The European derivatives exchange formed in 1998 by a merger of the Deutsche Terminbörse (DTB) and the Swiss Options and Financial Futures Exchange (SOFFEX).
Refers to an additional payment in a merger or acquisition that is not part of the original acquisition cost, which is based on the acquired company's future earnings relative to a level determined by the merger agreement.
A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and nonoperating profit before the deduction of interest plus cash income taxes. Equivalent to EBIT minus cash taxes.
A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and nonoperating profit before the deduction of interest and income taxes.
A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and nonoperating profit before the deduction of interest and income taxes. Depreciation expenses are not included in the costs.
A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and nonoperating profit before the deduction of interest and income taxes. Depreciation and amortization expenses are not included in the costs.
A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and nonoperating profit before the deduction of income taxes.
A company's profit divided by its
number of outstanding shares. If a company earning $2 million in one year had $2 million shares of stockoutstanding, its EPS would be $1 per share. In calculating EPS, the company often uses a weighted average of shares outstanding over the reporting term. The one-year (historical) EPS growth rate is calculated as the percentage change in earnings per share. The prospective EPS growth rate is calculated as the percentage change in this year's earnings and the consensus forecast earnings for next year.
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 effect on stockprices than a reciprocal positive earnings surprise.
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 is the total twelve months, earnings divided by number of outstandingshares, divided by the recent price, multiplied by 100. The end result is shown in percentage terms. We often look at earnings yield because this avoids the problem of zero earnings in the denominator of the price-earning ratio.
A theory that posits three types of advantages benefiting a multinational corporation:
ownership-specific, location-specific, and market internalization advantages.
The time period over which an asset'sNPV is maximized. Economic life
can be less than absolute physical life for reasons of technological obsolescence, physical
deterioration, or product life cycle.
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.
An agreement between two or more countries that allows the free movement of capital, labor, and all goods and services, and involves the harmonization and unification of social, fiscal, and monetary policies.
A method of performance evaluation that adjusts
accounting performance for investors' required
return on investment. Suppose a division produces a 12%
return on capital invested. Given the risk of the division's business line would have. If
investors would usually require 14% on capital invested, the division destroyed
shareholder value by the EVA metric. This description is trade marketed by
Stern-Stewart.
Produced by achieving lower operating costs by owning all components of
production and sometimes sales outlets rather than contracting for companies in the
outside marketplace.
The Securities & Exchange Commission uses Electronic Data Gathering and Retrieval to transmit company documents such as 10-Ks, 10-Qs, quarterly reports, and other SEC filings, to investors.
Specialized banking institutions, authorized and chartered by the Federal
Reserve Board of Governors in the U.S., that are allowed to engage in
transactions of a foreign or international character. They are not subject
to restrictions on interstate banking. Foreign banks operating in the US are
permitted to organize and own an edge corporation.
A type of individual retirement account enabling the contribution of up to $500 per year for each child up to the age of 18 by the parents in the family.
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 that expected cash flows will change as interest rates change due to the embedded option.
Used with SAT performance measures, the amount equal to the net earned spread, or margin of income, on assets in excess of financing costs for a given interest rate and prepayment rate scenario.
A sale based on the most recent round-lot price, which determines the price of the next odd lot. The difference created between the last round-lot price and the odd-lot price is referred to as the odd-lot differential.
The organizing principle of modern portfolio theory, which maintains that any risk-averse investor will search for the highest expected return for any particular level of portfolio risk.
The combinations of securitiesportfolios that maximize expected return for any level of expected risk, or that minimizes expected risk for any level of expected return. Pioneered by Harry Markowitz.
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.
In meanvariance skewness analysis, the set of portfolios that result from investors' preference for higher means, lower variance and higher (positive) skewness. The efficient surface is analogous (in three dimensions, mean, variance and skewness) to the effficient frontier (in two dimensions, mean and variance).
Used in the context of general equities. A specialist or another broker is bidding higher or offering lower than we are, often topping or undercutting us by an eighth.
The degree of buyers' responsiveness to price changes. Elasticity is measured as the percent change in quantity divided by the percent change in price. A large value (greater than 1) of elasticity indicates sensitivity of demand to price, e.g., luxury goods. Goods with a small value of elasticity (less than 1) have a demand that is insensitive to price, e.g., food.
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.
Technical market timing strategy that predicts price movements on the basis of historical price wave patterns and their underlying psychological motives. Robert Prechter is a famous Elliott Wave theorist.
