eFinancialCareers

A
Fifth letter of a Nasdaq stock symbol specifying Class A shares.

A-D
Advance-Decline, or measurement of the number of issues trading above their previous closing prices less the number trading below their previous closing prices over a particular period. As a technical measure of market breadth, the steepness of the AD line indicates whether a strong bull or bear market is under way.

AAA+ Bank
Refers to banks that are rated AAA by IBCA, Moodys Investor Service and Standard & Poors.

AAII
See: American Association of Individual Investors

Abandonment
Controlling party giving up rights to property voluntarily.

Abandonment option
The option of terminating an investment earlier than originally planned.

ABC agreement
A contract between an employee and a brokerage firm outlining the rights of the firm purchasing an NYSE membership for that employee.

Ability to pay
Refers to the borrower's ability to make interest and principal payments on debts. See: Fixed charge coverage ratio. In context of municipal bonds, refers to the issuer's present and future ability to create sufficient tax revenue to fulfill its contractual obligations, accounting for municipal income and property values. In context of taxation, notion that tax rates should be determined according to income or wealth.

Abnormal returns
The component of the return that is not due to systematic influences (market-wide influences). In other words, the abnormal returns is the difference between the actual return and that is expected to result from market movements (normal return). Related: excess returns.

ABO
See: Accumulated Benefit Obligation

Above par
See: Par.

ABS
See: Automated Bond System

Absolute advantage
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.

Absolute form of purchasing power parity
A theory that prices of products of two different countries should be equal when measured by a common currency. Also called the "law of one price."

Absolute Physical Life
The period of use after which an asset has deteriorated to such an extent that it can no longer be used.

Absolute priority
Rule in bankruptcy proceedings requiring senior creditors to be paid in full before junior creditors receive any payment.

Absorbed
Used in context of general equities. Securities are "absorbed" as long as there are corresponding orders to buy and sell. The market has reached the absorption point when further assimilation is impossible without an adjustment in price. See: Sell the book.

Abusive tax shelter
A limited partnership that the IRS judges to be claiming tax deductions illegally.

ACAT
See: Automated Customer Account Transfer

Accelerated cost recovery system (ACRS)
Schedule of depreciation rates allowed for tax purposes.

Accelerated depreciation
Any depreciation method that produces larger deductions for depreciation in the early years of an asset's life. Accelerated cost recovery system (ACRS), which is a depreciation schedule allowed for tax purposes, is one such example.

Acceleration clause
A contract stating that the unpaid balance becomes due and payable if specific actions transpire, such as failure to make interests payments on time.

Acceptance
Contractual agreement instigated when the drawee of a time draft "accepts" the draft by writing the word "accepted" thereon. The drawee assumes responsibility as the acceptor and for payment at maturity. See: Letter of credit and banker's acceptance.

Accommodative monetary policy
Federal Reserve System policy to increase the amount of money available to banks for lending. See: Monetary policy.

Account
In the context of bookkeeping, refers to the ledger pages upon which various assets, liabilities, income, and expenses are represented.
In the context of investment banking, refers to the status of securities sold and owned or the relationship between parties to an underwriting syndicate. In the context of securities, the relationship between a client and a broker/dealer firm allowing the firm's employee to be the client's buying and selling agent. See: Account executive; account statement.

Account Ad Valorem Duty
An imported merchandise tax expressed as a percentage.

Account balance
Credits minus debits at the end of a reporting period.

Account executive
The brokerage firm employee who handles stock orders for clients. See: Broker.

Account Party
Party who applies to open a bank for the issuance of a letter of credit.

Account reconciliation
The reviewing and adjusting of the balance in a personal checkbook to match your bank statement.

Account statement
In the context of banking, refers to a summary of all balances.
In the context of securities, a summary of all transactions and positions (long and short) between a broker/dealer and a client. See also: Option agreement.

Accountant's opinion
A signed statement from an independent public accountant after examination of a firm's records and accounts. The opinion may be unqualified or qualified. See: Qualified opinion.

Accounting earnings
Earnings of a firm as reported on its income statement.

Accounting exposure
The change in the value of a firm's foreign currency-denominated accounts due to a change in exchange rates.

Accounting insolvency
Total liabilities exceed total assets. A firm with a negative net worth is insolvent on the books.

Accounting liquidity
The ease and quickness with which assets can be converted to cash.

Accounts payable
Money owed to suppliers.

Accounts receivable
Money owed by customers.

Accounts receivable financing
A short-term financing method in which accounts receivable are collateral for cash advances. See: Factoring.

Accounts receivable turnover
The ratio of net credit sales to average accounts receivable, which is a measure of how quickly customers pay their bills.

