPS participant that has established bilateral limits with the failed participant agrees to assume an additional settlement obligcation equal to its pro rata share of the failed participan'ts net debit position. [GAO]

address of record

The official or primary location for an individual, company, or other organization. [ITDS]

address verification service (AVS)

AVS allows mail and telephone orders companies to verify a cardholder's billing address online. This program is designed to reduce fraudulent use of cardholder's credit card number [GAO]

adhesion contract

Contract with standard, often printed, terms for sale of goods and services offered to consumers who usually cannot negotiate any of the terms and cannot acquire the product unless they agree to the terms. [ITDS]

adjustable rate mortgage (ARM)

A loan in which the interest rate is periodically adjusted, moving higher or lower in the same ratio as a preselected index, such as Treasury bill rates. ARM loans may include caps on interest rate increases in a given time period, and over the life of the loan, and may include limits on the frequency of interest rate adjustments. ARM loans generally have initial below market interest rates in return for the borrower sharing the risk that interest rates may rise during the life of the loan. [OTS] A type of mortgage in which the interest rate is reset at regular intervals, typically at a spread over a stated short-term interest rate index. The most frequently used indexes have been the one-year U.S. Treasury constant maturity yield and the Eleventh District Cost of Funds Index. Because the interest rate paid by the borrower fluctuates with the general level of interest rates in the marketplace, ARMs shift most of the interest rate risk from the lender to the borrower. [FDIC]

adjustable rate preferred stock

Publicly traded issues that may be collateralized by mortgages and MBSs. [Harvey]

adjusted basis

The original cost of a property plus the value of any capital expenditures for improvements to the property, minus any depreciation taken. [OTS]

adjusted futures price

The cash-price equivalent reflected in the current futures price. This is calculated by taking the futures price times the conversion factor for the particular financial instrument (e.g., bond or note) being delivered. [CBOT][MIDAM]

adjusted present value (APV)

Net present value of an asset if financed solely by equity, plus the present value of any financing side affects. [WCSU] The net present value analysis of an asset if financed solely by equity (present value of un-levered cash flows), plus the present value of any financing decisions (levered cash flows). In other words, the various tax shields provided by the deductibility of interest and the benefits of other investment tax credits are calculated separately. This analysis is often used for highly leveraged transactions such as a leverage buy-out. [Harvey]

adjustment assistance

Financial, training and re-employment technical assistance to workers, and technical assistance to firms and industries, to help them cope with adjustment difficulties arising from increased import competition. [ITDS]

administered bank

A term used to describe a bank without a full stand-alone presence in Guernsey. An administered bank differs from a class 'B' or managed bank by requirement that its books and records must be maintained in Guernsey where they are locally audited. [UNODC]

administration costs

Costs of managing a utility, such as supervisory and clerical personnel and operating and maintaining administrative buildings and vehicles. Excludes costs related to billing and customer service. [EPA]

administrative law

law that is formulated by a government agency responsible for carrying out statute law. [OTS]

administrative law judge

An attorney appointed to conduct administrative hearings brought by federal agencies in civil cases. Such hearings are often held when a federal agency seeks to decide a contested issue or impose a directive or civil penalty on an individual or an institution. In most cases after conducting the hearing, the administrative law judge sends recommended findings and conclusions to the head of the federal agency, who makes the final decision. The agency head considers the recommendations of the administrative law judge and any briefs submitted by the agency staff and the respondent. The hearings are conducted under rules established by the Administrative Procedures Act. Federal agencies either have their own administrative law judges on staff or borrow them from other agencies when they need to conduct a hearing. The Office of Personnel Management assigns administrative law judges to other agencies upon request. Administrative law judges formerly were called hearing examiners. [OTS]

administrative pricing rules

IRS rules used to allocate income on export sales to a foreign sales corporation. [Harvey]

administrative workstation

A NYMEX ACCESS(R) workstation through which NYMEX Clearing Members monitor all activity in accounts they carry and set limits on their customers' accounts through the Trade Limit Monitoring System. [NYMEX]

admiralty

Any civil or criminal issue having to do with maritime law. [ITDS]

Admiralty Court

A court of law that has jurisdiction over maritime legal issues. [ITDS]

admission temporaire

The free entry of goods normally dutiable. [ITDS]

advance

(a) A drawing or payout of funds representing the disbursement of a loan, including disbursement in stages. (b) in international banking, an extension of credit usually recurring, when no instrument (other than a copy of the advice of an advance) is used as evidence of a specific indebtedness, except in special cases. A signed agreement must be on file in the department, stating the conditions applicable to payments made to the borrower. This loan category does not include commercial account overdrafts, but may be created to finance payments affected under a commercial letter of credit, to finance payments of collections or to refinance a maturing loan. [FDIC] A loan made by a Federal Home Loan Bank to a member financial institution. [OTS]

advance against documents

An advance made on the security of the documents covering a shipment. [FDIC]

advance arrangements

The shipment of certain classes of commodities that require arrangements in advance with carriers. [ITDS]

advance commitment

A promise to sell an asset before the seller has lined up purchase of the asset. This seller can offset risk by purchasing a futures contract to fix the sales price. [Harvey]

advance dividend

A payment made to an uninsured depositor or creditor after a bank or thrift failure. The amount of the advance dividend represents the FDIC's conservative estimate of the ultimate value of the receivership. Cash dividends equivalent to the board-approved advance dividend percentage (of total outstanding deposit claims) are paid to uninsured depositors, thereby giving them an immediate return of a portion of their uninsured deposit. [FDIC]

advance estimate

The first estimate of GDP and its components for a quarter. It is released 25-30 days after the end of the quarter and is based on source data that are incomplete and that are subject to revision. [BEA]

advance fee fraud

This category of fraud encompasses a broad variety of schemes which are designed to induce their victims into remitting up-front payments in exchange for the promise of goods, services, and/or prizes. In the securities and commodities fraud context, victims are informed that in order to participate in a promising investment opportunity, they must first pay various taxes and/or fees. [FBI]

advance package

advance refunding

(A) The refunding of an outstanding issue of securities by the issuance and delivery of a new issue of securities prior to the date on which the outstanding issue of securities can be redeemed or paid in accordance with its terms. Thus, for a period of time both the issue being refunded and the refunding issue are outstanding, although the trust agreement or indenture securing the issue being refunded may be defeased or discharged by the deposit of the proceeds of the new issue in escrow. (B) The refunding of an outstanding issue of securities by the issuance an delivery of a new issue of securities prior to the date on which the prior issue of securities become due or callable. The proceeds of the refunding bonds are used to purchase U.S. government securities which are deposited in an escrow account, the principal and interest on which will retire the bonds being refunded at maturity or a call date. [EPA]

advance refunding bonds

Bonds issued to refund an outstanding bond issue prior to the date on which the outstanding bonds become due or callable. Proceeds of the advance refunding bonds are deposited in escrow with a fiduciary, invested in U.S. Treasury Bonds or other authorized securities, and used to redeem the underlying bonds at maturity or call date and to pay interest on the bonds being refunded or the advance refunding bonds. [EPA]

adverse domination

A legal doctrine advanced by the FDIC and the RTC in professional liability suits against the officers and directors of a failed institution. Under the doctrine of adverse domination, in a lawsuit against corporate wrongdoers, the statute of limitations does not run during the period when the defendants were in control of the board of directors of the failed institution. [FDIC]

adverse opinion

An opinion issued by an independent auditor when the financial statements of a financial institution do not fairly present the institution's financial condition. [OTS]

adverse possession

A claim to acquire the title to another owner's property by an occupant who has openly and peaceably occupied that property continuously for a period of time (usually 20 years) without being challenged by the original owner. [OTS]

adverse selection

A situation in which a pricing policy causes only the least desirable customers to do business, e.g., a rise in insurance prices that leads only the least-good risks to buy insurance. [WCSU] A situation in which market participation is a negative signal. [Harvey]

advice

A form of letter that relates or acknowledges a certain activity or result with regard to a customers relations with a bank. [ITDS]

advised credit

A letter of credit whose terms and conditions have been confirmed by a bank. [ITDS]

advised letter of credit

An export letter of credit issued by a bank which requests another bank to advise the beneficiary that the credit has been opened in its favor. This occurs when the issuing bank does not have an office in the country of the beneficiary and uses the facilities of a correspondent bank. An advised credit creates no liability on the part of the advising bank [FDIC]

advised line

An authorization for credit made known to the customer. [FDIC]

advising bank

The bank which receives a letter of credit or amendment to a letter of credit from the issuing bank and forwards it to the beneficiary. [ITDS]

advisory

affidavit

A sworn statement in writing before an authorized official, usually a notary. [OTS]

affiliate

A business enterprise located in one country which is directly or indirectly owned or controlled by a person of another country. [ITDS]

affiliated company

A company that exercises a significant influence over another company. Any direct or indirect common ownership. [OTS]

affiliated foreign group

Equivalent of the foreign parent or any foreign person associated with the foreign parent which is owned more than 50 percent by the person above it. [ITDS]

affiliated person

as defined by OTS regulations, an affiliated person is: (1) a director, officer, or controlling person of a thrift institution; (2) a spouse of a director, officer or controlling person of a thrift institution; (3) a member of the immediate family residing in the same household as a director, officer or controlling person of a thrift institution; (4) a corporation of which a director, officer or controlling person: (a) is chief executive officer, chief financial officer, or a person performing similar functions of a thrift institution, (b) is a general partner in a partnership with a thrift institution, (c) is a limited partner in a partnership with a thrift institution and (i) directly or indirectly, either alone or with members of his immediate family who are also affiliated persons, owns an interest of 10 percent or more in the partnership based on the value of his capital contribution, or (ii) directly or indirectly with other directors, officers and controlling persons, and their family members who are also affiliated persons, owns an interest of 25 percent or more of any class of equity securities; or (5) any trust or other estate in which a director, officer, or controlling person or the spouse of such person has a substantial beneficial interest or as to which such person or his spouse serves as trustee or in a similar fiduciary capacity. [OTS]

affinity fraud

affirmative covenant

A bond covenant that specifies certain actions the firm must take. [Harvey]

affirmative lending

The practice of actively marketing and making loans in areas of particular need: inner-city, low- and moderate-income, minority and/or older neighborhoods in need of rehabilitation. [OTS]

Affordable Housing Program

A program established by FIRREA, under which each Federal Home Loan Bank uses a portion of its net income to make grants and advances to member institutions, which in turn use the funds to make loans for low- and moderate-income housing on below market terms. [OTS] An FDIC program that increases the stock of affordable housing through disposition of eligible residential properties to low- and moderate-income families. The RTC program was known as the Affordable Housing Disposition Program (AHDP). The affordable housing created comes from the agency's inventory of owned real estate. [FDIC]

affordable market value

A valuation model used to determine the sales price of multi-family residential property sold in the FDIC AHP. The affordable market value was determined by subtracting the cost to cure physical deficiencies and operating deficits from the maximum supportable loan amount, which was determined by applying a debt service coverage factor to the projected net operating income of the property. [FDIC]

affreightment

The hiring or chartering of all or part of a vessel for the transport of goods. [ITDS]

affreightment contract

A contract with a ship owner to hire. all or part of a ship for transporting goods. [ITDS]

afloat

Refers to a shipment of cargo which is currently on board a vessel between ports (as opposed to on land). [ITDS]

aft

Direction toward the stern of the vessel (ship or aircraft). [ITDS]

after date

A notation used on financial instruments (such as drafts or bills of exchange) to fix the maturity date as a fixed number of days past the date of drawing of the draft. [ITDS]

after sight

A draft where the time to maturity begins at its presentation or acceptance. [FDIC] A notation on a draft that indicates that payment is due a fixed number of days after the draft has been presented to the drawee. [ITDS]

after-acquired property

Buildings, equipment or furnishings added to the project after the issue is delivered. If so provided in the security documents, the property becomes subject to any lien of the security documents. [EPA]

after-tax real rate of return

Money after-tax rate of return minus the inflation rate. [Harvey]

against actuals

agencies

Federal agency securities. [Harvey] slang for securities issued by an agency of the federal government, or a corporation chartered by Congress, such as the FHLMC, FNMA or GNMA. [OTS]

agency bank

A foreign bank doing business in the United States as an agent for its parent bank; such banks arrange letters of credit financing on behalf of the parent but do not accept deposits or make loans in their own name. [UNODC] A form of organization commonly used by foreign banks to enter the U.S. market. An agency bank cannot accept deposits or extend loans in its own name; it acts as agent for the parent bank. [Harvey]

agency basis

The sale of securities by a broker acting as an agent for others and charging customers a commission for services. On an agency basis, the broker assumes no risk of holding the securities directly, but merely handles the buying and selling for others. [OTS]

agency cost view

The argument that specifies that the various agency costs create a complex environment in which total agency costs are at a minimum with some, but less than 100%, debt financing. [Harvey]

agency costs

The incremental costs of having an agent make decisions for a principal. [Harvey]

Agency for International Development

is a consolidation of most of the U.S. Government's foreign economic activities. After the U.S. Government has authorized funds to be used by foreign governments for the purpose of purchasing commodities, services for certain projects, AID works in cooperation with the foreign governments in the utilization of these funds. The foreign governments, usually represented by a Central Bank, will then apply to AID for a specified sum for a specific purpose and designates a U.S. bank which will open the related letters of credit. Upon approval, AID then sends a letter of commitment to the designated U.S. bank. The commitment letter authorizes the U.S. bank to open letters of credit in favor of beneficiaries who will supply the goods and services needed by the foreign government. Upon negotiation and payment under its letters of credit, the U.S. bank obtains reimbursement from AID in accordance with AID's letter of commitment. The U.S. opening bank's letters of credit, therefore, if properly handled and documented, are, in essence, guaranteed by the U.S. Government. [FDIC]

agency issues

debt securities issued by agencies of the federal government or corporations chartered by Congress. With the exception of the Government National Mortgage Association (Ginnie Mae), these issues are backed by the issuing agency but not by the full faith and credit of the U.S. Government. [OTS]

agency pass-throughs

Mortgage pass-through securities whose principal and interest payments are guaranteed by government agencies, such as the Government National Mortgage Association (' Ginnie Mae '), Federal Home Loan Mortgage Corporation (' Freddie Mac ') and Federal National Mortgage Association (' Fannie Mae'). [Harvey]

agency problem

Conflicts of interest among stockholders, bondholders, and managers. [Harvey]

agency swap program

A method of securitization in which single family residential mortgages conforming to agency underwriting guidelines are swapped for mortgage-backed securities issued by Fannie Mae or Freddie Mac. [FDIC]

agency theory

The analysis of principal-agent relationships, wherein one person, an agent, acts on behalf of another person, a principal. [Harvey] Theory concerning the relationship between principle, e.g. a shareholder, and an agent of the principal, e.g., the company's manager. [WCSU]

agent

A person or legal entity with the proper authorization to act on behalf of another person or legal entity. [ITDS] A person who acts for or in place of another with authority delegated by the other person. [OTS] The decision-maker in a principal-agent relationship. [Harvey]

agent bank

A bank acting on behalf of a foreign bank. [ITDS] The bank which leads and documents a syndicated loan. [FDIC]

aggregate

Any total (e.g., the gross national product; the sum of monthly sales). [FRBSF]

aggregated shipments

Several shipments from various shippers that are consolidated and treated as a single consignment. [ITDS]

aggregation

Process in corporate financial planning whereby the smaller investment proposals of each of the firm's operational units are added up and in effect treated as a big picture. [Harvey]

aging schedule

A table of accounts receivable broken down into age categories (such as 0-30 days, 30-60 days, and 60-90 days), which is used to see whether customer payments are keeping close to schedule. [Harvey] Record of the length of time that accounts receivable have been outstanding. [WCSU]

agreed valuation

The set value of a shipping load that is agreed upon by both the shipper and the carrier to define rate and/or liability. [ITDS]

agreement among underwriters or agreement among

An agreement setting forth the respective rights and responsibilities of the members of an account, including such terms as the period during which the initial offering price will not be changed, whether the account is a joint and several account or a several account, who the manager or managers of the account are and the managerial powers to act on behalf of the account, assumption of expenses in the event the account dissolves, and relegate of individual members of the account. (This agreement is to be distinguished from the bond purchase agreement, the contract of purchase or the underwriting agreement, which is between the account and the issuer.) This agreement is generally prepared by underwriters' counsel, but is reviewable by bond counsel because its terms, particularly as to joint and several liability, will affect the terms of the bond purchase agreement, underwriting agreement or contract of purchase. [EPA]

agreement corporation

An Agreement corporation is a federally or state- chartered corporation that has entered into an agreement or understanding with the Board that it will not exercise any power that is impermissable for an Edge corporation. [FRBC] An agreement corporation is a federally or state-chartered corporation that has entered into an agreement or understanding with the Board that it will not exercise any power that is impermissable for an Edge corporation. [FRB] An agreement corporation is a federally or state-chartered corporation that has entered into an agreement or understanding with the Board that it will not exercise any power that is impermissible for an [FRB][FRBM] Corporation chartered by a state to engage in international banking; so named because the corporation enters into an 'agreement' with the Board of Governors to limit its activities to those permitted an Edge Act corporation. [FRBSF]

agricultural bank

Banks of the Farm Credit System and certain other farm-oriented commercial banks, typically located in the farm belt states, that specialize in providing credit to the farming industry. [FDIC]

AIMR Performance Presentation Standards Implementation Committee

The Association for Investment Management and Research (AIMR)'s Performance Presentation Standards Implementation Committee is charged with the responsibility to interpret, revise and update the AIMR Performance Presentation Standards (AIMR-PPS(TM)) for portfolio performance presentations. [Harvey]

air cargo

Property of any kind that is transported by aircraft (excluding passenger baggage). [ITDS]

air express

Expedited air freight service. [ITDS]

air lot

A legal description for a condominium unit, containing both horizontal and vertical dimensions. The air lot generally extends to the inner faces of the walls, floors and ceiling of the condominium unit. [OTS]

air parcel post

Term used to describe priority mail, consisting of first class mail which weighs more than 13 ounces. [ITDS]

air rights

The ownership rights of everything above the physical surface of the land. [OTS]

air space

A two- or three-dimensional space located above ground level. All condominiums above the first floor are located in, and represent title to, air space. [OTS]

air waybill

Shipping document used for the transportation of air freight: includes conditions, liability, shipping instructions, description of commodity, and applicable transportation charges. [ITDS]

algorithmic trading

The use of computer programs for entering trading orders with the computer algorithm initiating orders or placing bids and offers. [CFTC]

alienable

Ability to be transferred or conveyed. [ITDS]

alienate

to transfer the title to a property from one party to another. [OTS]

aliquot

A fractional share. [ITDS]

all equity rate

The discount rate that reflects only the business risks of a project and abstracts from the effects of financing. [Harvey]

all or none

An order which must be filled in its entirety or not at all. [NYMEX] Requirement that none of an order be executed unless all of it can be executed at the specified price. [Harvey]

all or nothings

The option payout is a predetermined amount, which is paid out only if a trigger point is reached. [TMAC]

all savers certificate

A one-year certificate of deposit account, with a fixed rate tied to new Treasury bills, issued from October 1, 1981, through December 31, 1982, with a minimum deposit of $500. The saver received a once-in-a-lifetime exemption from federal income taxes for ASC earnings of up to $1,000 ($2,000 on a joint return). All savers certificates were authorized by the Economic Recovery Tax Act of 1981 as a means of attracting funds primarily to thrift institutions. [OTS]

all-cargo aircraft

Any aircraft that is used for the sole purpose of transporting cargo. [ITDS]

all-in cost

Total costs, explicit and implicit. [Harvey]

all-or-none underwriting

An arrangement whereby a security issue is canceled if the underwriter is unable to re-sell the entire issue. [Harvey] The security issue is canceled if the underwriter is unable to resell the entire issue. [WCSU]

Allocation Review Committee (ARC)

Convened from time to time, the ARC reviews and makes recommendations to the Quality of Markets Committee with respect to the Exchange's policies and procedures for the allocation of listing securities to specialist units. [NYSE]

allowances

An amount paid by the seller as restitution or reimbursement if the receiving party was dissatisfied with the shipment for any number of reasons: faulty packaging, late arrival, etc. [ITDS]

alpha

A measure of selection risk (also known as residual risk) of a mutual fund in relation to the market. A positive alpha is the extra return awarded to the investor for taking a risk, instead of accepting the market return. For example, an alpha of 0.4 means the fund outperformed the market-based return estimate by 0.4%. An alpha of -0.6 means a fund's monthly return was 0.6% less than would have been predicted from the change in the market alone. In a Jensen Index, it is factor to represent the portfolio's performance that diverges from its beta, representing a measure of the manager's performance. [Harvey]

alpha equation

The alpha of a fund is determined as follows: [ (sum of y) -((b)(sum of x)) ] / n ; where: n = number of observations (36 months), b = beta of the fund, x = rate of return for the S&P 500, y = rate of return for the fund. [Harvey]

alternative delivery procedure

A provision of a futures contract that allows buyers and sellers to make and take delivery under terms or conditions that differ from those prescribed in the contract. An ADP may occur at any time during the delivery period, once long and short futures positions have been matched for the purpose of delivery. [NYMEX]

alternative mortgage instruments (ATI)

Variations of mortgage instruments such as adjustable-rate and variable-rate mortgages, graduated-payment mortgages, reverse-annuity mortgages, and several seldom-used variations. [Harvey] all mortgage plans that differ from the conventional fixed rate, fixed term, fixed monthly payment, fully amortized mortgage. [OTS]

alternative tariff

A tariff with two or more rates for the same goods, to and from the same points, with the discretion to use the lowest of the charges. [ITDS]

amendment

An addition, deletion, or change in a document. [ITDS]

amenity

any feature that makes a property more attractive or valuable. Amenities include such items as off-street parking, a swimming pool, tennis courts, and proximity to good schools, transportation and shopping facilities. [OTS]

America's Community Bankers

A national trade association representing savings institutions and community banks. It was formed on June 1, 1992, through the merger of the United States League of Savings Institutions and the National Council of Community Bankers. At that merger, its original name was Savings & Community Bankers of America. The name was changed to America's Community Bankers on January 29, 1995. [OTS]

American Bankers Association (ABA)

A national trade organization of the banking industry formed in 1875. [OTS]

American Commodity Exchange (ACE)

American Council of State Savings Supervisors (ACSSS)

A national organization of state savings institution regulators. It was formerly called the National Association of State Savings & Loan Supervisors (NASS&LS). [OTS]

American Depositary Receipt (ADR)

American Depositary Receipt. A security issued by a U.S. bank in place of the foreign shares held in trust by that bank, thereby facilitating the trading of foreign shares in U.S. markets. [NYSE] Certificates issued by a U.S. depositary bank, representing foreign shares held by the bank, usually by a branch or correspondent in the country of issue. One ADR may represent a portion of a foreign share, one share or a bundle of shares of a foreign corporation. If the ADR's are 'sponsored,' the corporation provides financial information and other assistance to the bank and may subsidize the administration of the ADRs. 'Unsponsored' ADRs do not receive such assistance. ADRs carry the same currency, political and economic risks as the underlying foreign share; the prices of the two, adjusted for the SDR/ordinary ratio, are kept essentially identical by arbitrage. American depositary shares(ADSs) are a similar form of certification. [Harvey]

American Express

American option

An option contract that may be exercised at any time prior to expiration. This differs from a 'European option,' which may only be exercised on the expiration date. NYMEX options are 'American.' [NYMEX] An option that may be exercised at any time up to and including the expiration date. [Harvey] that can be exercised any time before the final exercise date. [WCSU]

American Petroleum Institute

The primary U.S. oil industry trade association; based in Washington, D.C. [NYMEX]

American Savings and Loan League

A thrift institution trade organization primarily representing minority-owned savings and loan associations. It is affiliated with America's Community Bankers. [OTS]

American shares

Securities certificates issued in the U.S. by a transfer agent acting on behalf of the foreign issuer. The certificates represent claims to foreign equities. [Harvey]

American Society for Testing Materials

Grade and quality specifications for petroleum products and metals are determined by the ASTM in test methods. [NYMEX]

American Stock Exchange (AMEX)

The second largest stock exchange in New York, located in the financial district of New York City. [NYSE] The second-largest stock exchange in the United States. It trades mostly in small-to medium-sized companies. [Harvey]

American Stock Exchange Options Switching System (AMOS)

American-style option

An option contract that can be exercised at any time between the date of purchase and the expiration date. Most exchange-traded options are American style. [Harvey] An option that can be exercised any time during its life up to and including the last trading day. [TMAC]

amidships

In the middle of the vessel; often preferred by shippers because of the minimal motion and the benefits to fragile freight. [ITDS]

amortization

(1) Repayment of a loan by installments; (2) allowance for depreciation. [WCSU] The gradual diminishment of any amount over a period of time. [ITDS] The payment of the principal amount of an issue by a series of periodic payments either directly to bondholders or to a sinking fund and thence to bondholders. Amortization payments usually are calculated to include interest in addition to a partial payment of principal. [EPA] The process of fully paying off indebtedness by installments of principal and earned interest over a definite time. [FRB][FRBC][FRBM][FRBSF] The repayment of a loan by installments. [Harvey] The repayment of a loan calculated so that the principal will be paid in full through monthly payments of principal and interest for a predetermined period of time. Many home mortgages are fully amortized in 15, 20 or 30 years. [OTS]

amortization factor

The pool factor implied by the scheduled amortization assuming no prepayemts. [Harvey]

amortizing interest rate swap

Swap in which the principal or national amount rises (falls) as interest rates rise (decline). [Harvey]

amortizing swap

A swap in which the notional amount of the agreement declines over time according to an amortization schedule. The rate of amortization may be preset or may be determined by interest rates. [OTS]

analysis

analyst

Employee of a brokerage or fund management house who studies companies and makes buy-and-sell recommendations on their stocks. Most specialize in a specific industry. [Harvey]

announcement date

Date on which particular news concerning a given company is announced to the public. Used in event studies, which researchers use to evaluate the economic impact of events of interest. [Harvey]

annual fund operating expenses

For investment companies, the management fee and 'other expenses,' including the expenses for maintaining shareholder records, providing shareholders with financial statements, and providing custodial and accounting services. For 12B-1 funds, selling and marketing costs are included. [Harvey]

annual input-output accounts

Set of I-O tables -- make tables, use tables, and direct and total requirements tables -- that are an update of the most recent benchmark I-O accounts. Annual tables incorporate less comprehensive and less reliable source data than those used for the benchmark tables. [BEA]

annual percentage rate (APR)

The cost of credit on a yearly basis expressed as a percentage. [FRB][FRBC][FRBM][FRBSF] The periodic rate times the number of periods in a year. For example, a 5% quarterly return has an APR of 20%. [Harvey] The rate required by Truth in Lending laws. It is designed to show customers the total cost of credit, including the stated interest rate plus certain finance and service charges. [OTS]

annual percentage yield

The effective, or true, annual rate of return. The APY is the rate actually earned or paid in one year, taking into account the affect of compounding. The APY is calculated by taking one plus the periodic rate and raising it to the number of periods in a year. For example, a 1% per month rate has an APY of 12.68% (1.01^12). [Harvey]

annual report

A report prepared by management once each year describing the financial and organizational condition of the company, institution or agency and describing the activities that were engaged in during the past year. [OTS] The formal financial statement issued yearly by a publicly owned corporation. The report shows assets, liabilities, revenues, expenses and earnings. The report also shows the company's financial condition at the close of the business year and other basic information of interest to shareholders. [NYSE] Yearly record of a publicly held company's financial condition. It includes a description of the firm's operations, its balance sheet and income statement. SEC rules require that it be distributed to all shareholders. A more detailed version is called a 10-K. [Harvey]

annualized gain

If stock X appreciates 1.5% in one month, the annualized gain for that sock over a twelve month period is 12*1.5% = 18%. Compounded over the twelve month period, the gain is (1.015)^12 = 19.6%. [Harvey]

annualized holding period return

The annual rate of return that when compounded 't' times, would have given the same t-period holding return as actually occurred from period 1 to period t. [Harvey]

annuity

(1) a payment of funds, often at a minimum guaranteed amount, made yearly, monthly or at other regular intervals. (2) a type of policy offered by insurance companies in which the policy holder makes payments for a fixed period or until a stated age, and then receives annuity payments from the insurance company. [OTS] A regular periodic payment made by an insurance company to a policyholder for a specified period of time. [Harvey] An insurance-based contract that provides future payments at regular intervals in exchange for current premiums. [UNODC] Investment that produces a level stream of cash flows for a limited number of periods. [WCSU]

annuity due

An annuity with 'n' payments, wherein the first payment is made at time t = 0 and the last payment is made at time t = n - 1. [Harvey]

annuity factor

Present value of $1 paid for each of 't' periods. [Harvey]

annuity in arrears

An annuity with a first payment on full period hence, rather than immediately. [Harvey]

ANSI X12

A communications format for electronic business data interchange established by the American National Standards Institute, a voluntary body supported by the American Bankers Association. [ACH]

anticipation

A deposit of funds to meet the payment of an acceptance prior to the maturity date. Should be applied to reduce customer's liability on acceptances. [FDIC] Arrangements whereby customers who pay before the final date may be entitled to deduct a normal rate of interest. [Harvey]

anticipation request

Formal request for funds for a capital investment project. [WCSU]

antidilutive effect

Result of a transaction that increases earnings per common share (e.g. by decreasing the number of shares outstanding). [Harvey]

antidumping

The opposite of dumping as defined by the system of laws to remedy dumping. [ITDS]

antitrust laws

Designed to promote open markets by limiting practices that reduce competition. [FACS]

any quantity

A cargo rating that applies to an article without consideration of weight. [ITDS]

apartment

A complete and separate rental living unit in a building containing other units. [OTS]

API gravity

Gravity (weight per unit volume) of oils as measured by the API scale whereby: API Gravity = 141.5 - 131.5 specific gravity at 60o F [NYMEX]

appellant

The party that appeals a decision of a lower court. [OTS]

appellee

The party that is the defendant in an appeal of a lower court decision. [OTS]

Applications Tracking System (ATS)

An electronic system employed by the Office of Thrift Supervision to keep track of the processing and status of thrift industry applications requiring regulatory approval. [OTS]

appraisal

An estimate of the market value of a piece of property by a qualified appraiser. [OTS]

appraisal fee

The charge for estimating the value of property offered as security. [FRB][FRBC][FRBM][FRBSF]

appraisal ratio

The signal-to-noise ratio of an analyst's forecasts. The ratio of alpha to residual standard deviation. [Harvey]

appraisal rights

A right of shareholders in a merger to demand the payment of a fair price for their shares, as determined independently. [Harvey]

appraised equity capital

A regulatory capital item established by the former FHLBB that allowed a savings association to count as part of its regulatory capital the difference between the book value and the fair market value (appraised value) of fixed assets, including owner-occupied real estate. [FDIC] The amount of the difference between the book value of certain thrift institution assets such as land, buildings and equipment, and the higher market value of such assets. [OTS]

appreciation

An increase in the value of one form of currency as compared to the currency of another nation. [ITDS] The increase in value of an item, specifically the increase in market value of real estate. [OTS]

appropriation request

Formal request for funds for capital investment project. [Harvey]

approved carriers

Armored carriers approved by the Exchange for the transportation of gold, platinum, and palladium. [NYMEX]

approving opinion or approving legal opinion

Written opinion of bond counsel to the effect that the issuance of the securities complies with the law (applicable constitutional, statutory and, in the case of certain municipalities, charter provisions, and court decisions). Usually also expresses the opinion that interest on the securities is exempt from federal income tax and, in some cases, from designated state and local taxes. Also referred to as 'legal opinion' or simply as 'the legal'. [EPA]

appurtenance

An accessory connected to a primary property used in conjunction with the primary property; usually permanently affixed (i.e. a crane on a ship). [ITDS] anything attached to the land and therefore part of the property and subject to being passed to a new owner if the property is sold. An appurtenance may be something tangible, such as a barn, garage, driveway or septic system, or abstract, such as an easement. [OTS]

apron

Area of the airport where planes are parked for loading and unloading. [ITDS]

arbitrage

(A) With respect to the issuance of municipal bonds, arbitrage usually refers to the difference between the interest paid on the bonds issued and the interest earned by investing the bond proceeds in other securities. (B) Investing funds borrowed at a lower interest cost in investments providing a higher rate of return. (C) The profit derived from the simultaneous purchase of securities, generally U.S. government securities, by the borrowing of funds through the use of tax-free securities. [EPA] A technique employed to take advantage of differences in price. If, for example, ABC stock can be bought in New York for $10 a share and sold in London at $10.50, an arbitrageur may simultaneously purchase ABC stock here and sell the same amount in London, making a profit of 50 cents a share, less expenses. Arbitrage may also involve the purchase of rights to subscribe to a security, or the purchase of convertible security -- and the sale at or about the same time of the security obtainable through exercise of the rights or of the security obtainable through conversion. [NYSE] A transaction in which an investor buys commodities, funds, mortgages, futures contracts, mortgage-backed securities or other securities in one market and simultaneously sells them in a different market in order to profit from differences in price between the two markets. [OTS] Purchase of one security and simultaneous sale of another to give a risk-free profit. 'Arbitrage' or 'risk arbitrage' often used loosely to describe the taking of positions in related securities, e.g., at the time of the takeover bid. [WCSU] Simultaneous buying and selling of foreign currencies, or securities and commodities, to realize profits from discrepancies between exchange rates prevailing at the same time in different markets, between forward margins for different maturities, or between interest rates prevailing at the same time in different markets or currencies. [FDIC] The simultaneous buying and selling of a security at two different prices in two different markets, resulting in profits without risk. Perfectly efficient markets present no arbitrage opportunities. Perfectly efficient markets seldom exist. [Harvey] The simultaneous purchase and sale of similar commodities in different markets to take advantage of a price discrepancy. [CBOT][MIDAM] The simultaneous purchase and sale of the same (or equivalent or related) securities to take advantage of a price differences prevailing in separate markets. A pure arbitrage involves trading effectively the same instruments for different prices at the same time. The term is now used widely in connection with concurrent purchases and sales of securities of proposed acquiring and acquired companies in pending tender offers and other acquisitions. [TMAC] The simultaneous purchase of one commodity against the sale of another in order to profit from fluctuations in the usual price relationships. Variations include the simultaneous purchase and sale of different delivery months of the same commodity; of the same delivery month, but different grades of the same commodity; and of different commodities. [NYMEX]

arbitrage certificate

Certificate evidencing compliance with the limitations on arbitrage imposed by §103 of the Internal Revenue Code and the regulations under that section. [EPA]

arbitrage pricing theory

An alternative model to the capital asset pricing model developed by Stephen Ross and based purely on arbitrage arguments. [Harvey]

arbitrage-free option-pricing models

Yield curve option-pricing models. [Harvey]

arbitrageurs

People who search for and exploit arbitrage opportunities. [Harvey]

arbitration

A low-cost alternative to settling disputes over securities transactions in the court system. The NYSE administers this service. [NYSE] The procedure of settling disputes between members, or between members and customers. [CBOT][MIDAM]

are

A metric unit of land measuring 10 meters by 10 meters, or 100 square meters. An are is also 0.1 of a hectare and is 119.60 square yards. [OTS]

arithmetic average (mean) rate of return

Arithmetic mean return. [Harvey]

arithmetic mean return

An average of the subperiod returns, calculated by summing the subperiod returns and dividing by he number of subperiods. [Harvey]

arm's length price

The price at which a willing buyer and a willing unrelated seller would freely agree to transact. [Harvey]

arm's length transaction

A transaction in which the parties involved act independently of each other, and in which the mechanics of the transaction are handled as they would be between strangers. Sometimes the transaction is conducted by a mutually agreed upon third party, to ensure that one of the principal parties does not influence the other. [OTS]

Arms index

Also known as a trading index (TRIN)= (number of advancing issues)/ (number of declining issues) (Total up volume)/ (total down volume). An advance/decline market indicator. Less than 1.0 indicates bullish demand, while above 1.0 is bearish. The index often is smoothed with a simple moving average. [Harvey]

arrears

(1) the state of a debt that remains unpaid following the date of maturity. The term is commonly used in connection with mortgages, installment payments and other obligations that are due and payable on specified dates. (2) the money that is past due but unpaid. [OTS]

arrivals

Imported goods which have been placed in a bonded warehouse for which duty has not been paid. [ITDS]

articles of association

The regulations for governing the rights and duties of the members of the company among themselves. Articles deal with internal matters such as general meetings, appointment of directors, issue and transfer of shares, dividends, accounts and audits. [UNODC]

articles of incorporation

Legal document establishing a corporation and its structure and purpose. [Harvey]

as is

Indicates goods for sale do not include a warranty or guarantee. [ITDS]

ascending or positive yield curve

The interest rate structure which exists when long-term interest rates exceed short-term interest rates. Compare 'Inverted or Negative Yield Curve'. [EPA]

Asia Pacific Advisory Committee (APAC)

Advises on matters involving international capital markets and the views and concerns of the business and financial communities of the countries represented. [NYSE]

Asia-Pacific Group on Money Laundering (APG)

Established in February 1997 and is located in Sydney, Australia. The purpose of APG is to provide a focus for co-operative anti-money laundering efforts in the region. Membership is open to any country within the Asia/Pacific region which commits itself to introducing anti-money laundering legislation and other measures. [UNODC]

Asian currency units

Dollar deposits held in Singapore or other Asian centers. [Harvey]

Asian option

Option based on the average price of the asset during the life of the option. [Harvey]

ask

A motion to sell. The same as Offer. [NYMEX] The lowest price a broker asks customers to pay for a security. [SEC] This is the quoted ask, or the lowest price an investor will accept to sell a stock. Practically speaking, this is the quoted offer at which an investor can buy shares of stock; also called the offer price. [Harvey]

ask price

A dealer's price to sell a security; also called the offer price. [Harvey] The price at which a security is offered for sale. [OTS]

asked price

The price at which securities are offered in the market to potential buyers. [EPA]

assay

To test a metal or an oil for purity or quality. [NYMEX]

assembly service

A service under which an airline combines multiple shipments from multiple shippers into one shipment to one receiver. [ITDS]

assess

To value property officially for the purpose of taxation. [EPA]

assessed valuation

(A) A valuation set upon real estate or other property by a government as a basis for levying taxes . (B) The value of property against which an ad valorem tax is levied, usually a percentage of 'true' or 'market' value. In some states, real property has an 'assessed valuation' of some percentage (less than 100%) of 'true value'.
(C) An annual determination of the just or fair market value of property by the county property appraiser for purposes of ad valorem taxation. [EPA] The value that a taxing authority places on real or personal property for the purpose of calculating taxes. [OTS]

assessment

(1) an estimate of the value of a piece of real property for the purpose of levying taxes; also called assessed valuation. (2) a charge against real property levied by a public governing body for a local improvement, such as a sewer repair or street paving. [OTS] The placement of antidumping duties on imported goods. [ITDS] The process of making the official valuation of property for purposes of taxation. The valuation placed upon property as a result of this process. [EPA]

assessment role

In the case of real property, the official list containing the legal description of each parcel of property and its assessed valuation. the name and address of the last known owner are also usually shown. In the case of personal property, the assessment roll is the official list containing the name and address of the owner, a description of the personal property, and its assessed value. [EPA]

assessment rolls

The public record of taxable property within the jurisdiction of the taxing authority. [OTS]

assessor

A public official who evaluates property for the purpose of determining the taxable value of property. [OTS]

asset activity ratios

Ratios that measure how effectively the firm is managing its assets. [Harvey]

asset allocation decision

The decision regarding how an institution's funds should be distributed among the major classes of assets in which it may invest. [Harvey]

asset classes

Categories of assets, such as stocks, bonds, real estate and foreign securities. [Harvey]

asset for asset swap

Creditors exchange the debt of one defaulting borrower for the debt of another defaulting borrower. [Harvey]

Asset Liquidation Agreement (ALA)

An asset management contract between the FDIC and a bank affiliate or private-sector contractor for the management and disposition of distressed assets of all types. The ALA contract was designed for asset pools with an aggregate book value in excess of $1 billion. [FDIC]

Asset Management and Disposition Agreement (AMDA)

A partnership agreement between the FDIC as manager of the FSLIC Resolution Fund (FRF) and the acquirers of certain failed savings and loan institutions, created as a result of the RTC's review and renegotiation of the FSLIC's 1988 and 1989 assistance agreements. Assets with a book value of $3.7 billion were assigned to two partnerships under AMDA contracts. [FDIC]

asset management contract

A contract with a private-sector asset management contractor for managing and disposing of distressed assets. [FDIC]

asset manager

A term often used to describe an asset management contractor who manages and disposes of assets (for example, an ALA or SAMDA contractor). The term 'asse t manager ' may also be used in a broad, generic sense to describe a person or entity responsible for the management of an asset or a portfolio of assets. [FDIC]

asset pool

A portfolio of assets, often composed of assets with similar characteristics. [FDIC]

asset pricing model

A model for determining the required rate of return on an asset. [Harvey] A model, such as the Capital Asset Pricing Model (CAPM), that determines the required rate of return on a particular asset. [Harvey]

asset protection trust

A trust established offshore to protect settlor's assets against those who may attempt to make claims against them, creditors, former spouses and dependents on death. Some offshore jurisdictions provide protection from creditor claims against persons who have guaranteed bank loans. [UNODC]

asset specialist

An FDIC or RTC employee with responsibility for the management and disposition of assets, or for the oversight of asset managers employed under asset management contracts. [FDIC]

asset substitution

A firm's investing in assets that are riskier than those that the debtholders expected. [Harvey]

asset substitution problem

Arises when the stockholders substitute riskier assets for the firm's existing assets and expropriate value from the debtholders. [Harvey]

asset swap

An interest rate swap used to alter the cash flow characteristics of an institution's assets so as to provide a better match with its iabilities. [Harvey]

asset turnover

The ratio of net sales to total assets. [Harvey] total gross income divided by total assets. [OTS]

asset valuation review (AVR)

A review of a failing institution's assets to estimate the liquidation value of the assets. An AVR estimate is used in the least cost analysis that is required by FDICIA. [FDIC]

asset-backed security

A security that is collateralized by loans, leases, receivables, or installment contracts on personal property, not real estate. [Harvey]

asset-based financing

Methods of financing in which lenders and equity investors look principally to the cash flow from a particular asset or set of assets for a return on, and the return of, their financing. [Harvey]

asset-coverage test

A bond indenture restriction that permits additional borrowing on if the ratio of assets to debt does not fall below a specified minimum. [Harvey]

asset/equity ratio

The ratio of total assets to stockholder equity. [Harvey]

asset/liability management

A plan or program to control the difference (also known as spread or net interest margin) between the rate of interest or earnings received on assets and the rate of interest due on liabilities. In addition to selecting the mix of complimenting assets and liabilities, a key part of such a plan is timing the maturity of matched assets and liabilities. When they come due at the same time, assets can be reinvested and balancing liabilities can be repurchased at new interest rates that maintain the desired spread. [OTS] Also called surplus management, the task of managing funds of a financial institution to accomplish the two goals of a financial institution: (1) to earn an adequate return on funds invested and (2) to maintain a comfortable surplus of assets beyond liabilities. [Harvey] Matching the amounts of assets and liabilities by term and interest rate type. Financial institutions carry out asset/liability management when they match the maturity of their deposits with the length of their loan commitments to keep from being adversely affected by rapid changes in interest rates. [TMAC]

assets

A firm's productive resources. [Harvey] Any possession that has value in an exchange. [Harvey] Anything a person, company, or group owns or is owed, including money, investments and property. [NYSE] Resources owned or held by a government which have monetary value. [EPA] What a person or business owns. [FACS] anything owned by an individual or company that has commercial usefulness or value if sold. An asset may be physical property or items, or enforceable claims against others. Loans made by a thrift institution are assets of that institution. Assets also include real estate, equipment, cash, investments in stocks and bonds, and any other resource that can be converted into cash. [OTS]

assets requirements

A common element of a financial plan that describes projected capital spending and the proposed uses of net working capital. [Harvey]

assign

To make an option seller perform his obligation to assume a short futures position (as a seller of a call option) or a long futures position (as a seller of a put option). [CBOT][MIDAM]

assignee

The person or institution to whom an agreement, contract, or interest in real property is transferred. [OTS]

assignment

Notice to an option writer that an option holder has exercised the option and that the writer will now be required to deliver (receive) under the terms of the contract. [NYSE] The process by which the seller of an option is notified of a buyer's intention to exercise the rights associated with the option. [NYMEX] The receipt of an exercise notice by an options writer that requires the writer to sell (in the case of a call) or purchase (in the case of a put) the underlying security at the specified strike price. [Harvey] The transfer in writing of some or all ownership rights to real or personal property from one party to another. [OTS]

assignment of rents

A legal document that assigns all rents and income from a property to the mortgagee if a mortgagor defaults. [OTS]

assignment or assignment agreement

Agreement under which the issuer assigns directly to the trustee or the bondholders certain rights and/or security interests it obtains under its agreement with a private entity, for the purposes of securing payment of debt service. [EPA]

assignor

A person or institution from whom an agreement, contract or property is transferred to another. [OTS]

assistance agreement

An agreement pertaining to a failing institution under which a deposit insurer, such as the FDIC, provides financial assistance to the failing institution or to an acquiring institution. The assistance agreement includes the terms of the purchase of assets and assumption of liabilities of the failing institution by the assuming institution; it may also include provisions regarding a reorganization of the failing institution under new management or a merger of the failing institution into a healthy institution. [FDIC]

assisted merger

A failing institution is absorbed into an acquiring institution that receives FDIC assistance. In 1950, the FDIC was authorized by section 13(e) of the FDI Act to implement assisted mergers. In 1982, when the FDI Act was amended, the merger authority, as amended, was written into section 13(c) of the FDI Act. Such transactions allow the FDIC to take direct action to reduce or avert a loss to the deposit insurance fund and to arrange the merger of a troubled institution with a healthy FDIC insured institution without closing the failing institution. Assisted merger was the FSLIC's preferred resolution method. [FDIC] The takeover of a troubled savings institution by another savings institution with financial assistance provided from the federal deposit insurance fund. [OTS]

associate broker

A person who has qualified as a real estate broker but who works for a principal broker licensed by the state. [OTS]

associate membership

A Chicago Board of Trade membership that allows an individual to trade financial instrument futures and other designated markets. [CBOT][MIDAM]

associated gas

Natural gas present in a crude oil reservoir, either separate from or in solution with the oil. [NYMEX]

associated person

An individual who solicits orders, customers, or customer funds (or who supervises persons performing such duties) on behalf of a Futures Commission Merchant, an Introducing Broker, a Commodity Trading Adviser, or a Commodity Pool Operator. [CBOT][MIDAM]

Association of Banking Supervisory Authorities of Latin America and the Caribbean

Established on July 29, 1981, in Mexico to define and improve supervisory systems. [UNODC]

Association of International Bond Dealers (AIBD)

assumable mortgage

A mortgage contract that gives the mortgagor the option of transferring primary liability for payment of the mortgage to a buyer if the property is re-sold with interest rates and other terms of the original mortgage remaining in effect. [OTS]

assuming institution

A healthy bank or thrift that purchases some or all of the assets and assumes some or all of the deposits and other liabilities of a failed institution in a purchase and assumption transaction. The assuming institution is also referred to as the acquiring institution. [FDIC]

assumption

The transfer of primary liability for payment of an existing mortgage (or deed of trust) from the seller to the buyer of a property. The seller remains secondarily liable unless specifically released by the lender. [OTS]

assumption fee

A fee paid to a lender, usually by the purchaser of a property, upon the assumption of a mortgage. [OTS]

asymmetric information

Information that is known to some people but not to other people. [Harvey]

asymmetric taxes

A situation wherein participants in a transaction have different net tax rates. [Harvey]

asymmetry

A lack of equivalence between two things, such as the unequal tax treatment of interest expense and dividend payments. [Harvey]

at sight

A negotiable instrument payable upon presentation or demand. [FDIC]

at-the-market

An order to buy or sell a financial instrument (eg. futures, options, etc.) at whatever price the contract is trading when the order is executed. [TMAC] An order to buy or sell a futures contract at whatever price is obtainable when the order reaches the trading floor. Also called a Market Order. [NYMEX] An order to buy or sell securities, executed by a broker at the best price available, rather than at a predetermined price. [OTS]

at-the-money

An option is at-the-money if the strike price of the option is equal to the market price of the underlying security. For example, if xyz stock is trading at 54, then the xyz 54 option is at-the-money. [Harvey] An option whose exercise price is equal to the market price of the underlying stock, index or other security. [TMAC] An option whose exercise, or strike, price is closest to the futures price. [NYMEX]

at-the-money option

An option purchased by an investor to buy or sell, with a strike price equal to the current market price of the underlying cash or futures contract. In this instance, the intrinsic value of the option is zero. Its value reflects the premium paid for the additional time the holder has to decide whether or not to exercise the option, in especially in times of price volatility. [OTS] An option with a strike price that is equal, or approximately equal, to the current market price of the underlying futures contract. [CBOT][MIDAM]

athwartships

Across a vessel form side to side. [ITDS]

ATS accounts

Automatic transfer from savings to demand deposit accounts. [WCSU]

attached house

any low-rise residential structure attached to another by a shared wall, such as a row house or town house. [OTS]

attachment

A seizure of a defendant's property by court order with the property held as security for any judgment the plaintiff may recover in a legal action. [OTS]

attest

to witness or testify; to affirm that a document is genuine. [OTS]

attractive nuisance

A structure or object on a property that might entice others, especially young children, into danger, such as a vacant building or swimming pool [OTS]

attribute bias

The tendency of stocks preferred by the dividend discount model to share certain equity attributes such as low price/earnings ratios, high dividend yield, high book-value ratio or membership in a particular industry sector. [Harvey]

auction

An asset sales strategy in which assets are sold either individually or in pools to the highest bidder in an open-outcry auction. [FDIC] The way price and interest are determined. [FRBSF]

auction market

Markets in which the prevailing price is determined through the free interaction of prospective buyers and sellers, as on the floor of the stock exchange. [Harvey] The system of trading securities through brokers or agents on an exchange such as the New York Stock Exchange. Buyers compete with other buyers while sellers compete with other sellers for the most advantageous price. [NYSE]

auction rate preferred stock

Floating rate preferred stock, the dividend on which is adjusted every seven weeks through a Dutch auction. [Harvey]

auction-rate preferred

A variant of floating-rate preferred stock where the dividend is reset every 49 days by auction. [WCSU]

audit

A methodical examination of utilization of resources. It concludes in a written report of its findings. An audit is a test of management's accounting system to determine the extent to which internal accounting controls are both available and being used. [EPA] A periodic or continuous official examination of a thrift institution's account records, policies and procedures, confirmation of account balances and tests of the accuracy of transactions to verify the stated assets and liabilities of the institution. [OTS] The examination of the accounting and financial documents of a company by an objective professional. The audit is done to determine the records' accuracy, consistency, and conformity to legal and accounting principles. [UNODC]

audit program

A detailed outline of work to be done and procedures to be followed in any given audit. [EPA]

audit report

(A) The report prepared by an auditor covering the audit or investigation made by him. As a rule, the report should include (a) a statement of the scope of the audit; (b) explanatory comments (if any) concerning exceptions by the auditor as to application of generally accepted auditing standards; (c) opinions; (d) explanatory comments (if any) concerning verification procedures; (e) financial statements and schedules; and (f) sometimes statistical tables, supplementary comments, and recommendations. The auditor's signature follows items (c) or (d) . (B) The report prepared by an auditor covering the audit or investigation of an entity's financial position for a given period of time. As a general rule, the report should include: (a) statement of the scope of the audit; (b) explanatory comments concerning exceptions from generally accepted auditing standards; (c) opinions; (d) explanatory comments concerning verification procedures; (e) financial statements and schedules; and (f) statistical tables, supplementary comments and recommendations. The auditor's signature follows item (c) or (d). [EPA]

audit trail

Reconstructs trading by explicitly aligning all member firms involved in a specific trade. [NYSE]

auditor's opinion

A statement signed by an auditor in which he or she states that he or she has examined the financial statements in accordance with generally accepted auditing standards (with exceptions, if any) and in which he or she expresses an opinion of some or all of the constituent funds and balanced account groups of the government as inappropriate. [EPA]

auditor's report

A section of an annual report containing the auditor's opinion about the veracity of the financial statements. [Harvey] Often called the accountant's opinion, it is the statement of the accounting firm's work and its opinion of the corporation's financial statements, especially if they conform to the normal and generally accepted practices of accountancy. [NYSE]

authentication

(A) The certification by the trustee of the genuineness or authenticity of a particular security under the governing security document (see 'Authentication Certificate'). Authentication is generally required of securities issued pursuant to a trust agreement or indenture. The act of authentication is generally the signature of an officer of the trustee on an authentication certificate printed on the security.
(B) The action of a bank or trust company certifying that the signature and seal on debt instruments is correct and true. [EPA] Authentication is the process of verifying the identification of the true sender of a message and also that the text of the message itself has not been altered. [GAO]

authentication certificate

A certification that the security on which the statement is printed is a security issued pursuant to a specific document, which statement is signed by an authorized officer of the trustee. [EPA]

authority

(A) A unit or agency of government established to perform specialized functions, usually financed by service charges, fees or tolls, although it may also have taxing powers. An authority may be independent of other government units, or it may depend upon other units for its creation, funding or operation. (B) A body, generally both corporate and political, created to perform a single or a group of closely related functions. The authorities generally are independent and sometimes even have taxing powers. They usually have debt issuing abilities and finance the repayments of the debt via user charges and fees. [EPA]

authorization

The act of insuring that the cardholder has adequate funds available against their line of credit. A positive authorization results in an authorization code being generated, and those funds being set aside. The cardholder's available credit limit is reduced by the authorized amount. [GAO]

authorization agreement

A written agreement signed by an employee or customer to allow the posting of ACH transactions to their account. [ACH]

authorized agent

A Bahamian bank or trust company authorized by regulatory authorities to deal in foreign currency securities. [UNODC]

authorized dealer bank

Bahamian Banks permitted by their regulating authority to deal in precious metals and all foreign currencies. [UNODC]

authorized share capital

Maximum number of shares that a company can issue, as specified in the firm's articles of incorporation. [WCSU]

authorized shares

Number of shares authorized for issuance by a firm's corporate charter. [Harvey]

autocorrelation

The correlation of a variable with itself over successive time intervals. [Harvey]

Automated Bond System (ABS)

Processes orders in all listed nonconvertible bonds and suggests matches for possible execution. [NYSE]

automated clearinghouse (ACH)

A collection of 32 regional electronic interbank networks used to process transactions electronically with a guaranteed one-day bank collection float. [Harvey] A computer-based clearing and settlement facility established to process the exchange of electronic transactions between participating depository institutions. Such electronic transactions (or wire transfers) take the place of paper checks. [OTS] A computer-based clearing and settlement operation, often operated by a Federal Reserve Bank, established for the exchange of electronic transactions among participating depository institutions. Such electronic transactions can be substituted for paper checks used to make recurring payments such as payroll or preauthorized insurance premiums. The U.S. Treasury uses the ACH extensively to pay certain obligations of the government. [FRB][FRBC][FRBM] A service used by banks to exchange electronic payments drawn on one another. Total debits and credits (payments and deposits) and itemized accounting of individual items are presented. This reduces transportation expenses and simplifies the transfer of funds between customers accounts. [FRB][FRBC] An automated clearinghouse networks is an electronic batch processing system by which payment orders are exchanged among finanical institutions. [GAO] Electronic clearing and settlement system for exchanging electronic transactions among participating depository institutions; such electronic transactions are substitutes for paper checks and are typically used to make recurring payments such as payroll or loan payments. The Federal Reserve Banks operate an automated clearinghouse, as do some private-sector firms. [FRBSF]

automated deposit

A deposit made directly to an account at a depository institution through the ACH network (i.e., payroll deposits, social security payments, and retirement benefits). [ACH]

Automated Search And Match (ASAM)

Researches and cross-references publicly available information on individuals, corporations, and service organizations possibly connected to a particular trading situation. [NYSE]

automated teller machines (ATMs)

A computer terminal to dispense cash, accept deposits and loan payments, and enable a financial institution's customer to order transfers among accounts and make account inquiries. [ACH] A machine that permits customers to gain access to their accounts through the use of a magnetically encoded plastic card and by pushing appropriate buttons on a computer terminal. ATMs dispense cash, transfer funds from one account to another, accept deposits, perform other functions, and are generally available 24 hours a day. [OTS] A machine used for banking services, including withdrawals and deposits, balance inquiries, transfers, and other services. Customers access an ATM by using a plastic card encoded with electromagnetic identification such as an access card or credit card. Transactions are processed electronically with the aid of computer systems. [FRB][FRBC] Computer-controlled terminals located on the premises of financial institutions or elsewhere, through which customers may make deposits, withdrawals, or other transactions as they would through a bank teller. Other terms sometimes used to describe such terminals are customer-bank communications terminal (CBCT) and remote service unit (RSU). Groups of banks sometimes share ATM networks located throughout a region of the country that may include portions of several states. [FRB][FRBC][FRBM][FRBSF]

automatic deposit

automatic exercise

Following option expiration, an option which is in-the-money by $100 or more is exercised automatically by the clearing house, unless the holder of the option submits specific instructions to the contrary. [NYMEX]

automatic payment

A service allowing customers to authorize their bank to make regular transfers for certain expenses (such as mortgage, insurance premiums, utilities, etc.) from their checking or savings account. [FRB][FRBC]

automatic stabilizers

Measures built into the governments budget that cause its spending to increase and its tax revenues to decrease when the economy goes into slumps, and that cause government expenditures to decrease and taxes to increase when the economy goes into booms. [FACS]

automatic stay

The restricting of liability holders from collection efforts of collateral seizure, which is automatically imposed when a firm files for bankruptcy under Chapter 11. [Harvey]

automatic transfer service (ATS)

automatic transfer service account

A depositor's savings account from which funds may be transferred automatically to the same depositor's checking account to cover a check written or to maintain a minimum balance. [FRB][FRBC][FRBM][FRBSF][OTS]

automatic transfer services account

A depositor's savings account from which funds may be transferred automatically to the same depositor's checking account to cover a check written or to maintain a minimum balance. [FRB][FRBC][FRBM][FRBSF][OTS]

autoregressive

Using past data to predict future data. [Harvey]

availability float

Checks deposited by a company that have not yet been cleared. [Harvey][WCSU]

aval

Bank guarantee for debt purchased by forfaiter. [WCSU]

average (across-day) measures

An estimation of price that uses the average or representative price of a large number of trades. [Harvey]

average

An arithmetic mean of selected stocks intended to represent the behavior of the market or some component of it. One good example is the widely quoted Dow Jones Industrial Average, which adds the current prices of the 30 DJIA's stocks, and divides the results by a predetermined number, the divisor. [Harvey] Various ways of measuring the trend of securities prices, one of the most popular of which is the Dow Jones average of 30 industrial stocks listed on the New York Stock Exchange. The prices of the 30 stocks are totaled and then divided by a divisor that is intended to compensate for past stock splits and stock dividends and that is changed from time to time. As a result, point changes in the average have only the vaguest relationship to dollar price changes in stocks included in the average. [NYSE]

average accounting return

The average project earnings after taxes and depreciation divided by the average book value of the investment during its life. [Harvey]

average age of accounts receivable

The weighted-average age of all of the firm's outstanding invoices. [Harvey]

average cost of capital

A firm's required payout to the bondholders and to the stockholders expressed as a percentage of capital contributed to the firm. Average cost of capital is computed by dividing the total required cost of capital by the total amount of contributed capital. [Harvey]

average life

(A) A factor in the pricing decisions by an underwriter, relating to the average of 12 calendar month periods of all the maturities of an issue, measured from the date of the issue. Calculated by dividing number of bond years by number of bonds ($1,000 increments). For example, an issue maturing serially on a level debt service basis over 25 years could have an 'average life' of 16.297 years. (B)Aggregate life of all bonds (in bond years) divided by the number of bonds. [EPA] Also referred to as the weighted-average life (WAL). The average number of years that each dollar of unpaid principal due on the mortgage remains outstanding. Average life is computed as the weighted average time to the receipt of all future cash flows, using as the weights the dollar amounts of the principal paydowns. [Harvey]

average maturity

The average time to maturity of securities held by a mutual fund. Changes in interest rates have greater impact on funds with longer average life. [Harvey]

average rate of return

The ratio of the average cash inflow to the amount invested. [Harvey] The return on an investment calculated by totaling the cash flow over the years during which earnings are received and dividing that amount by the number of years that the investment is outstanding. [OTS]

average tax rate

Taxes as a fraction of income; total taxes divided by total taxable income. [Harvey]

average-style (or Asian) options

The payoff of average-style options is based on the average price of the underlying interest over a period relative to the strike price. This contrasts with American and European style options which pay off based on a prices as at a single date relative to the strike price. [TMAC]

averaging

avoidance of contract

The legal cancellation of a contract because an event occurs that makes performance of the contract terms impossible or inequitable and that releases the parties from their obligations. [ITDS]

Avoirdupois unit

Customary U.S. weights. 1 troy ounce = 1.09 ounces avoirdupois. [NYMEX]

award

Action by the issuer, via its legislative body or an officer of the issuer authorized by the legislative body, accepting an offer to purchase a issue on the terms stated in the offer. [EPA]

away

A trade, quote, or market that does not originate with the dealer in question, e.g., 'the bid is 98-10 away from me.' [Harvey]

B bearer bond

A bond that does not have the owner's name registered on the books of the issuer. Interest and principal, when due, are payable to the owner [NYSE]

back fee

The fee paid on the extension date if the buyer wishes to continue the option. [Harvey]

back haul

To haul a shipment back over part of a route which it has traveled. [ITDS]

back months

Futures delivery months other than the spot or front month (also called deferred months). [CFTC]

back office

Brokerage house clerical operations that support, but do not include, the trading of stocks and other securities. Includes all written confirmation and settlement of trades, record keeping and regulatory compliance. [Harvey] The back office of a financial institution is made up of employees responsible for (1) recording and maintaining the official records of the financial institutions and (2) processing transactions entered into by the financial institutions or its customers. [GAO] The department in a financial institution that processes and deals and handles delivery, settlement, and regulatory procedures. [CFTC] departments of a financial institution that perform work out of sight of customers, including bookkeeping and the processing of checks and loan payments. [OTS]

back order

That portion of an order that cannot be delivered at the scheduled time, but will be delivered at a later date when available. [ITDS]

back spread

A delta-neutral ratio spread in which more options are bought than sold. A back spread will be profitable if volatility increases. [CFTC]

back-end loan fund

A mutual fund that charges investors a fee to sell (redeem) shares, often ranging from 4% to 6%. Some back-end load funds impose a full commission if the shares are redeemed within a designated time, such as one year. The commission decreases the longer the investor holds the shares. The formal name for the back-end load is the contingent deferred sales charge, or CDSC. [Harvey]

back-to-back borrowing

The process whereby a bank brings together a borrower and a lender so that they agree on a loan contract. [ITDS]

back-to-back financing

An intercompany loan channeled through a bank. [Harvey]

back-to-back letter of credit

An irrevocable letter of credit issued on the strength of another irrevocable letter of credit involving a related transaction. The latter credit is usually issued by a foreign bank with the beneficiary being a U.S. seller. The U.S. seller requests his bank of account to open a letter of credit in favor of the party who will ultimately sell the merchandise to him. As collateral, the U.S. seller deposits with his bank of account, the irrevocable credit in his favor opened by the foreign bank. The terms of the U.S. letter of credit must be identical with those of the backing credit except for the name of the beneficiary, the account party, the amount of the U.S. credit which may be less than that of the backing credit but not more, and the expiration date. [FDIC]

back-to-back loan

A loan in which two companies in separate countries borrow each other's currency for a specific time period and repay the other's currency at an agreed upon maturity. [Harvey] A loan structure when 'A' deposits a sum of money with a bank in country 'X' on condition that a related branch, agency, Edge Corporation or bank located in country 'Y' will lend an equivalent sum to 'A' or a designee in country 'Y'. [UNODC] Operations whereby a loan is made in one currency in one country against a loan in another currency in another country. [ITDS]

back-up

(1) When bond yields and prices fall, the market is said to back-up. (2) When an investor swaps out of one security into another of shorter current maturity he is said to back up. [Harvey]

backpricing

Fixing the price of a commodity for which the commitment to purchase has been made in advance. The buyer can fix the price relative to any monthly or periodic delivery using the futures markets. [CFTC]

backwardation

A market condition in which futures prices are lower in the distant delivery months than in the nearest delivery month. This situation may occur in when the costs of storing the product until eventual delivery are effectively subtracted from the price today. The opposite of contango. [Harvey] A market situation where the spot price trades at a premium to the forward price. Opposite of contango. [TMAC] Market situation in which futures prices are lower in each succeeding delivery month. Also known as an Inverted Market. The opposite of Contango. [NYMEX] Market situation in which futures prices are progressively lower in the distant delivery months. For instance, if the gold quotation for January is $360.00 per ounce and that for June is $355.00 per ounce, the backwardation for five months against January is $5.00 per ounce. (Backwardation is the opposite of contango). [CFTC]

bad debt reserve

A reserve account maintained by thrift institutions and used to offset losses from foreclosed or uncollectable loans. Within certain guidelines, contributions to the bad debt reserve are deductible from the institution's taxable income. The deduction is known as the bad debt deduction. [OTS]

bad faith

The intent to mislead or deceive. It does not include misleading by an honest, inadvertent or uncalled-for misstatement. [ITDS]

bagged cargo

Goods shipped in sacks. [ITDS]

bailment

A delivery of goods or personal property by one person (the bailer) to another (the bailee) on an express or implied contract and for a particular purpose related to the goods while in possession of the bailee, who has a duty to redeliver them to the bail. [ITDS]

Baker Plan

A plan by U.S. Treasury Secretary James Baker under which 15 principal middle-income debtor countries (the Baker 15) would undertake growth-oriented structural reforms, to be supported by increased financing from the World Bank and continued lending from commercial banks. [Harvey]

balance

The remaining amount credited to a customer's account, representing the amount the customer is entitled to withdraw, or conversely, the remaining amount of a customer's debt, which is the amount the customer is obligated to repay. The term also refers to the ratio of total credits to total debits. [OTS]

balance of payments

A record of all the financial transactions between a country and the rest of the world during a given year. [FACS] A statement identifying all the economic and financial transactions between companies, banks, private households and public authorities of one nation with those of other nations of the world over a specific time period. [ITDS] A statistical compilation formulated by a sovereign nation of all economic transactions between residents of that nation and residents of all other nations during a stipulated period of time, usually a calendar year. [Harvey] A summary of the international transactions of a country over a period of time including commodity and service transactions, and gold movements. [CBOT] A summary of the international transactions of a country over a period of time including commodity and service transactions, capital transactions, and gold movements. [MIDAM] An accounting statement of the money value of international transactions between one nation and the rest of the world over a specific time period. The statement shows the sum of transactions of individuals, businesses and government agencies located in one nation, against those of all other nations. [FRB][FRBM][FRBSF] Statistical statement that systematically summarizes the economic transactions of an economy with the rest of the world. Transactions, for the most part between residents and nonresidents, consist of those involving goods, services, and income; those involving financial claims on, and liabilities to, the rest of the world; and those (such as gifts) classified as transfers, which involve offsetting entries to balance--in an accounting sense--one-sided transactions. A transaction itself is defined as an economic flow that reflects the creation, transformation, exchange, transfer, or extinction of economic value and involves changes in ownership of goods and/or financial assets, the provision of services, or the provision of labor and capital. [BEA] The relationship between money flowing into and out of a country for a given period of time. Directly affected by the country's foreign trade position, capital inflows and outflows, remittances into and out of the country, grants and aid, and tourism. A deficit balance occurs when outflows exceed inflows with the converse situation reflecting a balance of payments surplus. [FDIC]

balance of trade

Net flow of goods (exports minus imports) between countries. [Harvey] That part of a nation's balance of payments dealing with imports and exports, that is trade in goods and services, over a given time period. If exports of goods exceed imports, the trade balance is said to be 'favorable'; if imports exceed exports, the trade balance if said to be 'unfavorable.' [FRB][FRBM][FRBSF] The difference between a countrys imports and exports. [ITDS] The difference in money value between a country's merchandise imports and exports excluding capital transactions and services such as tourism. A favorable balance of trade exists when exports exceed imports. An unfavorable trade balance is reflected when imports exceed exports. [FDIC]

balance sheet

A condensed financial statement showing the nature and amount of a company's assets, liabilities and capital on a given date. In dollar amounts the balance sheet shows what the company owned, what it owed, and the ownership interest in the company of its stockholders. [NYSE] A financial statement that contains the types and amounts of assets, liabilities and net worth of a company, institution or individual. Also called a statement of condition. [OTS] Also called the statement of financial condition, it is a summary of the assets, liabilities, and owners' equity. [Harvey] The basic financial statement which discloses the assets, liabilities, and equities of an entity at a specified date in conformity with GAAP. [EPA]

balance sheet identity

Total Assets = Total Liabilities + Total Stockholders' Equity [Harvey]

balanced economy

A condition of national finances in which imports and exports are equal. [ITDS]

balanced fund

An investment company that invests in stocks and bonds. The same as a balanced mutual fund. [Harvey]

balanced mutual fund

This is a fund that buys common stock, preferred stock and bonds. The same as a balanced fund. [Harvey]

bale

A large bundle of compressed and bound goods, such as cotton. [ITDS]

bale cargo

Bulky cargo shipped in bales, usually of burlap. [ITDS]

ballast

Heavy material placed on a ship to improve its stability. [ITDS]

balloon

The maturity of an issue which contains a large percentage of the aggregate principal amount of the issue. In the case of an issue structured with all the bonds maturing on the final date the bonds are outstanding, the term 'balloon' is generally not used and the bonds are referred to as tem bonds. (See 'Term Bonds'.) Balloons are often subject to mandatory sinking fund redemption. If no mandatory sinking fund redemption is provided for, the maturity schedule would be a 'bullet'. See 'Bullet''. [EPA]

balloon maturity

Any large principal payment due at maturity for a bond or loan with or without a a sinking fund requirement. [Harvey]

balloon mortgage

A mortgage that does not fully amortize by the end of the loan term. Periodic payments may be for principal and interest, or for interest only. At maturity, the unpaid principal is due in a lump sum. [OTS]

balloon payment

A large extra payment that may be charged at the end of a loan or lease. [FRB][FRBC][FRBM][FRBSF] Large final payment (e.g., when loan is repaid in installments). [WCSU] The lump sum payment of the unpaid principal remaining at the end of the term of a balloon mortgage loan or other non-amortizing loan. [OTS]

Baltimore Plan

An early housing plan implemented in 1944 to upgrade and maintain inner city housing standards. It included building, zoning, fire protection, and housing laws; a citizens' advisory council; a housing bureau in the health department; rodent control and sanitation. The plan was enforced by a special housing court. The Baltimore Plan was a model and an example to other cities trying to solve similar urban problems. [OTS]

Bane

In the words of Warren Buffet, Bill Bane Sr., is, 'a great American and one of the last real traders around. I like to call him 'Salvo.'' His wife, Carol, is a huge NASCAR fan, and in her own words 'delights in pulling the legs off central bankers.' Cooper Bane, son number two, is a thriving artiste who specializes in making art that is much better than the stuff most folks are doing. Jackson, son number three, is a world renowned master chef and plans on opening a restaurant. Bill Bane Jr., son number one, plans on giving Mr. Monroe Trout a run for his money. [Bill Bane, Jr. helped Professor Harvey put the hypertextual glossary together while an MBA student at Duke University.] [Harvey]

banging the close

A manipulative or disruptive trading practice whereby a trader buys or sells a large number of futures contracts during the closing period of a futures contract (that is, the period during which the futures settlement price is determined) in order to benefit an even larger position in an option, swap, or other derivative that is cash settled based on the futures settlement price on that day. [CFTC]

bank

When capitalized in this glossary refers to one of the 12 Federal Home Loan Banks. [OTS] When lower case in this glossary, refers to a commercial bank. A commercial bank is an institution that accepts demand deposits and makes commercial loans. [OTS]

bank check

A check drawn by a bank on itself and signed by an authorized bank officer. Also referred to as a cashier's check, officer's check, or treasurer's check. [OTS]

bank collection float

The time that elapses between when a check is deposited into a bank account and when the funds are available to the depositor, during which period the bank is collecting payment from the payer's bank. [Harvey]

bank discount basis

A convention used for quoting bids and offers for treasury bills in terms of annualized yield, based on a 360-day year. [Harvey]

bank draft

A check drawn by one bank against funds deposited to its account in another bank. [ITDS] A check written by one bank on its account with another bank. [OTS] A draft addressed to a bank. [Harvey]

Bank for International Settlements (BIS)

Acts as the agent for the European Monetary Agreement and promotes cooperation among European central bankers. [FDIC] An international bank headquartered in Basel, Switzerland, which serves as a forum for monetary cooperation among several European central banks, the Bank of Japan, and the U.S. Federal Reserve System. Founded in 1930 to handle the German payment of World War I reparations, it now monitors and collects data on international banking activity and promulgates rules concerning international bank regulation. [Harvey] The BIS, located in Basle, Switzerland, was established in 1930 to administer the post-World War I reparations agreements. Since the 1960s, the BIS has evolved into an important international monetary institution, and has provided a forum in which central bankers meet and consult on a monthly basis. As an independent financial organization, the BIS performs a variety of banking, trustee, and agent functions, primarily with central banks. [FRB][FRBM][FRBSF] The BIS, located in Basle, Switzerland, was established in 1930 to administer the post-World War I reparations agreements. Since the 1960s, the BIS has evolved into an important international monetary institution, and has provided a forum in which central bankers meet and consult on a monthly basis. As an independent financial organization, the BIS performs a variety of banking, trustee, and agent functions, primarily with central banks. At present the BIS has 29 members, 28 of which are central banks. The Federal Reserve is represented at BIS meetings, but is not a member. The BIS is the only international financial institution in which most Eastern European countries are members. The Soviet Union, East Germany, and Albania, however, are not members. [FRB][FRBC] The Bank for International Settlements (BIS) was established 20 January 1930 to promote cooperation among central banks in international financial settlements. BIS is located in Basel, Switzerland. [UNODC]

bank fraud

The use of potentially illegal means to obtain money, assets, or other property owned or held by a financial institution, or to obtain money from depositors by fraudulently posing as a bank or other financial institution.[1] In many instances, bank fraud is a criminal offence. While the specific elements of particular banking fraud laws vary between jurisdictions, the term bank fraud applies to actions that employ a scheme or artifice, as opposed to bank robbery or theft. For this reason, bank fraud is sometimes considered a white-collar crime. [Wikipedia]

bank guarantee

Unilateral contract in which the bank commits itself to pay a certain sum if a third party fails to perform or if any other form of default occurs. [ITDS]

bank holding company (BHC)

A company that owns or controls one or more banks. The Board of Governors has responsibility for regulating and supervising bankholding companies, such as approving acquisitions and mergers and inspecting the operations of such companies. This authority applies even though a bankowned by a holding company may be under the primary supervision of the Comptroller of the Currency or the FDIC. [FRB][FRBC][FRBM] Any company which directly controls, with power to vote, more than five percent of voting shares of one or more other banks. [ITDS] Company that owns, or has controlling interest in, one or more banks. A company that owns more than one bank is known as a multibank holding company. (A bank holding company may also own another bank holding company, which in turn owns or controls a bank; the company at the top of the ownership chain is called the top holder.) The Board of Governors is responsible for regulating and supervising bank holding companies, even if the bank owned by the holding company is under the primary supervision of a different federal agency (the Comptroller of the Currency or the Federal Deposit Insurance Corporation). [FRBSF]

bank holiday

A day on which banks are closed. [ITDS]

Bank Insurance Fund (BIF)

One of the two federal deposit insurance funds created by Congress in 1989 and placed under the FDIC's administrative control. The BIF insures deposits in most commercial banks and many savings banks. The FDIC's 'permanent insurance fund,' which had been in existence since 1934, was dissolved when the BIF was established. The money for a deposit insurance fund comes from the assessments contributed by member banks and also from investment income earned by the fund. [FDIC] The fund that provides deposit insurance for commercial banks. It is administered by the Federal Deposit Insurance Corporation (FDIC). [OTS]

bank line

Line of credit granted by a bank to a customer. [Harvey]

Bank Merger Act (BMA)

popular nickname for a section of the Federal Deposit Insurance Act (FDIA). [OTS]

bank note

A promissory note issued by an authorized bank that is payable on demand to a bearer and can be used as cash. Under law, such notes are redeemable as money and are considered full legal tender. Bank notes are also called bank bills or bank currency. [OTS] A term used synonymously with paper money or currency issued by a bank. Notes are, in effect, a promise to pay the bearer on demand the amount stated on the face of the note. Today, only the Federal Reserve Banks are authorized to issue bank notes, i.e. Federal Reserve notes, in the United States. [FRB][FRBM][FRBSF] Paper issued by a bank, redeemable as money and considered to be full legal tender. [ITDS]

bank panic

Bank Protection Act of 1968

A federal law that authorized the Federal Home Loan Bank Board and other federal regulators of depository institutions to set minimum standards to be met by financial institutions in installing security devices to discourage robberies, burglaries and larcenies. [OTS]

bank regulation

The formulation and issuance by authorized agencies of specific rules or regulations, under governing law, for the conduct and structure of banking. [FRB][FRBC][FRBM][FRBSF]

bank release

A document issued by a bank, after it has been paid or given an acceptance, giving authority to a person to take delivery of goods. [ITDS]

bank reserves

The total quantity of Federal Reserve notes held in bank vaults or checkable deposits held by the banks at the Fed district banks. [FACS]

bank run

A series of unexpected cash withdrawals caused by a sudden decline in depositor confidence or fear that the bank will be closed by the chartering agency, i.e. many depositors withdraw cash almost simultaneously. Since the cash reserve a bank keeps on hand is only a small fraction of its deposits, a large number of withdrawals in a short period of time can deplete available cash and force the bank to close and possibly go out of business. [FRB][FRBM][FRBSF]

bank supervision

Concern of financial regulators with the safety and soundness of individual banks, involving the general and continuous oversight of the activities of this industry to ensure that banks are operated prudently and in accordance with applicable statutes and regulations. [FRB][FRBC][FRBM] Oversight of individual banks to ensure that they are operated prudently and in accordance with applicable statutes and regulations. [FRBSF]

banker's bill

A negotiable draft without supporting papers drawn by one bank on its credit balance at a foreign bank. [OTS]

bankers bank

A bank that is established by mutual consent by independent and unaffiliated banks to provide a clearinghouse for financial transactions. [ITDS]

bankers draft

A draft payable on demand and drawn by, or on behalf of, a bank upon itself. [ITDS]

bankers' acceptance

A draft drawn on a bank, which when accepted by the bank, constitutes the bank's obligation to pay the draft writer's bills from a specified creditor when the bills are due. The bank literally stamps 'Accepted for payment by (name of bank) on (date)' across the face of the draft. Acceptance converts a depositor's 'order to pay' into an unconditional 'promise to pay' by the accepting bank. Bankers acceptances are effectively a guaranty of payment for a purchase and are usually used in financing the import, export, transfer or storage of goods, and qualify as liquid assets when held by a thrift institution. [OTS] A draft or bill of exchange accepted by a bank where the accepting institution guarantees payment. Used extensively in foreign trade transactions. [CFTC] A draft or bill of exchange accepted by a bank; payment is guaranteed by the accepting institution. [NYMEX] A short-term credit investment created by a non-financial firm and guaranteed by a bank as to payment. Acceptances are traded at discounts from face value in the secondary market. These instruments have been a popular investment for money market funds. They are commonly used in international transactions. [Harvey] A time or sight draft drawn on a commercial bank by a borrower, usually in connection with a commercial transaction. The borrower is liable for payment, as is the bank, which is the primary obligor, to pay the draft at its face amount on the maturity date. [TMAC] Bankers acceptances are negotiable time drafts, or bills of exchange, that have been accepted by a bank which, by accepting, assumes the obligation to pay the holder of the draft the face amount of the instrument on the maturity date specified. They are used primarily to finance the export, import, shipment, or storage of goods. [FRB][FRBC][FRBM][FRBSF] Written demand that has been accepted by a bank to pay a given sum at a future date. [WCSU]

Banking Act of 1933

The first major banking legislation of the Roosevelt administration, it created the Federal Deposit Insurance Corporation to provide insurance of deposits of member banks. The Act also provided for the regulation of banks, and limited branch banking. Also known as the Glass-Steagall Act. [OTS]

banking day

Any day on which a participating financial institution is open to the public during any part of the day for carrying on substantially all its financial functions. With reference to an automated clearinghouse, any day on which the appropriate facility of the clearing house is being operated. [ACH]

bankruptcy

State of being unable to pay debts. Thus, the ownership of the firm's assets is transferred from the stockholders to the bondholders. [Harvey] The condition of a legal entity that does not have the financial means to pay their incurred debts as they come due. [ITDS] The legal process in which a person or firm declares inability to pay debts. Any available assets are liquidated and the proceeds are distributed to creditors. A person or firm may be declared bankrupt under one of several chapters of the federal bankruptcy code: Chapter 7, which covers liquidation of the doubter's assets; Chapter 11, which covers reorganization of bankrupt businesses; or Chapter 13, which covers work-outs of debts by individuals. Upon a court declaration of bankruptcy, a person or firm surrenders assets to a court-appointed trustee, and is relieved from the payment of previous debts. [OTS]

bankruptcy cost view

The argument that expected indirect and direct bankruptcy costs offset the other benefits from leverage so that the optimal amount of leverage is less than 100% debt finaning. [Harvey]

bankruptcy risk

The risk that a counterparty, which owes your institution money, goes bankrupt. [TMAC] The risk that a firm will be unable to meet its debt obligations. Also referred to as default or insolvency risk. [Harvey]

bankruptcy view

The argument that expected bankruptcy costs preclude firms from being financed entirely with debt. [Harvey]

bankwire

A computer message system linking major banks. It is used not for effecting payments, but as a mechanism to advise the receiving bank of some action that has occurred, e.g. the payment by a customer of funds into that bank's account. [Harvey] An electronic communications network owned by an association of banks and used to transfer messages between subscribing banks. Bankwire also offers a clearing service called Cashwire that includes a settlement facility. [FRB][FRBC][FRBSF][OTS]

bar

Slang for one million dollars. [Harvey]

bar chart

A chart that graphs the high, low, and settlement prices for a specific trading session over a given period of time. [CBOT][MIDAM]

barbell strategy

A strategy in which the maturities of the securities included in the portfolio are concentrated at two extremes. [Harvey]

bare trusts

Also known as dry, formal, naked, passive or simple trusts. These are trusts where the trustees have no duties to perform other than to convey the trust property to the beneficiary(s) when called upon to do so. [UNODC]

bareboat charter

The charter of a vessel where the character party has the right to use his own master and crew on the vessel. [ITDS]

bargain-purchase-price option

Gives the lessee the option to purchase the asset at a price below fair market value when the lease expires. [Harvey]

barge

A flat bottomed cargo vessel primarily used on rivers and canals. [ITDS] A vessel, either motorized or towed, used to carry products in navigable waterways. Inland river barges that carry oil products generally hold 25,000 barrels. Ocean-going barges range in size up to 120,000 barrels. [NYMEX]

BARRA's performance analysis

A method developed by BARRA, a consulting firm in Berkeley, Calif. It is commonly used by institutional investors applying performance attribution analysis to evaluate their money managers' performances. [Harvey]

barratry

The intentional misconduct of the ships master or crew; includes theft, intentional casting away of vessel, or breach of trust. [ITDS]

barrel

A unit of volume measure used for petroleum and refined products. 1 barrel = 42 U.S. gallons. [NYMEX]

barrels per day

Usually used to quantify a refiner's output capacity or an oilfield's rate of flow. [NYMEX]

barrier options

Contracts with trigger points that, when crossed, automatically generate buying or selling of other options. These are very exotic options. [Harvey] These options operate in the same way as standard options, except that payout or receipt only occurs if certain thresholds in the related reference rate or index are or are not exceeded during the exercise period. Barrier options include Knock-in options and Knock-out options. [TMAC]

barter

Trade of goods for other goods without the use of money or a third party. [ITDS]

base metal

Copper, aluminum, lead, nickel, tin. [NYMEX]

base probability of loss

The probability of not achieving a portfolio expected return. [Harvey]

Basel Agreement

An accord developed during a 1975 meeting in Basel, Switzerland of central bankers of the industrialized nations setting forth guidelines for the supervision of banks. Included are guidelines for minimum capital requirements. The agreement was reached by the Committee on Banking Regulations and Supervisory Practices (also known as the Cooke Committee after its chairman, Peter Cooke), meeting under the auspices of The Bank for International Settlements. [OTS] An agreement signed by various countries, stating that they agree with the twenty-five core principles of the Basel Committee as of 1997, aimed at strengthening financial institutions. [UNODC]

Basel committee on banking supervision

The Basel Committee was established as the Committee on Banking Regulations and Supervisory Practices by the central bank Governors of the Group of Ten (G-10) countries at the end of 1974. BIS provides Secretariat for the Basel Committee in Basel, Switzerland. [UNODC]

Basel minimum standards

The Minimum Standards for the supervision of international banking groups and their cross-border establishments issued by the Basel Committee on Banking Supervision in July 1992, establish four main principles:

1. All international banks should be supervised by a home country authority that capably performs consolidated supervision.
2. The creation of a cross-border banking establishment should receive the prior consent of both the host country and the home country authority.
3. Home country authorities should possess the right to gather information from their cross-border banking establishments.
4. If the host country authority determines that any of these three standards is not being met, it could impose restrictive measures or prohibit the establishment of the banking office.

[UNODC]

baseline program

another name for the standard program, under which the Federal Home Loan Mortgage Corporation purchases mortgages for cash. [OTS]

basic balance

In a balance of payments, the basic balance is the net balance of the combination of the current account and the capital account. [Harvey]

basic business strategies

Key strategies a firm intends to pursue in carrying out its business plan. [Harvey]

basic financial statements

Those financial statements, including notes thereto, which are necessary for a fair presentation of the financial position and results of operations of an entity in conformity with GAAP. Under Statement 1, basic financial statements include a balance sheet, an 'all inclusive' operating statement, and (for proprietary funds, Pension Trust Funds, and Nonexpendable Trust Funds) a statement of changes in financial position. [EPA]

basic IRR rule

Accept the project if IRR is greater than the discount rate; reject the project is lower than the discount rate. [Harvey]

basic rent

The rent charged in a subsidized housing project and computed on the basis of a maximum subsidy resulting in a minimum rent payment under provisions of the HUD Section 236, Subsidized Housing Program. [OTS]

basing point

A location which is used to determine rates between other points. [ITDS]

basing rate

A rate which is used for the sole purpose of determining other rates. [ITDS]

basis

Regarding a futures contract, the difference between the cash price and the futures price observed in the market. Also, it is the price an investor pays for a security plus any out-of-pocket expenses. It is used to determine capital gains or losses for tax purposes when the stock is sold. [Harvey] The difference between a futures contract price for an item and the current spot price of the same item. [TMAC] The difference between the current cash price and the futures price of the same commodity. Unless otherwise specified, the price of the nearby futures contract month is generally used to calculate the basis. [CBOT][MIDAM] The difference between the price of related commodities in the same market or of the same commodity in different markets. Most commonly used in reference to the difference between the cash market price of a commodity and the corresponding futures market price. [OTS] The difference between the spot or cash price of a commodity and the price of the nearest futures contract for the same or a related commodity (typically calculated as cash minus futures). Basis is usually computed in relation to the futures contract next to expire and may reflect different time periods, product forms, grades, or locations. [CFTC] The differential that exists at any time between the cash, or spot price of a given commodity and the price of the nearest futures contract for the same or a related commodity. Basis may reflect different time periods, product forms, qualities or locations. Cash minus Futures equals Basis. [NYMEX]

basis grade

The grade of a commodity used as the standard or par grade of a futures contract. [CFTC]

basis point

.01 percent. [WCSU] In the bond market, the smallest measure used for quoting yields is a basis point. Each percentage point of yield in bonds equals 100 basis points. Basis points also are used for interest rates. An interest rate of 5% is 50 basis points greater than an interest rate of 4.5%. [Harvey] One gradation on a 100-point scale representing one percent; used especially in expressing variations in the yields of bonds. Fixed income yields vary often and slightly within one percent and the basis point scale easily expresses these changes in hundredths of one percent. For example, the difference between 12.83% and 12.88% is 5 basis points. [NYSE] Shorthand reference to one one-hundredth of one percent (.01 percent). Example: 5.49% is four 'basis points' less than 5.53%. [EPA] The measurement of a change in the yield of a debt security. One basis point equals 1/100 of one percent. [CFTC] one basis point equals 1/1OOth of one percent, or .0001. For example, 50 basis points is equal to 1/2 percent. Basis points are frequently used to describe spreads or changes in yields of interest rates. [OTS]

basis price

Price expressed in terms of yield to maturity or annual rate of return. [Harvey]

basis quote

Offer or sale of a cash commodity in terms of the difference above or below a futures price (e.g., 10 cents over December corn). [CFTC]

basis risk

The risk associated with an unexpected widening or narrowing of the basis between the time a hedge position is established and the time that it is lifted. [CFTC] The uncertainty about the basis at the time a hedge may be lifted. Hedging substitutes basis risk for price risk. [Harvey] The uncertainty as to whether the cash-futures spread will widen or narrow between the time a hedge position is implemented and liquidated. [NYMEX]

basis swap

A swap whose cash settlement price is calculated based on the basis between a futures contract (e.g., natural gas) and the spot price of the underlying commodity or a closely related commodity (e.g., natural gas at a location other than the futures delivery location) on a specified date. [CFTC]

basket of currencies

A means of establishing value for a composite unit consisting of the currencies of designated nations. [ITDS]

basket options

Packages that involve the exchange of more than two currencies against a base currency at expiration. The basket option buyer purchases the right, but not the obligation, to receive designated currencies in exchange for a base currency, either at the prevailing spot market rate or at a prearranged rate of exchange. A basket option is generally used by multinational corporations with multicurrency cash flows since it is generally cheaper to buy an option on a basket of currencies than to buy individual options on each of the currencies that make up the basket. [Harvey]

basket provision

thrift industry slang for provisions in the law that allow savings and loan associations, savings banks and insurance companies to invest a portion of their assets in investments not otherwise permitted. [OTS]

batch

A group of records or documents considered as a single unit for the purpose of data processing. [ACH] A measured amount in which crude oil and refined product shipments are sent through a pipeline. [NYMEX]

batch processing

Batch processing is the transmission or processing of a group of payment orders and/or securities transfer instructions. [GAO]

batching sequence

The order in which shipments are sent through a pipeline. [NYMEX]

battens

The protruding fixtures of the inside walls of a vessels hold which keep cargo away from the walls of the vessel. [ITDS]

bauverein

The German word for building association. In some U.S. German neighborhoods, local savings associations were called bauvereins. [OTS]

bear

An investor who believes a stock or the overall market will decline. A bear market is a prolonged period of falling stock prices, usually by 20% or more. [Harvey] One who anticipates a decline in price or volatility. Opposite of a Bull. [NYMEX] One who expects a decline in prices. The opposite of a bull. A news item is considered bearish if it is expected to result in lower prices. [CFTC] Someone who believes the market will decline. [MIDAM][NYSE] Someone who thinks market prices will decline. [CBOT]

bear hug

An unsolicited corporate takeover proposal, made privately or publicly to directors. [OTS]

bear market

A condition of a stock market characterized by a selling trend and declining prices. Opposite of a bull market. [OTS] A condition of the stock market when prices of stocks are generally declining. [NYSE] A market in which prices generally are declining over a period of months or years. Opposite of bull market. [CFTC] A period of declining market prices. [CBOT][MIDAM] Any market in which prices are in a declining trend. [Harvey][NYMEX] Widespread decline in security prices. [WCSU]

bear market rally

A temporary rise in prices during a bear market. [CFTC]

bear raid

A situation in which large traders sell positions with the intention of driving prices down. [Harvey]

bear spread

(1) A strategy involving the simultaneous purchase and sale of options of the same class and expiration date, but different strike prices. In a bear spread, the option that is purchased has a lower delta than the option that is bought. For example, in a call bear spread, the purchased option has a higher exercise price than the option that is sold. Also called bear vertical spread. (2) The simultaneous purchase and sale of two futures contracts in the same or related commodities with the intention of profiting from a decline in prices but at the same time limiting the potential loss if this expectation does not materialize. In agricultural products, this is accomplished by selling a nearby delivery and buying a deferred delivery [CFTC] 1) The simultaneous purchase and sale of two futures contracts in the same or related commodities with the intention of profiting from a decline in prices, but at the same time limiting the potential loss if this expectation is wrong. This can usually be accomplished by selling a nearby delivery and buying a deferred delivery. 2) A delta-negative option position comprised of long and short options of the same type, either calls or puts, designed to be profitable in a declining market. An option with a lower strike price is sold and one with a higher strike price is bought. [NYMEX] In most commodities and financial instruments, the term refers to selling the nearby contract month, and buying the deferred contract, to profit from a change in the price relationship. [CBOT][MIDAM]

bear vertical spread

bearer

The person in possession. [ITDS]

bearer bond

A bond that does not have the owner's name registered on the books of the issuing agency or company, and is payable to whomever holds the bond and bears it to the issuer for payment. [OTS] bonds that are not registered on the books of the issuer. Such bonds are held in physical form by the owner, who receives interest payments by physically detaching coupons from the bond certificate and delivering them to the paying agent. [Harvey]

bearer check

A check payable to 'cash' or to 'the bearer' rather than to a specific party. [OTS]

bearer security

A security, freely negotiable, that is payable to 'bearer'. [EPA] Security for which the primary evidence of ownership is possession of the certificate. [WCSU]

bearer share certificate

A negotiable share certificate filled out in the name of 'bearer' and not to a particular person or organization. [UNODC]

before-tax profit margin

The ratio of net income before taxes to net sales. [Harvey]

before-tax-income

gross income less all expenses except income taxes. [OTS]

beggar-thy-neighbor

An international trade policy of competitive devaluations and increased protective barriers where one country seeks to gain at the expense of its trading partners. [Harvey]

beggar-thy-neighbor devaluation

A devaluation that is designed to cheapen a nation's currency and thereby increase its exports at other countries' expense and reduce imports. Such devaluations often lead to trade wars. [Harvey]

belly pits or holds

Compartments beneath the cabin of an aircraft used for the transport of cargo or baggage. [ITDS]

belly-up

slang, used to describe a failed project or institution. [OTS]

below-market interest rate

An interest rate below the current rate for conventional financing in a given area. Programs with below-market rates may be used to assist low- or moderate-income buyers. [OTS]

belvedere

another name for a gazebo. [OTS]

benchmark

A mark made on a permanent object indicating elevation and serving as a reference in land surveys. [OTS] The performance of a predetermined set of securities, for comparison purposes. Such sets may be based on published indexes or may be customized to suit an investment strategy. [Harvey]

benchmark error

Use of an inappropriate proxy for the true market portfolio. [Harvey]

benchmark input-output accounts

Statistical description -- presented in make tables, use tables, and direct and total requirements tables -- of the production of goods and services and the transaction flows of goods and services between different producing sectors of the economy and to different components of final use. They are prepared primarily from Census data. [BEA]

benchmark interest rate

Also called the base interest rate, it is the minimum interest rate investors will demand for investing in a non-Treasury security. It is also tied to the yield to maturity offered on a comparable-maturity Treasury security that was most recently issued ('on-the-run'). [Harvey]

benchmark issues

Also called on-the-run or current coupon issues or bellwether issues. In the secondary market, it's the most recently auctioned Treasury issues for each maturity. [Harvey]

benchmark survey

A census intended to cover the entire universe of potential survey respondents, in terms of the value of selected data items. It is the most comprehensive survey in terms of coverage and number of data items collected. Data collected in benchmark surveys are treated as 'actual' values from which annual 'estimates' are extrapolated (or interpolated) based on sample surveys in non-benchmark years. Benchmark surveys generally occur once every five years. [BEA]

benchmarking

Comparing information of one entity to like information of another entity or composite group for the purpose of determining areas for potential improvement and to identify the best practices. [TMAC]

beneficial owner

The actual or economic owner of an offshore company as distinct from the registered or nominal owner. [UNODC] The true owner of a security which may, for convenience, be recorded under the name of a nominee. [SEC]

beneficiary

A person named in a life insurance policy, annuity, will, trust, or other agreement to receive a financial benefit upon the death of the owner. A beneficiary can be an individual, company, organization, etc. [UNODC] An individual or company who gains upon the opening of a letter of credit. [ITDS] The person designated to receive funds in a trust account or an insurance policy. [OTS] The person or company in whose favor a letter of credit is opened or a draft is drawn. [FDIC]

beneficiary statement

The statement of a lender that shows the remaining principal balance and other information about a loan. It is usually obtained when a property owner wants to sell or refinance. It is also called a bene statement, offset statement, or estoppel certificate, and it is normally requested by escrow or title companies. [OTS]

benefit-cost ratio

benefits in kind

Noncash forms of pay or assistance. [FACS]

bequeath

to give personal property in a will. [OTS]

bequest

A gift of personal property made by a deceased person. [OTS]

berm

A mound of earth created for either decorative purposes or functional reasons, such as controlling the flow of water or obscuring undesirable views. [OTS]

Bermuda option

An exotic option which can be exercised on a specified set of predetermined dates during the life of the option. [CFTC]

berth

The place beside a docking area where the ship is secured and cargo can be loaded or unloaded. [ITDS]

besloten vennootschap (BV)

This form of incorporation under Dutch company law is broadly comparable to the private limited liability company in the United Kingdom. [UNODC]

best-efforts sale

A method of securities distribution/ underwriting in which the securities firm agrees to sell as much of the offering as possible and return any unsold shares to the issuer. As opposed to a guaranteed or fixed price sale, where the underwriter agrees to sell a specific number of shares (with the securities firm holding any unsold shares in its own account if necessary). [Harvey]

best-efforts underwriting

A relationship under which an underwriter acts as agent of the issuer for the original offering of an issue, but with no commitment by that underwriter to purchase any portion of the issue. (Compare 'Firm Commitment'.) [EPA] Underwriters do not commit themselves to selling a security issue but promise only to use best efforts. [WCSU]

best-interests-of-creditors test

The requirement that a claim holder voting against a plan of reorganization must receive at least as much as he would have if the debtor were liquidated. [Harvey]

beta (mutual funds)

The measure of a fund's or stocks risk in relation to the market. A beta of 0.7 means the fund's total return is likely to move up or down 70% of the market change; 1.3 means total return is likely to move up or down 30% more than the market. Beta is referred to as an index of the systematic risk due to general market conditions that cannot be diversified away. [Harvey]

beta

Measure of market risk. [WCSU]

beta equation

The beta of a stock is determined as follows: [(n) (sum of (xy)) ]-[(sum of x) (sum of y)] / [(n) (sum of (xx)) ]-[(sum of x) (sum of x)]; where: n = # of observations (24-60 months), x = rate of return for the S&P 500 Index, y = rate of return for the stock. [Harvey]

betterment

An addition made to, or change made in, a fixed asset which is expected to prolong its life or to increase its efficiency over and above that arising from maintenance, and the cost of which is therefore added to the book value of the asset. the term is sometimes applied to sidewalks, sewers, and highways. [EPA]

bid

(1) an offer of money in exchange for property, or anything of value that has been placed for sale. (2) an offer to purchase something of value at a specified price made during an auction. (3) a formal offer in writing by a contractor to provide a product or service for a certain price, usually within a specified period of time. (4) in securities markets, an indication of a willingness to buy at a given price. [OTS] A motion to buy a futures or option contract at a specified price. Opposite of Offer. [NYMEX] An expression indicating a desire to buy a commodity at a given price, opposite of offer. [CBOT][MIDAM] An offer to buy a specific quantity of a commodity at a stated price. [CFTC] An offer to purchase an issue, usually at competitive bidding, specifying the interest rate(s) offered and the purchase price (that is, par plus a stated premium or less a stated discount). [EPA] The highest price a broker is willing to pay for a security. [SEC]

bid and asked

Often referred to as a quotation or quote. The bid is the highest price anyone wants to pay for a security at a given time, the asked is the lowest price anyone will take at the same time. [NYSE]

bid bond

Guarantee established in connection with international tenders. Guarantees fulfillment of the offer. [ITDS]

bid price

The price at which a buyer offers to purchase securities, whether from the issuer (see 'Purchase Price') or in the market. Bid Date is the date and hour beyond which bids shall not be received on securities. [EPA] This is the quoted bid, or the highest price an investor is willing to pay to buy a security. Practically speaking, this is the available price at which an investor can sell shares of stock. [Harvey]

bid-ask spread

The difference between the bid price and the ask or offer price. [CFTC]

bid-asked spread

The difference between the bid and asked prices. [Harvey]

bid-offer spread

The difference between the bid price and the ask or offer price. [CFTC]

bidder

A firm or person that wants to buy a firm or security. [Harvey]

big bang

The term applied to the liberalization in 1986 of the London Stock Exchange in which trading was automated with the use of computers. [Harvey]

Big Board

A nickname for the New York Stock Exchange. Also known as The Exchange. More than 2,000 common and preferred stocks are traded. Founded in 1792, the NYSE is the oldest exchange in the United States, and the largest. It is located on Wall Street in New York City. [Harvey]

bilateral trade

The commerce between two countries. [ITDS]

bilateralism

bilevel

A house with two distinct levels that are side-by-side and less than one story apart in height; also called a split-level. [OTS]

bill

A written statement of contract terms. [ITDS]

bill check

A system of payment, in which a debtor authorizes a creditor to obtain payment directly from the debtor's deposit account. [OTS]

bill of credit

A written statement that authorizes the recipient to receive or collect money from a foreign correspondent. [ITDS] The written request of an individual to his or her depository institution asking it to deliver money to the bearer of the request, with the money drawn from the individual's deposit account, or advanced on the individual's credit. [OTS]

bill of exchange

An unconditional order written from one person (the drawer) to another person (the drawee) directing the latter to pay a certain sum of money at a fixed or future determinable date to the order of a third party. The terms 'bill of exchange' and 'draft' are generally used interchangeably. [FDIC] General term for a document demanding payment. [Harvey][WCSU] instructions from one party to a second party to pay a third party following the completion of an assignment. [OTS]

bill of health

A certificate issued by customs declaring the proper health of crew or passengers of a vessel or airplane upon arrival or departure from port. [ITDS]

bill of lading

A contract between the exporter and a transportation company in which the latter agrees to transport the goods under specified conditions which limit its liability. It is the exporter's receipt for the goods as well as proof that goods have been or will be received. [Harvey] A document issued by a carrier to a shipper that provides written evidence regarding receipt of the goods, the conditions on which transportation is made, and the engagement to deliver goods at the prescribed destination to the lawful holder of the bill of lading. [ITDS] A receipt issued by a carrier to a shipper for merchandise delivered to the carrier for transportation from one point to another. A bill of lading serves as a receipt for the goods, a document of title, and a contract between the carrier and the shipper, covering the delivery of the merchandise to a certain point or to a designated person. It is issued in two primary forms: an 'order bill of lading', which provides for the delivery of goods to a named person or to his or her order (designee) but only on proper endorsement and surrender of a bill of lading to the carrier or its agents; and a 'straight bill of jading', which provides for delivery of the goods to the person designated by the bill of lading and no other. [FDIC] A written statement in which a carrier acknowledges the receipt of freight, identifies the freight, and sets forth terms under which the freight will be delivered to a destination. [OTS] Document establishing ownership of goods in transit. [WCSU]

bill of parcels

A statement sent with a shipment that gives descriptions and prices for included items; often referred to as a packing slip. [ITDS]

bill of sale

A written document by which a party legally transfers ownership of goods to another party. [ITDS] A written document that transfers title to personal property from the seller to the buyer. [OTS]

bill of sight

A Customs document which allows a party to see the goods before they pay duties on them. [ITDS]

bill-to party

Refers to the party designated on a bill of lading as the one responsible for payment of the freight charges. [ITDS]

billable volume

The volume upon which charges may be levied. [EPA]

billed weight

The designated weight shown on the freight bill. [ITDS]

billing third party

The transference of transportation charges to a party other than the shipper or consignee. [ITDS]

binary

A math system based on 2s rather than lOs, using only the digits O and 1. It is the operating system for computers. [OTS]

binary option

A type of option whose payoff is either a fixed amount or zero. For example, there could be a binary option that pays $100 if a hurricane makes landfall in Florida before a specified date and zero otherwise. Also called a digital option. [CFTC]

binder

A written statement binding two parties to an agreement until a formal contract can be executed. A binder is used to secure insurance for a mortgage until a complete policy is issued. [OTS]

binomial option pricing model

An option pricing model in which the underlying asset can take on only two possible, discrete values in the next time period for each value that it can take on in the preceding time period. [Harvey]

biological agents

A biologically active material. [ITDS]

black market

An illegal market. [Harvey] Any private market that operates in contravention of government restrictions. [UNODC] Buying or selling of products that violate government restrictions. [ITDS]

Black-Scholes formula

An option valuation formula based on the principle that an option can be priced by combining it with its underlying asset into a riskless hedge portfolio. [TMAC]

Black-Scholes model

An option pricing formula initially developed by Fisher Black and Myron Scholes for securities options and later refined by Black for options on futures. [NYMEX] An option pricing model initially developed by Fischer Black and Myron Scholes for securities options and later refined by Black for options on futures. [CFTC]

Black-Scholes option-pricing model

A model for pricing call options based on arbitrage arguments that uses the stock price, the exercise price, the risk-free interest rate, the time to expiration, and the standard deviation of the stock return. [Harvey]

blackboard trading

The practice, no longer used, of buying and selling commodities by posting prices on a blackboard on a wall of a commodity exchange. [CFTC]

blanket

something that pertains to more than one item, or more than one piece of property. In a blanket condemnation, a number of properties are sold through the power of eminent domain. A blanket insurance policy covers more than one property. A blanket mortgage is a lien on more than one parcel of land and is frequently used by developers and subdividers. [OTS]

blanket inventory lien

A secured loan that gives the lender a lien against all the borrower's inventories. [Harvey]

blanket mortgage loan

A loan made to developers or contractors to purchase one or more tracts of land with the intention of dividing the land into smaller parcels for resale or development. [OTS]

blanket rate

A special single rate applied to multiple articles in a single shipment. [ITDS]

blighted area

A run-down area in a community or a neighborhood that is close to becoming a slum. [OTS]

blind trust

A trust in which the trustees are enjoined from providing any information to the beneficiaries about the administration of assets of the trust. [UNODC]

block

A large holding or transaction of stock popularly considered to be 10,000 shares or more. [NYSE] The smallest square or rectangular portion of a city or town surrounded by four streets. A block may be wholly or partially occupied by buildings or be vacant land. [OTS]

block house

Brokerage firms that help to find potential buyers or sellers of large block trades. [Harvey]

block trade

A large trading order, defined on the New York Stock Exchange as an order that consists of 10,000 shares of a given stock or a total market value of $200,000 or more. [Harvey] A large transaction that is negotiated off an exchange's trading facility and then posted on the trading facility, as permitted under exchange rules. [CFTC]

block voting

A group of shareholders banding together to vote their shares in a single block. [Harvey]

blockade

Prevention of commercial exchange by physically preventing carriers from entering a specific port or nation. [ITDS]

blockbusting

The illegal practice of some real estate dealers who start rumors that play on prejudices against minorities, creating panic selling by an area's residents. The dealers buy the houses from frightened owners at below market prices, and then sell the homes to minority groups at above market prices. [OTS]

blocked account

Any account in a bank the handling of which is closely circumscribed by government regulations. The term is used in the United States to designate any account whose administration is subject to U.S. Treasury license because of enemy or suspected enemy interest. [UNODC]

blocked currency

A currency that is not freely convertible to other currencies due to exchange controls. [Harvey]

blocked exchange

Exchange which cannot be freely converted into other currencies. [FDIC]

blow-off top

A steep and rapid increase in price followed by a steep and rapid drop. This is an indicator seen in charts and used in technical analysis of stock price and market trends. [Harvey]

blue sky memorandum

A memorandum for use by the Account specifying the way a specific issue will be treated under all or specified state securities laws. This memorandum is prepared first in preliminary form which may note that certain steps need to be taken in various jurisdictions in order to qualify the issue for sale within these jurisdictions. The memorandum is then issued in supplemental form which generally reports that the required actions in the various jurisdictions have been taken. [EPA]

blue-chip company

Large and creditworthy company. [Harvey][WCSU]

blue-chip stock

Stock in a company with a national reputation for quality, reliability and the ability to operate profitably in good and bad times. [NYSE] The common stock of large, stable companies that have shown consistent earnings and usually have long-term growth potential. [OTS]

blue-sky laws

A popular name for laws various states have enacted to protect the public against securities fraud. The term is believed to have originated when a judge ruled that a particular stock had about the same value as a patch of blue sky. [NYSE] State laws covering the issue and trading of securities. [Harvey][WCSU]

board broker system

board foot

A unit used to measure lumber. One board foot is one inch thick, one foot wide and one foot long. [OTS]

board of directors

The group of persons who make up the governing body of an institution, and are responsible for policy and overall direction of the organization. [OTS]

Board of Governors

Central, governmental agency of the Federal Reserve System, located in Washington, DC, and composed of seven members who are appointed by the President and confirmed by the Senate. The Board is responsible for domestic and international economic analysis; with other components of the System, for the conduct of monetary policy; for supervision and regulation of certain banking organizations; for operation of much of the nation's payments system; and for administration of most of the nation's laws that protect consumers in credit transactions. [FRBSF] Governmental agency of the Federal Reserve System, located in Washington, DC, and composed of seven members who are appointed by the President and confirmed by the Senate. The Board is responsible for domestic and international economic analysis; with other components of the System, for the conduct of monetary policy; for supervision and regulation of certain banking organizations; for operation of much of the nation's payments system; and for administration of most of the nation's laws that protect consumers in credit transactions. [FRB][FRBM]

board of trade

Any organized exchange or other trading facility for the trading of futures and/or option contracts. [CFTC]

Board of Trade Clearing Corporation (BOTCC)

An independent corporation that settles all trades made at the Chicago Board of Trade acting as a guarantor for all trades cleared by it, reconciles all clearing member firm accounts each day to ensure that all gains have been credited and all losses have been collected, and sets and adjusts clearing member firm margins for changing market conditions. Also referred to as clearing corporation. [CBOT][MIDAM]

board of trustees

The group of persons that manages a mutual savings bank, establishes the policies under which it is to be operated, and appoints executive officers. In some states it is called a board of managers. [OTS]

board order

bogey

The return an investment manager is compared to for performance evaluation. [Harvey]

bogus

false, counterfeit, nonexistent or fraudulent. [OTS]

boiler room

An enterprise that often is operated out of inexpensive, low-rent quarters (hence the term 'boiler room'), that uses high pressure sales tactics (generally over the telephone), and possibly false or misleading information to solicit generally unsophisticated investors. [CFTC] An enterprise which often is operated out of inexpensive, low-rent quarters that uses high pressures sales tactics, generally over the telephone, and possibly false or misleading information to solicit generally unsophisticated investors. [NYMEX]

boilerplate

Standard legal language, often in fine print, used in most contracts, wills, indentures, prospectuses and other legal documents. [UNODC] Standard terms and conditions, e.g., in a debt contract. [WCSU] Standard terms and conditions. [Harvey] slang for standard legal language used in loan forms, real estate closings, etc. [OTS]

bona fide

In or with good faith, honesty, and sincerity. [ITDS] something that is in good faith, not a fraud, the real thing. [OTS]

bond

(A) the written evidence of debt, bearing a stated rate or stated rates of interest, or stating a formula for determining that rate, and maturing on a date certain, on which date and upon presentation a fixed sum of money plus interest (usually represented by interest coupons attached to the bond) is payable to the holder or owner. An issue is usually comprised of many bonds that mature over a number of years. (Compare 'Note'.) For purposes of computations based on a 'per bond' calculation, 'per bond' means a $1,000 increment of an issue (no matter what the actual denominations are). (B)A written promise to pay a specified sum of money called the face value or principal amount, at a specified date or dates in the future, called the maturity date(s), together with periodic interest at a specified rate. The difference between a note and a bond is that the latter runs for a longer period of time and requires a greater legal formality. (C) Written evidence of the issuer's obligation to repay a specified principal amount on a date certain (maturity date), together with interest at a stated rate, or according to a formula for determining that rate. Bonds are distinguishable from notes, which mature in a much shorter period of time. Bonds may be classified according to maturity (serial vs. term), source of payment (general obligation vs. revenue), method of transfer (bearer vs. registered), issuer (state vs. municipality vs. special district) or price (discount vs. premium). [EPA] A bond is a debt security representing a loan by the buyer to the corporation or government issuing the bond; it may pay interest, or it may be discounted in price from the value at maturity. [GAO] A bond is evidence of a debt in which the issuer promises to pay the bondholders a specified amount of interest and to repay the principal at maturity. [UNODC] A certificate that is evidence of a debt. The debt is initiated when the issuer sells the bond to the holder for a specific amount of cash. The issuer is obligated to pay the holder of the bond a fixed sum (the bond's face value) at a stated future date and to pay interest (usually twice a year) at a specified rate during the life of the bond. Bonds may be issued by corporations, the federal government, and by state and local governments as a means of raising funds in the capital markets. Bonds may be issued in registered form, in which the name of the holder is on record with the issuer, or in bearer form, in which the name of the owner is not registered and the bond is payable to whomever bears, or presents the bond to the issuer for redemption. [OTS] A certificate which is evidence of a debt in which the issuer promises to repay a specific amount of money to the bondholder, plus a certain amount of interest, within a fixed period of time. [SEC] An interest-bearing certificate of debt by which the issuer is obligated to pay the principal amount at a specific time and interest periodically. [ITDS] Bonds are debt and are issued for a period of more than one year. The U.S. government, local governments, water districts, companies and many other types of institutions sell bonds. When an investor buys bonds, he or she is lending money. The seller of the bond agrees to repay the principal amount of the loan at a specified time. Interest-bearing bonds pay interest periodically. [Harvey] Long-term debt. [WCSU] basically an I.O.U. or promissory note of a corporation or municipality, usually issued in multiples of $1,000 or $5,000. A bond is an evidence of debt on which the issuing company usually promises to pay the bondholder a specified amount of interest for a specified length of time, and to repay the loan on the expiration date. A bondholder is a creditor of the corporation, not a part owner as is the shareholder. While the interest paid on corporate bonds is fully taxable, the interest on municipal bonds is usually exempt from federal income tax and state and local taxes within the state of the issue. [NYSE]

bond agreement

A contract for privately placed debt. [Harvey]

bond anticipation note

(A) A note issued in anticipation of later issuance of bonds, usually payable from the proceeds of the sale of the bonds anticipated or of renewal notes. (B)A note issued in the anticipation of a later issuance of bonds to provide financing for the purpose of the issue; or the issuance of renewal notes.
(C) Short-term, interest-bearing notes issued by a government in anticipation of bonds to be issued at a later date. The notes are retired from proceeds of the bond issue to which they are related. [EPA]

bond counsel

(A) Lawyers with expertise in the municipal bond field who render 'approving opinions'. (B) An attorney (or firm of attorneys) retained by the issuer to give a legal opinion that the issuer is authorized to issue proposed bonds, the issuer has met all legal requirements necessary for issuance, and interest on the proposed bonds will be exempt from federal income taxation and, where applicable, from state and local taxation. [EPA]

bond covenant

A contractual provision in a bond indenture. A positive covenant requires certain actions, and a negative covenant limits certain actions. [Harvey]

bond discount

The difference between the purchase price and face value of a bond when the face value exceeds the purchase price. [OTS] The excess of the face value of a bond over the price for which it is acquired or sold. The price does not include accrued interest at the date of acquisition -or sale. [EPA]

bond fund

(A) A fund formerly used to account for the proceeds of general obligation bond issues. Such proceeds are now accounted for in a Capital Projects Fund. (B) A registered mutual fund that invests in tax-exempt obligations, or an account held by the trustee of an issue used to pay debt service and call premiums (if any) on an issue. (C) A special fund customarily held by the trustee to be used to pay debt service and call premiums on an issue. (also called 'Bond Payment Fund' or 'Debt Service Fund'.) A tax-exempt mutual fund comprised of tax-exempt issues. [EPA]

bond indenture

The contract that sets forth the promises of a corporate bond issuer and the rights of investors. [Harvey]

bond indexing

Designing a portfolio so that its performance will match the performance of some bond index. [Harvey]

bond of indemnity

An agreement made with a carrier that relieves them of any liability incurred under stated conditions. [ITDS]

bond ordinance or resolution

(A) An ordinance or resolution authorizing a bond issue . (B) An action of a governing body of a state or local government, or agency thereof, authorizing a bond issue. The resolution may be in the form of an amendment to a state constitution; an act or resolution of the state legislature; a local law or ordinance; or a resolution of the governing body of the issuer. [EPA]

bond points

A conventional unit of measure for bond prices set at $10 and equivalent to 1% of the $100 face value of the bond. A price of 80 means that the bond is selling at 80% of its face, or par value. [Harvey]

bond premium

The difference between the purchase price and the face value of a bond when the face value is less than the purchase price. [OTS] The excess of the price at which a bond is acquired or sold over its face value. The price does not include accrued interest at the date of acquisition or sale. [EPA]

bond proceeds

(A) Proceeds or funds received as a result of the issuance of a bond or note. (B) The money paid to the issuer by the purchaser or underwriter for a new issue of municipal bonds, used to finance the project or purpose for which the bonds were issued and to pay certain costs of issuance as may be provided in the bond contract. [EPA]

bond purchase agreement

The agreement between the issuer and the account or individual underwriter or purchaser which has agreed to purchase the issue setting forth the terms of the sale, including the price of the securities, any premium or discount, the interest rate or rates, the conditions to closing (including the contents, or a description of the contents, of the opinions and certificates to be rendered and delivered at closing), any restrictions on the liability of the issuer, and, occasionally, indemnity provisions if there is not a separate indemnity letter or agreement. Generally, if a matter is to be considered a prerequisite to closing, it must be stated as such in this agreement. (also called 'Contract of Purchase' or 'Underwriting Agreement'.) [EPA]

bond revenues

Revenues levied or collected for the purpose of providing for payment of the debt service on outstanding bonds. [EPA]

bond system

A computerized bond control system (part of ACS). [ITDS]

bond value

With respect to convertible bonds, the value the security would have if it were not convertible apart from the conversion option. [Harvey]

bond year

An element in calculating average life of an issue and in calculating net interest cost on an issue. A bond year is the number of 12 month intervals between the date of the bond and its maturity date, measured in $1,000 increments. For example, the 'bond years' allocable to a $5,000 bond dated April 1, 1982 and maturing June 1, 1983 is 5.830 (1.166 [14 months % 12 months] X 5 (number of $1,000 increments in $5,000 bond)).
Usual computations include bond years per maturity or per an interest rate, and total bond years for the issue. [EPA]

bond-equivalent basis

The method used for computing the bond-equivalent yield. [Harvey]

bond-equivalent yield

A bond, Treasury bill, or other discount instrument's yield over its life, assuming it is purchased at the asked price and the return is annualized using a simple interest approach. The bond equivalent yield is equal to a bill's discount, expressed as a fraction of the purchase price multiplied by 365 divided by the number of days to maturity. BEY = (discount/purchase price) x (365/days to maturity) [FDIC] Bond yield calculated on an annual percentage rate method. Differs from annual effective yield. [Harvey] The annualized yield to maturity computed by doubling the semiannual yield. [Harvey]

bonded

Goods stored by customs until the import duties are paid or the goods are exported. [ITDS]

bonded debt

That portion of issuer's total indebtedness represented by outstanding bonds. [EPA]

bonded terminal

An airline terminal approved by the U.S. Treasury Department for storage of goods until Customs duties are paid or released. [ITDS]

bonded warehouse

An approved warehouse used for the storage of goods until duties are paid or the goods are properly released. [ITDS]

bonds authorized and unissued

Bonds which have been legally authorized but not issued and which can be issued and sold without further authorization. This term must not be confused with the term 'margin of borrowing power' or 'legal debt margin,' either one of which represents the difference between the legal debt limit of a government and the debt outstanding against it. [EPA]

bonds issued

Bonds sold. [EPA]

boning

Charging a lot more for an asset than it's worth. [Harvey]

bonus

A borrowing facility that allows the firm to issue either eurnotes or U.S. domestic debt. Also called global note facility. [WCSU]

bonus account

A savings account that earns interest at a higher rate if the customer makes regular, scheduled deposits to the account, leaves a specified amount on deposit for a specified term, or fulfills other conditions of the account agreement. [OTS]

book

A banker or trader's positions. [Harvey]

book cash

A firm's cash balance as reported in its financial statements. Also called ledger cash. [Harvey]

book profit

The cumulative book income plus any gain or loss on disposition of the assets on termination of the SAT. [Harvey]

book runner

The managing underwriter for a new issue. The book runner maintains the book of securities sold. [Harvey]

book transfer

A series of accounting or bookkeeping entries used to settle a series of cash market transactions. [CFTC] Transfer of title without actually delivering the product. [NYMEX]

book value

A company's book value is its total assets minus intangible assets and liabilities, such as debt. A company's book value might be more or less than its market value. [Harvey] An accounting term. Book value of a stock is determined from a company's records, by adding all assets then deducting all debts and other liabilities, plus the liquidation price of any preferred issues. The sum arrived at is divided by the number of common shares outstanding and the result is book value per common share. Book value of the assets of a company or a security may have little relationship to market value. [NYSE] The dollar amount shown on the institution's accounting records or related financial statements. The 'gross book value' of an asset is the value without consideration for adjustments such as valuation allowances. The 'net book value' is the book value net of such adjustments. The FDIC restates amounts on the books of a failed institution to conform to the FDIC's liquidation accounting practices. Therefore, in the FDIC accounting environment, book value generally refers to the unpaid balance of loans or accounts receivable, or the recorded amount of other types of assets (for example, ORE or securities). [FDIC] The value of an asset as it appears on the accounting books of an organization. Book value is the initial cost of the asset, less depreciation. Book value may be different from market value, which is the estimated amount the asset would command if sold. Book value also refers to the total value of a company and is computed by adding all assets, then deducting all debts and other liabilities, and deducting the liquidation price of any preferred stock. The book value of a company may be divided by the number of outstanding shares of common stock to get the book value per share of common stock. [OTS]

book value per share

The ratio of stockholder equity to the average number of common shares. Book value per share should not be thought of as an indicator of economic worth, since it reflects accounting valuation (and not necessarily market valuation). [Harvey]

book value reduction

The decrease in book value of all types of assets resulting from activities such as the collection of loan principal, the sale of an asset, the forgiveness of a debt, and the write-off or donation of an asset. [FDIC]

book-entry

One form in which Treasury and certain government agency securities are held. Book-entry form consists of an entry on the records of the U.S. Treasury Department, a Federal Reserve Bank, or a financial institution. [FRB][FRBC][FRBM]

book-entry securities

Electronically recorded securities that include each creditor's name, address, Social Security or tax identification number, and dollar amount loaned, (i.e., no certificates are issued to bond holders, instead the transfer agent electronically credits interest payments to each creditor's bank account on a designated date). [CBOT][MIDAM] Securities that are recorded in electronic records, called book entries, rather than as paper certificates. Ownership of U.S. government book-entry securities is transferred over Fedwire. [FRBSF] The Treasury and federal agencies are moving to a book-entry system in which securities are not represented by engraved pieces of paper but are maintained in computerized records at the Fed in the names of member banks, which in turn keep records of the securities they own as well as those they are holding for customers. In the case of other securities where a book-entry has developed, engraved securities do exist somewhere in quite a few cases. These securities do not move from holder to holder but are usually kept in a central clearinghouse or by another agent. [Harvey]

book-entry system

A book-entry system is an accounting system that permits the transfer of assets (e.g., securities) without the physical movement of paper documents or certificates. [GAO] The recording, transferring and processing of securities solely by electronic means. The ownership of a security is recorded in a computer file and the purchaser does not receive a piece of paper evidencing ownership. [OTS]

booking

The act of recording arrangements for the movement of goods by vessel. [ITDS]

booking the basis

A forward pricing sales arrangement in which the cash price is determined either by the buyer or seller within a specified time. At that time, the previously-agreed basis is applied to the then-current futures quotation. [CFTC]

bookkeeping

The recording and balancing of financing transactions of an institution. [OTS]

booths

About 1,400 workspaces, each equipped with a computer system, around the perimeter of the Trading Floor where member firms and independent brokers receive orders. [NYSE]

bootstrapping

A process of creating a theoretical spot rate curve, using one yield projection as the basis for the yield of the next maturity. [Harvey]

borrow

To obtain or receive money on loan with the promise or understanding that it will be repaid. [Harvey]

borrower

individual or institution receiving funds in the form of a loan and obligated to repay the loan, usually with interest. A borrower is called a mortgagor when the loan is secured by real estate. [OTS]

borrower fallout

In the mortgage pipeline, the risk that prospective borrowers of loans committed to be closed will elect to withdraw from the contract. [Harvey]

borrowing

A way of acquiring necessary capital. One form of borrowing is when an individual or a company asks a bank to loan them a certain amount of money, over a certain period of time, and agrees to pay a certain amount of interest. [NYSE]

Boston Exchange Automated Communications and Order Routing Network (BEACON)

Boston Stock Exchange (BSE)

bottom-up equity management style

A management style that de-emphasizes the significance of economic and market cycles, focusing instead on the analysis of individual stocks. [Harvey]

bought deal

Security issue where one or two underwriters buy the entire issue. [Harvey]

bounties

Government payments to producers to strengthen their competitive position. [ITDS]

bourse

A term of French origin used to refer to stock markets. [Harvey]

box

Colloquial term referring to a trailer, semi-trailer, or container. [ITDS]

box car

A closed freight car. [ITDS]

box spread

An option market arbitrage in which both a bull spread and a bear spread are established for a riskless profit. One spread includes put options and the other includes calls. [NYMEX] An option position in which the owner establishes a long call and a short put at one strike price and a short call and a long put at another strike price, all of which are in the same contract month in the same commodity. [CFTC]

boycott

Refusing to deal commercially with a person, firm, or country. [ITDS]

bracket

A term signifying the extent of an underwriter's commitment in a new issue, e.g., major bracket or minor bracket. [Harvey][WCSU]

bracket creep

The process by which inflation drives personal incomes upward into higher tax brackets. In a progressive income tax system, this causes an increase in tax burdens. [FACS]

Brady bonds

Bonds issued by emerging countries under a debt reduction plan. [Harvey]

branch

An operation in a foreign country incorporated in the home country. [Harvey]

branch banking

Multi-office banking. Branch banking occurs when a single bank conducts its business at a number of different offices located in the same or different cities, states, or countries. The ability to operate branches is controlled by state law; most states permit branches within city limits and a few states permit statewide banking. Federal law ties the ability of a national bank to establish and operate branches to the scope of the branching powers granted by state law to the state banks located in the state in which the national bank is situated. [FDIC]

branch breakup

A resolution strategy that provides bidders with the choice of bidding on the entire franchise or on individual or groups of branches of the failing institution. Marketing failing institutions on both a whole franchise and a branch breakup basis can expand the universe of potential buyers and may result in better bids in the aggregate. In branch breakup transactions, prospective acquirers are required to submit bids on both the 'all deposits' and 'insured deposits' options except for bids on the entire franchise. The branch breakup resolution strategy was developed by the RTC to allow smaller institutions to participate in the resolution process and to increase competition among the bidders. [FDIC]

branch office

An office of a savings institution that is physically separated from the association's home office, but that offers the same kinds of deposit taking, loan and other services conducted at the home office. [OTS]

brand

Insignia identifying the producer of a specific commodity. [NYMEX]

breach

A violation of a legal obligation. [OTS]

break

A rapid and sharp price decline. [CFTC][Harvey][NYMEX]

break-even analysis

An analysis of the level of sales at which a project would make zero profit. [Harvey] Analysis of the level of sales at which a project would break even. [WCSU]

break-even lease payment

The lease payment at which a party to a prospective lease is indifferent between entering and not entering into the lease arrangement. [Harvey]

break-even payment rate

The prepayment rate of a MBS coupon that will produce the same CFY as that of a predetermined benchmark MBS coupon. Used to identify for coupons higher than the benchmark coupon the prepayment rate that will produce the same CFY as that of the benchmark coupon; and for coupons lower than the benchmark coupon the lowest prepayment rate that will do so. [Harvey]

break-even point

The level of sales or production at which the total costs and total revenue of a business are equal. [OTS] The underlying futures price at which a given option strategy is neither profitable nor unprofitable. For call options, it is the strike price plus the premium. For put options, it is the strike price minus the premium. [NYMEX]

break-even tax rate

The tax rate at which a party to a prospective transaction is indifferent between entering into and not entering into the transaction. [Harvey]

breakage

In marine insurance, 'breakage' refers to breakage of fragile goods such as glass and china and is excluded from coverage, unless the policy specifically covers breakage. [ITDS]

breakbulk

Unloading or distributing portions of a consolidated shipment for delivery. [ITDS]

breakbulk cargo

Cargo that is shipped as a unit but not containerized. [ITDS]

breakout

A rise in a security's price above a resistance level (commonly its previous high price) or drop below a level of support (commonly the former lowest price.) A breakout is taken to signify a continuing move in the same direction. Can be used by technical analysts as a buy or sell indicator. [Harvey]

Bretton Woods

An international monetary system operating from 1946-1973. The value of the dollar was fixed in terms of gold, and every other country held its currency at a fixed exchange rate against the dollar; when trade deficits occurred, the central bank of the deficit country financed the deficit with its reserves of international currencies. [FACS]

Bretton Woods Agreement

An agreement signed by the original United Nations members in 1944 that established the International Monetary Fund (IMF) and the post-World War II international monetary system of fixed exchange rates. [Harvey]

bribe

A payment that results in a benefit that would not have been received except for receipt of that money; a bribe is a criminal offense. [ITDS]

bribery

An act of giving money or gift giving that alters the behavior of the recipient, where the gift is of a dishonest nature. Bribery constitutes a crime and is defined by Black's Law Dictionary as the offering, giving, receiving, or soliciting of any item of value to influence the actions of an official or other person in charge of a public or legal duty. [Wikipedia]

brick

slang used to describe a package of currency that is banded with steel straps. [OTS]

bricks and mortar

slang for physical branch or main offices of a thrift institution. [OTS]

bridge

Interim financing for a project to be subsequently financed permanently by bonds. The 'bridge' is generally in the form of notes which are retired with the proceeds of the bonds. [EPA]

bridge bank

A temporary national bank established and operated by the FDIC on an interim basis to acquire the assets and assume the liabilities of a failed institution until final resolution can be accomplished. The use of bridge banks generally is limited to situations in which more time is needed to permit the least costly resolution of a large or complex institution. [FDIC]

bridge financing

Interim financing of one sort or another used to solidify a position until more permanent financing is arranged. [Harvey]

bridging loan

Short-term loan to provide temporary financing until more permanent financing is arranged. [WCSU]

British clearers

The large clearing banks that dominate deposit taking and short-term lending in the domestic sterling market. [Harvey]

British thermal unit

The amount of heat required to increase the temperature of a pound of water 1o Fahrenheit. A Btu is used as a common measure of heating value for different fuels. Prices of different fuels and their units of measure (dollars per barrel of crude, dollars per ton of coal, cents per gallon of gasoline, cents per thousand cubic feet of natural gas) can be easily compared when expressed as dollars and cents per million Btus. [NYMEX]

broad-based security index

Any index of securities that does not meet the legal definition of narrow-based security index. [CFTC]

broker

1) An individual who is paid a fee or commission for acting as an agent in making contracts, sales, or purchases. 2) A Floor Broker is a person who actually executes trading orders on the floor of an exchange. 3) An Account Executive, Registered Commodity Representative, or Customers' Man who deals with customers and their orders in commission house offices. [NYMEX] A company or individual that executes futures and options orders on behalf of financial and commercial institutions and/or the general public. [CBOT] A person paid a fee or commission for executing buy or sell orders for a customer. In commodity futures trading, the term may refer to: (1) Floor broker, a person who actually executes orders on the trading floor of an exchange; (2) Account executive or associated person, the person who deals with customers in the offices of futures commission merchants; or (3) the futures commission merchant. [CFTC] A person who acts as an agent for others in selling or buying funds, securities, real estate, insurance or other services or products. [OTS] One that acts as an agent for others, as in negotiating contracts, purchases, or sales in return for a fee or commission. [ITDS]

broker association

Two or more persons with exchange trading privileges who (1) share responsibility for executing customer orders; (2) have access to each other's unfilled customer orders as a result of common employment or other types of relationships; or (3) share profits or losses associated with their brokerage or trading activity. [CFTC]

Broker Booth Support System (BBSS)

A state-of-the-art order-management system designed exclusively for NYSE members. BBSS enables member firms to quickly and efficiently process and manage their orders and selectively route orders via SuperDot directly to either the trading post or the booths on the NYSE Trading Floor. [NYSE] An order management and routing system for brokers. [NYSE]

broker embezzlement

These schemes involve illicit and unauthorized actions by brokers to steal directly from their clients. Such schemes may be facilitated by the forging of client documents, doctoring of account statements, unauthorized trading/funds transfer activities, or other conduct in breach of the broker's fiduciary responsibilities to the victim client. [FBI]

Broker ITS (BITS)

Pre-opening indications service received on trading floor at broker terminals. Copies of Pre-opening Indications delivered through the Broker to Booth System in relevant issues. [NYSE]

broker-dealer

An entity engaged in the business of buying and selling securities. [SEC] Any person, other than a bank, engaged in the business of buying or selling securities on its own behalf or for others. [FRB][FRBC][FRBM][FRBSF]

brokerage fee

brokerage house

brokered deposits

deposits placed in a savings institution by a broker. The broker gathers funds from others and packages the funds in batches of $100,000. The broker then shops for thrift institutions paying the highest rates and takes out multiple jumbo ($100,000) certificates of deposit, which typically pay the highest rates of interest and are federally insured. The practice allows persons with less than $100,000 to pool their money and earn the higher rates paid by jumbo certificates of deposit. For his services, the broker charges fees to the investors for getting them higher rates and/or to the thrift institutions for placing deposits with them. [OTS]

brokered market

A market where an intermediary offers search services to buyers and sellers. [Harvey]

brokers' loans

Money borrowed by brokers from banks for uses such as financing specialists' inventories of stock, financing the underwriting of new issues of corporate and municipal securities, and financing customer margin accounts. [FRB][FRBC][FRBM] Money borrowed by brokers from banks for uses such as financing specialists' inventories of stock, the underwriting of new issues of corporate and municipal securities, and customer margin accounts. [FRBSF] Money borrowed by brokers from banks or other brokers for a variety of uses. It may be used by specialists to help finance investments of stock they deal in; by brokerage firms to finance the underwriting of new issues of corporate and municipal securities; to help finance a firm's own investments; and to help finance the purchase of securities for customers who prefer to use the broker's credit when they buy securities. [NYSE]

browser

A browser is a computer program that facilitates locating and displaying information on the World Wide Web (e.g., Netscape Navigator or Microsoft Explorer). The browser could work on the Internet or through internal information management systems called Intranets. [GAO]

bubble theory

Security prices sometimes move wildly above their true values. [Harvey]

buck

Slang for one million dollars. [Harvey]

bucket shop

A brokerage enterprise that 'books' (i.e., takes the opposite side of) retail customer orders without actually having them executed on an exchange. [CFTC]

bucketing

Directly or indirectly taking the opposite side of a customer's order into a broker's own account or into an account in which a broker has an interest, without open and competitive execution of the order on an exchange. Also called trading against. [CFTC]

budget

A detailed schedule of financial activity, such as an advertising budget, a sales budget, or a capital budget. [Harvey] A plan of financial operation embodying an estimate of proposed expenditures for a given period and the proposed means of financing them. Used without any modifier, the term usually indicates a financial plan for a single fiscal year. [EPA] An itemized listing, usually prepared annually, of anticipated revenue and projected expenses. [OTS]

budget deficit

The amount by which government spending exceeds government revenues. [Harvey]

budget document

The instrument used by the budget-making authority to present a comprehensive financial program to the appropriating body. the budget document usually consists of three parts. the first part contains a message from the budget-making authority, together with a summary of the proposed expenditures and the means of financing them. The second consists of schedules supporting the summary. These schedules show in detail the information as to past years' actual revenues, expenditures, and other data used a making the estimates. The third part is composed of drafts of the appropriation, revenue, and borrowing measures necessary to put the budget into effect. [EPA]

buffer zone

An area separating two or more types of land use, such as between a residential area and a commercial area. [OTS]

builder bailout

This scheme is used when a builder, who has unsold units in a tract, subdivision, or condominium complex, employs various fraudulent schemes to sell the remaining properties. [FFIEC]

builder buydown loan

A mortgage loan on newly developed property that the builder subsidizes during the early years of the development. The builder uses cash to buy down the mortgage rate to a lower level than the prevailing market loan rate for some period of time. The typical buydown is 3% of the interest-rate amount for the first year, 2% for the second year, and 1% for the third year (also referred to as a 3-2-1 buydown). [Harvey]

building and loan association

another name for a savings and loan association. [OTS]

building codes

city, county or state regulations that set forth standards and requirements for the construction, maintenance and occupancy of buildings. The codes are designed to provide for the safety, health and welfare of the public. [OTS]

building efficiency

The ratio of net rentable area to gross building area expressed as a percentage. [OTS]

building loan

A mortgage loan made to finance the construction of a building. It is advanced in stages as the work is completed. Also called a construction loan. [OTS]

building society

The British term for a savings and loan association. [OTS]

built-ins

cabinets, ranges, ovens, and other appliances or furniture that are attached to the structure. [OTS]

bulge

A rapid advance in futures prices. [NYMEX] slang for a sudden, temporary increase in the price of a security, stock or debt obligation. Any temporary, significant increase, such as that in the volume of work. [OTS]

bulk cargo

Cargo that is made up of one commodity; examples include grain, oil, and ore. [ITDS]

bulk carrier

A vessel designed for the shipment of bulk cargo. [ITDS]

bulk freight

Freight not in packages or containers. [ITDS]

bulk sale

The sale of a large number of assets to one purchaser in a single transaction. Also known as a 'portfolio sale.' [FDIC] The transfer of a large amount of inventory in a single transaction not in the usual course of business. [ITDS]

bulk solids

Dry cargo shipped loose in containers. [ITDS]

bull

An investor who thinks the market will rise. [Harvey] One who anticipates an increase in price or volatility. Opposite of a Bear. [NYMEX] One who believes the market will rise. [NYSE] One who expects a rise in prices. The opposite of bear. A news item is considered bullish if it is expected to result in higher prices. [CFTC] Someone who believes the market will rise. [CBOT][MIDAM]

bull CD, bear CD

A bull CD pays its holder a specified percentage of the increase in return on a specified market index while guaranteeing a minimum rate of return. A bear CD pays the holder a fraction of any fall in a given market index. [Harvey]

bull FRN

bull market

A condition of a stock or securities market characterized by increased buying and rising prices. Opposite of a bear market. [OTS] A condition of the stock market when prices of stocks are generally rising. [NYSE] A market in which prices generally are rising over a period of months or years. Opposite of bear market. [CFTC] A period of rising market prices. [CBOT][MIDAM] Any market in which prices are in an upward trend. [Harvey][NYMEX] Widespread rise in security prices. [WCSU]

bull spread

(1) A strategy involving the simultaneous purchase and sale of options of the same class and expiration date but different strike prices. In a bull vertical spread, the purchased option has a higher delta than the option that is sold. For example, in a call bull spread, the purchased option has a lower exercise price than the sold option. Also called bull vertical spread. (2) The simultaneous purchase and sale of two futures contracts in the same or related commodities with the intention of profiting from a rise in prices but at the same time limiting the potential loss if this expectation is wrong. In agricultural commodities, this is accomplished by buying the nearby delivery and selling the deferred. [CFTC] 1) The simultaneous purchase and sale of two futures contracts in the same or related commodities with the intention of profiting from a rise in prices but at the same time limiting the potential loss if this expectation is wrong. This can be accomplished by buying the nearby delivery and selling the deferred. 2) A delta-positive option position composed of both long and short options of the same type, either calls or puts, designed to be profitable in a rising market. An option with a lower strike price is bought and one with a higher strike price is sold. [NYMEX] A spread strategy in which an investor buys an out-of-the-money put option, financing it by selling an out-of-the money call option on the same underlying. [Harvey] In most commodities and financial instruments, the term refers to buying the nearby month, and selling the deferred month, to profit from the change in the price relationship. [CBOT][MIDAM]

bull vertical spread

bull-bear bond

Bond whose principal repayment is linked to the price of another security. The bonds are issued in two tranches: in the first tranche repayment increases with the price of the other security, and in the second tranche repayment decreases with the price of the other security. [Harvey] Bonds whose principle repayment is linked to the price of another security. The bonds are issued in two tranches: In the first the repayment increases with the price of the other security; in the second the repayment decreases with the price of the other security. [WCSU]

bulldog bond

Foreign bond issue made in London. [Harvey][WCSU]

bulldog market

The foreign market in the United Kingdom. [Harvey]

bullet

A maturity schedule structured to have a single payment of the entire principal amount of the issue on the final date the bonds are outstanding, with no mandatory sinking fund redemption. There may be a sinking fund to provide for payment on the single maturity date, perhaps in combination with an understood requirement that the principal amount not covered by sinking fund deposits will have to be refinanced at that time. An example of a bullet would be the $20,000,000 payment on January 15, 1990 on a $20,000,000 issue of bonds which matures in its entirety January 15, 1990. A bullet is a form of term bond. [EPA]

bullet contract

A guaranteed investment contract purchased with a single (one-shot) premium. [Harvey]

bullet loan

A bank term loan that calls for no amortization. [Harvey]

bullet payment

Single final payment, e.g., of a loan (in contrast to payment in installments). [WCSU]

bullet strategy

A strategy in which a portfolio is constructed so that the maturities of its securities are highly concentrated at one point on the yield curve. [Harvey]

bullion

Bars or ingots of precious metals, usually cast in standardized sizes. [CFTC] Precious metals cast into bars or other uncoined form. [NYMEX]

bullion coin

A precious metal coin whose market value is determined by its inherent precious metal content. They are bought and sold mainly for investment purposes. [NYMEX]

bullish, bearish

Words used to describe investor attitudes. Bullish refers to an optimistic outlook while bearish means a pessimistic outlook. [Harvey]

bunched order

A discretionary order entered on behalf of multiple customers. [CFTC]

Bundesbank

Established in 1875, the central bank of West Germany, located in Frankfurt. [FRBSF]

bundle

A stack of copper cathodes strapped together for shipping. [NYMEX]

bundling

A trend allowing creation of securities either by combining primitive and derivative securities into one composite hybrid or by separating returns on an asset into classes. [Harvey]

bungalow

A one- or one and one-half story house with low exterior lines. In Chicago, a bungalow is a gable-roofed brick building with two to three bedrooms, a half-sunken basement, and stairs leading to an attic. Most bungalows were built in Chicago in the 1920s. In India, a bungalow is a small cottage with a thatched or tiled roof surrounded by a wide veranda. [OTS]

bunker

A compartment on a ship for storage or fuel. [ITDS]

bunker adjustment factor

An adjustment in shipping charges to offset price fluctuations in the cost of bunker fuel. [ITDS]

bunker c fuel oil

(or bunkering fuel) Fuel used for ships. Generally refers to a No. 6 grade of residual fuel oil with an API gravity about 10.5o. [NYMEX]

bunker fuel

The fuel used to power a ship. [ITDS]

bunny bonds

Multiplier bonds. [WCSU]

buoyant

A market in which prices have a tendency to rise easily with a considerable show of strength. [CFTC]

Bureau of Labor Statistics (BLS)

A research agency of the U.S. Department of Labor; it compiles statistics on hours of work, average hourly earnings, employment and unemployment, consumer prices, and many other variables. [FRBSF]

bureau rate

in some states, a standard rate is established by a rating bureau for all companies writing policies for hazard insurance and for title insurance. [OTS]

business cycles

Periodic swings in the pace of national economic activity, characterized by alternating expansion and contraction phases. [FACS] Repetitive cycles of economic expansion and recession. [Harvey]

business failure

A business that has terminated with a loss to creditors. [Harvey]

business risk

The risk that the cash flow of an issuer will be impaired because of adverse economic conditions, making it difficult for the issuer to meet its operating expenses. [Harvey]

business transfer payments

business, professional, and technical services

An abbreviation for business, professional, and technical services, both receipts and payments. These services cover a wide range of private services sold to or purchased from foreigners, including advertising, telecommunications, data base and other information services, accounting and legal services, among others. [BEA]

bust

An executed trade cancelled by an exchange that is considered to have been executed in error. [CFTC]

butterfly shift

A non-parallel shift in the yield curve involving the height of the curve. [Harvey]

butterfly spread

A three-legged option spread in which each leg has the same expiration date but different strike prices. For example, a butterfly spread in soybean call options might consist of one long call at a $5.50 strike price, two short calls at a $6.00 strike price, and one long call at a $6.50 strike price. [CFTC] The placing of two interdelivery spreads in opposite directions with the center delivery month common to both spreads. [CBOT][MIDAM]

Buttonwood Agreement

A 1792 trade agreement banding the original 24 brokers in New York together into an investment community. The agreement was named for a Buttonwood tree that served as their informal meeting place on Wall Street. [NYSE]

buy

(1) to acquire ownership of something in exchange for money. (2) The quality of a purchase, as 'It is a good buy.' [OTS] To purchase an asset; taking a long position. [Harvey]

buy American acts

U.S. federal and state government statutes that give a preference to U.S. produced goods in government contracts. [ITDS]

buy and bail

This scheme typically involves a borrower who is current on a mortgage loan, but the value of the house has fallen below the amount owed. The borrower continues to make loan payments, while applying for a purchase money mortgage loan on a similar house that cost less due to the decline in market value. After obtaining the new property, the borrower 'walks' or 'bails' on the first loan. [FFIEC]

buy in

To cover, offset or close out a short position. [Harvey]

buy limit order

A conditional trading order that indicates a security may be purchased only at the designated price or lower. [Harvey]

buy on close

To buy at the end of the trading session at a price within the closing range. [Harvey] To buy at the end of the trading session within the closing price range. [CFTC]

buy on margin

A transaction in which an investor borrows to buy additional shares, using the shares themselves as collateral. [Harvey] The act of purchasing securities and paying cash for only a fraction of the purchase price. The remainder of the price is provided by credit extended by the broker to the buyer. [OTS]

buy on opening

To buy at the beginning of a trading session at a price within the opening range. [Harvey] To buy at the beginning of a trading session within the open price range. [CFTC]

buy side

An institution who buys services from a broker/dealer, i.e., pays a commission on the execution of an order. [NYSE]

buy-and-hold strategy

A passive investment strategy with no active buying and selling of stocks from the time the portfolio is created until the end of the investment horizon. [Harvey]

buy-back

Another term for a repo. [Harvey]

buy-back agreement

A provision in a real estate sales contract stating that the seller will repurchase the property within a specific period of time, usually for the selling price, for a specific cause such as the purchaser being transferred by his or her employer from the area. [OTS]

buy-sell agreement

A written agreement between a homeowner/borrower, a construction lender and a permanent lender that assigns the mortgage to the permanent lender when the construction is completed. Also called a tri-party agreement. [OTS]

buy-side analyst

A financial analyst employed by a non-brokerage firm, typically one of the larger money management firms that purchase securities on their own accounts. [Harvey]

buydown

A lump sum payment made to the creditor by the borrower or by a third party to reduce the amount of some or all of the consumer's periodic payments to repay the indebtedness. [FRB][FRBC][FRBM][FRBSF] Mortgages in which monthly payments consist of principal and interest, with portions of these payments during the early period of the loan being provided by a third party to reduce the borrower's monthly payments. [Harvey] The practice of a seller, builder or other party advancing money to a mortgage lender resulting in lower monthly mortgage payments by a third party, the homebuyer. As the result of a buydown, monthly mortgage payments may be reduced for the entire life of the mortgage, or for just an initial period of one or more years. Frequently, the amount of the buydown is added to the selling price of the property. [OTS]

buyer

A market participant who takes a long futures position or buys an option. An option buyer is also called a taker, holder, or owner. [CFTC]

buyer's call

A purchase of a specified quantity of a specific grade of a commodity at a fixed number of points above or below a specified delivery month futures price with the buyer allowed a period of time to fix the price either by purchasing a futures contract for the account of the seller or telling the seller when he wishes to fix the price. [CFTC]

buyer's option contract

When the buyer has the right to settle a forward contract at his or her option anytime within a specified period. [FDIC]

buyers market

A condition of the market in which there is an abundance of goods available and hence buyers can afford to be selective and may be able to buy at less than the price that previously prevailed. [CFTC][NYMEX] A market condition characterized by an oversupply of items for sale resulting in lower prices for the buyer. Opposite of a seller's market. [OTS]

buying hedge

Also called a long hedge. Buying futures contracts to protect against possible increased costs of commodities that will be needed in the future. [NYMEX] also called a long hedge. Term refers to buying futures contracts to protect against a possible increase in the cost of buying commodities that will be needed in future. [OTS]

buying power

money and other liquid assets, plus credit, that is available for spending and consumption of goods and services. [OTS]

buying the index

Purchasing the stocks in the S&P 500 in the same proportion as the index to achieve the same return. [Harvey]

buyout

Purchase of a controlling interest (or percent of shares) of a company's stock. A leveraged buy-out is done with borrowed money. [Harvey]

bylaws

The regulations that an institution adopts that set forth duties, limit authority and establish orderly procedures for conducting business. [OTS]

bypass trust

An agreement allowing parents to pass assets on to their children to reduce estate taxes. The trust must be made irrevocable, meaning that the terms can never be changed. [UNODC]

cable

A message sent and delivered by an international record carrier via satellite or cable connections to a foreign country. [UNODC] Exchange rate between British pounds sterling and the U.S.$. [Harvey]

cabotage

Coast-wide water transportation, navigation or trade between ports of a nation. [ITDS]

cadastral map

A legal map for recording title to a property. The map indicates legal boundaries and the ownership of the property. [OTS]

calamity provision

A provision for extraordinary optional call of an entire issue in the event of, for example, destruction or loss of the project through fire, calamity, eminent domain or otherwise, or financial hardship due to frustration of purpose. See 'Extraordinary Optional Call'. [EPA]

calendar

List of new issues scheduled to come to market shortly. [Harvey]

calendar effect

The tendency of stocks to perform differently at different times, including such anomalies as the January effect, month-of-the-year effect, day-of-the-week effect, and holiday effect. [Harvey]

calendar spread

(1) The purchase of one delivery month of a given futures contract and simultaneous sale of a different delivery month of the same futures contract; (2) the purchase of a put or call option and the simultaneous sale of the same type of option with typically the same strike price but a different expiration date. Also called a horizontal spread or time spread. [CFTC] An option position comprised of the purchase and sale of two option contracts of the same type that have the same strike prices but different expiration dates. Also known as a Horizontal, or Time, Spread. [NYMEX]

California Bankers Clearing House (CBCH)

CBCH provides check exchange services to over 100 depository institutions located mainly in California [GAO]

call

(1) An option contract that gives the buyer the right but not the obligation to purchase a commodity or other asset or to enter into a long futures position at a specified price on or prior to a specified expiration date; (2) formerly, a period at the opening and the close of some futures markets in which the price for each futures contract was established by auction; or (3) the requirement that a financial instrument such as a bond be returned to the issuer prior to maturity, with principal and accrued interest paid off upon return. [CFTC] (1) an option to buy a specific security at a specified price within a designated period. (2) to demand payment of a loan because of the failure of the borrower to comply with the terms of the loan. (3) to demand payment for stocks or bonds that have been purchased or subscribed. [OTS] A demand of payment on a loan, often because of failure on the part of the borrower to comply with conditions of the loan. [ITDS] Actions taken to pay the principal amount prior to the stated maturity date, in accordance with the provisions for 'redemption' stated in the proceedings and on the securities. Often referred to as 'prior redemption'. Compare 'Prepayment'. [EPA] An option that gives the right to buy the underlying futures contract. [Harvey] The right in options contracts to buy underlying securities at a specified price at a specified time. Also refers to provisions in bond contracts that allows issuers to buy back bonds prior to their stated maturity. [SEC]

call account

A deposit account with a financial institution without a fixed maturity date. The deposit can be 'called' (withdrawn) at any time. Call account deposits are usually one to seven day placements, however, two parties can agree on different maturities. [UNODC]

call an option

To exercise a call option. [Harvey]

call around market

A market, commonly used for options on futures on European exchanges, in which brokers contact each other outside of the exchange trading facility to arrange block trades. [CFTC]

call cotton

Cotton bought or sold on call. [CFTC]

call date

A date before maturity, specified at issuance, when the issuer of a bond may retire part of the bond for a specified call price. [Harvey]

call loans

loans used to finance the purchase of securities, and which may be terminated (called) at the discretion of the borrower or the lender on demand. [OTS]

call money

Currency lent by banks on a very short-term basis, which can be called the same day, at one days notice or at two days notice. [ITDS]

call money rate

Also called the broker loan rate, the interest rate that banks charge brokers to finance margin loans to investors. The broker charges the investor the call money rate plus a service charge. [Harvey]

call option

A call option is a contract that gives one the right, but not the obligation, to buy a specified amount of an underlying asset, such as stocks or currency, at a specified price by a certain date. [GAO] An option contract that gives its holder the right (but not the obligation) to purchase a specified number of shares of the underlying stock at the given strike price, on or before the expiration date of the contract. [Harvey] An option that gives the buyer the right, but not the obligation, to purchase (go 'long') the underlying futures contract at the strike price on or before the expiration date. [CBOT][MIDAM] Option to buy an asset at a specified exercise price on or before a specified exercise date. [WCSU] The buyer of a call option has the right to buy an underlying instrument at a predetermined price during a determined period. The seller of a call option has the obligation to sell, if the option is exercised. [TMAC] The option to buy a given amount of a commodity at a specified price during a specific period of time. Opposite of put option. [OTS]

call premium

(1) Difference between the price at which a company can call its bonds and their face value; (2) price of an option. [WCSU] A dollar amount, usually stated as a percentage of the principal amount of bonds called, paid as a penalty or premium to the investor for the exercise of a call provision. [EPA] Premium in price above the par value of a bond or share of preferred stock that must be paid to holders to redeem the bond or share of preferred stock before its scheduled maturity date. [Harvey]

call price

The price at which a callable bond or security is redeemable. It is used in connection with preferred stocks and debt securities having a fixed redemption value. It is the price the issuer must pay to call in the security and retire it by paying the holder. The call price often exceeds the par, or face value, of the security in order to compensate the holder for the disruption of earnings and the bother of having to reinvest the funds, possibly at a lower rate of return. [OTS] The price for which a bond can be repaid before maturity under a call provision. [Harvey] The price, specified at issuance, at which the issuer of a bond may retire part of the bond at a specified call date. [Harvey]

call protection

A feature of mortgage loans or mortgage-backed securities designed to reduce the risk of an early call, or early prepayment, of a loan or security. Call protection may be accomplished by including prepayment penalties and lock-in periods in mortgages. Call protection also may be achieved by structuring a mortgage-backed security in such a way that if underlying loans are paid earlier than scheduled, the payments are not immediately passed through to the investor holding the mortgage-backed security. Investors and lenders sometimes desire call protection so that their funds will remain invested for the entire planned length of time, providing a consistent cash flow at predictable rates and reducing the premature need to look for new investments. [OTS] A feature of some callable bonds that establishes an initial period when the bonds may not be called. [Harvey]

call provision

A clause in a mortgage giving the lender the right to demand and receive payment of the balance of the unpaid principal in full under certain conditions. A call provision is similar to an acceleration clause. [OTS] An embedded option granting a bond issuer the right to buy back all or part of the issue prior to maturity. [Harvey]

call report

A quarterly report of income and financial condition commercial banks file with their federal and state regulatory agencies. It is equivalent to the quarterly thrift financial report that savings institutions file with the Office of Thrift Supervision. [OTS]

call risk

The combination of cash flow uncertainty and reinvestment risk introduced by a call provision. [Harvey]

call rule

An exchange regulation under which an official bid price for a cash commodity is competitively established at the close of each day's trading. It holds until the next opening of the exchange. [CFTC]

call swaption

A swaption in which the buyer has the right to enter into a swap as a fixed-rate payer. The writer therefore becomes the fixed-rate receiver/floating rate payer. [Harvey]

callable

A bond issue, all or parts of which may be redeemed by the issuing corporation under specified conditions before maturity. The term also applies to preferred shares that may be redeemed by the issuing corporation. [NYSE] A financial security such as a bond with a call option attached to it, i.e., the issuer has the right to call the security. [Harvey] Subject to payment of the principal of the principal amount (and accrued interest) prior to the stated maturity date. [EPA]

callable bond

(A) A type of bond which permits the issuer to pay the obligation before the stated maturity date by giving notice of redemption in a manner specified in the bond contract . (B) A bond subject to repayment prior to the stated maturity date. [EPA]

called

Another term for exercised when an option is a call. In the case of an option on a physical, the writer of a call must deliver the indicated underlying commodity when the option is exercised or called. In the case of an option on a futures contract, a futures position will be created that will require margin, unless the writer of the call has an offsetting position. [CFTC]

calling officer

A financial institution employee who goes out to call on prospective new customers and on current customers in order to strengthen their affiliation with the institution. [OTS]

camouflage passport

A fake passport ostensibly issued by a country that no longer exists. [UNODC]

Canadian agencies

Agency banks established by Canadian banks in the U.S. [Harvey]

Canadian rollover mortgage

The standard home financing loan in Canada. Like standard mortgages in the U.S., the Canadian rollover mortgage is fully amortizing. However, it differs in that the loan's interest rate is subject to renegotiation every five years, with no limit or cap on how much interest rates, and therefore monthly payments, can increase during the life of the loan. [OTS]

cancel former order. (CFO)

canceled check

A check that has been paid by the financial institution on which it was drawn. It is stamped 'paid' on the day it is paid and it is charged to the account of the person who wrote the check. [OTS]

canceling order

An order that deletes a customer's previous order. [CBOT][MIDAM]

cap

cap

(1) the maximum allowable interest rate increase for adjustable rate mortgages. Caps embedded in mortgage agreements may limit the amount of upward change in the rate of interest at each adjustment period and provide a fixed maximum over which the rate cannot rise during the life of the loan. (2) an agreement negotiated between a buyer and seller. The buyer of a cap agreement pays a fee to the seller. In return, the seller will pay the buyer if a designated floating index rate is higher than a specified fixed rate on designated days. The seller pays nothing If the floating rate is below the fixed rate. Buyers of cap agreements use them to hedge against rising interest rates, because payments to the buyer increase as rates rise. [OTS] A contract between a borrower and a lender where the borrower is assured that he will not have to pay more than some maximum interest rate on borrowed funds. [TMAC] A supply contract between a buyer and seller, whereby the buyer is assured that he will not have to pay more than a given maximum price. This type of contract is analogous to a call option. [NYMEX] An upper limit on the interest rate on a floating-rate note. [Harvey][WCSU]

cap and trade

A market based pollution control system in which total emissions of a pollutant are capped at a specified level. Allowances are issued to firms and can be bought and sold on an organized market or OTC. [CFTC]

capacity

The ability of a borrower to repay a debt. It is determined by subtracting total expenses from the total income of the borrower. [OTS] The quantity that can be contained exactly or the rate of flow that can be carried exactly. Also, the load for which a machine, apparatus, station, or system is rated. [EPA]

capacity to contract

Legal competency to make a contract. [ITDS]

capacity utilization rate

The percentage of the economy's total plant and equipment that is currently in production. Usually a decrease in this percentage signals an economic slowdown, while an increase signals economic expansion. [FRBSF]

capital

(1) funds raised by a business through the sale of stock plus retained earnings. (2) wealth, including money and property, owned, used, or accumulated by a person or a company. (3) assets minus liabilities equals net worth or capital. [OTS] Money invested in a firm. [Harvey] The existing stock of productive resources, such as machines and buildings, that have been produced. [FACS]

capital account

Net result of public and private international investment and lending activities. [Harvey]

capital adequacy

The capacity of a financial institution's net worth to absorb potential adverse changes in the value of its assets without becoming insolvent. [UNODC]

capital allocation decision

Allocation of invested funds between risk-free assets versus the risky portfolio. [Harvey]

capital asset

A long-term or permanent thing of value used to carry on a business or profession. [OTS]

capital asset pricing model (CAPM)

An economic theory that describes the relationship between risk and expected return, and serves as a model for the pricing of risky securities. The CAPM asserts that the only risk that is priced by rational investors is systematic risk, because that risk cannot be eliminated by diversification. The CAPM says that the expected return of a security or a portfolio is equal to the rate on a risk-free security plus a risk premium. [Harvey]

capital budget

A firm's set of planned capital expenditures. [Harvey] A plan of proposed capital outlays and the means of financing them. [EPA] List of planned investment projects, usually prepared annually. [WCSU]

capital budgeting

The process of choosing the firm's long-term capital assets. [Harvey]

capital charges

One of GSP's four components. This component is composed of corporate profits with inventory valuation adjustment (IVA), corporate capital consumption allowances (CCA), business transfer payments, net interest, rental income of persons, and subsidies less current surplus of government enterprises. [BEA]

capital consumption allowances

capital controls

Government restrictions on the acquisition of foreign assets or foreign liabilities by domestic citizens, or the acquisition of domestic assets or domestic liabilities by foreigners. [UNODC]

capital directive

An enforceable order issued by the Office of Thrift Supervision to a savings association requiring the institution to increase its capital to minimum requirements. [OTS]

capital expenditure

Amount used during a particular period to acquire or improve long-term assets such as property, plant or equipment. [Harvey] money spent for additions or improvements to structures or equipment that are used to carry on the activities of an organization or individual. [OTS]

capital flight

The transfer of capital abroad in response to fears of political risk. [Harvey]

capital flows table

Table that expands the gross private fixed investment component of the I?O use table to show the types of equipment and structures used by industry. [BEA]

capital forbearance

The temporary permission for a bank or thrift to operate with capital levels below regulatory standards if the bank or thrift has adequate plans to restore capital. For example, banks suffering because of the energy and agricultural crisis in the mid-1980s were permitted to operate with capital levels below regulatory standards if they had adequate plans to restore capital. A joint policy statement issued in March 1986 by the FDIC, the OCC, and the Federal Reserve Board encouraged a capital forbearance program for agricultural banks. [FDIC]

capital gain

Profit made on securities, either through dividends or by selling the securities for a higher price than they originally cost. [NYSE] When a stock is sold for a profit, it's the difference between the net sales price of securities and their net cost, or original basis. If a stock is sold below cost, the difference is a capital loss. [Harvey]

capital gain or loss

The gain or loss incurred from the sale or disposition of assets including securities and real estate. [OTS]

capital gains yield

The price change portion of a stock's return. [Harvey]

capital goods

Manufactured goods that are productive industrial use. [ITDS]

capital improvement

A structure or major piece of equipment built or installed to permanently add value and capacity to property. [OTS]

capital improvement program

A written program of future capital expenditures (usually for five to ten years) and methods for financing them. The CIP is usually adopted by the governing body and updated annually. [EPA]

capital intensive

Production methods with a high quantity of capital per worker. [FACS]

capital lease

A lease obligation that has to be capitalized on the balance sheet. [Harvey]

capital loss

The difference between the net cost of a security and the net sale price, if that security is sold at a loss. [Harvey]

capital loss coverage

A form of aid in assistance transactions that provided for a payment equal to the difference between an asset's original value (book value) and the proceeds received when the asset was sold. [FDIC]

capital market

A financial market in which long-term debt obligations and equity securities are bought and sold. [OTS] Financial market (particularly the market for long-term securities). [WCSU] The market for buying and selling long term loans, in the form of bonds, mortgages, etc. [ITDS] The market for trading long-term debt instruments (those that mature in more than one year). [Harvey] The market in which corporate equity and longer-term debt securities (those maturing in more than one year) are issued and traded. [FRB][FRBC][FRBM][FRBSF]

capital market efficiency

Reflects the relative amount of wealth wasted in making transactions. An efficient capital market allows the transfer of assets with little wealth loss. [Harvey]

capital market imperfections view

The view that issuing debt is generally valuable but that the firm's optimal choice of capital structure is a dynamic process that involves the other views of capital structure (net corporate/personal tax, agency cost, bankruptcy cost, and pecking order), which result from considerations of asymmetric information, asymmetric taxes, and transaction costs. [Harvey]

capital market line

The line defined by every combination of the risk-free asset and the market portfolio. [Harvey]

capital market rates

capital outlays

Expenditures which result in the acquisition of or addition to fixed assets. Usually have a useful life of over one year and a cost greater than a threshold value established by the owner. [EPA]

capital plan

A written strategy developed by a thrift institution detailing steps to be taken to increase its capital to at least minimum requirements. [OTS]

capital projects fund

A fund created to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by proprietary funds, Special Assessment Funds, and Trust Funds). [EPA]

capital rationing

Placing one or more limits on the amount of new investment undertaken by a firm, either by using a higher cost of capital, or by setting a maximum on parts of, and/or the entirety of, the capital budget. [Harvey] Shortage of funds that forces a company to choose between projects. [WCSU]

capital stock

All shares representing ownership of a business, including preferred and common. [NYSE] The amount of stock a corporation is authorized to sell by the government authority that grants the corporate charter. Capital stock is sold by the corporation to raise funds to be used to expand or stimulate the business activities of the company. [OTS]

capital structure

Mix of different securities issued by a firm. [WCSU] The makeup of the liabilities and stockholders' equity side of the balance sheet, especially the ratio of debt to equity and the mixture of short and long maturities. [Harvey]

capital surplus

Amounts of directly contributed equity capital in excess of the par value. [Harvey]

capitalism

An economic system based on private ownership of the means of production. Under capitalism, individuals, companies or corporations invest in, own, and share in profits (or losses) of the entities that produce goods, distribute products or provide services. [OTS]

capitalist economies

Economies which use market-determined prices to guide peoples choices about the production and distribution of goods; these economies generally have productive resource which are privately owned. [FACS]

capitalization

(1) the value of authorized or outstanding shares of stock or bonds in a business firm. (2) the process of adding earned but uncollected interest to the loan balance, a practice prohibited in some states. (3) a method of estimating the present value of future income. (4) the total value of an owner's investments in a business. [OTS] Long-term debt, preferred stock plus net worth. [WCSU] The debt and/or equity mix that fund a firm's assets. [Harvey] Total amount of various securities issued by a corporation. Capitalization may include bonds, debentures, preferred and common stock, and surplus. [NYSE]

capitalization method

A method of constructing a replicating portfolio in which the manager purchases a number of the largest-capitalized names in the index stock in proportion to their capitalization. [Harvey]

capitalization rate

The ratio of net rentals from an income property to the market value of the property, expressed as a percentage. In appraising, the capitalization rate is used to judge value for investment purposes and can be compared to the rate of return on other kinds of investments. [OTS]

capitalization ratios

Also called financial leverage ratios, these ratios compare debt to total capitalization and thus reflect the extent to which a corporation is trading on its equity. Capitalization ratios can be interpreted only in the context of the stability of industry and company earnings and cash flow. [Harvey]

capitalization table

A table showing the capitalization of a firm, which typically includes the amount of capital obtained from each source - long-term debt and common equity - and the respective capitalization ratios. [Harvey]

capitalize

(1) to supply with capital. (2) to authorize the sale of a specified amount of capital stock. (3) The accounting treatment of large expenses as part of a firm's assets. Thus, rather than treating an expense as a deduction from the income statement, it is treated as an investment and is expected to generate future income. [OTS]

capitalized

Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives greater than one year. [Harvey]

capitalized interest

(A) A portion of the proceeds of a bond issue set aside, upon issuance of the bonds, to pay interest on the bonds for a specified period of time. Interest is often capitalized during the construction period of a revenue-producing project. (B)A dollar amount, set aside from the proceeds of an issue, to pay interest on the issue for a period of time (often during the construction period being financed). [EPA] Interest that is not immediately expensed, but rather is considered as an asset and is then amortized through the income statement over time. [Harvey]

capping

Effecting transactions in an instrument underlying an option shortly before the option's expiration date to depress or prevent a rise in the price of the instrument so that previously written call options will expire worthless, thus protecting premiums previously received. [CFTC]

captains protest

A document prepared by the captain of a vessel upon arrival in port that notes any unusual conditions encountered during the voyage; relieves the ship owner of liability. [ITDS]

captive insurance company

A wholly owned or controlled subsidiary company established by a non-insurance parent for the purpose of participation in the insurance risks of the parent and its other affiliates or associates. [UNODC]

capture

Converting the credit card authorization amount into a billable transaction record within a batch. Transactions cannot be captured unless previously authorized, and authorizations cannot be captured until the goods or services have been shipped or transmitted to the consumer. [GAO]

car

A loose quantity term sometimes used to describe a the amount of a commodity underlying one commodity contract; e.g., 'a car of bellies.' Derived from the fact that quantities of the product specified in a contract used to correspond closely to the capacity of a railroad car. [Harvey]

card reader replacement/hand held terminal (CRR/HHT)