A term the host uses to refer to guests on the PBS television show, "Wall Street Week", who are technical analysts attempting to predict the direction of stock prices over the next six months.
An option that is part of the structure of a bond that gives either the bondholder or the issuer the right to take some action against the other party, as opposed to a bare option, which trades separately from any underlying security.
A service once offered by the American Stock Exchange to help small growth companies fulfill special listing requirements. The service is no longer available.
A mutual fund that invests
primarily in countries with developing economies (that is, those that are becoming
industrialized). Emerging markets funds tend to be more volatile than domestic stock
funds due to currency fluctuation and political instability. Consequently, fund prices can
fluctuate dramatically.
The amount, if any, a company contributes on an employee's behalf to the
employee's retirement account, usually tied to the employee's own contribution.
A property owned by one party on which a second party reserves the right to make a valid claim, e.g., a bank's holding of a home mortgage encumbers property.
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; and so on.
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.
The market capitalization of a firm's equity plus the market value of the firm's debt. Often the value of assets that are non-core are excluded the final calculation.
A person starting a new company who takes on the risks associated with starting the enterprise, which may require venture capital to cover start-up costs.
A mutual fund that invests strictly in stocks of companies that are environmentally friendly and/or have the goal of environmental betterment. The investors are trying to support and profit from opportunities related to the environmental movement.
Selling common stock/convertibles in one company and reinvesting the proceeds in as many shares of (1) another type of securityissued by the company, or (2) another security of the same type but of another company -- as can be bought with the proceeds of the sale. See: Equal shares swap.
Applies mainly to convertible securities. Selling the underlying common and reinvesting the proceeds in as much of the convertible as can be converted into the number of shares of common just sold. See equal dollar swap.
Certificates issued by a trust that is formed to purchase an asset and lease it to a lessee. When the last of the certificates has been repaid, title and ownership of the asset transfers to the lessee.
Ownership interest in a firm. Also, the residual dollar value of a futures trading account, assuming its liquidation is at the going trade price. In real estate, dollar difference between what a property could be sold for and debts claimed against it. In a brokerage account, equity equals the value of the account'ssecurities minus any debit balance in a margin account. Equity is also shorthand for stock market investments.
An agreement in which one party, for an up-front premium, agrees to pay the other at specific time periods if a designated stock marketbenchmark tops a predetermined level.
An agreement in which one party agrees to pay the other at specific time periods if a specific stock marketbenchmark falls below a predetermined level.
Securities that give the holder the right (but not the obligation) 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.
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.
Provision in a contract allowing cost increases to be passed on. In an employment contract, for example an escalator clause may call for wage increases in line with inflation.
The process of turning over unclaimed or abandoned property to a state
authority. Escheatment laws require mutual funds to turn over uncashed or returned check
dollars and/or client account fund shares if the owner cannot be located within a length of
time determined by each state.
The preparation of a plan to carry out an individual's wishes as to the
administration and disposition of his/her property before or after his/her death.
Originally for a deposit outside one's home country but in the home country currency. This terminology is confusing now since the new European currency unit, also called the Euro, was introduced on January 1, 1999.
A bond that is (1) underwritten by an international syndicate, (2) issued simultaneously to investors in a number of countries, and (3) issued outside the jurisdiction of any single country.
The Euroclear group is the world's largest settlement system for domestic
and international securities transactions, covering both bonds and
equities for financial institutions located in over 80 countries.
Comprises banks that accept deposits and provide loans in large
denominations and in a variety of currencies. The banks that constitute this market are the same banks that constitute the Eurocurrencymarket; the difference is that Eurocredit loans are longer-term than so-called
Eurocurrency loans.
Instrument issued outside your country, but denominated in your currency.
A Eurodollar is a Certificate
of Deposit in US dollars in some other country (though mainly traded
in London). A Euroyen is a CD
in yen outside Japan.
The money market for borrowing and lending currencies that are held in the form of deposits in banks located outside the countries where the currencies are issued as legal tender.
Refers to a certificate of
deposit in US dollars in a bank that is not located in the US Most of
the Eurodollar deposits are in London banks, but Eurodeposits may be anywhere
other than the US Similarly, a Euroyen or Euro DM deposit represents a CD
in yen or DM outside Japan and Germany,
respectively.
Securities sold in the Euromarket. That is, securities initially sold to investors simultaneously in several national markets by an international syndicate. Related: External market.
A nonunderwrittenEuronoteissued 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.