Accredited investor
Refers to an individual whose net worth, or joint net worth with a spouse, exceeds $1,000,000; or whose individual income exceeded $200,000 or whose joint income with a spouse exceeded $300,000 in each of the 2 most recent years and can be expected to meet that income in the current year. More details of the definitions for investors other that individuals are found in Regulation D of the Securities and Exchange Commission.

Accreting Swap)
An interest rate swap in which the notional principal amount increases over time, for example as with a construction loan provided in tranches as each stage of the project is completed.

Accretion (of a discount)
In portfolio accounting, a straight-line accumulation of capital gains on a discount bond in anticipation of receipt of par at maturity.

Accrual Accounting Convention
An accounting system that tries to match the recognition of revenues earned with the expenses incurred in generating those revenues. It ignores the timing of the cash flows associated with revenues and expenses.

Accrual basis
In the context of accounting, practice in which expenses and income are accounted for as they are earned or incurred, whether or not they have been received or paid. Antithesis of cash basis accounting.

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.

Accrued benefits
The pension benefits earned by an employee according to the years of the employee's service.

Accrued discount
Interest that accumulates on savings bonds from the date of purchase until the date of redemption or final maturity, whichever comes first. Series A, B, C, D, E, EE, F, I, and J are discount or accrual bonds, meaning principal and interest are paid when the bonds are redeemed. Series G, H, HH, and K are income bonds, and the semiannual interest paid to their holders is not included in accrued discount.

Accrued interest
Applies mainly to convertible securities. Interest that has accumulated between the most recent payment and the sale of a bond or other fixed-income security. At the time of sale, the buyer pays the seller the bond's price plus "accrued interest," calculated by multiplying the coupon rate by the fraction of the coupon period that has elapsed since the last payment. (If a bondholder receives $40 in coupon payments per bond semiannually and sells the bond one-quarter of the way into the coupon period, the buyer pays the seller $10 as the latter's proportion of interest earned.)

Accrued market discount
The rise in the market value of a discount bond as it approaches maturity (when it is redeemable at par) and not because of falling market interest rates.

Accumulate
Broker/analyst recommendation that could mean slightly different things depending on the broker/analyst. In general, it means to increase the number of shares of a particular security over the near term, but not to liquidate other parts of the portfolio to buy a security that might skyrocket. A buy recommendation, but not an urgent buy.

Accumulated Benefit Obligation (ABO)
An approximate measure of the liability of a pension plan in the event of a termination at the date the calculation is performed. Related: Projected benefit obligation.

Accumulated dividend
A dividend that has reached its due date, but is not paid out. See: Cumulative preferred stock.

Accumulated profits tax
A tax on earnings retained in a firm as a way for the principals to defer personal income taxes.

Accumulation
In the context of corporate finance, refers to profits that are added to the capital base of the company rather than paid out as dividends. See: Accumulated profits tax. In the context of investments, refers to the purchase by an institutional broker of a large number of shares over a period of time in order to avoid pushing the price of that share up. In the context of mutual funds, refers to the regular investing of a fixed amount while reinvesting dividends and capital gains.

Accumulation area
A range within which a buyer accumulates shares of a stock. See: On-balance volume and distribution area.

ACES
See: Advance Computerized Execution System

ACH
See: Automated Clearing House

Acid test ratio
Also called the quick ratio, the ratio of current assets minus inventories, accruals, and prepaid items to current liabilities.

Acquired surplus
The surplus acquired when a company is purchased in a pooling of interests combination, i.e. the net worth not considered to be capital stock.

Acquiree
A firm that is being acquired.

Acquirer
A firm or individual that is purchasing another firm or asset.

Acquisition
When a firm buys another firm.

Acquisition cost
Refers to the price (including the closing costs) to purchase another company or property.
In the context of investments, refers to price plus brokerage commissions, of a security, or the sales charge applied to load funds. See: Tax basis.

Acquisition of assets
A merger or consolidation in which an acquirer purchases the selling firm's assets.

Acquisition of stock
A merger or consolidation in which an acquirer purchases the acquiree's stock.

Across the board
Movement or trend in the stock market that causes all stocks in all sectors to move in the same direction.

ACRS
See: Accelerated cost recovery system

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.

Acting in concert
Investors working together and performing identical actions to attain the same investment goal.

Active
A market in which there is frequent trading.

Active account
Refers to a brokerage account in which many transactions occur. Brokerage firms may levy a fee if an account generates an inadequate level of activity.

Active bond crowd
Refers to members of the bond department of the NYSE who trade the most bonds. Antithesis of cabinet crowd.

Active box
Securities that are held in safekeeping and are available as collateral for securing brokers' loans or customers' margin positions.

Active fund management
An investment approach that purposely shifts funds either between asset classes (asset allocation) or between individual securities (security selection).

Active income
Income from an active business as opposed to passive investment income according to the U.S. tax code.

Active Management
The pursuit of investment returns in excess of a specified benchmark.