Wireless devices used to report trades and quotes to the market data system. Also used for supervisory functions relating to Trading Halt, Delay, Indication, etc. [NYSE]

career-average plan

Pension plan offering a pension that depends on the employee's average compensation during his or her years of membership (a final average plan). [WCSU]

cargo

Merchandise hauled by transpiration lines. [ITDS]

cargo agent

An agent appointed by an airline shipping line to solicit and process international air and ocean freight for shipments. [ITDS]

cargo manifest

A list of a ships cargo or passengers but without a listing of charges. [ITDS]

cargo selectivity system

An ACS module which is used to sort high risk cargo from low risk cargo and to determine the type of examination required. [ITDS]

cargo tonnage

The weight of a shipment or of ships total cargo expressed in tons. [ITDS]

Caribbean Development Bank (CDB)

The CDB was established 18 October 1969 to promote economic development and cooperation. It is located in St. Michael, Barbados. [UNODC]

Caribbean Financial Action Task Force (CFATF)

endorsed the original 40 recommendations of FATF, which were amended in 1996, as well as issued the 19 Aruba Recommendations in June 1990. [UNODC]

carnet

A customs document permitting the holder to carry or send merchandise temporarily into certain foreign countries (for display, demonstration, or similar purposes) without paying duties or posting bonds. [ITDS]

carrier

A legal entity that is in the business of transporting passengers or goods for hire. [ITDS]

carriers certificate

A document issued by the shipping company which certifies the ownership of the goods to a named individual. [ITDS]

carring costs

Costs that increase with increases in the level of investment in current assets. [Harvey]

carry trade

A trade where one borrows a currency or commoidity commodity or currency with a low cost of carry and lends a similar instrument with a high cost of carry in order to profit from the differential. [CFTC]

carrying broker

An exchange member firm, usually a futures commission merchant, through whom another broker or customer elects to clear all or part of its trades. [CFTC]

carrying charges

(1) the part of the finance charge levied by most creditors to cover administrative costs of loaning money, such as billing, statement mailing costs, and bad debt losses. (2) costs incurred in order to hold title to property that is idle, non-productive, or in an interim use. (3) charges added to the price of goods or services to compensate for deferred payment. (4) fees charged by investment brokers for handling margin accounts. [OTS] Also called Cost of Carry. Cost of storing a physical commodity or holding a financial instrument over a period of time. These charges include insurance, storage, and interest on the deposited funds, as well as other incidental costs. It is a carrying charge market when there are higher futures prices for each successive contract maturity. If the carrying charge is adequate to reimburse the holder, it is called a 'full charge.' [CFTC] For physical commodities such as grains and metals, the cost of storage space, insurance, and finance charges incurred by holding a physical commodity. In interest rate futures markets, it refers to the differential between the yield on a cash instrument and the cost of funds necessary to buy the instrument. Also referred to as cost of carry or carry. [CBOT][MIDAM] The total cost of storing a physical commodity over a period of time. Includes storage charges, insurance, interest, and opportunity costs. [NYMEX]

carrying value

Book value. [Harvey]

carryover

Grain and oilseed commodities not consumed during the marketing year and remaining in storage at year's end. These stocks are 'carried over' into the next marketing year and added to the stocks produced during that crop year. [CBOT][MIDAM]

cartage agent

A ground service which provides transport and delivery of freight in areas not directly served by air or ocean. [ITDS]

cartel

A collection of independent producers formed to regulate production, pricing, and marketing of members to maximize market power and limit competition. [ITDS]

cascade

A situation in which the execution of market orders or stop loss orders on an electronic trading system triggers other stop loss orders which may, in turn, trigger still more stop loss orders. This may lead to a very large price move if there are no safety mechanisms to prevent cascading. [CFTC]

cash

(1) coins or negotiable paper issued by governments as well as the balance in demand deposit accounts. For accounting purposes, cash includes money in the cash drawer, the vault, petty cash and checking account deposits in thrift institutions or banks. (2) the process of presenting a check for payment: literally of converting a check to cash. [OTS] An asset account reflecting currency, coin, checks, postal and express money orders, and bankers' drafts on hand or on deposit with an official or agent designated as custodian of cash and bank deposits. All cash must be accounted for as a part of the fund to which it belongs. Any restrictions or limitations as to its availability must be indicated in the records and statements. It is not necessary, however, to have a separate bank account for each fund unless required by law. [EPA] The value of assets that can be converted into cash immediately, as reported by a company. Usually includes bank accounts and marketable securities, such as government bonds and Banker's Acceptances. Cash equivalents on balance sheets include securities (e.g., notes) that mature within 90 days. [Harvey]

cash account

A type of account with a broker-dealer in which the customer agrees to pay the full amount due for the purchase of securities within a short period of time, usually three business days. [SEC]

cash and carry

Purchase of a security and the multaneous sale of a future, with balance being financed with loan or repo. [Harvey][WCSU]

cash and equivalents

The value of assets that can be converted into cash immediately, as reported by a company. Usually includes bank accounts and marketable securities, such as government bonds and Banker's Acceptances. Cash equivalents on balance sheets include securities (e.g., notes) that mature within 90 days. [Harvey]

cash basis

A basis of accounting under which transactions are recognized only when cash changes hands. [EPA]

cash basis accounting

A method of accounting in which income and expense items are recorded and recognized when cash is received or disbursed. Opposite of accrual basis accounting. [OTS]

cash budget

A forecasted summary of a firm's expected cash inflows and cash outflows as well as its expected cash and loan balances. [Harvey] Forecast of sources and uses cash. [WCSU]

cash commodity

An actual physical commodity someone is buying or selling, e.g., soybeans, corn, gold, silver, Treasury bonds, etc. Also referred to as actuals. [CBOT][MIDAM] The actual physical commodity, as distinguished from a futures contract. [Harvey] The actual, physical commodity. Sometimes called a Spot Commodity or Actuals. [NYMEX] The physical or actual commodity as distinguished from the futures contract, sometimes called spot commodity or actuals. [CFTC]

cash concentration and disbursement (CCD)

A format for ACH payments. [ACH]

cash contract

A sales agreement for either immediate or future delivery of the actual product. [CBOT][MIDAM]

cash conversion cycle

The length of time between a firm's purchase of inventory and the receipt of cash from accounts receivable. [Harvey]

cash cow

A company that pays out all earnings per share to stockholders as dividends. Or, a company or division of a company that generates a steady and significant amount of free cash flow. [Harvey]

cash cycle

In general, the time between cash disbursement and cash collection. In net working capital management, it can be thought of as the operating cycle less the accounts payable payment period. [Harvey]

cash deficiency agreement

An agreement to invest cash in a project to the extent required to cover any cash deficiency the project may experience. [Harvey]

cash delivery

The provision of some futures contracts that requires not delivery of underlying assets but settlement according to the cash value of the asset. [Harvey]

cash discount

An incentive offered to purchasers of a firm's product for payment within a specified time period, such as ten days. [Harvey]

cash dividend

A dividend paid in cash to a company's shareholders. The amount is normally based on profitability and is taxable as income. A cash distribution may include capital gains and return of capital in addition to the dividend. [Harvey]

cash equivalents

A short-term security that is sufficiently liquid that it may be considered the financial equivalent of cash. [Harvey] Short-term investments, like U.S. treasury securities, certificates of deposit, and money market fund shares, which can be readily converted into cash. [UNODC]

cash flow

In investments, it represents earnings before depreciation, amortization and non-cash charges. Sometimes called cash earnings. Cash flow from operations (called funds from operations) by real estate and other investment trusts is important because it indicates the ability to pay dividends. [Harvey] Reported net income of a corporation plus amounts charged for depreciation, depletion, amortization, extraordinary charges to reserves, which are bookkeeping deductions and not paid out in actual dollars and cents. [NYSE] The amount of cash earned after paying all expenses and taxes. Cash flow is calculated by adding: net after-tax income plus any bookkeeping expenses that result in items being deducted but not paid out in cash. Such bookkeeping entries include amounts charged off for depreciation, depletion, amortization, and charges to reserves. Cash flow is a measure of a company's worth and its ability to pay dividends on its stock. [OTS]

cash flow after interest and taxes

Net income plus depreciation. [Harvey]

cash flow coverage ratio

The number of times that financial obligations (for interest, principal payments, preferred stock dividends, and rental payments) are covered by earnings before interest, taxes, rental payments, and depreciation. [Harvey]

cash flow forecasting

The process of identifying and/or estimating all known future cash receipts and obligations, and calculating cash balances for each future date in order to cover shortfalls and invest surpluses. [TMAC]

cash flow from operations

A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus non-cash expenses that were deducted in calculating net income. [Harvey]

cash flow matching

Also called dedicating a portfolio, this is an alternative to multiperiod immunization in which the manager matches the maturity of each element in the liability stream, working backward from the last liability to assure all required cash flows. [Harvey]

cash flow per common share

Cash flow from operations minus preferred stock dividends, divided by the number of common shares outstanding. [Harvey]

cash flow time-line

Line depicting the operating activities and cash flows for a firm over a particular period. [Harvey]

cash forward sale

cash investment

The underlying security for which futures are traded. [OTS]

cash letter

A cash letter is a group of checks, accompanied by a listing of the checks, which is sent to a clearing house, a correspondent bank, or the Federal Reserve for collection. [GAO]

cash letter of credit

A letter addressed from one bank to a correspondent bank making available to the party named in the letter a fixed sum of money up to a future specific date. The sum indicated in the letter is equal to an amount deposited in the issuing bank by the party before the letter is issued. [FDIC]

cash management bill (CMB)

Very short maturity bills that the Treasury occasionally sells because its cash balances are down and it needs money for a few days. [Harvey] Very-short-maturity bills that the Treasury sells on an irregular basis to bridge low points in the Treasury's cash balance. [FRBSF]

cash market

A market in which the delivery of commodities or securities occurs immediately after the sale. Also called a spot market. [OTS] A place where people buy and sell the actual commodities, i.e., grain elevator, bank, etc. [CBOT][MIDAM] Also called spot markets, these are markets that involve the immediate delivery of a security or instrument. [Harvey] The market for a cash commodity where the actual physical product is traded. [NYMEX] The market for the cash commodity (as contrasted to a futures contract) taking the form of: (1) an organized, self-regulated central market (e.g., a commodity exchange); (2) a decentralized over-the-counter market; or (3) a local organization, such as a grain elevator or meat processor, which provides a market for a small region. [CFTC]

cash method of accounting

A system, used especially in computing income tax, in which income is not credited until it is actually or constructively received and expenses are not charged until they have been paid; to be distinguished from the accrual method, in which income is credited when the legal right to the income occurs and expenses are charged when the legal liability becomes enforceable. [FRBSF]

cash offer

A public equity issue that is sold to all interested investors. [Harvey]

cash price

The price in the marketplace for actual cash or spot commodities to be delivered via customary market channels. [CFTC]

cash ratio

The proportion of a firm's assets held as cash. [Harvey]

cash sale

A transaction on the floor of the Stock Exchange that calls for delivery of the securities the same day. In 'regular way' trades, the seller is to deliver on the third business day, except for bonds, which are the next day. [NYSE]

cash settlement

A method of settling futures options and other derivatives whereby the seller (or short) pays the buyer (or long) the cash value of the underlying commodity or a cash amount based on the level of an index or price according to a procedure specified in the contract. Also called Financial Settlement. Compare to Physical Delivery. [CFTC] A way of settling some futures and options contracts. The seller pays the buyer the cash value of the underlying interest. [TMAC] Transactions generally involving index-based futures contracts that are settled in cash based on the actual value of the index on the last trading day, in contrast to those that specify the delivery of a commodity or financial instrument. [CBOT][MIDAM]

cash settlement contracts

Futures contracts, such as stock index futures, that settle for cash, not involving the delivery of the underlying. [Harvey]

cash transaction

A transaction where exchange is immediate, as contrasted to a forward contract, which calls for future delivery of an asset at an agreed-upon price. [Harvey]

cash-deficiency arrangement

Arrangement whereby a project's shareholders agree to provide the operating company with sufficient net working capital. [WCSU]

cash-equivalent items

Temporary investments of currently excess cash in short-term, high-quality investment media such as treasury bills and Banker's Acceptances. [Harvey]

cash-flow break-even point

The point below which the firm will need either to obtain additional financing or to liquidate some of its assets to meet its fixed costs. [Harvey]

cash-out merger

A merger in which the acquiring company buys the stock of the target company for cash, in effect cashing out the stock of the company being absorbed. This is a variation of a traditional merger in which shareholders of the target company trade in their stock for stock in the acquiring company. By paying cash, the acquiring company reduces its capital by the amount of the cash-out, but gains the assets of the target company. In a cash-out merger, shareholders of the target company have no interest in the company that results from the merger. [OTS]

cash-surrender value

An amount the insurance company will pay if the policyholder ends a whole life insurance policy. [Harvey]

cashier's check

A check written by a bank or thrift institution on its own funds and signed by a cashier. It is payable to a third party named by the customer who pays for the check at the time it is written. A cashier's check, which is drawn against the funds of the institution itself, differs from a certified check, which is drawn against the funds in a specific depositor's account. [OTS]

cashout

Refers to a situation where a firm runs out of cash and cannot readily sell marketable securities. [Harvey]

casinghead gas

Gas present in an oil well that is removed when it flows to the surface at the well's casing. [NYMEX]

casus major

A major casualty that is usually accidental, such as flood or shipwreck. [ITDS]

cat

A U.S. Treasury bond reissued by Solomon Brothers as a series of zero-coupon bonds. [WCSU]

category groups

Groupings of controlled products. [ITDS]

cathode

A flat rectangular piece of metal which has been refined by electrolysis. Copper is commonly traded and delivered in this form. [NYMEX]

caveat

Latin for 'let him beware.' In real estate transactions, it is a formal warning against the performance of specified acts. [OTS]

caveat emptor

Latin for 'let the buyer beware.' It refers to the sale of something of value, without a warranty from the seller. The buyer takes all risk of any loss in case of defects in the item sold. [OTS] The purchaser buys at his own risk. [ITDS]

caveat subscriptor (or caveat venditor)

Latin for 'let the seller beware.' It refers to the sale of something of value in which the seller does not disclaim responsibility prior to the sale. In this situation, the seller assumes liability to the buyer for any deviations from the specifications stated in the written sales contract. [OTS]

cease-and-desist order

A formal demand from the Office of Thrift Supervision, other government agency, or court, to a person or institution ordering an immediate halt to a specified activity. An OTS cease and desist order is a formal enforcement action. If the respondent does not challenge the issuance of the order, it is called a consent cease and desist order. [OTS] An order issued after notice and opportunity for hearing, requiring a depository institution, a holding company, or a depository institution official to terminate unlawful, unsafe, or unsound banking practices. Cease-and-desist orders are issued by the appropriate federal regulatory agencies under the Financial Institutions Supervisory Act and can be enforced directly by the courts. [FRB][FRBC][FRBM][FRBSF]

CEDEL

A centralized clearing system for eurobonds. Also Euroclear. [WCSU]

cell

The on board storage space for one shipping container on a ship. [ITDS]

census interface

An ACS module that captures US Bureau of Census data. [ITDS]

cent

The United States coin with the lowest value. It is equal to one one-hundredth of a dollar ($0.01). [OTS]

centare

A metric unit that equals one square meter, or 10.75 square feet. An are has 100 centares, and 100 ares equal one hectare. Also spelled centiare. [OTS]

Center for Latin American Monetary Studies (CEMLA)

Founded in September 1952 as a school to train Latin American central bank personnel. Aims are to increase understanding of monetary, central banking and bank supervision questions in Latin America, particularly with regard to financial policies; undertake research and synthesize the experience acquired in these fields; and to help in training personnel of central banks and other financial institutions [UNODC]

central american common market

An economic union composed of Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua. [FDIC]

central bank

An institution with the sole right to issue bank notes and power to dictate the monetary policy for a currency zone. [ITDS] Principal monetary authority of a nation, which performs several key functions, including issuing currency and regulating the supply of credit in the economy. The Federal Reserve is the central bank of the United States. [FRB][FRBC] The principal monetary authority of a nation, a central bank performs several key functions, including issuing currency and regulating the supply of credit in the economy. The Federal Reserve is the central bank of the United States. [FRB][FRBM][FRBSF]

central bank intervention

Direct action by a central bank to increase or decrease the supply of its currency to stabilize prices in the spot or forward market or move them in a desired direction. On occasion the announcement of an intention to intervene night achieve the desired results. [FDIC] In order to influence market conditions or exchange rate movements, central banks buy or sell their currency or the currency of other countries. [FRB][FRBM] Influence on exchange rates in the foreign exchange market when exchange rates are not fixed by law; i.e., a central bank buys its countrys currency with foreign currencies to drive its currency up in value; to drive it down, a central bank sells its currencies in return for foreign currencies. [FACS] The buying or selling of currency, foreign or domestic, by central banks, in order to influence market conditions or exchange rate movements. [FRBSF]

central information file (CIF)

A master file maintained by the ACH containing information on each depository financial institution. This file includes the depository financial institution's name, transit routing number, address, settlement and delivery information and output medium requested. [ACH]

Central Registration Depository (CRD)

Provides information on securities sales representatives and supervisory personnel. This data base is compiled from application forms, Exchange developed examinations, reported enforcement actions, and related information. The NASD owns the CRD system and its facilities, operating them on behalf of the NYSE, state regulators, and other users. [NYSE]

central standard time (CST)

certainty equivalent

An amount that would be accepted in lieu of a chance at a possible higher, but uncertain, amount. [Harvey]

certificate

(1) a piece of paper that is evidence of ownership. A stock certificate is evidence of ownership of one or more shares of a corporation. A savings certificate is evidence that the holder owns a savings account, usually one in which a fixed amount of funds is deposited for a specified term. (2) a form of paper money. It is a receipt for silver or gold held by the government. U.S. silver certificates are the best known. The privilege to redeem the paper certificate for the gold or silver backing it was revoked by Congress on June 14, 1968. (3) any written or printed document that can be used as proof of a fact. [OTS] The actual piece of paper that is evidence of ownership of stock in a corporation. Watermarked paper is finely engraved with delicate etchings to discourage forgery. [NYSE]

certificate account

A savings account in which the depositor is issued a certificate of deposit that states the amount of funds deposited, the rate of interest to be paid, and the minimum length of time the certificate must be held in order to collect that interest. Certificate accounts generally pay higher interest than regular passbook or statement accounts. The customer is charged a penalty for premature withdrawal of the funds originally deposited. [OTS]

certificate of claim

A written agreement to reimburse a lender for certain costs incurred in the event of a foreclosure, contingent on proceeds from the sale of the foreclosed property being sufficient to cover these costs. [OTS]

certificate of completion

A document issued by an architect or engineer stating that a construction project has been completed in accordance with approved terms, conditions, plans and specifications. [OTS]

certificate of conformance in financial reporting program

A voluntary program administered by MFOA to encourage governments to publish efficiently organized and easily readable CAFRs and to provide peer recognition and technical assistance to the finance officers preparing them. [EPA]

certificate of deposit (CD)

A certificate providing evidence of a bank time deposit. [WCSU] A form of time deposit at a bank or savings institution which cannot be withdrawn before a specified maturity date without being subject to an interest penalty for early withdrawal. Small-denomination CDs are often purchased by individuals. Large CDs of $100,000 or more are often in negotiable form, meaning they can be sold or transferred among holders before maturity. [FRBSF] A form of time deposit at a bank or savings institution; a time deposit cannot be withdrawn before a specified maturity date without being subject to an interest penalty for early withdrawal. Small-denomination CDs are often purchased by individuals. Large CDs of $100,000 or more are often in negotiable form, meaning they can be sold or transferred among holders before maturity. [FRB][FRBC][FRBM] A negotiable instrument issued by a bank and payable to the bearer. CDs pay a stated amount of interest and mature on a stated date, but may be bought and sold daily in a secondary market. [UNODC] A time deposit with a specific maturity evidenced by a certificate. [CBOT][MIDAM] Also called a time deposit, this is a certificate issued by a bank or thrift that indicates a specified sum of money has been deposited. A CD bears a maturity date and a specified interest rate, and can be issued in any denomination. The duration can be up to five years. [Harvey] An agreement with a bank that you will leave your money on deposit for a specified period of time in return for a specific amount of interest. [NYSE] The certificate issued to a depositor who opens a certificate account. The certificate is the written document issued by the financial institution as evidence of a deposit. It includes the issuer's promise to return the deposit at a specified future date plus earnings at a specified rate of interest. [OTS]

certificate of inspection

A certificate issued by an independent third party verifying the condition of cargo (or of other property). [ITDS]

certificate of occupancy

A written authorization given by a local government that allows a newly completed or substantially completed structure to be inhabited. [OTS]

certificate of origin

A document issued by the exporter certifying the place of origin of the merchandise to be exported. The information contained in this document is needed primarily to comply with tariff laws that may extend more favorable treatment to products of certain countries. [FDIC]

certificate of title

A document showing ownership, usually of real property, an automobile, or recreational vehicle, giving a description of the thing owned and any liens against the property. [OTS]

certificate of weight

A document stating the weight of a shipment. [ITDS]

certificated or certified stocks

Stocks of a commodity that have been inspected and found to be of a quality deliverable against futures contracts, stored at the delivery points designated as regular or acceptable for delivery by an exchange. In grain, called 'stocks in deliverable position.' [CFTC]

certification

Official proof of authenticity. [ITDS]

certification authority digital signature (CADS)

relying party uses certificate manufactored by a certification authority to obtain the public key for digital signature authentication [misc]

certified check

A check drawn on funds in a depositor's account that have been set aside to pay the check on demand. The face of the check bears the words 'certified,' or 'accepted,' and is signed by an official of the bank or thrift institution issuing the check to signify that (1) the signature of the drawer is genuine and that (2) sufficient funds are on deposit and earmarked for payment of the check. [OTS]

certified public accountant (CPA)

A designation given to accountants who have passed a qualifying examination and met certain educational and public accounting experience requirements established by a state licensing authority. [OTS]

certified thrift regulator (CTR)

The designation given an examiner, supervisor or other employee of the Office of Thrift Supervision who has completed education and experience requirements. [OTS]

cession of goods

A surrender of goods. [ITDS]

cetane number

A measure of the ignitability of diesel fuel. Diesel fuel generally has to meet a cetane number specification of 40. As a measure of performance, the cetane number serves a similar purpose as does the octane number of gasoline. [NYMEX]

CFTC Form 40

The form used by large traders to report their futures and option positions and the purposes of those positions. [CFTC]

chain

A measure of length equal to 66 feet. [OTS]

chain of title

The history of all the documents that have transferred title to a parcel of real property starting with the earliest existing document and ending with the most recent. [OTS]

change

money returned from the seller to the buyer when the buyer gives a sum of money greater than the purchase price. The change is the difference between the selling price plus taxes, fees or other charges, and the greater amount of money tendered by the buyer. [OTS]

change in demand

A shift in the entire demand curve so that at any given price, people will want to buy a different amount. A change in demand is caused by some change other than a change in the goods price. [FACS]

change in quantity demanded

Movement up or down a given demand curve caused by a change in the goods price with no shift in the curve itself. [FACS]

change in quantity supplied

A price change causing movement along the supply curve but no shift in the position of the curve itself. [FACS]

change in supply

A change in one of the cost determinants of supply causing a shift in the position of the supply curve. [FACS]

change order

A change in the original construction plans ordered by the owner or the general contractor. [OTS]

changer

Formerly, a clearing member of both the Mid-America Commodity Exchange (MidAm) and another futures exchange who, for a fee, would assume the opposite side of a transaction on MidAm by taking a spread position between MidAm and the other futures exchange that traded an identical, but larger, contract. Through this service, the changer provided liquidity for MidAm and an economical mechanism for arbitrage between the two markets. MidAm was a subsidiary of the Chicago Board of Trade (CBOT). MidAm was closed by the CBOT in 2003 after MidAm contracts were delisted on MidAm and relisted on the CBOT as Mini contracts. The CBOT continued to use changers for former MidAm contracts traded on an open outcry platform. [CFTC]

changes in financial position

Sources of funds internally provided from operations that alter a company's cash flow position: depreciation, deferred taxes, other sources, and capital expenditures. [Harvey]

characteristic line

The market model applied to a single security. The slope of the line is a security's beta. [Harvey]

charge

(1) a cost or expense. (2) to purchase on credit. (3) a judge's instruction to a jury. [OTS]

charge account

A line of credit that may be used repeatedly up to a stated limit of credit. [OTS]

charge-off

A book value amount that was expensed as a loss before receivership and that continues to be a legal obligation of the borrower to the institution. A charge-off is technically an off-book memorandum accounting item that represents the book value of an asset that the bank or thrift previously wrote off. [FDIC]

chargeable weight

The weight of a shipment used in determining freight charges. [ITDS]

chargeback

A credit card purchase disputed by the credit cardholder and the amount of the transaction is subsequently 'charged back' to the merchant. [misc]

charitable lead trust

A trust established for the benefit of a charitable organization under which the settlor receives income from an asset for a set number of years or for the life of the settlor. Upon termination of the trust, the asset reverts to the settlor or designated heirs. This type of trust reduces estate taxes and permits heirs to retain control of the assets in the trust. [UNODC]

charitable remainder trust

A trust established for the benefit of a charitable organization under which the charitable organization receives income from an asset for a set number of years or for the settlor's lifetime. Upon termination of the trust, assets revert to the settlor or designated heirs. [UNODC]

charter

The legal authorization to conduct business granted by the federal or state government to a thrift institution or other business or organization. [OTS]

charter party

A contract, expressed in writing on a special form, between the owner of a vessel and the one (the charterer) desiring to employ the vessel setting forth the terms of the arrangement such as freight rate and ports involved in the trip contemplated. [FDIC]

charter service

Temporary hiring of an aircraft for the transportation of cargo or passengers. [ITDS]

chartered ship

A ship leased by its owner for a stated time, voyage, or voyages. [ITDS]

chartering authority

A state or federal agency that grants charters to new depository institutions. For state chartered institutions, the chartering authority is usually the state banking department; for national banks, it is the OCC; and for federal savings institutions, it is the OTS. [FDIC]

charting

The use of charts to analyze market behavior and anticipate future price movements. Those who use charting as a trading method plot such factors as high, low, and settlement prices; average price movements; volume; and open interest. Two basic price charts are bar charts and point-and-figure charts. [CBOT][MIDAM] The use of graphs and charts in the analysis of market behavior, so as to plot trends of price movements, average movements of price, volume, and open interest, in the hope that such graphs and charts will help one to anticipate and profit from price trends. Contrasts with Fundamental Analysis. [NYMEX] The use of graphs and charts in the technical analysis of futures markets to plot trends of price movements, average movements of price, volume of trading, and open interest. [CFTC]

chartist

Technical trader who reacts to signals derived from graphs of price movements. [CFTC]

chassis

A special trailer or undercarriage on which containers are moved over the road. [ITDS]

chattel

personal property. All property that is not real property (owned real estate). [OTS]

chattel mortgage

A loan secured by personal property rather than real estate. [OTS]

cheap

Colloquialism implying that a commodity is underpriced. [CBOT][MIDAM]

cheapest-to-deliver

A method to determine which particular cash debt instrument is most profitable to deliver against a futures contract. [CBOT][MIDAM] Usually refers to the selection of a class of bonds or notes deliverable against an expiring bond or note futures contract. The bond or note that has the highest implied repo rate is considered cheapest to deliver. [CFTC]

cheapest-to-deliver issue

The acceptable Treasury security with the highest implied repo rate; the rate that a seller of a futures contract can earn by buying an issue and then delivering it at the settlement date. [Harvey]

check

A check is a written order from one party (the payor) to another party (the payee) requiring the payor to pay a specified sum on demand to the payee or to a third party specified by the payee. [GAO] A written order instructing a thrift institution or bank to pay immediately on demand a specified amount of money from the check writer's account to the person named on the check or, if a specific person is not named, to whoever bears the check to the institution for payment. [OTS]

check clearing

Check clearing is the movement of a check from the depository institution at which it was deposited back to the institution on which it was written. The funds move in the opposite direction, with a corresponding credit and debit to the involved accounts. [GAO] The movement of checks from the banks or other depository institutions where they are deposited back to those on which they are written, and funds movement in the opposite direction. This process results in credits to the accounts at the institutions of deposit and corresponding debits to the accounts at the paying institutions. The Federal Reserve participates in check clearing through its nationwide facilities, though many checks are cleared by private sector arrangement. [FRB][FRBC][FRBM][FRBSF]

check credit

A line of credit that customers can access by writing a check, up to a preapproved loan limit. Also called overdraft protection. [OTS]

check fraud

check kiting

Occurs when a depositor with accounts at two or more banks draws checks against the uncollected balance at one bank to take advantage of the float-that is, the time required for the bank of deposit to collect from the paying bank; and the depositor initiates the transaction with the knowledge that sufficient collected funds will not be available to support the amount of the checks drawn on all of the accounts. [UNODC]

check truncation

Check truncation is the practice of holding a paper check at the bank at which it was deposited (or at an intermediary bank) and electronically forwarding the essential information on the check to the bank on which it was written. A truncated check is not returned to the writer. [GAO]

checking account

A demand deposit account, withdrawals from which may be made by a written, negotiable instrument. [OTS]

cherry-pick

The tendency of an asset manager to dispose of the assets in a portfolio that are relatively easy to sell before disposing of the hard-to-sell assets; a P&A variation in which no loans are transferred as of closing but the acquiring institution has an option to acquire loans from the FDIC for a designated time period. [FDIC]

Chicago Board of Trade (CBOT) (CBT)

Chicago Board Options Exchange (CBOE)

Chicago Clearing House Association (CCH)

CCH provides check exchange services to its 8 member banks and its 260 affiliate members. [GAO]

Chicago Mercantile Exchange (CME)

A not-for-profit corporation owned by its members. Its primary functions are to provide a location for trading futures and options, collect and disseminate market information, maintain a clearing mechanism and enforce trading rules. [Harvey]

Chicago Stock Exchange (CHX)

chinese wall

Communication barrier between financiers (investment bankers) and traders. This barrier is erected to prevent the sharing of inside information that bankers are likely to have. [Harvey]

choice

The act of selecting among alternatives, a concept crucial to economics. [FACS]

chooser option

An exotic option that is transacted in the present, but that at some specified future date is chosen to be either a put or a call option. [CFTC]

chunking

When a third party convinces an uninformed borrower to invest in a property (or properties), with no money down and with the third party acting as the borrower’s agent. The third party is also typically the owner of the property or part of a larger group organizing the scheme. Without the borrower’s knowledge, the third party submits loan applications to multiple financial institutions for various properties. The third party retains the loan proceeds, leaving the borrower with multiple loans that cannot be repaid. The financial institutions are forced to foreclose on the properties. [FFIEC]

churning

Excessive trading of a client's \ account in order to increase the broker's commissions. [Harvey] Excessive trading of a discretionary account by a person with control over the account for the purpose of generating commissions while disregarding the interests of the customer. [CFTC] slang for excessive trading in a customer's account by a broke. [OTS]

Cincinnati Stock Exchange (CSE)

circle

Underwriters, actual or potential, often seek out and 'circle' investor interest in a new issue before final pricing. The customer circled basically made a commitment to purchase the issue if it comes at an agreed-upon price. In the latter case, if the price is other than that stipulated, the customer supposedly has first offer at the actual price. [Harvey]

circuit breakers

A state income tax credit for property taxes paid by elderly or low-income persons. [OTS] A system of coordinated trading halts and/or price limits on equity markets and equity derivative markets designed to provide a cooling-off period during large, intraday market declines. The first known use of the term circuit breaker in this context was in the Report of the Presidential Task Force on Market Mechanisms (January 1988), which recommended that circuit breakers be adopted following the market break of October 1987. [CFTC]

circus swap

A fixed rate currency swap against floating U.S. dollar LIBOR payments. [Harvey]

city gate

Generally refers to the location at which gas changes ownership or transportation responsibility from a pipeline to a local distribution company or gas utility. [NYMEX]

city terminal service

A service provided by some airlines that involves transporting cargo to in town terminals at lower rates than charged for door to door delivery. [ITDS]

civil law

The code regulating conduct between private persons. It is to be distinguished from criminal law, which regulates individual conduct and is enforced by the government. Under civil law, the government provides the forum for the settlement of disputes between private parties in such matters as contracts, domestic relations, business relations and auto accidents. In a civil suit the government may be either the plaintiff or defendant. In a criminal case the government is always the prosecution. [UNODC]

civilian labor force

All persons over the age of sixteen who are not in the armed forces nor institutionalized and who are either employed or unemployed. [FACS]

claim

A demand of payment of money or property. [ITDS] An assertion of the indebtedness of a failed institution to a depositor, general creditor, subordinated debt holder, or shareholder. [FDIC]

claim dilution

A reduction in the likelihood one or more of the firm's claimants will be fully repaid, including time value of money considerations. [Harvey]

claimant

A party to an explicit or implicit contract. [Harvey]

class of options

A class of options consists of options that are of the same type and style and cover the same underlying asset. [GAO] All call options, or all put options, exercisable for the same underlying futures contract and which expire on the same expiration date. [NYMEX]

class of service

A utility's sales categories such as residential, commercial, industrial, other, and sales for resale. [NYMEX]

classification

The categorization of merchandise. [ITDS]

classification of assets

The process of identifying a loan that is not being repaid on schedule and designating it as one of three types of troubled loans: substandard, doubtful or loss. An asset classified substandard has at least one well-defined weakness such as being under capitalized, or not protected by the paying capacity of the borrower or the worth of the pledged collateral. A doubtful classification means an asset that has all of the weaknesses of a doubtful asset plus other characteristics that make collection or liquidation highly questionable and improbable, but still possible. As asset classified loss is considered uncollectible and of such little value that its continuance as an asset on the books of a thrift institution is not warranted. Designating an asset to one of these categories is called classifying an asset. [OTS]

classified assets

An asset that is designated as substandard, doubtful, or subject to loss. An asset becomes classified when it is so designated by the appropriate regulatory agency. [FDIC] assets, generally loans, for which payments are not being made on time. Such assets are classified as substandard, doubtful or loss. [OTS]

classified loan

A loan that is not being repaid on time and has been designated a troubled asset. [OTS]

claused bill of lading

A notation on the bill of lading which denotes a deficient condition of the goods or packaging. [ITDS]

clean bank P&A

A purchase and assumption transaction in which the acquiring institution assumes the deposit liabilities and the cash and cash equivalent assets of the failed institution. In addition, the assuming bank purchases the 'good' loans of the failed institution or receives an exclusive call option to purchase designated fixed assets and assume certain contracts of the failed institution. [FDIC]

clean bill of lading

A bill of lading received by the carrier for goods delivered in 'apparent good order and condition. [ITDS]

clean cargo

Refined products such as kerosene, gasoline, home heating oil, jet fuel carried by tankers, barges and tank cars. All refined products except bunker fuels, residual fuel oil, asphalt and coke. [NYMEX]

clean draft

A sight or time draft to which no other documents such as shipping documents, bills of lading, or insurances certificates eve attached. [FDIC]

clean opinion

An auditor's opinion reflecting an unqualified acceptance of a company's financial statements. [Harvey]

clean price

Bond price excluding accrued interest. [Harvey]

clear

The process by which a clearinghouse maintains records of all trades and settles margin flow on a daily mark-to-market basis for its clearing member. [CBOT]

clear a position

To eliminate a long or short position, leaving no ownership or obligation. [Harvey]

clear title

title to property that is marketable by virtue of its title being free from demands or claims by other parties and not encumbered in any other manner. [OTS]

clearance

Clearance is the process of transmitting, reconciling, and in some cases, confirming payment orders or security transfer instructions prior to settlement, possibly including the netting of instructions and the establishment of final positions for settlement. In the context of securities markets, this process is often referred to as clearance. [GAO] The completion of customs entry requirements which results in the release of goods to the importer. [ITDS]

clearing

The procedure through which the clearing organization becomes the buyer to each seller of a futures contract or other derivative, and the seller to each buyer for clearing members. [CFTC]

clearing account

A bank account used by a mortgage servicing company for the temporary, short-term deposit of mortgage payments that have been collected and are either awaiting transmittal to investors who bought the mortgages or awaiting deposit in escrow accounts. [OTS]

clearing agent bank

Clearing agent banks are Fedwire participants that are regularly engaged in the business of providing clearing services in eligible securities for members and GSCC. [GAO]

clearing association

clearing corporation

clearing house

(1) an agency operated by financial organizations to exchange and pay checks drawn on each other. (2) an organization connected with a commodity exchange through which all futures contracts are reconciled, settled, guaranteed, and later either offset or fulfilled through delivery of the commodity, and through which financial settlements are made. [OTS] A clearing house is a voluntary association of depository institutions that facilitates the exchange of payment transactions such as checks, automated clearinghouse transactions, and large-value funds transfers and the settlement of participants' net debit or credit positions. [GAO] An adjunct to a futures exchange through which transactions executed its floor are settled by a process of matching purchases and sales. A clearing organization is also charged with the proper conduct of delivery procedures and the adequate financing of the entire operation. [Harvey] An agency or separate corporation of a futures exchange that is responsible for settling trading accounts, clearing trades, collecting and maintaining margin monies, regulating delivery, and reporting trading data. Clearinghouses act as third parties to all futures and options contracts; acting as a buyer to every clearing member seller and a seller to every clearing member buyer. [CBOT][MIDAM] An exchange-associated body charged with the function of insuring the financial integrity of each trade. Orders are 'cleared' by means of the clearinghouse acting as the buyer to all sellers and the seller to all buyers. [NYMEX] An institution where mutual claims are settled between accounts of member depository institutions. Clearinghouses among banks have traditionally been organized for check-clearing purposes, but more recently have cleared other types of settlements, including electronic fund transfers. [FRB][FRBC][FRBM][FRBSF]

Clearing House Automated Payments System

A computerized clearing system for sterling funds that began operations in 1984. It includes 14 member banks, nearly 450 participating banks, and is one of the clearing companies within the structure of the Association for Payment Clearing Services (APACS). [Harvey]

Clearing House Electronic Check Clearing System (CHECCS)

clearing house funds

Funds used in settlement of a transaction available for use after one business day. [FDIC]

Clearing House Interbank Payment System (CHIPS)

An automated clearing system used primarily for international payments. This system is owned and operated by the New York Clearinghouse banks and engages Fedwire for settlement. [FRB][FRBC][FRBM][FRBSF] An international wire transfer system for high-value payments operated by a group of major banks. [Harvey] CHIPS is a private-sector electronic funds transfer system run by the New York Clearing House Association (NYCHA) [GAO]

clearing margin

Financial safeguards to ensure that clearing members (usually companies or corporations) perform on their customers' open futures and options contracts. Clearing margins are distinct from customer margins that individual buyers and sellers of futures and options contracts are required to deposit with brokers. [CBOT][MIDAM]

clearing members

A member firm of a clearing house. Each clearing member must also be a member of the exchange. Not all members of the exchange, however, are members of the clearing organization. All trades of a non-clearing member must be registered with, and eventually settled through, a clearing member. [Harvey] A member of a clearing organization. All trades of a non-clearing member must be processed and eventually settled through a clearing member. [CFTC] A member of a commodity exchange who is also a member of the exchange's clearing house. [OTS] A member of an exchange clearinghouse. Memberships in clearing organizations are usually held by companies. Clearing members are responsible for the financial commitments of customers that clear through their firm. [CBOT][MIDAM] Clearing Members of the New York Mercantile Exchange accept responsibility for all trades cleared through them, and share secondary responsibility for the liquidity of the Exchange's clearing operation. They earn commissions for clearing their customers' trades, and enjoy special margin privileges. Original margin requirements for Clearing Members are lower than for customers, and Clearing Members may use letters of credit posted with the clearinghouse as original margin for customer accounts as well as for their own trades. Clearing Members must meet a minimum capital requirement. [NYMEX] Clearing members are firms that are determined by OCC to be qualified to interact with OCC on behalf of market participants. [GAO]

clearing organization

An entity through which futures and other derivative transactions are cleared and settled. It is also charged with assuring the proper conduct of each contract's delivery procedures and the adequate financing of trading. A clearing organization may be a division of a particular exchange, an adjunct or affiliate thereof, or a freestanding entity. Also called a clearing house, multilateral clearing organization, centralized counterparty, or clearing association. [CFTC]

clearing price

clientele effect

The grouping of investors who have a preference that the firm follow a particular financing policy, such as the amount of leverage it uses. [Harvey]

Clifford trust

A fixed-term, irrevocable trust account usually opened as a means of reducing the income taxes of the grantor (the person who opens the account and deposits funds in the account). The trust must last for a minimum of 10 years. During that time, income from the account is paid to a named beneficiary, and thus is not taxable to the grantor. At the end of the term of the trust, the principal, or property placed in trust, reverts to the grantor. [OTS]

close

The exchange-designated period at the end of the trading session during which all transactions are considered made 'at the close.' [CFTC]

close, the

The period at the end of the trading session. Sometimes used to refer to closing price. [Harvey]

closed period

The period of time during the term of a mortgage loan when the loan cannot be prepaid. [OTS]

closed-end credit

A type of credit arrangement in which the lender, at the time credit is first extended, limits the amount of credit to a specific amount, determines the length of time for repayment and determines the amount of each periodic payment. Most real estate and automobile loans are closed-end agreements. [OTS] An agreement in which advanced credit, plus any finance charges, are expected to be repaid in full over a definite time. Most real estate and automobile loans are closed-end agreements. [FRBSF] Generally, any loan or credit sale agreement in which the amounts advanced, plus any finance charges, are expected to be repaid in full over a definite time. Most real estate and automobile loans are closed-end agreements. [FRB][FRBC][FRBM]

closed-end fund

A type of investment company whose securities are traded on the open market rather than being redeemed by the issuing company. [SEC] An investment company that sells shares like any other corporation and usually does not redeem its shares. A publicly traded fund sold on stock exchanges or over the counter that may trade above or below its net asset value. [Harvey]

closed-end mortgage

A mortgage in which the amount of debt is fixed and cannot be increased during the life of the loan. It is the opposite of an open-end mortgage. [OTS] Mortgage against which no additional debt may be issued. [Harvey][WCSU]

closed-end transaction

A credit transaction with a fixed amount of time for repayment. [ITDS]

closing

The consummation of a financial transaction. In mortgage lending, closing is the process of delivering a deed, signing notes, mortgages and other loan documents, and advancing funds by the lender. All of these transactions normally occur at the same time. [OTS] The occasion (on a date and at a location) at which the securities are delivered to the original purchaser and the original purchaser pays the purchase price for the securities. If security interests are involved, the concept of 'closing' also includes the perfection of those security interests by recording of the necessary instruments of notice, including either a mortgage, or a security agreement and appropriate UCC financing statements, or, in the case of motor vehicles, certificates of title with lien notation thereon. [EPA]

closing a position

Covering open long or short positions by means of a spot operation and/or outright forward operation. [FDIC]

closing costs

expenses paid by a buyer and/or seller for the cost of processing the sale or financing of real property. Such costs include loan fees, title fees, and appraisal fees. [OTS]

closing documents

Documents which are called for either by the bond purchase agreement or by the requirements of law and bond and/or underwriters' counsel. Such documents generally are included in the transcript, and evidence or certify that all actions, warranties or representations required by any law or document in connection with the transaction or by any counsel as a prerequisite to the rendering of its opinion have been taken or given. Closing documents requiring signature are signed by the appropriate officer or person. For example, in the case of certificates indicating that legislative or corporate action has been taken, the certificate is generally given by the keeper of the records of the public body or corporation. Certificates that represent or certify that the transaction is not in violation of any existing covenant or document of a particular body are usually given by the chief financial officer and chief legal officer. The terms 'closing documents' and 'transcript requirements' are often used interchangeably, although the items covered by the references may vary. [EPA]

closing memorandum

A memorandum describing the actions that will be taken in connection with the closing. This memorandum sets forth in detail the time and the place of the closing, and the events which must occur prior to the exchange of securities and purchase price. [EPA]

closing price

The price at which transactions are made just before the end of trading on a given day. [OTS]

closing purchase

A transaction in which the purchaser's intention is to reduce or eliminate a short position in a stock, or in a given series of options. [Harvey]

closing range

A range of prices at which buy and sell transactions took place during the market close. [CBOT][MIDAM] A range of prices at which transactions took place at the closing of the market; buying and selling orders at the closing might have been filled at any point within such a range. [NYMEX] Also known as the range. The high and low prices, or bids and offers, recorded during the period designated as the official close. [Harvey]

closing sale

A transaction in which the seller's intention is to reduce or eliminate a long position in a stock, or a given series of options. [Harvey]

closing-out

Liquidating an existing long or short futures or option position with an equal and opposite transaction. Also known as Offset. [CFTC]

cloud on the title

An expression meaning that a claim or encumbrance on a property prevents the conveyance of a clear title when the property is sold. [OTS]

club account

A savings account dedicated to a specific goal, such as a Christmas club account or vacation club account, and based on weekly or biweekly deposits of a fixed amount. [OTS]

cluster analysis

A statistical technique that identifies clusters of stocks whose returns are highly correlated within each cluster and relatively uncorrelated between clusters. Cluster analysis has identified groupings such as growth, cyclical, stable and energy stocks. [Harvey]

cluster zoning

A type of zoning in which density is determined for an entire area, rather than on a lot-by-lot basis. Within the cluster zone, the developer has greater flexibility in designing and placing structures so long as the overall density requirement is met. Developments in cluster zoning often incorporate open, common areas with park-like settings. [OTS]

co-location

The placement of servers used by market participants in close physical proximity to an electronic trading facility's matching engine in order to facilitate high-frequency trading. [CFTC]

Coastal Barrier Improvement Act (CBI Act)

Legislation enacted in 1990 that placed limitations on property transfers and required special disposition procedures for certain environmentally significant properties located in coastal areas or located adjacent to publicly managed conservation areas. The act imposed a waiting period of up to six months on FDIC and RTC sales of environmentally sensitive property located in coastal areas or adjacent to publicly managed conservation areas. [FDIC]

coastal trade

Trade between ports of one nation. [ITDS]

COD options

The premium is paid only if a certain trigger point is reached. [TMAC]

coefficient of determination

A measure of the goodness of fit of the relationship between the dependent and independent variables in a regression analysis; for instance, the percentage of variation in the return of an asset explained by the market portfolio return. [Harvey]

coin

A small, usually round, flat piece of metal stamped with a design and issued by a government as currency. [OTS]

coinsurance effect

Refers to the fact that the merger of two firms decreases the probability of default on either firm's debt. [Harvey]

cold comfort

The assurance given by the primary obligor or its independent public accountants that the information contained in the financial statements which were included as a part of the offering materials are true and correct as of the date of the assurance, which is generally the date of initial delivery. The assurance given is not conditional and based upon financial statements which are good as of a date close to, or the date of, closing. [EPA]

collar

(1) the highest and lowest rates of interest that will be paid on the face value of a floating-rate note. (2) an agreement between a buyer and seller. The buyer pays a fee to the seller. In return, the seller will pay the buyer if a designated floating index rate rises above or falls below a specified range of fixed rates. [OTS] A floating rate debt contract that establishes a maximum and a minimum interest rate to be paid by the borrower. [TMAC] A supply contract between a buyer and seller of a commodity, whereby the buyer is assured that he will not have to pay more than some maximum price, and whereby the seller is assured of receiving some minimum price. This is analogous to an option fence, also known as a range forward. [NYMEX] An agreement that puts upper and lower limits on the interest rate of an agreement that is binding even if the market rate falls outside of this range. [ITDS] An upper and lower limit on the interest rate on a floating-rate note. [Harvey][WCSU]

collateral

Assets pledged to a lender until a loan is repaid. If the borrower defaults, the lender has the legal right to seize the collateral and sell it to pay off the loan. [UNODC] Assets than can be repossessed if a borrower defaults. [Harvey] Property that is offered to secure a loan or other credit and that becomes subject to seizure on default. (also called security) [FRB][FRBC][FRBM][FRBSF] Securities or other property pledged by a borrower to secure repayment of a loan. [NYSE] assets that are given security for a loan. [WCSU] something of value that is pledged as security for a loan. The lender can repossess the collateral if the loan is not repaid. [OTS]

collateral trust bonds

A bond in which the issuer (often a holding company) grants investors a lien on stocks, notes, bonds, or other financial asset as security. [Harvey] Bonds secured by common stocks that are owned by the borrower. [WCSU]

collateralized mortgage obligation (CMO)

A corporate bond backed by a pool of mortgages in which the cash flows of the pool are channeled into two or more series of bonds. Interest payments generally are made to the purchasers of such securities. [FDIC] A security backed by a pool of pass-throughs, structured so that there are several classes of bondholders with varying maturities, called tranches. The principal payments from the underlying pool of pass-through securities are used to retire the bonds on a priority basis as specified in the prospectus. [Harvey] A type of bond having mortgages or mortgage-backed securities as collateral. Principal and interest payments from an underlying pool of mortgages are redirected to pay the CMO holders until the CMOs are retired. A single issue of CMOs contains two or more classes of bonds called tranches, each with a different length of maturity, providing a form of call protection to the holder of a CMO. A holder who wants to lock in a CMO investment for a specific length of time will buy into a tranche with a low risk of being retired early because the underlying mortgages are paid off early. Such low prepayment risk tranches are called planned amortization classes (PACs). Changes in prepayment rates in the underlying pool of mortgages are absorbed first by another tranche, so that the PAC remains unaffected by prepayment risk. CMOs generally pay principal and interest semiannually. CMO were first issued by the Federal Home Loan Mortgage Corporation (Freddie Mac) in June 1983. [OTS]

collect charges

Transportation practice where the receiver of the goods pays the charges. [ITDS]

collect on delivery

A service where the purchase price of a good is collected by the carrier upon delivery of the shipment and subsequently paid to the shipper. [ITDS]

collection

(1) the presentation for payment and the subsequent actual payment of a draft, check or other obligation. (2) the process of resolving a delinquent, or past due, mortgage loan including, when necessary, proceeding with foreclosure. [OTS] The presentation for payment of an obligation and the payment thereof. [ITDS]

collection float

Checks written by customers that have not been received, deposited, and added to the company's available balance. [WCSU] The negative float that is created between the time when you deposit a check in your account and the time when funds are made available. [Harvey]

collection fractions

The percentage of a given month's sales collected during the month of sale and each month following the month of sale. [Harvey]

collection papers

All the documents given to the buyer in order to receive payments for a shipment; includes invoices, bills of lading, etc. [ITDS]

collection policy

Procedures followed by a firm in attempting to collect accounts receivables. [Harvey]

collection system

An ACS module that controls and accounts for payments collected by the US Customs Service. [ITDS]

collective investment fund (CIF)

A term used broadly to describe any fund which consists of shared or common ownership among participating accounts. Common trust funds and commingled employee benefit funds (pooled funds) of banks and trust companies are examples of CIF's. [UNODC]

collective wisdom

The combination of all of the individual opinions about a stock's or security's value. [Harvey]

COM membership

A Chicago Board of Trade membership that allows an individual to trade contracts listed in the commodity options market category. [CBOT][MIDAM]

comanger

A bank that ranks just below a lead manager in a syndicated Eurocredit or international bond issue. Comanagers may assist the lead manger bank in the pricing and issue of the instrument. [Harvey]

combination

Puts and calls held either long or short with different strike prices and/or expirations. Types of combinations include straddles and strangles. [CFTC]

combination aircraft

An aircraft capable of transporting both cargo and passengers on the same flight. [ITDS]

combination matching

Also called horizon matching, a variation of multiperiod immunization and cash flow matching in which a portfolio is created that is always duration matched and also cash-matched in the first few years. [Harvey]

combination strategy

A strategy in which a put and with the same strike price and expiration are either both bought or both sold. [Harvey]

combination utility

A utility which provides both gas and electric service. [NYMEX]

combined bill of lading

A bill of lading covering a shipment of goods by more than one mode of transportation. [ITDS]

combined transport

Consignment sent by means of various modes of transport. [ITDS]

comfort certificate or letter

The certificate or letter given by the parties responsible for an official statement or offering circular which states that all or specified portions of the materials contained in the offering materials in all material respects are, as of the date of the certificate or letter (and, usually, as of the date of the offering materials), true and do not contain any untrue statements of a material fact and do not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading. The assurances given in the certificate are addressed to the requirements of the fraud sections of the federal securities laws, particularly §10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 under that Section. [EPA]

comity

Courtesy, respect, and good will. [ITDS]

command economy

An economic system where decisions about resources are made by a central government authority. [ITDS]

commercial

An entity involved in the production, processing, or merchandising of a commodity. [CFTC]

commercial banks

A bank that specializes in accepting demand deposits and granting loans. [ITDS] A financial institution chartered by a state or federal agency that accepts demand deposits and offers commercial loans. Other types of financial services usually are provided as well. [OTS] Bank that offers a broad range of deposit accounts, including checking, savings, and time deposits, and extends loans to individuals and businesses. Commercial banks can be contrasted with investment banking firms, such as brokerage firms, which generally are involved in arranging for the sale of corporate or municipal securities. [FRBSF] Commercial Banks are allowed to engage in more varied lending activities and to offer more financial services than are the other depository institutions. Commercial banks are owned by stockholders and operated for profit. [FRBC] Privately owned banks receiving deposits and making loans, generally through a large number of branches. [EPA]

commercial draft

Demand for payment. [Harvey][WCSU]

commercial grain stocks

Domestic grain in store in public and private elevators at important markets and grain afloat in vessels or barges in lake and seaboard ports. [CFTC]

commercial invoice

A document which identifies the seller and buyer of a shipment; also includes invoice number, date, shipping date, mode of transport, delivery and payment terms, and description of goods. [ITDS]

commercial loan

A loan to a company to meet business operating expenses or to finance the purchase of inventory. [OTS]

commercial mortgage loan

A mortgage loan secured by real estate used by a business or to generate income. Also called an income property loan. [OTS]

commercial officers

Embassy officials who assist businesses through arranging appointments with local business and government officials and providing counsel on local trade regulations, laws, and customs. [ITDS]

commercial online service

A commercial online service is an integrated package of services providing news, e-mail, a special-interest forum, information resources, shopping, and other services accessed by consumer and business computer users using proprietary software and a modem (examples include America Online, Microsoft Network, CompuServe, etc.). [GAO]

commercial paper

A short-term, unsecured debt instrument issued by a corporation and sold at a discount from its maturity value. [UNODC] A written agreement setting forth the terms and conditions under which funds are borrowed by a corporation and promising to repay the debt. Commercial paper is issued by large corporations of good credit standing to borrow unsecured funds for a short time, usually 90 days, but no more than nine months. Commercial paper is bought, sold, and traded by individual and corporate investors. [OTS] Debt instruments issued by companies to meet short-term financing needs. [NYSE] Generally, unsecured promissory obligations having a maturity of substantially less than a year, the proceeds of which are employed to support current operations or for interim capital asset financing. The short maturity (which may be measured in days) is the basic factor that distinguishes commercial paper from 'notes', although under governing state law the commercial paper may technically be 'notes' or 'bond anticipation notes'. Usually backed by a line of credit, or by an existing agreement to purchase securities (commercial paper, notes or bonds) that would pay off the commercial paper at its maturity. [EPA] Negotiable instruments used in commerce. [ITDS] Short-term promissory notes issued in bearer form by large corporations, with maturities ranging from 5 to 270 days. Since the notes are unsecured, the commercial paper market generally is dominated by large corporations with impeccable credit ratings. [CFTC] Short-term unsecured promissory notes issued by a corporation. The maturity of commercial paper is typically less than 270 days; the most common maturity range is 30 to 50 days or less. [Harvey] Unsecured notes issued by companies and maturing within 9 months. [WCSU]

commercial risk

The risk that a foreign debtor will be unable to pay its debts because of business events, such as bankruptcy. [Harvey]

commercial set

The primary documents required to ship goods; usually includes an invoice, bill of lading, bill of exchange, and certificate of insurance. [ITDS]

commercial treaty

An agreement between two or more countries that establishes the conditions under which business may be contracted. [ITDS]

commercial/merchant server

A commercial/merchant server is a computer and/or computer program that provides information in response to requests by other computer programs. Some servers are capable of sending and receiving secure messages. [GAO]

commingling

The packing or mingling of various goods subject to different rates of duty so that the value of each class of goods cannot be readily determined. [ITDS]

commission

(1) The charge made by a futures commission merchant for buying and selling futures contracts; or (2) the fee charged by a futures broker for the execution of an order. Note: when capitalized, the word Commission usually refers to the CFTC. [CFTC] A fee paid to a person for conducting a business transaction or performing a service. A commission is usually based on a percentage of the total transaction. [OTS] The amount paid to an agent for their role in the completion of a transaction involving the sale of goods or services. [ITDS] The broker's basic fee for purchasing or selling securities or property as an agent. [NYSE] The fee charged by a broker-dealer for services performed in buying or selling securities on behalf of a customer. [SEC] The fee charged by a futures broker for the execution of an order. [NYMEX] The fee paid to a broker to execute a trade, based on number of shares, bonds, options, and/or their dollar value. In 1975, deregulation led to the creation of discount brokers, who charge lower commissions than full service brokers. Full service brokers offer advice and usually have a full staff of analysts who follow specific industries. Discount brokers simply execute a client's order -- and usually do not offer an opinion on a stock. Also known as a round-turn. [Harvey]

commission broker

A broker on the floor of an exchange acts as agent for a particular brokerage house and who buys and sells stocks for the brokerage house on a commission basis. [Harvey] An agent who executes the public's order for the purchase or sale of securities or commodities. [NYSE]

commission fee

A fee charged by a broker for executing a transaction. Also referred to as brokerage fee. [CBOT][MIDAM]

commission house

A firm which buys and sells future contracts for customer accounts. [Harvey] An organization that trades commodities and/or futures and options contracts for customer accounts in return for a fee. [NYMEX]

commission merchant

One who makes a trade, either for another member of an exchange or for a nonmember client, but who makes the trade in his own name and become liable as principal to the other. [NYMEX]

commitment fee

(1) a payment by a prospective borrower to a prospective lender in return for the lender's promise to loan money at a specified future date. (2) in the secondary market, a payment by a primary lender to Freddie Mac or other mortgage buyer for the buyer's promise to buy loans at a future date. [OTS] A fee paid to a commercial bank in return for its legal commitment to lend funds that have not yet been advanced. [Harvey]

commitment letter

A letter sent by a lender informing a borrower that the lender has approved a loan application for a specific amount, term and rate, and listing any conditions that must be met before the loan funds are disbursed. [OTS]

commitment or open interest

The number of open or outstanding contracts for which an individual or entity is obligated to the Exchange because that individual or entity has not yet made an offsetting sale or purchase, an actual contract delivery, or, in the case of options, exercised the option. [NYMEX]

commitments

(1) an agreement between a lender and a borrower to lend money at a future date, provided stated conditions are met. (2) a promise by Freddie Mac to a primary mortgage lender to buy mortgage loans at a future date. [OTS] A trader is said to have a commitment when he assumes the obligation to accept or make delivery on a futures contract. [Harvey]

Commitments of Traders Report (COT)

Committee on Uniform Securities Identification Procedures (CUSIP)

Each type and issue of security will have its own unique CUSIP number. [GAO] The organization that develops and assigns identifying numbers and symbols for all securities. [OTS]

Commodities Exchange Center

The location of five New York futures exchanges: Commodity Exchange, Inc. (COMEX), the New York Mercantile exchange (NYMEX), the New York Cotton Exchange, the Coffee, Sugar and Cocoa exchange (CSC), and the New York futures exchange (NYFE). common size statement A statement in which all items are expressed as a percentage of a base figure, useful for purposes of analyzing trends and the changing relationship between financial statement items. For example, all items in each year's income statement could be presented as a percentage of net sales. [Harvey]

commodities fraud

The deceptive or fraudulent sale of commodities investments. In such instances, false or deceptive sales practices are used to solicit victim funds for commodities transactions that either never occur or are inconsistent with the original sales pitches. Alternatively, commodities market participants may attempt to illegally manipulate the market for a commodity by such actions as fraudulently reporting price information or cornering the market to artificially increase the price of the targeted commodity. [FBI]

commodities futures

contracts for the future delivery at a fixed price of goods, such as agricultural or mining products, or future delivery at a fixed price of securities backed by those products. The contracts are bought and sold on commodities exchanges. [OTS]

commodity

(1) A commodity, as defined in the Commodity Exchange Act, includes the agricultural commodities enumerated in Section 1a(4) of the Commodity Exchange Act, 7 USC 1a(4), and all other goods and articles, except onions as provided in Public Law 85-839 (7 USC 13-1), a 1958 law that banned futures trading in onions, and all services, rights, and interests in which contracts for future delivery are presently or in the future dealt in; (2) .A physical commodity such as an agricultural product or a natural resource as opposed to a financial instrument such as a currency or interest rate. [CFTC] A commodity is food, metal, or another physical substance that investors buy or sell, usually via futures contracts. [Harvey] An article of commerce or a product that can be used for commerce. In a narrow sense, products traded on an authorized commodity exchange. The types of commodities include agricultural products, metals, petroleum, foreign currencies, and financial instruments and indexes, to name a few. [CBOT][MIDAM] As defined by the CFTC, specifically enumerated agricultural commodities, all other goods and articles, except onions, and all services, rights and interests in which contracts for future delivery are presently, or in the future may be, dealt. [NYMEX] something of value that can be bought or sold, usually a product or raw material. [OTS]

commodity code

The system of identifying a commodity by a certain number to determine its commodity rate for transport. [ITDS]

Commodity Credit Corporation (CCC)

A branch of the U.S. Department of Agriculture, established in 1933, that supervises the government's farm loan and subsidy programs. [CBOT][MIDAM] A government-owned corporation established in 1933 to assist American agriculture. Major operations include price support programs, foreign sales, and export credit programs for agricultural commodities. [CFTC] An agency of the U.S. Department of Agriculture, with its primary purpose being to promote the export of U.S. surplus agricultural commodities. Many of the letters of credit opened by U.S. banks are supported by purchase authorizations similar to AID letters of commitment. These authorizations enable the U.S. bank to obtain reimbursement from CCC for any drawings negotiated under this type of letter of credit. This particular type of CCC credit, however, is not to be confused with another CCC credit which is issued or confirmed by U.S. banks for account of a foreign government, central bank or importer. Under this latter form of credit, CCC is the beneficiary of the credit and not the account party. CCC therefore, does not reimburse the U.S. banks for any drawings made thereunder the U.S. bank must obtain reimbursement from its foreign customer for whom the credit was opened (account party of the letter of credit). Normal credit standards should be used in analyzing this latter type of credit, particularly since they often provide for terms of up to three years but are related to commodity transactions which are customarily financed on shorter terms. [FDIC]

Commodity Exchange Act (CEA)

The 1936 Commodity Exchange Act as amended, 7 USC 1, et seq., provides for the federal regulation of commodity futures and options trading. [CFTC]

commodity exchange authority (CEA)

A regulatory agency of the U.S. Department of Agriculture established to regulate futures trading under the Commodity Exchange Act between 1936 and 1975. The Commodity Exchange Authority was the predecessor of the Commodity Futures Trading Commission. Before World War II, this agency was known as the Commodity Exchange Administration. [CFTC]

commodity exchange commission

Commodity Exchange of New York (COMEX)

commodity flow method

Method used to estimate purchases of a commodity by intermediate or final users. The method generally begins with an estimate of the total supply of a commodity available for domestic uses; it then either attributes a fixed percentage of supply to an intermediate or final user, or it adjusts for intermediate purchases and attributes the residual to intermediate or final users. [BEA]

Commodity Futures Trading Commission (CFTC)

A federal agency responsible for coordinating the commodities industry in the United States. Established in April 1975, the CFTC is charged with detecting and prosecuting violators of the Commodity Exchange Act of 1976. [OTS] A federal regulatory agency authorized under the Commodity Futures Trading Commission Act of 1974 to regulate futures trading in all commodities. The commission is comprised of five commissioners, one of whom is designated as chairman, all appointed by the President, subject to Senate confirmation. The CFTC is independent of the Cabinet departments. [NYMEX] A federal regulatory agency established under the Commodity Futures Trading Commission Act, as amended in 1974, that oversees futures trading in the United States. The commission is comprised of five commissioners, one of whom is designated as chairman, all appointed by the President subject to Senate confirmation, and is independent of all cabinet departments. [CBOT] CFTC and SEC are the primary regulators and oversee the actions of the clearing organizations under their jurisdictions to determine whether or not they are functioning in accordance with regulations and the law [GAO] Created by Congress in 1974 to regulate exchange trading in futures. [NYSE]

commodity index

An index of a specified set of (physical) commodity prices or commodity futures prices. [CFTC]

commodity index fund

An investment fund that enters into futures or commodity swap positions for the purpose of replicating the return of an index of commodity prices or commodity futures prices. [CFTC]

commodity index swap

A swap whose cash flows are intended to replicate a commodity index. [CFTC]

commodity index trader

An entity that conducts futures trades on behalf of a commodity index fund or to hedge commodity index swap positions. [CFTC]

commodity option

An option on a commodity or a futures contract. [CFTC]

commodity pool

A venture, usually a limited partnership, in which funds contributed by a number of investors are combined for the purpose of trading futures. Also called a commodity fund or a futures fund. [NYMEX] An enterprise in which funds contributed by a number of persons are combined for the purpose of trading futures contracts or commodity options. [CBOT][MIDAM] An investment trust, syndicate, or similar form of enterprise operated for the purpose of trading commodity futures or option contracts. Typically thought of as an enterprise engaged in the business of investing the collective or 'pooled' funds of multiple participants in trading commodity futures or options, where participants share in profits and losses on a pro rata basis. [CFTC]

commodity pool operator (CPO)

Acts as general partner of commodity pools. CPOs hire independent Commodity Trade Advisors to handle daily trading decisions. Responsible for the pool's administration, structure, and selecting and monitoring the traders who conduct transactions using the fund's money. [NYMEX] An individual or organization that operates or solicits funds for a commodity pool. [CBOT][MIDAM]

commodity price index

commodity prices

An index of commodities (such as oil and steel) traded in worldwide markets. [FRB][FRBC][FRBSF]

commodity rate

The rate applicable to shipping a given commodity between points. [ITDS]

commodity swap

A swap in which the payout to at least one counterparty is based on the price of a commodity or the level of a commodity index. [CFTC] Commodity swaps can either swap a fixed and a floating price for the underlying commodity, or can swap two different commodities. [TMAC]

commodity technology assumption

Assumption about the input structure required for the production of secondary products. The input structure for the secondary product is assumed to be the same as the industry where the product is primary. [BEA]

commodity trading adviser

A person who, for compensation or profit, directly or indirectly advises others as to the value or the advisability of buying or selling futures contracts or commodity options. Advising indirectly includes exercising trading authority over a customer's account as well as providing recommendations through written publications or other media. [CBOT][MIDAM]

commodity trading advisor (CTA)

Directs trading in the managed accounts of a commodity pool. Professional money managers who manage client assets on a discretionary basis, using global futures markets as an investment medium. [NYMEX]

commodity-linked bond

A bond in which payment to the investor is dependent to a certain extent on the price level of a commodity, such as crude oil, gold, or silver, at maturity. [CFTC]

common area

land or improvements that are designated for common use by all occupants, tenants, or owners. [OTS]

common law

A judge-made law that originated in England from the decisions shaped according to prevailing custom. Decisions were reapplied to similar situations and, thus, gradually became common to the nation. [UNODC] The body of law developed first in England from judicial decisions shaped by custom and precedent, but not written in any formal statute. Common law is the basis of the legal system in England and the United States. [OTS]

common market

An agreement between two or more countries that permits the free movement of capital and labor as well as goods and services. [Harvey]

Common Message Switch (CMS)

Handles virtually all orders, and reports between member firms and NYSE and AMEX trading floors. CMS, designed and operated by SIAC, simplifies firms' order-delivery report procedures, and eliminates equipment and communications line duplication. [NYSE]

common point

A location serviced by two or more transportation lines. [ITDS]

common property resources

Resources for which there are no clearly defined property rights; property owned in common by a society. [FACS]

common stock

One of two types of stock an investor may purchase in a company. Most stock is common stock. Investors who purchase it have voting rights at the company's annual stockholders' meeting. Common Stockholders are not guaranteed dividends, buy they may receive higher dividends during the company's prosperous periods. If a company fails or liquidates, common stockholders are paid after bondholders and preferred stockholders. [NYSE] These are securities that represent equity ownership in a company. Common shares let an investor vote on such matters as the election of directors. They also give the holder a share in a company's profits via dividend payments or the capital appreciation of the security. [Harvey] securities that are evidence of proportionate equity or ownership of a corporation, and give the holder an unlimited proportionate interest in the corporation's earnings and assets after claims from creditors and the holders of preferred stock have been met. [OTS]

common stock equivalent

A convertible security that is traded like an equity issue because the optioned common stock is trading high. [Harvey]

common stock market

The market for trading equities, not including preferred stock. [Harvey]

common stock ratios

Ratios that are designed to measure the relative claims of stockholders to earnings (cash flow per share), and equity (book value per share) of a firm. [Harvey]

common stock/other equity

Value of outstanding common shares at par, plus accumulated retained earnings. Also called shareholders' equity. [Harvey]

common-base-year analysis

The representing of accounting information over multiple years as percentages of amounts in an initial year. [Harvey]

common-size analysis

The representing of balance sheet items as percentages of assets and of income statement items as percentages of sales. [Harvey]

Community Investment Program

A program offered by each Federal Home Loan Bank to provide advances to member institutions which use them in community lending to moderate income families. [OTS]

community property

A form of ownership in some states in which property acquired during a marriage is presumed to be owned jointly unless specifically acquired as separate property of either spouse. [OTS]

Community Reinvestment Act

Community Reinvestment Act of 1977 (CRA)

Enacted by Congress in 1977, the CRA encourages banks to help meet the credit needs of their communities for housing and other purposes, particularly in neighborhoods with low or moderate incomes, while maintaining safe and sound operations. [FRBSF] Encourages banks to help meet the credit needs of their communities for housing and other purposes, particularly in neighborhoods with low or moderate incomes, while maintaining safe and sound operations. [FRB][FRBC][FRBM] requires financial institutions to meet the credit needs of all segments of their communities, including low- and moderate-income neighborhoods. [OTS]

Community Reinvestment Act Statement

A description available for public inspection at each bank office indicating, on a map, the communities served by that office and the types of credit the bank is prepared to extend within the communities served. [FRBSF]

company

A business entity which creates paperless entries for introduction into the ACH network. [ACH]

company limited by guarantee

An incorporated entity without share capital. [UNODC]

comparative advantage

Describes the ability of a person, company or country to produce a good or service at a lower cost relative to other goods and services. Even though a country may have an [FRB][FRBM] The ability of a producer to produce a good at a lower marginal cost than other producers; marginal cost in the sacrifice of some other good compared to the amount of a good obtained. [FACS]

comparative credit analysis

A method of analysis in which a firm is compared to others that have a desired target debt rating in order to infer an appropriate financial ratio target. [Harvey]

comparison member

Comparison members are primarily government securities broker-dealers and clearing agent banks that are capable of interacting with GSCC operations. [GAO]

comparison universe

The collection of money managers of similar investment style used for assessing relative performance of a portfolio manager. [Harvey]

compensating balance

A dollar amount equal to the lowest percentage of a line of credit that the customer of a financial institution is expected to maintain, usually in a demand deposit account, as a condition for being granted the line of credit. [OTS] An excess balance that is left in a bank to provide indirect compensation for loans extended or services provided. [Harvey] Non-interest-bearing demand deposits to compensate banks for bank loans or services. [WCSU]

compensatory trade

A form of countertrade where any combination of goods and services are bartered. [ITDS]

competence

Sufficient ability or fitness for ones needs. Possessing the necessary abilities to be qualified to achieve a certain goal or complete a project. [Harvey]

competition

Intra- or intermarket rivalry between businesses trying to obtain a larger piece of the same market share. [Harvey] Rivalry among individuals in order to acquire more of something that is scarce. [FACS]

competitive bid

A bid submitted for an issue sold at a competitive sale. [EPA]

competitive bidders

One of two categories of bidders on Treasury securities: competitive and noncompetitive. Competitive bidders are usually financial institutions. [FRBSF]

competitive bidding

A securities offering process in which securities firms submit competing bids to the issuer for the securities the issuer wishes to sell. [Harvey] Means by which public utilities holding companies are required to choose their underwriter. [WCSU] Provisions for sale of an issue on the best bid after published notice requesting bids. [EPA]

Competitive Equality Banking Act (CEBA)

Legislation enacted in 1987 that permitted qualifying agricultural banks to amortize losses over a seven-year period for agricultural loans, rather than having to deduct losses from capital as soon as the loss was incurred. CEBA also created the Financing Corporation, which was chartered by the FHLBB, to borrow up to $10.8 billion over three years to finance the closure of failed S&Ls or to subsidize their takeover by healthy S&Ls. In addition, CEBA encouraged the supervisory forbearance of well-managed but undercapitalized institutions. CEBA also expanded the FDIC's authority to permit out-of-state bank holding companies to acquire stock institutions and mutual savings banks before failure, providing those companies met certain conditions. In addition, CEBA provided the FDIC with authority to establish a bridge bank, a new national bank that was created to purchase the assets and assume the liabilities of a failing bank until resolution could be accomplished. Under CEBA a bridge bank could be established if--- . The cost of establishing the bridge bank did not exceed the cost of liquidating the failing bank; . The continued operation of the uninsured bank was essential to provide adequate banking services in the community; or . The continued operation of the institution was in the best interest of its depositors and the public. [FDIC]

competitive offering

An offering of securities through competitive bidding. [Harvey]

competitive rate

Rate determined by one transportation line to compete with the rate of another transportation line. [ITDS]

competitive risk

Occurs due to nature of the business the company is in and the type and location of its competition. It is the risk that the demand for a company's goods and services will decline due to the actions of competitors. [TMAC]

competitive trader

A member of the Exchange who trades in stocks on the Floor for an account in which the member firm has an interest. Also known as Registered Trader. [NYSE]

complementary imports

Imports of raw materials or products that a country does not internally possess or produce. [ITDS]

complements

A price change for one product leads to a shift in the opposite direction direction in the demand for another product. [FACS]

complete capital market

A market in which there is a distinct marketable security for each and every possible outcome. [Harvey]

complete portfolio

The entire portfolio, including risky and risk-free assets. [Harvey]

completion bonding

Insurance that a construction contract will be successfully completed. [Harvey][WCSU]

completion bonds

Additional bonds, often subject to a maximum principal amount, that may be issued on a parity with outstanding bonds if necessary to complete the project financed with the outstanding bonds. Completion bonds often may be issued without meeting earnings coverage tests. [EPA]

completion risk

The risk that a project will not be brought into operation successfully. [Harvey]

completion undertaking

An undertaking either (1) to complete a project such that it meets certain specified performance criteria on or before a certain specified date or (2) to repay project debt if the completion test cannot be met. [Harvey]

compliance exam

An examination of a savings institution to determine how well it is complying with federal law and regulations, particularly those dealing with consumer protection and non-discrimination. [OTS]

compliance period

The period of time during which a thrift institution must comply with a regulation, ruling, order, or resolution of its regulatory agency. [OTS]

composite receivers' file (CRF)

A file listing all depository financial institutions qualified to receive ACH entries. Call your association office to subscribe. The CRF is available from the FRB as magnetic tape for direct computer input, or on microfiche. [ACH]

composition

Voluntary arrangement to restructure a firm's debt, under which payment is reduced. [Harvey]

compound interest

Interest paid on previously earned interest as well as on the principal. [Harvey] Reinvestment of each interest payment on money invested, to earn more interest. [WCSU] The interest that accrues when earnings for each specified period of time are added to the principal, thus increasing the principal base on which subsequent interest is computed. [OTS]

compound option

Option on an option. [Harvey]

compounding

The process of accumulating the time value of money forward in time. For example, interest earned in one period earns additional interest during each subsequent time period. [Harvey]

compounding frequency

The number of compounding periods in a year. For example, quarterly compounding has a compounding frequency of 4. [Harvey]

compounding period

The length of the time period (for example, a quarter in the case of quarterly compounding) that elapses before interest compounds. [Harvey]

compradore

An agent in a foreign country employed by a domestic businessman to facilitate transactions with local businesses within the foreign country. [ITDS]

comprehensive annual financial report

The official annual report of a government. It includes five Combined Statements - Overview (the 'liftable' GPFS) and basic financial statements for each individual fund and account group prepared in conformity with GAAP and organized into a financial reporting pyramid. It also includes supporting schedules necessary to demonstrate compliance with finance-related legal and contractual provisions, extensive introductory material, and a detailed Statistical Section. Every governments should prepare and publish a CAFR as a matter of public record. [EPA]

comprehensive due diligence investigation

The investigation of a firm's business in conjunction with a securities offering to determine whether the firm's business and financial situation and its prospects are adequately disclosed in the prospectus for the offering. [Harvey]

Comprehensive Employment and Training Act (CETA)

Federal funding for local governments to retrain and employ difficult-to-hire workers. [FACS]

Comptroller of the Currency (OCC)

A federal office created by Congress in 1863 as a part of the national banking system. The Comptroller of the Currency is a bureau of the Treasury Department and charters, regulates and examines national banks. The Comptroller of the Currency came into being during the civil war. In part to finance the war debt, Congress authorized federally chartered banks that were to issue bank notes -- in other words, currency. Initially, the OCC provided the bank notes to these federally chartered banks, and each bank then printed its own name on the paper money it put into circulation. Thus, the agency got its name from its original responsibility of controlling the currency it distributed to these federal banks. [OTS] The Comptroller of the Currency is an officer of the Treasury Department responsible for chartering national banks and has primary supervisory authority over them. All national banks are required to be members of the Federal Reserve System and are insured by the Federal Deposit Insurance Corporation. [FRB][FRBC][FRBM]

Computerized Trading Reconstruction System

A Chicago Board of Trade computerized surveillance program that pinpoints in any trade the traders, the contract, the quantity, the price, and time of execution to the nearest minute. [CBOT][MIDAM]

concealed damage

Damage to the contents of a package which is not apparent from the condition of the exterior. [ITDS]

concealed loss

Damage, loss, or shortage of goods within a package which is not apparent from its exterior condition. [ITDS]

concentration account

A single centralized account into which funds collected at regional locations (lockboxes) are transferred. [Harvey]

concentration banking

system whereby customers make payments to a regional collection center. The collection center pays the funds into a regional bank account and surplus money is transferred to the company's principle bank. [WCSU]

concentration services

Movement of cash from different lockbox locations into a single concentration account from which disbursements and investments are made. [Harvey]

concession

The allowance that an underwriter or syndicate allows a nonmember of the account. [EPA]

concession agreement

An understanding between a company and the host government that specifies the rules under which the company can operate locally. [Harvey]

concurrent indicators

condemnation

The legal process for taking over privately owned property for public use, under the right of eminent domain, with just compensation to the owner. [OTS]

conditional endorsement

A type of restrictive endorsement on a negotiable instrument that designates both the next titleholder and conditions to the endorser's liability. [OTS]

conditional sales

Sales in which ownership does not pass to the buyer until payment is completed. [WCSU]

conditional sales contracts

Similar to equipment trust certificates except that the lender is either the equipment manufacturer or a bank or finance company to whom the manufacturer has sold the conditional sales contract. [Harvey]

condominium

A single dwelling unit in a multi-unit structure in which each unit is individually owned. The owner holds legal title to his or her unit and owns the common areas (roof, basement, halls, stairs, etc.) and land jointly with other unit owners. An owner may live in his or her condominium, rent it or sell it. Owners pay individual property taxes and may claim tax exemptions just as they would if they owned a free standing, single-family home. [OTS]

conduit

(1) industry term for a firm through which mortgages flow. The company issues mortgage-backed securities based on mortgage loans it buys from a number of primary lenders. (2) a type of roll-over IRA used by individuals to transfer all or any part of a lump-sum distribution from one retirement plan to another retirement plan. (3) any intermediary between a lender and an investor. [OTS]

confession of judgment

A clause in a loan contract providing that the borrower waives the right to be notified and the right to be heard in court if the lender brings suit and obtains a judgment against the borrower in the event of a default. This credit practice was prohibited by regulation in 1985. [OTS]

confidence indicator

A measure of investors' faith in the economy and the securities market. A low or deteriorating level of confidence is considered by many technical analysts as a bearish sign. [Harvey]

confidence level

The degree of assurance that a specified failure rate is not exceeded. [Harvey]

Confidential Individual Information System (CIIS)

A computerized nationwide data base used by the various national and local offices of the Office of Thrift Supervision to collect and share information about persons who require particular supervisory attention. The system is designed to alert federal regulators to persons who have been the subject of supervisory concern. CIIS is used to prevent persons who have been caught violating regulations in one savings institution from moving to a different part of the country and causing problems in another institution. [OTS]

confidentiality agreement

An agreement between the FDIC and a potential acquiring financial institution that acknowledges the confidentiality of the information package pertaining to the failing institution and other documents, including the financial transaction agreements. To receive the information package and perform on-site due diligence at the institution before failure, potential acquirers must sign a confidentiality agreement. [FDIC]

confirmation

The written statement that follows any 'trade' in the securities markets. Confirmation is issued immediately after a trade is executed. It spells out settlement date, terms, commission, etc. [Harvey] Written communication to the counterparty in a foreign exchange transaction which recites all the relevant details agreed upon by telephone telex. [FDIC]

confirmation statement

A statement sent by a futures commission merchant to a customer when a futures or options position has been initiated which typically shows the price and the number of contracts bought and sold. [CFTC]

confirmed letter of credit

A letter of credit issued by a bank which bears the confirmation of the seller's (exporter's) bank. The 'confirming' bank undertakes to honor the draft drawn in accordance with the terms of the letter of credit. Thus, the beneficiary has the unconditional assurance that, if the issuing bank refused to honor the draft against the credit, the confirming bank will pay (or accept) it. In many instances, the seller (exporter) will ask that the letter of credit be confirmed by another bank since the seller is not familiar with the foreign issuing bank and as a precaution against unfavorable exchange regulations, foreign currency shortages, political upheavals, and similar situations that may arise in the foreign country. [FDIC]

confiscation

'The permanent deprivation of property by order of a court or other competent authority'. Includes forfeiture where applicable. - United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, Article 1. [UNODC]

conflict between bondholders and stockholders

These two groups may have interests in a corporation that conflict. Sources of conflict include dividends, distortion of investment, and underinvestment. Protective covenants work to resolve these conflicts. [Harvey]

conflict of interest

A situation in which a person may realize personal benefit from decisions or actions he or she may take on behalf of something the person is entrusted to manage or care for. For example, a director of a savings association would have a conflict of interest approving loans to companies in which the director has a personal interest. [OTS]

conforming loan

A mortgage loan that conforms to regulatory limits such as loan-to-value ratio, term and other characteristics. [OTS]

congestion

(1) A market situation in which shorts attempting to cover their positions are unable to find an adequate supply of contracts provided by longs willing to liquidate or by new sellers willing to enter the market, except at sharply higher prices; (2) in technical analysis, a period of time characterized by repetitious and limited price fluctuations. [CFTC]

conglomerate

A corporation that has diversified in operations usually by acquiring enterprises in widely varied industries. [NYSE] A firm engaged in two or more unrelated businesses. [Harvey]

conglomerate merger

A merger involving two or more firms that are in unrelated businesses. [Harvey] Merger between two companies in unrelated businesses. [WCSU]

congregate housing

A housing development in which a central dining facility is provided and some or all of the dwelling units have no kitchen facilities. This type of arrangement is sometimes used in housing for the elderly, who want to be free of cooking chores. [OTS]

connecting carrier

A carrier which has direct physical connection with another carrier or forms a connecting link between two or more carriers. [ITDS]

connection charge

A viable means of assessing new system users to recover the cost of system excess capacity constructed for their eventual use. [EPA]

consensus forecast

The mean of all financial analysts' forecasts for a company. [Harvey]

consent merger agreement

A type of supervisory agreement in which the board of directors of a troubled savings institution agrees to have the Office of Thrift Supervision arrange for a merger of the troubled institution into another institution. Such arrangements were formerly called consent agreements or consent resolutions, but in the late 1980s they began to be handled as a type of supervisory agreement. [OTS]

conservator

(1) a person appointed by a court to protect and preserve the property of an individual who is physically or mentally unable to handle his or her own affairs. (2) a person appointed by a court to protect the interests of an estate. (3) an agency or person placed in charge of a troubled savings institution or bank by federal or state authorities to protect and conserve the assets of the institution while more permanent measures for dealing with the institution are worked out. [OTS] A person or entity, including a government agency, appointed by a regulatory authority to operate a troubled financial institution in an effort to conserve, manage, and protect the troubled institution's assets until the institution has stabilized or has been closed by the chartering authority. [FDIC]

Conservator's Strategic Plan (CSP)

A plan prepared by the managing agent of an RTC-controlled institution within 60 days of the start of the conservatorship. The CSP describes the plan of operation for the failed institution during the conservatorship stage. The CSP formerly was known as the 'Conservator's Operating Plan. [FDIC]

conservatorship

The legal procedure provided by statute for the interim management of financial institutions used by the FDIC and RTC. Under the pass-through receivership method, after the failure of a savings institution, a new institution is chartered and placed under agency conservatorship; the new institution assumes certain liabilities and purchases certain assets from the receiver of the failed institution. Under a straight conservatorship, the FDIC or RTC may be appointed conservator of an open, troubled institution. In each case, the conservator assumes responsibility for operating the institution on an interim basis in accordance with the applicable laws of the federal or state authority that chartered the new institution. Under a conservatorship, the institution's asset base is conserved pending the resolution of the conservatorship. [FDIC] The state of being under the control of a conservator. A conservatorship affects the control and operation of an institution or company but does not alter its ownership. [OTS]

consideration

An element that is required in all valid contracts. A consideration is anything of value. All parties to the contract must exchange something of value. [OTS]

consignee

The person or firm named in a freight contract to whom goods have been shipped or turned over for care. [ITDS] The ultimate recipient of goods being shipped. [OTS]

consignment

A shipment made by a producer or dealer to an agent elsewhere with the understanding that the commodities in question will be cared for or sold at the highest obtainable price. Title to the merchandise shipped on consignment rests with the shipper until the goods are disposed of according to agreement. [CFTC] Delivery of merchandise from an exporter to an agent for sale by the agent, credited to the exporters account, with a commission earned by the agent. [ITDS] The act of entrusting goods to a dealer for sale, but retaining ownership of them until sold. The dealer pays the seller only when and if the goods are sold. [OTS]

consignor

The entity that ships goods to another for care; the exporter in a consignment relationship. [ITDS] The originator of a shipment of goods. [OTS]

consol

A type of bond that has an infinite life but is not issued in the U.S. capital markets. [Harvey]

consolidate

to bring together various financial obligations under one agreement, contract, or note. [OTS]

consolidated balance sheet

A balance sheet showing the financial condition of a corporation and its subsidiaries. [NYSE]

consolidated container

A shipping container that contains cargo from numerous shippers for delivery to numerous consignees. [ITDS]

consolidated metropolitan statistical area (CSMA)

A geographic unit composed of two or more adjacent standard metropolitan statistical areas having a combined population of one million or more, with close social and economic links. [OTS]

consolidated obligations

debt instruments (bonds and discount notes) sold by the Federal Home Loan Banks through the Office of Finance. The obligations consolidate the borrowing needs of all 12 Banks into joint securities offerings sold in the capital markets. The Banks share the funds raised by the sale of the securities, and they share the obligation to repay the debt. Thus each Bank is legally responsible for repayment of its own debt plus the debt of all other Federal Home Loan Banks. [OTS]

Consolidated Quotation System (CQS)

Collects and disseminates, electronically, current bid and asked quotations, with volume, from and to all market centers trading listed stocks. [NYSE]

consolidated tape

The ticker tape reporting transactions in NYSE listed securities that take place on the NYSE or any of the participating regional stock exchanges and other markets. Similarly, transactions in Amex listed securities, and certain other securities listed on regional stock exchanges, are reported on a separate tape. [NYSE]

Consolidated Tape Association (CTA)

Oversees the operations of the consolidated tape, which it developed, under a formal 'CTA Plan' filed with the Securities and Exchange Commission. CTA is an independent, industry-wide organization. [NYSE]

Consolidated Tape Reporting System (CTRS)

Receives and disseminates, electronically, listed stock last-sale prices in all markets in which they trade. CTS is under the operational guidance of the Consolidated Tape Association (CTA). [NYSE]

Consolidated Tape System (CTS)

Receives and disseminates, electronically, listed stock last-sale prices in all markets in which they trade. CTS is under the operational guidance of the Consolidated Tape Association (CTA). [NYSE]

consolidation

The combining of smaller shipments from a central location into a single shipment that is sent to a destination point at a lower shipping rate. [ITDS] The combining of two or more firms to form an entirely new entity. [Harvey] The results obtained on a balance sheet when the accounts of a parent company and its subsidiaries are combined to reflect the financial position and operating results of the group as if it operated as a single entity. [OTS]

consolidation loan

A loan that consolidates, or pays off, several old loans and replaces them with one new loan, usually to obtain a lower interest rate or lower monthly payment by extending the loan over a longer period of time. [OTS]

consolidator

A company that provides consolidation services. [ITDS]

consortium

A group of corporations, financial institutions or other companies that join forces to achieve a mutually agreed upon objective, requiring cooperation and pooling of resources. [OTS] A grouping of corporations to fulfill a combined objective or project that usually requires interbusiness cooperation and sharing of the goods. [FRBSF]

consortium banks

A merchant banking subsidiary set up by several banks that may or may not be of the same nationality. Consortium banks are common in the Euromarket and are active in loan syndication. [Harvey]

constant dollars

The price paid for something in previous years, adjusted for inflation to equal what the price would be in current dollars. Constant dollars permit comparisons of the true cost of goods and services or other financial data from different time periods. [OTS]

constant payment

A periodic payment of a fixed amount that includes interest and principal. While the total amount of the payment remains the same, the ratio of principal and interest included in the payment changes. As the loan is paid off, the portion of the payment applied to the principal increases. Most home mortgages are constant payment loans. [OTS]

constant-growth model

Also called the Gordon-Shapiro model, an application of the dividend discount model which assumes (1) a fixed growth rate for future dividends and (2) a single discount rate. [Harvey]

construction fund

A special fund, often held by the trustee or other fiduciary, into which the net proceeds of an issue are deposited to be used to pay project costs. The construction fund is often pledged for the payment of the securities, pending its use for the purpose of paying the project costs. [EPA]

construction loan

A short-term, interim loan for financing the cost of construction. The lender makes payments called draws to the builder at periodic intervals as the work progresses. [OTS]

consular documents

Bills of lading, certificates of origin, or special forms of invoice which carry the official signature of the consul of the country of destination. [FDIC]

consular invoice

An invoice covering the shipment of goods certified by the counsel of the country for which the merchandise is destined. [ITDS] Detailed statement regarding the character of goods shipped which is duly certified by the consul at the port of shipment. Required by certain countries, including the United States. Principal function is to record accurately the types of goods and their quantity, grade and value for import duty, balance of payments and other statistical purposes. [FDIC]

consulate

The offices representing the commercial interests of one country located within the borders of another country. [ITDS]

Consumer Advisory Council (CAC)

A statutory body established by Congress in 1976. The Council, with 30 members who represent a broad range of consumer and creditor interests, advises the Board on the exercise of its responsibilities under the Consumer Credit Protection Act and on other matters on which the Board seeks its advice. [FRB][FRBC][FRBM] A statutory body established by Congress in 1976. The Council, with 30 members who represent a broad range of consumer and creditor interests, advises the Federal Reserve Board on the exercise of its responsibilities under the Consumer Credit Protection Act and on other matters on which the Federal Reserve Board seeks its advice. [FRBSF]

consumer credit

Credit granted by a firm to consumers for the purchase of goods or services. Also called retail credit. [Harvey] any loan or extension of credit to an individual for personal, family, or household use not involving real estate. [OTS]

consumer goods

Any goods produced for the expressed use of individuals rather than the production or manufacturing of other goods. [ITDS]

consumer price index (CPI)

A major inflation measure computed by the U.S. Department of Commerce. It measures the change in prices of a fixed market basket of some 385 goods and services in the previous month. [CBOT][MIDAM] A measure of the average amount (price) paid for a market basket of goods and services by a typical U.S. consumer in comparison to the average paid for the same basket in an earlier base year. [FACS] A measurement of the cost of living determined by the Bureau of Labor Statistics. [FRBSF] A monthly measure of changes in the prices of goods and services consumed. The index is compiled by the U.S. Bureau of Labor Statistics. [OTS] The CPI, as it is called, measures the prices of consumer goods and services and is a measure of the pace of U.S. inflation. The U.S.Department of Labor publishes the CPI very month. [Harvey]

consumption entry

A customs entry where the importer pays the applicable dues and the goods are released from customs custody. [ITDS]

consumption expenditures

The total dollar value of all goods and services purchased by the household sector for current use. [FACS]

consumption function

A mathematical expression relating personal consumption expenditures to disposable income. [FACS]

container

A single rigid, sealed, reusable metal 'box' in which merchandise is shipped by vessel, truck, or rail. [ITDS]

container freight charge

Charge made for the packing or unpacking of cargo from ocean freight containers. [ITDS]

container load

A shipment of cargo that according to weight or volume, will fit any number of standard containers. [ITDS]

container on flatcar

A container without wheels put on railcars for transport. [ITDS]

container part load

A shipment of cargo that according to weight or volume, will not fit into any number of standard containers. [ITDS]

container vessel

An ocean going vessel designed specifically to handle the loading, storage and removal of freight containers. [ITDS]

contango

A condition in a futures market where the more distant delivery months trade at a premium to the near term delivery months. [TMAC] A market condition in which futures prices are higher in the distant delivery months. [Harvey] Market situation in which prices in succeeding delivery months are progressively higher than in the nearest delivery month; the opposite of backwardation. [CFTC]

contango market

A market situation in which prices are higher in the succeeding delivery months than in the nearest delivery month. Opposite of Backwardation. [NYMEX]

contemporaneous reserve accounting (CRA)

An accounting method which allows member banks of the Federal Reserve a one day lag when calculating their required reserves and reserves held as vault cash. Except for the one-day lag, assets and liabilities used in calculating reserves and required reserves are those of the same week. [FRBSF]

contingency order

An order which becomes effective only upon the fulfillment of some condition in the marketplace. [NYMEX]

contingent claim

A claim that can be made only if one or more specified outcomes occur. [Harvey]

contingent deferred sales charge

The formal name for the load of a back-end load fund. [Harvey]

contingent immunization

An arrangement in which the money manager pursues an active bond portfolio strategy until an adverse investment experience drives the then-available potential return down to the safety-net level. When that point is reached, the money manager is obligated to pursue an immunization strategy to lock in the safety-net level return. [Harvey]

contingent liabilities

Items which may become liabilities as a result of conditions undetermined at a given date, such as guarantees, pending law suits, judgments under appeal, unsettled dispute claims, unfilled purchase orders, and uncompleted contracts. All contingent liabilities should be disclosed within the basic financial statements, including the notes thereto. [EPA]

contingent pension liability

Under ERISA, the firm is liable to the plan participants for up to 39% of the net worth of the firm. [Harvey]

contingent project

Project that can not be undertaken unless another project is also undertaken. [WCSU]

continuing examination file

A file containing information of continuing interest to on-site examiners. Such items as policies, business plans, articles of incorporation and bylaws are included in the file. [OTS]

continuous compounding

Interest compounded continuously rather than at fixed intervals. [WCSU] The process of accumulating the time value of money forward in time on a continuous, or instantaneous, basis. Interest is earned continuously, and at each instant, the interest that accrues immediately begins earning interest on itself. [Harvey]

Continuous Net Settlement (CNS)

Clears securities transactions, with the total settlement payable and receivable for each security balanced daily. Excess payables and receivables are adjusted to the market value of the underlying security by charges or credits to firms with unsettled transactions. [NYSE] System operated by NSCC. It receives compared or locked-in securities trades from most of the major securities marketplaces in the United States, nets each day's trades together with any outstanding failed delivery instructions, and settles the resulting netted position at DTC. This significantly reduces the number of shares and dollars that need to be settled, and reduces participant risk via novation and settlement guarantees. [NSCC]

continuous random variable

A random value that can take any fractional value within specified ranges, as contrasted with a discrete variable. [Harvey]

contra

against, opposite, or contrasting. In accounting, a contra entry is one which is offset by an opposite entry, either a debit or credit. [OTS]

contra asset

An item that is entered on the asset side of an accounting ledger even though the item has a credit (negative) balance. For a thrift institution, contra assets include such items as deferred income and loans in process. [OTS]

contraband

Any product that a nation has labeled as unsuitable to possess, produce, or transport. [ITDS]

contract

(1) A term of reference describing a unit of trading for a commodity future or option or other derivative; (2) an agreement to buy or sell a specified commodity, detailing the amount and grade of the product and the date on which the contract will mature and become deliverable. [CFTC] 1) A term of reference describing a unit of trading for a commodity future or option. 2) An agreement to buy or sell a specified commodity, detailing the amount and grade of the product and the date on which the contract will mature and become deliverable. [NYMEX] A binding agreement between two or more persons or entities, such as companies or institutions, by which rights to specific goods, services or actions are acquired by the parties to the contract. [OTS] A term of reference describing a unit of trading for a financial or commodity future. Also, the actual bilateral agreement between the buyer and seller of a transaction as defined by an exchange. [Harvey]

contract carrier

Excluding common carriers, any person who under special contract will transport passengers or goods for agreed upon compensation. [ITDS]

contract for deed

A written agreement between the seller and buyer of a piece of property, whereby the buyer receives title to the property only after making a determined number of monthly payments; also called an installment contract or land contract. [OTS]

contract grades

That grade of product established in the rules of a commodity futures exchange as being suitable for delivery against a futures contract. [NYMEX] Those grades of a commodity that have been officially approved by an exchange as deliverable in settlement of a futures contract. [CFTC]

contract market

A board of trade or exchange designated by the Commodity Futures Trading Commission to trade futures or options under the Commodity Exchange Act. A contract market can allow both institutional and retail participants and can list for trading futures contracts on any commodity, provided that each contract is not readily susceptible to manipulation. Also called designated contract market. [CFTC]

contract month

The month in which futures contracts may be satisfied by making or accepting a delivery. Also called value managers, those who assemble portfolios with relatively lower betas, lower price-book and P/E ratios and higher dividend yields, seeing value where others do not. [Harvey]

contract size

The actual amount of a commodity represented in a contract. [CFTC]

contract trading volume

Daily trading volume. [NYMEX]

contract unit

contraction phase

The part of the business cycle when GNP, employment and production are on the decline. [FACS]

contractionary fiscal policy

A policy to increase governmental spending and/or a reduction in taxes. [FRBSF]

contractionary monetary policy

A policy to restrict the growth of money and credit in the economy. [FRBSF]

contractor

An individual or other legal entity that directly or indirectly submits offers for or receives a government contract for goods or services. [FDIC]

Contractor Oversight and Monitoring Branch (COMB)

An organizational unit located in Dallas, Texas, within the FDIC's former Division of Liquidation and responsible for overseeing the FDIC's asset management contractors. This contractor oversight group has since been renamed but is still situated in Dallas. [FDIC]

contribution margin

The difference between variable revenue and variable cost. [Harvey]

control

50% of the outstanding votes plus one vote. [Harvey]

control fraud

Occurs when a trusted person in a high position of responsibility in a company, corporation, or state subverts the organization and engages in extensive fraud for personal gain. The term Control fraud was coined by William K. Black to refer both to the acts of fraud and to the individuals who commit them. [Wikipedia]

controlled account

An account for which trading is directed by someone other than the owner. Also called a Managed Account or a Discretionary Account. [CFTC]

controlled disbursement

A service that provides for a single presentation of checks each day (typically in the early part of the day). [Harvey]

controlled foreign corporation

A foreign corporation whose voting stock is more than 50% owned by U.S. stockholders, each of whom owns at least 10% of the voting power. [Harvey]

controller

Officer responsible for budgeting, accounting, and auditing in a firm. [WCSU] The chief financial officer of a company, financial institution or other entity. The controller is responsible for supervising the operations of the accounting department and preparing its financial reports. Also spelled comptroller. [OTS] The corporate manager responsible for the firm's accounting activities. [Harvey]

controlling person

anyone who directly, indirectly, or acting in concert with one or more persons or companies, or together with members of the immediate family, owns, controls, or holds with power to vote, 10 percent or more of the voting stock of a savings institution, or controls in any manner the election or appointment of a majority of the institution's board of directors. [OTS]

convenience yield

The extra advantage that firms derive from holding the commodity rather than the future. [Harvey]

convention statement

An annual statement filed by a life insurance company in each state where it does business in compliance with that state's regulations. The statement and supporting documents show, among other things, the assets, liabilities, and surplus of the reporting company. [Harvey]

conventional mortgage

A loan based on the credit of the borrower and on the collateral for the mortgage. [Harvey]

conventional mortgage loan

A fixed- or adjustable-rate, fully amortized loan secured by a mortgage or deed of trust that is not insured or guaranteed by an agency of the federal government (such as FHA or VA). [OTS]

conventional pass-throughs

Also called private-label pass-throughs, any mortgage pass-through security not guaranteed by government agencies. [Harvey]

conventional project

A project with a negative initial cash flow (cash outflow), which is expected to be followed by one or more future positive cash flows (cash inflows). [Harvey]

convergence

A term referring to cash and futures prices tending to come together (i.e., the basis approaches zero) as the futures contract nears expiration. [CBOT][MIDAM] The movement of the price of a futures contract toward the price of the underlying cash commodity. At the start, the contract price is higher because of the time value. But as the contract nears expiration, the futures price and the cash price converge. [Harvey] The narrowing of futures prices to cash prices as the delivery date approaches. [OTS] The tendency for prices of physicals and futures to approach one another, usually during the delivery month. Also called a 'narrowing of the basis.' [CFTC]

conversion

A delta-neutral arbitrage transaction involving a long futures, a long put option, and a short call option. The put and call options have the same strike price and same expiration date. [NYMEX] A position created by selling a call option, buying a put option, and buying the underlying instrument (for example, a futures contract), where the options have the same strike price and the same expiration. [CFTC] in the financial services industry, the term refers to a change of ownership of a thrift institution from mutual to stock form (or vice versa), or a change of charter from state to federal (or vice versa). [OTS]

conversion factors

A factor used to equate the price of T-bond and T-note futures contracts with the various cash T-bonds and T-notes eligible for delivery. This factor is based on the relationship of the cash-instrument coupon to the required 8 percent deliverable grade of a futures contract as well as taking into account the cash instrument's maturity or call. [CBOT][MIDAM] Numbers published by a futures exchange to determine invoice prices for debt instruments deliverable against bond or note futures contracts. A separate conversion factor is published for each deliverable instrument. Invoice price = Contract Size X Futures Settlement Price X Conversion Factor + Accrued Interest. [CFTC] Rules set by the Chicago Board of Trade for determining the invoice price of each acceptable deliverable Treasury issue against the Treasury Bond futures contract. [Harvey]

conversion premium

The percentage by which the conversion price in a convertible security exceeds the prevailing common stock price at the time the convertible security is issued. [Harvey]

conversion price

Par value of a convertible security divided by the number of shares into which it may be exchanged. [WCSU]

conversion ratio

Number of shares for which a convertible security may be exchanged. [WCSU] The number of shares of common stock that the security holder will receive from exercising the call option of a convertible security. [Harvey]

conversion value

Also called parity value, the value of a convertible security if it is converted immediately. [Harvey]

convertibility

Ease of exchanging one currency for that of another nation or for gold. [ITDS] The ability of owners of one currency to exchange it for other foreign currencies (or gold) in the open market. Some countries permit portion of their currency to be convertible and will designate accounts that way, for example, 'External' sterling and 'Free' yen. [FDIC] The degree of freedom to exchange a currency without government restrictions or controls. [Harvey]

convertible

A bond or a preferred stock that, under specified conditions, may be exchanged for common stock or another security, usually of the same issuer. [OTS] A bond, debenture or preferred share that may be exchanged by the owner for common stock or another security, usually of the same company, in accordance with the terms of the issue. [NYSE]

convertible bonds

Bonds that can be converted into common stock at the option of the holder. [Harvey]

convertible Eurobond

A Eurobond that can be converted into another asset, often through exercise of attached warrants. [Harvey]

convertible exchangeable preferred stock

Convertible preferred stock that may be exchanged, at the issuer's option, into convertible bonds that have the same conversion features as the convertible preferred stock. [Harvey]

convertible preferred stock

Preferred stock that can be converted into common stock at the option of the holder. [Harvey]

convertible price

The contractually specified price per share at which a convertible security can be converted into shares of common stock. [Harvey]

convertible security

A security that can be converted into common stock at the option of the security holder, including convertible bonds and convertible preferred stock. [Harvey] Bond or preferred stock that maybe converted into another security at the beholder's option. [WCSU]

convex

Bowed, as in the shape of a curve. Usually referring to the price/required yield relationship for option-free bonds. [Harvey]

convexity

The rate of change in price of a position for a given change in yield. [TMAC] rate of change in duration with respect to changes in interest rates. Positive convexity occurs when durations shorten as interest rates rise or lengthen as interest rates decrease. Negative convexity occurs when durations lengthen as interest rates rise or shorten as interest rates decrease. Mortgages typically have negative convexity, because as interest rates rise the incentive to prepay is reduced, thus extending the duration of the mortgage. [OTS]

convexity risk

The risk of adverse changes in the price of a position due to changes in the yield. [TMAC]

convey

The act of transferring title to real property from one party to another. [OTS]

conveyance

A document, such as a deed, used to effect a transfer of property from one owner to another. [OTS]

cooperative

A system of indirect ownership of a single unit in a multi-unit structure. The individual owns shares in a non-profit corporation that holds title to the building. In turn, the corporation gives the owner a long-term proprietary lease on the unit. The corporation may finance the property with a blanket mortgage. Homeowners, in turn, may get a share loan to finance the purchase of the shares that entitle them to occupy a specific apartment. Also called a co-op. [OTS]

cooperative banks

state-chartered savings associations located in Massachusetts, New Hampshire, Rhode Island and Vermont. [OTS]

core branch P&A

A component in a purchase and assumption (P&A) transaction in an RTC branch breakup resolution. Under the terms of the core branch P&A agreement, the acquiring institution assumes all of the deposit liabilities directly attributable to the failed institution's headquarters branch and other acquired branches, and certain other liabilities. In addition, the acquirer purchases the assets directly attributable to the headquarters and other acquired branches as well as assets that are not branch-specific such as the trust or credit card business. The core branch P&A incorporates the terms of the standard P&A as the standard terms and conditions of the transaction. Generally, the core branch P&A was used in branch breakup transactions for the sale of the headquarters branch or core branch clusters while individual branch offices were sold under the limited branch P&A. [FDIC]

core capital

one of three capital standards established for savings institutions in 1989. The minimum amount of core capital for the soundest institutions is 3 percent of assets. [OTS]

core competency

Primary area of competence. Narrowly defined fields or tasks at which a company or business excels. Primary areas of specialty. [Harvey]

core deposit intangibles

A premium paid to acquire the core deposits of an institution. The premium is the amount paid in excess of the dollar amount of the deposits, and under accounting rules, the premium is listed on the books as an intangible asset. [OTS]

core deposits

That portion of a bank's deposits that is relatively stable and has a predictable cost. Deposits fluctuate seasonally and cyclically, but even in adverse circumstances, deposits normally do not fall below some minimum level. [FDIC] those deposits that are expected to remain with a savings institution for a relatively long period of time. Such deposits are attracted by the convenience and service offered by the institution rather than from interest rates paid. [OTS]

core inflation

The basic level of inflation over a period of time as opposed to temporary fluctuations. [ITDS]

core principle

A provision of the Commodity Exchange Act with which a contract market, derivatives transaction execution facility, or derivatives clearing organization must comply on an ongoing basis. There are 18 core principles for contract markets, 9 core principles for derivatives transaction execution facilities, and 14 core principles for derivatives clearing organizations. [CFTC]

corn laws

Tariffs which England placed on grain imports from 1815 to 1846. By restricting the supply or grain in England, these laws raised the price of grain in England and increased the value of English farmland. [FACS]

corn-hog ratio

corner

(1) Securing such relative control of a commodity that its price can be manipulated, that is, can be controlled by the creator of the corner; or (2) in the extreme situation, obtaining contracts requiring the delivery of more commodities than are available for delivery. [CFTC]

corner a market

To purchase enough of the available supply of a commodity or stock in order to manipulate its price. [Harvey]

corner lot

A lot abutting two or more streets at their intersection. [OTS]

corporate acquisition

The acquisition of one firm by another firm. [Harvey]

corporate bond

A bond issued by a corporation. [NYSE] Debt obligations issued by corporations. [Harvey]

corporate charter

A legal document creating a corporation. [Harvey]

corporate dumping

The practice of exporting banned or out of date goods to a foreign market where restrictions on that product are not as severe. [ITDS]

corporate finance

One of the three areas of the discipline of finance. It deals with the operation of the firm (both the investment decision and the financing decision) from that firm's point of view. [Harvey]

corporate financial management

The application of financial principals within a corporation to create and maintain value through decision making and proper resource management. [Harvey]

corporate financial planning

Financial planning conducted by a firm that encompasses preparation of both long- and short-term financial plans. [Harvey]

corporate payments

Corporate payments are payments that are used by businesses to pay other businesses for goods or services. [GAO]

corporate personality

The principle that a company is for legal purposes an independent person having an existence separate from that of the human beings who own, manage and service it. [UNODC]

corporate processing float

The time that elapses between receipt of payment from a customer and the depositing of the customer's check in the firm's bank account; the time required to process customer payments. [Harvey]

corporate profits

The income earned by corporations as a result of current production. This measure differs from profits as they are reported in corporate financial statements. It excludes capital gains and losses, and it is calculated by valuing depreciation of fixed assets and inventory withdrawals at current cost, rather than at historical cost. [BEA]

corporate tax view

The argument that double (corporate and individual) taxation of equity returns makes debt a cheaper financing method. [Harvey]

corporate taxable equivalent

Rate of return required on a par bond to produce the same after-tax yield to maturity that the premium or discount bond quoted would. [Harvey]

corporate trade exchange (CTX)

An ACH payment program for corporate to corporate payments. [ACH]

corporate trade payment (CTP)

A payment made between corporations through the ACH network. [ACH]

corporation

A group of people granted a charter legally recognizing them as a separate entity having its own rights, powers, privileges and liabilities distinct and separate from those of its members. [OTS] A legal 'person' that is separate and distinct from its owners. A corporation is allowed to own assets, incur liabilities, and sell securities, among other things. [Harvey]

corporator

(1) a member of a corporation, especially one of the original members who formed the corporation. (2) one of a group that, in certain states, elects the trustees of a mutual savings bank. [OTS]

corporeal property

real or personal property having form or structure, such as a house, furniture, land, equipment or an automobile. [OTS]

correction

A temporary decline in prices during a bull market that partially reverses the previous rally. [CFTC]

corrective action plan (CAP)

A plan for correcting organizational or operational weaknesses. As defined in the FDIC Internal Control Review program, a CAP states the deficiency, the corrective action required to cure the deficiency, the person or persons responsible for the action, and actual or expected completion dates for the required actions. [FDIC]

correlation

A measure of the degree to which returns on two risky assets move in tandem. A positive correlation means the returns move together. A negative correlation means they vary inversely. [TMAC]

correlation coefficient

A standardized statistical measure of the dependence of two random variables, defined as the covariance divided by the standard deviations of two variables. [Harvey] Measure of the closeness of the relationship between two variables. [WCSU]

correlation risk

The risk that the actual correlation between two risk assets is not equal to the estimated or expected correlation. [TMAC]

correspondent

A securities firm, bank or other financial organization that regularly performs services for another in a place or market to which the other does not have direct access. Securities firms may have correspondents in foreign countries or on exchanges of which they are not members. Correspondents are frequently linked by private wires. Member organizations of the NYSE with offices in New York City may also act as correspondents for out-of-town member organizations that do not maintain New York offices. [NYSE]

correspondent bank

A bank that accepts deposits of and performs banking services for other depository institutions. [FRB][FRBC][FRBM][FRBSF] A bank that regularly performs services for another financial institution usually located in another city or marketing area. Services typically include handling out-of-area checks, trusts and technical services, and acceptance of deposits from the out-of-area institution. [OTS] A correspondent bank is a bank that--by arrangement--holds the deposits of another bank and provides payments and other services for that bank. [GAO]

cosigner

A term referring to a person, other than the principle borrower, who signs for a loan. The cosigner(s) assumes equal liability for the loan. [FRBSF] An individual or entity that signs a legal document on an equal basis with the signer. On a promissory note, all cosigners are individually and jointly liable for repayment of the full debt. [OTS] Another person who signs for a loan and assumes equal liability for it. [FRB][FRBC][FRBM]

cost

(A) The amount of money or other consideration exchanged for property or services. Costs may be incurred even before money is paid; that is, as soon as liability is incurred. Ultimately, however, money or other consideration must be given in exchange. Again, the cost of some property or service may, in turn, become a part of the cost of another property or service. For example, the cost of part of all of the materials purchased at a certain time will be reflected in the cost of articles made from such materials or in the cost of those services in the rendering of which the materials were used. Expense . (B) The amount of money or other consideration exchanged for property or services. Costs may be incurred even before money is paid; that is as soon as liability is incurred. Ultimately, however, money or other consideration must be given to exchange. [EPA] The most valuable opportunity forsaken when a choice is made. [FACS] something of value, usually an amount of money, given up in exchange for something else, usually goods or services. All expenses are costs, but not all costs are expenses. (An expense is the cost of resources used to produce revenue.) As a verb, cost means to estimate the amount of money needed to produce a product or perform a service. [OTS]

cost accounting

A branch of accounting dealing with the classification, recording, allocation, summarization and reporting of current and prospective costs and analyzing their behaviors. Cost accounting is frequently used to facilitate internal decision making and provides tools with which management can appraise performance and control costs of doing business. [OTS]

cost allocation

The process of expressing the total utility revenue requirements, including operation and maintenance expense, depreciation expense, and other capital costs, in terms of costs related to various service requirements or functions. [EPA]

cost and freight

cost approach to value

An approximation of the market value of improved real estate measured as the cost of reproduction or replacement. [OTS]

cost basis

The original price of an asset, normally the purchase price or the appraised value of the asset at the time of acquisition. [OTS]

cost company arrangement

Arrangement whereby the shareholders of a project receive output free of charge but agree to pay all operating and finance charges of the project. [Harvey][WCSU]

cost of capital

The required return for a capital budgeting project. [Harvey]

cost of carry (or carry)

cost of carry

cost of funds

Interest rate associated with borrowing money. [Harvey] The interest paid or accrued on savings, advances from a Federal Home Loan Bank or interest on other funds borrowed by a thrift institution, expressed as a percent of its average total savings and borrowings during a given accounting period. [OTS]

cost of funds index

A measure of how much interest a financial institution must pay for money it borrows from savers in the form of deposits, or from other lenders such as a Federal Home Loan Bank. The index, expressed as a percentage, is calculated by dividing the total amount of interest (or costs) paid or accrued on deposits, on District Bank advances and on other borrowed money, by the average amount of deposits and borrowed money on hand during a reporting period. A cost of funds index, such as the one published by the Office of Thrift Supervision, may be used by lending institutions as the basis for adjusting interest rates on adjustable rate mortgage loans. [OTS]

cost of lease financing

A lease's internal rate of return. [Harvey]

cost of limited partner capital

The discount rate that equates the after-tax inflows with outflows for capital raised from limited partners. [Harvey]

cost of tender

Total of various charges incurred when a commodity is certified and delivered on a futures contract. [CFTC]

cost test

The statutory requirement before enactment of FDICIA that a P&A transaction be less costly to the relevant insurance fund than a payoff and liquidation. The 'cost test' was introduced in 1982 by the Garn--St Germain Depository Institutions Act, which enhanced the power of the FDIC and FSLIC to provide aid to troubled institutions and imposed the condition that the assistance provided must be less costly than the cost of liquidation. [FDIC]

cost, insurance, and freight (C.I.F.)

A price quotation under which the seller defrays all expenses involved in the delivery of goods. [FDIC] Cost, insurance, and freight paid to a point of destination and included in the price quoted. [CFTC]

cost, insurance, freight

Term refers to a sale in which the buyer agrees to pay a unit price that includes the free on board (FOB) value at the port of origin plus all costs of insurance and transportation. This type of transaction differs from a 'delivered' agreement in that it is generally ex-duty, and the buyer accepts the quantity and quality at the loading port rather than pay on quality and quantity as determined at the unloading port. Risk and title are transferred from the seller to the buyer at the loading port, although the seller is obliged to provide insurance in a transferable policy at the time of loading. [NYMEX]

cost-benefit ratio

The net present value of an investment divided by the investment's initial cost. Also called the profitability index. [Harvey]

cost-causative agent

Effecting or operating as an agent which is responsible for the cost effect produced. [EPA]

cost-effective

economical in terms of tangible benefits produced by money spent. [OTS]

cost-of-living adjustments

Automatic adjustments in incomes paid to individual recipients which are tied to the inflation rate, usually measured by the Consumer Price Index. [FACS]

cost-plus

A pricing method where the purchaser agrees to pay the production cost of the good plus a fixed percentage to the seller for profit. [ITDS] The practice of establishing the selling price for a product or service by adding a fixed amount or percentage to costs. For example, the FDIC's ALA contractors received a cost-plus compensation package. [FDIC]

cost-plus contract

A construction contract in which the contract price is equal to the cost of construction plus a profit allowance to the builder, as opposed to a fixed price contract. [OTS]

cost-push inflation

A term that applies when increases in the price level are caused by increases in cost. [FACS]

costless collar

Is made up of two options, one purchased and one written, structured so that the value of the two premiums are equal and offsetting. [TMAC]

costs of issuance

The expenses associated with the sale of a new issue of municipal securities, including such items as underwriter's spread, printing, legal fees and rating costs. [EPA]

council of economic advisors

Three persons who act as the Presidents chief economic advisers. [FACS]

Council of Europe

The CoE was established 5 May 1949 to promote increased unity and quality of life in Europe. It is located in Strasbourg, France. [UNODC]

counter trade

The exchange of goods for other goods rather than for cash; barter. [Harvey]

counter-trend trading

In technical analysis, the method by which a trader takes a position contrary to the current market direction in anticipation of a change in that direction. [CFTC]

counterfeit

something that is an imitation and is made to deceive persons into believing that the forgery is genuine. Counterfeit money, for example, are bills printed by private parties to be passed off as legitimate U.S. currency. [OTS]

counterpart items

In the balance of payments, counterpart items are analogous to unrequited transfers in the current account. They arise because the double-entry system in balance of payments accounting and refer to adjustments in reserves owing to monetization or demonetization of gold, allocation or cancellation of SDRs, and revaluation of the various components of total reserves. [Harvey]

counterparty

Party on the other side of a trade or transaction. [Harvey] The opposite party in a bilateral agreement, contract, or transaction, such as a swap. In the retail foreign exchange (or Forex) context, the party to which a retail customer sends its funds; lawfully, the party must be one of those listed in Section 2(c)(2)(B)(ii)(I)-(VI) of the Commodity Exchange Act. [CFTC] The other party in a swap transaction. [OTS] The parties to an interest rate swap. [Harvey]

counterparty risk

The risk associated with the financial stability of the party entered into contract with. Forward contracts impose upon each party the risk that the counterparty will default, but futures contracts executed on a designated contract market are guaranteed against default by the clearing organization. [CFTC] The risk that the other party to an agreement will default. In an options contract, the risk to the option buyer that the option writer will not buy or sell the underlying as agreed. [Harvey]

countersignature

An additional signature attesting to the authenticity of the first signature or the authenticity of the document being signed. [OTS]

country beta

Covariance of a national economy's rate of return and the rate of return the world economy divided by the variance of the world economy. [Harvey]

country economic risk

Developments in a national economy that can affect the outcome of an international financial transaction. [Harvey]

country financial risk

The ability of the national economy to generate enough foreign exchange to meet payments of interest and principal on its foreign debt. [Harvey]

country of departure

The country from which a ship or shipment has or is scheduled to depart. [ITDS]

country of destination

The country that is the ultimate destination for a ship or shipment of goods. [ITDS]

country of dispatch

The country from which cargo was shipped. [ITDS]

country of exportation

Usually, the country in which the merchandise was manufactured and produced and from where it was first exported. [ITDS]

country of origin

The country where merchandise was grown, mined or manufactured. [ITDS]

country risk

General level of political and economic uncertainty in a country affecting the value of loans or investments in that country. [Harvey] The financial risks of a transaction which relate to the political, economic, or social instability of a country. [ITDS]

country selection

A type of active international management that measures the contribution to performance attributable to investing in the better-performing stock markets of the world. [Harvey]

coupon

(1) Specifically, a coupon attached to the certificate of a bearer bond that must be surrendered to collect the interest payment. (2) More generally, interest payment on debt. [WCSU] (1) a tab attached to a bond, which can be torn off and presented to collect an interest payment, usually semiannually. (2) a percentage of a bond's face value, which is the annual rate of return received by the bondholder. [OTS] Negotiable instrument attached to a security, representing interest payable on the principal amount of the security on a date certain and upon presentation of the coupon. A coupon usually represents 'six months interest' on the principal amount of the security to which it is attached; often the 'first coupon' or the 'short coupon' (that representing the first interest payable after issuance)is for a period of fewer or more than six months. [EPA] The interest rate on a debt instrument expressed in terms of a percent on an annualized basis that the issuer guarantees to pay the holder until maturity. [CBOT][MIDAM] The periodic interest payment made to the bondholders during the life of the bond. [Harvey]

coupon bond

A written document evidencing a debt obligation to which interest coupons are attached. Each coupon bears a different maturity date and states the interest due on that date. The bondholder clips the coupons from the bond as they mature and presents the coupons to the bond issuer for payment of interest. [OTS] Bond with interest coupons attached. The coupons are clipped as they come due and presented by the holder for payment of interest. [NYSE] Bonds issued with coupons attached that are 'clipped' on each interest payment date and presented for payment. [EPA]

coupon book

A set of notices, usually computer generated, that the borrower returns to the lender, one at a time, with each loan repayment or with each deposit to a savings account such as a club account. [OTS]

coupon equivalent yield

True interest cost expressed on the basis of a 365-day year. [Harvey]

coupon payments

A bond's interest payments. [Harvey]

coupon rate

In bonds, notes or other fixed income securities, the stated percentage rate of interest, usually paid twice a year. [Harvey] The annual interest rate of a debt instrument. More generally, the annual interest rate on any indebtedness. In mortgage banking, the term is used to describe the contract interest rate on the face of a bond or note. [OTS] The interest rate specified on interest coupons attached to a bond. The term is synonymous with nominal interest rate. [EPA]

coupon security

Security with coupons attached. (Compare 'fully Registered'.) [EPA]

courier

Attendant who accompanies shipments. [ITDS]

court

(1) an open area between buildings or walls. (2) an institution in which disputes and conflicts are heard, argued and decided on the basis of law. (3) an area equipped for playing such games as tennis or racquetball, and sometimes provided as an amenity for owners or tenants in a housing development. [OTS]

court of equity

A court of law in which mortgage suits and foreclosure actions are heard and decided. [OTS]

covariance

A statistical measure of the degree to which random variables move together. [Harvey] Measure of the comovement between two variables. [WCSU]

covenant

Agreements and undertakings in the security documents to do or not to do something. (Covenants are distinguished from representations or warranties, which assert the existence or nonexistence of a set of facts.) Although it is generally clear that the breach of a covenant Would be a default under usual default provisions, it often is not clear under the language of most security documents that a default occurs if a representation or warranty turns out not to be true. [EPA] Clause in a loan agreement. [WCSU] Provisions in a bond indenture or preferred stock agreement that require the bond or preferred stock issuer to take certain specified actions (affirmative covenants) or to refrain from taking certain specified actions (negative covenants). [Harvey] The part of a loan agreement that sets forth constraints as to what the borrower will and will not do regarding the property pledged as collateral for the loan. Covenants may also be written into a deed. Real covenants bind subsequent owners of the property while personal covenants do not. [OTS]

cover

(1) Purchasing futures to offset a short position (same as Short Covering) (2) to have in hand the physical commodity when a short futures sale is made, or to acquire the commodity that might be deliverable on a short sale. [CFTC] The execution of an offsetting foreign exchange trade to close or eliminate an open exposure. [FDIC] The purchase of a contract to offset a previously established short position. [Harvey] To close out a short futures or option position. [NYMEX]

coverage

The ratio of net revenue available for debt service to the average annual debt service requirements of an issue of revenue bonds. [EPA]

coverage ratio

A key ratio for an enterprise fund, calculated by dividing the net revenues of the fund (total revenues minus operating expenses) by the annual debt service on revenue bonds outstanding and multiplying by 100. Quantity of revenues and stability and predictability of coverage r-age are all important analytical factors. [EPA] Ratios used to test the adequacy of cash flows generated through earnings for purposes of meeting debt and lease obligations, including the interest coverage ratio and the fixed charge coverage ratio. [Harvey]

covered assets

assets of a failed financial institution that are purchased or acquired under a government program that protects the new owner against all or partial loss when the assets are sold. [OTS]

covered call

A short call option position in which the writer owns the number of shares of the underlying stock represented by the option contracts. Covered calls generally limit the risk the writer takes because the stock does not have to be bought at the market price, if the holder of that option decides to exercise it. [Harvey]

covered call option writing

A call option seller is covered if he owns the underlying actuals (Naked Call Option Writing) for the call option contract. [TMAC]

covered call writing strategy

A strategy that involves writing a call option on securities that the investor owns in his or her portfolio. [Harvey]

covered interest arbitrage

A portfolio manager invests dollars in an instrument denominated in a foreign currency and hedges his resulting foreign exchange risk by selling the proceeds of the investment forward for dollars. [Harvey]

covered option

A short call or put option position that is covered by the sale or purchase of the underlying futures contract or other underlying instrument. For example, in the case of options on futures contracts, a covered call is a short call position combined with a long futures position. A covered put is a short put position combined with a short futures position. [CFTC] An option position that is offset by an equal and opposite position in the underlying security. [NYSE]

covered or hedge option strategies

Strategies that involve a position in an option as well as a position in the underlying stock, designed so that one position will help offset any unfavorable price movement in the other, including covered call writing and protective put buying. [Harvey]

covered put

A put option position in which the option writer also is short the corresponding stock or has deposited, in a cash account, cash or cash equivalents equal to the exercise of the option. This limits the option writer's risk because money or stock is already set aside. In the event that the holder of the put option decides to exercise the option, the writer's risk is more limited than it would be on an uncovered or naked put option. [Harvey]

covered writing

The sale of an option against an existing position in the underlying futures contract. For example, short call and long futures. [NYMEX]

Cox-Ross-Rubinstein option pricing model

An option pricing model developed by John Cox, Stephen Ross, and Mark Rubinstein that can be adopted to include effects not included in the Black-Scholes Model (e.g., early exercise and price supports). [CFTC]

crack spreads

(1) In energy futures, the simultaneous purchase of crude oil futures and the sale of petroleum product futures to establish a refining margin. One can trade a gasoline crack spread, a heating oil crack spread, or a 3-2-1 crack spread which consists of three crude oil futures contracts spread against two gasoline futures contracts and one heating oil futures contract. The 3-2-1 crack spread is designed to approximate the typical ratio of gasoline and heating oil that results from refining a barrel of crude oil. (2) Calculation showing the theoretical market value of petroleum products that could be obtained from a barrel of crude after the oil is refined or cracked. This does not necessarily represent the refining margin because a barrel of crude yields varying amounts of petroleum products. [CFTC] The simultaneous purchase or sale of crude oil against the sale or purchase of refined petroleum products. These spread differentials which represent refining margins are normally quoted in dollars per barrel by converting the product prices into dollars per barrel (divide the cents-per-gallon price by 42) and subtracting the crude price. [NYMEX]

craft unions

Exclusive combinations of workers in individual trades such as printers, shoemakers and bakers. [FACS]

cramdown

A court-ordered reduction of the secured balance due on a home mortgage loan, granted to a homeowner who has filed for personal bankruptcy. In a cramdown, the bankruptcy court splits the outstanding mortgage balance into two parts. The amount of debt equal to the current appraised value of the home is treated as a secured claim, which the borrower must continue to pay. The amount of debt in excess of the current property's value becomes an unsecured claim, which is usually not repaid in full. In areas where home prices have depreciated, cramdowns can result in significant mortgage reductions. In some cases, the judge may order the remaining secured debt amortized over the remaining life of the loan term, thus lowering monthly payments. In other cases, monthly payments remain the same as before the cramdown, and the secured mortgage is simply paid off faster. [OTS] The ability of the bankruptcy court to confirm a plan of reorganization over the objections of some classes of creditors. [Harvey]

crawling peg

An automatic system for revising the exchange rate. It involves establishing a par value around which the rate can vary up to a given percent. The par value is revised regularly according to a formula determined by the authorities. [Harvey]

credible signal

A signal that provides accurate information; a signal that can be distinguish among senders. [Harvey]

credit

(1) the provision of goods or services in exchange for the promise of future payment. (2) an accounting term that refers to the right-hand side of an account record in which the amounts are entered in a double-entry system of bookkeeping. [OTS] Money loaned. [Harvey] The capacity to borrow money up to a specified limit under specified conditions. [FACS] The promise to pay in the future in order to buy or borrow in the present. The right to defer payment of debt. [FRB][FRBC][FRBM][FRBSF]

credit analysis

The process of analyzing information on companies and bond issues in order to estimate the ability of the issuer to live up to its future contractual obligations. [Harvey]

credit bureau

An agency that collects and distributes credit-history information of individuals and businesses. [OTS]

credit card

A credit card is a payment card issued to a person for purchasing goods and services and obtaining cash against a line of credit established by the issuer. Credit cards can be of two types: those issued by merchants and vendors, such as department stores or oil companies, and general purpose credit cards issued by banks. [GAO] A plastic card that can be used by the cardholder to make purchases or obtain cash advances using a line of credit extended by the financial institution that issued the card. The card normally contains the cardholder's name and account number and may contain other information encoded on a magnetic strip. Some credit cards may be used in automatic teller machines. [OTS] Any card, plate, or coupon book that may be used repeatedly to borrow money or buy goods and services on credit. [FRB][FRBC][FRBM][FRBSF]

credit card company

A credit card company is a company that owns the trademark of a particular credit card and may also provide a number of marketing, processing, or other services to the members using the card services. [GAO]

credit card fraud

A wide-ranging term for theft and fraud committed using or involving a payment card, such as a credit card or debit card, as a fraudulent source of funds in a transaction. The purpose may be to obtain goods without paying, or to obtain unauthorized funds from an account. Credit card fraud is also an adjunct to identity theft. [Wikipedia]

credit crunch

slang for a general economic condition in which loans are harder to obtain. [OTS]

credit default option

A put option that makes a payoff in the event the issuer of a specified reference asset defaults. Also called default option. [CFTC]

credit default swap

A bilateral over-the-counter (OTC) contract in which the seller agrees to make a payment to the buyer in the event of a specified credit event in exchange for a fixed payment or series of fixed payments; the most common type of credit derivative; also called credit swap; similar to credit default option. [CFTC]

credit deposit

The value of a merchant's credit card purchases that are credited to its bank account after the acquirer buys the merchant's sales slips. The deposit is credited. It is not funded until the acquirer gets the monetary value from the issuer during settlement. [GAO]

credit derivative

A derivative contract designed to assume or shift credit risk, that is, the risk of a credit event such as a default or bankruptcy of a borrower. For example, a lender might use a credit derivative to hedge the risk that a borrower might default or have its credit rating downgraded. Common credit derivatives include credit default swaps, credit default options, credit spread options, and total return swaps. [CFTC]

credit enhancement

Lending of a superior credit for a fee to an issue or issuer for the purpose of increased marketability. [EPA] Purchase of the financial guarantee of a large insurance company to raise funds. [Harvey]

credit event

An event such as a debt default or bankruptcy that will affect the payoff on a credit derivative, as defined in the derivative agreement. [CFTC]

credit history

A record of how a person has borrowed and repaid debt. [FRB][FRBC][FRBM][FRBSF]

credit life insurance

insurance on the life of a borrower that pays off a specific amount of debt or a specified credit account if the borrower dies. [OTS]

credit line

A credit line is the maximum amount of credit available in an open-ended credit arrangement, such as a bank credit card, which the lender may change at any time. The credit line is disclosed in the credit card agreement. [GAO]

credit period

The length of time for which the customer is granted credit. [Harvey]

credit rating

A rating determined by a rating agency that indicates the agency's opinion of the likelihood that a borrower such as a corporation or sovereign nation will be able to repay its debt. The rating agencies include Standard & Poor's, Fitch, and Moody's. [CFTC] An estimate of the likelihood that a borrower will repay a loan on time. This measure of creditworthiness is based on the borrower's present financial condition, past credit history, integrity and experience. [OTS]

credit risk

An estimate of the probability that a borrower will not repay all or a portion of a loan on time. The risk that a loan will not be repaid. [OTS] The risk of loss from a counterparty who is unwilling or unable to settle its side of a transaction. [TMAC] The risk that an issuer of debt securities or a borrower may default on his obligations, or that the payment may not be made on a negotiable instrument. [Harvey]

credit scoring

A procedure for assignment scores to companies on the basis of the risk of default. [WCSU] A statistical technique wherein several financial characteristics are combined to form a single score to represent a customer's creditworthiness. [Harvey]

credit scoring system

A statistical system used to determine whether or not to grant credit by assigning numerical scores to various characteristics related to creditworthiness. [FRB][FRBC][FRBM][FRBSF]

credit spread

The difference between the yield on the debt securities of a particular corporate or sovereign borrower (or a class of borrowers with a specified credit rating) and the yield of similar maturity Treasury debt securities. [CFTC]

credit spread option

An option whose payoff is based on the credit spread between the debt of a particular borrower and similar maturity Treasury debt. [CFTC]

Credit Standards Advisory Committee (CSAC)

An independent committee established by Congress in the Financial Institutions Reform, Recovery and Enforcement Act of 1989. The committee consists of representatives of the five federal bank/thrift regulatory agencies plus six members of the public who are knowledgeable with the credit standards and lending practices of insured depository institutions. The committee's mission is to monitor and review the credit standards and lending practices of federally insured depository institutions and recommend any needed changes in federal regulation and supervision. [OTS]

credit support providers

Are typically party to swap agreements where one of the counterparties is a member of a corporate group in which other members of the group are stronger credits. [TMAC]

credit swap

credit unions

A cooperative organization chartered by state or federal government that accepts savings from its members and makes low interest loans to its members. Credit unions are normally formed among members who are employed by the same company or are members of the same organization. [OTS] Credit Unions are financial cooperative organizations of individuals with a common affiliation (such as employment, labor union membership, or place of residence). Credit unions accept deposits of members, pay interest (dividends) on them out of earnings, and primarily provide consumer installment credit to members. [FRBC] Financial cooperative organization of individuals who have a common bond, such as a place of employment, residence, or membership in a labor union. Credit unions accept deposits from members, pay interest (in the form of dividends) on the deposits out of earnings, and use their funds mainly to provide consumer installment loans to members. [FRBSF]

crediting rate

The interest rate offered on an investment type insurance policy. [Harvey]

creditor

An individual, business or other organization to whom money or something of value is owed. [OTS] Lender of money. [Harvey]

creditworthiness

A creditor's measure of a consumer's past and future ability and willingness to repay debts. [FRB][FRBC][FRBM][FRBSF]

crime

criminal

critically undercapitalized

One of the five capital categories of financial condition established by FDICIA and codified in section 38 of the FDI Act. The five categories are wellcapitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. Section 38 requires banking supervisors to impose constraints on insured depository institutions that are determined to be in any of the latter three categories. An insured depository institution is 'critically undercapitalized' if its ratio of tangible capital to total assets is equal to or less than 2 percent. [FDIC]

criticized assets

loans with payments in arrears that are rated by government examiners as substandard, doubtful, loss or special mention. Criticized assets include classified assets plus those listed as special mention. [OTS]

crop (marketing) year

The time span from harvest to harvest for agricultural commodities. The crop marketing year varies slightly with each ag commodity, but it tends to begin at harvest and end before the next year's harvest, e.g., the marketing year for soybeans begins September 1 and ends August 31. The futures contract month of November represents the first major new-crop marketing month, and the contract month of July represents the last major old-crop marketing month for soybeans. [CBOT][MIDAM]

crop reports

Reports compiled by the U.S. Department of Agriculture on various ag commodities that are released throughout the year. Information in the reports includes estimates on planted acreage, yield, and expected production, as well as comparison of production from previous years. [CBOT][MIDAM]

crop year

The time period from one harvest to the next, varying according to the commodity (e.g., July 1 to June 30 for wheat; September 1 to August 31 for soybeans). [CFTC]

cross default

A provision under which default on one debt obligation triggers default on another debt obligation. [Harvey]

cross guarantee

A provision of the FDI Act added by FIRREA that allows the FDIC to recover part of its costs of liquidating or assisting a troubled insured institution by assessing those costs to the remaining solvent insured institutions which are commonly controlled as defined in the statute. When the FDIC acts to protect its interests under this provision, the assessment can result in a liquidity strain or, in some cases, the immediate insolvency of an affiliated bank. [FDIC]

cross holdings

One corporation holds shares in another firm. [Harvey]

cross rates

In foreign exchange, the price of one currency in terms of another currency in the market of a third country. For example, the exchange rate between Japanese yen and Euros would be considered a cross rate in the U.S. market. [CFTC] The exchange rate between two currencies expressed as the ratio of two foreign exchange rates that are both expressed in terms of a third currency. [Harvey] The ratio between the exchange rate of two foreign currencies in terms of a third currency. [FDIC]

cross trade

Offsetting or noncompetitive match of the buy order of one customer against the sell order of another, a practice that is permissible only when executed in accordance with the Commodity Exchange Act, CFTC regulations, and rules of the contract market. [NYMEX]

cross trading

Offsetting or noncompetitive match of the buy order of one customer against the sell order of another, a practice that is permissible only when executed in accordance with the Commodity Exchange Act, CFTC rules, and rules of the exchange. [CFTC]

cross-border risk

Refers to the volatility of returns on international investments caused by events associated with a particular country as opposed to events associated solely with a particular economic or financial agent. [Harvey]

cross-default clause

Clause in the loan agreement stating that the company is in default if it fails to meet its obligation on any other debt issue. [WCSU]

cross-hedge

Hedging a cash market position in a futures or option contract for a different but price-related commodity. [CFTC]

cross-hedging

Hedging a cash commodity using a different but related futures contract when there is no futures contract for the cash commodity being hedged and the cash and futures markets follow similar price trends (e.g., using soybean meal futures to hedge fish meal). [CBOT][MIDAM] The practice of hedging with a futures contract that is different from the underlying being hedged. [Harvey]

cross-margining

A procedure for margining related securities, options, and futures contracts jointly when different clearing organizations clear each side of the position. [CFTC]

cross-sectional approach

A statistical methodology applied to a set of firms at a particular point in time. [Harvey]

crossover rate

The return at which two alternative projects have the same net present value. [Harvey]

crowding in

Increase of private investment through the income-raising effect of government spending financed by deficits. [FACS]

crowding out

The tendency for federal government, by deficit financing to compete with firms or persons for borrowed funds; that is, firms and households unable to borrow at a low rate of interest curtail their investment and consumption spending. [FACS]

crown jewel

A particularly profitable or otherwise particularly valuable corporate unit or asset of a firm. [Harvey]

crude oil

A mixture of hydrocarbons that exists as a liquid in natural underground reservoirs and remains liquid at atmospheric pressure after passing through surface separating facilities. Crude is the raw material which is refined into gasoline, heating oil, jet fuel, propane, petrochemicals and other products. [NYMEX]

crush spread

In the soybean futures market, the simultaneous purchase of soybean futures and the sale of soybean meal and soybean oil futures to establish a processing margin. [CFTC] The purchase of soybean futures and the simultaneous sale of soybean oil and meal futures. [CBOT][MIDAM]

cubage

A method of appraising property using the cost approach. The front, or width, of the building is multiplied by the depth of the building and by its height, figured from the floor of the basement to the outer surfaces of the exterior walls and roof. The total cubic measurement is then multiplied by a cost-per-cubic-foot factor to obtain the appraisal figure. [OTS]

cubic foot

The most common measure of gas volume, referring to the amount of gas needed to fill a volume of one cubic foot at 14.73 pounds per square inch absolute pressure and 60o Fahrenheit. One cubic foot of natural gas contains, on average, 1,027 Btus. [NYMEX]

cul de sac

A street with a dead end, usually with adequate space at the end for vehicles to turn around. [OTS]

Culpeper Switch

A federal reserve facility located in Culpeper, Virginia, just south of Washington, DC, housing computers that serve as a central relay for messages transmitted electronically on the Fedwire. Messages moving billions of dollars of funds and securities are processed electronically every day at the Culpeper facility. Most messages originate at financial institutions, are sent to Federal Reserve Banks and then are transmitted to Culpeper, where they are switched to other Federal Reserve Banks and finally to receiving financial institutions. [OTS]

cum dividend

With dividend. [Harvey]

cum rights

With rights. [Harvey]

cumulative abnormal return

Sum of the differences between the expected return on a stock and the actual return that comes from the release of news to the market. [Harvey]

cumulative dividend feature

A requirement that any missed preferred or preference stock dividends be paid in full before any common dividend payment is made. [Harvey]

cumulative preferred

A stock having a provision that if one or more dividends are omitted, the omitted dividends must be paid before dividends may be paid on the company's common stock. [NYSE]

cumulative preferred stock

Preferred stock whose dividends accrue, should the issuer not make timely dividend payments. [Harvey] Stock which takes priority over common stock in regard to dividend payments. Dividends may not be paid on the common stock until all past dividends on the preferred have been paid. [WCSU]

cumulative probability distribution

A function that shows the probability that the random variable will attain a value less than or equal to each value that the random variable can take on. [Harvey]

Cumulative Translation Adjustment account

An entry in a translated balance sheet in which gains and/or losses from translation have been accumulated over a period of years. The CTA account is required under the FASB No. 52 rule. [Harvey]

cumulative voting

A method of voting for corporate directors that enables the shareholders to multiply the number of their shares by the number of directorships being voted on and to cast the total for one director or a selected group of directors. A 10-shareholder normally casts 10 votes for each of, say, 12 nominees to the board of directors. One thus has 120 votes. Under the cumulative voting principle, one may do that or may cast 120 (10x12) votes for only one nominee, 60 for two, 40 for three, or any other distribution one chooses. Cumulative voting is required under the corporate laws of some states and is permitted in most others. [NYSE] A stockholder may cast all of his or her votes for one candidate for the board of directors. [WCSU] A system of voting for directors of a corporation in which shareholder's total number of votes is equal to his number of shares held times the number of candidates. [Harvey]

curb trading

Trading by telephone or by other means that takes place after the official market has closed and that originally took place in the street on the curb outside the market. Under the Commodity Exchange Act and CFTC rules, curb trading is illegal. Also known as kerb trading. [CFTC]

currency

Money. [Harvey] Paper money issued by the government. [FACS] coins and paper money, which circulate as a legal medium of exchange. [OTS]

currency appreciation

An increase in the value of one currency relative to another currency. Appreciation occurs when, because of a change in exchange rates, a unit of one currency buys more units of another currency. [FRB][FRBM][FRBSF]

currency arbitrage

Taking advantage of divergences in exchange rates in different money markets by buying a currency in one market and selling it in another market. [Harvey]

currency basket

The value of a portfolio of specific amounts of individual currencies, used as the basis for setting the market value of another currency. It is also referred to as a currency cocktail. [Harvey]

currency depreciation

A decline in the value of one currency relative to another currency. Depreciation occurs when, because of a change in exchange rates, a unit of one currency buys fewer units of another currency. [FRB][FRBM][FRBSF]

currency devaluation

A deliberate downward adjustment in the official exchange rate established, or pegged, by a government against a specified standard, such as another currency or gold. [FRB][FRBM][FRBSF]

currency future

A financial future contract for the delivery of a specified foreign currency. [Harvey]

currency option

An option to buy or sell a foreign currency. [Harvey] Currency options are options that represent the right to buy or sell foreign currency at a particular price within a specified period. [GAO]

currency revaluation

A deliberate upward adjustment in the official exchange rate established, or pegged, by a government against a specified standard, such as another currency or gold. [FRB][FRBM][FRBSF]

currency risk sharing

An agreement by the parties to a transaction to share the currency risk associated with the transaction. The arrangement involves a customized hedge contract embedded in the underlying transaction. [Harvey]

currency selection

Asset allocation in which the investor chooses among investments denominated in different currencies. [Harvey]

currency swaps

A swap that involves the exchange of one currency (e.g., U.S. dollars) for another (e.g., Japanese yen) on a specified schedule. [CFTC] A transaction involving the exchange of cash flows and principal in one currency for those in another with an agreement to reverse the principal swap at a future date. [UNODC] An agreement to swap a series of specified payment obligations denominated in one currency for a series of specified payment obligations denominated in a different currency. [Harvey] An exchange of equal initial principal amounts of two currencies at the spot exchange rate. Over the term of the agreement, the counterparties exchange fixed or floating rate interest payments in their swapped currencies. At maturity, the principal amount is reswapped at a predetermined exchange rate so that the parties end up with their original currencies. [TMAC]

current

A term which, applied to budgeting and accounting, designates the operations of the present fiscal period as opposed to past or future periods. It usually connotates items likely to be used up or converted into cash within one year. [EPA]

current account

Acategory in the balance of payments account that includes all transactions that either contribute to national income or involve the spending of national income. [FACS] Net flow of goods, services, and unilateral transactions (gifts) between countries. [Harvey]

current account balance

The difference between the nation's total exports of goods, services, and transfers and its total imports of them. Current account balance calculations exclude transactions in financial assets and liabilities. [FRBSF] The difference between the nation's total exports of goods, services, and transfers and its total imports of them. It excludes transactions in financial assets and liabilities. [FRB][FRBC][FRBM] The difference in monetary terms between all goods, services and transfer payments entering and leaving a country. Includes trade, travel, military spending and other short-term financial flows. Short-term and long- term capital flows are excluded as they are included in the capital account balance. In most countries the balance of trade comprises the bulk of this indicator. [FDIC]

current asset

Asset that will normally be turned into cash within a year. [WCSU] Those assets of a company that are reasonably expected to be realized in cash, or sold, or consumed during one year. These include cash, U.S. Government bonds, receivables and money due usually within one year, and inventories. [NYSE] Those assets which are available or can be made readily available to finance current operations or to pay current liabilities. Those assets which will be used up or converted into cash within one year. Some examples are cash, temporary investments, and taxes receivable which will be collected within one year. [EPA] Value of cash, accounts receivable, inventories, marketable securities and other assets that could be converted to cash in less than 1 year. [Harvey]

current coupon

A bond selling at or close to par, that is, a bond with a coupon close to the yields currently offered on new bonds of a similar maturity and credit risk. [Harvey]

current delivery month

The futures contract which matures and becomes deliverable during the present month or the month closest to delivery. Also called the Spot Month. [NYMEX]

current estimates

Estimates prepared for years that have not yet been subject to an annual revision. [BEA]

current exposure

Represents the current replacement cost of financial instrument transactions, that is, their market value. [TMAC]

current issue

In Treasury securities, the most recently auctioned issue. Trading is more active in current issues than in off-the-run issues. [Harvey]

current liabilities

Amount owed for salaries, interest, accounts payable and other debts due within one year. [Harvey] Liabilities which are payable within one year. [EPA] Money owed and payable by a company, usually within one year. [NYSE]

current liability

Liability that will normally be repaid within a year. [WCSU]

current maturity

Current time to maturity on an outstanding debt instrument. [Harvey]

current rate method

Under this currency translation method, all foreign currency balance-sheet and income statement items are translated at the current exchange rate. [Harvey]

current ratio

Current assets divided by current liabilities-a measure of liquidity. [WCSU] Indicator of short-term debt paying ability. Determined by dividing current assets by current liabilities. The higher the ratio, the more liquid the company. [Harvey] The ratio of total current assets to total current liabilities, calculated by dividing current assets by current liabilities. [OTS]

current refunding

The refunding of an outstanding issue of securities by the issuance and delivery of a new issue of securities on or about the date on which the outstanding issue of securities can be redeemed or paid in accordance with its terms. [EPA]

current revenue note

Note issued in anticipation of revenues to be received later in the then current fiscal year. [EPA]

current value accounting

An accounting method that measures the value of individual assets at the current prices they would command rather than at the actual dollar cost at which they were purchased in earlier times. [OTS]

current yield

(A) The relation of the annual interest received to the purchase price of the security. For example, a $1,000 bond for which $1.00( was paid and that pays $80 per year in interest has a current yield of 8%. If only $980 was paid for the $1,000 bond the current yield is 8.16% ($80 interest % $980). (B) The annual interest received relative to the purchase price calculated by dividing the annual interest payment received by the purchase price. [EPA] For bonds or notes, the coupon rate divided by the market price of the bond. [Harvey] The ratio of the coupon to the current market price of the debt instrument [CBOT][MIDAM]

current/noncurrent method

Under this currency translation method, all of a foreign subsidiary's current assets and liabilities are translated into home currency at the current exchange rate while noncurrent assets and liabilities are translated at the historical exchange rate, that is, the rate in effect at the time the asset was acquired or the liability incurred. [Harvey]

cushion bonds

High-coupon bonds that sell at only at a moderate premium because they are callable at a price below that at which a comparable non-callable bond would sell. Cushion bonds offer considerable downside protection in a falling market. [Harvey]

cushion gas

The amount of gas required in a storage pool to maintain sufficient pressure to keep the working gas recoverable. [NYMEX]

cusip

The Committee on Uniform Securities Identification Procedures which was established to develop a uniform method of identifying municipal, U.S. government and corporate securities under the system developed by CUSIP. [EPA]

CUSIP number

A number assigned to securities by the Committee on Uniform Securities Identification Procedures (CUSIP). The identifying numbers and codes are used to record all buy and sell orders. [OTS]

custodial fees

Fees charged by an institution that holds securities in safekeeping for an investor. [Harvey]

custodial gift

A gift to a minor child from an adult who retains control over the gift, or grants such control to another adult, until the child reaches maturity age and legally can accept responsibility for the gift. A custodial gift may be in the form of a custodial savings account at a depository institution. [OTS]

custodian

A financial institution that holds in custody and for safekeeping the securities and other assets of an investment company. [OTS]

custody bill of lading

A bill of lading issued by American warehouses as a receipt for goods stored. [ITDS]

customary payout ratios

A range of payout ratios that is typical based on an analysis of comparable firms. [Harvey]

customer

A natural person(s) that maintains an account at a Depository Financial Institution. A customer may authorize a financial institution to debit/credit his or her account in response to an ACH entry. [ACH]

customer classification

The homogeneous grouping of customers. Typically the utility's customers may be classified for rate-making purposes as: residential, commercial and industrial. [EPA]

customer draft

customer initiated entry (CIE)

These are ACH entries initiated by a consumer through direct contact with an originator such as a bill payment system. [ACH]

customer margin

Within the futures industry, financial guarantees required of both buyers and sellers of futures contracts and sellers of options contracts to ensure fulfillment of contract obligations. FCMs are responsible for overseeing customer margin accounts. Margins are determined on the basis of market risk and contract value. Also referred to as performance-bond margin. [CBOT][MIDAM]

customer service costs

Customer service costs vary with the number of customers served. These costs include investment charges and expenses relative to a portion of the general distribution system, service connection facilities, metering equipment, meter reading, billing, and accounting. In the methodology used in this workbook, fire protection costs are also customer costs. [EPA]

customer type indicate (CTI)

customer type indicator codes

These consist of four identifiers that describe transactions by the type of customer for which a trade is effected. The four codes are: (1) trading by a person who holds trading privileges for his or her own account or an account for which the person has discretion; (2) trading for a clearing member's proprietary account; (3) trading for another person who holds trading privileges who is currently present on the trading floor or for an account controlled by such other person; and (4) trading for any other type of customer. Transaction data classified by the above codes is included in the trade register report produced by a clearing organization. [CFTC]

customized benchmarks

A benchmark that is designed to meet a client's requirements and long-term objectives. [Harvey]

customs

A government authority designated to regulate the flow of goods to/from a country and to collect duties levied upon imports and exports. [ITDS]

customs union

An agreement by two or more countries to erect a common external tariff and to abolish restrictions on trade among members. [Harvey]

cyberbank

A bank that conducts transactions electronically using the Internet. [UNODC]

cyclical unemployment

Temporary layoff of workers due to downturns in the pace of economic activity. [FACS] Unemployment caused by a low level of aggregate demand associated with recession in the business cycle. [FRBSF]

D'Oench Duhme

One of the 'superpower' remedies relied on extensively by the FDIC and the RTC in disposing of assets. D'Oench Duhme has existed since the 1940s and essentially states that side agreements that are not recorded on the books or records of a financial institution cannot be enforced. [FDIC]

daily interest account

A savings account that computes and pays interest each day from the date of deposit to the date of withdrawal. [OTS]

daily price limit

The maximum price advance or decline from the previous day's settlement price permitted during one trading session, as fixed by the rules of an exchange. [CFTC]

daily trading limit

The maximum price range set by the exchange cash day for a contract. [CBOT] The maximum price range set by the exchange each day for a contract. Day Traders: Speculators who take positions in futures or options contracts and liquidate them prior to the close of the same trading day. [MIDAM]

damages

Money compensation for loss or damage. [ITDS]

dangerous goods

Goods which are capable of posing a health or safety risk when transported by air. [ITDS]

Data Encryption Standard

A technique by which a message is scrambled into an indecipherable stream of bits for transmission. [ACH]

data limitations

In stabilization policy, refers to two types: 1) quantitative factual information or data that is only available after the event (e.g., unemployment figures for last month); 2) the raw information that is adjusted for seasonal variations or changes in prices; therefore, data may not accurately measure the activity. [FRBSF]

data transmission

The electronic exchange of information between two data processing points (computers). [ACH]

date draft

A draft drawn to mature on a fixed date, irrespective of acceptance. [FDIC] A draft which matures a specified number of days after the date it is issued, without regard to the date of acceptance. [ITDS]

date of issue

Date assigned as date of issue. Interest to the first coupon is generally paid from this date. [EPA]

date of payment

Date dividend checks are mailed. [Harvey]

date of record

Date on which holders of record in a firm's stock ledger are designated as the recipients of either dividends or stock rights. [Harvey]

dated date

The date from which interest on an issue accrues; fixed as of or prior to the date of delivery and stated on the security. [EPA]

dates convention

Treating cash flows as being received on exact dates - date 0, date 1, and so forth - as opposed to the end-of-year convention. [Harvey]

dating

Extended credit terms granted by the seller to induce buyers to receive goods in advance of required delivery dates. [ITDS]

day ahead

day cycle

The first scheduled time for the Federal Reserve system's interregional transmission of data from Originating ACHs to Receiving ACHs. Also referred to as the 'day time window'. [ACH]

day order

An order that expires automatically at the end of each day's trading session. There may be a day order with time contingency. For example, an 'off at a specific time' order is an order that remains in force until the specified time during the session is reached. At such time, the order is automatically canceled. [CFTC] An order to buy or sell stock that automatically expires if it can't be executed on the day it is entered. [Harvey] An order to buy or sell which, if not executed, expires at the end of the trading day on which it was entered. [NYSE]

day trade

Also know as a 'daylight trade.' The purchase and sale or the short sale and cover of the same security in a margin account on the same day. [FRB][FRBC] Also known as a 'daylight trade'. The purchase and sale or the short sale and cover of the same security in a margin account on the same day. [FRB][FRBM][FRBSF] The purchase and sale of a futures or an option contract on the same day. [NYMEX]

day traders

A trader, often a person with exchange trading privileges, who takes positions and then offsets them during the same trading session prior to the close of trading. [CFTC] Speculators who take positions in futures or options contracts and liquidate them prior to the close of the same trading day. [CBOT]

day trading

Refers to establishing and liquidating the same position or positions within one day's trading. [Harvey]

daylight overdraft

A daylight overdraft is an intraday loan that occurs when a bank transfers funds in excess of its reserve account. [GAO]

days in receivables

Average collection period. [Harvey]

days' sales in inventory ratio

The average number of days' worth of sales that is held in inventory. [Harvey]

days' sales outstanding

Average collection period. [Harvey]

de facto

Existing in actual fact although not by official recognition. [Harvey] Latin for 'in actual fact.' Something that is in reality, actual and existing regardless of legal or moral considerations. [OTS]

de jure

Latin for 'by right.' Something that is rightful, legitimate or just according to law or equity. The term describes a state of affairs or a condition that exists based on a right under the law, rather than a de facto condition in which something exists in fact regardless of its right to exist. [OTS]

de novo

new, fresh, just beginning. A de novo thrift institution is a newly chartered institution. De novo branching refers to opening a new branch office as opposed to buying an existing branch or acquiring branches through a merger of institutions. [OTS]

de novo judicial review

A court's independent review of the facts and the law with no deference to the agency's original determination. The court makes its determination based on the facts of the case, independent of any prior decision by the agency. [FDIC]

de-leveraged bonds

bonds that pay investors according to a formula that is based on a fraction of the increase or decrease in a specified index, such as the Constant Maturity Treasury (CMT) rate or the prime rate. For example, the coupon might be 0.5 x 10-year CMT + 150 basis points. The 'de-leverage multiplier,' (0.5) causes the coupon to lag behind overall movements in market yields. [OTS]

dead cat bounce

A small upmove in a bear market. [Harvey]

dead load

The permanent, inert weight of a building, exclusive of furniture and occupants. [OTS]

deadweight

The maximum carrying capacity of a ship. [ITDS]

dealer

A person or business firm acting as a middleman to facilitate distribution of securities or goods. Typically, a dealer buys for his or her own account and sells to a customer from the dealer's inventory. Thus a dealer acts as a principal rather than as an agent. The dealer's profit or loss is the difference between the price he pays and the price he receives for the same security or goods. The same individual or company may, at different times, function as a dealer or as a broker, who buys and sells for his clients' accounts. [OTS] An entity that stands ready and willing to buy a security for its own account (at its bid price) or sell from its own account (at its ask price). [Harvey] An individual or firm in the securities business who buys and sells stocks and bonds as a principal rather than an agent. The dealer 's profit or loss is the difference between the price paid and the price received for the same security. The dealer's confirmation must disclose to the customer that the principal has been acted upon. The same individual or firm may function, at different times, either as broker or dealer. [NYSE] An individual or firm that acts as a market maker in an instrument such as a security or foreign currency. [CFTC] An individual or firm who acts as principal in the sale of merchandise. [ITDS]

dealer loan

Overnight, collateralized loan made to a dealer financing his position by borrowing from a money market bank. [Harvey]

dealer market

A market where traders specializing in particular commodities buy and sell assets for their own accounts. [Harvey]

dealer options

Over-the-counter options, such as those offered by government and mortgage-backed securities dealers. [Harvey]

dealer paper

retail installment contracts that are purchased by a financial institution for a price negotiated with a dealer. The transfer of the loan contract from merchant to dealer to financial institution is evidenced by the execution of the assignment section of the contract. [OTS]

dealer tank wagon price

(DTW) The price, usually of gasoline, offered by the majors which is branded and delivered to the service station on a CIF basis. [NYMEX]

debenture

A promissory note backed by the general credit of a company and usually not secured by any specific collateral, such as a mortgage or property. [NYSE] An unsecured debt instrument or bond backed only by the general credit standing and earning capacity of the issuer. Debentures are used to obtain capital funds. [OTS]

debenture bond

An unsecured bond whose holder has the claim of a general creditor on all assets of the issuer not pledged specifically to secure other debt. [Harvey]

debenture unsecured

debit

(1) in accounting, an entry on the left-hand side of an account record in which amounts are recorded in a double-entry system of bookkeeping. (2) a charge to a customer's access account or deposit account. [OTS]

debit balance

In a customer's margin account, that portion of the purchase price of stock, bonds or commodities that is covered by credit extended by the broker to the margin customer. [NYSE]

debit card

A card that resembles a credit card but which debits a transaction account (checking account) with the transfers occurring contemporaneously with the customer's purchases. A debit card may be machine readable, allowing for the activation of an automated teller machine or other automated payments equipment. [FRB][FRBC][FRBM][FRBSF] A plastic card with which a customer may withdraw funds on deposit in the customer's account using an automated teller machine. Some merchants accept debit cards, treating them the same as cash. A debit card transaction pays the seller of goods or services by withdrawing funds already on deposit in the buyer's account, as opposed to a credit card transaction in which funds are loaned to the buyer by the card issuer. [OTS]

debt

(A) An obligation to pay money (usually to repay borrowed money) at a future date. There are both constitutional and statutory definitions and concepts, embellished by case law of what constitutes debt. [EPA] Money borrowed. [Harvey] money, services, goods or anything else of value that is owed by one person to another as the result of a previous agreement. [OTS]

debt capacity

Ability to borrow. The amount a firm can borrow up to the point where the firm value no longer increases. [Harvey]

debt capital

money loaned at a stated interest rate for a fixed term of years, distinguished from equity capital. [OTS]

