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]
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 crises 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]
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: [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]