Active portfolio strategy
A strategy that uses available information and forecasting techniques to seek better performance than a buy and hold portfolio. Related: Passive portfolio strategy.

Active Return
Return relative to a benchmark. If a portfolio's return is 5%, and the benchmark's return is 3%, then the portfolio's active return is 2%.

Active Risk
The risk (annualized standard deviation) of the active return. Also called the tracking error.

Actual market
Used in context of general equities. Firm market. Antithesis of Subject market.

Actuals
The physical commodities underlying a futures contract. Cash commodity, physical asset.

ACU
See: Asian currency units

AD
The two-character ISO 3166 country code for ANDORRA.

Ad valorem tax
A type of tax calculated based on percentage of gross or stated value. For example, VAT.

ADB
See: Adjusted Debit Balance

ADB
See: Asian Development Bank

Additional bonds test
A test for ensuring that bond issuers can meet the debt service requirements of issuing any new additional bonds.

Additional hedge
A protection against fallout risk in the mortgage pipeline.

Adequacy of coverage
A test that measures the extent to which the value of an asset is protected from potential loss either through insurance or hedging.

Adjustable rate
Applies mainly to convertible securities. Refers to interest rate or dividend that is adjusted periodically, usually according to a standard market rate outside the control of the bank or savings institution, such as that prevailing on Treasury bonds or notes. Typically, such issues have a set floor or ceiling, called caps and collars that limits the adjustment.

Adjustable-rate mortgage (ARM)
A mortgage that features predetermined adjustments of the loan interest rate at regular intervals based on an established index. The interest rate is adjusted at each interval to a rate equivalent to the index value plus a predetermined spread, or margin, over the index, usually subject to per-interval and to life-of-loan interest rate and/or payment rate caps.

Adjustable-rate preferred stock (ARPS)
Publicly traded issues that may be collateralized by mortgages and MBS

Adjusted balance method
Method of calculating finance charges that uses the account balance remaining after adjusting for all transactions posted during the given billing period as its basis. Related: Average daily balance method, previous balance method, past due balance method.

Adjusted basis
Price from which to calculate and derive capital gains or losses upon sale of an asset. Account actions such as any stock splits that have occurred since the initial purchase must be accounted for.

Adjusted debit balance (ADB)
The account balance for a margin account that is calculated by combining the balance owed to a broker with any outstanding balance in the special miscellaneous account, and any paper profits on short accounts.

Adjusted exercise price
Term used in options on Ginnie Mae (Government National Mortgage Association) contracts. The final exercise price of the option accounts for the coupon rates carried on Ginnie Mae mortgages. For example, if the standard GNMA mortgage has an 9% yield, the price of GNMA pools with 13% mortgages in them is altered so that the investor receives the same yield.

Adjusted gross income (AGI)
Gross income less allowable adjustments, which is the income on which an individual is taxed by the federal government.

Adjusted present value (APV)
The net present value analysis of an asset if financed solely by equity (present value of unlevered 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 leveraged buyout.

Adjustment bond
A bond issued in exchange for outstanding bonds when a corporation facing bankruptcy is recapitalized.

Administrative pricing rules
IRS rules used to allocate income on export sales to a foreign sales corporation.

ADR
See: American Depositary Receipt

ADS
See: American Depositary Share

Advance
Increase in the market price of stocks, bonds, commodities, or other assets.

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 approximately.

Advance Computerized Execution System (ACES)
Refers to the Advance Computerized Execution System, run by Nasdaq. ACES automates trades between order entry and market maker firms that have established trading relationships with each other. Securities are designated as specified for automatic execution.

Advance funded pension plan
A pension plan in which funds are set aside in advance of the date of retirement.

Advance refunding
In the context of municipal bonds, refers to the sale of new bonds (the refunding issue) before the first call date of old bonds (the issue to be refunded). The refunding issue usually specifies a rate lower than the issue to be refunded, and the proceeds are invested, usually in government securities, until the higher-rate bonds become callable. See: Refunding escrow deposits.

Advancement
Money or property given to a person by the deceased before death and intended as an advance against the beneficiary's share in the will.

Adverse opinion
An independent auditor's opinion expressing that a firm's financial statements do not reflect the company's position accurately. See also: Qualified opinion.

Adverse selection
Refers to a situation in which sellers have relevant information that buyers lack (or vice versa) about some aspect of product quality.

Advising bank
Corresponding bank in the beneficiary's country to which an issuing bank sends a letter of credit.

Advisory letter
A newsletter offering financial advice to its readers.

AE
The two-character ISO 3166 country code for UNITED ARAB EMIRATES.

AED
>The ISO 4217 currency code for United Arab Emirates Dirham.

AEX
See: Amsterdam Exchange

AF
The two-character ISO 3166 country code for AFGHANISTAN.

AFA
The ISO 4217 currency code for Afghan Afghani.