Debt Collection Improvement Act of 1996 (DCIA)

debt displacement

The amount of borrowing that leasing displaces. Firms that do a lot of leasing will be forced to cut back on borrowing. [Harvey]

debt financing

The long-term borrowing of money by government or a business, usually in exchange for debt securities or a note, in order to obtain working capital or to retire other indebtedness. [OTS]

debt instrument

An asset requiring fixed dollar payments, such as a government or corporate bond. [Harvey]

debt investment

investment in the financing of property or of some endeavor, in which the investor loaning funds does not own the property or endeavor, nor share in its profits. If property is pledged, or mortgaged, as security for the loan, the investor may claim the property to repay the debt if the borrower defaults on payments. [OTS]

debt leverage

The amplification of the return earned on equity when an investment or firm is financed partially with borrowed money. [Harvey]

debt limit

(A) The maximum amount of gross or net debt which is legally permitted . (B) The maximum amount of debt which an issuer of municipal securities is permitted to incur under constitutional, statutory or charter provisions. [EPA] Limits which may be imposed by statute or constitution on the amount of debt that an issuer may incur which may be determined in various ways, such as a limit on principal amount of debt that an issuer may have outstanding at any one time or maximum debt service payable in any year on debt. [EPA]

debt limitation

A bond covenant that restricts in some way the firm's ability to incur additional indebtedness. [Harvey]

debt market

The market for trading debt instruments. [Harvey]

debt offsets

Offsets to long-term debt include cash and investment assets of sinking funds and other reserve funds, which are specifically held for redemption of long-term debt. [EPA]

debt ratio

The relationship expressed as a percentage or fraction between the debt (or portion of the debt) of a particular entity and some other component of the financial statement such as revenue, networth, assets, etc. [EPA] Total debt divided by total assets. [Harvey]

debt relief

Reducing the principal and/or interest payments on LDC loans. [Harvey]

debt securities

IOUs created through loan-type transactions - commercial paper, bank CDs, bills, bonds, and other instruments. [Harvey]

debt service

(A) The amount of money necessary to pay interest on an outstanding debt, the serial maturities of principal for serial bonds and the required contributions to an amortization or sinking fund for term bonds . (B) Principal and interest. (Sometimes called 'bond service charges'.) [EPA] Interest payment plus repayments of principal to creditors, that is, retirement of debt. [Harvey] The payments of principal and interest by a borrower to a lender. Commonly used in reference to mortgage loans and long-term government or industrial bonds. The payments may be monthly, quarterly, semiannual or annual. [OTS]

debt service constant

A factor that, multiplied by the original loan principal, yields the annual debt service payment (principal plus interest) required to amortize a loan. [OTS]

debt service fund

A fund established to account for the accumulation of resources for, and the payment of, general long-term debt principal and interest. Formerly called a sinking fund. [EPA]

debt service fund requirements

The amounts of revenue which must be provided for a Debt Service Fund so that all principal and interest payments can be made in full on schedule. [EPA]

debt service parity approach

An analysis wherein the alternatives under consideration will provide the firm with the exact same schedule of after-tax debt payments (including both interest and principal). [Harvey]

debt service requirement

(A) The amount of money required to pay interest on outstanding debt, serial maturities of principal for serial bonds, and required contributions to accumulate monies for future retirement of term bonds. (B) Amounts required to pay debt service, often expressed in the context of a time frame (such as 'annual debt service requirements'). [EPA]

debt service reserve fund

(A) The fund created by the security documents as a reserve against a temporary interruption in pledged receipts to pay debt service. A common funding requirement for a debt service reserve fund is one-year's average or highest debt service on the bonds. The debt service reserve fund may be funded initially out of bond proceeds, or over period of time from pledged revenues, or by a combination of the two. (B) A fund created from the proceeds of bond issues and/or excess of revenues of the system to provide a ready reserve to meet current debt service payments should monies not be available from current revenues. [EPA]

debt service schedule

A table listing the annual payments necessary to meet debt service requirements over the period of time the bonds are to be outstanding. [EPA]

debt swap

A set of transactions (also called a debt-equity swap) in which a firm buys a country's dollar bank debt at a discount and swaps this debt with the central bank for local currency that it can use to acquire local equity. [Harvey]

debt-for-nature swap

Swap arranged by private conservation group to use the proceeds of debt conversions to finance conservation projects relating to park land or tropical forests. [ITDS]

debt-service coverage ratio

Earnings before interest and income taxes plus one-third rental charges, divided by interest expense plus one-third rental charges plus the quantity of principal repayments divided by one minus the tax rate. [Harvey]

debt/equity ratio

Indicator of financial leverage. Compares assets provided by creditors to assets provided by shareholders. Determined by dividing long-term debt by common stockholder equity. [Harvey]

debtee

A creditor, one who lends money. [OTS]

debtor

A person who owes something of value, such as money. [OTS]

debtor in possession

A firm that is continuing to operate under Chapter 11 bankruptcy process. [Harvey]

debtor nation

A nation that is owed less foreign currency obligations than it owes other nations. [ITDS]

debtor-in-possession financing

New debt obtained by a firm during the Chapter 11 bankruptcy process. [Harvey]

decedent

A deceased person, ordinarily used with respect to one who has died recently. A savings account held in the name of an executor or administrator of a deceased person's estate is called a decedent estate account. [OTS]

decile rank

Performance over time, rated on a scale of 1-10.1 indicates that a mutual fund's return was in the top 10% of funds being compared, while 3 means the return was in the top 30%. Objective Rank compares all funds in the same investment strategy category. All Rank compares all funds. [Harvey]

decision tree

Method of representing alternative sequential decisions and the possible outcomes from these decisions. [Harvey][WCSU]

deck

The orders for purchase or sale of futures and option contracts held by a floor broker. Also referred to as an order book. [CFTC]

deck cargo

Cargo that is shipped on the deck of a vessel rather than in holds below. [ITDS]

declaration date

The date on which a firm's directors meet and announce the date and amount of the next dividend. [Harvey]

declaration of condominium ownership

A complex legal document, with appropriate addenda, that provides for qualifying a multiunit property for condominium development and sale in accordance with a state's condominium law. [OTS]

declining balance

The balance of outstanding debt that decreases with each payment. The service charge is often computed on the declining balance. [OTS]

declining balance depreciation method

A depreciation method that converts the cost of an asset into a periodic expense. The method permits charging larger amounts of depreciation expenses in earlier years and lesser amounts later. In calculating annual depreciation charges, a constant percentage is applied each year to the net asset after deducting the previous accumulated depreciation until the asset's value is reduced to its net residual value at the end of its useful life. [OTS]

decree of foreclosure and sale

A court decree of judgment that establishes the outstanding mortgage debt and orders the property sold to satisfy the debt. [OTS]

decryption

Decryption is the restoration of encrypted data to their original text. [GAO]

dedicated capital

Total par value (number of shares issued, multiplied by the par value of each share). Also called dedicated value. [Harvey]

dedicated portfolio

Bond portfolio that provides the cash flows to meet a series of fixed pension obligations at minimum cost. [WCSU]

dedication

The giving of land by its owner, free of cost, for some public use and its acceptance for such use by an authorized public official. [OTS]

dedication strategy

Refers to multi-period cash flow matching. [Harvey]

deductive reasoning

The use of general fact to provide accurate information about a specific situation. [Harvey]

deductive value

A valuation of merchandise that is the resale price of imported merchandise in United States with deductions for certain items. [ITDS]

deed

A written agreement in proper legal form that conveys title to, or an interest in, real property. [OTS]

deed given to secure a debt

A form of mortgage in which title to the property is conveyed from the borrower to the lender as security for the repayment of the debt. Also called a deed absolute. [OTS]

deed in lieu of foreclosure

The transfer of title to real property from a delinquent mortgagor to the mortgagee, given to satisfy the obligation of repaying the balance due on the defaulted loan and thus preventing foreclosure. [OTS]

deed of trust

A deed that establishes a trust. It is used in some loan transactions in place of a mortgage. In a trust deed the property on which money has been lent is conveyed as collateral to a trustee, who holds it in trust for the benefit of the holder or holders of the loan notes. A trust deed is often used where several notes are held by different individuals. The trust deed states the authority of the trustee and any conditions which must govern the actions of the trustee in dealing with the property. These include the condition that the trustee shall reconvey the title of the property to the buyer of the property when the debt has been repaid. The trustee also has power to sell the property and pay the debt in the event of a default on the part of the debtor. [OTS] Indenture. [Harvey]

deed restriction

A limitation written into a deed limiting or restricting the use of the real property. [OTS]

deep discount

A discount greater than traditional (l% to 3%) market discounts. See 'Discount'. [EPA]

deep-discount bond

A bond issued with a very low coupon or no coupon and selling at a price far below par value. When the bond has no coupon, it's called a zero-coupon bond. [Harvey]

defalcation

The misappropriation, misuse, theft or embezzlement of funds by someone entrusted with them. [OTS]

default

(A) An event which, if not corrected immediately or within a stated period of time, becomes ('ripens into') an event of default under a security document. (B) Failure to pay principal and interest promptly when due. It may also refer to a breach of certain covenants made in respect to an issue or debt. [EPA] Failure to make timely payment of interest or principal on a debt security or to otherwise comply with the provisions of a bond indenture. [Harvey] Failure to meet the terms of a credit agreement. [FRB][FRBC][FRBM][FRBSF] Failure to perform on a futures contract as required by exchange rules, such as failure to meet a margin call, or to make or take delivery. [CFTC] failure to do something that is required by duty, law, or the terms of a loan or other contract. The term is commonly used when a corporate, institutional or governmental borrower fails to pay the principal or interest on a debt when due. [OTS]

default option

default premium

A differential in promised yield that compensates the investor for the risk inherent in purchasing a corporate bond that entails some risk of default. [Harvey]

default risk

Also referred to as credit risk (as gauged by commercial rating companies), the risk that an issuer of a bond may be unable to make timely principal and interest payments. [Harvey]

defeasance

(A) The process by which an insurer may be able to defease or replace the lien created by an indenture or other form of contractual provision relating to a bond issue. (B) Termination of the rights and interests of the trustee and bondholders under a security document upon final payment or provision for payment of all debt service and other costs, all as specifically provided for in the security document. [EPA] Borrower sets aside cash or bonds sufficient to service the borrower's debt. Both the borrower's debt and the offsetting cash or bonds are removed from the balance sheet. [WCSU] Practice whereby the borrower sets aside cash or bonds sufficient to service the borrower's debt. Both the borrower's debt and the offestting cash or bonds are removed from the balance sheet. [Harvey]

defeasance clause

The clause in a mortgage agreement that gives the borrower the right to redeem title to the property upon payment to the lender of the complete debt obligation. [OTS]

deferred air freight

Air freight with less urgency, delivered over a period of days. [ITDS]

deferred call

A provision that prohibits the company from calling the bond before a certain date. During this period the bond is said to be call protected. [Harvey]

deferred delivery month

The more distant month(s) in which futures trading is taking place, as distinguished from the nearby (delivery) month. [CBOT][MIDAM]

deferred equity

A common term for convertible bonds because of their equity component and the expectation that the bond will ultimately be converted into shares of common stock. [Harvey]

deferred expense

An expense that is paid before the corresponding benefit is fully received, such as a prepaid insurance premium. For accounting purposes, the expense is listed as an asset until the paid-for benefit is obtained, and is usually prorated over a number of subsequent accounting periods. [OTS]

deferred futures

The most distant months of a futures contract. A bond that sells at a discount and does not pay interest for an initial period, typically from three to seven years. [Harvey]

deferred income

any income that is received before it is due or before it is earned. Rent paid in advance is an example of deferred income that is received during one accounting period but earned in later accounting period. Interest received that applies to a subsequent period of the loan term is also deferred income. The crediting of the income is deferred until such time as it is earned. Until then, it is listed on a balance sheet as a current liability. [OTS]

deferred month

The more distant month(s) in which futures trading is taking place, as distinguished from the nearby (delivery) month. [CBOT][MIDAM]

deferred nominal life annuity

A monthly fixed-dollar payment beginning at retirement age. It is nominal because the payment is fixed in dollar amount at any particular time, up to and including retirement. [Harvey]

deferred payment letter of credit

An instrument permitting the drawing of sight drafts and containing the stipulation that the drafts are not to be presented to the issuing bank until a specified length of time after documents have been presented and shipment made. Until presentation of documents, the bank's liability under this arrangement is contingent in nature. When the beneficiary presents the documents and the balk acknowledges the receipt thereof or other performance by the beneficiary, the issuing bank is directly liable to the beneficiary as it would be in an acceptance transaction. [FDIC]

deferred taxes

A non-cash expense that provides a source of free cash flow. Amount allocated during the period to cover tax liabilities that have not yet been paid. [Harvey]

deferred-annuities

Tax-advantaged life insurance product. Deferred annuities offer deferral of taxes with the option of withdrawing one's funds in the form of life annuity. [Harvey]

deficiency

The dollar amount that is owed to a lender after foreclosure or repossession has occurred. The deficiency is normally the sum of principal debt outstanding, unpaid interest, and late charges remaining as a legal obligation, minus the net value of the foreclosed or repossessed asset. [FDIC]

deficiency judgment

A court order that declares the property securing a debt to be worth less than the amount of outstanding debt, and that authorities the collection from the debtor of the part of the debt remaining unsatisfied after the foreclosure and sale of the collateral. [OTS]

deficit

(A) The excess of the liabilities of a fund over its assets. (B) The excess of expenditures over revenues during a fiscal year. [EPA] An excess of liabilities over assets, of losses over profits, or of expenditure over income. [Harvey] The amount by which something, such as money, falls short of the required or expected amount. The amount by which liabilities exceed assets. The amount by which expenditures and obligations exceed the amount budgeted for them. [OTS] The amount each year by which government spending is greater than government income. [FRBSF]

deficit spending

A term which refers to the situation wherein he government spends more than it receives in taxes. [FACS]

defined benefit plan

A pension plan in which the sponsor agrees to make specified dollar payments to qualifying employees. The pension obligations are effectively the debt obligation of the plan sponsor. [Harvey]

defined contribution plan

A pension plan in which the sponsor is responsible only for making specified contributions into the plan on behalf of qualifying participants. [Harvey]

deflation

An economic condition in which the purchasing power of money increases; a lowering of prices, costs and expenses. Opposite of inflation. [OTS]

defunct

something that has ceased to exist; a company or organization that has been dissolved. [OTS]

degree day

A measure of the coldness of the weather (heating degree day) or its heat (cooling degree day) based on the extent to which the daily mean temperature falls below or rises above 65o Fahrenheit. [NYMEX]

del credere risk

Risk that a counterparty is either unable or unwilling to fulfill his payment obligations. [ITDS]

delayed issuance pool

Refers to MBSs that at the time of issuance were collateralized by seasoned loans originated prior to the MBS pool issue date. [Harvey]

delayed opening

The postponement of trading of an issue on a stock exchange beyond the normal opening of a day's trading because of market conditions that have been judged by exchange officials to warrant such a delay. Reasons for the delay may be an influx of either buy or sell orders, an imbalance of buyers and sellers, or pending corporate news that requires time for dissemination. [NYSE]

delinquency

The failure to pay an obligation when due. [OTS]

delinquency rate

The percentage of outstanding loans in a loan portfolio that are delinquent. [OTS]

delinquent loan

A loan that is 30 to 60 days past due with no payments being made. [OTS]

deliverable grades

The standard grades of commodities or instruments listed in the rules of the exchanges that must be met when delivering cash commodities against futures contracts. Grades are often accompanied by a schedule of discounts and premiums allowable for delivery of commodities of lesser or greater quality than the standard called for by the exchange. Also referred to as contract grades. [CBOT][MIDAM]

deliverable instrument

The asset in a forward contract that will be delivered in the future at an agree-upon price. [Harvey]

deliverable stocks

Stocks of commodities located in exchange-approved storage for which receipts may be used in making delivery on futures contracts. In the cotton trade, the term refers to cotton certified for delivery.. [CFTC]

deliverable supply

The total supply of a commodity that meets the delivery specifications of a futures contract. [CFTC]

delivered

Often regarded as synonymous with CIF in the international cargo trade, its terms differ from the latter in a number of ways. Generally, the seller's risks are greater in a delivered transaction because the buyer pays on the basis of landed quality/quantity. Risk and title are borne by the seller until such time as the commodity, such as oil, passes from shipboard into the connecting flange of the buyer's shore installation. The seller is responsible for clearance through customs and payment of all duties. Any in-transit contamination or loss of cargo is the seller's liability. In delivered transactions the buyer pays only for the quantity of oil actually received in storage. [NYMEX]

delivery

(1) the transfer of the possession of an item from one person to another. (2) the legal, final and absolute transmission of a deed from the seller to the buyer in such a manner that it cannot be recalled by the seller. (3) the physical transportation and presentation of loan documents from a loan originator to a mortgage buyer who has made a previous commitment to purchase the loans. (4) the transmission of the certificate or book-entry representing shares bought on a securities exchange. [OTS] The act of transferring physical possession. [ITDS] The tender and receipt of an actual commodity or financial instrument in settlement of a futures contract. [Harvey] The tender and receipt of the actual commodity, the cash value of the commodity, or of a delivery instrument covering the commodity (e.g., warehouse receipts or shipping certificates), used to settle a futures contract. [CFTC] The term has distinct meaning when used in connection with futures contracts. Delivery generally refers to the changing of ownership or control of a commodity under specific terms and procedures established by the exchange upon which the contract is traded. Typically, except for energy, the commodity must be placed in an approved warehouse, precious metals depository or other storage facility, and be inspected by approved personnel, after which the facility issues a warehouse receipt, shipping certificate, demand certificate or due bill, which becomes a transferable delivery instrument. Delivery of the instrument usually is preceded by a notice of intention to deliver. After receipt of the delivery instrument, the new owner typically can take possession of the physical commodity, can deliver the delivery instrument into the futures market in satisfaction of a short position, or can sell the delivery instrument to another market participant who can use it for delivery into the futures market in satisfaction of his short position or for cash, or can take delivery of the physical himself. The procedure differs for energy contracts. Bona fide buyers or sellers of the underlying energy commodity can stand for delivery. If a buyer or seller stands for delivery, the contract is held through the termination of trading. The buyer and seller each file a notice of intent to make or take delivery with their respective Clearing Members who file them with the Exchange. Buyers and sellers are randomly matched by the Exchange. The delivery payment is based on the contract's final settlement price. [NYMEX] The transfer of the cash commodity from the seller of a futures contract to the buyer of a futures contract. Each futures exchange has specific procedures for delivery of a cash commodity. Some futures contracts, such as stock index contracts, are cash settled. [CBOT][MIDAM]

delivery carrier

The transport carrier whose responsibility it is to place a shipment at the disposal of the buyer. [ITDS]

delivery date

(A) The settlement date for a bond issue. (B) The date upon which the issue is delivered to and paid for by the original purchaser. [EPA] The date on which the commodity or instrument of delivery must be delivered to fulfill the terms of a contract. [CFTC]

delivery day

The third day in the delivery process at the Chicago Board of Trade, when the buyer's clearing firm presents the delivery notice with a certified check for the amount due at the office of the seller's clearing firm. [CBOT][MIDAM]

delivery instructions

Specific delivery instructions for the freight forwarder or carrier stating exactly where the goods are to be delivered, the deadline, and a contact person should problems arise. [ITDS]

delivery instrument

A document used to effect delivery on a futures contract, such as a warehouse receipt or shipping certificate. [CFTC]

delivery month

A specific month in which delivery may take place under the terms of a futures contract. Also referred to as contract month. [CBOT][MIDAM] The month specified in a given futures contract for delivery of the actual physical spot or cash commodity. [NYMEX] The specified month within which a futures contract matures and can be settled by delivery or the specified month in which the delivery period begins. [CFTC]

delivery notice

A notice presented through an exchange's clearing house by a clearing member announcing the intention to deliver the actual commodity in satisfaction of a contract obligation. [NYMEX] The written notice given by the seller of his intention to make delivery against an open short futures position on a particular date. This notice, delivered through the clearing organization, is separate and distinct from the warehouse receipt or other instrument that will be used to transfer title. Also called Notice of Intent to Deliver or Notice of Delivery. [CFTC] The written notice given by the seller of his intention to make delivery against an open, short futures position on a particular date. [Harvey]

delivery options

A provision of a futures contract that provides the short with flexibility in regard to timing, location, quantity, or quality in the delivery process. [CFTC] The options available to the seller of an interest rate futures contract, including the quality option, the timing option, and the wild card option. Delivery options make the buyer uncertain of which Treasury Bond will be delivered or when it will be delivered. [Harvey]

delivery order

A document from the consignee, shipper, or owner of freight ordering the delivery of freight to another party. [ITDS]

delivery points

A location designated by a commodity exchange where stocks of a commodity represented by a futures contract may be delivered in fulfillment of the contract. Also called Location. [CFTC] Location(s) designated by an exchange at which delivery may be made in fulfillment of contract terms. [NYMEX] The locations and facilities designated by a futures exchange where stocks of a commodity may be delivered in fulfillment of a futures contract, under procedures established by the exchange. [CBOT][MIDAM] Those points designated by futures exchanges at which the financial instrument or commodity covered by a futures contract may be delivered in fulfillment of such contract. [Harvey]

delivery price

The price fixed by the clearing house at which deliveries on futures are invoiced--generally the price at which the futures contract is settled when deliveries are made. [Harvey] The price fixed by the clearing organization at which deliveries on futures are invoiced -- generally the price at which the futures contract is settled when deliveries are made. Also called Invoice Price. [CFTC]

delivery, current

Deliveries being made during a present month. Sometimes current delivery is used as a synonym for nearby delivery. [CFTC]

delivery, nearby

The nearest traded month, the front month. In plural form, one of the nearer trading months. [CFTC]

delivery-versus-payment (DVP)

A transaction in which the buyer's payment for securities is due at the time of delivery (usually to a bank acting as agent for the buyer) upon receipt of the securities. The payment may be made by bank wire, check, or direct credit to an account. [Harvey]

delta

A measure of how much an option premium changes, given a unit change in the underlying futures price. Delta often is interpreted as the probability that the option will be in-the-money by expiration. [CBOT][MIDAM] Also called the hedge ratio, the ratio of the change in price of a call option to the change in price of the underlying stock. [Harvey] The expected change in an option's price given a one-unit change in the price of the underlying futures contract or physical commodity. For example, an option with a delta of 0.5 would change $.50 when the underlying commodity moves $1.00. [CFTC] The ratio of the change in the price of the option to the change in the price of the underlying. [TMAC] The sensitivity of the option price to a change in the price of the underlying futures contract, also referred to as an option's futures-equivalent position. Deltas are positive for bullish option positions, or calls, and negative for bearish option positions, or puts. Deltas of deep in-the-money options are approximately equal to one; deltas of at-the-money options are 0.5; and deltas of deep out-of-the-money options approach zero. [NYMEX]

delta hedge

A dynamic hedging strategy using options with continuous adjustment of the number of options used, as a function of the delta of the option. [Harvey]

delta margining

An option margining system used by some exchanges that equates the changes in option premiums with the changes in the price of the underlying futures contract to determine risk factors upon which to base the margin requirements. [CFTC]

delta neutral

Refers to a position involving options that is designed to have an overall delta of zero. [CFTC] The value of the portfolio is not affected by changes in the value of the asset on which the options are written. [Harvey]

delta neutral spread

A spread where the total delta position on the long side and the total delta on the short side add up to approximately zero. [NYMEX]

delta-based margining

demand

The maximum quantities of some good that people will choose (or buy) at different prices. An identical definition is the relative value of the marginal unit of some good when different quantities of that good are available. [FACS]

demand costs

Costs of water supply, treatment and distribution that vary with peak demand for water, including water storage, pumping costs (if electricity costs increase with use) and capital cost of water lines. [EPA]

demand curve

A graphic representation of the relationship between prices and the corresponding quantities demanded per time period. [FACS]

demand deposit

A deposit payable on demand, or a time deposit with a maturity period or required notice period of less than 7 days, on which the depository institution does not reserve the right to require at least 7 days written notice of intended withdrawal. Commonly takes the form of a checking account. [FRB][FRBC][FRBM] A deposit that may be withdrawn at any time without prior written notice to the depository institution. A checking account is the most common form of demand deposit. [FRBSF] Checking accounts in commercial banks. These banks are obliged to pay out funds when depositors write checks on those numbers. Checking accounts are not cash - they are numbers recorded in banks. [FACS] Checking accounts that pay no interest and can be withdrawn upon demand. [Harvey]

demand deposit account (DDA)

An account from which a depositor may withdraw funds immediately without prior notice, commonly known as a checking account. Since funds may be withdrawn on demand in person or by presentation of a check, the account has many of the liquid characteristics of circulating currency. [OTS] Deposits held at banks which the owner can withdraw instantly upon demand-either by check or electronically. [UNODC]

demand draft

Draft payable immediately upon presentation to the drawee. Also called a 'sight' or 'presentation' draft. [FDIC]

demand line of credit

A bank line of credit that enables a customer to borrow on a daily or on-demand basis. [Harvey]

demand master notes

Short-term securities that are repayable immediately upon the holder's demand. [Harvey]

demand note/demand mortgage

A note or mortgage that the lender can call due at any time without prior notice. [OTS]

demand shock

An event that affects the demand for goods in services in the economy. [Harvey]

demand-pull inflation

A term used when an increase in aggregate demand occurs which cannot be offset by a corresponding increase in real supply causing an increase in the price level (inflation). [FACS]

demise

A lease of property; a demise charter is a bareboat charter. [ITDS]

demurrage

The detention of a freight car or ship beyond time permitted for loading or unloading. [ITDS]

denomination

The face amount of a particular note or bond. Usually $5,000 (occasionally $1,000) for coupon bonds, $5,000 or whole multiples of $5,000 for fully registered bonds. If the amount of an issue is not a whole multiple of $5,000 (such as,a bond issue of $163,000), there will be 'odd bonds' (in that example, three 'odd bonds' of the denomination of $1,000 each). In note issues, the denomination varies and often there will be one note equalling the entire amount of the note issue. [EPA] The value of a particular size or type of coin, paper currency, stamp, or security. [OTS]

density

A measure of the intensity of land use, designating the number of residential or commercial structures built on a designated area of land, or the number of persons to live and/or work on the property. Density is usually regulated by local government. [OTS]

dependent

Acceptance of a capital budgeting project contingent on the acceptance of another project. [Harvey]

depletion accounting

Natural resources, such as metals, oil, gas and timber, which conceivably can be reduced to zero over the years, present a special problem in capital management. Depletion is an accounting practice consisting of charges against earnings based upon the amount of the asset taken out of the total reserves in the period for which accounting is made. A bookkeeping entry, it does not represent any cash outlay nor are funds earmarked for that purpose. [NYSE]

deposit

(1) the placement of funds into an account at a institution in order to increase the credit balance of the account. (2) that which is deposited. (3) a sum of money given to assure the future purchase of something. (4) a portion of the purchase price given as earnest money, or a down payment, by the buyer to the seller. [OTS]

deposit ceiling rates of interest

Maximum interest rates that can be paid on savings and time deposits at federally insured commercial banks, mutual savings banks, savings and loan associations, and credit unions. Ceilings on credit union deposits are established by the Depository Institutions Deregulation Committee (DIDC). Under current law, deposit interest rate ceilings are being phased out over a six-year period, ending in 1986 under the oversight of the DIDC. [FRBSF]

Deposit Insurance National Bank (DINB)

The Banking Act of 1933 authorized the FDIC to establish a 'new' bank called a DINB to assume the insured deposits of a failed bank. Passage of the act permitted the FDIC to pay the depositors of a failed FDIC insured institution through a DINB, a national bank that was chartered with limited life and powers. Depositors of a DINB were given up to two years to move their insured accounts to other institutions. A DINB allowed a failed bank to be liquidated in an orderly fashion, minimizing disruption to local communities and financial markets. [FDIC]

deposit payoff

A resolution method for failed FDIC insured institutions that is used when liquidation of the institution is determined to be the least costly resolution or when no assuming institution can be found. Deposit payoffs generally have two forms: (1) a straight deposit payoff, in which the FDIC directly pays the insured amount of each depositor, and (2) an insured deposit transfer, in which a healthy institution is paid by the FDIC to act as its agent and pay the insured deposits to customers of the failed institution. A deposit payoff is sometimes called a payoff. [FDIC]

depositary

A person identified as someone to be entrusted with something of value for safekeeping. [OTS]

depositary bank

A depositary bank is the bank at which a check is first deposited. [GAO]

deposition

(1) something that is deposited. (2) the act of making a deposit. (3) testimony under oath taken for later use in place of a person's spoken testimony. [OTS]

depositor

A person or entity that places funds in an account at a financial institution. [OTS]

depositor discipline

One aspect of 'market discipline.' The concern of depositors for the safety of their deposits is theorized to control the riskiness of a bank's investment and lending portfolios. [FDIC]

depository

A bank or other entity responsible for holding assets in safekeeping. [FDIC] A place where something of value is left for safekeeping. [OTS]

depository institution

A financial institution that obtains its funds mainly through deposits from the public. This includes commercial banks, savings and loan associations, savings banks, and credit unions. Although historically they have specialized in certain types of credit, the powers of nonbank depository institutions have been broadened in recent years. For example, NOW accounts, credit union share drafts, and other services simialr to checking accounts may be offered by thrift institutions. [FRBSF] A financial intermediary that accepts savings and/or demand deposits from the general public. [OTS] Financial institution that obtains its funds mainly through deposits from the public; includes commercial banks, savings and loan associations, savings banks, and credit unions. [FRB][FRBC]

depository institutions debit cards

Plastic cards encoded with electromagnetic identification. Banks may issue them to customers who meet certain qualifications. Customers can use their card to pay for purchases electronically using point-of-sale terminals. [FRB][FRBC]

Depository Institutions Deregulation and Monetary Control Act (DIDMCA)

The 1980 act that began the process of phasing out Regulation Q, the regulation that had placed a ceiling on the rates of interest banks and thrifts could offer their depositors. DIDMCA sought to deregulate banking and promote more competition in the banking industry to benefit customers. It also permitted S&Ls to issue credit cards and offer checking accounts, and it increased FDIC insurance coverage on insured deposits from $40,000 to $100,000. [FDIC]

Depository Institutions Deregulation Committee (DIDC)

The Committee responsible for the orderly phase-out over a six-year period of interest rate ceilings on time and savings accounts at depository institutions. Voting members of the DIDC are the Secretary of the Treasury and the chairmen of the Federal Reserve Board, Federal Deposit Insurance Corporation, Federal Home Loan Bank Board, and National Credit Union Administration Board. The Comptroller of the Currency serves as a non-voting member. [FRB][FRBC][FRBSF] was created under the Depository Institutions Deregulation and Monetary Control Act of 1980. The committee was made up of the principal federal financial regulators and was responsible for implementing the orderly phaseout and ultimate elimination of federally imposed ceilings on savings deposit interest rates by March 31, 1986. After accomplishing its work, the committee disbanded. [OTS]

depository or warehouse receipt

A document issued by a bank or warehouse indicating ownership of a commodity stored in a bank depository or warehouse. In the case of many commodities deliverable against futures contracts, transfer of ownership of an appropriate depository receipt may effect contract delivery. [NYMEX]

depository receipts

The class, series and number of the foreign shares represented by the depository receipt. [Harvey]

depository transfer check

Check made out directly by a local bank to a particular firm or person. [Harvey][WCSU]

depository trust company

A limited service trust company created to facilitate the handling of registered bonds. [EPA]

Depository Trust Corporation (DTC)

A central securities certificate depository through which members effect security deliveries between each other via computerized bookkeeping entries thereby reducing the physical movement of stock certificates. [NYSE] DTC is a user-owned securities depository which accepts deposits of eligible securities for custody, executes book-entry deliveries and records book-entry pledges of securities in its custody, and provides for withdrawals of securities from its custody. [Harvey] DTC tracks the transfer of equities and corporate and municipal bonds cleared through NSCC via an automated book-entry system. [GAO] Provides a central securities certificate depository through which brokers deliver securities by computerized bookkeeping entries, vastly reducing physical transfer of stock certificates. DTC is operated by a separate management and has an independent board of directors [NYSE] The Depository Trust Corporation (DTC) holds, in its vaults, securities owned by its participants. DTC makes and receives deliveries of securities in book-entry form, allowing settlement of securities transactions electronically. Through the Continuous Net Settlement (CNS) system and Institutional Delivery (ID) system, as well as the Participant Terminal System (PTS), DTC settlement facilities are tied in to a broad range of related settlement systems. [NSCC]

depreciate

To allocate the purchase cost of an asset over its life. [Harvey]

depreciation

(1) Reduction in the book or market value of an asset. (2) Portion of an investment that can be deducted from taxable income. [WCSU] A non-cash expense that provides a source of free cash flow. Amount allocated during the period to amortize the cost of acquiring Long term assets over the useful life of the assets. [Harvey] Normally, charges against earnings to write off the cost, less salvage value, of an asset over its estimated useful life. It is a bookkeeping entry and does not represent any cash outlay nor are funds earmarked for the purpose. [NYSE] The decline in the dollar value of an asset over time and though use. The amount of annual depreciation may be computed differently for tax purposes than the actual decline in value. [OTS] The portion of the cost of a fixed asset other than a wasting asset which is charged as an expense during a particular period. In accounting for depreciation, the cost of a fixed asset, less any salvage value, is prorated over the estimated service life of such an asset, and each period is charged with a portion of such cost. Through this process, the entire cost of the asset is ultimately charged off as an expense. [EPA]

depreciation tax shield

The value of the tax write-off on depreciation of plant and equipment. [Harvey]

depressed mortgage

A mortgage with a market value less than its face value. [OTS]

depth of the market

The amount of currency that can be traded in the market at a given time without causing a price fluctuation. Thin markets are usually characterized by wide spreads and substantial price fluctuations during a short period of time. Strong markets tend to be characterized by relatively narrow spreads of stable prices. [FDIC]

derivative

A financial instrument, traded on or off an exchange, the price of which is directly dependent upon (i.e., 'derived from') the value of one or more underlying securities, equity indices, debt instruments, commodities, other derivative instruments, or any agreed upon pricing index or arrangement (e.g., the movement over time of the Consumer Price Index or freight rates). They are used to hedge risk or to exchange a floating rate of return for fixed rate of return. Derivatives include futures, options, and swaps. For example, futures contracts are derivatives of the physical contract and options on futures are derivatives of futures contracts. [CFTC] A generic term often used to categorize a wide variety of financial instruments whose value 'depends on' or is 'derived from' the value of an underlying asset, reference rate or index. [TMAC] Financial instrument derived from a cash market commodity, futures contract or other financial instrument. Derivatives can be traded on regulated exchange markets or over-the-counter. For example, futures contracts are derivatives of physical commodities, options on futures are derivatives of futures contracts. [NYMEX]

derivative instruments

Contracts such as options and futures whose price is derived from the price of the underlying financial asset. [Harvey]

derivative markets

Markets for derivative instruments. [Harvey]

derivative mortgage product

A financial instrument that is created by redistributing the cash flows from some underlying instruments, such as mortgages or mortgage-backed securities, to new classes of holders. The most common derivatives include multiple class securities, stripped mortgage-backed securities, and residuals. [OTS]

derivative security

A financial security, such as an option, or future, whose value is derived in part from the value and characteristics of another security, the underlying security. [Harvey]

derivatives clearing organization

A clearing organization or similar entity that, in respect to a contract (1) enables each party to the contract to substitute, through novation or otherwise, the credit of the derivatives clearing organization for the credit of the parties; (2) arranges or provides, on a multilateral basis, for the settlement or netting of obligations resulting from such contracts; or (3) otherwise provides clearing services or arrangements that mutualize or transfer among participants in the derivatives clearing organization the credit risk arising from such contracts. [CFTC]

Derivatives Transaction Execution Facility (DTEF)

derived investment value (DIV)

A valuation model that was developed for the RTC, primarily to value portfolios of real estate and nonperforming commercial mortgages. The DIV model discounts expected future cash flows, using many rules that govern holding periods, marketing periods, various discount rates by asset type, and so on. The DIV model has been widely used to value the collateral underlying commercial mortgage-backed securities. [FDIC]

descriptive statement

A bank account summary that contains information concerning one or more entries for which no separate item is enclosed. ACH entries necessitate some form of descriptive statement unless a substitute enclosure document is produced by the financial institution. Minimum reporting requirements are defined by Regulation E. [ACH]

designated contract market (DCM)

designated self regulatory organization (DSRO)

destination

The place to which a shipment is consigned. [ITDS]

detachable warrant

A warrant entitles the holder to buy a given number of shares of stock at a stipulated price. A detachable warrant is one that may be sold separately from the package it may have originally been issued with (usually a bond). [Harvey]

detached house

A free-standing, single-family dwelling unit, that does not share a common wall with any other structure. [OTS]

detention

Delay in clearing goods through customs, usually resulting in storage fees and other charges. [ITDS]

deterministic models

Liability-matching models that assume that the liability payments and the asset cash flows are known with certainty. [Harvey]

detrend

To remove the general drift, tendency or bent of a set of statistical data as related to time. [Harvey]

Deutsche mark (DM)

devaluation

A decrease in the spot price of the currency. [Harvey] An official act wherein the official of a country's currency is adjusted downward dollar, gold, Special Drawing Rights (IMF), or a currency. After a devaluation, there are more devalued currency units relative to the dollar, gold, SDR or other currency. [FDIC]

devanning

The unloading of cargo from a container. [ITDS]

developed countries

A term used to describe more industrialized nations. [ITDS]

developer

A person or company who prepares raw land for building sites and/or builds on those sites. [OTS]

developing countries

A term used to describe countries that lack strong amounts of industrialization, infrastructure, and sophisticated technology. [ITDS]

development loan

A loan made to fiance preparing raw land for the construction of buildings. Such preparation may include grading and the installation of utilities and roadways. [OTS]

diagonal spread

A spread between two call options or two put options with different strike prices and different expiration dates. [CFTC]

diesel fuel

Distillate fuel oil used in compression-ignition engines. It is similar to home heating oil, but must meet a cetane number specification of 40 or more. [NYMEX]

difference from S&P

A mutual fund's return minus the change in the Standard & Poors 500 Index for the same time period. A notation of -5.00 means the fund return was 5 percentage points less than the gain in the S&P, while 0.00 means that the fund and the S&P had the same return. [Harvey]

differential disclosure

The practice of reporting conflicting or markedly different information in official corporate statements including annual and quarterly reports and the 10-Ks and 10-Qs. [Harvey]

differential swap

Swap between two LIBO rates of interest, e.g. yen LIBOR for dollar LIBOR. Payments are in one currency. [Harvey]

differentials

An amount added to or deducted from a base shipping rate between two given locations to determine a new rate for another location. [ITDS] Price differences between classes, grades and locations of different stocks of the same commodity. [NYMEX] Price differences between classes, grades, and delivery locations of various stocks of the same commodity. [CBOT][MIDAM] The discount (premium) allowed for grades or locations of a commodity lower (higher) than the par of basis grade or location specified in the futures contact. [CFTC] refers to what was once the traditional difference in interest rates on savings deposits paid by commercial banks and thrift institutions. At times, the slightly higher rate paid by thrift institutions (generally 25 basis points) was mandated by regulation. The required differential was phased out by January 1984. [OTS]

diffusion process

A conception of the way a stock's price changes that assumes that the price takes on all intermediate values. dirty price. [Harvey]

digital option

dilution

Diminution in the proportion of income to which each share is entitled. [Harvey][WCSU]

dilutive effect

Result of a transaction that decreases earnings per common share. [Harvey]

dime

A 1O-cent coin, valued at one-tenth of a U.S. dollar. [OTS]

diminishing relative value

The principle that if all other factors remain constant, and individuals relative value of a good will decline as more of that good is obtained. Accordingly, the relative value of a good will increase, other factors remaining constant, as an individual gives up more of that good. [FACS]

diminishing returns

As more and more of a productive resource is added to a given amount to other productive resources, additions to output will eventually diminish other factors, such as technology and the degree of specialization remaining constant. [FACS]

direct debit

A method of ACH collection used where the debtor gives authorization to debit his or her account upon the receipt of an entry issued by a creditor. [ACH]

direct deposit

A method of payment which electronically credits your checking or savings account. [FRB][FRBM][FRBSF] A plan in which an individual authorizes the issuers of payroll, Social Security, dividend or other checks to send the checks directly to a thrift institution or bank for deposit in the individual's account. [OTS] A service provided by many employers, government agencies, and other parties. The party offering the service can transfer funds electronically to the appropriate financial institution, which deposits the funds directly in an individual's account (see ACH and EFT). The customer receives a written notification that the funds were deposited, including the effective date and account number used for the transaction. [FRBC] A service provided by many employers, government agencies, and other parties. The party offering the service can transfer funds electronically to the appropriate financial institution, which deposits the funds directly in an individual's account. The customer receives a written notification that the funds were deposited, including the effective date and account number used for the transaction. [FRB]

direct estimate method

A method of cash budgeting based on detailed estimates of cash receipts and cash disbursements category by category. [Harvey]

direct expenses

Those expenses which can be charged directly as a part of the cost of a product or service, or of a department or operating unit, as distinguished from overhead and other indirect costs which must be prorated among several products or services, departments, or operating units. [EPA]

direct investment

investment by thrift institutions directly in the equity of such ventures as real estate development, and business firms as opposed to thrifts' traditional debt investment. With direct investment, a thrift institution actually owns all or a portion of a venture, rather than simply lending money to finance the venture. Direct investments can be more profitable -- and more risky -- than debt investments. [OTS]

direct lease

Lease in which the lessor purchases new equipment from the manufacturer and leases it to the lessee. [Harvey][WCSU]

direct net debt

Gross direct debt less debt that is self-supporting (revenue bonds) and double-barreled bonds (general obligation bonds secured by earmarked revenues which flow outside the general fund). [EPA]

direct paper

Commercial paper sold directly by the issuer to investors. [Harvey]

direct participants

Direct participants are financial institutions that are permitted to transact with the clearing organization, and all customers come to the clearing organization through them. The term usually refers to institutions that interact with NSCC. [GAO]

direct placement

Selling a new issue not by offering it for sale publicly, but by placing it with one of several institutional investors. [Harvey] selling a security issue to one or several large investors (usually institutional investors) rather than offering it to the public through broker-dealers. [OTS]

direct quote

For foreign exchange, the number of U.S. dollars needed to buy one unit of a foreign currency. [Harvey]

direct reduction mortgage

A type of mortgage in which at least a portion of each payment is applied directly to reduce the amount of outstanding principal. The interest is computed each month on the remaining principal balance. Therefore, each month the amount of interest due is reduced as the loan is repaid. In direct reduction mortgages with equal monthly payments, the portion of the fixed payment applied to principal increases each month as the interest portion decreases. [OTS]

direct requirements table

This commodity-by-industry direct requirements table is derived from the use table by relating commodity inputs used by an industry to the industry's output. The values in this table, referred to as 'direct requirements coefficients', are in ratio format and show the amount of a commodity required directly by an industry to produce a dollar of the industry's output. [BEA]

direct search market

Buyers and sellers seek each other directly and transact directly. [Harvey]

direct stock-purchase programs

The purchase by investors of securities directly from the issuer. [Harvey]

directional trading

Trading strategies designed to speculate on the direction of the underlying market, especially in contrast to volatility trading. [CFTC]

directly estimated method

Procedure for estimating Federal Government purchases based on data from the budget and from the 'Monthly Treasury Statement'. [BEA]

directly priced method

Procedure for estimating Federal Government purchases by multiplying the delivered quantity by the price paid. [BEA]

director

A person responsible for determining the policy of a corporation, institution or other entity. Directors are usually elected by the shareholders, but sometime are appointed. Directors appoint the organization's president, vice presidents and other operating officers, and decide among other things, when dividends are paid. [OTS] Person elected by shareholders, usually during an annual meeting, to serve on the Board of Directors of a corporation. The directors appoint the president, vice president and all other operating officers. Directors decide, among other matters, if and when dividends shall be paid. [NYSE]

directorate

An organization's board of directors. [OTS]

directors' and officers insurance

insurance that protects directors and officers against personal liability for losses incurred by a third party due to negligent performance by the director or officer. [OTS]

dirty cargo

Those petroleum products which leave significant amounts of residue in tanks. Generally applies to crude oil and residual fuel oil. [NYMEX]

dirty float

A system of floating exchange rates in which the government occasionally intervenes to change the direction of the value of the country's currency. [Harvey] A type of floating exchange rate that is not completely freely floating because central banks intervene from time to time to alter the rate from its free-market level. It is still a floating rate because it has not been pegged at a predetermined par value. [FRB][FRBM][FRBSF]

dirty price

Bond price including accrued interest, i.e., the price paid by the bond buyer. [Harvey]

disburse

to pay out money. [OTS]

disbursement

The payment of funds toward the full or partial settlement of an obligation. [OTS]

disbursement float

A decrease in book cash but no immediate change in bank cash, generated by checks written by the firm. [Harvey]

discharge

The unloading of passengers or cargo from a vessel, vehicle, or aircraft. [ITDS]

disclaimer of opinion

An auditor's statement disclaiming any opinion regarding the company's financial condition. [Harvey]

disclosure document

A statement that must be provided to prospective customers that describes trading strategy, potential risk, commissions, fees, performance, and other relevant information. [CFTC]

disclosure statements

information that government regulations require a lender to give a borrower prior to consummation of a loan. [OTS]

discount

(1) The amount a price would be reduced to purchase a commodity of lesser grade; ( 2) sometimes used to refer to the price differences between futures of different delivery months, as in the phrase 'July at a discount to May,' indicating that the price for the July futures is lower than that of May. [CFTC] (1) the sale of a note or other obligation for less than its face value, with the lender obligated to pay the full face value to the holder at maturity. (2) the amount representing the difference between the face value and the lower sales price of a note. [OTS] (A) Amount (stated in dollars or a percent) by which the selling or purchase price of a security is less than its face amount. (B) Amount by which the amount bid for an issue is less than the aggregate principal amount of that issue. [EPA] 1) A downward adjustment in price allowed for delivery of stocks of a commodity of lesser than contract grade against a futures contract. 2) Sometimes used to refer to the price differences between futures of different delivery months. [NYMEX] An amount deducted from the regular price for those who purchase with cash instead of credit. [FRB][FRBC] In foreign exchange, an adjustment to spot price made in arriving at a quote for future delivery. If a dealer quotes $2.40 and $2.45 (bid and asked) for sterling and the discounts for six months forward are .0030 and .0275, the forward quotes would be adjusted to $2.3700 and $2.4225. This discount usually represents differences in interest rates in the U.S. and Britain. However, in periods of crisis for a currency, the discount can represent the market anticipation of a lower price. [FDIC] Referring to the selling price of a bond, a price below its par value. [Harvey] The amount by which a preferred stock or bond may sell below its par value. Also used as a verb to mean 'takes into account' as the price of the stock has discounted the expected dividend cut. [NYSE]

discount bond

Debt sold for less than its principal value. If a discount bond pays no interest, it is called a zero-coupon bond. [Harvey] Debt sold for less than its principle value. If a discount bond pays no interest, it is called a 'pure' discount bond. [WCSU]

discount brokerage

A brokerage house that executes orders to buy or sell securities at commission rates sharply lower than those charged by a full service broker. Discount brokers offer limited service. They do not offer investment advice to clients. [OTS]

discount certificates

certificates of deposit that are offered at an issue price that is less than the stated face value at maturity. The difference between the issue price (the amount invested) and the stated redemption value of the account at maturity is called the original issue discount. [OTS]

discount factor

Present value of $1 received at a stated future date. [Harvey][WCSU]

discount loan

A loan on which the interest and/or charges are deducted from the face amount of the loan at the time it is made. The borrower receives an amount of principal reduced by the amount of interest, but must repay the full face amount of the loan. Used only for short-term loans. [OTS]

discount method

A method of paying interest by issuing a security at less than par and repaying par value at maturity. The difference between the higher par value and the lower purchase price is the interest. [CBOT][MIDAM]

discount payment

The difference between the face value and the price paid for a security. [FRB][FRBM][FRBSF]

discount period

The period during which a customer can deduct the discount from the net amount of the bill when making payment. [Harvey]

discount point

An amount paid by a borrower to a lender at the time the loan is made to increase the loan's effective yield. One point is equal to one percent of the loan amount. [OTS]

discount rate

Financial institutions can borrow from the U.S. Federal Reserve. The interest rate charged by the Federal Reserve Bank is called the discount rate; the act of borrowing is called 'borrowing at the discount rate'. [UNODC] Rate used to calculate the present value of future cash flows. [WCSU] The interest a private bank pays for a loan from the U.S. Federal Reserve System. [FACS] The interest rate at which eligible depository institutions may borrow funds, usually for short periods, directly from the Federal Reserve Banks. The law requires the board of directors of each Reserve Bank to establish the discount rate every 14 days subject to the approval of the Board of Governors. [FRB][FRBC][FRBM][FRBSF] The interest rate charged by the Federal Reserve Banks on loans to their member banks. [OTS] The interest rate charged on loans by the Federal Reserve Bank. [CBOT] The interest rate charged on loans by the Federal Reserve to member banks. Discretionary Account: An arrangement by which the holder of the account gives written power of attorney to another person, often his broker, to make trading decisions. Also known as a controlled or managed account. [MIDAM] The interest rate that the Federal Reserve charges a bank to borrow funds when a bank is temporarily short of funds. Collateral is necessary to borrow, and such borrowing is quite limited because the Fed views it as a privilege to be used to meet short-term liquidity needs, and not a device to increase earnings. [Harvey]

discount securities

Non-interest-bearing money market instruments that are issued at a discount and redeemed at maturity for full face value, e.g. U.S. Treasury bills. [Harvey]

discount window

A figurative expression referring to the Federal Reserve facility for extending credit directly to eligible depository institutions (banks and thrift institutions with transaction accounts or nonpersonal time deposits). In the early years of the Federal Reserve System, bankers came to a Federal Reserve Bank teller window to get credit. [OTS] Facility provided by the Fed enabling member banks to borrow reserves against collateral in the form of governments or other acceptable paper. [Harvey] Figurative expression for Federal Reserve facility for extending credit directly to eligible depository institutions (those with transaction accounts or nonpersonal time deposits). [FRB][FRBC][FRBM] Figurative expression referring to the Federal Reserve's facility for extending credit directly to eligible depository institutions (those with transaction accounts or nonpersonal time deposits). [FRBSF]

discounted basis

Selling something on a discounted basis is selling below what its value will be at maturity, so that the difference makes up all or part of the interest. [Harvey]

discounted cash flow (DCF)

Future cash flows multiplied by discount factors to obtain present values. [Harvey] future cash flows multiplied by discount factors to obtain present values. [WCSU]

discounted dividend model

A formula to estimate the intrinsic value of a firm by figuring the present value of all expected future dividends. [Harvey]

discounted payback period rule

An investment decision rule in which the cash flows are discounted at an interest rate and the payback rule is applied on these discounted cash flows. [Harvey]

discounted payoff

The payoff of a nonperforming loan at a price that is below the book value of the asset; for example, a 15 percent discount would equate to a price that is 85 percent of book value. [FDIC]

discounting

Calculating the present value of a future amount. The process is opposite to compounding. [Harvey] The sale at less than original price value of a commodity or monetary instrument, often for immediate payment. [ITDS]

Discover

discrete compoundingm

Compounding the time value of money for discrete time intervals. [Harvey]

discrete random variable

A random variable that can take only a certain specified set of discrete possible values - for example, the positive integers 1, 2, 3, . . . [Harvey]

discretionary account

A type of account with a broker-dealer in which the investor authorizes the broker to buy and sell securities, selected by the broker, at a price, amount, and time the broker believes to be best. [SEC] Accounts over which an individual or organization, other than the person in whose name the account is carried, exercises trading authority or control. [Harvey] An account in which the customer gives the broker or someone else discretion to buy and sell securities or commodities including selection, timing, amount, and price to be paid or received. [NYSE] An arrangement by which the holder of an account gives written power of attorney to someone else, often a broker, to buy and sell without prior approval of the account holder. Often referred to as a 'managed account.' [NYMEX] An arrangement by which the holder of an account gives written power of attorney to someone else, often a commodity trading advisor, to buy and sell without prior approval of the holder; often referred to as a 'managed account' or controlled account. [CFTC] An arrangement by which the holder of the account gives written power of attorney to another person, often his broker, to make trading decisions. Also known as a controlled or managed account. [CBOT][MIDAM]

discretionary cash flow

Cash flow that is available after the funding of all positive NPV capital investment projects; it is available for paying cash dividends, repurchasing common stock, retiring debt, and so on. [Harvey]

discretionary fiscal policy

Changes in a fiscal (tax or spending) program initiated by the government in order to change aggregate demand. [FACS]

discretionary income

The portion of disposable income remaining after essential living costs are paid. [OTS]

discretionary trust

A trust (revocable or irrevocable) where a number of potential beneficiaries (referred to as a 'class') are named but not given a defined interest in the trust. The Trustees are given 'discretion' to decide which members of the class of beneficiaries will benefit from the trust. [UNODC]

discriminant analysis

A statistical process that links the probability of default to a specified set of financial ratios. [Harvey]

discrimination

The preferential rates or privileges granted to some shippers but not to others under similar conditions. [ITDS]

disequalibrium

The quantity demanded does not equal the quantity supplied at the going price. [FACS]

dishonored check

A check for which payment has been denied when the check was presented to the drawee. [OTS]

disinflation

A slowdown in the rate of inflation. [FACS]

disintermediation

The movement of funds from one investment vehicle to another; for example the withdrawal of funds from depository institutions for the purpose of investing the same funds in money market instruments. [OTS] Withdrawal of funds from a financial institution in order to invest them directly. [Harvey][WCSU]

dispatch

An amount paid by a vessels operator to a charter if loading or unloading is completed in less time than stipulated in the charter agreement. [ITDS]

displacement

The movement of people, against their will, out of their homes or neighborhoods by forces beyond their control. Causes of displacement include: fire, highway construction, redevelopment, gentrification, condominium conversion, and natural disasters. [OTS]

disposable income

The amount of an individuals income that remains after the deduction of income taxes. [FACS] personal income remaining after income taxes (and other taxes) have been paid, and available for consumption or saving. [OTS]

disposable personal income

Personal income less personal tax and nontax payments; the income available to persons for spending or saving. [BEA]

dispossess

to remove a person from his or her real property by lawful means, including, if necessary, the use of force. [OTS]

disregard tape (DRT)

Absent any restrictions, a DRT (Not-Held Order) means any order giving the floor broker complete discretion over price and time in execution of an order, including discretion to execute all, some, or none of this order. [CFTC]

distillate fuel oil

Products of refinery distillation sometimes referred to as middle distillates; kerosene, diesel fuel, and home heating oil. [NYMEX]

distressed asset

Owned real estate, nonperforming loan, or other troubled asset. The market value of a distressed asset is almost always less than it was projected to be when the investment was originally made and is often below the asset's current book value. [FDIC]

distributed

After a Treasury auction, there will be many new issues in dealer's hands. As those issues are sold, it is said that they are distributed. [Harvey]

distribution license

A license that allows multiple exports of authorized commodities to foreign consignees approved in advance by the U.S. Bureau of Export Administration. [ITDS]

distribution service

A service that accepts one shipment from a single shipper and at a point of destination, separates the shipment and distributes it to many receivers. [ITDS]

distributions

Payments from fund or corporate cash flow. May include dividends from earnings, capital gains from sale of portfolio holdings and return of capital. Fund distributions can be made by check or by investing in additional shares. Funds are required to distribute capital gains (if any) to shareholders at least once per year. Some Corporations offer Dividend Reinvestment Plans (DRP). [Harvey]

distributor

An agent who sells directly for a supplier and maintains an inventory of the suppliers products. [ITDS]

district bank

another name for one of the 12 Federal Home Loan Banks. [OTS]

divergence

When two or more averages or indices fail to show confirming trends. [Harvey]

diversification

Dividing investment funds among a variety of securities with different risk, reward, and correlation statistics so as to minimize unsystematic risk. [Harvey] Spreading investments among different types of securities and various companies in different fields. [NYSE] The participation by a firm in the production or sale of widely divergent kinds of good or services. Diversification permits the company to minimize the impact on overall revenue of business fluctuations in a single market, single product or service line. [OTS]

diversion

Any change in the billing of a shipment once it has been received by the carrier at point of origin and prior to delivery at destination. [ITDS]

divestiture

(1) the process of disposing of all or part of a business. (2) the act of taking away property rights. [OTS]

divided interest

An ownership interest in only a part of a property. The interest in the selected part may be total or partial. [OTS]

dividend clawback

With respect to a project financing, an arrangement under which the sponsors of a project agree to contribute as equity any prior dividends received from the project to the extent necessary to cover any cash deficiencies. [Harvey]

dividend clientele

A group of shareholders who prefer that the firm follow a particular dividend policy. For example, such a preference is often based on comparable tax situations. [Harvey]

dividend discount model

A model for valuing the common stock of a company, based on the present value of the expected cash flows. [Harvey]

dividend growth model

A model wherein dividends are assumed to be at a constant rate in perpetuity. [Harvey]

dividend limitation

A bond covenant that restricts in some way the firm's ability to pay cash dividends. [Harvey]

dividend payout ratio

Percentage of earnings paid out as dividends. [Harvey]

dividend policy

An established guide for the firm to determine the amount of money it will pay as dividends. [Harvey]

dividend rate

The fixed or floating rate paid on preferred stock based on par value. [Harvey]

dividend reinvestment plan

Automatic reinvestment of shareholder dividends in more shares of a company's stock, often without commissions. Some plans provide for the purchase of additional shares at a discount to market price. Dividend reinvestment plans allow shareholders to accumulate stock over the Long term using dollar cost averaging. The DRP is usually administered by the company without charges to the holder. [Harvey]

dividend rights

A shareholders' rights to receive per-share dividends identical to those other shareholders receive. [Harvey]

dividend yield

Annual dividend divided by share price. [WCSU] Indicated yield represents annual dividends divided by current stock price. [Harvey] Indicated yield represents return on a share of a mutual fund held over the past 12 months. Assumes fund was purchased 1 year ago. Reflects effect of sales charges (at current rates), but not redemption charges. [Harvey]

dividends

A dividend is a portion of a company's profit paid to common and preferred shareholders. A stock selling for $20 a share with an annual dividend of $1 a share yields the investor 5%. [Harvey] A payment by a corporation to its stockholders, usually representing a share in the company's earnings. [SEC] A payment, usually in cash, that a corporation makes to its stockholders. The dividend is the stockholders' share of the profits left after the company sets aside funds to finance operations, expansion and modernization. [OTS] Cash payments made by corporations to stockholders. Capital gains distributions by mutual funds are not included in dividends. [BEA] Payment by a company to its stockholders. [WCSU] Profits of a firm that are distributed to its investors (stockholders). [FACS] The payment designated by the Board of Directors to be distributed pro rata among the shares outstanding. For preferred shares, the dividend is usually a fixed amount. For common shares, the dividend varies with the fortunes of the company and the amount of cash on hand, and may be omitted if business is poor or if the directors determine to withhold earnings to invest in plants and equipment. Sometimes a company will pay a dividend out of past earnings even if it is not currently operating at a profit. Dividend Reinvestment Plan [NYSE]

dividends per share

Amount of cash paid to shareholders expressed as dollars per share. [Harvey] Dividends paid for the past 12 months divided by the number of common shares outstanding, as reported by a company. The number of shares often is determined by a weighted average of shares outstanding over the reporting term. [Harvey]

division of labor

Assigning of specific tasks to workers and productive resources; it is a reflection of economic specialization. [FACS]

Division of Resolutions and Receiverships (DRR)

An FDIC organizational unit, created in late 1996 by combining the Division of Resolutions (DOR) and the Division of Depositor and Asset Services (DAS). [FDIC]

dock

Loading or unloading platform at an industrial location or carrier terminal. [ITDS]

dock examination

A U.S. Customs examination that requires be opened for a thorough inspection rather than just a visual one. [ITDS]

dock receipt

A receipt issued by a port officer that certifies that goods have been received by a shipper. [ITDS]

docket number

A five-digit number assigned to a thrift institution by the Office of Thrift Supervision (OTS). Each savings institution that is regulated by OTS has its own docket number. The number is used to file and retrieve all financial, organizational, and regulatory data regarding that institution. [OTS]

doctor test

A qualitative method of detecting undesirable sulfur compounds in petroleum distillates; that is, determining whether an oil is sour or sweet. [NYMEX]

doctrine of sovereign immunity

Doctrine that says a nation may not be tried in the courts of another country without its consent. [Harvey]

documentary credit

A commercial letter of credit providing for payment by a bank to the named beneficiary, usually the seller of merchandise, against delivery of documents specified in the credit. [FDIC]

documentary draft

A draft with documents attached delivered to the drawee when it accepts or pays the draft, and which ordinarily controls title to the merchandise. [FDIC]

documentary stamp

A form of tax in some states that requires a revenue stamp to be affixed to documents transferring title to real property. [OTS]

documentation risk

The risk that the legal agreements between two institutions is insufficient or incomplete. [TMAC]

documented discount notes

Commercial paper backed by normal bank lines plus a letter of credit from a bank stating that it will pay off the paper at maturity if the borrower does not. Such paper is also referred to as LOC (letter of credit) paper. [Harvey]

documents

Shipping and other papers attached to foreign drafts, consisting of ocean bills of lading, marine insurance certificates and commercial invoices. Certificates of origin and consular invoices may also be required. [FDIC] anything printed or written that is relied on to record or prove something. [OTS]

documents against acceptance

Instructions given by an exporter to a bank that the documents attached to a draft for collection are deliverable to the drawee only against his or her acceptance of the draft. [FDIC]

documents against payment

Instructions given by an exporter to his or her bank that the documents attached to a draft for collection are deliverable to the drawee only against his or her payment of the draft. [FDIC]

dollar

The monetary unit of the United States. [OTS]

dollar bond

A municipal bond that is quoted and traded on the basis of dollars rather than a percentage, or yield, to maturity. Term bonds, tax-exempt notes and public housing authority bonds are dollar bonds. [OTS] Municipal revenue bonds for which quotes are given in dollar prices. Not to be confused with 'U.S. Dollar' bonds, a common term of reference in the Eurobond market. [Harvey]

dollar cost averaging

A system of buying securities at regular intervals with a fixed dollar amount. Under this system investors buy by the dollars' worth rather than by the number of shares. If each investment is of the same number of dollars, payments buy more shares when the price is low and fewer when it rises. Thus temporary downswings in price benefit investors if they continue periodic purchases in both good times and bad and the price at which the shares are sold is more than their average cost. [NYSE]

dollar duration

The product of modified duration and the initial price. [Harvey]

dollar exchange acceptance

Time draft drawn by Central Banks in specific foreign countries and accepted by banks in the U.S. for the purpose of furnishing foreign exchange. These instruments do not arise from specific commercial transactions, rather they are designed to alleviate shortages of dollar exchange for certain countries specified in a list published by the Federal Reserve System. It is anticipated that the acceptance will be liquidated subsequently from dollar funds acquired by the Central Bank. Limits are placed on initial maturity of drafts (three months). Member banks may not accept drafts in an amount exceeding 50% of paid-in and unimpaired capital and surplus. [FDIC]

dollar price of a bond

Percentage of face value at which a bond is quoted. [Harvey]

dollar return

The return realized on a portfolio for any evaluation period, including (1) the change in market value of the portfolio and (2) any distributions made from the portfolio during that period. [Harvey]

dollar reverse repurchase agreements

A financial transaction that is similar to a reverse repurchase agreements in which a dealer, in effect, loans money by buying a security and agreeing to sell it back to the customer at a higher price at a later date. In a dollar reverse repurchase agreements (dollar reverse repo) the dealer does not sell back the exact same security but another, substantially identical security. [OTS]

dollar roll

Similar to the reverse repurchase agreement - a simultaneous agreement to sell a security held in a portfolio with purchase of a similar security at a future date at an agreed-upon price. [Harvey]

dollar safety margin

The dollar equivalent of the safety cushion for a portfolio in a contingent immunization strategy. [Harvey]

dollar-weighted rate of return

Also called the internal rate of return, the interest rate that will make the present value of the cash flows from all the subperiods in the evaluation period plus the terminal market value of the portfolio equal to the initial market value of the portfolio. [Harvey]

dolly

A piece of equipment with wheels used to move freight with or without a tractor. [ITDS]

domestic exports

Exports which were grown, produced, or manufactured in the United States. [ITDS]

Domestic International Sales Corporation

A U.S. corporation that receives a tax incentive for export activities. [Harvey]

domestic market

Part of a nation's internal market representing the mechanisms for issuing and trading securities of entities domiciled within that nation. [Harvey]

domicile

The place of your permanent home and the means by which you are connected with a certain system of law for certain legal purposes such as marriage, divorce, succession of estate and taxation. [UNODC] The place where a draft or acceptance is made payable. [ITDS] The place where a person has his or her true, fixed, permanent home; their principal established residence to which a person intends to return whenever absent. A person may have several residences, but only one domicile. [OTS]

dominant future

That future having the largest amount of open interest. [CFTC]

donee

A person who receives a gift. [OTS]

donor

A person who gives a gift. [OTS]

door-to-door

Shipping service from shippers door to consignees door. [ITDS]

dormant account

A savings account on which no transaction (except the crediting of interest) has occurred for a specified number of years. At the end of that time period set by state law, funds in the account escheat to the state. [OTS]

double deflation

Technique for estimating real GDP by industry. GDP by industry is estimated as the difference between real gross output and real intermediate inputs. [BEA]

double entry

A method of bookkeeping in which there are two entries for each transaction, one as a debit and the other as a credit, that check and balance each other. [OTS]

double exits

Use of two passports for the purpose of confusion or convenience. [UNODC]

double hedging

As used by the CFTC, it implies a situation where a trader holds a long position in the futures market in excess of the speculative position limit as an offset to a fixed price sale, even though the trader has an ample supply of the commodity on hand to fill all sales commitments. [CFTC]

double selling

Occurs when a mortgage loan originator accepts a legitimate application and documentation from a buyer, reproduces or copies the loan file, and sends the loan package to separate warehouse lenders to each fund the loan. [FFIEC]

double-barreled bond

Traditionally, a bond secured by a defined source of revenue plus the full faith and credit of the issuer. [EPA]

double-column tariff

A tariff schedule with two rates, one for preferred trading partners and one for imports from non-preferred trading countries. [ITDS]

double-decker thrift

slang for a corporate structure in which one thrift institution owns another thrift institution. [OTS]

double-declining-balance depreciation

Method of accelerated depreciation. [Harvey][WCSU]

double-dip lease

A cross-border lease in which the disparate rules of the lessor's and lessee's countries let both parties be treated as the owner of the leased equipment for tax purposes. [Harvey]

double-tax agreement

Agreement between two countries that taxes paid abroad can be offset against domestic taxes levied on foreign dividends. [Harvey][WCSU]

doubling option

A sinking fund provision that may allow repurchase of twice the required number of bonds at the sinking fund call price. [Harvey]

doubtful

one of the categories of classified assets. [OTS]

dough

slang for money, cash. [OTS]

Dow Jones industrial average

A measurement of market price movement for 30 widely held stocks listed on the New York Stock Exchange. The average is computed by adding the prices of the 30 stocks and dividing by an adjusted denominator. [OTS] This is the best known U.S.index of stocks. It contains 30 stocks that trade on the New York Stock Exchange. The Dow, as it is called, is a barometer of how shares of the largest U.S.companies are performing. There are thousands of investment indexes around the world for stocks, bonds, currencies and commodities. [Harvey]

Dow theory

A theory of market analysis based upon the performance of the Dow Jones industrial and transportation stock price averages. The Theory says that the market is in a basic upward trend if one of these averages advances above a previous important high, accompanied or followed by a similar advance in the other. When the averages both dip below previous important lows, this is regarded as confirmation of a downward trend. The Dow Jones is one type of market index. [NYSE]

dower

The rights of a widow to some or all of the property of her late husband. [OTS]

down and out

slang expression for being without funds, penniless. [OTS]

down payment

(1) an initial, partial payment made at the time of purchase to permit the buyer to take delivery of the purchase. (2) a partial payment made to evidence good faith that the buyer will complete the purchase transaction at the time the contract is signed. [OTS]

down-and-in option

Barrier option that comes into existence if asset price hits a barrier. [Harvey]

down-and-out option

Barrier option that expires if asset price hits a barrier. [Harvey]

downgrade

A classic negative change in ratings for a stock, and or other rated security. [Harvey]

downstream

An industry term referring to commercial oil and gas operations beyond the production phase; oil refining and marketing, and natural gas transmission and distribution. [NYMEX]

downstream dumping

The sale of products by a manufacturer below cost to a secondary producer in its domestic market where the product is then further processed and shipped to another country. [ITDS]

draft

A draft is an order in writing signed by one party (the drawer) requesting a second party (the drawee) to make payment in lawful money at a determinable future time to a third party (the payee). Drafts occasionally may be written to be non-negotiable, in that they will not meet all the requirements of the Uniform Negotiable Instruments Act. Drafts generally arise from a commercial transaction, whereby the seller makes an agreement with a buyer in advance for the transfer of goods. The draft may be made out by the seller (the drawer) ordering the buyer (the drawee) to pay his or her bank (the payee) for the goods purchased. It may be accompanied by a bill of lading, which the bank will surrender to the buyer upon payment of the draft. The buyer may then claim the goods at the office of the carrier who transported them to the buyer's place of business. Drafts may be classified as to time element, such as sight or presentation drafts. A time draft is presented at sight, accepted, and then paid on the agreed upon date which may be 30, 60, 90 days or longer after presentation and acceptance. [FDIC] A written order signed by one party (the drawer) requesting a second party (the drawee) to pay a specified amount of money to a third party (the payee) at some future time. A check is a draft. [OTS] An unconventional order in writing - signed by a person, usually the exporter, and addressed to the importer - ordering the importer or the importer's agent to pay, on demand (sight draft) or at a fixed future date (time draft), the amount specified on its face. [Harvey]

dragon bond

A bond issued by a foreign borrower in an Asian or Pacific country (excluding Japan). [UNODC]

draw

The disbursal of a portion of a construction loan after a certain stage of completion. Also called a progress payment. [OTS]

drawback

A refund of 99 percent of duties (and taxes) paid on imported merchandise which is immediately exported, subjected to manufacture or production and then exported,, or destroyed in the same condition as it was imported. [ITDS]

drawback system

An ACS module that provides the means for processing and controlling all types of drawback entries. [ITDS]

drawee

The addressee of a draft, i.e., the person on whom the draft is drawn. [FDIC] The financial institution on which a check is drawn. [OTS]

drawer

The issuer or signer of a draft. [FDIC] The party who issues an order, draft, check or bill of exchange. [OTS]

dray

A vehicle used to haul cargo or goods. [ITDS]

drayage

The charge made for hauling freight or carts, drays or trucks. [ITDS]

drive-in window

A teller's window situated so as to permit a motorist to transact business without leaving his or her vehicle. [OTS]

drop lock

An arrangement whereby the interest rate on a floating rate note or preferred stock becomes fixed if it falls to a specified level. [Harvey] An arrangement whereby the interest rate on a floating-rate note or preferred becomes fixed if it falls to a specified level. [WCSU]

drop shipment

A shipment of goods from a manufacturer directly to a dealer or consumer, avoiding shipment to the wholesaler. [ITDS]

drop, the

With the dollar roll transaction the difference between the sale price of a mortgage-backed pass-through, and its re-purchase price on a future date at a predetermined price. [Harvey]

dropoff

The delivery of a shipment by a shipper to a carrier for transportation. [ITDS]

dropoff charge

A charge made by a transportation company for delivery of a container. [ITDS]

drug fraud

dry cargo

Cargo which does not require temperature controls. [ITDS]

dry gas

Gas that does not contain liquid hydrocarbons. [NYMEX]

dry-bulk container

A container designed to carry any of a number of free flowing dry solids such as grain or sand. [ITDS]

dry-cargo container

Any shipping container designed to transport goods other than liquids. [ITDS]

dual allocation

An estimating procedure in which the elements within a matrix are adjusted to simultaneously sum to known row and column totals. [BEA]

dual currency bond

Bond with interest paid in one currency and principle paid in another. [WCSU]

dual exchange rate

The existence of two or more exchange rates for a single currency. [ITDS]

dual index note

A note with a coupon rate that varies in relation to the movement of two different indexes, typically the Constant Maturity Treasury (CMT) rate and LIBOR. A dual index note usually has a fixed rate for a brief period, followed by a longer period of variable rates. For example, the coupon might start out as a fixed rate of 8 percent for two years, then switch to a variable rate calculated as the 10-year Treasury rate plus 300 basis points minus the 6-month LIBOR. A dual index note is a type of structured note. [OTS]

dual pricing

The selling of identical products in different markets for different prices. [ITDS]

dual syndicate equity offering

An international equity placement where the offering is split into two tranches - domestic and foreign - and each tranche is handled by a separate lead manager. [Harvey]

dual trading

Dual trading occurs when an individual (or representative of a firm) trades on behalf of customers and also trades for his or her own or the firm's proprietary account. [GAO] Dual trading occurs when: (1) a floor broker executes customer orders and, on the same day, trades for his own account or an account in which he has an interest; or (2) a futures commission merchant carries customer accounts and also trades or permits its employees to trade in accounts in which it has a proprietary interest, also on the same trading day. [CFTC]

dual-banking system

Systems peculiar to the United States, in which there are two distinct regulatory systems: state and federal. Banks are regulated according to the system under which they are chartered. [UNODC] refers to the emergence of two systems -- state and federal -- which charter and regulate banks and savings institutions. [OTS]

dual-currency issues

Eurobonds that pay coupon interest in one currency but pay the principal in a different currency. [Harvey]

due bill

A written acknowledgment of the existence of a debt owed to a particular party. A due bill is not payable on demand nor transferable to another party by endorsement. [OTS] An instrument evidencing the obligation of a seller to deliver securities sold to the buyer. Occasionally used in the bill market. [Harvey]

due care

The standard of conduct displayed by an ordinary, reasonable, prudent individual. [OTS]

due date

The date on which all or part of a debt is required to be paid; the maturity date. [OTS]

due diligence

A potential purchaser's on-site inspection of the books and records of a failing institution. Before an institution's failure, the FDIC invites potential purchasers to the institution to review pertinent files so they can make informed decisions about the value of the failing institution's assets. All potential purchasers must sign a confidentiality agreement. In addition, contractors may be hired to perform due diligence work on assets that are earmarked for multi-asset sales initiatives. By hiring outside firms to provide and certify the due diligence, investors have the assurance that an independent source provides them with reliable investment information. [FDIC] Inquiry made to determine facts in connection with the issuer, the issue and the security for the issue that would be material to a prudent investor in making an investment decision. [EPA] The performance of those actions that are generally regarded as prudent, responsible and necessary to conduct a thorough and objective investigation, review and/or analysis. In the thrift industry, the term is used to describe the preacquisition analysis of a savings association by a potential acquirer. The analysis includes a review of the institution's franchise value, an identification of its assets and liabilities, an evaluation of its management, and a determination of its purchase price. [OTS]

due-on-sale clause

A clause in a mortgage contract providing that if the borrower sells or transfers any interest in the property, the lender has the right to demand the entire unpaid principal balance. [OTS]

dumping

The sale of acommodity in a foreign market at less than fair value, usually considered to be a price lower than that at which it is sold within the exporting country or to third countries. [ITDS]

dun

to press for payment of a debt; to demand repeatedly to be paid what is owed. [OTS]

dunnage

Materials placed around cargo to prevent breakage or movement. [ITDS]

duplex

A single residential structure containing two separate housing units. [OTS]

Dupont system of financial control

Highlights the fact that return on assets (ROA) can be expressed in terms of the profit margin and asset turnover. [Harvey]

durable goods

Any product which is not consumed through use. [ITDS]

durable merchandise

Goods that have a relatively lengthy life (television sets, radios, etc.) [FRBSF]

duration

A common gauge of the price sensitivity of an asset or portfolio to a change in interest rates. [Harvey] A measure of a bond's price sensitivity to changes in interest rates. [CFTC] A measure of the sensitivity of the price of an interest rate instrument to a change in interest rates. [TMAC] The average time to an asset's discounted cash flows. [WCSU]

dutch auction

An auction in which the price of items is continuously lowered until a bidder responds favorably. [OTS] An auction of a debt instrument (such as a Treasury note) in which all successful bidders receive the same yield (the lowest yield that results in the sale of the entire amount to be issued). [CFTC] Auction in which the lowest price necessary to sell the entire offering becomes the price at which all securities offered are sold. This technique has been used in Treasury auctions. [Harvey]

dutch sandwich

A tax structure using companies from two Dutch Jurisdictions to reduce the U.S. tax obligation on royalty and patent income flowing from the United States. [UNODC]

dutiable list

Items listed in a countrys tariff schedule for which it charges import duty. [ITDS]

duty

A tax levied by a government on the import, export, or consumption of goods. [ITDS]

duty of care

One of the principal fiduciary duties of bank directors and trustees. The duty of care requires directors and trustees to make appropriate inquiries and acquaint themselves with all information reasonably available to them before making a business decision, and to act with requisite care after becoming so acquainted. [FDIC]

duty of loyalty

The fiduciary obligation of a bank director or trustee to act in the best interest of the institution and its constituents, as opposed to acting for the fiduciary's own interest or for the benefit of outsiders. [FDIC]

DVP system

A delivery vs. payment (DVP) system is a system that ensures that the final transfer of one asset will occur if, and only if, the final transfer of another asset (or other assets) occurs. [GAO]

dwelling unit

living quarters consisting of contiguous rooms intended for convenient, long-term occupancy by one family and providing complete, independent facilities for living, eating, cooking, sleeping and sanitation. [OTS]

dynamic asset allocation

An asset allocation strategy in which the asset mix is mechanistically shifted in response to -changing market conditions, as in a portfolio insurance strategy, for example. [Harvey]

dynamic hedging

A strategy that involves rebalancing hedge positions as market conditions change; a strategy that seeks to insure the value of a portfolio using a synthetic put option. [Harvey]

e-commerce

Consumer and business transactions conducted over a network, using computers and telecommunications. [UNODC]

e-local

A person with trading privileges at an exchange with an electronic trading facility who trades electronically (rather than in a pit or ring) for his or her own account, often at a trading arcade. [CFTC]

e-mini

A mini contract that is traded exclusively on an electronic trading facility. E-Mini is a trademark of the CME Group, Inc. [CFTC]

EAFE index

The European, Australian, and Far East stock index, computed by Morgan Stanley. [Harvey]

earned income

income derived from an individual's personal efforts, from work, from services rendered or from goods produced and sold. It also includes pension and annuity income, which is based on income that was previously earned. [OTS]

earnest money

A sum of money given to bind an agreement, such as the sale of real estate, the advance of a loan or some other transaction requiring a deposit. Earnest money is forfeited by the donor if he or she fails to carry out the terms of the contract or agreement. [OTS]

earning assets

total assets less repossessed assets, office premises and equipment, and nonaccrual loans. [OTS]

earning power

Earnings before interest and taxes (EBIT) divided by total assets. [Harvey]

earnings

(1) net income. (2) anything that is earned as compensation for labor (salary, wages, tips, bonuses) or as compensation for the use of something of value (rent, interest, dividends and other returns on investments). (3) the profits of a business. [OTS] Net income for the company during the period. [Harvey]

earnings before interest and taxes (EDBT)

A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and non-operating profit before the deduction of interest and income taxes. [Harvey]

earnings coverage

The margin of earnings available for payment of debt service, reflecting the number of times (e.g. '12O% coverage') by which annual pledged revenues exceed or 'cover' annual debt service. [EPA]

earnings per share (EPS)

EPS, as it is called, is a company's profit divided by its number of outstanding shares. If a company earned $2 million in one year had 2 million shares of stock outstanding, its EPS would be $1 per share. The company often uses a weighted average of shares outstanding over the reporting term. [Harvey] The total after-tax earnings of a corporation divided by the total number of its outstanding shares. [OTS]

earnings report

A statement -- also called an income statement -- issued by a company showing its earnings or losses over a given time period. The earnings report lists the income earned, expenses and the net result. [NYSE]

earnings retention ratio

Plowback rate. [Harvey]

earnings surprises

Positive or negative differences from the consensus forecast of earnings by institutions such as First Call or IBES. Negative earnings surprises generally have a greater adverse affect on stock prices than the reciprocal positive earnings surprise on stock prices. [Harvey]

earnings yield

The ratio of earnings per share after allowing for tax and interest payments on fixed interest debt, to the current share price. The inverse of the price/earnings ratio. It's the Total Twelve Months earnings divided by number of outstanding shares, divided by the recent price, multiplied by 100. The end result is shown in percentage. [Harvey]

earnings-based accounts

certificates of deposit that pay a rate of interest based at least in part on the earnings or profitability of assets held by the institution. [OTS]

ease off

A minor and/or slow decline in the price of a market. [CFTC]

easement

A right held by one person to make specific, limited use of land owned by another person. An easement is granted by the owner of the property for the convenience, or ease, of the person using the property. Common easements include the right to pass across the property, the right to construct and maintain a roadway across the property, the right to construct a pipeline under the land, or a power line over the land. Easements for party walls that share a common foundation, are common in town house and condominium developments. [OTS] A right to use another persons property. [ITDS]

East Rutherford Operations Center (EROC)

Federal Reserve primary payment processing computing system [GAO]

Eastern Caribbean Central Bank (ECCB)

The ECCB, established on 1 October 1983, has a statutory obligation to safeguard the international value of the Eastern Caribbean dollar, to regulate the availability of money and credit, to promote monetary stability and a sound financial structure of its eight member territories: Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines. In addition, the ECCB is empowered to regulate bank operations on behalf of, and in collaboration with its members. [UNODC]

eastern standard time (EST)

eastern time (ET)

econometric model

A set of mathematical equations that depict real economic conditions both in the present and in the future. Econometric models are used to determine the economic effects of changes in government policy and regulation, changes in interest rates, tax law, wage levels, population trends and many other factors. All the factors influence each other, so changing one factor will have a chain reaction effect on the other factors. Data showing the effects and relationships of each factor to the other factors are entered into a computer, programmed with the model's equations. Using the computerized model, analysts can determine the probable economic consequences of various regulatory or business options. [OTS]

econometrics

The application of statistical and mathematical methods in the field of economics to test and quantify economic theories and the solutions to economic problems. [CBOT][MIDAM]

economic assumptions

Economic environment in which the firm expects to reside over the life of the financial plan. [Harvey]

economic citizenship

By offering economic citizenship a country can attract foreign capital for financing investment projects within the country. A person who invests in an approved fund or project and pays a certain fee gets the citizenship. [UNODC]

Economic Commission for Europe

A United Nations regional body comprising all European members of that organization plus Germany and the U.S. [FDIC]

Economic Commission for Latin America

A United Nations regional body comprising all Latin American members of that organization plus France, the Netherlands, the U.K. and the United States. [FDIC]

economic dependence

Exists when the costs and/or revenues of one project depend on those of another. [Harvey]

economic depreciation

The loss of value of real estate due to changes occurring outside of the affected property, such as a decline in the neighborhood or changes in zoning. [OTS]

economic earnings

The real flow of cash that a firm could pay out forever in the absence of any change in the firm's productive capacity. [Harvey]

economic exposure

The extent to which the value of the firm will change because of an exchange rate change. [Harvey]

economic growth

A sustained increase in total output or output per person for an economy over a long period of time. [FACS] An increase in the nation's capacity to produce goods and services. [FRBSF]

economic income

Cash flow plus change in present value. [Harvey][WCSU]

economic indicator

A key statistic in the overall economy that experts use as a yardstick to predict the performance of the stock market. [NYSE]

economic life

The length of time during which a piece of property may be put to profitable use. Usually less than its physical life. [OTS]

economic order quantity

The order quantity that minimizes total inventory costs. [Harvey]

Economic Recovery Tax Act of 1981 (ERTA)

Designed to foster savings and investment to encourage long-term growth through reductions of personal income tax rates, taxes on personal savings for retirement and business taxes for firms investing in new capital. [FACS]

economic regulations

The control of entry into the market, pricing, the extension of service by established firms and issues of quality control. [FACS]

economic rent

Profits in excess of the competitive level. [Harvey][WCSU] The amount of rent a property likely would command in the open market if it were vacant and available for rent. Economic rent may be more or less than the actual rent currently in force. [OTS]

economic risk

In project financing, the risk that the project's output will not be salable at a price that will cover the project's operating and maintenance costs and its debt service requirements. [Harvey]

economic shocks

Events that impact the economy, come from outside it, are unexpected and unpredictable (e.g., Hurricane Andrew in 1991, the rise in oil prices by OPEC). [FRBSF]

economic specialization

Concentration of activity in a few particular tasks or in producing only a few items. [FACS]

economic surplus

For any entity, the difference between the market value of all its assets and the market value of its liabilities. [Harvey]

economic union

An agreement between two or more countries that allows the free movement of capital, labor, all goods and services, and involves the harmonization and unification of social, fiscal, and monetary policies. [Harvey]

economically deliverable supply

That portion of the deliverable supply of a commodity that is in position for delivery against a futures contract, and is not otherwise unavailable for delivery. For example, Treasury bonds held by long-term investment funds are not considered part of the economically deliverable supply of a Treasury bond futures contract. [CFTC]

economics

The branch of the social sciences that deals with the financial considerations of the production, distribution, and consumption of goods and services. [OTS] The study of choice and decision-making in a world with limited resources. [FACS]

economies of scale

The decrease in the marginal cost of production as a plant's scale of operations increases. [Harvey]

economies of scope

Scope economies exist whenever the same investment can support multiple profitable activities less expensively in combination than separately. [Harvey]

Edge Act

An act passed December 24, 1919 as Section (25(a) of the Federal Reserve Act, with the title 'Banking Corporations Authorized to do Foreign Banking Business'. Edge corporations are chartered by the Board of Governors of the Federal Reserve System for 20 years with a minimum capital of $2,000,000. Regulation K governs their operations. Their purpose is to aid in financing and stimulating foreign trade. [FDIC] Section 25(a) of the U.S. Federal Reserve Act as amended in 1919, to authorize the Board of Governors of the Federal Reserve System to charter corporations (Edge Corporations) in the United States for the purpose of engaging in international or foreign banking or other international or foreign operations. [UNODC]

Edge Act corporation

An organization chartered by the Federal Reserve to engage in international banking operations. The Board acts upon applications by U.S. and foreign banking organizations to establish Edge corporations. It also examines Edge corporations and their subsidiaries. The Edge corporation gets its name from Senator Walter Edge of New Jersey, the sponsor of the original legislation to permit formation of such organizations. [FRB][FRBC][FRBM] An organization chartered by the Federal Reserve to engage in international banking operations. The Federal Reserve Board acts upon applications by U.S. and foreign banking organizations to establish Edge corporations. The Board also examines Edge corporations and their subsidiaries. The Edge corporation gets its name from Senator Walter Edge of New Jersey, the sponsor of the original legislation to permit the formation of such organizations. [OTS] Banks that are subsidiaries either to bank holding companies or other banks established to engage in foreign business transactions. [ITDS] Specialized banking institutions, authorized and chartered by the Federal Reserve Board in the U.S., which are allowed to engage in transactions that have a foreign or international character. They are not subject to any restrictions on interstate banking. Foreign banks operating in the U.S. are permitted to organize and own and Edge corporation. [Harvey]

EDS/SACS/ROE

A computer network with which data on the examination and supervision of savings institutions is transmitted electronically between Federal thrift regulators. The acronym stands for: Examination Data System/ Supervisory Action Control System/Report Of Examination. EDS includes data on when an examination began and ended, the number of examiner man-hours used to complete the examination, the rating(s) assigned to the examined savings institution and any violations uncovered during the examination. SACS includes information on supervisory actions taken to correct problems at the savings institution. ROE is the summary of the examiners' findings on the condition of the savings institution. [OTS]

education loan

An advance of funds to a student for the purpose of financing a college or vocational education. [OTS]

effective annual interest rate

An annual measure of the time value of money that fully reflects the effects of compounding. [Harvey]

effective annual yield

Annualized interest rate on a security computed using compound interest techniques. [Harvey]

effective call price

The strike price in an optional redemption provision plus the accrued interest to the redemption date. [Harvey]

effective convexity

The convexity of a bond calculated with cash flows that change with yields. [Harvey]

effective date

In an interest rate swap, the date the swap begins accruing interest. [Harvey]

effective duration

The duration calculated using the approximate duration formula for a bond with an embedded option, reflecting the expected change in the cash flow caused by the option. Measures the responsiveness of a bond's price taking into account the expected cash flows will change as interest rates change due to the embedded option. [Harvey]

effective entry date

The date placed on an ACH transaction by the Originator of the transaction - it is normally the date the originator intended the transfer to take place. [ACH]

effective interest rate

(A) The percentage, stated in terms of the effective interest rate on an issue, determined in several ways, but most simply by dividing the net interest cost by the amount borrowed. The effective interest rate differs from the stated interest rate if the purchase price includes a discount or premium, or, of course, if there are different stated interest rates for different maturities. For a simple example: a $100,000 one-year note at a stated interest rate of 8%, purchased at a premium of $100; effective interest rate - 7.9% ($7,900 net interest cost [$8,000 - $100] % $100,000). Also referred to as 'net interest rate' (NIR) or, somewhat inaccurately, as 'net interest cost' (NIC). (B) The rate of earning on a bond investment based on the actual price paid for the bond, the coupon rate, the maturity date, and the length of time between interest dates, in contrast to the nominal interest rate. [EPA]

effective margin

Used with SAT performance measures, the amount equaling the net earned spread, or margin, of income on the assets in excess of financing costs for a given interest rate and prepayment rate scenario. [Harvey]

effective rate

A measure of the time value of money that fully reflects the effects of compounding. [Harvey] The actual yield of interest as opposed to the stated rate. For deposits, the effective rate of interest is based on the accounting method used to compute interest and the frequency of compounding. For loans, the effective rate is the stated interest rate plus fees and charges prorated over the estimated life of the mortgage, usually ten years. [OTS]

effective spread

The gross underwriting spread adjusted for the impact of the announcement of the common stock offering on the firm's share price. [Harvey]

efficiency

Reflects the amount of wasted energy. [Harvey] The allocation of goods to their uses of highest relative value. [FACS]

efficiency apartment

A small, one-room apartment that serves as the occupant's total living, sleeping and eating space, usually containing a separate bathroom. [OTS]

efficient capital market

A market in which new information is very quickly reflected accurately in share prices. [Harvey]

efficient diversification

The organizing principle of modern portfolio theory, which maintains that any risk-averse investor will search for the highest expected return for any level of portfolio risk. [Harvey]

efficient frontier

The combinations of securities portfolios that maximize expected return for any level of expected risk, or that minimizes expected risk for any level of expected return. [Harvey]

efficient market

In economic theory, an efficient market is one in which market prices adjust rapidly to reflect new information. The degree to which the market is efficient depends on the quality of information reflected in market prices. In an efficient market, profitable arbitrage opportunities do not exist and traders cannot expect to consistently outperform the market unless they have lower-cost access to information that is reflected in market prices or unless they have access to information before it is reflected in market prices. [CFTC] Market in which security prices reflect information instantaneously. [WCSU]

efficient market hypothesis

In general the hypothesis states that all relevant information is fully and immediately reflected in a security's market price thereby assuming that an investor will obtain an equilibrium rate of return. In other words, an investor should not expect to earn an abnormal return (above the market return) through either technical analysis or fundamental analysis. Three forms of efficient market hypothesis exist: weak form (stock prices reflect all information of past prices), semi-strong form (stock prices reflect all publicly available information) and strong form (stock prices reflect all relevant information including insider information). [Harvey]

efficient portfolio

A portfolio that provides the greatest expected return for a given level of risk (i.e. standard deviation), or equivalently, the lowest risk for a given expected return. [Harvey] portfolio that offers the lowest risk (standard deviation) for its expected return and the highest expected return for its level of risk. [WCSU]

efficient set

Graph representing a set of portfolios that maximize expected return at each level of portfolio risk. [Harvey]

egress

to go out, exit, leave. It is used with the word 'ingress' (to go in, enter) to describe the right of access to real property. [OTS]

either-way market

In the interbank Eurodollar deposit market, an either-way market is one in which the bid and offered rates are identical. [Harvey]

either/or facility

An agreement permitting a bank customer to borrow either domestic dollars from the bank's head office or Eurodollars from one of its foreign branches. [Harvey]

ekistics

The science of human settlements, including regional, city and community planning and dwelling design. [OTS]

elasticity of an option

Percentage change in the value of an option given a 1% change in the value of the option's underlying stock. [Harvey]

elasticity of demand

The percentage change in the quantity demanded divided by the percentage change in price. [FACS]

electronic banking

Electronic banking is a banking activity accessed by electronic means. [GAO]

electronic benefits transfer

The transfer of public entitlement payments, such as welfare or food stamps, via direct deposit or point-of-sale technology. The recipient can be given an identification card, similar to a benefit card, and a PIN number to allow them to access the benefits through an electronic network. [FRB][FRBC]

Electronic Check Clearing House Organization (ECCHO)

ECCHO drafts rules and designs formats for electronic check processing among its members. Banks that are ECCHO participants can exchange electronic check data among themselves before the paper checks are physically presented for payment. [GAO]

electronic check presentment (ECP)

ECP is a process by which the MICR-line information is sent electronically to the paying bank. [GAO]

electronic commerce

A system of integrated communications, data management, and security services that allow business applications within different organizations to automatically interchange information. [ITDS]

electronic communication network (ECN)

frequently used for creating electronic stock or futures markets. [CFTC]

electronic data capture (EDC)

EDC is a point-of-sale terminal that reads the information encoded in the magnetic stripe of bank cards. These terminals electronically authorize and capture transaction data, eliminating the need for a paper deposit. [GAO]

Electronic Data Gathering, Analysis and Retrieval System (EDGAR)

The Securities and Exchange commission's system for the electronic submission by direct transmission, magnetic tape or diskette, of most filings and related correspondence. [NYSE]

electronic data interchange

The exchange of information electronically, directly from one firm's computer to another firm's computer, in a structured format. [Harvey]

electronic depository transfers

The transfer of funds between bank accounts through the Automated Clearing House (ACH) system. [Harvey]

Electronic Fund Transfer Systems (EFTS)

A variety of systems and technologies for transferring funds (money) electronically rather than by check. This includes Fedwire, Bankwire, automated clearinghouses (ACHs), and other automated systems. [FRB][FRBC][FRBM][FRBSF] any system that moves funds from one institution to another, by means of electronic signals transmitted by wire, rather than the physical exchange of some other medium such as paper checks. [OTS]

electronic funds transfer (EFT)

A generic term describing any transfer of funds between parties or depository institutions via electronic data systems. [FRB][FRBC] A generic term used whenever money is moved without the use of a check or draft. [ACH] EFT is any transfer of funds between accounts using an electronic terminal, telephone, computer, or magnetic tape and that does not use checks or other paper. [GAO] System of transferring funds from one account to another using electronic pulses instead of paper. [ITDS] Transfer of funds electronically rather than by check or cash. The Federal Reserve's Fedwire and automated clearinghouse services are EFT systems. [FRBSF]

Electronic Funds Transfer Act (EFTA)

electronic funds transfer systems (EFTS)

electronic money system (EMS)

Citibanks's EMS is designed to provide secure, real-time transactions over any network, including the Internet. EMS offers a blend of anonymity and disclosure. Each electronic transaction would have an audit trail that could be traced, but the identity of the parties would remain anonymous. [GAO]

electronic purse

A specific type of smart-card. A chip in the card provides multiple payment options such as debit, credit, and direct payment from a stored balance. The electronic purse allows for transactions with different merchants in many locations. [FRB][FRBC]

electronic trader

A person who is authorized to enter orders for his own account and/or for customers' accounts on the NYMEX ACCESSSM electronic trading system. [NYMEX]

electronic trading facility

A trading facility that operates by an electronic or telecommunications network instead of a trading floor and maintains an automated audit trail of transactions. [CFTC]

elevation drawing

A drawing of the geometrical exterior of a building or other structure a. [OTS]

eligible bankers' acceptances

In the BA market, an acceptance may be referred to as eligible because it is acceptable by the Fed as collateral at the discount window and/or because the accepting bank can sell it without incurring a reserve requirement. [Harvey]

eligible commercial entity

An eligible contract participant or other entity approved by the CFTC that has a demonstrable ability to make or take delivery of an underlying commodity of a contract; incurs risks related to the commodity; or is a dealer that regularly provides risk management, hedging services, or market-making activities to entities trading commodities or derivative agreements, contracts, or transactions in commodities. [CFTC]

eligible contract participant

An entity, such as a financial institution, insurance company, or commodity pool, that is classified by the Commodity Exchange Act as an eligible contract participant based upon its regulated status or amount of assets. This classification permits these persons to engage in transactions (such as trading on a derivatives transaction execution facility) not generally available to non-eligible contract participants, i.e., retail customers. [CFTC]

Elliot wave

(1) A theory named after Ralph Elliot, who contended that the stock market tends to move in discernible and predictable patterns reflecting the basic harmony of nature and extended by other technical analysts to futures markets; (2) in technical analysis, a charting method based on the belief that all prices act as waves, rising and falling rhythmically. [CFTC]

Elnectronic Fund Transfer Systems

embargo

A deliberate cutoff of supply, typically intended as a political statement. [FACS] A prohibition upon exports or imports with respect to specific products or specific countries. [ITDS]

embedded option

An option that is part of the structure of a bond that provides either the bondholder or issuer the right to take some action against the other party, as opposed to a bare option, which trades separately from any underlying security. [Harvey] Securities, which contain call or put features. For example, a 'callable bond' contains provisions that allow the issuer to buy back the bond at a predetermined price at specified times in the future. A 'putable bond' contains provision that allow the holder to demand early redemption at a predetermined price at specified times in the future. [TMAC]

embezzlement

Act of dishonestly withholding assets for the purpose of conversion (theft) of such assets by one or more individuals to whom such assets have been entrusted, to be held and/or used for other purposes. Embezzlement is a kind of financial fraud. For instance, a lawyer could embezzle funds from clients' trust accounts, a financial advisor could embezzle funds from investors, or a person could embezzle funds from his or her spouse. Embezzlement may range from the very minor in nature, involving only small amounts, to the immense, involving large sums and sophisticated schemes. [Wikipedia]

emergency

Any market occurrence or circumstance which requires immediate action and threatens or may threaten such things as the fair and orderly trading in, or the liquidation of, or delivery pursuant to, any contracts on a contract market. [CFTC]

emerging markets

The financial markets of developing economies. [Harvey]

eminent domain

The right of a government to take over ownership of private property for public use with just compensation to the owner. [OTS]

Employee Retirement Income Security Act (ERISA)

employee stock fund

A firm-sponsored program that enables employees to purchase shares of the firm's common stock on a preferential basis. [Harvey]

employee stock option plan (ESOP)

An employee benefit in which employees, as part of their compensation, are given equity shares (stock) in their company. The purchase of such stock is normally funded by a loan. The stock is transferred initially to a trust and the loan is paid off from dividends on the stock and contributions from the employing company. [OTS]

employee stock ownership plan (ESOP)

A company contributes to a trust fund that buys stock on behalf of employees. [Harvey] Companies contribute to a trust fund that buys stock on behalf of its employees. [WCSU]

Employment Act of 1946

Set full employment and price stability as national policy goals and established the Council of Economic Advisors. [FACS]

en route

In transit (referring to goods, passengers, or vessels). [ITDS]

encroachment

The act of intruding gradually and without permission upon the rights, land or other possessions of another. Encroachment is often used to describe the spread of one type of neighborhood into an adjoining but different type of neighborhood. A change made to one property may encroach upon the rights or value of a second property. [OTS]

encryption

Encryption is the process of disguising a message (using mathematical formulas called algorithms) in such a way as to hide its substance, a process of creating secret writing. [GAO] The coding of data for privacy protection or security considerations when transmitted over telecommunications links so that only the person to whom it is sent can read it. [UNODC]

encumber

to burden a parcel of land with a lien or a charge such as a mortgage. [OTS]

encumbrance

A claim attached to real property, such as a lien, mortgage or unpaid taxes. [OTS]

end loan

The final mortgage loan to the ultimate purchaser of a property, as opposed to a construction loan or other form of interim financing. [OTS]

end-of-year convention

Treating cash flows as if they occur at the end of a year as opposed to the date convention. Under the end-of-year convention, the present is time 0, the end of year 1 occurs one year hence, etc. [Harvey]

end-use

A classification system for U.S. exported and imported merchandise based on principal use rather than the physical characteristics of the merchandise. [BEA]

end-user

The ultimate consumer of petroleum products or natural gas; most commonly refers to large commercial, industrial, or utility consumers. [NYMEX]

endogenous variable

A value determined within the context of a model. [Harvey]

endorse

(1) the act of signing a person's name to a check or other financial instrument, usually on the back, to indicate the legal transfer of ownership of the instrument, especially in return for money or credit indicated on the face of the instrument. (2) to sign a note as a third party guaranteeing payment in the even of default by the principal borrower. (3) to sign a contract indicating approval of its contents or terms. (4) to acknowledge with a signature the receipt of payment. (5) to give support or sanction to something. [OTS]

endorsee

The person or entity to whom a negotiable instrument is transferred by the act of endorsement. [OTS]

endorsement

A signature either stamped or written by hand on the back of a negotiable instrument by which the signer transfers ownership of the instrument to another party. [OTS]

endorser

The person or entity who, by signing a negotiable instrument, transfers his or her ownership of the instrument to another. [OTS]

endowment funds

Investment funds established for the support of institutions such as colleges, private schools, museums, hospitals, and foundations. The investment income may be used for the operation of the institution and for capital expenditures. [Harvey]

energy bank

Commercial banks, often located in the southwest, that provided credit to the energy industry during the period of the study, 1980 through 1994. [FDIC]

Energy Information Administration (EIA)

enhanced indexing

Also called indexing plus, an indexing strategy whose objective is to exceed or replicate the total return performance of some predetermined index. [Harvey]

enhancement

An innovation that has a positive impact on one or more of a firm's existing products. [Harvey]

enterprise fund

A fund established to account for operations (A) that are financed and operated in a manner similar to private business enterprises -where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges or (B) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. Examples of Enterprise Funds are those for water, gas, electric utilities, swimming pools, airports, parking garages, and transit systems. [EPA]

Entitlement Management Tool (EMT)

Basis of network security. Allows user access to specific services delivered through the Integrated Network. [NYSE]

entitlements

Government transfer payments made to individuals having certain designated characteristics and circumstances, such as age or need. [FACS]

entity

The basic unit upon which accounting and/or financial reporting activities focus. The basic governmental legal and accounting entity is the individual fund and account group. Under NCGA Statement 1, governmental GAAP reporting entities include (A) Combined Statements - Overview (the 'liftable' GPFS) and (B) financial statements of individual funds (which may be presented as columns on Combining Statements - By Fund Type, on physically separate individual fund statements, or both). The term 'entity' is also sometimes used to describe the composition of 'the government as a whole'. [EPA]

entrance fee

A fee required by statute to be paid to the Bank Insurance Fund when an insured depository institution participates in a conversion transaction wherein insured deposits are transferred from a Savings Association Insurance Fund member to a Bank Insurance Fund member. The entrance fee assessed in connection with a conversion from SAIF to BIF is the amount derived by multiplying the dollar amount of the deposits transferred from SAIF to BIF by the BIF reserve ratio. The entrance fee assessed in connection with a SAIF conversion is the amount derived by multiplying the amount of deposits transferred from BIF to SAIF by the SAIF reserve ratio or by .01 percent, whichever is greater. [FDIC]

entrepot

An intermediary storage facility where goods are kept temporarily for distribution. [ITDS]

entrepot trade

The import and export of goods without the further processing of the goods. Usually refers to a party that buys and sells as a middleman. [ITDS]

entry

A statement of the kinds, quantities, and values of goods imported together with duties due and declared before a customs officer. [ITDS]

entry documents

The documents required to secure the release of imported merchandise. [ITDS]

entry summary

Documentation which is necessary to enable US Customs to assess duties, collect statistics, and determine whether other requirements of law or regulations are met upon importation. [ITDS]

entry summary system

An ACS module that automates the entry processing cycle. [ITDS]

enumerated agricultural commodities

The commodities specifically listed in Section 1a(3) of the Commodity Exchange Act: wheat, cotton, rice, corn, oats, barley, rye, flaxseed, grain sorghums, mill feeds, butter, eggs, Solanum tuberosum (Irish potatoes), wool, wool tops, fats and oils (including lard, tallow, cottonseed oil, peanut oil, soybean oil, and all other fats and oils), cottonseed meal, cottonseed, peanuts, soybeans, soybean meal, livestock, livestock products, and frozen concentrated orange juice. [CFTC]

equalization

Money allotted to the customer if the goods are picked up at a destination other than the one named on the bill of lading. [ITDS]

equation of exchange

(M x T = P x Q) The equation indicates that the money supply multiplied by the number of times that money turns over equals the price level multiplied by real output. [FACS]

equilibrium

The amount of output supplied equals the amount demanded. At equilibrium, the market has neither a tendency to rise nor fall but clears at the existing price. [FACS]

equilibrium market price of risk

The slope of the capital market line (CML). Since the CML represents the return offered to compensate for a perceived level of risk, each point on the line is a balanced market condition, or equilibrium. The slope of the line determines the additional return needed to compensate for a unit change in risk. [Harvey]

equilibrium price

The market price at which the quantity supplied of a commodity equals the quantity demanded. [CBOT][MIDAM]

equilibrium rate of interest

The interest rate that clears the market. Also called the market-clearing interest rate. [Harvey]

equilibrium real interest rate

The rate that would be consistent with the full employment of labor and industrial capacity, and with real GDP being at its long-run potential level. This rate is needed as a benchmark to judge whether a given real interest rate is expansionary or contractionary. [FRBSF]

equipment trust certificate

A type of security, generally issued by a railroad, to pay for new equipment. Title to the equipment, such as a locomotive, is held by a trustee until the notes are paid off. An equipment trust certificate is usually secured by a first claim on the equipment. [NYSE] Certificates issued by a trust that was formed to purchase an asset and lease it to a lessee. When the last of the certificates has been repaid, title of ownership of the asset reverts to the lessee. [Harvey] Form of secured debt generally used to finance railroad equipment. The trustee retains ownership of the equipment until the debt is repaid. [WCSU]

equitable mortgage

An instrument that because of a technical error in its terms is not actually a mortgage, but that encumbers property as security for the repayment of a debt. If the intent of the parties was to create a mortgage, the instrument is enforceable under the law. [OTS]

equitable right of redemption

A right under state law of a defaulted borrower to redeem his or her property up to the date of the mortgage foreclosure sale by paying in full the outstanding mortgage debt. [OTS]

equity

(1) Common stock and preferred stock. Often used to refer to common stock only. (2) net worth. [WCSU] As used on a trading account statement, refers to the residual dollar value of a futures or option trading account, assuming it was liquidated at current prices. [CFTC] Represents ownership interest in a firm. Also the residual dollar value of a futures trading account, assuming its liquidation at the going market price. [Harvey] The ownership interest of common and preferred stockholders in a company. [NYSE] in real estate, equity is the difference between the fair market value of a property and the amount of any mortgage debt, or liens against the property, still outstanding. In business, the excess of a firm's assets over its liabilities. The term is also used to refer to the ownership interest of stockholders in a company, and to the value of the investments raised by the stock offerings. [OTS]

equity cap

An agreement in which one party, for an upfront premium, agrees to compensate the other at specific time periods if a designated stock market benchmark is greater than a predetermined level. [Harvey]

equity capital

money invested in a business by owners, stockholders or others who share in profits; distinguished from debt capital. [OTS]

equity claim

Also called a residual claim, a claim to a share of earnings after debt obligation have been satisfied. [Harvey]

equity collar

The simultaneous purchase of an equity floor and sale of an equity cap. [Harvey]

equity contribution agreement

An agreement to contribute equity to a project under certain specified conditions. [Harvey]

equity floor

An agreement in which one party agrees to pay the other at specific time periods if a specific stock market benchmark is less than a predetermined level. [Harvey]

equity index option

An equity index option is an options contract that covers the price of a diversified stock portfolio that matches a designated stock-index (a statistical indicator used to measure changes in stock groupings). [GAO]

equity investment

investment in the ownership of property, in which the investor shares in gains or losses on the property. [OTS]

equity kicker

Used to refer to warrants because they are usually issued attached to privately placed bonds. [Harvey]

equity loan

A loan that uses the borrower's equity in real property as collateral. The loan may be for a variety of purposes. Also known as a second or junior mortgage loan. [OTS]

equity multiplier

Total assets divided by total common stockholders' equity; the amount of total assets per dollar of stockholders' equity. [Harvey] total assets divided by total tangible equity. [OTS]

equity options

Securities that give the holder the right to buy or sell a specified number of shares of stock, at a specified price for a certain (limited) time period. Typically one option equals 100 shares of stock. [Harvey]

equity partnerships

An RTC asset disposition program in which the RTC transferred a share of the ownership and certain rights and responsibilities regarding specific assets but retained the right to share in future profits. The program was used to dispose of nonperforming commercial mortgages, nonperforming business loans, land, and other distressed assets. [FDIC]

equity security

An ownership interest in a company, most often taking the form of corporate stock. [SEC]

equity skimming

Use of a fraudulent appraisal that over-values a property, creating phantom equity, which is subsequently stripped out through various schemes. [FFIEC]

equity swap

A contract between two counterparties to exchange two different cash flows over time. During the life of the swap one party agrees to pay the rate of return on an equity or the equity index while the other party agrees to pay a floating or fixed rate of interest. [TMAC] A swap in which the cash flows that are exchanged are based on the total return on some stock market index and an interest rate (either a fixed rate or a floating rate). [Harvey]

equity/stock

Equity or stock is a financial instrument that represents ownership in a company. [GAO]

equityholders

Those holding shares of the firm's equity. [Harvey]

equivalent annual annuity

The equivalent amount per year for some number of years that has a present value equal to a given amount. [Harvey]

equivalent annual benefit

The equivalent annual annuity for the net present value of an investment project. [Harvey]

equivalent annual cash flow

Annuity with the same net present value as the company's proposed investment. [Harvey][WCSU]

equivalent annual cost

The equivalent cost per year of owning an asset over its entire life. [Harvey]

equivalent bond yield

Annual yield on a short-term, non-interest bearing security calculated so as to be comparable to yields quoted on coupon securities. [Harvey]

equivalent loan

Given the after-tax stream associated with a lease, the maximum amount of conventional debt that the same period-by-period after-tax debt service stream is capable of supporting. [Harvey]

equivalent taxable yield

The yield that must be offered on a taxable bond issue to give the same after-tax yield as a tax-exempt issue. [Harvey]

erosion

An innovation that has a negative impact on one or more of a firm's existing assets. [Harvey]

errors and omissions insurance

An insurance policy against liability due to errors or omissions in the performance of professional services. [OTS]

escalator clause

A provision of an agreement that provides for automatic adjustments in payments based on an economic index that neither party to the agreement controls. Typical escalator clauses provide for increases in wages based on increases in the cost of living index, or higher rent or other charges based on high fuel or maintenance costs. [OTS]

escape clause

A provision in a bilateral or multilateral commercial agreement permitting a signatory nation to temporarily violate their obligations when imports threaten serious harm to the producers of competitive domestic goods. [ITDS]

escheat

The reversion of ownership of property to the state when a person dies without leaving a will and has no heirs, or when the property is abandoned for a period of time. [OTS]

escrow

A written agreement under which documents, funds or other property being transferred from one party to another are placed with a third person or entity, usually a trust company, acting as custodian. The custodian completes the transfer to the second party only upon the fulfillment of certain specified conditions. [OTS]

escrow account

An account established at a thrift institution into which a borrower makes monthly payments, usually a part of the monthly mortgage payment. The savings association draws funds from the escrow account to pay property taxes, insurance and any special assessments on the mortgaged property as they become due. Also called a reserve, impound, or trust account. [OTS]

escrow agent

The person or organization having a fiduciary responsibility to both the buyer and seller (or lender and borrower) and who performs the duties to complete the transaction and ensure that the terms of the purchase/sale (or loan) are carried out. [OTS]

escrow closing

A type of loan closing in which an escrow agent accepts the loan funds and mortgage from the lender, the down payment from the buyer and the deed from the seller, and completes the actions required by the transaction. [OTS]

escrow company

An organization that performs the functions of an escrow agent. [OTS]

essentiality

Under section 13(c) of the FDI Act as originally enacted, the FDIC was allowed to assist an open bank to prevent its failure if the FDIC Board of Directors determined that the insured bank was in danger of failing and continued operation of such bank was 'essential.' Section 13(c) of the FDI Act was revised by the Garn--St Germain Depository Institutions Act; and this essentiality test was replaced by the cost test, except for cases in which the cost of providing open bank assistance was expected to exceed the cost of liquidating the failed institution. [FDIC]

estate

(1) all ownership rights, title or other interest held in real or personal property. (2) all assets owned by an individual. [OTS]

estate tax

A federal or state tax imposed on the fair market value of all assets, less liabilities, held by a person at the time of death. [OTS]

estimated cash recovery (ECR)

An estimate of the amount and timing of all future cash recoveries, direct expenses, and payment of any prior liens. An ECR is a projection of expected net cash flows and often is used in the process of valuing a nonperforming loan. [FDIC]

estimated recovery value (ERV)

A mark-to-market valuation of an asset, determined by calculating the net present value of expected net cash flows. The RTC calculated an ERV for each asset that was assigned to the original SAMDA contracts. This method of valuation was similar in concept to the FDIC's 'net present value of the estimated cash recovery.' [FDIC]

estoppel

A legal term referring to a condition or justification that bars a person from alleging something he has previously denied, or from denying something he has previously alleged. [OTS]

estoppel certificate

A written statement setting forth facts about a piece of real estate such as the unpaid principal balance of a mortgage and the interest rate. Its purpose is to stop a future claim that the amount owed is different from the actual unpaid balance, or that the interest rate is other than the contracted rate. [OTS]

et tuxor

A legal term meaning 'and wife.' Sometimes abbreviated as 'et ux .' [OTS]

ethics

Standards of conduct or moral judgment. [Harvey]

euro

The official currency of most members of the European Union. [CFTC]

Euro CDs

CDs issued by a U.S. bank branch or foreign bank located outside the U.S. Almost all Euro CDs are issued in London. [Harvey]

Euro lines

Lines of credit granted by banks (foreign or foreign branches of U.S. banks) for Eurocurrencies. [Harvey]

Euro straight

A fixed-rate coupon Eurobond. [Harvey]

Euro-commercial paper

Short-term notes with maturities up to 360 days that are issued by companies in international money markets. [Harvey]

Euro-medium term note

A non-underwritten Euronote issued directly to the market. Euro-MTNs are offered continuously rather than all at once as a bond issue is. Most Euro-MTN maturities are under five years. [Harvey]

Euro-note

Short- to medium-term debt instrument sold in the Eurocurrency market. [Harvey]

Eurobank

A bank that regularly accepts foreign currency denominated deposits and makes foreign currency loans. [Harvey]

Eurobond

A bond issued for release by a U.S. or other non-European company or government for sale in Western Europe. In that market, corporations and governments normally issue medium-term securities with maturities of 10 to 15 years. [OTS] A bond issued in a foreign currency, different than the one in which the bond is sold. [ITDS] A bond that is (1) underwritten by an international syndicate, (2) offered at issuance simultaneously to investors in a number of countries, and (3) issued outside the jurisdiction of any single country. [Harvey] Bond that is marketed internationally. [WCSU]

Euroclear

A centralized clearing system for euro-bonds. [WCSU] One of two principal clearing systems in the Eurobond market. It began operations in 1968, is located in Brussels, and is managed by Morgan Guaranty Bank. [Harvey]

Eurocredits

Intermediate-term loans of Eurocurrencies made by banking syndicates to corporate and government borrowers. [Harvey]

eurocurrency

Certificates of Deposit (CDs), bonds, deposits, or any capital market instrument issued outside of the national boundaries of the currency in which the instrument is denominated (for example, Eurodollars, Euro-Swiss francs, or Euroyen). [CFTC] The nonresident ownership of one of the major western European currencies. Eurocurrencies, similar to Eurodollars, are frequently available for borrowing in the London exchange markets. [FDIC]

Eurocurrency deposit

A short-term fixed rate time deposit denominated in a currency other than the local currency (i.e. US$ deposited in a London bank). [Harvey]

Eurocurrency market

The money market for borrowing and lending currencies that are held in the form of deposits in banks located outside the countries of the currencies issued as legal tender. [Harvey]

Eurodollar bonds

Eurobonds denominated in U.S.dollars. [Harvey]

Eurodollar CDs

Eurodollar deposit

Dollar deposit with a bank outside the United States. [WCSU]

eurodollars

Deposits denominated in U.S. dollars at banks and other financial institutions outside the United States. Although this name originated because of the large amounts of such deposits held at banks in Western Europe, similar deposits in other parts of the world are also called Eurodollars. [FRB][FRBC][FRBM][FRBSF] Dollar deposit claims upon American banks deposited in banks located outside the United States, including foreign branches of American banks, although the funds do not physically leave the U.S. banks. Those claims in turn may be redeposited with banks or lent to companies, individuals or governments outside the United States. [FDIC] This is an American dollar that has been deposited in a European bank or an U.S. bank branch located in Europe. It got there as a result of payments made to overseas companies for merchandise. [Harvey] U.S. dollar deposits placed with banks outside the U.S. Holders may include individuals, companies, banks, and central banks. [CFTC] U.S. dollars on deposit with a bank outside of the United States and, consequently, outside the jurisdiction of the United States. The bank could be either a foreign bank or a subsidiary of a U.S. bank. [CBOT][MIDAM] deposits denominated in U.S. dollars at banks and other financial institutions outside the United States. Although this name originated because of the large amounts of such deposits held at banks in Western Europe, similar deposits in other parts of the world are also called Eurodollars. [OTS]

Euroequity issues

Securities sold in the Euromarket. That is, securities initially sold to investors simultaneously in several national markets by an international syndicate. Euromarket. [Harvey]

European Advisory Committee (EAC)

Provides views and attitudes of the European corporate community regarding the NYSE's role in international matters. The committee consists of active or former chief executive officers of European-based companies or financial institutions. They provide views on strengthening NYSE policies and programs on internationalization, facilitating multinational corporate securities offerings, and strengthening communication with European corporations. [NYSE]

European Community/European Union

Established on April 8, 1965, to integrate the European Atomic Energy Community, the European Coal and Steel Community, the European Economic Community (or Common Market), and to establish a completely integrated common market. Since 7 February 1992, usually known as the European Union. The 15 member states are Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, the United Kingdom of Great Britain and Northern Ireland. [UNODC]

European Currency Unit (ECU)

A basket of different European currencies. [WCSU] An index of foreign exchange consisting of about 10 European currencies, originally devised in 1979. [Harvey]

European Monetary System

An exchange arrangement formed in 1979 that involves the currencies of European Union member countries. [Harvey]

European Option

An option that may be exercised only on its expiration date. [NYMEX] An option that may be exercised only on the expiration date. [CFTC] Option that can be exercised only on final exercise date. [WCSU] Option that may be exercised only at the expiration date. [Harvey]

European Union

An economic association of European countries founded by the Treaty of Rome in 1957 as a common market for six nations. It was known as the European Community before 1993 and is comprised of 15 European countries. Its goals are a single market for goods and services without any economic barriers and a common currency with one monetary authority. The EU was known as the European Community until January 1, 1994. [Harvey]

European-style option

An option contract that can only be exercised on the expiration date. [Harvey] An option that can be exercised only on the expiration date. If investors do not want to wait until the expiration date, they can close the position with an offsetting trade. [TMAC]

Europeans terms

A method of quoting exchange rates, which measures the amount of foreign currency needed to buy one U.S. dollar, i.e., foreign currency unit per dollar. [CBOT][MIDAM]

Euroyen bonds

Eurobonds denominated in Japanese yen. [Harvey]

evaluation period

The time interval over which a money manager's performance is evaluated. [Harvey]

even lot

A unit of trading in a commodity established by an exchange to which official price quotations apply. [CFTC]

evening up

Buying or selling to offset an existing market position. [Harvey]

event market

A market in derivatives whose payoff is based on a specified event or occurrence such as the release of a macroeconomic indicator, a corporate earnings announcement, or the dollar value of damages caused by a hurricane. [CFTC]

event of default

Event specified in the security document which provides a basis for the trustee or the bondholders to exercise the remedies set forth in the security document. [EPA]

event risk

The risk that the ability of an issuer to make interest and principal payments will change because of rare, discontinuous, and very large, unanticipated changes in the market environment such as (1) a natural or industrial accident or some regulatory change or (2) a takeover or corporate restructuring. [Harvey]

event study

A statistical study that examines how the release of information affects prices at a particular time. [Harvey]

events of default

Contractually specified events that allow lenders to demand immediate repayment of a debt. [Harvey]

evergreen credit

Revolving credit without maturity. [Harvey][WCSU]

eviction

The lawful expulsion of an occupant from real property, if necessary, by force. [OTS]

ex factory

A sale term where the buyer gains ownership of goods when they leave the vendors dock. [ITDS]

ex-dividend

A synonym for 'without dividend.' The buyer of a stock selling ex-dividend does not receive the recently declared dividend. Every dividend is payable on a fixed date to all shareholders recorded on the books of the company as of a previous date of record. For example, a dividend may be declared as E payable to holders of record on the books of the company on a given Friday. Since three business days are allowed for delivery of stock in a 'regular way' transaction on the New York Stock Exchange, the Exchange would declare the stock 'ex-dividend' as of the opening of the market on the preceding Wednesday. That means anyone who bought it on or after that Wednesday would not be entitled to that dividend. When stocks go ex-dividend, the stock tables include the symbol 'x' following the name. [NYSE] Purchase of shares in which the buyer is not entitled to the dividend. [WCSU] This literally means 'without dividend.' The buyer of shares when they are quoted ex-dividend is not entitled to receive a declared dividend. [Harvey]

ex-dividend date

The first day of trading when the seller, rather than the buyer, of a stock will be entitled to the most recently announced dividend payment. This date set by the NYSE (and generally followed on other US exchanges) is currently two business days before the record date. A stock that has gone ex-dividend is marked with an x in newspaper listings on that date. [Harvey]

ex-pit

ex-post facto law

Latin for 'after the fact.' Article 1 of the U.S. Constitution prohibits convicting a person for committing an act that was not illegal at the time the act was performed, but which was made illegal by subsequent legislation. [OTS]

ex-rights

In connection with a rights offering, shares of stock that are trading without the rights attached. [Harvey] Purchase of shares in which the buyer is not entitled to the rights to buy shares in the company's rights issue. [WCSU] Without the rights. Corporations raising additional money may do so by offering their stockholders the right to subscribe to new or additional stock, usually at a discount from the prevailing market price. The buyer of a stock selling ex-rights is not entitled to the rights. [NYSE]

ex-rights date

The date on which a share of common stock begins trading ex-rights. [Harvey]

exact matching

A bond portfolio management strategy that involves finding the lowest cost portfolio generating cash inflows exactly equal to cash outflows that are being financed by investment. [Harvey]

examination

A detailed review of the policies, management, operations and books of a thrift institution, bank or credit union made by the institution's federal or state regulatory agency. [OTS]

examination data system (EDS)

examiner

An individual employed by a federal or state regulatory agency to conduct detailed reviews of the operation of savings institutions or banks in order to determine if the institutions are meeting the requirements of federal law and regulation. [OTS]

Examiniation Data System

A computer system maintained by the Office of Thrift Supervision to record data from examinations of thrift institutions and make the information accessible to authorized OTS staff. The EDS data includes the report of examination (ROE). [OTS]

exante return

The expected return of a portfolio based on the expected returns of its component assets and their weights. [Harvey]

except for opinion

An auditor's opinion reflecting the fact that the auditor was unable to audit certain areas of the company's operations because of restrictions imposed by management or other conditions beyond the auditor's control. [Harvey]

exception

An item that may not be covered by title insurance because it limits in some way the owner's right to his or her property. Exceptions may include easements, liens, and deed restrictions. [OTS]

exception rates

Shipping rates set higher because the commodity requires special handling and care (i.e. live animals). [ITDS]

excess loan servicing

An asset established when loans are sold to yield a rate to the buyer that is higher or lower than the original contractual rate and the loan seller retains the servicing of the loans. The present value of the difference between the amount to be collected from the borrower and the amount to be paid to the purchaser of the loans (the point spread differential), less normal servicing costs, is the excess servicing amount recorded as the seller's asset at the time of sale. The excess servicing amount increases the gain or decreases the loss on the sale of the loan. [OTS]

excess reserves

Amount of reserves held by an institution in excess of its reserve requirement and required clearing balance. [FRB][FRBC][FRBSF] Any excess of actual reserves above required reserves. [Harvey]

excess return on the market portfolio

The difference between the return on the market portfolio and the riskless rate. [Harvey]

excess returns

Also called abnormal returns, returns in excess of those required by some asset pricing model. [Harvey]

exchange

A central facility where various financial instruments are traded. The exchange is an organized, well capitalized body owned by the holders of seats. The exchange establishes the rules under which the financial instruments are traded and terms are established by the bidding process of buyers and sellers on the floor of the exchange. [OTS] A central marketplace with established rules and regulations where buyers and sellers meet to trade futures and options contracts or securities. Exchanges include designated contract markets and derivatives transaction execution facilities. [CFTC] An exchange is an organized market with transactions concentrated in a physical facility with participants entering two-sided quotations (bid and ask) on a continuous basis. [GAO] The marketplace in which shares, options and futures on stocks, bonds, commodities and indices are traded. Principal US stock exchanges are: New York Stock Exchange (NYSE), American Stock Exchange (AMEX) and the National Association of Securities Dealers [Harvey] The voluntary transfer of rights to use goods. [FACS]

exchange certified stocks

Stocks of commodities held in depositories or warehouses certified by an Exchange approved inspection authority as constituting good delivery against a futures contract position. Current total certified stocks are reported in the press for many important commodities such as platinum. [NYMEX]

Exchange Clearing House (ECHO)

ECHO system is based in London and calculates multilateral netting of trades that are passed throught it. For each currency, a user will have only a signle payment obligation or expected receipt. Settlement takes place via traditional national payment systems into and out of ECHO accounts in each country. [GAO]

exchange contracts

Documents issued by foreign exchange dealers, by banks dealing in foreign exchange, and by foreign exchange brokers confirming foreign exchange transactions. [FDIC]

exchange control or restrictions

Limits on free dealings in foreign exchange or of free transfers of funds into other currencies and other countries. [FDIC] Limits on free dealings in foreign exchange or on free transfers of funds into other currencies and other countries. [UNODC]

exchange control risk

The possibility of defaults on obligations by the imposition of exchange control or restrictions. [FDIC]

exchange controls

Governmental restrictions on the purchase of foreign currencies by domestic citizens or on the purchase of the local domestic currency by foreigners. [Harvey]

exchange data processing

exchange for physicals (EFP)

A transaction generally used by two hedgers who want to exchange futures for cash positions. Also referred to as 'against actuals' or 'versus cash'. [CBOT][MIDAM]

Exchange Market Information Program (EMIP)

Seeks to promote constituent confidence in and support for the NYSE trading mechanism, and to strengthen the mutuality of purpose between the NYSE and member firm listed company and institutional investor. Teams of NYSE staff members, floor brokers, and specialists present programs tailored to constituent audiences in cities nationwide. [NYSE]

exchange of assets

Acquisition of another company by purchase of its assets in exchange for cash or shares. [WCSU] Acquisition of another company by purchase of its assets in exchange for cash or stock. [Harvey]

exchange of futures for cash

A transaction in which the buyer of a cash commodity transfers to the seller a corresponding amount of long futures contracts, or receives from the seller a corresponding amount of short futures, at a price difference mutually agreed upon. In this way, the opposite hedges in futures of both parties are closed out simultaneously. [NYMEX]

exchange of futures for physicals

A futures contract provision involving an agreement for delivery of physical product that does not necessarily conform to contract specifications in all terms from one market participant to another and a concomitant assumption of equal and opposite futures positions by the same participants at the time of the agreement. [NYMEX]

exchange of stock

Acquisition of another company by purchase of its stock in exchange for cash or shares. [Harvey]

exchange offer

An offer by the firm to give one security, such as a bond or preferred stock, in exchange for another security, such as shares of common stock. [Harvey]

exchange rate

The price of a currency in terms of another. [FDIC] The price of one country's currency expressed in another country's currency. [FRB][FRBM][FRBSF][Harvey] The price of one currency expressed in terms of another. [ITDS] The price of one currency in terms of another. [FACS][ITDS] The price of one currency stated in terms of another currency. [CFTC]

Exchange Rate Mechanism

The methodology by which members of the EMS maintain their currency exchange rates within an agreed upon range with respect to other member countries. [Harvey]

exchange rate risk

Also called currency risk, the risk of an investment's value changing because of currency exchange rates. [Harvey]

exchange risk

The risk of market fluctuation of an asset or liability denominated in a foreign currency, such as the ownership of a currency (spot or forward) or trade accounts payable in foreign currency. [FDIC] The variability of a firm's value that results from unexpected exchange rate changes or the extent to which the present value of a firm is expected to change as a result of a given currency's appreciation or depreciation. [Harvey]

exchange risk factor

The delta of an option as computed daily by the exchange on which it is traded. [CFTC]

exchange traded contracts

Futures and options offered by an exchange. They are standardized contracts subject to the rules and regulations of the exchange. [TMAC]

Exchange Traded Fund (ETF)

Exchange Traders Advisory Committee (ETAC)

Advises on ways to strengthen the efficiency and expand the use of NYSE markets, and reviews policy issues affecting NYSE traders. The members, representatives of major NYSE member organizations, also advise the NYSE staff on the prospective impact of proposed trading rules on NYSE traders, their needs and interests, and ways to strengthen communication with them. [NYSE]

exchange value

The purchasing power of a unit of currency for goods and services in the marketplace. [FACS]

exchangeable security

Security that grants the security holder the right to exchange the security for the common stock of a firm other than the issuer of the security. [Harvey]

excise tax

A selective tax; sometimes referred to as a consumption tax. [ITDS]

excluded commodity

In general, the Commodity Exchange Act defines an excluded commodity as: any financial instrument such as a security, currency, interest rate, debt instrument, or credit rating; any economic or commercial index other than a narrow-based commodity index; or any other value that is out of the control of participants and is associated with an economic consequence. [CFTC]

exclusion principle

The owner of a private good may exclude others from use unless they pay. [FACS]

exclusionary self-tender

The firm makes a tender offer for a given amount of its own stock while excluding targeted stockholders. [Harvey]

exclusive listing

A written contract giving one agent the exclusive right to find buyers or renters for a property during a stated period of time. Ordinarily, such an agreement by itself does not preclude the owner from selling or renting the property himself, thus avoiding payment of a commission to the agent. [OTS]

exclusive right to sell

same as exclusive listing, except that the owner agrees in writing to pay the full commission to the agent even if the owner himself sells or rents the property. [OTS]

exculpatory clause

A contractual clause that releases one party from liability in case of wrong doing by the other party involved. [ITDS] that part of a written agreement that relieves one party to the agreement of liability as a result of actions (or lack of actions) performed in the course of executing the terms of the contract. In a trust agreement, an exculpatory clause relieves the trustee of liability resulting from any act performed in good faith under the trust agreement. In a lease, the exculpatory clause relieves the landlord of liability for personal injury to tenants or damage to tenants' property. [OTS]

execution

The process of completing an order to buy or sell securities. Once a trade is executed, it is reported by a Confirmation Report; settlement (payment and transfer of ownership) occurs in the U.S. between 1 (mutual funds) and 5 (stocks) days after an order is executed. Settlement times for exchange listed stocks are in the process of being reduced to three days in the U. S. [Harvey]

execution costs

The difference between the execution price of a security and the price that would have existed in the absence of a trade, which can be further divided into market impact costs and market timing costs. [Harvey]

Executive Committee

A decision-making body of the FRBSF comprised of a number of the Bank's senior officers, the Committee and its six satellite committees were established in 1995 to replace the smaller, more centralized Management Committee. The revised committee structure was intended to decentralize decision-making and promote increased information-sharing and teambuilding District-wide. [FRBSF]

executor

A person or institution named in a will and approved by a probate court to administer the disposition of an estate according to the instructions of the will. [OTS]

executrix

A female executor. [OTS]

exempt board of trade

A trading facility that trades commodities (other than securities or securities indexes) having a nearly inexhaustible deliverable supply and either no cash market or a cash market so liquid that any contract traded on the commodity is highly unlikely to be susceptible to manipulation. An exempt board of trade's contracts must be entered into by parties that are eligible contract participants. [CFTC]

exempt commercial market

An electronic trading facility that trades exempt commodities on a principal-to-principal basis solely between persons that are eligible commercial entities. [CFTC]

exempt commodity

The Commodity Exchange Act defines an exempt commodity as any commodity other than an excluded commodity or an agricultural commodity. Examples include energy commodities and metals. [CFTC]

exempt foreign firm

A foreign firm that does business with U.S. customers only on foreign exchanges and is exempt from registration under CFTC regulations based upon compliance with its home country's regulatory framework (also known as a 'Rule 30.10 firm'). [CFTC]

exempt securities

Instruments exempt from the registration requirements of the Securities Act of 1933 or the margin requirements of the SEC Act of 1934. Such securities include government bonds, agencies, munis, commercial paper, and private placements. [Harvey]

exempted security

A security that is exempted from most provisions of the securities laws, including the margin rules. Such securities include U.S. government and agency securities, municipal securities designated by the SEC. [FRB][FRBC][FRBM][FRBSF]

exercise

Action taken by an option holder that requires the writer to perform the terms of the contract. [NYSE] Exercise means to make use of the 'rights' in a contract. For instance, a buyer of a call option may exercise the right to buy the underlying asset at a particular price agreed upon when the contract was purchased. [GAO] The action taken by the holder of a call option if he wishes to purchase the underlying futures contract or by the holder of a put option if he wishes to sell the underlying futures contract. [CBOT][MIDAM] The process of converting an options contract into a futures position. [NYMEX] To implement the right of the holder of an option to buy (in the case of a call) or sell (in the case of a put) the underlying security. [Harvey]

exercise price

Price at which the call option or put option may be exercised. [WCSU] The price at which the underlying future or options contract may be bought or sold. [Harvey] The price at which the underlying futures contract will be bought or sold in the event an option is exercised. Also called the strike price. [NYMEX] The prices at which an option may be exercised. Also called strike prices. [NYSE]

exercise value

The amount of advantage over a current market transaction provided by an in-the-money option. [Harvey]

exercising the option

The act buying or selling the underlying asset via the option contract. [Harvey]

exit fee

A fee required by statute to be paid to the Savings Association Insurance Fund (or the Financing Corporation, as determined by the secretary of the Treasury) when an insured depository institution participates in a conversion transaction wherein insured deposits are transferred from a SAIF member to a BIF member. The exit fee assessed in connection with a conversion from SAIF to BIF is the amount derived by multiplying the dollar amount of deposits transferred from SAIF to BIF by .90 percent. The exit fee assessed in connection with a conversion from BIF to SAIF is the amount derived by multiplying the dollar amount of the retained deposit base transferred from BIF to SAIF by .01 percent. [FDIC]

exogenous variable

A variable whose value is determined outside the model in which it is used. Also called a parameter. [Harvey]

exotic derivatives

Generic term for the more sophisticated derivative strategy which has features over and above the basic contracts. [TMAC]

exotic options

Any of a wide variety of options with non-standard payout structures or other features, including Asian options and lookback options. Exotic options are mostly traded in the over-the-counter market. [CFTC]

expanded trading hours

Additional trading hours of specific futures and options contracts at the Chicago Board of Trade that overlap with business hours in other time zones. [CBOT][MIDAM]

expansion phase

The phase of the business cycle when the economy is growing rapidly, output is increasing, employment is rising, industrial production is increasing and prices are tending to rise. [FACS]

expansionary fiscal policy

A policy to decrease governmental expenditures and/or to increase taxes. [FRBSF]

expansionary monetary policy

A policy of the Federal Reserve System that is designed to expand the growth of money and credit in the economy. [FRBSF]

expatriation

The removal of legal residence or citizenship from one country to another in anticipation of future restrictions on capital movements or to avoid estate taxes. [UNODC]

expectations hypothesis theories

Theories of the term structure of interest rates which include the pure expectations theory, the liquidity theory of the term structure, and the preferred habitat theory. These theories hold that each forward rate equals the expected future interest rate for the relevant period. These three theories differ, however, on whether other factors also affect forward rates, and how. [Harvey]

expectations theory of forward exchange rates

A theory of foreign exchange rates that holds that the expected future spot foreign exchange rate 't' periods in the future equals the current t-period forward exchange rate. [Harvey]

expected future cash flows

Projected future cash flows associated with an asset of decision. [Harvey]

expected future return

The return that is expected to be earned on an asset in the future. Also called the expected return. [Harvey]

expected rate of inflation

The public's expectations for inflation. These expectations determine how large an effect a given policy action by the Fed will have on economic activity. [FRBSF]

expected return

Average of possible returns weighted by their probabilities. [WCSU] The return expected on a risky asset based on a probability distribution for the possible rates of return. Expected return equals some risk free rate (generally the prevailing U.S. Treasury note or bond rate) plus a risk premium (the difference between the historic market return, based upon a well diversified index such as the S&P500 and historic U.S. Treasury bond) multiplied by the assets beta. [Harvey]

expected return on investment

The return one can expect to earn on an investment. [Harvey]

expected return-beta relationship

Implication of the CAPM that security risk premiums will be proportional to beta. [Harvey]

expected value

The weighted average of a probability distribution. [Harvey]

expected value of perfect information

The expected value if the future uncertain outcomes could be known minus the expected value with no additional information. [Harvey]

Expedited Funds Availability Act of 1987 (EFAA)

expenditures

Decreases in net financial resources. Expenditures include current operating expenses which require the current or future use of net current assets, debt service, and capital outlays. [EPA]

expense ratio

The percentage of the assets that were spent to run a mutual fund (as of the last annual statement). This includes expenses such as management and advisory fees, overhead costs and 12B-1 (distribution and advertising) fees. The expense ratio does not include brokerage costs for trading the portfolio, although these are reported as a percentage of assets to the SEC by the funds in a Statement of Additional Information (SAI). the SAI is available to shareholders on request. Neither the expense ratio or the SAI includes the transaction costs of spreads, normally incurred in unlisted securities and foreign stocks. These two costs can add significantly to the reported expenses of a fund. The expense ratio is often termed an Operating Expense Ratio (OER). [Harvey]

expensed

Charged to an expense account, fully reducing reported profit of that year, as is appropriate for expenditures for items with useful lives under one year. [Harvey]

expenses

(1) the cost of resources used to create revenue. (2) the cost of goods or services acquired in the performance of a job. (3) anything paid out to attain a goal or accomplish an act. All expenses are costs, but not all costs are expenses. [OTS] Decreases in net total assets. Expenses represent the total cost of operations during a period regardless of the timing of related expenditures [EPA]

experience losses

In a pension plan, losses resulting from any difference between expectations and experience (e.g., a decline in the value of a pensions fund's securities). [WCSU]

expiration

The time when the option contract ceases to exist (expires). [Harvey]

expiration cycle

An expiration cycle relates to the dates on which options on a particular security expire. A given option will be placed in 1 of 3 cycles, the January cycle, the February cycle, or the March cycle. At any point in time, an option will have contracts with 4 expiration dates outstanding, 2 in near-term months and 2 in far-term months. [Harvey]

expiration date

Options on futures generally expire on a specific date during the month preceding the futures contract delivery month. For example, an option on a March futures contract expires in February but is referred to as a March option because its exercise would result in a March futures contract position. [CBOT][MIDAM] The date and time after which trading in options terminates, and after which all contract rights or obligations become null and void. [NYMEX] The date on which an option contract automatically expires; the last day an option may be exercised. [CFTC] The date the option contract expires. [NYSE] The day the option contract expires and becomes worthless. [TMAC] The last day (in the case of American-style) or the only day (in the case of European-style) on which an option may be exercised. For stock options, this date is the Saturday immediately following the 3rd Friday of the expiration month; however, brokerage firms may set an earlier deadline for notification of an option holder's intention to exercise. If Friday is a holiday, the last trading day will be the preceding Thursday. [Harvey]

expire

to come an to end, to terminate, to cease be in force, as in the passing of the time limit for an agreement, a contract or other instrument to be enforceable. [OTS]

expiry date

A foreign exchange term for the last day that options can be executed; an expiration date. [ITDS]

export

To send or transport abroad merchandise, especially for sale or trade. [ITDS]

export broker

A firm that specializes in bringing buyers and sellers together for a fee but does not participate in the actual business transaction. [ITDS]

export control

Retaining control over exports for statistical and strategic purposes. [ITDS]

export credit insurance

A system to underwrite the collection of credits extended by exporters against various contingencies. In some countries only noncommercial risks can be insured. Public or private organizations, or both, may offer export credit insurance in different countries. [FDIC]

export declaration

A required customs document for exportation from the United States. [ITDS]

export draft

An order for the importing party to pay the seller for the exported goods. [ITDS]

export duty

A tax imposed on exports of some nations. [ITDS]

export letter of credit

A letter of credit opened by another bank or branch (usually foreign), arising from the financing of exports from the foreign country. The issuing bank may request another bank to confirm or advise the credit to the beneficiary. If confirmed, the credit becomes a confirmed letter of credit, and if advised, it becomes an advised (unconfirmed) letter of credit. [FDIC]

export license

A government document which gives permission to export a specified quantity of a specified commodity. [ITDS]

export management company

A private firm that serves as the export department for several manufacturers and handles the exporting aspect of the business for a commission or salary. [ITDS]

export merchant

A company that buys products directly from manufacturers, then packages and marks the merchandise for resale under its own name. [ITDS]

export processing zone

Industrial parks designated by a government to provide tax and other incentives to export firms. [ITDS]

export quotas

Specific restrictions on the value or volume of exports from a nation. [ITDS]

export restraints

Restrictions as to the number of exports that are allotted for certain foreign markets. [ITDS]

export statistics

The statistics that contain the total volume or value of all exports leaving the United States. [ITDS]

export subsidies

Government payments to induce exportation by domestic producers. [ITDS]

export trading company

A corporation organized for the principal purpose of exporting goods and services. [ITDS]

export-import bank

Established in 1934; all of its shares are held by the U.S. Treasury. Purpose is to provide intermediate and long-term nonrecourse financing for U.S. exports when such facilities are not available from commercial banks. [FDIC] The U.S. federal government agency that extends trade credits to U.S. companies to facilitate the financing of U.S. exports. [Harvey]

exporter

An individual or company that transports goods or merchandise from one country to another in the course of trade. [ITDS]

exposure

The existence of risk of gain or loss because of the ownership of an asset, or the net amount of various assets and liabilities, denominated in a foreign currency. [FDIC]

exposure netting

Offsetting exposures in one currency with exposures in the same or another currency, where exchange rates are expected to move in such a way that losses or gains on the first exposed position should be offset by gains or losses on the second currency exposure. [Harvey]

expropriation

The act of confiscating private property for a public use by a legally constituted governing body. For example, property taken under eminent domain is expropriated. [OTS] The official seizure by a government of private property. Any government has the right to seize such property, according to international law, if prompt and adequate compensation is given. [Harvey]

extendable bond

Bond whose maturity can be extended at the option of the lender or issuer. [Harvey][WCSU]

extendable notes

Note the maturity of which can be extended by mutual agreement of the issuer and investors. [Harvey]

extended coverage endorsement

A provision attached to fire insurance policies that expands coverage to include the perils of windstorm, hail, explosion, riot, civil disorder, damage by aircraft or vehicles, or smoke, or lightening. [OTS]

extension

Voluntary arrangements to restructure a firm's debt, under which the payment date is postponed. [Harvey]

extension date

The day on which the first option either expires or is extended. [Harvey]

extension swap

Extending maturity through a swap, e.g. selling a 2-year note and buying one with a slightly longer current maturity. [Harvey]

external finance

Finance that is not generated by the firm: new borrowing or a stock issue. [Harvey] finance that is not generated by the firm: new borrowing or an issue of stock. [WCSU]

external market

Also referred to as the international market, the offshore market, or, more popularly, the Euromarket, the mechanism for trading securities that (1) at issuance are offered simultaneously to investors in a number of countries and (2) are issued outside the jurisdiction of any single country. [Harvey]

external value

The purchasing power of a currency abroad, converted using the exchange rate. [ITDS]

externalities

Costs or benefits that fall on third parties. [FACS]

extinguish

Retire or pay off debt. [Harvey]

extra

The short form of 'extra dividend.' A dividend in the form of stock or cash in addition to the regular or usual dividend the company has been paying. [NYSE]

extra dividend

Dividend that may or may not be repeated. [WCSU]

extra or special dividends

A dividend that is paid in addition to a firm's 'regular' quarterly dividend. [Harvey]

extradition

The return of an alleged criminal from one country to the country that has jurisdiction. [ITDS]

extraordinary optional call

An optional right of call which results from application of a calamity provision. This call may or may not carry a call premium. It is not a mandatory call, because it does not have to be exercised. It is not a typical optional call, because it can only be exercised upon the happening of certain events. [EPA]

extraordinary positive value

A positive net present value. [Harvey]

extrapolative statistical models

Models that apply a formula to historical data and project results for a future period. Such models include the simple linear trend model, the simple exponential model, and the simple autoregressive model. [Harvey]

extrinsic value

The amount by which the premium exceeds its intrinsic value. Also known as time value. [NYMEX]

facade easement

An historic preservation program agreement by which a property owner pledges to retain intact the exterior of a structure and such outbuildings and amenities that are relevant to the history or design of the structure. [OTS]

face amount

The principal amount of a bond or note, as shown on its 'face'. (See 'Denomination'). [EPA]

face value

The amount of money printed on the face of the certificate of a security; the original dollar amount of indebtedness incurred. [CBOT][MIDAM] The amount of money which the issuer of a bond promises to repay to the bondholder on or before the maturity date. [SEC] The sum of money denoted on the principal, or 'face' side, of a financial instrument such as bond or note, representing: (1) the amount of money the issuer promises to pay at maturity and (2) the amount on which interest is computed. Synonymous with par value. [OTS] The value of a bond that appears on the face of the bond, unless the value is otherwise specified by the issuing company. Face value is ordinarily the amount the issuing company promises to pay at maturity. Face value is not an indication of market value. Sometimes referred to as par value. [NYSE]

facilitation

Any program designed to expedite the flow of international commerce. [ITDS]

factor

A financial institution that buys a firm's accounts receivables and collects the debt. [Harvey] An agent who receives merchandise under a consignment or bailment contract, who sells it for the principal or in the factors own name, and who is paid a commission for each sale. [ITDS]

factor analysis

A statistical procedure that seeks to explain a certain phenomenon, such as the return on a common stock, in terms of the behavior of a set of predictive factors. [Harvey]

factor model

A way of decomposing the factors that influence a security's rate of return into common and firm-specific influences. [Harvey]

factor portfolio

A well-diversified portfolio constructed to have a beta of 1.0 on one factor and a beta of zero on any other factors. [Harvey]

factorage

The commission or other compensation paid to a factor. [ITDS]

factoring

(1) a method commonly used to compute the amount of interest to be refunded or credited because a loan is being paid off before maturity; (2) the selling by a firm of its accounts receivable before their due date, usually at a discount. [OTS] Arrangement whereby a financial institution buys a company's accounts receivable and collects the debt. [WCSU] Sale of a firm's accounts receivable to a financial institution known as a factor. [Harvey]

factors lien

The right of a factor to retain the principals merchandise until the factor receives full compensation from the principal. [ITDS]

fail

A trade is said to fail if on settlement date either the seller fails to deliver securities in proper form or the buyer fails to deliver funds in proper form. [Harvey]

failure

The closing of a financial institution by its chartering authority, which rescinds the institution's charter and revokes its ability to conduct business because the institution is insolvent, critically undercapitalized, or unable to meet deposit outflows. [FDIC]

fair game

An investment prospect that has a zero risk premium. [Harvey]

fair lending practices regulations

The Office of Thrift Supervision regulations that pertain to the application and appraisal practices of federal associations. The regulations prohibit the use of discriminatory appraisals and require the preparation of written loan underwriting standards, the collection of monitoring information and the maintenance of loan application registers. [OTS]

fair market price

A reasonable price for securities based on supply and demand. [NYSE] Amount at which an asset would change hands between two parties, both having knowledge of the relevant facts. Also referred to as market price. [Harvey]

fair market value

The price at which property would be transferred from a willing seller to a willing buyer, each of whom has a reasonable knowledge of all pertinent facts concerning the property in question and similar properties on the market, and neither is under any compulsion to buy or sell. Most accountants consider fair market value to be slang for market value. [OTS]

fair price

The equilibrium price for futures contracts. Also called the theoretical futures price, which equals the spot price continuously compounded at the cost of carry rate for some time interval. [Harvey]

fair value

A method of determining what a troubled asset would be worth (its present value) if its present owner sold it in the current market. Fair value assumes a reasonable marketing period, a willing buyer and a willing seller. It assumes that the current selling price (its present value) would rise or fall in relation to the asset's future earnings potential. To calculate that price, fair value converts the asset's future earnings into what they are worth in today's dollars, using a formula that discounts the assets' future net cash flows. The discount is based on the fact that a dollar earned in the future is equal to, say, $.75 invested today plus interest over an equivalent period of time. Thus, a dollar received today and invested is worth more than a dollar received in the future. Fair value, therefore is based on a formula incorporating rates of interest earned. While market value measures the sales price agreed to by the buyer and seller, OTS defines fair value as measuring the value of what the seller would receive less selling costs. Fair value is one accounting method used to calculate the present value of an asset (a loan) at some point after the loan has become past due and book value is no longer valid. [OTS] The weighted average of a products domestic market prices. [ITDS] Theoretical value. [NYMEX]

fair-and-equitable test

A set of requirements for a plan of reorganization to be approved by the bankruptcy court. [Harvey]

fake down payment

In order to meet loan-to-value requirements, a fake down payment through fictitious, forged, falsified, or altered documents is used to mislead the lender. [FFIEC]

fall-out

slang for loans that are not closed because they are not approved by the lender or because the borrower decides not to take the loan. [OTS]

falling market

A market in which prices or interest rates are moving in an overall downward direction. [OTS]

fallout risk

A type of mortgage pipeline risk that is generally created when the terms of the loan to be originated are set at the same time as the sale terms are set. The risk is that either of the two parties, borrower or investor, fails to close and the loan 'falls out' of the pipeline. [Harvey]

family

A family consists of a householder and one or more other persons living in the same household who are related to the householder by birth, marriage, or adoption; all persons who are related to the householder are regarded as members of his or her family. Not all households contain families, because a household may be composed of a group of unrelated persons or one person living alone. [EPA] two or more persons related by blood, marriage, or convenience who occupy the same dwelling. [OTS]

Fannie Mae

A corporation (government-sponsored enterprise) created by Congress to support the secondary mortgage market (formerly the Federal National Mortgage Association). It purchases and sells residential mortgages insured by the Federal Housing Administration (FHA) or guaranteed by the Veteran's Administration (VA). [CFTC]

Farmers Home Administration (FmHA)

A federal agency created in the 1930s in the U.S. Department of Agriculture. Its mission is to support American farmers through commodity programs, farmer operating and emergency loans, conservation, domestic and overseas food assistance, and disaster programs. In a 1994 USDA reorganization, FmHA became the Farm Service Agency (FSA). [FDIC] A federal government agency that finances and insures loans to farmers and other qualified borrowers for rural housing and other purposes. [OTS]

fast market

An open outcry market situation in which transactions in the pit or ring take place in such volume and with such rapidity that price reporters fall behind with price quotations, label each quote 'FAST' and show a range of prices. Also called a fast tape. [CFTC] Transactions in the pit or ring that take place in such volume and with such rapidity that price reporters are behind with price quotations, so they insert 'Fast' and show a range of prices. [NYMEX]

FATF 40

These Forty Recommendations set out the basic framework for anti-money laundering efforts and they are designed to be of universal application. They cover the criminal justice system and law enforcement; the financial system and its regulation, and international cooperation. [UNODC]

feasibility study

A detailed investigation and analysis of a proposed development project to determine whether it is viable technically and economically. [OTS] Financial feasibility forecast or projection in the form of a study prepared by recognized consultants or experts evidencing that the pledged revenues (from, for example, the project being financed) will produce a level of earnings coverage during a given forecast period. The study may be in the nature of a market study analyzing the demand for the service to be performed by the financed facility or for the bond proceeds (such as for the proceeds of bonds issued to finance home mortgages). [EPA]

feasible portfolio

A portfolio that an investor can construct given the assets available. [Harvey]

feasible set of portfolios

The collection of all feasible portfolios. [Harvey]

feasible target payout ratios

Payout ratios that are consistent with the availability of excess funds to make cash dividend payments. [Harvey]

Federal Advisory Council (FAC)

An advisory group consisting of one member, usually a banker, from each Federal Reserve District. Members are elected annually by the Reserve Bank boards of directors. Members meet with the Federal Reserve Board at least four times a year to make recommendations on business and financial issues relating to banking, but have no real power. [FRBSF] This group consists of one member from each Federal Reserve District (usually a banker) elected annually by the Board of Directors of each of the 12 Federal Reserve Banks. They meet with the Board to discuss business and financial conditions and make advisory recommendations. [FRB][FRBC][FRBM]

federal agency issues

securities issued by a federal agency or an organization affiliated with the federal government. The securities are fully guaranteed as to principal and interest by the issuing agency, but are not direct debt obligations of the U.S. government and are not backed by its full faith and credit. The more common federal agency issues include obligations of the federal home loan banks, Farm Credit System, Federal National Mortgage Association, Government National Mortgage Association and Student Loan Marketing Association. [OTS]

Federal agency securities

Securities issued by corporations and agencies created by the U.S. government, such as the Federal Home Loan Bank Board and Ginnie Mae. [Harvey]

Federal Asset Disposition Association (FADA)

A corporation, chartered as a savings and loan and wholly owned by the FSLIC, created in 1985 by the FHLBB to manage and liquidate assets of failed thrifts. One of the RTC's duties was to liquidate the FADA within 180 days from the enactment of FIRREA. [FDIC] A federal savings and loan association chartered by the former Federal Home Loan Bank Board in November 1985. Although FADA could accept deposits, it was chartered as a wholly owned subsidiary of the former Federal Savings and Loan Insurance Corporation (FSLIC) for the sole purpose of liquidating and disposing of assets of failed savings institutions acquired by the FSLIC in its role as receiver. Since it was chartered under Section 406 of the National Housing Act, FADA was informally known as a '406 corporation.' Although FADA initially received a 10-year charter, it was turned over to the Resolution Trust Corporation (RTC) in August 1990. The RTC liquidated FADA during the next 180 days, as required by Subtitle A, Section 501 of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA). [OTS]

Federal association

A savings and loan, building and loan, homestead association or savings bank chartered by the Office of Thrift Supervision. [OTS]

federal compliance regulator (FCR)

An accredited OTS examiner who is qualified to handle all aspects of a compliance examination of a savings institution. [OTS]

Federal credit agencies

Agencies of the federal government set up to supply credit to various classes of institutions and individuals, e.g. S&Ls, small business firms, students, farmers, and exporters. [Harvey]

Federal debt

The current dollar sum of obligations equal to the accumulated past deficits minus surpluses of the United States government. [FACS]

Federal Deposit Insurance Act (FDI Act)

A 1950 act that, among other things, (1) increased the FDIC deposit insurance limit from $5,000 to $10,000 and (2) granted the FDIC the authority to provide open bank assistance through loans or the purchase of assets to prevent the failure of an insured bank. Under the 'essentiality doctrine' of the FDI Act, a bank was eligible for open bank assistance only if the FDIC Board of Directors decided that the continued operation of the institution was 'essential.' [FDIC]

Federal Deposit Insurance Corporation (FDIC)

A federal institution that insures bank deposits. [Harvey] A federal regulatory agency that insures all deposit accounts in member banks up to $100,000. [FACS] A government corporation that insures deposits in thrift institutions and commercial banks. The FDIC administers the Savings Association Insurance Fund (SAIF) providing deposit insurance to thrifts, and the Bank Insurance Fund (BIF) providing deposit insurance to commercial banks. [OTS] Agency of the federal government that insures accounts at most commercial banks and mutual savings banks. The FDIC also has primary federal supervisory authority over insured state banks that are not members of the Federal Reserve System. [FRB][FRBC][FRBM] An independent deposit insurance agency created by Congress in 1933 to maintain stability and public confidence in the nation's banking system. The FDIC promotes safety and soundness of insured depository institutions and the U.S. financial system by identifying, monitoring, and addressing risks to the deposit insurance funds; minimizes disruptive effects from the failure of banks and savings associations; and ensures fairness in the sale of financial products and provision of financial services. [FRBSF] The FDIC is the independent deposit insurance agency created by the U. S. Congress to maintain stability and public confidence in the nation's banking system. In its unique role as deposit insurer of banks and saving associations, and in cooperation with the other federal and state regulatory agencies, the FDIC promotes the safety and soundness of insured depository institutions and the U.S. financial system by identifying, monitoring, and addressing risks to the deposit insurance funds. [UNODC]

Federal Deposit Insurance Corporation Improvement Act (FDICIA)

A comprehensive package of legislation, enacted in 1991, that included (1) a 'least cost' test, imposed in the resolution process, that required the FDIC to evaluate all resolution alternatives, including liquidation, and to choose the resolution method least costly to the relevant insurance fund; (2) section 131 of FDICIA, which imposed new capital requirements, effective December 19, 1992, whereby institutions were to be closed before they became insolvent, although banks with tangible capital of less than 2 percent of assets were 'critically undercapitalized' and subject to immediate closure; and (3) an extension of the time period for the RTC to accept conservatorship and receivership appointments from August 31, 1992, to October 1, 1993, a date after which the FDIC would assume responsibility for failed thrifts and would pay losses from the SAIF. [FDIC]

Federal Energy Regulatory Commission (FERC)

Federal Financial Institutions Examination Council (FFIEC)

An organization established by Congress in 1987 to coordinate and unify regulations, standards and report forms among the five member federal agencies that regulate savings institutions, commercial banks and credit unions: Office of Thrift Supervision, Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and National Credit Union Administration. The work of the council is carried out by five task forces, made up of representatives of each agency, dealing with: education and training, supervision, reports, consumer compliance, and surveillance. Also known as the Exam Council. [OTS]

Federal Financing Bank (FFB)

A bank established by the Federal Financing Bank Act of 1973 with a mission to (1) assure coordination between federal borrowing programs and the overall economic and fiscal policies of the federal government and (2) reduce the cost of federal and federally assisted borrowings from the public. The FFB has become the vehicle through which most federal agencies finance their programs involving the sale or placement of credit market instruments, including agency securities. The FFB is under the general supervision of the secretary of the Treasury, and it is managed and staffed by Treasury employees. [FDIC] A federal institution that lends to a wide array of federal credit agencies funds it obtains by borrowing from the U.S. Treasury. [Harvey]

federal funds

Member bank deposits at the Federal Reserve; these funds are loaned by member banks to other member banks. [CBOT][MIDAM] Non-interest bearing deposits by banks at the Federal Reserve. Excess reserves are lent by banks to each other. [WCSU] Non-interest bearing deposits held in reserve for depository institutions at their district Federal Reserve Bank. Also, excess reserves lent by banks to each other. [Harvey] Reserve balances that depository institutions lend each other, usually on an overnight basis. In addition, Federal funds include certain other kinds of borrowings by depository institutions from each other and from federal agencies. [FRB][FRBM] funds on deposit in a financial intermediary's reserve account at its district Federal Reserve Bank. A member of the Federal Reserve is required to maintain a minimum average balance during any one week, based on its deposit levels during the two previous weeks. Larger commercial banks tend to need extra funds to meet minimum reserve requirements, and often borrow from other institutions, particularly smaller institutions, which usually have excess funds to lend. The seller, or lender, of federal funds can be another commercial bank within the Federal Reserve System, a nonFederal Reserve member such as a Federal Home Loan Bank or an individual thrift institution which has a surplus of funds to invest on a short-term basis. The exchange of funds between lenders and borrowers occurs in the informal federal funds market, either directly between institutions or through brokers. Whereas the bulk of these funds are lent on an overnight basis, some funds referred to as term federal funds, are lent for longer periods. [OTS]

Federal funds market

The market where banks can borrow or lend reserves, allowing banks temporarily short of their required reserves to borrow reserves from banks that have excess reserves. [Harvey]

Federal funds rate

The interest rate at which banks borrow Federal funds. [FRB][FRBM] The interest rate at which banks borrow surplus reserves and other immediately available funds. The federal funds rate is the shortest short-term interest rate, with maturities on federal funds concentrated in overnight or one-day transactions. [FRB][FRBC] The rate of interest charged for the use of Federal funds. [CBOT][MIDAM] This is the interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans. The Fed Funds rate, as it is called, often points to the direction of U.S. interest rates. [Harvey]

Federal Home Loan Bank (FHLB)

A system of banks created in 1932 by the Federal Home Loan Bank Act, which established 12 regional FHLBs to encourage home loans by local thrifts during the Great Depression that began in 1929. The FHLBB was responsible for overseeing the FHLBs from 1932 to 1989, when FIRREA transferred this function to the Federal Housing Finance Board. [FDIC] The institutions that regulate and lend to savings and loan associations. The Federal Home Loan Banks play a role analogous to that played by the Federal Reserve Banks vis-a-vis member commercial banks. [Harvey] one of the 12 regional Banks of the Federal Home Loan Bank System. The Banks were established to extend loans and provide various services to member institutions including savings and loan associations, savings banks and insurance companies. [OTS]

Federal Home Loan Bank Board (FHLBB)

A five-member board established on July 22, 1932, by the Federal Home Loan Bank Act. The board was authorized to establish Federal Home Loan Banks with the authority to regulate and supervise S&Ls, as well as to lend money to S&Ls, which would in turn finance home loans. The FHLBB retained these basic responsibilities until the passage of FIRREA in August 1989. FIRREA created the Federal Housing Finance Board to succeed the FHLBB, and some of the FHLBB's functions were transferred to the FDIC, the RTC, and the OTS. [FDIC] A former independent agency in the executive branch of the federal government that regulated and supervised the savings and loan industry, the Federal Home Loan Banks, the Federal Savings and Loan Insurance Corporation and the Federal Home Loan Mortgage Corporation. The Bank Board was abolished in August 1989 by the Financial Institutions Reform, Recovery and Enforcement Act of 1989 and its functions transferred to other agencies, including the Office of Thrift Supervision. [OTS] The agency of the federal government that supervises all federal savings and loan associations and federally insured state-chartered savings and loan associations. The FHLBB also operates the Federal Savings and Loan Insurance Corporation, which insures accounts at federal savings and loan associations and those state-chartered associations that apply and are accepted. In addition, the FHLBB directs the Federal Home Loan Bank System, which provides a flexible credit facility for member savings institutions to promote the availability of home financing. The FHL Banks also own the Federal Home Loan Mortgage Corporation, established in 1970 to promote secondary markets for mortgages. [FRB][FRBC][FRBSF]

Federal Home Loan Bank Board Memorandum

The former Bank Board published several memorandum series that included interpretations of regulations, instructions on compliance, and opinions. The primary series were the R, T, SP, AB, and PA memos, all of which are being replaced by Thrift Bulletins and Regulatory Bulletins published by the Office of Thrift Supervision. [OTS]

Federal Home Loan Bank System

is made up of the 12 regional Federal Home Loan Banks, the Office of Finance, and the Federal Housing Finance Board. [OTS]

Federal Home Loan Mortgage Corporation (FHLMC) (Freddie Mac)

A Congressionally chartered corporation that purchases residential mortgages in the secondary market from S&Ls, banks, and mortgage bankers and securitizes these mortgages for sale into the capital markets. [Harvey] A corporate instrumentality of the United States, created by Congress on July 24, 1970. Freddie Mac is owned by its shareholders and accountable to its shareholders and a board of directors. Its primary mission is to increase the availability of money from mortgage lenders to homebuyers and investors in multi-family residential property. As one of the biggest buyers of home mortgages in the United States, Freddie Mac is a secondary market conduit between mortgage lenders and investors. [FDIC] A private corporation chartered by Congress in 1970 to make funds from the capital markets available for home financing. It does this by operating a secondary market for home mortgage loans, buying such mortgages from original lenders and selling securities in the capital markets backed by those mortgages. It is popularly known as Freddie Mac. [OTS]

Federal Housing Administration (FHA)

A division of the U.S. Department of Housing and Urban Development that insures mortgage loans for a variety of purposes, but primarily for those related to residential housing. Congress originally created the FHA in 1934 to make homeownership possible for first-time homebuyers. Today the FHA helps low- to middle-income families to purchase a home without making a large down payment, encourages improvement in housing standards and conditions, and provides a system of government-guaranteed mortgage insurance. [FDIC] A division of the U.S. Department of Housing and Urban Development that insures residential mortgage loans and sets construction standards. [CBOT][MIDAM] A government agency within the Department of Housing and Urban Development (HUD) that administers many programs including housing subsidies, mortgage insurance, and rental assistance. [OTS]

Federal Housing Finance Board (FHFB)

An independent federal agency established by Congress in 1989 to regulate and supervise the 12 Federal Home Loan Banks. [OTS]

federal information systems regulator (FISR)

An accredited OTS examiner who is qualified to handle all aspects of an electronic data processing examination of a thrift institution. [OTS]

federal limit

A speculative position limit that is established and administered by the CFTC rather than an exchange. [CFTC]

Federal margin call

A broker's demand upon a customer for cash or securities needed to satisfy the required Regulation T down payment for a purchase or short sale of securities. [FRB][FRBC][FRBM][FRBSF]

Federal National Mortgage Association (FNMA) (Fannie Mae)

A corporation created by Congress to facilitate the secondary mortgage market. Popularly known as Fannie Mae. [OTS] A tax-paying corporation, owned entirely by private stockholders, established in 1938 to provide additional liquidity to the mortgage market. In 1968, the original Fannie Mae was reorganized into two corporations: the privately-owned Fannie Mae and the government-owned Ginnie Mae. Fannie Mae purchases and sells residential mortgages insured by the Federal Housing Administration or guaranteed by the Veterans' Administration, as well as conventional home mortgages. Purchases of mortgages are financed by the sale of mortgage-backed securities to private investors. Fannie Mae operates with regulatory oversight from both the U.S. Treasury Department and the U.S. Department of Housing and Urban Development. [FDIC]

Federal Open Market Committee (FOMC)

A 12-member committee consisting of the seven members of the Federal Reserve Board and five of the 12 Federal Reserve Bank presidents. The president of the New York Federal Reserve Bank is a permanent member while the other Federal Reserve Bank presidents serve on a rotating basis. The committee sets objectives for growth of money and credit that are implemented through purchases and sales of U.S. Government securities in the open market. The FOMC also establishes policy relating to Federal Reserve System operations in the foreign exchange markets. [OTS] A 12-member committee consisting of the seven members of the Federal Reserve Board and five of the twelve Federal Reserve Bank presidents. The president of the New York Federal Reserve Bank is a permanent member while the other Federal Reserve presidents serve on a rotating basis. The Committee sets objectives for the growth of money and credit that are implemented through purchases and sales of U.S. government securities in the open market. The FOMC also establishes policy relating to System operations in the foreign exchange markets. [FRB][FRBC][FRBM] Twelve-member committee made up of the seven members of the Board of Governors; the president of the New York Federal Reserve Bank; and, on a rotating basis, the presidents of four other Reserve Banks. The FOMC meets eight times a year to set Federal Reserve guidelines regarding the purchase and sale of government securities in the open market as a means of influencing the volume of bank credit and money in the economy. It also establishes policy relating to System operations in the foreign exchange rates. [FRBSF]

Federal Register

A government publication printed daily Monday through Friday that publishes new regulations and legal notices issued by the Office of Thrift Supervision and other federal government agencies. The Federal Register provides the official notice to the public of regulations, orders, legal notices, Presidential proclamations, executive orders, documents required by Act of Congress and other official documents of public interest. [OTS]

Federal Reserve account

A Federal Reserve account is a noninterest-earning account that a depository institution maintains with a Federal Reserve Bank. The balance in this account is maintained for purposes of (1) satisfying the Federal Reserve's reserve requirements and/or (2) settling payments cleared through the Federal Reserve. The balances in these accounts play a central role in the exchange of funds between depository institutions. [GAO]

Federal Reserve Act of 1913

Federal legislation that established the Federal Reserve System. [FRBSF]

Federal Reserve Bank (FRB)

One of the 12 regional banks in the Federal Reserve System. The 12 FRBs and their 25 branches, which are managed by the Board of Governors of the Federal Reserve System, perform a variety of functions, including operating a nationwide payments system, distributing the nation's currency, supervising and regulating member banks and bank holding companies, and serving as banker for the U.S. Treasury. The FRBs supervise and examine state chartered banks that are members of the Federal Reserve System (state member banks). [FDIC] One of the twelve operating arms of the Federal Reserve System, located throughout the nation, that together with their twenty-five Branches carry out various System functions, including operating a nationwide payments system, distributing the nation's currency and coin, supervising and regulating member banks and bank holding companies, and serving as banker for the U.S. Treasury. [FRBSF] One of the twelve operating arms of the Federal Reserve System, located throughout the nation, that together with their twenty-five Branches carry out various System functions. [FRB][FRBM]

Federal Reserve Bank of Chicago (FRBC)

Federal Reserve Bank of Minneapolis (FRBM)

Federal Reserve Bank of New York (FRBNY)

Federal Reserve Bank of San Francisco (FRBSF)

Federal Reserve District

(also 'Reserve District,' or 'District') One of the twelve geographic regions served by a Federal Reserve Bank. [FRBSF] One of the twelve geographic regions served by a Federal Reserve Bank. [FRB][FRBM]

Federal Reserve float

Checkbook money, that for a period of time, appears on the books of both the payor and payee due to the lag in the collection process. Federal Reserve float often arises during the Federal Reserve's check collection process. In order to promote an efficient payments mechanism with certainty as to the date funds become available, the Federal Reserve has employed the policy of crediting the reserve accounts of depository institutions depositing checks according to an availability schedule before the Federal Reserve is able to obtain payment from others. [FRB][FRBC][FRBSF]

Federal Reserve notes

Nearly all of the nation's circulating paper currency consists of Federal Reserve notes printed by the Bureau of Engraving and Printing and issued to the Federal Reserve Banks which put them into circulation through commercial banks and other depository institutions. Federal Reserve notes are obligations of the U.S. government. [FRB][FRBM][FRBSF] Nearly all of the nation's circulating paper currency consists of Federal Reserve notes printed by the Bureau of Engraving and Printing and issued to the Federal Reserve Banks which put them into circulation through depository institutions. Federal Reserve notes are obligations of the U.S. government. [FRB][FRBC] The paper currency placed in circulation by the Federal Reserve Banks and issued in denominations of from $1 to $100. Nearly all of the nation's circulating paper currency consists of Federal Reserve notes printed by the Bureau of Engraving and Printing. Federal Reserve notes are obligations of the U.S. Government. [OTS]

Federal Reserve System

A central banking system in the United States, created by the Federal Reserve Act in 1913, designed to assist the nation in attaining its economic and financial goals. The structure of the Federal Reserve System includes a Board of Governors, the Federal Open Market Committee, and 12 Federal Reserve Banks. [CBOT][MIDAM] The Federal Reserve System is the central bank of the United States. It was founded by Congress in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system. Over the years its role in banking and the economy has expanded. Today, the Federal Reserve's duties fall into four general areas: 1) conducting the nation's monetary policy; 2) supervising and regulating banking institutions; 3) maintaining the stability of the financial system and containing systemic risk that may arise in financial markets; and 4) providing certain financial services to the U.S. government, to the public, to financial institutions, and to foreign official institutions. [UNODC] The Federal Reserve System operates a comprehensive, nationwide system for clearing and settling checks drawn on depository institutions located in all regions of the United States. [GAO] The U.S. central bank consisting of 12 regional banks are run by a board of governors appointed by the president for overlapping 14-year terms; formally independent of the executive and congressional branches of government; private bank members of the system own their assets. [FACS] The central bank of the U.S., established in 1913, and governed by the Federal Reserve Board located in Washington, D.C. The system includes 12 Federal Reserve Banks and is authorized to regulate monetary policy in the U.S. as well as to supervise Federal Reserve member banks, bank holding companies, international operations of U.S.banks, and U.S.operations of foreign banks. [Harvey] The central bank of the United States created by Congress, consisting of a seven-member Board of Governors in Washington, D.C., 12 regional Reserve Banks, and depository institutions that are subject to reserve requirements. All national banks are members; state chartered banks may elect to become members, and state members are supervised by the Board of Governors and the Reserve Banks. Reserve requirements established by the Federal Reserve Board apply to nonmember depository institutions as well as member banks. Both classes of institutions have access to Federal Reserve discount borrowing privileges and Federal Reserve services on an equal basis. [FRB][FRBC][FRBM] The central bank of the United States, created by Congress and made up of a seven-member Board of Governors in Washington, DC, twelve regional Federal Reserve Banks, and their twenty-five Branches. [FRBSF] The central banking system of the United States, founded by Congress in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system. Over the years, the Fed's role in banking and the economy has expanded. The Fed administers the nation's monetary policy using three major tools: open market operations, the reserve requirement, and the discount rate. The Fed also plays a major role in the supervision and regulation of the U.S. banking system. The Board of Governors of the Federal Reserve System (the Federal Reserve Board) is made up of seven members appointed to 14-year terms by the president of the United States and confirmed by the Senate. The chairman and vice chairman of the board, however, serve four-year terms. The Federal Reserve Board's policies are carried out by the 12 regional Federal Reserve Banks. [FDIC] The central banking system of the United States; coordinator of monetary policy. [ITDS] made up of the Federal Reserve Board, the 12 regional Federal Reserve Banks, federally chartered commercial banks, and state-chartered commercial banks that elect to be members. The Federal Reserve System serves as a central credit facility for member commercial banks, and controls the nation's money supply. [OTS]

Federal Savings and Loan Insurance Corporation (FSLIC)

A former government corporation under the direction of the former Federal Home Loan Bank Board that insured deposits at savings institutions. Congress authorized the FSLIC in the National Housing Act of 1934. Under the Financial Institutions Reform, Recovery and Enforcement Act of 1989, FSLIC was abolished. Its deposit insurance function was assumed by a new insurance fund, the Savings Association Insurance Fund (SAIF), administered by the Federal Deposit Insurance Corporation (FDIC). [OTS] The federal corporation chartered by Congress in 1934 to insure deposits in savings institutions. The FSLIC also served as a conservator or receiver for troubled or failed insured savings associations. Effective April 1, 1980, for insured savings and loan institutions, the FSLIC insured savings accounts up to $100,000. The FSLIC functioned under the direction of the FHLBB, which provided certain administrative services and conducted the examination and supervision of insured S&Ls. In 1989, Congress abolished the FSLIC, transferring its resolution, conservatorship, and receivership functions to the RTC and its responsibilities for the deposit insurance fund to the Savings Association Insurance Fund, which is administered by the FDIC. [FDIC]

Federal savings association

Federal thrift regulator (FTR)

An accredited OTS examiner who is qualified to handle all aspects of a safety and soundness examination of a thrift institution. [OTS]

Federal Trade Commission (FTC)

Federally chartered association

A savings association that is chartered by the Office of Thrift Supervision (OTS) (or previously by its predecessor agency, the Federal Home Loan Bank Board) under the provisions of the Home Owners Loan Act of 1933, and is subject to the supervision of OTS. Federal savings associations are required by law to have their savings accounts insured by the Savings Association Insurance Fund (SAIF) and to be members of a Federal Home Loan Bank. [OTS]

Federally related institutions

Arms of the federal government that are exempt from SEC registration and whose securities are backed by the full faith and credit of the U.S. government (with the exception of the Tennessee Valley Authority). [Harvey]

Federation Internationale des Bourses de Valeurs (FIBV)

The International Federation of Stock Exchanges -- Encourages cooperative policies designed to stimulate a freer flow of capital across national boundaries. The NYSE is a member of this Paris-based organization. [NYSE]

FEDNET

A high-speed, nationwide communications network that electronically links all Federal Reserve Banks and branches with depository institutions. [GAO]

Fedwire

A wire transfer system for high-value payments operated by the Federal Reserve System. [Harvey] Electronic funds transfer network operated by the Federal Reserve. Fedwire is usually used to transfer large amounts of funds and U.S. government securities from one institution's account at the Federal Reserve to another institution's account. It is also used by the U.S. Department of the Treasury and other federal agencies to collect and disburse funds. [FRBSF] The Federal Reserve System's electronic funds transfer network. Fedwire is used for transferring reserve account balances of depository institutions, and for transferring government securities. Fedwire is also used for the settlement of other clearing systems, such as CHIPS (Clearinghouse Interbank Payments Systems), which engages Fedwire for settlement. [OTS] The Federal Reserve System's wire transfer service, used to move large sums of money between depository institutions such as banks, savings & loans, and credit unions. [FRB][FRBC] The Federal Reserve funds transfer system. Fedwire is used for transferring reserve account balances of depository institutions and government securities. Fedwire is also used for the settlement of other clearing systems, such as CHIPS. [FRB][FRBC][FRBM] The electronic funds transfer system operated by the Federal Reserve. [GAO] The primary U.S. domestic wire transfer service for wire transfer message traffic that initiates funds transfers. This system handles both the message initiating the transfer and the actual movement of funds. Fedwire is operated by the Federal Reserve System and connects Federal Reserve banks with thousands of domestic banks. [UNODC]

fee

(1) a remuneration for a service performed or for a privilege, such as an admission fee. (2) an inheritable estate. [OTS]

fee simple estate

A type of real property ownership in which the owner is fully accountable for all responsibilities pertaining to the property and entitled to all the rights and privileges derived from ownership including the right to pass the property on to one's heirs. [OTS]

fee tail

An estate that may be inherited only by a limited class of heirs. [OTS]

feed ratio

A ratio used to express the relationship of feeding costs to the dollar value of livestock. [CBOT][MIDAM] The relationship of the cost of feed, expressed as a ratio to the sale price of animals, such as the corn-hog ratio. These serve as indicators of the profit margin or lack of profit in feeding animals to market weight. [CFTC]

feeder vessel

A vessel which is used to connect to a line vessel which directly services a port. [ITDS]

feedstock

The supply of crude oil, natural gas liquids, or natural gas to a refinery or petrochemical plant or the supply of some refined fraction of intermediate product to some other manufacturing process. [NYMEX]

fence

A long (short) underlying position together with a long (short) out-of-the-money put and a short (long) out-of-the-money call. All options must expire at the same time. [NYMEX]

FHA loan

A home mortgage, mobile home or property improvement loan made by a private lender and insured by the Federal Housing Administration. [OTS]

FHA prepayment experience

The percentage of loans in a pool of mortgages outstanding at the origination anniversary, based on annual statistical historic survival rates for FHA-insured mortgages. [Harvey]

fiat money

Money that has little or no intrinsic value as a commodity; it is costless to produce, usually taking the form of tokens or pieces of paper; and is not redeemable for any commodity. [FRB][FRBM][FRBSF] Nonconvertible paper money. [Harvey]

Fiber Digital Data Interface (FDDI)

Trading floor network connecting all trading floor terminals. [NYSE]

fibonacci numbers

A number sequence discovered by a thirteenth century Italian mathematician Leonardo Fibonacci (circa 1170-1250), who introduced Arabic numbers to Europe, in which the sum of any two consecutive numbers equals the next highest number -- i.e., following this sequence: 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, and so on. The ratio of any number to its next highest number approaches 0.618 after the first four numbers. These numbers are used by technical analysts to determine price objectives from percentage retracements. [CFTC]

fictitious loan

Tje fabrication of loan documents or use of a real person’s information to apply for a loan which the applicant typically has no intention of paying. A fictitious loan can be perpetrated by an insider of the financial institution or by external parties such as loan originators, real estate agents, title companies, and/or appraisers. [FFIEC]

fictitious trading

Wash trading, bucketing, cross trading, or other schemes which give the appearance of trading but actually no bona fide, competitive trade has occurred. [CFTC]

fidelity bonds

An insurance plan to insure savings institutions against infidelity by employees, including dishonesty, embezzlement of funds or other disappearances of cash. Some bonds also insure against robbers, burglars and vandals. Fidelity bond coverage is provided by private insurers, and is required by the SAIF as a condition for obtaining and keeping deposit insurance. [OTS] Insurance provided to indemnify employees against loss by reason of the dishonesty of employees or as a result of the nonperformance of contracts. In fidelity insurance contracts, the insurance company issues fidelity insurance bonds as a guarantee against loss arising from the default or dishonesty of the insured person. Fidelity bonds are issued for three classes of risk: larceny, culpable negligence, and unfaithful discharge of duty. [FDIC]

fiduciary

A relationship established by a trust to act for an individual or corporation. [EPA] someone who is entrusted with the care of another person's money, property or other items of value. [OTS]

fiduciary account

A savings account, the funds of which are owned by one individual but administered for that individual's benefit by another individual, such as a legally appointed conservator, trustee, or agent. [OTS] An amount typically deposited with a Swiss Bank which will redeposit the sum with a third party bank outside Switzerland in its own name (to overcome Swiss withholding tax on interest). [UNODC]

fie chien

A Chinese underground banking system, the term itself meaning literally 'flying money'. It is based on trust, family ties, local social structures, and the threat of ostracism for any breach of good faith. This system generally involves depositing money in one country in exchange for a 'chit' or 'chop' (seal), and the remittance of this money in another country on presentation of the chit. [UNODC]

field warehouse

Warehouse rented by a warehouse company on another firm's premises. [Harvey] warehouse rented by a warehouse company on another firm's premises. [WCSU]

figuring the tail

Calculating the yield at which a future money market (one available some period hence) is purchased when that future security is created by buying an existing instrument and financing the initial portion of its life with a term repo. [Harvey]

file

A file is a group of entries transmitted by originating institutions or to receiving institutions by ACH operators. A file may contain one or more batches of entries. [GAO]

file header

The first record of an ACH file containing information necessary to route, validate and track the ACH contained within the file. [ACH]

fill

The execution of an order. [CFTC] The price at which an order is executed. [Harvey][NYMEX]

fill-or-kill

A customer order that is a price limit order that must be filled immediately or canceled. [CBOT][MIDAM] An order which must be filled immediately, and in its entirety. Failing this, the order will be canceled. [NYMEX]

fill-or-kill order

A trading order that is canceled unless executed within a designated time period. [Harvey]

filter

A rule that stipulates when a security should be bought or sold according to past price action. [Harvey]

final estimate

The third estimate of GDP and its components for a quarter. It is released 85-90 days after the end of the quarter, and it is based on source data that are more detailed and comprehensive than the preliminary estimate. [BEA]

final settlement price

The price at which a cash-settled futures contract is settled at maturity, pursuant to a procedure specified by the exchange. [CFTC]

final use

Goods and services consumed in final-demand markets. Those consist of personal consumption expenditures; gross private fixed investment; change in private inventories; exports of goods and services; imports of goods and services; and consumption expenditures and gross investment by Federal, State, and local governments. [BEA]

final-average plan

Pension plan offering a pension that depends on the employee's average compensation in his or her final years of service. [WCSU]

finality

Finality is an irrevocable and unconditional transfer of payment. [GAO]

finance

A discipline concerned with determining value and making decisions. The finance function allocates resources, which includes acquiring, investing, and managing resources. [Harvey]

finance charge

The total dollar amount paid to obtain credit. [FRB][FRBC][FRBM][FRBSF] all charges that the borrower pays for the use of funds including interest, fees and other charges paid directly for the use of credit, or indirectly as a condition for the extension of credit. Finance charges must be included on truth-in-lending disclosure statements as the total dollar amount paid for the use of borrowed money. [OTS]

finance subsidiary

A thrift institution's subsidiary company organized for the sole purpose of selling securities, typically preferred stock or mortgage-backed securities. The subsidiary may only sell those securities that the parent thrift itself is authorized to issue directly (or in the case of a mutual association those securities it would be permitted to issue if it converted to a stock institution). The subsidiary remits proceeds from the sale of securities to the parent thrift. [OTS]

financial

Can be used to refer to a derivative that is financially settled or cash settled. [CFTC]

Financial Accounting Standards Board (FASB)

A seven-member body that establishes rules governing accounting practices throughout the U.S. Founded in 1972, FASB is under the direction of the Financial Accounting Foundation, a private sector trust. [OTS] In 1973, this Board succeeded the Accounting Principles Board of the American Institute of CPAs as the designated body in the private sector for establishing standards of financial accounting and reporting. [EPA]

financial action task force (FATF)

Established by the G-7 Summit in Paris in 1989 to examine measures to combat money laundering. In April 1990, the FATF issued a report containing a programme of 40 Recommendations in this area. The Recommendations are designed to provide a comprehensive blueprint for action against money laundering covering the criminal justice system and law enforcement; the financial system and its regulation; and international cooperation. The Recommendations are not a binding international convention, but each of the FATF members has made a firm political commitment to combat money laundering. In 1996 the Recommendations were modified to take into account recent money laundering trends and potential future threats.
FATF concentrates on three main tasks:

1. monitoring members' progress in implementing measures to counter money laundering through a two-fold process of annual self-assessment and a more detailed mutual evaluation;
2. reviewing money laundering trends, techniques and counter-measures and their implications for the 40 Recommendations; and
3. promoting the adoption and implementation of the FATF Recommendations by non-member countries.