Created on March 1, 1996, Euro.NM is a pan-European network of regulated markets dedicated to growth companies, regardless of their sector of activity or country of origin. Euro.NM member exchanges and their respective new markets consist of the Paris Stock Exchange (Le Nouveau Marché), the Deutsche Börse AG (Neuer Markt), the Amsterdam Exchanges (NMAX), and the Brussels Stock Exchange (Euro.NM Belgium).
Bank created to monitor the monetary policy of the 11 countries that have converted to the Euro from their local currencies. The 11 countries are: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain.
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 until January 1, 1994 and currently comprises 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 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.
Residual return plus benchmark timing return. For a given asset with beta
equal to one, if its residual return is 2%, and the benchmarkportfolio exceeds its consensus expected returns by
1%, then the asset's exceptional return is 3%.
The amount of a required minimum distribution that an IRA holder fails to remove
from an IRA in a timely manner. Excess accumulations are subject to a 50% IRS penalty
tax.
This literally means "without dividend." The buyer of shares when they are quoted ex-dividend is not entitled to receive a declared dividend. It is the interval between the record date and the payment date during which the stock trades without its dividend-the buyer of a stock selling ex-dividend does not receive the recently declared dividend. Antithesis of cum dividend (with dividend).
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. The 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 denoted
by an x in newspaper listings on that date.
The time period between the announcement of a stock dividend and its actual payment. The buyer of shares during this time period does is not entitled to the dividend.
Interest paid based on the basis of a 365-day/year schedule by a bank or other financial institution as opposed to a 360-day basis (ordinary interest). Difference can be material when large principal sums of money are involved.
A bondportfolio management strategy that involves finding the lowest cost portfolio generating cash inflows exactly equal to cash outflows that are being financed by investment.
An auditor's opinion reflecting the fact that the auditor is unable to audit certain areas of the company's operations because of restrictions imposed by management or other conditions beyond the auditor's control.
Kurtosis measures the "fatness" of the tails of a distribution. Excess kurtosis means that distribution has fatter tails than a normal distribution. Fat tails means there is a higher than normal probability of big positive and negative returns realizations.
A nickname for the New York Stock Exchange. Also known as the Big Board, where more than 2000 common and preferred stocks are traded. The exchange is the oldest in the United States, founded in 1792, and the largest. It is located on Wall Street in New York City.
Investment vehicle introduced in 1999 that appeals to wealthy investors with large holdings in a single stock who want to diversify without paying capital gains taxes. These funds allow investors to exchange their stock for shares in the diversified portfolio of stocks in a tax-free transaction.
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.
Also known as ETF. A basket of stocks similar to an index mutual fund. However, there are a number of important differences between ETFs and mutual funds. The ETF can be traded within the day, they can be shorted, purchased on margin and there even exists options on some ETFs.
Applies mainly to convertible securities. Means the issuer, if so stated, may substitute a convertible debenture for an existing convertible preferred with identical terms. Most often used when a corporation has an immediate need for equity capital and a low tax rate, and expects either or both conditions to change. This would make the debenture less attractive if the interest tax-deductibility is lost.
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 US between one (mutual
funds) and five (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. The time varies
greatly across countries. In France, for example settlements
are only once per month.
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.
Total amount of dividends received during the life of a futures contract or total dividends received for holding a particular stock one year. See: Current yield.
The expected return on a riskyasset, given 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&P 500 and the historic
US Treasury bond) multiplied by the assetsbeta. The conditional expected return varies
through time as a function of current market information.
The exchange rate between
two currencies that is anticipated to prevail in the spot market on a given future date. It differs
from the current spot rate primarily by the extent to which inflation expectations in the two currencies
differ.
The percentage of the assets that are 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 nor the SAI includes the transactions 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).
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.
Dates on which options on a particular security expire. A given option will be placed in one of three cycles; the January cycle, the February cycle, or the March cycle. At any time, an option has contracts with four expiration datesoutstanding: two in near-term months and two in far-term months. Last day on which an option may be exercised.
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 third Friday
of the expiration month; 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.
Offsetting exposures in one currency with exposures in the same or another currency, when 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.
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.
Also referred to as the international market, the offshore market, or, more popularly, the Euromarket. A mechanism for trading securities that at issuance (1) are offered simultaneously to investors in a number of countries and (2) are issued outside the jurisdiction of any single country. Related: Internal market.
An unusual and unexpected one-time event that must be explained to shareholders in an annual or quarterly report, e.g., write down for a discontinued operation, employee fraud, a lawsuit, or other one-time events. Results are often presented with and without these items. The logic of excluding these items is that investors a better notion of future performance if one-time events are excluded.
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.