Affidavit of Loss
A sworn statement describing the particulars and circumstances of the loss of securities. This affidavit is required before a Bond of Indemnity can be issued and the securities replaced.

Affiliate
Relationship between two companies when one company owns substantial interest, but less than a majority of the voting stock of another company, or when two companies are both subsidiaries of a third company. See: Subsidiaries, parent company.

Affiliated corporation
A corporation that is an affiliate to the parent company.

Affiliated person
An individual who possesses enough influence and control in a corporation as to be able to alter the actions of the corporation.

Affirmative covenant
A bond covenant that specifies certain actions the firm must take.

Affirmative obligation
A New York Stock Exchange rule that governs the behavior of specialists. Affirmative obligation is the mandate of the specialists to step in and act as either the buyer or the seller when public investor orders exist do not match up naturally. Also known as positive_obligation. Related: negative_obligation.

Affordability index
An index that measures the financial ability of consumers to purchase a home.

AFM
See: Amman Financial Market

After acquired clause
A contractual clause in a mortgage agreement stating that any additional mortgageable property attained by the borrower after the mortgage is signed will be regarded as additional security for the obligation addressed in the mortgage.

After-hours dealing or trading
Securities trading after regular trading hours on organized exchanges.

After-tax basis
The comparison basis used to analyze the net after-tax returns on a corporate taxable bond and a municipal tax-free bond.

After-tax profit margin
The ratio of net income to net sales.

After-tax real rate of return
The after-tax rate of return minus the inflation rate.

Aftermarket
See: Secondary market.

AG
The two-character ISO 3166 country code for ANTIGUA AND BARBUDAAG.

Against the box
See: Selling short against the box.

Aged fail
An account between two broker/dealers that remains intact 30 days after the settlement date. The receiving firm must adjust its capital as it can no longer treat this account as an asset.

Agencies
See: Federal agency securities.

Agency
In context of general equities, buying or selling for the account and risk of a customer. Generally, an agent, or broker, acts as intermediary between buyer and seller, taking no financial risk personally or as a firm, and charging a commission for the service. The broker represents a customer buyer/seller to a customer seller/buyer and does not act as principal for the firm's own trading account. Antithesis of principal. See: Dealer.

Agency bank
A form of organization commonly used by foreign banks to enter the US market. An agency bank cannot accept deposits or extend loans in its own name; it acts as agent for the parent bank. It is also the financial_institution that issues ADRs to the general market.

Agency basis
A means of compensating the broker of a program trade solely on the basis of commission established through bids submitted by various brokerage firms.

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.

Agency costs
The incremental costs of having an agent make decisions for a principal.

Agency incentive arrangement
A means of compensating the broker of a program trade using benchmark prices for issues to be traded in determining commissions or fees.

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).

Agency problem
Conflicts of interest among stockholders, bondholders, and managers.

Agency securities
Securities issued by federally related institutions and U.S. government-sponsored entities. Such agencies were created to reduce borrowing costs for certain sectors of the economy, such as agriculture.

Agency theory
The analysis of principal-agent relationships, in which one person, an agent, acts on behalf of another person, a principal.

Agent
A party appointed to act on behalf of a principal entity or person. In context of project financing, refers to the bank in charge of administering the project financing.

Aggregate exercise price
The exercise price multiplied by the number of shares in a put or call contract. The option premium is excluded in the aggregate exercise price. In the case of options traded on debt instruments, the aggregate exercise price is the exercise price of the underlying security multiplied by its face value.

Aggregation
Process in corporate financial planning whereby the smaller investment proposals of each of the firm's operational units are aggregated and effectively treated as a whole.

Aggressive Growth Hedge Fund
In the context of hedge funds, a style of management that focuses primarily on equities that are expected to have strong earnings growth.

Aggressive growth mutual fund
A mutual fund designed for maximum capital appreciation that places its money in companies with high growth rates.

Aggressively
Used in context of general equities. For a customer it means working to buy or sell one's stock, with an emphasis on execution over price. For a trader it means acting in a way that puts the firm's capital at higher risk through paying a higher price, selling cheaper, or making a larger short sale or purchase than the trader would under normal circumstances.

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 determine if customer payments are keeping close to schedule.

Agreement among underwriters
A contract among participating members of a syndicate that defines the members' proportionate liability, which is usually limited to and based on the participants' level of involvement. The contract outlines the payment schedule on the settlement date. Compare: Underwriting agreement.

Agreement corporation
Corporation chartered by a state to engage in international banking: so named because the corporation enters into an "agreement" with the Fed's Board of Governors that it will limit its activities to those permitted by an Edge Act Corporation.

Ahead of itself
In context of general equities, refers to equities that are overbought or oversold on a fundamental basis.

Ahead of you
Used for listed equity securities. At the same price but entered ahead of your order/interest, usually referring to the specialist's book. See: Behind, matched orders, priority,