Member states are: Argentina, Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong (China), Iceland, Ireland, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, Turkey, United Kingdom, United States, the European Commission and the Gulf Co-operation Council. [UNODC]

financial advisers

Contractors in the private sector who are hired to help select assets for portfolio sales, manage the due diligence process, provide sellers with an opinion about the market value of the assets, find buyers, and negotiate the final terms and conditions of sales contracts. The expertise provided by financial advisors was especially useful to the FDIC and the RTC in organizing and executing their mortgage-backed securities programs. [FDIC]

financial advisor

(A) With respect to a new issue of municipal bonds, a consultant who advises the issuer on matters pertinent to the issue, such as structure, timing, marketing, fairness of pricing, terms and bond ratings. Such consultant may be employed in a capacity unrelated to a new issue of municipal securities, such as advising on cash flow and investment matters. The financial advisor is sometimes referred to as a fiscal consultant or fiscal agent. (B) A person or organization (often a broker-dealer or dealer-bank) holding itself out as providing unbiased professional advice to the issuer as to market conditions, issue structure, and security matters, for which it is paid a fee by the issuer. There is a question in some states as to whether, and under what circumstances, a financial advisor may act as underwriter or original purchaser of the issue for which is has served as financial advisor, whether or not the sale is negotiated or competitive. The Municipal Securities Rulemaking Board has promulgated a rule relating to the conduct of financial advisors. [EPA]

Financial Analysis Auditing Compliance Tracking System (FACTS)

The National Futures Association's computerized system of maintaining financial records of its member firms and monitoring their financial conditions. [CBOT][MIDAM]

financial analysts

Also called securities analysts and investment analysts, professionals who analyze financial statements, interview corporate executives, and attend trade shows, in order to write reports recommending either purchasing, selling, or holding various stocks. [Harvey]

Financial and Operational Combined Uniform Single Report (FOCUS)

Gives the Exchange a complete, detailed picture of member firms' financial and operational conditions. Firms must file monthly summaries of their financial and operational data, and must respond quarterly to several hundred questions about financial and operational conditions and activities. [NYSE]

Financial and Operational Reporting in a Computerized Environment (FORCE)

Consolidates all available member organization financial, operational, sales practice, and other regulatory information. The system gives the NYSE regulatory staff on-line viewing, editing, retrieval, and monitoring capabilities. [NYSE]

financial assets

Claims on real assets. [Harvey][WCSU]

financial commodity

Any futures or option contract that is not based on an agricultural commodity, a natural resource such as energy or metals, or other physical or tangible commodity. It includes currencies, equity securities, fixed income securities, and indexes of various kinds. [CFTC]

financial control

The management of a firm's costs and expenses in order to control them in relation to budgeted amounts. [Harvey]

financial crimes

Crimes against property, involving the unlawful conversion of the ownership of property (belonging to one person) to one's own personal use and benefit. Financial crimes may involve fraud (cheque fraud, credit card fraud, mortgage fraud, medical fraud, corporate fraud, securities fraud (including insider trading), bank fraud, payment (point of sale) fraud, health care fraud); theft; scams or confidence tricks; tax evasion; bribery; embezzlement; identity theft; money laundering; and forgery and counterfeiting, including the production of Counterfeit money and consumer goods. Financial crimes may involve additional criminal acts, such as computer crime, elder abuse, burglary, armed robbery, and even violent crime such as robbery or murder. Financial crimes may be carried out by individuals, corporations, or by organized crime groups. Victims may include individuals, corporations, governments, and entire economies. [Wikipedia]

Financial Criminal Enforcement Network (FinCEN)

A division of the U.S. Treasury Department that operates the Financial Institutions Regulatory Agencies Criminal Referral and Enforcement System (FIRACRES), a data base used by various federal agencies to track and share information on crimes (and criminals) involving savings associations, banks or credit unions. [OTS]

financial distress

Events preceding and including bankruptcy, such as violation of loan contracts. [Harvey]

financial distress costs

Legal and administrative costs of liquidation or reorganization. Also includes implied costs associated with impaired ability to do business (indirect costs). [Harvey]

financial engineering

Combining or dividing existing instruments to create new financial products. [Harvey]

financial futures

A contract entered into now that provides for the delivery of a specified asset in exchange for the selling price at some specified future date. [Harvey] A futures contract on a financial commodity. [CFTC] Futures contracts based on financial instruments such as U.S. Treasury bonds, CDs and other interest-sensitive issues, currencies and stock market indicators. [NYSE] contracts to buy or sell a specific financial instrument at a specific future time at a specified price. Such financial instruments include treasury securities, and certificates of deposit, the prices of which fluctuate with changes in interest rates. [OTS]

financial institution

A corporation chartered for the purpose of dealing primarily with money, such as deposits, investments, and loans, rather than goods or services. [OTS] An institution that collects funds from the public to place in financial assets such as stocks, bonds, money market instruments, bank deposits, or loans. Depository institutions (banks, savings and loans, savings banks, and credit unions) pay interest on deposits and invest the money mostly in loans. Non-depository institutions (insurance companies and pension plans) collect money by selling insurance policies or receiving employer contributions and pay it out for legitimate claims or for retirement benefits. Increasingly, many institutions perform both depository and non-depository functions. For instance, brokerage firms now place customer's money in certificates of deposit and money market funds and sell insurance. [UNODC] An institution that uses its funds chiefly to purchase financial assets (deposits, loans, securities) as opposed to tangible property. Financial institutions can be classified according to the nature of the principal claims they issue: nondeposit intermediaries include, among others, life and property/casualty insurance companies and pension funds, whose claims are the policies they sell, or the promise to provide income after retirement; depository intermediaries obtain funds mainly by accepting deposits from the public. The major depository institutions are listed below. Although historically they have specialized in certain types of credit, the powers of nonbank depository institutions have been broadened in recent years. For example, NOW accounts, credit union share drafts, and other services similar to checking accounts may be offered by thrift institutions. [FRB][FRBC] An institution that uses its funds chiefly to purchase financial assets (loans, securities) as opposed to tangible property. Financial institutions can be classified according to the nature of the principal claims they issue nondeposit intermediaries include, among others, life and property/casualty insurance companies and pension funds, whose claims are the policies they sell, or the promise to provide income after retirement; depository intermediaries obtain funds mainly by accepting deposits from the public. The major depository institutions are listed below. Although historically they have specialized in certain types of credit, the powers of nonbank depository institutions have been broadened in recent years. For example, NOW accounts, credit union share drafts, and other services similar to checking accounts may be offered by thrift institutions. [FRB][FRBM]

Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA)

Legislation that established the Resolution Trust Corporation and the Oversight Board of the RTC as instrumentalities of the United States. Enacted by Congress on August 9, 1989, it includes section 21A of the Federal Home Loan Bank Act (U.S. Code, volume 12, 1441[a]), as added by section 501(a) of FIRREA (Public Law No. 101-73, section 501[a], 103 Statute 83, 363-393). Resulting from the thrift crisis of the late 1980s, FIRREA revised the structure of the deposit insurance system creating a new Bank Insurance Fund and a Savings Association Insurance Fund, both of which were to be administered by the FDIC. FIRREA abolished the FHLBB and the FSLIC. FIRREA divided the Federal Home Loan Bank System into three parts: the OTS, under the general oversight of the secretary of the Treasury; the SAIF; and the Federal Housing Finance Board, which was responsible for overseeing the lending activities of the 12 regional Federal Home Loan Banks. A separate FDIC fund, the FSLIC Resolution Fund, was established to assume the assets and liabilities of the FSLIC except for those transferred to the RTC. [FDIC]

financial instrument

A document which has monetary value or is evidence of a transaction. [ITDS] A legally enforceable agreement between two or more parties, expressing a contractual right or a right to the payment of money. Practically all documents used in credit are financial instruments, including checks, drafts, notes and bonds. [OTS] Any written instrument having monetary value or evidencing a monetary transaction. [FRBSF] There are two basic types: (1) a debt instrument, which is a loan with an agreement to pay back funds with interest; (2) an equity security, which is a share or stock in a company. [CBOT][MIDAM]

financial intelligence unit (FIU)

'A central, national agency responsible for receiving (and, as permitted, requesting), analysing and disseminating to the competent authorities, disclosures of financial information:

1. concerning suspected proceeds of crime, or
2. required by national legislation or regulation, in order to counter money laundering.' (Statement of Purpose of the Egmont Group of Financial Intelligence Units)

[UNODC]

financial intermediaries

Institutions that provide the market function of matching borrowers and lenders or traders. [Harvey]

financial intermediary

A financial institution that accepts money from savers or investors and loans those funds to borrowers, thus providing a link between thos. [OTS]

financial lease

Long-term, noncancelable lease. [Harvey][WCSU]

financial leverage

Use of debt to increase the expected return on equity. Financial leverage is measured by the ratio of debt to debt plus equity. [Harvey][WCSU]

financial leverage clientele

A group of investors who have a preference for investing in firms that adhere to a particular financial leverage policy. [Harvey]

financial market

A market for the exchange of capital and credit in the economy. Money markets concentrate on short-term debt instruments; capital markets trade in long-term debt and equity instruments. Examples of financial markets: stock market, bond market, commodities market, foreign exchange market. [UNODC] An organized institutional structure or mechanism for creating and exchanging financial assets. [Harvey] Market for the exchange of capital and credit in an economy; it is divided into money markets and capital markets. [ITDS]

financial objectives

Objectives of a financial nature that the firm will strive to accomplish during the period covered by its financial plan. [Harvey]

financial plan

A financial blueprint for the financial future of a firm. [Harvey]

financial planning

The process of evaluating the investing and financing options available to a firm. It includes attempting to make optimal decisions, projecting the consequences of these decisions for the firm in the form of a financial plan, and then comparing future performance against that plan. [Harvey]

financial press

That portion of the media devoted to reporting financial news. [Harvey]

financial ratio

The result of dividing one financial statement item by another. Ratios help analysts interpret financial statements by focussing on specific relationships. [Harvey]

financial risk

The risk that the cash flow of an issuer will not be adequate to meet its financial obligations. Also referred to as the additional risk that a firm's stockholder bears when the firm utilizes debt and equity. [Harvey]

financial settlement

financial stability forum (FSF)

The FSF was convened in April 1999 to promote international financial stability through information exchange and international co-operation in financial supervision and surveillance. The Forum brings together on a regular basis national authorities responsible for financial stability in significant international financial centres, international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts. The FSF seeks to co-ordinate the efforts of these various bodies in order to promote international financial stability, improve the functioning of markets, and reduce systemic risk. [UNODC]

financial statements

reports that summarize a firm's accounting data and indicate its financial condition. The four basic financial statements are: the balance sheet, income statement, statement of retained earnings, and statement of changes in financial position. [OTS]

financing decisions

Decisions concerning the liabilities and stockholders' equity side of the firm's balance sheet, such as the decision to issue bonds. [Harvey]

financing lease

A lease which requires rental payments equal to the debt service on the securities issued to finance the property which is the subject of the lease and certain costs of the lessor resulting from lease obligations. The lessee is required to pay all maintenance and upkeep and insurance costs and, generally, to treat the project as if it were the owner. A financing lease is sometimes called a 'net lease'. [EPA]

financing statement

A document filed at a public office that serves as public notice to any interested parties that a lender has established a security interest in property pledged as collateral. [OTS] Uniform Commercial Code filings to perfect security interests in tangible and intangible personal property which is security for an issue. [EPA]

finder's fee

A fee or commission paid to a broker for obtaining a mortgage loan for a client or for referring a mortgage loan to a broker. It may also refer to a commission paid to a broker for locating a property. [OTS]

fine weight

The weight of precious metal contain in a coin or bullion as determined by multiplying the gross weight by the fineness. [NYMEX]

fineness

The purity of precious metal measured in parts per thousand. [NYMEX]

fire wall

A wall constructed so as to stop the spread of fire in a building. [OTS]

firm

Refers to an order to buy or sell that can be executed without confirmation for some fixed period. Also, a synonym for company. [Harvey]

firm commitment

A lender's agreement to make a loan to a specific borrower on a specific property. [OTS] A relationship between an issuer and an underwriter under which the underwriter acts as principal and has agreed to purchase from the issuer the entire issue. (Compare 'Best Efforts Underwriting'.) [EPA]

firm commitment underwriting

An undewriting in which an investment banking firm commits to buy the entire issue and assumes all financial responsibility for any unsold shares. [Harvey]

firm service

Utility service which assumes no interruption except if residential customers' supply is threatened. Opposite of Interruptible Service. [NYMEX]

firm's net value of debt

Total firm value minus total firm debt. [Harvey]

first mortgage

A mortgage that creates a lien against real property with the lien having first priority against other claims in the event of foreclosure. Also called a senior mortgage. [OTS]

first notice day

According to Chicago Board of Trade rules, the first day on which a notice of intent to deliver a commodity in fulfillment of a given month's futures contract can be made by the clearinghouse to a buyer. The clearinghouse also informs the sellers who they have been matched up with. [CBOT][MIDAM] The first day on which notices of intent to deliver actual commodities against futures market positions can be received. First notice day may vary with each commodity and exchange. [CFTC] The first day on which the clearinghouse notifies clearing members of delivery allocations. Energy contracts have only one notice day. Metals contracts have notice days just prior to the beginning and end of the delivery period. [NYMEX] The first day, varying by contracts and exchanges, on which notices of intent to deliver actual financial instruments or physical commodities against futures are authorized. [Harvey]

first world countries

Western, industrialized, non-communist countries. [ITDS]

first-call

With CMOs, the start of the cash flow cycle for the cash flow window. [Harvey]

first-in-first-out

A method of valuing the cost of goods sold that uses the cost of the oldest item in inventory first. [Harvey]

first-pass regression

A time series regression to estimate the betas of securities portfolios. [Harvey]

fiscal agency agreement

An alternative to a bond trust deed. Unlike the trustee, the fiscal agent acts as the agent of the borrower. [Harvey][WCSU]

fiscal agency services

Services performed by the Federal Reserve Banks on behalf of the U.S. government. These include maintaining deposit accounts for the Treasury Department, paying U.S. government checks drawn on the Treasury, and issuing and redeeming savings bonds and other government securities. [FRB][FRBC][FRBM][FRBSF]

fiscal agent

An entity, usually a commercial bank or trust company, designed by the issuer to act for it in one or more designated capacities in the sale, administration, and payment of bonds and coupons. [EPA]

fiscal policy

Federal government policy regarding taxation and spending, set by Congress and the Adminstration. [FRB][FRBC] Government policy regarding taxation and spending. Fiscal policy is made by Congress and the Administration. [FRB][FRBM] The federal government's decisions about the amount of money it spends and collects in taxes to achieve a full employment and non-inflationary economy. [FRBSF] The use of government spending and taxing for the specific purpose of stabilizing the economy. [Harvey] Those federal-government expenditure, tax and borrowing decisions that affect the level of national economic activity. [FACS]

fiscal year

A corporation's accounting year. Due to the nature of that particular business, some companies do not use the calendar year for their bookkeeping. A typical example is the department store that finds December 31 too early a date to close its books after the Christmas rush. For that reason many stores wind up their accounting year January 31. Their fiscal year, therefore, runs from February 1 of one year through January 31 of the next. The fiscal year of other companies may run from July 1 through the following June 30. Most companies, though, operate on a calendar year basis. [NYSE] A twelve-month period which determines the time frame for reporting, budgeting and accounting. At the end of the fiscal year, financial and results of operations are determined. [EPA] any consecutive 12 months designated as the time frame for financial reporting and preparation of balance sheets, profit and loss statements, and other financial summations. [OTS]

Fisher effect

A theory that nominal interest rates in two or more countries should be equal to the required real rate of return to investors plus compensation for the expected amount of inflation in each country. [Harvey] An increase in expected inflation causes a proportional increase in the market interest rate so that the expected real rate of interest remains unchanged. [FACS]

Fisher ideal price index

The geometric mean of the Laspeyres and Paasche price indexes. The Fisher index is superior to either the Laspeyres or the Paasche index if the structure of relative prices in the economy changes between the base period and the current period. [BEA]

Fisher's separation theorem

The firm's choice of investments is separate from its owner's attitudes towards investments. Also refered to as portfolio separation theorem. [Harvey]

five against bond (FAB)

five against bond spread

A futures spread trade involving the buying (selling) of a five-year Treasury note futures contract and the selling (buying) of a long-term (15-30 year) Treasury bond futures contract. [CFTC]

five against note (FAN)

five against note spread

A futures spread trade involving the buying (selling) of a five-year Treasury note futures contract and the selling (buying) of a ten-year Treasury note futures contract. [CFTC]

five Cs of credit

Five characteristics that are used to form a judgment about a customer's creditworthiness: character, capacity, capital, collateral, and conditions. [Harvey]

five dragons

Term used to describe the emerging economies of Hong Kong, Singapore, South Korea, Taiwan, and Thailand. [ITDS]

fixed annuity

The guaranteed income of an annuity, the amount and payment schedule of which has been specified in advance. [OTS]

fixed asset

Assets of a long-term character which are intended to continue to be held or used, such as land, buildings, improvements other than buildings, machinery, and equipment. [EPA] Long-lived property owned by a firm that is used by a firm in the production of its income. Tangible fixed assets include real estate, plant, and equipment. Intangible fixed assets include patents, trademarks, and customer recognition. [Harvey] those tangible assets, such as office buildings, furniture, fixtures, and equipment, used in the operation of a business, that have a relatively long life and are not intended to be sold in the normal process of the business. [OTS]

fixed asset turnover ratio

The ratio of sales to fixed assets. [Harvey]

fixed charges

A company's fixed expenses, such as bond interest, which it has agreed to pay whether or not earned, and which are deducted from income before earnings in equity capital are computed. [NYSE] Charges which do not increase or decrease with a change in volume. [ITDS]

fixed cost

A cost that is fixed in total for a given period of time and for given production levels. [Harvey]

fixed exchange

An administratively fixed exchange rate where no rate fluctuations are possible. [ITDS]

fixed exchange rate system

Exchange rates between currencies that are set at predetermined levels and don't move in response to changes in supply and demand. [FRB][FRBM][FRBSF]

fixed exchange rates

A country's decision to tie the value of its currency to another country's currency, gold (or another commodity), or a basket of currencies. [Harvey] The central bank holds the value of the currency constant against some foreign currency or currencies. [FACS]

fixed income investment

any investment in which the dividend, interest, or rental income is specified as a non-changing dollar amount in the investment contract. [OTS]

fixed inputs

Inputs that cannot be changed over a given time interval. [FACS]

fixed interest trust

A trust (revocable or irrevocable) where named beneficiaries are clearly given the right to receive a specific 'fixed' interest in the trust. [UNODC]

fixed price basis

An offering of securities at a fixed price. [Harvey]

fixed rate

A traditional approach to determining the finance charge payable on an extension of credit. A predetermined and certain rate of interest is applied to the principal. [FRB][FRBC][FRBM]

fixed rate mortgage

A mortgage in which the interest rate and the amount of each payment remain constant throughout the life of the loan. [OTS]

fixed rate of exchange

A rate of exchange set by a foreign government relative to the dollar, gold, another currency or perhaps SDR's. It remains in effect as long as that government is willing and/or able to buy or sell exchange at the set rates. [FDIC]

fixed-annuities

Annuity contracts in which the insurance company or issuing financial institution pays a fixed dollar amount of money per period. [Harvey]

fixed-charge coverage ratio

A measure of a firm's ability to meet its fixed-charge obligations: the ratio of (net earnings before taxes plus interest charges paid plus long-term lease payments) to (interest charges paid plus long-term lease payments). [Harvey]

fixed-dates

In the Euromarket the standard periods for which Euros are traded (1 month out to a year out) are referred to as the fixed dates. [Harvey]

fixed-dollar obligations

Conventional bonds for which the coupon rate is set as a fixed percentage of the par value. [Harvey]

fixed-dollar security

A nonnegotiable debt security that can be redeemed at some fixed price or according to some schedule of fixed values, e.g., bank deposits and government savings bonds. [Harvey]

fixed-income equivalent

Also called a busted convertible, a convertible security that is trading like a straight security because the optioned common stock is trading low. [Harvey]

fixed-income instruments

Assets that pay a fixed-dollar amount, such as bonds and preferred stock. [Harvey]

fixed-income market

The market for trading bonds and preferred stock. [Harvey]

fixed-income security

A security whose nominal (or current dollar) yield is fixed or determined with certainty at the time of purchase, typically a debt security. [CFTC]

fixed-price tender offer

A one-time offer to purchase a stated number of shares at a stated fixed price, usually a premium to the current market price. [Harvey]

fixed-rate loan

A loan on which the rate paid by the borrower is fixed for the life of the loan. [Harvey]

fixed-rate payer

In an interest rate swap the counterparty who pays a fixed rate, usually in exchange for a floating-rate payment. [Harvey]

fixing

Establishing of the official exchange rate of a domestic currency against other negotiable currencies. [ITDS]

fixture

personal property that becomes real property upon being attached to real estate, such as a light fixture that is securely fastened to a wall or ceiling. [OTS]

fixturing period

A rent free period at the beginning of a lease during which time the tenant occupies the premises to install improvements, fixtures, stock, or finish the interior. [OTS]

flag

A reference to the country or registry of a vessel. [ITDS]

flag lot

A parcel of land shaped like a flag; the staff is a narrow strip of land providing vehicular and pedestrian access to a street, with the bulk of the property lying to the rear of other lots. [OTS]

flag of convenience

The national flag flown by a ship that is registered in a country other than that of its owners. [ITDS]

flat

An apartment located entirely on one floor. [OTS]

flat benefit formula

Method used to determine a participant's benefits in a defined benefit plan by multiplying months of service by a flat monthly benefit. [Harvey]

flat income bond

This term means that the price at which a bond is traded includes consideration for all unpaid accruals of interest. Bonds that are in default of interest or principal are traded flat. Income bonds that pay interest only to the extent earned are usually dealt in 'and interest,' which means that the buyer pays to the seller the market price plus interest accrued since the last payment date. [NYSE]

flat price (also clean price)

The quoted newspaper price of a bond that does not include accrued interest. The price paid by purchaser is the full price. [Harvey]

flat price risk

Taking a position either long or short that does not involve spreading. [Harvey]

flat rental

rental payments that remain fixed and unchanged throughout the life of the lease. [OTS]

flat trades

(1) A bond in default trades flat; that is, the price quoted covers both principal and unpaid, accrued interest. (2) Any security that trades without accrued interest or at a price that includes accrued interest is said to trade flat. [Harvey]

flattening of the yield curve

A change in the yield curve where the spread between the yield on a long-term and short-term Treasury has decreased. [Harvey]

flee or flight clause

A special provision inserted in many trusts to safeguard their assets in the event of unforeseen circumstances such as insurrections, invasions by foreign powers, imposition of local taxes or exchange restrictions, etc. Should any of these circumstances occur, the site and control of a trust is automatically transferred to another jurisdiction with similar benefits. [UNODC]

flexible payment mortgage

A mortgage with unequal periodic payments, which may be more or less than the prorated amount needed to amortize the loan over the life of the mortgage. [OTS]

flexible rate of exchange

A rate of exchange subject to relatively frequent changes. It is determined by market forces but subject to various floors or ceilings relative to the dollar, gold, SDR's or another currency when the rate fluctuates beyond certain parameters. [FDIC]

flight capital

The movement of large sums of money from one country to another to escape political or economic turmoil, aggressive taxation or to seek higher rates of interest. [UNODC]

flight of capital

The movement of capital to avoid loss or increase gain. [ITDS]

flight to quality

The tendency of investors to move towards safer, government bonds during periods of high economic uncertainty. [Harvey]

flip-flop note

Note that allows investors to switch between two different types of debt. [Harvey] Note which allows investors to switch backwards and forwards between two different types of debt. [WCSU]

flips

float

Float is checkbook money that appears on the books of both the check writer (the payor) and the check receiver (the payee) while a check is being processed. [GAO] The number of shares that are actively tradable in the market, excluding shares that are held by officers and major stakeholders that have agreements not to sell until someone else is offered the stock. [Harvey] The time that elapses between the day a check is written and issued and the day it is presented for payment to the financial institution on which it is drawn. [OTS]

floater

A CMO tranche with an interest rate that adjusts periodically in relation to an index such as LIBOR. [OTS] Floating rate bond. [Harvey]

floating

Free determination of exchange rates based on supply and demand with no intervention on the part of the central bank. [ITDS]

floating exchange rate system

The flexible exchange rate system in which the exchange rate is determined by the market forces of supply and demand without intervention. [FRB][FRBM][FRBSF]

floating exchange rates

A country's decision to allow its currency value to freely change. The currency is not constrained by central bank intervention and does not have to maintain its relationship with another currency in a narrow band. The currency value is determined by trading in the foreign exchange market. [Harvey] The central bank allows market supply and demand to determine currency exchange rates. [FACS]

floating interest rate

An interest rate that, instead of being a fixed percentage, is stated as an amount above or below another rate, such as the prime rate. The interest rate moves up or down in relation to the rate of the controlling index. [OTS] See 'Variable Interest Rate'. [EPA]

floating lien

General lien against a company's assets or against a particular class of assets. [Harvey][WCSU]

floating rate

A rate of exchange that is completely determined by market forces with no floor ceiling vis-a-vis the dollar, gold, SDR's or any other currency. [FDIC]

floating rate bond

A type of bond bearing a yield that may rise and fall within a specified range according to fluctuations in the market. The bond has been used in the housing bond market. [OTS]

floating supply

The amount of securities believed to be available for immediate purchase, that is, in the hands of dealers and investors wanting to sell. [Harvey]

floating-rate contract

A guaranteed investment contract where the credit rating is tied to some variable ('floating') interest rate benchmark, such as a specific-maturity Treasury yield. [Harvey]

floating-rate notes (FRN)

Note whose interest payments varies with the short-term interest rate. [Harvey][WCSU]

floating-rate payer

In an interest rate swap, the counterparty who pays a rate based on a reference rate, usually in exchange for a fixed-rate payment [Harvey]

floating-rate preferred

Preferred stock paying dividends that vary with short-term interest rates. [Harvey] preferred stock paying dividends that vary with short term interest rates. [WCSU]

flood plain

land that is likely to be flooded when a nearby stream or river is at flood stage. [OTS]

floor

(1) the minimum allowable interest rate decrease for adjustable rate mortgages. Floors embedded in mortgage agreements may limit the amount of downward change in the rate of interest at each adjustment period and provide a fixed minimum below which the rate cannot drop during the life of the loan. (2) an agreement negotiated between a buyer and seller. The buyer of a floor agreement pays a fee to the seller. In return, the seller will pay the buyer if a designated floating index rate is lower than a specified fixed rate on designated days. The seller pays nothing if the floating rate is above the fixed rate. Buyers of floor agreements use them to hedge against falling interest rates, because payments to the buyer increase as rates rise. [OTS] 1) The main trading area of an exchange. 2) A supply contract between a buyer and seller of a commodity, whereby the seller is assured that he will received at least some minimum price. This type of contract is analogous to a put option. [NYMEX] An aspect of a floating rate debt contract that specifies a minimum interest rate for an investor. [TMAC] The huge trading area -- about the size of a football field -- where stocks are bought and sold on the New York Stock Exchange. [NYSE]

floor area ratio

The ratio of the total floor area of a building to the total land area of the site. [OTS]

floor broker

A floor broker executes trades for customers and may also execute trades for their personal or employer accounts. [GAO] A member who is paid a fee for executing orders for clearing members or their customers. A floor broker executing customer orders must be licensed by the CFTC. [Harvey] A person with exchange trading privileges who, in any pit, ring, post, or other place provided by an exchange for the meeting of persons similarly engaged, executes for another person any orders for the purchase or sale of any commodity for future delivery. [CFTC] An exchange member who executes orders to buy or sell futures and options in the trading ring on the floor of a commodities exchange. [NYMEX] An individual who executes orders for the purchase or sale of any commodity futures or options contract on any contract market for any other person. [CBOT][MIDAM] The largest single membership group of the NYSE. There are two main types: Commission brokers, employed by brokerage houses, buy and sell securities on the NYSE floor for the general public. Independent floor brokers work for themselves. They execute orders for brokerages without full-time commission brokers or for overly busy brokers. [NYSE]

floor information devices (FID)

Displays consolidated close, NYSE last sale, quotes, net change, regional ITS Quotes, ex-dividend and Dow Jones news indicators. [NYSE]

floor limit

The largest amount for which a merchant may accept payment by check or credit card without obtaining an authorization. A zero floor limit would require an authorization for every non-cash transaction. [OTS]

floor plan

A scale architectural drawing showing details of a single floor a. [OTS]

floor planning

Arrangement used to finance inventory. A finance company buys the inventory, which is then held in trust by the user. [Harvey][WCSU]

floor planning loan

A loan made to finance a dealer's purchase of inventory. [OTS]

floor trader

A floor trader executes trades only for their personal accounts. A floor trader is also referred to as a 'local.' [GAO] A member who generally trades only for his own account, for an account controlled by him or who has such a trade made for him. Also referred to as a 'local'. [Harvey] A person with exchange trading privileges who executes his own trades by being personally present in the pit or ring for futures trading. [CFTC] An individual who executes trades for the purchase or sale of any commodity futures or options contract on any contract market for such individual's own account. [CBOT][MIDAM]

floor trader or local

An exchange member who executes orders to buy or sell futures and options for his own account. [NYMEX]

flotsam

Floating debris or wreckage of a ship and its cargo. [ITDS]

flow of funds

The structure established in the security documents for the receipt, deposit, transfer and application of the pledged revenues and moneys on deposit in the special funds. [EPA]

flow-through basis

An account for the investment credit to show all income statement benefits of the credit in the year of acquisition, rather than spreading them over the life of the asset acquired. [Harvey]

flow-through method

The practice of reporting to shareholders using straight-line depreciation and accelerated depreciation for tax purposes and 'flowing through' the lower income taxes actually paid to the financial statement prepared for shareholders. [Harvey]

flower bond

Government bonds that are acceptable at par in payment of federal estate taxes when owned by the decedent at the time of death. [Harvey]

forbearance

A bank resolution method used by the FDIC in the mid-1980s. Forbearance exempted certain distressed institutions that were operating in a safe and sound manner, from minimum capital requirements. The forbearance program was designed for well-managed, economically sound institutions with concentrations of 25 percent or more of their loan portfolios in agricultural or energy loans. Forbearance is also a means of handling a delinquent loan. A 'forbearance agreement' is a written agreement providing that a lender will delay exercising its rights (in the case of a mortgage, foreclosure) as long as the borrower performs in accordance with certain agreed-upon terms. [FDIC] The act of surrendering the right to enforce a valid claim usually in return for a binding promise to perform a specified act. In the thrift industry, forbearance sometimes refers to an agreement by a lender to refrain from taking legal action when a mortgage is in arrears, as long as the borrower complies with a satisfactory arrangement to pay off the past due balance by a future date. The term also may refer to the Office of Thrift Supervision refraining from taking enforcement action against a thrift institution as long as certain conditions are met. [OTS]

force majeure

A clause in a supply contract that permits either party not to fulfill the contractual commitments due to events beyond their control. These events may range from strikes to export delays in producing countries. [CFTC] A standard clause which indemnifies either or both parties to a transaction whenever events which the Exchange declares to be reasonably beyond the control of either party occur to prevent fulfillment of the terms of the contract. [NYMEX] A superior or irresistible force, such as an 'Act of God', that makes it impossible to perform a contract. [ITDS]

force majeure risk

The risk that there will be an interruption of operations for a prolonged period after a project finance project has been completed due to fire, flood, storm, or some other factor beyond the control of the project's sponsors. [Harvey]

forced conversion

Use of a firm's call option on a callable convertible bond when the firm knows that the bondholders will exercise their option to convert. [Harvey]

forced heirship

When laws dictate how assets are to pass to relatives at death. Forced heirship occurs under Sharia law and also in many civil law countries where the concept of trust is not recognized. [UNODC]

forced liquidation

The situation in which a customer's account is liquidated (open positions are offset) by the brokerage firm holding the account, usually after notification that the account is under-margined due to adverse price movements and failure to meet margin calls. [CFTC]

foreclosure

A legal proceeding by which a mortgage lender may claim title to a mortgaged property if the borrower fails to repay the loan. [OTS]

foreign bank office (FBO)

An entity of a foreign bank that is not separately incorporated in the United States. [UNODC]

Foreign Bank Supervision Enhancement Act (FIBSEA)

Part of the U.S. FDIC Improvement Act of 1991, the legislation expanded the regulatory powers of the federal banking agencies. [UNODC]

foreign banking market

That portion of domestic bank loans supplied to foreigners for use abroad. [Harvey]

foreign bond

A bond issued on the domestic capital market of another company. [Harvey] A bond issued on the domestic capital market of another country. [WCSU] An international bond denominated in the currency of the country where it is issued. [ITDS]

foreign bond market

That portion of the domestic bond market that represents issues floated by foreign companies to governments. [Harvey]

foreign commerce

Trade between individuals or legal entities in different countries. [ITDS]

Foreign Credit Insurance association (FCIA)

foreign currency

Foreign money. [Harvey] The currency of any foreign country which is the authorized medium of circulation. [ITDS]

foreign currency account

An account maintained in a foreign bank in the currency of the country in which the bank is located. Foreign currency accounts are also maintained for depositors by banks in the United States. Such accounts usually represent that portion of the carrying bank's foreign currency account that exceeds its contractual requirements. [UNODC]

foreign currency operations

Purchase or sale of the currencies of other nations by a central bank for the purpose of influencing foreign exchange rates or maintaining orderly foreign exchange markets. Also called foreign-exchange market intervention. [FRB][FRBC][FRBSF]

foreign currency option

An option that conveys the right to buy or sell a specified amount of foreign currency at a specified price within a specified time period. [Harvey]

foreign currency reserve

The foreign currencies that a central bank keeps on hand for intervention. [FACS]

foreign currency translation

The process of restating foreign currency accounts of subsidiaries into the reporting currency of the parent company in order to prepare consolidated financial statements. [Harvey]

foreign direct investment

The acquisition abroad of physical assets such as plant and equipment, with operating control residing in the parent corporation. [Harvey]

foreign direct investment in the United States

Ownership or control, directly or indirectly, by one foreign person of 10 percent or more of the voting securities of an incorporated U.S. business enterprise or the equivalent interest in an unincorporated U.S. business enterprise. [BEA]

foreign eexchange rate

Price of the currency of one nation in terms of the currency of another nation. [FRB][FRBC][FRBSF]

foreign equity market

That portion of the domestic equity market that represents issues floated by foreign companies. [Harvey]

foreign exchange (Forex)

Currency from another country. [Harvey] Simply stated, foreign money. In addition to currency and coin, foreign exchange includes bank assets and liabilities payable in foreign currencies. Also, the trading in or exchange of a foreign currency in relation to another currency. Rates of exchange are established and quoted for various foreign currencies based on the demand, supply and stability of the currency. Foreign exchange is the means by which values are established for foreign merchandise, thus permitting the exchange of commodities between countries. [FDIC] Trading in foreign currency. [CFTC]

foreign exchange contract

A contract for the sale or purchase of foreign exchange specifying an exchange rate and delivery date. [ITDS]

foreign exchange controls

Various forms of controls imposed by a government on the purchase/sale of foreign currencies by residents or on the purchase/sale of local currency by nonresidents. [Harvey]

foreign exchange dealer

A firm or individual that buys foreign exchange from one party and then sells it to another party. The dealer makes the difference between the buying and selling prices, or spread. [Harvey]

foreign exchange desk

The foreign exchange trading desk at the New York Federal Reserve Bank. The desk undertakes operations in the exchange markets for the account of the Federal Open Market Committee, and as agent for the U.S. Treasury and for foreign central banks. [FRB][FRBC][FRBM][FRBSF]

foreign exchange fraud

These schemes are characterized by the use of false or deceptive sales practices, alleging high rates of return for minimal risk, to induce victims to invest in the foreign currency exchange market. In such instances, the touted transactions never occur, are inconsistent with the original sales pitches, or are executed for the sole purpose of generating excessive trading commissions in breach of fiduciary responsibilities to the victim client. Alternatively, individual corrupt currency traders employed by large financial institutions may attempt to manipulate foreign currency exchange prices in an effort to generate illicit trading profits for their own enrichment. [FBI]

foreign exchange market

Meetings or systematic communications by telephone or telex between foreign exchange dealers and brokers to transact wholesale business in foreign exchange and in Eurocurrencies. [FDIC]

foreign exchange rate

Price of the currency of one nation in terms of the currency of another nation. [FRB][FRBC][FRBSF] The price of one currency in terms of another. [FACS][ITDS] The price of one nation's currency denominated in the currency of another nation. For example, the value of British pounds expressed in U.S. dollars. [OTS]

foreign exchange reserves

The reserves maintained by a central bank which usually include gold and easily traded currencies of major industrial nations. [FDIC]

foreign exchange risk

The risk that a long or short position in a foreign currency might have to be closed out at a loss due to an adverse movement in the currency rates. [Harvey]

foreign exchange swap

An agreement to exchange stipulated amounts of one currency for another currency at one or more future dates. [Harvey]

foreign exchange transactions

Purchase or sale of the currency of one nation with that of another. Foreign exchange rates refer to the number of units of one currency needed to purchase one unit of another, or the value of one currency in terms of another. [FRB][FRBC][FRBM]

foreign exports

The U.S. export of foreign merchandise consisting of foreign commodities and goods in Customs bonded warehouses. [ITDS]

foreign flag

A reference to a carrier not registered in a country but flies that countrys flag. [ITDS]

foreign income

Income earned by Americans from work performed in another country. [ITDS]

foreign investment

The purchase of assets from abroad. [ITDS]

foreign market

Part of a nation's internal market, representing the mechanisms for issuing and trading securities of entities domiciled outside that nation. [Harvey]

foreign market beta

A measure of foreign market risk that is derived from the capital asset pricing model. [Harvey]

foreign market value

The price at which merchandise is sold in the principal markets of the country from which it is exported. [ITDS]

foreign parent

The first foreign person or entity outside the United States in an affiliatess ownership chain that has direct investment in the affiliate. [ITDS]

foreign person

A person who resides outside of the United States or is subject to the jurisdiction of a country other than the United States. [ITDS]

foreign remittances

The transfer of any monetary instrument across national boundaries. [ITDS]

foreign sales corporations (FSC)

A corporation that provides U.S. businesses which export with tax benefits. Exporters can establish a Foreign Sales Corporation (FSC) in a specially designated foreign country, or one of several designated U.S. possessions. The statute providing for the establishment of FSCs was part of the Deficit Reduction Act of 1984. [UNODC] A special type of corporation created by the Tax Reform Act of 1984 that is designed to provide a tax incentive for exporting U.S.-produced goods. [Harvey]

foreign tax credit

Home country credit against domestic income tax for foreign taxes paid on foreign derived earnings. [Harvey]

Forex market

An over-the-counter market where buyers and sellers conduct foreign exchange business by telephone and other means of communication. Also referred to as foreign exchange market. [CBOT][MIDAM]

forfaiter

Purchaser of promises to pay issued by importers. [Harvey]

forfaiting

Purchase of promise-to-pay (e.g., bills of exchange or promissory notes) issued by importers. [WCSU]

forfeiture

A divestiture of specific property without compensation. [UNODC] The loss of money, property, rights or privileges because of a failure to perform a requirement. [OTS]

forgery

The process of making, adapting, or imitating objects, statistics, or documents with the intent to deceive or make usually large amounts of money by selling the forged item. Copies, studio replicas, and reproductions are not considered forgeries, though they may later become forgeries through knowing and willful misrepresentations. Forging money or currency is more often called counterfeiting. But consumer goods may also be counterfeits if they are not manufactured or produced by the designated manufacture or producer given on the label or flagged by the trademark symbol. When the object forged is a record or document it is often called a false document. [Wikipedia]

form 10-K

The designation of the official audited financial report and narrative which publicly owned companies must file with the SEC. It shows assets, liabilities, equity revenues, expenses, and so forth. It is a reflection of the corporation's condition at the close of the business year, and the results of operations for that year. [SEC]

form 10-Q

Quarterly reports containing interim information that is 'material'--important for investors to know. These must be filed with the SEC. [SEC]

form 8-K

A current report required to be filed with the SEC if a certain specified event occurs, such as: a change in control of the registrant, acquisition or disposition of assets, bankruptcy or receivership, or other material event. Form 8-K is required to be filed within 15 days of the event. [SEC]

formula

formula basis

A method of selling a new issue of common stock in which the SEC declares the registration statement effective on the basis of a price formula rather than on a specific range. [Harvey]

formula investing

An investment technique. One formula calls for the shifting of funds from common shares to preferred shares or bonds as a selected market indicator rises above a certain predetermined point -- and the return of funds to common share investments as the market average declines. [NYSE]

forward (cash) contract

A cash contract in which a seller agrees to deliver a specific cash commodity to a buyer sometime in the future. Forward contracts, in contrast to futures contracts, are privately negotiated and are not standardized. [CBOT][MIDAM]

forward book

Total of all forward contracts for a given currency or all currencies. [FDIC]

forward commitment

A pledge made by a lender to make a loan to a homebuyer, purchase a loan from another lender, or sell a loan to a secondary market participant. [OTS]

forward contract

A cash market transaction in which delivery of the commodity is deferred until after the contract has been made. It is not standardized and is not traded on organized exchanges. Although the delivery is made in the future, the price is determined at the initial trade date. [Harvey] A cash transaction common in many industries, including commodity merchandising, in which a commercial buyer and seller agree upon delivery of a specified quality and quantity of goods at a specified future date. Terms may be more 'personalized' than is the case with standardized futures contracts (i.e., delivery time and amount are as determined between seller and buyer). A price may be agreed upon in advance, or there may be agreement that the price will be determined at the time of delivery. [CFTC] A simple forward-based contract obligates one party to buy and the other party to sell a financial instrument, a currency, an equity or a commodity at a future date. Examples of forward-based contracts include forward contracts, futures contracts, FRAs and swap transactions. [TMAC] A supply contract between a buyer and seller, whereby the buyer is obligated to take delivery and the seller is obligated to provide delivery of a fixed amount of a commodity at a predetermined price on a specified future date. Payment in full is due at the time of, or following, delivery. This differs from a futures contract where settlement is made daily, resulting in partial payment over the life of the contract. [NYMEX]

forward cover

Purchase or sale of forward foreign currency in order to offset a known future cash flow. [Harvey][WCSU]

forward delivery

A transaction in which the settlement will occur on a specified date in the future at a price agreed upon on the trade date. [Harvey] The delivery of mortgages or mortgage-backed securities to satisfy the settlement of cash or futures market transactions of an earlier date. Also called deferred delivery. [OTS]

forward differential

Annualized percentage difference between spot and forward rates. [Harvey]

forward discount

A currency trades at a forward discount when its forward price is lower than its spot price. [Harvey]

forward exchange

A type of foreign exchange transaction whereby a contract is made to exchange one currency for another at a fixed date in the future at a specified exchange rate. By buying or selling forward exchange, businesses protect themselves against a decrease in the value of a currency they plan to sell at a future date. [FRB][FRBM][FRBSF]

forward exchange position

The long or short position in the forward market, as compared to spot dealing. The suggestion of such a position usually require is further explanation as forward contracts eventually become due in short periods of time as do spot contracts. [FDIC]

forward exchange rate

Exchange rate fixed today for exchanging currency at some future date. [Harvey][WCSU]

forward Fed funds

Fed funds traded for future delivery. [Harvey]

forward foreign exchange

An agreement to purchase foreign currency at a future date at a predetermined rate. [ITDS]

forward forward contract

In Eurocurrencies, a contract under which a deposit of fixed maturity is agreed to at a fixed price for future delivery. [Harvey]

forward interest rate

Interest rate fixed today on a loan to be made at some future date. [Harvey][WCSU]

forward looking multiple

A truncated expression for a P/E ratio that is based on forward (expected) earnings rather than on trailing earnings. [Harvey]

forward market

A market in which participants agree to trade some commodity, security, or foreign exchange at a fixed price for future delivery. [Harvey] The over-the-counter market for forward contracts. [CFTC]

forward months

Futures contracts, currently trading, calling for later or distant delivery. [CFTC]

forward or delayed start swap

Interest rate swaps that are structured so that they start at some time in the future. [TMAC]

forward premium

A currency trades at a forward premium when its forward price is higher than its spot price. [Harvey]

forward pricing

The pricing of financial instruments for a value date in the future. [TMAC]

forward purchase

An outright purchase of a forward contract. [FDIC]

forward rate

A projection of future interest rates calculated from either the spot rates or the yield curve. [Harvey] The actual rates at which foreign exchange for future delivery are quoted, bought and sold. [FDIC]

forward rate agreement (FRA)

Agreement to borrow or lend at a specified future date at an interest rate that is fixed today. [Harvey][WCSU] FRAs are over the counter contracts on forward interest rates typically for periods of less than two years. [TMAC]

forward sale

A method for hedging price risk which involves an agreement between a lender and an investor to sell particular kinds of loans at a specified price and future time. [Harvey]

forward trade

A transaction in which the settlement will occur on a specified date in the future at a price agreed upon the trade date. [Harvey]

forward-forward dealing

The simultaneous purchase and sale of a currency for different forward dates. [FDIC]

forwardation

foul bill of lading

A receipt for goods with the indication that they were received damaged or short in quantity. [ITDS]

foundation

A fiduciary arrangement available primarily in Liechtenstein, which holds assets for the benefit of its founder and/or other designated persons. [UNODC]

Foundation for American Communication (FACS)

four eyes principle

A requirement that business will be effectively conducted by at least two individuals ('Four Eyes'). [UNODC]

fourplex

A low-rise dwelling containing four dwelling units. [OTS]

fourth market

Direct trading in exchange-listed securities between investors without the use of a broker. [Harvey]

fractional currency

Any currency that is smaller than a standard money unit. [ITDS]

fractionation

The process whereby saturated hydrocarbons from natural gas are separated into distinct parts or 'fractions' such as propane, butane, ethane, etc. [NYMEX]

franchise

The authorization to conduct a business using the name and operating methods of another. In lending on an income property, a franchise may have value as an additional security, and may be assigned to the lender. [OTS]

franco

Free from duties, transportation charges and other levies. [ITDS]

Frankfurt Electronic Clearing System (EAF-2)

fraud

Deception deliberately practiced in order to secure unfair or unlawful gain (adjectival form fraudulent; to defraud is the verb).[1] As a legal construct, fraud is both a civil wrong (i.e., a fraud victim may sue the fraud perpetrator to avoid the fraud and/or recover monetary compensation) and a criminal wrong (i.e., a fraud perpetrator may be prosecuted and imprisoned by governmental authorities). Defrauding people or organizations of money or valuables is the usual purpose of fraud, but it sometimes instead involves obtaining benefits without actually depriving anyone of money or valuables, such as obtaining a drivers license by way of false statements made in an application for the same. [Wikipedia] The intentional misrepresentation of information or identity to deceive others, the unlawful use of a credit or debit card or ATM, or the use of electronic means to transmit deceptive information, in order to obtain money or other things of value. Fraud may be committed by someone inside or outside the business. Includes instances in which a computer was used to defraud the business of money, property, financial documents, insurance policies, deeds, use of rental cars, or various services by forgery, misrepresented identity, credit card or wire fraud. [BJS]

fraudster

fraudulent appraisal

Appraisal fraud can occur when an appraiser, for various reasons, falsifies information on an appraisal or falsely provides an inaccurate valuation on the appraisal with the intent to mislead a third party. [FFIEC]

fraudulent documentation

Consists of any forged, falsified, incomplete, or altered document that the financial institution relied upon in making a credit decision. [FFIEC]

fraudulent financial filing

fraudulent use of shell company

A business entity that typically has no physical presence, has nominal assets, and generates little or no income is a shell company. Shell companies in themselves are not illegal and may be formed by individuals or business for legitimate purposes. However, due to lack of transparency regarding beneficial ownership, ease of formation, and inconsistent reporting requirements from state to state, shell companies have become a preferred vehicle for financial fraud schemes. [FFIEC]

FRCS-80

The Communications network of the Federal Reserve which interconnects Federal Reserve Bank offices, the board of Governors, depository institutions, and the Treasury. It is used for Fedwire transfers and transfers of U.S. securities as well as for transfer of Federal Reserve administrative, supervisory, and monetary policy information. [FRBSF]

Freddie Mac

A corporation (government-sponsored enterprise) created by Congress to support the secondary mortgage market (formerly the Federal Home Loan Mortgage Corporation). It purchases and sells residential mortgages insured by the Federal Home Administration (FHA) or guaranteed by the Veterans Administration (VA). [CFTC] popular name for the Federal Home Loan Mortgage Corporation. [OTS]

free alongside ship

A term of a price quotation under which the seller delivers merchandise free of charge to the steamer's side and pays lighterage expenses up to that destination, if necessary. [FDIC]

free and open market

A market in which supply and demand are freely expressed in terms of price. Contrasts with a controlled market in which supply, demand and price may all be regulated. [NYSE]

free cash flow

Cash not required for operations or for reinvestment. Often defined as earnings before interest (often obtained from operating income line on the income statement) less capital expenditures less the change in working capital. [Harvey] Cash not required for operations or reinvestments. [WCSU]

free domicile

Term to describe when the shipper pays all the transportation charges and applicable duties. [ITDS]

free float

An exchange rate system characterized by the absence of government intervention. Also known as clean float. [Harvey]

free good

A good which is abundant and costless. [FACS]

free in

A pricing term indicating that the loading charges are for the account of the supplier. [ITDS]

free in and out

A pricing term indicating that the vessel operator is responsible for the cost of loading and unloading. [ITDS]

free list

A statement of items that are not liable to the payment of duties. [ITDS]

free market

Unrestricted movement of items in and out of a market, unhampered by the existence of tariffs or other trade barriers. [ITDS]

free on board

A term for a price quotation under which the seller delivers the goods at his or her expense on board the steamer at the location named. Subsequent risks and expenses are for account of the buyer. [FDIC] A transaction in which the seller provides a commodity at an agreed unit price, at a specified loading point within a specified period; it is the responsibility of the buyer to arrange for transportation and insurance. [NYMEX] Implies that distributive services like transport and handling performed on goods up to the customs frontier of the economy from which the goods are classed as merchandise. [Harvey]

free out

A pricing term indicating that unloading charges are for the account of the receiver. [ITDS]

free port

An area where imported goods may be brought without payment of duties. [ITDS]

free reserves

Excess reserves minus member bank borrowings at the Fed. [Harvey]

free rider

A follower who avoids the cost and expense of finding the best course of action and by simply mimicking the behavior of a leader who made these investments. [Harvey] One who receives something without paying. [FACS]

free time

The time allowed shippers and receivers to load or unload cars before demurrage or detention. [ITDS]

free zone

An area within a country (a seaport, airport, warehouse or any designated area) regarded as being outside its customs territory where importers may bring goods of foreign origin without paying customs duties and taxes, pending their eventual processing, transshipment or re-exportation. [ITDS]

free-astray

A shipment dropped off at the wrong location is forward to the proper location free of charge. [ITDS]

freehold

The occupying without actual ownership of a piece of land, a dwelling or an office for life, sometimes with the right to pass it on to one's heirs. [OTS]

freezing

'Temporarily prohibiting the transfer, conversion, disposition or movement of property or temporarily assuming custody or control of property on the basis of an order issued by a court or a competent authority'. United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, Article 1. [UNODC]

freight

All merchandise, goods, products, or commodities shipped by rail, air, road, or water, other than baggage, express mail, or regular mail. [ITDS]

freight charge

The charge assessed for transporting freight. [ITDS]

freight claim

A demand upon a carrier for the payment of overcharge or loss or damage sustained by shipper or consignee. [ITDS]

freighter

A ship or airplane used primarily to carry freight. [ITDS]

frequency distribution

The organization of data to show how often certain values or ranges of values occur. [Harvey]

friction costs

Costs, both implied and direct, associated with a transaction. Such costs include time, effort, money, and associated tax effects of gathering information and making a transaction. [Harvey]

frictional unemployment

Short-term joblessness associated with mobility. A person who leaves a job to find something better is considered frictionally unemployed. This type of unemployment characterizes workers subject to seasonal work (e.g., construction, agricultural, winter recreational workers, etc.). [FRBSF] Unemployment due to workers leaving old jobs and seeking new ones. [FACS]

frictions

The 'stickiness' in making transactions; the total hassle including time, effort, money, and tax effects of gathering information and making a transaction such as buying a stock or borrowing money. [Harvey]

Friedmans Law

Inflation follows excessive monetary growth with a long (about two years) and variable lag. Or the rate of price change follows the rate of monetary growth. [FACS]

front fee

The fee initially paid by the buyer upon entering a split-fee option contract. [Harvey]

front foot

A linear measure of one foot along the frontage of real property. [OTS]

front month

The spot or nearby delivery month, the nearest traded contract month. [CFTC]

front spread

A delta-neutral ratio spread in which more options are sold than bought. Also called ratio vertical spread. A front spread will increase in value if volatility decreases. [CFTC]

frontage

The property line abutting the most prominent adjacent property, usually a street, lake, river, or ocean. [OTS]

frontrunning

Illegal practice of a stockbroker executing orders on a security for its own account while taking advantage of advance knowledge of pending orders from its customers. When orders previously submitted by its customers will predictably affect the price of the security, purchasing first for its own account gives the broker an unfair advantage, since it can expect to close out its position at a profit based on the new price level. The front running broker either buys for his own account (before filling customer buy orders that drive up the price), or sells (where the broker sells for its own account, before filling customer sell orders that drive down the price). One common practice of high-frequency traders (HFT) is a form of front running, where they peer into various exchanges and try to detect orders as they propagate from a broker's order router. HFT traders place many small orders that indicate buying/selling pressure. Those with the shortest lag in reaching other exchanges then place orders on those exchanges to catch the rest of the order, at a more advantageous price. [Wikipedia] With respect to commodity futures and options, taking a futures or option position based upon non-public information regarding an impending transaction by another person in the same or related future or option. Also known as trading ahead. [CFTC]

FSLIC Resolution Fund

A federal fund established under FIRREA in 1989 in response to the thrift crisis of the 1980s. Funded by congressional appropriations, the FRF is responsible for the satisfaction of all debts and liabilities and the sale of all assets of the former FSLIC and the former RTC. [FDIC] A fund established by the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) to assume all the assets and liabilities of the Federal Savings and Loan Insurance Corporation (FSLIC), which FIRREA abolished. The FSLIC Resolution Fund is managed by the Resolution Trust Corporation (RTC). FIRREA required the fund to be dissolved upon the satisfaction of all FSLIC debt and liabilities and the sale of all FSLIC assets assumed by the fund. [OTS]

fuel oil

Refined petroleum products used as a fuel for home heating and industrial and utility boilers. Fuel oil is divided into two broad categories, distillate fuel oil, also known as No. 2 fuel, gasoil or diesel fuel; and residual fuel oil, also known as No. 6 fuel, or outside the United States, just as fuel oil. No. 2 fuel is a light oil used for home heating, in compression ignition engines and in light industrial applications. No. 6 oil is a heavy fuel used in large commercial, industrial and electric utility boilers. [NYMEX]

full carry

full carrying charge

full carrying charge market

A futures market where the price difference between delivery months reflects the total costs of interest, insurance, and storage. [CBOT][MIDAM]

full coupon bond

A bond with a coupon equal to the going market rate, thereby, the bond is selling at par. [Harvey]

Full Employment and Balanced Growth Act of 1978

(Humphrey-Hawkins Act)Federal legislation that, among other things, specifies the primary objectives of U.S. economic policy--maximum employment, stable prices, and moderate long-term interest rates. [FRBSF]

full faith and credit

A pledge of a government to commit its general taxing power to raise funds for payment of obligations. [OTS]

full faith and credit debt

A pledge of the general taxing power for the payment of debt obligations. Bonds carrying such pledges are referred to as general obligation bonds or full faith and credit bonds. [EPA]

full faith-and-credit obligations

The security pledges for larger municipal bond issuers, such as states and large cities which have diverse funding sources. [Harvey]

full membership

A Chicago Board of Trade membership that allows an individual to trade all futures and options contracts listed by the exchange. [CBOT][MIDAM]

full price

Also called dirty price, the price of a bond including accrued interest. [Harvey]

full-payment lease

full-service lease

Also called rental lease. Lease in which the lessor promises to maintain and insure the equipment leased. [Harvey] Lease in which the lessor promises to maintain and insure the equipment. [WCSU]

fully amortizing loan

A loan in which the principal and interest will be repaid fully through regular installments by the time the loan's term ends. [OTS]

fully diluted earnings per shares

Earnings per share expressed as if all outstanding convertible securities and warrants have been exercised. [Harvey]

fully funded

The state of a fund having in it at least the amount of moneys and investments required to be in it. [EPA]

fully indexed note rate

The total interest rate of an adjustable rate loan consisting of the rate of the governing index plus the gross margin above (or below) that rate. [OTS]

fully modified pass-throughs

Agency pass-throughs that guarantee the timely payment of both interest and principal. [Harvey]

fully registered

A security that is registered as to both principal and interest, payment of which is made only to or on the order of the registered owner. Compare 'Registrable as to Principal Only'. [EPA]

functional currency

As defined by FASB No. 52, an affiliate's functional currency is the currency of the primary economic environment in which the affiliate generates and expends cash. [Harvey]

fund

(A) A fiscal and accounting entity with a self-balancing set of accounts and recording cash and other financial resources, together with all related liabilities and residual equities or balances, and changes therein, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations . (B) Noun: A separate (paper separation or physical separation) allocation of cash or investments held and to be applied for a designated purpose, such as a 'bond retirement fund' for the payment of outstanding debt. Verb: To deposit money to a fund, or to make current payments to a fund to provide for payment of an obligation due in the future. [EPA] available money, cash in hand, including balances held in depository institutions. [OTS]

fund family

Set of funds with different investment objectives offered by one management company. In many cases, investors may move their assets from one fund to another within the family at little or no cost. [Harvey]

fund of funds

A commodity pool that invests in other commodity pools rather than directly in futures and options contracts. [CFTC]

fundamental analysis

A method of anticipating future price movement using supply and demand information. [CBOT][MIDAM] Security analysis that seeks to detect misvalued securities by an analysis of the firm's business prospects. Research analysis often focuses on earnings, dividend prospects, expectations for future interest rates, and risk evaluation of the firm. [Harvey] Study of basic, underlying factors that will affect the supply and demand of the commodity being traded in futures contracts. [CFTC] The study of pertinent supply and demand factors which influence the specific price behavior of commodities. [NYMEX]

fundamental beta

The product of a statistical model to predict the fundamental risk of a security using not only price data but other market-related and financial data. [Harvey]

fundamental descriptors

In the model for calculating fundamental beta, ratios in risk indexes other than market variability, which rely on financial data other than price data. [Harvey]

fundamental research

Analysis of industries and companies based on such factors as sales, assets, earnings, products or services, markets and management. As applied to the economy, fundamental research includes consideration of gross national product, interest rates, unemployment, inventories, savings, etc. [NYSE]

funded debt

Debt maturing after more than one year. [Harvey][WCSU]

funding ratio

The ratio of a pension plan's assets to its liabilities. [Harvey]

funds availability

The time at which funds associated with paperless entries have been made available to the customer. [ACH]

funds from operations

Used by real estate and other investment trusts to define the cash flow from trust operations. It is earnings with depreciation and amortization added back. A similar term increasingly used is Funds Available for Distribution (FAD), which is FFO less capital investments in trust property and the amortization of mortgages. [Harvey]

funds rate

fungibility

The characteristic of interchangeability. Futures contracts for the same commodity and delivery month traded on the same exchange are fungible due to their standardized specifications for quality, quantity, delivery date, and delivery locations. [CFTC]

fungibles

Bearer instruments, securities or goods that are equivalent, substitutable and interchangeable. [UNODC] Goods that are identical with other goods of the same nature. [ITDS] Interchangeable. Products which can be substituted for purposes of shipment or storage. [NYMEX] substitutable. The interchangability of an unit that is as acceptable as another, usually referring to mortgage documents, appraisals and property or credit standards that make mortgages more marketable because of their uniformity and substitutability. [OTS]

future advances clause

A clause in a mortgage contract that allows a lender to advance additional funds without executing a new mortgage instrument. [OTS]

future exchange contract

A contract usually between a bank and its customer for the purchase or sale of foreign exchange at a fixed rate with delivery at a specified future time. A future contract is due later than a spot contract which is settled in one to ten days depending on the bank or market. Future exchange contracts are generally used by the customer to avoid the risk of fluctuations in rates of foreign exchange which he or she may need or may be due in the future. [FDIC]

future investment opportunities

The options to identify additional, more valuable investment opportunities in the future that result from a current opportunity or operation. [Harvey]

future service costs

Value of the pensions that are expected to accrue from employees' future service. [WCSU]

future value

The amount of cash at a specified date in the future that is equivalent in value to a specified sum today. [Harvey]

futures

A contract specifying a future date of delivery or receipt of a certain amount of a specific tangible or intangible product. The commodities traded in futures markets include stock index futures; agricultural products like wheat, soybeans and pork bellies; metals; and financial instruments. Futures are used by business as a hedge against unfavorable price changes and by speculators who hope to profit from such changes. [NYSE] A contract to buy a commodity or a security on a future date at a price that is fixed today. Unlike forward contracts futures are generally traded on organized exchanges and are market-to-market daily. [WCSU] A term used to designate all contracts covering the sale of financial instruments or physical commodities for future delivery on a commodity exchange. [Harvey] Contracts that require delivery of a commodity of specified quality and quantity, at a specified price, on a specified future date. Commodity futures are traded on a commodity exchange and are used for both speculation and hedging. [FRB][FRBC][FRBM][FRBSF] contracts for the sale or purchase of a specified item at a specified price on a given date in the future. When the item sold or purchased is an interest-bearing security, the contract is called an interest-rate future, or a financial future. [OTS]

futures commission merchant (FCM)

A firm or person engaged in soliciting or accepting and handling orders for the purchase or sale of futures contracts, subject to the rules of a futures exchange and, who, in connection with such solicitation or acceptance of orders, accepts any money or securities to margin any resulting trades or contracts. The FCM must be licensed by the CFTC. [Harvey] An FCM is a firm that buys or sells futures contracts and accepts payment from or extends credit to those whose orders it accepts. [GAO] An FCM is the only industry participant who receives, handles and manages customers' funds, margin payments and commission charges. He is also responsible for confirmation of trade slips, customer statements, and guarantees. [NYMEX] An individual or organization that solicits or accepts orders to buy or sell futures contracts or options on futures and accepts money or other assets from customers to support such orders. Also referred to as 'commission house' or 'wire house'. [CBOT][MIDAM]

futures contract

A contract for the future delivery of a specified commodity, currency or security on a specific date at a rate determined in the present. [ITDS] A legally binding agreement, made on the trading floor of a futures exchange, to buy or sell a commodity or financial instrument sometime in the future. Futures contracts are standardized according to the quality, quantity, and delivery time and location for each commodity. The only variable is price, which is discovered on an exchange trading floor. [CBOT][MIDAM] A supply contract between a buyer and seller, whereby the buyer is obligated to take delivery and the seller is obligated to provide delivery of a fixed amount of a commodity at a predetermined price at a specified location. Futures contracts are traded exclusively on regulated exchanges and are settled daily based on their current value in the marketplace. [NYMEX] Agreement to buy or sell a set number of shares of a specific stock in a designated future month at a price agreed upon by the buyer and seller. The contracts themselves are often traded on the futures market. A futures contract differs from an option because an option is the right to buy or sell, whereas a futures contract is the promise to actually make a transaction. A future is part of a class of securities called derivatives, so named because such securities derive their value from the worth of an underlying investment. [Harvey] An agreement to purchase or sell a commodity for delivery in the future: (1) at a price that is determined at initiation of the contract; (2) that obligates each party to the contract to fulfill the contract at the specified price; (3) that is used to assume or shift price risk; and (4) that may be satisfied by delivery or offset. [CFTC] An exchange traded variant of over the counter forwards. [TMAC]

futures contract multiple

A constant, set by an exchange, which when multiplied by the futures price gives the dollar value of a stock index futures contract. [Harvey]

futures exchange

A central marketplace with established rules and regulations where buyers and sellers meet to trade futures and options on futures contracts. [CBOT][MIDAM]

Futures Industry Association (FIA)

A national not-for-profit futures industry trade association that represents the brokerage community on industry, regulatory, political and educational issues. [NYMEX]

futures market

A market in which contracts for future delivery of a commodity or a security are bought or sold. [Harvey] A market in which futures contracts are bought and sold on many basic fibers, foodstuffs, metals, currencies, and financial instruments. [OTS]

futures option

An option on a futures contract. [CFTC][Harvey]

futures price

(1) Commonly held to mean the price of a commodity for future delivery that is traded on a futures exchange; (2) the price of any futures contract. [CFTC] The price at which the parties to a futures contract agree to transact on the settlement date. [Harvey]

futures-equivalent

A term frequently used with reference to speculative position limits for options on futures contracts. The futures-equivalent of an option position is the number of options multiplied by the previous day's risk factor or delta for the option series. For example, ten deep out-of-money options with a delta of 0.20 would be considered two futures-equivalent contracts. The delta or risk factor used for this purpose is the same as that used in delta-based margining and risk analysis systems. [CFTC] A term frequently used with reference to speculative position limits for options on futures contracts. The futures-equivalent of an option position is the number of options multiplied by the previous day's risk factor or delta for the option series. For example, ten deep out-of-the money options with a risk factor of 0.20 would be considered 2 futures-equivalent contracts. The delta or risk factors used for this purpose is the same as that used in delta-based margining and risk analysis systems. [NYMEX]

gain

An increase, benefit, profit, or advantage which is more than at a previous time. [OTS]

gains of exchange

The difference between the relative values of a good to the buyer and the seller. How this difference is divided between buyer and seller will depend upon the price of the good. Exchange will not occur unless both the buyer and the seller expect to receive some of this gain. [FACS]

gamma

A measurement of how fast delta changes, given a unit change in the underlying futures price. [CBOT][MIDAM] A measurement of how fast the delta of an option changes, given a unit change in the underlying futures price; the 'delta of the delta.' [CFTC] Measures the change in the delta for a given change in the price of the underlying. [TMAC] The ratio of a change in the option delta to a small change in the price of the asset on which the option is written. [Harvey] The sensitivity of an option's delta to changes in the price of the underlying futures contract. [NYMEX]

gang

A group of stevedores under a supervisor who are assigned to load or unload a portion of a vessel. [ITDS]

gangway

The opening through which a ship is boarded. [ITDS]

gantry crane

A specialized machine for the raising or lowering of cargo mounted on a structure spanning an open space on a ship. [ITDS]

gap

The difference between the dollar value of assets and liabilities with the same remaining term to maturity and repricing. The gap is usually expressed as a percentage of assets. [OTS]

gap financing

An interim loan made to provide funding during the time between the end of loans extended during the development stage of a project and the beginning of the permanent mortgage extended to the buyer. [OTS]

gap management

A technique using hedging to offset difference in the volume of assets and liabilities being repriced within a given time period. Repricing occurs because assets or liabilities mature and are reinvested at new rates or because they carry adjustable rates tied to some index. Gap refers to a specific period of time, such as a 30-day gap, in which assets repricing exceed or fall short of repricing liabilities. [OTS]

gap position monitoring

A component of asset/liability management during which the mismatched positions are reviewed and managed. [TMAC]

Garmen-Kohlhagen option pricing model

A widely used model for pricing foreign currency options. [Harvey]

Garn-St Germain Depository Institutions Act

Legislation enacted in 1982 that gave the thrift industry a great deal more flexibility in managing assets and liabilities. It gave the thrift industry the right to (1) invest up to 50 percent of assets in construction and development loans; (2) invest up to 30 percent of assets in consumer loans, commercial paper, and corporate debt; (3) own real estate development companies; (4) use land and other noncash assets in the capitalization of new charters, instead of the previously required cash; and (5) offer money market deposit accounts. [FDIC]

garnishment

A notice to an employer or other asset holder requiring that monies, wages, or property due a debtor be withheld and given to a creditor to be applied to a specific debt in arrears. [OTS] A procedure allowing debt to be paid off by deductions from the debtor's wages. [WCSU]

gasoil

European designation for No. 2 heating oil and diesel fuel. [NYMEX]

gasoline, straight-run

Also known as raw gasoline. Gasoline which is obtained directly from crude oil by fractional distillation. Straight-run gasoline generally must be upgraded to meet current motor fuel specifications. [NYMEX]

gateway

A major airport or seaport; or the port where customs clearance takes place; or a point at which freight moving from one territory to another is interchanged between transportation lines. [ITDS]

gazebo

An ornamental garden pavilion, designed to let in light and air and often situated to take advantage of a view. It is constructed of light metal or wood. Also called a belvedere. [OTS]

GDP-by-industry

GDP-by-industry is the contribution of each private industry and government to the Nation's output (that is, the GDP.) An industry's GDP-by-industry, or its 'value added', is equal to its gross output (which consists of sales or receipts and other operating income, commodity taxes, and inventory change) minus its intermediate inputs (which consist of energy, raw materials, semifinished goods, and services that are purchased from domestic industries or from foreign sources). [BEA]

gearing

Financial leverage. [Harvey][WCSU]

geisha bond

Bond issued on the Japanese market in currencies other than yen. [ITDS]

General Accounting Office (GAO)

An investigative arm of the U.S. Congress charged with examining all matters relating to the receipt and disbursement of public funds. Established in 1921 to independently audit federal government agencies, the GAO functions under the direction of the comptroller general of the United States, who is appointed by the president and confirmed by the Senate for a 15-year term. [FDIC]

General Agreement on Tariffs and Trade (GATT)

Established in 1947, the GATT was a framework of rules for countries to manage their trade policies. It also provides a forum in which disputes can be negotiated. [UNODC]

general and administrative expenses (G&A)

The expenses of operating a business that are not directly linked to the company's products or services. They include salaries, rent and payments to utilities generally known as overhead. [OTS]

general average

An internationally accepted rule of the sea which says when a peril threatens the survival of the ship, there may be sacrificed (thrown overboard) any cargo or supplies or ships furnishings, and any expense incurred necessary to save the ship. If the vessel is saved, all cargo owners, ship owner, and owners of the freight revenue share pro rata in the loss. [ITDS]

general cargo rate

The rate a carrier charges for the shipment of cargo which does not have a special class rate or commodity rate. [ITDS]

general cargo vessels

A vessel designed to handle breakbulk cargo such as bags, cartons, cases, crates and drums, either individually or in unitized or palletized loads. [ITDS]

general cash offer

A public offering made to investors at large. [Harvey] Issue of securities offered to all investors. [WCSU]

general commodity rate

A freight rate applicable to all commodities except those for which specific rates have been filed. [ITDS]

general contractor

A party that performs or supervises the construction or development of a property pursuant to the terms of a primary contract with the property owner. The general contractor may use its own employees to perform the work and/or the services of other contractors called subcontractors. [OTS]

general creditors

Entities, including uninsured depositors, suppliers, tradespeople, and contractors, with unsecured claims against a failed financial institution. [FDIC]

general government

Functions of the government that do not provide a specific service, but perform basic operations necessary for its existence, such as elected officials and chief executives; finance, personnel, and purchasing offices; and tax assessment and collection. [EPA]

general grade

A classification of federal civil service employees who have 'career status' regarding pay and benefits. [FDIC]

general imports

The total physical arrivals of merchandise from foreign countries, whether such merchandise enters consumption channels immediately or is entered into bonded warehouses or Foreign Trade Zones under U.S. Customs custody. [ITDS]

general ledger

An accounting record or legend in which are listed all increases or decreases of all other accounts such as liability, reserve, capital, income and expense accounts. [OTS]

general liability

Unlimited responsibility for an obligation, such as payment of debts of a business. [ITDS]

general license

Authorized licenses by the U.S. Bureau of Export Administration that permit the export of non-strategic goods to specified countries without the need for a validated license. [ITDS]

general mortgage bond

A bond that is secured by a blanket mortgage on the company's property but may be outranked by one or more other mortgages. [NYSE]

general obligation

A security the payment of which is secured by a pledge of the issuer's full faith and credit and taxing (usually property tax) power. [EPA]

general obligation bonds

(A) Bonds which are secured by the full faith and credit of the issuer. General obligation bonds issued by local units of government are secured by a pledge of the issuer's ad valorem taxing power. Ad valorem taxes necessary to pay debt service on general obligation bonds are typically not subject to the constitutional service property tax millage limits. Such bonds constitute debts of the issuer and normally require approval by election prior to issuance. In the event of default, the holders of general obligation bonds have the right to compel a tax levy or legislative appropriation, by mandamus or injunction, in order to satisfy the issuer's obligation on the defaulted bonds . (B) Bonds for the payment of which the full faith and credit of the issuing governments are pledged. [EPA] Municipal securities secured by the issuer's pledge of its full faith, credit, and taxing power. [Harvey] state or municipal debt instruments backed by the general taxing and borrowing authority of the state or municipality. [OTS]

general order

Merchandise not entered within 5 working days after arrival of the carrier and stored at the expense of the importer. [ITDS]

general order warehouse

Warehouse where customs sends merchandise that has not been claimed within 5 days of arrival. [ITDS]

general partner

A co-owner of a business who is liable for all debts and other obligations of the venture as well as for the management and operation of the partnership. A general partner can have control of the business and can take actions that are binding on the other partners. [OTS] A type of partner within a general or limited partnership. In a general partnership, there are two or more general partners, all the partners are general, and they are all co-owners liable for company debts to the full extent of their personal assets. In a limited partnership, there are one or more general partners and the business is managed by the general partner(s). [FDIC]

general partnership

A partnership in which all partners are general partners. [Harvey] A partnership where all partners have joint ownership and liability. [ITDS]

general reserves

The funds that are set aside by a financial institution for the sole purpose of covering possible losses that have not yet been specifically identified. [OTS]

general tariff

A tariff that applies to countries that do not enjoy either preferential or most favored nation tariff treatment. [ITDS]

general valuation allowance

A reserve held against assets other than those individually classified as loss. [OTS]

generally accepted accounting principles (GAAP)

(A) There is no single source for all the principles which comprise GAAP. However, the sources of established accounting principles are generally the following:

• Pronouncements of an authoritative body designated by the American Institute of Certified Public Accountants Council to establish accounting principles. (For governmental entities this is the Governmental Accounting Standards Board, followed by others such as the Financial Accounting Standards Board and the former Accounting Principles Board.)
• Pronouncements of bodies composed of expert accountants that follow due process procedures, including broad distribution of proposed accounting principles for public comment, for the intended purpose of establishing accounting principles or describing existing practices that are generally accepted.
• Practices or pronouncements that are widely recognized as being generally unaccepted because they represent prevalent practice in a particular industry or the knowledgeable application to specific circumstances of pronouncements that are general accepted. Other accounting literature.

[EPA] A technical accounting term that encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time. [Harvey] Accounting rules and conventions established by the Financial Accounting Standards Board that define acceptable practices in preparing financial statements. [FDIC] accounting rules and procedures adopted by the accounting profession to facilitate uniformity in preparing financial statements. [OTS]

generally accepted auditing standards

Measures of the quality the performance of auditing procedures and the objectives to be attained through their use. They are concerned with the auditor's professional qualities and with the judgement exercised in the performance of an audit. Generally accepted auditing standards have been prescribed by the American Institute of Certified Public Accountants (AICPA) and the U.S. General Accounting Office (GAO) in Standards for Audit of Governmental Organizations, Programs, Activities, & Function (the 'Yellow' book). [EPA]

generic

Refers to the characteristics and/or experience of the total universe of a coupon of MBS sector type; that is, in contrast to a specific pool or collateral group, as in a specific CMO issue. [Harvey]

gentrification

The rehabilitation of a deteriorated neighborhood by new residents who are wealthier than the long-time residents. This can cause an increase in housing prices and lead to displacement of the long-time residents. [OTS]

geographic risk

Risk that arises when an issuer has policies concentrated within certain geographic areas, such as the risk of damage from a hurricane or an earthquake. [Harvey]

geometric mean return

Also called the time weighted rate of return, a measure of the compounded rate of growth of the initial portfolio market value during the evaluation period, assuming that all cash distributions are reinvested in the portfolio. It is computed by taking the geometric average of the portfolio subperiod returns. [Harvey]

gesellschaft mit beschr?nkter haftung (GMBH)

In Germany, Switzerland and Austria, a limited liability company in which the liability of the members is limited to amounts of agreed contributions or as stipulated in the Articles of Association. [UNODC]

gestation repo

A reverse repurchase agreements between mortgage firms and securities dealers. Under the agreement, the firm sells federal agency-guaranteed MBS and simultaneously agrees to repurchase them at a future date at a fixed price. [Harvey]

gestor

in law, someone who acts for another. [OTS]

gilt-edged

High-grade bond issued by a company that has demonstrated its ability to earn a comfortable profit over a period of years and pay its bondholders their interest without interruption. [NYSE]

gilts

British and Irish government securities. [Harvey]

GIM membership

A Chicago Board of Trade membership that allows an individual to trade all futures contracts listed in the government instrument market category. [CBOT][MIDAM]

Ginnie Mae

popular name for Government National Mortgage Association. [OTS]

ginzy trading

A non-competitive trade practice in which a floor broker, in executing an order -- particularly a large order -- will fill a portion of the order at one price and the remainder of the order at another price to avoid an exchange's rule against trading at fractional increments or 'split ticks.' [CFTC]

give-up

A contract executed by one broker for the client of another broker that the client orders to be turned over to the second broker. The broker accepting the order from the customer collects a fee from the carrying broker for the use of the facilities. Often used to consolidate many small orders or to disperse large ones. [CFTC] A term with many different meanings. For one, a member of the Exchange on the floor may act for a second member by executing an order for him with a third member. The first member tells the third member that he is acting on behalf of the second member and 'gives up' the second member's name rather than his own. [NYSE] The loss in yield that occurs when a block of bonds is swapped for another block of lower-coupon bonds. Can also be referred to as 'after-tax give up' when the implications of the profit or loss on taxes are considered. [Harvey]

Glass-Steagall Act

A 1933 act in which Congress forbade commercial banks to own, underwrite, or deal in corporate stock and corporate bonds. [Harvey]

global bonds

A bond that can be traded immediately in any United States capital market and in the Euromarket. [ITDS] Bonds that are designed so as to qualify for immediate trading in any domestic capital market and in the Euromarket. [Harvey]

global fund

A mutual fund that can invest anywhere in the world, including the U.S. [Harvey]

global programme against money laundering (GPML)

The technical assistance and research programme implemented by the United Nations Office on Drugs and Crime (UNODC). [UNODC]

global quota

A quota on the total imports of a product from all countries. [ITDS]

globalization

Tendency toward a worldwide investment environment, and the integration of national capital markets. [Harvey]

GLOBEX

A global after-hours electronic trading system. [CBOT]

gnomes

Freddie Mac's 15-year, fixed-rate pass-through securities issued under its cash program. [Harvey] Wall Street slang for 15-year Participation Certificates sold by the Federal Home Loan Mortgage Corporation. [OTS]

gnomes of Zurich

slang referring to financial and banking people of Zurich, Switzerland, who are involved in foreign exchange speculation. The term was coined by Great Britain's Labour ministers during the 1964 sterling crisis. [OTS]

GNP deflator

Measure of the percentage increase in the average price of products in GNP over a certain base year (now 1972) published by the Commerce Department. [FACS]

go-around

When the Fed offers to buy securities, to sell securities, to do repo, or to do reverses, it solicits competitive bids or offers from all primary dealers. [Harvey]

going long

A strategy in hedging by which loans are originated before an attempt is made to sell the loans to investors. In securities markets the term means buying something with no immediate intention of selling it. [OTS]

going public

When a company sells shares of itself to the public to raise capital. [NYSE]

going short

A strategy in hedging by which investor commitments to buy loans are obtained before the loans are actually made. In securities markets, the term means selling something before it is owned. That which is sold must subsequently be purchased by the seller and delivered to the buyer. Investors use this technique when they believe market prices will fall. Thus they sell at one price something, they hope to purchase later at a lower price to deliver to the buyer. [OTS]

going-private transactions

Publicly owned stock in a firm is replaced with complete equity ownership by a private group. The shares are delisted from stock exchanges and can no longer be purchased in the open markets. [Harvey]

gold certificate

A certificate attesting to a person's ownership of a specific amount of gold bullion. [CFTC]

gold exchange standard

A system of fixing exchange rates adopted in the Bretton Woods agreement. It involved the U.S. pegging the dollar to gold and other countries pegging their currencies to the dollar. [Harvey] A variant form of the gold standard under which a country pegged the value of its currency to the value of the currency of a 'major' country, e.g. sterling or dollars, which was itself on a gold standard. The international monetary regime in force between 1958 and 1970 is frequently described as a gold exchange standard system because of the wide use of the dollar, itself pegged to gold, as a reserve currency and as an accepted medium of exchange internationally. [FRB][FRBM][FRBSF] An international monetary agreement according to which money consists of fiat national currencies that can be converted into gold at established price ratios. [ITDS]

gold fix

The setting of the price of gold by dealers (especially in a twice-daily London meeting at the central bank); the fix is the fundamental worldwide price for setting price of gold boullion and gold-related contracts and products. [NYSE] The setting of the price of gold by dealers. The primary gold fix is made twice each day by dealers meeting at the central bank in London. The fix is the fundamental worldwide price for setting prices of gold bullion and gold-related contracts and products. [OTS]

gold fixing

gold reserves

Gold, retained by a nations monetary agency, forming the backing of currency that the nation has issued. [ITDS]

gold standard

A monetary agreement whereby all national currencies 100 percent by gold and the gold is utilized for payments of foreign activity. [ITDS] A monetary system in which currencies are defined in terms of a given weight of gold. [FRB][FRBM][FRBSF] An international monetary system in which currencies are defined in terms of their gold content and payment imbalances between countries are settled in gold. It was in effect from about 1870-1914. [Harvey]

gold/silver ratio

The number of ounces of silver required to buy one ounce of gold at current spot prices. [CFTC][NYMEX]

golden parachute

A large termination payment due to a company's management if they lose their jobs as a result of a merger. [WCSU] Compensation paid to top-level management by a target firm if a takeover occurs. [Harvey]

gondola car

An open railway car with sides and ends, used principally for hauling coal, sand, etc. [ITDS]

good 'til canceled

An order to be held by a broker until it can be filled or until canceled. [NYMEX] Sometimes simply called 'GTC', it means an order to buy or sell stock that is good until you cancel it. Brokerages usually set a limit of 30-60 days, at which the GTC expires if not restated. [Harvey]

good 'til canceled order (GTC)

An order to buy or sell at a specific price until the investor cancels the order. [NYSE]

good 'till canceled order (GTC)

good delivery

A delivery in which everything - endorsement, any necessary attached legal papers, etc. - is in order. [Harvey] Approved metal brands acceptable for delivery against the metals contracts. [NYMEX]

good delivery and settlement procedures

Refers to PSA Uniform Practices such as cutoff times on delivery of securities and notification, allocation, and proper endorsement. [Harvey]

good faith estimate

A disclosure required under the Real Estate Settlement Procedures Act (RESPA) that must be given to all mortgage loan applicants at the time of application. The disclosure is an estimate of all settlement charges likely to be incurred at closing. [OTS]

good this week order (GTW)

goods

Anything that anyone wants. All options or alternatives are goods. Goods can be tangible or intangible. [FACS] Merchandise, supplies, raw materials, and completed products. [ITDS]

goods delivery

Certain basic qualifications must be met before a security sold on the Exchange may be delivered. The security must be in proper form to comply with the contract of sale and to transfer title to the purchaser. [NYSE]

goodwill

Excess of the purchase price over the fair market value of the net assets acquired under purchase accounting. [Harvey] The difference between the market value of an institution's assets and the higher amount paid at the time the institution is purchased or merged into another institution. Rather than making the acquiring institution immediately deduct the difference from its stated assets, accounting procedures allow the institution to amortize the goodwill over the average life of the acquired assets -- usually 10 to 30 years. In a broader sense, the acquiring institution is amortizing the premium it paid to acquire the goodwill of the disappearing institution's customers. [OTS]

gore lot

A triangular parcel of land. [OTS]

government bond

A bond issued by the federal government. Growth Stock -- Stock of a company with a record of earnings growth at a relatively high rate. [NYSE]

government budget constraint

Total government outlays (the sum of expenditures on goods and services, transfer payments and interest on debt) must equal total revenue (the sum of taxes and U.S. government loans). [FACS]

Government National Mortgage Association (GNMA) (Ginnie Mae)

A government corporation, part of the Department of Housing and Urban Development, that subsidizes the purchase of FHA and VA mortgages. GNMA also guarantees securities issued by private institutions and backed by pools of mortgages. Popularly known as Ginnie Mae. [OTS] A wholly owned U.S. government corporation within the Department of Housing & Urban Development. Ginnie Mae guarantees the timely payment of principal and interest on securities issued by approved servicers that are collateralized by FHA-issued, VA-guaranteed, or Farmers Home Administration (FmHA)-guaranteed mortgages. [Harvey] A wholly owned government corporation within HUD, established in 1968 as a spinoff from Fannie Mae. The main functions of Ginnie Mae are (1) the purchase and sale of certain FHA and VA mortgages pursuant to various programs designed to support the housing market and (2) the guarantee of mortgage-backed securities secured by pools of FHA and VA mortgages. [FDIC]

government securities

Negotiable U.S. Treasury securities. [Harvey] Securities issued by the U.S. Treasury or federal agencies. [FRBSF] The Bureau of the Public Debt issues three types of marketable securities; bills, notes and bonds. These securities are direct obligations of the United States Government. [FRB][FRBC]

Government Securities Clearing Corporation (GSCC)

GSCC provides a netting mechanism for the clearance and settlement of U.S. Government securities in both the primary and secondary markets for Treasury securities. [GAO]

government security

A contract of the government promising to pay a lender a fixed rate of interest per year and repay the original loan at a fixed future date. [FACS]

government sponsored enterprises

Privately owned, publicly chartered entities, such as the Student Loan Marketing Association, created by Congress to reduce the cost of capital for certain borrowing sectors of the economy including farmers, homeowners, and students. [Harvey]

government survey system

The land survey system adopted by the U.S. government in 1785 and based on the geographic north-south lines of longitude (meridians) and the east-west lines of latitude (parallels). Each region of the country was assigned a specific meridian and parallel as a reference point; these special meridians were generally referred to as principal meridians, while parallels were referred to as base lines. The land was divided into a grid of 24 miles square by additional parallels known as correction lines, and meridians known as guide meridians. Additional imaginary east-west township lines and north-south range lines divide the land into six-mile square townships. Each township is divided into 36 one-mile square sections. [OTS]

government transfer payment

Outlays by the government for which no good or service is received in the current period. [FACS]

governmental accounting standards board

This Board, organized in 1984, has assumed the responsibility of the designated body in the governmental sector for establishing standards of financial accounting and reporting. [EPA]

grace period

A specified period after the regular due date of a loan payment during which no late charge or other penalty is assessed on tardy payments. [OTS]

grace period provision

A clause in a promissory note stating that a borrower who has prepaid part of a loan may at any time skip payments until the loan balance equals the amount it would have been had no prepayments been made. [OTS]

grade 1 copper

Copper which is good delivery against the COMEX Division high grade copper futures contract and meets the ASTM specification B115-91. [NYMEX]

grades

Various qualities of a commodity. [CFTC]

grading certificates

A formal document setting forth the quality of a commodity as determined by authorized inspectors or graders. [CFTC]

graduated payment

Repayment terms calling for gradual increases in the payments on a closed-end obligation. A graduated payment loan usually involves negative amortization. [FRB][FRBC][FRBM][FRBSF]

graduated-equity mortgage (GEM)

A loan for which payments increase according to a prearranged schedule and the increases repay the debt faster than a conventional, fixed-payment mortgage. [OTS]

graduated-payment mortgage

A mortgage loan which provides for initial lower monthly payments, with payment amounts increasing gradually over a period, usually up to 10 years, under the assumption that the borrower's income will also rise during the period. [OTS] A type of stepped-payment loan in which the borrower's payments are initially lower than those on a comparable level-rate mortgage. The payments are gradually increased over a predetermined period (usually 3,5, or 7 years) and then are fixed at a level-pay schedule which will be higher than the level-pay amortization of a level-pay mortgage originated at the same time. The difference between what the borrower actually pays and the amount required to fully amortize the mortgage is added to the unpaid principal balance. [Harvey]

Graham-Harvey Measure 1

Performance measure invented by John Graham and Campbell Harvey. The idea is to lever a fund's portfolio to exactly match the volatility of the S and P 500. The difference between the fund's levered return and the S&P 500 return is the performance measure. [Harvey]

grain futures act

Federal statute that provided for the regulation of trading in grain futures, effective June 22, 1923; administered by the Grain Futures Administration, an agency of the U.S. Department of Agriculture. The Grain Futures Act was amended in 1936 by the Commodity Exchange Act and the Grain Futures Administration became the Commodity Exchange Administration, later the Commodity Exchange Authority. [CFTC]

grain terminal

Large grain elevator facility with the capacity to ship grain by rail and/or barge to domestic or foreign markets. [CBOT][MIDAM]

grandfathered activities

Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United States, but which were acquired or engaged in before a particular date. Such activities may be continued under the 'grandfather' clauses of the Bank Holding Company Act and the International Banking Act. [FRB][FRBC][FRBM][FRBSF] activities prohibited by law, regulation, or agreement that may continue because they were established prior to being prohibited. [OTS]

grant

(1) to transfer property by deed. (2) to bestow or confer. (3) that which is granted. [OTS]

grant anticipation notes

Notes issued in anticipation of grants, generally to fund a deficit period between an award of grant and funding of a grant. [EPA]

grantee

A corporation to which the privilege of establishing, operating, or maintaining a foreign trade zone has been given. [ITDS] A person to whom a grant is made; the person named in a deed to receive title to property. [OTS]

granting clause

The paragraphs of the security document in which the security assigned for the payment of the securities is set forth and is granted by the issuer to the trustee. [EPA]

grantor

A person who makes a grant; a person who makes a settlement, executes a deed or creates a trust giving up title to property. [OTS] The maker, writer, or issuer of an option contract who, in return for the premium paid for the option, stands ready to purchase the underlying commodity (or futures contract) in the case of a put option or to sell the underlying commodity (or futures contract) in the case of a call option. [CFTC]

grantor trust

A mechanism of issuing MBS wherein the mortgages' collateral is deposited with a trustee under a custodial or trust agreement. [Harvey] Under U.S. tax law, income of the trust is taxed as the income of the grantor. [UNODC]

gray market

Purchases and sales of Eurobonds that occur before the issue price is finally set. [Harvey]

green card

An identity card (visa) issued by the U.S. Immigration and Naturalization Service entitling a foreign national to enter and reside in the United States as a permanent resident. [ITDS]

green clause letter of credit

Same as the red clause letter of credit, except that under the green ink clause, advance payment is made, generally upon presentation of warehouse receipts evidencing storage of the goods. [FDIC]

greenbelt

An open space of landscaped or undeveloped land, usually surrounding a residential area, and designated by easement, covenant, deed restriction, or zoning ordinance. [OTS]

greenmail

A large block of stock is held by an unfriendly company, which forces the target company to repurchase the stock at a substantial premium to prevent a takeover. [WCSU] Situation in which a large block of stock is held by an unfriendly company, forcing the target company to repurchase the stock at a substantial premium to prevent a takeover. [Harvey]

greenshoe option

Option that allows the underwriter for a new issue to buy and resell additional shares. [Harvey]

grey list

A list of disreputable end users in nations of concern for missile proliferation from the U.S. intelligence community. [ITDS]

grey market

Purchases and sales of eurobonds that occur before the issue price is finally set. [WCSU]

grid

Fixed margin within which exchange rates are allowed to fluctuate. [ITDS]

gross

12 dozen or 144 articles. [ITDS] The amount before deductions are made. [OTS]

gross cash recovery (GCR)

The gross cash collections projected during the expected holding period of an asset (or a pool of assets) in a receivership. [FDIC]

gross collections

The gross cash recoveries---prior to paying the holding, marketing, and selling costs---resulting from the disposition of one or more assets. [FDIC]

gross direct debt

The total amount of bonded debt of a government (general obligation bonds plus revenue bonds). [EPA]

gross domestic income

The costs incurred and the incomes earned in the production of GDP. In theory, GDI should equal GDP, but in practice they differ because their components are estimated using largely independent and less-than-perfect source data. The difference between the two is termed the 'statistical discrepancy'. [BEA]

gross domestic product (GDP)

A measure of the market value of all goods and services produced within the boundaries of a nation. [ITDS] The market value of goods and services produced by labor and property in the United States, regardless of nationality; GDP replaced GNP as the primary measure of U.S. production in 1991. [BEA] The market value of goods and services produced over time including the income of foreign corporations and foreign residents working in the U.S., but excluding the income of U.S. residents and corporations overseas. [Harvey] The total market value of a nation's output of goods and services. GDP may be expressed in terms of product--consumption, investment, government purchases of goods and services, and net exports--or, it may be expressed in terms of income earned--wages, interest, and profits. [FRB][FRBC] The total value of a nation's output, income, or expenditure produced within a nation's physical borders. [FRBSF] The value of all final goods and services produced by an economy over a particular time period, normally a year. [CBOT][MIDAM] Total value of goods and services produced in the economy. [FRB][FRBM]

gross income

total income before taxes and other expenses are deducted. [OTS]

gross interest

Interest earned before taxes are deducted. [Harvey]

gross margin

(1) the difference between the total sales revenue and the cost to the seller of the items sold. (2) an amount, expressed as a percent, which is stated in the terms of a loan and which is added to the percentage expressed by a controlling rate index to establish the rate the borrower pays on the loan. [OTS]

gross national product (GNP)

A country's total output of goods and services from all forms of economic activity measured at market prices for a calendar year. [FRBSF] A measure of the market value of all goods and services produced by the labor and property of a nation. [ITDS] Gross Domestic Product plus the income accruing to domestic residents as a result of investments abroad less income earned in domestic markets accruing to foreigners abroad. [CBOT][MIDAM] Measures and economy's total income. It is equal to GDP plus the income abroad accruing to domestic residents minus income generated in domestic market accruing to non-residents. [Harvey] The market value of goods and services produced by labor and property supplied by U.S. residents, regardless of where they are located. [BEA] The most comprehensive measure of a nation's total output of goods and services, consisting of the total retail market value of all items and services produced in a country during a specified period. [OTS] The total market value, in terms of current dollars, of all final goods and services produced in the U.S. in one year. [FACS]

gross negligence

A standard of conduct under which an officer or director of a failed institution may be held personally liable for monetary damages in a civil action. This standard generally establishes 'liability' based upon culpable conduct that is grossly negligent or worse, although definitions vary from state to state. [FDIC]

gross operating income

An accounting term that includes income received from ordinary operation of a business before deducting expenses of doing business. [OTS]

gross pledge

A pledge to the payment of debt service of all pledged revenues in priority to and before deduction of any operation and maintenance expenses. Compare 'Net Pledge'. [EPA]

gross processing margin (GPM)

The difference between the cost of soybeans and the combined sales income of the processed soybean oil and meal. [CBOT][MIDAM]

gross profit margin

Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. [Harvey]

gross refunding

An advanced refunding in which the earnings on the deposited proceeds of the refunding bonds are sufficient to pay a portion, or all, of the interest on the refunding bonds with the principal of the investment being sufficient to pay principal of and interest on the refunded bonds to maturity, or earlier call date. [EPA]

gross savings

total savings, including interest credited. [OTS]

gross spread

The fraction of the gross proceeds of an underwritten securities offering that is paid as compensation to the underwriters of the offering. [Harvey]

gross state product

A measurement of a State's output; it is the sum of gross state product originating (GSPO) from all industries in the State. GSP is the State counterpart of the Nation's GDP. [BEA]

gross weight

The full weight of a shipment, including goods and packaging. [ITDS]

gross yield

The return on a security or other investment before deducting costs or losses incurred in procuring and managing the investment. [OTS]

ground lease

A lease of land alone that does not include buildings or other improvements on the land, usually on a long-term basis. A ground lease may be used in the case where buildings are constructed on land owned by another. [OTS]

ground rent

income from the lease of the ground itself, and not from any buildings or other improvements on that ground. Ground rent is frequently used in mobile home parks where the living units are individually owned but the land is rented from the mobile home park owner. [OTS]

group of 10 (G-10)

Commonly referred to as the 'Paris Club,' is composed of the wealthiest members of the IMF who provide most of the money to be loaned and act as the informal steering committee; name persists in spite of the addition of Switzerland in 1984. Members are Belgium, Canada, France, Germany, Italy, Japan, Netherlands, Sweden, Switzerland, UK and the United States. [UNODC]

group of five

The five leading countries (France, Germany, Japan, United Kingdom, and the U.S.) that meet periodically to achieve some cooperative effort on international economic issues. When currency issues are discussed, the monetary authorities of these nations hold the meeting. [Harvey]

group of seven

The G-5 countries plus Canada and Italy. [Harvey]

group rotation manager

A top-down manager who infers the phases of the business cycle and allocates assets accordingly. [Harvey]

growing equity mortgage

A type of loan in which periodic increases in monthly payments are used to reduce outstanding principal owed and shorten the term of the loan. [OTS]

growing perpetuity

A constant stream of cash flows without end that is expected to rise indefinitely. [Harvey]

growth manager

A money manager who seeks to buy stocks that are typically selling at relatively high P/E ratios due to high earnings growth, with the expectation of continued high or higher earnings growth. [Harvey]

growth opportunity

Opportunity to invest in profitable projects. [Harvey]

growth phase

A phase of development in which a company experiences rapid earnings growth as it produces new products and expands market share. [Harvey]

growth rates

Compound annual growth rate for the number of full fiscal years shown. If there is a negative or zero value for the first or last year, the growth is NM (not meaningful). [Harvey]

growth stock

A stock issued by a corporation earning above average profits, a situation likely to result in the stock trading at a higher price in the future. [OTS] Common stock of a company that has an opportunity to invest money and earn more than the opportunity cost of capital. [Harvey] stocks of companies that have an opportunity to invest money to earn more than the opportunity cost of capital. [WCSU]

guanxi

Meaning 'personal connections' in Mandarin, guanxi is an informal mechanism of exchange and co-ordination between individuals rather than institutions in China. This unofficial mechanism of exchange includes everything ranging from goods and services to information in return for mutually beneficial favours, introductions and services, often in the form of invitations and gifts. [UNODC]

guarantee

A promise, especially in writing, that something is of specified quality, content, benefit, or that it will provide satisfaction or will perform or produce in a specified manner. In the thrift industry, one such guarantee is the promise of the issuer of mortgage-backed securities that the issuer will pay principal and interest to investors in those securities, even if borrowers of the underlying mortgage loans default. [OTS]

guaranteed insurance contract

A contract promising a stated nominal interest rate over some specific time period, usually several years. [Harvey]

guaranteed introducing broker

An introducing broker that has entered into a guarantee agreement with a futures commission merchant (FCM), whereby the FCM agrees to be jointly and severally liable for all of the introducing broker's obligations under the Commodity Exchange Act. By entering into the agreement, the introducing broker is relieved from the necessity of raising its own capital to satisfy minimum financial requirements. In contrast, an independent introducing broker must raise its own capital to meet minimum financial requirements. [CFTC]

guaranteed investment contract

A pure investment product in which a life company agrees, for a single premium, to pay the principal amount of a predetermined annual crediting (interest) rate over the life of the investment, all of which is paid at the maturity date. [Harvey]

guaranteed student loan

A loan made by a savings an loan association, bank, credit union or college to help a student with tuition and other educational expenses. Payment of the loan is guaranteed by the federal or state government. [OTS]

guarantor

An individual, institution or other entity that guarantees to repay a debt if the borrower defaults. Under the Federal Home Loan Mortgage Corporation's Guarantor Program, original lenders sell ('swap') loans to Freddie Mac in exchange for Participation Certificates. [OTS]

guarantor program

Under the Freddie Mac program, the aggregation by a single issuer (usually an S&L) for the purpose of forming a qualifying pool to be issued as PCs under the Freddie Mac guarantee. [Harvey]

guaranty

A promise by one party to pay the debt or perform an obligation of a second party if the second party fails to carry out terms of the obligation to a third party. [OTS] One to whom a guaranty is made. This word is also used as a noun to denote the contract of guaranty or the obligation of a guarantor, and as a verb, to denote the action of assuming the responsibilities of a guarantor. [UNODC]

guaranty company

Companies which have limitation of liabilities by reference to sums which the members have guaranteed to pay to meet the companies' debts in the event of liquidation. [UNODC]

guaranty or guaranty agreement

(A) Agreement of a third party, for consideration, to pay debt service on an issue which is the primary obligation of another party. (B) Promise of the primary obligor under a sale and leaseback, by a separate agreement, to pay debt service on the issue. [EPA]

guardian

An individual who is legally responsible for the care of another and the management of the property of the other person, such as a child, who is considered incompetent to manage his or her own affairs. [OTS]

guardian account

An account established at a financial institution in the name of a guardian who acts on behalf of and administers the funds for the benefit of the ward. [OTS]

guidance line

An authorization, unknown to the customer, or a line of credit. If communicated to the customer, the guidance line becomes a commitment. [FDIC]

habeas corpus

A writ alleging that an individual has been unlawfully detained and ordering the official having custody of the individual to bring the person before a court for the purpose of determining whether the imprisonment was legal. [OTS]

habendum clause

Latin for 'to have and to hold.' The clause is written into deeds and mortgages to define the transfer of the subject property. It reads: 'To have and hold the premises herein granted unto the party of the second part (the grantee), his heirs and the assigns forever.' [OTS]

haircut

(1) that portion of an asset's value that cannot be used as collateral. For example, if 90 percent of an asset's value can be used as collateral for a loan, the haircut is 10 percent. Therefore, to provide full backing, the lender will require collateral that is valued in excess of the amount of the loan. The haircut is meant to protect the lender against a possible decrease in the value of the collateral -- to below the amount of outstanding principal -- during the life of the loan. (2) the spread in a repurchase agreement. [OTS] In computing the value of assets for purposes of capital, segregation, or margin requirements, a percentage reduction from the stated value (e.g., book value or market value) to account for possible declines in value that may occur before assets can be liquidated. [CFTC] The margin or difference between the actual market value of a security and the value assessed by the lending side of a transaction (ie. a repo). [Harvey]

hallmark

A stamped impression on the surface of a precious metal bar that indicates the producer, serial number, weight, and purity of the metal. [NYMEX] An impression made on gold and silverware introduced in the beginning of the fourteenth century in England to identify the quality of the metal used. [ITDS]

hand held device (HHD)

Wireless device utilized by brokers, and Exchange trading floor personnel. [NYSE]

hand held terminal

A small computer terminal used by floor brokers or floor traders on an exchange to record trade information and transmit that information to the clearing organization. [CFTC]

handle

The whole-dollar price of a bid or offer is referred to as the handle (ie. if a security is quoted at 101.10 bid and 101.11 offered, 101 is the handle). Traders are assumed to know the handle. [Harvey]

harbor fees

Charges assessed to users for use of a harbor, used generally for maintenance of the harbor. [ITDS]

harbor master

An officer who attends to the berthing, etc. of ships in a harbor. [ITDS]

hard capital rationing

Capital rationing that under no circumstances can be violated. [Harvey]

hard currency

A freely convertible currency that is not expected to depreciate in value in the foreseeable future. [Harvey] The term 'hard currency' is a carry-over from the days when sound currency was freely convertible into 'hard' metal, i.e., gold. It is used today to describe a currency which is sufficiently sound so that it is generally accepted internationally at face value. [UNODC]

hard loan

A foreign loan that must be paid in hard money. [ITDS]

hard money

Currency of a nation having stability in the country and abroad. [ITDS]

hard position limit

A speculative position limit, especially in contrast to a position accountability level. [CFTC]

hard-to-sell asset

Those assets remaining unsold other than cash, securities, and performing single-family residential mortgages. By dollar amount, most of the RTC's hard-to-sell assets consisted of commercial mortgages, owned real estate, and subsidiary assets. [FDIC]

hardening

(1) Describes a price which is gradually stabilizing; (2) a term indicating a slowly advancing market. [CFTC]

harmless warrant

Warrant that allows the user to purchase a bond only by surrendering an existing bond with similar terms. [Harvey][WCSU]

harmonized system

A multipurpose international goods classification system designed to be used by manufacturers, transporters, exporters, importers, customs, statisticians, and others in classifying goods moving in international trade under a single commodity code. [ITDS]

harter act

Legislation protecting a ships owner against claims for damage resulting from the behavior of the vessels crew, provided the ship left port in proper condition. [ITDS]

Harvey Copyright

C, Harvey at Duke, Copyright, for non-commerical use only [Harvey]

hatch

The opening in the deck of a vessel witch gives access to the, cargo hold. [ITDS]

haulage

The local transport of goods. Also the charge(s) made for hauling freight on carts, drays or trucks. Also called cartage or drayage. [ITDS]

havala

hawala

An alternative remittance system. In its current usage in Hindi, Urdu and Arabic Hawala means 'trust' and 'reference'. The term is interchangeably used with the term hundi, which has the meanings 'cheque' or 'bill of exchange' and reffers to a means of transferring money based on trust or an appropriate reference. Hawala is a trust-based system of money transfer associated with the Indian Sub-Continent and the Persian (Arabian) Gulf and is liable to abuse and exploitation by money launderers. Hawala works fast and, leaves either no paper trail or a minimal and confusing one and gives returns much higher than conventional banking. [UNODC]

hawalah

hawallah

hazard insurance

A form of insurance coverage for real estate that includes protection against loss from fire, certain natural causes, vandalism and malicious mischief. [OTS]

hazardous materials

A substance or material which has been determined by the U.S. Secretary of Transportation to be capable of posing an unreasonable risk to health, safety, and property when transported in commerce and which has been so designated. [ITDS]

head & shoulders

In technical analysis, a chart formation in which a stock price reaches a peak and declines, rises above its former peak and again declines and rises again but not to the second peak and then again declines. The first and third peaks are shoulders, while the second peak is the formation's head. Technical analysts generally consider a head and shoulders formation to be a very bearish indication. [Harvey]

head and shoulders

In technical analysis, a chart formation that resembles a human head and shoulders and is generally considered to be predictive of a price reversal. A head and shoulders top (which is considered predictive of a price decline) consists of a high price, a decline to a support level, a rally to a higher price than the previous high price, a second decline to the support level, and a weaker rally to about the level of the first high price. The reverse (upside-down) formation is called a head and shoulders bottom (which is considered predictive of a price rally). [CFTC]

health care fraud

Includes health insurance fraud, drug fraud, and medical fraud. [Wikipedia]

health insurance fraud

heating oil

No. 2 fuel oil, a distillate fuel oil used either for domestic heating or in moderate capacity commercial-industrial burners. [NYMEX]

heaven-and-hell bonds

Dual currency bonds whose principle repayment is in a currency different from interest payments. The size of the principle payment is partially increased if the value of the currency falls, and vice versa. [WCSU]

heavy

A market in which prices are demonstrating either an inability to advance or a slight tendency to decline. [CFTC]

heavy crude

Crude oil with a high specific gravity and a low API gravity due to the presence of a high proportion of heavy hydrocarbon fractions. [NYMEX]

heavy lift

Articles too heavy to be lifted by a ships tackle. [ITDS]

heavy lift charge

A charge made for lifting articles too heavy to be lifted by a ships tackle. [ITDS]

heavy lift vessel

A vessel with heavy lift cranes and other equipment designed to be self-sustaining in the handling of heavy cargo. [ITDS]

hectare

A metric unit of land measurement equaling 100 ares, or 10,000 square meters, or 2.47 acres. There are 100 hectares in a square kilometer. [OTS]

hedge

A transaction that reduces the price risk of an underlying security or commodity position by making the appropriate offsetting derivative transaction. [TMAC] A transaction that reduces the risk of an investment. [Harvey] The initiation of a position in a futures or options market that is intended as a temporary substitute for the sale or purchase of the actual commodity. The sale of futures contracts in anticipation of future sales of cash commodities as a protection against possible price declines, or the purchase of futures contracts in anticipation of future purchases of cash commodities as a protection against the possibility of increasing costs. [NYMEX] To offset. [ITDS]

hedge exemption

An exemption from speculative position limits for bona fide hedgers and certain other persons who meet the requirements of exchange and CFTC rules. [CFTC]

hedge fund

A fund that may employ a variety of techniques to enhance returns, such as both buying and shorting stocks based on a valuation model. [Harvey] A private investment fund or pool that trades and invests in various assets such as securities, commodities, currency, and derivatives on behalf of its clients, typically wealthy individuals. Some commodity pool operators operate hedge funds. [CFTC]

hedge fund fraud

Hedge funds are private investment partnerships which have historically accepted only high-net worth clients willing to meet significant minimum investment thresholds. The industry as a whole has been largely unregulated but has become increasingly relevant to middle class investors through their exposure to hedge fund activities via ancillary investments (e.g., pension funds). The relative lack of regulatory scrutiny has made the industry vulnerable to fraud by fund managers, to include overstatement/misappropriation of fund assets; overcharging for fund management fees; insider trading; market timing; and late trading. [FBI]

hedge ratio

1) Ratio of the value of futures contracts purchased or sold to the value of the cash commodity being hedged, a computation necessary to minimize basis risk. 2) The ratio, determined by an option's delta, of futures to options required to establish a riskless position. For example, if a $1/barrel change in the underlying futures price leads to a $0.25/barrel change in the option premium, the hedge ratio is 4 (four options for each futures contract). [NYMEX] Ratio of the value of futures contracts purchased or sold to the value of the cash commodity being hedged, a computation necessary to minimize basis risk. [CFTC] The amount of an underlying instrument or the number of options which are needed to hedge a covered option. [ITDS] The number of shares to buy for each option sold in order to create a safe position. More generally, the number of units of an asset that should be bought to hedge one unit of a liability. [WCSU] The ratio of volatility of the portfolio to be hedged and the return of the volatility of the hedging instrument. [Harvey]

hedged portfolio

A portfolio consisting of the long position in the stock and the short position in the call option, so as to be riskless and produce a return that equals the risk-free interest rate. [Harvey]

hedger

A trader who enters into positions in a futures market opposite to positions held in the cash market to minimize the risk of financial loss from an adverse price change; or who purchases or sells futures as a temporary substitute for a cash transaction that will occur later. One can hedge either a long cash market position (e.g., one owns the cash commodity) or a short cash market position (e.g., one plans on buying the cash commodity in the future). [CFTC] A trader who enters the market with the specific intent of protecting an existing or anticipated physical market exposure from unexpected or adverse price fluctuations. [NYMEX] An individual or company owning or planning to own a cash commodity; corn, soybeans, wheat, U.S. Treasury bonds, notes, bills, etc.; and concerned that the cost of the commodity may change before either buying or selling it in the cash market. A hedger achieves protection against changing cash prices by purchasing (selling) futures contracts of the same or similar commodity and later offsetting that position by selling (purchasing) futures contracts of the same quantity and type as the initial transaction. [CBOT][MIDAM]

hedgie

Slang for a hedge fund. [Harvey]

hedging

A strategy designed to reduce investment risk using call options, put options, short selling, or futures contracts. A hedge can help lock in existing profits. Its purpose is to reduce the volatility of a portfolio, by reducing the risk of loss. [Harvey] A transaction used by dealers in foreign exchange, commodities and securities, as well as manufacturers and other producers, to protect against severe fluctuations in exchange rates and prices. A current sale or purchase is offset by contracting to purchase or sell at a specified future date. The object is to defer a profit or loss on the current purchase or sale by realizing a profit or loss on a future purchase or sale. The hedge contract may run for a period that coincides with the expected liquidation of the asset, or it may merely last one, three, six or twelve months to offset the exchange risk for an asset that is expected to be held for a long term, in which case the choice of the term of the hedge is a matter of relative cost and judgment. (Also referred to as 'covering'.) [FDIC] Buying one security and selling another in order to reduce risk. A perfect hedge produces a riskless portfolio. [WCSU] Hedging is engaging in financial transactions to protect against potential adverse changes in the values of assets, liabilities, or off-balance-sheet activities. [GAO] The practice of offsetting the price risk inherent in any cash market position by taking an equal but opposite position in the futures market. Hedgers use the futures markets to protect their business from adverse price changes. [CBOT][MIDAM] The purchase or sale of a commodity, security or other financial instrument for the purpose of offsetting the profit or loss of another security or investment. Thus, any loss on the original investment will be hedged, or offset, by a corresponding profit from the hedging instrument. [OTS] The purchase or sale of a derivative security (such as options or futures) in order to reduce or neutralize all or some portion of the risk of holding another security. [NYSE]

hedging demands

Demands for securities to hedge particular sources of consumption risk, beyond the usual mean-variance diversification motivation. [Harvey]

held-to-maturity accounts

Debt securities that the institution has the intent and ability to hold to maturity, which are reported at amortized cost. [UNODC]

hell-or-high-water clause

Clause in a lease that obliges the lessee to make payments regardless of what happens to the lessor or the equipment. [WCSU]

hell-or-high-water contract

A contract that obligates a purchaser of a project's output to make cash payments to the project in all events, even if no product is offered for sale. [Harvey]

henry hub

A natural gas pipeline hub in Louisiana that serves as the delivery point for New York Mercantile Exchange natural gas futures contracts and often serves as a benchmark for wholesale natural gas prices across the U.S. [CFTC]

herstatt risk

The risk of loss in foreign exchange trading that one party will deliver foreign exchange but the counterparty financial institution will fail to deliver its end of the contract. It is also referred to as settlement risk. [Harvey]

hidden defect

any encumbrance on a title that is not apparent in the public records; for example, unknown heirs, secret marriages, forged instruments, mental incompetence, or infancy of a grantor. [OTS]

hidden quantity order

An order placed on an electronic trading system whereby only a portion of the order is visible to other market participants. As the displayed part of the order is filled, additional quantities become visible. Also called Iceberg, Max Show. [CFTC]

high

The highest price of the day for a particular futures contract. [CBOT][MIDAM]

high density

The compression of flat or standard bales of cotton to high density of approximately 32 pounds. [ITDS]

high price

The highest (intraday) price of a stock over the past 52 weeks, adjusted for any stock splits. [Harvey]

high-coupon bond refunding

Refunding of a high-coupon bond with a new, lower coupon bond. [Harvey]

high-frequency trading (HFT)

A primary form of algorithmic trading in finance. Specifically, it is the use of sophisticated technological tools and computer algorithms to rapidly trade securities. HFT uses proprietary trading strategies carried out by computers to move in and out of positions in seconds or fractions of a second. [Wikipedia] Computerized or algorithmic trading in which transactions are completed in very small fractions of a second. [CFTC] Trading activities that employ sophisticated, algorithmic technologies to interpret signals from the market and, in response, implement trading strategies that generally involve the high frequency generation of orders and a low latency transmission of these orders to the market. Related trading strategies mostly consist of either quasi market making or arbitraging within very short time horizons. They usually involve the execution of trades on own account (rather than for a client) and positions usually being closed out at the end of the day. [ESMA]

high-rise

A housing structure containing multiple dwelling units and at least eight floors. [OTS]

highest and best use

An appraisal and zoning concept that evaluates all the possible, permissible and profitable uses of a property to determine the use that will provide the owner with the highest net return on investment in the property, consistent with existing neighboring land uses. [OTS]

highly leveraged transaction

Bank loan to a highly leveraged firm. [Harvey]

historical exchange rate

An accounting term that refers to the exchange rate in effect when an asset or liability was acquired. [Harvey]

historical volatility

A statistical measure of the volatility (specifically, the annualized standard deviation) of a futures contract, security, or other instrument over a specified number of past trading days. [CFTC] The annualized standard deviation of percent changes in futures prices over a specific period. It is an indication of past volatility in the marketplace. [NYMEX] To estimate volatility empirically, prices are observed at fixed time intervals and used to calculate volatility for that period. [TMAC]

hit

A dealer who agrees to sell at the bid price quoted by another dealer is said to 'hit' that bid. [Harvey]

hitchment

The combination of portions of a shipment with different geographical regions that move under one bill of lading from shipper to consignee. [ITDS]

hog/corn ratio

The relationship of feeding costs to the dollar value of hogs. It is measured by dividing the price of hogs ($/hundredweight) by the price of corn ($/bushel). When corn prices are high relative to pork prices, fewer units of corn equal the dollar value of 100 pounds of pork. Conversely, when corn prices are low in relation to pork prices, more units of corn are required to equal the value of 100 pounds of pork. [CBOT][MIDAM]

hokeys

The nickname for bonds sold by the former Home Owners' Loan Corporation. The bonds are no longer in circulation. [OTS]

hold

A notation made on an account record to show that a specific amount of money in the account is temporarily not available to the account holder, or to show that the account requires special handling. For example, a hold may be placed on recently deposited checks to allow time for the checks to clear. [OTS] The space below deck in a vessel used to carry cargo. [ITDS]

hold for pickup

Freight to be held at the carriers destination location for pickup by the recipient. [ITDS]

hold harmless clause

A provision in a contract that relieves a party to the contract from liability, either as a matter of negotiated agreement, or in the event that circumstances beyond his control prevent him from fulfilling the terms of the contract. For example, in a construction loan, the lender might agree to hold the borrower harmless in the event that the building construction was not completed on time due to a strike, thus preventing foreclosure on the loan. [OTS]

hold harmless contract

An agreement by which one party accepts responsibility for all damages and other liability that arise from a transaction, relieving the other party of any such liability. [ITDS]

holder

holder in due course

any subsequent owner of a negotiable instrument such as a check, note or other document. The holder must have accepted possession of the financial instrument in good faith and given something of value for it. The holder is presumed to be unaware that the financial instrument previously may have been overdue, been dishonored when presented for payment, or had a claim against it, if in fact such were the case. For example, someone who accepts a third party check or NOW draft is a holder in due course, as are all subsequent holders of the instrument. Likewise, the holder of a note or loan agreement concluded by two other parties (the original consumer and the seller who first extended credit) is also a holder in due course. Until 1976, the Uniform Commercial Code held that a holder in due course was not liable for any prior claims made against the instrument held. However, in 1976, the Federal Trade Commission ruled that holders in due course could be liable in some cases. For example, if the original customer stops making loan payments because the merchandise purchased on credit is faulty, and the original seller refuses to honor the terms of the guarantee, all subsequent holders of the note may be subject to claims against the seller. While claims may be made against holders of a note, innocent holders of a check or NOW draft generally have the right to collect the face amount from the payer or drawer, regardless or prior claims. [OTS]

holder-of-record date

The date on which holders of record in a firm's stock ledger are designated as the recipients of either dividends or stock rights. Also called date of record. [Harvey]

holding company

A corporation or other entity that owns a majority of stock or securities of one or more other corporations, thus obtaining control of the other corporations. A savings and loan holding company is defined by the National Housing Act as '...any company which directly or indirectly controls an insured institution or controls any other company which is a savings and loan holding company....' Control is defined as owning 25 percent or more of the voting stock. [OTS] A corporation that owns enough voting stock in another firm to control management and operations by influencing or electing its board of directors. [Harvey] A corporation that owns the securities of another, in most cases with voting control. [NYSE] Company whose sole function is to in other companies subsidiaries. [WCSU]

holding period

Length of time that an individual holds a security. [Harvey]

holding period return

The rate of return over a given time period. [Harvey]

holographic will

A will entirely in the handwriting of the testator. [UNODC]

home

A residential structure containing one to four dwelling units, or a condominium unit, regardless of the number of units in the building. [OTS]

home country

The country from which a banking entity or holding company is headquartered. [UNODC]

home equity loan

A revolving, open-end loan extended under a line of credit and secured by the borrower's residential property. [OTS]

home improvement loan

An advance of funds, usually not secured by a mortgage and usually short-term, made to a property owner for such improvements as maintenance and repair, additions and alterations, or replacement of equipment or structural elements. [OTS]

home loan

A residential mortgage loan secured by a one- to four-family property or a condominium unit. [OTS]

home office

The principal place of business of a savings institution; the location registered with the Office of Thrift Supervision as an institution's primary office. [OTS]

Home Owners' Loan Corporation

A federally chartered corporation established in 1933 and administered by the Federal Home Loan Bank Board to refinance mortgages of economically distressed homeowners. The HOLC legally expired in 1954. [OTS]

homemade dividend

Sale of some shares of stock to get cash that would be similar to receiving a cash dividend. [Harvey]

homemade leverage

Idea that as long as individuals borrow (or lend) on the same terms as the firm, they can duplicate the affects of corporate leverage on their own. Thus, if levered firms are priced too high, rational investors will simply borrow on personal accounts to buy shares in unlevered firms. [Harvey]

homeowner's insurance

A broad form of real estate insurance coverage that combines hazard insurance with personal liability protection and other coverage. [OTS]

homeowners association

An organization of homeowners residing within a particular area whose principal purpose is to ensure the provision of and maintenance of community facilities and services for the common benefit of the residents. [OTS]

homestead

The dwelling place, owned and occupied by a family, including the land, house and accessory buildings. [OTS]

homestead association

The name used by some savings and loan associations in the state of Louisiana. [OTS]

homestead estate

in some states, the home and property occupied by an owner and protected by law (up to certain limits) from attachment and sale to satisfy the claims of creditors. [OTS]

homogeneity

The degree to which items are similar. [Harvey]

homogeneous

Exhibiting a high degree of homogeneity. [Harvey]

homogenous expectations assumption

An assumption of Markowitz portfolio construction that investors have the same expectations with respect to the inputs that are used to derive efficient portfolios: asset returns, variances, and covariances. [Harvey]

honor

To pay or to accept a draft complying with the terms of credit. [ITDS] to accept and pay a check or draft upon presentation. [OTS]

horizon analysis

An analysis of returns using total return to assess performance over some investment horizon. [Harvey]

horizon return

Total return over a given horizon. [Harvey]

horizontal acquisition

Merger between two companies producing similar goods or services. [Harvey]

horizontal analysis

The process of dividing each expense item of a given year by the same expense item in the base year. This allows for the exploration of changes in the relative importance of expense items over time and the behavior of expense items as sales change. [Harvey]

horizontal merger

A merger involving two or more firms in the same industry that are both at the same stage in the production cycle; that is two or more competitors. [Harvey] Merger between two companies that manufacture similar products. [WCSU]

horizontal spread

Calendar or time spread. [NYMEX] The purchase of either a call or put option and the simultaneous sale of the same type of option with typically the same strike price but with a different expiration month. Also referred to as a calendar spread. [CBOT][MIDAM] The simultaneous purchase and sale of two options that differ only in their exercise date. [Harvey][WCSU]

host country

The country in which a foreign bank is opening a banking office. [UNODC]

host security

The security to which a warrant is attached. [Harvey]

hot money

(1) Large quantities of money that move quickly in international currency exchanges due to speculative activity. (2) Foreign funds temporally transferred to a financial center and subject to withdrawal at any moment. [UNODC] Money that moves across country borders in response to interest rate differences and that moves away when the interest rate differential disappears. [Harvey]

house

A building for human habitation, usually a detached structure. [OTS]

house air waybill

A bill of lading issued by a freight forwarder for consolidated air freight shipments. [ITDS]

house-to-house

A term usually used to indicate a container yard to container yard shipment. [ITDS]

household

A household consists of all the persons who occupy a housing unit. A house, an apartment, or other group of rooms, or a single room is regarded as a housing unit, when it is occupied or intended for occupancy as separate living quarters. A household includes the related family members and all the unrelated persons, if any, such as lodgers, foster children, wards, or employees who share the housing unit. A person living alone in a housing unit, or a group of unrelated persons sharing a housing unit as partners, is also counted as a household. [EPA] all persons occupying a separate housing unit that has either direct access to the outside or a public area, or separate cooking facilities. When the members are related by law or blood, the household constitutes a family. [OTS]

housing

buildings or other shelters in which people live. [OTS]

housing permit

A certificate issued by a local government authorizing residential construction. It describes the type of structure to be built and its estimated cost. [OTS]

housing start

The commencement of construction of a new housing unit. For multiple dwelling structures, each unit is counted as a start when excavation of the building site begins. For public housing, the awarding of the contract is counted as the start. [OTS]

housing stock

The total number of residential units, including mobile homes, available for nontransient occupancy. [OTS]

hub and spoke routing

Aircraft routing service pattern that feeds traffic from many cities into a central hub designed to connect with other flights to final destinations. The system maximizes operating flexibility by connecting many markets through a central hub with fewer flights than would be required to connect each pair of cities in an extensive system. [ITDS]

hubris

An arrogance due to excessive pride and an insolence toward others. [Harvey]

hull

The outer shell of a vessel. [ITDS]

human capital

The unique capabilities and expertise of individuals. [Harvey]

hump

That part of a rail track which is elevated so that when a car is pushed up on 'the hump' and uncoupled it runs down the other side by gravity. [ITDS]

Humphrey-Hawkings Act

hundredweight pricing

Special pricing for multiple-piece shipments traveling to one destination which are rated on the total weight of the shipment as opposed to rating on a per package basis. [ITDS]

hurdle rate

Minimum acceptable rate of return on a project. [WCSU] The required return in capital budgeting. [Harvey]

hybrid

A package containing two or more different kinds of risk management instruments that are usually interactive. [Harvey]

hybrid company

Companies with members whose liability is limited by shares and also members whose liability is limited by guarantee. [UNODC]

hybrid security

A complex security consisting of a combination of two or more risk management building blocks - bond or note, forward, future, option or swap. [TMAC] A convertible security whose optioned common stock is trading in a middle range, causing the convertible security to trade with the characteristics of both a fixed-income security and a common stock instrument. [Harvey]

hybrid-instruments

Financial instruments that possess, in varying combinations, characteristics of forward contracts, futures contracts, option contracts, debt instruments, bank depository interests, and other interests. Certain hybrid instruments are exempt from CFTC regulation. [CFTC]

hydrocarbons

Organic chemical compounds containing hydrogen and carbon atoms. They form the basis of all petroleum products. [NYMEX]

hyperinflations

Rapid, out-of-control inflations, at double digit rates per month and more, usually occurring only during wars and periods of severe political instability. [FACS]

hypothecate

to pledge property as security for a debt without giving up possession or title. The pledged property is said to be hypothecated. For example, a savings or trust account that is pledged or assigned as collateral for a loan is called a hypothecated account. [OTS]

hypothecation

The pledging of securities as collateral -- for example, to secure the debit balance in a margin account. [NYSE]

I-O industry classification system

System for classifying industries in the I-O accounts so that output typically represents the total output of all establishments in an industry. This system is based on the SIC (1992 benchmark) or NAICS (1997 benchmark), and adjusts those to attain a common input structure for commodities produced by an I-O industry. The adjustments are referred to as redefinitions. [BEA]

iceberg

IDEM membership

A Chicago Board of Trade membership of trading privileges for futures contracts in the index, debt, and energy markets category (gold, municipal bond index, 30-day Fed funds, and stock index futures). [CBOT][MIDAM]

identical merchandise

Used by U.S. Customs in establishing the customs value of merchandise exported to the United States, identical merchandise is merchandise that is: (1) Identical in all respects to the merchandise being appraised, (2) Produced in the same country as the merchandise being appraised, and (3) Produced by the same person as the merchandise being appraised. [ITDS]

identity theft

Assuming the use of another person’s personal information (e.g., name, SSN, credit card number, etc.) without the person’s knowledge and the fraudulent use of such knowledge to obtain credit. [FFIEC]

idiosyncratic risk

Unsystematic risk or risk that is uncorrelated to the overall market risk. In other words, the risk that is firm specific and can be diversified through holding a portfolio of stocks. [Harvey]

illegal

illiquid

describes an asset that cannot easily be converted into cash; the opposite of liquid. Illiquid assets can be converted into cash, but usually only after a period of time and often at a loss in value. [OTS]

immediate delivery

An alternate U.S. Customs entry procedure which provides for immediate release of a shipment in certain cases. [ITDS]

immediate or cancel

An order which must be filled immediately or be canceled. IOC orders need not be filled in their entirety. [NYMEX]

immediate purchase contract

An over-the-counter offer by a seller to a purchaser of a mortgage. [OTS]

immediate settlement

Delivery and settlement of securities within five business days. [Harvey]

immigration

The entry of foreign nationals into a country for the purpose of establishing permanent residence. [ITDS]

immunization

The construction of an asset and a liability that are subject to offsetting changes in value. [Harvey][WCSU]

immunization strategy

A bond portfolio strategy whose goal is to eliminate the portfolio's risk against a general change in the rate of interest through the use of duration. [Harvey]

impact lag

The time it takes for the full impact of the policy to be felt. [FRBSF]

implementation lag

The time it takes for policymakers to act once they recognize an economic condition requiring action. [FRBSF]

implicit interest

In financing leases, the amount of interest on debt determined by the difference between the total cash rental payments and the amount of cash borrowed or the face value of non-cash assets received. [EPA]

implicit price deflator

The ratio of the current-dollar value of a series, such as GDP, to its corresponding chained-dollar value, multiplied by 100. [BEA]

implied call

The right of the homeowner to prepay, or call, the mortgage at any time. [Harvey]

implied conditions

Certain implied conditions are not written into marine insurance policies, but they are so basic to understanding between underwriter and the assured that the law gives them much the same effect as if written. (In many other types of contracts there also may be 'implied conditions'. For example, a seller of goods implies that they are fit for the purpose they purport to serve. [ITDS]

implied repo rate

The rate of return that can be obtained from selling a debt instrument futures contract and simultaneously buying a bond or note deliverable against that futures contract with borrowed funds. The bond or note with the highest implied repo rate is cheapest to deliver. [CFTC] The rate that a seller of a futures contract can earn by buying an issue and then delivering it at the settlement date. [Harvey]

implied volatility

A measurement of the market's expected price range of the underlying commodity futures based on the market-traded option premiums. [NYMEX] The expected volatility in a stock's return derived from its option price, maturity date, exercise price, and riskless rate of return, using an option-pricing model such as Black-Scholes. [Harvey] The volatility implied by the option price observed in the marketplace. [TMAC] The volatility of a futures contract, security, or other instrument as implied by the prices of an option on that instrument, calculated using an options pricing model. [CFTC]

implied warranty

A provision of the law that holds that a product is guaranteed to be fit for consumption or use even though the manufacturer or merchant makes no written statement to that effect. [OTS]

import

Commodities of foreign origin as well as goods of domestic origin returned to the producing country with no change in condition, or after having been processed and/or assembled in other countries. [ITDS] To bring in (goods or services) from a foreign country for trade or sale. [ITDS]

import credit

A commercial letter of credit issued for the purpose of financing the importation of goods. [ITDS]

import duty

Any tax on items imported. [ITDS]

import letter of credit

A letter of credit issued by the bank on behalf of a local customer who is importing merchandise into the country. Issuance of an import credit carries a definite commitment by the bank to honor the beneficiary's drawings under the credit. [FDIC]

import license

A document required and issued by some national governments authorizing the importation of goods. [ITDS]

import quota

A protective ruling establishing limits on the quantity of a particular product that can be imported. [ITDS]

import quota auctioning

The process of auctioning the right to import specified quantities of quota-restricted goods. [ITDS]

import relief

Any of several measures imposed by a government to temporally restrict imports of a product or commodity to protect domestic producers from competition. [ITDS]

import restrictions

Any one of a series of tariff and non-tariff barriers imposed by an importing nation to control the volume of goods coming into the country from other countries. [ITDS]

import substitution

A strategy which emphasizes the replacement of imports with domestically produced goods to encourage the development of domestic industry. [ITDS]

import-substitution development strategy

A development strategy followed by many Latin American countries and other LDCs that emphasized import substitution - accomplished through protectionism - as the route to economic growth. [Harvey]

importer

The individual, firm or legal entity that brings articles of trade from a foreign source into a domestic market in the course of trade. [ITDS]

importer number

An identification number assigned by the U.S. Customs Service to each importer to track entries and other transactions. [ITDS]

imports for consumption

The total of merchandise that has physically cleared through U.S. Customs either entering domestic consumption channels immediately or entering after withdrawal for consumption from bonded warehouses under U.S. Customs custody or from U.S. Foreign Trade Zones. [ITDS]

impost

A tax, usually an import duty. [ITDS]

impoters manual USA

A reference book detailing specific requirements for importing 135 different product groups into the United States and other important information. [ITDS]

impound

To seize or hold; or to place in protective custody by order of a court. [ITDS] to seize, hold, or place in protective custody by order of a court. Examples include impounded property and impounded records. [OTS]

impound account

imprest fund

(1) available money of a designated amount maintained in order to pay for small, routine operating expenses of a business or other organization. Also called a petty cash fund. (2) a loan of government funds [OTS]

improved real estate

real property on which one or more structures have been built for either residential or business use, or a combination of both. [OTS]

improvements

additions to raw land that normally increase its usefulness and value, such as buildings, streets and sewers. [OTS]

imputation tax system

Arrangement by which investors who receive a dividend also receive a tax credit for corporate taxes that the firm has paid. [Harvey]

imputations

Estimates of the value of certain income and product flows that do not take measurable monetary form. In the NIPA's for example, BEA imputes a rental value to owner-occupied housing and a value to services that banks and other depository institutions provide without charge. [BEA]

in bond

A procedure under which goods are transported or warehoused under customs supervision until they are either formally entered into the customs territory of the United States and duties paid, or until they are exported from the United States. [ITDS]

in bond shipment

An import or export shipment which has not been cleared by U.S. Customs officials. [ITDS]

in fee

ownership of land with all the rights and obligations of ownership including the right to sell or give away the land or pass it on to one's heirs. [OTS]

in position

Refers to a commodity located where it can readily be moved to another point or delivered on a futures contract. Commodities not so situated are 'out of position.' Soybeans in Mississippi are out of position for delivery in Chicago, but in position for export shipment from the Gulf of Mexico. [CFTC]

in sight

The amount of a particular commodity that arrives at terminal or central locations in or near producing areas. When a commodity is 'in sight,' it is inferred that reasonably prompt delivery can be made; the quantity and quality also become known factors rather than estimates. [CFTC]

in the box

This means that a dealer has a wire receipt for securities indicating that effective delivery on them has been made. [Harvey]

in-bond system

A part of U.S. Customs Automated Commercial System, controls merchandise from the point of unloading at the port of entry or exportation. [ITDS]

in-fill housing

housing that is built on vacant lots in built-up areas of a city. [OTS]

in-house processing float

Refers to the time it takes the receiver of a check to process the payment and deposit it in a bank for collection. [Harvey]

in-substance defeasance

Defeasance whereby debt is removed from the balance sheet but not cancelled. [Harvey]

in-the-money

A put option that has a strike price higher than the underlying futures price, or a call option with a strike price lower than the underlying futures price. For example, if the March COMEX silver futures contract is trading at $6 an ounce, a March call with a strike price of $5.50 would be considered in-the-money by $0.50 an ounce. [Harvey] A situation in which an investor will receive a profit from the sale or purchase of a financial instrument. This results when the investor holds a contract to buy a stock at a price less than its market value, or holds a contract to sell a stock at a price greater than its market value. [OTS] A term used to describe an option contract that has a positive value if exercised. A call with a strike price of $1100 on gold trading at $1150 is in-the-money 50 dollars. [CFTC] An option that can be exercised and immediately closed out against the underlying market for a cash credit. The option is in-the-money if the underlying futures price is above a call option's strike price, or below a put option's strike price. [NYMEX] For a call, it is when the market price of the underlying interest is above the strike price of the option. For a put, it is when the market prices of the underlying interest is below the strike price of the option. [TMAC]

in-the-money option

An option having intrinsic value. A call option is in-the-money if its strike price is below the current price of the underlying futures contract. A put option is in-the-money if its strike price is above the current price of the underlying futures contract. [CBOT][MIDAM] An option that would be worth exercising if it expired immediately. [WCSU]

in-well transfer

An inventory transfer of propane held in underground caverns or storage. [NYMEX]

inactive account

A savings account on which no transaction has occurred (except the crediting of earnings) for a specific number of years. Also called a dormant account. [OTS]

inalienable

something that may not be sold, transferred or assigned to another. [OTS]

incentive

A motivational force that stimulates people to greater activity or increased efficiency. [ITDS]

inchoate

newly begun, incomplete, not organized. [OTS]

inchoate courtesy

The imperfected ownership interest that the law gives a husband in the properties of his wife, which becomes perfected upon the death of the wife and may result in possession and use. [OTS]

inchoate dower

The imperfected interest that the law gives a wife in the property of her husband, which becomes perfected upon the death of the husband and may result in possession and use. [OTS]

income

Money or its equivalent, earned or accrued, arising from the sale of goods or services. [ITDS] money or its equivalent received in exchange for labor, for services, from the sale of goods or property, or as earnings on investments. [OTS]

income approach to value

The process of estimating the market value of a property by comparing the net rental income the property would produce over its remaining effective life with the yields that could be obtained from other kinds of investments of comparable risk. [OTS]

income beneficiary

A person designated to receive income from a trust during the term of the trust. [OTS] One who receives income from a trust. [Harvey]

income bond

A bond on which the payment of interest is contingent on sufficient earnings. These bonds are commonly used during the reorganization of a failed or failing business. [Harvey] Bonds on which interest is paid only if earned. [WCSU] Generally, income bonds promise to repay principal but to pay interest only when earned. In some cases unpaid interest on an income bond may accumulate as a claim against the corporation when the bond becomes due. An income bond may also be issued in lieu of preferred stock. [NYSE]

income capital certificate (ICC)

A method of assistance developed in 1981 by the FSLIC to provide noncash assistance to mutual savings institutions. From 1981 through 1985, the FSLIC gave notes to troubled institutions in exchange for ICCs. The troubled thrift carried the FSLIC note as an asset, and the offsetting liability (the dollar amount of the ICC) was included within regulatory capital. [FDIC] An instrument developed by the former Federal Savings and Loan Insurance Corporation to provide assistance to troubled thrift institutions. Under the program, the thrift issued ICCs to the FSLIC in return for cash or the FSLIC's promissory notes. The thrift was allowed to count outstanding ICCs as part of its net worth (minimum required capital). As the institution regained financial health, the ICCs were retired. [OTS]

income fund

A mutual fund providing for liberal current income from investments. [Harvey]

income limits

maximum amounts that families may earn in order to qualify for admission into low- and moderate-income housing projects or for rent supplement assistance. The limits, established by law, are based on family size and geographic location. [OTS]

income maintenance agreement (IMA)

A resolution method used by the FDIC in the early 1980s to guarantee a market rate of return on the acquired assets of failed savings banks. The FDIC paid the acquirer the difference between the yield on assets acquired and the average cost of funds of savings banks. [FDIC]

income policies

Strategies to restrict wage and price increases, ranging from 'jawboning' by the president to laws that set wage and price levels. [FACS]

income property

real estate owned or operated to produce revenue. [OTS]

income property loan

income statement (statement of operations)

A statement showing the revenues, expenses, and income (the difference between revenues and expenses) of a corporation over some period of time. [Harvey]

income statement

A financial statement that contains a summary of a business' financial operations for a specific period of time. It shows the net profit or loss for the period by stating the company's revenues and expenses. [OTS] A report on a company's financial status over a period of time. It totals profits, subtracts expenses and pinpoints how much money the company can reinvest. [NYSE] An annual summary of income and expenses of a given business in order to determine the net income of the business. [FACS]

income stock

A stock that pays higher than average dividends. In order to pay above-average dividends, a corporation must have a steady, predictable source of income. [OTS] Common stock with a high dividend yield and few profitable investment opportunities. [Harvey] Common stocks that pay large dividends that an investor could use as income. [NYSE] Stocks with high dividend yields. [WCSU]

income tax regulations

The applicable federal income tax regulations under §103 of the Internal Revenue Code, generally included both final and temporary and proposed regulations. [EPA]

income velocity of money

The ratio of national income to the quantity of money in circulation; velocity measures the average number of times money changes hands in generating national income per year (monetarist theory). [FACS]

incorporeal

of no material substance. Something that exists with no physical properties, such as rights or privileges. [OTS]

incorporeal property

intangible personal property lacking in physical substance, such as property rights, leases and mortgages. [OTS]

incoterms

A codification of international rules for the uniform interpretation of common contract clauses in export/import transactions. [ITDS]

incremental cash flows

Difference between the firm's cash flows with and without a project. [Harvey]

incremental costs and benefits

Costs and benefits that would occur if a particular course of action were taken compared to those that would occur if that course of action were not taken. [Harvey]

incremental internal rate of return

IRR on the incremental investment from choosing a large project instead of a smaller project. [Harvey]

indebtedness

The state of being in debt, of owing money or something of value. Any form of liability. [OTS]

indefeasible

incapable of being annulled or rendered void, such as an indefeasible title to property. [OTS]

indemnification

In general, a collateral contract or assurance under which one person agrees to secure another person against either anticipated financial losses or potential adverse legal consequences. [FDIC] The assumption of one party to a securities transaction of responsibility to pay or reimburse the costs and expenses of the liability of another party for certain specifically enumerated events or occurrences. Often used in connection with securities laws liability occasioned by the misstatements or negligence of the indemnifying party, and by many trustees as to certain actions to be taken by them pursuant to a security document. [EPA]

indemnify

To compensate for actual loss sustained. [ITDS] to compensate for an actual, sustained loss so as to restore to the condition prevailing before the loss. [OTS]

indemnity

(1) payment for damage, a guarantee against losses. (2) a bond protecting the insured against losses caused by others failing to fulfill their obligations. (3) the granting of exemption from prosecution. (4) an option to buy or sell a specific quantity of stock at a stated price within a given period of time. [OTS] An agreement to reimburse another individual or legal entity who incurs a loss that is covered by the agreement. [ITDS]

indemnity agreement or letter

The document by which the indemnifying party sets forth its undertaking to indemnify another party, and the conditions to such indemnification, and the indemnified party makes certain covenants, representations and warranties as the consideration for the indemnification. Occasionally, the indemnity agreement is stated and undertaken in the bond purchase agreement. [EPA]

indenture

(1) the formal agreement between a group of bondholders and the bond issuer containing terms of the debt. (2) a deed, written contract, or sealed agreement. The term derives from an old practice of actually indenting the deed by cutting or tearing it in half with a jagged or indented edge so that the two parts could subsequently by matched by the grantor and the grantee. [OTS] (A) General term referring to all forms of indenture. See 'Trust Indenture' and 'Indenture of Mortgage'. (B) Formal agreement between the bond holders, acting through a trustee, and the issuer at to the terms and security for the debt. [EPA] A written agreement under which bonds and debentures are issued, setting forth maturity date, interest rate, and other terms. [NYSE] Agreement between lender and borrower which details specific terms of the bond issuance. Specifies legal obligations of bond issuer and rights of bondholders. [Harvey] Formal agreement, e.g., establishing the terms of a bond issue. [WCSU]

indenture of mortgage

A trust indenture under which the security or collateral includes a mortgage on real or personal property. Compare 'Trust Indenture'. [EPA]

independent

Term generally applies to a non-integrated oil or natural gas company, usually active in only one or two sectors of the industry. An independent marketer buys petroleum products from major or independent refiners and resells them under his own brand name or buys natural gas from producers and resells it. There are also independents which are active exclusively either in oil or gas production or refining. [NYMEX]

independent action

The right of a conference member to depart from the common freight rates, terms or conditions of the conference without the need for prior approval of the conference. [ITDS]

independent audit

An examination of financial statements conducted by an outside CPA (one not employed by the firm being examined) according to generally accepted auditing standards (GAAS) for the purpose of expressing an opinion as to whether the statements are a fair presentation in accordance with generally accepted accounting principles (GAAP). [OTS]

independent broker

Member on the floor of the NYSE who executes orders for other brokers having more business at that time than they can handle themselves, or for firms who do not have their Exchange member on the floor. Formerly known as two-dollar brokers from the time when these independent brokers received $2 per hundred shares of executing such orders. Their fees are paid by the commission brokers. [NYSE]

independent project

A project whose acceptance or rejection is independent of the acceptance or rejection of other projects. [Harvey]

index

A number that is adjusted at set intervals to describe relative changes in the quantity of goods, services or levels of activity. An example is the consumer-price index. Changes in interest payments of adjustable rate mortgages are usually based on an index such as the National Average Mortgage Contract Rate Index or Cost of Funds Index published by the Office of Thrift Supervision. [OTS] A statistical yardstick expressed in terms of percentages of a base year or years. For instance, the NYSE composite index of all NYSE common stocks is based on year-end 1965 as 50. An index is not an average. [NYSE]

index amortizing note (IANs)

A note that repays principal over a period of time that lengthens or shortens according to an amortization schedule linked to a specific index, usually LIBOR. As interest rates increase, the IAN's maturity extends longer, an effect similar to what happens to a collateralized mortgage obligation when prepayment rates decrease. An IAN is a type of structured note. [OTS]

index and option market

A division of the CME established in 1982 for trading stock index products and options. [Harvey]

index arbitrage

An investment/trading strategy that exploits divergences between actual and theoretical futures prices. [Harvey] The simultaneous purchase (sale) of stock index futures and the sale (purchase) of some or all of the component stocks that make up the particular stock index to profit from sufficiently large intermarket spreads between the futures contract and the index itself. [CFTC]

index fund

Investment fund designed to match the returns on a stockmarket index. [Harvey]

index model

A model of stock returns using a market index such as the S&P 500 to represent common or systematic risk factors. [Harvey]

index option

A call or put option based on a stock market index. [Harvey]

index warrant

A stock index option issued by either a corporate or sovereign entity as part of a security offering, and guaranteed by an option clearing corporation. [Harvey]

index-amortizing swaps

These swaps generally operate as basis swaps for an initial period (the lock-out period), after which time the notional principal balance is amortized or extended based on a schedule linked to interest rate changes or some other index during the lock-out period. [TMAC]

indexation

Modifying contracts so that their dollar terms adjust to the inflation rate as measured in an index, such as the consumer price index. [FACS]

indexed bond

Bond whose payments are linked to an index, e.g. the consumer price index. [Harvey] Bonds whose payments are linked to an index, e.g., a consumer price index. [WCSU]

indexed currency option note (ICON)

A eurobond providing a principle repayment that is linked to the value of the bond's currency (e.g., a dollar bond whose principle repayment declines if the dollar appreciates against the yen). [WCSU]

indexing

A passive instrument strategy consisting of the construction of a portfolio of stocks designed to track the total return performance of an index of stocks. [Harvey]

indicated dividend

Total amount of dividends that would be paid on a share of stock over the next 12 months if each dividend were the same amount as the most recent dividend. Usually represent by the letter 'e' in stock tables. [Harvey]

indicated yield

The yield, based on the most recent quarterly rate times four. To determine the yield, divide the annual dividend by the price of the stock. The resulting number is represented as a percentage. [Harvey]

indirect bucketing

Also referred to as indirect trading against. Refers to when a floor broker effectively trades opposite his customer in a pair of non-competitive transactions by buying (selling) opposite an accommodating trader to fill a customer order and by selling (buying) for his personal account opposite the same accommodating trader. The accommodating trader assists the floor broker by making it appear that the customer traded opposite him rather than opposite the floor broker. [CFTC]

indirect business taxes

Taxes paid by businesses other than employer contributions for social insurance and corporate income taxes; examples include sales taxes, excise taxes, and property taxes. [BEA]

indirect cost

A cost necessary for the functioning of the organization as a whole, but which cannot be directly assigned to one service. [EPA]

indirect loan

A loan that is transferred to a third party after being originated by a dealer, retailer or other seller of goods or services to finance the purchase of those goods or services. The loan is an indirect loan from the third party (to whom it is transferred) to the consumer of the goods or services bought on credit. [OTS]

indirect quote

For foreign exchange, the number of units of a foreign currency needed to buy one U.S.$. [Harvey]

individual account

A savings account owned and controlled by one person rather than by a corporation or other legal entity. [OTS]

Individual Investor Express Delivery Service (IIEDS)

A Service for individual investors which put their orders to the head of any Tandem Systems Queue. [NYSE]

Individual Investors Advisory Committee (IIAC)

Provides counsel on the needs and concerns of individual investors. The committee advises the board on policies and programs to advance the interests of individuals who invest in equities, options, futures, and fixed income securities. In addition, the committee serves as a liaison and enhances communications between individual shareholders and the NYSE board. Other Financial Organizations Advisory Committees [NYSE]

individual minimum capital requirement (IMCR)

An order issued by the Office of Thrift Supervision to a savings institution ordering the thrift to hold higher capital than would be required under the agency's regulations, or federal law. IMCRs may be issued to institutions experiencing unusual problems including high exposure to interest rate risk and credit risk, inadequate liquidity, operating problems, inadequate underwriting policies, and low-yielding assets. [OTS]

individual retirement account (IRA)

A pension plan with tax advantages, permits investment through intermediaries like mutual funds, insurance companies and banks or directly in stocks and bonds through stockbrokers. [NYSE] An IRS-approved pension plan for individuals. [WCSU] An interest-earning retirement savings account in which the allowable contributions and earnings are not taxed until the funds are withdrawn, after age 59 1/2. [OTS]

inductive reasoning

The attempt to use information about a specific situation to draw a conclusion. [Harvey]

industrial bank

A limited service financial institution that raises funds by selling certificates called 'investment shares' and by accepting deposits, and invests such funds in installment loans to consumers and to small businesses. Often such loans are secured by a third party who signs a co-maker note pledging to repay the loan if the borrower defaults, or the loan is secured by a chattel mortgage. Industrial banks are sometimes called Morris Plan banks or industrial loan companies. Industrial banks are distinguished from commercial loan companies because industrial banks accept deposits in addition to making consumer loans. Industrial banks are distinguished from commercial banks because industrial banks do not offer demand deposit (checking) accounts. [OTS]

Industrial Bank Savings Guaranty Corporation (IBSGC)

A Colorado nonprofit corporation that provides deposit insurance for state chartered industrial banks. [FDIC]

industrial list

The Coordinating Committee for Multilateral Export Controls industrial list contains dual-use items whose export are controlled for strategic reasons. [ITDS]

industrial policy

Encompasses traditional government policies intended to provide a favorable economic climate for the development of industry in general or specific industrial sectors. [ITDS]

industrial revenue bond (IRB)

A financing technique in which a municipality or its development corporation issues bonds to finance revenue-producing projects. Revenue thus generated is used to pay the debt service on the bonds. [OTS] Bond issued by local government agencies on behalf of corporations. [Harvey] Issued by local government agencies on behalf of corporations. [WCSU]

industry

The category describing a company's primary business activity. This category is usually determined by the largest portion of revenue. [Harvey]

industry condition report (ICR)

any of the financial reports savings associations are required to file with the Office of Thrift Supervision. [OTS]

inelastic demand

A term used when the percentage change in quantity demanded is smaller than the percentage change in price. [FACS]

infant industry argument

The view that 'temporary protection' for a new industry or firm in a particular country through tariff and non-tariff barriers to imports can help it to become established and eventually competitive in world markets. [ITDS]

infirmity

any known act or visible omission in detail during the creation or transfer of title that would invalidate the title. [OTS]

inflation

A rate increase in the general price level of all goods and services. (This should not be confused with increases in the prices of specific goods relative to the prices of other goods.) [FRB][FRBC] A rate of increase in the general price level of all goods and services. (This should not be confused with increases in the prices of specific goods relative to the prices of other goods.) [FRBSF] A rise, over time, in the average level of prices. [FRB][FRBM] An economic condition marked by a decrease in the purchasing power of the dollar and a general rise in prices. [OTS] Increase in the overall level of prices over an extended period of time. [FACS] Increase in the prices for goods and services. [NYSE] Loss of purchasing power of money caused by growth of the amount of money in circulation. [ITDS] The rate at which the general level of prices for goods and services is rising. [Harvey]

inflation rate

An important economic indicator. The rate at which prices are rising. [NYSE]

inflation risk

Also called purchasing-power risk, the risk that changes in the real return the investor will realize after adjusting for inflation will be negative. [Harvey]

inflation uncertainty

The fact that future inflation rates are not known. It is a possible contributing factor to the makeup of the term structure of interest rates. [Harvey]

inflation-escalator clause

A clause in a contract providing for increases or decreases in inflation based on fluctuations in the cost of living, production costs, and so forth. [Harvey]

inflation-indexed debt instrument

Generally a debt instrument (such as a bond or note) on which the payments are adjusted for inflation and deflation. In a typical inflation-indexed instrument, the principal amount is adjusted monthly based on an inflation index such as the Consumer Price Index. [CFTC]

inflationary expectations

The rate of increase in the general price level anticipated by the public in the period ahead. [FRB][FRBC][FRBSF]

informal entry

A simplified import entry procedure accepted at the option of Customs for any baggage or commercial shipment that does not exceed $2000. [ITDS]

information asymmetry

A situation involving information that is known to some, but not all, participants. [Harvey]

information coefficient

The correlation between predicted and actual stock returns, sometimes used to measure the value of a financial analyst. An IC of 1.0 indicates a perfect linear relationship between predicted and actual returns, while an IC of 0.0 indicates no linear relationship. [Harvey]

information costs

Transaction costs that include the assessment of the investment merits of a financial asset. [Harvey]

Information Generation System (IGS)

Reads information lines, calculates best bid offer, index calculation, best price quotes (pricing for odd lots), and forms and sends information to trading floor overhead screen (FID). [NYSE]

information package

A collection of detailed information about the amounts and types of assets and liabilities of a failed or failing institution. The information varies, depending on the composition of assets and liabilities of the troubled institution. An information package, which is subject to a confidentiality agreement, is provided to potential purchasers to facilitate their analyses of the failing institution. [FDIC]

information services

Organizations that furnish investment and other types of information, such as information that helps a firm monitor its cash position. [Harvey]

information superhighway

A slang phrase referring to efforts to deregulate communication services allowing for the integration of all aspects of the Internet, CATV, telephone, business, entertainment, information providers, education, etc. [UNODC]

information-content effect

The rise in the stock price following the dividend signal. [Harvey]

information-motivated trades

Trades in which an investor believes he or she possesses pertinent information not currently reflected in the stock's price. [Harvey]

informational efficiency

The speed and accuracy with which prices reflect new information. [Harvey]

informationless trades

Trades that are the result of either a reallocation of wealth or an implementation of an investment strategy that only utilizes existing information. [Harvey]

informed compliance

A term that describes the improved ability of a entity (such as a company) to comply with Federal rules and regulations through easy access to up-to-date information. [ITDS]

infrastructure

The basic structure of a nations economy. [ITDS]

ingress

to go in, to enter. It is used with the word egress to describe the right of access to land. [OTS]

inherent risk

The potential for fraud, waste, abuse, or mismanagement in an organizational unit without regard to the controls contemplated or already in place, as defined in the FDIC Internal Control Review program. [FDIC]

inherent vice

The inherent physical properties of goods which may cause them to suffer deterioration or damage without outside influence. (For example: spontaneous combustion.) [ITDS]

inheritance tax

A state tax based on the value of property passing to each heir. It differs from the estate tax in that kinship generally determines the tax rate and the exempt amount, while the estate tax is a net value tax. [OTS]

initial closing

The act in which a lender funds a construction loan. [OTS]

initial delivery

The delivery of a new issue by the issuer to the original purchaser, upon payment of the purchase price. Also called 'original delivery'. [EPA]

initial deposit

initial margin

Customers' funds put up as security for a guarantee of contract fulfillment at the time a futures market position is established. [CFTC]

initial margin requirement

When buying securities on margin, the proportion of the total market value of the securities that the investor must pay for in cash. The Security Exchange Act of 1934 gives the board of governors of the Federal Reserve the responsibility to set initial margin requirements, but individual brokerage firms are free to set higher requirements. In futures contracts, initial margin requirements are set by the exchange. [Harvey]

initial offering price

The price (based upon yield to maturity) stated as a percentage of par at which the original purchaser determines to market the issue during the initial offering period. If the original purchaser is an account, members of the account may not offer any part of the issue at any other price during that period. If a large principal amount of the issue remains unsold at the end of the initial offering period, the account may at that time adjust the offering price. [EPA]

initial public offering (IPO)

A company's first sale of stock to the public. Securities offered in an IPO are often, but not always, those of young, small companies seeking outside equity capital and a public market for their stock. Investors purchasing stock in IPOs generally must be prepared to accept very large risks for the possibility of large gains. IPO's by investment companies (closed-end funds) usually contain underwriting fees which represent a load to buyers. [Harvey] A corporation's first offering of stock to the public. [NYSE] The first time a company offers to sell its stock to the public. An IPO of a newly formed corporation takes place before the stock begins trading in the market, and the price of the IPO shares is fixed by the company. [OTS]

initial targeted cash value (ITCV)

An estimate of the gross cash collections expected from the disposition of a pool of assets assigned to an asset manager under an RALA. [FDIC]

injunction

A court order prohibiting an act or compelling an act to be performed. [OTS]

injury

A finding by the U.S. International Trade Commission that an import is causing harm or going to cause harm to a U.S. industry. [ITDS]

inland bill of lading

A bill of lading used in transporting goods overland to the exporters international carrier. [ITDS]

inland carrier

A transportation line which hauls import/export traffic between ports and inland points. [ITDS]

inner city

The older, central part of a city, often characterized by crowded, run-down, low-income neighborhoods. [OTS]

input-output tables

Tables that indicate how much each industry requires of the production of each other industry in order to produce each dollar of its own output. [Harvey]

insider

An individual who by virtue of his or her employment or other close relationship has information on the financial status of a firm or a particular transaction before that information is available to the general public. [OTS] These are directors and senior officers of a corporation -- in effect those who have access to inside information about a company. An insider also is someone who owns more than 10% of the voting shares of a company. [Harvey]

insider dealing

A criminal offense involving the purchase or sale of shares by someone who possesses 'inside' information about a company's performance and prospects which is not yet available to the market as a whole, and which if available might affect the share price. [UNODC]

insider information

Relevant information about a company that has not yet been made public. It is illegal for holders of this information to make trades based on it, however received. [Harvey]

insider trading

The trading of a public company's stock or other securities (such as bonds or stock options) by individuals with access to non-public information about the company. In various countries, trading based on insider information is illegal. This is because it is seen as unfair to other investors who do not have access to the information. [Wikipedia] Trading by officers, directors, major stockholders, or others who hold private inside information allowing them to benefit from buying or selling stock. [Harvey]

insolvency

The inability to pay one's debts as they come due. Even though the total assets of an organization may exceed its total liabilities, the entity is insolvent if the assets cannot be converted into cash to meet the current obligations. [OTS]

insolvency risk

The risk that a firm will be unable to satisfy its debts. Also known as bankruptcy risk. [Harvey]

insolvent

The state of being unable to pay debts when demanded by creditors at maturity. [OTS]

inspection certificate

A document confirming that goods have been inspected for conformity. [ITDS]

installment

The regular, periodic payment that a borrower agrees to make to a lender to repay a debt. [OTS]

installment credit

The practice of paying for goods or services after receiving them by making two or more payments within a specified period of time. [OTS]

installment sale

The sale of an asset in exchange for a specified series of payments (the installments). [Harvey] Transaction by which the issuer sells the project on an installment purchase basis, and the purchaser buys (pays the installment purchase price for) the project by paying debt service on the issue and certain other costs of the issuer related to the issue or project. [EPA]

institution

An organization, foundation or establishment devoted to a particular type of endeavor, such as a savings institution. [OTS]

Institutional Delivery (ID)

System operated by DTC allows an institutional investor to make and receive deliveries directly or via custodial accounts in satisfaction of trades that have been made. Often, the offset of an ID delivery is an exchange trade settled in CNS. [NSCC]

institutional investor

A bank, financial institution or insurance company or other highly financially-sophisticated organization which conducts a business of investing. [EPA] Organizations that invest, including insurance companies, depository institutions, pension funds, investment companies, mutual funds, and endowment funds. [Harvey]

institutional lender

A financial institution or mortgage lender that invests its own funds and funds it is managing in real estate mortgages. Examples include savings and loan associations, savings banks, commercial banks, life insurance companies and pension and trust funds. [OTS]

Institutional Traders Advisory Committee (ITAC)

Advises on policies and procedures for strengthening the efficiency of NYSE markets. Its members, who represent leading financial institutions, also assist the NYSE staff in developing ways to improve communication with investing institutions. They provide views on the prospective impact of proposed trading rules on institutional investors' needs and interests. [NYSE]

institutionalization

The gradual domination of financial markets by institutional investors, as opposed to individual investors. This process has occurred throughout the industrialized world. [Harvey]

instrument

A tradable asset such as a commodity, security, or derivative, or an index or value that underlies a derivative or could underlie a derivative. [CFTC] Any written document that gives formal expression to a legal agreement or act. [ITDS] Financial securities, such as money market instruments or capital market insturments. [Harvey] any written document that sets forth a legal agreement. [OTS]

instrumentality

An organization created by the federal government whose obligations are not the direct obligation nor guaranteed by the federal government. [OTS]

insufficient funds

The situation in which the drawer's deposit balance is less than the amount of the drawer's check presented for payment. [OTS]

insurance

insurance principle

The law of averages. The average outcome for many independent trials of an experiment will approach the expected value of the experiment. [Harvey]

insured bond

A municipal bond backed both by the credit of the municipal issuer and by commercial insurance policies. [Harvey]

insured closing letter

A document issued by a title insurance company in connection with an about-to-be-issued title insurance policy. It protects a mortgagee who is forwarding funds to a title insurance company's agent or attorney against an embezzlement of funds or a failure to follow specific closing instructions. [OTS]

insured deposit

Deposit in an FDIC insured commercial bank, savings bank, or savings association that is fully protected by FDIC deposit insurance. Savings, checking, and other deposit accounts, when combined, are generally insured up to $100,000 per depositor in each financial institution insured by the FDIC. Deposits held in different ownership categories, such as single or joint accounts, are separately insured. Also, separate $100,000 coverage is usually provided for retirement accounts, such as individual retirement accounts. [FDIC]

insured deposit transfer (IDT)

A type of deposit payoff in which the insured and secured deposits of a closed bank or thrift are transferred to a transferee or agent institution in the community, permitting a direct payoff of the failed institution's depositors by the agent institution. The agent institution pays customers of the failed institution the amount of their insured deposits or, at the customer's request, opens a new account in the agent institution for the customer. When no assuming bank can be found for the failed bank, an insured deposit transfer is an alternative to a straight deposit payoff. [FDIC]

insured plans

Defined benefit pension plans that are guaranteed by life insurance products. [Harvey]

intangible asset

A legal claim to some future benefit, typically a claim to future cash. Goodwill, intellectual property, patents, copyrights, and trademarks are examples of intangible assets. [Harvey] An asset that has no substance or physical properties. Intangible assets include goodwill, patent rights, permits, copyrights and licenses. [OTS] Nonmaterial assets such as technical expertise, trademarks, and patents. [WCSU]

integer programing

Variant of linear programming where solution values must be integers. [WCSU]

integer programming

Variant of linear programming whereby the solution values must be integers. [Harvey]

Integrate Technology Plan Network (ITPN)

High-speed secure environment to integrate services and functions supporting the trading floor. [NYSE]

integrated cargo service

A blend of all segments of the cargo system providing the combined services of carrier, forwarder, handlers, and agents. [ITDS]

integrated carriers

Carriers that have multiple varieties of fleets (i.e. air and ground, truck and rail, etc.). [ITDS]

Integrated Computer Assisted Surveillance System (ICASS)

Accesses data from many sources to provide on-line stock watch and follow-up case studies. [NYSE]

integration

A term that describes the degree in and to which one given company participates in all phases of the petroleum industry. [NYMEX]

intellectual property

A collective term used to refer to new ideas, inventions, designs, writings, film and others protected by copyright, patents, trade-marks, etc. [UNODC] An original piece of work that can be copyrighted or trade marked to confirm ownership. [ITDS]

inter vivos trust

A trust established between living persons. [UNODC]

Inter-American Development Bank

A multinational financial organization established in 1959 to encourage economic development in 21 member Latin American nations. [OTS]

interbank dealings

Dealings between the banks. [ITDS]

interbank rate of exchange

The rate at which banks deal with each other in the market. [UNODC]

intercept point

An institution or computer service company designated to act on behalf of another institution to receive and/or send ACH entries. [ACH]

interchange

The exchange of information, transaction data and money among banks. Interchange systems are managed by Visa and MasterCard associations and are very standardized so banks and merchants worldwide can use them. [GAO]

interchange agreement

An agreement that specifically lays out the terms of leasing equipment from a carrier. [ITDS]

interchange fee

A fee paid by the acquiring bank/merchant bank to the issuing bank. The fee compensates the issuer for the time after settlement with the acquiring bank/merchant bank and before it recoups the settlement value from the cardholder. [GAO]

interchange point

A location where one carrier delivers freight to another carrier. [ITDS]

intercommodity spread

A spread in which the long and short legs are in two different but generally related commodity markets. Also called an intermarket spread. [CFTC] The purchase of a given delivery month of one futures market and the simultaneous sale of the same delivery month of a different, but related, futures market. [CBOT][MIDAM]

interdelivery spread

A spread involving two different months of the same commodity. Also called an intracommodity spread. [CFTC] The purchase of one delivery month of a given futures contract and simultaneous sale of another delivery month of the same commodity on the same exchange. Also referred to as an intramarket or calendar spread. [CBOT][MIDAM]

interest

(A) The charge for or cost of borrowing money, measured in terms of a percentage per annum of the principal amount. (B) Compensation for the use of borrowed money, generally expressed as an annual percentage of the principal amount. [EPA] A fee paid for using money that belongs to another, usually expressed as an annual percentage of the amount used. A financial institution makes periodic payments of interest to savers for the use of their deposited funds. A borrower pays interest to the financial institution for the use of its funds. [OTS] Payments borrowers pay lenders for the use of their money. A corporation pays interest on its bonds to its bondholders. [NYSE] The annual earnings that are sacrificed when wealth is invested in a given asset or business. The interest sacrificed by investing in a given business is often called the cost of capital. [FACS] The payment a corporate or governmental issuer makes to bondholders in return for the loan of money. [SEC] The price paid for borrowing money. It is expressed as a percentage rate over a period of time and reflects the rate of exchange of present consumption for future consumption. Also, a share or title in property. [Harvey]

interest cover

interest coverage ratio

The ratio of the earnings before interest and taxes to the annual interest expense. This ratio measures a firm's ability to pay interest. [Harvey]

interest coverage test

A debt limitation that prohibits the issuance of additional long-term debt if the issuer's interest coverage would, as a result of the issue, fall below some specified minimum. [Harvey]

interest credited

interest that a savings institution automatically deposits to a savings account. [OTS]

interest earned

interest generated but not yet credited or paid. [OTS]

interest equalization tax

Tax on foreign investment by residents of the U.S. which was abolished in 1974. [Harvey][WCSU]

interest margin

The dollar amount of interest earned on assets minus the dollar amount of interest paid on liabilities. [OTS]

interest on interest

Interest earned on reinvestment of each interest payment on money invested. [Harvey]

interest only

interest paid

interest that a savings institution mails directly to a depositor. [OTS]

interest payment dates

Dates on which interest is due and payable. [EPA]

interest payments

Contractual debt payments based on the coupon rate of interest and the principal amount. [Harvey] The return expressed in percentages earned on an investment each year. These payments are issued every six months based on an annual rate. [FRBSF]

interest rate

Another important economic indicator. The price, calculated as a percentage of the money loaned, that banks are charging borrowers for the use of the banks' money. Intermarket Trading System [NYSE] The annual percentage of principal payable for the use of borrowed money. [EPA] The percentage of the principal paid by the borrower to the lender for the use of the lender's money. [OTS]

interest rate agreement

An agreement whereby one party, for an upfront premium, agrees to compensate the other at specific time periods if a designated interest rate (the reference rate) is different from a predetermined level (the strike rate). [Harvey]

interest rate cap

Also called an interest rate ceiling, an interest rate agreement in which payments are made when the reference rate exceeds the strike rate. [Harvey]

interest rate floor

An interest rate agreement in which payments are made when the reference rate falls below the strike rate. [Harvey]

interest rate futures

Futures contracts traded on fixed income securities such as U.S. Treasury issues, or based on the levels of specified interest rates such as LIBOR (London Interbank Offered Rate). Currency is excluded from this category, even though interest rates are a factor in currency values. [CFTC]

interest rate on debt

The firm's cost of debt capital. [Harvey]

interest rate parity theorem

Interest rate differential between two countries is equal to the difference between the forward foreign exchange rate and the spot rate. [Harvey]

interest rate risk

The risk that a savings association's assets and/or liabilities will decline in market value because of changes in market interest rates. For example, on the asset side, an old loan earning 10 percent will be worth less to the association if interest rates on new loans rise to 12 percent. On the liabilities side, an existing certificate of deposit yielding 10 percent becomes relatively more costly to the association if the interest rate on a comparable new CD drops to 8 percent. [OTS] The risk that a security's value changes due to a change in interest rates. For example, a bond's price drops as interest rates rise. For a depository institution, also called funding risk, the risk that spread income will suffer because of a change in interest rates. [Harvey]

interest rate spread

A percent calculated as follows: (dollars of interest earned divided by the dollar amount of interest earning assets) minus (dollars of interest paid divided by the dollar amount of interest costing liabilities). [OTS]

interest rate swap

A binding agreement between counterparties to exchange periodic interest payments on some predetermined dollar principal, which is called the notional principal amount. For example, one party will pay fixed and receive variable. [Harvey] A contractual agreement whereby two parties exchange interest payments on a notional amount of principal during a predetermined period. In a fixed/floating swap, fixed-rate interest rate payments are exchanged for variable-rate payments. In a floating/floating swap, payments tied to two types of short-term variable indices are exchanged. Interest rate swaps are an asset/liability management tool. [OTS] A swap in which the two counterparties agree to exchange interest rate flows. Typically, one party agrees to pay a fixed rate on a specified series of payment dates and the other party pays a floating rate that may be based on LIBOR (London Interbank Offered Rate) on those payment dates. The interest rates are paid on a specified principal amount called the notional principal. [CFTC] The exchange between counterparties of a fixed interest rate and a floating interest rate in a single currency. [TMAC]

interest subsidy

A firm's deduction of the interest payments on its debt from its earnings before it calculates its tax bill under current tax law. [Harvey]

interest tax shield

The reduction in income taxes that results from the tax-deductibility of interest payments. [Harvey]

interest-only strip

A security based solely on the interest payments form a pool of mortgages, Treasury bonds, or other bonds. Once the principal on the mortgages or bonds has been repaid, interest payments stop and the value of the IO falls to zero. [Harvey]

interest-rate parity

Theory that the differential between the forward exchange rate and the spot exchange rate is equal to the difference between the foreign and domestic interest rate. [WCSU]

interim loan

A short-term mortgage loan, often for the construction of a building. [OTS]

interline shipping

The movement of a single shipment in two or more carriers. [ITDS]

interlocking directorate

The situation in which one or more members of the board of directors of one business are also members of the board of directors of another corporation. [OTS]

intermarket sector spread

The spread between the interest rate offered in two sectors of the bond market for issues of the same maturity. [Harvey]

intermarket spread

The sale of a given delivery month of a futures contract on one exchange and the simultaneous purchase of the same delivery month and futures contract on another exchange. [CBOT][MIDAM]

intermarket spread swaps

An exchange of one bond for another based on the manager's projection of a realignment of spreads between sectors of the bond market. [Harvey]

Intermarket Surveillance Group (ISG)

Allows regulatory staffs of the national securities exchanges and the NASD to coordinate industry-wide cooperative efforts for exchanging market data. Their goal is to enhance intermarket surveillance to assure the integrity of trading in options and equities, and to enhance public protection. [NYSE]

Intermarket Surveillance Information System (ISIS)

Houses detailed and summarized equity and option transaction, quotation and clearance data from all the ISG participants, as well as the proprietary data of participants. An NYSE product, ISIS is currently used by the American, Boston, and Philadelphia stock exchanges. Providing surveillance personnel with easy on-line access to complete, accurate, and timely data makes surveillance tasks more efficient and effective. [NYSE]

Intermarket Trading System (ITS)

An electronic network of U.S. exchanges and NASD broker/dealers. The ITS system displays quotes of stocks traded on multiple exchanges. This allows specialists and traders to get the best possible price of a stock for their customers. [NYSE] Links the NYSE and other national market centers in a communications and dataprocessing network. ITS, cooperatively developed by the system's competing markets, enables brokers and participating market-makers to reach electronically into any of the markets within seconds, whenever the Consolidated Quotation System indicates the possibility of better execution. [NYSE]

intermediary

A person or institution empowered to make investment decisions for others. [UNODC] A person who acts on behalf of another person in connection with futures trading, such as a futures commission merchant, introducing broker, commodity pool operator, commodity trading advisor, or associated person. [CFTC]

intermediate inputs

Goods and services-consisting of energy, materials, and purchased services-- that are used in the production of other goods and services and not sold in final-demand markets. [BEA]

intermediate targets

An intermediate target is a variable (such as the money supply) that is not directly under the control of the central bank, but that does respond fairly quickly to policy actions, is observable frequently, and bears a predictable relationship to the ultimate goals of policy. [FRBSF]

intermediate-term

Typically 1-10 years. [Harvey]

intermediation

Investment through a financial institution. [Harvey][WCSU] The process carried out by a financial institution serving as a link, or intermediary, between borrowers and savers. Savers deposit funds in the institution, which lends those funds to home buyers and other borrowers. [OTS]

intermodal compatibility

The capability of a shipment of goods to be transported from one form of transportation to another. [ITDS]

intermodal transport

Coordinated transport of freight using multiple methods of transportation. [ITDS]

internal control systems

Processes designed to provide reasonable assurance that control objectives are achieved, according to the FDIC Internal Control Review program. [FDIC]

internal finance

Finance generated within a firm by retained earnings and depreciation. [Harvey][WCSU]

internal growth rate

Maximum rate a firm can expand without outside source of funding. Growth generated by cash flows retained by company. [Harvey]

internal market

The mechanisms for issuing and trading securities within a nation, including its domestic market and foreign market. [Harvey]

internal measure

The number of days that a firm can finance operations without additional cash income. [Harvey][WCSU]

internal rate of return (IRR)

A discount rate at which the present value of future net cash flows of an investment equals the cost of the investment. [FDIC] Dollar-weighted rate of return. Discount rate at which net present value (NPV) investment is zero. The rate at which a bond's future cash flows, discounted back to today, equals its price. [Harvey]

Internal Revenue Service (IRS)

internally efficient market

Operationally efficient market. [Harvey]

international

international association of insurance supervisors (IAIS)

Established in 1994, the IAIS seeks to establish international standards on insurance supervision and conducts training seminars for insurance supervisors from emerging markets. The Association also seeks to coordinate its efforts with other global financial regulators, particularly those from the banking and securities industries. [UNODC]

International Bank for Reconstruction and Development (IBRD)

(The World Bank) an organization proposed at the July 1944 Bretton Woods Conference, which began operation in June 1946. Initially, it provided loans for reconstruction following World War II. Its primary function now is to provide loans for economic development. [OTS] International Bank for Reconstruction and Development makes loans at nearly conventional terms to countries for projects of high economic priority. [Harvey] The IBRD was established 22 July 1944 to provide economic development loans. IBRD is a UN specialized agency and is located in Washington, D.C., USA. [UNODC]

international banking facility (IBF)

A branch that an American bank establishes in the United States to do Eurocurrency business. [WCSU] A set of asset and liability accounts segregated on the books and records of a depository institution. [UNODC] Facilities which, in general, can accept time deposits from foreign customers free of reserve requirements and interest rate limitations, and can lend to foreigners if the funds are for the conduct of foreign business outside of the U.S. Net borrowing from these facilities by domestic banking offices is subject to reserve requirements. [FRBSF] In general, these facilities can accept time deposits from foreign customers free of reserve requirements and interest rate limitations, and can lend to foreigners if the funds are for the conduct of foreign business outside of the U.S. Net borrowing from these facilities by domestic banking offices is subject to reserve requirements. [FRB][FRBC][FRBM] International Banking Facility. A branch that an American Bank establishes in the United States to do Eurocurrency business. [Harvey]

international bonds

A collective term that refers to global bonds, Eurobonds, and foreign bonds. [Harvey]

international business corporations (IBCs)

A term used to define a variety of offshore corporate structures. Common to all IBCs are their dedication to business use outside the incorporating jurisdiction, rapid formation, secrecy, broad powers, low cost, low to zero taxation, and, minimal filing and reporting requirements. An increasing number of offshore jurisdictions are permitting the use of bearer shares, nominee shareholders, directors and officers. Once formed, the company will become a 'separate legal entity' and once established, its financial liability be limited and it can also be arranged that the principals will have no manifest connection with the company. IBCs are routinely used in money-laundering schemes because they provide an impenetrable layer of protection around the ownership of assets. The corporation was created as a legal entity in order to give business people the opportunity to conduct their affairs without risking all their assets. At its heart was the concept of limited liability that depended on a paid-in capital. In the world's leading commercial jurisdictions, corporations are required by law to have regular meetings and keep books and corporate records, otherwise the protection of the corporate form ends. In contrast, in most jurisdictions the IBC operates without any government requirements. The purpose of the IBCs corporate form is to enable its owners to act with complete anonymity and the limited liability has been extended to a concept of no legal responsibility for any action. [UNODC]

International Capital Markets Advisory Committee (ICM)

Advises on policies to strengthen the position of the U.S. as a world capital center and the NYSE as an international market. The committee's widely respected international finance experts receive and react to the NYSE's prospective international policies and programs, and advise on operating systems and procedures to facilitate nonresidents' trading in U.S. securities. They recommend programs to encourage the listing of foreign companies' securities in the U.S., and advise the staff on fulfilling the NYSE's obligations as a member of the International Federation of Stock Exchanges. [NYSE]

international commodities clearinghouse

International Criminal Police Organization (INTERPOL)

Established on June 13, 1956, to promote international cooperation among police authorities in fighting crime. [UNODC]

International Depository Receipt

A receipt issued by a bank as evidence of ownership of one or more shares of the underlying stock of a foreign corporation that the bank holds in trust. The advantage of the IDR structure is that the corporation does not have to comply with all the regulatory issuing requirements of the foreign country where the stock is to be traded. The U.S. version of the IDR is the American Depository Receipt (ADR). [Harvey]

international diversification

The attempt to reduce risk by investing in the more than one nation. By diversifying across nations whose economic cycles are not perfectly correlated, investors can typically reduce the variability of their returns. [Harvey]

international finance subsidiary

A subsidiary incorporated in the U.S., usually in Delaware, whose sole purpose was to issue debentures overseas and invest the proceeds in foreign operations, with the interest paid to foreign bondholders not subject to U.S. withholding tax. The elimination of the corporate withholding tax has ended the need for this type of subsidiary. [Harvey]

international financial centres

International Fisher effect

States that the interest rate differential between two countries should be an unbiased predictor of the future change in the spot rate. [Harvey]

international fund

A mutual fund that can invest only outside the United States. [Harvey]

international investment position of the United States

Measure of the value of accumulated stocks of U.S. assets abroad less those of foreign assets in the United States at a point in time. [BEA]

International Monetary Fund (IMF)

A specialized agency of the United Nations. It encourages monetary cooperation, establishes international standards for exchange policy, promotes stable exchange policy, promotes stable exchange rates among member nations, and makes short-term advances and standby credits to members experiencing temporary payments difficulties. Its resources come mainly from subscriptions of members. [FDIC] An international organization with 146 members, including the United States. The main functions of the IMF are to lend funds to member nations to finance temporary balance of payments problems, to facilitate the expansion and balanced growth of international trade, and to promote international monetary cooperation among nations. The IMF also creates special drawing rights (SDR's), which provide member nations with a source of additional reserves. Member nations are required to subscribe to a Fund quota, paid mainly in their own currency. The IMF grew out of the Bretton Woods Conference of 1944. [FRBSF] An international organization with 146 members, including the United States. The main functions of the International Monetary Fund are to lend funds to member nations to finance temporary balance of payments problems, to facilitate the expansion and balanced growth of international trade, and to promote international monetary cooperation among nations. The IMF also creates special drawing rights (SDR's), which provide member nations with a source of additional reserves. Member nations are required to subscribe to a Fund quota, paid mainly in their own currency. The IMF grew out of the Bretton Woods Conference of 1944. [FRB][FRBC][FRBM] An international organization with 146 members, including the United States. The main functions of the International Monetary Fund are to lend member nations funds to finance solutions to temporary balance of payments problems, to facilitate the expansion and balanced growth of international trade, and to provide international monetary cooperation among nations. The IMF also creates additional reserves for member nations called special drawing rights. Member nations must subscribe to a Fund quota, making payments mainly in their own currency. The IMF grew out of the Bretton Woods Conference of 1944. [OTS] An organization founded in 1944 to oversee exchange arrangements of member countries and to lend foreign currency reserves to members with short-term balance of payment problems. [Harvey] IMF was established 22 July 1944 to promote world monetary stability and economic development. IMF is a UN specialized agency and is located in Washington, D.C., USA. [UNODC] The overseer for the exchange rate system and international monetary relations. [FACS]

International Monetary Market

A division of the CME established in 1972 for trading financial futures. [Harvey]

international narcotics control strategy report (INCSR)

The US Department of State's INCSR is prepared in accordance with § 489 of the Foreign Assistance Act of 1961, as amended (the FAA, 22 U.S.C. §2291). The INCSR provides the factual basis for the Presidential narcotics certification determinations for major drug-producing and/or drug-transit countries. Although the Convention does not contain a list of goals and objectives, it does set forth a number of obligations that the parties agree to undertake. Generally speaking, it requires the parties to take legal measures to outlaw and punish all forms of illicit drug production, trafficking, and drug money laundering, to control chemicals that can be used to process illicit drugs, and to cooperate in international efforts to these ends. [UNODC]

International Organization of Securities Commissioners (IOSCO)

Encourages cooperative policies on market regulation, surveillance, and enforcement at the domestic and international levels in order to maintain just and efficient securities markets. [NYSE]

International Organization of Securities Commissions (IOSCO)

IOSCO is the leading international grouping of securities market regulators. IOSCO is comprised of regulatory bodies which have day to day responsibility for securities regulation and the administration of securities laws.
IOSCO was formed:

• to cooperate together to promote high standards of regulations in order to maintain just, efficient and sound markets.
• to exchange information on their respective experiences in order to promote the development of domestic markets.
• to unite their efforts to establish standards and an effective surveillance of international securities transactions.
• to provide mutual assistance to promote the integrity of the markets by a rigorous application of the standards and by effective enforcement against offenses.

[UNODC]

International Securities Clearing Corporation (ISCC)

International Swaps and Derivatives Association (ISDA) Agreements

Standardized legal documents used by institutions entering into over the counter derivative contracts. [TMAC]

International Swaps and Derivatives Association (ISDA)

international trade

The business of buying and selling commodities outside of national boarders. [ITDS]

International Trade Data System (ITDS)

Internet

The Internet is an open, worldwide communication infrastructure consisting of interconnected computer networks that allow access to remote information and the exchange of information between computers. [GAO]

internet fraud

interregional exchange

The exchange of ACH entries through more than one ACH, to financial institutions throughout the United States. [ACH]

interrogation device

A computer terminal that provides market information -- last sale price, quotes, volume, etc. -- on a screen or paper tape. [NYSE]

interruptible service

Utility service which expects and permits interruption on short notice, generally in peak-load periods, in order to meet the demand by firm service customers. Interrupt-ible service customers usually pay a lower rate than firm service customers. Opposite of Firm Service. [NYMEX]

interstate carrier

A common carrier whose business extends beyond the boundaries of one state. [ITDS]

interstate commerce

Trade between or among several states of the United States; includes facsimile across state lines or transport by rail and roads. [ITDS]

interval measure

The number of days that a firm can finance operations without additional cash income. [Harvey][WCSU]

intestate

The situation in which a person dies without leaving a valid will. [OTS]

intra-day position

The size of spot or forward positions allowed for a dealer during the business day, which may be larger than that allowed for the end of the day. Also called 'daylight' limits. [FDIC]

intracommodity spread

intracompany loan

Loan made by one unit of a corporation to another unit of the same corporation. [Harvey]

intracompany transaction

Transaction carried out between two units of the same corporation. [Harvey]

intramarket sector spread

The spread between two issues of the same maturity within a market sector. For instance, the difference in interest rates offered for five-year industrial corporate bonds and five-year utility corporate bonds. [Harvey]

intraregional exchange

The exchange of ACH entries between two financial institutions within the same Federal Reserve zone. [ACH]

intrinsic value

(1) the market value of something's tangible material. (2) the difference between the option price and the market value of the underlying security, if the option to buy or sell is exercised immediately. [OTS] A measure of the value of an option or a warrant if immediately exercised, that is, the extent to which it is in-the-money. The amount by which the current price for the underlying commodity or futures contract is above the strike price of a call option or below the strike price of a put option for the commodity or futures contract. [CFTC] The amount by which an option is in-the-money. [CBOT][MIDAM] The amount by which an option is in-the-money. An option which is not in the money has no intrinsic value. For calls, intrinsic value equals the difference between the underlying futures price and the option's strike price. For puts, intrinsic value equals the option's strike price minus the underlying futures price. Intrinsic value is never less than zero. [NYMEX] The dollar amount of the difference between the exercise price of an option and the current cash value of the underlying security. Intrinsic value and time value are the two components of an option premium, or price. [NYSE] The economic value of an option if it is exercised immediately. The intrinsic value cannot be less than zero. [TMAC]

intrinsic value of a firm

The present value of a firm's expected future net cash flows discounted by the required rate of return. [Harvey]

intrinsic value of an option

The amount by which an option is in-the-money. An option which is not in-the-money has no intrinsic value. [Harvey]

introducing broker (IB)

A firm engaged in soliciting or in accepting orders for the purchase or sale of any commodity for future delivery. [NYMEX] A person or organization that solicits or accepts orders to buy or sell futures contracts or commodity options but does not accept money or other assets from customers to support such orders. [CBOT][MIDAM]

inventory

A stock of goods or resources held by a buyer or seller in order to reduce the cost of exchange or production. [FACS] All the raw materials and finished products a company has in its possession. [NYSE] For companies: Raw materials, items available for sale or in the process of being made ready for sale. They can be individually valued by several different means, including cost or current market value, and collectively by FIFO, LIFO or other techniques. The lower value of alternatives is usually used to preclude overstating earnings and assets. For security firms: securities bought and held by a broker or dealer for resale. [Harvey]

inventory loan

A loan granted for the purpose of purchasing inventory for resale, particularly manufactured (mobile) homes. [OTS] A secured short-term loan to purchase inventory. The three basic forms are a blanket inventory lien, a trust receipt, and field warehousing financing. [Harvey]

inventory turnover

The ratio of annual sales to average inventory which measures the speed that inventory is produced and sold. Low turnover is an unhealthy sign, indicating excess stocks and/or poor sales. [Harvey]

inventory valuation adjustment

In the NIPA's, an adjustment made to corporate profits and to proprietors' income in order to remove inventory 'profits', which are more like a capital-gain than like profits from current production. [BEA]

inverse floater

An asset, such as a mortgaged backed bond, paying an adjustable interest rate that rises or falls in the opposite direction of the movement of general market interest rates. The floating coupon rate is calculated as the difference between a constant interest rate and a designated index. For example, the floating rate might be 14 percent minus the current rate of LIBOR. As LIBOR increases, the bond's coupon payment rate decreases and vice versa. An inverse floater is a type of structured note. [OTS]

inverse floating rate note

A variable rate security whose coupon rate increases as a benchmark interest rate declines. [Harvey]

inverted market

A futures market in which the nearer months are selling at price premiums to the more distant months. [Harvey] A futures market in which the nearer months are selling at prices higher than the more distant months; a market displaying 'inverse carrying charges,' characteristic of markets with supply shortages. [CFTC] A futures market in which the relationship between two delivery months of the same commodity is abnormal. [CBOT][MIDAM] A futures market is said to be inverted when distant contract months are selling at a discount to nearby contract months; also known as backwardation. [NYMEX]

inverted or negative yield curve

The interest rate structure which exists when short-term interest rates exceed long-term interest rates. Compare 'Ascending or Positive Yield Curve'. [EPA]

investment

(1) The ownership or control of equity: (2) binding commitments to acquire equity; (3) contributions to the capital and surplus of an organization; and (4) the holding of an organization's subordinated debt when the investor and the investor's affiliates hold more than five percent of the equity of the organization. [UNODC] An outlay of a sum of money to be used in such a way that a profit or increase in capital may be expected. [OTS] As a discipline, the study of financial securities, such as stocks and bonds, from the investor's viewpoint. This area deals with the firm's financing decision, but from the other side of the transaction. [Harvey] Securities and real estate held for the production of income in the form of interest, dividends, rentals, or lease payments. The term does not include fixed assets used in governmental operations. [EPA] The use of money for the purpose of making more money, to gain income or increase capital, or both. [NYSE]

investment bank

A broker-dealer that (a) for a fee undertakes to market on behalf of an issuer a new issue, or (b) purchases, at competitive bidding or negotiated sale, a new issue from an issuer for resale. [EPA] Financial intermediaries who perform a variety of services, including aiding in the sale of securities, facilitating mergers and other corporate reorganizations, acting as brokers to both individual and institutional clients, and trading for their own accounts. Underwriters. [Harvey]

investment banker

Also known as an underwriter, the 'middleman' between a corporation issuing new securities and the public. The usual practice is for one or more investment bankers to buy outright from a corporation a new issue of stocks or bonds. The group forms a syndicate to sell the securities to individuals and institutions. Investment bankers also distribute very large blocks of stock or bonds --- perhaps held by an estate. [NYSE] An underwriter who serves as a middleman between a corporation issuing new securities and the public. Usually, an investment banker, or several investment bankers in a syndicate, buy the securities issue outright, then sell the securities to individuals or institutions. [OTS]

investment company

A company engaged primarily in the business of investing in securities. [SEC] A company or trust that uses its capital to invest in other companies. There are two principal types: the closed end and the open end, also known as a mutual fund. Shares of closed-end investment companies, most of which are listed on the NYSE, are readily transferable in the open market and are bought and sold like shares of stock. Capitalization of these companies remains the same unless action is taken to change, which is rare. Open-end funds sell their own new shares to investors, stand ready to buy back their old shares, and are not listed. Open-end funds are so called because their capitalization is not fixed; they issue more shares as people want them. [NYSE] A financial intermediary that sells shares and invests the proceeds in a portfolio of stocks and bonds. [OTS]

investment counsel

One whose principal business consists of acting as investment adviser and rendering investment supervisory services. [NYSE]

investment decisions

Decisions concerning the asset side of a firm's balance sheet, such as the decision to offer a new product. [Harvey]

investment expenditures

Dollar expenditures by firms on capital goods (factories, office buildings and others structures, machinery and equipment, inventories and residential housing) used to produce other new goods and services. [FACS]

investment fraud

investment grade

Corporate debt securities that are rated in the top four rating categories (AAA, AA, A, BBB) by one of the nationally recognized bond rating organizations. [FDIC]

investment income

The revenue from a portfolio of invested assets. [Harvey]

investment management

Also called portfolio management and money management, the process of managing money. [Harvey]

investment manager

Also called a portfolio manager and money manager, the individual who manages a portfolio of investments. [Harvey]

investment portfolio

A variety of securities owned by an individual or an institution. [NYSE]

investment product line

The line of required returns for investment projects as a function of beta (nondiversifiable risk). [Harvey]

investment tax credit

Proportion of new capital investment that can be used to reduce a company's tax bill (abolished 1986). [Harvey][WCSU]

investment trust

A closed-end fund regulated by the Investment Company Act of 1940. These funds have a fixed number of shares which are traded on the secondary markets similarly to corporate stocks. The market price may exceed the net asset value per share, in which case it is considered at a 'premium.' When the market price falls below the NAV/share, it is at a 'discount.' Many closed-end funds are of a specialized nature, with the portfolio representing a particular industry, country, etc. These funds are usually listed on US and foreign exchanges. [Harvey]

investment-grade bonds

A bond that is assigned a rating in the top four categories by commercial credit rating companies. For example, S&P classifies investment grade bonds as BBB or higher, and Moodys' classifies investment grade bonds as Ba or higher. [Harvey] Bonds rated Baa or above. [WCSU]

investor

An individual whose primary concerns in the purchase of a security are regular dividend income, safety of the original investment, and if possible, capital appreciation. [OTS] The owner of a financial asset. [Harvey]

investor fallout

In the mortgage pipeline, risk that occurs when the originator commits loan terms to the borrowers and gets commitments from investors at the time of application, or if both sets of terms are made at closing. [Harvey]

investor relations

The process by which the corporation communicates with its investors. [Harvey]

investor's equity

The balance of a margin account. [Harvey]

invisible supply

Uncounted stocks of a commodity in the hands of wholesalers, manufacturers, and producers that cannot be identified accurately; stocks outside commercial channels but theoretically available to the market. [CFTC] Uncounted stocks of a commodity in the hands of wholesalers, manufacturers, and producers which cannot be identified accurately; stocks outside commercial channels but theoretically available to the market. [CBOT][MIDAM][NYMEX]

invisible trade balance

The balance of trade created by the import and export of services. [ITDS]

invoice

A document identifying the buyer and seller; includes all relevant information such as number, date, shipping date, mode of transport, etc. [ITDS] An instrument prepared by a seller of goods or services listing all such items sold, and presented to the buyer for payment. [OTS] Bill written by a seller of goods or services and submitted to the purchaser. [Harvey]

invoice billing

Billing system in which the invoices are sent off at the time of customer orders are all separate bills to be paid. [Harvey]

invoice date

Usually the date when goods are shipped. Payment dates are set relative to the invoice date. [Harvey]

invoice price

The price fixed by the clearing house at which deliveries on futures are invoiced -- generally the price at which the futures contract is settled when deliveries are made. Also called Delivery Price. [CFTC] The price that the buyer of a futures contract must pay the seller when a Treasury Bond is delivered. [Harvey]

involuntary lien

A lien imposed on property without the consent of the owner. Examples include taxes, special assessments for such items as nearby sidewalks or sewers, and judgments. [OTS]

involuntary liquidation preference

A premium that must be paid to preferred or preference stockholders if the issuer of the stock is forced into involuntary liquidation. [Harvey]

involuntary unemployment

Potential workers able and willing to work at the existing market wage rate, are unable to find jobs. [FACS]

inward investment

Foreign investment in the United States. [BEA]

IRA/Keogh accounts

Special accounts where you can save and invest, and the taxes are deferred until money is withdrawn. These plans are subject to frequent changes in law with respect to the deductibility of contributions. Withdrawals of tax deferred contributions are taxed as income, including the capital gains from such accounts. [Harvey]

irrational call option

The implied call imbedded in the MBS. Identified as irrational because the call is sometimes not exercised when it is in the money (interest rates are below the threshold to refinance). Sometimes exercised when not in the money (home sold without regard to the relative level of interest rates). [Harvey]

irrelevance result

The Modigliani and Miller theorem that a firm's capital structure is irrelevant to the firm's value. [Harvey]

irrevocable trust

A trust that cannot be annulled by the grantor, the person who originally set up the trust. [OTS] A trust whose provisions, once established, cannot be subsequently revoked or amended by the settlor. [UNODC]

issuance

The establishment of a letter of credit by the issuing bank based on the buyers application and credit relationship with the bank. [ITDS]

issuance costs

Those costs incurred by the issuer of securities incident to the planning and sale of securities. [EPA]

issue

(A) Noun: a specific identified issue of securities, usually with an identifying caption such as 'School Improvement Bonds, Series 1982'. (B) Verb: to authorize and deliver an issue. [EPA] A particular financial asset. [Harvey] Any of a company's securities, or the act of distributing such securities. [NYSE] any of a company's or agency's securities, usually grouped by the same initial sales date. Also, the act of distributing such securities to the buyers. [OTS]

issue date

The date when a refund payment is issued on a Treasury Security representing the difference between the investment amount and the purchase price, as determined at auction. [FRBSF]

issued share capital

Total amount of shares that are in issue. [Harvey]

issuer

An entity that issues a financial asset. [Harvey] The bank that extends credit to customers through bankcard accounts. The bank issues the credit card and receives the cardholder's payment at the end of the billing period. Also call the issuing bank or the cardholder bank. [GAO] The public entity that issues securities and is named as the issuer-obligor on those securities. The public entity is the 'issuer' even of an issue for which the actual source of the money to pay debt service is to be an entity other than the issuer (such as by a private entity in an IDB issue). [EPA]

Issuer's Clearing House Service (ICS)

issuing bank

Also known as the opening bank. The buyer's bank which issues a letter of credit. [FDIC]

j-curve

Theory that says a country's trade deficit will initially worsen after its currency depreciates because higher prices on foreign imports will more than offset the reduced volume of imports in the short-run. [Harvey]

JDC Program

An RTC equity partnership program. The ownership entity was a limited partnership, in which an investor with collection experience was the general partner and the RTC was a limited partner. There were 30 partnerships created under this program, with an average book value of $414 million in JDCs per partnership. [FDIC]

Jensen index

An index that uses the capital asset pricing model to determine whether a money manager outperformed a market index. The 'alpha' of an investment or investment manager. [Harvey]

jet fuel

Kerosene-type; high-quality kerosene product used primarily as fuel for commercial turbojet and turboprop aircraft engines. [NYMEX]

jetsam

Articles from a ship or ships cargo which are thrown overboard, usually to lighten the load in times of emergency or distress and that sinks or is washed ashore. [ITDS]

jettison

The act of throwing overboard at sea part of a vessels paraphernalia or cargo or hull - usually in hopes of saving the ship from sinking. [ITDS]

job lot

A form of contract having a smaller unit of trading than is featured in a regular contract. [CFTC]

jobber

A middleman. A gasoline jobber, for example, might buy from refiners and would resell to small distributors or consumers. [NYMEX]

joint account

An agreement between two or more firms to share risk and financing responsibility in purchasing or underwriting securities. [Harvey]

joint agent

A person having authority to transact business for two or more transportation lines. [ITDS]

joint and several obligation

A debt entered into by two or more borrowers, each of whom is liable for repaying the full amount of the debt. Bonds and discount notes sold by the Office of Finance are the joint and several obligations of the 12 Federal Home Loan Banks. [OTS]

joint clearing members

Firms that clear on more than one exchange. [Harvey]

joint float

An arrangement by which a group of currencies maintain a fixed relationship relative to each other, but move jointly relative to another currency in response to supply and demand conditions in the exchange market. [FRB][FRBM][FRBSF]

joint managers

When an Account is made up of several groups of underwriters that normally function as separate accounts, the larger combined account is often managed by several underwriters, usually one from each of the several groups, and these are referred to as the joint managers. See also 'Manager'. [EPA]

joint ownership

A general term describing ownership by two or more parties. [OTS]

joint rate

A single through-rate on cargo moving via two or more carriers. [ITDS]

joint stock company

An unincorporated business association with ownership interests represented by shares of stock. [ITDS]

joint tenancy

A form of ownership by two or more parties who share equal rights in and control of property, with the survivor or survivors continuing to hold all such rights on the death of one or more of the tenants. Joint tenancy is a common form of ownership when two or more persons jointly open a savings account. [OTS]

joint venture

A combination of two or more individuals or legal entities who undertake together a transaction for mutual gain or to engage in a commercial enterprise together with mutual sharing of profits and losses; or a form of business partnership involving joint management and the sharing of risks and profits as between enterprises based in different countries. [ITDS] A commercial project, usually of a limited duration or for a specific accomplishment, undertaken by two or more persons or companies. [OTS]

journal voucher

A document that provides written authorization for a financial transaction, often used in place of or supplementary to the journals or registers. It is commonly used for disbursements from the petty cash account. [OTS]

journalizing

The recording of transactions using the double-entry system. The recording is in five steps: (1) date; (2) the account to be debited and the amount; (3) the account to be credited and the amount; (4) the explanation and (5) the cross-reference to the General Ledger. [OTS]

judgment

A final determination by a court of the rights and claims of the parties to an action. [OTS] An obligation to pay; created by a court and evidenced by an official certificate. A judgment may include loan principal, unpaid interest, unpaid taxes, legal fees, court costs, and other collection expenses. [FDIC]

judgment in rem

A judgment against a thing (i.e. bank account, personal property) as contrasted with a judgment against an individual. [OTS]

judgment lien

A court order placing a claim on property of a debtor, making the property security for payment of the debt. When applied to personal property, it is known as an attachment. [OTS]

judgments, deficiencies, and charge-offs (JDC)

The three categories of the assets of a failed institution marketed together by the RTC in its JDC program. [FDIC]

judicial foreclosure

A type of foreclosure proceeding used in some states that is handled as a civil lawsuit and conducted under the auspices of a court. [OTS]

jumbo certificate

A certificate of deposit of $100,000 or more, exempt from regulatory interest rate ceilings and usually paying a market rate of interest. Jumbo CDs resulted when the Federal Reserve in 1973 amended Regulation Q to exempt time deposits of $100,000 or more from regulatory interest rate limits. [OTS]

jumbo loan

Loans of $1 billion or more. Or, loans that exceed the statutory size limit eligible for purchase or securitization by the federal agencies. [Harvey]

junior debt (subordinate debt)

Debt whose holders have a claim on the firm's assets only after senior debtholder's claims have been satisfied. Subordinated debt. [Harvey]

junior debt

junior mortgage

A mortgage that is subordinate to claims of a prior lien or mortgage. Borrowers sometimes use junior mortgages to obtain additional funds needed for down payments or closing costs. Lenders tend to discourage junior financing because the borrower has little or no equity in the home. Also called a second mortgage. [OTS]

junk bond

A bond with a speculative credit rating of BB (S&P) or Ba (Moody's) or lower is a junk or high yield bond. Such bonds offer investors higher yields than bonds of financially sound companies. Two agencies, Standard & Poors and Moody's investor Services, provide the rating systems for companies' credit. [Harvey] High-yield, high-risk debt that, in many cases, was issued to finance corporate takeovers. [FDIC] Wall Street slang for bonds listed at below investment grade (below the top four ratings) by agencies that rate bonds. Such bonds are frequently unsecured or thinly backed by company assets, and thus carry a relatively high level of risk for investors. Consequently, the bonds must pay high yields, commonly three to four percent above high-grade corporate bonds. Some junk bonds are issued by thos. [OTS]

jurat

A statement signed by a person authorized to take oaths certifying to the authenticity of a document or affidavit. [ITDS]

juristic act

Action intended to, and capable of having, a legal effect, such as the creation, termination, or modification of a legal right. [ITDS]

just in time

The principle of production and inventory control that prescribes precise controls for the movement of raw materials, component parts and work-in-progress. Goods arrive when needed for production for use rather than becoming expensive inventory that occupies costly warehouse space. [ITDS]

just-in-time inventory systems

Systems that schedule materials/inventory to arrive exactly as they are needed in the production process. [Harvey]

Kansas City Board of Trade (KCBT)

kappa

The ratio of the dollar price change in the price of an option to a 1% change in the expected price volatility. [Harvey]

karat

A measure of the purity of gold. Pure gold is 24 karat. [NYMEX]

keelage

The charges paid by a ship entering or remaining in certain ports. [ITDS]

Keogh account

A tax-deferred trust savings account that allows self-employed individuals or those who own their own incorporated businesses to save for their retirement. Savers place a portion of their income each year in their Keogh account until they reach at least age 59 1/2. Federal income tax on the deposited funds and the interest they earn is deferred until withdrawals are begun, presumably when the saver has retired, and is, therefore, in a lower tax bracket. Employers who establish a Keogh plan for themselves must also make the benefit available to qualified employees. [OTS]

keogh plan

An IRS-approved pension plan for the self-employed and owners of unincorporated businesses. [WCSU] Tax advantaged personal retirement program that can be established by a self-employed individual. [NYSE]

kerb trading or dealing

key currency

A major currency in the global economy. Key currencies include the U.S. dollar, the British pound sterling, the German mark, the Swiss franc, the French franc, the Dutch gilder, the Japanese yen and the Canadian dollar. [ITDS]

key-tested telex (KTT)

An identification/verification message exchanged by banks prior to an electronic funds transfer. [UNODC]

Keynesians

A group of economists who emphasize an activist governmental role in economic affairs through planned changes in the federal governments expenditures and taxes. [FACS]

kick-out clause

A provision of a lease that permits a tenant to cancel a lease if the landlord fails to comply with stated conditions, obligations or standards. [OTS]

kiosk

A small structure which incorporates a computer screen and input devices such as a keyboard or touch screen. Usually found in public places such as libraries or museums, it is used for the dissemination of information to the public. [ITDS]

kiretsu

A network of Japanese companies organized around a major bank. [Harvey]

knock-in

A provision in an option or other derivative contract, whereby the contract is activated only if the price of the underlying instrument reaches a specified level before a specified expiration date. [CFTC]

knock-in option

An option which pays nothing at expiry unless it is first 'activated' as a result of the underlying variable reaching a pre-determined level. [TMAC]

knock-out

A provision in an option or other derivative contract, whereby the contract is immediately canceled if the price of the underlying instrument reaches a specified level during the life of the contract. [CFTC]

knock-out option

Begins life as a standard option but is 'killed off' if an underlying variable touches a pre-determined level. [TMAC]

knocked down

An article taken apart and folded or telescoped in such a manner as to reduce its bulk at least 66 2/3 percent from its normal shipping cubage when set up or assembled. [ITDS]

known loss

An evident loss (as opposed to a concealed loss or damage to contents within a package). A loss of which the insured and/or the insurer is aware at the time the insurance is effected. [ITDS]

labor banks

banks owned by labor unions and their members. [OTS]

labor intensive methods

Use of low quantity of capital per worker. [FACS]

labor productivity

The ratio of real output per unit of labor input; growth is measured by a higher ratio of outputs to inputs. [FACS]

ladder strategy

A bond portfolio strategy in which the portfolio is constructed to have approximately equal amounts invested in every maturity within a given range. [Harvey]

lag

Payment of a financial obligation later than is expected or required, as in lead and lag. Also, the number of periods that an independent variable in a regression model is 'held back' in order to predict the dependent variable. [Harvey]

lag response of prepayments

There is typically a lag of about three months between the time the weighted average coupon of an MBS pool has crossed the threshold for refinancing and an acceleration in prepayment speed is observed. [Harvey]

lagging indicators

Market indicators showing the general direction of the economy and confirming or denying the trend implied by the leading indicators. Also referred to as concurrent indicators. [CBOT][MIDAM]

laissez-faire

A term used to describe minimal governmental involvement in an economy, allowing market forces and individuals to make their own decisions, with little or no regulation. [ITDS] The theory that government should have as little influence as possible in the nation's economy. [OTS]

lambda

The ratio of a change in the option price to a small change in the option volatility. It is the partial derivative of the option price with respect to the option volatility. [Harvey]

land contract

A type of mortgage in which the seller retains the original loan and the buyer makes monthly payments to the seller to cover the amount of the original loan and any new mortgage. No transfer of title occurs until the loan is fully paid, and thus no equity is established until the debt is completely paid off. Most loans of this type have below-market interest rates and a balloon payment of principal at the end of the term. [OTS]

land development loan

An advance of funds, secured by a mortgage, to finance the making, installing, or constructing of the improvements necessary to convert raw land into construction-ready building sites. [OTS]

land flip

A technique to artificially increase the book value of a parcel of land. The land is sold several times in quick succession among persons acting in concert, with the price increasing each time the land is sold. In a land flip, multiple sales of the same property can occur within a few days. [OTS]

Land Fund

One form of the RTC's equity partnerships, targeted for the smaller investor to broaden the market as much as possible. Land Fund portfolios consisted primarily of undeveloped and partially developed tracts of commercially and residentially zoned land. There were three RTC Land Fund transactions. [FDIC]

Land Use Restriction Agreement (LURA)

An agreement that controls use of single-family and multi-family residential property sold in the RTC Affordable Housing Disposition Program. The LURA used for single-family residential property requires the purchaser to certify to owner occupancy and income eligibility. The LURA used for multi-family residential property requires that a certain percentage of units be continuously rented to lower-income households. [FDIC]

landbridge

The movement of containers from a foreign country by vessel, transiting a country by rail or truck, and then being loaded aboard another vessel for delivery to a second foreign country. [ITDS]

landed price

The actual delivered cost of oil to a refiner, taking into account all costs from production or purchase to the refinery. [NYMEX]

landlord

The owner or lessor or real property. [OTS]

Lanham Act of 1947

Federal legislation governing trademarks and other symbols for identifying goods sold in interstate commerce. [ITDS]

large econometric models

Mathematical constructions of national economics used for policy analysis and forecasting. [FACS]

large order execution (LOX)

large order execution procedures

Rules in place at the Chicago Mercantile Exchange that authorize a member firm that receives a large order from an initiating party to solicit counterparty interest off the exchange floor prior to open execution of the order in the pit and that provide for special surveillance procedures. The parties determine a maximum quantity and an 'intended execution price.' Subsequently, the initiating party's order quantity is exposed to the pit; any bids (or offers) up to and including those at the intended execution price are hit (acceptable). The unexecuted balance is then crossed with the contraside trader found using the LOX procedures. [CFTC]

large traders

A large trader is one who holds or controls a position in any one future or in any one option expiration series of a commodity on any one exchange equaling or exceeding the exchange or CFTC-specified reporting level. [CFTC]

Laspeyres price index

A fixed-weighted price index that is computed as (1) the sum of base-period quantities valued at current-period prices divided by (2) base-period quantities valued at base-period prices. [BEA]

last notice day

The final day on which notices of intent to deliver on futures contracts may be issued. [CFTC][NYMEX]

last split

After a stock split, the number of shares distributed for each share held and the date of the distribution. [Harvey]

last trading day

According to the Chicago Board of Trade rules, the final day when trading may occur in a given futures or options contract month. Futures contracts outstanding at the end of the last trading day must be settled by delivery of the underlying commodity or securities or by agreement for monetary settlement (in some cases by EFPs). [CBOT][MIDAM] Day on which trading ceases for the maturing (current) delivery month. [CFTC] The final day under an exchange's rules during which trading may take place in a particular futures or options contract. Contracts outstanding at the end of the last trading day must be settled by delivery of underlying physical commodities or financial instruments, or by agreement for monetary settlement depending upon futures contract specifications. [Harvey] The final trading day for a particular delivery month futures contract or option contract. Any futures contracts left open following this session must be settled by delivery. [NYMEX]

last-in-first-out

A method of valuing inventory that uses the cost of the most recent item in inventory first. [Harvey]

late charge

A penalty fee imposed by a lender for delinquent payments. [OTS]

late-day trading

These schemes involve the illicit purchase and sale of securities after regular market hours. Such trading is restricted in order to prevent individuals from profiting on market-moving information which is released after the close of regular trading. Unscrupulous traders attempt to illegally exploit such opportunities by buying or selling securities at the market close price, secure in the knowledge that the market-moving information will generate illicit profits at the opening of trading on the following day. [FBI]

latency

The amount of time that elapses between the placement of a market order or marketable limit order on an electronic trading system and the execution of that order. [CFTC]

Latin America Advisory Committee (LAAC)

Provides the representative views and attitudes of the Latin American corporate community on the role of the NYSE in international matters, including such areas as: strengthening Exchange policies and programs dealing with the internationalization of the capital markets; facilitating multinational offerings of corporate securities; monitoring legislative and regulatory proposals that impose duties or responsibilities on corporate boards of directors of publicly owned issuers; and strengthening communications between the Exchange and the Latin American corporate community. [NYSE]

Latin America Free Trade Association

An economic union comprising Argentina, Brazil, Columbia, Equador, Mexico, Paraguay, Peru, and Uruguay. [FDIC]

law

law of demand

People purchase more of any particular good or service as its relative price falls; they purchase less as its relative price rises. [FACS] The relationship between product demand and price. [CBOT]

law of large numbers

The mean of a random sample approaches the mean (expected value) of the population as the sample grows. [Harvey]

law of one price

An economic rule stating that a given security must have the same price regardless of the means by which one goes about creating that security. This implies that if the payoff of a security can be synthetically created by a package of other securities, the price of the package and the price of the security whose payoff it replicates must be equal. [Harvey]

law of supply

At higher relative prices, the quantity supplied of a good will increase; at lower relative prices, smaller quantities will be supplied. [FACS] The relationship between product supply and its price. [CBOT]

lay order

The period during which imported merchandise may remain at the place of unloading without some action being taken for its disposition. [ITDS]

layering

Entering hidden orders on one side of the book (for example, a sell) and simultaneously submitting visible orders on the other side of the book ( buys). The visible buys orders are intended only to encourage others in the market to believe there is strong price pressure on one side, thereby moving prices up. If this occurs, the hidden sell order executes, and the trader then cancels the visible orders. [ESMA] The second step in the process of money laundering, whereby the launderer attempts to remove the funds from direct association with the crime by a series of financial transactions, thus making it harder to connect the proceeds to its origin. [UNODC]

lead

Payment of a financial obligation earlier than is expected or required. [Harvey]

lead manager

The commercial or investment bank with the primary responsibility for organizing syndicated bank credit or bond issue. The lead manager recruits additional lending or underwriting banks, negotiates terms of the issue with the issuer, and assesses market conditions. [Harvey]

leading economic indicators

Economic series that tend to rise or fall in advance of the rest of the economy. [Harvey]

leading indicators

Market indicators that signal the state of the economy for the coming months. Some of the leading indicators include: average manufacturing workweek, initial claims for unemployment insurance, orders for consumer goods and material, percentage of companies reporting slower deliveries, change in manufacturers' unfilled orders for durable goods, plant and equipment orders, new building permits, index of consumer expectations, change in material prices, prices of stocks, change in money supply. [CBOT][MIDAM]

leakage

Release of information to some persons before official public announcement. [Harvey]

leaps

Long-dated, exchange-traded options. Stands for 'Long-term Equity Anticipation Securities.' [CFTC]

lease

A contract by which the owner grants the right to possess and use real estate or equipment to another, and which sets forth the terms of payment and other conditions. [OTS] A long-term rental agreement, and a form of secured long-term debt. [Harvey] Financial instrument employed the contango in the gold or silver market to finance precious metals inventory. [NYMEX] Long-term rental agreement. [WCSU]

lease rate

The payment per period stated in a lease contract. [Harvey]

lease-purchase

A method of acquiring ownership of property whereby all or a portion of rent payments made under terms of a lease may be subsequently applied to the purchase price. [OTS]

leasehold

An interest in an estate held by a tenant who possesses certain rights of occupancy and use by virtue of renting the real property, even though the tenant does not hold title to the property. [OTS]

least cost test

A procedure mandated by FDICIA that requires the FDIC to implement the resolution alternative that is determined to be least costly to the relevant deposit insurance fund of all possible resolution alternatives, including liquidation of the failed institution. Before enactment of FDICIA, the FDIC could pursue any resolution alternative, as long as it was less costly than a deposit payoff combined with liquidation of the failed bank's assets. [FDIC]

ledger cash

A firm's cash balance as reported in its financial statements. Also called book cash. [Harvey]

legal

Legal Advisory Committee (LAC)

These distinguished members of the legal profession primarily advise on matters relating to corporate governance. They also advise on other subjects involving broad legal issues or principles directly or indirectly affecting the NYSE, the securities industry or capital markets. The committee also advises the Exchange staff on policies relating to the NYSE Listed Company Manual, the American Law Institute's Corporate Governance Project, financial services industry regulation, and the legal aspects of industry rules and regulations. [NYSE]

legal and regulatory risk

The effect on a company due to new or changing laws affecting its normal course of business. [TMAC]

legal bankruptcy

A legal proceeding for liquidating or reorganizing a business. [Harvey]

legal capital

Value at which a company's shares are recorded in its books. [Harvey][WCSU]

legal defeasance

The deposit of cash and permitted securities, as specified in the bond indenture, into an irrevocable trust sufficient to enable the issuer to discharge fully its obligations under the bond indenture. [Harvey]

legal entity

Any individual, proprietorship, partnership, corporation, association, or other organization that has, in the eyes of the law, the capacity to make a contract or an agreement, and the abilities to assume an obligation and to discharge a indebtedness. [ITDS] any individual, partnership, proprietorship, corporation, association or other organization that has, in the eyes of the law, the capacity to make a contract or an agreement and the abilities to assume an obligation and to pay off its debts. A legal entity, under the law, is responsible for its actions and can be sued for damages. [OTS]

legal investment survey

A report to an Account, for use in the marketing process, on the eligibility under state law (frequently of all 50 states, Puerto Rico and the District of Colombia) of a particular issue for investment by certain state or local government funds or by certain state regulated investors, such as state banks and fiduciaries and insurance companies. [EPA]

legal investments

(A) Investments that may lawfully be made by a public body from public funds, as governed by statute or terms of any applicable trust agreement. (B) Securities that may lawfully be invested with monies the investment of which is governed by law (such as trust funds, money held in trust). [EPA] Investments that a regulated entity is permitted to make under the rules and regulations that govern its investing. [Harvey]

legal list

A list of investments selected by various states in which certain institutions and fiduciaries, such as insurance companies and banks, may invest. Legal lists are often restricted to high quality securities meeting certain specifications. [NYSE]

legal opinion

The opinion of an official authorized to render it, such as an attorney general or city attorney, as to legality. In the case of government bonds, the opinion of a specialized bond attorney as to the legality of a bond issue. [EPA]

legal risks

These risks result when companies transact with counterparties in foreign countries, which are subject to different legal and regulatory frameworks. [TMAC]

legal tender

Any money that is recognized as being lawful for use by a debtor to pay a creditor, who must accept same in the discharge of a debt unless the contract between the parties specifically states that another type of money is to be used. [ITDS] Coins that have been authorized by Congress. This includes circulating coins and all commemorative coins legislated by Congress. [NYMEX] Paper dollars and coins mandated as acceptable means of payment by the government. [FACS] The coin or paper currency required by law to be accepted in payment of obligations. [OTS]

leisure

All uses of time in which ones labor services are not exchanged for money. The uses of everyones time can be divided between employment and leisure. [FACS]

lend

To provide money temporarily on the condition that it or its equivalent will be returned, often with an interest fee. [Harvey] to grant the temporary use of something with the understanding that it will be returned. Lend -- past tense lent -- is the verb. Loan is the noun. [OTS]

lender of last resort

As the nation's central bank, the Federal Reserve,has the authority and financial resources to act as 'lender of last resort' by extending credit to depository institutions or to other entities in unusual circumstances involving a national or regional emergency, where failure to obtain credit would have a severe adverse impact on the economy. [FRB][FRBC][FRBM][FRBSF]

lending institution

An organization that makes loans. [OTS]

lending policy

An institution's statement of its basic lending philosophy, including standards, guidelines, and limitations that are to be observed and adhered to in the process of deciding whether to grant a loan. The policy must adhere to applicable law and regulations. [OTS]

leniency clause

A provision written into a promissory note spelling out the lender's willingness to adjust loan payments temporarily if a borrower is experiencing severe financial difficulties through no personal fault. [OTS]

lent

past tense of lend. [OTS]

Leontief inversion approach

A mathematical technique which is used at BEA to estimate the I-O total requirement coefficients and multipliers and the RIMS multipliers. [BEA]

less than truckload

A shipment weighing less than the weight required for the application of the truck load rate. [ITDS]

lessee

A person, business or other organization that is granted the use and possession of property in return for payment of rent. When real estate is rented, the lessee is known as the tenant. [OTS] An entity that leases an asset from another entity. [Harvey] User of a leased asset. [WCSU]

lessor

An entity that leases an asset to another entity. [Harvey] Owner of a leased asset. [WCSU] The owner of property who allows another to use and possess it in return for payment of rent. When real estate is rented, the lessor is known as the landlord. [OTS]

letter of assignment

A document with which the assignor assigns rights to a third party. [ITDS]

letter of comment

A communication to the firm from the SEC that suggests changes to its registration statement. [Harvey]

letter of credit

(A) An engagement, commonly irrevocable, by a bank or other person made at the request of an issuer or the assisted public or private entity to honor drafts or other demands or payment of debt service on an issue. A letter of credit differs form a guaranty or surety generally in that it is a primary obligation between the issuing bank or other person and the beneficiary (generally a trustee). (B) A method of grant payment used by the federal government usually based on costs incurred. [EPA] A document issued by a bank stating its commitment to pay someone a stated amount of money on behalf of a buyer so long as the seller meets very specific terms and conditions. Letters of credit are more formally called documentary letters of credit. [ITDS] A document issued by a financial institution on behalf of a buyer stating the amount of credit the buyer has available, and that the institution will honor drafts up to that amount written by the buyer. It gives the buyer the prestige and financial backing of the issuing institution and satisfies the requirements of the seller in completing the transaction. The accepting institution has a prior agreement as to how the buyer will pay for the drafts as they are presented. [OTS] A form of guarantee of payment issued by a bank used to guarantee the payment of interest and repayment of principal on bond issues. [Harvey] An instrument or document issued on behalf of a buyer stating that the issuer will honor drafts or other demands for payment upon compliance with the conditions specified in the letter. Letters of credit must be issued in conformity with all applicable rules and regulations. The credit may be revocable or irrevocable. The engagement can be either an agreement to honor or a statement that the issuer is authorized to honor the credit. [FDIC] Instrument or document issued by a bank, guaranteeing the payment of a customer's drafts up to a stated amount for a specified period. Letters of Credit substitute the bank's credit for the buyer's and eliminate the seller's risk. They are used extensively in international trade. [UNODC] Letter from a bank stating that it has established a credit in the company's favor. [WCSU]

letter of indemnity

A document which serves to protect the carrier/owner financially against possible repercussions in connection with the release of goods without presentation of an original bill of lading. [ITDS]

letter of intent

A document that describes the preliminary understanding between parties who intend to make a contract or join together in another action. [ITDS]

letter of renunciation

This applies to a rights issue and is the form attached to an allotment letter which is completed should the original holder wish to pass his entitlement to someone else, or to renounce his rights absolutely. [UNODC]

letter of wishes/memorandum of wishes

A document prepared by the settlor or grantor of a trust providing guidance on how trustees should exercise their discretions. While a common practice, it is not legally enforceable. Documents evidencing a settlor's wishes constitute an adverse tax risk and are not considered to be a supplement to the trust deed. [UNODC]

letter stock

Privately placed common stock because the SEC requires a letter from the purchaser that the stock is not intended for resale. [WCSU] Privately placed common stock, so called because the SEC requires a letter from the purchaser stating that the stock is not intended for resale. [Harvey]

level cost method

Method for estimating the normal costs of a pension plan. Its principle is that the company should contribute each year an equal amount per employee or an equal proportion of its wage bill. [WCSU]

level debt service

(A) The result of a maturity schedule that has increasing principal amounts maturing each year so that the debt service in all years is essentially 'level'. Under some state laws, level debt service is not permitted for certain bond issues, which must have substantially equal annual principal maturities. (B) An arrangement of serial maturities in which the amount of principal maturing increases at approximately the same rate as the amount of interest declines, resulting in substantially equal annual debt service payments over the life of the bonds. [EPA]

level pay

The characteristic of the scheduled principal and interest payments due under a mortgage such that total monthly payment of P&I is the same while characteristically the principal payment component of the monthly payment becomes gradually greater while the monthly interest payment becomes less. [Harvey]

level payment mortgage

A mortgage that provides for a constant, fixed payment at periodic intervals during its term. Part of each payment consists of interest with the balance of the payment used to reduce the principal. [OTS]

level-coupon bond

Bond with a stream of coupon payments that are the same throughout the life of the bond. [Harvey]

leverage

(1) the use of borrowed money to increase the return on a cash investment. For leverage to be profitable, the rate of return on the investment must be higher than the cost of the borrowed money. (2) the use of a relatively small amount of capital to control a large dollar amount of a commodity or cash instrument by buying on margin. In the futures market, the margin is a good faith performance bond. In the cash market, the margin is an actual down payment. (3) the effect on the earnings per share of the common stock of a company when large sums must be paid for bond interest or preferred stock dividends before earnings are paid to holders of common stock. [OTS] The ability to control large dollar amounts of a commodity or security with a comparatively small amount of capital. [CFTC] The ability to control large dollar amounts of a commodity with a comparatively small amount of capital. [CBOT][MIDAM] The effect on a company when the company has bonds, preferred stock, or both outstanding. Example: If the earnings of a company with 1,000,000 common shares increases from $1,000,000 to $1,500,000 -- earnings per share would go from $1 to $1.50, or an increase of 50 percent. But if earnings of a company that had to pay $500,000 in bond interest increased that much -- earnings per common share would jump from 50 cents to $1 a share, or 100 percent. [NYSE] The minimizing of actual cash exposure while attempting to maximize (eg. trading on margin) upside opportunity. [TMAC] The use of debt financing. [Harvey]

leverage clientele

A group of shareholders who, because of their personal leverage, seek to invest in corporations that maintain a compatible degree of corporate leverage. [Harvey]

leverage ratio

Measures of the relative contribution of stockholders and creditors, and of the firm's ability to pay financing charges. Value of firm's debt to the total value of the firm. [Harvey] The ratio of tier 1 (core) capital to adjusted total assets. [OTS]

leverage rebalancing

Making transactions to adjust (rebalance) a firm's leverage ratio back to its target. [Harvey]

leverage swaps

These swap arrangements can be structured in a variety of ways but have as a common characteristic a variable rate payment stream that adjusts at a multiple of the actual change in market rates. [TMAC]

leveraged beta

The beta of a leveraged required return; that is, the beta as adjusted for the degree of leverage in the firm's capital structure. [Harvey]

leveraged buyout

A transaction used for taking a public corporation private financed through the use of debt funds: bank loans and bonds. Because of the large amount of debt relative to equity in the new corporation, the bonds are typically rated below investment grade, properly referred to as high-yield bonds or junk bonds. Investors can participate in an LBO through either the purchase of the debt (i.e., purchase of the bonds or participation in the bank loan) or the purchase of equity through an LBO fund that specializes in such investments. [Harvey]

leveraged equity

Stock in a firm that relies on financial leverage. Holders of leveraged equity face the benefits and costs of using debt. [Harvey]

leveraged lease

A lease arrangement under which the lessor borrows a large proportion of the funds needed to purchase the asset and grants the lender a lien on the assets and a pledge of the lease payments to secure the borrowing. [Harvey] Lease in which the lessor finances part of the cost of an asset by an issue of debt secured by the asset and the lease payments. [WCSU]

leveraged portfolio

A portfolio that includes risky assets purchased with funds borrowed. [Harvey]

leveraged required return

The required return on an investment when the investment is financed partially by debt. [Harvey]

levy

(A) (Verb) to impose taxes, special assessments, or service charges for the support of governmental activities. (B) (Noun) The total amount of taxes, special assessments, or service charges imposed by a government. [EPA]

liabilities

Debt or other legal obligation arising out of transactions in the past which must be liquidated, renewed, or refunded at some future date. This term does not include encumbrances. [EPA] The debts of a person or business. [FACS]

liabilities, total liabilities

Total value of financial claims on a firm's assets. Equals (1) total assets or (2) total assets minus net worth. [WCSU]

liability

(1) Money owed; (2) obligation to do, or refrain from doing, something; and (3) a duty that eventually must be performed. [UNODC] A financial obligation, or the cash outlay that must be made at a specific time to satisfy the contractual terms of such an obligation. [Harvey] All the claims against a corporation. Liabilities include accounts, wages and salaries payable; dividends declared payable; accrued taxes payable; fixed or long-term liabilities, such as mortgage bonds, debentures and bank loans. [NYSE] An item of value that is part of the overall debt or obligation of a person or business. For example, a mortgage is a liability of the homeowner/borrower, but the same mortgage is an asset of the savings and loan/lender. At savings institutions, savings deposits and all borrowed money are considered liabilities. Net worth, or regulatory capital, is accounted for as a liability because it is an obligation of the institution to its owners. [OTS]

liability funding strategies

Investment strategies that select assets so that cash flows will equal or exceed the client's obligations. [Harvey]

liability on an account

Legal responsibility to repay debt. [FRB][FRBC][FRBM]

liability swap

An interest rate swap used to alter the cash flow characteristics of an institution's liabilities so as to provide a better match with its assets. [Harvey]

libertarianism

The view that governments role should be minimal, rarely interfering in the personal lives of private citizens. [FACS]

Libor scandal

A series of fraudulent actions connected to the Libor (London Interbank Offered Rate) and also the resulting investigation and reaction. The Libor is an average interest rate calculated through submissions of interest rates by major banks in London. The scandal arose when it was discovered that banks were falsely inflating or deflating their rates so as to profit from trades, or to give the impression that they were more creditworthy than they were. Libor underpins approximately $350 trillion in derivatives. It is administered by NYSE Euronext, which took over running the Libor in January 2014. [Wikipedia]

licensed warehouses

A warehouse approved by an exchange from which a commodity may be delivered on a futures contract. [CFTC] Warehouses which have been approved for the storage of copper deliverable against the COMEX Division copper futures contract. [NYMEX]

licensed weighmaster

An organization approved by the Exchange to witness and verify the weighing of copper delivered against the COMEX copper futures contract. [NYMEX]

licensing agreement

A contract whereby the holder of a trademark, patent, or copyright transfers a limited right to use a process, sell or manufacture an article, or furnish specialized services covered by the trademark, patent or copyright to another firm. [ITDS]

lien

A claim by one person on the property of another person making the property security for the payment of a debt. A mortgage is a lien against a house. If the mortgage is not paid on time, the house can be seized to satisfy the lien. [OTS] A security interest in an identifiable piece of personal property, or a real estate mortgage on real property. The word 'lien' ordinarily is not used in connection with fungible property to be received in the future, such as dollars. In the case of dollars, the word 'pledge' is more appropriate to indicate an assignment of the interest therein as and when received. Compare 'Pledge'. [EPA] A security interest in one or more assets that is granted to lenders in connection with secured debt financing. [Harvey] Lender's claims on specified assets. [WCSU]

lien holder

A person or institution holding a mortgage or having a legal claim on the specific property of another person as security for a debt. [OTS]

lien theory

An assumption of real estate law, which holds that a mortgage conveys to the lender a claim to, or lien on, the mortgaged property. [OTS]

lien waiver

A document signed by a contractor, subcontractor, or other supplier of goods or services stating that the supplier has been paid for the work performed or goods supplied and waiving the supplier's right to file a claim against the property. [OTS]

life estate

A freehold estate giving a beneficiary all property rights except the right to sell. The right to the estate is terminated upon the death of the beneficiary. [OTS]

life insurance company

A type of financial intermediary that shares the financial risk of untimely death among its participants. The participants buy policies for which they pay stated, periodic premiums and are guaranteed a minimum payment to designated beneficiaries at the time of the policyholder's death. Policyholders may also use their policies to build up cash savings. [OTS]

life of contract

Period between the beginning of trading in a particular futures contract and the expiration of trading. In some cases, this phrase denotes the period already passed in which trading has already occurred. For example, 'The life-of-contract high so far is $2.50.' Same as life of delivery or life of the future. [CFTC]

life of loan

The agreed upon length of time in which a loan must be repaid. [OTS]

life of loan cap

The limit beyond which the rate of interest may not rise throughout the term of an adjustable rate loan. [OTS]

lift van

A wooden or metal container used for packing household goods and personal effects. [ITDS]

lifting

Refers to tankers and barges loading cargoes of petroleum at a terminal or transshipment point. [NYMEX]

lifting a leg

Closing out one side of a long-short arbitrage before the other is closed. [Harvey]

light crude

Crude oil with a low specific gravity and high API gravity due to the presence of a high proportion of light hydrocarbon fractions. [NYMEX]

light ends

The more volatile products of petroleum refining, such as butane, propane, ethane. [NYMEX]

lighter

A barge towed by a tugboat and used mainly in harbors and inland waterways for the transport of cargo. [ITDS]

lighter aboard ship

A floatable large container (lighter) used in the combined ocean and inland waterway transport of goods. [ITDS]

lighterage

The loading or unloading of a ship by means of a lighter, especially when shallow waters prevent an ocean going vessel from entering a waterway. [ITDS]

limit move

limit only

The definite price stated by a customer to a broker restricting the execution of an order to buy for not more than, or to sell for not less than, the stated price. [CFTC]

limit order

A contingent order for an option or futures trade specifying a certain maximum (or minimum) price, beyond which the order (buy or sell) is not to be executed. [NYMEX] An order in which the customer sets a limit on the price and/or time of execution. [CBOT][MIDAM] An order in which the customer specifies a minimum sale price or maximum purchase price, as contrasted with a market order, which implies that the order should be filled as soon as possible at the market price. [CFTC] An order to buy a stock at or below a specified price or to sell a stock at or above a specified price. For instance, you could tell a broker 'Buy me 100 shares of XYZ Corp at $8 or less' or to 'sell 100 shares of XYZ at $10 or better.' The customer specifies a price and the order can be executed only if the market reaches or betters that price. A conditional trading order designed to avoid the danger of adverse unexpected price changes. [Harvey] An order to buy or sell when and if a security reaches a specific price. [NYSE]

limit order book

A record of unexecuted limit orders that is maintained by the specialist. These orders are treated equally with other orders in terms of priority of execution. [Harvey]

limit price

maximum price fluctuation [Harvey]

limitation on asset dispositions

A bond covenant that restricts in some way a firm's ability to sell major assets. [Harvey]

limitation on liens

A bond covenant that restricts in some way a firm's ability to grant liens on its assets. [Harvey]

limitation on merger, consolidation, or sale

A bond covenant that restricts in some way a firm's ability to merge or consolidate with another firm. [Harvey]

limitation on sale-and-leaseback

A bond covenant that restricts in some way a firm's ability to enter into sale and leaseback transactions. [Harvey]

limitation on subsidiary borrowing

A bond covenant that restricts in some way a firm's ability to borrow at the subsidiary level. [Harvey]

limitation period

A maximum period set by statute within which a legal. action can be brought or a right enforced. A statute may prohibit, for example, any individual or legal entity from bringing an action for breach of contract more than one year after the breach ccurred. [ITDS]

limited appointment

Persons appointed by to U.S. & Foreign Commercial Service (or to other foreign services) from the private sector or from the federal government who are non-career officers assigned overseas for a limited time. [ITDS]

limited branch P&A

A component of a purchase and assumption transaction in an RTC branch breakup resolution. Under the terms of the limited branch P&A, the acquiring institution assumes all of the deposits and other liabilities of the failed institution directly attributable to the acquired branches. The acquirer also purchases certain assets directly attributable to the acquired branches. The limited branch P&A incorporates the terms of the standard P&A as the standard terms and conditions of the transaction. Generally, the limited branch P&A was used in branch breakup transactions for any branch or branches not transferred to the core branch P&A acquirer. [FDIC]

limited liability

Limitation of a share holder's losses to the amount invested. [WCSU] Limitation of possible loss to what has already been invested. [Harvey] Restricted liability for the obligations of a business. [ITDS]

limited liability company (LLC)

An entity which has corporate personality and limited liability for all its members, but which in all other respects behaves like a partnership. [UNODC]

limited partner

A partner who has limited legal liability for the obligations of the partnership. [Harvey]

limited partnership

A partnership in which at least one partner has general liability and at least one of the other partners has limited liability. [ITDS] A partnership in which certain partners are designated general partners and some are designated limited partners. A limited partnership registers as a limited partnership in the state in which it is organized. The general partners manage the business. The liabilities of the limited partners are limited if certain legal requirements are met. [FDIC] A partnership that consists of at least one general partner who is fully personally liable for the debts of the partnership, and one or more limited partners who are each liable only for the amount of their own investment. [OTS] A partnership that includes one or more partners who have limited liability. [Harvey]

limited tax bond

A bond secured by a pledge of a tax or category of taxes which is limited as to rate or amount. [EPA]

limited-liability instrument

A security, such as a call option, in which the owner can only lose his initial investment. [Harvey]

limited-tax general obligation bond

A general obligation bond that is limited as to revenue sources. [Harvey]

limits

Arbitrary price and/or quantity barriers imposed on traders or positions. [TMAC] Maximum line amounts by bank name with other banks for forward exchange transactions. Eurocurrency transactions, and payments arising from foreign exchange transactions on the same day. [FDIC] The maximum daily allowable amount a futures price may advance or decline in any one day's trading session. [NYMEX]

line haul

The direct movement of freight between two major ports by a single ship. [ITDS]

line haul vessel

A vessel which is on a regularly defined schedule. [ITDS]

line item budget

A budget prepared along departmental lines that focuses on what is to be bought. [EPA]

line of credit

A preestablished loan authorization with a specified borrowing limit extended by a lending institution to an individual or business based on creditworthiness. A line of credit allows borrowers to obtain a number of loans without re-applying each time as long as the total of borrowed funds does not exceed the credit limit. [OTS] Agreement by a bank that a company may borrow at any time up to an established limit. [WCSU] An informal arrangement between a bank and a customer establishing a maximum loan balance that the bank will permit the borrower to maintain. [Harvey]

line release system

A part of the U.S. Customs Automated Commercial System that is designed for the release and tracking of shipments through the use of personal computers and bar code technology. [ITDS]

linear programming

Technique for finding the maximum value of some equation subject to stated linear constraints. [Harvey][WCSU]

linear regression

A statistical technique for fitting a straight line to a set of data points. [Harvey]

liner

A vessel carrying passengers and cargo that operates on a route with a fixed schedule. [ITDS]

liner terms

Conditions under which a shipping company will transport goods, including the amount payable for freight and the cost both for loading and discharge of the vessel. [ITDS]

link

A unit of land measurement. One link equals 7.92 inches or 0.66 feet. There are 100 links of equal length in a surveyor's chain. [OTS]

linkage

The ability to buy (sell) contracts on one exchange (such as the Chicago Mercantile Exchange) and later sell (buy) them on another exchange (such as the Singapore International Monetary Exchange). [CBOT][MIDAM]

linked financing

The practice of depositing money into a savings institution or a bank with the understanding that the institution will make a corresponding loan to a borrower specified by the depositor. [OTS]

linter's observations

John Lintner's work (1956) suggested that dividend policy is related to a target level of dividends and the speed of adjustment of change in dividends. [Harvey]

liquefied natural gas

Natural gas which has been made liquid by reducing its temperature to minus 258o Fahrenheit at atmospheric pressure. Its volume is 1/600 of gas in vapor form. [NYMEX]

liquefied petroleum gas

Propane, butane, or propane-butane mixtures derived from crude oil refining or natural gas fractionation. For convenience of transportation, these gases are liquefied through pressurization. [NYMEX]

liquid

A characteristic of a security or commodity market with enough units outstanding to allow large transactions without a substantial change in price. Institutional investors are inclined to seek out liquid investments so that their trading activity will not influence the market price. [CBOT]

liquid asset

Asset that is easily and cheaply turned into cash - notably cash itself and short-term securities. [Harvey] Assets that are easily and cheaply turned into cash; notably cash itself and short-term securities. [WCSU] The total amount of funds that are in the form of cash or can quickly be converted to cash. These include (1) cash; (2) demand deposits; (3) time and savings deposits; and (4) investments capable of being quickly converted into cash without significant loss, either through their sale or through the scheduled return of principal at the end of a short time remaining to maturity. [OTS]

liquid market

A market characterized by the ability to buy and sell with relative ease. [NYMEX] A market in which selling and buying can be accomplished with minimal effect on price. [CFTC]

liquid yield option note

Zero-coupon, callable, putable, convertible bond invented by Merrill Lynch & Co. [Harvey]

liquidate

Selling (or purchasing) futures contracts of the same delivery month purchased (or sold) during an earlier transaction or making (or taking) delivery of the cash commodity represented by the futures contract. [CBOT] When a company fails, the process of converting all of its assets back into cash and distributing it to those with a claim on it. [NYSE]

liquidated damages

A sum of money that a contracting party agrees to pay to the other party for breaching an agreement, particularly important in a contract in which damages for breach may be difficult to assess. [ITDS]

liquidating dividend

A pro rata distribution to uninsured depositors and creditors of the net proceeds of the liquidated assets of a failed institution. [FDIC] Dividend that represents a return of capital. [WCSU] Payment by a firm to its owners from capital rather than from earnings. [Harvey]

liquidation

The closing out of a long position. The term is sometimes used to denote closing out a short position, but this is more often referred to as covering. [CFTC] The closing out of futures and options positions. [NYMEX] The final review of a U.S. Customs entry, and determination of the rate of duty and amount of duty by Customs. [ITDS] The process of terminating a business including selling assets to obtain cash and using the cash to discharge liabilities. [OTS] The winding down of the business affairs and operations of a failed insured depository institution through the orderly disposition of its assets after it has been placed in receivership. [FDIC] When a firm's business is terminated, assets are sold, proceeds pay creditors and any leftovers are distributed to shareholders. Any transaction that offsets or closes out a Long or short position. [Harvey]

liquidation cost

The resolution cost that the FDIC will incur if it pays off only the insured depositors and liquidates the assets of the failed institution. [FDIC]

liquidation differential

The decrease in value (if any) of a failed bank's assets that results from liquidating them, rather than having the assets managed by an operating entity. [FDIC]

liquidation grade

Classification of federal civil service employees who have temporary status regarding pay and benefits. [FDIC]

liquidation rights

The rights of a firm's securityholders in the event the firm liquidates. [Harvey]

liquidation system

A part of U.S. Customs Automated Commercial System, closes the file on each entry and establishes a batch filing number which is essential for recovering an entry for review or enforcement purposes. [ITDS]

liquidation value

Net amount that could be realized by selling the assets of a firm after paying the debt. [Harvey]

liquidator

Person appointed by unsecured creditors in the United Kingdom to oversee the sale of an insolvent firm's assets and the repayment of its debts. [Harvey]

liquidity

(1) How easily one's assets can be converted back into cash. For example, money in an account that can't be withdrawn for ten years is not very liquid. (2) The ability of the market in a particular security to absorb a reasonable amount of buying or selling at reasonable price changes. Liquidity is one of the most important characteristics of a good market. [NYSE] (1) The ability of a bank or business to meet its current obligations; (2) the quality that makes an asset quickly and readily convertible into cash. [FRBSF] (economics) (a) A companys ability to meet its obligations at all times. (b) The availability of liquid funds in an economy. (c) The possibility of being able to carry out financial transactions without influencing the market. [ITDS] A market is liquid when it has a high level of trading activity, allowing buying and selling with minimum price disturbance. Also a market characterized by the ability to buy and sell with relative ease. [Harvey] A market is said to be 'liquid' when it has a high level of trading activity and open interest. [NYMEX] A measure of the ability of an individual, business, or institution to convert assets to cash without significant loss at a particular point in time. [OTS] Liquidity is a quality that makes an asset easily convertible into cash with relatively little loss of value in the conversion process. [GAO]

liquidity base

The amount of money in a thrift institution's net withdrawable accounts, less the unpaid balance of any loans secured by those savings, plus short-term borrowings. [OTS]

liquidity data bank

A computerized profile of CBOT market activity, used by technical traders to analyze price trends and develop trading strategies. There is a specialized display of daily volume data and time distribution of prices for every commodity traded on the Chicago Board of Trade. [CBOT][MIDAM]

liquidity diversification

Investing in a variety of maturities to reduce the price risk to which holding long bonds exposes the investor. [Harvey]

liquidity preference hypothesis

The argument that greater liquidity is valuable, all else equal. Also, the theory that the forward rate exceeds expected future interest rates. [Harvey]

liquidity premium

(1) Additional return for investing in a security that can not easily be turned into cash. (2) difference between the forward rate and the expected spot rate of interest. [WCSU] Forward rate minus expected future short-term interest rate. [Harvey]

liquidity ratio

A comparison, expressed as a percentage, of an institution's liquid assets to its unpledged net withdrawable accounts. [OTS] Ratios that measure a firm's ability to meet its short-term financial obligations on time. [Harvey]

liquidity risk

The risk of a company's working capital becoming insufficient to meet near term financial demands. [TMAC] The risk that arises from the difficulty of selling an asset. It can be thought of as the difference between the 'true value' of the asset and the likely price, less commissions. [Harvey]

liquidity theory of the term structure

A biased expectations theory that asserts that the implied forward rates will not be a pure estimate of the market's expectations of future interest rates because they embody a liquidity premium. [Harvey]

Listed Company Advisory Committee (LCAC)

Provides a forum for the securities-related concerns of listed companies, and advises the board on contemplated policies and programs affecting listed companies. It also acts as an NYSE staff sounding board on contemplated policies and programs affecting listed companies' interest and recommends, on its own initiative, policies or actions aimed at promoting those interests. [NYSE]

listed stock

Stocks that are traded on an exchange. [Harvey] The stock of a company that is traded on a securities exchange. The various stock exchanges have different standards for listing. Some of the guides used by the New York Stock Exchange for an original listing are national interest in the company and a minimum of 1.1 million shares publicly held among no less than 2,000 round-lot stockholders. The publicly held common shares should have a minimum aggregate market value of $40 million. The company should have net income in the latest year of over $2.5 million before federal income tax and $2 million in each of the preceding two years. [NYSE]

listing

A written authorization by the owner to sell or lease real property. [OTS]

listing particulars

The details a company must publish about itself and any securities it issues before these can be listed on the Official List. Often called a prospectus. [UNODC]

litigant

A person engaged in a lawsuit. [OTS]

litigation

The act of engaging in and proceeding with a lawsuit. [OTS]

Lloyds of London

An English association of insurance underwriters, the oldest of its kind in the world. Not in itself an insurance company. [ITDS]

Lloyds registry

An English society, independent of Lloyds of London, which surveys and classifies the ships of the world according to their description, condition, seaworthiness, and compliance with codes and protocols. Also establishes standards for maintenance and construction. (Correct name is: Lloyds Register of Shipping.) [ITDS]

load

The portion of the offering price of shares of open-end investment companies in excess of the value of the underlying assets. Covers sales commissions and all other costs of distribution. The load is usually incurred only on purchase, there being, in most cases, no charge when the shares are sold (redeemed). [NYSE]

load fund

A mutual fund with shares sold at a price including a large sales charge -- typically 4% to 8% of the net amount indicated. Some 'no-load' funds have distribution fees permitted by article 12B-1 of the Investment Company Act; these are typically 0. 25%. A 'true no-load' fund has neither a sales charge nor Freddie Mac program, the aggregation that the fund purchaser receives some investment advice or other service worthy of the charge. [Harvey] A type of mutual fund that charges a sales commission when an investor buys shares. [OTS]

load-to-load

Arrangement whereby the customer pays for the last delivery when the next one is received. [Harvey][WCSU]

loaded couponing

The practice of a lender including the cost of mortgage insurance in the interest rate stated in the loan note, rather than listing it as a separate monthly charge. The practice permits a lender to cancel the mortgage insurance at a later date, while continuing to collect the monthly insurance premium from the homeowner/borrower. The practice was prohibited in 1985 by the Federal Home Loan Mortgage Corporation. [OTS]

loading

The physical placing of cargo into carriers container, or onto a vessel. [ITDS]

loan

A sum of money transferred to another for temporary use, to be repaid with or without interest according to terms of the loan agreement written in the accompanying bond, note, mortgage or other document of indebtedness. Loan is the noun. Lend (past tense lent) is the verb. [OTS]

loan agreement

Transaction under which an issuer loans money derived from an issue to X, and X promises to repay to the issuer, or to another (such as the trustee) on the issuer's behalf, the debt service on the issue together with issuer costs resulting from the fulfillment of obligations under the loan agreement. [EPA]

loan amortization schedule

The schedule for repaying the interest and principal on a loan. [Harvey]

loan application

(1) a request to a lending institution for an advance of funds. (2) the form on which data about the loan and about the prospective borrower are recorded. [OTS]

loan application register (LAR)

A register that lists all loan applications taken by a savings association. [OTS]

Loan Loss Amortization Program

A capital forbearance program authorized by Congress in 1986. This program provided relief to 33 agricultural banks by permitting them to defer the recognition of agricultural loan losses. Only institutions with less than $100 million in total assets and with at least 25 percent of their total loans in qualified agricultural credits were eligible for the program. The Loan Loss Amortization Program allowed such banks to amortize these losses over a seven-year period. [FDIC]

loan modification and refinance fraud

This scheme occurs when a borrower submits false income information and/or false credit reports to persuade the financial institution to modify or refinance the loan on more favorable terms. [FFIEC]

loan origination

The steps by a lending institution up to the time a loan is placed on its books, including solicitation and processing of applications and loan closing. [OTS]

loan origination fee

The initial service charge imposed by a lending institution on a borrower for placing a loan on the institution's books. [OTS]

loan participation

(1) the buying of portions of outstanding loans by investors, who then participate on a pro rata basis in collecting interest and principal payments. (2) the sharing by two or more lenders in the ownership of a loan or package of loans. [OTS]

loan portfolio

The total of all the loans that a financial institution, or other lender, holds at a given time. [OTS]

loan proceeds

The net amount of funds that a lending institution disburses under terms of a loan, and which the borrower then owes. [OTS]

loan processing

all the steps taken by a lending institution from the time a loan application is received to the time the loan is closed and placed on the books, including taking the application, conducting the credit investigation, evaluating the loan terms and other steps. [OTS]

loan program

A federal program in which the government lends money at preannounced rates to farmers and allows them to use the crops they plant for the upcoming crop year as collateral. Default on these loans is the primary method by which the government acquires stocks of agricultural commodities. [CBOT][MIDAM]

loan purchase P&A

An FDIC purchase and assumption transaction in which the acquirer assumes the deposit liabilities and certain other liabilities of the failed institution and purchases only a portion of the loan portfolio, usually just the installment loans, in addition to the cash and cash equivalent assets. [FDIC]

loan rate

The amount lent per unit of a commodity to farmers. [CBOT][MIDAM]

loan servicer

A contractor hired by the FDIC and the RTC to manage loans of failed institutions. [FDIC]

loan servicing

The acts performed to collect and process loan payments during the life of a loan. They include billing the borrower; collecting payments of principal, interest, and payments into an escrow account; disbursing funds from the escrow account to pay taxes and insurance premiums; and forwarding funds to an investor if the loan has been sold in the secondary market. [OTS]

loan settlement statement

A document prepared for and presented to the borrower at the loan closing showing all disbursements to be made, such as payment to the seller. [OTS]

loan syndication

Group of banks sharing a loan. [Harvey]

loan terms

The specifications in a loan agreement that prescribe the loan amount, interest rate, length of time in which to repay the loan, and any other enforceable agreements entered into by the borrower and lender to effect the advance of funds. [OTS]

loan value

The amount a policyholder may borrow against a whole life insurance policy at the interest rate specified in the policy. [Harvey]

loan workout

A series of steps taken by a lender with a borrower to resolve the problem of delinquent loan payments. Steps can include rescheduling loan payments into lower installments over a longer period of time so that the entire outstanding principal is eventually repaid. [OTS]

loan-related assets

The sum of mortgage and nonmortgage loans. [OTS]

loan-to-value ratio

The relationship, expressed as a percent, of the amount of money loaned to the appraised value of the real estate pledged as security for the loan. For example, an $85,000 loan on a $100,000 house would have a loan-to-value ratio of 85 percent. [OTS]

loans in process

all loans on which an institution has made a firm commitment to lend money but not yet disbursed the entire proceeds. [OTS]

local

An individual with exchange trading privileges who trades for his own account, traditionally on an exchange floor, and whose activities provide market liquidity. [CFTC]

local distribution company

Company that distributes natural gas primarily to end-users. A gas utility. [NYMEX]

local expectations theory

A form of the pure expectations theory which suggests that the returns on bonds of different maturities will be the same over a short-term investment horizon. [Harvey]

location

A Delivery Point for a futures contract. [CFTC]

lock box service

A service performed by a vendor in which customers' incoming payments are picked up from a Post Office box and processed. [OTS]

lock-box system

form of concentration banking. Customers send payments to a post office box. A local bank collects and processes the checks and transfers the funds to the company's principle bank. [WCSU]

lock-in period

The portion of the term of a mortgage loan during which the loan cannot be paid off earlier than scheduled. [OTS]

lock-out

With PAC bond CMO classes, the period before the PAC sinking fund becomes effective. With multifamily loans, the period of time during which prepayment is prohibited. [Harvey]

lock-up CDs

CDs that are issued with the tacit understanding that the buyer will not trade the certificate. Quite often, the issuing bank will insist that the certificate be safekept by it to ensure that the understanding is honored by the buyer. [Harvey]

lockbox

A collection and processing service provided to firms by banks, which collect payments from a dedicated postal box that the firm directs its customers to send payment to. The banks make several collections per day, process the payments immediately, and deposit the funds into the firm's bank account. [Harvey]

locked limit

A price that has advanced or declined the permissible limit during one trading session, as fixed by the rules of an exchange. Also called Limit Move. [CFTC]

locked market

A market is locked if the bid = ask price. This can occur, for example, if the market is brokered and brokerage is paid by one side only, the initiator of the transaction. [Harvey] A market where prices have reached their daily trading limit and trading can only be conducted at that price or prices which are closer to the previous settlement price. [NYMEX]

locked-in

A hedged position that cannot be lifted without offsetting both sides of the hedge (spread). Also refers to being caught in a limit price move. [CFTC] Investors are said to be locked in when they have profit on a security they own but do not sell because their profit would immediately become subject to the capital gains tax. [NYSE]

locked-in trades

Locked-in trades are transactions that are matched by a computer, usually at the place of the trade, before being sent to a clearing organization. [GAO]

log-linear least-squares method

A statistical technique for fitting a curve to a set of data points. One of the variables is transformed by taking its logarithm, and then a straight line is fitted to the transformed set of data points. [Harvey]

lognormal distribution

A distribution where the logarithm of the variable follows a normal distribution. Lognormal distributions are used to describe returns calculated over periods of a year or more. [Harvey]

london gold market

Refers to the dealers in the London Bullion Market Association who set (fix) the gold price in London. [CFTC]

London interbank offered rate (LIBOR)

The average interest rate estimated by leading banks in London that the average leading bank would be charged if borrowing from other bank [Wikipedia] The interest rate offered by a specific group of London banks for U.S. dollar deposits of a stated maturity. LIBOR is used as a base index for setting rates of some adjustable rate financial instruments. [OTS] The rate at which, theoretically, banks in London place Eurocurrencies/Eurodollars with each other. [FDIC] The rate of interest at which banks borrow funds (denominated in U.S. dollars) from other banks, in marketable size, in the London interbank market. LIBOR rates are disseminated by the British Bankers Association, which also disseminates LIBOR rates for British pounds sterling. Some interest rate futures contracts, including Eurodollar futures, are cash settled based on LIBOR. [CFTC]

London International Financial Futures Exchange

A London exchange where Eurodollar futures as well as futures-style options are traded. [Harvey]

long

(1) One who has bought a futures contract to establish a market position; (2) a market position that obligates the holder to take delivery; (3) one who owns an inventory of commodities. [CFTC] 1) The market position of a futures contract buyer whose purchase obligates him to accept delivery unless he liquidates his contract with an offsetting sale. 2) One who has bought a futures contract to establish a market position. 3) In the options market, position of the buyer of a call or put option contract. Opposite of Short. [NYMEX] One who has bought a contract(s) to establish a market position and who has not yet closed out this position through an offsetting sale; the opposite of short. [Harvey] One who has bought futures contracts or owns a cash commodity. [CBOT] Signifies ownership of securities. 'I am long 100 U.S. Steel' means the speaker owns 100 shares. [NYSE] refers to the ownership of stock, futures, cash commodities or financial instruments, specifically to the purchase of such securities with the intention of holding them in anticipation of a price increase. 'I am long 100 Freddie Mac,' means the investor owns 100 shares of Freddie Mac stock. [OTS]

long bonds

Bonds with a long current maturity. The 'long bond' is the 30-year U.S. government bond. [Harvey]

long coupons

(1) Bonds or notes with a long current maturity. (2) A bond on which one of the coupon periods, usually the first, is longer than the other periods or the standard period. [Harvey]

long hedge

Purchase of futures against the future market price purchase or fixed price forward sale of a cash commodity to protect against price increases. [NYMEX] The purchase of a futures contract(s) in anticipation of actual purchases in the cash market. Used by processors or exporters as protection against an advance in the cash price. [Harvey] The purchase of futures contracts to compensate for a rise in the price of a commodity or financial instrument. A long hedge is often used to lock in the yield (or cost) of an anticipated cash market purchase or to 'shorten' the maturity of a liability. [OTS]

long position

An excess of assets (and/or forward purchase contracts) over liabilities (and/or forward sales contracts) in the same currency. A dealer's position when net purchases and sales result in a net-purchased position. [FDIC] An options position where a person has executed one or more option trades where the net result is that they are an 'owner' or holder of options (i. e. the number of contracts bought exceeds the number of contracts sold). [Harvey]

long run

A period of time in which all costs are variable; greater than one year. [Harvey]

long straddle

A straddle in which a long position is taken in both a put and call option. [Harvey]

long the basis

A person or firm that has bought the spot commodity and hedged with a sale of futures is said to be long the basis. [CFTC][NYMEX]

long-term

In accounting information, one year or greater. [Harvey]

long-term assets

Value of property, equipment and other capital assets minus the depreciation. This is an entry in the bookkeeping records of a company, usually on a 'cost' basis and thus does not necessarily reflect the market value of the assets. [Harvey]

long-term debt

An obligation having a maturity of more than one year from the date it was issued. Also called funded debt. [Harvey] Debt that is payable during some future accounting period (more than 1 year from the date of the balance sheet). [EPA]

long-term debt ratio

The ratio of long-term debt to total capitalization. [Harvey]

long-term debt to equity ratio

A capitalization ratio comparing long-term debt to shareholders' equity. [Harvey]

long-term debt/capitalization

Indicator of financial leverage. Shows long-term debt as a proportion of the capital available. Determined by dividing long-term debt by the sum of long-term debt, preferred stock and common stockholder equity. [Harvey]

long-term financial plan

Financial plan covering two or more years of future operations. [Harvey]

long-term interest rates

Interest rates on loan contracts--or debt instruments such as Treasury bonds or utility, industrial, or municipal bonds--having maturities greater than one year. Often called capital market rates. [FRB][FRBC][FRBSF]

long-term liabilities

Amount owed for leases, bond repayment and other items due after 1 year. [Harvey]

longshoreman

A laborer who loads and unloads ships at a seaport. [ITDS]

look-thru

A method for calculating U.S. taxes owed on income from controlled foreign corporations that was introduced by the Tax Reform Act of 1986. [Harvey]

lookalike option

An over-the-counter option that is cash settled based on the settlement price of a similar exchange-traded futures contract on a specified trading day. [CFTC]

lookalike swap

An over-the-counter swap that is cash settled based on the settlement price of a similar exchange-traded futures contract on a specified trading day. [CFTC]

lookback option

An exotic option whose payoff depends on the minimum or maximum price of the underlying asset during some portion of the life of the option. Lookback options allow the buyer to pay or receive the most favorable underlying price during the lookback period. [CFTC] An option that allows the buyer to choose as the option strike price any price of the underlying asset that has occurred during the life of the option. If a call, the buyer will choose the minimal price, whereas if a put, the buyer will choose the maximum price. This option will always be in the money. [Harvey] The payout is based on the lowest in the case of a put, or highest, in the case of a call, level reached by the underlying instrument during the exercise period. [TMAC]

loophole certificate

A certificate of deposit for which part of the deposited funds have been lent by the issuing institution to the certificate holder. [OTS]

Lorenz Curve

A graph which visually presents a measure of the inequality of a nations income distribution. [FACS]

lose of intent

A document, such as a written memorandum, that describes the preliminary understanding between parties who intend to make a contract or join together in another action, such as a joint venture or a corporate merger. [ITDS]

loss

(1) the situation in which money received from the sale of an item is less than the money previously spent to buy the item. (2) the excess of costs and expenses over income. (3) a category of classified assets. [OTS]

loss sharing

A method in a purchase and assumption transaction in which the FDIC as receiver agrees to share with the acquirer losses on certain types of loans. Loss sharing may be offered by the receiver in connection with the sale of classified or nonperforming loans that otherwise might not be sold to an acquirer at the time of resolution. The FDIC usually agrees to absorb a significant portion (for example, 80 percent) of future disposition losses on assets that have been designated as 'shared loss assets' for a specific period of time (for example, three to five years). The economic rationale for such transactions is that retaining shared loss assets in the banking sector would produce a better net recovery than would the FDIC's liquidation of the assets. [FDIC]

lot

A measured parcel of land having fixed boundaries as shown on the recorded plat. [OTS] A unit of trading. [CFTC] Any definite quantity of a futures commodity of uniform grade; the standard unit of trading. [NYMEX]

lot labels

Labels attached to each piece of multiple lot shipment for identification purposes. [ITDS]

low

The lowest price of the day for a particular futures contract. [CBOT][MIDAM]

low price

This is the day's lowest price of a security that has changed hands between a buyer and a seller. [Harvey]

low price/earnings ratio effect

The tendency of portfolios of stocks with a low price/earnings ratio to outperform portfolios consisting of stocks with a high price/earnings ratio. [Harvey]

low-coupon bond refunding

Refunding of a low coupon bond with a new, higher coupon bond. [Harvey]

lower deck containers

Carrier owned containers specially designed as an integral part of the aircraft to fit in the cargo compartments of a wide body aircraft. [ITDS]

lower of cost or market (LOCOM)

An accounting method used to establish the dollar amount at which assets are recorded on a savings association's books. The amount established is the lower of the cost of the asset or the current market value. Under this method, assets must be written down if the market value falls below the cost. They may also be written up but not above their amortized cost. [OTS]

lump-sum distribution

The withdrawal of an individual's pension benefits or retirement savings all at once in one payment. [OTS]

M1

Measure of the U.S. money stock that consists of currency held by the public, travelers checks, demand deposits, and other checkable deposits, including NOW (negotiable order of withdrawal) and ATS (automatic transfer service) account balances and share draft account balances at credit unions. [FRBC][FRBSF] The total quantity of coins and paper currency classified as legal tender by government mandate that circulates in the hands of the public, plus all checking account balances the public maintains in financial institutions. [FACS]

M2

All of M1 plus savings, small time deposit account balances (less than $100,000) in financial institutions and small money market mutual funds owned by individuals. [FACS] Measure of the U.S. money stock that consists of M1, certain overnight repurchase agreements and certain overnight Eurodollars, savings deposits (including money-market deposit accounts), time deposits in amounts of less than $100,000, and balances in money market mutual funds (other than those restricted to institutional investors). [FRBC][FRBSF]

M3

Measure of the U.S. money stock that consists of M2, time deposits of $100,000 or more at all depository institutions, term repurchase agreements in amounts of $100,000 or more, certain term Eurodollars, and balances in money market mutual funds restricted to institutional investors. [FRBC][FRBSF]

Macaulay duration

The weighted-average term to maturity of the cash flows from the bond, where the weights are the present value of the cash flow divided by the price. [Harvey]

machine transfer entry (MTE)

ACH entries initiated by a consumer through direct contact with an originator, including automated teller machines. [ACH]

macro fund

A hedge fund that specializes in strategies designed to profit from expected macroeconomic events. [CFTC]

macroeconomics

The study of economics in terms of whole systems, especially with reference to general levels of output and income and to the interrelations among sectors within the economy. [OTS] The study of the sum total of economic activity, dealing with the issues of growth, inflation and unemployment and with national economic policies relating to these issues. [FACS]

macroeconornics

The study of statistics of the economy as a whole rather than as single economic units. [ITDS]

magic of diversification

The effective reduction of risk (variance) of a portfolio, achieved without reduction to expected returns through the combination of assets with low or negative correlations (covariances). [Harvey]

magnetic ink character recognition (MICR)

mail entry

A means of shipping and entering goods into the Customs Territory of the United States. [ITDS]

mail float

Refers to the part of the collection and disbursement process where checks are trapped in the postal system. [Harvey]

maintenance

A set minimum margin (per outstanding futures contract) that a customer must maintain in his margin account. [CBOT][MIDAM] The upkeep necessary for efficient operation of physical properties. It involves labor and materials but is not to be confused with replacement or retirement. [EPA]

maintenance margin

A set minimum margin (per outstanding futures contract) that a customer must maintain in his margin account. [CBOT][MIDAM] Minimum margin that must be maintained on a Futures contract. [WCSU]

maintenance margin requirement

A sum, usually smaller than -but part of the original margin, which must be maintained on deposit at all times. If a customer's equity in any futures position drops to, or under, the maintenance margin level, the broker must issue a margin call for the amount at money required to restore the customer's equity in the account to the original margin level. [Harvey]

major

A term broadly applied to those multinational oil companies which by virtue of size, age, or degree of integration, are among the pre-eminent companies in the international petroleum industry. [NYMEX]

majority voting

Voting system under which each director is voted upon separately. [Harvey][WCSU]

make a market

A dealer is said to make a market when he quotes bid and offered prices at which he stands ready to buy and sell. [Harvey]

maker

An individual, firm, or other legal entity who signs a note, check, or other negotiable instrument and is authorized or responsible for so doing. [OTS] Members of the New York Stock Exchange who trade on the floor for their own or their firm's account and who have an obligation, when called upon by an Exchange official, to narrow a quote or improve the depth of an existing quote by their own bid or offer. [NYSE]

making delivery

Refers to the seller's actually turning over to the buyer the asset agreed upon in a forward contract. [Harvey]

mala fide

In bad faith; a sellers representation that goods are usable for a particular purpose when in fact the seller knows that the goods are not. [ITDS]

Malthusian Trap

The minimum subsistence level to which humans descend as a result of geometric population growth and arithmetic resource growth. [FACS]

man of straw

Effectively a nominee settlor or grantor who creates an offshore trust but often has no further connection with the trust once it is created. [UNODC]

managed account

managed bank

An offshore bank also known as a Class 'B', Shell Branch or Cubicle Bank. The Managed Bank is not required to maintain a physical presence in the licensing jurisdiction. Its presence in the licensing jurisdiction is passive with nominee directors and officers provided by a managing trust company with a physical presence. The Managed Bank is not permitted to transact business within the licensing jurisdiction but may maintain its books, records, etc., to assure secrecy of operations. [UNODC]

managed company

A private, limited liability company which can be established for corporations, trusts or individuals and managed in different locations around the world. [UNODC]

managed float

Also known as 'dirty' float, this is a system of floating exchange rates with central bank intervention to reduce currency fluctuations. [Harvey]

managed floating

Intervention by central banks in foreign exchange markets to stabilize their currency exchange rates. [FACS]

managed futures

Represents an industry comprised of professional money managers known as commodity trading advisors who manage client assets on a discretionary basis, using global futures markets as an investment medium. [CBOT][MIDAM]

management buyout

Leveraged buyout whereby the acquiring group is led by the firm's management. [Harvey]

management control review (MCR)

An examination of a system of internal controls for a particular process or function as defined by the FDIC Internal Control Review program. The main goal of a management control review is to document controls that are currently in place. [FDIC]

management fee

An investment advisory fee charged by the financial advisor to a fund based on the fund's average assets, but sometimes determined on a sliding scale that declines as the dollar amount of the fund increases. [Harvey]

management/closely held shares

Percentage of shares held by persons closely related to a company, as defined by the Securities and exchange commission. Part of these percentages often is included in Institutional Holdings -- making the combined total of these percentages over 100. There is overlap as institutions sometimes acquire enough stock to be considered by the SEC to be closely allied to the company. [Harvey]

manager

The underwriter that serves as the lead or managing underwriter for an Account. The manager generally negotiates the interest rate and purchase price in a negotiated sale, or serves as the generator of the consensus for the interest rate and purchase price to be bid in a competitive bidding situation. The manager signs the contract or submits the bid on behalf of the Account and generally receives either a fee or a slightly larger portion of the spread for its services in this capacity. See also 'Joint Managers'. [EPA]

manager of syndicate

The bank which solicits the loan from the borrower and solicits other lenders to join the syndicate making the loan. [FDIC]

managerial decisions

Decisions concerning the operation of the firm, such as the choice of firm size, firm growth rates, and employee compensation. [Harvey]

managing agent

The FDIC or RTC employee responsible for managing day-to-day operations of an institution in conservatorship. The MA prepares the institution for resolution by downsizing (selling assets). [FDIC]

mandatory call

Call required by the financing documents, often on the occurrence of an event contemplated in those documents. (Compare 'Optional Call'). [EPA]

mandatory delivery

A type of loan purchase program offered by the Federal Home Loan Mortgage Corporation in which delivery of loans by the seller/servicer to Freddie Mac is required. [OTS]

mandatory redemption schedule

Schedule according to which sinking fund payments must be made. [Harvey]

mandatory sinking fund

The special fund into which the obligor makes required periodic deposits, the moneys in which are applied on a fixed and mandatory basis to pay term bonds by mandatory sinking fund redemption or otherwise. [EPA]

mandatory sinking fund redemption

A requirement to redeem in the years prior to the stated maturity date a portion of term bonds in accordance with a fixed schedule. Although the principal amount to be redeemed in each year is fixed, the specific term bonds to be called to satisfy the requirement for any year are selected by the issuer or the trustee by lot. Mandatory sinking fund redemption usually carries no call premium since it is a requirement known at the delivery date and not an optional right. [EPA]

mangement's discussion

A report from management to the shareholders that accompanies the firm's financial statements in the annual report. This report explains the period's financial results and enables management to discuss other ideas that may not be apparent in the financial statements in the annual report. [Harvey]

manifest

A document giving the description of a ships cargo or the contents of a car or truck. [ITDS]

manipulation

An illegal operation. Buying or selling a security for the purpose of creating false or misleading appearance of active trading or for the purpose of raising or depressing the price to induce purchase or sale by others. [NYSE] Any planned operation, transaction, or practice that causes or maintains an artificial price. Specific types include corners and squeezes as well as unusually large purchases or sales of a commodity or security in a short period of time in order to distort prices, and putting out false information in order to distort prices. [CFTC]

manufactured home

A dwelling that is wholly or substantially built in a factory with major components then delivered to the building site for assembly. Mobile homes, as well as prefabricated stationary homes, are included in the category of manufactured home. [OTS]

manufactured housing securities

Loans on manufactured homes - that is, factory-built or prefabricated housing, including mobile homes. [Harvey]

many-to-many

Refers to a trading platform in which multiple participants have the ability to execute or trade commodities, derivatives, or other instruments by accepting bids and offers made by multiple other participants. In contrast to one-to-many platforms, many-to-many platforms are considered trading facilities under the Commodity Exchange Act. Traditional exchanges are many-to-many platforms. [CFTC]

maquiladora

A program which allows foreign manufacturers to ship components into Mexico duty free for assembly and subsequent reexport. [ITDS]

margin

(1) in futures trading, a specific dollar amount, set by each exchange, that both buyers and sellers must deposit as a guarantee that both will perform as agreed to make or take delivery during a designated period of time. The deposit is held by the clearing organization of the exchange. (2) in stock transactions, margin refers to the down payment required when borrowing from a broker to finance the purchase of stock. In this case, margin requirements may be set by the Federal Reserve Board, the Board of Governors of the Exchange or the broker. The margin is expressed as a percentage of the purchase price. [OTS] Cash or securities set aside by an investor as evidence that he or she can honor a commitment. [WCSU] Minimum deposit of cash or negotiable instruments to guarantee a position. [TMAC] The amount of money or collateral deposited by a customer with his broker, by a broker with a clearing member, or by a clearing member with a clearing organization. The margin is not partial payment on a purchase. Also called Performance Bond. (1) Initial margin is the amount of margin required by the broker when a futures position is opened; (2) Maintenance margin is an amount that must be maintained on deposit at all times. If the equity in a customer's account drops to or below the level of maintenance margin because of adverse price movement, the broker must issue a margin call to restore the customer's equity to the initial level. Exchanges specify levels of initial margin and maintenance margin for each futures contract, but futures commission merchants may require their customers to post margin at higher levels than those specified by the exchange. Futures margin is determined by the SPAN margining system, which takes into account all positions in a customer's portfolio. [CFTC] The amount of money or collateral deposited by a customer with his broker, or deposited by a broker with a Clearing Member, or by a Clearing Member with the Clearinghouse, for the purpose of insuring the broker or Clearinghouse against adverse price movement on open futures contracts. The margin is not partial payment on a purchase. 1) Initial Margin is the minimum deposit per contract required by the broker when a futures position is opened. 2) Maintenance Margin is a sum which must be maintained on deposit at all times. If the equity in a customers' account drops to, or under, that level because of an adverse price movement, the broker must issue a margin call to restore the customers' equity. Margins are set by the Exchange based on its analysis of price risk volatility in the market at that time. [NYMEX] The amount paid by the customer when using a broker's credit to buy or sell a security. Under Federal Reserve regulations, the initial margin required since 1934 has ranged from 40% of the purchase price up to 100%. Since 1974 the current rate of 50% has been in effect. [NYSE] The difference between the cost of sold items and the total net sales income. [ITDS] This allows investors to buy securities by borrowing money from a broker. The margin is the difference between the market value of a stock and the loan a broker makes. [Harvey] With regard to securities, this term refers to a fractional amount of full value, or the equity outlay (down payment) required for an investment in securities purchased on credit. [FRB][FRBC][FRBM][FRBSF]

margin account

A leverageable account in which stocks can be purchased for a combination of cash and a loan. The loan in the margin account is collateralized by the stock and, if the value of the stock drops sufficiently, the owner will be asked to either put in more cash, or sell a portion of the stock. Margin rules are federally regulated, but margin requirements and interest may vary among broker/dealers. [Harvey] A type of account with a broker-dealer, in which the broker agrees to lend the customer part of the amount due for the purchase of securities. [SEC]

margin call

(1) A request from a brokerage firm to a customer to bring margin deposits up to initial levels; (2) a request by the clearing organization to a clearing member to make a deposit of original margin, or a daily or intra-day variation margin payment because of adverse price movement, based on positions carried by the clearing member. [CFTC] A call from a clearinghouse to a clearing member, or from a brokerage firm to a customer, to bring margin deposits up to a required minimum level. [CBOT][MIDAM] A demand for additional funds because of adverse price movement. Maintenance margin requirement, security deposit maintenance [Harvey] A demand for additional margin funds when futures prices move adverse to a trader's position, or if margin requirements are increased. Buyers of options are not subject to margin calls. [NYMEX] A demand upon a customer to put up money or securities with the broker. The call is made when a purchase is made; also if a customer 's equity in a margin account declines below a minimum standard set by the Exchange or by the firm. [NYSE]

margin of safety

With respect to working capital management, the difference between 1) the amount of long-term financing, and 2) the sum of fixed assets and the permanent component of current assets. [Harvey]

margin requirement

The amount of cash an uncovered (naked) option writer is required to deposit and maintain to cover his daily position valuation and reasonably foreseeable intra-day price changes. [Harvey]

margin stock

Any stock listed on a national securities exchange, any over-the-counter security approved by the SEC for trading in the national market system, or appearing on the Board's list of over-the-counter margin stock and most mutual funds. [FRB][FRBC][FRBM][FRBSF]

margin, or margin costs

The value of the trade services provided in delivering commodities from producers' establishments to purchasers. [BEA]

marginal

Incremental. [Harvey] The additional or extra quantity of something. If one drinks six sodas in a day, the marginal soda would be the sixth soda. [FACS]

marginal cost

The increase in the total cost of production that results from manufacturing one more unit of output. [ITDS] The increase in total costs as one more unit is produced. [FACS]

marginal productivity

The additional output obtained by adding an additional unit of a productive resource, such as labor. More precisely, marginal productivity is the change in total output divided by the change in the amount of the productive resource employed. [FACS]

marginal propensity to consume (MPC)

The percentage of new or added income that is consumed. [FACS]

marginal propensity to save (MPS)

The percentage of new or added income that is saved. [FACS]

marginal revenue

The addition to total revenue as one additional unit is produced and sold. [FACS]

marginal tax rate

The tax rate charged on the taxpayers last dollar earned; in a progressive tax system the marginal tax rate is always greater than the average tax rate. [FACS] The tax rate that would have to be paid on any additional dollars of taxable income earned. [Harvey]

marine insurance policy

A contract of indemnity by which an insurance company undertakes to refund to the insured the amount of loss arising from specified marine casualties. Marine insurance is more extensive than other types, because it may provide not merely for losses arising from fire, but also from piracy, wreck and most injuries sustained at sea. [FDIC]

maritime

Business pertaining to commerce or navigation by sea. [ITDS]

mark-to-market

A procedure to adjust the carrying value of a security or derivative contract to its current market value. [TMAC] An accounting procedure by which assets are 'marked,' or recorded, at their current market value, which may be higher or lower than their purchase price or book value. [OTS] Daily cash flow system used by U.S. futures exchanges to maintain a minimum level of margin equity for a given futures or options contract position by calculating the gain or loss in each contract position resulting from changes in the price of the futures or option contracts at the end of each trading day. [NYMEX] Part of the daily cash flow system used by U.S. futures exchanges to maintain a minimum level of margin equity for a given futures or option contract position by calculating the gain or loss in each contract position resulting from changes in the price of the futures or option contracts at the end of each trading session. These amounts are added or subtracted to each account balance. [CFTC] The daily adjustment of the amount of funds in margin accounts to reflect the market gain or loss on the position as measured by changes in the daily settlement price. This ensures that the account contains the minimum amount of margin funds required by the Federal Reserve Board, the Stock Exchange and/or the brokerage house involved. [OTS] The process whereby the book value or collateral value of a security is adjusted to reflect current market value. [Harvey]

marked-to-market

An arrangement whereby the profits or losses on a futures contract are settled each day. [Harvey]

market

(1) Public place where products are bought and sold, directly or through intermediaries (also called market-place; (2) aggregate of people with the present or potential ability and desire to purchase a product or service; equivalent to demand; and (3) securities markets in the aggregate. [UNODC] (1) all persons possessing the ability and desire or potential desire to purchase and take delivery of a product or service. (2) the estimated or actual level of demand for a product or service. [OTS] A network in which buyers and sellers interact to exchange goods and services for money. [FACS]

market access

The openness of a national market to foreign products. [ITDS]

market capitalization

The total dollar value of all outstanding shares. Computed as shares times current market price. It is a measure of corporate size. [Harvey]

market capitalization rate

Expected return on a security. [WCSU] Expected return on a security. The market-consensus estimate of the appropriate discount rate for a firm's cash flows. [Harvey]

market clearing

Total demand for loans by borrowers equals total supply of loans from lenders. The market, any market, clears at the equilibrium rate of interest or price. [Harvey]

market clearing price

A price which rations the supply of a good among competing consumers so that the quantity of the good demanded is equal to the quantity supplied. [FACS]

market conversion price

Also called conversion parity price, the price that an investor effectively pays for common stock by purchasing a convertible security and then exercising the conversion option. This price is equal to the market price of the convertible security divided by the conversion ratio. [Harvey]

market correction

In technical analysis, a small reversal in prices following a significant trending period. [NYMEX]

market cycle

The period between the 2 latest highs or lows of the S&P 500, showing net performance of a fund through both an up and a down market. A market cycle is complete when the S&P is 15% below the highest point or 15% above the lowest point (ending a down market). The dates of the last market cycle are: 12/04/87 to 10/11/90 (low to low). [Harvey]

market data approach to value

The estimation of the market value of a property by comparing it with similar properties in the general area that have sold recently under comparable conditions. [OTS]

Market Data System (MDS)

Captures and displays, worldwide, trade and volume information continuously generated by trading floor activity. MDS is the core of the NYSE international communications network. [NYSE]

market discipline

The forces in a free market (without the influence of government regulation) which tend to control and limit the riskiness of a financial institution's investment and lending activities. Such forces include the concern of depositors for the safety of their deposits and the concern of bank investors for the safety and soundness of their institutions. [FDIC]

market disruption

A situation where a surge of imports of a certain product causes a sharp decline in the domestic sales of that product and creates a hardship for domestic producers. [ITDS]

market economy

A decentralized system where many buyers and sellers interact. [FACS] An economic system where resources are allocated and production of products determined by market forces rather than by government decree. [ITDS]

market impact costs

Also called price impact costs, the result of a bid/ask spread and a dealer's price concession. [Harvey]

Market Information Data Inquiry System (MIDIS)

Historical Chicago Board of Trade price, volume, open interest data and other market information accessible by computers within the Chicago Board of Trade building. [CBOT][MIDAM]

market interest rates

Rates of interest paid on deposits and other investments, determined by the interaction of the supply of and demand for funds in financial markets. [FRB][FRBC][FRBSF]

market liquidity

The ability of market participants to easily enter into or unwind a particular type of transaction. [TMAC]

market manipulation

These schemes, commonly referred to as 'Pump and Dumps,' are effected by creating artificial buying pressure for a targeted security, generally a low-trading volume issuer in the over-the-counter securities market that is largely controlled by the fraud perpetrators. This artificially increased trading volume has the effect of artificially increasing the price of the targeted security (i.e., the Pump), which is rapidly sold off into the inflated market for the security by the fraud perpetrators (i.e., the Dump); resulting in illicit gains to the perpetrators and losses to innocent third party investors. Typically, the increased trading volume is generated by inducing unwitting investors to purchase shares of the targeted security through false or deceptive sales practices and/or public information releases. [FBI]

market marker

market model

This relationship is sometimes called the single-index model. The market model says that the return on a security depends on the return on the market portfolio and the extent of the security's responsiveness as measured, by beta. In addition, the return will also depend on conditions that are unique to the firm. Graphically, the market model can be depicted as a line fitted to a plot of asset returns against returns on the market portfolio. [Harvey]

market order

An order to be filled immediately at the current market price. [NYMEX] An order to buy or sell a futures contract at whatever price is obtainable at the time it is entered in the ring, pit, or other trading platform. [CFTC] An order to buy or sell a futures contract of a given delivery month to be filled at the best possible price and as soon as possible. [CBOT][MIDAM] An order to buy or sell at the best price currently available on the Trading Floor. [NYSE] This is an order to immediately buy or sell a security at the current trading price. [Harvey]

market overhang

The theory that in certain situations, institutions wish to sell their shares but postpone the share sales because large orders under current market conditions would drive down the share price and that the consequent threat of securities sales will tend to retard the rate of share price appreciation. Support for this theory is largely anecdotal. [Harvey]

Market Performance Committee (MPC)

Focuses primarily on evaluating and seeking to strengthen the performance of NYSE specialist organizations, administering trading procedures, and recommending to the QOMC ways to improve NYSE markets' quality and competitiveness. Members include specialists, nonspecialist floor members, allied members, and institutional traders. [NYSE]

market portfolio

A portfolio consisting of all assets available to investors, with each asset held -in proportion to its market value relative to the total market value of all assets. [Harvey]

market price

The amount of money that a willing buyer pays to acquire something from a willing seller, when a buyer and seller are independent and when such an exchange is motivated by only commercial consideration. [Harvey] The last reported price at which the stock or bond sold, or the current quote. [NYSE] The price established in the market where buyers and sellers meet to buy and sell similar products. [ITDS]

market price of risk

A measure of the extra return, or risk premium, that investors demand to bear risk. The reward-to-risk ratio of the market portfolio. [Harvey]

Market Price Reporting and Information System

The Chicago Board of Trade's computerized price-reporting system. [CBOT][MIDAM]

market profile

A Chicago Board of Trade information service that helps technical traders analyze price trends. Market Profile consists of the Time and Sales ticker and the Liquidity Data Bank. [CBOT][MIDAM]

market reporter

A person employed by the exchange and located in or near the trading pit who records prices as they occur during trading. [CBOT][MIDAM]

market research

The process of gathering, analyzing and interpreting information about a market; about a product or service to be offered for sale in that market; and about the past, present and potential customers for the product or service. [OTS]

market return

The return on the market portfolio. [Harvey]

market risk

Risk that cannot be diversified away. [Harvey] Risk that cannot be diversified that way. [WCSU] The risk of loss resulting from changes to foreign exchange rates, interest rates, commodity prices, or equity prices or indices. [TMAC]

market sectors

The classifications of bonds by issuer characteristics, such as state government, corporate, or utility. [Harvey]

market segmentation theory or preferred habitat theory

A biased expectations theory that asserts that the shape of the yield curve is determined by the supply of and demand for securities within each maturity sector. [Harvey]

market timer

A money manager who assumes he or she can forecast when the stock market will go up and down. [Harvey]

market timing

Asset allocation in which the investment in the market is increased if one forecasts that the market will outperform T-bills. [Harvey]

market timing costs

Costs that arise from price movement of the stock during the time of the transaction which is attributed to other activity in the stock. [Harvey]

market value

(1) The price at which a security is trading and could presumably be purchased or sold. (2) The value investors believe a firm is worth; calculated by multiplying the number of shares outstanding by the current market price of a firm's shares. [Harvey] The highest price a property will bring in a competitive and open market. The price that an owner is prepared to accept to sell property and a buyer is willing to pay. [OTS] The value of an asset based on current market prices. [TMAC]

market value of portfolio equity

market value ratios

Ratios that relate the market price of the firm's common stock to selected financial statement items. [Harvey]

market value-weighted index

An index of a group of securities computed by calculating a weighted average of the returns on each security in the index, with the weights proportional to outstanding market value. [Harvey]

market-book ratio

Market price of a share divided by book value per share. [Harvey]

market-if-touched (MIT)

A price order, below market if a buy or above market if a sell, that automatically becomes a market order if the specified price is reached. [Harvey]

market-if-touched order

An order that becomes a market order when a particular price is reached. A sell MIT is placed above the market; a buy MIT is placed below the market. [NYMEX] An order that becomes a market order when a particular price is reached. A sell MIT is placed above the market; a buy MIT is placed below the market. Also referred to as a board order. Compare to Stop Order. [CFTC]

market-maker

A financial intermediary which will provide both bid and offer prices. [TMAC] A professional securities dealer or person with trading privileges on an exchange who has an obligation to buy when there is an excess of sell orders and to sell when there is an excess of buy orders. By maintaining an offering price sufficiently higher than their buying price, these firms are compensated for the risk involved in allowing their inventory of securities to act as a buffer against temporary order imbalances. In the futures industry, this term is sometimes loosely used to refer to a floor trader or local who, in speculating for his own account, provides a market for commercial users of the market. Occasionally a futures exchange will compensate a person with exchange trading privileges to take on the obligations of a market maker to enhance liquidity in a newly listed or lightly traded futures contract. [CFTC] An independent trader or trading firm which is prepared to buy and sell futures or options contracts in a designated market. Market makers provide a two-sided (bid and ask) market and greater liquidity. [NYMEX] Market maker is a dealer that makes bids and offers at which he/she will trade. [GAO] one who stands ready to buy or sell financial instruments at bid or asking prices throughout the business day. Market makers attempt to profit from the bid/ask spread. [OTS]

market-on-close

An order to buy or sell at the end of the trading session at a price within the closing range of prices. [CFTC][NYMEX]

market-on-opening

An order to buy or sell at the beginning of the trading session at a price within the opening range of prices. [CFTC]

market-to-market

An arrangement whereby the profits or loses on a futures contract are settled up each day. [WCSU] The comparison of the purchase price or book value of an investment with the price of the primary and secondary market. [UNODC]

marketability

A negotiable security is said to have good marketability if there is an active secondary market in which it can easily be resold. [Harvey] The relative ease in which an asset can be sold quickly at a price near the price at which similar assets are selling. [OTS]

marketable securities

Treasury bills, notes and bonds that are transferable and may be sold in the secondary securities market. [FRB][FRBC] those securities for which there is a valid expectation of finding a buyer in an available, active market. [OTS]

marketable title

title to property that is free of defects and that will legally be accepted without objection. Also known as perfect title, clear title, and good title. [OTS]

marketed claims

Claims that can be bought and sold in financial markets, such as those of stockholders and bondholders. [Harvey]

marketplace price efficiency

The degree to which the prices of assets reflect the available marketplace information. Marketplace price efficiency is sometimes estimated as the difficulty faced by active management of earning a greater return than passive management would, after adjusting for the risk associated with a strategy and the transactions costs associated with implementing a strategy. [Harvey]

marking-to-market

To debit or credit on a daily basis a margin account based on the close of that day's trading session. In this way, buyers and sellers are protected against the possibility of contract default. [CBOT][MIDAM]

Markowitz diversification

A strategy that seeks to combine assets a portfolio with returns that are less than perfectly positively correlated, in an effort to lower portfolio risk (variance) without sacrificing return. [Harvey]

Markowitz efficient frontier

The graphical depiction of the Markowitz efficient set of portfolios representing the boundary of the set of feasible portfolios that have the maximum return for a given level of risk. Any portfolios above the frontier cannot be achieved. Any below the frontier are dominated by Markowitz efficient portfolios. [Harvey]

Markowitz efficient portfolio

Also called a mean-variance efficient portfolio, a portfolio that has the highest expected return at a given level of risk. [Harvey]

Markowitz efficient set of portfolios

The collection of all efficient portfolios, graphically referred to as the Markowitz efficient frontier. [Harvey]

marks

Information placed on outer surface of shipping containers or packages such as address labels, identifying numbers, box specifications, cautions, or directional warnings. [ITDS]

markup

(1) the difference between the cost and selling price of an item or service expressed in either dollars or a percentage and calculated to cover the seller's operating expenses plus a profit. (2) the process of amending or changing legislation while in committee. [OTS]

master deed

The basic condominium document that must be registered by the originating property owner prior to the conveyance of the first unit sold. Also referred to as the condominium declaration, the master deed thoroughly describes the entire condominium entity, and specifies essential elements of ownership that permanently govern its operation. Also called an enabling declaration, or matrix deed. [OTS]

master in chancery

An official appointed by a court to take testimony, calculate interest, project damage costs, determine liens, and perform other related duties as requested by the court. [OTS]

master limited partnership

A publicly traded limited partnership. [Harvey]

master plan insurance

A form of insurance coverage that insures a financial institution against loss resulting from certain types of damage to a property pledged as security for a loan, whether or not the borrower maintains insurance coverage on the property. [OTS]

MasterCard

matador bond

Bond issued on the Spanish market, denominated in currencies other than the peseta. [ITDS]

matador market

The foreign market in Spain. [Harvey]

match fund

A bank is said to match fund a loan or other asset when it does so by buying (taking) a deposit of the same maturity. The term is commonly used in the Euromarket. [Harvey]

matched

A forward purchase is matched when it is offset by a forward sale for the same date, or vice versa. However, as a practical necessity, when setting limits for unmatched positions, a bank may consider a contract matched if the covering contract falls within the same week or semi-monthly period. [FDIC]

matched book

A bank runs a matched book when the distribution of maturities of its assets and liabilities are equal. [Harvey]

matched sale-purchase agreements

An agreement in which the Federal Reserve sells a security outright for immediate delivery to a dealer or foreign central bank, with an agreement to buy the security back on a specific date (usually within 7 days) at the same price. Matched sale-purchase agreements are the reverse of repurchase agreements and allow the Federal Reserve to withdraw reserves on a temporary basis. [FRBSF] When the Federal Reserve makes a matched sale-purchase agreement, it sells a security outright for immediate delivery to a dealer or foreign central bank, with an agreement to buy the security back on a specific date (usually within 7 days) at the same price. Matched sale-purchase agreements are the reverse of repurchase agreements and allow the Federal Reserve to withdraw reserves on a temporary basis. [FRB][FRBC][FRBM]

matching concept

The accounting principle that requires the recognition of all costs that are associated with the generation of the revenue reported in the income statement. [Harvey]

material contract terms

Terms in a contract that describe the goods, fix the price, and set the delivery date. [ITDS]

materials requirement planning

Computer-based systems that plan backward from the production schedule to make purchases in order to manage inventory levels. [Harvey]

mates receipt

A declaration issued by an officer of a vessel in the name of the shipping company stating that certain goods have been received on board his vessel. [ITDS]

mathematical programming

An operations research technique that solves problems in which an optimal value is sought subject to specified constraints. Mathematical programming models include linear programming, quadratic programming, and dynamic programming. [Harvey]

mature

To cease to exist; to expire. [Harvey]

maturity

(1) the end of the period of time for which credit, an insurance contract, or a mortgage loan is written. (2) the date(s) on which some types of investments such as bonds may be redeemed at face value. (3) the date on which a note, time draft, bill of exchange, bond, certificate of deposit or other negotiable instrument becomes due and payable. [OTS] For a bond, the date on which the principal is required to be repaid. In an interest rate swap, the date that the swap stops accruing interest. [Harvey] Period within which a futures contract can be settled by delivery of the actual commodity. [CFTC] The date upon which the principal of a municipal bond becomes payable to the bondholder. [EPA]

maturity amount

The value of an investment, including accrued earnings, at the time of its redemption. [OTS]

maturity date

The date that a bond comes due and must be paid off. [NYSE] The date upon which the principal amount of a security becomes due and payable. [EPA] The settlement date or delivery date for a forward contract. [FDIC]

maturity factoring

Factoring arrangement that provides collection and insurance of accounts receivable. [Harvey][WCSU]

maturity gap

Mismatched asset and liability maturities creating days or periods of uneven cash inflows and outflows. A substantial inflow of a particular currency over a prolonged period may result in excess idle funds for which no investment or sale has been arranged. This could mean a loss of income on the idle funds for that period and/or of be amount by which the value of that currency is expected to appreciate or depreciate. Conversely, substantial outflows prior to the maturities of offsetting assets may necessitate purchasing or borrowing the required currency for that period (gap) at substantially higher rates. Thus, the bank is exposed to the risk of rate changes between the time the gap was created and the date it is actually closed. [FDIC]

maturity intermediation

borrowing funds at short-term and lending the funds obtained at longer term. [OTS]

maturity mix

The variety of lengths of terms of assets in a firm's or individual's investment portfolio, such as 90-day Treasury bills, and 20-year corporate bonds. [OTS]

maturity phase

A phase of company development in which earnings continue to grow at the rate of the general economy. [Harvey]

maturity spread

The spread between any two maturity sectors of the bond market. [Harvey]

max show

maximum price fluctuation

A commodity exchange's standardized maximum limits for fluctuations in futures prices during any one trading session. [NYMEX] The maximum amount the contract price can change, up or down, during one trading session, as fixed by exchange rules in the contract specification. [Harvey]

MBS Depository

A book-entry depository for GNMA securities. The depository was initially operated by MBSCC and is currently in the process of becoming a separately incorporated, participant-owned, limited-purpose trust company organized under the State of New York Banking Law. [Harvey]

MBS servicing

The requirement that the mortgage servicer maintain payment of the full amount of contractually due principal and interest payments whether or not actually collected. [Harvey]

mean

The expected value of a random variable. [Harvey]

mean of the sample

The arithmetic average; that is, the sum of the observations divided by the number of observations. [Harvey]

mean-variance analysis

Evaluation of risky prospects based on the expected value and variance of possible outcomes. [Harvey]

mean-variance criterion

The selection of portfolios based on the means and variances of their returns. The choice of the higher expected return portfolio for a given level of variance or the lower variance portfolio for a given expected return. [Harvey]

measurement cargo

A cargo on which the transportation charge is assessed on the basis of measurement. [ITDS]

measurement error

Errors in measuring an explanatory variable in a regression that leads to biases in estimated parameters. [Harvey]

mechanic's lien

A legal, enforceable claim for payment to a person who has performed work or supplied materials used in the construction or repair of a building. The building and land is attached as security for payment of the claim. Mechanic's liens are permitted by the laws of most states. Also called a materialmen's lien. [OTS]

median income

The median income is the amount which divides the distribution into two equal groups, one having incomes above the median and other having incomes below the median. [EPA]

medical fraud

medium of exchange

Any commodity which is widely accepted in payment for goods and services and in settlement of debts. [ITDS]

medium-term note

A corporate debt instrument that is continuously offered to investors over a period of time by an agent of the issuer. Investors can select from the following maturity bands: 9 months to 1 year, more than 1 year to 18 months, more than 18 months to 2 years, etc., up to 30 years. [Harvey]

member bank

A depository institution that is a member of the Federal Reserve. All national banks are required to be System members, and state-chartered commercial banks and mutual savings banks may elect to become members. Member banks own stock in Federal Reserve Banks and elect some of the Reserve Bank directors. [FRB][FRBC] A depository institution that is a member of the Federal Reserve. All national banks are required to be System members, and state-chartered commercial banks may elect to become members. Member banks own stock in Federal Reserve Banks and elect some of the Reserve Bank directors. [FRB][FRBM] Depository institution that is a member of the Federal Reserve System. All federally chartered banks are automatically members of the System. State-chartered banks are divided into those that are members of the System (state member banks) and those that are not (nonmember banks). [FRBSF]

member corporation

A securities brokerage firm, organized as a corporation, with at least one member of the New York Stock Exchange who is an officer or employee of the corporation. [NYSE]

member firm

A securities brokerage firm, organized as a corporation, partnership or sole proprietorship with at least one member of the NYSE who is an officer or employee of the corporation. [NYSE]

member organization

This term includes New York Stock Exchange Member firms and Member Corporations. [NYSE]

member rate

Commission charged for the execution of an order for a person who is a member of or has trading privileges at the exchange. [CFTC]

members

(1) all the savers and borrowers in a mutual savings institution who have the right to elect directors, amend the bylaws, approve any basic corporate change or policy or organization, and, in general, possess most of the rights of ownership that stockholders have in a stock corporation except the right to share in profits. (2) financial institutions that belong to one of the Federal Home Loan Banks. [OTS]

membership or a seat on the exchange

A limited number of exchange positions that enable the holder to trade for the holder's own accounts and charge clients for the execution of trades for their accounts. [Harvey]

memo posting

A notation posted to an account which indicates credit funds will be posted, but have not yet been posted to the account. [ACH]

memorandum bill of lading

The duplicate copy of the bill of lading. [ITDS]

memorandum of association

The charter of a company which indicates nationality, the nature of its business and the share capital it is authorized to issue. It is a statutory document which effectively governs the company's relations with the outside world. [UNODC]

memorandum tariff

Publications which contain rule and rate information extracted from official tariffs. [ITDS]

merchandise

All movable goods such as cars, textiles, appliances, etc. and 'f.o.b.' means free on board. [Harvey]

merchandise trade balance

Category in the current account of the balance of payments which includes all traded goods (manufactured items, agricultural commodities, chemicals and all other physically tangible products). [FACS]

merchant bank

A British term for a bank that specializes not in lending out its own funds, but in providing various financial services such as accepting bills arising out of trade, underwriting new issues, and providing advice on acquisitions, mergers, foreign exchange, portfolio management, etc. [Harvey] A European form of an investment bank. [UNODC]

merchants credit

A letter of credit issued by the buyer himself with no commitment on the part of a bank. [ITDS]

merchants haulage

The inland move from or to a port that has all arrangements made by the exporter. [ITDS]

merger

(1) Acquisition in which all assets and liabilities are absorbed by the buyer. (2) More generally, any combination of two companies. [Harvey] Acquisition in which all assets and liabilities are absorbed by the buyer. More generally, any combination of two companies. [WCSU] Combination of two or more corporations. [NYSE] The combining of two or more savings institutions or other entities through one acquiring the assets and liabilities of the other(s). The acquired institutions lose their corporate identity and are absorbed into the surviving institution. [OTS]

merger-conversion

A transaction in which a mutual thrift institution converts to stock form and simultaneously merges into an acquiring stock thrift or bank. The acquiring institution obtains the stock of the converting institution in exchange for stock in the new, combined institution that results from the merger. Account holders at the converting mutual are given the opportunity to buy stock in the new, combined institution. [OTS]

Merit Increase Decision System (MIDS)

The agency-wide computer program that helps OTS managers calculate employees' annual salary increases and bonuses based on performance. [OTS]

merry-go-round

The circulation of money through various sources, ending up where it started. [ITDS]

meter equivalent

A measure that puts varying water meter sizes into equal terms by converting large meter sizes into the number of standard-size meters that would generate the same capital, maintenance, and service costs. [EPA]

metes and bounds

measurements of property contained in a deed by which the land location and its boundaries are defined by directions and distances. [OTS]

method

metropolitan statistical area (MSA)

A geographic unit comprised of one or more counties around a central city or urbanized area with 50,000 or more population. Contiguous counties are included if they have close social and economic links with the area's population nucleus. Also known as a standard metropolitan statistical area (SMSA). [OTS]

MICR-line information

MICR-line information refers to the data characters at the bottom of a check. The magnetic ink character recognition (MICR) line at the bottom of a check includes the routing number of the payor bank, the amount of the check, the number of the check, and the account number of the customer. [GAO]

microbridge

A landbridge movement in which cargo originating/destined to an inland point is railed or trucked to/from the water port for a shipment to/from a foreign country. [ITDS]

microeconomics

The study of economics in terms of individual areas of activity, such as the economics of a firm, a household, or of single economic components such as prices. [OTS] The study of the individual parts of the economy, the household and the firm, how prices are determined and how prices determine the production, distribution and use of goods and services. [FACS]

middle distillate

Hydrocarbons that are in the so called 'middle boiling range' of refinery distillation. Examples are heating oil, diesel fuels, and kerosene. [NYMEX]

Midwest Exchange Automated Execution System (MAX)

military indulgence

The protection against foreclosure afforded by the Soldiers and Sailors Civil Relief Act to a mortgagor who is about to enter or is in military service and whose ability to make payments on a loan is affected by the military service. [OTS]

mill

one tenth of one percent; a measure used to state property tax rates. [OTS]

millage

Generally associated with property tax. As a means of assessing a tax, one mill is equal to 1/10 of one cent. [EPA]

million british thermal units (MMBTU)

mimic

An imitation that sends a false signal. [Harvey]

mini

Refers to a futures contract that has a smaller contract size than an otherwise identical futures contract. [CFTC]

mini-trust

A short (usually pre-printed) form of trust, often used as a confidentiality enhancer to bridge the ownership and management of an International Business Company. The Mini-Trust is intended only to pass assets on the death of the settlor, i.e., a will substitute. [UNODC]

minibridge

Movement of cargo from a port over water then over land to a port on an opposite coast. [ITDS]

minimax bond

floating-rate note whose interest payments are subject to a narrow collar. [WCSU]

minimum charge

A charge for water or sewer service that combines the service charge and a minimum amount of water or sewer service, usually less than or equal to the amount used by an average household. [EPA] The lowest rate applicable on each type of cargo service no matter how small the shipment. [ITDS]

minimum gross yield

The sum of the required net yield and the required servicing spread in a Freddie Mac purchase contract. [OTS]

minimum price contract

A hybrid commercial forward contract for agricultural products that includes a provision guaranteeing the person making delivery a minimum price for the product. For agricultural commodities, these contracts became much more common with the introduction of exchange-traded options on futures contracts, which permit buyers to hedge the price risks associated with such contracts. [CFTC]

minimum price fluctuation

Minimum unit by which a futures price or an option premium can fluctuate per trade. [NYMEX] Smallest increment of price movement possible in trading a given contract. Also called point or tick. The zero-beta portfolio with the least risk. [Harvey]

minimum purchases

For mutual funds, the amount required to open a new account (Minimum Initial Purchase) or to deposit into an existing account (Minimum Additional Purchase). These minimums may be lowered for buyers participating in an automatic purchase plan [Harvey]

minimum servicing spread

The minimum amount of mortgage interest income to be retained by the originating lender (seller/servicer) as compensation for servicing mortgages purchased in whole by Freddie Mac. [OTS]

minimum tick

minimum wage

A wage below which employers may not legally pay employees for specific kinds of employment. [FACS]

minimum-variance frontier

Graph of the lowest possible portfolio variance that is attainable for a given portfolio expected return. [Harvey]

minimum-variance portfolio

The portfolio of risky assets with lowest variance. [Harvey]

minority interest

An outside ownership interest in a subsidiary that is consolidated with the parent for financial reporting purposes. [Harvey]

minority resolution program

A resolution program that favors a minority individual, a minority-owned business, or a minority depository institution. For example, the Completion Act gave a bidding preference to minority bidders and acquirers in connection with the resolution of failed institutions located in 'predominantly minority neighborhoods.' [FDIC]

mint

A facility where coins are manufactured. [OTS]

mismatch bond

Floating rate note whose interest rate is reset at more frequent intervals than the rollover period (e.g. a note whose payments are set quarterly on the basis of the one-year interest rate). [Harvey] Floating-rate note whose interest rate is reset at more frequent intervals than the roll over period (e.g., a note whose payments are set quarterly on the basis of the 1-year interest rate). [WCSU]

mixed credit

The combining of concessional and market-rate export credit as an export promotion mechanism. [ITDS]

mobile home

A movable, portable dwelling without permanent foundation, designed for year-round living. [OTS]

mobile home loan

A loan to finance the purchase of a mobile home, secured by the lender's claim on the mobile home. The loan may include funds for associated costs such as transportation of the mobile home and setup on a new site. [OTS]

MOD Act

Customs Modernization and Informed Compliance Act: Passage 1992, HR 3935. [ITDS]

model

model indenture

The model indenture contained in the Commentaries on Model Debenture, Indenture Provisions (1965), or Mortgage Bond Indenture Form (1981), published by the American Bar Foundation, dealing with corporate registered issues and certain related negotiable provisions. Although designed for private corporate transactions, Model Indenture provisions are sometimes used as a basis for drafting provisions of security documents for municipal bonds. [EPA]

modeling

The process of creating a depiction of reality, such as a graph, picture, or mathematical representation. [Harvey]

modern portfolio theory

Principles underlying the analysis and evaluation of rational portfolio choices based on risk-return trade-offs and efficient diversification. [Harvey]

modification agreement

A written agreement between a financial institution and a borrower that changes one or more terms of an existing mortgage loan such as the interest rate, number of years allowed for repayment, or amount of monthly payment. [OTS]

modified accrual basis

A basis of accounting under which revenues are recognized when they become both 'measurable' and 'available to finance expenditures of the current period' and expenditures are recognized when the related fund liability is incurred. [EPA]

modified duration

The ratio of Macaulay duration to (1 + y), where y = the bond yield. Modified duration is inversely related to the approximate percentage change in price for a given change in yield. [Harvey]

modified pass-throughs

Agency pass-throughs that guarantee (1) timely interest payments and (2) principal payments as collected, but no later than a specified time after they are due. [Harvey]

modified payoff

A variation of the straight deposit payoff. In a modified payoff, the FDIC sells some of the assets of a failed or failing institution to an acquirer, whereas in a straight deposit payoff the FDIC directly pays the insured amount of each insured depositor and liquidates the remaining assets. [FDIC]

modified whole bank P&A

A purchase and assumption transaction in which the acquiring institution assumes the deposits and certain other liabilities of the failed institution. In addition to purchasing the cash and cash equivalent assets, the acquiring institution also receives an exclusive call option to purchase fixed assets owned by the failed institution. [FDIC]

Modigliani and Miller proposition I

A proposition by Modigliani and Miller which states that a firm cannot change the total value of its outstanding securities by changing its capital structure proportions. Also called the irrelevance proposition. [Harvey]

Modigliani and Miller proposition II

A proposition by Modigliani and Miller which states that the cost of equity is a linear function of the firm's debt-equity-ratio. [Harvey]

modular house

A residence assembled in units or sections at a factory and transported to a building site where it is erected on a foundation. The term does not include mobile homes. [OTS]

mogas

Industry slang for motor gasoline. [NYMEX]

momentum

In technical analysis, the relative change in price over a specific time interval. Often equated with speed or velocity and considered in terms of relative strength. [CFTC]

monetarists

Followers of Milton Friedman who focus on the effect of money and monetary policy on changing price and employment levels. [FACS] one who believes that changes in the supply of money determine the course of a nation's economy. [OTS]

monetary / non-monetary method

Under this translation method, monetary items (e.g. cash, accounts payable and receivable, and long-term debt) are translated at the current rate while non-monetary items (e.g. inventory, fixed assets, and long-term investments) are translated at historical rates. [Harvey]

monetary asset

money or a pledge to receive a fixed amount of money without regard to future prices. [OTS]

monetary base

The total quantity of currency in circulation outside of banks plus the currency held by banks or deposited with the Fed. [FACS]

Monetary Control Act of 1980 (MCA)

Among its major provisions, this Act applied uniform reserve requirements to all depository institutions with certain types of accounts and required reports from these depository institutions. It also extended access to the Federal Reserve discount window and to other Federal Reserve services in step with the implementation of a fee schedule. [FRB][FRBC][FRBM] An Act which requires that all banks and all institutions that accept deposits from the public make periodic reports to the Federal Reserve System. Starting in September 1981, the Fed charged banks for a range of services that it had provided free in the past, including check clearing, wire transfer of funds, and the use of automated clearinghouse facilities. [FRBSF]

monetary gold

Gold held by governmental authorities as a financial asset. [Harvey]

monetary liability

The promise to pay a specified amount of money, the sum of which is unaffected by inflation or deflation. [OTS]

monetary policy

A central bank's actions to influence the availability and cost of money and credit, as a means of helping to promote high employment, economic growth, price stability, and a sustainable pattern of international transactions. Tools of U.S. monetary policy include open market operations, discount policy, and reserve requirements. [FRB][FRBC] Actions taken by the Board of Governors of the Federal Reserve System to influence the money supply or interest rates. [Harvey] Federal Reserve actions to influence the availability and cost of money and credit, as a means of helping to promote high employment, economic growth, price stability, and a sustainable pattern of international transactions. Tools of monetary policy include open market operations, discount policy, and reserve requirements. [FRB][FRBM] The federal governments attempt to change aggregate demand through money supply changes. [FACS] The regulation, by the Federal Reserve System, of the money supply in order to maximize production and employment, and stabilize prices. [FRBSF]

monetize

To convert assets into money. [FRBSF]

money

Any denomination of coin or paper currency of legal tender that passes freely as a medium of exchange; anything that is accepted in exchange for other things. [ITDS] Anything that serves as a generally accepted medium of exchange, a standard of value, and a means to save or store purchasing power. In the United States, paper currency (nearly all of which consists of Federal Reserve notes), coin and funds in checking and similar accounts at depository institutions are examples of money. [FRB][FRBC][FRBM] The accepted common medium of exchange for goods and services in the marketplace that functions as the unit of account, a means of deferred payment and a store of value. [FACS] anything that is generally accepted as a medium of exchange, such as currency or precious metals. [OTS]

money base

Composed of currency and coins outside the banking system plus liabilities to the deposit money banks. [Harvey]

money center bank

A major bank in the United States that undertakes a wide range of banking activities. [WCSU] Banks that raise most of their funds from the domestic and international money markets, relying less on depositors for funds. [Harvey]

money creation

The increase in money supply by the central or commercial banks. [ITDS]

money laundering

A three-stage process which disguises illegal profits without compromising the criminals who wish to benefit from the proceeds. This requires: first, moving the funds from direct association with the crime; second, disguising the trail to foil pursuit; and third, making the money available to the criminal once again with the occupational and geographic origins hidden from view. [UNODC]

money market

Figurative expression for the informal network of dealers and investors over which short-term debt securities are purchased and sold. Money market securities generally are highly liquid securities that mature in less than one year, typically in less than ninety days. [FRBSF] Market for short-term safe investments. [WCSU] Money markets are for borrowing and lending money for three years or less. The securities in a money market can be U.S.government bonds, treasury bills and commercial paper from banks and companies. [Harvey] The activity generated by financial institutions that facilitate the purchase, sale, and transfer of lendable funds in the form of short-term debt securities such as promissory notes, collateral loans, and Treasury bills. [OTS] The market for short term financial instruments (i.e. commercial paper, treasury bills, discount notes). [ITDS] The market for short-term debt instruments. [CFTC]

money market account

An account in which your money is reinvested in short-term securities by the bank or investment firm managing the account. [NYSE]

money market certificate

A certificate of deposit in a minimum denomination of $10,000 with a maturity of six months. The interest rate on money market certificates is related to the yield on six-month Treasury bills. [FRB][FRBC] A certificate of deposit that when first authorized had a fixed maturity of six months and a $2,500 minimum deposit, with rates based on the weekly posting of average yields for United States Treasury bills. With deregulation in the 1980s, federal regulators now leave it up to each individual thrift institution to determine the maturity and yield of this savings instrument. [OTS]

money market demand account

An account that pays interest based on short-term interest rates. [Harvey]

money market hedge

The use of borrowing and lending transactions in foreign currencies to lock in the home currency value of a foreign currency transaction. [Harvey]

money market mutual funds

Shares in institutional funds invested in financial instruments such as the U.S. Treasury securities, certificates of deposit in financial institutions (CDs) and commercial paper (IOUs of big corporations). [FACS]

money market notes

Publicly traded issues that may be collateralized by mortgages and MBSs. [Harvey]

money market operations

Comprises the acceptance and relending of deposits on the money market. [ITDS]

money multiplier

The process by which excess reserves create new demand deposits or money; for example, with a 10% legal reserve requirement, $10 of excess reserves may be used to create $100 of new money. [FACS]

money order

An instrument of exchange purchased for a fee from the U.S. Postal Service or from a financial institution. The instrument is an order to pay on demand a sum of money specified on the face of the order to a party (the payee) named by the purchaser. Since the purchaser has already paid the face amount of a money order to the issuer, the payee presenting the order to an agent of the issuer is sure of collecting the funds. Thus, money orders are easily converted to cash anywhere in the United States, or anywhere the issuer has agents. [OTS]

money purchase plan

A defined benefit contribution plan in which the participant contributes some part and the firm contributes at the same or a different rate. Also called and individual account plan. [Harvey]

money rate of return

Annual money return as a percentage of asset value. [Harvey]

money supply

Legal currency and various transaction account balances held at financial institutions (M1) plus small savings and time deposit accounts of individuals (M2). [FACS] M1-A: Currency plus demand deposits [Harvey] The amount of domestic cash and deposit money available in an economy. [ITDS] The amount of money (coins, paper currency, and checking accounts) that is in circulation in the economy. [FRBSF] The amount of money in the economy, consisting primarily of currency in circulation plus deposits in banks: M-1; U.S. money supply consisting of currency held by the public, traveler's checks, checking account funds, NOW and super-NOW accounts, automatic transfer service accounts, and balances in credit unions. M-2; U.S. money supply consisting of M-1 plus savings and small time deposits (less than $100,000) at depository institutions, overnight repurchase agreements at commercial banks, and money market mutual fund accounts. M-3; U.S. money supply consisting of M-2 plus large time deposits ($100,000 or more) at depository institutions, repurchase agreements with maturities longer than one day at commercial banks, and institutional money market accounts. [CBOT][MIDAM]

money transmission

The sale or issuance of payment instruments or engaging in the business of receiving money for transmission or transmitting money by any and all means, including but not limited to payment instrument, wire, facsimile or electronic transfer. [UNODC]

money-market deposit account (MMDA)

A savings account, offered by financial institutions, that pays fluctuating market rates of interest as long as the balance does not fall below a predetermined minimum. [OTS]

money-market fund

A mutual fund that invests only in short term securities, such as bankers' acceptances, commercial paper, repurchase agreements and government bills. The net asset value per share is maintained at $1. 00. Such funds are not federally insured, although the portfolio may consist of guaranteed securities and/or the fund may have private insurance protection. [Harvey] A mutual fund whose investments are in high-yield money market instruments such as federal securities, CDs and commercial paper. Its intent is to make such instruments, normally purchased in large denominations by institutions, available indirectly to individuals. [NYSE] Generally, a mutual fund which typically invests in short-term debt instruments such as government securities, commercial paper, and large denomination certificates of deposit of banks. [SEC] Mutual fund which invests solely in short-term safe securities. [WCSU] The combined money of many individuals which is jointly invested in high yield financial instruments including U.S. government securities, certificates of deposit, and commercial paper. A money market fund is a mutual fund which strives to make a profit by buying and selling various forms of money rather than buying and selling shares of ownership in corporations. [OTS]

monitor

To seek information about an agent's behavior; a device that provides such information. [Harvey]

monopolistic competition

A market with a large number of firms selling similar but differentiated products with no significant barriers to entry. [FACS]

monopoly

A market with only one supplier. [FACS] control of the supply, distribution and/or price of a commodity acquired by ownership, franchise or government patent. [OTS]

monopsony

A market situation in which there is only one buyer for an item. [OTS]

Monte Carlo simulation

An analytical technique for solving a problem by performing a large number of trail runs, called simulations, and inferring a solution from the collective results of the trial runs. Method for calculating the probability distribution of possible outcomes. [Harvey] Method for calculating the probability distribution of possible outcomes, e.g., from a project. [WCSU]

monthly income preferred security

Preferred stock issued by a subsidiary located in a tax haven. The subsidiary relends the money to the parent. [Harvey]

moor

To secure a vessel to an anchor, buoy, or pier. [ITDS]

moorage

Charges assessed for mooring a vessel to a pier or wharf. [ITDS]

moot

(1) of little or no practical value, meaning, or consequence. (2) subject to discussion or argument. (3) doubtful, theoretical, or hypothetical. (4) in law, an issue previously clarified by earlier cases or decisions of the court. [OTS]

moral hazard

A potentially costly side effect of most insurance. Persons or companies insured against a particular risk have a tendency to assume more risk. For example, deposit insurance tends to encourage banks to hold riskier portfolios than they otherwise would. [FDIC] The risk that the existence of a contract will change the behavior of one or both parties to the contract, e.g. an insured firm will take fewer fire precautions. [Harvey] The that the existence of a contract will change the behavior of one or both parties to the contract; e.g., an insured firm may take fewer fire precautions. [WCSU]

moral obligation bonds

Bonds in respect to which a government, especially a state government, has asserted the intent of the legislative body to make appropriations sufficient to cure any deficiency in monies required to meet debt service for specified bonds but in respect to which the legislature body has no legally enforceable obligation to pay. [EPA]

moratorium

legal authorization to delay the collection of a debt, or the temporary suspension of some other activity. [OTS]

Morris plan bank

A bank that handle small loans and consumer credit incorporating life insurance on the debtors. [OTS]

mortality tables

Tables of probability that individuals of various ages will die within one year. [Harvey]

mortgage

A legal document by which real property is pledged as security for the repayment of a loan; the pledge is canceled when the debt is paid in full. [OTS] A loan secured by the collateral of some specified real estate property which obliges the borrower to make a predetermined series of payments. [Harvey] An interest in land created by a written instrument providing security for the performance of a duty or the payment of a debt. [FDIC] Grant of real property interests by an obligor to secure payment of, or performance of, a specified obligation. [EPA]

mortgage banker

An individual or firm that primarily deals in mortgages as a broker, originating loans and then selling the loans to investors. [OTS]

mortgage bond

A bond in which the issuer has granted the bondholders a lien against the pledged assets. Collateral trust bonds [Harvey] A bond secured by a mortgage on a property. The value of the property may or may not equal the value of the bond issued against it. [NYSE] A bond secured by a mortgage on real property. [OTS] Bond secured against plant and equipment. [WCSU] Bond secured by a mortgage against a specified piece of property. If primarily paid from enterprise revenue they are also classified as revenue bonds. [EPA]

mortgage broker

A firm or individual who brings the borrower and lender together, receiving a commission if a sale results. [OTS]

mortgage derivative

any of several types of securities that pay their investors with cash flows generated by the payments of principal and interest to an underlying pool of mortgages. Mortgage derivative products include collateralized mortgage obligations (CMOs), real estate mortgage investment conduits (REMICs), stripped mortgage-backed securities such as interest-only securities (IOs) and principal-only securities (POs), and pass-through mortgage-backed securities with senior/subordinated structures. [OTS]

mortgage discount

The amount paid by the borrower to increase the yield of a mortgage to the lender. Sometimes called points, loan brokerage fee, or new loan fee. The discount is computed on the amount of the loan, not the selling price of the property. [OTS]

mortgage duration

A modification of standard duration to account for the impact on duration of MBSs of changes in prepayment speed resulting from changes in interest rates. Two factors are employed: one that reflects the impact of changes in prepayment speed or price. [Harvey]

mortgage fraud

A a crime in which the intent is to materially misrepresent or omit information on a mortgage loan application to obtain a loan or to obtain a larger loan than would have been obtained had the lender or borrower known the truth. [Wikipedia]

mortgage life insurance

An insurance policy on the life of a borrower that repays an outstanding mortgage debt upon the death of the insured. [OTS]

mortgage loan

An advance of funds from a lender, called the mortgagee, to a borrower, called the mortgagor, secured by real property and evidenced by a document called a mortgage. The mortgage sets forth the conditions of the loan, the manner and duration of repayment, and reserves to the mortgagee the right to repossess the pledged property if the mortgagor fails to repay any portion of principal and interest. [OTS]

mortgage loans outstanding

The total dollar amount of money that is owed by mortgagors. [OTS]

mortgage note

A written promise to repay a specified sum of money plus interest at a specified rate. While the mortgage itself pledges the title to real property as security for a loan, the mortgage note states the amount of debt and the rate of interest, and makes the borrower who sign's the note personally responsible for repayment. [OTS]

mortgage origination

The making of a new mortgage, including all steps taken by a lender to attract and qualify a borrower, process the mortgage loan, and place it on the lender's books. [OTS]

mortgage participation

The division of a mortgage or pool of mortgages into units that are sold to one or more investors, each of whom participates in receiving payments of principal and interest. [OTS]

mortgage pass-through security

Also called a passthrough, a security created when one or more mortgage holders form a collection (pool) of mortgages sells shares or participation certificates in the pool. The cash flow from the collateral pool is 'passed through' to the security holder as monthly payments of principal, interest, and prepayments. This is the predominant type of MBS traded in the secondary market. [Harvey]

mortgage pipeline

The period from the taking of applications from prospective mortgage borrowers to the marketing of the loans. [Harvey]

mortgage pool

A group of mortgages assembled to form the collateral for securities. Mortgage payments of principal and interest into the pool are used to pay those who invest in the securities. [OTS]

mortgage portfolio

The total of all mortgage loans held by a lender or investor. [OTS]

mortgage rate

The interest rate on a mortgage loan. [Harvey]

mortgage revenue bonds

tax exempt bonds issued by state and local governments. Funds raised by the sale of the bonds are used to finance home mortgages. Revenue from mortgage payments is used to repay the bonds. [OTS]

mortgage servicing

The activity of keeping a mortgage loan current, including collecting monthly mortgage payments, forwarding principal and interest payments to the current mortgage holder (if the loan has been sold), maintaining escrow accounts, paying taxes and insurance premiums, and taking steps to collect overdue payments. Mortgage servicing may be performed by the original lender, or the lender may sell the right to service a mortgage to another company, which performs the service for a fee. Some companies, including some savings associations, specialize in servicing mortgages, both their own and those made by other lenders. The original lender may sell the mortgage servicing rights to one company and sell the mortgage itself to another company. [OTS]

mortgage servicing fraud

This fraud is perpetrated by the loan servicer and generally involves the diversion or misuse of loan payments, proceeds from loan prepayments, and/or escrow funds for the benefit of the service provider. [FFIEC]

mortgage servicing rights

The right to service a mortgage. [OTS]

mortgage take back

A mortgage loan issued by the seller of the mortgaged property. [OTS]

mortgage-backed bonds

bonds that are secured by mortgages. Unlike mortgage-backed passthrough securities, mortgage-backed bonds do not convey ownership of any portion of the underlying pool of mortgages. However, mortgage-backed bonds do offer a more predictable maturity and thus offer a form of call protection. [OTS]

mortgage-backed passthrough securities

securities that convey ownership of a fractional part of each mortgage in a pool of mortgages backing the securities. Mortgage payments are sent to the issuer of the securities and then passed through to those who bought the securities. Each security owner shares proportionally the interest and principal payments generated by the underlying pool of mortgages. [OTS]

mortgage-backed securities

MBS are securities that are backed by mortgages in which investors receive payments out of the interest and principal payments made on the underlying mortgages. [GAO] Securities backed by a pool of mortgage loans. [Harvey]

Mortgage-Backed Securities Clearing Corporation

A wholly owned subsidiary of the Midwest Stock Exchange that operates a clearing service for the comparison, netting, and margining of agency-guaranteed MBSs transacted for forward delivery. [Harvey]

mortgage-backed security (MBS)

An ordinary bond backed by an interest in a pool of mortgages or trust deeds. The interest and principal payments collected on the underlying mortgages are the source of income to the bondholders. The RTC, which began issuing one-to-four family residential mortgage-backed securities in June 1991, was instrumental in developing the MBS market in the early 1990s. Most mortgage-backed securities have AA or AAA bond ratings. [FDIC]

mortgage-pipeline risk

The risk associated with taking applications from prospective mortgage borrowers who may opt to decline to accept a quoted mortgage rate within a certain grace period. [Harvey]

mortgagee

The institution, group or individual that lends money secured by pledged real estate; the lender. [OTS] The lender of a loan secured by property. [Harvey]

mortgager

The borrower of a loan secured by property. [Harvey]

mortgagor

The owner of real estate who pledges the property as security for the repayment of a debt; the borrower. [OTS]

most distant futures contract

When several futures contracts are considered, the contract settling last. [Harvey]

most favored nation

A non-discriminatory trade policy commitment on the part of one country to extend to another country the lowest tariff rate it applies to any other country. [ITDS]

motor carriers terminal

The place where loaded or empty shipping containers are received or delivered by a motor carrier. [ITDS]

motor gasoline

A complex mixture of relatively volatile hydrocarbons, with or without small quantities of additives, that have been blended to form a fuel suitable for use in spark-ignition engines. [NYMEX]

motor oil

Refined lubricating oil, usually containing additives, used in internal combustion engines. [NYMEX]

moving average

Used in charts and technical analysis, the average of security or commodity prices constructed in a period as short as a few days or as Long as several years and showing trends for the latest interval. As each new variable is included in calculating the average, the last variable of the series is deleted. [Harvey]

moving-average charts

A statistical price analysis method of recognizing different price trends. A moving average is calculated by adding the prices for a predetermined number of days and then dividing by the number of days. [CBOT][MIDAM]

multi-currency line

A line of credit giving the borrower the option of using any readily available major currency. [FDIC]

multi-option financing facility

A syndicated confirmed credit line with attached options. [Harvey]

multicurrency clause

Such a clause on a Euro loan permits the borrower to switch from one currency to another currency on a rollover date. [Harvey]

multicurrency loans

Give the borrower the possibility of drawing a loan in different currencies. [Harvey]

multifactor CAPM

A version of the capital asset pricing model derived by Merton that includes extra-market sources of risk referred to as factor. [Harvey]

multifamily loans

Loans usually represented by conventional mortgages on multi-family rental apartments. [Harvey]

multifamily structure

as defined in federal government statistics, a structure containing more than four dwelling units. [OTS]

multilateral agreement

An international compact involving three or more parties. [ITDS]

multilateral clearing organization

multilateral netting

Multilateral netting is an arrangement among three or more parties to net their obligations, which may arise from financial contracts, transfers of funds, or both. This type of netting normally takes place in the context of a multilateral net settlement system. [GAO]

multilateralism

An international policy intended to free international trade from the restrictions of bilateralism>. Multilateralism represents an effort to permit nations to specialize in production and exchange in accordance with the principle of comparative advantage. [FRBSF]

multimodal transport

Shipping which includes at least two modes of transport, such as shipping by rail and by sea. [ITDS]

multinational corporation

A corporation having subsidiaries in more than one country. [ITDS] A firm that operates in more than one country. [Harvey]

Multinet International Bank

Clearing house project of the U.S. and Canadian banks involved in VALUNET to provide multilaterial netting and settlement of foriegn exchange transactions among its members. [GAO]

multiperiod immunization

A portfolio strategy in which a portfolio is created that will be capable of satisfying more than one predetermined future liability regardless if interest rates change. [Harvey]

multiple discriminate analysis (MDA)

Statistical technique for distinguishing between two groups on the basis of their observed characteristics. [Harvey][WCSU]

Multiple Investor Fund

An RTC equity partnership created in early 1993 and targeted for the large institutional investor market. The two MIF transactions disposed of approximately 1,000 nonperforming and subperforming commercial mortgages, with an aggregate book value of approximately $2 billion. [FDIC]

multiple rates of return

More than one rate of return from the same project that make the net present value of the project equal to zero. This situation arises when the IRR method is used for a project in which negative cash flows follow positive cash flows. For each sign change in the cash flows, there is a rate of return. [Harvey]

multiple regression

The estimated relationship between a dependent variable and more than one explanatory variable. [Harvey]

multiple-discriminant analysis

Statistical technique for distinguishing between two groups on the basis of their observed characteristics. [Harvey][WCSU]

multiple-issuer pools

Under the GNMA-II program, pools formed through the aggregation of individual issuers' loan packages. [Harvey]

multiples

Another name for price/earnings ratios. [Harvey]

multiplier

The number of times new investment spending will be respent to produce a certain amount of new income. [FACS]

multiplier bonds

Bonds that provide the option of taking interest payment in the form of additional multiplier bonds. [WCSU]

multirule system

A technical trading strategy that combines mechanical rules, such as the CRISMA (cumulative volume, relative strength, moving average) Trading System of Pruitt and White. [Harvey]

municipal bond

A bond issued by a county, city, district or authority. [NYSE] A security issued by or on behalf of a state or a political subdivision, the interest on which is exempt from federal income tax. [EPA] A tax exempt debt obligation issued by a state or local government agency to raise funds for the public good, such as building low-income housing, improving streets or building bridges. The bonds are redeemed with interest and are backed by the government's taxing authority. [OTS] Debt securities issued by state and local governments, and special districts and counties. [CBOT][MIDAM] State or local governments offer muni bonds or municipals, as they are called, to pay for special projects such as highways or sewers. The interest that investors receive is exempt from some income taxes. [Harvey]

municipal bond spread

A spread between the municipal bond futures contract and the Treasury bond contract, also known as munis over bonds. [CFTC]

municipal improvement certificates

Certificates issued in lieu of bonds for the financing of special improvements. As a rule, these certificates are placed in the contractor's hands for collection from the special assessment payers. [EPA]

municipal notes

Short-term notes issued by municipalities in anticipation of tax receipts, proceeds from a bond issue, or other revenues. [Harvey]

Municipal Securities Rule-making Board (MSRB)

muniment of title

(1) anything that protects or enforces a title. (2) written proof that aids an owner in defense of title to a property. (3) deeds and contracts that show conclusive proof of ownership. [OTS]

mutual

A savings institution organized in a nonstock business form. Neither mutual savings banks nor mutual savings institutions have stockholders. All depositors in a mutual institution have a share in the ownership of the institution, according to the amounts of their deposits. [FDIC]

mutual association

A savings association that is owned and controlled solely by its savers and borrowers who are called members. A mutual association does not issue capital stock, and thus, its members do not share in profits of the association, but do exercise other ownership rights such as the right to elect directors of the association. [OTS]

mutual capital certificate

A long-term debt security issued by a federal mutual savings association that is subordinated to all other claims on assets, and is not covered by federal deposit insurance. They could be counted as part of an institution's regulatory net worth, and were authorized by federal regulators, who purchased the certificates, as a temporary way of helping savings associations meet minimum regulatory net worth requirements. [OTS]

mutual fund

A financial corporation that sells shares of its own stock and invests the funds thus raised in the stock and securities of other corporations or in government securities. Dividends paid to shareholders are based on the earnings of the securities held by the fund, minus operating expenses. A mutual fund pools the funds of many investors and provides professional management in investing those funds. Also called an open-end investment company. [OTS] A pool of stocks, bonds, or other securities purchased by a group of investors and managed by a professional/registered investment company. The investment company itself is also commonly referred to as a mutual fund. [SEC] Managed invest fund whose shares are sold to investors. [WCSU] Mutual funds are pools of money that are managed by an investment company. They offer investors a variety of goals, depending on the fund and its investment charter. Some funds, for example, seek to generate income on a regular basis. Others seek to preserve an investor's money. Still others seek to invest in companies that are growing at a rapid pace. Funds can impose a sales charge, or load, on investors when they buy or sell shares. Many funds these days are no load and impose no sales charge. Mutual funds are investment companies regulated by the Investment Company Act of 1940. [Harvey]

mutual fund theorem

A result associated with the CAPM, asserting that investors will choose to invest their entire risky portfolio in a market-index or mutual fund. [Harvey]

mutual holding company

A corporate structure that combines elements of a mutual savings and loan, which is owned by its depositors and, in some cases, by its borrowers, with elements of a stock savings and loan, which is owned by its shareholders. In a mutual holding company setup, depositors and, in some cases, borrowers, own the mutual holding company, which in turn holds a majority of the voting stock of its subsidiary savings association. The balance of the thrift's stock can be sold to outside investors to raise capital. Mutual holding companies were first authorized by the Competitive Equality Banking Act of 1987 (CEBA). Those provisions were clarified by Congress in the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). [OTS]

mutual legal assistance treaty (MLAT)

A treaty which provides for mutual legal assistance, including the exchange of information, etc., in cases where criminal offenses have been committed. [UNODC]

mutual offset

A system, such as the arrangement between the CME and SIMEX, which allows trading positions established on one exchange to be offset or transferred on another exchange. [Harvey]

mutual savings banks

A financial institution chartered by state or federal government to: (1) provide a safe place for individuals to save and (2) invest those savings in mortgages loans, stocks, bonds and other securities. Most mutual savings banks are located in the Northeast, and are owned by their depositors and borrowers. A mutual savings bank does not issue capital stock. Profits are distributed to the owner/customers in proportion to the business they do with the institution. [OTS] Banks which accept deposits primarily from individuals and place a large portion of their funds into mortgage loans. These institutions are prominent in many of the northeastern states. Savings banks generally have broader asset and liability powers than savings and loan associations but narrower powers than commercial banks. Savings banks are authorized to offer checking-type accounts. [FRBSF] Mutual Savings Banks also accept deposits primarily from individuals, and place a large portion of their funds into mortgage loans. These institutions are prominent in many of the northeastern states. Savings banks generally have broader asset and liability powers than savings and loan associations but narrower powers than commercial banks. Savings banks are authorized to offer checking-type accounts. [FRBC]

mutually exclusive investment decisions

Investment decisions in which the acceptance of a project precludes the acceptance of one or more alternative projects. [Harvey]

mutually exclusive projects

Two projects that can not both be undertaken. [WCSU]

N-Series

An RTC equity partnership targeted for the institutional investor market. There were six Nonperforming Loan Series, or N-Series, transactions, consisting of relatively large portfolios of nonperforming and subperforming commercial mortgages. The N-Series asset pools had an average book value in excess of $450 million. [FDIC]

naamloze vennootschap (NV)

In Dutch company law, the NV is the form of incorporation favored by larger companies. It can be compared to the American corporation. [UNODC]

naive diversification

A strategy whereby an investor simply invests in a number of different assets and hopes that the variance of the expected return on the portfolio is lowered. [Harvey]

naked

A long (short) market position taken without having an offsetting short (long) position. A trader who executes one side of a spread is said to be naked until he executes the other side. [NYMEX]

naked call option writing

Options sold, without owning the actual underlying product (versus covered call option writing). [TMAC]

naked option

An option position that is not offset by an equal and opposite position in the underlying security. [NYSE] Option held on its own, i.e., not used to hedge a holding in the asset or other options. [WCSU] The sale of a call or put option without holding an equal and opposite position in the underlying instrument. Also referred to as an uncovered option, naked call, or naked put. [CFTC]

naked option strategies

An unhedged strategy making exclusive use of one of the following: Long call strategy (buying call options), short call strategy (selling or writing call options), Long put strategy (buying put options), and short put strategy (selling or writing put options). By themselves, these positions are called naked strategies because they do not involve an offsetting or risk-reducing position in another option or the underlying security. [Harvey]

naked short selling

Practice of short-selling a tradable asset of any kind without first borrowing the security or ensuring that the security can be borrowed, as is conventionally done in a short sale. When the seller does not obtain the shares within the required time frame, the result is known as a 'failure to deliver'. The transaction generally remains open until the shares are acquired by the seller, or the seller's broker settles the trade. [Wikipedia]

naphtha

A volatile, colorless product of petroleum distillation. Used primarily as a paint solvent, cleaning fluid, and blendstock in gasoline production. [NYMEX]

naphthenes

One of the three basic hydrocarbon classifications found naturally in crude oil. Naphthenes are widely used as petrochemical feedstocks. [NYMEX]

narrow-based security index

In general, the Commodity Exchange Act defines a narrow-based security index as an index of securities that meets one of the following four requirements (1) it has nine or fewer components; (2) one component comprises more than 30 percent of the index weighting; (3) the five highest weighted components comprise more than 60 percent of the index weighting, or (4) the lowest weighted components comprising in the aggregate 25 percent of the index's weighting have an aggregate dollar value of average daily volume over a six-month period of less than $50 million ($30 million if there are at least 15 component securities). However, the legal definition in Section 1a(25) of the Commodity Exchange Act, 7 USC 1a(25), contains several exceptions to this provision. [CFTC]

National Association of Investment Clubs (NAIC)

National Association of Securities Dealers (NASD)

A private organization registered with the Securities Exchange Commission to provide self-regulation of the over-the-counter (OTC) securities market. NASD issues rules governing the practices of broker-dealer firms in the OTC market. [OTS] A self-regulatory organization with jurisdiction over certain broker-dealers. The NASD requires member brokers to register, and conducts examinations for compliance with net capital requirements and other regulations. It also conducts market surveillance of the over-the-counter (OTC) securities market. NASDAQ is a subsidiary of the NASD which facilitates the trading of approximately 5,000 most active OTC issues through an electronically connected network. [FRB][FRBC][FRBM] An association of brokers and dealers in the over-the-counter securities business. [NYSE]

National Association of Securities Dealers Automated Quotations (NASDAQ)

An automated data network providing brokers and dealers with price quotations on securities traded in the over-the-counter market. [OTS] Provides price quotation for securities traded over the counter. [NYSE]

National Association of Security Dealers (NASD)

National Association of State Savings & Loan Supervisors (NASS&LS)

The former name of a national organization representing state thrift institution regulators. It is now called the American Council of State Savings Supervisors (ACSSS). [OTS]

National Automated Clearinghouse Association (NACHA)

A body which oversees all ACH activities and procedures and is composed of all local ACHs. [ACH]

National Council of Community Bankers

A former trade organization of savings banks, savings and loans, cooperative banks and commercial banks. The organization began using its name on September 13, 1991. Previously it was called the National Council of Savings institutions, which was formed by the November 1, 1983 merger of the National Savings and Loan League (founded in 1943) and the National Association of Mutual Savings Banks (founded in 1920). On June 1, 1992, the National Council of Community Bankers merged with the United States League of Savings Institutions to form the Savings & Community Bankers of America. [OTS]

National Credit Union Administration (NCUA)

An independent federal agency that supervises and insures both federal and state-chartered credit unions. NCUA is entirely funded by credit unions and receives no tax dollars. [FRBSF] The federal agency that charters, examines, supervises and insures federal credit unions. NCUA also insures state-chartered credit unions that apply and qualify for deposit insurance. In addition, the NCUA operates a central credit facility for member credit unions. [OTS] The federal government agency that supervises, charters, and insures federal credit unions. NCUA also insures state-chartered credit unions that apply and qualify for insurance. The NCUA also operates a credit facility for member credit unions. [FRB][FRBC][FRBM]

national debt

The debt owed by the federal government. [OTS]

national depositor preference amendment

Provisions of the Omnibus Budget Reconciliation Act, that established the priority for paying claims filed against a failed depository institution. The Omnibus Budget Reconciliation Act was enacted on August 10, 1993, and amended section 11(d) of the FDI Act and standardized the assets distribution scheme for all receiverships regardless of the institution's chartering agency. As a result of this act, deposit liabilities of the institution have priority over all claims except the administrative expenses of the receiver. [FDIC]

National Futures Association. (NFA)

An industrywide, industry-supported, self-regulatory organization for futures and options markets. The primary responsibilities of the NFA are to enforce ethical standards and customer protection rules, screen futures professionals for membership, audit and monitor professionals for financial and general compliance rules, and provide for arbitration of futures-related disputes. [CBOT][MIDAM] The futures industry self regulatory organization established in 1982. [Harvey] Trade association which promulgates rules of conduct and mediates disputes between customers and brokers. [NYMEX]

national income

National income is the sum of labor and property earnings that arise from current production. It is the sum of employee compensation, proprietors' income, rental income of persons, corporate profits, and net interest. It measures the total factor costs of the goods and services produced by labor and capital supplied by U.S. residents. [BEA]

national income and product accounts

BEA's economic accounts that display the value and composition of national output and the distribution of incomes generated in its production. [BEA]

National Market System (NMS)

In the Securities Acts Amendments of 1975, Congress called for development of a National Market System to provide an effective and efficient nationwide trading environment for corporate securities. The component elements of a National Market System, developed and implemented over the years, are commonly identified by acronyms. [NYSE]

National Organization of Clearing Houses (NOCH)

National Securities Clearing Corporation (NSCC)

Facilitates trade processing, clearance, delivery and settlement of equities, and corporate and municipal bond transactions. NSCC is owned equally by the New York and American Stock Exchanges and the National Association of Securities Dealers. [NYSE] The leading US provider of centralized clearance, settlement, and information services for equity, corporate & municipal bond, Unit Investment Trust, annuity and mutual fund transactions. Services include comparison and matching of purchases and sales, recording of matched trades locked in at the marketplace, settlement guarantees for compared trades, netting, settlement through systems such as CNS, and risk management. NSCC works closely with its facilities manager the Securities Industry Automation Corporation (SIAC) and with the Depository Trust Corporation (DTC), as well as its affiliated companies the Government Securities Clearing Corporation, the MBS Clearing Corporation (mortgage backed securities) and the International Depository and Clearing LLC. [NSCC]

National Security Traders Association (NSTA)

National Security Trading System (NSTS)

Operated by the Cincinnati Stock Exchange [NYSE]

national treatment

National treatment affords foreign individuals and firms the same competitive opportunities, including market access, as are available to domestic parties. [ITDS]

nationalization

A government takeover of a private company. [Harvey] Takeover by the government without compensation of a public or private activity. [ITDS] The takeover by the government with or without compensation of a private entity. The Continental Illinois Corporation assistance transaction of 1984 was referred to at the time by some commentators as a 'nationalization' of the bank, since the FDIC acquired an 80 percent equity interest in the bank under the terms of the assistance agreement. [FDIC]

nationwide loan

A mortgage loan on improved real property located outside a lending institution's normal business territory but within the United States, its territories or possessions. [OTS]

natural gas

A naturally occurring mixture of hydrocarbon and non-hydrocarbon gases found in porous rock formations. Its principal component is methane. [NYMEX]

natural gas liquids

A general term for all liquid products separated from natural gas in a gas processing plant. NGLs include propane, butane, ethane, and natural gasoline. [NYMEX]

natural logarithm

Logarithm to the base 'e' (approximately 2.7183). [Harvey]

natural monopoly

One producer supplying all of the market at lower costs than many producers could. [FACS]

natural rate of unemployment

The rate of unemployment that can be sustained in the long run, and that is consistent with constant inflation. [FRB][FRBC][FRBSF]

natural unemployment rate

An economys civilian unemployment rate when supply and demand for labor are equal. The natural rate is the percentage of the civilian labor force unemployed at one time or another during any given year multiplied by the average time people spend searching for jobs. [FACS]

near-monies

Assets which are not directly exchangeable for goods and services but which may be readily converted into money. A savings account is an example. [FACS]

nearby delivery month

The futures contract month closest to expiration. Also referred to as spot month. [CBOT][MIDAM] The month of the futures contract closest to maturity; the front month or lead month. [CFTC]

nearby futures contract

When several futures contracts are considered, the contract with the closest settlement date is called the nearby futures contract. The next futures contract is the one that settles just after the nearby futures contract. The contract farthest away in time from settlement is called the most distant futures contract. [Harvey]

nearbys

The nearest active trading month of a financial or commodity futures market. [Harvey] The nearest delivery months of a commodity futures market. [CFTC]

need

A specific quantity of a specific good for which an individual would pay any price. [FACS]

negative amortization

A loan repayment schedule in which the outstanding principal balance of the loan increases, rather than amortizing, because the scheduled monthly payments do not cover the full amount required to amortize the loan. The unpaid interest is added to the outstanding principal, to be repaid later. [Harvey] An increase in the principal of a loan, when the loan payments are insufficient to pay the interest due. The unpaid interest is added to the outstanding loan balance causing the principal to increase rather than decrease as payments are made. This situation typically occurs in an adjustable mortgage with an annual cap limiting any increases in the interest rate, and also in a graduated payment mortgage, which has low initial payments so moderate-income borrowers can afford to make the loan payments. [FRBSF] Repayment schedule calling for periodic payments [FRB][FRBM] Repayment schedule calling for periodic payments that are insufficient to fully amortize the loan. Earned but unpaid interest is added to the principal, increasing the debt. Eventually, payments must be rescheduled to fully pay off the debt. [FRB][FRBC] The result of a mortgage repayment plan in which the borrower makes payments that amount to less than the interest due. Unpaid interest is then added to the outstanding loan balance, causing the outstanding loan balance to increase instead of decrease. [OTS]

negative carry

The cost of financing a financial instrument (the short-term rate of interest), when the cost is above the current return of the financial instrument. [CFTC]

negative cash flow

The situation in which expenditures required to maintain an investment exceed income received on the investment. [OTS]

negative convexity

A bond characteristic such that the price appreciation will be less than the price depreciation for a large change in yield of a given number of basis points. [Harvey]

negative covenant

A bond covenant that limits or prohibits altogether certain actions unless the bondholders agree. [Harvey]

negative duration

A situation in which the price of the MBS moves in the same direction as interest rates. [Harvey]

negative pledge clause

A bond covenant that requires the borrower to grant lenders a lien equivalent to any liens that may be granted in the future to any other currently unsecured lenders. [Harvey] Clause under which the borrower agrees not to permit an exclusive lien on any of its assets. [WCSU]

negative yield curve

neglected firm effect

The tendency of firms that are neglected by security analysts to outperform firms that are the subject of considerable attention. [Harvey]

negotiable

Anything that can be sold or transferred to another for money or as payments of a debt. [ITDS] Refers to a security, title to which is transferable by delivery. [NYSE] able to be transferred or assigned, in place of money, in the ordinary course of conducting business. [OTS]

negotiable bill of lading

Bill of lading transferred by endorsement. [ITDS]

negotiable instrument

A written promise or order signed by the maker to transfer a specified sum of money on demand or at a fixed future time to the person named on the instrument or to the bearer. A negotiable instrument is usually in the form of a check, draft, bill of exchange, promissory note or acceptance. [OTS]

negotiable order of withdrawal (NOW)

Demand deposits that pay interest. [Harvey]

negotiable order of withdrawal account

A savings account with characteristics of a checking account. An account holder can withdraw funds by writing a negotiable order of withdrawal payable to a third party. NOW accounts may earn interest. [OTS] An interest earning account on which checks may be drawn. Withdrawals from NOW accounts may be offered by commercial banks, mutual savings banks, and savings and loan associations and may be owned only by individuals and certain nonprofit organizations and governmental units. [FRBSF] An interest earning account on which checks may be drawn. Withdrawals from NOW accounts may be subject to a 14-day or more notice requirement although such is rarely imposed. NOW accounts may be offered by commercial banks, mutual savings banks, and savings and loan associations and may be owned only by individuals and certain nonprofit organizations and governmental units. [FRB][FRBC]

negotiated certificate of deposit

A large-denomination CD, generally $1MM or more, that can be sold but cannot be cashed in before maturity. [Harvey]

negotiated markets

Markets in which each transaction is separately negotiated between buyer and seller (i.e. an investor and a dealer). [Harvey]

negotiated offering

An offering of securities for which the terms, including underwriters' compensation, have been negotiated between the issuer and the underwriters. [Harvey]

negotiated sale

Situation in which the terms of an offering are determined by negotiation between the issuer and the underwriter rather than through competitive bidding by underwriting groups. [Harvey] The sale of securities the terms of which are determined by negotiation between the buyer and the seller. Often called 'private sale'. [EPA]

negotiated underwriting

Method of choosing underwriters. Most firms may choose their underwriter by negotiation. [WCSU]

negotiation letter of credit

A credit requiring negotiation (usually in the locality of the beneficiary) on or before the expiration date. The engagement clause to honor drafts is in favor of the drawers, endorsers or bona fide holders. [FDIC]

Neighborhood Housing Services programs

programs aimed at halting the further decline of neighborhoods that have begun to deteriorate. They are based on a partnership of community residents, lenders, and local government. NHS is administered by the Neighborhood Reinvestment Corporation. [OTS]

Neighborhood Reinvestment Corporation

was created by the Housing and Community Development Act of 1978 to help establish locally run self-help coalitions of business leaders, residents, and local government officials, called Neighborhood Housing Services (NHS) programs, that encourage communities to revitalize depressed urban neighborhoods and thus make home financing more attractive in these areas. [OTS]

nest egg

slang for money saved, often in a savings account, in preparation for retirement or other significant use. [OTS]

nested

Packed one within another. [ITDS]

net

The amount remaining after certain deductions have been made from the gross amount. [OTS]

net adjusted present value

The adjusted present value minus the initial cost of an investment. [Harvey]

net advantage of refunding

The net present value of the savings from a refunding. [Harvey]

net advantage to leasing

The net present value of entering into a lease financing arrangement rather than borrowing the necessary funds and buying the asset. [Harvey]

net advantage to merging

The difference in total post- and pre-merger market value minus the cost of the merger. [Harvey]

net asset value

The dollar value of one share of a mutual fund at a given point in time, which is calculated by adding up the value of all of the fund's holdings and dividing by the number of outstanding shares. [SEC] The value of a fund's investments. For a mutual fund, the net asset value per share usually represents the fund's market price, subject to a possible sales or redemption charge. For a closed end fund, the market price may vary significantly from the net asset value. [Harvey] Usually used in connection with investment companies to mean net asset value per share. An investment company computes its assets daily, or even twice daily, by totaling the market value of all securities owned. All liabilities are deducted, and the balance divided by the number of shares outstanding. The resulting figure is the net asset value per share. [NYSE]

net assets

The difference between total assets on the one hand and current liabilities and noncapitalized long-term liabilities on the other hand. [Harvey]

net balance

The amount of debt outstanding at a particular time, after all refunds and adjustments have been calculated. It is often called the payoff balance or net payoff. [OTS]

net benefit to leverage factor

A linear approximation of a factor, 'T*', that enables one to operationalize the total impact of leverage on firm value in the capital market imperfections view of capital structure. [Harvey]

net book value

The current book value of an asset or liability; that is, its original book value net of any accounting adjustments such as depreciation. [Harvey]

net cash

Payment for goods sold usually within a short period of time with no deduction allowed from the invoice price. [ITDS]

net cash balance

Beginning cash balance plus cash receipts minus cash disbursements. [Harvey]

net change

The change in the price of a security from the closing price of one day to the closing price on the next day on which the stock is traded. The net change is ordinarily the last figure in the newspaper stock price list. The mark +1 1 /8 means up $1.125 a share from the last sale on the previous day the stock traded. [NYSE] This is the difference between a day's last trade and the previous day's last trade. [Harvey]

net collections

The net cash recoveries resulting from the disposition of a portfolio of assets. Generally speaking, net collections are equal to gross collections less all relevant holding, marketing, and selling costs during the collection period. [FDIC]

net debit cap

A net debit cap is the quantitative limit placed on the debit position that participants in a funds or securities transfer system can incur during the business day. Under the Federal Reserve's policy, institutions are subject to two caps--a daily cap and a 2-week cap. [GAO]

net domestic product

The net market value of the goods and services attributable to labor and property located in the United States; equal to GDP less consumption of fixed capital (CFC). NDP may be viewed as an estimate of sustainable product--the level of consumption that can be maintained while leaving capital assets intact. [BEA]

net errors and omissions

In balance of payments accounting, net errors and omissions record the statistical discrepancies that arise in gathering balance of payments data. [Harvey]

net financing cost

Also called the cost of carry or, simply, carry, the difference between the cost of financing the purchase of an asset and the asset's cash yield. Positive carry means that the yield earned is greater than the financing cost; negative carry means that the financing cost exceeds the yield earned. [Harvey]

net float

Sum of disbursement float and collection float. [Harvey]

net gross receipts

A statistic tabulated from the tax returns of sole proprietors and partnerships; used in the estimation of nonfarm proprietors income by State and county. [BEA]

net income

Proprietary fund excess of operating revenues, nonoperating revenues, and operating transfers-in over operating expenses, nonoperating expenses, and operating transfers-out. [EPA] The company's total earnings, reflecting revenues adjusted for costs of doing business, depreciation, interest, taxes and other expenses. [Harvey] gross income less expenses, including taxes and insurance, but before depreciation, additions to reserves or distribution of earnings. [OTS]

net interest cost

The average cost rate on a bond issue calculated on the basis of simple interest. Involves a fraction in which the numerator is the gross amount of interest to be paid over the life of the bonds plus the amount of discount, or minus the amount of premium at the time of sale and the denominator of which is the average life of the bond issue times the par value of the bond issue. [EPA]

net interest income

net interest margin

interest income earned on assets less interest expense paid on liabilities and capital. This is the gross margin for financial institutions. [OTS]

net interest spread

net interest-earning assets

The dollar amount of all interest-earning assets minus the dollar amount of all interest costing liabilities. [OTS]

net investment

Gross, or total, investment minus depreciation. [Harvey]

net lease

A lease arrangement under which the lessee is responsible for all property taxes, maintenance expenses, insurance, and other costs associated with keeping the asset in good working condition. [Harvey] Lease in which the lessee promises to maintain and insure the equipment. [WCSU]

net national product

The market value of the net output of goods and services produced by the nations economy. [ITDS] The net market value of goods and services attributable to the labor and property supplied by U.S. residents; equal to GNP less consumption of fixed capital (CFC). [BEA]

net new savings

new savings deposits received by a thrift institution less withdrawals; does not include interest credited. [OTS]

net operating income

The net interest margin less provisions for losses and operating expenses plus other operating income. [OTS]

net operating losses

Losses that a firm can take advantage of to reduce taxes. [Harvey]

net operating margin

The ratio of net operating income to net sales. [Harvey]

net payoff

net period

The period of time between the end of the discount period and the date payment is due. [Harvey]

net pledge

A pledge to the payment of debt service of all pledged revenues after a priority pledge to payment of operation and maintenance expenses. Compare 'Gross Pledge'. [EPA]

net portfolio value (NPV)

The present value of expected cash inflows from existing assets, minus the present value of expected cash outflows from existing liabilities, plus the present value of net expected cash inflows from existing off-balance sheet contracts. Also called market value of portfolio equity. [OTS]

net position

A bank has a position in a foreign currency when its assets, including future contracts to sell, in that currency are not equal. An excess of assets over liabilities is called a net 'long' position and liabilities in excess of assets result in a net 'short' position. A long net position in a currency which is depreciating results in a loss because, with each day, that position (asset) is convertible into fewer units of local currency. A short position in a currency which is appreciating represents a loss because, with each day, satisfaction of that position (liability) costs more units of local currency. [FDIC] The difference between an individual or firm's open long contracts and open short contracts in any one commodity. [NYMEX] The difference between the open long contracts and the open short contracts held by a trader in any one commodity. [CFTC]

net present value (NPV)

A project's net contribution to wealth-present value minus initial value. [WCSU] The net present value is the value today of a series of future cash flows discounted at a suitable discount rate. The net present value is sometimes referred to as the 'present value. [FDIC] The present value of the expected future cash flows minus the cost. [Harvey]

net present value of future investments

The present value of the total sum of NPVs expected to result from all of the firm's future investments. [Harvey]

net present value of growth opportunities

A model valuing a firm in which net present value of new investment opportunities is explicitly examined. [Harvey]

net present value rule

An investment is worth making if it has a positive NPV. Projects with negative NPVs should be rejected. [Harvey]

net price

Price after all discounts, rebates, etc have been allowed. [ITDS]

net profit

net profit margin

Net income divided by sales; the amount of each sales dollar left over after all expenses have been paid. [Harvey]

net realizable value

A method of determining the present value of a troubled asset to its present owner based on the assumption that the asset will be held for a period of time and sold at some future date. The present value includes future earnings the asset is expected to generate, less the cost of owning, holding, developing and operating the asset. To compensate for these costs, the asset's projected future net cash flows are discounted using a formula that incorporates the cost of capital (the cost of paying dividends and interest). Net realizable value, therefore, is based on a formula incorporating what the asset must earn in order to pay for its share of the costs of running the business. Net realizable value is one accounting method used to calculate the present value of an asset (a loan) at some point after the loan has become past due and book value is no longer valid. [OTS]

net recovery rate

Ratio of the net-present-value-of-net-collections-to-book-value-reductions. This performance measurement, in contrast with the 'recovery rate,' involves discounting net collections at an appropriate discount rate to determine the 'net present value of net collections' before this ratio can be calculated. The net recovery rate is sometimes referred to as the 'net recovery.' [FDIC]

net rentable area

The actual square footage of a building that can be rented. Halls, lobbies, stairways, elevator shafts, maintenance areas and the like are not included. [OTS]

net return

The remainder left after total operational expenses and interest payments are deducted from gross income. [OTS]

net revenues

Pledged revenues remaining after deduction for or payment of operation and maintenance expenses. [EPA]

net revenues available for debt service

Proprietary fund gross operating revenues less operating and maintenance expenses but exclusive of depreciation and bond interest. 'Net revenue available for debt service' as thus defined is used to compute 'coverage' on revenue bond issues. See 'Coverage'. Under the laws of some states and the provisions of some revenue bond indentures, 'net revenues available for debt service' for computation of revenue bond coverage must be computed on a cash basis rather than in conformity with GAAP. [EPA]

net salvage value

The after-tax net cash flow for terminating the project. [Harvey]

net savings inflow

The change during a given time period of an institution's total savings account liability, determined by adding all deposits and subtracting all withdrawals. Also referred to as net savings gain or net savings receipts. When interest credited to accounts during the period is excluded, the resulting total is referred to as net new savings. [OTS]

net settlement

Net settlement is the settlement of a number of obligations or transfers between or among counterparties on a net basis. [GAO]

net weight

The weight of goods without packaging. [ITDS]

net working capital

Current assets minus current liabilities. [WCSU] Current assets minus current liabilities. Often simply referred to as working capital. [Harvey]

net worth

Book value of a company's common stock, surplus, and retained earnings. [WCSU] Common stockholders' equity which consists of common stock, surplus, and retained earnings. [Harvey] The difference between the assets and liabilities of a person or business. [FACS] The new ownership value of a firm. Net worth equals the value of assets held minus the value of all liabilities. [UNODC] The value in dollars of all assets less all liabilities. Net worth may be expressed as a dollar amount, or as a percentage of either assets or liabilities, calculated by subtracting liabilities from assets and dividing the remainder by assets or liabilities. [OTS]

net worth certificate (NWC)

A capital instrument purchased by the FDIC or the former FSLIC under a special program created by Congress in 1982 to maintain or increase the capital of troubled institutions that qualified for the program. Under this program, the FDIC purchased a net worth certificate from a qualified institution in exchange for an FDIC insured promissory note, which was an asset on the bank's books, with the offsetting liability of the net worth certificate counted as regulatory capital. Extended twice by Congress, this program expired in 1986. [FDIC] An instrument authorized by the Garn-St Germain Depository Institutions Act of 1982, to assist thrift institutions in meeting minimum regulatory net worth requirements. A thrift participating in the program issued net worth certificates to the former Federal Savings and Loan Insurance Corporation (FSLIC) in return for the FSLIC's promissory notes. The notes could be counted as part of the institution's net worth. As the institution regained financial health, it redeemed the net worth certificates by returning the FSLIC's promissory notes. [OTS]

net yield

that part of gross yield that remains after deduction of all costs, including servicing and reserves for losses. [OTS]

netback

Industry term referring to the net FOB cost of product offered on a delivered or CIF basis. It is derived by subtracting all costs of shipment from the landed price. [NYMEX]

netting

Calculating the total exposure to a counterparty by offsetting the receivables and payables, in the same currency, for the same dates. This exposure is less than if a gross total calculation is used. [TMAC] Netting is an agreed upon offsetting of positions or obligations by trading partners that can reduce a large number of individual obligations or positions to a smaller number. [GAO] Reducing transfers of funds between subsidiaries or separate companies to a net amount. [Harvey]

netting member

Netting members are primarily government securities broker-dealers and banks that are capable of participating in the netting services through GSCC. [GAO]

netting out

To get or bring in as a net; to clear as profit. [Harvey]

neutral air waybill

A standard air waybill without identification of issuing carrier. [ITDS]

neutral period

In the Euromarket, a period over which Eurodollars are sold is said to be neutral if it does not start or end on either a Friday or the day before a holiday. [Harvey]

neutral spread

Another name for a delta neutral spread. Spreads may also be lot neutral, where the total number of long contracts and the total number of short contracts of the same type are approximately equal. [NYMEX]

new classical macroeconomics

new deal

Programs initiated in the 1930s that were characterized by significantly increased government aid to various economic groups and equally significant increases in government involvement in the economy. [FACS]

New Hampshire Plan

The strategy used in resolving seven New Hampshire banks that failed in October 1991. The FDIC combined and marketed the banks as two franchises instead of marketing the failed bank franchises individually. The FDIC appointed a third-party contractor under an asset management contract to manage and dispose of the failed banks' distressed assets. The New Hampshire Plan was significant in part because it was the first time the FDIC solicited asset management contractors that were not eligible to be assuming institutions. [FDIC]

new issue

A stock or bond sold by a corporation for the first time. [OTS] A stock or bond sold by a corporation for the first time. Proceeds may be used to retire outstanding securities of the company, for new plants or equipment, for additional working capital, or to acquire a public ownership interest in the company for private owners. New York Stock Exchange [NYSE]

new money

In a Treasury auction, the amount by which the par value of the securities offered exceeds that of those maturing. [Harvey]

new town

A new community built in an undeveloped area, intended to be a self-governing, self-contained settlement, and containing residential, commercial, industrial, and institutional facilities as well as public and community facilities. Examples are Columbia, Maryland, and Reston, Virginia. [OTS]

New York Area Firms Advisory Committee (NYAC)

Advises on the likely impact of important policy decisions on specialty firms, and presents its views on the problems and needs of these firms. Its members are principals of smaller, non-specialist member firms headquartered in the New York metropolitan area. [NYSE]

New York Automated Clearinghouse (NYACH)

NYCHA provides check exchange services to its 10 member banks and to 131 other depository institutions. [GAO]

New York Clearing House Association (NYCHA)

New York Stock Exchange (NYSE)

Also known as the Big Board or The Exhange. More than 2,00 common and preferred stocks are traded. The exchange is the older in the United States, founded in 1792, and the largest. It is lcoated on Wall Street in New York City [Harvey] The largest organized securities market in the United States, founded in 1792. The Exchange itself does not buy, sell own, or set the price of securities traded there. The prices are determined by the public supply and demand. The Exchange is a not-for-profit corporation of 1,366 individual members, governed by a Board of Directors consisting of 12 public representatives, 12 member firm representatives, and a fulltime chairman, executive vice chairman and president. [NYSE] The oldest (founded 1792) and largest securities market in the United States. [OTS]

new-issues market

The market in which a new issue of securities is first sold to investors. [Harvey]

next day

A spot contract that provides for delivery of a commodity on the next calendar day or the next business day. Also called day ahead. [CFTC]

next futures contract

The contract settling immediately after the nearby futures contract. [Harvey]

nexus (of contracts)

A set or collection of something. [Harvey]

night cycle

The second scheduled time for interregional transmission of data from Originating ACHs to Receiving ACHs. Also referred to as 'nighttime window.' [ACH]

no action letter

A Securities and Exchange Commission staff letter stating that the staff has determined not to take any enforcement or injunctive action against a particular issue, based upon the facts and circumstances stated in a letter to the staff requesting the no action letter. The no action letter does not ultimately determine any securities liability question, but indicates only that the staff has determined not to initiate any action at that time. [EPA]

no load mutual fund

An open-end investment company, shares of which are sold without a sales charge. There can be other distribution charges, however, such as Article 12B-1 fees. A true 'no load' fund will have neither a sales charge nor a distribution fee. [Harvey]

no prior relationship (NPR)

No prior business relationship exists between originater of a digital signature transaction/document and the receiver [misc]

no show

Freight that has been booked to a ship, but has not physically arrived in time to be loaded to that ship. [ITDS]

no-load fund

A mutual fund that does not impose a sales commission. [Harvey] A type of mutual fund that does not charge a sales commission (load fee) when an investor buys shares of the fund. [OTS] A type of mutual fund that offers its shares directly to the public at their net asset value with no accompanying sales charge. [SEC]

no-par stock

A stock with no designated face value. [OTS]

noise

Price and volume fluctuations that can confuse interpretation of market direction. [Harvey]

nominal

In name only. Differences in compounding cause the nominal rate to differ from the effective interest rate. Inflation causes the purchasing power of money to differ from one time to another. [Harvey]

nominal annual rate

An effective rate per period multiplied by the number of periods in a year. [Harvey]

nominal cash flow

A cash flow expressed in nominal terms if the actual dollars to be received or paid out are given. [Harvey]

nominal exchange rate

The actual foreign exchange quotation in contrast to the real exchange rate that has been adjusted for changes in purchasing power. [Harvey]

nominal GNP

GNP measured in current prices. [FACS]

nominal interest rates

Current stated rates of interest paid or earned. [FRB][FRBC][FRBSF] Interest rate expressed in money terms. [WCSU] The cost inflicted by inflation eroding the value of stored dollars plus the foregone real interest rate; the opportunity cost of holding money. [FACS] The interest rate unadjusted for inflation. [Harvey] The stated, or contractual, interest rate in a loan agreement, bond or other security, which may differ from the effective interest rate. [OTS]

nominal measures

The most basic of methodologies for risk management and represents a risk position based on the nominal amount or face amount of the transactions. [TMAC]

nominal price

Price quotations on futures for a period in which no actual trading took place. [Harvey] The declared price for a futures month sometimes used in place of a closing price when no recent trading has taken place in that particular delivery month; usually an average of the bid and asked prices. [NYMEX]

nominee

An official of a financial institution or some other appointed agent to whom securities or other funds are transferred by agreement with the actual owner. Nominees facilitate the collection and distribution of income from securities (when such securities are held in the name of a nominee), and facilitate the sale or purchase of securities when it may be inconvenient or impractical to obtain the necessary signature of the principal in order to conduct a transaction. [OTS]

nominee company

A company formed for the express purpose of holding securities and other assets in its name or to provide nominee directors and/or officers on behalf of clients of its parent bank or trust company. [UNODC]

nominee director

A director whose function is passive in nature. The director receives a fee for lending his or her name to the organization. Nominee directors are subject to director responsibilities. [UNODC]

non compos mentis

Latin for the condition of an individual not possessing sufficient understanding to comprehend the nature, extent and meaning of his or her obligations or contracts. [OTS]

non debt

Any obligation which is not considered a debt under both constitutional and statutory definitions. Generally these are special revenue bonds for water or sewer systems. [EPA]

non-active company

A company which is either in voluntary liquidation or wishes to protect a name which includes the word bank or trust company in it even though the company is not carrying on any banking or trust business. [UNODC]

non-associated gas

Natural gas in a reservoir which contains no crude oil. [NYMEX]

non-bank bank

slang for a kind of financial institution that in the 1980s did not meet the legal definition of a commercial bank, and thus avoided the prohibition against branching across state lines. It avoided being classified as a commercial bank by not engaging in one of the two lines of business cited in the law to define commercial banks; demand deposits or commercial loans. It may have offered a range of bank services but engaged in only one of the two activities that legally defined a commercial bank. The non-bank bank loophole was closed by the Competitive Equality Banking Act of 1987. [OTS]

non-cumulative preferred stock

Preferred stock whose holders must forgo dividend payments when the company misses a dividend payment. [Harvey]

non-financial services

Include such things as freight, insurance, passenger services, and travel. [Harvey]

non-insured plans

Defined benefit pension plans that are not guaranteed by life insurance products. [Harvey]

non-member traders

Speculators and hedgers who trade on the exchange through a member or a person with trading privileges but who do not hold exchange memberships or trading privileges. [CFTC]

non-parallel shift in the yield curve

A shift in the yield curve in which yields do not change by the same number of basis points for every maturity. [Harvey]

non-reproducible assets

A tangible asset with unique physical properties, like a parcel of land, a mine, or a work of art. [Harvey]

non-tradables

Refer to goods and services produced and consumed domestically that are not close substitutes to import or export goods and services. [Harvey]

nonaccruing loan

A loan that is more than 60 days past due with no payments being made, and that has stopped accruing interest. [OTS]

nonamortized loan

A loan in which the periodic payments are sufficient to cover only the interest due and, thus, do not reduce the outstanding principal. [OTS]

nonassumption clause

A provision of a mortgage contract that prohibits the assumption of the mortgage by a third party without the prior approval of the lender. [OTS]

noncash charge

A cost, such as depreciation, depletion, and amortization, that does not involve any cash outflow. [Harvey]

noncompetitive bid

In a Treasury auction, bidding for a specific amount of securities at the price, whatever it may turn out to be, equal to the average price of the accepted competitive bids. [Harvey]

noncompetitive bidders

One of two categories of bidders on Treasury securities: competitive and noncompetitive. Noncompetitive bidders, made up of individuals or financial institutions, receive the average price and investment yield of the accepted competitive bids. [FRBSF]

nonconforming land use

real property being used in a manner not otherwise permitted by the zoning for the property. The land use is permitted to continue because the land was being used in such a fashion before the zoning ordinance was passed. [OTS]

nonconforming loan

A loan with an unpaid principal balance or an unexpired term that exceeds lending limitations established by the principal purchasers and guarantors of the secondary mortgage market; the Federal Home Loan Mortgage Corporation, and the Federal National Mortgage Association. [OTS]

noncumulative

A type of preferred stock on which unpaid dividends do not accrue. Omitted dividends are, as a rule, gone forever. [NYSE]

noncurrent loan

A loan in which payments have fallen behind schedule. [OTS]

nondepository financial institution

A company that deals in financial instruments but does not accept deposits. Examples are insurance companies and brokerage firms. [OTS]

nondisturbance clause

An agreement that permits a tenant holding a lease to remain in possession of a property despite any foreclosure against the owner(s) of the property. [OTS]

nondiversifiability of human capital

The difficulty of diversifying one's human capital (the unique capabilities and expertise of individuals) and employment effort. [Harvey]

nondiversifiable risk

Risk that cannot be eliminated by diversification. [Harvey]

nonfiling insurance

A type of private insurance that thrift institutions purchase to insure against a loss resulting from unintentional errors or omissions in the filing or recording of a security interest. [OTS]

noninterest expense

The sum of personnel compensation, legal expense, office occupancy and equipment expense, other noninterest expense and loan loss provisions. [OTS]

noninterest income

The sum of mortgage loan servicing fees and other fees and charges, profit (loss) from asset sales, leasing income, and other noninterest income. [OTS]

nonmarketed claims

Claims that cannot be easily bought and sold in the financial markets, such as those of the government and litigants in lawsuits. [Harvey]

nonmember bank

Depository institution that is not a member of the Federal Reserve System. Specifically, a state-chartered commercial bank that has elected not to join the System. [FRBSF]

nonmember depository institution

A depository institution (commercial bank, mutual savings bank, savings and loan association, credit union, or U.S. agency or branch of a foreign bank) that is not a member of the Federal Reserve System. Nonmember depository institutions that offer transaction accounts or nonpersonal time deposits are subject to reserve requirements set by the Federal Reserve, and have access to the Federal Reserve discount window and Federal Reserve services on the same terms as member banks. [FRBSF] A depository institution (commercial bank, mutual savings bank, savings and loan association, credit union, or U.S. agency or branch of a foreign bank) that is not a member of the Federal Reserve System. Nonmember depository institutions that offer transaction accounts or nonpersonal time deposits are subject to reserve requirements set by the Federal Reserve, and they also have access to the Federal Reserve discount window and Federal Reserve services on the same terms as member banks. [FRB][FRBC]

nonmortgage loan

An advance of funds not secured by a real estate mortgage. [OTS]

nonoperating expenses

(A) Proprietary fund expenses which are not directly related to the fund's primary service activities . (B) Expenses incurred for nonoperating properties in the performance of activities not directly related to supplying the basic service by a governmental enterprise. [EPA] The outlays and losses of a savings association that are nonrecurring in nature and that do not result from the ordinary savings and lending operations of the institution. These include the expense of maintaining real estate owned or a loss taken on the sale of a nonmortgage investment; also called nonrecurring expense. [OTS]

nonoperating income

The profit and revenue of a savings association that are nonrecurring in nature and that do not result from the ordinary savings and lending operations of the institution. These include profit on the sale of real estate owned or other nonmortgage investment. [OTS]

nonoperating properties

Properties which are owned by an Enterprise Fund but which are not used in the provision of the fund's primary service activities. [EPA]

nonoperating revenues

(A) Proprietary fund revenues which are incidental to, or by-products of, the fund's primary service activities . (B) Revenue from governmental enterprises that is not derived from the basic operations of such enterprises. An example is interest on investments or on bank time deposits. [EPA]

nonpayment

The failure to pay as agreed. [OTS]

nonperformance

The failure of a contracting party to provide goods or services according to terms of an agreement. [OTS]

nonperforming loan

A loan that is not earning income and: (1) full payment of principal and interest is no longer anticipated, (2) principal or interest is 90 days or more delinquent, or (3) the maturity date has passed and payment in full has not been made. [OTS]

nonrecourse

Without recourse, as in a non-recourse lease. [Harvey]

nonrecourse loan

A type of loan in which the only remedy available to the lender in the event of the borrower's default is to foreclose on the collateral; the borrower is not personally liable for repayment. [OTS]

nonrecurring charge

An cost, expense, or involuntary loss that is not likely to occur again. [OTS]

nonredeemable

Not permitted, under the terms of indenture, to be redeemed. [Harvey]

nonrefundable

Not permitted, under the terms of indenture, to be refundable. [Harvey]

nonrefundable debt

Debt that may not be called in order to replace it with another issue at a lower interest cost. [WCSU]

nonresidential mortgage loan

A mortgage loan secured by nonresidential property such as an office building, store, factory, or church. [OTS]

nonsystematic risk

Nonmarket or firm-specific risk factors that can be eliminated by diversification. Also called unique risk or diversifiable risk. Systematic risk refers to risk factors common to the entire economy. [Harvey]

nontax payments

Nontax payments include payments to government, such as fees, special assessments, fines, forfeitures, rents, royalties, and donations. [BEA]

normal annuity form

The manner in which retirement benefits are paid out. [Harvey]

normal backwardation theory

Holds that the futures price will be bid down to a level below the expected spot price. [Harvey]

normal costs

Stream of contributions to a pension plan that is required to cover future employee service. [WCSU]

normal distribution

Symmetric bell-shaped distribution that can be completely defined by its mean and standard deviation. [WCSU]

normal portfolio

A customized benchmark that includes all the securities from which a manager normally chooses, weighted as the manager would weight them in a portfolio. [Harvey]

normal probability distribution

A probability distribution for a continuous random variable that is forms a symmetrical bell-shaped curve around the mean. [Harvey]

normal random variable

A random variable that has a normal probability distribution. [Harvey]

normalizing method

The practice of making a charge in the income account equivalent to the tax savings realized through the use of different depreciation methods for shareholder and income tax purposes, thus washing out the benefits of the tax savings reported as final net income to shareholders. [Harvey]

normative economics

Analysis that contains value judgments, either implicitly or explicitly (see Economics or Positive Economics). [FACS]

North American industry classification system

The North American Industry Classification System (NAICS) has replaced the U.S. Standard Industrial Classification (SIC) system. NAICS was developed jointly by the United States, Canada, and Mexico to provide new comparability in statistics about business activity across North America. [BEA]

North American Securities Administrators Association (NASAA)

An organization made up of state and provincial securities regulators from all 50 states and Canada. [OTS]

North American Securities Rule-making Board (NASAA)

nostro accounts

Demand accounts of banks with their correspondents in foreign countries in the currency of that country. Such accounts are used to make and receive payments in foreign currencies for a bank's customers and to settle maturing foreign exchange contracts. Also called due from foreign bank-demand accounts, or balances with them, or due from balances. [UNODC] Demand accounts of banks with their correspondents in foreign countries of the latters' currencies. Such accounts are used to make and receive payments in foreign currencies for a bank's customers and to settle maturing foreign exchange contracts. Also called due from foreign bank - demand accounts, our balances with them, or due from balances. [FDIC]

not-held order

Absent any restrictions, a DRT (Not-Held Order) means any order giving the floor broker complete discretion over price and time in execution of an order, including discretion to execute all, some, or none of this order. [CFTC]

notary public

A person commissioned by a state for a stipulated period to administer certain oaths and to attest and certify documents. [ITDS] A public figure authorized to attest to the signing of documents, such as deeds or mortgages. The notary public certifies that he or she has witnessed the signing of the document by also signing the document and affixing his or her official seal. [OTS]

notational voting

A procedure in which matters to be decided are circulated among those eligible to vote, each of whom in turn indicates approval or disapproval by making a notation on the document being circulated. [OTS]

note

(A) A written, short-term promise of the issuer to repay a specified principal amount on a date certain, together with interest at a stated rate, or according to a formula for determining that rate, payable from a defined source of anticipated revenue. Notes usually mature in less than five (5) years . (B) A security usually (but not always) having a shorter maturity than a bond issue and usually (but not always) part of an issue having a single maturity. [EPA] An instrument bearing legal evidence of debt. A note is signed by the maker (borrower) and promises to pay a specified sum of money to the lender at a certain future date and place. [OTS] Debt instruments with initial maturities greater than one year and less than 10 years. [Harvey] Unsecured debt with a maturity of up to 10 years. [WCSU]

note against bond (NOB)

note against bond spread

A futures spread trade involving the buying (selling) of a Treasury note futures contract and the selling (buying) of a Treasury bond futures contract. [CFTC]

note agreement

A contract for privately placed debt. [Harvey]

note issuance facility (NIF)

An agreement by which a syndicate of banks indicates a willingness to accept short-term notes from borrowers and resell these notes in the Eurocurrency markets. [Harvey] In the Eurocurrency market, a facility that guarantees the company the right to borrow from a group of banks up to some agreed maximum. [WCSU]

notes to the financial statements

A detailed set of notes immediately following the financial statements in an annual report that explain and expand on the information in the financial statements. [Harvey]

notice account

A savings account on which the customer agrees to give the thrift institution a specified notice before making a withdrawal, usually in return for higher interest rates. A penalty may be imposed by the institution for a withdrawal made without the agreed upon notice. [OTS]

notice day

A day on which notices of intent to deliver pertaining to a specified delivery month may be issued. [Harvey] According to Chicago Board of Trade rules, the second day of the three-day delivery process when the clearing corporation matches the buyer with the oldest reported long position to the delivering seller and notifies both parties. [MIDAM] According to Chicago Board of Trade rules, the second day of the three-day delivery process when the clearing corporation matches the buyer with the oldest reported long position to the delivering seller and notifies both parties. See First Notice Day. [CBOT] Any day on which notices of intent to deliver on futures contracts may be issued. [CFTC]

notice of commencement

A document used in some states and recorded after a construction loan mortgage has been recorded. All mechanics' liens relate back to the date the notice of commencement was recorded, thus enabling the construction mortgage to remain a first lien, not subordinated to any labor or supplier claim for nonpayment of bills. [OTS]

notice of completion

A legal notice recorded after completion of construction. Mechanics' liens must be filed within a specified period thereafter. [OTS]

notice of intent to deliver

A notice that must be presented by the seller of a futures contract to the clearing organization prior to delivery. The clearing organization then assigns the notice and subsequent delivery instrument to a buyer. Also notice of delivery. [CFTC]

notification date

The day the option is either exercised or expires. [Harvey]

notify address

Address mentioned in the transport document to which the carrier is to give notice when goods are due to arrive. [ITDS]

notify party

Name and address of a party in the transport document to be notified by the shipping company of the arrival of a shipment. [ITDS]

notional principal

In an interest rate swap, forward rate agreement, or other derivative instrument, the amount or, in a currency swap, each of the amounts to which interest rates are applied in order to calculate periodic payment obligations. Also called the notional amount, the contract amount, the reference amount, and the currency amount. [CFTC] The amount of principal underlying an interest rate swap transaction, and upon which is based the calculation of swap payments. [OTS]

notional principal amount

In an interest rate swap, the predetermined dollar principal on which the exchanged interest payments are based. [Harvey]

novation

(1) the substitution of a new debt or obligation for a previous one. (2) the substitution of a new creditor or debtor for an old creditor or debtor. [OTS] Defeasance whereby the firm's debt is canceled. [Harvey] In a netting system, many transactions that are input to the net are replaced by a smaller number of net positions. At the time that the net is performed, the input transactions are considered settled by novation, the act of novation creates new obligations on the participants to settle the net positions. If alloting is used, the new positions are against other parties to the net, with whom the principal party may not have traded. If the netting system uses interposed novation, all of the new obligations are against the party who performed the net, which minimizes any participant's exposure to settlement risk based on the insolvency of any other participant. [NSCC] Novation is an agreement to replace one party to a contract with a new party. The novation transfers both rights and duties and requires the consent of both the original and the new party. [GAO]

NOW account

'Negotiable order of withdrawal' account; a savings account that offers checking privileges. [WCSU]

NP-Series

An RTC equity partnership created in 1995 and designed for the smaller investor. The composition of NP-Series portfolios was similar to that of the N-Series, S-Series and SN-Series pools; however, the portfolios of the NP-Series were the smallest in the RTC equity partnership program, averaging under $70 million in book value each. [FDIC]

nuclear energy agency

Promotes the safe and effective use of nuclear energy through the exchange of information among technical experts, the sharing of analytical studies, and undertaking joint research and development projects by member countries. [ITDS]

numismatic

Pertaining to coins and the collection of coins and medals. [FRBSF]

NYMEX ACCESS(R)

An interactive data communications network for bidding, offering and trading certain commodity futures and options contracts offered by the New York Mercantile Exchange for overnight trading. NYMEX provides the user with the equipment, software and services. ACCESS stands for American Computerized Commodity Exchange System and Services. [NYMEX]

NYMEX lookalike

A lookalike swap or lookalike option that is based on a futures contract traded on the New York Mercantile Exchange (NYMEX). [CFTC]

NYSE composite index

The composite index covering price movements of all common stocks listed on the New York Stock Exchange. It is based on the close of the market December 31, 1965 as 50.00 and is weighed according to the number of shares listed for each issue. The index is computed continuously and printed on the ticker tape. Point changes in the index are converted to dollars and cents so as to provide a meaningful measure of changes in the average price of listed stocks. The composite index is supplemented by separate indexes for four industry groups: industrial, transportation, utility and finance. [NYSE]

Oakar Amendment

An amendment to section 5(d) of the FDI Act of 1950 named for its sponsor, Congresswoman Mary Rose Oakar. The amendment allowed an institution to avoid the prohibition against conversion of insured deposits between insurance funds, with approval of the appropriate federal regulatory authority. The Oakar amendment authorized any state depository institution to merge, consolidate, or transfer the assets and liabilities of an acquired institution while maintaining existing fund coverage of the acquired deposits. [FDIC]

objective (mutual funds)

The fund's investment strategy category as stated in the prospectus. There are more than 20 standardized categories. [Harvey]

obligation

The requirement imposed on a debtor to pay a debt and the legal right of a creditor to enforce payment. [OTS]

obligee

A creditor. [OTS]

obligor

A debtor. [OTS]

obsolescence

The loss of value or usefulness usually over a period of time, because of wear, changing technology or user preference. [OTS]

occupancy rate

The percentage of space or units that are leased or occupied. [OTS]

ocean bill of lading

A receipt for the cargo and a contract for transportation between a shipper and the ocean carrier. [ITDS]

octane number

A measure of the resistance of gasoline to pre-ignite or knock when burned in an internal combustion engine. [NYMEX]

odd dates

Deals within the market are usually for spot, one month, two months, three months or six months forward. Other dates are odd dates, and prices for them are frequently adjusted with more than a mathematical difference. Hence, most market deals are for regular dates, although commercial deals for odd dates are common. [FDIC]

odd lot

A block of shares of less than a round lot, usually traded at one time. (A round lot is a multiple of 100.) [OTS] A trading order for less than 100 shares of stock. [Harvey] Fewer than 100 shares of stock. [SEC] Stock transactions that involve less than 100 shares. [NYSE]

odd lot dealer

A broker who combines odd lots of securities from multiple buy or sell orders into round lots and executes transactions in those round lots. [Harvey]

off exchange

off-balance sheet activities

The business activities of a savings association that generally do not involve booking assets (loans) and taking deposits. Off-balance sheet activities normally generate fees, but produce liabilities or assets that are deferred or contingent and thus, under GAAP, do not appear on the institution's balance sheet until or unless they become actual assets or liabilities with a value or cost that can be determined. Examples include guarantees substituting the institution's own credit for a third party such as in standby letters of credit; interest rate swaps; foreign exchange forward options; repurchase agreements; loan commitments; and recourse associated with sales of assets. [OTS]

off-balance-sheet financing

Financing that is not shown as a liability in a company's balance sheet. [Harvey][WCSU]

off-board

This term may refer to transactions over-the-counter in unlisted securities or to a transaction of listed shares that is not executed on a national securities exchange. [NYSE]

offer

A motion to sell a futures or option contract at a specified price. Opposite of Bid. [NYMEX] A proposal that is made to a certain individual or legal entity to enter into a contract, that is definite in its terms, and that indicates the offers intent to be bound by an acceptance. [ITDS] An expression indicating one's desire to sell a commodity at a given price, opposite of bid. [CBOT][MIDAM] An expression of a willingness to sell something at a given price; opposite of bid. [OTS] An indication of willingness to sell at a given price; opposite of bid, the price level of the offer may be referred to as the ask. [CFTC] Indicates a willingness to sell at a given price. [Harvey] The price at which a person is ready to sell. Opposed to bid, the price at which one is ready to buy. [NYSE]

offering

An issue of securities or bonds presented for sale. [OTS]

offering circular

(A) A document prepared by the underwriter in connection with its original offering for sale to others of a new issue, conforming to state and federal requirements and containing information about the issue, issuer, the entity responsible for paying debt service, and the terms and purposes of the financing. (Often referred to as 'Prospectus; compare 'Official Statement'.) (B) A document setting forth the terms of the bonds being offered and the terms of the sale. [EPA]

offering memorandum

A document that outlines the terms of securities to be offered in a private placement. [Harvey]

Office of Federal Housing Enterprise Oversight (OFHEO)

A government agency responsible for ensuring the financial safety and soundness of the nation's two largest players in the secondary mortgage market, the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). OFHEO is an independent office of the Department of Housing and Urban Development, and was established by the Federal Housing Enterprises Financial Safety and Soundness Act of 1992. [OTS]

Office of Financial Institution Adjudication (OFIA)

An office that houses administrative law judges who conduct adjudicatory hearings for the federal financial institution regulatory agencies: the Office of Thrift Supervision, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, and the National Credit Union Administration. OFIA is housed at the Office of Thrift Supervision. [OTS]

Office of Foreign Assets Control (OFAC)

OFAC within the Department of the Treasury operates under laws to thwart terrorism or crime. OFAC powers are to be exercised on payments flowing across Fedwire or CHIPS, even if the payments are legal in the payor's country. [GAO]

Office of Inspector General

An independent federal organization established to audit the programs and operations of the FDIC and to investigate complaints of fraud, waste, and mismanagement in those programs. The Inspector General Act of 1978, as amended, required the chairman to appoint an inspector general beginning in 1989, the position changing to a presidential appointment in 1994. The RTC was required to have a presidentially-appointed inspector general throughout its life. [FDIC]

Office of Inspector General, FDIC and RTC (OIG)

Office of the Comptroller of the Currency (OCC)

A bureau within the U.S. Department of the Treasury, established in 1863. The OCC charters, regulates, and supervises national banks, which can usually be identified because they have the word 'national' or 'national association' in their names. The OCC also supervises and regulates the federally licensed branches and agencies of foreign banks doing business in the United States. The comptroller of the currency, who is appointed by the president of the United States, with Senate confirmation, and who is one of the FDIC's five directors, heads the OCC. [FDIC] An independent bureau of the Treasury Department and the oldest federal financial regulatory body. The OCC oversees the nation's federally chartered banks and promotes a system of bank supervision and regulation that promotes safety and soundness by requiring that national banks adhere to sound management principles and comply with the law, and encourages banks to satisfy customer and community needs while remaining efficient competitors in the financial services market. [FRB][FRBM][FRBSF]

Office of Thrift Supervision (OTS)

A bureau of the Treasury Department established in August 1989. OTS has the authority to charter federal Thrift Institutions and serves as the primary regulator of approximately 2,000 federal and state chartered thrifts. [FRBSF] A bureau of the Treasury Department that was authorized by Congress in the Financial Institutions Reform, Recovery and Enforcement Act of 1989, to charter, regulate, examine and supervise savings institutions. [OTS] A bureau of the Treasury Department, established in August of 1989, which has the authority to charter federal Thrift Institutions and serve as the primary regulator of approximately 2,000 federal and state chartered thrifts. [FRB][FRBM] An organization within the U.S. Department of the Treasury, established on August 9, 1989, by FIRREA. The OTS, with five regional offices located in Jersey City, Atlanta, Chicago, Dallas, and San Francisco, is the primary regulator of all federal and many state chartered thrift institutions. A director, who is appointed by the president, with Senate confirmation, for a five-year term and who is one of the five FDIC directors, heads the OTS. [FDIC]

Office On Drugs And Crime (UNODC)

The UNODC comprises the United Nations International Drug Control Programme (UNDCP) and the Centre for International Crime Prevention (CICP) and the Global Programme against Money Laundering (GPML). The Office was established to enable the organization to focus and enhance its capacity to address the interrelated issues of drug control, crime prevention and international terrorism in all its forms. [UNODC]

official reserves

Holdings of gold and foreign currencies by official monetary institutions. [Harvey]

official statement

(A) A legal document which summarizes all the salient features of the underlying documents and agreements which support a municipal bond offering. It is considered the disclosure document which presents information that is 'material' to the offering. The official statement should contain what a reasonable investor would need to know in making a decision about the issue. Thus this document will usually include a description of the issuer, a description of the security of the bond, a summary of the principal financing documents, any feasibility studies which relate to the security, and any other 'key information' . (B) A document prepared by the issuer in connection with its original offering for sale of an issue, conforming to state and federal requirements and containing information about the issue, issuer, the entity responsible for paying debt service, and the terms and purposes of the financing. (Compare 'Offering Circular'.) (C) A statement issued by a governmental authority at the time of sale of its bonds or notes setting forth the pertinent facts concerning the issuer, the issuer's financial condition, the security pledged for the securities being offered, the projected use of the proceeds of the sale, and other facts deemed necessary to enable the investor to judge fairly the quality of the securities being offered. [EPA] A statement published by an issuer of a new municipal security describing itself and the issue [Harvey]

official unrequited transfers

Include a variety of subsidies, military aid, voluntary cancellation of debt, contributions to international organizations, indemnities imposed under peace treaties, technical assistance, taxes, fines, etc. [Harvey]

offset

A transaction which liquidates or closes out an open contract position. In spread positions, one side offsets the other without liquidating the entire position. Risk is reduced when one side offsets the other. [NYMEX] Elimination of a long or short position by making an opposite transaction. [Harvey] Liquidating a purchase of futures contracts through the sale of an equal number of contracts of the same delivery month, or liquidating a short sale of futures through the purchase of an equal number of contracts of the same delivery month. [CFTC] Taking a second futures or options position opposite to the initial or opening position. [CBOT][MIDAM]

offsetting

Offsetting is liquidating a purchase of contracts (e.g., futures contracts) by the sale of an equal number of contracts with the same delivery month, thus closing out a position. [GAO]

offshore

A reference to financial operations transacted outside the country in question. [ITDS]

offshore bank

Bank located outside the country in question. [ITDS]

offshore banking

By popular usage, the establishment and operation of U.S. or foreign banks in such offshore jurisdictions as the Bahamas and the Cayman Islands. [UNODC]

offshore banking center

Financial center where many of the financial institutions have little connection with that countrys financial system; usually done for tax purposes. [ITDS]

offshore banking unit (OBU)

A bank in Cyprus, or any other financial center with similar organizations; not allowed to conduct business in the domestic market, only with other OBUs or with foreign persons. [UNODC]

offshore booking centers

An offshore financial center used by international banks as a location for 'shell branches' to book certain deposits and loans. Such offshore bookings are often utilized to avoid regulatory restrictions and taxes. [UNODC]

offshore company

offshore dollars

Same as Eurodollars, but encompassing such deposits held in banks and branches anywhere outside of the United States, including Europe. [FDIC][UNODC]

offshore finance subsidiary

A wholly owned affiliate incorporated overseas, usually in a tax haven country, whose function is to issue securities abroad for use in either the parent's domestic or its foreign business. [Harvey]

offshore financial centers

A country or jurisdiction where an intentional attempt has been made to attract foreign business by deliberate government policy such as the enactment of secrecy laws and tax incentives. [UNODC]

offshore financial transactions

In popular use, 'offshore banking' is often taken to mean nothing more than persons resident in one legal jurisdiction holding assets in financial institutions incorporated in another jurisdiction. Offshore financial transactions have a precise meaning. Banks or other financial institutions operating 'offshore' are exempt from a wide range of regulations normally imposed on 'onshore' institutions. Their transactions are tax-exempt, not encumbered by reserve requirements, free of interest-rate restrictions and often, though not always, exempt from regulatory scrutiny with respect to liquidity or capital adequacy. Over the last 50 years, all of the world's major banks have opened branches in offshore financial centres. A number of jurisdictions have been willing to 'charter' banks upon presentation of the required fees. As long as they do not do banking business with the local population, their books are unexamined and their practices are uncontrolled. [UNODC]

offshore group of banking supervisors (OGBS)

The purpose of the OGBS is to represent the interests of member jurisdictions in the development of effective supervision of its member's banking systems. [UNODC]

offshore institute

An Isle of Man based organization engaged in the promotion of education and training for accountants, bankers and lawyers whose professional activities include the use of offshore financial centers. [UNODC]

offshore limited partnership

A partnership, the general partner of which is an offshore company, but the limited partners may be onshore entities. [UNODC]

offshore profit centers

Branches of major international banks and multinational corporations located in a low tax financial center which are established for the purpose of lowering taxes. [UNODC]

offshore trust

The majority of offshore centers are tax havens so offshore trusts are simply trusts established to take advantage of low or no tax jurisdictions. [UNODC]

offsite improvements

improvements in land development that are off the development site, such as utility lines, sidewalks, gutters and curbs, that enhance the value of the development. [OTS]

old-line factoring

Factoring arrangement that provides collection, insurance, and finance for accounts receivable. [Harvey][WCSU]

old-to-market

A committed to export, experienced, larger scale firm with export sales volume in excess of 15%. [ITDS]

oligopoly

A market structure with just a few firms controlling a high percentage of total sales. [FACS]

omnibus account

An account carried by one futures commission merchant with another futures commission merchant in which the transactions of two or more persons are combined and carried in the name of the originating broker, rather than designated separately. [Harvey] An account carried by one futures commission merchant with another in which the transactions of two or more persons are combined rather than designated separately and the identity of the individual accounts is not disclosed. [NYMEX] An account carried by one futures commission merchant, the carrying FCM, for another futures commission merchant, the originating FCM, in which the transactions of two or more persons, who are customers of the originating FCM, are combined and carried by the carrying FCM. Omnibus account titles must clearly show that the funds and trades therein belong to customers of the originating FCM. An originating broker must use an omnibus account to execute or clear trades for customers at a particular exchange where it does not have trading or clearing privileges. [CFTC]

on account

describes the application of a payment to reduce the outstanding principal of a loan. [OTS]

on board

Notation on a bill of lading indicating that the goods have been loaded on board of shipped on a named ship. In the case of received for shipment bills of lading, the following four parties are authorized to add this 'on board' notation: (1) the carrier, (2) the carriers agent, (3) the master of the ship, and (4) the masters agent. [ITDS]

on deck

Notation on a bill of lading which indicates that the goods have been loaded on the deck of the ship. [ITDS]

on deck bill of lading

Bill of lading containing the notation that goods have been placed on deck. [ITDS]

on margin

The situation in which an investor borrows part of the purchase price of a security from the broker selling that security. [OTS]

on the run

The most recently issued (and, therefore, typically the most liquid) government bond in a particular maturity range. [Harvey]

on-us check

A depositor's check that is presented for payment at the same financial institution that carries the account on which the check is written. A financial institution would use the term to refer to checks drawn on accounts it holds and presented for payment at its counter. [OTS] An 'on-us check' is a check payable from funds on deposit at the same bank where it is presented for collection. [GAO]

on-us entries

Entries on an ACH file that belong to the originating financial institution. These entries may be stripped from the file and posted internally before a file is sent to the ACH. [ACH]

one cancels the other (OCO)

Two orders submitted simultaneously, either of which may be filled. If one order is filled, the other is considered to be canceled. [NYMEX]

one cancels the other order (OCO)

A pair of orders, typically limit orders, whereby if one order is filled, the other order will automatically be cancelled. For example, an OCO order might consist of an order to buy 10 calls with a strike price of 50 at a specified price or buy 20 calls with a strike price of 55 (with the same expiration date) at a specified price. [CFTC]

one man picture

The picture quoted by a broker is said to be a one-man picture if both the bid and offered prices come from the same source. [Harvey]

one-factor apt

A special case of the arbitrage pricing theory that is derived from the one-factor model by using diversification and arbitrage. It shows the expected return on any risky asset is a linear function of a single factor. [Harvey]

one-to-many

Refers to a proprietary trading platform in which the platform operator posts bids and offers for commodities, derivatives, or other instruments and serves as a counterparty to every transaction executed on the platform. In contrast to many-to-many platforms, one-to-many platforms are not considered trading facilities under the Commodity Exchange Act. [CFTC]

one-way market

(1) A market in which only one side, the bid or asked, is quoted or firm. (2) A market that is moving strongly in one direction. [Harvey]

onsite improvements

any construction of buildings or other improvements within the boundaries of a property that increases the value of the property. [OTS]

open account

Arrangement whereby sales are made with no formal debt contract. The buyer signs a receipt, and the seller records the sale in the sales ledger. [Harvey][WCSU] Credit extended that is not supported by a note, mortgage, or other formal written evidence of indebtedness. [ITDS]

open bank assistance (OBA)

A resolution method in which an insured bank in danger of failing receives assistance in the form of a direct loan, an assisted merger, or a purchase of assets. OBA usually entails a change in bank management and requires substantial dilution of shareholder interest in the troubled institution. Originally, as provided in the FDI Act of 1950, the FDIC could grant open bank assistance only if the institution's continued operation was deemed 'essential.' With the passage of the Garn--St Germain legislation in 1982, an institution could receive assistance if the cost of the assistance was less than the cost of liquidating the institution. When FDICIA was enacted in 1991, OBA had to be deemed least costly to the insurance fund of all possible resolution methods. A later amendment to FDICIA prohibited providing assistance to the shareholders of a troubled institution. The FDIC rescinded its OBA policy statement in 1996. [FDIC]

open conference

A shipping conference in which there are no restrictions upon membership other than ability and willingness to serve the trade. [ITDS]

open contracts

Contracts which have been bought or sold without the transaction having been completed by subsequent sale or purchase, or by making or taking actual delivery of the financial instrument or physical commodity. [Harvey]

open economy

An economy free of trade restrictions. [ITDS]

open interest

In options and futures trading, the number of outstanding option contracts, at a given point in time, which have not been exercised and have not yet reached expiration. [NYSE] The number of outstanding long or short positions for a given exchange-traded futures or option contract. A measure of the liquidity of the contract. [TMAC] The total number of derivative contracts traded that not yet been liquidated either by an offsetting derivative transaction or by delivery. [Harvey] The total number of futures contracts long or short in a delivery month or market that has been entered into and not yet liquidated by an offsetting transaction or fulfilled by delivery. Also called open contracts or open commitments. [CFTC] The total number of futures or options contracts of a given commodity that have not yet been offset by an opposite futures or option transaction nor fulfilled by delivery of the commodity or option exercise. Each open transaction has a buyer and a seller, but for calculation of open interest, only one side of the contract is counted. [CBOT][MIDAM]

open interest or commitment

The number of open or outstanding contracts for which an individual or entity is obligated to the Exchange because that individual or entity has not yet made an offsetting sale or purchase, an actual contract delivery, or, in the case of options, exercised the option. [NYMEX]

open market operations

Purchase or sale of government securities by the monetary authorities to increase or decrease the domestic money supply. [Harvey] Purchases and sales of government and certain other securities in the open market by the New York Federal Reserve Bank as directed by the FOMC in order to influence the volume of money and credit in the economy. Purchases inject reserves into the depository system and foster expansion in money and credit; sales have the opposite effect. Open market operations are the Federal Reserve's most important and most flexible monetary policy tool. They are used to promote either higher or lower growth in money and credit and to offset undesired changes in the reserve positions of depository institutions stemming from movements in currency, float, Treasury deposits, and other factors. [FRB][FRBM] Purchases and sales of government and certain other securities in the open market, through the Domestic Trading Desk at the New York Federal Reserve Bank as directed by the Federal Open Market Committee, to influence the volume of money and credit in the economy. Purchases inject reserves into the depository system and foster expansion in money and credit; sales have the opposite effect. Open market operations are the Federal Reserve's most important and most flexible monetary policy tool. They are used to promote either higher or lower growth in money and credit and to offset undesired changes in the reserve positions of depository institutions stemming from movements in currency, float, Treasury deposits, and other factors. [FRB][FRBC] Purchases and sales of government securities and certain other securities in the open market, through the Domestic Trading Desk at the New York Federal Reserve Bank as directed by the Federal Open Market Committee (FOMC), to influence the volume of money and credit in the economy. Purchases inject reserves into the banking system and stimulate growth of money and credit; sales do the opposite. [FRBSF] The buying and selling of government securities; Treasury bills, notes, and bonds by the Federal Reserve. [CBOT][MIDAM] The purchase or sale of government bonds by the Federal Reserve in order to change commercial banks reserves. [FACS] purchases and sales of government and certain other securities in the open market by the New York Federal Reserve Bank as directed by the Federal Open Market Committee, in order to influence the volume of money and credit in the economy. Purchases of government securities inject reserves into the depository system and foster expansion in money and credit; sales have the opposite effect. Open market operations are the Federal Reserve's most important and flexible monetary policy tool. [OTS]

open meeting requirements

Legal requirements as to open meetings of issuers, found in state law and implementing rules of the issuer, and in the cases of some municipal corporations in the municipal charter. Often referred to as 'sunshine requirements'. [EPA]

open mortgage

A mortgage loan that can be paid off, without penalty, at any time prior to maturity. [OTS]

open order

A resting order that is good until canceled. [NYMEX]

open outcry

A method of public auction for making verbal bids and offers for contracts in the trading pits or rings of commodity exchanges. [NYMEX] A method of public auction, common to most U.S. commodity exchanges during the 20th century, where trading occurs on a trading floor and traders may bid and offer simultaneously either for their own accounts or for the accounts of customers. Transactions may take place simultaneously at different places in the trading pit or ring. At most exchanges open outcry has been replaced or largely replaced by electronic trading platforms. [CFTC] Method of public auction for making verbal bids and offers in the trading pits or rings of futures exchanges. [CBOT][MIDAM] Open outcry is a form of trading whereby buyers and sellers trade by shouting their orders and using hand signals. [GAO] The method of trading used at futures exchanges, typically involving calling out the specific details of a buy or sell order, so that the information is available to all traders. [Harvey]

open position

A net long or short position whose value will change with a change in prices. [Harvey]

open repo

A repo with no definite term. The agreement is made on a day-to-day basis and either the borrower or the lender may choose to terminate. The rate paid is higher than on overnight repo and is subject to adjustment if rates move. [Harvey]

open trade equity

The unrealized gain or loss on open futures positions. [CFTC]

open-end contract

An agreement by which the buyer may purchase goods from a seller for a certain time without changes in the price or the contract terms. [ITDS]

open-end credit

A consumer line of credit that may be used repeatedly up to an established overall limit. Commonly known as revolving credit or a charge account, in which the customer may pay in full or in installments that include a finance charge. The term does not include negotiated advances under an open-end real estate mortgage or a letter of credit. [OTS] A line of credit that may be used repeatedly up to a certain limit, also called a charge account or revolving credit. [FRB][FRBC][FRBM][FRBSF]

open-end fund

A type of investment company which continuously offers shares to the public and stands ready to buy back such shares whenever an investor wishes to sell. [SEC] Also called a mutual fund, an investment company that stands ready to sell new shares to the public and to redeem its outstanding shares on demand at a price equal to an appropriate share of the value of its portfolio, which is computed daily at the close of the market. [Harvey]

open-end investment company

open-end lease

A lease that may involve a balloon payment based on the value of the property when it is returned. (also called finance lease) [FRB][FRBC][FRBM][FRBSF] A lease that requires a balloon payment based on the value of the leased property when the lease expires. [OTS]

open-end mortgage

Mortgage against which additional debt may be issued. [Harvey][WCSU]

open-end mortgage clause

A provision in mortgage contracts in some states, that declares the mortgaged real estate may be used as security for future additional advances from the original lender, if the lender and borrower agree. All subsequent advances under this clause represent a claim on the property dating back to the time of recording the original mortgage. [OTS]

open-market purchase operation

A systematic program of repurchasing shares of stock in market transactions at current market prices, in competition with other prospective investors. [Harvey]

opening

The period at the beginning of the trading session officially designated by the exchange during which all transactions are considered made 'at the opening.' [CFTC]

Opening Automated Report Service (OARS)

Provides improved accuracy and efficiency for handling certain orders sent before trading opens. OARS receives, stores, and continuously tabulates market orders -- up to a specified size -- routed through the common message switch. It matches buy and sell interest in each stock, calculates imbalances, and reports them to specialists. Seconds after the specialist notifies OARS of an opening price, the system automatically generates and returns execution reports to originating firms, and submits the trade for automatic clearance and settlement. [NYSE]

opening price

The price for a given futures commodity that is generated by trading through open outcry during the opening range of trading on a commodity exchange. [NYMEX] The range of prices at which the first bids and offers were made or first transactions were completed. [Harvey]

opening purchase

A transaction in which the purchaser's intention is to create or increase a long position in a given series of options. [Harvey]

opening range

A range of prices at which buy and sell transactions took place during the opening of the market. [CBOT][MIDAM]

opening sale

A transaction in which the seller's intention is to create or increase a short position in a given series of options. [Harvey]

opening, the

The period at the beginning of the trading session officially designated by the exchange during which all transactions are considered made 'at the opening'. [Harvey]

operating budget

A detailed projection of all estimated income and expenses during a given future period. [OTS]

operating capital

funds available for use in financing the day-to-day activities of a business. [OTS]

operating cash flow

Earnings before depreciation minus taxes. It measures the cash generated from operations, not counting capital spending or working capital requirements. [Harvey]

operating cycle

The average time intervening between the acquisition of materials or services and the final cash realization from those acquisitions. [Harvey]

operating expenses

Proprietary (or enterprise) fund expenses which are directly related to the fund's primary service activities. In reference to the accounts of governmental enterprises, the term means those costs that are necessary to the maintenance of the enterprise, the rendering of services, the sale of merchandise, the production and disposition of commodities produced and the collection of enterprise revenues. [EPA] charges incurred as a result of the customary savings and lending business of a thrift institution, not including interest on borrowed money, interest paid to depositors, nor taxes. Operating expenses include such items as salaries and related compensation costs, office space, furniture, fixtures and equipment, advertising, deposit insurance premiums, and professional and supervisory fees. [OTS]

operating exposure

Degree to which exchange rate changes, in combination with price changes, will alter a company's future operating cash flows. [Harvey]

operating income

The excess of proprietary fund operating revenues over operating expenses. [EPA] for thrift institutions, income generated by the customary lending and deposit taking business of an association; sometimes called gross operating income. Major operating income items include interest earned on loans, loan fees and charges, net income from service corporations and subsidiaries, stock dividends received and earnings on reserves. [OTS]

operating lease

Short-term, cancelable lease. [WCSU] Short-term, cancelable lease. A type of lease in which the period of contract is less than the life of the equipment and the lessor pays all maintenance and servicing costs. [Harvey]

operating leverage

Fixed operating costs, so called because they accentuate variations in profits. [Harvey][WCSU]

operating profit margin

The ratio of operating margin to net sales. [Harvey]

operating ratio

An indication of an infrastructure or system's efficiency calculated by dividing the system's operating revenues by its operating expenses, excluding allowances for reserves and depreciation. [EPA]

operating revenues

(A) Proprietary fund revenues which are directly related to the fund's primary service activities. They consist primarily of user charges for services. (B) Revenue derived directly from the operations of an enterprise. [EPA]

operating risk

The inherent or fundamental risk of a firm, without regard to financial risk. The risk that is created by operating leverage. Also called business risk. [Harvey]

operating subsidiary

A subsidiary of a federally chartered savings institution that engages only in activities permitted the parent thrift institution. Unlike service corporations, the stock of operating subsidiaries may be sold to non-thrift investors. [OTS]

Operation Clean Sweep

A catch phrase coined in the spring of 1990 by FDIC Chairman L. William Seidman in a speech to the National Press Club when he announced that the RTC would sell or liquidate 141 conservatorship institutions by June 30, 1990, including at least 50 institutions that would be liquidated without any sales attempts because these institutions were determined to have little franchise value. Chairman Seidman referred to these liquidations as 'Operation Clean Sweep.' [FDIC]

operational risk

The risk of loss resulting from breakdown in administrative procedures and controls or any aspect of operating procedures. [TMAC]

operationally efficient market

Also called an internally efficient market, one in which investors can obtain transactions services that reflect the true costs associated with furnishing those services. [Harvey]

operator

A corporation that operates a foreign trade zone under the terms of an agreement with a foreign trade zone grantee. [ITDS]

opinion shopping

A practice prohibited by the SEC which involves attempts by a corporation to obtain reporting objectives by following questionable accounting principles with the help of a pliable auditor willing to go along with the desired treatment. [Harvey]

opportunity cost of capital

Expected return that is foregone by investing in a project rather than in comparable financial securities. [Harvey][WCSU]

opportunity costs

Opportunity costs refer to the present value of income that could be earned (or saved) by investing in the most attractive alternative to the one being considered. [GAO] The difference between the yield that funds earn in one use and the yield they could have earned had they been placed in an alternative investment generating the highest yield available. [OTS] The difference in the performance of an actual investment and a desired investment adjusted for fixed costs and execution costs. The performance differential is a consequence of not being able to implement all desired trades. Most valuable alternative that is given up. [Harvey] The highest-valued sacrifice needed to get a good or service. [FACS]

opportunity set

The possible expected return and standard deviation pairs of all portfolios that can be constructed from a given set of assets. [Harvey]

optimal contract

The contract that balances the three types of agency costs (contracting, monitoring, and misbehavior) against one another to minimize the total cost. [Harvey]

optimal portfolio

An efficient portfolio most preferred by an investor because its risk/reward characteristics approximate the investor's utility function. A portfolio that maximizes an investor's preferences with respect to return and risk. [Harvey]

optimal redemption provision

Provision of a bond indenture that governs the issuer's ability to call the bonds for redemption prior to their scheduled maturity date. [Harvey]

optimization approach to indexing

An approach to indexing which seeks to Optimize some objective, such as to maximize the portfolio yield, to maximize convexity, or to maximize expected total returns. [Harvey]

option

A contract providing the right to buy or sell something--often 100 shares of corporate stock--at a fixed price, within a specified period of time. [SEC] A contract that conveys the right, but not the obligation, to buy or sell a particular item at a certain price for a limited time. Only the seller of the option is obligated to perform. [CBOT][MIDAM] A contract that gives the buyer the right, but not the obligation, to buy or sell a specified quantity of a commodity or other instrument at a specific price within a specified period of time, regardless of the market price of that instrument. [CFTC] A contract which gives the holder the right, but not the obligation, to purchase or to sell the underlying futures contract at a specified price within a specified period of time in exchange for a one-time premium payment. The contract also obligates the writer, who receives the premium, to meet these obligations. [NYMEX] A right to buy or sell a fixed amount of a given stock at a specified price within a limited period of time. If the right is not exercised the option expires and the buyer forfeits the money. [NYSE] An agreement granting the right to buy or sell property, or to use it in some fashion, for a stated price within a stated period of time. In investments, an option refers to a contract granting the right to buy or sell a security or a commodity at a set price within a stipulated time. [OTS] An option provides the holder with the right, but not the obligation, to buy or sell an underlying bond, equity, currency or commodity, or to receive a payment based on the movement of such underlying interest. The holder of the option pays a premium for this right. [TMAC] Anything that anyone wants. In economics, options (alternatives) are also called goods. [FACS] Gives the buyer the right, but not the obligation, to buy or sell an asset at a set price on or before a given date. Investors, not companies, issue options. Investors who purchase call options bet the stock will be worth more than the price set by the option (the strike price), plus the price they paid for the option itself. Buyers of put options bet the stock's price will go down below the price set by the option. An option is part of a class of securities called derivatives, so named because these securities derive their value from the worth of an underlying investment. [Harvey] The right to buy or sell a security or commodity at a specified price during a specified period. The holder of an option has the right, but not the obligation, to buy (call option) or sell (put option) a security or commodity at a specified price during a specified period. The writer of an option is obligated to sell (call option) or purchase (put option) the instrument only if the holder chooses to exercise the option. [FRBSF]

option buyer

The person who buys calls, puts, or any combination of calls and puts. [CFTC] The purchaser of either a call or put option. Option buyers receive the right, but not the obligation, to assume a futures position. Also referred to as the holder. [CBOT][MIDAM]

option contracts

Foreign exchange transactions wherein one of the parties has the right to settle all or part of the contract at an agreed time prior to maturity at the price shown in the contract. Also, called optional forward contracts. [FDIC]

option day

The specified date when an option expires unless it is exercised. [OTS]

option delta

option elasticity

The percentage increase in an option's value given a 1% change in the value of the underlying security. [Harvey]

option grantor

option not to deliver

In the mortgage pipeline, an additional placed in tandem with the forward or substitute sale. [Harvey]

option on futures

Are exchange traded option which give the holder the right, but not the obligation, to enter into a long or short futures position. [TMAC]

option premium

The option price. [Harvey] The price of an option; the sum of money that the option buyer pays and the option seller receives for the rights granted by the option. [CBOT][MIDAM]

option price

Also called the option premium, the price paid by the buyer of the options contract for the right to buy or sell a security at a specified price in the future. [Harvey]

option pricing model

A mathematical model used to calculate the theoretical value of an option. Inputs to option pricing models typically include the price of the underlying instrument, the option strike price, the time remaining till the expiration date, the volatility of the underlying instrument, and the risk-free interest rate (e.g., the Treasury bill interest rate). Examples of option pricing models include Black-Scholes and Cox-Ross-Rubinstein. [CFTC]

option seller

Also called the option writer, the party who grants a right to trade a security at a given price in the future. [Harvey] The person who sells an option in return for a premium and is obligated to perform when the holder exercises his right under the option contract. Also referred to as the writer. [CBOT][MIDAM]

option spread

The simultaneous purchase and sale of one or more options contracts, futures, and/or cash positions. [CBOT][MIDAM]

option writer

Option seller. [Harvey] The person who originates an option contract by promising to perform a certain obligation in return for the price or premium of the option. Also known as option grantor or option seller. [CFTC]

option-adjusted spread

(1) The spread over an issuer's spot rate curve, developed as a measure of the yield spread that can be used to convert dollar differences between theoretical value and market price. (2) The cost of the implied call embedded in a MBS, defined as additional basis-yield spread. When added to the base yield spread of an MBS without an operative call produces the option-adjusted spread. [Harvey]

optional call

Call of all or a portion of an issue permitted at the option of the issuer. (Compare 'Mandatory Call'.) Usually involves a call premium. [EPA]

optional delivery

A mortgage loan purchase program offered by the Federal Home Loan Mortgage Corporation in which the seller/servicer may decide not to deliver the loans and thus not consummate the sale. [OTS]

Options Clearing Corporation (OCC)

Clears options transactions. Partly owned by the NYSE. [NYSE] The OCC clears and settles all options traded on securities exchanges in the United States and is owned by five participating exchanges. [GAO]

options contract

A contract that, in exchange for the option price, gives the option buyer the right, but not the obligation, to buy (or sell) a financial asset at the exercise price from (or to) the option seller within a specified time period, or on a specified date (expiration date). [Harvey]

options contract multiple

A constant, set at $100, which when multiplied by the cash index value gives the dollar value of the stock index underlying an option. That is, dollar value of the underlying stock index = cash index value x $100 (the options contract multiple). [Harvey]

options on futures

An option on a futures contract gives an investor the right but not the obligation, in exchange for a price (called a premium), to buy or sell a specified futures contract at a specific price (called the exercise price) within a specified period. [GAO]

options on physicals

Interest rate options written on fixed-income securities, as opposed to those written on interest rate futures contracts. [Harvey]

order bill

A bill of lading that states that goods are consigned to the order of the person named in the bill. [ITDS]

order notify

A bill of lading term to provide for surrender of the original bill of lading before freight is surrendered. [ITDS]

order-book official

An order-book official is an exchange official who accepts and executes limit orders from customers--orders to buy or sell when the market reaches a certain price. [GAO]

orders

A request to deliver, sell, receive, or purchase goods or services. [ITDS] Specific instructions for handling transactions. [NYSE]

ordinary income

income subject to taxation at full or ordinary rates rather than at favorable capital gains rates. [OTS]

organization for economic cooperation and development (OECD)

OECD was established 14 December 1960 to promote economic cooperation and development. It is located in Paris, France. [UNODC]

Organization of Petroleum Exporting Countries (OPEC)

A group of nations that produce most of the worlds oil and control most of the worlds oil exports. [FACS] Emerged as the major petroleum pricing power in 1973, when the ownership of oil production in the Middle East transferred from the operating companies to the governments of the producing countries or to their national oil companies. Members areAlgeria, Ecuador, Gabon, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. [CBOT]

organized exchange

A securities marketplace wherein purchasers and sellers regularly gather to trade securities according to the formal rules adopted by the exchange. [Harvey]

original face

The original principal amount, or face value, of a mortgage-backed security. [OTS]

original face value

The principal amount of the mortgage as of its issue date. [Harvey]

original issue discount bonds

Bonds which are part of the bond issue sold at a discount at the time of sale. [EPA]

original issue discount debt

Debt that is initially offered at a price below par. [Harvey] Debt that is originally offered at a price below face value. [WCSU]

original margin

Term applied to the initial deposit of margin money each clearing member firm is required to make according to clearing organization rules based upon positions carried, determined separately for customer and proprietary positions; similar in concept to the initial margin or security deposit required of customers by exchange rules. [CFTC] The amount a futures market participant must deposit into his margin account at the time he places an order to buy or sell a futures contract. Also referred to as initial margin. [CBOT][MIDAM] The initial deposit of funds, as good faith monies, at the outset of trading a futures contract in order to guarantee fulfillment of its obligations. Also known as Initial Margin. [NYMEX] The margin needed to cover a specific new position. [Harvey]

original maturity

Maturity at issue. For example, a five year note has an original maturity of 5 years; one year later it has a maturity of 4 years. [Harvey]

original purchaser

The purchaser of an issue directly from the issuer. [EPA]

originate a loan

to make or issue a loan; the process whereby a lender qualifies a borrower, appraises the collateral, processes all documents, advances funds and places the loan on the books. [OTS]

originating company

An organization or company that produces an ACH file and delivers it to an ODFI for introduction into the ACH network. [ACH]

originating depository financial institution (ODFI)

A member institution which is responsible for the origination of ACH transactions. This institution may deposit items directly with an ACH or may work through a processing center which is the actual sending point. [ACH]

originating depository institution

An originating depository institution is a depository institution that initiates and warrants electronic payments processed through the ACH network on behalf of its customers. [GAO]

origination

The making of mortgage loans. [Harvey]

origination fee

A charge imposed by a lender for the evaluation, preparation and processing of loan applications. [OTS]

originator

An originator is the person or organization that initiates an ACH entry. [GAO]

OTC margin bond

A debt security not traded on the national securities exchange which meets certain Regulation T requirements as to size of original offering, available information, and status of interest payments. [FRB][FRBC][FRBM]

other capital

In the balance of payments, other capital is a residual category that groups all the capital transactions that have not been included in direct investment, portfolio investment, and reserves categories. It is divided into long-term capital and short-term capital and, because of its residual status, can differ from country to country. Generally speaking, other long-term capital includes most non-negotiable instruments of a year or more like bank loans and mortgages. Other short-term capital includes financial assets of less than a year such as currency, deposits, and bills. [Harvey]

other current assets

Value of non-cash assets, including prepaid expenses and accounts receivable, due within one year. [Harvey]

other long-term liabilities

Value of leases, future employee benefits, deferred taxes and other obligations not requiring interest payments that must be paid over a period of more than 1 year. [Harvey]

other sources

Amount of funds generated during the period from operations by sources other than depreciation or deferred taxes. Part of Free cash flow calculation. [Harvey]

other value added

Value derived as a residual for most industries after subtracting total intermediate inputs, compensation of employees, and indirect business tax and nontax liability from total industry output. Other value added includes consumption of fixed capital, proprietors' income, corporate profits, and business transfer payments. [BEA]

out of position

out trade

A trade that cannot be cleared by a clearing organization because the trade data submitted by the two clearing members or two traders involved in the trade differs in some respect (e.g., price and/or quantity). In such cases, the two clearing members or traders involved must reconcile the discrepancy, if possible, and resubmit the trade for clearing. If an agreement cannot be reached by the two clearing members or traders involved, the dispute would be settled by an appropriate exchange committee. [CFTC]

out-of-the-money

A term used to describe an option that has no intrinsic value. For example, a call with a strike price of $400 on gold trading at $390 is out-of-the-money 10 dollars. [CFTC] An option which has no intrinsic value. For calls, an option whose exercise price is above the market price of the underlying future. For puts, an option whose exercise price is below the futures price. [NYMEX] The situation in which the fixed price of an option turns out to be a less favorable price than that currently available in the market, resulting in a loss for the investor. The holder of an option to sell a security is out of the money when the option price is lower than the market price. Conversely, the holder of an option to buy is out of the money when the option price is higher than the market price. [OTS]

out-of-the-money option

A call option is out-of-the-money if the strike price is greater than the market price of the underlying security. A put option is out-of-the-money if the strike price is less than the market price of the underlying security. [Harvey] An option that would not be worth exercising if it matured immediately. [WCSU] An option with no intrinsic value, i.e., a call whose strike price is above the current futures price or a put whose strike price is below the current futures price. [CBOT][MIDAM] For a call, it is when the market value of the underlying interest is below the strike price of the option. For a put, it is when the market price of the underlying interest is above the strike price of the option. [TMAC]

outgo

slang referring to any expense or cost. [OTS]

output multiplier

Estimate of output required to satisfy a given level of final use. There are three I-O output multipliers: One corresponds to the commodity-by-commodity total requirements table. It is the total commodity output required to deliver a dollar of a commodity to final users. The second corresponds to the industry-by-commodity total requirements table. It is the total industry output required to deliver a dollar of a commodity to final users. The third corresponds to the industry-by-industry total requirements table. It is the total industry output required to deliver a dollar of an industry to final users. [BEA]

outright

A forward purchase or sale of foreign exchange which is not offset by a corresponding spot transaction. [ITDS] An order to buy or sell only one specific type of futures contract; an order that is not a spread order. [CFTC] Forward exchange bought and sold independently from a simultaneous sale or purchase spot exchange. [FDIC]

outright rate

Actual forward rate expressed in dollars per currency unit, or vice versa. [Harvey]

outsourcing

The practice of purchasing a significant percentage of intermediate components from outside suppliers. [Harvey]

outstanding check

A check that has not yet been presented for payment to the financial institution on which it was drawn. [OTS]

outstanding debt

that portion of a debt which remains unpaid. Outstanding loan balance refers to that portion of principal that has not been repaid. [OTS]

outstanding share capital

Issued share capital less the par value of shares that are held in the company's treasury. [Harvey]

outstanding shares

Shares that are currently owned by investors. [Harvey]

outward investment

U.S. residents' investments in foreign assets (stocks, bonds, etc.). [BEA]

outward swap

Spot purchase of foreign exchange and forward resale of the same currency against domestic currency. [ITDS]

over-the-counter (OTC)

A market for buying and selling stock between broker-dealers over the telephone rather than by going through a stock exchange. [SEC] A market for securities made up of dealers who may or may not be members of a securities exchange. The OTC market is conducted over the telephone and deals mainly with stocks of companies without sufficient shares, stockholders or earnings to warrant listing on an exchange. OTC firms may act either as principals or dealers (buying or selling stock from their own inventory and charging a markup) or as a broker or agent and charging a commission. [NYSE] A market where products such as stocks, foreign currencies, and other cash items are bought and sold by telephone and other means of communication. [MIDAM] Securities trading which takes place outside the normal exchanges. [ITDS] Term used to describe a financial instrument that is traded through principals rather than on an exchange. [TMAC] The buying and selling of securities that are not listed on an organized exchange. Trading is handled by dealers through negotiation rather than through the use of a stock exchange's auction system. [OTS]

over-the-counter market

A decentralized market (as opposed to an exchange market) where geographically dispersed dealers are linked together by telephones and computer screens. The market is for securities not listed on a stock or bond exchange. The NASDAQ market is an OTC market for U.S. stocks. [Harvey] A market where products such as stocks, foreign currencies, and other cash items are bought and sold by telephone and other means of communications. [CBOT]

over-the-counter stocks

Stocks not traded on a national securities exchange. [FRB][FRBC][FRBM]

overall net debt

The sum of indirect net debt and overlapping debt. [EPA]

overbought

A technical opinion that the market price has risen too steeply and too fast in relation to underlying fundamental factors. [NYMEX] A technical opinion that the market price has risen too steeply and too fast in relation to underlying fundamental factors. Rank and file traders who were bullish and long have turned bearish. [CFTC] An opinion as to price levels. May refer to a security that has had a sharp rise or to the market as a whole after a period of vigorous buying which, it may be argued, has left prices 'too high.' [NYSE]

overbought/oversold indicator

An indicator that attempts to define when prices have moved too far and too fast in either direction and thus are vulnerable to reaction. [Harvey]

overdraft

A draft or check written for an amount that exceeds the funds in the account on which the check is drawn. [OTS]

overdraft checking account

A checking account associated with a line of credit that allows a person to write checks for more than the actual balance in the account, generally with a finance charge on the overdraft. [FRBSF] A checking account associated with a line of credit that allows a person to write checks for more than the actual balance in the account, with a finance charge on the overdraft. [FRB][FRBC][FRBM]

overdraft protection

A line of credit that is activated when a customer writes a check that totals more than the funds in his or her checking account. With overdraft protection, the institution on which the check is drawn automatically loans money to the checking account when an overdraft situation occurs. [OTS]

overdue

The status of a payment that is late and not yet paid. [OTS]

overfunded pension plan

A pension plan that has a positive surplus (i.e., assets exceed liabilities). [Harvey]

overhead

The cost of equipment, materials and services that are necessary to conduct business but are unrelated to the products or services the firm offers. [OTS] Those elements of cost necessary in the production of an article or the performance of a service which are of such a nature that the amount applicable to the product or service cannot be determined accurately or readily. Usually they related to those objects of expenditure which do not become an integral part of the finished product or service such as rent, heat, light, supplies, management, supervision, etc. [EPA]

overlapping debt

The proportionate share of the debts of local governments located wholly or in part within the limits of the reporting government which must be borne by property within each government. Except for special assessment debt, the amount of debt of each unit applicable to the reporting unit is arrived at by determining what percentage of the total assessed value of the overlapping jurisdiction lies within the limits of the reporting unit, and applying this percentage to the total debt of the overlapping jurisdiction. Special assessment debt is allocated on the basis of the ration of assessments receivable in each jurisdiction which will be used wholly or in part to pay off the debt to total assessments receivable which will be used wholly or in part for this purpose. [EPA]

overlay strategy

A strategy of using futures for asset allocation by pension sponsors to avoid disrupting the activities of money managers. [Harvey]

overnight

Swap from settlement date until the following business day. [ITDS]

overnight delivery risk

A risk brought about because differences in time zones between settlement centers require that payment or delivery on one side of a transaction be made without knowing until the next day whether the funds have been received in an account on the other side. Particularly apparent where delivery takes place in Europe for payment in dollars in New York. [Harvey]

overnight money

any money that replaces daily. It generally refers to funds that are loaned by one institution to another overnight, including but not limited to the federal funds market. [OTS]

overnight repo

A repurchase agreement with a term of one day. [Harvey]

overnight trade

A trade which is not liquidated during the same trading session during which it was established. [CFTC]

overperform

When a security is expected to appreciate at a rate faster than the overall market. [Harvey]

overreaction hypothesis

The supposition that investors overreact to unanticipated news, resulting in exaggerated movement in stock prices followed by corrections. [Harvey]

overseas adjustment

An adjustment made to the national estimates of personal income to exclude the wages and salaries and related components of the income of U.S. residents employed abroad temporarily (e.g., military personnel stationed abroad). The adjusted national estimates are used in the estimation of State personal income. [BEA]

overshooting

The tendency of a pool of MBSs to reflect an especially high rate or prepayments the first time it crosses the threshold for refinancing, especially if two or more years have passed since the date of issue without the WAC of the pool having crossed the refinancing threshold. [Harvey]

oversight manager

A person designated by a program office to monitor the activities of a contractor. [FDIC]

oversold

A technical opinion that the market price has declined too steeply and too fast in relation to underlying fundamental factors. [NYMEX] A technical opinion that the market price has declined too steeply and too fast in relation to underlying fundamental factors; rank and file traders who were bearish and short have turned bullish. [CFTC] The reverse of overbought. Asingle security or a market which, it is believed, has declined to an unreasonable level. [NYSE]

oversubscribed issue

Investors are not able to buy all of the shares or bonds they want, so underwriters must allocate the shares or bonds among investors. This occurs when a new issue is underpriced or in great demand because of growth prospects. [Harvey]

oversubscription privilege

In a rights issue, arrangement by which shareholders are given the right to apply for any shares that are not taken up. [Harvey]

overwrite

The writing of more options than one expects to have exercised. Call options are overwritten because the writer considers the underlying overvalued. Put options are overwritten because the underlying is considered undervalued. [NYMEX]

overzoned

The zoning of real property to permit development that exceeds the practical present highest and best use of the land. [OTS]

owe

to be obligated to pay something to someone in return for value received. [OTS]

owned real estate (ORE)

An accounting classification of real estate. Marketable title has normally been acquired by (1) judicial or nonjudicial foreclosure, (2) deed in lieu of foreclosure, or (3) by purchase or other acquisition to protect the institution's interest in a debt or debts previously contracted. The FDIC's ORE also includes all real estate acquired for investment or resale and the book value of any premises purchased directly or acquired by means of a capital lease used in the reporting receivership's business operations, net of accumulated depreciation. Also know as real estate owned (REO). [FDIC]

owner-occupant

A property owner who occupies his or her property, as distinguished from an absentee landlord or owner. [OTS]

ownership

The state of holding a lawful claim or title to property. [OTS]

p/e effect

That portfolios with low P/E stocks have exhibited higher average risk-adjusted returns than high P/E stocks. [Harvey]

p/e ratio

Assume XYZ Co. sells for $25.50 per share and has earned $2.55 per share this year; $25. 50 = 10 times $2. 55, XYZ stock sells for 10 times earnings. P/E = Current stock price divided by trailing annual earnings per share or expected annual earnings per share. [Harvey] Share price divided by earnings per share. [WCSU]

Paasche price index

A fixed-weighted price index that is computed as (1) the sum of current-period quantities valued at current-period prices divided by (2) current-period quantities valued at base-period prices. [BEA]

pac-man strategy

Takeover defense strategy in which the prospective acquiree retaliates against the acquirer's tender offer by launching its own tender offer for the other firm. [Harvey]

Pacific Stock Exchange (PSE)

package provision

An optional mortgage clause that allows the borrower to finance chattels such as major household appliances, carpeting, drapery and equipment under the original home mortgage and make a single monthly payment for the entire package. [OTS]

packing list

A document prepared by the shipper listing the kinds and qualities of merchandise in a particular shipment. [ITDS]

pairoff

A buy-back to offset and effectively liquidate a prior sale of securities. [Harvey]

pallet

A platform with or without sides, on which a number of packages or pieces may be loaded to facilitate handling. [ITDS]

pallet loader

A device employing one or more vertical lift platforms for the mechanical loading or unloading of palletized freight at planeside. [ITDS]

pallet transporter

A vehicle for the movement of loaded pallets between the aircraft and the freight terminal. [ITDS]

palletizing

The loading and securing of a number of sacks, bags, boxes or drums on a pallet base. [ITDS]

paper

Money market instruments, commercial paper and other. [Harvey]

paper barrels

A term used to denote trade in non-physical oil (futures, forwards, swaps, etc.) markets which give a buyer or seller the right to a certain quantity and quality of crude oil or refined products at a future date, but not to any specific physical lot. [NYMEX]

paper gain

Unrealized capital gain (loss) on securities held in portfolio, based on a comparison of current market price to original cost. [Harvey]

paper profit

An increase in the value of property or a security still held. Paper profits become realized profits only when the property or security is sold. [OTS] An unrealized profit (or loss) on a security still held. Paper profits (and losses) become realized only when the security is sold. [NYSE]

paper profit or loss

The profit or loss that would be realized if open contracts were liquidated as of a certain time or at a certain price. [CFTC]

par

(1) Refers to the standard delivery point(s) and/or quality of a commodity that is deliverable on a futures contract at contract price. Serves as a benchmark upon which to base discounts or premiums for varying quality and delivery locations; (2) in bond markets, an index (usually 100) representing the face value of a bond. [CFTC] Equal to the nominal or face value of a security. [NYSE] The face value of a security. For example, a bond selling at par is worth the same dollar amount it was issued for or at which it will be redeemed at maturity. [CBOT][MIDAM] The situation in which the face value of a security equals its actual selling price: sold 'at par.' [OTS]

par balue

The official fixed exchange rate between two currencies or between a currency and a specific weight of gold. [ITDS]

par bid

A bid which must be in an amount at least equal to the par value of the debt instruments upon which the bid is submitted. [EPA]

par exchange rate

The free market price of one countrys money in terms of the currency of another. [ITDS]

par of exchange

The market price of money in one national currency that is exchanged at the official rate for a specific amount in another national currency, or another commodity of value (gold, silver, etc.). [ITDS]

par or basis grade

The grade or grades specified in a given futures contract for delivery. A contract may permit substitutions for and deviations from the par grade subject to specified premiums or discounts. [NYMEX]

par value

(1) the value assigned to a share of stock by the issuer at the time the stock is first offered for sale. The par value may be more or less than the market value. (2) the value of a bond or note at maturity. (3) the face value of a security. [OTS] (A) The face value or amount of the principal of a bond or note. (B) The face amount of a security. The aggregate principal amount of an issue. [EPA] Also called the maturity value or face value, the amount that the issuer agrees to pay at the maturity date. [Harvey] The full face value of a security. [FRB][FRBM][FRBSF] Value of security shown on certificate. [WCSU]

paradox of thrift

Increased saving increases withdrawals from the money flow; unless these withdrawals are successfully channeled into new investment spending, capital formation will decline. [FACS]

parallel loan

A process whereby two companies in different countries borrow each other's currency for a specific period of time, and repay the other's currency at an agreed maturity for the purpose of reducing foreign exchange risk. Also referred to as back-to-back loans. [Harvey]

parallel owned bank

Where a bank licensed in one jurisdiction has the same ownership as a bank in another jurisdiction but where the one is not a subsidiary of the other. [UNODC]

parallel shift

With reference to yield curve movements, is an equal shift of the whole curve either upwards or downwards. [TMAC]

parallel shift in the yield curve

A shift in the yield curve in which the change in the yield on all maturities is the same number of basis points. In other words, if the 3 month T-bill increases 100 basis points (one percent), then the 6 month, 1 year, 5 year, 10 year, 20 year, and 30 year rates increase by 100 basis points as well. [Harvey]

parameter

A representation that characterizes a part of a model (e.g. a growth rate), the value of which is determined outside of the model. [Harvey]

parcel post air freight

An airline service through which a shipper can consolidate a number of parcel post packages, with destination postage affixed by the shipper, for shipment as air freight to the postmaster at another city for subsequent delivery within local postal zones or beyond. [ITDS]

parent bank

A bank in a major industrial country that sets up a subsidiary in a developing country. [ITDS]

parity

Equality in amount or value. [ITDS] equality in amount, status or character. In futures trading, it is the situation in which cash and futures contracts are selling at equivalent yields. [OTS]

parity clause

A provision in a mortgage contract stating that all notes are equally secured and that no holder of the collateral will receive preferential treatment in the event of default or foreclosure. [OTS]

parity debt

An issue of securities with an equal and ratable claim on the same underlying security for and source of payment of debt service on other outstanding issues of securities. [EPA]

parol

Oral expression. A parol contract is one that is verbal only and that has not been put into writing by the parties. [ITDS]

partially amortizing loan

A loan in which the periodic payments cover all of the interest charges but only part of the principal, therefore leaving an unpaid principal balance when the loan matures. [OTS]

participating depository financial institution

Any financial institution that is authorized to originate/receive ACH entries. [ACH]

participating fees

The portion of total fees in a syndicated credit that go to the participating banks. [Harvey]

Participating GIC

A guaranteed investment contract where the policyholder is not guaranteed a crediting rate, but instead receives a return based on the actual experience of the portfolio managed by the life company. [Harvey]

participating preferred

A preferred stock, that is entitled to its stated dividend, and, also, to additional dividends on a specific basis upon payment of dividends on the common stock. [NYSE]

participation

(1) ownership by two or more lenders or investors of all or a portion of a single mortgage or a package of mortgages. (2) the cooperative origination by two or more lenders of a single (usually large) mortgage loan. [OTS]

participation certificate (PC)

A document setting forth the description of a package of loans and the share of the package that is being bought or sold. [OTS]

participation loan

A loan made or owned by more than one lender; the joint investors share profits and losses in proportion to how much of the loan each owns. [OTS]

particular average

A partial loss of cargo or hull which falls entirely upon the interest concerned. See also 'General Average'. [ITDS]

partnership

A business relationship in which two or more people agree to share the risks and profits of running a business. [NYSE] A form of business organization in which two or more persons join in a business or commercial enterprise, sharing profits, risks and losses according to the terms set forth in their partnership contract. [OTS] An unincorporated business owned and operated by two or more persons, who may have general or limited liability according to the agreement of the partnership. [ITDS] Shared ownership among two or more individuals, some of whom may, but do not necessarily, have limited liability. [Harvey]

party wall

A wall built on a line between two adjoining properties and used by both owners. [OTS]

pass-through coupon rate

The interest rate paid on a securitized pool of assets, which is less than the rate paid on the underlying loans by an amount equal to the servicing and guaranteeing fees. [Harvey]

pass-through financing

Tax-exempt issue to finance facilities for the use of a private for-profit or non-profit entity, which is generally solely responsible for the payment of debt service. [EPA]

pass-through rate

The net interest rate passed through to investors after deducting servicing, management, and guarantee fees from the gross mortgage coupon. [Harvey]

pass-through receivership

Method used by the OTS to transfer the assets and liabilities of a failed thrift to a newly chartered institution placed in RTC conservatorship. Under this method, the OTS closes the institution, appoints a receiver, and passes the assets and liabilities of the failed thrift to the new institution, which is then placed in conservatorship. [FDIC]

pass-through securities

A pool of fixed-income securities backed by a package of assets (i.e. mortgages) where the holder receives the principal and interest payments. [Harvey] Notes or bonds back by a package of assets (e.g., mortgage pass-throughs, CARs, CARDs). [WCSU]

pass-through security

A security granting the holder an interest in a pool of mortgages. A portion of the payments of principal and interest from the underlying mortgages are passed through to the holder of the security. [OTS]

passbook

A small book in ledger form in which are recorded all deposits, withdrawals and earnings of a customer's savings account. [OTS]

passbook account

A savings account that normally requires no minimum balance, no minimum term, no specified frequency of deposits, and no notice or penalty for withdrawals. Passbook accounts, once the most widely used form of thrift savings account, have been largely replaced by statement accounts that provide a monthly statement mailed to the depositor. [OTS]

passbook loan

A loan secured by funds in a savings account on deposit with the same institution originating the loan. The pledged funds may not be withdrawn during the life of the loan. [OTS]

passed dividend

Omission of a regular or scheduled dividend. [NYSE]

passive investment management

Buying a well-diversified portfolio to represent a broad-based market index without attempting to search out mispriced securities. [Harvey]

passive portfolio

A market index portfolio. [Harvey]

passive portfolio strategy

A strategy that involves minimal expectational input, and instead relies on diversification to match the performance of some market index. A passive strategy assumes that the marketplace will reflect all available information in the price paid for securities, and therefore, does not attempt to find mispriced securities. [Harvey]

past due

The status of a scheduled loan payment that has not been paid on time. [OTS]

past due loan

A loan on which payment in full is 30 to 60 days past due, but partial payments are being made. [OTS]

patent

A grant by law to an inventor of a device of the right to exclude other persons from making, using, or selling the device. [ITDS] in real estate, a patent is the original document issued for the purpose of granting public land to an individual. [OTS]

path-dependent option

An option whose valuation and payoff depends on the realized price path of the underlying asset, such as an Asian option or a Lookback option. [CFTC] An option whose value depends on the sequence of prices of the underlying asset rather than just the final price of the asset. [Harvey] These options ('up and in', 'down and out', etc.) only become effective if the value of the underlying interest moves above or below specified 'trigger' points. [TMAC]

pay

to compensate, reimburse, or satisfy an obligation by giving over something of value, such as money. [OTS]

pay-up

The loss of cash resulting from a swap into higher price bonds or the need/willingness of a bank or other borrower to pay a higher rate of interest to get funds. [Harvey]

pay/collect

A shorthand method of referring to the payment of a loss (pay) and receipt of a gain (collect) by a clearing member to or from a clearing organization that occurs after a futures position has been marked-to-market. [CFTC]

payable in exchange

The requirement that a negotiable instrument be paid in the funds of the place from which it was originally issued. [ITDS]

payable through account

A correspondent banking account relationship established by a foreign bank with a U.S. bank, for the purpose of clearing U.S. dollar denominated checks drawn on the foreign bank by its demand deposit customers. [UNODC]

payable through drafts

A method of making payment that is used to maintain control over payments made on behalf of the firm by personnel in noncentral locations. The payer's bank delivers the payable through draft to the payer, which must approve it and return it to the bank before payment can be received. [Harvey]

payables

A bookkeeping term for the costs of purchases or other obligations made but not yet paid. [OTS]

payback

The length of time it takes to recover the initial cost of a project, without regard to the time value of money. [Harvey]

payback period

Time taken for a project to recover its initial investment. [WCSU]

paydown

In a Treasury refunding, the amount by which the par value of the securities maturing exceeds that of those sold. [Harvey]

payee

The person or organization to whom a check or draft or note is made payable. [ITDS] The person or organization to whom a check, draft, or note is payable. The payee's name follows the words: 'Pay to the order of.' [OTS]

payer

The party primarily responsible for the payment of the amount owned as evidenced by a given negotiable instrument. [ITDS] The person or organization who is responsible for paying the amount stated on the face of a negotiable instrument. [OTS]

paying agent

The bank, trust company or public office (such as the 'office of the treasurer') identified on the security as the place at which securities are presented for payment. [EPA]

paying bank

A paying bank is the bank at which a check is payable and to which it is sent for payment or collection. [GAO]

payment

that which is paid. The sum of money or other item(s) of value that is transferred from one party to another. [OTS]

payment date

The date on which each shareholder of record will be sent a check for the declared dividend. [Harvey]

payment float

Company-written checks that have not yet cleared. [Harvey] checks written by a company that have not yet cleared. [WCSU]

payment processor or credit card association

A payment processor is an association dedicated to the settlement and clearance of transactions using credit cards. Examples of such associations are VISA and MasterCard. [GAO]

payment system

Collective term for mechanisms (both paper-backed and electronic) for moving funds, payments, and money among financial institutions throughout the nation. The Federal Reserve plays a major role in the nation's payments system through distribution of currency and coin, processing of checks, electronic transfer of funds, and the operation of automated clearinghouses that transfer funds electronically among depository institutions; various private organizations also perform payments system functions. [FRBSF] Mechanisms designed for the movement of funds, payments, and money between financial institutions throughout the nation. The Federal Reserve plays a major role in the nation's payments mechanism through distribution of currency and coin, check processing, wire transfer of funds, and the operation of automated clearinghouses that transfer funds electronically among depository institutions. Federal Reserve payments services are made available to both member banks and nonmember depository institutions on the basis of uniform pricing schedules. [FRB][FRBM] Payment system is a collective term for mechanisms (both paper-backed and electronic) for moving funds, payments, and money among financial institutions throughout the nation. The Federal Reserve plays a major role in the nation's Payment System through distribution of currency and coin, processing of checks, electronic transfer of funds, and the operation of automated clearinghouses that transfer funds electronically among depository institutions; various private organizations also perform Payment System functions. [GAO]

payment versus payment (PVP)

payment-in-kind bond

A bond that gives the issuer an option (during an initial period) either to make coupon payments in cash or in the form of additional bonds. [Harvey]

payment-in-kind program

A government program in which farmers who comply with a voluntary acreage-control program and set aside an additional percentage of acreage specified by the government receive certificates that can be redeemed for government-owned stocks of grain. [CBOT][MIDAM]

payments mechanism

Systems designed for the movement of funds, payments, and money between financial institutions throughout the nation. The Federal Reserve plays a major role in the nation's payments mechanism through distribution of currency and coin, check processing, wire transfer of funds, and the operation of automated clearinghouses that transfer funds electronically among depository institutions. Federal Reserve payments mechanism services are made available to both member banks and nonmember depository institutions on the basis of uniform pricing schedules. [FRB][FRBC]

payments netting

Reducing fund transfers between affiliates to only a netted amount. Netting can be done on a bilateral basis (between pairs of affiliates), or on a multi-lateral basis (taking all affiliates together). [Harvey]

payments pattern

Describes the lagged collection pattern of receivables, for instance the probability that a 72-day-old account will still be unpaid when it is 73-days-old. [Harvey]

payments surplus

The excess of the value of a nations exports over its imports. [ITDS]

payoff

A resolution method for a failed bank or thrift in which the FDIC directly pays the insured amount of each insured depositor. Also known as a deposit payoff. [FDIC] The complete repayment of loan principal, interest and any other sums due; payoff occurs either over the scheduled full term of the loan, or through one or more prepayments. [OTS]

payoff statement

A document prepared when a loan payoff is being considered. It shows the current status of the loan account, all sums due and the daily rate of interest. Also referred to as a letter of demand. [OTS]

payout ratio

Dividend as a proportion of earnings per share. [WCSU] Generally, the proportion of earnings paid out to the common stockholders as cash dividends. More specifically, the firm's cash dividend divided by the firm's earnings in the same reporting period. [Harvey]

peak

The highest point attained in the business cycle. [FACS] The transition from the end of an economic expansion to the start of a contraction. [Harvey]

pecking-order view (of capital structure)

The argument that external financing transaction costs, especially those associated with the problem of adverse selection, create a dynamic environment in which firms have a preference, or pecking-order of preferred sources of financing, when all else is equal. Internally generated funds are the most preferred, new debt is next, debt-equity hybrids are next, and new equity is the least preferred source. [Harvey]

pegged price

The price at which a commodity has been fixed by agreement. [CFTC]

pegging

Effecting transactions in an instrument underlying an option to prevent a decline in the price of the instrument shortly prior to the option's expiration date so that previously written put options will expire worthless, thus protecting premiums previously received. [CFTC]

penalties

The charges assessed or action taken by customs in response to a violation of a customs-enforced regulation or law. [ITDS]

penalty clause

(1) a provision in a promissory note specifying a penalty for late payments. (2) a clause in a savings certificate specifying a penalty for premature withdrawal of funds. [OTS]

penny stocks

Low-priced issues, often highly speculative, selling at less than $1 a share. Frequently used as a term of disparagement, although some penny stocks have developed into investment-caliber issues. [NYSE] low-priced issues, often highly speculative, selling at less than $1 a share. [OTS]

Pension Benefit Guarantee Corporation (PBGC)

A federal agency that insures the vested benefits of pension plan participants (established in 1974 by the ERISA legislation). [Harvey]

pension fund

A fund set up to collect regular premiums from employees and their employers, invest those funds safely and profitably, and pay out a monthly income to employees who reach a specified age and retire. [OTS]

Pension Managers Advisory Committee (PMAC)

Provides counsel on the concerns of pension managers and the impact of proposed rules and related matters on the interests of pension managers. Further, the committee enhances communications between pension managers and the NYSE. [NYSE]

pension plan

A fund that is established for the payment of retirement benefits. [Harvey]

pension sponsors

Organizations that have established a pension plan. [Harvey]

percentage interest margin

A ratio that compares the net interest margin to total assets. [OTS]

percolation test

A test given to soil to determine the soil's wate. [OTS]

perfect capital market

A market in which there are never any arbitrage opportunities. [Harvey]

perfect competition

An idealized market environment in which every market participant is too small to affect the market price by acting on its own. [Harvey]

perfect hedge

A financial result in which the profit and loss from the underlying asset and the hedge position are equal. [Harvey]

perfect market view (of capital structure)

Analysis of a firm's capital structure decision, which shows the irrelevance of capital structure in a perfect capital market. [Harvey]

perfect market view (of dividend policy)

Analysis of a decision on dividend policy, in a perfect capital market environment, that shows the irrelevance of dividend policy in a perfect capital market. [Harvey]

perfected first lien

A first lien that is duly recorded with the cognizant governmental body so that the lender will be able to act on it should the borrower default. [Harvey]

perfecting a title

The elimination of any claims against a title. [OTS]

perfectly competitive financial markets

Markets in which no trader has the power to change the price of goods or services. Perfect capital markets are characterized by the following conditions: 1) trading is costless, and access to the financial markets is free, 2) information about borrowing and lending opportunities is freely available, 3) there are many traders, and no single trader can have a significant impact on market prices. [Harvey]

performance

The proper fulfillment of a contract or obligation. [ITDS]

performance attribution analysis

The decomposition of a money manager's performance results to explain the reasons why those results were achieved. This analysis seeks to answer the following questions: (1) What were the major sources of added value? (2) Was short-term factor timing statistically significant? (3) Was market timing statistically significant? And (4), Was security selection statistically significant? [Harvey]

performance bond

A bond issued to guarantee performance of certain specified acts, such as the completion of construction of a property. [OTS]

performance bond margin

The amount of money deposited by both buyer and seller of a futures contract or an options seller to ensure performance of the term of the contract. Margin in commodities is not a payment of equity or down payment on the commodity itself, but rather it is a security deposit. [CBOT][MIDAM]

performance code

A building code that specifies construction requirements according to performance criteria rather than to specific building materials, products, or methods of construction. [OTS]

performance evaluation

The evaluation of a manager's performance which involves, first, determining whether the money manager added value by outperforming the established benchmark (performance measurement) and, second, determining how the money manager achieved the calculated return (performance attribution analysis). [Harvey]

performance measurement

The calculation of the return realized by a money manager over some time interval. [Harvey] The comparison of actual returns against a pre-specified benchmark. [TMAC]

performance shares

Shares of stock given to managers on the basis of performance as measured by earnings per share and similar criteria. A control device used by shareholders to tie management to the self-interest of shareholders. [Harvey]

performing loan

A loan on which payments of principal and interest are less than 90 days past due. [OTS]

peril point

A hypothetical limit beyond which a reduction in tariff protection would cause serious injury to a domestic industry. [ITDS]

period certain

A predetermined amount of time during which a participant receives allowable distributions from an IRA. A period certain may be any length of time so long as the period is less than the participant's life expectancy. The longer the period of payments, the less each payment amounts to. [OTS]

period of redemption

The period of time during which a mortgagor may reclaim the title and possession of his or her property by paying the debt the property secures. [OTS]

perishable freight

Freight subject to decay or deterioration. [ITDS]

permanent lender

A lender that provides long-term financing for projects after construction has been completed. [OTS]

permanent loan

A long-term loan of not less than 10 years that is fully amortized and made to purchase, rather than to construct, real property. [OTS]

permissible nonbank activities

Financial activities closely related to banking that may be engaged in by bank holding companies (BHC's), either directly or through nonbank subsidiaries. For example, a BHC might own finance companies or engage in mortgage banking. The Federal Reserve Board determines which activities are closely related to banking. Before making such activities permissible, the Board must determine that performance of the activities by bank holding companies is in the public interest. [FRBSF] Financial activities closely related to banking that may be engaged in by bank holding companies, either directly or through nonbank subsidiaries. Examples are owning finance companies and engaging in mortgage banking. The Board determines which activities are closely related to banking. Before making such activities permissible, the Board must also determine that performance of the activities by bank holding companies is in the public interest. [FRB][FRBC][FRBM]

permitted encumbrances

Encumbrances on title to property which is collateral or security for an issue which, either by definition or by agreement, have been determined to be acceptable to the parties to the transaction. The basis for acceptability is generally that the encumbrance will not interfere with the use of the project or the purpose for which it is intended and wiil, accordingly, not cause an interruption of the pledged revenues, and will not materially impede remedies, such as foreclosure, relating to the property. [EPA]

perpetual preferred stock

preferred stock that has no fixed maturity date and that cannot be redeemed at the option of the holder. Cumulative perpetual preferred stock accumulates dividends from one dividend period to the next. [OTS]

perpetual warrants

Warrants that have no expiration date. [Harvey]

perpetuity

A constant stream of identical cash flows without end, such as a British consol. [Harvey] Investment offering a level stream of cash flows in perpetuity. [WCSU]

perquisites

Personal benefits, including direct benefits, such as the use of a firm car or expense account for personal business, and indirect benefits, such as up-to-date office d'cor. [Harvey]

personal check

A check drawn on a depository institution by an individual against the individual's own funds. [OTS]

personal consumption expenditures

The goods and services purchased by the personal sector. In the NIPA's, the personal sector consists of individuals (and nonprofit institutions serving them) residing in the United States. [BEA]

personal identification number (PIN)

A code number used by the customer to authorize transactions using an access card or some other form of electronic funds transfer. The code number may be assigned by the bank or chosen by the customer and is not issued to other parties. The PIN number should be kept secret by the customer. [FRB][FRBC] A number or code used by an account holder in conjunction with a credit or debit card to verify the user's identity to an automated teller machine. [OTS]

personal income

Income received by individuals from all sources. It is the sum of wages and salaries, other labor income, proprietors' income, rental income, dividend income, interest income, and transfer payments to persons-less personal contributions for social insurance. [BEA]

personal loan

An unsecured loan usually made for the purpose of debt consolidation, vacation or the purchase of durable goods. Also called a signature loan. [OTS]

personal outlays

The sum of personal consumption expenditures, interest paid by consumers, and personal transfer payments to foreigners. [BEA]

personal property

any property that is not real property. While state laws vary on the definition of personal property, it is generally thought of as the movable items that a person owns. They can be tangible, such as furniture and other merchandise, or intangible, such as stocks and bonds. [OTS]

personal saving

The difference between disposable personal income and personal outlays. The personal saving rate is personal saving as a percentage of disposable personal income. [BEA] The difference between household income (after taxes) and consumption expenditures. [FACS]

personal tax view (of capital structure)

The argument that the difference in personal tax rates between income from debt and income from equity eliminates the disadvantage from the double taxation (corporate and personal) of income from equity. [Harvey]

personal trust

An interest in an asset held by a trustee for the benefit of another person. [Harvey]

petrochemical

An intermediate chemical derived from petroleum, hydrocarbon liquids, or natural gas, such as ethylene, propylene, benzene, toluene, and xylene. [NYMEX]

petrodollars

Huge sums of money from oil-producing nations other than the United States or Great Britain. [ITDS]

petroleum

A generic name for hydrocarbons, including crude oil, natural gas liquids, refined, and product derivatives. [NYMEX]

phantom sale

This scheme generally involves an individual or individuals who falsely transfer title to a property or properties and fraudulently obtain funds via mortgage loans or sales to third parties. [FFIEC]

Philadelphia Automated Communications and Executions System (PACE)

Philadelphia Stock Exchange (PHLX)

A securities exchange where American and European foreign currency options on spot exchange rates are traded. [Harvey]

phone switching

In mutual funds, the ability to transfer shares between funds in the same family by telephone request. There may be a charge associated with these transfers. Phone switching is also possible among different fund families if the funds are held in street name by a participating broker/dealer. [Harvey]

physical

A contract or derivative that provides for the physical delivery of a commodity rather than cash settlement. [CFTC]

physical commodity

A tangible commodity rather than a financial commodity, typically an agricultural commodity, energy commodity or a metal. [CFTC]

physical delivery

A provision in a futures contract or other derivative for delivery of the actual commodity to satisfy the contract. Compare to cash settlement. [CFTC]

physical settlement

With reference to futures contracts, the actual receipt or delivery of the underlying product or commodity. [TMAC]

pickup

The gain in yield that occurs when a block of bonds is swapped for another block of higher-coupon bonds. [Harvey]

pickup order

An order from a broker to a carrier to pick up freight at a location. [ITDS]

picture

The bid and asked prices quoted by a broker for a given security. [Harvey]

pie model of capital structure

A model of the debt/equity ratio of the firms, graphically depicted in slices of a pie that represent the value of the firm in the capital markets. [Harvey]

pier-to-pier

Shipment of cargo by carrier from origin pier to discharge pier. [ITDS]

piggyback

The transportation of truck trailers and containers on specially equipped railroad flat-cars. [ITDS]

pilferage

Taking of property by stealth or clandestine theft, usually in small quantities. [ITDS]

pilot

A person whose occupation is to steer ships, particularly along a coast, or into and out of a harbor. [ITDS]

pin risk

The risk to a trader who has sold an option that, at expiration, has a strike price identical to, or pinned to, the underlying futures price. In this case, the trader will not know whether he will be required to assume his options obligations. [NYMEX]

pip

The smallest price unit of a commodity or currency. [CFTC]

pipeline

A pipe through which oil or natural gas is pumped between two points, either offshore or onshore. [NYMEX] An expression referring to loan applications in process up until closing or until the mortgage is sold. What's in the pipeline is taken into account when analyzing mortgage loan inventory and commitments on new mortgages. [OTS]

pit

A specially constructed area on the trading floor of some exchanges where trading in a futures contract or option is conducted. On other exchanges, the term ring designates the trading area for commodity contract. [CFTC] A specific area of the trading floor that is designed for the trading of commodities, individual futures, or option contracts. [Harvey] The area on the trading floor where futures and options on futures contracts are bought and sold. Pits are usually raised octagonal platforms with steps descending on the inside that permit buyers and sellers of contracts to see each other. [CBOT][MIDAM]

pit brokers

pit committee

A committee of the exchange that determines the daily settlement price of futures contracts. [Harvey]

pit or ring

The place on the floor of an exchange where a commodity futures or options contract is traded by open outcry. [NYMEX]

pivot

Price level established as being significant by market's failure to penetrate or as being significant when a sudden increase in volume accompanies the move through the price level. [Harvey]

placement

A bank depositing Eurodollars with (selling Eurodollars to) another bank is often said to be making a placement. [Harvey] The first stage of the money laundering process, whereby the launderer disguises the provenance of criminal proceeds, often by a complex series of financial transactions. [UNODC]

plain vanilla

A term that refers to a relatively simple derivative financial instrument, usually a swap or other derivative that is issued with standard features. [Harvey]

plan for reorganization

A plan for reorganizing a firm during the Chapter 11 bankruptcy process. [Harvey]

plan sponsors

The entities that establish pension plans, including private business entities acting for their employees; state and local entities operating on behalf of their employees; unions acting on behalf of their members; and individuals representing themselves. [Harvey]

planned amortization class

(1) One class of CMO that carries the most stable cash flows and the lowest prepayement risk of any class of CMO. Because of that stable cash flow, it is considered the least risky CMO. (2) A CMO bond class that stipulates cash-flow contributions to a sinking fund. With the PAC, principal payments are directed to the sinking fund on a priority basis in accordance with a predetermined payment schedule, with prior claim to the cash flows before other CMO classes. Similarly, cash flows received by the trust in excess of the sinking fund requirement are also allocated to other bond classes. The prepayment experience of the PAC is therefore very stable over a wide range of prepayment experience. [Harvey]

planned capital expenditure program

Capital expenditure program as outlined in the corporate financial plan. [Harvey]

planned financing program

Program of short-term and long-term financing as outlined in the corporate financial plan. [Harvey]

planned unit development (PUD)

A type of residential, commercial, or industrial land development that provides more planning flexibility than traditional zoning and lot layout. Buildings are often clustered on smaller lots, permitting the preservation of natural features in common areas or open park-like areas. The development maintains the same or slightly greater density than is permitted by conventional zoning methods. Individual properties are owned in fee with the common areas owned jointly or deeded to the local government. [OTS]

planning horizon

The length of time a model projects into the future. [Harvey]

plat

A map that shows land subdivided into lots with streets, boundaries, easements and dimensions drawn to scale. [OTS]

platinum group metals

Platinum and related metals, includes palladium, rhodium, ruthenium, iridium. [NYMEX]

pledge

A form of security interest granted in certain categories of property, generally money or other intangibles, on which it may not be possible to have a lien because at the time of granting the interest the subject of the interest is not identifiable property in possession. Compare 'Lien'. [EPA]

pledged account mortgage (PAM)

A type of mortgage loan in which the borrower's payments are supplemented by payments from a savings account pledged as additional collateral for the loan. The savings account is established with part of the down payment. [OTS]

pledged loan

A mortgage loan that has been identified and set aside as security for borrowing by the holder of the mortgage; particularly a loan that has been pledged as security for an advance from a Federal Home Loan Bank. [OTS]

pledged receipts or pledged revenues

The moneys which are 'pledged' and set aside pursuant to a security document for deposit requirements and the payment of debt service. Usually includes moneys from a stream of revenues, such as revenues from a project financed. May include proceeds from the sale of collateral. A specific enumeration of the categories of revenues or receipts pledged is usually contained in the security document. See also 'Net Pledge' and 'Gross Pledge'. [EPA]

plimsoll mark

The horizontal line on the outside of a ship which represents the depth to which a vessel may be safely loaded; this mark must stay above the water surface. [ITDS]

plug

A variable that handles financial slack in the financial plan. [Harvey]

plus

Dealers in government bonds normally give price quotes in 32nds. To quote a bid or offer in 64ths, they use pluses; a dealer who bids 4+ is bidding the handle plus 4/32 + 1/64, which equals the handle plus 9/64. [Harvey]

point balance

A statement prepared by futures commission merchants to show profit or loss on all open contracts using an official closing or settlement price, usually at calendar month end. [CFTC]

point of origin

The location at which a shipment is received by a transportation line from the shipper. [ITDS]

point or tick

The smallest monetary unit of change in a futures price or an option premium. [NYMEX]

point-and-figure

A method of charting that uses prices to form patterns of movement without regard to time. It defines a price trend as a continued movement in one direction until a reversal of a predetermined criterion is met. [CFTC]

point-and-figure charts

A price-only chart that takes into account only whole integer changes in price, i.e., a 2-point change. Point and figure charting disregards the element of time and is solely used to record changes in price. [Harvey] Charts that show price changes of a minimum amount regardless of the time period involved. [CBOT][MIDAM]

point-of-sale network

A network of banks, debit cardholders, and merchants that permits a consumer to electronically make direct payment at the place of purchase. The funds transfer directly from the account of the cardholder to the account of the merchant. [FRB][FRBC]

point-to-point

Represents service and rates for shipments in door-to-door service. [ITDS]

points

An amount equal to one percent of the principal amount of an investment or a loan. Points are a one time charge assessed at closing by the lender to increase the lender's earnings on mortgage loans. [OTS] Finance charges paid by the borrower at the beginning of a loan in addition to monthly interest; each point equals one percent of the loan amount. [FRB][FRBC][FRBM] In the case of shares of stock, a point means $1. If ABC shares rise 3 points, each share has risen $3. In the case of bonds a point means $10, since a bond is quoted as a percentage of $1000. A bond that rises 3 points gains 3 percent of $1000, or $30 in value. An advance from 87 to 90 would mean an advance in dollar value from $870 to $900. In the case of market averages, the word point means merely that and no more. If, for example, the NYSE composite index rises from 90.25 to 91.25, it has risen a point. A point in this index, however, is not equivalent to $1. [NYSE] Shorthand reference to one per cent. In the context of a 'bond', a 'point' means $10 since a 'bond' means $1,000 (no matter what the actual denominations of the bonds of the issue). An issue or a security that is 'discounted two points' is quoted at 98 percent of its par value. (Compare 'Basis Point'.) [EPA] The smallest unit of price change quoted or, one one-hundredth of a percent. [Harvey]

poison pill

An issue of securities that is convertible in the event of a merger into the shares of the acquiring firm or must be repurchased by the acquiring firm. [WCSU] Anit-takeover device that gives a prospective acquiree's shareholders the right to buy shares of the firm or shares of anyone who acquires the firm at a deep discount to their fair market value. Named after the cyanide pill that secret agents are instructed to swallow if capture is imminent. [Harvey]

poison put

A covenant allowing the bondholder to demand repayment in the event of a hostile merger. [Harvey]

policy asset allocation

A long-term asset allocation method, in which the investor seeks to assess an appropriate long-term 'normal' asset mix that represents an ideal blend of controlled risk and enhanced return. [Harvey]

political economy

Policies that emphasize the interaction between politics and economics and that have political and economic effects. [FACS]

political risk

Political changes or trends often accompanied by shifts in economic policy which may affect the availability of foreign exchange to finance private and public external obligations. The banker must understand the subtleties of current exchange procedures and restrictions as well as the possibilities of war, revolution or expropriation in each country with which the bank transacts business, regardless of the actual currency(s) involved. [FDIC] Possibility of the expropriation of assets, changes in tax policy, restrictions on the exchange of foreign currency, or other changes in the business climate of a country. [Harvey]

Ponzi schemes

An operation intended to defraud investors in which no new wealth is produced and creditors are paid off by borrowing ever larger amounts from new investors. [OTS] Named after Charles Ponzi, a man with a remarkable criminal career in the early 20th century, the term has been used to describe pyramid arrangements whereby an enterprise makes payments to investors from the proceeds of a later investment rather than from profits of the underlying business venture, as the investors expected, and gives investors the impression that a legitimate profit-making business or investment opportunity exists, where in fact it is a mere fiction. [CFTC] Named after its early 20th century creator, Charles Ponzi, these schemes use money collected from new 'investors' (i.e., victims), rather than profits from the purported underlying business venture, to pay the high rates of return promised to earlier victims. This arrangement gives victims the impression that there is a legitimate, money-making enterprise behind the perpetrator's story when, in reality, victim monies are the only source of funding. [FBI]

pool

A large group of mortgages that back a mortgage security. [OTS]

pool factor

The outstanding principal balance divided by the original principal balance with the result expressed as a decimal. Pool factors are published monthly by the Bond Buyer newspaper for Ginnie Mae, Fannie Mae, and Freddie Mac(Federal Home Loan Mortgage Corporation) MBSs. [Harvey]

pooled financing

The general grouping of a number of loans into a common 'pool' or group, the security of which would consist of a blending of credits between and among the group of loans. [EPA]

pooling of interest

An accounting method for reporting acquisitions accomplished through the use of equity. The combined assets of the merged entity are consolidated using book value, as opposed to the purchase method, which uses market value. The merging entities' financial results are combined as though the two entities have always been a single entity. [Harvey] Method of accounting for mergers. The consolidated balance sheet of the merged firm is obtained by combining the balance sheets of the separate firms. [WCSU]

pork bellies

One of the major cuts of the hog carcass that, when cured, becomes bacon. [CFTC]

port

A harbor or haven where ships may anchor and discharge or receive cargo. [ITDS]

port charge

A charge made for services performed at ports. [ITDS]

port of discharge

The port at which a shipment is off loaded by a transportation line. [ITDS]

port of entry

A port at which foreign goods are admitted into the receiving country. [ITDS]

port of export

The port, airport, or customs point from which an export shipment leaves a country for a voyage to a foreign country. [ITDS]

portfolio

A collection of investments, real and/or financial. [Harvey] Holdings of securities by an individual or institution. [NYSE] all of the income-producing assets held by an individual or institution, such as the income-earning securities and mortgage loans of a savings institution. [OTS]

portfolio insurance

A strategy using a leveraged portfolio in the underlying stock to create a synthetic put option. The strategy's goal is to ensure that the value of the portfolio does not fall below a certain level. [Harvey] A trading strategy that uses stock index futures and/or stock index options to protect stock portfolios against market declines. [CFTC]

portfolio internal rate of return

The rate of return computed by first determining the cash flows for all the bonds in the portfolio and then finding the interest rate that will make the present value of the cash flows equal to the market value of the portfolio. [Harvey]

portfolio investment

In general, any foreign investment that is not direct investment is considered portfolio investment. [ITDS]

portfolio margining

A method for setting margin requirements that evaluates positions as a group or portfolio and takes into account the potential for losses on some positions to be offset by gains on others. Specifically, the margin requirement for a portfolio is typically set equal to an estimate of the largest possible decline in the net value of the portfolio that could occur under assumed changes in market conditions. Sometimes referred to as risked-based margining. [CFTC]

portfolio opportunity set

The expected return/standard deviation pairs of all portfolios that can be constructed from a given set of assets. [Harvey]

portfolio sale

The marketing and sale of a large portfolio of similar assets. Portfolio sales usually have been accomplished through sealed bid sales at the FDIC. Also known as a bulk sale. [FDIC]

portfolio separation theorem

An investor's choice of a risky investment portfolio is separate from his attitude towards risk. [Harvey]

portfolio turnover rate

For an investment company, an annualized rate found by dividing the lesser of purchases and sales by the average of portfolio assets. [Harvey]

portfolio variance

weighted sum of the covariance and variances of the assets in a portfolio. [Harvey]

position

A market commitment to go long (buy) or short (sell) a security or commodity. It also refers to the amount of securities or commodities owned (long position) or owed (short position). [OTS] A market commitment. A buyer of a futures contract is said to have a long position and, conversely, a seller of futures contracts is said to have a short position. [CBOT][MIDAM] A market commitment; the number of contracts bought or sold for which no offsetting transaction has been entered into. The buyer of a commodity is said to have a long position and the seller of a commodity is said to have a short position. [Harvey] An interest in the market, either long or short, in the form of one or more open contracts. [CFTC] The net or overall balance of a foreign currency taking into account all assets and liabilities, direct and indirect, denominated in a particular currency. [FDIC] The net total of a trader's open contracts, either long or short, in a particular underlying commodity. [NYMEX]

position accountability

A rule adopted by an exchange requiring persons holding a certain number of outstanding contracts to report the nature of the position, trading strategy, and hedging information of the position to the exchange, upon request of the exchange. [CFTC]

position day

According to the Chicago Board of Trade rules, the first day in the process of making or taking delivery of the actual commodity on a futures contract. The clearing firm representing the seller notifies the Board of Trade Clearing Corporation that its short customers want to deliver on a futures contract. [CBOT][MIDAM]

position diagram

Diagram showing the possible payoffs from a derivative investment. [Harvey]

position limits

For a single trader or firm, the maximum number of allowable open contracts with the same underlying commodity. [NYMEX] The maximum net debit or credit foreign currency balance either during the day (daylight limits) or at close of business (overnight limits) as stipulated by bank management. [FDIC] The maximum number of speculative futures contracts one can hold as determined by the Commodity Futures Trading Commission and/or the exchange upon which the contract is traded. Also referred to as trading limit. [CBOT][MIDAM]

position sheet

Also known as the position book. A listing of all foreign exchange transactions creating a position. Enables the senior dealer to monitor the open position in particular currency and the overall open position in all currencies. [FDIC]

position trader

A commodity trader who either buys or sells contracts and holds them for an extended period of time, as distinguished from a day trader, who will normally initiate and offset a futures position within a single trading session. [CFTC] An approach to trading in which the trader either buys or sells contracts and holds them for an extended period of time. [CBOT][MIDAM]

positive carry

The cost of financing a financial instrument (the short-term rate of interest), where the cost is less than the current return of the financial instrument. [CFTC]

positive convexity

A property of option-free bonds whereby the price appreciation for a large upward change in interest rates will be greater (in absolute terms) than the price depreciation for the same downward change in interest rates. [Harvey]

positive covenant (of a bond)

A bond covenant that specifies certain actions the firm must take. Also called and affirmative covenant. [Harvey]

possessions corporation

A type of corporation permitted under the U.S. tax code whereby a branch operation in a U.S. possessions can obtain tax benefits as though it were operating as a foreign subsidiary. [Harvey]

post

Particular place on the floor of an exchange where transactions in stocks listed on the exchange occur. [Harvey]

Post Execution Reporting System (PER)

American Stock Exchange equities trading system. [NYSE]

Post Support System (PSS)

Links a Local Area Network (LAN), allowing data to be transmitted to trading floor devices. [NYSE]

post-audit

A set of procedures for evaluating a capital budgeting decision after the fact. [Harvey] Evaluation of an investment project after it has been undertaken. [WCSU]

postal money order

An instrument, like a check, sold by United States post offices providing for the payment of a specified sum of money to the individual or firm designated by the purchaser of the money order. [OTS]

postdated check

A check bearing a date that has not yet arrived. [ITDS]

posted price

An announced or advertised price indicating what a firm will pay for a commodity or the price at which the firm will sell it. [CFTC] The price some refiners will pay for crude of a certain API gravity from a particular field or area. [NYMEX]

posting

The process of transferring journal entries to the general ledger. [OTS]

postponement option

The option of postponing a project without eliminating the possibility of undertaking it. [Harvey]

posttrade benchmarks

Prices after the decision to trade. [Harvey]

potential credit risk

Is in addition to the current risk exposure amount calculated, and reflects the risk that the contract may move further 'into the money', increasing the credit exposure. [TMAC]

potential exposure

An estimate of the future replacement cost of these transactions. [TMAC]

potential output

The level of real GDP that can be sustained in the long run, and that is consistent with constant inflation. [FRB][FRBC][FRBSF]

pour point

A temperature 5o Fahrenheit higher than the temperature at which crude oil or a refined product stops flowing. [NYMEX]

power of attorney

A document that authorizes one person to legally act as the agent for, or in place of, another person in performing various actions under specified conditions. Full power may be granted, or authority may be limited to certain functions. [OTS]

pre-closing

A meeting sometimes held preceding the closing, at which all of the closing documents and all closing memorandum requirements are reviewed or reported on. Any unresolved matters are dealt with at or immediately after the pre-closing so as to avoid any problems at or delay in the closing. [EPA]

pre-license checks

Checks that are conducted to determine that a request for a license to export a controlled commodity represents a legitimate order. [ITDS]

pre-trade benchmarks

Prices occurring before or at the decision to trade. [Harvey]

prearranged trading

Trading between brokers in accordance with an expressed or implied agreement or understanding, which is a violation of the Commodity Exchange Act and CFTC regulations. [CFTC]

preauthorized checks

Checks that are authorized by the payer in advance and are written either by the payee or by the payee's bank and then deposited in the payee's bank account. [Harvey]

preauthorized electronic debits

Debits to its bank account in advance by the payer. The payer's bank sends payment to the payee's bank through the _ACH)Automated Clearing House (ACH) system. [Harvey]

preauthorized payment

A system established by a written agreement under which a financial institution is authorized by the customer to debit the customer's account in order to pay bills or make loan payments. [OTS]

precautionary demand (for money)

The need to meet unexpected or extraordinary contingencies with a buffer stock of cash. [Harvey]

precautionary motive

A desire to hold cash in order to be able to deal effectively with unexpected events that require cash outlay. [Harvey]

predicate offence

The criminal activity from which the proceeds of the crime are derived. Money laundering is a derivative crime. Its status as a crime depends on the genesis of the funds involved. [UNODC]

preemptive right

Common stockholder's right to anything of value distributed by the company. [Harvey][WCSU]

preexisting use

A land use that existed prior to and does not comply with a newly established zoning classification. [OTS]

prefabricated housing

housing with structural or mechanical components manufactured and assembled away from the construction site. [OTS]

preference stock

A security that ranks junior to preferred stock but senior to common stock in the right to receive payments from the firm; essentially junior preferred stock. [Harvey]

preferences

A creditors right to be paid before other creditors of the same debtor. [ITDS]

preferred debt

any obligation that has precedence over another debt. A senior or first mortgage is an example of a preferred debt. [OTS]

preferred equity redemption stock

Preferred stock that converts automatically into equity at a stated date. A limit is placed on the value of the shares the investor receives. [Harvey]

preferred habitat theory

A biased expectations theory that believes the term structure reflects the expectation of the future path of interest rates as well as risk premium. However, the theory rejects the assertion that the risk premium must rise uniformly with maturity. Instead, to the extent that the demand for and supply of funds does not match for a given maturity range, some participants will shift to maturities showing the opposite imbalances. As long as such investors are compensated by an appropriate risk premium whose magnitude will reflect the extent of aversion to either price or reinvestment risk. [Harvey]

preferred shares

Preferred shares give investors a fixed dividend from the company's earnings. And more importantly: preferred shareholders get paid before common shareholders. [Harvey]

preferred stock

A security that shows ownership in a corporation and gives the holder a claim, prior to the claim of common stockholders, on earnings and also generally on assets in the event of liquidation. Most preferred stock pays a fixed dividend that is paid prior to the common stock dividend, stated in a dollar amount or as a percentage of par value. This stock does not usually carry voting rights. The stock shares characteristics of both common stock and debt. [Harvey] A stock that yields a fixed-dollar income. The stock represents equity, or ownership, in the company but generally carries no voting rights. The stockholder has a claim to the issuing firm's earnings and assets ahead of the holder of common stock, but behind the holder of a bond. [OTS] Stock that takes priority over common stock in regard to dividends. Dividends may not be paid on common stock unless the dividend is paid on all preferred stock. The dividend rate on preferred is usually fixed at the time of issue. [WCSU]

preferred stock agreement

A contract for preferred stock. [Harvey]

preliminary estimate

The second estimate of GDP and its components for a quarter. It is released 55-60 days after the end of the quarter, and it is based on source data that are more complete that the advance estimate, though they are still subject to revision. [BEA]

preliminary examination response kit (PERK)

A package sent by OTS to a financial institution prior to the start of an on-site examination. The package contains forms and instructions to the institution for gathering various information and documents. The PERK also indicates the expected date of the examination, requests that the institution arrange various logistics details and asks the institution to have basic information ready for the arrival of the examination staff. Also called the advance package. [OTS]

preliminary official statement or preliminary offering circular

A near-final version of an official statement or offering circular used by the issuer or underwriters to inform the marketplace prior to receipt of bids at competitive bidding or to the assignment of an interest rate and offering price in a negotiated sale. The preliminary document is subject to change and no sales may be made prior to complying with applicable state security laws, and a statement to that effect is usually contained on the cover page. Such statement is generally printed in red, and thus the preliminary document is often referred to as the 'Red Herring'. Although the preliminary document is technically a draft, there should be few, if any, substantial changes between the preliminary document and the final official statement or offering circular. [EPA]

preliminary prospectus

A preliminary version of a prospectus. [Harvey]

premium

(1) Amount paid for a bond above the par value. (2) The price of an option contract; also, in futures trading, the amount the futures price exceeds the price of the spot commodity. [Harvey] (1) The additional payment allowed by exchange regulation for delivery of higher-than-required standards or grades of a commodity against a futures contract. (2) In speaking of price relationships between different delivery months of a given commodity, one is said to be 'trading at a premium' over another when its price is greater than that of the other. (3) In financial instruments, the dollar amount by which a security trades above its principal value. [CBOT][MIDAM] (1) The payment an option buyer makes to the option writer for granting an option contract; (2) the amount a price would be increased to purchase a better quality commodity; (3) refers to a futures delivery month selling at a higher price than another, as 'July is at a premium over May.' [CFTC] (1) the amount, often stated as a percentage, paid in addition to the face value of a note or bond. (2) a fee charged for the granting of a loan. (3) the price paid for an insurance contract. (4) a product given free or sold at discount, offered as an inducement to the public to open or add to a savings account, or to purchase other specified products or services. [OTS] (A) The amount by which the price of or offered for an issue or a security exceeds its par value. Stated in terms of 'priced at 102' (i.e., 102% of the face amount] or, in the case of the purchase price paid to an issuer, of a premium of specified dollars (a 'premium of $') (B) The excess of the price at which a bond is acquired or sold over its face value. [EPA] 1) The amount above a regular price, paid as incentive to do something. 2) The price of insurance protection for a specified risk for a specified period of time. Comment: Meaning number 1 above correctly indicates that one meaning of 'Premium' is something in addition to the regular price. In meaning number 2 above 'Premium' is the price. [ITDS] 1) The price or cost of an option determined competitively by buyers and sellers in open outcry trading on the exchange trading floor. 2) An upward adjustment in price allowed for delivery of a commodity of higher grade against a futures contract. [NYMEX] A premium is the amount that the buyer of an option pays the writer or seller of the option. [GAO] The adjustment to a spot price that is made in arriving at a quote for future delivery. If a dealer were to quote $2.00 and $2.05 (bid and asked) for sterling and the premiums for six months forward are .0275 and .0300, the forward quotes would be adjusted to $2.0275 and $2.0800. The premium usually represents differences in interest rates for comparable instruments in two countries. However, in periods of crisis for a currency, the premium may represent the market anticipation of a higher price. [FDIC] The amount by which a bond or preferred stock may sell above its par value. For options, the price that the buyer pays the writer for an option contract ('option premium' is synonymous with 'the price of an option'). May refer, also, to redemption price of a bond or preferred stock if it is higher than face value. [NYSE] The amount by which the auction price of a bill, note, or bond is higher than its face value. [FRB][FRBM][FRBSF] The cost which the buyer of an options pays to the writer of seller of the option; normally only a very small fraction of the notional value of the underlying product commodity. [TMAC]

premium bond

A bond that is selling for more than its par value. [Harvey]

prenotification (Prenote)

A zero dollar entry that must be sent through the ACH at least ten calendar days prior to any live entries affecting an account at a receiving institution. The prenotification (prenote) allows the receiving institution to validate entry information. [ACH]

prepackaged bankruptcy

A bankruptcy in which a debtor and its creditors pre-negotiate a plan or reorganization and then file it along with the bankruptcy petition. [Harvey]

prepaid

A notation on a shipping document indicating that shipping charges have already been paid by the shipper to the carrier. [ITDS]

prepaid charges

The transportation trade practice under which the shipper pays transportation charges. [ITDS]

prepayment

A payment made before its scheduled due date. [OTS] Payments made in excess of scheduled mortgage principal repayments. [Harvey]

prepayment clause

A provision in a promissory note stating the amount a borrower may repay ahead of schedule without incurring a penalty. [OTS]

prepayment penalty

A fee assessed by a lender on a borrower who repays all or part of the principal of a loan before it is due. The prepayment penalty compensates the lender for the loss of interest that would have been earned had the loan remained in effect for its full term. [OTS]

prepayment speed

Also called speed, the estimated rate at which mortgagors pay off their loans ahead of schedule, critical in assessing the value of mortgage pass-through securities. [Harvey]

prerefunded bond

Refunded bond. [Harvey]

prescriptive code

A building code that specifies construction requirements according to particular materials and construction methods, rather than to performance criteria. Same as a specification code. [OTS]

present value

Discounted value of future cash flows. [WCSU] The amount of cash today that is equivalent in value to a payment, or to a stream of payments, to be received in the future. [Harvey]

present value cost

The cost in currently valued dollars of funds to be expended over a period of time, usually a number of years, less the net of any funds to be repaid. It is adjusted to compensate for the loss or gain of the opportunity to invest the funds rather than spend them -- that is, compensate for the dollars' estimated earning potential in alternative uses. For example, the present value cost is reduced by the amount of income the funds are expected to earn until they are disbursed and increased to compensate for the loss of earnings thereafter, or until such time as the funds are repaid. Present value cost is used by federal regulators to estimate the impact on the thrift insurance fund of alternative solutions to troubled thrift institutions. [OTS]

present value factor

Factor used to calculate an estimate of the present value of an amount to be received in a future period. [Harvey]

present value of growth opportunities

(NPV) Net present value of investments the firm is expected to make in the future. [Harvey]

presentment fee

A presentment fee is a fee that a bank receiving a check may impose on the bank that presents the check for payment. [GAO]

preservation of capital

one of several objectives of investing, the goal being to prevent the loss of any capital invested by avoiding high-risk investments. [OTS]

presold issue

An issue that is sold out before the coupon announcement. [Harvey]

price

Price of a share of common stock on the date shown. Highs and lows are based on the highest and lowest intraday trading price. [Harvey] The amount of money a seller receives for the goods or services sold. Price is the amount of money actually received by the seller, not necessarily the amount originally asked for. In the buying and selling of bonds and mortgages, price represents the difference -- expressed as a percentage -- between the amount paid for an instrument and the face value of that instrument. For example, if sold at par, the price is 100 percent of the face value; a premium price could be 105 percent; and a discount price could be 95 percent of face value. [OTS] The amount of money, or other goods, that you have to give up to buy a good or service. [FACS]

price banding

A CME Group and ICE-instituted mechanism to ensure a fair and orderly market on an electronic trading platform. This mechanism subjects all incoming orders to price verification and rejects all orders with clearly erroneous prices. Price bands are monitored throughout the day and adjusted if necessary. [CFTC]

price basing

A situation where producers, processors, merchants, or consumers of a commodity establish commercial transaction prices based on the futures prices for that or a related commodity (e.g., an offer to sell corn at 5 cents over the December futures price). [CFTC]

price ceiling

The upper legal limit on a price. [FACS]

price compression

The limitation of the price appreciation potential for a callable bond in a declining interest rate environment, based on the expectation that the bond will be redeemed at the call price. [Harvey]

price discovery

The generation of information about 'future' cash market prices through the futures markets. [CBOT][MIDAM] The manner of making prices visible and readily available to the public. [NYMEX] The process of determining the price level for a commodity through the interaction of buyers and sellers and based on supply and demand conditions. [CFTC]

price discovery process

The process of determining the prices of the assets in the marketplace through the interactions of buyers and sellers. [Harvey]

price elasticities

The percentage change in the quantity divided by the percentage change in the price. [Harvey]

price elasticity of demand

A measure of the responsiveness of the quantity demanded of a good to changes in that goods price. [FACS]

price floor

The lower limit imposed on a products price by a price control law. [FACS]

price limit

The maximum advance or decline from the previous day's settlement price permitted for a contract in one trading session by the rules of the exchange. [CBOT][MIDAM]

price limit order

A customer order that specifies the price at which a trade can be executed. [CBOT][MIDAM]

price risk

The risk of adverse movements in prices. [TMAC] The risk that the value of a security (or a portfolio) will decline in the future. Or, a type of mortgage-pipeline risk created in the production segment when loan terms are set for the borrower in advance of terms being set for secondary market sale. If the general level of rates rises during the production cycle, the lender may have to sell his originated loans at a discount. [Harvey]

price support

Subsidy or financial aid offered to specific growers, producers, or distributors, in accordance with governmental regulations to keep market prices from dropping below a certain minimum level. [ITDS]

price takers

Individuals who respond to rates and prices by acting as though they have no influence on them. [Harvey]

price value of a basis point

Also called the dollar value of a basis point, a measure of the change in the price of the bond if the required yield changes by one basis point. [Harvey]

price-level-adjusted mortgage (PLAM)

A form of home loan in which payments are adjusted for inflation not by changing the interest rate but by changing the amount of outstanding principal. The loan is fully amortized, meaning the principal is repaid in a fixed number of years. Initial payments are low because the real rate of interest -- typically between 3 and five percent -- does not include a factor for inflation. Instead, inflation or deflation increases or decreases the amount of outstanding principal, and correspondingly, the amount of the monthly payment. The payment is adjusted each month based on a predetermined index, such as the Consumer Price Index. It is assumed that the value of the home and the borrower's income increases or decreases in tandem with fluctuations in the amount of unpaid principal. A PLAM offers monthly payments that are substantially lower and less volatile than mortgages with adjustable interest rates, while assuring the lender will be repaid all the principal, plus interest, plus whatever inflation eats away. [OTS]

price-specie-flow mechanism

Adjustment mechanism under the classical gold standard whereby disturbances in the price level in one country would be wholly or partly offset by a countervailing flow of specie (gold coins) that would act to equalize prices across countries and automatically bring international payments back in balance. [Harvey]

price-volume relationship

A relationship espoused by some technical analysts that signals continuing rises and falls in security prices based on accompanying changes in volume traded. [Harvey]

price/book ratio

Compares a stock's market value to the value of total assets less total liabilities (book value). Determined by dividing current stock price by common stockholder equity per share (book value), adjusted for stock splits. Also called Market-to-Book. [Harvey]

price/earnings ratio

A popular way to compare stocks selling at various price levels. The PE ratio is the price of a share of stock divided by earnings per share for a twelve-month period. For example, a stock selling for $50 a share that earned $5 a share is said to be selling at a price/earnings ratio of 10. [NYSE] Shows the 'multiple' of earnings at which a stock sells. Determined by dividing current stock price by current earnings per share (adjusted for stock splits). Earnings per share for the P/E ratio is determined by dividing earnings for past 12 months by the number of common shares outstanding. Higher 'multiple' means investors have higher expectations for future growth, and have bid up the stock's price. [Harvey]

price/sales ratio

Determined by dividing current stock price by revenue per share (adjusted for stock splits). Revenue per share for the P/S ratio is determined by dividing revenue for past 12 months by number of shares outstanding. [Harvey]

priced out

The market has already incorporated information, such as a low dividend, into the price of a stock. [Harvey]

pricing efficiency

Also called external efficiency, a market characteristic where prices at all times fully reflect all available information that is relevant to the valuation of securities. [Harvey]

prima facie

at first view; that which appears to be true and is accepted as being true as long as contrary evidence is not detected. [OTS]

primary dealers

A designation given by the Federal Reserve System to commercial banks or broker/dealers who meet specific criteria. Among the criteria are capital requirements and meaningful participation in the Treasury auctions. [CBOT][MIDAM] A securities firm that makes a market in government debt securities, acting as a principal in the trades. Federal Home Loan Bank System discount notes are sold through a group of primary dealers. [OTS] Security firms that are recognized by the U.S. Federal Reserve System to buy and sell securities with the Fed. [UNODC]

primary distribution

Also called primary or public offering. The original sale of a company's securities. [NYSE]

primary inputs

Capital and labor inputs to production; the related costs include, for example, compensation, profits, and depreciation. [BEA]

primary issue

Issue of new securities by a firm. [WCSU]

primary market

(1) For producers, their major purchaser of commodities; (2) to processors, the market that is the major supplier of their commodity needs; and (3) in commercial marketing channels, an important center at which spot commodities are concentrated for shipment to terminal markets. [CFTC] Market of new issues of securities. [CBOT][MIDAM] The first buyer of a newly issued security buys that security in the primary market. All subsequent trading of those securities is done in the secondary market. [Harvey] The market in which lenders make mortgage loans directly to borrowers, as opposed to the secondary market in which the original lenders sell those mortgage loans to investors. [OTS] The process by which a corporation's stock is issued for the first time. It is then sold to the public on the secondary market. [NYSE]

primary offering

A firm selling some of its own newly issued shares to investors. [Harvey]

primary product

The principal good or service produced by an industry, which is used to classify establishments in the SIC or NAICS systems and the I-O industry classification system. [BEA]

primary reserves

Refers to the assets in the form of cash maintained in a bank's own vault or claims on cash on deposit with compulsory or optional depositories. When compulsory pursuant to banking laws, such cash primary reserves are referred to as legal reserve requirements. [FRB][FRBC]

primary stocks

Stocks of crude oil or refined products held in storage at leases, refineries, natural gas processing plants, pipelines, tankfarms, and bulk terminals that can store at least 50,000 barrels of refined products. [NYMEX]

prime bank scheme

Victims are induced to invest in financial instruments, allegedly issued by well-known institutions, which offer risk-free opportunities for high rates of return; benefits which are allegedly the result of the perpetrator's access to a secret worldwide exchange ordinarily open only to the world's largest financial institutions. [FBI]

prime rate

Interest rate charged by major banks to their most creditworthy customers. [CBOT][MIDAM] Rate at which banks lend to their most favored customers. [WCSU] The interest rate at which banks lend to their best (prime) customers. Much more often than not, a bank's most creditworthy customers borrow at rates below the prime rate. [Harvey] The interest rate charged by leading banks to their best, most secure customers. It tends to be a yardstick for general trends in interest rates. [OTS] The lowest interest rate charged by commercial banks to their most creditworthy and largest corporate customers; other interest rates such as personal, automobile, commercial and financing loans are often pegged to the prime. [NYSE]

primitive security

An instrument such as a stock or bond for which payments depend only on the financial status of the issuer. [Harvey]

principal

(1) The total amount of money being borrowed or lent. (2) The party affected by agent decisions in a principal-agent relationship. [Harvey] (1) the capital sum of a loan. The amount of borrowed funds to be repaid. (2) an individual or firm buying or selling for his (her/its) own account. [OTS] (A) The face amount or par value of a bond or issue of bonds payable on stated dates of maturity . (B) The par value or face value of a bond, note, or other fixed-amount security. [EPA] The person for whom a broker executes an order or dealers buying or selling for their own accounts. The term 'principal' may also refer to a person's capital or to the face amount of a bond. [NYSE]

principal amount

(A) As to a single security, see 'Face Amount'. (B) As to an issue, the aggregate principal amount of the issue (the total of the face amounts of the individual securities making up the issue). [EPA] The face amount of debt; the amount borrowed or lent. Often called principal. [Harvey]

principal balance

The portion of a loan not yet repaid, exclusive of interest or other charges. [OTS]

principal basis

The sale of securities through a dealer or group of dealers who buy and sell the securities at least initially for their own portfolios, assuming the market risk of holding the securities, and then selling the securities from their own inventory to their customers at a markup. [OTS]

principal of diversification

Highly diversified portfolios will have negligible unsystematic risk. In other words, unsystematic risks disappear in portfolios, and only systematic risks survive. [Harvey]

principal office

principal only

A mortgage-backed security in which the holder receives only principal cash flows on the underlying mortgage pool. The principal-only portion of a stripped MBS. For PO securities, all of the principal distribution due from the underlying collateral pool is paid to the registered holder of the stripped MBS based on the current face value of the underlying collateral pool. [Harvey]

principal payment date

See 'Maturity Date'. [EPA]

principal payments

The face amount or par value of a debt instrument where interest is paid. The interest payment is not part of the principal. [FRBSF]

principal-agent relationship

A situation that can be modeled as one person, an agent, who acts on the behalf of another person, the principal. [Harvey]

principals' market

principle

Amount of debt that must be repaid. [WCSU]

prior lien

A mortgage that ranks ahead of another. [OTS]

priority air freight

Reserved air freight or air express service wherein shipments have a priority after mail and the small package services. [ITDS]

Private ACH Exchange (PAX)

Established in 1994 by NYACH, VISA and American Express to allow transaction exchange directly without using the Federal Reserve as an intermediary processor. [GAO]

private banking

Banking services, including lending and investment management, for wealthy individuals. Private banking is primarily a credit service, and is less dependent on accepting deposits than retail banking. [UNODC]

private corporation

A business corporation with shares that are not traded among the general public. [ITDS]

private enterprise

An economy in which the production of goods and services is carried out by businesses owned and operated by people risking their investment of capital and/or labor in the hope of making a profit. [OTS]

Private Export Funding Corporation

Company that mobilizes private capital for financing the export of big-ticket items by U.S. firms by purchasing at fixed interest rates the medium- to long-term debt obligations of importers of U.S. products. [Harvey]

private good

A good exclusively owned that cannot be simultaneously used by others. [FACS]

private mortgage insurance (PMI)

insurance policies written by private companies insuring lenders against loss resulting from defaults on mortgages. [OTS]

private placement

(A) Bonds or notes issued by state or local governments sold directly to investors but not reoffered to the public. (B) The original placement of an issue in the private money market composed of different types of financial institutions (banks, bond funds, life insurance companies, pension funds, REIT'S, etc.) [EPA] The process of negotiating for the sale of securities, debt, equity, or a combination thereof to a relatively small group of investors. [UNODC] The sale of a bond or other security directly to a limited number of investors. [Harvey] The sale of a debt security to one buyer or a few buyers, as opposed to offering the security to the public through a group of dealers. [OTS]

private placement letter

A letter from an institutional investor to the issuer (and usually the issuer's bond counsel) stating that the institutional investor has assumed responsibility for determining the investment quality of the issue being offered and often containing assurances as to any subsequent distribution by the institutional investor of the securities. A properly drafted private placement letter used in the appropriate circumstances will generally protect the issuer and other participants in the transaction from liability to the institutional investor for any claimed fraud in connection with the securities offering. [EPA]

private placement memorandum

A memorandum briefly describing the project and the primary obligor of the securities issue, having attached a collection of financial data about the primary obligor, generally including, in the case of a private corporate primary obligor, recent filings with the Securities and Exchange Commission, annual reports and audited financial statements. The memorandum is generally addressed to a single institutional investor and is prepared by a broker-dealer or dealer-bank acting as the private placement agent (as distinguished from acting as underwriter) for the issue. [EPA]

private sale

See 'Negotiated Sale'. [EPA]

private sector

that portion of the economy composed of businesses and households, and excluding government. [OTS]

private trust company

A company incorporated in certain offshore jurisdictions, such as Bermuda, to act as a trustee for a limited class or group of trusts. Private trustee companies are generally not permitted to offer trustee services to the public. The Company may use the word 'trust' or 'trustee' in its name as long as those words are qualified by the word 'private'. [UNODC]

private unrequited transfers

Refers to resident immigrant workers' remittances to their country of origin as well as gifts, dowries, inheritances, prizes, charitable contributions, etc. [Harvey]

privatization

The act of returning state-owned or state-run companies back to the private sector, usually by selling them. [Harvey]

privileged subscription issue

pro forma

A revenue or receipt projection showing anticipated costs and revenue for the period of the projection, generally not more than five years. In cases of a pro forma for a longer period, such as the entire period of a bond issue, figures used for later years are generally computed by the application of some mathematical factors which take into account inflationary expectations. [EPA]

pro forma capital structure analysis

A method of analyzing the impact of alternative capital structure choices on a firm's credit statistics and reported financial results, especially to determine whether the firm will be able to use projected tax shield benefits fully. [Harvey]

pro forma financial statements

Financial statements as adjusted to reflect a projected or planned transaction. [Harvey]

pro forma statement

A financial statement showing the forecast or projected operating results and balance sheet, as in pro forma income statements, balance sheets, and statements of cash flows. [Harvey] from Latin meaning 'according to form.' A pro forma statement is a financial statement projecting anticipated income, expenses and cash flow for some specified future period. [OTS]

pro rata

1. 'According to the rate' (Latin); 2. In proportion to a total amount. For example, if a contract is terminated prior to the end of the period for which payment has been given, a pro rata return of the payment is made, in proportion to the unused period of time remaining. [FRBSF] Latin, meaning 'according to the rate.' Pro rata refers to dividing something (costs, income, profits, assessments, proceeds from a liquidation, etc.) among participants according to a rate in which each participant's share is in proportion to the part of the whole owned or claimed by the participant. [OTS]

probability

The relative likelihood of a particular outcome among all possible outcomes. [Harvey]

probability density function

The probability function for a continuous random variable. [Harvey]

probability distribution

Also called a probability function, a function that describes all the values that the random variable can take and the probability associated with each. [Harvey]

probability function

A function that assigns a probability to each and every possible outcome. [Harvey]

probate

The process of proving before a court of law that a document offered for official recognition as the last will and testament of a deceased person is genuine and the process of determining and resolving all issues concerning the will. [OTS]

problem institution

A savings association or savings bank that: (1) is subject to special regulatory controls or restrictions; (2) poses particular supervisory concerns to its federal or state regulator; (3) fails to meet its regulatory capital requirement; and/or has a composite MACRO rating of 4 or 5. [OTS]

proceeds

The money the issuer actually receives upon initial delivery of an issue, being par value, plus premium or less discount, and plus accrued interest. [EPA]

processing day

Any day that a member institution is open to the public to conduct business, or that an ACH facility is being operated. [ACH]

processing plant

Plant which separates natural gas into methane and the various other gases (e.g., propane, butane, ethane). [NYMEX]

procurement and lead time

The time required by the buyer to select a supplier and to place and obtain a commitment for specific quantities of materials at specified times. [ITDS]

producer price index (PPI)

An index that shows the cost of resources needed to produce manufactured goods during the previous month. [CBOT][MIDAM]

product cycle

The time it takes to bring new and/or improved products to market. [Harvey]

product groups

Commodity groupings used for export control purposes. [ITDS]

product risk

A type of mortgage-pipeline risk that occurs when a lender has an unusual loan in production or inventory but does not have a sale commitment at a prearranged price. [Harvey]

production payment

Loan in the form of advanced payment for future delivery of a product. [WCSU]

production payment financing

A method of nonrecourse asset-based financing in which a specified percentage of revenue realized from the sale of the project's output is used to pay debt service. [Harvey]

production possibilities curve

All combinations of the maximum amounts of goods that a society can produce with the available resources and technology. [FACS]

production-flow commitment

An agreement by the loan purchaser to allow the monthly loan quota to be delivered in batches. [Harvey]

productive resources

The inputs of labor, natural resources and capital used to generate new goods and services. [FACS]

productivity

A measurement of the efficiency of production. [ITDS] The amount of physical output for each unit of productive input. [FRB][FRBC][FRBM][FRBSF]

professional liability program

An investigation by the FDIC or the RTC of all potential claims (inherited from each receivership) for losses caused by the wrongful conduct of officers, directors, lawyers, accountants, brokers, appraisers, or others who have provided services to the failed institution. [FDIC]

profit and loss statement

A summary listing a firm's total revenues and expenses within a specified period of time. Synonymous with income and expense statement. [OTS]

profit center accounting

A method of accounting that identifies various segments of a business that are responsible for both revenues and expenses, as a way of measuring each segment's contribution to the profit of the company as a whole. [OTS]

profit margin

Indicator of profitability. [Harvey]

profit-taking

Selling stock which has appreciated in value since purchase, in order to realize the profit. The term is often used to explain a down-turn in the market following a period of rising prices. [NYSE]

profitability index

Ratio of a project's present value to the initial investment. [WCSU] The present value of the future cash flows divided by the initial investment. Also called the benefit-cost ratio. [Harvey]

profitability ratios

Ratios that focus on the profitability of the firm. Profit margins measure performance with relation to sales. Rate of return ratios measure performance relative to some measure of size of the investment. [Harvey]

profits

The excess of income over all costs and expenses. [OTS] The excess of income over all costs, including the interest cost of the wealth invested. The net income of a business is not an accurate measure of its profit. [FACS]

program trades

Also called basket trades, orders requiring the execution of trades in a large number of different stocks at as near the same time as possible. [Harvey]

program trading

The purchase (or sale) of a large number of stocks contained in or comprising a portfolio. Originally called program trading when index funds and other institutional investors began to embark on large-scale buying or selling campaigns or 'programs' to invest in a manner that replicates a target stock index, the term now also commonly includes computer-aided stock market buying or selling programs, and index arbitrage. [CFTC] Trades based on signals from computer programs, usually entered directly from the trader's computer to the market's computer system and executed automatically. [Harvey] computer-triggered, simultaneous buying and selling of securities in different exchanges to take advantage of price differences in two or more markets. [OTS]

progress payment

progress review

A periodic review of a capital investment project to evaluate its continued economic viability. [Harvey]

progressive tax system

A tax system wherein the average tax rate increases for some increases in income but never decreases with an increase in income. [Harvey]

project

The capital facilities financed by the issue of securities. (Note that securities may be issued for purposes other than financing capital facilities, such as current expenses.) [EPA]

project costs

Costs of acquiring, constructing, equipping and installing the project which, under applicable law, can be included in the principal amount of the securities issued to finance the project. Depending upon applicable law, these costs may include capitalized interest, funding reserves, printing costs, legal fees, issuer fees and other financing costs. [EPA]

project finance

debt that is largely claimed against the cash flows from a particular project rather than against the firm as a whole. [WCSU]

project financing

A form of asset-based financing in which a firm finances a discrete set of assets on a stand-alone basis. [Harvey]

project license

A U.S. license which authorizes large-scale exports of a wide variety of commodities and technical data for specified activities. [ITDS]

project loan certificate

A primary program of Ginnie Mae for securitizing FHA-insured and co-insured multifamily, hospital, and nursing home loans. [Harvey]

project loan securities

Securities backed by a variety of FHA-insured loan types - primarily multi-family apartment buildings, hospitals, and nursing homes. [Harvey]

project note

Note issued by the public housing agencies or urban renewal agencies. [WCSU] Project notes are issued by municipalities to finance federally sponsored programs in urban renewal and housing and are guaranteed by the U.S. Department of Housing and Urban Development. [Harvey]

projected benefit cost method

projected benefit obligation

A measure of a pension plan's liability at the calculation date assuming that the plan is ongoing and will not terminate in the foreseeable future. [Harvey]

projected maturity date

With CMOs, final payment at the end of the estimated cash flow window. [Harvey]

promissory note

A written promise to pay a stipulated sum of money to a specified party under conditions mutually agreed upon. Also called a note, promise, or bond. [OTS] Promise to pay. [WCSU] Written promise to pay. [Harvey]

promotional rate

A rate applying to traffic under special conditions and usually confined to movement between a limited number of cities. [ITDS]

prompt barrel

Product which will move or become available within three to four days. [NYMEX]

prompt corrective action (PCA)

A provision of FDICIA, which amended the FDI Act by adding section 38. The PCA provision, among other things, requires regulators to take prompt corrective action to resolve the problems of an insured depository institution. Unless other action is determined to be appropriate, regulators are required to close an institution that is 'critically undercapitalized' and unable to provide an adequate capital restoration plan. [FDIC]

prompt date

The date on which the buyer of an option will buy or sell the underlying commodity (or futures contract) if the option is exercised. [CFTC]

proof of delivery

Evidence that one party has turned over something (cargo) to another. Commonly, in transportation, a signed, dated acknowledgment of receipt. [ITDS]

prop shop

A proprietary trading group, especially one where the group's traders trade electronically at a physical facility operated by the group. [CFTC]

propane

A natural hydrocarbon occurring in a gaseous state under normal atmospheric pressure and temperature, however, propane is usually liquefied through pressurization for transportation and storage. Propane is primarily used for rural heating and cooking and as a fuel gas in areas not serviced by natural gas mains and as a petrochemical feed stock. [NYMEX]

proper law

The body of law which governs the validity and interpretation of a contract or trust deed. [UNODC]

property

something that is owned or possessed. Property may be real (land), personal, tangible (touchable), or intangible (such as the interest in a play or other creative work). [OTS]

property assessment

The determination of the value of real property upon which taxes will be imposed. [OTS]

property flip fraud

A scheme in which individuals, businesses, and/or straw borrowers, buy and sell properties among themselves to artificially inflate the value of the property. [FFIEC]

property rights

Rights of individuals and companies to own and utilize property as they see fit and to receive the stream of income that their property generates. [Harvey] The conditions of ownership of an asset, the rights to own, use and sell. [FACS]

proprietary account

An account that a futures commission merchant carries for itself or a closely related person, such as a parent, subsidiary or affiliate company, general partner, director, associated person, or an owner of 10 percent or more of the capital stock. The FCM must segregate customer funds from funds related to proprietary accounts. [CFTC]

proprietary trading

Proprietary trading is the buying and selling for the trading institution's own account, in contrast to the trading the institution does on behalf of its customers. [GAO]

proprietary trading group

An organization whose owners, employees, and/or contractors trade in the name of accounts owned by the group and exclusively use the funds of the group for all of their trading activity. [CFTC]

proprietor

A person who has an exclusive right or interest in property or in a business. [ITDS]

proprietorship

A business owned by one person. [ITDS]

prorate

to allocate between two or more parties, the proportionate share of each. For example, the payment of property taxes or insurance premiums may be prorated between buyer and seller. [OTS]

prospectus

A document that provides details about a new offering of securities for sale to the public. It gives a detailed financial background of the issuing company, how the proceeds of the securities will be used, and other pertinent information investors will need to make an informed decision. [NYSE] A written offer to sell property or a security, providing a detailed description of what is being sold, including its characteristics and quality. [OTS] Formal written document to sell securities that describes the plan for a proposed business enterprise, or the facts concerning an existing one, that an investor needs to make an informed decision. Prospectuses are used by mutual funds to describe the fund objectives, risks and other essential information. [Harvey] See 'Offering Circular'. [EPA] Summary of the registration statement providing information on a issue of securities. [WCSU] The document required to be furnished to purchasers of newly registered securities, which provides detailed information about the company issuing the securities and about that particular offering. [SEC]

protectionism

Protecting domestic industry from import competition by means of tariffs, quotas, and other trade barriers. [Harvey] The deliberate use or encouragement of restrictions on imports to enable relatively inefficient domestic producers to compete successfully with foreign producers. [ITDS]

protective covenant

A part of the indenture or loan agreement that limits certain actions a company takes during the term of the loan to protect the lender's interests. [Harvey] Restrictive covenants requiring or preventing certain actions by the issuer or the assisted public or private entity, the breach of which could trigger an event of default. Often subcategories as financial and operating covenants. [EPA]

protective put buying strategy

A strategy that involves buying a put option on the underlying security that is held in a portfolio. [Harvey]

protective service

Many airlines offer a protective service where shippers can arrange to have their shipments under carrier surveillance at each stage of transit. [ITDS]

protective tariff

A duty or tax on imported products to make them more expensive in comparison to domestic products. [ITDS]

protector

A person appointed by the settlor/grantor of a trust, who has limited powers to control the trustee, and usually has the right to change trustees. [UNODC]

protest

The means by which an importer, consignee, or other designated party may challenge a customs decision. [ITDS]

provisional call feature

A feature in a convertible issue that allows the issuer to call the issue during the non-call period if the price of the stock reaches a certain level. [Harvey]

proxy

(l) the authority or power to act for another. (2) a document giving such authority. (3) the person authorized to act for another. [OTS] A written authorization given by shareholders for someone else to cast their votes on such corporate issues as election of directors. [SEC] Document intended to provide shareholders with information necessary to vote in an informed manner on matters to be brought up at a stockholders' meeting. Includes information on closely held shares. Shareholders can and often do give management their proxy, representing the right and responsibility to vote their shares as specified in the proxy statement. [Harvey] Written authorization given by a shareholder to someone else to represent him and vote his shares at a shareholders' meeting. [NYSE]

proxy contest

A battle for the control of a firm in which the dissident group seeks, from the firm's other shareholders, the right to vote those shareholder's shares in favor of the dissident group's slate of directors. Also called proxy fight. [Harvey]

proxy statement

A document which the SEC requires a company to send to its shareholders (owners of record) that provides material facts concerning matters on which the shareholders will vote. [SEC] Information given to stockholders in conjunction with the solicitation of proxies. [NYSE]

proxy vote

Vote cast by one person on behalf of another. [Harvey][WCSU]

prudent man rule

An investment standard. In some states, the law requires that a fiduciary, such as a trustee, may invest the fund's money only in a list of securities designated by the state -- the so called legal list. In other states, the trustee may invest in a security if it is one that would be bought by a prudent man of discretion and intelligence, who is seeking a reasonable income and preservation of capital. [NYSE]

public

In trade parlance, non-professional speculators as distinguished from hedgers and professional speculators or traders. [CFTC]

public bank license

The bank is permitted to carry on banking business with members of the general public. [UNODC]

public corporation

A business corporation with shares traded among the general public, such as through a stock exchange. [ITDS]

public elevators

Grain elevators in which bulk storage of grain is provided to the public for a fee. Grain of the same grade but owned by different persons is usually mixed or commingled as opposed to storing it 'identity preserved.' Some elevators are approved by exchanges as regular for delivery on futures contracts. [CFTC]

public file

The file available at the Company Registry for inspection on request. [UNODC]

public goods

Goods that cannot be withheld from people even if they dont pay for them. [FACS]

public key infrastructure

public offering

The sale of registered securities by the issuer (or the underwriters acting in the interests of the issuer) in the public market. Also called public issue. [Harvey]

public sale

Sale of an issue by competitive bidding. [EPA]

public sector

that portion of the economy composed of all levels of government, and excluding businesses and households. [OTS]

Public Securities Administration

The trade association for primary dealers in U.S. government securities, including MBSs. [Harvey]

public warehouse

Warehouse operated by an independent warehouse company on its own premises. [Harvey][WCSU]

publicly traded assets

Assets that can be traded in a public market, such as the stock market. [Harvey]

published rate

The charges for a particular class of cargo as published in a carriers tariff. [ITDS]

puke

Slang for a trader selling a position, usually a losing position, as in, 'When in doubt, puke it out.' [Harvey]

pulpit

A raised structure adjacent to, or in the center of, the pit or ring at a futures exchange where market reporters, employed by the exchange, record price changes as they occur in the trading pit. [CBOT][MIDAM]

pump and dump

pump-over

An intra, or inter-facility transfer. For example, when one pipeline pumps crude oil or refined products from its tanks or mainline into the mainline or storage tank of the receiving pipeline. [NYMEX]

punch list

A record of incomplete or unsatisfactory construction items covered by a contract, usually prepared by an architect or engineer, before certifying project completion. [OTS]

purchase

To buy, to be long, to have an ownership position. [Harvey]

purchase accounting

A method of accounting when one enterprise is acquired by another. The surviving enterprise records as its cost the market value of the acquired assets less liabilities assumed. The difference between that market value and the total price paid is recorded as an asset called goodwill. [OTS] Method of accounting for a merger in which the acquirer is treated as having purchased the assets and assumed liabilities of the acquiree, which are all written up or down to their respective fair market values, the difference between the purchase price and the net assets acquired being attributed to goodwill. [Harvey]

purchase agreement

A signed document stating the purchaser's agreement to buy and the seller's agreement to sell a specified property under stated terms and conditions. [OTS] As used in connection with project financing, an agreement to purchase a specific amount of project output per period. [Harvey]

purchase and assumption (P&A)

A resolution method in which a healthy insured institution purchases some or all of the assets and assumes the deposit liabilities of a failed bank or thrift. On a case-by-case basis, the assuming institution's bid may be sufficient to allow assumption of all the deposit liabilities of the failing institution, including the uninsured deposits. [FDIC]

purchase and sale

A method of securities distribution in which the securities firm purchases the securities from the issuer for its own account at a stated price and then resells them, as contrasted with a best-efforts sale. [Harvey]

purchase and sell statement

A Statement sent by a commission house to a customer when his futures or options on futures position ha changed, showing the number of contracts bought or sold, the prices at which the contracts were bought or sold, the gross profit or loss, the commission charges, and the net profit or loss on the transaction. [CBOT]

purchase fund

Resembles a sinking fund except that money is used only to purchase bonds if they are selling below their par value. [Harvey]

purchase method

Accounting for an acquisition using market value for the consolidation of the two entities' net assets on the balance sheet. Generally, depreciation/amortization will increase for this method compared with pooling and will result in lower net income. [Harvey]

purchase option

A clause in a lease granting the lessee an option to purchase the leased property on or before the lease termination date, usually at a specified price. [OTS]

purchase order

A purchasers written offer to a supplier formally stating all terms and conditions of a proposed transaction. [ITDS]

purchase price

The price at which an issue is purchased, resulting in 'proceeds'. [EPA]

purchase-money mortgage

A mortgage given to the seller, with the mortgage constituting all or part of the compensation received for the sale of property. Such a mortgage is used when the seller is also the lender. Most purchase-money mortgages are one or two years in length or, in some cases, up to five years. [OTS]

purchased credit card relationships (PCCR)

The premium paid to acquire established credit card accounts from a financial institution. Buyers pay a premium over the dollar value of the credit card accounts themselves in order to acquire the customer loyalty in an established line of business. The premium is listed on the books as an intangible asset. [OTS]

purchased mortgage servicing rights (PMSR)

The right, acquired from another, to service a mortgage and collect a fee. The value of that right is listed on the books as an intangible asset. [OTS]

purchasing (long) hedge

Buyer futures contracts to protect against a possible price increase of cash commodities that will e purchased in the future. At the time the cash commodities are bought, the open futures position is closed by selling an equal number and type of futures contracts as those that were initially purchased. Also referred to as a buying hedge. [CBOT] Buying futures contracts to protect against a possible price increase of cash commodities that will be purchased in the future. At the time the cash commodities are bought, the open futures position is closed by selling an equal number and type of futures contracts as those that were initially purchased. Also referred to as a buying hedge. [MIDAM]

purchasing power

The value of money measured by the amount of goods and services it can buy. [OTS]

purchasing power parity

The notion that the ratio between domestic and foreign price levels should equal the equilibrium exchange rate between domestic and foreign currencies. [Harvey]

purchasing power parity theory

A theory by which the exchange rate between any two currencies adjusts to reflect changes in the price levels within the two countries. [FRBSF] The exchange rate between any two currencies adjusts to reflect changes in the price levels within the two countries. [FRB][FRBM]

pure competition

A situation where many sellers sell the same product and no seller can set the price. [FACS]

pure expectations theory

A theory that asserts that the forward rates exclusively represent the expected future rates. In other words, the entire term structure reflects the markets expectations of future short-term rates. For example, an increasing sloping term structure implies increasing short-term interest rates. [Harvey]

pure index fund

A portfolio that is managed so as to perfectly replicate the performance of the market portfolio. [Harvey]

pure yield pickup swap

Moving to higher yield bonds. [Harvey]

pure-discount bond

A bond that will make only one payment of principal and interest. Also called a zero-coupon bond or a single-payment bond. [Harvey]

purpose credit

Credit used for the purpose of buying, carrying, or trading in securities. [FRB][FRBC][FRBM][FRBSF]

purpose trust

A trust created for an expressed purpose without any individually ascertained or ascertainable beneficiaries. A purpose trust is typically used in circumstances where the trust would not be exclusively charitable, but, wholly philanthropic. [UNODC]

put

A contract giving the holder the right to sell a specific security at a specified price during a designated period. A put is purchased by someone who thinks the price of the underlying security will go down and who wants to lock in a higher selling price. Opposite of call. [OTS] An option contract that gives the holder the right but not the obligation to sell a specified quantity of a particular commodity, security, or other asset or to enter into a short futures position at a given price (the 'strike price') prior to or on or prior to a specified expiration date. [CFTC] An option granting the right to sell the underlying futures contract. Opposite of a call. [Harvey] The right, in an options contract, to sell underlying securities at a specified price at a specified time. [SEC]

put an option

To exercise a put option. [Harvey]

put bond

A bond that the holder may choose either to exchange for par value at some date or to extend for a given number of years. [Harvey] Bonds that contain provisions giving the holders an option to require redemption at a specified price, within a specified time period or at a specified time and under specified conditions. This option is intended to afford the bondholders protection against market price fluctuations and, at times, other risks, and may be used to give the bondholders an effective means of accelerating bond payment even in the absence of an event of default. The option may be used in connection with a letter of credit which obligates the issuer of the letter of credit to honor a draft or demand for payment of the principal and accrued interest and any premium on the bonds by a bondholder when the 'put' option is exercised by the bondholder. [EPA]

put option

A provision in some purchase and assumption agreements under which an assuming institution has the option of requiring the FDIC, within a specified time frame, to repurchase certain loans that have been transferred to the acquiring institution under a P&A agreement. [FDIC] A put option is a contract that gives one the right, but not the obligation, to sell a specified amount of an underlying asset, such as stocks or currency, at a specified price by a certain date. [GAO] An option attached to a bond that gives the owner the right to 'put' or sell that bond back to a remarketing agent on a predetermined date at a predetermined price, generally 100% of par value. [EPA] An option that gives the option buyer the right but not the obligation to sell (go 'short') the underlying futures contract at the strike price on or before the expiration date. [CBOT][MIDAM] An option which gives the buyer, or holder, the right, but not the obligation, to sell a futures contract at a specific price within a specific period of time in exchange for a one-time premium payment. It obligates the seller, or writer, of the option to buy the underlying futures contract at the designated price, should an option be exercised at that price. [NYMEX] Option to sell an asset at a specified exercise price on or before a specified exercise date. [WCSU] This security gives investors the right to sell (or put) fixed number of shares at a fixed price within a given time frame. An investor, for example, might wish to have the right to sell shares of a stock at a certain price by a certain time in order to protect, or hedge, an existing investment. [Harvey]

put price

The price at which the asset will be sold if a put option is exercised. Also called the strike or exercise price of a put option. [Harvey]

put provision

Gives the holder of a floating-rate bond the right to redeem his note at par on the coupon payment date. [Harvey]

put swaption

A financial tool in which the buyer has the right, or option, to enter into a swap as a floating-rate payer. The writer of the swaption therefore becomes the floating-rate receiver/fixed-rate payer. [Harvey]

put-call parity relationship

The relationship between the price of a put and the price of a call on the same underlying security with the same expiration date, which prevents arbitrage opportunities. Holding the stock and buying a put will deliver the exact payoff as buying one call and investing the present value (PV) of the exercise price. The call value equals C=S+P-PV(k). [Harvey]

put-call parity theorem

An equation representing the proper relationship between put and call prices. Violation of a parity allows arbitrage opportunities. [TMAC]

puts option

An option that gives the right to the buyer to deliver to the seller the underlying instrument at a predetermined price within a specified period. The seller of a put option has the obligation to accept delivery if the option is exercised. [TMAC]

pyramid schemes

An illegal, fraudulent scheme in which a con artist contrives victims to invest by promising an extraordinary return but simply uses newly invested funds to pay off any investors who insist on terminating their investment. [Harvey] As in Ponzi Schemes, the money collected from newer victims of the fraud is paid to earlier victims to provide a veneer of legitimacy. In Pyramid Schemes, however, the victims themselves are induced to recruit further victims through the payment of recruitment commissions. [FBI]

pyramiding

The use of profits on existing positions as margin to increase the size of the position, normally in successively smaller increments. [CFTC]

Q ratio

quadratic programming

Variant of linear programming where the equations are quadratic rather than linear. [Harvey][WCSU]

quadrilateral meetings

Meetings involving trade ministers from the U.S., European Community, Canada, and Japan to discuss trade policy matters. [ITDS]

quadrominium

A four-unit condominium. [OTS]

quadroplex

A structure containing four dwelling units with shared walls. Ownership of each unit may be fee simple or as a condominium. [OTS]

qualified financial contract (QFC)

A type of financial agreement that includes, but is not limited to, securities contracts, forward contracts, repurchase agreements, and swap agreements. When a receiver repudiates a QFC, damages are measured as of the date of the repudiation and may include the cost of acquiring a replacement QFC. Special rules for the repudiation of QFCs are necessary to protect domestic financial markets. [FDIC]

qualified opinion

An opinion issued by an independent auditor when the scope of the audit has been restricted in some manner or the financial records have departed from generally accepted accounting principles (GAAP). [OTS]

qualified thrift investment (QTI)

housing-related assets that a savings institution can count toward meeting its qualified thrift lender test. [OTS]

qualified thrift lender (QTL)

A savings institution that qualifies for low cost advances from its Federal Home Loan Bank and/or qualifies for federal tax benefits by virtue of having at least a certain percentage of its assets in housing-related investments. Traditionally, the minimum has ranged between 60 and 70 percent of assets. [OTS]

Quality of Markets Committee (QOMC)

Oversees and advises on the quality and competitiveness of the NYSE market, as well as on issues related to market structure. The QOMC, a standing board committee, is assisted by two operating committees and an ad hoc advisory committee. [NYSE]

quality option

Also called the swap option, the seller's choice of deliverables in Treasury Bond and Treasury note futures contract. [Harvey]

quality spread

Also called credit spread, the spread between Treasury securities and non-Treasury securities that are identical in all respects except for quality rating. For instance, the difference between yields on Treasuries and those on single A-rated industrial bonds. [Harvey]

quantitative restrictions

Explicit limits, or quotas, on the physical amounts of particular commodities that can be imported or exported during a specified time period, usually measured by volume but sometimes by value. The quota may be applied on a selective basis, with varying limits set according to the country of origin, or on a quantitative global basis that only specifies the total limit and thus tends to benefit more efficient suppliers. [ITDS]

quanto option

An option in which foreign exchange risks in an underlying security have been eliminated. [TMAC]

quantos

Currency options with a guaranteed exchange rate that enable buyers who like the asset, German bonds for example, but not the asset's pricing currency, to arrange to be paid in a different currency for a fee. [Harvey]

quarantine

The term during which an arriving ship or airplane, including its passengers, crew and cargo, suspected of carrying a contagious disease, is held in isolation to prevent the possible spread of the disease. [ITDS]

quarter

A United States coin equal to 25 cents or one-fourth of a dollar. [OTS]

quay

A structure built for the purpose of mooring a vessel; also called a pier. [ITDS]

questioned trade (QT)

Indicates a trade in which, during the comparison process, one participant is discovered to be incorrectly identified. [NYSE]

queue

A line or group of people waiting for service, such as a line of people waiting in a teller line at a bank; or paperwork in a stack waiting for processing; or items on a waiting list waiting for processing or repair. [ITDS]

quick assets

Current assets minus inventories. [Harvey]

quick ratio

Indicator of a company's financial strength (or weakness). Calculated by taking current assets less inventories, divided by current liabilities. This ratio provides information regarding the firm's liquidity and ability to meet its obligations. Also called the Acid Test ratio. [Harvey] Measure of liquidity: (current assets-inventory) divided by current liabilities. [WCSU]

quick take

The acquisition by government of private real property under the power of eminent domain, prior to the completion of condemnation proceedings, in order to avoid loss of time. [OTS]

quid pro quo

A mutual consideration; securing an ad. vantage or receiving a concession in return for a similar favor. [ITDS]

quiet title action

A legal process to eliminate any claims against a property by persons other than the owner. The procedure is used to perfect the title to the property when quitclaim deeds can not be obtained from those who may have such claims on the property. [OTS]

quitclaim deed

A document by which the owner of real estate conveys to another the owner's legal right to, interest in and title to a property, but which contains no warranty or statement regarding claims, if any, that others might have in the property. [OTS]

quota

A limitation on the quantity of goods that may be imported into a country from all countries or from specific countries during a set period of time. [ITDS] A quantitative restriction on imports. [FACS]

quota system

A part of the U.S. Customs Service Automated Commercial System, controls quota levels (quantities authorized) and quantities entered against those levels. [ITDS]

quotation (or quote)

The price at which a security may be bought or sold at any given time. [SEC]

quotation

The actual price or the bid or ask price of either cash commodities or futures contracts. [CFTC] The highest bid to buy and the lowest bid to sell a security in a given market at a given time. A quotation might be, for example, '32 1/4 to 32 1/2' meaning that $32.25 is the highest price any buyer wanted to pay at the time the quote was given and $32.50 was the lowest price any seller would take at the same time, in the same exchange. [OTS]

quote

The highest bid to buy and the lowest offer to sell any stock at a given time. [NYSE]

R registered bond

A bond that is registered on the books of the issuing company in the name of the owner. It can be transferred only when endorsed by the registered owner. Registered Competitive Market [NYSE]

R squared

Square of the correlation coefficient proportion of the variability explained by the linear regression model. For example, an r squared of 75% means that 75% of the variability observed in the dependent variable is explained by the independent variable. [Harvey] Square of the correlation coefficient-the proportion of the variability in one series that can be explained by the variability of one or more other series. [WCSU]

rack price

Price charged by a supplier to a customer that buys transport truck lots at a terminal, on an FOB basis. [NYMEX]

Racketeer Influenced and Corrupt Organization Act (RICO)

A federal law in the United States used to convict individuals and firms of insider trading. [UNODC]

rail waybill

Freight document that indicates goods have been received for shipment by rail. [ITDS]

rally

A brisk rise following a decline in the general price level of the market, or in an individual stock. [NYSE] An advancing price movement following a decline in a market. [NYMEX] An upward movement of prices. [CFTC] An upward movement of prices. Opposite of reaction. [Harvey]

random variable

A function that assigns a real number to each and every possible outcome of a random experiment. [Harvey]

random walk

An economic theory that market price movements move randomly. This assumes an efficient market. The theory also assumes that new information comes to the market randomly. Together, the two assumptions imply that market prices move randomly as new information is incorporated into market prices. The theory implies that the best predictor of future prices is the current price, and that past prices are not a reliable indicator of future prices. If the random walk theory is correct, technical analysis cannot work. [CFTC] Theory that stock price changes from day to day are at random; the changes are independent of each other and have the same probability distribution. Many believers of the random walk theory believe that it is impossible to outperform the market consistently without taking additional risk. [Harvey]

randomized strategy

A strategy of introducing into the decision-making process a random element that is designed to reduce the information content of the decision-maker's observed choices. [Harvey]

range (price)

The price span during a given trading session, week, month, year, etc. [CBOT][MIDAM]

range

The difference between the high and low price of a commodity, futures, or option contract during a given period. [CFTC] The difference between the highest and lowest prices recorded during a given trading period. [NYMEX] The high and low prices, or high and low bids and offers recorded during a specified time. [Harvey]

range bonds

bonds that stop paying an investor when the bond's reference rate is higher or lower than a predetermined range on an established index. The bonds pay an above-market coupon rate as long as the reference rate falls within the range. For example, if LIBOR is the index, a range bond might pay LIBOR plus 75 basis points for each day LIBOR is between 3.5 and 5 percent. When LIBOR is less than 3.5 percent or more than 5 percent, the bond accrues no interest. A range bond is a type of structured note. [OTS]

range forward

A forward exchange rate contract that places upper and lower bounds on the cost of foreign exchange. [Harvey]

rate

rate anticipation swaps

An exchange of bonds in a portfolio for new bonds that will achieve the target portfolio duration, based on the investor's assumptions about future changes in interest rates. [Harvey]

rate base

The value of utility property used in computing an authorized rate of return as authorized by law or a regulatory commission. [EPA]

rate block

A range of water consumption charged at a specific rate per thousand gallons. Rate structures may be one-block (where all water is charged at the same rate) or multi-block (where the charge per thousand gallons decreases with each higher-use block, called a 'declining block structure'). Rate structures with increasing charges in higher use blocks are becoming more popular, but this workbook does not include a method for increasing block structures. [EPA]

rate covenant

(A) A provision in a bond indenture under which the issuer agrees to adjust rates charged for services being rendered in order to produce sufficient revenue to meet obligations under an indenture. (B) A covenant requiring the charging of rates or fees for the use or availability of specified facilities, products or operations, at rates or in amounts at least sufficient to achieve a stated minimum earnings coverage. See 'Earnings Coverage'. [EPA]

rate intermediation

borrowing funds at short-term interest rates and lending the funds at longer term fixed rates. [OTS]

rate lock

An agreement between the mortgage banker and the loan applicant guaranteeing a specified interest rate for a designated period, usually 60 days. [Harvey]

rate of exchange

The amount of currency of one nation that may be purchased on a specific date with a specified amount of the currency of another nation. [OTS] The amount of funds of one nation that can be bought, at a specific date, for a sum of currency of another country. [ITDS]

rate of interest

The rate, as a proportion of the principal, at which interest is computed. [Harvey]

rate of return

In stocks and bonds, the amount of money returned to investors on their investments. Also known as yield. [NYSE] The measure of profitability of an investment. It measures the income that may be obtained from an investment against its purchase price, or its current market price. The rate of return refers to either the yield to maturity on a bond or the current income return of an investment such as a security. Also known as return on investment (ROA), or yield. [OTS]

rate of return ratios

Ratios that are designed to measure the profitability of the firm in relation to various measures of the funds invested in the firm. [Harvey]

rate risk

In banking, the risk that profits may decline or losses occur because a rise in interest rates forces up the cost of funding fixed-rate loans or other fixed-rate assets. [Harvey]

rate-sensitive

describes a deposit account or security investment for which changes in its interest rate produce wide fluctuations in its supply and/or demand. [OTS]

rating

(A) Designations of the quality of bonds or notes issued by state and local governmental units. Ratings are provided by agencies or corporations that seek and render a professional judgment concerning the quality of the security being rated, e.g., Moody's Investor Service, Inc. and Standard & Poor's Corporation. (B) Designations used by investor services to give relative indications of credit quality, ranging from excellent (Aaa/AAA) to medium (Baa/BBB) to noninvestment grade (BA/BB + or below). [EPA] An evaluation of credit quality Moody's, S&P, and Fitch Investors Service give to companies used by investors and analysts. [Harvey] in securities trading, a formal opinion given by an independent, professional service on the credit standing of the issuer of a bond and on the investment quality of the security. The opinion is normally expressed in letters: AAA, Baa-l, etc. [OTS]

rating agencies

Usually refers to Moody's Investors Service, Inc. or Standard & Poor's Corporation. [EPA]

ratio

ratio hedge

The number of options compared to the number of futures contracts bought or sold in order to establish a hedge that is neutral or delta neutral. [CFTC]

ratio spread

Any spread where the number of long market contracts and the number of short market contracts are unequal. [NYMEX] This strategy, which applies to both puts and calls, involves buying or selling options at one strike price in greater number than those bought or sold at another strike price. Ratio spreads are typically designed to be delta neutral. Back spreads and front preads are types of ratio spreads. [CFTC]

ratio vertical spread

rational expectations

Market participants intuitively anticipate systemic policy actions and their consequences for the economy; thus, on average, private market forecasts are accurate and planned policy is ineffectual (see New Classical Macroeconomics). [FACS] The idea that people rationally anticipate the future and respond to what they see ahead. [Harvey]

raw land

land in its natural state, with no man-made improvements such as grading, sewers, roads or buildings. [OTS]

raw material supply agreement

As used in connection with project financing, an agreement to furnish a specified amount per period of a specified raw material. [Harvey]

re-domiciliation corporations

Some offshore jurisdictions allow corporations incorporated in other jurisdictions to re-incorporate in their own at will. [UNODC]

reaction

A decline in prices following an advance. Opposite of rally. [Harvey] A downward price movement after a price advance. [CFTC]

reaffirmation agreement

An agreement that reinstates a previous debt after bankruptcy proceedings are completed. [OTS]

real accounts

The accounts: asset, liability, reserve and capital -- whose balances are not canceled out at the end of an accounting period, but are carried over to the next period. These accounts appear on the post-closing trial balance and the statement of condition (balance sheet). Also called permanent accounts. [OTS]

real assets

Identifiable assets, such as buildings, equipment, patents, and trademarks, as distinguished from a financial obligation. [Harvey] Tangible assets and intangible assets used to carry on business. [WCSU] tangible assets in contrast to financial assets or securities. Real assets include real estate, land, gold, coins, stamps, art, and antiques. [OTS]

real capital

Wealth that can be represented in financial terms, such as savings account balances, financial securities, and real estate. [Harvey]

real cash flow

A cash flow is expressed in real terms if the current, or date 0, purchasing power of the cash flow is given. [Harvey]

real estate

land and all physical property on, below or attached to the land. Houses, sewers, trees and fences are all real estate. [OTS]

real estate investment trust (REIT)

An investment vehicle established for the benefit of a group of real estate investors. A REIT is an unincorporated trust or association, managed by one or more trustees who hold title to the assets of the trust and control its acquisitions and investments. Real estate investments commonly include office buildings, apartment houses and shopping centers. [OTS] An organization similar to an investment company in some respects but concentrating its holdings in real estate investments. The yield is generally liberal since REITs are required to distribute as much as 90% of their income. [NYSE]

real estate mortgage investment conduit (REMIC)

A entity through which an issuer can sell multiple class securities with call protection to investors. A REMIC may be a corporation, trust, association, or partnership, but in order to qualify, it must confine its investments to mortgages, cash, government securities, foreclosure property acquired in connection with imminent default of a mortgage, or other REMICs. Typically, a REMIC invests in a pool of mortgages, and sells interests in those mortgages through securities with one or more senior classes and a subordinated class that assumes the credit risk of defaults and delinquencies. This creates a form of self-insurance that increases the investment ratings for the senior securities. A REMIC does not keep its mortgage assets on its books, but sells them to investors through its securities. [OTS] A mortgage-backed securities vehicle, authorized by the Tax Reform Act of 1986, that holds residential or commercial mortgages and issues securities representing interests in those mortgages. The REMIC structure (1) qualifies as an asset sale for tax purposes, (2) offers tax and accounting flexibility to portfolio lenders, and (3) creates a broad investor market through multiple classes of securities. The REMIC itself is normally exempt from federal income tax, but investors generally report the interest from the securities as taxable income. [FDIC]

real estate owned (REO)

real estate owned by a savings institution as the result of default by borrowers and subsequent foreclosure by the institution. [OTS]

Real Estate Owned Management System (REOMS)

A national database system that provided the RTC with an online inventory control system designed to monitor the acquisition, management, and disposition of real estate owned. [FDIC]

real exchange rates

Exchange rates that have been adjusted for the inflation differential between two countries. [Harvey]

real GDP

GDP adjusted for inflation. Real GDP provides the value of GDP in constant dollars, which is used as an indicator of the volume of the nation's output. [FRB][FRBC][FRBM][FRBSF]

real GNP

The GNP of any year measured in the prices of a base year. Real GNP is nominal GNP adjusted for inflation. [FACS]

real interest rates

Interest rate expressed in terms of real goods, i.e., nominal interest rate adjusted for inflation. [WCSU] Interest rates adjusted for the expected erosion of purchasing power resulting from inflation. Technically defined as nominal interest rates minus the expected rate of inflation. [FRB][FRBC][FRBM][FRBSF] The rate of interest excluding the effect of inflation; that is, the rate that is earned in terms of constant-purchasing-power dollars. Interest rate expressed in terms of real goods, i.e. nominal interest rate adjusted for inflation. [Harvey]

real market

The bid and offer prices at which a dealer could do 'size.' Quotes in the brokers market may reflect not the real market, but pictures painted by dealers playing trading games. [Harvey]

real property

all immovable property such as land and the buildings or other objects permanently affixed to the land. [OTS]

real rate of interest

The dollar interest rate corrected for inflation; equal to the nominal rate minus the inflation rate. [FACS]

real rights

Rights in real estate or in items attached to real estate. [ITDS]

real time

A real time stock or bond quote is one that states a security's most recent offer to sell or bid (buy). A delayed quote shows the same bid and ask prices 15 minutes and sometimes 20 minutes after a trade takes place. [Harvey]

real wage

Ones wage adjusted for inflation. [FACS]

real-time gross settlement

Real-time gross settlement is a system that processes each transaction as it is initiated rather than processing it in a batch. Gross settlement means that the system settles each transaction individually. [GAO]

Real-Time Gross Settlement System (RTGS)

realignment

Simultaneous and mutually coordinated re- and devaluation of the currencies of several countries. [ITDS]

realized compound yield

Yield assuming that coupon payments are invested at the going market interest rate at the time of their receipt and rolled over until the bond matures. [Harvey]

realized profits and losses

A profit or loss realized from the sale of capital assets, such as portfolio securities. [TMAC]

realized return

The return that is actually earned over a given time period. [Harvey]

realtor

A real estate agent or broker who is a member of the National Association of Realtors, formerly the National Association of Real Estate Boards. [OTS]

rebalancing

Realigning the proportions of assets in a portfolio as needed. [Harvey]

receipt

A written acknowledgment that something of value was received. [OTS] Any written acknowledgment of value received. [ITDS]

receivables

A bookkeeping term for amounts of revenue contracted for but not yet received. [OTS]

receivables balance fractions

The percentage of a month's sales that remain uncollected (and part of accounts receivable) at the end of succeeding months. [Harvey]

receivables turnover ratio

Total operating revenues divided by average receivables. Used to measure how effectively a firm is managing its accounts receivable. [Harvey]

receiver

A bankruptcy practitioner appointed by secured creditors in the United Kingdom to oversee the repayment of debts. [Harvey] A party appointed by a court or regulatory agency to manage property subject to litigation, or the property and affairs of a bankrupt person or institution. The receiver maintains and manages the property in the interest of lenders or creditors until a final disposition of the property is made. [OTS] A receiver is the individual or organization that has authorized an originator to initiate an ACH credit or debit transaction entry to the receiver's account with the receiving depository institution. [GAO]

receivership

The legal procedure for winding down the affairs of an insolvent institution. [FDIC] The state of being under the administration of a receiver. A receivership removes the institution or company in receivership from its owners, who lose their equity. Since a receivership ends the corporate existence of an institution or company, it stops the payment of stock dividends and interest on debt. [OTS]

receivership certificate

A document issued by the receiver that represents the total amount of the proved claim that each depositor or unsecured creditor has against a failed bank or thrift in receivership. [FDIC]

receiving depository financial institution (RDFI)

A receiving financial institution is an ACH transaction's final destination. The receiving financial institution may receive the items directly from an ACH or may work through a processing center, which is the actual receiving point. [ACH]

receiving papers

Paperwork that accompanies a shipment when it is brought to the dock. [ITDS]

receiving point

Any site where entries are received from an ACH for processing. This may be the member financial institution, its data center, or a data processing service authorized to receive entries on behalf of a member institution. [ACH]

recession

A period of no or negative economic growth and high unemployment. [NYSE] A period of reduced economic activity during which the level of unemployment rises, production slows, and general prosperity lags. [OTS] A significant decline in general economic activity extending over a period of time. [FRB][FRBC][FRBM][FRBSF]

reciprocal of European terms

One method of quoting exchange rates, which measured the U.S. dollar value of one foreign currency unit, i.e., U.S. dollars per foreign units. See European Terms. [CBOT] One method of quoting exchange rates, which measures the U.S. dollar value of one foreign currency unit, i.e., U.S. dollars per foreign units. [MIDAM]

reciprocity

The process by which governments extend similar concessions to each other. [ITDS]

reclamation

A claim for the right to return or the right to demand the return of a security that has been previously accepted as a result of bad delivery or other irregularities in the delivery and settlement process. [Harvey]

recognition lag

The time it takes for policymakers to recognize the state of the economy. [FRBSF]

reconciliation

The process of analyzing two related records and, if differences exist between them, finding the cause and bringing the two records into agreement. A common example of reconciliation is the comparison of an up-to-date check book with a monthly statement from the financial institution holding the account. [OTS]

reconsignment

A change in the name of the consignor; a change in the place of delivery; or relinquishment of shipment at point of origin. [ITDS]

Reconstruction Finance Corporation (RFC)

An entity established by Congress in 1932 to extend credit on an emergency basis 'to stop deflation in agriculture and industry' to banks, agricultural credit institutions, railroads, insurance companies, and public works. In its heyday, the RFC was the leading federal domestic financing agency and its financing activities included war projects during World War II. The RFC went out of existence on June 30, 1954. [FDIC]

reconveyance

The transfer of the title of property from the current owner to the most recent previous owner. [OTS]

record date

(1) Date by which a shareholder must officially own shares in order to be entitled to a dividend. For example, a firm might declare a dividend on Nov 1, payable Dec 1 to holders of record Nov 15. Once a trade is executed an investor becomes the 'owner of record' on settlement, which currently takes 5 business days for securities, and one business day for mutual funds. Stocks trade ex-dividend the fourth day before the record date, since the seller will still be the owner of record and is thus entitled to the dividend. (2) The date that determines who is entitled to payment of principal and interest due to be paid on a security. The record date for most MBSs is the last day of the month, however the last day on which they may be presented for the transfer is the last business day of the month. The record date for CMOs and asset-backed securities vary with each issue. [Harvey] Date set by directors when making dividend payment. Dividends are sent to stock holders who are registered on the record date. [WCSU] The date on which you must be registered as a shareholder of a company in order to receive a declared dividend or, among other things, to vote on company affairs. [NYSE]

recourse

(1) the right of a holder in due course to demand payment from the maker or endorser of a negotiable instrument, or from prior endorsers, if the instrument is dishonored by the maker. (2) the acceptance, assumption or retention of some or all of the risk of loss associated with an asset owned by another party. (3) in the secondary mortgage market, recourse refers to a provision in a sales contract by which a mortgage seller agrees to buy back the loan if default and foreclosure occur. [OTS] Term describing a type of loan. If a loan is with recourse, the lender has a general claim against the parent company if the collateral is insufficient to repay the debt. [Harvey][WCSU]

recourse servicing

mortgage servicing in which the company servicing a mortgage has assumed the financial risk in the event the borrower defaults on the loan. [OTS]

recovery

An upward price movement after a decline. [CFTC]

recovery rate

Ratio of net-collections-to-book-value-reductions. This performance measurement does not consider the time value of money. [FDIC]

red book

The Bond Buyer 'Director of Municipal Bond Dealers of the United States', which also contains a directory of bond counsel and financial advisors. [EPA]

red clause letter of credit

Ordinarily, the terms of a letter of credit, as specified by the buyer, will not permit the beneficiary to obtain payment in advance of shipping the merchandise. In certain circumstances, the buyer may wish to extend the benefits of a letter of credit to assist the seller in procuring or obtaining the goods (closely akin to an unsecured working capital advance). Traditionally, this provision is inserted on the face of a regular letter of credit in a clause written in red ink. The beneficiary is authorized to obtain preshipment financing against his undertaking to deliver the shipping documents as specified within the expiration date. These instruments take two forms. One authorizes a foreign bank to provide financing in foreign funds to the beneficiary. The foreign bank is paid for advances and interest thereon by drawing drafts on the issuing bank. The other type authorizes the beneficiary to draw drafts on the issuing bank. [FDIC]

red herring

A preliminary prospectus containing information required by the SEC. It excludes the offering price and the coupon of the new issue. [Harvey] See 'Preliminary Official Statement or Preliminary Offering Circular'. [EPA]

redacted

The condition of a document that has been edited to remove sensitive or confidential information. [OTS]

redeem

to buy back, as in an issuer redeeming bonds at maturity, or a property owner redeeming his or her property after a foreclosure sale. [OTS]

redeemable

Eligible for redemption under the terms of the indenture. [Harvey]

redeliver

A demand by U.S. Customs to return previously released goods to Customs custody for reexamination, reexport, or destruction. [ITDS]

redemption charge

The commission charged by a mutual fund when redeeming shares. For example, a 2% redemption charge (also called a 'back end load') on the sale of shares valued at $1000 will result in payment of $980 (or 98% of the value) to the investor. This charge may decrease or be eliminated as shares are held for longer time periods. [Harvey]

redemption cushion

The percentage by which the conversion value of a convertible security exceeds the redemption price (strike price). [Harvey]

redemption of accounts

The process by which a savings institution buys back the savings accounts of its depositors by paying their full withdrawal value. [OTS]

redemption price

The price at which a bond may be redeemed before maturity, at the option of the issuing company. Redemption value also applies to the price the company must pay to call in certain types of preferred stock. [NYSE]

redemption provisions

Provisions for optional or mandatory call. [EPA]

redevelopment

The urban process of improving cleared or undeveloped land, including erection of buildings and other facilities by public or private developers, but not including site improvements installed by a local public agency in order to prepare the land for disposition to developers. [OTS]

redlining

The refusal of a savings institution or other business to extend credit to, lend to, insure, or otherwise assume some financial risk involving property or a business located in a high-risk geographical area, usually a declining inner-city neighborhood. Redlining also refers to setting prohibitively high fees for financial services in a high-risk area. [OTS]

reefer container

A controlled temperature shipping container (usually refrigerated). [ITDS]

reexport

The export of imported goods without added value. [ITDS]

reference asset

An asset, such as a corporate or sovereign debt instrument, that underlies a credit derivative. [CFTC]

reference rate

A benchmark 'interest rate (such as LIBOR), used to specify conditions of an interest rate swap or an interest rate agreement. [Harvey]

refinancing

Same as refunding. New securities are sold by a company and the money is used to retire existing securities. Object may be to save interest costs, extend the maturity of the loan, or both. [NYSE] The repayment of a loan with funds from a new loan secured by the same property as the first loan. The new loan may be from the same or a different lending institution. [OTS]

refiner-distributor

A company that acts as a wholesaler of gasoline, heating oil or other products which operates its own refinery; may also retail and buy additional supplies to supplement its own refining output. [NYMEX]

refinery

A plant used to process crude oil or metals. An oil refinery separates the fractions of crude oil and converts them into usable products. A metals refinery removes impurities, bringing the metal up to designated purity specifications. [NYMEX]

reforming process

The use of heat and catalysts to effect the rearrangement of certain hydrocarbon molecules without altering their composition appreciably; for example, the conversion of low-octane naphthas or gasolines into high-octane number products. [NYMEX]

refund

An amount returned to the consignor as a result of the carrier having collected charges in excess of the originally agreed upon charges. [ITDS]

refundable

Eligible for refunding under the terms of indenture. [Harvey]

refunded bond

Also called a prerefunded bond, one that originally may have been issued as a general obligation or revenue bond but that is now secured by an 'escrow fund' consisting entirely of direct U.S. government obligations that are sufficient for paying the bondholders. [Harvey]

refunding

Replacement of existing debt with a new issue of debt. [WCSU] Sale of a new issue, the proceeds of which are to be used, immediately or in the future, to pay debt service on and retire an outstanding issue. The object of refunding may be to save on interest cost, extend the maturity of the debt or to relax or remove restrictive covenants. Compare 'Advance Refunding'. [EPA] The redemption of a bond with proceeds received from issuing lower-cost debt obligations ranking equal to or superior to the debt to be redeemed. [Harvey]

Regional Asset Liquidation Agreement (RALA)

Asset management contract between the FDIC and a private-sector contractor for the management and disposition of distressed assets, primarily nonperforming loans, designed for asset pools under $500 million in aggregate book value. The FDIC issued four RALA contracts during 1992 and 1993. [FDIC]

regional check processing center (RCPC)

A Federal Reserve check processing operation that clears checks drawn on depository institutions located within a specified area. RCPCs expedite collection and settlement of checks within the area on an overnight basis. [FRB][FRBC][FRBM][FRBSF]

Regional Firms Advisory Committee (RFAC)

Keeps the board informed of the policy needs, preferences and concerns of regionally based firms, as well as its views on the operation of the Exchange marketplace. Its members are principals of NYSE member firms headquartered outside metropolitan New York. [NYSE]

regional fund

A mutual fund that invests in a specific geographical area overseas, such as Asia or Europe. [Harvey]

regional input-output modelling system

An input-output based model that estimates regional I-O multipliers. [BEA]

registered bond

A bond whose issuer records ownership and interest payments. Differs from a bearer bond which is traded without record of ownership and whose possession is the only evidence of ownership. [Harvey]

Registered Competitive Market Maker (RCMM)

Identifies NYSE floor members with a specific Exchange-imposed obligation to enhance the quality of NYSE markets by injecting their own or their firms' capital into difficult market-making situations. At the request of an Exchange official, an RCMM must make a bid or offer that narrows an existing quote spread or improves its depth. An RCMM may also be asked to assist a commission broker or floor broker in executing a customer's otherwise unexecutable order. [NYSE]

registered options trader

A trader that trades on the exchange floor but has an obligation to make markets similar to that of specialists. [GAO]

registered representative (RR)

A person registered with the CFTC who is employed by, and soliciting business for, a commission house or futures commission merchant. [Harvey] Describes full-time NYSE member organization sales persons who have met the NYSE's background and industry knowledge requirements. [NYSE] The person, normally employed by a brokerage firm or broker/dealer, who acts as an account executive for customers to buy and sell securities. The term registered means the individual has passed qualifying securities examinations and is registered with the SEC. [NYSE]

registered securities

Securities registered 'on the books' of the issuer or trustee as to ownership, the transfer of ownership of which (and of the right to payment) must be registered with the issuer or trustee. See 'Fully Registered' and 'Registrable as to Principal Only'. [EPA] Stocks or bonds or other securities for which a registration statement has been filed with the SEC. [SEC]

registered security

Security whose ownership is recorded by the company's registrar. [WCSU]

registered trader

A member of the exchange who executes frequent trades for his or her own account. [Harvey]

registrable as to principal only

Coupon securities the principal amount of which may be registered with so that principal is payable only to the 'registered holder'. Interest continues to be paid upon presentation of coupons. [EPA]

registrar

Financial institution appointed to record issue and ownership of company securities. [Harvey][WCSU] Usually a trust company or bank charged with the responsibility of keeping a record of the owners of a corporation's securities and preventing the issuance of more than the authorized amount. [NYSE]

registration

(A) The act of having ownership of a registered security noted and recorded by the trustee or other registrar for the issue. (B) The filing of issue information with, and the receipt of permission to market the issue from, the Securities and Exchange Commission in accordance with the Securities Act of 1933. Generally, tax-exempt securities are exempt from registration requirements under federal securities laws. [EPA] Before a public offering may be made of new securities by a company, the securities must be registered under the Securities Act of 1933. A registration statement is filed with the SEC by the issuer. It must disclose pertinent information relating to the company's operations, securities, management and purpose of the public offering. Before a security may be admitted to dealings on a national security exchange, it must be registered under the Securities Exchange Act of 1934. The application for registration must be filed with the exchange and the SEC by the company issuing the securities. [NYSE] The process of obtaining SEC approval for public issue of securities. [WCSU]

registration statement

A legal document that is filed with the SEC to register securities for public offering. [Harvey]

regression analysis

A statistical technique that can be used to estimate relationships between variables. [Harvey] In statistics, a technique for finding the best line of fit. [WCSU]

regression equation

An equation that describes the average relationship between a dependent variable and a set of explanatory variables. [Harvey]

regression toward the mean

The tendency for subsequent observations of a random variable to be closer to its mean. [Harvey]

regressive taxes

A greater portion of income is taken from those in lower levels than from those in upper income levels. [FACS]

regs

slang for regulations. [OTS]

regular dividend

Dividend that the company expects to maintain in the future. [WCSU]

regular warehouse

A processing plant or warehouse that satisfies exchange requirements for financing, facilities, capacity, and location and has been approved as acceptable for delivery of commodities against futures contracts. [CFTC]

regular way delivery

Unless otherwise specified, securities sold on the New York Stock Exchange are to be delivered to the buying broker by the selling broker and payment made to the selling broker by the buying broker on the third business day after the transaction. Regular delivery for bonds is the following business day. [NYSE]

regular way settlement

In the money and bond markets, the regular basis on which some security trades are settled is that the delivery of the securities purchased is made against payment in Fed funds on the day following the transaction. [Harvey]

Regulation A

Extensions of Credit by Federal Reserve Banks - Governs borrowing by depository institutions at the Federal Reserve discount window [FRB] The securities regulation that exempts small public offerings, those valued at less than $1.5MM, from most registration requirements with the SEC. [Harvey]

Regulation A issue

Security issues of under $400,000; exempt from SEC registration requirements. [WCSU]

Regulation AA

Unfair or Deceptive Acts or Practices - Establishes consumer complaint procedures and defines unfair or deceptive practices in extending credit to consumers [FRB]

Regulation B

Equal Credit Opportunity - Prohibits lenders from discriminating against credit applicants, establishes guidelines for gathering and evaluating credit information, and requires written notification when credit is denied [FRB]

Regulation BB

Community Reinvestment - Implements the Community Reinvestment Act and encourages banks to help meet the credit needs of their communities [FRB]

Regulation C

Home Mortgage Disclosure - Requires certain mortgage lenders to disclose data regarding their lending patterns [FRB]

Regulation CC

Availability of Funds and Collection of Checks - Governs the availability of funds deposited in checking accounts and the collection and return of checks [FRB]

Regulation D

Fed regulation currently that required member banks to hold reserves against their net borrowings from foreign offices of other banks over a 28-day averaging period. Regulation D has been merged with Regulation M. [Harvey] Reserve Requirements of Depository Insititutions - Sets uniform requirements for all depository institutions to maintain reserve balances either with their Federal Reserve Bank or as cash in their vaults [FRB]

Regulation DD

Truth in Savings - Requires depository institutions to provide disclosures to enable consumers to make meaningful comparisons of deposit accounts [FRB]

Regulation E

Electronic Funds Transfers - Establishes the rights, liabilities, and responsibilities of parties in electronic funds transfers and protects consumers when they use such systems [FRB]

Regulation EE

Netting Eligibility for Financial Institutions - Defines financial institutions to be covered by statutory provisions regarding netting contracts---that is, contracts in which the parties agree to pay or receive the net, rather than the gross, payment due [FRB]

Regulation F

Limitations on Interbank Liabilities - Prescribes standards to limit the risks posed by obligations of insured depository institutions to other depository institutions Federal Reserve Regulations [FRB]

Regulation G

Securities Credit by Persons other than Banks, Brokers or Dealers - Governs extension of credit by parties other than banks, brokers, or dealers to finance the purchase or the carrying of margin securities; see also regulations T, U, and X [FRB]

Regulation H

Membership of State Banking Institutions in the Federal Reserve System - Defines the requirements for membership by state-chartered banks in the Federal Reserve System and establishes minimum levels for the ratio of capital to assets to be maintained by state member banks [FRB]

Regulation I

Issue and Cancellation of Capital Stock of Federal Reserve Banks - Sets forth stock­subscription requirements for all banks joining the Federal Reserve System [FRB]

Regulation J

Collection of Checks and Other Items by Federal Reserve Banks and Funds Transfers through Fedwrite - Establishes procedures, duties, and responsibilities among (1) Federal Reserve Banks, (2) the senders and payors of checks and other items, and (3) the senders and recipients of wire transfers of funds [FRB]

Regulation K

International Banking Operations - Governs the international banking operations of U.S. banking organizations and the operations of foreign banks in the United States [FRB]

Regulation L

Management Official Interlocks - Restricts the management relationships that an official in one depository institution may have with other depository institutions [FRB]

Regulation M

Consumer Leasing - Implements the consumer leasing provisions of the Truth in Lending Act by requiring meaningful disclosure of leasing terms [FRB] Fed regulation currently requiring member banks to hold reserves against their net borrowings from their foreign branches over a 28-day averaging period. Reg M has also required member banks to hold reserves against Eurodollars lent by their foreign branches to domestic corporations for domestic purposes. [Harvey]

Regulation N

Relations with Foreign Banks and Bankers - Governs relationships and transactions between Federal Reserve Banks and foreign banks, bankers, or governments [FRB]

Regulation O

Loans to Executive Officers, Directors, and Principal Shareholders of Member Banks - Restricts credit that a member bank may extend to its executive officers, directors, and principal shareholders and their related interests [FRB]

Regulation P

Minimum Security Devices and Procesures for Federal Reserve Banks and State Member Banks - Sets requirements for a security program that state­chartered member banks must establish to discourage robberies, burglaries, and larcenies [FRB]

Regulation Q

Fed regulation imposing caps on the rates that banks may pay on savings and time deposits. Currently time deposits with a denomination of $100,000 or more are exempt from Reg Q. [Harvey] Limit on the rate of interest that banks may pay on (small) deposits. [WCSU] Prohibition against Payment of Interest on Demand Deposits - Prohibits member banks from paying interest on demand deposits (for example, checking accounts) [FRB]

Regulation R

Relationships with Dealers in Securities under Section 32 of the Banking Act of 1933 - Restricts employment relations between securities dealers and member banks to avoid conflict of interest, collusion, or undue influence on member bank investment policies or advice to customers [FRB]

Regulation S

(1) a rule adopted by a federal or state government executive branch agency. A regulation is based on and carries out a law. (2) the act or process of governing or regulating. [OTS] Reimbursement to Financial Institutions for Assembling or Providing Financial Records - Establishes rates and conditions for reimbursement to financial institutions for providing customer records to a government authority [FRB]

Regulation T

Credit by Brokers and Dealers - Governs extension of credit by securities brokers and dealers, including all members of national securities exchanges; see also regulations G, U, and X [FRB] The federal regulation governing the amount of credit that may be advanced by brokers and dealers to customers for the purchase of securities. [NYSE]

Regulation U

Credit by Banks for Purchasing or Carrying Margin Stocks - Governs extension of credit by banks to finance the purchase or the carrying of margin securities; see also regulations G, T, and X [FRB] The federal regulation governing the amount of credit that may be advanced by a bank to its customers for the purchase of listed stock. [NYSE]

Regulation V

Loan Guarantees for Defense Production (Dormant) - Facilitates the financing of contracts deemed necessary to national defense production [FRB]

Regulation X

Borrowers of Securities Credit - Extends to borrowers who are subject to U.S. laws the provisions of regulations G, T, and U for obtaining credit within or outside the United States for the purpose of purchasing securities [FRB]

Regulation Y

Bank Holding Companies and Change in Bank Control - Governs the bank and nonbank expansion of bank holding companies, the divestiture of impermissible nonbank interests, and the acquisition of a bank by individuals [FRB]

Regulation Z

Truth in Lending - Prescribes uniform methods for computing the cost of credit, for disclosing credit terms, and for resolving errors on certain types of credit accounts [FRB]

regulatory accounting practices (RAP)

accounting rules and procedures approved by the Office of Thrift Supervision for use by savings institutions under the agency's jurisdiction. They may differ from generally accepted accounting principles (GAAP), and are adopted by the agency to achieve policy objectives. [OTS]

regulatory accounting procedures

Accounting principals required by the FHLB that allow S&Ls to elect annually to defer gains and losses on the sale of assets and amortize these deferrals over the average life of the asset sold. [Harvey]

Regulatory Advisory Committee (RAC)

Advises on issues of regulation, self-regulation, and regulatory systems as they directly or indirectly affect the NYSE, the securities industry, and capital markets. In addition, the committee advises the board on the role of regulation in business and government. The committee also provides counsel to NYSE staff on the implications of regulatory trends and developments. [NYSE]

regulatory bulletin

A directive issued by the Office of Thrift Supervision to its regulatory staff providing clarification of regulations and/or specifying guidelines and procedures. The regulatory bulletin series and the thrift bulletin series are the successors to the previous R, T, SP, and AB memoranda issued by the former Federal Home Loan Bank Board. [OTS]

regulatory capital

net worth as defined by rules adopted by a regulatory agency, which may be different than capital calculated under generally accepted accounting principles. [OTS]

regulatory plan

The OTS plan developed for regulating each savings institution. [OTS]

regulatory pricing risk

Risk that arises when regulators restrict the premium rates that insurance companies can charge. [Harvey]

regulatory pyramid

A network of safeguards that surrounds the securities industry -- from individual brokerages all the way up to the U.S. Congress. [NYSE]

regulatory risk

The risk that regulators will change the current rules or impose new rules, and negatively impact positions already on the books. [TMAC]

regulatory surplus

The surplus as measured using regulatory accounting principles (RAP) which may allow the non-market valuation of assets or liabilities and which may be materially different from economic surplus. [Harvey]

rehabilitation

The restoration, repair or improvement of a declining house, area, or neighborhood. [OTS]

reimbursement letter of credit

A letter of credit issued by one bank and payable at a second bank which, in turn, draws on a third bank for reimbursement of the second bank's payment to the beneficiary. Those credits are almost always expressed in a currency other than that of the buyer (issuing bank) or the seller, and because of wide acceptability many are settled in the United States through yet another bank as the reimbursing agent. Upon issuance, the correspondent sands the reimbursing bank an authorization to honor drawings presented by the negotiating bank. [FDIC]

reinstatement

The payment by a borrower of all past due, or delinquent, payments, thus restoring the loan to current status. [OTS]

reinvest

Funneling of profits back into a company to enhance its operations. An individual stockowner can also reinvest by designating that dividends paid on stock will be used to purchase additional shares of that stock. [NYSE]

reinvestment

The process of investing new capital in existing, mature, developed neighborhoods, most likely in inner city areas. The reinvestment is usually in the form of housing rehabilitation, public works improvements, and new or reconditioned commercial development. [OTS]

reinvestment rate

The rate at which an investor assumes interest payments made on a debt security can be reinvested over the life of that security. [Harvey]

reinvestment risk

The risk that interest rates will decrease as investments or bond coupons come due. [TMAC] The risk that proceeds received in the future will have to be reinvested at a lower potential interest rate. [Harvey]

reinvoicing center

A central financial subsidiary used by an MNC to reduce transaction exposure by having all home country exports billed in the home currency and then reinvoiced to each operating affililate in that affiliate's local currency. It can also be used as a netting center. [Harvey]

relative purchasing power parity

Idea that the rate of change in the price level of commodities in one country relative to the price level in another determines the rate of change of the exchange rate between the two countries' currencies. [Harvey]

relative strength

A stock's price movement over the past year as compared to a market index (the S&P 500). Value below 1.0 means the stock shows relative weakness in price movement (underperformed the market); a value above 1.0 means the stock shows relative strength over the 1-year period. Equation for Relative Strength: [current stock price/year-ago stock price] [current S&P 500/year-ago S&P 500] [Harvey]

relative value

The attractiveness measured in terms of risk, liquidity, and return of one instrument relative to another, or for a given instrument, of one maturity relative to another. [Harvey]

relative yield spread

The ratio of the yield spread to the yield level. [Harvey]

relay

A shipment that is transferred to its ultimate destination port after having been shipped to an intermediate point. [ITDS]

release

(1) the discharge of property from a mortgage lien. (2) a written statement that an obligation has been satisfied. [OTS]

reliance letter

A letter from a person who has delivered a closing opinion or certificate, stating that the addressee may rely on the opinion or certificate as if it were addressed to the addressee. Generally used either when a person has requested a copy of an opinion or certificate which is too much trouble to have re-addressed and re-executed, or when it is not customary to address the opinion or certificate to the party requesting the reliance letter. [EPA]

remainderman

One who receives the principal of a trust when it is dissolved. [Harvey] The person designated to receive assets at the end of a trust term. [OTS]

remaining maturity

The length of time remaining until a bond's maturity. [Harvey]

remaining principal balance

The amount of principal dollars remaining to be paid under the mortgage as of a given point in time. [Harvey]

remake

A replacement file generated upon request because an original file was unprocessable for some reason. [ACH]

rembrandt bonds

Dutch guilder denominated foreign bonds issued in Amsterdam. [UNODC]

Rembrandt market

The foreign market in the Netherlands. [Harvey]

remedies

The actions which may be taken by the trustee, a stated minimum percentage of bondholders, and individual bondholders, after the occurrence of an event of default. Typical remedies are acceleration, appointment of a receiver, re-entry to the exclusion of the primary obligor, foreclosure of a mortgage, and sale of the project financed with the bond proceeds or which was pledged as security for their payment. There is generally a 'catch-all' phrase in the remedies section of a security document stating that any other remedy available in equity shall be available to the trustee or bondholders. [EPA]

remittance

Funds forwarded from one person to another as payment for bought items or services. [ITDS] funds transferred from one party to another as payment for purchased goods or services. [OTS]

remote disbursement

Technique that involves writing checks drawn on banks in remote locations so as to increase disbursement float. [Harvey]

removal and prohibition order

An enforcement order issued by the Office of Thrift Supervision forcing a person out of a current position with a savings institution and prohibiting the person from ever again working for any savings association, bank or credit union that has federal deposit insurance without the prior written approval of the institution's regulator. If the person agrees not to challenge the issuance of the order, it is called a consent removal and prohibition order. [OTS]

remuneration

wages and other benefits received as compensation for employment. [OTS]

renegotiable rate

A type of variable rate involving a renewable short-term 'balloon' note. The interest rate on the loan is generally fixed during the term of the note, but when the balloon comes due, the lender may refinance it at a higher rate. In order for the loan to be fully amortized, periodic refinancing may be necessary. [FRB][FRBC][FRBM]

renegotiable rate mortgage (RRM)

An alternative mortgage loan in which the interest rate is renegotiated periodically. The loan may be either a long-term loan with periodic interest rate adjustments, or a short-term loan that is renewed periodically at new interest rates, but based on a long-term mortgage. [OTS]

renewal note

Note (usually a bond anticipation note) issued to pay off an outstanding note. [EPA]

rent

compensation paid the owner of property for the use and/or occupancy of the property. [OTS]

rent controls

Fixed limits on rents that can be charged to tenants by owners according to a legal restriction. [FACS]

rental income of persons

Earnings from the rental of real property by persons who are not primarily engaged in the real estate business; also includes the imputed net rental income of owner-occupants of nonfarm dwellings, and royalties received by persons from patents, copyrights, and rights to natural resources. [BEA]

reoffering yield

In a purchase and sale, the yield to maturity at which the underwriter offers to sell the bonds to investors. [Harvey]

reopen an issue

The Treasury, when it wants to sell additional securities, will occasionally sell more of an existing issue (reopen it) rather than offer a new issue. [Harvey]

reorganization

Creating a plan to restructure a debtor's business and restore its financial health. [Harvey] The altering of a firm's capital, organizational, and/or management structure following a plan worked out during bankruptcy proceedings under Chapter 11. The objectives of a reorganization are to eliminate the cause of the failure, settle with creditors, and allow the firm to remain in business. [OTS]

replacement cost

Cost to replace a firm's assets. [Harvey] Costs of routine replacement of parts and equipment. Should be budgeted on an annual basis along with operating and maintenance costs. [EPA] The current cost of producing a similar building or piece of equipment equal in utility and quality to the building or equipment already existing. [OTS]

replacement cycle

The frequency with which an asset is replaced by an equivalent asset. [Harvey]

replacement value

Current cost of replacing the firm's assets. [Harvey]

replacement-chain problem

Idea that future replacement decisions must be taken into account in selecting among projects. [Harvey]

replevin

A legal action for recovering property brought by the owner or party entitled to repossess the property against a party who has wrongfully kept it. [ITDS] A legal action for the return of, or recovery of goods or chattels wrongfully taken or detained. [OTS]

replicating portfolio

A portfolio constructed to match an index or benchmark. [Harvey] A portfolio of assets for which changes in value match those of a target asset. For example, a portfolio replicating a standard option can be constructed with certain amounts of the asset underlying the option and bonds. Sometimes referred to as a synthetic asset. [CFTC]

repo

A agreement in which one party sells a security to another party and agrees to repurchase it on a specified date for a specified price. [Harvey]

repo or repurchase agreement

A transaction in which one party sells a security to another party while agreeing to repurchase it from the counterparty at some date in the future, at an agreed price. Repos allow traders to short-sell securities and allow the owners of securities to earn added income by lending the securities they own. Through this operation the counterparty is effectively a borrower of funds to finance further. The rate of interest used is known as the repo rate. [CFTC]

report of examination (ROE)

The document that describes the findings and conclusions of an examination of a savings institution. The ROE is comprised of two sections: the narrative section containing analysis and comments of the examiners, and the appendix section containing various schedules, financial data, and other statistics used to support the findings and analysis and the assigned MACRO rating. [OTS]

reportable position

The number of futures contracts, as determined by the Exchange or the CFTC, above which a customer must be identified daily to the Exchange and to the CFTC with regard to the size of his position by commodity, by delivery month and by purpose of the trading. [NYMEX]

reported factor

The pool factor as reported by the bond buyer for a given amortization period. [Harvey]

reporting currency

The currency in which the parent firm prepares its own financial statements; that is, U.S. dollars for a U.S. company. [Harvey]

reporting level

Sizes of positions set by the exchanges and/or the CFTC at or above which commodity traders or brokers who carry these accounts must make daily reports about the size of the position by commodity, by delivery month, and whether the position is controlled by a commercial or non-commercial trader. [CFTC]

repossession

The process of a lender or his agent taking back items that were bought on credit or were pledged as collateral for a loan from a borrower who has fallen behind on loan payments. [OTS]

representations and warranties

Legally binding statements, made by the parties to a contract, regarding, among other things, asset quality requirements. Representations and warranties, which may extend for only a few months or for the life of the asset or agreement, may protect the purchasers of loans from potential problems associated with missing loan documentation, title defects, or a change in payment status. [FDIC]

representative office

A facility established in distant markets by a bank in order to sell the bank's services and assist clients; these offices cannot accept deposits. [UNODC]

reprice

to change the interest rate. Money lent is priced at a rate of interest. It is repriced when the loan matures, the money is repaid and lent at a new rate. A certificate of deposit reprices when the CD matures and is either withdrawn or rolled over at the then prevailing rate. [OTS]

reproducible assets

A tangible asset with physical properties that can be reproduced, such as a building or machinery. [Harvey]

repudiate

A receiver's (or conservator's) right to disaffirm outstanding contractual obligations previously entered into by a failed insured depository institution. The receiver may take such action only if (1) the contracts are considered burdensome and (2) repudiation will promote the orderly administration of the receivership estate. The FDI Act provides that certain contracts cannot be repudiated. [FDIC]

repudiated contract

A contract of a failed institution that the receiver has repudiated. When contracts are repudiated, damages are limited to actual damages determined as of the date of the appointment of the receiver. [FDIC]

repurchase agreements (REPO) (RP)

A financial transaction in which a dealer in effect borrows money by selling securities and simultaneously agreeing to buy them back at a higher price at a later time. The dealer invests the money paid for the securities, hoping to get a higher return than he owes on his obligation to repurchase the securities. repurchase agreements are commonly called 'repos,' and they function in a way similar to a secured loan with the securities serving as collateral. In a reverse repurchase agreements, the dealer in effect loans money by buying securities and agreeing to sell them back to the customer at a higher price at a later date. In either case, the difference between the bought and sold price of the securities constitutes the yield on the transaction. [OTS] A repurchase agreement is an agreement between a buyer and seller (usually) of U.S. government securities, whereby the seller agrees to repurchase the securities at an agreed-upon price and, usually, at a stated time. [GAO] An agreement between a seller and a buyer whereby the seller agrees to repurchase the securities at an agreed upon price usually at a stated time. [UNODC] An agreement between a seller and a buyer, usually in U.S. government securities, in which the seller agrees to buy back the security at a later date. [CBOT][MIDAM] An agreement by which, for example, the Federal Reserve purchases a security for immediate delivery and receives interest at a specific rate from a government securities dealer, with an agreement to sell the security back at the same price by a specific date (usually within 15 days). This arrangement allows the Federal Reserve to inject reserves into the banking system on a temporary basis to meet a temporary need and to withdraw these reserves as soon as that need has passed. [FRBSF] An agreement with a commitment by the seller (dealer) to buy a security back from the purchaser (customer) at a specified price at a designated future date. Also called a repo, it represents a collateralized short-term loan, where the collateral may be a Treasury security, money market instrument, federal agency security, or mortgage-backed security. From the purchaser (customer) perspective, the deal is reported as a reverse Repo. [Harvey] Purchase of Treasury securities from a securities dealer with an agreement that the dealer will repurchase the at a specified price. [WCSU] When the Federal Reserve makes a repurchase agreement with a government securities dealer, it buys a security for immediate delivery with an agreement to sell the security back at the same price by a specific date (usually within 15 days) and receives interest at a specific rate. This arrangement allows the Federal Reserve to inject reserves into the banking system on a temporary basis to meet a temporary need and to withdraw these reserves as soon as that need has passed. [FRB][FRBC][FRBM]

repurchase of stock

Device to pay cash to firm's shareholders that provides more preferable tax treatment for shareholders than dividends. Treasury stock is the name given to previously issued stock that has been repurchased by the firm. A repurchase is achieved through either a dutch auction, open market, or tender offer. [Harvey]

request for quotation

A negotiating approach whereby the buyer asks for a price quotation from a potential seller for specific quantities of goods. [ITDS]

required clearing balance

Amount kept by a depository institution in an account at a Federal Reserve Bank, in addition to its required reserve balance, to ensure that it can meet its daily transaction obligations without overdrawing its required reserve account and thereby incurring a penalty. Required clearing balances earn credits that can be used to pay for services provided by the Federal Reserve. [FRBSF]

required reserve balance

Portion of its required reserves that a depository institution must hold in an account at a Federal Reserve Bank. [FRBSF]

required reserves

Funds that a depository institution is required to maintain as vault cash or on deposit with a Federal Reserve Bank; required amount varies according to required reserve ratios set by the Board of Governors and the volume of reservable liabilities held by the institution. [FRBSF] The dollar amounts based on reserve ratios that banks are required to keep on deposit at a Federal Reserve Bank. [Harvey]

required return

The minimum expected return you would require to be willing to purchase the asset, that is, to make the investment. [Harvey]

required yield

Generally referring to bonds, the yield required by the marketplace to match available returns for financial instruments with comparable risk. [Harvey]

rescind

To cancel a contract. [ITDS]

rescission of contract

The replacing of a contract by mutual consent or by either party for reasonable cause. [OTS]

reserve currency

A foreign currency held by a central bank or monetary authority for the purposes of exchange intervention and the settlement of inter-governmental claims. [Harvey]

reserve fund

A special fund (funded from securities proceeds, pledged revenues, or otherwise), established by the security document and maintained in a stated or determinable amount sufficient to cover some unusual operation or maintenance expense or some interruption of pledged revenues. See 'Debt Service Reserve Fund'. [EPA]

reserve price

The minimum price for which one asset or a portfolio of assets can be sold. A reserve price is often expressed as a percentage of book value for which an asset or a pool of assets can be sold. [FDIC]

reserve ratios

Specified percentages of deposits, established by the Federal Reserve Board, that banks must keep in a non-interest-bearing account at one of the twelve Federal Reserve Banks. [Harvey]

reserve requirements

Reserves that must be held against customer deposits of banks and other depository institutions. The reserve requirement ratio affects the expansion of deposits that can be supported by each additional dollar of reserves. The Board of Governors sets reserve requirements within limits specified by law for all depository institutions (including commercial banks, savings banks, savings and loan associations, credit unions, some industrial loan banks, and U.S. agencies and branches of foreign banks) that have transaction accounts or nonpersonal time deposits. A lower reserve requirement allows more deposit and loan expansion and a higher reserve ratio permits less expansion. [FRB][FRBC][FRBM] The minimum amount of cash and liquid assets as a percentage of demand deposits and time deposits that member banks of the Federal Reserve are required to maintain. [CBOT][MIDAM] The percentage of different types of deposits that member banks are required to hold on deposit at the Fed. [Harvey]

reserved account

An account subject to reserve requirements determined by the Federal Reserve Board. The rules require financial institutions to set aside (not invest) a portion of funds in such accounts as reserves to meet depositors' demands for cash withdrawals. The reserves are deposited at a Federal Reserve Bank or held as cash. [OTS]

reserved freight space

A service by some airlines enabling shippers to reserve freight space on designated flights. [ITDS]

reserves

(1) Segregation of retained earnings to provide for payouts such as dividends; contingencies, improvements, or retirement of preferred stock; (2) valuation reserve for depreciation, bad debt losses, shrinkage of receivable because of discounts taken, and other provisions created by charges to the profit and loss statement; (3) hidden reserves, represented by understatements of balance sheet values; (4) cash on hand and deposit maintained by a commercial bank in a Federal Reserve Bank to meet the federal reserve requirements; and (5) gold and foreign currency held by governments to pay for imports and foreign debts. [UNODC] (1) that portion of current earnings set aside to take care of possible future losses or for other specified purposes. (2) the portion of deposits in transaction accounts that must be held by depository institutions in liquid form (vault cash or deposits in a Federal Reserve Bank). Such reserves may not be used for lending or investing. The reserve ratio for transaction accounts or nonpersonal time deposits in all depository institutions (including commercial banks, savings banks, savings and loan associations and credit unions) is set by the Board of Governors of the Federal Reserve System. A lower reserve requirement allows more expansion of deposit and loan volume, while a higher reserve ratio permits less economic expansion. That is because the lower the required reserve ratio, the greater the portion of deposits that can be lent, redeposited somewhere else, and lent again thus multiplying each dollar of the original deposit. [OTS] A depository institution's vault cash (up to the level of its required reserves) plus balances in its reserve account (not including funds applied to its required clearing balance). [FRBSF] An accounting entry that properly reflects the contingent liabilities. [Harvey] Funds set aside by depository institutions in the form of vault cash and/or balances at the Federal Reserve Banks, either directly or indirectly passing through a correspondent institution. [FRB][FRBC] Funds set aside by depository institutions to meet reserve requirements. For member banks, reserve requirements are satisfied with holdings of vault cash and/or balances at the Federal Reserve Banks. Depository institutions that are not members of the Federal Reserve System may hold their reserves in the same manner, or they may pass the reserve balances through a correspondent institution to the Federal Reserve Banks. [FRB][FRBM]

reset frequency

The frequency with which the floating rate changes. [Harvey]

resident company

A bank, trust company or holding company permitted to deal only in local currency. Foreign currency transactions must be approved by the appropriate regulatory authority. [UNODC]

residential

describes buildings which are used as dwellings by people. [OTS]

residual assets

Assets that remain after sufficient assets are dedicated to meet all senior debtholder's claims in full. [Harvey]

residual dividend approach

An approach that suggests that a firm pay dividends if and only if acceptable investment opportunities for those funds are currently unavailable. [Harvey]

residual fuel oil

Heavy fuel oil produced from the residue in the fractional distillation process rather than from the distilled fractions. [NYMEX]

residual losses

Lost wealth of the shareholders due to divergent behavior of the managers. [Harvey]

residual method

A method of allocating the purchase price for the acquisition of another firm among the acquired assets. [Harvey]

residual value

The economic value or money received by the R-Class bondholder, the FDIC, when (1) the bonds have been paid off and cash flows from the mortgage collateral are still to be generated, or (2) the proceeds from the sale of the mortgage collateral as whole loans are greater than the amount needed to retire the outstanding bonds. [FDIC] Usually refers to the value of a lessor's property at the time the lease expires. [Harvey]

residuals

(1) Parts of stock returns not explained by the explanatory variable (the market-index return). They measure the impact of firm-specific events during a particular period. (2) Remainder cash flows generated by pool collateral and those needed to fund bonds supported by the collateral. [Harvey] Cash flows resulting from the difference between the income stream generated by a pool of mortgages and the cash flow necessary to fund a series of collateralized mortgage obligations (CMOs) or REMIC bonds. [FDIC]

resistance

A level above which prices have had difficulty penetrating. [CBOT][MIDAM] In technical analysis, a price area where new selling will emerge to dampen a continued rise. [CFTC] Opposite of Support. [NYMEX]

resistance level

A price level above which it is supposedly difficult for a security or market to rise. [Harvey]

resolution

The disposition plan for a failed institution, designed to (1) protect insured depositors and (2) minimize the losses to the relevant insurance fund, which are expected from covering insured deposits and disposing of the institution's assets. Resolution methods generally include purchase and assumption transactions, insured deposit transfers, and straight deposit payoffs. The term 'resolution' can also refer to the assistance plan, through open bank assistance, for a failing institution. [FDIC]

resolution cost

For a given resolution method, the sum of the FDIC's expenditures and obligations incurred, including any immediate or long-term obligations and any direct or contingent liabilities for future payment. Since FDICIA was enacted in 1991, the FDIC has been required to select the resolution method that is least costly to the relevant insurance fund. [FDIC]

Resolution Funding Corporation (REFCORP)

A corporation established under FIRREA to fund the activities of the RTC, primarily through bond sales. FIRREA provided private and public funds to deal with thrifts that failed between 1989 and 1999, as well as providing a mechanism to capitalize the new Savings Association Insurance Fund. [FDIC] sold bonds to raise funds that finance the work of the Resolution Trust Corporation (RTC). [OTS]

Resolution Trust Corporation (RTC)

A temporary federal government corporation chartered by Congress in 1989 and affiliated with the FDIC that: (1) ensures that customers of failed thrifts have access to their insured deposits, and (2) disposes of the assets of failed thrifts. The RTC receives overall policy guidance from the Thrift Depositor Protection Oversight Board. The RTC was scheduled to finish its work and go out of business by December 31, 1995, and stopped accepting newly failed institutions on June 30, 1995. All subsequent business was to be handled by the FDIC. [OTS] An entity established in 1989 by FIRREA to oversee the resolution of insolvent thrifts and to dispose of assets acquired from the failed thrifts in the wake of the thrift crisis of the 1980s. The RTC operated from August 9, 1989, to December 31, 1995. [FDIC]

Resolution Trust Corporation Completion Act (RTCCA)

Legislation enacted on December 17, 1993, that allowed the RTC to use up to $18.3 billion to resolve the remaining insolvent thrifts. The Completion Act also (1) extended the RTC's authority to take institutions into conservatorship or receivership from September 30, 1993, to July 1, 1995; (2) accelerated the RTC's closing date by a year from December 31, 1996, to December 31, 1995; (3) reduced the maximum funding authorization of the SAIF; and (4) instituted a wide range of RTC management reforms. [FDIC]

resolved

The status of a troubled savings association that has been taken over by the government and disposed of in some final fashion. Such resolution usually involves either selling the institution to new owners or closing it permanently and paying depositors their federally insured accounts. [OTS]

respondent bank

A respondent bank is a bank that regularly buys check processing and other services from a correspondent bank. [GAO]

resting order

A limit order to buy at a price below or to sell at a price above the prevailing market that is being held by a floor broker. Such orders may either be day orders or open orders. [CFTC] An order away from the market, waiting to be executed. [NYMEX]

restricted bank and/or trust license

Is one which permits the holder to carry on business with certain specified persons whose names are usually listed in the license. [UNODC]

restricted securities

Stocks or bonds which were issued in a private sale or other transaction not registered with the SEC. [SEC]

restrictive covenant

A clause in a deed limiting the use of the property. [OTS] Provisions that place constraints on the operations of borrowers, such as restrictions on working capital, fixed assets, future borrowing, and payment of dividend. [Harvey]

resumption

The reopening the following day of specific futures and options markets that also trade during the evening session at the Chicago Board of Trade. [CBOT][MIDAM]

retail

Individual and institutional customers as opposed to dealers and brokers. [Harvey]

retail credit

Credit granted by a firm to consumers for the purchase of goods or services. [Harvey]

retail customer

A customer that does not qualify as an eligible contract participant under Section 1a(12) of the Commodity Exchange Act, 7 USC 1a(12). An individual with total assets that do not exceed $10 million, or $5 million if the individual is entering into an agreement, contract, or transaction to manage risk, would be considered a retail customer. [CFTC]

Retail Execution Automation System (REAS)

Chicago Board of Options Exchange. [NYSE]

retail investors individual investors

Small investors who commit capital for their personal account. [Harvey]

retail repos

repurchase agreements in which a thrift institution or bank sells a portion of a government security to its customer for cash, and simultaneously agrees to buy back the security for the same price plus interest at a future specified date. Such transactions are considered to be investments, not deposits, and thus are not federally insured. [OTS]

retained earnings

Accounting earnings that are retained by the firm for reinvestment in its operations; earnings that are not paid out as dividends. [Harvey] Business profits which are held by firms and not paid to the stockholders of the firm; the earnings are usually reinvested by the firms. [FACS] Profits a company keeps for its operations, after paying taxes and dividends. [NYSE] The corporate profits that are neither paid out in cash dividends to stockholders nor used to increase capital stock, but are reinvested in the company. [OTS] earnings not paid out as dividends. [WCSU]

retaliation

Action taken by a country to restrain its imports from a country that has increased a tariff or imposed other measures that adversely affect its exports. [ITDS]

retender

In specific circumstances, some exchanges permit holders of futures contracts who have received a delivery notice through the clearing organization to sell a futures contract and return the notice to the clearing organization to be reissued to another long; others permit transfer of notices to another buyer. In either case, the trader is said to have retendered the notice. [CFTC]

retention rate

The percentage of present earnings held back or retained by a corporation, or one minus the dividend payout rate. Also called the retention ratio. [Harvey]

retire

To extinguish a security, as in paying off a debt. [Harvey]

retirement CD

A certificate of deposit that combines elements of a deposit and an annuity. [OTS]

retracement

A price movement in the opposite direction of the previous trend. [Harvey] A reversal within a major price trend. [CFTC]

return

The change in the value of a portfolio over an evaluation period, including any distributions made from the portfolio during that period. [Harvey]

return item

A return item is a transaction that has been returned by a receiving depository institution because it cannot be posted. [GAO] An ACH entry that has been rejected by a receiving financial institution because it is non-postable. [ACH]

return on assets

Indicator of profitability. Determined by dividing net income for the past 12 months by total average assets. Result is shown as a percentage. ROA can be decomposed into return on sales (net income/sales) multiplied by asset utilization (sales/assets). [Harvey] after-tax net income divided by total assets. [OTS]

return on average assets

A financial measurement of the efficiency with which a business uses its assets. Return on average assets is the ratio of net income divided by average total assets. [OTS]

return on equity

A measure of how effective a business has been in investing its net worth. Return on equity is expressed as a ratio, calculated by dividing net income by average equity. [OTS] Indicator of profitability. Determined by dividing net income for the past 12 months by common stockholder equity (adjusted for stock splits). Result is shown as a percentage. Investors use ROE as a measure of how a company is using its money. ROE may be decomposed into return on assets (ROA) multiplied by financial leverage (total assets/total equity). [Harvey] Usually, equity earnings as a proportion of the book value of equity. [WCSU]

return on investment (ROI)

Generally, book income as a proportion of net book value. [Harvey][WCSU]

return on total assets

The ratio of earnings available to common stockholders to total assets. [Harvey]

return-to-maturity expectations

A variant of pure expectations theory which suggests that the return that an investor will realize by rolling over short-term bonds to some investment horizon will be the same as holding a zero-coupon bond with a maturity that is the same as that investment horizon. [Harvey]

returned check

A check that was presented to the financial institution on which it was drawn, was refused payment by that institution and was sent back unpaid. [OTS]

revaluation

An increase in the foreign exchange value of a currency that is pegged to other currencies or gold. [Harvey] An official act wherein the official parity of a currency is adjusted relative to the dollar, gold, SDR's or another currency, resulting in less revalued units relative to those currencies. Also, the periodic computations of the current values (reevaluations) of ledger accounts and unmatured future purchase and sales contracts. [FDIC] The restoration of the value of a nations currency that had once been devalued in terms of the currency of another nation. [ITDS]

revenue anticipation notes

Notes issued in anticipation of the receipt of revenues, generally non-tax revenues -- especially revenues receivable from other governments. [EPA]

revenue bond

(A) Bonds payable from a specific source of revenue and which do not pledge the full faith and credit of the issuer. Revenue bonds are payable from identified sources of revenue, and do not permit the bondholders to compel taxation or legislative appropriation of funds not pledged for payment of debt service. Pledged revenues may be derived from operation of the financed project, grants and excise or other specified non-ad valorem taxes. Generally, no election is required prior to issuance or validation of such obligations . (B) Bonds whose principal and interest are payable exclusively from earnings of an Enterprise Fund. In addition to a pledge of revenues, such bonds sometimes contain a mortgage on the Enterprise Fund's property .
(C) A bond the debt service on which is payable solely from the revenue generated from the operation of the facilities being financed or a category of facilities, or from other non-tax sources; frequently also secured by a mortgage on the revenue-producing facilities. [EPA] A bond issued by a municipality to finance either a project or an enterprise where the issuer pledges to the bondholders the revenues generated by the operating projects financed, for instance, hospital revenue bonds and sewer revenue bonds. [Harvey] A municipal bond that is secured by the income expected to be generated by the project financed by the bond, as opposed to a general obligation bond that is secured by the government's taxing authority. [OTS]

revenue fund

A fund accounting for all revenues from an enterprise financed by a municipal revenue bond. [Harvey] The special fund into which pledged revenues may be required to be deposited as received, and from which disbursements are made to pay allowable operation and maintenance expenses and to meet deposit requirements to other special funds. [EPA]

revenues

(A) Increases in governmental fund type net current assets from other than expenditure refunds and residual equity transfers. Under NCGA Statement 1, general long-term debt proceeds and operating transfers-in are classified as 'other financing sources' rather than revenues. Increases in proprietary fund type net total assets from other than expense refunds, capital contributions, and residual equity transfers. Under NCGA Statement 1, operating transfers-in are classified separately from revenues . (B) In general terms, money received in exchange for the delivery of goods and services. A more precise definition is the addition to assets, such as cash or accounts receivable, which: do not increase any liability, such as a debt obligation; do not represent a recover of an expenditure, such as results from a return of defective purchased equipment; (3) do not represent the cancellation of certain liabilities without a corresponding increase in other liabilities or a decrease in assets such as forgiveness of a debt; and (4) are not contributions made to fund businesslike enterprises. [EPA] The total of all earnings received from the sale of a firm's product or service during a given time period. [OTS] Total gross earnings of a firm before subtracting costs. [FACS]

reversal

A change of direction in prices. [CFTC]

reverse conversion or reversal

With regard to options, a position created by buying a call option, selling a put option, and selling the underlying instrument (for example, a futures contract). [CFTC]

reverse crush spread

The sale of soybean futures and the simultaneous purchase of soybean oil and meal futures. [CBOT][CFTC][MIDAM]

reverse FRN

Floating-rate note whose payments rise as the general level of interest rates falls, and vice versa. [WCSU]

reverse mortgage fraud

A scheme using a reverse mortgage loan to defraud a financial institution by stripping legitimate or fictitious equity from the collateral property. [FFIEC]

reverse preferences

Tariff advantages once offered by developing countries to imports from certain developed countries that granted them preferences. [ITDS]

reverse price risk

A type of mortgage-pipeline risk that occurs when a lender commits to sell loans to an investor at rates prevailing at application but sets the note rates when the borrowers close. The lender is thus exposed to the risk of falling rates. [Harvey]

reverse repo

In essence, refers to a repurchase agreement. From the customer's perspective, the customer provides a collateralized loan to the seller. [Harvey]

reverse repurchase agreements

reverse stock split

A proportionate decrease in the number of shares, but not the value of shares of stock held by shareholders. Shareholders maintain the same percentage of equity as before the split. For example, a 1-for-3 split would result in stockholders owning 1 share for every 3 shares owned before the split. After the reverse split, the firm's stock price is, in this example, worth three times the pre-reverse split price. A firm generally institutes a reverse split to boost its stock's market price and attract investors. [Harvey]

reverse-annuity mortgage (RAM)

An alternative mortgage loan program in which the lender makes periodic payments to the borrower. The loan is secured by the borrower's accumulated equity in the home. This type of loan is usually taken out by an older, retired person who has substantially paid for a home, and now needs additional income to live on. The borrower receives periodic payments from the lender, or from an annuity set up with the proceeds from the loan. The owner continues to live in the house until death, with the sale of the home at that time used to pay off the loan. This is a plan for taking money out of a home; for converting an existing frozen asset into current income. [OTS]

reversing entry

A file created by a sending point to completely cancel a previous file or entry because the previous file or entry was in error for some reason. Used extensively with duplicate entries. [ACH]

reversing trade

Entering the opposite side of a currently held futures position to close out the position. [Harvey]

revocable trust

A trust in which the grantor retains the right to revoke, and reclaim property that had been placed in the trust. [OTS] A trust whose provisions may be amended or terminated, in whole or part, by the settlor during his/hers lifetime. [UNODC]

revolving credit

A line of credit extended to customers who may use it as often as desired up to a certain dollar limit. Items purchased using this line of credit, may be paid in full upon receipt of a monthly statement, or they may be paid for in several installments, for which an interest charge is added. [OTS] legally assured line of credit with a bank. [WCSU]

revolving credit agreement

A legal commitment wherein a bank promises to lend a customer up to a specified maximum amount during a specified period. [Harvey]

revolving letter of credit

A letter of credit issued for a specific amount which renews itself for the same amount over a given period. Usually the unused renewable portion of the credit is cumulative as long as drafts are drawn before the expiration of the credit. [FDIC]

revolving line of credit

A bank line of credit on which the customer pays a commitment fee and can take down and repay funds according to his needs. Normally the line involves a firm commitment from the bank for a period of several years. [Harvey]

revolving loan

Loan from a state revolving fund that is a form of local debt that does not involve issuing bonds. Revolving loans may have lower interest rates and/or issuance costs than bonds. A revolving loan fund (e.g., an SRF or State Revolving Fund) is a separate account from which loans are made and to which repayments are made. A revolving loan program may consist of several accounts or revolving funds that make loans or other types of assistance available for various kinds of infrastructure projects. Such programs typically have several sources of funds and may have borrowing authority where bond issues are secured by repayment streams of the program's loans or by the full faith and credit of the State. [EPA]

revolving underwriting facility (RUF)

Issuance facility for short-term euronotes. [WCSU]

reward-to-volatility ratio

Ratio of excess return to portfolio standard deviation. [Harvey]

rho

The sensitivity of the option price to a change in the interest rate. [TMAC]

riding the yield curve

Buying long-term bonds in anticipation of capital gains as yields fall with the declining maturity of the bonds. [Harvey] Trading in an interest rate futures contract according to the expectations of change in the yield curve. [CFTC]

right

A short-lived (typically less than 90 days) call option for purchasing additional stock in a firm, issued by the firm to all its shareholders on a pro rata basis. [Harvey] When a company wants to raise more funds by issuing additional securities, it may give its stockholders the opportunity, ahead of others, to buy the new securities in proportion to the number of shares each owns. The piece of paper evidencing this privilege is called a right. Because the additional stock is usually offered to stockholders below the current market price, rights ordinarily have a market value of their own and are actively traded. In most cases they must be exercised within a relatively short period. Failure to exercise or sell rights may result in monetary loss to the holder. [NYSE]

right of first refusal

A provision in an agreement stating that a specified party must be given an opportunity -- before any others -- to either accept or reject an offer. The right of first refusal may extend, for example, to the act of selling property. In this case, if and when the owner decides to sell, the property must first be offered to the specified party. Upon refusal by the specified party, the property may then be offered under the same terms and conditions to others. [OTS]

right of foreclosure

The right of a lending institution to take over mortgaged property and close out the mortgagor's interest in it if the mortgagor violates the terms of the mortgage or loan note. [OTS]

right of redemption

A right provided by law in some states permitting a mortgagor to reclaim foreclosed property by making full payment of the mortgage debt, including interest and fees, or the foreclosure sales price. The redemption period is for a specified period of time. [OTS]

right of rescission

The borrower's statutory right under the Truth-in-Lending law to change his or her mind and cancel a loan within three business days from the date of the loan application. [OTS]

right of survivorship

A right when property is co-owned and one owner dies. In that case, the entire, undivided property passes to the ownership of the surviving owner(s). [OTS]

right of way

authority granted to others by the owner of land to pass across the land, sometimes in the form of an access easement. Streets and sidewalks are normally part of the public right of way. [OTS]

right to vote

The right of common stockholders to vote on matters of corporate policy at an annual stockholder's meeting. The impact of a stockholder's vote is proportionate to the amount of stock owned. [NYSE]

right-to-work laws

Laws banning union membership as a requirement for continued employment. [FACS]

rights issue

Issue of securities that is offered to current stockholders. [WCSU]

rights offering

Issuance of 'rights' to current shareholders allowing them to purchase additional shares, usually at a discount to market price. Shareholders who do not exercise these rights are usually diluted by the offering. Rights are often transferable, allowing the holder to sell them on the open market to others who may wish to exercise them. Rights offerings are particularly common to closed end funds, which cannot otherwise issue additional common stock. [Harvey]

rights-on

Shares trading with rights attached to them. [Harvey]

rings

A circular area on the trading floor of an exchange where traders and brokers stand while executing futures trades. Some exchanges use pits rather than rings. [CFTC] Trading arenas located on the floor of an exchange in which traders execute orders. Sometimes called a pit. [Harvey]

riparian

pertaining to the water's edge. It is generally used to describe the rights of land owners whose property is adjacent to rivers, lakes or other bodies of water. [OTS]

riparian rights

The rights of owners of land adjacent to a body of water to the water and land below the high water mark. [OTS]

risk

Exposure to uncertain change. In the investment field, risk is the probability that the actual return on an investment will differ from its expected return. For example, a Treasury bill is considered by most investors to have practically no risk. Risks associated with investments in general include interest rate risk, market risk, business risk, financial risk, and liquidity risk. In the FDIC Internal Control Review program, risk is considered to be the susceptibility of an organizational unit or process to mismanagement, erroneous reports or data, illegal or unethical acts, and adverse public opinion. [FDIC] The probability of loss, or the degree of uncertainty of being repaid, associated with loaning or investing funds. [OTS] Typically defined as the standard deviation of the return on total investment. Degree of uncertainty of return on an asset. [Harvey]

risk arbitrage

Speculation on perceived mispriced securities, usually in connection with merger and acquisition deals. Mike Donatelli, John Demasi, Frank Cohane, and Scott Lewis are all hardcore arbs. They had a huge BT/MCI position in the summer of 1997, and came out smelling like roses. [Harvey]

risk assessment

Generally, the identification and quantification of risk types, levels, and locations in a process or organizational unit. In the FDIC Internal Control Review program, management tries to identify the susceptibility of an organizational unit or process to the occurrence of waste, loss, unauthorized use, or misappropriation. [FDIC]

risk averse

A risk-averse investor is one who, when faced with two investments with the same expected return but two different risks, prefers the one with the lower risk. [Harvey]

risk classes

Groups of projects that have approximately the same amount of risk. [Harvey]

risk controlled arbitrage

A self-funding, self-hedged series of transactions that generally utilize mortgage securities as the primary assets. [Harvey]

risk factor

risk indexes

Categories of risk used to calculate fundamental beta, including (1) market variability, (2) earnings variability, (3) low valuation, (4) immaturity and smallness, (5) growth orientation, and (6) financial risk. [Harvey]

risk lover

A person willing to accept lower expected returns on prospects with higher amounts of risk. [Harvey]

risk management

The process of identifying and evaluating risks and selecting and managing techniques to adapt to risk exposures. [Harvey]

risk metrics

JP Morgan's trade name for a VaR methodology and dataset of historical rate volatilities and correlations which can be utilized in employing the methodology. [TMAC]

risk neutral

Insensitive to risk. [Harvey]

risk position

An asset or liability which is exposed to fluctuations in value through changes in exchange rates or interest rates. [ITDS]

risk premium

Expected additional return for making a risky investment rather than a safe one. [WCSU] The reward for holding the risky market portfolio rather than the risk-free asset. The spread between Treasury and non-Treasury bonds of comparable maturity. [Harvey]

risk premium approach

The most common approach for tactical asset allocation to determine the relative valuation of asset classes based on expected returns. [Harvey]

risk prone

Willing to pay money to transfer risk from others. [Harvey]

risk, credit

The possibility that the buyer or seller of foreign exchange may be unable to meet his or her obligation on maturity. [FDIC]

risk, delivery

The possibility that a seller of foreign exchange, having collected the payment in local currency, may fail to deliver the exchange in the foreign center where it was sold. Also called settlement risk. [FDIC]

risk, exchange

The possibility of a loss on a covered position as a result of an appreciation or depreciation of the foreign currency. [FDIC]

risk, forward exchange

The possibility of a loss on a covered position as a result of a change in the swap margin. [FDIC]

risk-adjusted profitability

A probability used to determine a 'sure' expected value (sometimes called a certainty equivalent) that would be equivalent to the actual risky expected value. [Harvey]

risk-adjusted return

Return earned on an asset normalized for the amount of risk associated with that asset. [Harvey]

risk-based capital

one of three capital standards adopted for savings institutions in 1989. The standard is designed to require savings institutions to hold more capital for higher-risk assets. The value of each asset is weighted according to its risk and then capital is calculated at a fixed percent of each risk-weighted asset. The standard adopted in 1989 was 8 percent of risk-weighted assets. [OTS]

risk-free asset

An asset whose future return is known today with certainty. [Harvey]

risk-free rate

The rate earned on a riskless asset. [Harvey]

risk/reward ratio

The relationship between the probability of loss and profit. This ratio is often used as a basis for trade selection or comparison. [CFTC]

risked-based margining

riskless arbitrage

The simultaneous purchase and sale of the same asset to yield a profit. [Harvey]

riskless or risk-free asset

An asset whose future return is known today with certainty. The risk free asset is commonly defined as short-term obligations of the U.S. government. [Harvey]

riskless rate

The rate earned on a riskless investment, typically the rate earned on the 90-day U.S. Treasury Bill. [Harvey]

riskless rate of return

The rate earned on a riskless asset. [Harvey]

risky asset

An asset whose future return is uncertain. [Harvey]

ritzy maes

slang for mortgage-backed securities sold by the Resolution Trust Corporation. [OTS]

road waybill

Transport document that indicates goods have been received for shipment by road haulage carrier. [ITDS]

roll-on, roll-off

A category of ships designed to load and discharge cargo which rolls on wheels. [ITDS]

rollover

A special futures straddle trading procedure involving the shift of one month of a straddle into another future month while maintaining the other contract month of the original spread position. The shift can take place in either the long or short straddle month. [NYMEX] A trading procedure involving the shift of one month of a straddle into another future month while holding the other contract month. The shift can take place in either the long or short straddle month. The term also applies to lifting a near futures position and re-establishing it in a more deferred delivery month. [CFTC] Most term loans in the Euromarket are made on a rollover basis, which means that the loan is periodically repriced at an agreed spread over the appropriate, currently prevailing LIBO rate. [Harvey] Reinvest funds received from a maturing security in a new issue of the same or a similar security. [Harvey] The issuance of renewal notes to retire outstanding notes. [EPA] The practice of reinvesting capital and interest of one investment into an identical new investment. [OTS] The process of reinvesting funds received from a maturing security in a new issue of the same or a similar security. [OTS]

rollover CD

A package of successive certificates of deposit. [WCSU]

rollover credit

Any line of credit that can be borrowed against up to a stated credit limit and into which repayments go for crediting. [ITDS]

round lot

A quantity of a commodity equal in size to the corresponding futures contract for the commodity, as distinguished from a job lot, which may be larger or smaller than the contract. [NYMEX] A quantity of a commodity equal in size to the corresponding futures contract for the commodity. [CFTC] A trading order typically of 100 shares of a stock or some multiple of 100. [Harvey] A unit of stock, usually consisting of 100 shares or multiples of 100 shares. [OTS] Generally, one hundred shares of stock or multiples of 100. [SEC]

round lot order

An order to buy or sell in multiples of 100 shares. [NYSE]

round trip trading

round-trip transactions costs

Costs of completing a transaction, including commissions, market impact costs, and taxes. [Harvey]

round-turn

A completed transaction involving both a purchase and a liquidating sale, or a sale followed by a covering purchase. [CFTC] Procedure by which the Long or short position of an individual is offset by an opposite transaction or by accepting or making delivery of the actual financial instrument or physical commodity. [Harvey] The completion of both a purchase and sale of a commodity futures contract. [NYMEX]

route

The course or direction that a shipment moves. [ITDS]

routing and transit numbers

The identification numbers printed on checks and drafts designating the paying institution and its location. The numbers facilitate the check-collection process. [OTS]

royal lives clause

A clause inserted in many trusts to determine their maximum durations. A prominent person - often the late British monarch King George VI - is selected, and termination of the trust is determined by the death of the last lineal descendant of that person living at the time the trust takes effect, plus twenty one years. [UNODC]

royalty

Compensation for the use of a persons property based on an agreed percentage of the income arising from its use. [ITDS]

RTC Oversight Board

An instrumentality of the federal government created in 1989 by FIRREA and responsible for the general oversight of the REFCORP. [FDIC]

RTC Refinancing, Restructuring, and Improvement Act (RTCRRIA)

Legislation enacted in 1991 that provided funding and organization for the RTC. Among its major provisions, the act (1) provided $25 billion in new loss funds for the RTC to be used through April 1, 1992; (2) extended the RTC's ability to accept appointment as conservator or receiver over failed thrifts from August 9, 1992, through September 30, 1993; (3) removed the FDIC as the exclusive manager of the RTC; (4) abolished the RTC Board of Directors; (5) established a chief executive officer position at the RTC; and (6) changed the RTC oversight body from the Oversight Board to the Thrift Depositor Protection Oversight Board. [FDIC]

rule 144a

SEC rule allowing qualified institutional buyers to buy and trade unregistered securities. [Harvey]

rule 415

Rule enacted in 1982 that permits firms to file shelf registration statements. [Harvey]

rule of 78s

A method used by a lender to calculate an interest rebate on a loan that is paid off, or refinanced, prior to its maturity, or for accruing earned discount. A predetermined factor is applied to the portion of total interest generated during the period in question. Also, sometimes called sum-of-the-digits method. [OTS]

rules

The principles for governing an exchange. In some exchanges, rules are adopted by a vote of the membership, while in others, they can be imposed by the governing board. [CFTC]

rules of the class

The terms and conditions established by a savings institution for each type of account and included in each savings account contract. They include rates of interest, penalty provisions, and any minimum deposits. [OTS]

run

A run consists of a series of bid and offer quotes for different securities or maturities. Dealers give to and ask for runs from each other. [Harvey] The situation in which large numbers of customers make massive withdrawals of their funds from a depository institution. [OTS]

runners

Messengers or clerks who deliver orders received by phone clerks to brokers for execution in the pit. [CFTC] Messengers who rush orders received by phone clerks to brokers for execution in the pit. [CBOT][MIDAM]

S-Series

An RTC equity partnership created specifically for the smaller investor. The S-Series transactions consisted of relatively small portfolios of nonperforming and subperforming commercial mortgages, similar to the composition of N-Series pools; however, the S-Series pools were smaller in size to permit relatively small investors to participate. [FDIC]

safe deposit box

A container in a secure vault that is rented to an individual or organization for the safekeeping of valuables. [OTS]

safety and soundness

The terms 'safety' and 'soundness' are commonly used in laws governing financial institution regulation, and safety and soundness determinations fall within the special expertise of the financial institution regulatory agencies. The terms are generally used as a measure of an institution's financial health, the integrity of its operations, and its ability to remain financially viable. [UNODC]

safety and soundness exam

An examination of a thrift institution's financial strength and operating policies and procedures to determine whether the institution is being run in a safe and sound manner. [OTS]

sale advertisement

In a public sale, a solicitation of bids published in a newspaper or financial or trade journal. [EPA]

sale and leaseback

Sale of an existing asset to a financial institution that then leases it back to the user. [WCSU] Transaction by which X sells real or personal property to the issuer, and concurrently the issuer leases the property back to X, generally with improvements funded by an issue the debt service on which X agrees to pay. X acquires an equity position in the property during the lease term. [EPA]

sale-buyback

A financing arrangement in which the developer sells a property to an investor and then buys it back under a long-term sales contract. [OTS]

sale-leaseback

An arrangement in which a seller deeds property to a buyer for cash or other consideration, and the buyer simultaneously leases the property back to the seller, usually on a long-term basis. [OTS]

sales

The income received when goods or services are sold. [OTS] The transfer of ownership of an item or the entitlement to a service in exchange for money. [OTS]

sales agreement

A written document by which a seller agrees to convey property to a buyer for a stipulated price under specified conditions. [ITDS]

sales tax

A tax placed by a state or municipality on items at the time of their purchase. [ITDS]

Sallie Mae

salvage

Compensation paid for the rescue of a ship, its cargo or passengers from a loss at sea; or the act of saving a ship or its cargo from possible loss; or property saved from a wreck or fire. [ITDS]

salvage value

Scrap value of plant and equipment. [WCSU]

samaurai bond

Bond issued on the Japanese market in yen outside Japan. [ITDS]

same day funds

The use of Federal funds, or the equivalent, in the settlement of a transaction which will probably create an interest adjustment of the trading rate to compensate for the difference in the availability of the funds for use. [FDIC]

sample grade

Usually the lowest quality of a commodity, too low to be acceptable for delivery in satisfaction of futures contracts. [CFTC]

samurai bonds

A yen bond issued in Tokyo by a non-Japanese borrower. [WCSU] Yen-denominated bonds issued by a foreign borrower in Japan. [UNODC]

sanction

An embargo imposed against an individual country by the United Nations-or a group of nations-in an effort to influence its conduct or its policies. [ITDS]

satisfaction of mortgage

The recordable instrument given by the lender that evidences payment in full of the mortgage debt. Also known as a release deed. [OTS]

save

to put aside a portion of income, deferring its consumption until a future date. [OTS]

Savings & Community Bankers of America

savings

The total accumulated amount of income that is not spent on consumption. [OTS]

savings account loan

A loan secured by funds on deposit in a savings account, normally maintained at the lending institution. Funds in the savings account equal to the amount of outstanding principal of the loan, may not be withdrawn. [OTS]

savings accounts

A deposit or account in which the depositor is not required by the deposit contract, but may at any time be required by the deposit institution, to give written notice of a withdrawn not less than seven days before withdrawal is made, and that is not payable on a specified date or at the expiration of a specified time after the date of deposit. [UNODC] An account maintained by a customer with a depository institution for the purpose of accumulating funds over a period of time. Funds deposited in a savings account may be withdrawn only by the account owner or a duly authorized agent, or on the owner's nontransferable order. The account may be owned by one or more persons. Some accounts require funds to be kept on deposit for a minimum length of time, while others permit unlimited access to funds. Earnings may be in the form of dividends, as in the case of a share type savings account, or interest as in the case of a deposit type account. [OTS]

Savings and Loan Associations (S&L)

An association of savers and borrowers formally established to accept deposits and make loans, primarily on residential real estate. An association may be organized as a mutual or a stock association. A mutual association is owned by its depositors and, in some cases, its borrowers. A stock association is owned by its shareholders. A savings and loan association may be chartered by a state or receive a federal charter from the Office of Thrift Supervision. Savings and loan associations are also called S&Ls, savings associations, building and loan associations, cooperative banks, or homestead societies. [OTS] Historically, depository institution that accepted deposits mainly from individuals and invested heavily in residential mortgage loans. Although still primarily residential lenders, S&Ls may now offer checking-type deposits and make a wider range of loans. [FRBSF] Savings and Loan Associations (sometimes called building and loan associations, cooperative banks, or homestead associations) accept deposits primarily from individuals, and channel their funds primarily into residential mortgage loans. Most savings and loan associations are technically owned by the depositors who receive shares in the association for their deposits. [FRBC]

savings and loan crisis (S&L crisis)

Failure of 1,043 out of the 3,234 savings and loan associations in the United States from 1986 to 1995: FSLIC closed or otherwise resolved 296 institutions from 1986 to 1989 and the RTC closed or otherwise resolved 747 institutions from 1989 to 1995. [Wikipedia]

savings association

Savings Association Insurance Fund (SAIF)

One of the two federal deposit insurance funds created by FIRREA in 1989 and placed under the FDIC's administrative control. Created for the thrift industry, SAIF succeeded the FSLIC as the insurer of deposits to specified limits at savings associations (also called S&Ls) and many savings banks. [FDIC] The fund that provides deposit insurance for savings institutions. SAIF was authorized by Congress in 1989 to take over the thrift deposit insurance role held by the former Federal Savings and Loan Insurance Corporation (FSLIC). SAIF is administered by the Federal Deposit Insurance Corporation (FDIC). [OTS]

Savings Association Trade Executive

An organization made up of executives from state savings and loan trade associations. [OTS]

savings bank

A financial intermediary that accepts savings deposits and invests these funds in loans primarily for commercial and residential real estate, plus investments in government and high quality corporate bonds and blue chip stock. Savings banks may be state-or federally chartered and insured by the SAIF or the FDIC. In 1982, Congress removed all differences between federally chartered savings banks and federally chartered savings and loan associations as to the kinds of loans and investments they can make. [OTS] Depository institution historically engaged primarily in accepting consumer savings deposits and in originating and investing in securities and residential mortgage loans; now may offer checking-type deposits and make a wider range of loans. [FRBSF]

savings certificate

A document that is evidence of ownership of a savings account, typically an account in which a stated amount of funds is deposited for a fixed term. [OTS]

savings flow

The net increase or decrease of the total of all savings account balances held by a savings institution during a specific period of time. [OTS]

savings inflows

The net increase over a period of time of the total of all savings account balances held by one institution or all balances held by a group of savings institutions. [OTS]

savings institution

A financial intermediary established to promote thrift by accepting savings from the public. Savings institutions include both savings and loan associations and savings banks. Savings institutions are also called thrift institutions. [OTS]

savings liability

The total amount of savings deposits entrusted to a depository institution by its depositors. It is the total amount of all savings account balances held by an institution, including earnings credited to such accounts, less redemptions and withdrawals. [OTS]

savings outflows

The net decrease over a period of time of the total of all savings account balances held by one institution or all balances held by a group of savings institutions. [OTS]

sawbuck

slang for a $10 bill. [OTS]

scale order

An order to buy (or sell) a security, that specifies the total amount to be bought (or sold) at specified price variations. [NYSE]

scalper

A speculator on the trading floor of an exchange who buys and sells rapidly, with small profits or losses, holding his positions for only a short time during a trading session. Typically, a scalper will stand ready to buy at a fraction below the last transaction price and to sell at a fraction above, thus creating market liquidity. [NYMEX] A speculator, often with exchange trading privileges, who buys and sells rapidly, with small profits or losses, holding his positions for only a short time during a trading session. Typically, a scalper will stand ready to buy at a fraction below the last transaction price and to sell at a fraction above, e.g., to buy at the bid and sell at the offer or ask price, with the intent of capturing the spread between the two, thus creating market liquidity. [CFTC] A trader who trades for small, short-term profits during the course of a trading session, rarely carrying a position overnight. [CBOT][MIDAM]

scarce good

A good which people want more of and which is costly to obtain. [FACS]

scarcity shortage

A term used when the quantity of a good demanded exceeds the quantity supplied at the existing price. [FACS]

scheduled items

problem assets, which all SAIF-insured savings institutions must list in a separate category in their financial reports to the Office of Thrift Supervision. Scheduled items include slow real estate and consumer loans, real estate owned as a result of foreclosure, and real estate sold on contract or financed at a loan-to-value ratio greater than normally permitted. The amount listed as scheduled items is one measurement of the soundness of an institution's portfolio. [OTS]

scoping an exam

slang for planning the activities to be performed during a forthcoming examination of a savings association. The scope determines the areas to receive special attention, the procedures to be used and the depth of the review. In determining the scope, OTS staff considers: the institution's regulatory plan, prior examination reports, supervisory actions, correspondence, newspaper/magazine clippings, business plans, capital plans, audit reports, management letters, OTS financial analysis reports, SEC filings, and discussions with OTS and institution staff. [OTS]

scratch

slang for readily available money. [OTS]

scripophily

A term coined in the mid-1970s to describe the hobby of collecting antique bonds, stocks and other financial instruments. Values are affected by beauty of the certificate and the issuer 's role in world finance and economic development. [NYSE]

seal

A mark or sign that is used to witness and authenticate the signing of an instrument, contract, or other document. [ITDS]

sealed bid sale

A 'silent auction' in which investors independently value an asset and submit bids by a certain date. Information on bids or bidders is not released before a sale closes. [FDIC]

season datings

extended credit for customers who order goods out of the peak season. [WCSU]

seasonality claims

Misleading sales pitches that one can earn large profits with little risk based on predictable seasonal changes in supply or demand, published reports or other well-known events. [CFTC]

seasoned issue

Issue of a security for which there is an existing market. [WCSU]

seasoned mortgage

A mortgage that has been in effect at least one year and on which principal and interest payments are being made on time. [OTS]

seat

An instrument granting trading privileges on an exchange. A seat may also represent an ownership interest in the exchange. [CFTC] The traditional term for the right to trade on the Trading Floor of the NYSE. The owners of seats are considered members of the NYSE. [NYSE]

seaworthiness

The fitness or safety of a vessel for its intended use. [ITDS]

second mortgage

secondary distribution

Also known as secondary offering. The redistribution of a block of stock some time after it has been sold by the issuing company. The sale is handled off the NYSE by a securities firm or group of firms and the shares are usually offered at a fixed price related to the current market price of the stock. Usually the block is a large one, such as might be involved in the settlement of an estate. The security may be listed or unlisted. [NYSE]

secondary issue

Procedure for selling blocks of seasoned issues of stock. More generally, sale of already issued stock. [WCSU]

secondary market

Market in which one can buy or sell seasoned issues of securities. [WCSU] Market where previously issued securities are bought and sold. [CBOT][MIDAM] The market in which securities are traded after their initial delivery. [EPA] When stocks or bonds are traded or resold, they are said to be sold on the secondary market. The majority of all securities transactions takes place on the secondary market. Securities and Exchange [NYSE]

secondary mortgage market

A market through which existing mortgage loans are bought and sold to other lenders, to government or private agencies, or to investors. Mortgage loans are originated to home buyers in the primary market and sold to investors in the secondary market. [OTS]

secondary product

Goods or services produced an industry other than the primary product of that industry. [BEA]

secrecy haven

An offshore jurisdiction, that may or may not have achieved 'offshore center status', which rigorously enforces bank secrecy through practice or law to attract business. [UNODC]

secret trust

A UK trust where no evidence of the existence of the trust appears in any public document. They invariably arise in connection with wills, where the will is a public document. [UNODC]

section

A parcel of land in a government survey comprising one square mile or 640 acres. [OTS]

secure electronic transaction (SET)

VISA and Mastercard technical standards for making secure credit card purchases over open networks such as the Internet. [GAO]

secure hypertext transfer protocol (S-HTTP)

secure sockets layer (SSL)

secured

Guaranteed as to payment by the pledge of something valuable. [ITDS] guaranteed as to full payment by the pledge of something of equal or better value. [OTS]

secured debt

Debt which, in the event of default, has first claim on specified assets. [WCSU]

secured loan

A loan for which the borrower pledges collateral that will be forfeited to the lender if the borrower fails to repay the loan. [OTS]

secured party

The person or organization holding a security interest or lien against collateral. Also known as the mortgagee, the conditional seller, or the pledgee. [OTS]

securities

Paper certificates (definitive securities) or electronic records (book-entry securities) evidencing ownership of equity (stocks) or debt obligations (bonds). [FRB][FRBM][FRBSF] Securities refer to a financial instrument that represents a share of ownership in a corporation--a stock; a loan to a corporation, government, or governmental body--a bond; or conditional rights to ownership, e.g., an option. [GAO]

Securities Act of 1933

federal legislation requiring the full and fair disclosure of all material information about the issuance of new securities. [OTS]

securities act or securities laws

Generally a reference to the Securities Act of 1933, but in certain contexts includes also the Securities Exchange Act of 1934 and the Trust Indenture Act of 1939. Securities Laws include state 'Blue Sky' laws; see 'Blue Sky Memorandum'. [EPA]

Securities and Exchange Commission (SEC)

A federal agency that regulates the securities exchanges and the over-the-counter markets, and works to protect investors from unfair and inequitable practices. The SEC administers the Securities Act of 1933, the Securities Exchange Act of 1934, the Trust Indenture Act, the Investment Company Act, and the Public Utility Holding Company Act. [OTS] An independent agency of the U.S. government consisting of five members appointed by the President that administers comprehensive legislation governing the securities industry. [FRB][FRBC][FRBM] An independent, non-partisan, quasi-judicial regulatory agency with responsibility for administering the federal securities laws. The purpose of these laws is to protect investors and to ensure that investors have access to disclosure of all material information concerning publicly traded securities. The Commission also regulates firms engaged in the purchase or sale of securities, people who provide investment advice, and investment companies. [FRBSF] Established by Congress to help protect investors. The SEC administers the Securities Act of 1933, the Securities Exchange Act of 1934, the Securities Act Amendment of 1975, the Trust Indenture Act, the Investment Company Act, the Investment Advisers Act, and the Public Utility Holding Company Act. [NYSE]

Securities Communications Order Report and Execution System (SCOREX)

Pacific Stock Exchange. [NYSE]

Securities Exchange Act of 1934 (SEA)

federal legislation that established the Securities and Exchange Commission (SEC). The Office of Thrift Supervision administers the act's requirements for savings associations that are organized as stock corporations. [OTS]

securities fraud

Deceptive practice in the stock or commodities markets that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of securities laws. Offers of risky investment opportunities to unsophisticated investors who are unable to evaluate risk adequately and cannot afford loss of capital is a central problem. Securities fraud can also include outright theft from investors (embezzlement by stockbrokers), stock manipulation, misstatements on a public company's financial reports, and lying to corporate auditors. The term encompasses a wide range of other actions, including insider trading, front running and other illegal acts on the trading floor of a stock or commodity exchange. [Wikipedia]

Securities Industry Association (SIA)

Represents the collective business interests of more than 500 brokerages and investment banking firms. Membership includes most NYSE member organizations, major firms of all U.S. and Canadian exchanges, and the over-the-counter market. [NYSE]

Securities Industry Automation Corporation (SIAC)

An independent organization established by the New York and American Stock Exchanges as a jointly owned subsidiary to provide automation, data processing, clearing and communication services. [NYSE] Operates New York and American Stock Exchange automation and communications systems; supporting trading, market data reporting, and surveillance activities. SIAC also supports NSCC's nationwide clearance and settlement systems, and is the systems processor for industry-wide National Market System components, such as the Consolidated Tape Association, Consolidated Quotation System, Options Price Reporting Association, and the intermarket Trading System. SIAC is separately managed by an independent board of directors. [NYSE]

Securities Industry Protection Corporation (SIPC)

A nonprofit membership corporation established by Congress in 1970 to protect investors' securities and cash held by broker-dealers in the event of liquidation. SIPC derives its annual assessments from U.S.-registered broker-dealers who are legally required to join. NYSE Affiliated Organizations Non-NYSE Affiliated Organizations [NYSE]

Securities Investor Protection Corporation (SIPC)

Provides funds for use, if necessary, to protect customers' cash and securities that may be on deposit with a SIPC member firm in the event the firm fails and is liquidated under the provisions of the SIPC Act. SIPC is not a Government Agency. It is a non-profit membership corporation created, however, by an Act of Congress. [NYSE]

securities market

A place or places where securities are bought and sold, the facilities and people engaged in such transactions, the demand for and availability of securities to be traded, and the willingness of buyers and sellers to reach agreement on sales. Securities markets include over-the-counter markets, the New York Stock Exchange, the Chicago Board of Trade and the American Stock Exchange. [OTS]

Securities Telecommunications Organization (SECTOR)

Provides the financial industry with communications lines. An industry-wide policy board oversees mutualized operations of this SIAC division. [NYSE]

securitization

The process by which generally illiquid assets with similar features are pooled into interest-bearing securities with marketable investment characteristics. In the securitization of commercial and multi-family residential mortgages, the cash flow associated with the mortgage payments is placed into the most appropriate legal package (for example, CMO and REMIC), techniques are used to reshape the mortgage cash flow, a credit enhancement feature is added, and a mortgage-backed security is created. From 1991 to 1997, 72 RTC and 2 FDIC securitizations were closed, disposing of conservatorship and receivership assets with a total book value of approximately $44 billion. [FDIC] The process of gathering a group of debt obligations such as mortgages into a pool, and then dividing that pool into portions that can be sold as securities in the secondary market. [OTS]

security

(1) the collateral that is given, deposited, or pledged to guarantee an obligation or the payment of a debt. For example, the property on which a mortgage is issued is the security for the mortgage loan. (2) a financial instrument that provides evidence of a debt, or of rights to share in earnings or the distribution of property. Stocks and bonds are securities. (3) measures taken to protect property against theft or vandalism. [OTS] Common or preferred stock; a bond of a corporation, government, or quasi-government body. [CBOT][MIDAM] Generally, a transferable instrument representing an ownership interest in a corporation (equity security or stock) or the debt of a corporation, municipality, or sovereign. Other forms of debt such as mortgages can be converted into securities. Certain derivatives on securities (e.g., options on equity securities) are also considered securities for the purposes of the securities laws. Security futures products are considered to be both securities and futures products. Futures contracts on broad-based securities indexes are not considered securities. [CFTC] Property pledged as collateral. [ITDS]

security agreement

A document or section of a note that contains a description of the loan collateral. It establishes the lender's rights to the collateral in the event of default on the loan. [OTS] Written agreement between debtor and creditor containing the terms by which a security interest is created in specific assets or property of the debtor. [EPA]

security deposit

money paid by a renter to a landlord as security against abuse of the rented property. The deposit is returned to the renter when the renter leaves the property in good condition, except for normal wear and tear. [OTS]

security future

A contract for the sale or future delivery of a single security or of a narrow-based security index. [CFTC]

security futures product

A security future or any put, call, straddle, option, or privilege on any security future. [CFTC]

security instrument

The mortgage or trust deed that is the evidence of the pledge of real estate as security, as distinguished from the note or other credit instrument. [OTS]

security interest

An enforceable claim to collateral pledged to secure payment of a debt or performance of an obligation. [OTS] Property interest in a debtor's assets or property which is assigned to the creditor or to a third party (such as a trustee) to secure payment or performance of an obligation that the debtor owes the creditor. [EPA] The creditor's right to take property or a portion of property offered as security. [FRB][FRBC][FRBM] The property or a portion of property offered as security. [FRBSF]

security interest in household goods

A clause in a loan contract giving a lender a nonpossessory lien on a borrower's personal property, including household goods. This credit practice was prohibited for savings institutions by federal regulation in 1985. [OTS]

security market line

Line representing the relationship between expected return and market risk. [WCSU]

seed money

Consists of both the capitalization grant (from the U.S. EPA) as well as the state contribution to be utilized in conjunction with a loan program as the initial capital to be loaned to the borrowing entities. [EPA] funds required to start a development project, or to attract other capital investment. [OTS]

segregation of duties

A key operational control to ensure that one individual does not participate in more than one key trading or operational function. [TMAC]

seigniorage

The profit which results from the difference between the cost of making coins and currency and the exchange value of coin and currency in the market. [FRB][FRBM][FRBSF]

seisin

The act of taking possession of real estate by its rightful and lawful owner. [OTS]

seizure

The act of taking possession of property. [ITDS] The act of taking possession. [OTS]

self-check

(1) a check deposited in a financial institution for credit to the check writer's account. (2) a check presented for payment at the institution on which it was drawn. [OTS]

self-liquidating

The status of an asset that over a period of time returns the total amount of its cost. For example, a fully amortized mortgage is a lender's self-liquidating asset. [OTS]

self-liquidating loan

Loan to finance current assets. The sale of current assets provides the cash to repay the loan. [WCSU]

self-regulation

The way in which the securities industry monitors itself to create a fair and orderly trading environment. [NYSE]

self-regulatory organizations (SRO)

Describes a national securities exchange, registered securities association or registered clearing agency authorized by the Securities Exchange Act of 1934 to regulate the conduct and activities of its members, subject to oversight by a specified government regulatory agency. [NYSE] Nongovernment organizations that have statutory responsibility to regulate their own members such as the NYSE, AMEX, and NASD. [FRB][FRBC][FRBM] Self-regulatory organizations are industry organizations and associations responsible for enforcement and practices in their market. [GAO]

self-selection

Consequence of a contract that induces only one group (e.g., the low-risk individuals) to participate. [WCSU]

sell on close

To sell at the end of the trading session within the closing price range. [CFTC]

sell on opening

To sell at the beginning of a trading session within the open price range. [CFTC]

sell side

A broker/dealer who sells expertise in research, order execution or any other service to an individual or institution. [NYSE]

seller financing

A purchase money mortgage provided to buyers by the FDIC and the RTC to facilitate the sale of hard-to-sell assets and to maximize the value of assets sold. Seller financing was used primarily to facilitate the sale of owned real estate. Seller financing was also offered by the RTC in the disposition of nonperforming loans in structured transactions. [FDIC]

seller's call

Seller's call, also referred to as call purchase, is the same as the buyer's call except that the seller has the right to determine the time to fix the price. [CFTC]

seller's option

A special transaction on the NYSE, that gives the seller the right to deliver the stock or bond at any time within a specified period, ranging from no less than two business days to no more than 60 days. [NYSE] The right of a seller to select, within the limits prescribed by a contract, the quality of the commodity delivered and the time and place of delivery. [CFTC]

seller's option contract

When the seller has the right to settle a forward contract at his or her option anytime within a specified period. [FDIC]

seller's points

A lump sum paid by the seller to the buyer's creditor to reduce the cost of the loan to the buyer. This payment is either required by the creditor or volunteered by the seller, usually in a loan to buy real estate. Generally, one point equals one percent of the loan amount. [FRB][FRBC][FRBM]

seller-servicer

An organization approved by the Federal Home Loan Mortgage Corporation (Freddie Mac) that sells mortgages into the secondary market and services mortgages by collecting and forwarding monthly payments, maintaining records and performing any other functions needed to keep the mortgage loans current. [OTS]

sellers market

A condition of the market in which there is a scarcity of goods available and hence sellers can obtain better conditions of sale or higher prices. [CFTC][NYMEX] A market condition in which demand for a product or service exceeds available supply, resulting in higher prices favoring the seller. Opposite of buyer's market. [OTS] Exists when goods cannot easily be secured and when the economic forces of business tend to cause goods to be priced at the vendors estimate of value. [ITDS]

selling (short) hedge

Selling futures contracts to protect against possible declining prices of commodities that will be sold in the future. At the time the cash commodities are sold, the open futures position is closed by purchasing an equal number and type of futures contracts as those that were initially sold. [CBOT]

selling group

A syndicate of securities dealers that participates in selling an issue of securities to the public. [OTS]

selling hedge (or short hedge)

Selling futures contracts to protect against possible decreased prices of commodities. [NYMEX]

selling hedge

selling price

The cash price that a buyer must pay for purchased goods or services. [OTS]

selling rate

Rate at which a bank is willing to sell foreign exchange or to lend money. [ITDS]

selling short

A technique employed by an investor who believes the market price of a security will drop. The investor borrows stock, which he then sells (even though he doesn't own it). If the price of the stock drops, the investor can buy the same stock for less than what he originally sold it for, and make a profit, after paying the brokerage commission for borrowing the stock. The investor must return a like number of shares of the borrowed stock to the stock lender. [OTS]

semistrong-form efficient market

market in which security prices reflect all publicly available information. [WCSU]

sending point

A processing site that sends entries to an ACH. This may be a member institution or a data processing service operating on its behalf. [ACH]

senior debt

Debt which, in the event of bankruptcy, must be repaid before subordinate debt receives any payment. [WCSU]

senior mortgage

A first mortgage. [OTS]

senior securities

preferred securities and bonds that receive higher priority for payment than common stock when a company is liquidated. [OTS]

sensitivity analysis

Analysis of the effect on the project profitability of possible changes in sales, costs, and so on. [WCSU]

sequential bidding

The FDIC's practice of reviewing bids for failing banks in the 1980s. On December 30, 1986, the FDIC Board of Directors established an order of priority for six alternative methods of passing assets to acquirers under authority delegated by the FDIC Board of Directors to staff prior to the receipt of the bids. [FDIC]

serial annuity bonds

Serial bonds in which the annual installments of bond principal are so arranged that the combined payments for principal and interest are approximately the same each year. [EPA]

serial bond

(A) An issue of bonds some of which are scheduled to mature annually over a number of years. Compare 'Term Bonds'. The maturity schedule for serial bonds is usually either on a substantially equal annual principal amount basis or on a level debt service basis. An issue of bonds may have a combination of serial bonds and one or more term bonds. (B) Bonds whose principal is repaid in periodic installments over the life of the issue. [EPA] A bond issue in which a portion of the bonds are scheduled to be retired at regular intervals over a period of years. Serial bonds are issued when the underlying security for the bonds depreciates through use or obsolescence. The maturities of the bonds are scheduled so that at any time, the bonds still outstanding will not exceed the declining value of the security. [OTS] An issue that matures in part at periodic stated intervals. [NYSE] Package of bonds that mature in successive years. [WCSU]

serial expiration

Options on the same underlying futures contract which expire in more than one month. NYMEX platinum options have serial expiration. [NYMEX]

series

All options of the same class which share a common strike price. [NYMEX]

series of options

Series of options are all options of the same class that also have the same unit of trade, strike price, and expiration date. [GAO]

server

A server is a computer that stores information that is retrieved by other computers. [GAO]

service a loan

To pay interest due on a loan. [ITDS]

service bureau

A business that rents computer time or sells data-processing services to savings institutions and other users. [OTS]

service charge

A component of some finance charges, such as the fee for triggering an overdraft checking account into use. [FRB][FRBC][FRBM] A fee imposed by a financial institution for a service, such as triggering an overdraft loan provision in a checking account. [OTS] A regular charge to all customers, levied for providing water or sewer service. Does not include any water and is designed to recover costs of billing, customer service, and meter installation and maintenance. [EPA]

service commitments

Pickup and/or delivery commitments agreed to by carrier and shipper. [ITDS]

service company

A company located in an offshore financial center to provide management, invoicing and other services for client companies located in other countries. Initially used to advantage double taxation treaties, Service Companies are now frequently used to facilitate flight capital outflow and are often involved in money laundering schemes. [UNODC]

service corporation

A corporation wholly owned by one or more savings institutions that engages in business activities reasonably related to a savings institution. All activities must be approved by the Office of Thrift Supervision, and can include some activities that the parent thrift may not engage in directly. Typical service corporation activities include: originating, holding, selling and servicing mortgages; performing appraisal, brokerage, clerical, escrow, and research services; and acquiring, developing, renovating or holding real estate for investment purposes. [OTS]

service life

The anticipated duration of an asset's usefulness. [OTS]

servicing

servicing contract

A document used in secondary mortgage market transactions that details servicing requirements and legally binds the institution servicing the mortgage to carry out the requirements. [OTS]

setback lines

lines on a plot drawing that delineate how close to the edges of the property a structure may be built. A structure may not extend past the setback lines, thus may be no closer to the perimeter of the property than the setback lines. Setback lines are defined in building codes, deed restrictions, and zoning regulations. [OTS]

settle

settlement

Conclusion of a securities transaction when a customer pays a broker/dealer for securities purchased or delivers securities sold and receives from the broker the proceeds of a sale. [NYSE] In banking, settlement refers to the process of recording the debit and credit positions of two parties in a transfer of funds. Also, it is the delivery of securities by a seller and the payment by the buyer. [GAO] The act of fulfilling the delivery requirements of the futures contract. [CFTC] The conclusion of a transaction when that which was bought is delivered to the buyer and payment is made to the seller. [OTS] The process of accounting for dollar transactions processed through the ACH. There is a daily settlement, which occurs directly in the case of Federal Reserve member financial institutions unless those financial institutions designate other members to settle in their behalf. Non-members of the Federal Reserve System must settle their accounts through a member of the Federal Reserve System. [ACH] Usually, the final disposition of accounts between a receiver and a failed bank acquirer. It is a process that normally takes place after closing a sales transaction with an acquirer. [FDIC]

settlement bank

Settlement banks are banks that maintain the settlement accounts for clearing members whereby payments and deposits are made. [GAO]

settlement costs

money paid by borrowers and/or sellers to effect the closing of a mortgage loan. This normally includes an origination fee, discount points, title insurance premium, survey costs, attorney's fees, and prepaid items such as insurance and tax payments to the escrow account. [OTS]

settlement date

The date on which payment for a transaction must be made. [ITDS] The day on which settlement occurs, i.e., funds actually change hands as a result of an ACH entry. [ACH] The day on which the securities are exchanged by the issuer for the purchase price, after taking into consideration the security deposits and the accrued interest on the bonds. [EPA]

settlement day

The deadline by which the seller must deliver and the purchaser must pay for that which has been bought. [OTS]

settlement or settling price

The price established by the Exchange Settlement Committee at the close of each trading session as the official price to be used by the Clearinghouse in determining net gains or losses, margin requirements, and the next day's price limits. The term 'settlement price' is often used as an approximate equivalent to the term 'closing price.' The close in futures trading refers to a brief period at the end of the day, during which transactions frequently take place quickly and at a range of prices immediately before the bell. Therefore, there frequently is no one closing price, but a range of prices. The settlement price is the closing price if there is only one closing price. When there is a closing range, it is derived by calculating the weighted average of prices during that period. [NYMEX]

settlement price

The daily price at which the clearing organization clears all trades and settles all accounts between clearing members of each contract month. Settlement prices are used to determine both margin calls and invoice prices for deliveries. The term also refers to a price established by the exchange to even up positions which may not be able to be liquidated in regular trading. [CFTC] The last price paid for a commodity on any trading day. The exchange clearinghouse determines a firm's net gains or losses, margin requirements, and the next day's price limits, based on each futures and options contract settlement price. If there is a closing range of prices, the settlement price is determined by averaging those prices. Also referred to as settle or closing price. [CBOT][MIDAM]

settlement risk

This risk occurs when a payment is required by a counterparty and it is unable or unwilling to effect it. [TMAC]

settling

(1) the process of balancing in-coming drafts that are accepted, as well as returned checks that an institution receives and making payment for the drafts within the check-collection system. (2) the process of delivering and paying for items previously purchased. (3) an agreement reached between two or more parties in contention. (4) a property arrangement to satisfy a dispute, as between a husband and wife. (5) the winding up and final distribution of an estate. [OTS]

settlor

A person who makes a settlement or creates a trust of property. Also called a grantor. [OTS] The original owner of the assets that are being placed in trust, i.e., the person who creates the trust. The settlor can be either an individual or a legal entity. [UNODC]

severally

separately, singly. For example, severally owned property is property owned by one person. Being severally responsible for debt means a person or organization is solely responsible for repayment of the obligation. [OTS]

share

A unit of stock of a corporation. Each share is equal to and has the same value as any other share of the same stock. Each share is a portion of ownership of the corporation. [OTS]

shared equity loan

A loan in which the lender shares in the equity of the mortgaged property in return for a lower interest rate to the borrower. [OTS]

shared-appreciation mortgage (SAM)

A mortgage which gives the lender a portion of any future increase in the value of the mortgaged property when sold in return for a lower rate of interest to the borrower. [OTS]

shareholder

someone who owns or holds shares of stock in a corporation such as a stock savings and loan association. [OTS]

shares outstanding

all shares of stock issued by a corporation, excluding treasury stock. [OTS]

sharia law

A term used to describe the canonical law of Islam. A number of different areas of law are subject to principals or rules of Sharia or, Shari'ah as it is known in Saudi Arabia, including death, descent and distribution, divorce, contracts, sales, interest, and mortgages. [UNODC]

shark repellents

Amendments to company charters intended to protect them from takeover. [WCSU]

shave

(1) to cut a price by a small margin. (2) reducing the amount a seller receives by raising the charge for handing the sale of a low quality financial instrument. [OTS]

shelf registration

A procedure that allows firms to file one registration statement covering several issues of the same security. [WCSU] The marketing procedure in which a company registers a large amount of securities with the Securities and Exchange Commission (SEC) at one time, and then sells them 'off the shelf' in smaller batches as market conditions warrant. [OTS]

sheriff's deed

A deed given by court order to convey title to property that has been sold to satisfy a judgment of delinquent taxes. [OTS]

shipment

Cargo tendered by on shipper, on one bill of lading, from one point of departure, for one consignee, to one destination, at one time, via a single port of discharge. [ITDS]

shipment record

A repository of information for each shipment that reflects all activity throughout each step of the shipment life cycle. [ITDS]

shipped on deck

Annotation in a bill of lading that the goods have been shipped on the deck of a vessel. [ITDS]

shipper

The company or person who ships cargo to the consignee. [ITDS]

shipping certificate

A negotiable instrument used by several futures exchanges as the futures delivery instrument for several commodities (e.g., soybean meal, plywood, and white wheat). The shipping certificate is issued by exchange-approved facilities and represents a commitment by the facility to deliver the commodity to the holder of the certificate under the terms specified therein. Unlike an issuer of a warehouse receipt, who has physical product in store, the issuer of a shipping certificate may honor its obligation from current production or through-put as well as from inventories. [CFTC]

shipping order

Instructions of shipper to carrier for forwarding of goods. [ITDS]

ships manifest

A list of the individual shipments constituting the ships cargo. [ITDS]

ships papers

The documents a ship must carry to meet the safety, health, immigration, commercial and customs requirements of a port of call or of international law. [ITDS]

ships stores

The food, medical supplies, spare parts and other provisions carried for the day-to-day running of a vessel. [ITDS]

shock absorber

A temporary restriction in the trading of certain stock index futures contracts that becomes effective following a significant intraday decrease in stock index futures prices. Designed to provide an adjustment period to digest new market information, the restriction bars trading below a specified price level. Shock absorbers are generally market specific and at tighter levels than circuit breakers. [CFTC]

shogun bonds

Dollar bond issued in Japan by a nonresident. [WCSU] Foreign bonds issued in Tokyo and denominated in currencies other than the Japanese yen. [UNODC]

short (noun)

One who has sold futures contracts or plans to purchase a cash commodity. (verb) Selling futures contracts or initiating a cash forward contract sale without offsetting a particular market position. [CBOT]

short

(1) The selling side of an open futures contract; (2) a trader whose net position in the futures market shows an excess of open sales over open purchases. [CFTC] (noun) One who has sold futures contracts or plans to purchase a cash commodity. (verb) Selling futures contracts or initiating a cash forward contract sale without offsetting a particular market position. [MIDAM] 1) The market position of a futures contract seller whose sale obligates him to deliver the commodity unless he liquidates his contract by an offsetting purchase. 2) A trader whose net position in the futures market shows an excess of open sales over open purchases. 3) The holder of a short position. 4) In the options market, the position of the seller of a call or a put option. The short in the options market is obliged to take a futures position if he is assigned for exercise. Opposite of Long. [NYMEX] The activity of selling something prior to owning it. In securities markets, selling short means a trader sells a futures contract or makes a forward contract for the sale of a cash commodity or instrument without owning what is sold. The trader must then buy an identical amount in order to deliver what has been sold. The trader will make a profit in a market with declining prices, since he will buy for a price less than the previous price at which he sold. [OTS]

short covering

Buying stock to return stock previously borrowed to make delivery on a short sale. [NYSE] The buying of stock to use as a replacement for identical stock that was previously borrowed and sold. The purchased stock may be used to repay the original stock lender. [OTS]

short form bill of lading

A bill of lading on which the detailed conditions of transportation are not listed in full. [ITDS]

short hedge

short of exchange

The position of a foreign exchange trader who has sold more foreign bills than the quantity of bills he or she has in possession to cover sales. [ITDS]

short position

An excess of liabilities (and/or forward sales contracts) over assets (and/or forward purchase contracts) in the same currency. A dealer's position when the net purchases and sales in a net-sold or oversold position. [FDIC] Stock options, or futures contracts sold short and not covered as of a particular date. On the NYSE, a tabulation is issued once a month listing all issues on the Exchange in which there was a short position of 5,000 or more shares and issues in which the short position had changed by 2,000 or more shares in the preceding month. Short position also means the total amount of stock an individual has sold short and has not covered, as of a particular date. [NYSE] The status of a transaction in which an investor has sold stock that he or she borrowed but did not own at the time of sale. The position remains short until the investor actually buys stock in sufficient quantity in order to return the same amount of stock that was borrowed to the stock lender. [OTS]

short run

The period during which some inputs are fixed and cannot be varied. [FACS]

short sale

A transaction by a person who believes a security will decline and sells it, though the person does not own the security. For instance: You instruct your broker to sell 100 shares of XYZ. Your broker borrows the stock so delivery of the 100 shares can be made to the buyer. The money value of the shares borrowed is deposited by your broker with the lender. Sooner or later you must cover your short sale by buying the same amount of stock you borrowed for return to the lender. If you are able to buy XYZ at a lower price than you sold it for, your profit is the difference between the two prices -- not counting commission and taxes. But if you have to pay more for the stock than the price you received, that is the amount of your loss. Stock exchange and federal regulations govern and limit the conditions under which a short sale may be made on a national securities exchange. Sometimes people will sell short a stock they already own in order to protect a paper profit. This is known as selling short against the box. [NYSE] Sale of a security that the investor does not own. [WCSU]

short sale fraud

Fraud occurs in a short sale when a borrower purposely withholds mortgage payments, forcing the loan into default, so that an accomplice can submit a 'straw' short-sale offer at a purchase price less than the borrower’s loan balance. Sometimes the borrower is truly having financial difficulty and is approached by a fraudster to commit the scheme. In all cases, a fraud is committed if the financial institution is misled into approving the short-sale offer, when the price is not reasonable and/or when conflicts of interest are not properly disclosed. [FFIEC]

short selling

Selling a contract with the idea of delivering or of buying to offset it at a later date. [NYMEX] Selling a futures contract or other instrument with the idea of delivering on it or offsetting it at a later date. [CFTC]

short squeeze

short the basis

The purchase of futures as a hedge against a commitment to sell in the cash or spot markets. [CFTC][NYMEX]

short weight

Notation of a shipments weight as less than noted on the original bill of lading, indicating loss during shipment. [ITDS]

short-term deposits

deposits with a maturity of less than one year. [OTS]

short-term interest rates

Interest rates on loan contracts--or debt instruments such as Treasury bills, bank certificates of deposit, or commercial paper--having maturities of less than one year. Often called money market rates. [FRB][FRBC][FRBM][FRBSF]

shortage

A deficiency in quantity shipped. [ITDS]

sight draft

A customer's order to a financial institution holding the customer's funds to pay all or part of them to another institution in which the customer has another account. The draft is payable upon delivery to the first institution, or 'upon sight.' Also called a customer draft. [OTS] A draft payable upon presentation to the drawee or within a brief period thereafter known as 'days of grace'. [FDIC] Demand for immediate payment. [WCSU]

signal

Action that demonstrates an individual's unobservable characteristics (because it would be unduly costly for someone without those characteristics to take the action). [WCSU]

signature card

A form signed by a depositor upon opening an account at a financial institution. The card establishes the type of account ownership and sets forth the account terms and the obligations of the customer and the institution. Signature cards are used for subsequent identification of the customer by comparing the customer's signature with the signature on the card. [OTS]

signature service

A service designed to provide continuous responsibility for the custody of shipments in transit, so named because a signature is required from each person handling the shipment. [ITDS]

significant price discovery contract (SPDC)

silver certificate

A form of U. S. paper currency. The certificate is a receipt for a stated amount of silver in the U. S. Treasury, but the redemption privilege was revoked by Congress in 1968. Silver certificates were first issued in 1873. [OTS]

simple interest

Interest calculated only on the individual investment. [WCSU] interest that is calculated on the outstanding principal balance and not on any interest previously earned. [OTS]

simple negligence

A civil, as opposed to a criminal, standard of negligence. Under simple or ordinary negligence, (1) a person acts negligently when he fails to perceive a substantial and unjustifiable risk that a particular result will occur, and (2) the risk must be of such a nature and degree that the failure to perceive it constitutes a deviation from the standard of care that a reasonable person would observe in such a situation. [FDIC]

simulation analysis of financial exposure

A sophisticated computer risk-analysis program that monitors the risk of clearing members and large-volume traders at the Chicago Board of Trade. It calculates the risk of change in market prices or volatility to a firm carrying open positions. [CBOT][MIDAM]

single audit act of 1984

This Act is a federal law affecting every state and local government receiving more than $25,000 in federal assistance in any fiscal year. The purposes of the Act are:

• To improve the financial management and accountability of state and local governments with respect to federal financial assistance programs;
• To establish uniform requirements for audits of federal financial assistance provided to state and local governments;
• To promote the efficient and effective use of audit resources; and
• To assure the federal departments and agencies, to the maximum extent practicable, rely upon and use audit work done pursuant to this Act.

[EPA]

single entry

A method of bookkeeping in which each transaction is entered only once on the account books. [OTS]

single stock future

A futures contract on a single stock as opposed to a stock index. Single stock futures were illegal in the U.S. prior to the passage of the Commodity Futures Modernization Act of 2000. [CFTC]

single-family dwelling

A detached housing unit with open space on all sides. [OTS]

sinker

sinking fund

(A) Separate accumulation of cash or investments (including earnings on investments) in a fund in accordance with the terms of a trust agreement or indenture, funded by periodic deposits by the issuer (or other entity responsible for debt service), for the purpose of assuring timely availability of moneys for payment of debt service. Usually used in connection with term bonds. (B) A fund utilized to accumulate monies to retire or 'sink' the bonds outstanding. (C) A fund established to account for the accumulation of resources for, and the payment of, the principal and interest of general long-term debt. [EPA] A fund used to accumulate the cash needed to pay off bonds or other debt instruments, or to pay for future replacement of plant and equipment. [OTS] Fund that established by a company to retire debt before maturity. [WCSU] Money regularly set aside by a company to redeem its bonds, debentures or preferred stock from time to time as specified in the indenture or charter. [NYSE]

site manager

The managing agent, financial institution specialist, or other employee responsible for overseeing the operation of a conservatorship or receivership. [FDIC]

site value

The worth of raw land, without improvements. [OTS]

situs

Latin for a place or situation where a thing is located. For example, a home is the situs of the owner's personal property. [OTS]

skewed distribution

Probability distribution in which an unequal number of observations lie above and below the mean. [WCSU]

skip

(1) to move with no forwarding address leaving a debt unpaid. (2) a person who skips. [OTS]

skip-payment clause

A provision of some mortgage contracts that allows the borrower to skip monthly payments up to the amount of payments that have previously been paid ahead of schedule. [OTS]

skiptracing

The work of collectors in developing information to locate delinquent debtors and collect payment. [OTS]

sky lease

A lease of air rights, or the right to build a structure that, except for its supports, is constructed above a plane over a specified property. [OTS]

sling

A contrivance into which freight is placed to be hoisted into or out of a ship. [ITDS]

slip

A vessels berth between two piers. [ITDS]

slow consumer credit

Office of Thrift Supervision regulations define slow consumer credit as closed-end consumer credit accounts 90 to 119 days delinquent, and open-end consumer credit accounts delinquent 90 to 179 days. [OTS]

slow loan

A loan for which payments have fallen behind schedule. Such delinquent loans must be reported to federal regulators. Office of Thrift Supervision regulations spell out what constitutes a slow loan in terms of the loan's age and how long it has been delinquent. Loans less than one year old are slow when 60 days delinquent; those between one and seven years old are slow when 90 days delinquent, etc. [OTS]

Small Business Administration (SBA)

A federal government agency that makes, guarantees and purchases participations in loan to small wholesale, retail, service and manufacturing businesses. [OTS]

Small Business Investment Company (SBIC)

Small Investor Program

A target marketing plan that was designed to meet the needs of small investors who wanted to buy or invest in RTC assets one at a time or in small pools. The Small Investor Program arranged for the marketing and sale of individual real estate assets (with a value of less than $5 million) and relatively small pools of loans (up to $10 million in value). [FDIC]

small package service

A specialized service to guarantee the delivery of small parcels within specified express time limits. [ITDS]

small saver certificate

A certificate of deposit with a minimum maturity of 2 and 1/2 years offered by banks and thrift institutions to individuals. The interest rate on these certificates is related to the average yield on 2 and 1/2 year Treasury securities. There is no minimum denomination required on these certificates. [FRB][FRBC] A certificate of deposit, with a minimum maturity of 2-1/2 years, offered by banks and thrift institutions to individuals. The interest rate on these certificates is related to the average yield on 2-1/2 year Treasury securities, in accordance with regulations issued by the Depository Institutions Deregulation Committee. There is no minimum denomination required on these certificates. [FRBSF] A general term for a fixed-rate savings account with a minimum maturity of 18 months, but no minimum deposit. New issues have an interest rate tied to the average yield on comparable Treasury securities. [OTS]

small traders

Traders who hold or control positions in futures or options that are below the reporting level specified by the exchange or the CFTC. [CFTC]

smart card

A card-based payment system that stores value for transactions on a computer chip instead of a magnetic stripe. As the card is used for transactions, the amounts are subtracted from a balance on the chip. When the balance approaches zero, the chip can be 're-loaded' through a number of methods. These cards are often used in closed-systems for specific types of purchases but do not have to be so restricted. The chip also allows the owner to keep a variety of information with them at all times. [FRB][FRBC]

smuggling

Conveying goods or persons across borders without permission. [ITDS]

smurfing

To avoid a currency transaction threshold, a system of structuring occurs. Smurfing is the act of multiple transactions that are conducted by one individual at the same or various other institutions, or a group of individuals may conduct this at the various branches of the same institution. [UNODC]

SN-Series

An RTC equity partnership created for both large and small investors. Like the N-Series and S-Series transactions, portfolios generally consisted of nonperforming and subperforming commercial mortgages. However, an SN-series pool was larger than an S-Series but smaller than an N-Series portfolio. [FDIC]

social costs

Private costs plus external costs. [FACS]

socialism

The view that the government should own and control major industries using the dollars earned to provide benefits to citizens. [FACS]

Society for Worldwide Interbank Financial Telecommunication (SWIFT)

A message writing system that connects worldwide participating banks primarily for the purpose of communicating payment information. Frequently, the SWIFT message is only part of an international payment process which might also employ a system such as CHIPS to fully implement the transaction. [FRB][FRBC][FRBM] A message writing system that connects worldwide participating banks, primarily for the purpose of communicating payment information. Frequently, the SWIFT message is only part of an international payment [FRBSF] The Society for Worldwide Interbank Financial Telecommunication is an international financial payment cooperative organization that operates a network that facilitates the exchange of payment and other financial messages between financial institutions throughout the world. [GAO]

soft

(1) A description of a price that is gradually weakening; or (2) this term also refers to certain 'soft' commodities such as sugar, cocoa, and coffee. [CFTC]

soft currency

A currency which is not freely convertible into other currency. [UNODC] The funds of a country that are controlled by exchange procedures, thereby having limited convertibility into gold and other currencies. [ITDS]

soft loans

A loan made with easy or generous terms such as low or no interest and long payback. [ITDS] Loans with exceptionally lenient terms for repayment such as low interest, extended amortization, or the right to repay in the currency of the borrower. [FDIC]

sold-out-market

When liquidation of a weakly-held position has been completed, and offerings become scarce, the market is said to be sold out. [CFTC]

sole proprietorship

Any business that is owned and operated by a single individual. [NYSE]

solvency

The condition that exists when liabilities amount to less than total assets, thus providing the ability to pay debts. [OTS]

solvent

The state of being able to meet expenses and pay debts. [OTS]

sour gas

Natural gas found with a sufficiently high quantity of sulfur to require purifying prior to shipment or use. [NYMEX]

sour or sweet crude

Industry terms which denote the relative degree of a given crude oil's sulfur content. Sour crude refers to those crudes with a comparatively high sulfur content, 0.5% by weight and above; sweet refers to those crudes with sulfur content of less than 0.5%. [NYMEX]

source document

The original record of a transaction or an event. [OTS]

sources and uses of funds statement

A thrift industry statement that shows the cash flow between balance sheet accounts in a given reporting period. [OTS]

sovereign credit

A borrowing guaranteed by the government of a sovereign state. [ITDS]

sovereign risk

The risk that a government of a country may interfere with the repayment of a debt. [UNODC] The risk to a lender that the government of a sovereign state may default on its financial obligations. [ITDS]

spark spread

The differential between the price of electricity and the price of natural gas or other fuel used to generate electricity, expressed in equivalent units. [CFTC]

special assessment

(A) Charges imposed against property in a particular locality because that property receives a special benefit by virtue of some public improvement, separate and apart from the general benefit accruing to the public at large. Special assessments must be apportioned according to the value of the benefit received, rather than the cost of the improvement, and may not exceed in the value of such benefit . (B) A compulsory levy made against certain properties to defray part or all of the cost of a specific improvement or service deemed to primarily benefit those properties. [EPA] A property tax levied for a specified improvement only on those properties directly benefiting from the improvement. Special assessments are used to pay for such improvements as sewers, water systems, street repairs and street lights. Also called an improvement lien. [OTS]

special assessment bonds

Bonds payable from the proceeds of special assessments. If the bonds are payable only from the collections of special assessments, they are known as special assessment bonds. If, in addition to the assessments, the full faith and credit of the government are pledged, they are known as general obligation special assessment bonds. [EPA]

special assessment district

any geographic area over which a governing authority has power to levy taxes for specific public uses. Examples include: school districts, water and sewer districts and lighting districts. [OTS]

special assessment fund

A fund used to account for the financing of public improvements or services deemed to benefit primarily the properties against which special assessments are levied. [EPA]

special district

An independent unit of local government organized to perform a single governmental function or a restricted number of related functions. Special districts usually have the power to incur debt and levy taxes; however, certain types of special districts are entirely dependent upon enterprise earnings and cannot impose taxes. Examples of special districts are water districts, drainage districts, flood control districts, hospital districts, fire protection districts, transit authorities, port authorities, and electric power authorities. [EPA]

special district bonds

Bonds issued by a special district. [EPA]

special dividend

Dividend that is unlikely to be repeated. [WCSU]

special drawing rights (SDR's)

A type of international money created by the IMF and allocated to its member nations. SDRs are an international reserve asset, although they are only accounting entries (not actual coin or paper, and not backed by precious metal). Subject to certain conditions of the IMF, a nation that has a balance of payments deficit can use SDRs to settle debts to another nation or to the IMF. [FRB][FRBC][FRBM] A type of international money created by the International MOnetary Fund (IMF) and allocated to its member nations. SDRs are an international reserve asset, although they are only accounting entries (not actual coin or paper, and not backed by precious metal). Subject to certain conditions of the IMF, a nation that has a balance of payments deficit can use SDRs to settle debts to another nation or to the IMF. [FRBSF]

special mention

A designation used by OTS examiners for thrift institution assets that do not currently expose the institution to enough risk to warrant adverse classification, but do possess credit deficiencies or potential weaknesses deserving management's close attention. Special mention assets have a potential weakness or pose an unwarranted financial risk that, if not corrected, could weaken the asset and increase risk in the future. [OTS]

special obligation

A security that is not a general obligation. (In some states, referred to as a 'limited obligation'.) [EPA]

special rates

Rates that apply to cargo traffic under special conditions and usually a limited number of cities. [ITDS]

special series program

A program of the Federal Home Loan Banks in which an advance to one member thrift institution is matched in amount and term to a certificate of deposit placed with the Bank by another member institution. [OTS]

specialist

A member of a stock exchange who operates on the trading floor buying and selling shares of particular securities as necessary to maintain a fair and orderly market. [SEC] A member of the NYSE who has two primary functions. First, to maintain an orderly market in the securities assigned to the specialist. To do this, the specialist must, to a reasonable degree, buy or sell for their own account when there is a temporary disparity between supply and demand. Second, the specialist acts as a broker's broker. When commission brokers on the Exchange Floor receive a limit order, say, to buy at $50 a stock then selling at $60, they cannot wait at the post where the stock is traded to see if the price reaches the specified level. They leave the order with the specialist, who will try to execute it in the market if and when the stock declines to the specified price. At all times the specialists must put their customers' interests above their own. [NYSE] A specialist is a member designated by an exchange to be the sole market maker for a particular stock. [GAO]

Specialist Performance Evaluation Questionnaire (SPEQ)

Surveys floor brokers quarterly to assess how well the specialists maintain the auction market; and how effectively they fulfill their dealer, agency, communication, and administrative functions. [NYSE]

specialist system

A type of trading commonly formerly used for the exchange trading of securities in which one individual or firm acts as a market-maker in a particular security, with the obligation to provide fair and orderly trading in that security by offsetting temporary imbalances in supply and demand by trading for the specialist's own account. Like Open Outcry, the specialist system was supplanted by electronic trading during the early 21st century. In 2008, the New York Stock Exchange replaced the specialist system with a competitive dealer system. Specialists were converted into Designated Market Makers who have a different set of privileges and obligations than specialists had. [CFTC]

specialization

The act of producing more of a good than one consumes, the rest of that good being exchanged. [FACS]

specie

coined money. [OTS]

specific commodity rate

Rate applicable to certain classes of commodities, usually commodities moving in volume shipments. [ITDS]

specific gravity

The ratio of the density of a substance at 60o F. to the density of water at the same temperature. [NYMEX]

specific rate of duty

A specified amount of duty per unit of weight or other quantity. [ITDS]

specific valuation allowance

A reserve held against specific assets classified as loss. [OTS]

specification code

specifications

1) Contract terms specified by the Exchange. 2) Term referring to the properties of a given crude oil or refined petroleum product, which are 'specified' since they often vary widely even within the same grade of product. In the normal process of negotiation, seller will guarantee buyer that the product or crude to be sold will meet certain specified limits. Generally, the major properties of oil that are guaranteed are API gravity; sulfur; pour point; viscosity, and BS&W. [NYMEX]

speculation

Speculation is the assumption of risk in anticipation of gain but recognizing a higher than average possibility of loss. The term speculation implies that a business or investment risk can be analyzed and measured, and its distinction from the term investment is one of degree of risk. [GAO] The act of knowingly investing funds in a venture carrying higher-than-average risks in the hope of making above-average profits. Speculators expect to make a profit because of price changes. [OTS] The employment of funds by a speculator. Safety of principal is a secondary factor. [NYSE] Trading for the explicit purpose of making profits. [TMAC]

speculative bubble

A rapid run-up in prices caused by excessive buying that is unrelated to any of the basic, underlying factors affecting the supply or demand for a commodity or other asset. Speculative bubbles are usually associated with a 'bandwagon' effect in which speculators rush to buy the commodity (in the case of futures, 'to take positions') before the price trend ends, and an even greater rush to sell the commodity (unwind positions) when prices reverse. [CFTC]

speculative limit

speculative position limit

The maximum position, either net long or net short, in one commodity future (or option) or in all futures (or options) of one commodity combined that may be held or controlled by one person (other than a person eligible for a hedge exemption) as prescribed by an exchange and/or by the CFTC. [CFTC] The maximum position, either net long or net short, in one commodity futures or option, or in all futures or options of one commodity combined which may be held or controlled by an entity without a hedge exemption as prescribed by an exchange or the CFTC. [NYMEX]

speculator

A market participant who tries to profit from buying and selling futures and options contracts by anticipating future price movements. Speculators assume market price risk and add liquidity and capital to the futures markets. [CBOT][MIDAM] A trader who hopes to profit from the specific directional price move of a futures or option contract, or commodity. [NYMEX] In commodity futures, a trader who does not hedge, but who trades with the objective of achieving profits through the successful anticipation of price movements. [CFTC]

spendthrift provision

conditions written into a trust instrument that are designed to prevent the beneficiary from spending income from the trust extravagantly or wastefully. Spendthrift provisions limit the right of the beneficiary in disposing of his or her interest in the trust, such as by assignment, and limit the right of creditors to reach it, such as by attachment. [OTS]

spin off

The separation of a subsidiary or division of a corporation from its parent by issuing shares in a new corporate entity. Shareowners in the parent receive shares in the new company in proportion to their original holding and the total value remains approximately the same. [NYSE] The separation of a subsidiary or division of a corporation from its parent by making it a new corporate entity and by issuing shares in the new entity. Shareholders in the parent receive shares in the new entity in proportion to their original holding and the total value remains approximately the same. [OTS]

split

'Free' issue of shares to existing shareholders. [WCSU] The division of the outstanding shares of a corporation into either a larger or smaller number of shares, without any immediate impact in individual shareholder equity. For example, a 3-for-1 forward split by a company with 1 million shares outstanding results in 3 million shares outstanding. Each holder of 100 shares before the split would have 300 shares worth less, although the proportionate equity in the company would stay the same. A reverse split would reduce the number of shares outstanding and each share would be worth more. [NYSE] The division of the outstanding shares of stock in a corporation into a larger number of shares. For example, a three-for-one split would result in each shareholder receiving three shares for every old share held. The split merely increases the number of shares issued, and does not immediately alter the total capital of the company, nor each stockholder's proportionate equity in the company. [OTS]

split close

A condition that refers to price differences in transactions at the close of any market session. [CFTC]

split-rate account

A savings account that pays higher rates of interest for higher account balances. [OTS]

spoofing

Using and immediately cancelling, limit orders in an attempt to lure traders to raise their own limits, again for the purpose of trading at an artificially inflated price. [ESMA]

spot

Market of immediate delivery of and payment for the product. [CFTC] Term which describes one-time open market case transaction, where a commodity is purchased 'on the spot' at current market rates. Spot transactions are in contrast to term sales, which specify a steady supply of product over a period of time. [NYMEX] The current price or rate. [TMAC] Usually refers to a cash market price for a physical commodity that is available for immediate delivery. [CBOT][MIDAM]

spot cash

Immediate cash payment in a transaction. [ITDS]

spot commodity

(1) The actual commodity as distinguished from a futures contract; (2) sometimes used to refer to cash commodities available for immediate delivery. [CFTC]

spot deferred forward contracts

A forward sale of a commodity at a specified future date at a specified price. The holder has the option to postpone the maturity date of the contract, in return for the payment of the premium. [TMAC]

spot delivery

immediate delivery. [OTS]

spot exchange

Foreign exchange purchased or sold for immediate delivery and paid for on the day of the delivery. Immediate delivery is usually considered delivery in one or two business days after the conclusion of the deal. Many U.S. banks consider transactions maturing in as many as ten business days as spot exchange. Their reasons vary but are generally to facilitate reevaluation accounting policies and to initiate final confirmation and settlement verification procedures on future contracts nearing maturity. [FDIC] The purchase and sale of foreign exchange for delivery and payment at the time of the transaction. [ITDS]

spot exchange rate

The price of one currency expressed in terms of another currency at a given moment in time. [ITDS] exchange rate on currency for immediate delivery. [WCSU]

spot market

The market for a commodity or foreign exchange available for immediate delivery. [ITDS]

spot month

The futures contract closest to maturity. The nearby delivery month. [NYMEX] The futures contract that matures and becomes deliverable during the present month. Also called Current Delivery Month. [CFTC]

spot operations

Foreign exchange dealing in which settlement of the mutual delivery commitments is made at the latest two days after the transaction was carried out. [ITDS]

spot price

A price quotation for immediate sale and delivery of a commodity or currency. [ITDS] The price at which a physical commodity for immediate delivery is selling at a given time and place. [CFTC]

spot rate

The rate for purchase or sale of a commodity for immediate delivery. [ITDS]

spot transaction

A foreign exchange transaction in which each party promises to pay a certain amount of currency to the other on the same day or within one or two days. [FRBSF] A foreign exchange transaction in which each party promises to pay a certain amount of currency to the other today or within one or two days. [FRB][FRBM] A transaction for spot exchange (or currency). [FDIC]

spot zoning

zoning that does not fit any predetermined pattern of land use. [OTS]

spotting

The placing of a container where required to be loaded or unloaded. [ITDS]

spousal IRA

An Individual Retirement Account (IRA) established by a working spouse for his or her non-working spouse. Spousal IRAs were created by the Tax Reform Act of 1976. [OTS]

spread

(1) the difference between the interest rate at which money can be lent (the return on investments), and the rate at which money can be borrowed (the cost of funds). (2) the difference between two related prices. (3) the difference between the bid and asked prices of securities. [OTS] The difference between the bid and asked prices of a security and to the dealer's commission on a security offering. [TMAC] The difference between the price at which an issue is purchased from an issuer and the price at which it is reoffered by the underwriters to the first purchasers from the underwriters. [EPA] The difference between the price at which an underwriter buys an issue from a firm and the price at which the underwriter sells it to the public. [WCSU] The discrepancy between buying and selling foreign exchange rates and between support points or arbitrage support points. [FDIC] The price difference between two related markets or commodities. [CBOT][MIDAM] The purchase and sale of two options which vary in terms of type (call or put), strike prices, expiration dates, or both. May also refer to an options contract purchase (sale) and the simultaneous sale (purchase) of a futures contract for the same underlying commodity. [NYMEX] The simultaneous purchase of one futures contract and sale of a futures contract for a different month, different commodity or different grade of the same commodity. [NYMEX]

spread position

A combination of a put and call options at different prices, one below and the other above the current market price. [TMAC]

spreading

The simultaneous buying and selling of two related markets in the expectation that a profit will be made when the position is offset. Examples include: buying one futures contract and selling another futures contract of the same commodity but different delivery month; buying and selling the same delivery month of the same commodity on different futures exchanges; buying a given delivery month of one futures market and selling the same delivery month of a different, but related, futures market. [CBOT][MIDAM]

squatter

someone who illegally occupies another's property. [OTS]

squeeze

A market situation in which the lack of supplies tends to force shorts to cover their positions by offset at higher prices. [CFTC]

stagflation

An economic condition characterized by simultaneous inflation, slow growth and high unemployment. [FACS]

stale-dated check

A check payable on demand that remains uncashed for an unreasonable length of time after its issue. [OTS]

Standard Asset Management Amendment (SAMA)

A SAMDA contract amended to transfer asset disposition from the SAMDA contractor to the RTC. The RTC began issuing SAMAs in January 1992. SAMDA contractors who accepted the SAMA allowed the RTC to dispose of their remaining assets while the contractors continued to manage assets but not to dispose of them. Later, SAMDA contracts with SAMAs were issued to some new contractors who were hired to perform asset management services only. [FDIC]

Standard Asset Management And Disposition Agreement (SAMDA)

Contractual agreements for asset management and disposition services that allowed the RTC to manage and dispose of a large volume of distressed assets, primarily real estate and nonperforming loans, through the use of private-sector contractors. The RTC issued the first SAMDA contract in August 1990. [FDIC]

standard deviation

square root of the variance-a measure a variability. [WCSU]

standard entry class code

A 3 character code within an ACH Company/Batch Header Record to identify the payment types contained within an ACH batch, (e.g., CCD, CIE, CTP, CTX, MTE, POS, or PPD). [ACH]

standard error

In statistics, a measure of the possible error in an estimate. [WCSU]

standard industrial classification

A U.S. system for classifying economic activity. It is now being replaced by the North American Industry Classification System (NAICS). [BEA]

standard international trade classification

An internationally recognized foreign trade data classification system. This system, which was developed by the United Nations, provides the commodity aggregates needed for economic analysis and permits international comparisons of foreign trade data. Census translates the harmonized system into the SITC scheme. [BEA]

Standard Metropolitan Statistical Area (SMSA)

one or more cities or counties designated by the Department of Commerce as an integrated economic and social unit with a large population nucleus. [OTS]

standard of living

The level of material affluence of a nation as measured by per capita output. [ITDS]

standard P&A

The RTC or FDIC agreement that contained the standard terms and conditions under which an acquiring institution could assume the liabilities of and purchase the assets of a failed institution from the RTC or FDIC in its capacity as receiver of the failed institution. In RTC transactions, the standard P&A was originally conceived of as the equivalent of the FDIC's whole bank transaction; it was supplemented with the core branch P&A and the limited branch P&A for multi-acquirer branch breakup transactions. The FDIC's version of the standard P&A has certain optional provisions that allow its use for the range of P&A resolutions between a whole bank transaction and a clean bank transaction. [FDIC]

standard program

A program in which the Federal Home Mortgage Corporation purchases mortgages for cash. [OTS]

standby agreement

In a rights issue, agreement that the underwriter will purchase any stock that is not purchased by investors. [WCSU]

standby commitment

A bank commitment to loan money up to a specified amount for a specific period, to be used only in a certain contingency. [ITDS] A promise by a lender to lend a specified amount of money at specified terms at a future date. The borrower has the right to cancel the loan. In the secondary mortgage market, the term refers to a promise to purchase a loan or loans under specified terms, with the seller retaining the option to cancel. [OTS]

standby letter of credit

A guaranty issued by a Federal Home Loan Bank on behalf of a member thrift institution wishing to enter into an interest rate swap agreement on its own. If the member institution defaults on its swap contract, the standby letter of credit obligates the District Bank either to pay a stated amount to the counterparty or to assume the swap obligation of the member institution. [OTS] Any letter of credit, or similar arrangement however named or described, which represents an obligation to the beneficiary on the part of the issuer: to repay money borrowed by or advanced to or for the account party; to make payment on account of any indebtedness undertaken by the account party; or to make payment on account of any default by the account party in the performance of an obligation. [FDIC]

starts

residential units on which construction has begun. [OTS]

state member bank

A bank that is chartered by a state and has elected to join the Federal Reserve System. [FRBSF]

state-chartered association

A savings institution that has received its operating charter from a state regulatory authority. [OTS]

stated interest rate

The rate of interest stated on the security as the basis for computing the interest payable on that security. Usually expressed as a percent per annum. [EPA]

statement

A written record prepared by a financial institution, usually once a month, listing all transactions for an account, including deposits, withdrawals, checks, electronic transfers, fees and other charges, and interest credited or earned. The statement is usually mailed to the customer. [OTS]

statement of ACH activity

The advice prepared by the ACH stating the number of items and dollar value of an ACH file. [ACH]

statement of changes in financial position

A financial statement that outlines the sources and uses of funds and explains any changes in cash or working capital. [OTS]

statement of condition

A statement of the amount and type of assets and liabilities of an organization at the close of business on a given date; also called a balance sheet. [OTS]

statement of financial accounting standards (SFAS)

An accounting rule or procedure issued by the Financial Accounting Standards Board. [OTS]

statement of operations

A summary of an organization's financial operations during a specified period, showing income and its allocation to operating expenses, payment of earnings, and additions to reserves. [OTS]

statement of revenues and expenditures

The basic financial statement which is the governmental fund and Expendable Trust Fund GAAP operating statement. It presents increases (revenue and other financing sources) and decreases (expenditures and other financing uses) in an entity's net current assets. [EPA]

statement of revenues and expenses

The basic financial statement which is the proprietary fund, Nonexpendable Trust Fund, and Pension Trust Fund GAAP operating statement. It presents increases (revenues) and decreases (expenses) in an entity's net total assets. [EPA]

statement savings

A type of savings account in which the customer's record of account activity is contained in statements mailed to the customer each month (or at some other stated interval). The statement lists all account action -- deposits, withdrawals, interest postings and fees -- occurring within a specified period. [OTS]

statistical discrepancy

The difference between gross domestic product (GDP) and gross domestic income [BEA]

statute

A law enacted by a legislature. [OTS]

steamship indemnity

An indemnity received by an ocean carrier issued by a bank indemnifying him for any loss incurred for release of goods to the original bill of lading. [ITDS]

steer/corn ratio

The relationship of cattle prices to feeding costs. It is measured by dividing the price of cattle ($/hundredweight) by the price of corn ($/bushel). When corn prices are high relative to cattle prices, fewer units of corn equal the dollar value of 100 pounds of cattle. Conversely, when corn prices are low in relation to cattle prices, more units of corn are required to equal the value of 100 pounds of beef. [CBOT][MIDAM]

step-up bond

A bond that pays the investor an initial above-market yield for a short, noncall period and then, if not called, steps up to a predetermined higher coupon rate. The bond may include a series of step-up rates and is callable at every step-up date. For example, the initial rate may be 5 percent, increasing to 6 percent after two years, and 7 percent after four years. The bond is designed to protect the issuer against falling market interest rates. If interest rates fall, the issuer can call the bond. If interest rates rise to levels equal to or higher than the step-up rate, the issuer would likely not call the bond. A step-up bond is a type of structured note. [OTS] Bond whose coupon is stepped up over time. (Also step-down bonds. [WCSU]

stevedore

A person having charge of the loading and unloading of ships in port. [ITDS]

stock

(1) shares of ownership in a corporation. (2) the capital raised by the sale of shares. (3) a certificate that shows ownership of a stated number of shares. [OTS] An ownership interest in a company, also known as 'shares' in a company. [SEC]

stock association

A savings and loan association that sells stock to raise capital. It is owned by those who buy its stock, called shareholders, and they may share in profits earned by the association. [OTS]

stock certificate

A document that constitutes written evidence of ownership of a company's shares. The certificate lists the number of shares registered in the name of the owner, the corporation issuing the shares, and whether the stock is sold at par value or at market prices. [OTS]

stock dividend

A dividend paid in securities rather than cash. The dividend may be additional shares of the issuing company, or in shares of another company (usually a subsidiary) held by the company. [NYSE] A portion of the net earnings of a corporation paid to the corporation's stockholders of record, with the payment consisting of additional shares of stock rather than cash. [OTS] Dividend in the form of stock rather than cash. [WCSU]

stock exchange

An organization that provides a market for trading stocks and bonds. [OTS] An organized marketplace for securities featured by the centralization of supply and demand for the transaction of orders by member brokers for institutional and individual investors. [NYSE]

stock fraud

stock index

A way of using a select group of stocks for long term evaluation. The performance of a group of stocks that experts regard as important is averaged, and over time that average serves as an indicator of the market's general movement. [NYSE] An indicator used to measure and report value changes in a selected group of stocks. How a particular stock index tracks the market depends on its composition; the sampling of stocks, the weighting of individual stocks, and the method of averaging used to establish an index. [CBOT][MIDAM]

stock index futures

Futures contracts based on market indexes. [NYSE]

stock manipulation

stock market

A market in which shares of stock are bought and sold. [CBOT][MIDAM]

stock split

stock split-down

The reverse of a stock split. The total number of shares outstanding is lowered by issuing a new stock share to replace each of two or more shares presently in circulation, thus increasing the market value of the new shares. Also called a reverse stock split. [OTS]

stock ticker symbols

Every corporation whose transactions are reported on the NYSE or AMEX ticker or on Nasdaq has been given a unique identification symbol of up to four letters. These symbols abbreviate the complete corporate name and facilitate trading and ticker reporting. Some of the most famous symbols are: T (American Telephone & Telegraph), XON (Exxon), GM (General Motors), IBM (International Business Machines), S (Sears Roebuck) and XRX (Xerox). [NYSE]

stock type settlement

A settlement procedure in which the purchase of a contract requires immediate and full payment by the buyer to the seller. In stock type settlement, the actual cash profit or loss from a trade is not realized until the position is liquidated. NYMEX energy and platinum options have this type of settlement procedure, which differs from that in the futures market where gains and losses are realized on a daily basis. [NYMEX]

stock/equity option

A stock option gives one the right to purchase or sell a certain number of shares of stock at a particular price within a specified period. [GAO]

stockbroker

A person who serves as a middleman and, for a fee, facilitates the transactions between buyers and sellers of stock. [OTS]

stockholder

The owner of one or more shares of stock representing some degree of ownership of a corporation. [OTS]

stockholder of record

A stockholder whose name is registered on the books of the issuing corporation. [NYSE]

stockholders' equity

The value of all the stock owned by the shareholders of a particular company. Also known as net worth. [NYSE]

StockWatch

The NYSE's state-of-the-art computer surveillance unit. StockWatch monitors the stock market for suspicious signals and detects illegal transactions. [NYSE]

stop logic functionality

A provision applicable to futures traded on the CME's Globex electronic trading system designed to prevent excessive price movements caused by cascading stop orders. Stop Logic Functionality introduces a momentary pause in matching (Reserved State) when triggered stops would cause the market to trade outside predefined values. The momentary pause provides an opportunity for additional bids or offers to be posted. [CFTC]

stop loss order

stop order

An order to buy at a price above or sell at a price below the current market. Stop buy orders are generally used to limit or protect unrealized profits on a short sale. Stop sell orders are generally used to protect unrealized profits or limit loss on a holding. A stop order becomes a market order when the stock sells at or beyond the specified price and, thus, may not necessarily be executed at that price. [NYSE] An order to buy or sell when the market reaches a specified point. A stop order to buy becomes a market order when the futures contract trades (or is bid) at or above the stop price. A stop order to sell becomes a market order when the futures contract trades (or is offered) at or below the stop price. [CBOT][MIDAM] This is an order that becomes a market order when a particular price level is reached. A sell stop is placed below the market, a buy stop is placed above the market. Sometimes referred to as stop loss order. Compare to market-if-touched order. [CFTC]

stop payment order

An order by a customer instructing a financial institution to refuse payment when presented with a specific draft or check written by the customer. [OTS]

stop-close-only order

A stop order that can be executed, if possible, only during the closing period of the market. [CFTC]

stop-limit order

A stop limit order is an order that goes into force as soon as there is a trade at the specified price. The order, however, can only be filled at the stop limit price or better. [CFTC] A stop order that becomes a limit order after the specified stop price has been reached. [NYSE] A variation of a stop order in which a trade must be executed at the exact price or better. If the order cannot be executed, it is held until the stated price or better is reached again. [CBOT][MIDAM] An order that goes into force as soon as there is a trade at the specified stop price. The order however, can only be filled at the limit price or better. The stop price and the limit price can be the same or different. The stop price is the price level specified in the order. [NYMEX]

stop-loss

A resting order designed to close out a losing position when the price reaches a level specified in the order. It becomes an at-the-market order when the 'stop' price is reached. Individuals also use stops to enter the market when the prices reaches a specified level. [NYMEX]

storage

The keeping of goods in a warehouse. [ITDS]

storage demurrage

A charge made on property remaining on the dock past the prescribed 'free-time period'. [ITDS]

storage in transit

The stopping of freight traffic at a point located between the point of origin and destination to be stored and reforwarded at a later date. [ITDS]

store-door delivery

The movement of goods to the consignees place of business, customarily applied to movement by truck. [ITDS]

stored-value card

A stored-value card is a credit-card-sized device, implanted with a computer chip, with stored money value. A reloadable stored-value card can be reused by transferring value to it from an automated teller machine or other device. A disposable card cannot be reloaded. [GAO]

story

The part of a building included between two floors. [OTS]

stowage

The arranging and packing of cargo in a vessel for shipment. [ITDS]

stowage instructions

Specific instructions given by the shipper or his agent concerning the way in which cargo is to be stowed. [ITDS]

stowplan

A diagram showing how cargo containers have been placed on a vessel; also know as stowage plan. [ITDS]

straddle

Also known as a spread, the purchase of one futures month against the sale of another futures month of the same commodity. A straddle trade is based on a price relationship between the two months. [NYMEX] An option position consisting of the purchase of put and call options having the same expiration date and strike price. [CFTC] The combination of a put option and a call option with the same exercise price. [WCSU] The purchase or sale of both a put and a call having the same strike price and expiration date. The buyer of a straddle benefits from increased volatility, and the seller benefits from decreased volatility. [NYMEX]

straight bill of lading

A nonnegotiable bill of lading that designates a consignee who is to receive the goods and obligates the carrier to deliver the goods to that consignee only. [ITDS]

straight deposit payoff

A resolution method for failed FDIC insured institutions which can be used when the liquidation, closing, or winding down of the affairs is determined to be the least costly resolution of the institution. A straight deposit payoff is one of the two methods of deposit payoffs. (The other is an insured deposit transfer.) In a straight deposit payoff, the FDIC determines the amount of insured deposits and pays that amount directly to each depositor. The FDIC as receiver retains all assets and liabilities, and the receivership bears the cost of liquidating all of the assets. [FDIC]

straight letter of credit

A credit requiring presentation on or before the expiration date at the office of the paying bank. The engagement clause to honor drafts is in favor of the beneficiary only. [FDIC]

straight-line depreciation

The amortization of an asset's cost into uniform, periodic amounts of expense during the asset's useful life. [OTS]

strangle

An option position consisting of the purchase of put and call options having the same expiration date, but different strike prices. [CFTC] An option position consisting of the purchase or sale of put and call options having the same expiration but different strike prices. [NYMEX]

strategy

strategy-based margining

A method for setting margin requirements whereby the potential for gains on one position in a portfolio to offset losses on another position is taken into account only if the portfolio implements one of a designated set of recognized trading strategies as set out in the rules of an exchange or clearing organization. [CFTC]

street book

A daily record kept by futures commission merchants and clearing members showing details of each futures and option transaction, including date, price, quantity, market, commodity, future, strike price, option type, and the person for whom the trade was made. [CFTC]

street name

A name other than that of the beneficial owner (e.g., a broker-dealer) in which stock may be recorded, usually to facilitate resale. [SEC] Securities held in the name of a broker instead of a customer's name are said to be carried in 'street name.' This occurs when the securities have been bought on margin or when the customer wishes the security to be held by the broker. [NYSE] Securities held in the name of brokers, or banks, or their nominees, instead of in the customer's name. [FRB][FRBC][FRBM][FRBSF]

stress testing

Assists in identifying and measuring the effects on a portfolio or a position of changes in market prices, volatility levels, shifts in the yield curve and correlations between two or more market factors. [TMAC]

strike clause

An insurance clause which may be included in policies to cover against losses as a result of strikes, riots and civil commotions. [ITDS]

strike price

The price at which the futures contract underlying a call or put option can be purchased (if a call) or sold (if a put). Also referred to as exercise price. [CBOT][MIDAM] The price at which the underlying futures contract is bought or sold in the event an option is exercised. Also called an exercise price. [NYMEX] The price specified in the option contract at which the option holder may buy or sell the underlying interest. [TMAC]

striking price

The fixed price at which a security can be purchased in a call contract or sold in a put contract. Also called the exercise price. [OTS]

strip

A sequence of futures contract months (e.g., the June, July, and August natural gas futures contracts) that can be executed as a single transaction. [CFTC] The simultaneous opening of futures positions in consecutive months. The average of the prices for the futures contracts bought or sold is the price level of the hedge. A six-month strip, for example, consists of an equal number of futures contracts for each of six consecutive contract months. [NYMEX]

strip call

The redemption of bonds by calling a portion of each maturity. This form of redemption can be either (a) proportional: amount redeemed in each maturity equals total amount to be redeemed times remaining principal amount of particular maturity divided by aggregate principal amount of bonds outstanding before redemption, or (less commonly) (b) level debt service reduction: redeemed from each maturity so that the difference between debt service before redemption and debt service after redemption is the same for each maturity. If the bonds are issued on a level debt service basis, proportional and level debt service redemption are the same. Under either method, the redemption provision can be drafted so that (a) certain maturities or a portion of certain maturities may be omitted from the redemption and (b) the principal amount of term bonds redeemed is spread on the same basis across the mandatory sinking fund redemptions applicable to the term bonds. [EPA]

stripped mortgage-backed securities

mortgage pass-through securities in which the cash flow from the underlying mortgages is separated. All principal is diverted into securities that pay only principal back to the investors, while all interest is diverted into securities that pay only interest. The interest-only (IO) and principal-only (PO) securities are used as hedging tools to provide greater stability for mortgage portfolios during periods of fluctuating interest rates. [OTS]

strippend bond

A bond that can be subdivided into a series of zero-coupon bond. [WCSU]

stripping

The unloading of cargo from a container; also called devanning. [ITDS]

strong hands

When used in connection with delivery of commodities on futures contracts, the term usually means that the party receiving the delivery notice probably will take delivery and retain ownership of the commodity; when used in connection with futures positions, the term usually means positions held by trade interests or well-financed speculators. [CFTC]

strong-form efficient market

Market in which security prices reflect instantaneously all information available to investors. [WCSU]

structural unemployment

Long-term joblessness caused by shifts in the economy. Often structural unemployment occurs because of changes in technology. [FRBSF] Workers without jobs whose skills are no longer suitable for or do not match the types of jobs available. [FACS]

structured notes

Structured notes are debt securities in which the repayment of interest, and sometimes principal, is tied to movements in an underlying index. Examples include range bonds, step-up notes and inverse floaters. [TMAC] debt securities which have many of the same characteristics as derivatives but which are generally not backed by mortgages or other collateral. They take various forms and often contain complex rate-adjustment formulas and embedded options including calls, caps, and collars. The notes are often customized to meet the needs of a particular investor. Types of structured notes include: step-up bonds, index amortizing notes, dual index notes, de-leveraged bonds, range bonds and inverse floaters. Structured notes are issued by corporations and government sponsored entities such as the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Federal Home Loan Banks. [OTS]

structured transaction

An RTC multi-asset portfolio sale of distressed assets, which was normally coupled with seller financing with an equity participation feature so that the RTC's equity interest was tied to the terms of a seller financing note. This 1991--92 program generally is considered to have been a first-generation portfolio sales program of the RTC. [FDIC]

structuring

A system where a substantial amount of cash is divided up into amounts less than the reporting threshold. [UNODC]

Student Loan Marketing Association (Sallie Mae)

A federal government-sponsored private corporation created to increase the flow of funds into student loans by facilitating the purchase of student loans in the secondary market. It is commonly called Sallie Mae. [OTS]

stuffing

The loading of cargo into a container. [ITDS]

subcontractor

A person or company under contract to perform work for a developer or a general contractor. [OTS] Any individual or entity with whom a primary contractor enters into a contract to provide goods or services to fulfill the primary contractor's obligation under its contract with the government. [FDIC]

subdivision

land divided into several parcels, usually intended for development and individual resale. [OTS]

sublease

A lease executed by a leasee to a third person granting use of the leased property for the payment of rent for a period of time no longer than the original lease. [OTS]

subordinated debt

An obligation that has a claim on assets junior to other debt and is repayable only after other debt with a higher claim has been satisfied. [FDIC] Debt over which senior debt takes priority. In the event of bankruptcy, subordinated debtholders receive payment only after the senior debt is paid in full. [WCSU] borrowing in the form of an unsecured note, debenture, or other debt instrument, which in the event of the debtor's bankruptcy, has a lesser claim to the assets of the debtor than other classes of debt. [OTS]

subordination clause

A mortgage clause that makes other debts or rights in the collateral real estate secondary to the claim of the mortgage lender. [OTS]

subrogated claim

An insured depositor's demand against the receivership that the FDIC acquires by virtue of having provided deposit insurance. [FDIC]

subrogation

The substitution of one person for another in reference to a debt, claim or right. [OTS]

subscribe

(1) to buy or pledge to buy an investment, such as stock or a deposit, in a savings institution. (2) to sign or mark a document to signify approval of its contents. [OTS]

subscriber

A person who promises in writing to purchase a certain number of shares of stock of a specified corporation, or to deposit a certain amount of funds in a mutual savings institution. [OTS]

subscription

A written agreement to purchase that which is offered. [OTS]

subsidiary

An organization controlled by another organization or company. [OTS] Any organization more than 50 percent of whose voting stock is owned by another firm. [ITDS] Company in which more than 50 percent of the voting shares are owned by another corporation, called the parent company. [UNODC]

Subsidiary Information Management Network (SIMAN)

A national system, developed by the RTC in 1992, currently used by the FDIC to collect and track information about subsidiaries, joint ventures, and partnerships. [FDIC]

subsidize

to furnish financial aid for a specific purpose. The government subsidizes housing in a number of ways including low-interest loans, rent assistance payments and the income tax deduction for mortgage interest payments. [OTS]

subsidy

A grant paid by a government to producers of goods to strengthen their competitive position. [ITDS]

substandard

one of the categories of classified assets. [OTS]

substitutes

Price change for one product leads to a shift in the same direction in the demand for another product. [FACS]

suburb

A residential area near a city; the area has an identifiable character and name, but is not necessarily incorporated. [OTS]

sulfur

An element that is present in some oil and gas as an impurity in the form of its various compounds. [NYMEX]

sum-of-the-digits depreciation

A method of calculating the depreciation of residential property authorized by the 1969 Tax Reform Act. For example, assuming a structure has 20 useful years, its number of useful life-years would be calculated by adding: 1+2+3+4+5+6+7+8+9+10+11+12+13+14+15+16+17+18+19+20=210 years. This becomes the denominator in the calculation of the depreciation value in any given year. The numerator is the number of years remaining in the useful life of the property; in the first year this would be 20, in the second year 19, etc. Thus, the formula for establishing the deprecation value in the first year would be 20/210 times the depreciation base. [OTS]

sum-of-the-years'-digits depreciation

Method of accelerated depreciation. [Harvey][WCSU]

sunk costs

Costs which have been incurred and can be reversed. [WCSU]

sunset

termination of an entity or activity at the end of a stated period of time. [OTS]

Sunshine Act

A 1976 federal law called Government in the Sunshine Act that requires (1) most meetings of most federal agencies shall be open to the public and (2) the fullest practical disclosure to the public of the government decision making process. [OTS]

Super Designated Order Turnaround System (SUPER DOT)

The electronic order-routing system through which NYSE member firms transmit market and limit orders directly to the trading post where the security is traded or to the member firm's booth. After the order has been completed in the auction market, a report of execution is returned directly to the member firm office over the same electronic circuit that brought the order to the Trading Floor. [NYSE] Transmits member firms' market and day limit orders, up to specified sizes in virtually all listed stocks, through the common message switch to the proper trading floor workstation. Specialists receiving orders through SuperDot execute them in the trading crowd at their posts, as quickly as market interest and activity permit, and return reports to the originating firm's offices via the same electronic circuit that brought them to the floor. Super Dot can handle daily volume exceeding 2 billion shares. [NYSE]

super-NOW account

A variation of the negotiable order of withdrawal (NOW) account. With a Super NOW account the offering financial institution sets a higher interest rate if the account balance is maintained above a specified minimum. If the balance drops below the minimum, the account earns the same rate as the institution pays on regular NOW accounts. [OTS] Checking account with a specified minimum balance and on which interest is paid. [WCSU]

supermajority

A provision in a company's charter requiring a majority of, say, 80 percent of shareholders to approve certain changes, such as a merger. [WCSU]

superstructure

The portion of a building above the ground or above its foundation. [OTS]

supervised lender

A Veterans Administration classification meaning any lender subject to examination and supervision by a state or federal agency. [OTS]

supervisory agent

A title no longer officially in use. Prior to the regulatory reorganization of October 1989, the title referred to an official at one of the Federal Home Loan Banks who had lawful authority delegated by the former Federal Home Loan Bank Board to carry out the enforcement of laws and regulations dealing with the operation of savings institutions. The president of each District Bank was traditionally designated the district's principal supervisory agent. In October 1989, the supervisory agents became employees of the Office of Thrift Supervision and now have various titles including assistant deputy district director, assistant director, and supervisory examiner. [OTS]

supervisory agreement

A formal, written agreement between the board of directors of a savings institution and the Office of Thrift Supervision. The provisions of the agreement may require the institution to cease any statutory or regulatory violations or unsafe or unsound practice, and the agreement may require affirmative corrective action by the institution to correct any existing violations, management or operational deficiencies, or other unsound practices. Violation of a supervisory agreement is cause for the Office of Thrift Supervision to initiate cease and desist proceedings against the institution or against an officer, board member or employee of the institution. [OTS]

supervisory conversion

The conversion of a savings institution from a mutual form of ownership to stock ownership, with the conversion arranged by the Office of Thrift Supervision. A supervisory conversion is normally used when OTS, as the thrift's supervisor, has arranged the sale of a troubled institution to new owners. Unlike a normal conversion, a supervisory conversion does not require that the new capital stock be first offered for sale to the institutions depositors and borrowers. All of the new stock is acquired by the thrift's new owners. [OTS]

supervisory goodwill

goodwill that is created when the purchase of a savings institution is arranged by its federal regulator. [OTS]

supervisory merger

A consolidation of savings institutions arranged by the Office of Thrift Supervision in which a weak institution that is at or close to insolvency is merged into a strong institution. [OTS]

supplemental liability

Additional liability to a pension plan that results from an increase in promised benefits. [WCSU]

supplemental opinion

An opinion by bond counsel which deals with matters not customarily covered in bond counsel's legal opinion. For examples, a 10b-5 opinion, exemption from registration under the securities laws, and non-applicability of the Trust Indenture Act. [EPA]

supply access

Assurances that importing countries will, in the future, have fair and equitable access at reasonable prices to supplies of raw materials and other essential imports. [ITDS]

supply curve

A graphic representation of the relationship between quantities supplied at each price for a given time period. [FACS]

supply-side economics

Focus on the effects of national output potential or supply through reduction of taxes and government regulation for businesses designed to increase productivity and economic growth. [FACS]

support

In technical analysis, a price area where new buying is likely to come in and stem any decline. [CFTC][NYMEX] The place on a chart where the buying of futures contracts is sufficient to halt a price decline. [CBOT][MIDAM]

surcharge

A charge above the usual or customary charge. [ITDS] An additional charge imposed for a specific service, product or purpose. [OTS] An extra charge imposed on those who purchase with a credit card instead of cash. (currently, surcharges for credit card purchases are prohibited.) [FRB][FRBC][FRBM][FRBSF]

surety

A bond, guaranty, or other security that protects a person, corporation, or other legal entity in cases of anothers default in the payment of a given obligation, improper performance of a given contract, malfeasance of office, and others. [ITDS]

surety bond

A guarantee by which a third party (the guarantor) is bound to assume responsibility for the completion of a project or the performance of contracted acts if the second party (the contractor) defaults. [OTS]

surplus

(1) that which is over and above, or in addition to the required amount. (2) a mutual savings institution's retained earnings after payments to savers and additions to reserves. In a stock institution, these funds are called undivided profits. [OTS] A term used when the quantity of a good supplied exceeds the quantity demanded at the existing price. [FACS] In a publicly owned utility, the amount by which the assets exceed the total liabilities, reserves and municipal equity. [EPA]

survey

(1) a detailed inspection or investigation. (2) the act of making a comprehensive inspection. (3) a map-like document that shows the exact boundaries of a property, including lot lines and placement of roads, buildings and other improvements on the property. [OTS] A report by an independent third party, generally a surveyor, who determines the condition of vessels, cargo, or property. (Often to support an insurance claim.) [ITDS]

survey of savings capital

A report on savings accounts, generally grouped by the rate of interest paid, or by type of account. [OTS]

sushi bonds

A eurobond issued by a Japanese corporation. [WCSU] Dollar-denominated Eurobonds issued by Japanese companies, which are managed by Japanese banks and which are purchased primarily by Japanese investors. [UNODC] Eurodollar bonds issued by Japanese corporations on the Japanese market for Japanese investors. [ITDS]

suspension

The end of the evening session for specific futures and options markets traded at the Chicago Board of Trade. [CBOT][MIDAM]

swap (transaction)

A spot purchase of foreign exchange, fixed or floating rate funds, or assets with simultaneous forward sale or vice versa. [ITDS]

swap

(1) a technique of the Federal Home Loan Mortgage Corporation by which original lenders exchange the mortgages they have made for Freddie Mac Participation Certificates (PCs), which provide the lender with ownership interests in the same mortgages. Freddie Mac refers to the transaction as the Guarantor Program, because the corporation adds its own guarantees to the safety of the mortgage investment. (2) a financial transaction in which two counterparties agree to exchange streams of payments over a period of time according to a predetermined rule. For example, the counterparties may swap interest payments, with each paying the other's interest on the same amount of principal. Usually a fixed rate interest obligation is swapped for a floating rate interest obligation, so that both parties can match the form of interest they owe on their debts with the form of interest income they expect to receive on their assets -- fixed with fixed, or floating with floating. Or, the counterparties may swap payments in one denomination of currency for payments in another country's currency. Both interest rate swaps and currency swaps are designed to lessen market exposure of paying off debt in an environment of potentially changing interest rates. [OTS] A custom-tailored, individually negotiated transaction designed to manage financial risk, usually over a period of one to 12 years. Swaps can be conducted directly by two counter-parties, or through a third party such as a bank or brokerage house. The writer of the swap, such as a bank or brokerage house, may elect to assume the risk itself, or manage its own market exposure on an exchange. Swap transactions include interest rate swaps, currency swaps and price swaps for commodities, including energy and metals. In a typical commodity or price swap, parties exchange payments based on changes in the price of a commodity or a market index, while fixing the price they effectively pay for the physical commodity. The transaction enables each party to manage exposure to commodity prices or index values. Settlements are usually made in cash. [NYMEX] An arrangement between the central banks of two countries for standby credit to facilitate the exchange of each other's currencies. [FRBSF] An arrangement whereby two companies lend to each other on different terms, e.g., in different currencies, or one at a fixed rate and the other at a floating rate. [WCSU] In general, the exchange of one asset or liability for a similar asset or liability for the purpose of lengthening or shortening maturities, or otherwise shifting risks. This may entail selling one securities issue and buying another in foreign currency; it may entail buying a currency on the spot market and simultaneously selling it forward. Swaps also may involve exchanging income flows; for example, exchanging the fixed rate coupon stream of a bond for a variable rate payment stream, or vice versa, while not swapping the principal component of the bond. Swaps are generally traded over-the-counter. [CFTC] The combination of a spot purchase or sale against a forward sale or purchase of one currency in exchange for another; merely trading one currency (lending) for another currency (borrowing) for that period of time between which the spot exchange is made and the forward contract matures. [FDIC]

swap arrangements

Short-term reciprocal lines of credit between the Federal Reserve and 14 foreign central banks as well as the Bank for International Settlements. Through a swap transaction, the Federal Reserve can, in effect, borrow foreign currency in order to purchase dollars in the foreign exchange market. In doing so, the demand for dollars and the dollar's foreign exchange value are increased. Similarly, the Federal Reserve can temporarily provide dollars to foreign central banks through swap arrangements. [FRBSF] Short-term reciprocal lines of credit between the Federal Reserve and 14 foreign central banks as well as the Bank for International Settlements. Through a swap transaction, the Federal Reserve can, in effect, borrow foreign currency in order to purchase dollars in the foreign exchange market. In doing so, the demand for dollars is increased and the dollar's foreign exchange value is increased. Similarly, the Federal Reserve can temporarily provide dollars to foreign central banks through swap arrangements. [FRB][FRBC][FRBM]

swap cost or profit

The cost of profit related to the temporary movement of funds into another currency and back again in a 'swap' transaction. That exchange cost or profit must then be applied to the rate of interest earned on the loan or investment for which the exchange was used. Furthermore, the true trading profits or losses generated by the foreign exchange trader cannot be determined if swap profits or costs are charged to the exchange function rather than being allocated to the department whose loans or investments the swap actually funded. [FDIC]

swap spread

The number of basis points to be added to the appropriate market bond yield. [TMAC]

swapping

Selling one security and buying a similar one almost at the same time to take a loss, usually for tax purposes. [NYSE]

swaptions

An option to enter into a swap -- i.e., the right, but not the obligation, to enter into a specified type of swap at a specified future date. [CFTC] Are over-the-counter options on swaps. [TMAC]

sweat equity

The investment of labor, in lieu of cash, by the owner-occupant of a property. Such labor creates improvements that increase the market value of the property, and thus the owner-occupant's equity. [OTS]

sweep

An arrangement to maximize the interest earned by a customer who has both a high-interest rate account and a low- or no-interest account at the same financial institution. Funds not being immediately used in the low-interest account are automatically transferred (swept) to the high-interest account, where they remain until the balance in the low-interest account drops below a certain minimum and the funds are transferred back to the first account. The funds may be swept to the high-interest account overnight, or for longer periods of time. [OTS]

swingline facility

Bank borrowing facility to provide finance while the firm replaces U.S. commercial paper with eurocommercial paper. [WCSU]

switch

Offsetting a position in one delivery month of a commodity and simultaneous initiation of a similar position in another delivery month of the same commodity, a tactic referred to as 'rolling forward.' [CFTC]

switch arrangements

A form of countertrade in which the seller sells on credit and then transfers the credit to a third party. [ITDS]

syndicate

(1) a temporary association of two or more persons formed to carry out some specific business venture, such as the development of large-scale real estate projects. (2) a group of securities dealers who work together to distribute a new issue of securities. [OTS] A group of investment bankers who together underwrite and distribute a new issue of securities or a large block of an outstanding issue. [NYSE]

syndicate participation

Usually, a large credit put together by a group of lenders with each advancing a portion of the required funds. It differs from a participation loan because the banks participate at the outset and are known to the borrower. [FDIC]

syndicated loan

A loan advanced jointly by two or more financial institutions. [OTS]

synthetic futures

A position created by combining call and put options. A synthetic long futures position is created by combining a long call option and a short put option for the same expiration date and the same strike price. A synthetic short futures contract is created by combining a long put and a short call with the same expiration date and the same strike price. [CFTC] A position created by combining call and put options. A synthetic long futures position is created by combining a long call options and a short put options for the same expiration date and the same strike price. A synthetic short futures is created by combining a long put and a short call with the same expiration date and the same strike price. [NYMEX]

systematic risk

Market risk due to factors that cannot be eliminated by diversification. [CFTC]

systemic risk

Risk associated with the general health or structure of the financial system which would have serious adverse effects on economic conditions or financial stability. An example of systemic risk might be the probability that the failure of a major bank will cause a substantial number of other banks to fail, leading to a loss of confidence in the safety and soundness of a significant sector of the U.S. banking system. A finding of systemic risk is the only exception to the FDICIA mandate (and subject to satisfying certain stringent, procedural requirements) that the FDIC choose the resolution method with the least cost to the insurance fund. [FDIC] Systemic risk refers to the risk that the failure of one participant in a transfer system (or financial markets generally) to meet its required obligations will cause other participants or financial institutions to be unable to meet their obligations when due. [GAO] The risk that a default by one market participant will have repercussions on other participants due to the interlocking nature of financial markets. For example, Customer A's default in X market may affect Intermediary B's ability to fulfill its obligations in Markets X, Y, and Z. [CFTC] The risk that a specific large counterparty (such as a country), a certain market or a settlement system should experience a crisis, and that there will be a widespread spillover into the financial markets as a whole. [TMAC]

T-period holding-period return

The percentage return over the T-year period an investment lasts. [Harvey]

table of denial orders

A list of individuals and firms which have been disbarred from shipping or receiving U.S. goods or technology. Firms and individuals on the list may be disbarred with respect to either controlled commodities or general destination (across-the-board) exports. [ITDS]

tactical asset allocation

An asset allocation strategy that allows active departures from the normal asset mix based upon rigorous objective measures of value. Often called active management. It involves forecasting asset returns, volatilities and correlations. The forecasted variables may be functions of fundamental variables, economic variables or even technical variables. [Harvey]

tail

(1) The difference between the average price in Treasury auctions and the stopout price. (2) A future money market instrument (one available some period hence) created by buying an existing instrument and financing the initial portion of its life with a term repo. (3) The extreme end under a probability curve. (4) The odd amount in a MBS pool. [Harvey]

take

(1) A dealer or customer who agrees to buy at another dealer's offered price is said to take that offer. (2) Also, Euro bankers speak of taking deposits rather than buying money. [Harvey]

take a position

To buy or sell short; that is, to have some amount that is owned or owed on an asset or derivative security. [Harvey]

take-or-pay contract

A contract that obligates the purchaser to take any product that is offered to it (and pay the cash purchase price) or pay a specified amount if it refuses to take the product. [Harvey]

take-out

A cash surplus generated by the sale of one block of securities and the purchase of another, e.g. selling a block of bonds at 99 and buying another block at 95. Also, a bid made to a seller of a security that is designed (and generally agreed) to take him out of the market. [Harvey]

take-up fee

A fee paid to an underwriter in connection with an underwritten rights offering or an underwritten forced conversion as compensation for each share of common stock he underwriter obtains and must resell upon the exercise of rights or conversion of bonds. [Harvey] Fee paid to underwriters of a rights issue on any stock that they are obliged to purchase. [WCSU]

takedown

The actual transfer of money from a lender to a borrower under a loan agreement, loan commitment, or line of credit. [OTS]

takeout commitment

A promise by a lender to provide a long-term mortgage loan upon satisfactory completion of construction. [OTS]

takeout loan

A permanent loan on real property, which takes out the interim, construction loan. [OTS]

takeover

General term referring to transfer of control of a firm from one group of shareholder's to another group of shareholders. [Harvey]

taker

The buyer of an option contract. [CFTC]

taking a view

A London expression for forming an opinion as to where market prices are headed and acting on it. [Harvey]

taking delivery

Refers to the buyer's actually assuming possession from the seller of the asset agreed upon in a forward contract or a futures contract. [Harvey]

tandem plan

A program in which the Government National Mortgage Association (GNMA) buys certain mortgages at a subsidized price for subsequent resale at market prices to the Federal Home Loan Mortgage Corporation (FHLMC) or the Federal National Mortgage Association (FNMA). [OTS]

tandem programs

Under Ginnie Mae, mortgage funds provided at below-market rates to residential mortgage buyers with FHA Section 203 and 235 loans and to developers of multifamily projects with Section 236 loans initially and later with Section 221(d)(4) loans. [Harvey]

tangible asset

An asset whose value depends on particular physical properties. These i nclude reproducible assets such as buildings or machinery and non-reproducible assets such as land, a mine, or a work of art. Also called real assets. [Harvey] Physical assets such as plant, machinery, and offices. [WCSU] physical and material assets that have shape and form, and can be touched. Examples are cash, land, and buildings. [OTS]

tangible capital

OTS defines a thrift institution's tangible capital as outstanding stock plus retained earnings. In 1989, OTS set the minimum tangible capital requirement for savings institutions at 1.5 percent of assets. [OTS]

tangible equity

The amount of a savings association's core capital plus the amount of outstanding cumulative perpetual preferred stock minus all intangible assets not previously deducted except purchased mortgage servicing rights that may be included in core capital and qualifying supervisory goodwill that can be counted as core capital. [OTS]

tangible net worth

same as tangible capital. [OTS]

tank train

A procedure in the rail shipment of crude oil, refined products, and other liquids developed by General American Transportation (GATX). 'Tank Train' tank cars are interconnected, which permits loading and unloading of the entire train of cars from one connection. [NYMEX]

tare weight

The weight of a container and/or packing materials, but without the goods being shipped. The gross weight of a shipment less the net weight of the goods being shipped. [ITDS]

target cash balance

Optimal amount of cash for a firm to hold, considering the trade-off between the opportunity costs of holding too much cash and the trading costs of holding too little cash. [Harvey]

target firm

A firm that is the object of a takeover by another firm. [Harvey]

target payout ratio

A firm's long-run dividend-to-earnings ratio. The firm's policy is to attempt to pay out a certain percentage of earnings, but it pays a stated dollar dividend and adjusts it to the target as base-line increases in earnings occur. [Harvey]

target zone arrangement

A monetary system under which countries pledge to maintain their exchange rates within a specific margin around agreed-upon, fixed central exchange rates. [Harvey]

targeted examination

An examination that focuses on specific areas of a financial institution's operations. [OTS]

targeted repurchase

The firm buys back its own stock from a potential bidder, usually at a substantial premium, to forestall a takeover attempt. [Harvey]

tariff

A comprehensive list or 'schedule' of merchandise with applicable rates to be paid or charged for each listed article; or a schedule of shipping rates charged, together with governing rules and regulations. [ITDS] A schedule of rates or charges permitted a common carrier or utility; pipeline tariffs are the charges made by pipelines for transporting crude oil, refined products or natural gas from an origin to a destination. [NYMEX] A tax on imports. [FACS]

tariff anomaly

A tariff anomaly exists when the tariff on raw materials or semi-manufactured goods is higher than the tariff on the finished product. [ITDS]

tariff escalation

A situation in which tariffs on manufactured goods are relatively high, tariffs on semi-processed goods are moderate, and tariffs on raw materials are nonexistent or very low. [ITDS]

tariff quotas

Application of a higher tariff rate to imported goods after a specified quantity of the item has entered the country at a lower prevailing rate. [ITDS]

tariff schedule

A comprehensive list of the goods which a country may import and the import duties applicable to each product. [ITDS]

tariff war

When one nation increases the tariffs on goods imported from, or exported to another country, and that country then follows by raising tariffs itself in a retaliatory manner. [ITDS]

tax

tax abatement

A reduction of taxes or an exemption from taxes granted by a local government on a piece of real property for a specified length of time. [OTS]

tax anticipation notes

(A) Notes issued in anticipation of collection of taxes, usually retireable only from tax collections, and frequently only from the proceeds of the tax levy whose collection they anticipate. (B) Note issued in anticipation of receipt in future years of the proceeds of a specific tax (usually a voted tax). [EPA]

tax avoidance

The legal usage of the tax regime to one's own advantage, to reduce the amount of tax that is payable by means that are within the law. Tax sheltering is very similar, and tax havens are jurisdictions which facilitate reduced taxes. The term tax mitigation is sometimes used; its original use was by tax advisers as an alternative to the pejorative term tax evasion. 'Tax aggressive' strategies fall into the grey area between commonplace and well-accepted tax avoidance (such as purchasing municipal bonds in the United States) and evasion. [Wikipedia]

tax base

The assessed valuation of all taxable property within the boundaries of an issuer. [EPA]

tax books

Set of books kept by a firm's management for the IRS that follows IRS rules. The stockholder's books follow Financial Accounting Standards Board rules. [Harvey]

tax clawback agreement

An agreement to contribute as equity to a project the value of all previously realized project-related tax benefits not already clawed back to the extent required to cover any cash deficiency of the project. [Harvey]

tax deed

A deed on property issued when the property is purchased at a public sale for nonpayment of taxes. [OTS]

tax deferral option

The feature of the U.S. Internal Revenue Code that the capital gains tax on an asset is payable only when the gain is realized by selling the asset. [Harvey]

tax differential view (of dividend policy)

The view that shareholders prefer capital gains over dividends, and hence low payout ratios, because capital gains are effectively taxed at lower rates than dividends. [Harvey]

tax escalation clause

A provision in a lease for the tenant to pay for any increase in real estate taxes imposed on the leased property. [OTS]

tax evasion

The illegal evasion of taxes by individuals, corporations and trusts. Tax evasion often entails taxpayers deliberately misrepresenting the true state of their affairs to the tax authorities to reduce their tax liability and includes dishonest tax reporting, such as declaring less income, profits or gains than the amounts actually earned, or overstating deductions. Tax evasion is an activity commonly associated with the informal economy. [Wikipedia]

tax free acquisition

A merger or consolidation in which 1) the acquirer's tax basis in each asset whose ownership is transferred in the transaction is generally the same as the acquiree's, and 2) each seller who receives only stock does not have to pay any tax on the gain he realizes until the shares are sold. [Harvey]

tax haven

A nation offering low tax rates and other incentives for individuals and businesses of other countries. [ITDS] A nation with a moderate level of taxation and/or liberal tax incentives for undertaking specific activities such as exporting or investing. [Harvey] A state, country or territory where certain taxes are levied at a low rate or not at all.[2] Individuals or corporate entities can find it attractive to establish shell subsidiaries or move themselves to areas with reduced or nil taxation levels relative to typical international taxation. [Wikipedia]

tax lien

A government claim against real property for unpaid taxes. [OTS]

tax or taxes

Compulsory charges levied by a governmental unit for the purpose of raising revenue. Taxes should be distinguished from special assessments, which are levied according to the actual benefits derived, and from fees which must bear a reasonable relation to the costs of administration or regulation and are imposed under the police power. Tax revenues are used to pay for services or improvements provided for the general public benefit. [EPA]

tax participation clause

A provision in a lease stipulating that the tenant will pay all or part of the real estate taxes on the leased property. Also called a tax stop clause. [OTS]

tax rate

The amount of tax stated in terms of a unit of the tax base; for example 10 dollars per thousand dollars assessed valuation. [EPA]

tax rate limitation

The limitation on ad valorem property taxes without a vote by the electorate, created by constitution or statute or charter. [EPA]

Tax Reform Act of 1986

A 1986 law involving a major overhaul of the U.S. tax code. [Harvey] A major tax legislation package that amended the Internal Revenue Code of 1954, which was redesignated as the Internal Revenue Code of 1986. In the design of this legislation, Congress attempted to deal with broad public policy implications instead of addressing specific issues such as recessions, energy shortages, and others. The broad objectives of the Tax Reform Act of 1986 were fairness, revenue neutrality, long-term economic growth, and simplicity. This legislation had a major effect on how individuals and businesses earn, spend, save, and invest. For individuals, many tax deductions were eliminated, thereby increasing individual gross income; at the same time, the tax rates were lowered. [FDIC]

tax sale

The sale of property by a taxing authority or an officer of the court acting on a judgment to satisfy the payment of delinquent taxes. [OTS]

tax sheltering

any legal means of postponing or reducing the amount of tax due. [OTS]

tax shield

The reduction in income taxes that results from taking an allowable deduction from taxable income. [Harvey]

tax stop clause

tax swap

Swapping two similar bonds to receive a tax benefit. [Harvey]

tax-anticipation bills

Short-term bill issued by the U.S. Treasury that can be surrendered at face value in payment of taxes. [WCSU] Special bills that the Treasury occasionally issues that mature on corporate quarterly income tax dates and can be used at face value by corporations to pay their tax liabilities. [Harvey]

tax-deferred annuity

An investment vehicle generally used to create income for retirement. Pretax dollars are invested by an employer for an employee to provide a future stream of income to the employee for either a fixed number of years, or for life. Federal income tax on the pretax dollars invested and on the interest they earn is postponed until the retirement income is received. [OTS]

tax-deferred income

income which is subject to tax when earned, but for which the actual tax payment is postponed until a later time. [OTS]

tax-deferred investment

An investment that is subject to tax, but on which the actual tax payment is postponed until a later time. Normally, the payment is delayed until a person is in a lower tax bracket, thus reducing the tax liability. [OTS]

tax-deferred retirement plans

Employer-sponsored and other plans that allow contributions and earnings to be made and accumulate tax-free until they are paid out as benefits. [Harvey]

tax-exempt

The state of an investment that produces income not subject to federal and/or state income tax. For example, tax-exempt bonds are sold by local governments to finance such public projects as sewers, school construction and parks. [OTS]

tax-exempt bond

A security whose interest is exempt from federal income tax. [EPA]

tax-exempt sector

The municipal bond market where state and local governments raise funds. Bonds issued in this sector are exempt from federal income taxes. [Harvey]

tax-sheltered income

all income which is exempt from taxation or on which taxes are deferred. [OTS]

tax-timing option

The option to sell an asset and claim a loss for tax purposes or not to sell the asset and defer the capital gains tax. [Harvey]

taxable acquisition

A merger or consolidation that is not a tax-fee acquisition. The selling shareholders are treated as having sold their shares. [Harvey]

taxable income

Gross income less a set of deductions. [Harvey]

taxable transaction

Any transaction that is not tax-free to the parties involved, such as a taxable acquisition. [Harvey]

taxable year

The 12-month period used as the basis for calculating federal tax on income received during that time period. Also called the tax year. [OTS]

teaser rate

An initial, below-market interest rate offered on loans. After the initial time period, the permanent rate takes effect. [OTS]

technical analysis

An approach to forecasting commodity prices that examines patterns of price change, rates of change, and changes in volume of trading and open interest, without regard to underlying fundamental market factors. Technical analysis can work consistently only if the theory that price movements are a random walk is incorrect. [CFTC] An approach to forecasting commodity prices which examines patterns of price change, rates of change, and changes in volume of trading and open interest, without regard to underlying fundamental market factors. [NYMEX] Anticipating future price movement using historical prices, trading volume, open interest, and other trading data to study price patterns. [CBOT][MIDAM] Security analysis that seeks to detect and interpret patterns in past security prices. [Harvey]

technical analysts

Also called chartists or technicians, analysts who use mechanical rules to detect changes in the supply of and demand for a stock and capitalize on the expected change. [Harvey]

technical assistance advisor (TAA)

Local organizations hired in the RTC Affordable Housing Disposition Program (AHDP). TAAs were nonprofit organizations or public agencies located in every state where the RTC owned residential property marketed under the AHDP. TAAs provided training for single-family purchasers who were, for the most part, first-time homebuyers. The role of TAAs was to conduct training on how to buy a house, to assist the buyers in completing the income certifications required by the AHDP, and to provide post-closing seminars on homeowner responsibilities. In addition, TAAs assisted in the multi-family program. They helped the RTC to identify local nonprofit organizations and public agencies interested in owning multi-family properties and to locate state and federal sources of acquisition and rehabilitation financing. [FDIC]

technical condition of a market

Demand and supply factors affecting price, in particular the net position, either long or short, of the dealer community. [Harvey]

technical descriptors

Variables that are used to describe the market on a technical basis. [Harvey]

technical insolvency

Default on a legal obligation of the firm. For example, technical insolvency occurs when a firm doesn't pay a bill. [Harvey]

technical research

Analysis of the market and stocks based on supply and demand. The technician studies price movements, volume, trends and patterns, which are revealed by charting these factors, and attempts to assess the possible effects of current market action or future supply and demand for securities and individual issues. [NYSE]

technological change

An advance, usually scientific, that causes an increase in output to occur relative to the quantity of inputs. [FACS]

TED spread

(1) The difference between the interest rate on three-month U.S. Treasury bills and three-month LIBOR; (2) traditionally, the difference between the price of the three-month U.S. Treasury bill futures contract and the price of the three-month Eurodollar time deposit futures contract with the same expiration month (Treasury Over Eurodollar). [CFTC] Difference between U.S. Treasury bill rate and eurodollar rate; used by some traders as a measure of investor/trader anxiety. [Harvey]

teller

An employee of a depository institution who waits on customers, usually from behind a counter or some other partition. Tellers accept deposits, provide cash or checks for withdrawals, and perform most other routine customer services involving transfers of funds. [OTS]

teller's check

A check drawn by a depository institution on an account maintained at a second depository institution and signed by a teller at the originating institution. Teller's checks are often used in payment of withdrawal orders. [OTS]

temporal method

Under this currency translation method, the choice of exchange rate depends on the underlying method of valuation. Assets and liabilities valued at historical cost (market cost) are translated at the historical (current market) rate. [Harvey]

tenancy

The holding of property (including real estate and deposit accounts) either by ownership or by lease. [OTS]

tenancy at will

The lease of real estate that may be canceled at the will of either the landlord or the tenant, usually with notice. [OTS]

tenancy by the entirety

A form of ownership by a husband and wife, recognized in some states, in which one may not act without the other's consent in matters affecting property. When one dies, the rights of the deceased spouse automatically pass to the survivor. [OTS]

tenancy in common

A form of ownership in which two or more parties own property, with each owning a separate interest. When one owner dies, that owner's share passes to his or her heirs and not to the remaining owners. When ownership of a deposit account is established as tenancy in common, the signatures of all owners are necessary for a withdrawal. [OTS]

tenant

A person or organization that has the temporary use and right of occupancy of real property owned by another. [OTS]

tender

(A) An offer by a bondholder to the issuer for the issuer to purchase the security, often in response to the issue's solicitation or of request for tenders. (B) An offering of securities; may be made in response to invitations which contain specifications as to amounts and prices. [EPA] A small vessel which serves a larger vessel in a port for the purpose of supplying provisions and carrying passengers from ship to shore. [ITDS] An application or offer to purchase a U.S. Treasury bill, note, or bond. [FRB][FRBM][FRBSF] To give notice to the clearing organization of the intention to initiate delivery of the physical commodity in satisfaction of a short futures contract. [CFTC] To offer for delivery against futures. [Harvey]

tender agent

A bank who will act as agent for an issuer in accepting the tender of both bonds or notes generally through put options. [EPA]

tender offer

A public offer to buy shares from existing stockholders of one public corporation by another company or other organization under specified terms good for a certain time period. stockholders are asked to 'tender' (surrender) their holdings for stated value, usually at a premium above current market price, subject to the tendering of a minimum and maximum number of shares. [NYSE] A public offer to buy shares of stock from existing stockholders of one public corporation by another company or other organization under specified terms good for a stated time period. The offer is for stockholders to 'tender' (surrender) their holdings for a stated price, usually at a premium above the current market price. The offer is made subject to the buyer being able to obtain at least a minimum number and no more than a maximum number of shares. [OTS] General offer made directly to a firm's shareholders to by their stock. [WCSU] General offer made publicly and directly to a firm's shareholders to buy their stock at a price well above the current market price. [Harvey]

tender offer premium

The premium offered above the current market price in a tender offer. [Harvey]

tender panel

panel of underwriting banks established to bid for notes issued under a note issuance facility. [WCSU]

tenderable grades

tenor

Designation of payment of a draft as being due at sight, a given number of days after sight or a given number of days after sight or a given number of days after the date of the draft. [FDIC] Maturity of a loan. [Harvey] The period between the formation of a debt and the date of expected payment. [ITDS]

term bonds

Bonds of an issue that have a single deferred stated maturity date. In many cases the issuer is required at regular intervals before the stated maturity date to call or purchase a certain amount of the term bonds using money set aside in a sinking fund. See 'Mandatory Sinking Fund Redemption'. Serial bonds and term bonds are often combined in one issue. [EPA] Often referred to as bullet-maturity bonds or simply bullet bonds, bonds whose principal is payable at maturity. [Harvey]

term deposit

funds deposited in a savings account, the terms of which impose a financial penalty if funds are withdrawn before a specified date. [OTS]

term Fed funds

Fed Funds sold for a period of time longer than overnight. [Harvey]

term insurance

Provides a death benefit only, no build-up of cash value. [Harvey]

term life insurance

A contract that provides a death benefit but no cash build-up or investment component. The premium remains constant only for a specified term of years, and the policy is usually renewable at the end of each term. [Harvey]

term loan

A bank loan, typically with a floating interest rate, for a specified amount that matures in between one and ten years and requires a specified repayment schedule. [Harvey] A loan with a maturity of usually three to five years, during which time interest is paid, but no payments to reduce principal are made. The entire principal is due and payable at the end of the loan term. [OTS] Medium-term, privately placed loans, usually made by banks. [WCSU]

term mortgage

A mortgage loan with a fixed time period, usually five years or less, during which only interest is paid. At the end of the term, the entire principal is due and payable. [OTS]

term premiums

Excess of the yields to maturity on long-term bonds over those of short-term bonds. [Harvey]

term repo

A repurchase \agreement with a term of more than one day. [Harvey]

term structure of interest rates

Relationship between interest rates on loans of different maturities. [WCSU]

term to maturity

The time remaining on a bond's life, or the date on which the debt will cease to exist and the borrower will have completely paid off the amount borrowed. [Harvey]

term trust

A closed-end fund that has a fixed termination or maturity date. [Harvey]

terminal

The area at the end of a rail, ship, air, or truck line which serves as a loading, unloading, transfer point, and storage/repair facility. [ITDS]

terminal charge

A charge made for services performed at terminals. [ITDS]

terminal elevator

An elevator located at a point of greatest accumulation in the movement of agricultural products that stores the commodity or moves it to processors. [CFTC]

terminal market

Usually synonymous with commodity exchange or futures market, specifically in the United Kingdom. [CFTC]

terminal value

The value of a bond at maturity, typically its par value, or the value of an asset (or an entire firm) on some specified future valuation date. [Harvey]

terminal warehouse

terms

The details, specifications, obligations, requirements, and conditions of an agreement, or contract. [OTS] The period of time established to repay a loan or redeem a security. [OTS]

terms of sale

Conditions on which a firm proposes to sell its goods services for cash or credit. [Harvey]

terms of trade

Relative price levels of goods exported and imported by a country. [FDIC] The relative prices of goods and services traded in international markets. [FACS] The volume of exports that can be traded for a given volume of imports. [ITDS] The weighted average of a nation's export prices relative to its import prices. [Harvey]

test key

A code used in transferring funds by cable or telephone so that the recipient may authenticate the message. A test key generally consists of a series of numbers, including a fixed number for each correspondent bank, a number for the type of currency, a number for the total amount, and possibly numbers for the day of the month and the day of the week. A single number code indicates whether the total amount is in thousands, hundreds, tens or digits. To arrive at a test number, the indicated numbers are totaled, and the total amount usually precedes the text of the message. [UNODC]

testament

The written declaration of an individual citing how he or she wishes his or her property to be disposed following his or her death. [OTS]

testamentary account

deposited funds owned and controlled by an individual and invested in a revocable trust account, tentative or Totten trust account, payable-on-death account, or a similar account for which there is evidence of the intention that deposited funds will be paid to a named party at the time of the account owner's death. [OTS]

testamentary trust

A trust that goes into effect when the person who establishes the trust dies. [UNODC]

testate

The status of having signed and left a legal will at the time of death. [OTS]

testator

A male who has set forth in a will his desires and bequests for the distribution of his property when he dies. [OTS]

testatrix

A female who has set forth in a will her desires and bequests for the distribution of her property when she dies. [OTS]

The Depository Institutions Deregulation and Monetary Control Act of 1980

Among its major provisions, this Act applied uniform reserve requirements to all depository institutions with certain types of accounts and required reports from these depository institutions. It also extended access to the Federal Reserve discount window and to other Federal Reserve services in step with the implementation of a fee schedule. [FRB][FRBC][FRBM]

The Desk

The trading desk at the New York Federal Reserve Bank, through which open market purchases and sales of government and federal agency securities are made. The desk maintains direct telephone communication with major government securities dealers. A 'foreign desk' at the New York Federal Reserve Bank conducts transactions in the foreign exchange market. [FRB][FRBC][FRBM][FRBSF]

The Exchange

A nickname for the New York stock exchange. Also known as the Big Board. More than 2,000 common and preferred stocks are traded. The exchange is the oldest in the United States, founded in 1792, and the largest. It is located on Wall Street in New York City. [Harvey]

The International Swap Dealers Association, Inc.

the trading desk

The trading desk at the New York Federal Reserve Bank, through which open market purchases and sales of government and federal agency securities are made. The desk maintains direct telephone communication with major government securities dealers. A 'foreign desk' at the New York Federal Reserve Bank conducts transactions in the foreign exchange market. [FRB][FRBC][FRBM][FRBSF]

theft

theoretical futures price

Also called the fair price, the equilibrium futures price. [Harvey]

theoretical spot rate curve

A curve derived from theoretical considerations as applied to the yields of actually traded Treasury debt securities because there are no zero-coupon Treasury debt issues with a maturity greater than one year. Like the yield curve, this is a graphical depiction of the term structure of interest rates. [Harvey]

theoretical value

An option's value generated by a mathematical model given certain prior assumptions about the term of the option, the characteristics of the underlying futures contract, and prevailing interest rates. [NYMEX]

theory

therm

100,000 British thermal units. A dekatherm is 1 million Btus. [NYMEX]

theta

Also called time decay, the ratio of the change in an option price to the decrease in time to expiration. [Harvey] The sensitivity of the option price to a change in the amount of time to expiration. [NYMEX] The sensitivity of the option price to time decay. [TMAC]

thin market

A market in which trading volume is low and in which consequently bid and asked quotes are wide and the liquidity of the instrument traded is low. [Harvey]

thinly traded

Infrequently traded. [Harvey]

third market

Exchange-listed securities trading in the OTC market. [Harvey] Trading of stock exchange listed securities in the over-the-counter market by non-exchange-member brokers. [NYSE]

third world countries

Developing countries, especially in Asia, Africa, and Latin America, but excluding communist countries. [ITDS]

thread

threat

three-flat

A three-story walk up apartment building in which each dwelling unit occupies one story and all share a common main entrance. [OTS]

three-phase DDM

A version of the dividend discount model which applies a different expected dividend rate depending on a company's life-cycle phase, growth phase, transition phase, or maturity phase. [Harvey]

threshold for refinancing

The point when the WAC of an MBS is at a level to induce homeowners to prepay the mortgage in order to refinance to a lower-rate mortgage, generally reached when the WAC of the MBS is 2% or more above currently available mortgage rates. [Harvey]

thrift

A financial institution that ordinarily possesses the same depository, credit, financial intermediary, and account transactional functions as a bank, but that is chiefly organized and primarily operates to promote savings and home mortgage lending rather than commercial lending. Also known as a savings bank, a savings association, a savings and loan association, or an S&L. [FDIC] another term for a thrift institutions. [OTS]

Thrift Administration Review Program (TARP)

An OTS program to help savings associations improve their books, records and loan files and to implement better internal controls. [OTS]

thrift bulletin

A directive issued by the Office of Thrift Supervision to thrift institutions providing clarification of regulations or laws and/or specifying guidelines and procedures. The thrift bulletin series and the regulatory bulletin series are successors to the previous R, T, SP, and AB memoranda issued by the former Federal Home Loan Bank Board. [OTS]

Thrift Depositor Protection Oversight Board (TDPOB)

A government agency that provides guidance to the Resolution Trust Corporation (RTC). The TDPOB was formerly the Resolution Trust Corporation Oversight Board. It was renamed and reorganized by the Resolution Trust Corporation Refinancing, Restructuring, and Improvement Act of 1991. [OTS] The name chosen in 1992 for the redefined RTC Oversight Board. The original oversight board was an instrumentality of the federal government created in 1989 by FIRREA and was responsible for the general oversight of the RTC and REFCORP. In addition, the oversight board approved funding for the RTC. On February 1, 1992, pursuant to RTCRRIA, the oversight board was redesignated as the Thrift Depositor Protection Oversight Board and given the mandate to review the overall strategies, plans, and goals of the RTC and to continue to approve prior to implementation RTC financial plans, budgets, and periodic financing requests. [FDIC]

thrift financial report (TFR)

The report that savings institutions must file each quarter with the Office of Thrift Supervision. The report includes detailed information about the institution's operations and financial condition. The thrift financial report for savings institutions is similar to the call report required of commercial banks. [OTS]

thrift industry

all of the operating financial institutions that primarily accept deposits from individual savers and loan funds for home mortgages. These include savings and loan associations, savings banks and credit unions. [OTS]

Thrift Information Exchange System (TIES)

A computer data base used by Office of Thrift Supervision staff to access information on individual savings associations and various segments of the thrift industry. [OTS]

thrift institutions

The general term for savings banks, savings and loan associations, and credit unions. [OTS] Thrift Institutions is a general term often used for mutual savings banks, savings and loan associations, and credit unions. [FRBC] a general term encompassing savings banks, savings and loan associations, and credit unions. [FRBSF]

Thrift Institutions Advisory Council (TIAC)

A council, established following the passage of the Monetary Control Act of 1980, whose purpose is to provide information and views on the special needs and problems of thrifts. The group is comprised of representatives of savings banks, savings and loan associations, and credit unions. [FRBSF] This Council was established following the passage of the Monetary Control Act of 1980. Its purpose is to provide information and views on the special needs and problems of thrifts. The group is comprised of representatives of savings banks, savings and loan associations, and credit unions. [FRB][FRBC][FRBM]

through bill of lading

A single bill of lading covering receipt of cargo at the point of origin for delivery to the ultimate consignee. [ITDS]

through rate

A shipping rate applicable from point of origin to destination. [ITDS]

throughput

1) A term used to describe the total volume of raw materials that are processed by a plant such as an oil refinery in a given period. 2) The total volume of crude oil and refined products that are handled by a tank farm, pipeline or terminal loading facility. [NYMEX]

throughput agreement

An agreement to put a specified amount of product per period through a particular facility. For example, an agreement to ship a specified amount of crude oil per period through a particular pipeline. [Harvey]

throughput arrangement

Arrangement by which shareholders of a pipeline company agree to make sufficient use of the pipeline to enable the pipeline to service its debt. [WCSU]

tick

A minimum change in price, up or down. [NYMEX] A small fluctuation in price, either up or down. [OTS] Refers to a minimum change in price up or down. An up-tick means that the last trade was at a higher price than the one preceding it. A down-tick means that the last price was lower than the one preceding it. [CFTC] Refers to the minimum change in price a security can have, either up or down. [Harvey] The smallest allowable increment of price movement for a contract. [CBOT] The smallest allowable increment of price movement for a contract. Also referred to as minimum price fluctuation. [MIDAM]

tick indicator

A market indicator based on the number of stocks whose last trade was an uptick or a downtick. Used as an indicator of market sentiment or psychology to try to predict the market's trend. [Harvey]

tick-test rules

SEC-imposed restrictions on when a short sale may be executed, intended to prevent investors from destabilizing the price of a stock when the market price is falling. A short sale can be made only when either (1) the sale price of the particular stock is higher than the last trade price (referred to as an uptick trade) or (2) if there is no change in the last trade price of the particular stock, the previous trade price must be higher than the trade price that preceded it (referred to as a zero uptick). [Harvey]

ticker

A telegraphic system that continuously provides the last sale prices and volume of securities transactions on exchanges. Information is either printed or displayed on a moving tape after each trade. [NYSE]

tied loan

A loan made by a government agency that requires a foreign borrower to spend the proceeds in the lenders country. [ITDS]

tier 1 capital

The sum of core capital elements (1) common shareholders' equity; (2) qualifying non-cumulative perpetual preferred stock (including related surplus); and (3) minority interests in the equity accounts of consolidated subsidiaries less goodwill and other intangible assets required to be deducted. [UNODC] as defined by OTS' Prompt Corrective Action regulation, tier 1 capital is the same as core capital. [OTS]

tier 1 risk-based capital ratio

The ratio of tier 1 capital to risk-weighted assets. [OTS]

tight market

A tight market, as opposed to a thin market, is one in which volume is large, trading is active and highly competitive, and spreads between bid and ask prices are narrow. [Harvey]

tilted portfolio

An indexing strategy that is linked to active management through the emphasis of a particular industry sector, selected performance factors such as earnings momentum, dividend yield, price/earnings ratio, or selected economic factors such as interest rates and inflation. [Harvey]

Time Activity Reporting System (TARS)

The agency-wide computer program used to keep track of hours worked by OTS employees. [OTS]

time and sales ticker

Part of the Chicago Board of Trade Market Profile system consisting of an on-line graphic service that transmits price and time information throughout the day. [CBOT][MIDAM]

time decay

The tendency of an option to decline in value as the expiration date approaches, especially if the price of the underlying instrument is exhibiting low volatility. [CFTC]

time deposits

A deposit of funds in a savings institution under an agreement stipulating that (a) the funds must be kept on deposit for a stated period of time, or (b) the institution may require a minimum period of notification before a withdrawal is made. [OTS] Interest-bearing deposit at a savings institution that has a specific maturity. [Harvey] Savings held in the financial institution for a fixed time period (such as six months or a year). [FACS]

time draft

A draft drawn to mature at a fixed time after presentation or acceptance, e.g., a given number of days after sight (acceptance) or a given number of days after the date of the draft. [FDIC] Demand for payment at a stated future date. [Harvey] demand for payment at a stated future date. [WCSU]

time lags

(In stabilization policy) refers to the period between an economic event and the impact of the economic policy to correct it. [FRBSF]

time limit order

A customer order that designates the time during which it can be executed. [CBOT][MIDAM]

time premium

Also called time value, the amount by which the option price exceeds its intrinsic value. The value of an option beyond its current exercise value representing the optionholder's control until expiration, the risk of the underlying asset, and the riskless return. [Harvey]

time sharing

A form of real property ownership that grants each of several owners the exclusive right to occupy a housing unit during a specified time period each year. [OTS]

time spread

The selling of a nearby option and buying of a more deferred option with the same strike price. [NYMEX] The selling of a nearby option and buying of a more deferred option with the same strike price. Also called Horizontal Spread. [CFTC]

time to maturity

The time remaining until a financial contract expires. Also called time until expiration. [Harvey]

time until expiration

The time remaining until a financial contract expires. Also called time to maturity. [Harvey]

time value

Part of the option premium which reflects the excess over the intrinsic value, or the entire premium if there is no intrinsic value. At given price levels the option time value will decline until expiration. It is this decrease in time value that makes options a wasting asset. [NYMEX] That portion of an option's premium that exceeds the intrinsic value. The time value of an option reflects the probability that the option will move into-the-money. Therefore, the longer the time remaining until expiration of the option, the greater its time value. Also called Extrinsic Value. [CFTC] The amount of money option buyers are willing to pay for an option in the anticipation that, over time, a change in the underlying futures price will cause the option to increase in value. In general, an option premium is the sum of time value and intrinsic value. Any amount by which an option premium exceeds the option's intrinsic value can be considered time value. Also referred to as extrinsic value. [CBOT][MIDAM] The part of an option premium that is in excess of the intrinsic value. [NYSE] The time value is equal to the difference between the premium of an option and its intrinsic value. This portion of the premium is attributable to the amount of time remaining to expiration and the fact that components that determine the value of the contract may change in that time. [TMAC]

time value of an option

The portion of an option's premium that is based on the amount of time remaining until the expiration date of the option contract, and that the underlying components that determine the value of the option may change during that time. Time value is generally equal to the difference between the premium and the intrinsic value. [Harvey]

time value of money

The idea that a dollar today is worth more than a dollar in the future, because the dollar received today can earn interest up until the time the future dollar is received. [Harvey]

time-of-day order

This is an order that is to be executed at a given minute in the session. For example, 'Sell 10 March corn at 12:30 p.m.' [CFTC]

time-stamped

Part of the order-routing process in which the time of day is stamped on an order. An order is time-stamped when it is (1) received on the trading floor, and (2) completed. [CBOT][MIDAM]

time-weighted rate of return

rate of return that gives equal weight to each time period; used in investment performance measurement. [WCSU]

times interest earned

Earnings before interest and tax, divided by interest payments. [Harvey][WCSU]

times-interest-earned ratio

Earnings before interest and tax, divided by interest payments. [Harvey][WCSU]

timing option

For a Treasury Bond or note futures contract, the seller's choice of when in the delivery month to deliver. [Harvey]

title

(1) the ownership right to property, including the right of possession. (2) the document or instrument constituting evidence of such an ownership right. [OTS]

title binder

A written evidence of temporary title insurance coverage in force for a limited period of time, which is to be replaced by a permanent policy. [OTS]

title company

A business firm that examines real property titles, reports its findings as to the legal status of such titles, and issues insurance policies to indemnify the owner and lender against financial loss resulting from unknown title defects or prior claims against the property. [OTS]

title defect

any fact, circumstance or lawful right that could successfully claim all or part of a property or could challenge the ownership of the property. [OTS]

title insurance

The insurance that protects both the lender and the homeowner (borrower) against loss resulting from any defects in the title or claims against a property that were not uncovered in the title search, and that are not specifically listed as exemptions to the coverage on the title insurance policy. [OTS]

title report

A written statement by a title guarantee company that sets forth the condition of title to a specified piece of real estate as of a certain date. [OTS]

title search

A review of public records to determine whether there are any claims or defects in the current owner's title to real estate. [OTS]

to order

A term on a financial instrument or title document indicating that it is negotiable and transferable. [ITDS]

to-arrive contract

A transaction providing for subsequent delivery within a stipulated time limit of a specific grade of a commodity. [CFTC]

Tobin's Q ratio

Market value of a firm's assets divided by replacement value of the firm's assets. [Harvey] Market value of assets divided by replacement value of assets. A Tobin's Q ratio greater than 1 indicates the firm has done well with its investment decisions. [Harvey] The ratio of the market value of an asset to its replacement cost. [WCSU]

tolling agreement

An agreement to put a specified amount of raw material per period through a particular processing facility. For example, an agreement to process a specified amount of alumina into aluminum at a particular aluminum plant. [Harvey]

Tom next

In the interbank market in Eurodollar deposits and the foreign exchange market, the value (delivery) date on a Tom next transaction is the next business day. Refers to 'tomorrow next.' [Harvey]

tombstone

Advertisement listing the underwriters to a security issue. [Harvey][WCSU] The advertisement of a new issue placed by the underwriters in financial or trade journals and newspapers. [EPA]

too big to fail

A catchphrase coined in the 1980s to describe the perception that a depository institution could be immune to failure because of its size or the magnitude of its correspondent relationships. [FDIC]

top-down equity management style

A management style that begins with an assessment of the overall economic environment and makes a general asset allocation decision regarding various sectors of the financial markets and various industries. The bottom-up manager, in contrast, selects the specific securities within the favored sectors. [Harvey]

top-down model

A projections model that is used to force lower-level geographical or industry projections to higher-level totals. [BEA]

torrens system

A method of registration of title to land with the appropriate public office, by which an official certificate at the office always shows the condition of the title and the person in whom it is vested. [OTS]

tort

A wrongful act committed against another person or against another person's property, for which the injured party is entitled to compensation. [OTS]

tortfeasor

A person who commits a tort. [OTS]

total annual revenue requirements

The total amount revenue required in 1 year to meet all expenditures incurred or obligated during that year for the financing of the construction and for the operation and maintenance (including administration) of the general sewer system, intercepting sever system, the treatment and disposal facilities and other major wastewater facilities. [EPA]

total asset turnover

The ratio of net sales to total assets. [Harvey]

total cost

The sum of all costs, direct and indirect, associated with the provision of a service. [EPA]

total debt to equity ratio

A capitalization ratio comparing current liabilities plus long-term debt to shareholders' equity. [Harvey]

total direct effect earnings multipliers

Total dollar change in earnings of households employed in all industries for each additional dollar of earnings paid directly to households employed by the industry delivering output to final demand. Represents the ratio between the total earnings requirement coefficient and the direct earnings requirement coefficient. [BEA]

total direct effect employment multipliers

The total number of jobs from all industries for each additional job in a given industry delivering output to final demand. These multipliers represents the ratio between the total employment requirement coefficient and the direct employment requirement coefficient. [BEA]

total dollar return

The dollar return on a nondollar investment, which includes the sum of any dividend/interest income, capital gains or losses, and currency gains or losses on the investment. [Harvey]

total nonfinancial debt

Includes outstanding credit market debt of federal, state, and local governments and of private nonfinancial sectors (including mortgages and other kinds of consumer credit and bank loans, corporate bonds, commercial paper, bankers acceptances, and other debt instruments). [FRB][FRBC][FRBSF]

total return

In performance measurement, the actual rate of return realized over some evaluation period. In fixed income analysis, the potential return that considers all three sources of return (coupon interest, interest on interest, and any capital gain/loss) over some i nvestment horizon. [Harvey]

total return swap

A type of credit derivative in which one counterparty receives the total return (interest payments and any capital gains or losses) from a specified reference asset and the other counterparty receives a specified fixed or floating cash flow that is not related to the creditworthiness of the reference asset. Also called total rate of return swap, or TR swap. [CFTC]

total revenue

Total sales and other revenue for the period shown. Known as 'turnover' in the UK. [Harvey]

totten trust

An informal trust in which assets deposited into an account are controlled by the person creating the trust, the GRANTOR, and held in trust for another, who is named as BENEFICIARY. When the account owner dies, the account is transferred to the beneficiary, but taxed as a part of the grantor's estate. If the account is jointly owned, the regulations covering joint accounts apply. When all the owners of the account die, the beneficiary becomes the lawful owner. [UNODC]

Totten trust account

A trust account established without a written trust agreement. The trustee deposits his or her own money into the account. The trustee retains ownership of the account, but holds it in a revocable trust for a named beneficiary. Upon the death of the trustee/depositor, the balance in the account may be claimed by the beneficiary. [OTS]

town house

A low-rise, single-family dwelling, attached to one or more similar dwellings by common walls, and having a separate entrance. [OTS]

township

A legal description of land established by the government survey system, six miles square, containing 36 sections or 36 square miles or 23,040 acres. [OTS]

trace number

A number assigned to every ACH entry by an originating institution that uniquely identifies that entry with a specific ACH file. First eight digits of the trace number are transit/routing number of ODFI and last seven digits are sequence numbers assigned by the originator. [ACH]

tracer

A request upon a transportation line to trace a shipment for the purpose of expediting its movement or establishing delivery. [ITDS]

tracking

A carriers system of recording movement intervals of shipments from origin to destination. [ITDS]

tracking error

In an indexing strategy, the difference between the performance of the benchmark and the replicating portfolio. [Harvey]

tract

An area of land designated for a specified purpose or a specified development. [OTS]

tract house

A house located in a subdivision in which style, floor plan, color, design, and price are repeated in various structures within the development. [OTS]

trade

A verbal (or electronic) transaction involving one party buying a security from another party. Once a trade is consummated, it is considered 'done' or final. Settlement occurs 1-5 business days later. [Harvey] In general, buying or selling of goods and services among companies, states, or countries, also known as commerce. The amount of goods and services imported minus the amount exported makes up a country's balance of trade. [UNODC] The consummation of the purchase or sale of a security. [OTS]

trade acceptance

Written demand that has been accepted by an industrial company to pay a given sum at a future date. [Harvey] Written demand that has been accepted by an industrial company to pay a sum at a future date. [WCSU]

trade balance

The difference between a nation's imports and exports of merchandise. [CBOT]

trade comparison

Trade comparison is the receipt, validation, and matching of data on the long (buy) and short (sell) side of a transaction and the reporting of such match. [GAO]

trade credit

Credit granted by a firm to another firm for the purchase of goods or services. [Harvey]

trade date

In an interest rate swap, the date that the counterparties commit to the swap. Also, the date on which a trade occurs. Trades generally settle (are paid for) 1-5 business days after a trade date. With stocks, settlement is generally 3 business days after the trade. [Harvey] The date a security transaction is executed. [OTS]

trade debt

Accounts payable. [Harvey]

trade deficit

A nations excess of imports over exports over a period of time. [ITDS] Refers to the amount by which merchandise imports exceed merchandise exports. [FRB][FRBC][FRBM] The amount by which merchandise imports exceed merchandise exports. [FRBSF]

trade draft

A draft addressed to a commercial enterprise. [Harvey]

trade house

A firm which deals in actual commodities. [Harvey][NYMEX]

Trade Limit Monitoring System

The system through which Clearing Members set and monitor limits on their customers' NYMEX ACCESSSM accounts, including maximum order size, maximum position size per session, session trading volume and session trading losses. [NYMEX]

trade name

The name under which an organization conducts business, or by which the business or its goods and services are identified. [ITDS]

trade on top of

Trade at a narrow or no spread in basis points relative to some other bond yield, usually Treasury bonds. [Harvey]

trade option

A commodity option transaction in which the purchaser is reasonably believed by the writer to be engaged in business involving use of that commodity or a related commodity. [CFTC]

trade promotion

Encouragement of the progress, growth, or acceptance of trade. [ITDS]

trade surplus

A nations excess of exports over imports over a period of time. [ITDS]

trade terms

The setting of responsibilities of the buyer and seller in a sale including sale price, shipping, insurance, and customs. [ITDS]

trade-off

The opportunity costs of selecting one alternative rather than another. [FACS]

trade-weighted value of the dollar

The value of the dollar pegged to or expressed relative to a market basket of selected foreign currencies. The Federal Reserve calculates a trade-weighted value of the dollar based on the weighted-average exchange value of the dollar against the currencies of 10 industrial countries. [FRB][FRBM][FRBSF]

trader

(1) A merchant involved in cash commodities; (2) a professional speculator who trades for his own account and who typically holds exchange trading privileges. [CFTC] An individual who buys and sells securities for his or her own account for short-term profit (loss). The term also refers to an employee of a broker, dealer or financial institution who buys and sells securities for the firm or its clients. [OTS] Individuals who buy and sell for their own accounts for short-term profit. Also, an employee of a broker/dealer or financial institution who specializes in handling purchases and sales of securities for the firm and/or its clients. [NYSE] Persons who take positions in securities and their derivatives with the objective of making profits. Traders can make markets by trading the flow. When they do that, their objective is to earn the bid/ask spread. Traders can also be of the sort who take proprietary positions whereby they seek to profit from the directional movement of prices or spread positions. [Harvey]

trader workstation

A NYMEX ACCESSSM workstation through which NYMEX ACCESSSM orders are placed. [NYMEX]

trading

Buying and selling securities. [Harvey] Buying and selling. [NYMEX]

trading account

A group of securities that are purchased with the express intent of selling them prior to their maturity. [OTS]

trading ahead

trading arcade

A facility, often operated by a clearing member that clears trades for locals, where e-locals who trade for their own account can gather to trade on an electronic trading facility (especially if the exchange is all-electronic and there is no pit or ring). [CFTC]

trading at settlement (TAS)

trading costs

Costs of buying and selling marketable securities and borrowing. Trading costs include commissions, slippage, and the bid/ask spread. [Harvey]

trading facility

A person or group of persons that provides a physical or electronic facility or system in which multiple participants have the ability to execute or trade agreements, contracts, or transactions by accepting bids and offers made by other participants in the facility or system. [CFTC]

trading floor

A physical trading facility where traders make bids and offers via open outcry or the specialist system. [CFTC]

trading halt

Trading of a stock, bond, option or futures contract can be halted by an exchange while news is being broadcast about the security. [Harvey]

trading limit

trading paper

CDs purchased by accounts that are likely to resell them. The term is commonly used in the Euromarket. [Harvey]

trading posts

The 17 horseshoe-shaped counters manned by clerks and specialists on the Trading Floor of the NYSE are like stores where individual stocks are bought and sold. Each trading post is responsible for over 100 stocks. The actual buying and selling takes place around each post. [NYSE] The posts on the floor of a stock exchange where the specialists stand and securities are traded. [Harvey]

trading range

The difference between the high and low prices traded during a period of time; with commodities, the high/low price limit established by the exchange for a specific commodity for any one day's trading. [Harvey]

trading trust

A trustee vehicle that carries on a trade via its trustee. Often used to circumvent accounting disclosure requirements as offshore trusts do not general file accounts. [UNODC]

trading volume

The number of contracts that change hands during a specified period of time. [NYMEX]

traditional dividend

A dividend paid to proven creditors after the FDIC has determined the net funds available for distribution. Traditional dividends are normally used to pay the final dividend due at the termination of a receivership. [FDIC]

traditional view (of dividend policy)

An argument that 'within reason,' investors prefer large dividends to smaller dividends because the dividend is sure but future capital gains are uncertain. [Harvey]

trailor

A vehicle without motor power designed to be drawn by another vehicle. [ITDS]

tramp line

A transportation line operating tramp steamers. [ITDS]

tramp steamer

A steamship which does not operate under any regular schedule from one port to another, but calls at any port where cargo may be obtained. [ITDS]

tranche

A term sometimes used when referring to the number of drawings of funds by a borrower under a term loan. [FDIC] A term usually referring to the number of drawings of funds by a borrower under a term loan. [UNODC] One of several related securities offered at the same time. Tranches from the same offering usually have different risk, reward, and/or maturity characteristics. [Harvey] one of the classes, portions or segments of a bond or mortgage-backed security, such as a Collateralized Mortgage Obligation (CMO). Each tranche normally offers different terms, usually involving the length of time it takes for principal to be repaid to investors. With this type of security, all payments of principal from the underlying mortgages are diverted initially to the first tranche. When all principal has been repaid in the first tranche, payments of principal begin to the second tranche and, after the second tranche is retired, the payments continue in turn to the rest of the tranches, like a series of steps, until investors in the last tranche have been repaid. By selecting a particular tranche, investors choose whether they want their funds repaid quickly or whether they want to lock in their investment for a longer period of time. In another meaning, tranche also refers to a portion of a bond that is distributed in another geographic area, such as a foreign country. [OTS]

trans-ship

To transfer goods from one transportation line to another, or from one ship to another of different ownership. [ITDS]

transaction

(1) any agreement between two or more parties that establishes a legal obligation. (2) the act of carrying out such an obligation. (3) all activities that effect a deposit account that are performed at the request of the account holder. (4) All events that cause some change in the assets, liabilities or net worth of a business. [OTS] The entry or liquidation of a trade. [CFTC]

transaction account

A checking account or similar account from which transfers can be made to third parties. Demand deposit accounts, negotiable order of withdrawal (NOW) accounts, automatic transfer service (ATS) accounts, and credit union share draft accounts are examples of transaction accounts at banks and other depository institutions. [FRB][FRBC][FRBM] A checking or similar account from which transfers can be made to third parties. Demand deposit accounts, negotiable order of withdrawal (NOW) accounts, automatic transfer service (ATS) accounts, and credit union share draft accounts are examples of transaction accounts at banks and other depository institutions. [FRBSF] A deposit or account from which the depositor or account holder is permitted to make transfers or withdrawals by negotiable or transferable instrument, payment order or withdrawal, telephone transfer, or other similar device for the purpose of making payments or transfers to third persons or others or from which the depositor may make third-party payments at an automated teller machine (ATM) or remote service unit, or other electronic device including by debit card. The term does not include savings deposits. [UNODC] any account from which funds may be transferred to a third party on demand of the account holder. Included are demand deposit (checking) accounts, negotiable order of withdrawal (NOW) accounts, automatic transfer (bill paying) accounts, and credit union share draft accounts, [OTS]

transaction adjusted payment (TAP)

TAP refers to the dollar difference between the amount at which securities are to be delivered and received and the amount at which securities were traded. [GAO]

transaction costs

The full costs of making an exchange. [FACS]

transaction demand (for money)

The need to accommodate a firm's expected cash transactions. [Harvey]

transaction exposure

Risk to a firm with known future cash flows in a foreign currency that arises from possible changes in the exchange rate. [Harvey]

transaction loan

A loan extended by a bank for a specific purpose. In contrast, lines of credit and revolving credit agreements involve loans that can be used for various purposes. [Harvey]

transaction value

The price actually paid or payable for merchandise. [ITDS]

transactions costs

The time, effort, and money necessary, including such things as commission fees and the cost of physically moving the asset from seller to buyer. [Harvey]

transactions motive

A desire to hold cash for the purpose of conducting cash based transactions. [Harvey]

transcript or transcript of proceedings

The assemblage of documents and certifications relating to the authorization and sale of an issue, based on a review of which bond counsel renders its approving opinion. [EPA]

transfer

This term may refer to two different operations. For one, the delivery of a stock certificate from the seller's broker to the buyer's broker and legal change of ownership, normally accomplished within a few days. For another, to record the change of ownership on the books of the corporation by the transfer agent. When the purchaser's name is recorded, dividends, notices of meetings, proxies, financial reports and all pertinent literature sent by the issuer to its securities holders are mailed direct to the new owner. [NYSE]

transfer agent

A company that issues, registers, and redeems securities on behalf of the security issuer. [OTS] A transfer agent keeps a record of the name of each registered shareowner, his or her address, the number of shares owned, and sees that certificates presented for transfer are properly cancelled and new certificates issued in the name of the new owner. [NYSE] Individual or institution appointed by a company to look after the transfer of securities. [Harvey][WCSU]

transfer and stamp taxes

The taxes paid to a local or state government in connection with the execution or recording of mortgages or other financial instruments. [OTS]

transfer notice

A term used on some exchanges to describe a notice of delivery. [CFTC]

transfer of technology

The movement of modern or scientific methods of production or distribution from one enterprise to another. [ITDS]

transfer price

The price at which one unit of a firm sells goods or services to another unit of the same firm. [Harvey]

transfer trades

Entries made upon the books of futures commission merchants for the purpose of: (1) transferring existing trades from one account to another within the same firm where no change in ownership is involved; (2) transferring existing trades from the books of one FCM to the books of another FCM where no change in ownership is involved. Also called Ex-Pit transactions. [CFTC]

transfer trades and exchange for physicals

transferable letter of credit

A credit under which the beneficiary has the right to give instructions to the bank called upon to affect payment or acceptance, or to any bank entitled to affect negotiation, to make the credit available in whole or in part to one or more third parties (second beneficiaries). The credit may be transferred only upon the express authority of the issuing bank and provided that it is expressly designated as transferable. It may be transferred in whole or in part. [FDIC]

transferable option

transferable put right

An option issued by the firm to its shareholders to sell the firm one share of its common stock at a fixed price (the strike price) within a stated period (the time to maturity). The put right is 'transferable' because it can be traded in the capital markets. [Harvey]

transit number

transit routing number

A nine digit number (eight digits and a check digit) that identifies a specific financial institution. These numbers are assigned by the Thomson Financial Publishing and are listed in its annual publication Key to Routing and Transit Numbers. [ACH]

transit zone

A port of entry in a coastal country that is established as a storage and distribution center for the convenience or a neighboring country lacking adequate port facilities or access to the sea. [ITDS]

transition phase

A phase of development in which the company's earnings begin to mature and decelerate to the rate of growth of the economy as a whole. [Harvey]

translation exposure

Risk of adverse effects on a firm's financial statements that may arise from changes in exchange rates. [Harvey]

translation risk

An accounting or financial reporting risk. It is the risk that the consolidated earnings of a company will be negatively impacted due to the method of accounting for foreign operations. [TMAC]

transmission company

Company that transports gas for resale on its own behalf or transports gas for others. Also known as a pipeline company. [NYMEX]

transmittal letter

A list of the particulars of a shipment and a record of the documents being transmitted together with instructions for disposition of documents. [ITDS]

transnational

A term used to describe any transactions which may encounter laws of more than one country. [UNODC]

transparency

The extent to which laws, regulations, agreements, and practices affecting international trade are open, clear, measurable, and verifiable. [ITDS]

transport documents

All types of documents evidencing acceptance, receipt and shipment of goods. [ITDS]

transport layer security (TLS)

A cryptographic protocol (and its predecessor Secure Sockets Lsyer) designed to provide communication security over the Internet. They use X.509 certificates and hence asymmetric cryptography to authenticate the counterparty with whom they are communicating, and to exchange a symmetric key. This session key is then used to encrypt data flowing between the parties. This allows for data/message confidentiality, and message authentication codes for message integrity and as a by-product, message authentication. Several versions of the protocols are in widespread use in applications such as web browsing, electronic mail, Internet faxing, instant messaging, and voice-over-IP (VoIP). An important property in this context is forward secrecy, so the short-term session key cannot be derived from the long-term asymmetric secret key. [Wikipedia]

transportation

traveler

A person who stays for a period of less than one year in a country of which he or she is not a resident. [ITDS]

traveler's letter of credit

A letter of credit addressed to the issuing bank's correspondents, authorizing them to negotiate drafts drawn by the beneficiary named in the credit upon proper identification. The customer is furnished with a list of the bank's correspondents. Payments are endorsed on the reverse side of the letter of credit by the correspondent banks when they negotiate the drafts. This type of letter of credit is usually prepaid by the customer. [FDIC]

travelers checks

A form of check especially designed for travelers, including persons on vacation and business trips. [ITDS] A type of check designed especially for business or vacation travelers. The traveler pays for the checks in advance. Thus the check is an order from the issuing company to pay on demand. Traveler's checks are issued in various fixed denominations, may be cashed almost anywhere in the world, and are insured against loss, theft, or destruction. [OTS]

treasurer

Principle financial manager. [WCSU] The corporate officer responsible for designing and implementing many of the firm's financing and investing activities. [Harvey]

treasurer's check

A check issued by a bank to make a payment. Treasurer's checks outstanding are counted as part of a bank's reservable depostits and as part of the money supply. [Harvey]

treasuries

treasury bills (T-bills)

A short-term U.S. government debt instrument with an original maturity of one year or less. Bills are sold at a discount from par with the interest earned being the difference between the face value received at maturity and the price paid. [MIDAM] A short-term debt obligation issued by the U. S. Treasury at a discount under competitive bidding, with a maturity of up to one year. The bills are issued payable to the bearer only, and are sold at a minimum face value of $10,000. [OTS] A short-term obligation of the U.S. Treasury issued with a term of one year or less (13, 16, or 52 week maturity). Treasury bills are sold at a discount from face value (par) and do not pay interest before maturity. The difference between the purchase price of the bill and the amount that is paid at maturity (par), or when the bill is sold prior to maturity, is the interest earned on the bill. [FRB][FRBC] Debt obligations of the U.S. Treasury that have maturities of one year or less. Maturities for T-bills are usually 91 days, 182 days, or 52 weeks. [Harvey] Short-term U.S. Treasury security issued in minimum denominations of $10,000 and usually having original maturities of 3, 6, or 12 months. Investors purchase bills at prices lower than the face value of the bills; the return to the investors is the difference between the price paid for the bills and the amount received when the bills are sold or when they mature. Treasury bills are the type of security used most frequently in open market operations. [FRB][FRBM] Short-term discount debt maturing in less than 1 year, issued regularly by the government. [WCSU] Short-term securities with a maturity period of 13 weeks, 26 weeks, or 52 weeks. [FRBSF]

treasury bonds

A federal government debt obligation, ordinarily payable to the bearer, that is issued at par, with maturities of more than five years, and with interest payable semiannually. [OTS] A long-term direct obligation of the U.S. Treasury with a term of 30 years. [FRB][FRBC] Government-debt security with a coupon and original maturity of more than 10 years. Interest is paid semiannually. [MIDAM] Long-term U.S. Treasury security usually having initial maturities of more than 10 years and issued in denominations of $1,000 or more, depending on the specific issue. Bonds pay interest semiannually, with principal payable at maturity. [FRB][FRBM] Long-term securities with a maturity period of 30 years. [FRBSF] debt obligations of the U.S. Treasury that have maturities of 10 years or more. [Harvey]

treasury certificate

A U. S. Treasury security usually issued at par with a specified rate of interest and a maturity of one year or less. It is issued payable to the bearer and sold in minimum amounts of $l,OO0. [OTS]

Treasury Direct

Service provided to the U.S. Department of the Treasury whereby Federal Reserve Banks hold book-entry Treasury securities purchased by individuals. [FRBSF]

treasury notes

A debt obligation of the U. S. Treasury, usually issued payable to the bearer with a fixed maturity of not less than one year nor more than seven years. It is issued at par, with a specific interest return payable semiannually. [OTS] A medium-term direct obligation of the U.S. Treasury with a term of between 2 and 10 years. [FRB][FRBC] Debt obligations of the U.S. Treasury that have maturities of more than 2 years but less than 10 years. [Harvey] Government-debt security with a coupon and original maturity of one to 10 years. [MIDAM] Intermediate-term coupon-bearing U.S. Treasury security having initial maturities from 1 to 10 years and issued in denominations of $1,000 or more, depending on the maturity of the issue. Notes pay interest semiannually, and the principal is payable at maturity. [FRB][FRBM] Medium-term securities with a maturity period of two years, three years, five years, or ten years. [FRBSF] Same as Treasury bonds except that Treasury notes are medium-term (more than one year but not more than ten years). [CFTC]

treasury securities

A Treasury security is a negotiable debt obligation of the U.S. government, backed by its full faith and credit, and issued with various maturities. [GAO] Debt obligations of the U.S. government. Treasuries are among the safest investments, since they are secured by the full faith and credit of the government. The interest of Treasuries is exempt from state and local taxes but is subject to federal income tax. There are three types of treasuries: Treasury Bills, with maturities of one year or less; Treasury Notes, with maturities ranging from one to 10 years; and Treasury Bonds, long-term instruments with maturities of 10 years or more. [NYSE] Interest-bearing obligations of the U.S. government issued by the Treasury as a means of borrowing money to meet government expenditures not covered by tax revenues. Marketable Treasury securities fall into three categories - bills, notes, and bonds. Marketable Treasury obligations are currently issued in book-entry form only; that is, the purchaser receives a statement, rather than an engraved certificate. [FRB][FRBM] Interest-bearing obligations of the U.S. government issued by the Treasury as a means of borrowing money to meet government expenditures not covered by tax revenues. Marketable Treasury securities fall into three categories - bills, notes, and bonds. The Federal Reserve System holds more than $125 billion of these obligations, acquired through open market operations. Marketable Treasury obligations are currently issued in book-entry form only; that is, the purchaser receives a statement, rather than an engraved certificate.. [FRB][FRBC] Securities issued by the U.S. Department of the Treasury. [Harvey] interest-bearing debt obligations of the U. S. government that are issued by the Treasury as a means of borrowing money to meet government expenditures not covered by tax revenues. Marketable Treasury securities include bills, notes, and bonds. [OTS]

treasury stock

Common stock that has been repurchased by the company and held in the company's treasury. [Harvey][WCSU] Stock issued by a company but later reacquired. It may be held in the company's treasury indefinitely, reissued to the public, or retired. Treasury stock receives no dividend and has no vote while held by the company. [NYSE] shares of stock previously issued by a corporation that have been reacquired by that corporation by purchase, gift, donation, inheritance or other means. [OTS]

treaty shopping

Where a national or resident of a third country seeks to obtain the benefit of a double tax agreement between two other countries by interposing a company or other entity in one or the other of them. [UNODC]

trend

The general direction of price movement. [NYMEX] The general direction of the market. [Harvey] The general direction, either upward or downward, in which prices have been moving. [CFTC]

trendline

In charting, a line drawn across the bottom or top of a price chart indicating the direction or trend of price movement. If up, the trendline is called bullish; if down, it is called bearish. [CFTC]

Treynor Index

A measure of the excess return per unit of risk, where excess return is defined as the difference between the portfolio's return and the risk-free rate of return over the same evaluation period and where the unit of risk is the portfolio's beta. [Harvey]

tri-party agreement

tri-temp

A container that can maintain three exact temperature zones in difference compartments simultaneously. [ITDS]

triangular arbitrage

Striking offsetting deals among three markets simultaneously to obtain an arbitrage profit. [Harvey]

triangular trade

Trade between three countries, in which an attempt is made to create a favorable balance for each. [ITDS]

triple witching hour

The four times a year that the S&P futures contract expires at the same time as the S&P 100 index option contract and option contracts on individual stocks. [Harvey] The last trading hour on the third Friday of March, June, September and December when options and futures on stock indexes expire concurrently. [NYSE]

triplex

A low-rise building comprised of three dwelling units, each with a separate entrance and yard, but sharing some common walls. [OTS]

tropical products

Agricultural goods of export interest to developing countries in the tropical zones of Africa, Latin America, and East Asia (coffee, tea, spices, bananas, and tropical hardwoods). [ITDS]

troubled debt restructuring

A change in the makeup of an obligation in which the creditor, because of the debtor's financial difficulties, grants a concession to the debtor for the sake of transforming a nonperforming loan to a performing loan. The nature and extent of the concession depends on many factors, including the delinquency status, the value of the collateral, and the financial condition of the borrower. [FDIC]

trough

A point in the business cycle corresponding to the end of the slowdown and the beginning of expansion. [FACS] The transition point between economic recession and recovery. [Harvey]

troy ounce

A unit weight, equal to about 1.1 avoirdupois ounce. The troy ounce is the traditional unit weight for precious metals, believed to be named after a weight used as the annual fair at Troyes in France in the Middle Ages. 1 ounce troy = 480 grains = 31.04 grams, 1,000 grams = 1 kilogram = 32.15 ounces troy, 1,000 kilograms = 1 metric ton = 32,150 ounces troy [NYMEX]

true interest cost

For a security such as commercial paper that is sold on a discount basis, the coupon rate required to provide an identical return assuming a coupon-bearing instrument of like maturity that pays interest in arrears. [Harvey]

true lease

A contract that qualifies as a valid lease agreement under the Internal Revenue code. [Harvey]

truncation

The arrangement under which a financial institution does not return canceled checks or drafts to the account holder. Instead, the checks or drafts are microfilmed and the microfilm becomes the record if the customer requests a copy of the check or draft. [OTS]

trust (perpetuity) period

The period during which a trust can remain in effect before its assets are disposed of. The general rule is that property must be capable of transference of ownership and that the owner of property must not be able to tie up the disposal of property indefinitely. The rule against perpetuities was therefore devised to prevent this, and it operates to render void any future interest that will not vest within the stipulated period. The period can be a specific number of years as set out in the appropriate jurisdiction's legislation or alternatively, a period not exceeding a life in being (not necessarily connected with the trust) plus 21 years. [UNODC]

trust

A legal entity created to manage property for the benefit of a specific person or persons. A trust is funded when the owner (the grantor) transfers ownership of property to another (the trustee) for the immediate or eventual benefit of a third person, (the beneficiary). The person who creates a trust is called a grantor, settlor or trustor. The person designated to receive assets at the end of the trust term is called a remainderman. [OTS] A relationship in which a person called a trustee holds title to property for the benefit of another person called the beneficiary. The agreement that establishes the trust, contains its provisions, and sets forth the powers of the trustee is called the trust indenture. The person creating the trust is called the settlor or grantor. The property itself is called the corpus, trust fund or trust estate, which is distinguished from any income earned by it. If the trust is created while the settlor is living, it is called a living trust or inter vivos trust. A trust created by a will is called a testamentary trust. The trustee is charged with investing trust property productively and unless specifically limited, can sell, mortgage, or lease the property as he or she deems warranted. [UNODC]

trust account

(1) a savings account, established under a trust agreement, containing funds administered by a trustee for the benefit of another person or persons. (2) an escrow account. [OTS]

trust agreement

A written agreement between settlor and trustee setting forth the terms of the trust. [UNODC] A written agreement under which a grantor transfers legal ownership of property to another person or organization charged with administering the property for the benefit of a third person or persons. [OTS]

trust deed

Agreement between trustee and borrower setting out terms of bond. [Harvey][WCSU]

trust fund

An amount of capital which a person (the trustor) places in custody of a trustee to be administered for the benefit of another (the beneficiary). [OTS]

trust indenture

trust receipt

A declaration by a client to a bank that ownership in goods released by the bank are retained by the bank, and that the client has received the goods in trust only. [ITDS] Receipt for goods that are to be held in trust for another. [WCSU] Receipt for goods that are to be held in trust for the lender. [Harvey] Used extensively in letter of credit financing, this is a document or receipt in which the buyer promises to hold the property received in the name of the bank releasing it, although the bank retains title to the goods. The merchant is called the trustee, the bank the entruster. Trust receipts are used primarily to allow an importer to take possession of the goods for resale before paying the issuing bank. [FDIC]

trustee

(1) a person to whom the title of property has been conveyed for the immediate or eventual benefit of another. (2) the legal title holder and controller of funds in a trust account established under a trust agreement for the benefit of another. [OTS] Person(s) eligible for appointment as trustee under an indenture may not have conflicting interests. There must at all times be one or more trustees, at least one of whom must be a corporation authorized to exercise corporate trust powers and subject to supervision or examination by governmental authority. The institutional or corporate trustee must have a combined capital and surplus of not less than $150,000. Annual reports are required of the indenture trustee and may be required of the obligor. (The Trust Indenture Act of 1939). [EPA] The individual(s) or corporations(s) to which legal ownership of assets is transferred under the terms of the trust deed. It is the duty of the trustees to administer the trust in accordance with the terms of the trust deed and the general law. [UNODC]

trustor

An individual who establishes a trust by giving property to a trustee for the benefit of another. Also called a settlor. [OTS]

Truth in Lending Act of 1968 (TLA)

TLA is implemented through Federal Reserve Regulation Z, which requires uniform methods for computing the cost of consumer credit and disclosing credit terms, prohibits the unsolicited issuance of credit cards, and limits cardholder liability for unauthorized use. [GAO]

Truth-In-Lending

The popular name for the Consumer Credit Protection Act (Regulation Z), which requires lenders to disclose to borrowers the cost of financing during the life of the loan. [OTS]

TT&L account

Treasury tax and loan account at a bank. [Harvey]

turnaround

Securities bought and sold for settlement on the same day. Also, when a firm that has been performing poorly changes its financial course and improves its performance. [Harvey]

turnaround time

Time available or needed to effect a turnaround. [Harvey]

turnkey

A method of construction whereby the contractor assumes total responsibility from design through completion of the product. [ITDS]

turnkey construction contract

A type of construction contract under which the construction firm is obligated to complete a project according to prespecified criteria for a price that is fixed at the time the contract is signed. [Harvey]

turnkey contract

An agreement under which a contractor agrees to complete a product so that it is ready for use when delivered to the other contracting party. [ITDS]

turnkey project

A project in which a builder/developer contracts to construct a completed facility that includes all items necessary for use and occupancy. All that is required of the buyer to begin using the facility is to turn a key in the new door lock and enter. [OTS]

turnover

Mutual Funds: A measure of trading activity during the previous year, expressed as a percentage of the average total assets of the fund. A turnover ratio of 25% means that the value of trades represented one-fourth of the assets of the fund. Finance: The number of times a given asset, such as inventory, is replaced during the accounting period, usually a year. Corporate: The ratio of annual sales to net worth, representing the extent to which a company can growth without outside capital. Markets: The volume of shares traded as a percent of total shares listed during a specified period, usually a day or a year. Great Britain: total revenue. [Harvey]

turnover rate

The volume of shares traded in a year as a percentage of total shares listed on an Exchange, outstanding for an individual issue or held in an institutional portfolio. [NYSE]

Twelve L (12L)

Refers to the Federal Reserve Bank of San Francisco, which is the Twelfth District in the Federal Reserve System. 'L' is the official letter for the Twelfth District seal, being the twelfth letter of the alphabet. [FRBSF]

twisting

The unethical practice of convincing a customer to trade unnecessarily, thereby generating a commission. [UNODC]

two-factor model

Black's zero-beta version of the capital asset pricing model. [Harvey]

two-fund separation theorem

The theoretical result that all investors will hold a combination of the risk-free asset and the market portfolio. [Harvey]

two-sided market

A market in which both bid and asked prices, good for the standard unit of trading, are quoted. [Harvey]

two-state option pricing model

An option pricing model in which the underlying asset can take on only two possible (discrete) values in the next time period for each value it can take on in the preceding time period. Also called the binomial option pricing model. [Harvey]

two-tier market

An exchange rate regime which normally insulates a country from the balance of payments effects of capital flows while it maintains a stable exchange rate for current account transactions. [ITDS]

two-tier tax system

A method of taxation in which the income going to shareholders is taxed twice. [Harvey]

tying arrangement

A condition that a seller imposes on a buyer, requiring that if the buyer desires to purchase one product (tying product), the buyer must also agree to purchase another product (tied product), which the buyer may or may not want. The laws of some countries prohibit certain tying arrangements. [ITDS]

type

The classification of an option contract as either a put or a call. [Harvey]

type of option

Either puts or calls. [NYMEX]

U.S. direct investment abroad

Ownership or control, directly or indirectly, by one U.S. person of 10 percent or more of the voting securities of an incorporated foreign business enterprise or an equivalent interest in an unincorporated foreign business enterprise. [BEA]

U.S. Treasury bill

U.S. government debt with a maturity of less than a year. [Harvey]

U.S. Treasury bond

U.S. government debt with a maturity of more than 10 years. [Harvey]

U.S. Treasury note

U.S. government debt with a maturity of one to 10 years. [Harvey]

U.S. Treasury securities

Direct obligations of the U.S. Government, issued by the U.S. Treasury's Bureau of Public Debt as a means of financing the Federal Government. There are three types of securities issued: treasury bills (T-bills), Treasury bonds, Treasury notes [FRBSF]

ultimate consignee

The person who is the true party in interest, receiving goods for the designated end use. [ITDS]

ultimo day

The last business day or last stock trading day of a month. [ITDS]

ultra vires activities

The activities of a corporation that are not authorized by its charter. [UNODC]

unable

All orders not filled by the end of a trading day are deemed 'unable' and void, unless they are designated GTC (Good Until Canceled) or open. [CFTC]

unbiased predictor

A theory that spot prices at some future date will be equal to today's forward rates. [Harvey]

unbundling

When a multinational firm unbundles its transfer of funds into separate flows for specific purposes. [Harvey]

uncertain responses

In stabilization policy, the situation when the reactions of individuals and businesses to a ppolicy is notwhat policymakers predicted (e.g., a decrease in income tax rates that does not increase consumer spending). [FRBSF]

unclaimed deposit

A deposit account in a failed FDIC insured institution that remains unclaimed after the appointment of a receiver. [FDIC]

Unclaimed Deposits Amendment Act (UDAA)

Legislation enacted on June 28, 1993, to amend the claims procedures for the depositors of a failed institution. Under UDAA, the FDIC is required, among other things, to make insurance payments available for 18 months after the appointment of a receiver, after which all remaining unclaimed funds would be offered to the appropriate state. [FDIC]

uncollected funds

funds that have been deposited in an account by means of a check drawn on another institution that has not yet paid the check. [OTS]

unconfirmed

A documentary letter of credit where the advising bank makes no commitment to pay, accept, or negotiate. [ITDS]

unconscionable

Unfair or oppressive. [ITDS]

uncovered call

A short call option position in which the writer does not own shares of underlying stock represented by his option contracts. Also called a 'naked' call, it is much riskier for the writer than a covered call, where the writer owns the underlying stock. If the buyer of a call exercises the option to call, the writer would be forced to buy the stock at market price. [Harvey]

uncovered option

uncovered put

A short put option position in which the writer does not have a corresponding short stock position or has not deposited, in a cash account, cash or cash equivalents equal to the exercise value of the put. Also called 'naked' puts, the writer has pledged to buy the stock at a certain price if the buyer of the options chooses to exercise it. The nature of uncovered options means the writer's risk is unlimited. [Harvey]

underdeveloped country

A nation in which per capita re income is proportionately low when contrasted with the per capita real income of nations where industry flourishes. [ITDS]

underfunded pension plan

A pension plan that has a negative surplus (i.e., liabilities exceed assets). [Harvey]

underinvestment problem

The mirror image of the asset substitution problem, wherein stockholders refuse to invest in low-risk assets to avoid shifting wealth from themselves to the debtholders. [Harvey]

underlying

The 'something' that the parties agree to exchange in a derivative contract. [Harvey] The security that one has the right to buy or sell according to the terms of an option contract. [NYSE] The stock, commodity, futures contract or cash index against which the futures or options contract is valued. [NYMEX]

underlying asset

The asset that an option gives the option holder the right to buy or to sell. [Harvey]

underlying commodity

The cash commodity underlying a futures contract. Also, the commodity or futures contract on which a commodity option is based, and which must be accepted or delivered if the option is exercised. [CFTC]

underlying futures contract

The specific futures contract that is bought or sold by exercising an option. [CBOT][MIDAM]

underlying security

Options: the security subject to being purchased or sold upon exercise of an option contract. For example, IBM stock is the underlying security to IBM options. [Harvey]

underperform

When a security is expected to appreciate at a slower rate than the overall market. [Harvey]

underpricing

Issue of securities below their market value. [Harvey][WCSU]

underwater loan

A loan that, if sold, would be worth less than its current book value. Loans 'sink' underwater because: (1) payments are delinquent, or (2) the loan's interest rate is below current market rates for similar loans of similar maturity, or (3) the collateral of a delinquent loan has decreased in value below the amount of outstanding principal. [OTS]

underwrite

(1) to sign one's name at the end of a document, thus signifying agreement or concurrence with the contents of the document. (2) to assume risk and liability for specified events in return for a fee. An insurance company, by signing a policy, becomes the policy's underwriter, thereby assuming the risk of being liable for losses if events specified in the policy occur. (3) in mortgage lending, the act of assessing the risk of a loan and matching it to an appropriate rate of interest and term. (4) to guarantee the sale of a new issue of securities, usually by a securities dealer or a syndicate of dealers. [OTS] To guarantee, as to guarantee the issuer of securities a specified price by entering into a purchase and sale agreement. To bring securities to market. [Harvey]

underwriter

A broker-dealer or a dealer-bank that (a) for a fee undertakes to market on behalf of an issuer a new issue, or (b) purchases, at competitive bidding or negotiated sale, a new issue from an issuer for resale. [EPA] A party that guarantees the proceeds to the firm from a security sale, thereby in effect taking ownership of the securities. Or, stated differently, a firm, usually an investment bank, that buys an issue of securities from a company and resells it to investors. [Harvey] Firm which buys an issue of securities from a company and resells it to investors. [WCSU]

underwriters' counsel

In many transactions the underwriters are represented by their own counsel. Underwriters, counsel deals with matters relating to the offering of a security, the offering circular, the agreement among underwriters and other matters. [EPA]

underwriting

Acting as the underwriter in a purchase and sale. [Harvey] The purchase from the issuer and the marketing of new-issue securities by an underwriter. [EPA]

underwriting agreement

(A) Another tem for the Bond Purchase Agreement. See 'Bond Purchase Agreement'. (B) The agreement between the underwriters and the primary obligor of a securities issue. [EPA]

underwriting fee

The portion of the gross underwriting spread that compensates the securities firms that underwrite a public offering for their underwriting risk. [Harvey]

underwriting income

For an insurance company, the difference between the premiums earned and the costs of settling claims. [Harvey]

underwriting spread

The difference between the offering price to the public by the underwriter, and the purchase price the underwriter pays to the issuer. The underwriter's expenses, selling costs and profit are usually covered by this amount. [EPA]

underwriting syndicate

A group of investment banks that work together to sell new security offerings to investors. The underwriting syndicate is led by the lead underwriter. [Harvey]

underwritten offering

A purchase and sale. [Harvey]

undistributed profits

The portion of corporate profits that remains after taxes and dividends have been paid. [BEA]

undivided interest

A complete or partial ownership of all parts of a whole. For example, an undivided interest in a pool of mortgages means the ownership or rights to a certain percent of each and every mortgage in the pool. [OTS]

unearned income

(1) income that has been collected in advance of the performance of a contract. (2) income that is derived from investments, such as dividends, property rentals, and other sources not involving the individual's direct personal efforts. [OTS]

unearned interest

interest on a loan that has already been collected but has not yet been earned because the principal has not been in the hands of the borrower long enough. [OTS]

unemployment rate

The percentage of the labor force that is unemployed and actively seeking a job. [FRBSF] The ratio of the number of people classified as unemployed to the total labor force. [Harvey]

unencumbered property

property that is fee and clear of debts or liens. [OTS]

unfair trade practice

Unusual government support to firms such as export subsidies to certain anticompetitive practices by firms themselves such as dumping, boycotts or discriminatory shipping arrangements that result in competitive advantages for the benefiting firms in international trade. [ITDS]

unfunded debt

Debt maturing within one year (short-term debt). [Harvey] Debt maturing within one year. [WCSU]

Uniform Commercial Code (UCC)

A set of business-related laws dealing with the sale of goods, their transportation and delivery, financing, storage, payments, and various other commercial transactions. These model laws have been adopted, with minor modifications, by most states to provide some consistency among states' commercial laws. They were drafted by the National Conference of Commissioners on Uniform State Laws. [OTS] A set of statutes purporting to provide some consistency among states commercial laws. [ITDS] The Uniform Commercial Code (UCC) is a set of model laws governing commercial and financial transactions. [GAO]

Uniform Commercial Code Article 4A (UCC 4A)

Uniform Commercial Code (UCC) is a comprehensive body of state law governing commercial transactions. Article 4A covers certain funds transfers, including ACH credit transactions not subject to the Electronic Funds Transfer Act. [ACH]

Uniform Gift to Minors Act

A law in most states that sets forth provisions for giving a minor an intangible gift, such as a savings account, stocks or bonds. The giver (usually a parent) serves as custodian with direct control over the gift. For example, the custodian can sell the gift for the benefit of the child, as long as proceeds are reinvested and the minor receives all gains and income from the gift. Once established, the giver/custodian may not take back the gift. Income from the gift, such as interest from a savings account, is reported and taxed under the name of the minor, at the minor's usually low tax rates. [OTS]

uniform settlement statement

A form that lists all charges imposed on the borrower and the seller in connection with a home mortgage loan settlement. The Real Estate Settlement Procedures Act requires that the lender make the statement available to the buyer and seller at the time of settlement. [OTS]

Uniform Standards of Professional Appraisal Practice (USPAP)

rules used in appraising the value of property. The standards are promulgated by the Appraisal Standards Board of the Appraisal Foundation. [OTS]

Uniform Thrift Performance Report (UTPR)

OTS' national financial monitoring report used by OTS examiners and analysts to monitor and analyze the activities, condition and performance of individual thrift institutions. The UTPR is also used to focus examiner efforts for on-site examinations of thrifts. First developed in 1992, the detailed UTPR tracks a savings association's financial information over a three-year period. OTS computers produce a UTPR for each savings institution, using data submitted by savings associations in their quarterly Thrift Financial Reports. A UTPR report compares a thrift institution to other peer group associations using percentile ranks and medians, and identifies trends. [OTS]

unilateral transfers

Items in the current account of the balance of payments of a country's accounting books that corresponds to gifts from foreigners or pension payments to foreign residents who once worked in the country whose balance of payments is being considered. [Harvey]

unimproved land

land in its natural state with no man-made changes in its appearance. [OTS]

uninsured deposit

The portion of any deposit of a customer at an insured depository institution that exceeds the applicable FDIC insurance coverage for that depositor at that institution. [FDIC]

unique risk

Also called unsystematic risk or idiosyncratic risk. Specific company risk that can be eliminated through diversification. [Harvey] Risk that can be eliminated by diversification. [WCSU]

unissued stock

Shares of a corporation's stock that are authorized in its charter but not issued. [UNODC]

unit benefit formula

Method used to determine a participant's benefits in a defined benefit plan by multiplying years of service by the percentage of salary. [Harvey]

unit cost

A term used in cost accounting to denote the cost of producing a unit of product or rendering a unit of service; for example, the cost of treating and purifying 1,000 gallons of sewage. [EPA]

unit investment trust

A type of investment company with a fixed unmanaged portfolio, typically invested in bonds or other debt securities in which the interests are redeemable. [SEC] Money invested in a portfolio whose composition is fixed for the life of the fund. Shares in a unit trust are called redeemable trust certificates, and they are sold at a premium above net asset value. [Harvey]

unit load

The strapping or banding together of a number of individual cargo containers in order to create a single unit. [ITDS]

unit load device

Term commonly used when referring to containers and pallets. [ITDS]

unit trusts

Are a form of collective investment vehicles. The beneficial rights to the trust assets are divided into a number of units and these units are offered for sale to the public. The unit trust vehicle can either be a trust or corporate entity. [UNODC]

United Nations

Established on June 26, 1945 to maintain international peace and security and to promote cooperation involving economic, social, cultural and humanitarian problems. [UNODC]

United Nations Convention Against Illicit Traffic in Narcotic drugs and Psychotropic Substances

also known as the 1988 Vienna Convention. This treaty, which entered into force in 1990, established the blueprint for a coordinated international effort to control illicit drugs. [UNODC]

United Nations Electronic Data Interchange for Administration, Commerce and Transport (Un/Edifact)

A nationally accepted Electronic Data Interchange standard. [ITDS]

United States code (USC)

A set of volumes containing the official compilation of U.S. law. are also local offices of the U.S. Government Printing Office in major U.S. cities. [ITDS]

United States League of Savings Institutions

A former national organization representing the thrift industry. It was founded in 1892 in Chicago. The U.S. League merged on June 1, 1992 with the National Council of Community Bankers to form the Savings & Community Bankers of America. Its name was changed to America's Community Bankers on January 29, 1995. [OTS]

United States price

In the context of dumping investigations, this term refers to the price at which goods are sold in the U.S. compared to their foreign market value. The comparisons are used in the process of determining whether imported merchandise is sold at less than fair value. [ITDS]

unitization

The practice or technique of consolidating many small pieces of freight into a single unit for easier handling. [ITDS]

universal life

A whole life insurance product whose investment component pays a competitive interest rate rather than the below-market crediting rate. [Harvey]

unleveraged beta

The beta of an unleveraged required return (i.e. no debt) on an investment when the investment is financed entirely by equity. [Harvey]

unleveraged required return

The required return on an investment when the investment is financed entirely by equity (i.e. no debt). [Harvey]

unlimited liability

Full liability for the debt and other obligations of a legal entity. The general partners of a partnership have unlimited liability. [Harvey]

unlimited tax bonds

A bond secured by a pledge of taxes that may be levied at an unlimited rate or amount. [EPA]

unlisted security

A security that is not listed on any stock exchange, and thus is traded over-the-counter. [OTS]

unlisted stock

A security not listed on a stock exchange. [NYSE]

unloading

The physical removal of cargo from carriers container. [ITDS]

unmatched

A forward purchase is unmatched when a forward sale for the same date has not been executed, or vice versa. [FDIC]

unmatched book

If the average maturity of a bank's liabilities is less than that of its assets, it is said to be running an unmatched book. The term is commonly used with the Euromarket. Term also refers to the condition when a firm enters into OTC derivatives contracts and chooses to hedge that risk by not making trades in the opposite direction to another financial intermediary. In this case, the firm with an unmatched book hedges its net market risk with futures and options, usually. [Harvey]

unrealized profits

paper profits that do not become actual profits until the asset producing the profit is sold or redeemed. [OTS]

unrealized profits and losses

Profits and losses resulting from the mark-to-market process. [TMAC]

unseasoned issue

Issue of a security for which there is no existing market. [Harvey] Issue of security for which there is no existing market. [WCSU]

unsecured credit

credit extended on the borrower's promise to repay the debt, and for which collateral is not required. [OTS]

unsecured debt

An obligation, generally a loan, not backed by a pledge of assets. [OTS] Debt that does not identify specific assets that can be taken over by the debtholder in case of default. [Harvey]

unsterilized intervention

Foreign exchange market intervention in which the monetary authorities have not insulated their domestic money supplies from the foreign exchange transactions. [Harvey]

unsystematic risk

Also called the diversifiable risk or residual risk. The risk that is unique to a company such as a strike, the outcome of unfavorable litigation, or a natural catastrophe that can be eliminated through diversification. [Harvey]

upstairs market

A network of trading desks for the major brokerage firms and institutional investors that communicate with each other by means of electronic display systems and telephones to facilitate block trades and program trades. [Harvey]

Upstairs Traders Advisory Committee (UTAC)

Advises on policies and procedures designed to enhance the efficiency of NYSE markets from the perspective of member organizationss' upstairs traders. It also guides the staff on ways to improve communication between the trading floor and upstairs trading desks. Its members are senior officers who daily transact large orders for individuals and institutions. [NYSE]

uptick

A term used to describe a transaction that took place at a higher price than the preceding transaction involving the same security. [Harvey] A term used to designate a transaction made at a price higher than the preceding transaction. Also called a 'plus tick.' A 'zero plus' tick is a term used for a transaction at the same price as the preceding trade but higher than the preceding different price. Conversely, a down tick, or 'minus' tick is a term used to designate a transaction made at a price lower than the preceding trade. A plus sign, or minus sign, is displayed throughout the day next to the last price of each stock at the trading post on the floor of the New York Stock Exchange. [NYSE]

urban area

according to the U. S. Bureau of the Census, any community with a population of 2,500 or more, whether incorporated or not. [OTS]

urban renewal

The redevelopment or rehabilitation of real property in a city, usually as the result of a cooperative effort by private developers and local government. [OTS]

Uruguay round

The eighth round of multilateral trade negotiations concerning the General Agreement on Tariffs and Trade (GATT). The Uruguay Round (so named because meetings began in Punta del Este, Uruguay in 1987) concluded in December, 1993 after seven years of talks with 117 member nations. [ITDS]

usance

The period of time between presentation of a draft and its maturity. [FDIC]

user charge

A charge for service provided, usually varying with the amount of service provided. A charge against user for the collection and treatment, for example, of wastewater and for the provision of the facilities thereof. Charges for use may be related to wastewater consumption, size of water meter or connection, wastewater flow, strength of wastewater, number and type of plumbing fixtures, or other means of determination. [EPA]

users fee

Assessments collected by the U.S. Customs Service as part of the entry process to help defray various costs involved in the importation of goods to the United States. [ITDS]

usuance

The time allowed for payment of an international obligation. [ITDS]

usury

interest charges that are higher than allowed by law. [OTS]

utility

The measure of the welfare or satisfaction of an investor or person. [Harvey]

utility function

A mathematical expression that assigns a value to all possible choices. In portfolio theory the utility function expresses the preferences of economic entities with respect to perceived risk and expected return. [Harvey]

utility value

The welfare a given investor assigns to an investment with a particular return and risk. [Harvey]

vacancy factor

A measurement of gross rental income loss due to vacancy and non-collection of rent. The rate is expressed as a percentage, and is calculated by dividing lost rental income (from vacancy and non-collection) into total potential gross rental income (including income from other rental units and the lost income). [OTS]

vacancy rate

The percentage of housing units that are unoccupied. [OTS]

validated export license

A document issued by the U.S. Government authorizing the export of commodities for which written export authorization is required. [ITDS]

validation

proof, confirmation, or evidence to confirm or legally support a claim or contract. [OTS]

validity

The time period for which a letter of credit is valid. [ITDS]

valuation

An estimated value or worth of something. [OTS] The appraisal of the worth of imported goods by customs officials for the purpose of determining the amount of duty payable in the importing country. [ITDS]

valuation allowance (or valuation reserve)

funds in an account established to cover probable loan losses. If a savings association believes a loan is uncollectible, it sets aside in the reserve account a portion of earnings equal to the difference between unpaid principal and the market value of the loan. If the loan is charged off as worthless, the institution writes down the loan portfolio and the reserve account by equal amounts. [OTS]

valuation charges

Transportation charges assessed shippers who declare a value of goods higher than the value of the carriers limits of liability. [ITDS]

value

The monetary worth of property, goods or services. [OTS]

value added

That part of the value of produced goods developed in a company. It is determined by subtracting from sales the costs of materials and supplies, energy costs, contract work, and so on, and it includes labor expenses, administrative and sales costs, and other operating profits. [ITDS]

value added networks

Value added networks refer to a third-party service provider that manages data communications networks for businesses that exchange electronic data with other businesses. [GAO]

value additivity

Rule that the value of the whole must equal the sum of value of the parts. [WCSU]

value additivity principal

Prevails when the value of a whole group of assets exactly equals the sum of the values of the individual assets that make up the group of assets. Stated differently, the principle that the net present value of a set of independent projects is just the sum of the net present values of the individual projects. [Harvey]

value at risk

This calculation focuses on the probability of loss from a position, typically calculated using a 95 or 99% confidence interval over a holding period of one to ten days. [TMAC]

value date

In the market for Eurodollar deposits and foreign exchange, value date refers to the delivery date of funds traded. Normally it is on spot transactions two days after a transaction is agreed upon and the future date in the case of a forward foreign exchange trade. [Harvey] The date on which foreign exchange bought and sold must be delivered and on which the price for them in local currency must be paid. [FDIC]

value dating

Refers to when value or credit is given for funds transferred between banks. [Harvey]

value manager

A manager who seeks to buy stocks that are at a discount to their 'fair value' and sell them at or in excess of that value. Often a value stock is one with a low price to book value ratio. [Harvey]

value of a basis point

Methodology which calculates the change in present value of a financial instrument or portfolio of instruments due to a one basis point change in interest rates. [TMAC]

value-added tax

An indirect tax on consumption that is assessed on the increased value of goods at each discrete point in the chain of production and distribution, from the raw material stage to final consumption. The tax on processors or merchants is levied on the amount by which they increase the value of items they purchase and resell. [ITDS] Method of indirect taxation whereby a tax is levied at each stage of production on the value added at that specific stage. [Harvey]

value-at-risk model

Procedure for estimating the probability of portfolio losses exceeding some specified proportion based on a statistical analysis of historical market price trends, correlations, and volatilities. [Harvey]

vanilla issue

A security issue that has no unusual features. [Harvey]

variable

A value determined within the context of a model. Also called endogenous variable. [Harvey]

variable annuities

Annuity contracts in which the issuer pays a periodic amount linked to the investment performance of an underlying portfolio. [Harvey]

variable annuity

A life insurance annuity contract whose value fluctuates with that of the underlying investment. [UNODC] A life insurance policy where the annuity premium (a set amount of dollars) is immediately turned into units of a portfolio of stocks. Upon retirement, the policyholder is paid accordingly to accumulated units, the dollar value of which varies according to the performance of the stock portfolio. Its objective is to enhance, through stock investment, the purchasing value of the annuity which otherwise is subject to erosion through inflation. [NYSE]

variable costs

A cost that is directly proportional to the volume of output produced. When production is zero, the variable cost is equal to zero. [Harvey] Costs of a production process that increase or decrease along with changes in level of production, as opposed to fixed costs. [FACS]

variable interest rates

(A) Interest rates which vary according to a formula expressed in the securities. Variable interest rates most commonly are tied to the prime rate of a particular lending institution, the consumer price-index, federal funds rates or other money market measurements. (B) Bonds on which the interest rate adjusts periodically based on some predetermined formula. [EPA]

variable life insurance policy

A whole life insurance policy that provides a death benefit dependent on the insured's portfolio market value at the time of death. Typically the company invests premiums in common stocks, and hence variable life policies are referred to as equity-linked policies. [Harvey]

variable limit

According to the Chicago Board of Trade rules, an expanded allowable price range set during volatile markets. [CBOT][MIDAM]

variable price limit

A price limit schedule, determined by an exchange, that permits variations above or below the normally allowable price movement for any one trading day. [CFTC]

variable price security

A security, such as stocks or bonds, that sells at a fluctuating, market-determined price. [Harvey]

variable rate

A variable rate agreement, as distinguished from a fixed rate agreement, calls for an interest rate that may fluctuate over the life of the loan. The rate is often tied to an index that reflects changes in market rates of interest. A fluctuation in the rate causes changes in either the payments or the length of the loan term. Limits are often placed on the degree to which the interest rate or the payments can vary. [FRB][FRBC][FRBM]

variable rate CDs

Short-term certificate of deposits that pay interest periodically on roll dates. On each roll date, the coupon on the CD is adjusted to reflect current market rates. [Harvey]

variable rate certificate

A certificate savings account on which the interest rate varies during the term of the deposit according to a predetermined schedule, formula, or index. [OTS]

variable rate loan

Loan made at an interest rate that fluctuates based on a base interest rate such as the Prime Rate or LIBOR. [Harvey]

variable rate mortgage

variable rated demand bond

Floating rate bond that can be sold back periodically to the issuer. [Harvey]

variance

A measure of dispersion of a set of data points around their mean value. The mathematical expectation of the squared deviations from the mean. The square root of the variance is the standard deviation. [Harvey] Mean squared deviation from the expected value-a measure of variability. [WCSU] permission from an appropriate governing agency to not conform to specific construction codes, zoning regulations, or other prescribed restrictions concerning property use. [OTS]

variance minimization approach to tracking

An approach to bond indexing that uses historical data to estimate the variance of the tracking error. [Harvey]

variance rule

Specifies the permitted minimum or maximum quantity of securities that can be delivered to satisfy a TBA trade. For Ginnie Mae, Fannie Mae, and Feddie Mac pass-through securities, the accepted variance is plus or minus 2.499999 percent per million of the par value of the TBA quantity. [Harvey]

variation margin

An additional required deposit to bring an investor's equity account up to the initial margin level when the balance falls below the maintenance margin requirement. [Harvey] During periods of great market volatility or in the case of high-risk accounts, additional margin deposited by a clearing member firm to an exchange clearinghouse. [MIDAM] During periods of great market volatility or in the case of high-risk accounts, additional margin deposited by a clearing member firm to an exchange. [CBOT] Payment made on a daily or intraday basis by a Clearing Member to the Clearinghouse to cover losses created by adverse price movement in positions carried by the Clearing Member, calculated separately for customer and proprietary positions. [NYMEX] Payment made on a daily or intraday basis by a clearing member to the clearing organization based on adverse price movement in positions carried by the clearing member, calculated separately for customer and proprietary positions. [CFTC] The daily gains or losses on a futures contract that are credited to the investors margin account. [WCSU]

vault

A secure room or rooms in a financial institution where cash on hand is stored and safe deposit boxes are located. [OTS]

vault cash

Cash kept on hand in a depository institution's vault to meet day-to-day business needs, such as cashing checks for customers; can be counted as a portion of the institution's required reserves. [FRB][FRBM][FRBSF]

vault receipt

A document indicating ownership of a commodity stored in a bank or other depository and frequently used as a delivery instrument in precious metal futures contracts. [CFTC]

vega

Coefficient measuring the sensitivity of an option value to a change in volatility. [CFTC] The sensitivity of the option price to a change in volatility. [NYMEX][TMAC]

velocity

(1) the rate at which money flows from one transaction to another. The number of times money changes hands in a given time period. (2) the rate at which total money in circulation is spent on goods and services in a given time period (usually measured as the ratio of GNP to the money stock). Greater velocity thus means that a given amount of money is used for a higher dollar volume of transactions. [OTS] The rate at which money balances turn over in a period for expenditures on goods and services (often measured as the ratio of GNP to the money stock). A larger velocity means that a given quantity of money is associated with a greater dollar volume of transactions. [FRB][FRBC][FRBM][FRBSF]

vend

to sell, or offer to sell, something. [OTS]

vendee

A buyer of property, goods or services. [OTS]

vendor

A company or individual that supplies goods or services. [ITDS] A seller of property, goods, or services. [OTS]

vendor's lien

The right of a seller who has not yet been paid to take back possession of sold property until its purchase price has been received from the buyer. [OTS]

venture capital

An investment in a start-up business that is perceived to have excellent growth prospects but does not have access to capital markets. Type of financing sought by early-stage companies seeking to grow rapidly. [Harvey] Capital to finance a new firm. [WCSU]

venue

The place where a suit or charge is brought to court, generally the place or jurisdiction where the alleged wrong was committed. [OTS]

verification

Verification is the ability to positively identify and authenticate a particular encrypted communication. [GAO]

versus cash

vertical acquisition

Acquisition in which the acquired firm and the acquiring firm are at different steps in the production process. [Harvey]

vertical analysis

The process of dividing each expense item in the income statement of a given year by net sales to identify expense items that rise faster or slower than a change in sales. [Harvey]

vertical merger

A merger in which one firm acquires another firm that is in the same industry but at another stage in the production cycle. For example, the firm being acquired serves as a supplier to the firm doing the acquiring. [Harvey] Merger between a supplier and its customer. [WCSU]

vertical spread

Any of several types of option spread involving the simultaneous purchase and sale of options of the same class and expiration date but different strike prices, including bull vertical spreads, bear vertical spreads, back spreads, and front spreads. [CFTC] Buying and selling puts or calls of the same expiration month but different strike prices. [CBOT][MIDAM] Simultaneous purchase and sale of two options that differ only in their exercise price. [Harvey] The simultaneous purchase and sale of two options that differ only in their exercise price. [WCSU]

vessel ton

A unit of measurement n the shipping industry assuming that 100 cubic feet of cargo equals one ton. [ITDS]

vest

(1) to confer the right of immediate or future possession and use of property. (2) a designation of ownership or possession of property. For example: a title is said to vest in John Doakes. (3) a designation of the endowment of rights, power or authority. For example: the authority to regulate the thrift industry is vested by Congress in the Office of Thrift Supervision. [OTS]

vested interest

A fixed interest in tangible or intangible property, although the right of possession, use and enjoyment may be postponed until some future date or until the happening of some specified event. [OTS]

vesting

Employee's entitlement to all or part of a pension if he or she leaves before retirement. [WCSU]

Veterans Administration (VA)

A federal government agency that, among other things, aids veterans of the U. S. armed forces in obtaining housing. VA loans offer a guarantee to the lending institution as to repayment of the loans and result in veteran home buyers being able to obtain mortgage loans with a lower down payment. [OTS]

virtual currency option

A new option contract introduced by the PHLX in 1994 that is settled in US$ rather than in the underlying currency. These options are also called 3-Ds (dollar denominated delivery). [Harvey]

VISA

visa

A license issued by the government of an exporting country for the export to a specific importing country of a certain quantity of a quota controlled commodity subject to a voluntary export restriction or a voluntary restraint agreement. [ITDS]

visa waiver

A program of selected countries to eliminate their visa requirement on a test basis. [ITDS]

viscosity

A method of measuring a given liquid's resistance to flow, usually decreasing with increasing temperatures. Material with higher viscosity is more resistant to flow. [NYMEX]

visible supply

New muni bond issues scheduled to come to market within the next 30 days. [Harvey] Usually refers to supplies of a commodity in licensed warehouses. Often includes floats and all other supplies 'in sight' in producing areas. [CFTC]

volatility

A measure of risk based on the standard deviation of investment fund performance over 3 years. Scale is 1-9; higher rating indicates higher risk. Also, the standard deviation of changes in the logarithm of an asset price, expressed as a yearly rate. Also, volatility is a variable that appears in option pricing formulas. In the option pricing formula, it denotes the volatility of the underlying asset return from now to the expiration of the option. [Harvey] A measurement of the change in price over a given time period. It is often expressed as a percentage and computed as the annualized standard deviation of the percentage change in daily price. [CBOT][MIDAM] A statistical measurement (the annualized standard deviation of returns) of the rate of price change of a futures contract, security, or other instrument underlying an option. [CFTC] The market's price range and movement within that range. The direction of the price move, whether up or down, is not relevant. Historic volatility indicates how much prices have changed in the past and is derived by using daily settlement prices for futures. Implied volatility measures how much the market thinks prices will change in the future, and is obtained from daily settlement prices for options. [NYMEX] The measure of the relative deviation of a price from the mean. [ITDS] The rate of change in the price of the underlying commodity. [TMAC]

volatility quote trading

Refers to the quoting of bids and offers on option contracts in terms of their implied volatility rather than as prices. [CFTC]

volatility risk

The risk in the value of options portfolios due to the unpredictable changes in the volatility of the underlying asset. [Harvey]

volatility spread

A delta-neutral option spread designed to speculate on changes in the volatility of the market rather than the direction of the market. [CFTC]

volatility trading

Strategies designed to speculate on changes in the volatility of the market rather than the direction of the market. [CFTC]

volume

The number of contracts traded during a specified period of time. It is most commonly quoted as the number of contracts traded, but for some physical commodities may be quoted or as the total of physical units, such as bales, or bushels, pounds or dozens or barrels. [CFTC] The number of purchases or sales of a commodity futures contract made during a specific period of time, often the total transactions for one trading day. [CBOT][MIDAM] The number of shares or contracts traded in a security or an entire market during a given time period. Volume is usually considered on a daily basis and a daily average is computed for longer periods. [NYSE] This is the daily number of shares of a security that change hands between a buyer and a seller. [Harvey]

volume rate

A rate applicable in connection with a specified volume of freight. [ITDS]

voluntary association account

A savings account held by a nonincorporated group, such as a club, baseball team, church, civic group or charity; otherwise generally similar to a corporation account. [OTS]

voluntary conveyance

voluntary export restraint

Identical to an import quota except that the foreign market agrees voluntarily to limit exports from its county to a market. [FACS]

vostro account

A demand account maintained for a bank by a correspondent bank in a foreign country. The nostro account of one bank is the vostro account of the other bank. [UNODC] Used by a bank to describe a demand account maintained with it by a bank in a foreign country. The nostro account of the other bank. [FDIC]

voting rights

The right to vote on matters that are put to a vote of security holders. For example the right to vote for directors. [Harvey]

voting stock

stock that gives the holder the right to vote in the election of the corporation's directors, in the appointment of auditors and in other matters brought up at the annual stockholders' meeting. Most common stock is voting stock. Most preferred stock in nonvoting stock. [OTS]

voucher

(1) a written statement that bears witness or substantiates a transaction; for example providing evidence that services have been rendered, goods purchased, or some other expenditure has been made. (2) a printed form authorizing a disbursement. [OTS]

voucher check

A check to which is attached a form (voucher) describing the purpose of the check, and/or explaining various items on which the check is based. The voucher is detached before the check is cashed. [OTS]

voucher payment plan

A system of advancing funds from lender to borrower in a construction loan. The borrower/contractor must complete a ledger form requesting each loan payout when particular, prespecified stages of construction are reached. [OTS]

w-type bottom

A double bottom where the price or indicator chart has the appearance of a W. [Harvey]

wage

compensation paid to employees. [OTS]

wage assignment

A clause in a loan contract that allows the lender to obtain the borrower's wages in the case of a default without notice or a hearing. This credit practice was prohibited by federal regulation in 1985. [OTS]

wage garnishment

A process granted by a court order by which a lender obtains, directly from an employer, part of the salary of an employee who is behind in payments to the lender. [OTS]

waiting period

Time during which the SEC studies a firm's registration statement. During this time the firm may distribute a preliminary prospectus. [Harvey]

waiver

The voluntary relinquishment of a right to one's own property or to a claim against another's property, or to any other legally enforceable right. [OTS]

waiver of exemption

A loan contract clause that contains a waiver or limitation of the borrower's right to exempt his or her personal or real property from attachment, execution or other legal process in the event of a default. This credit practice was prohibited by federal regulation in 1985. [OTS]

Wall Street

Generic term for firms that buy, sell, and underwrite securities. [Harvey]

wallflower

Stock that has fallen out of favor with investors; tends to have a low P/E (price to earnings ratio). [Harvey]

wanted for cash

A statement displayed on market tickers indicating that a bidder will pay cash for same day settlement of a block of a specified security. [Harvey]

war clause

A marine insurance provision excluding the liability of an insurer if a loss is caused by war or hostile action. Bills of Lading and charter parties may contain a 'War Clause' giving the vessel options to maintain its safety in case of hostilities. [ITDS]

war risk

The risk to a vessel, its cargo and passengers by aggressive actions of a hostile nation or group. [ITDS]

war risk insurance

Insurance covering loss or damage caused by war or other hostile actions, usually a separate policy from a marine insurance policy, or a special attachment to it. [ITDS]

warehouse loan

warehouse receipt

A document certifying possession of a commodity in a licensed warehouse that is recognized for delivery purposes by an exchange. [CFTC] An document listing the goods or commodities deposited in a warehouse. It is a receipt for the commodities listed, and for which the warehouse is the bailee. Warehouse receipts may be either non-negotiable or negotiable. [ITDS] An instrument which lists, and is a receipt for goods or commodities deposited in the warehouse which issues the receipt. Such receipts may be negotiable or non-negotiable warehouse receipt is made to the 'bearer' and a non- negotiable warehouse receipt specifies precisely to whom the goods shall be delivered. There are several alternatives for releasing goods held under warehouse receipts: The delivery of goods may be allowed only against cash payment or substitution of similar collateral. Some or all of the goods may be released against trust receipt without payment. A warehouseman may release a stipulated quantity of goods without a specific delivery order. Banks will accept a warehouse receipt is a bonded warehouseman. The bank must have protected assurances for the genuineness of the receipt and the fact that the commodities pledged are fully available as listed on the warehouse receipt. [FDIC] Document guaranteeing the existence and availability of a given quantity and quality of a commodity in storage; commonly used as the instrument of transfer of ownership in both cash and futures transactions. [CBOT][MIDAM] Evidence that a firm owns goods stored in a warehouse. [Harvey][WCSU]

warehousing

The ability of an originating institution to receive 1 file from a customer/company ahead of the effective date and hold it for release to the ACH on the effective date or for a receiving financial institution to receive entries ahead of the effective date and hold them without posting until the effective date has been reached. [ACH] The borrowing of funds by a retail lender on a short-term basis using permanent mortgage loans as collateral. This form of interim financing, called a warehouse loan, is used to raise funds to make home mortgages and carry them until the mortgages are packaged and sold 'out of the warehouse' to an investor. Proceeds from the sale are used to reduce the warehouse loan. [OTS] The interim holding period from the time of the closing of a loan to its subsequent marketing to capital market investors. [Harvey]

warrant

(1) a certificate giving the holder the right to purchase securities at a stated price within a specified time period. (2) a written order, signed by a magistrate in the name of the government directing an officer to make an arrest. [OTS] A certificate giving the holder the right to purchase securities at a stipulated price within a specified time limit or perpetually. Sometimes a warrant is offered with securities as an inducement to buy. [NYSE] A security entitling the holder to buy a proportionate amount of stock at some specified future date at a specified price, usually one higher than current market. This 'warrant' is then traded as a security, the price of which reflects the value of the underlying stock. Warrants are issued by corporations and often used as a 'sweetener' bundled with another class of security to enhance the marketability of the latter. Warrants are like call options, but with much longer time spans -- sometimes years. In addition, warrants are offered by corporations whereas exchange traded call options are not issued by firms. [Harvey] An issuer-based product that gives the buyer the right, but not the obligation, to buy (in the case of a call) or to sell (in the case of a put) a stock or a commodity at a set price during a specified period. [CFTC] An option to purchase or sell an underlying instrument at a given price and time or series of prices and times. It is ordinarily issued for longer than a year. [TMAC] Long-term call option issued by a company. [WCSU]

warrant or warehouse receipt for metals

Certificate of physical deposit, which gives title to physical metal in an exchange-approved warehouse. [CFTC]

warranty

A promise by a contracting party that the other party can rely on certain facts or representations as being true. [ITDS] A statement, either written, expressed or implied, providing assurance that some specified provision in a contract, such as a sale, is true. [OTS]

warranty deed

A deed in which the seller warrants that the title to the real estate to be sold is good and salable. [OTS]

Warsaw convention

An international multilateral treaty which regulates, in a uniform manner, the conditions of international transportation by air. [ITDS]

wash

Gains equal losses. [Harvey]

wash sale

wash trading

Entering into, or purporting to enter into, transactions to give the appearance that purchases and sales have been made, without incurring market risk or changing the trader's market position. The Commodity Exchange Act prohibits wash trading. Also called Round Trip Trading, Wash Sales. [CFTC]

waste

When the relative value of a good is different from that goods marginal cost of production, waste occurs. Goods or resources are wasted when they are allocated to uses which are not the most valuable. [FACS]

wastewater system

A collective term used to denote all of the property involved in the operation of a wastewater treatment utility. It includes land, sewer lines and appurtenances, pumping stations, treatment plants, and general property. [EPA]

wasting asset

An asset which has a limited life and thus, decreases in value (depreciates) over time. Also applied to consumed assets, such as gas, and termed 'depletion.' [Harvey]

watch list

A list of securities selected for special surveillance by a brokerage, exchange or regulatory organization; firms on the list are often takeover targets, companies planning to issue new securities or stocks showing unusual activity. [Harvey]

water supply system

A collective term to denote all of the property involved in the operation of a water supply utility. It includes land, the source of water supply, treatment facilities, water lines, meters, and general property. [EPA]

water table

The point beneath the surface of the ground at which natural ground water is found. It is one of the factors considered by mortgage lenders. [OTS]

way

A street, alley or other thoroughfare or easement permanently established as a passage for people and/or vehicles. [OTS]

waybill

A document prepared by a transportation line at the point of a shipment, showing the point or origin, destination, route, consignor, consignee, description of shipment and amount charged for the transportation service, and forwarded with the shipment, or by direct mail, to the agent at the transfer point or waybill destination. [ITDS]

weak form efficiency

A form of pricing efficiency where the price of the security reflects the past price and trading history of the security. In such a market, security prices follow a random walk. [Harvey]

weak hands

When used in connection with delivery of commodities on futures contracts, the term usually means that the party probably does not intend to retain ownership of the commodity; when used in connection with futures positions, the term usually means positions held by small speculators. [CFTC]

weak-form efficient market

Market in which security prices instantaneously reflect the information in the past history of security prices. In such a market securities follow a random walk. [WCSU]

wealth

The value of one's total possessions and property rights. [OTS] The value of the existing stock of goods; those goods may be tangible or intangible. [FACS]

weather derivative

A derivative whose payoff is based on a specified weather event, for example, the average temperature in Chicago in January. Such a derivative can be used to hedge risks related to the demand for heating fuel or electricity. [CFTC]

Webb-Pomerene Act Of 1918

Federal legislation exempting exporters associations from the antitrust regulations. [ITDS]

Webb-Pomerene Association

Associations engaged in exporting that combine the products of similar producers for overseas sales. These associations have partial exemption from U.S. anti-trust laws but may not engage in import, domestic or third country trade, or combine to export services. [ITDS]

weekend effect

The common recurrent low or negative average return from Friday to Monday in the stock market. [Harvey]

weight break

Levels at which the freight rate per 100 pounds decreases because of substantial increases in the weight of the shipment. [ITDS]

weighted average coupon

The weighted average of the gross interest rate of the mortgages underlying the pool as of the pool issue date, with the balance of each mortgage used as the weighting factor. [Harvey]

weighted average maturity

The WAM of a MBS is the weighted average of the remaining terms to maturity of the mortgages underlying the collateral pool at the date of issue, using as the weighting factor the balance of each of the mortgages as of the issue date. [Harvey]

weighted average portfolio yield

The weighted average of the yield of all the bonds in a portfolio. [Harvey]

weighted average remaining maturity

The average remaining term of the mortgages underlying a MBS. [Harvey]

weighted-average cost of capital

Expected return on a portfolio of all the firm's securities. Used as a hurdle rate for capital investment. [Harvey][WCSU]

well diversified portfolio

A portfolio spread out over many securities in such a way that the weight in any security is small. The risk of a well-diversified portfolio closely approximates the systemic risk of the overall market, the unsystematic risk of each security having been diversified out of the portfolio. [Harvey]

West Texas Intermediate

A grade of crude oil deliverable against the New York Mercantile Exchange light sweet crude oil contract. Nominally, the benchmark crude of the U.S. oil industry. [NYMEX]

wet barrel

A physical barrel of crude oil or refined product as opposed to a 'paper barrel.' [NYMEX]

wet gas

Natural gas containing condensable hydrocarbons. [NYMEX]

wharfage

A charge assessed by a pier or dock owner for handling incoming or outgoing cargo. [ITDS]

when issued

Ashort form of 'when, as and if issued.' The term indicates a conditional transaction in a security authorized for issuance but not as yet actually issued. All 'when issued' transactions are on an 'if' basis, to be settled if and when the actual security is issued and the exchange or National Association of Securities Dealers rules the transactions are to be settled. [NYSE] short for 'when, as, and if issued.' The term indicates a conditional sale of a security; the security has been authorized but not yet issued and paid for. All when-issued transactions are on a conditional basis until the security is delivered to the buyer and payment is delivered to the issuer. Federal Home Loan Bank System bonds are sold on a when-issued basis. [OTS]

white elephant

slang for property or a business that is so costly to maintain or operate that it is impossible to make a profit. [OTS]

white knight

A friendly potential acquirer of a firm sought out by a target firm that is threatened by a less welcome suitor. [Harvey] A friendly potential acquirer sought out by a target company threatened by a less welcome suitor. [WCSU]

whole bank P&A

A type of purchase and assumption transaction in which the FDIC or the RTC as receiver sells to an insured institution all or substantially all of the assets of a closed bank or thrift in consideration for the assumption of all deposits and sometimes other liabilities. Prospective bidders are invited to analyze a failing institution's assets and submit bids to purchase essentially all of the assets 'as is' on a discounted basis and to assume the outstanding deposits. [FDIC]

whole life insurance

A contract with both insurance and investment components: (1) It pays off a stated amount upon the death of the insured, and (2) it accumulates a cash value that the policyholder can redeem or borrow against. [Harvey]

whole loan

A mortgage loan sold in its entirety. When a whole loan is sold by the original lender to an investor, all of the contractual rights and responsibilities of the original lender pass to the investor. [OTS]

wholesale credit

A credit transaction originated or received by a non-consumer, i.e., a credit transaction to a 'business account'. [ACH]

wholesale mortgage banking

The purchasing of loans originated by others, with the servicing rights released to the buyer. [Harvey]

wholesale price index

A measure of changes in the prices of goods at the wholesale level, particularly those goods sold between businesses. [FACS]

wi

When issued. [Harvey]

wi wi

Treasury bills trade on a wi basis between the day they are auctioned and the day settlement is made. Bills traded before they are auctioned are said to be traded wi wi. [Harvey]

wild card option

Refers to a provision of any physical delivery Treasury bond or Treasury note futures contract that permits shorts to wait until as late as 8:00 p.m. Chicago time on any notice day to announce their intention to deliver at invoice prices that are fixed at 2:00 p.m., the close of futures trading, on that day. [CFTC] The right of the seller of a Treasury Bond futures contract to give notice of intent to deliver at or before 8:00 p.m. Chicago time after the closing of the exchange (3:15 p.m. Chicago time) when the futures settlement price has been fixed. [Harvey]

will

A legally enforceable document declaring the writer's wishes regarding the distribution of his or her assets after his or her death. [UNODC] A written document signed by an individual that sets forth how the person desires his or her property to be distributed upon the person's death. [OTS]

windfall profit

An unexpected profit arising from causes not controlled by the recipient. [OTS]

window

A predetermined period in time in which an exchange of information and funds can take place. [ACH]

window contract

A guaranteed investment contract purchased with deposits over some future designated time period (the 'window'), usually between 3 and 12 months. All deposits made are guaranteed the same credit rating. [Harvey]

winners's curse

Problem faced by uninformed bidders. For example, in an initial public offering uninformed participants are likely to receive larger allotments of issues that informed participants know are overpriced. [Harvey]

winter wheat

Wheat that is planted in the fall, lies dormant during the winter, and is harvested beginning about May of the next year. [CFTC]

wire

Often the words 'wire' and 'cable' are used interchangeably. In some cases, 'wire' denotes messages sent within the confines of the United States and 'cable' refers to the messages transmitted overseas. Others use 'wire' to mean a transfer of funds by telephone rather than by cable, telex, or telegram. [UNODC]

wire house

A firm operating a private wire to its own branch offices or to other firms, commission houses or brokerage houses. [Harvey]

wire transfer

An order to pay or to credit money transmitted electronically rather than by paper check. [OTS] Electronic transfer of funds; usually involves large dollar payments. [FRB][FRBM][FRBSF]

wireless data system (WDS)

New technology for transmitting orders, reports, and administrative messages between brokers and clerks. Also used by CRR as path to ITPN. National Market System [NYSE]

with dividend

Purchase of shares in which the buyer is entitled to the forthcoming dividend. [Harvey] Term describing a purchase of shares by which the buyer is entitled to the forthcoming dividend. [WCSU]

with full recourse

A term used in the secondary mortgage loan market. It refers to a written clause in a sales agreement by which a lender sells mortgages to an investor. It means the seller/lender will fully reimburse the buyer/investor for any losses resulting from the purchased loans. This may be accomplished by the seller taking back any loans that become delinquent. [OTS]

with partial recourse

A secondary mortgage market term referring to a clause in the sales contract by which lenders sell their mortgage loans to investors. It means the seller/lender is obligated to reimburse the buyer/investor for an agreed-on portion of any losses resulting from default or other problems in the purchased loans. [OTS]

with rights

Purchase of shares in which the buyer is entitled to buy shares in the company's rights issue. [WCSU] Purchase of shares in which the buyer is entitled to the rights to buy shares in the company's rights issue. [Harvey]

withdrawal

A removal of funds from a savings or checking account by the account's owner. [OTS]

withdrawal form

A source document filled out by a customer to authorize a withdrawal from the customer's savings or checking account. The form is kept by the savings institution for its records. [OTS]

withdrawal penalty

A charge imposed upon an account holder for the early removal of funds from a certificate account; usually an amount equal to interest earned during a prespecified period. [OTS]

withdrawal plan

The ability to establish automatic periodic mutual fund redemptions and have proceeds mailed directly to the investor. [Harvey]

withdrawal ratio

withdrawals expressed as a percentage of gross savings during a given period of time. [OTS]

withdrawal value

The amount credited to the savings account of a thrift institution depositor, less deductions as shown on the records of the savings institution. [OTS]

withholding tax

A tax levied by a country of source on income paid, usually on dividends remitted to the home country of the firm operating in a foreign country. Tax levied on dividends paid abroad. [Harvey] Tax is levied on dividends paid abroad. [WCSU]

without

If 70 were bid in the market and there was no offer, the quote would be '70 bid without.' The expression 'without' indicates a one-way market. [Harvey]

without recourse

A term used in the secondary mortgage market. It is a clause in a sales contract by which a lender sells mortgage loans to an investor. It means the seller/lender is under no obligation to reimburse the buyer/investor for any losses resulting from the purchased loans. [OTS] Without the lender having any right to seek payment or seize assets in the event of nonpayment from anyone other than the party (such as a special-purpose entity) specified in the debt contract. [Harvey]

without reserve

A term indicating that a shippers agent or representative is empowered to make definitive decisions and adjustments abroad without approval of the group or individual represented. [ITDS]

woody

Sexual slang for a market moving strongly upward, as in, 'This market has a woody.' [Harvey]

working capital

Current assets and current liabilities. The term is commonly used as synonymous with net working capital. [WCSU] Defined as the difference in current assets and current liabilities (excluding short-term debt). Current assets may or may not include cash and cash equivalents, depending on the company. [Harvey] Funds invested in a company's cash, accounts receivable, inventory and other current assets (gross working capital). It usually refers to net working capital: current assets minus current liabilities. Working capital finances the cash conversion cycle of a business - the length of time required to convert raw materials into finished goods, finished goods into sales, and accounts receivable into cash. [UNODC] The assets a company has that can be poured into the company's operations. [NYSE] The excess of current assets over current liabilities, representing the liquid assets immediately available to fund the continued operation of the business. [FDIC] liquid assets available for conducting the daily affairs of a business. [OTS]

working capital management

The management of current assets and current liabilities to maximize short-term liquidity. [Harvey]

working capital ratio

Working capital expressed as a percentage of sales. [Harvey]

working control

Theoretically, ownership of 51 percent of a company's voting stock is necessary to exercise control. In practice --- and this is particularly true in the case of a large corporation --- effective control sometimes can be exerted through ownership, individually or by a group acting in concert, of less than 50 percent. [NYSE]

working poor

Workers earning inadequate income as judged by government-established standards of poverty. [FACS]

workout

Informal arrangement between a borrower and creditors. [Harvey]

workout agreement

A plan approved by borrower and lender by which a delinquent borrower can reschedule loan payments so that the entire outstanding principal is eventually repaid. [OTS]

workout period

Realignment period of a temporary misaligned yield relationship that sometimes occurs in fixed income markets. [Harvey]

World Bank

A multilateral development finance agency created by the 1944 Bretton Woods, New Hampshire negotiations. It makes loans to developing countries for social overhead capital projects, which are guaranteed by the recipient country. [Harvey] The International Bank for Reconstruction and Development (IBRD), commonly referred to as the World Bank, is an intergovernmental financial institution located in Washington, DC. Its objectives are to help raise productivity and incomes and reduce poverty in developing countries. [ITDS]

World Bank group

An integrated group of international institutions that provides financial and technical assistance to developing countries. [ITDS]

world investible wealth

The part of world wealth that is traded and is therefore accessible to investors. [Harvey]

world trade clubs

Local or regional based organizations in the United States and around the world of importers, exporters, customs brokers, freight forwarders, attorneys, bankers, manufacturers and shippers. [ITDS]

worth

Inherent value of a commodity, service, or other economic factor. Worth is often measured in non-price terms, as in comparable worth programs designed to pay equivalent wages for work or equivalent worth, even though the market prices of the services ordinarily would differ. [UNODC] The total value of something. [OTS]

wraparound

A financing device that permits an existing loan to be refinanced and new money to be advanced at an interest rate between the rate charged on the old loan and the current market interest rate. The creditor combines or 'wraps' the remainder of the old loan with the new loan at the intermediate rate. [FRB][FRBC][FRBM][FRBSF]

wraparound mortgage

A financing device that permits an existing loan to be refinanced and new, additional money to be advanced at an interest rate between the rate charged on the old loan and the current market interest rate. The creditor combines or 'wraps' the remainder of the old loan with the new loan at the intermediate rate. The borrower makes one payment, to the new lender, who in turn makes the monthly payments to the original lender. The amount of the wraparound mortgage is the total of the outstanding principal of the first mortgage (which remains in effect) and the additional outstanding funds advanced by the wraparound lender. [OTS]

writ

A written order, under the seal of government authority, issued by a court and directing an officer of the court to perform some act, or enjoining a party to do or refrain from doing some act. [OTS]

write-down

Decreasing the book value of an asset if its book value is overstated compared to current market values. [Harvey]

write-off

The accounting procedure used when an asset has been determined to be uncollectible and is therefore charged off as a loss. On the books, the amount is removed from the asset portion of a balance sheet and recorded as an expense item on the income statement. [OTS]

writer

A person who assumes the obligation to sell (call) or buy (put) the underlying security at an option's exercise [NYSE] An options seller is called a writer of options, a 'covered' writer if owning the underlying asset and a 'naked' writer if not. The writer of an option is obligated to sell, in the case of a call option, or buy, in the case of a put option, a specified amount of the underlying asset at a predetermined price when the buyer or holder exercises the option. The writer earns a premium paid by the buyer. [GAO] The issuer, grantor, or seller of an option contract. [CFTC] The seller of an option, usually an individual, bank, or company, that issues the option and consequently has the obligation to sell the asset ( if a call) or to buy the asset (if a put) on which the option is written if the option buyer exercises the option. [Harvey] The seller of an option. Also known as the grantor of the option. [NYMEX]

xchange risk factor

Xmas Club Account

Yankee bond

A dollar bond issued in the United States by a non-U.S. borrower. [WCSU] A dollar-denominated foreign bond issued in the U.S. market. [UNODC] Foreign bonds denominated in US$ issued in the United States by foreign banks and corporations. These bonds are usually registered with the SEC. For example, bonds issued by originators with roots in Japan are called Samurai bonds. [Harvey]

Yankee CD

A CD issued in the domestic market, typically New York, by a branch of a foreign bank. [Harvey]

Yankee market

The foreign market in the United States. [Harvey]

yard

(1) the open, unoccupied ground area on a lot, between the exterior walls of a building and the property line. Yards may be to the front, rear or side of the building. (2) slang for a $100 bill. [OTS] Slang for one billion dollars. Used particularly in currency trading, e.g. for Japanese yen since on billion yen only equals approximately US$10 million. It is clearer to say, ' I'm a buyer of a yard of yen,' than to say, 'I'm a buyer of a billion yen,' which could be misheard as, 'I'm a buyer of a million yen.' [Harvey]

yield

(1) the return on an investment, expressed as a percentage of the price originally paid for it. If the investment, such as a security, is to be sold, its yield is its return expressed as a percentage of its current market price. (2) income derived from an investment in property. (3) to give up possession; to pay. [OTS] 1) A measure of the annual return on an investment expressed as a percentage. 2) The proportion of heavy or light products which can be derived from a given barrel of crude oil. [NYMEX] A measure of the annual return on an investment. [CBOT][MIDAM] Generally, the return on an investment in a stock or bond, calculated as a percentage of the amount invested. [SEC] In stocks and bonds, the amount of money returned to investors on their investments. Also known as rate of return. [NYSE] The effective annual rate of return on an investment expressed as a percentage. [FDIC] The percentage rate of return paid on a stock in the form of dividends, or the effective rate of interest paid on a bond or note. [Harvey]

yield curve

A chart in which the yield level is plot on the vertical axis and the term to maturity of debt instruments of similar creditworthiness is plotted n the horizontal axis. The yield curve is positive when long-term rates are higher than short-term rates However, yield curve is negative or inverted. [CBOT] A chart in which the yield level is plotted on the vertical axis and the term to maturity of debt instruments of similar creditwor thiness is plotted on the horizontal axis. The yield curve is positive when long-term rates are higher than short-term rates. However, when short-term rates are higher than yields on long-term investments, the yield curve is negative or inverted. [MIDAM] A chart in which yield levels are plotted on the vertical axis and the terms to maturity of debt instruments of similar creditworthiness are plotted on the horizontal axis. [OTS] A graphic representation of market yield for a fixed-income security plotted against the maturity of the security. The yield curve is positive when long-term rates are higher than short-term rates. [CFTC] The plotting of investment yields against maturity periods. [TMAC]

yield curve option-pricing models

Models that can incorporate different volatility assumptions along the yield curve, such as the Black-Derman-Toy model. Also called arbitrage-free option-pricing models. [Harvey]

yield curve risk

The risk of losses due to adverse changes or shifts in the yield curve. [TMAC]

yield curve strategies

Positioning a portfolio to capitalize on expected changes in the shape of the Treasury yield curve. [Harvey]

yield ratio

The quotient of two bond yields. [Harvey]

yield spread strategies

Strategies that involve positioning a portfolio to capitalize on expected changes in yield spreads between sectors of the bond market. [Harvey]

yield to call

The percentage rate of a bond or note, if you were to buy and hold the security until the call date. This yield is valid only if the security is called prior to maturity. Generally bonds are callable over several years and normally are called at a slight premium. The calculation of yield to call is based on the coupon rate, length of time to the call and the market price. [Harvey]

yield to maturity

(A) The percentage rate of return an investor will receive taking into account the dates or purchase and maturity of the bond, the coupon rate, and the price paid for the bond. (B) The computed percentage of return to the investor on a security. Yield is based on the cost of the security, the length of time to its maturity and the stated interest rate. Two common methods -- actuarial and Canadian. [EPA] The average annual yield of a fully amortized loan, that is held by an investor for the life of the loan. The average rate takes into the account the fact that the outstanding principal, and consequently the amount of interest, declines each year until the loan is fully paid. When the term is used in reference to a bond or other security, it means the average annual rate of return of the security when held to maturity, taking into account discounts or premiums paid when the security is purchased and capital gains or losses. [OTS] The percentage rate of return paid on a bond, note or other fixed-income security if you buy and hold it to its maturity date. The calculation for YTM is based on the coupon rate, length of time to maturity and market price. It assumes that coupon interest paid over the life of the bond will be reinvested at the same rate. [Harvey] The rate of return an investor receives if a fixed-income security is held to maturity. [CBOT][CFTC][MIDAM] The yield of a bond to maturity takes into account the price discount from or premium over the face amount. It is greater than the current yield when the bond is selling at a discount and less than the current yield when the bond is selling at a premium. [NYSE] internal rate of return on a bond. [WCSU]

yield to worst

The bond yield computed by using the lower of either the yield to maturity or the yield to call on every possible call date. [Harvey]

Z bond

Also known as an accrual bond or accretion bond; a bond on which interest accretes interest but is not paid currently to the i nvestor but rather is accrued, with accrual added to the principal balance of the Z and becoming payable upon satisfaction of all prior bond classes. [Harvey]

Z score

Statistical measure that quantifies the distance (measured in standard deviations) a data point is from the mean of a data set. Separately, z score is the output from a credit-strength test that gauges the likelihood of bankruptcy. [Harvey]

zero coupon

Refers to a debt instrument that does not make coupon payments, but, rather, is issued at a discount to par and redeemed at par at maturity. [CFTC]

zero coupon yield curve

The plotting of zero coupon rates against maturity dates. [TMAC]

zero prepayment assumption

The assumption of payment of scheduled principal and interest with no payments. [Harvey]

zero-balance account

A checking account in which zero balance is maintained by transfers of funds from a master account in an amount only large enough to cover checks presented. [Harvey]

zero-beta portfolio

A portfolio constructed to represent the risk-free asset, that is, having a beta of zero. [Harvey]

zero-coupon bond

A bond in which no periodic coupon is paid over the life of the contract. Instead, both the principal and the interest are paid at the maturity date. [Harvey] A bond which pays no interest but is priced, at issue, at a discount from its redemption price. [NYSE] A security sold at a deep discount from its face value and redeemed at its full face value at maturity. These bonds pay no interest. Instead, the investor's return is the difference between the purchase price of the bond and its face value when redeemed. Since these bonds do not pay interest, there are no interest coupons attached to the bond document, hence the name 'zero-coupon bond.' Even though the yield is not paid until maturity, the return accrues and is taxable on a prorated basis each year of the bond's life. [OTS] Bonds sold without coupons at a deep discount from their face value. Bondholders receive interest when the bond matures or when it is subsequently sold. [UNODC] Discount bond making no coupon payments. [WCSU] Such a debt security pays an investor no interest. It is sold at a discount to its face price and matures in one year or longer. [Harvey]

zero-investment portfolio

A portfolio of zero net value established by buying and shorting component securities, usually in the context of an arbitrage strategy. [Harvey]

zero-one integer programming

An analytical method that can be used to determine the solution to a capital rationing problem. [Harvey]

zero-sum game

A type of game wherein one player can gain only at the expense of another player. [Harvey]

zip code

A numerical code, established by the U.S. Postal Service, used for the purpose of routing and to identify delivery zones. Some U.S. carriers apply this code for freight in the same manner. [ITDS]

zone

Any one of a number of sections or districts in the United States or of the world used for the purpose of establishing proper rates for parcels, mail, pickup, and delivery. [ITDS]

zone status

The legal status of merchandise which has been admitted to a U.S. foreign trade zone, thereby becoming subject to the provisions of the Foreign Trade Zone Act (FTZA). [ITDS]

zone user

A corporation, partnership or party that uses a U.S. foreign trade zone for storage, handling, processing, or manufacturing merchandise in zone status, whether foreign or domestic. [ITDS]

zoning

A legislative process that divides a community into areas (zones) of specified land use and that regulates the location, height, density, type and overall size of buildings within each zone. The zones are designated according to broad categories of land use, such as residential, commercial or industrial, and more specifically as to building type or density of land use, such as single family or multifamily residential. [OTS]

zoning code, law or ordinance

A local law prescribing how and for what purpose each parcel of land in a community may be used. [OTS]