A
AAA - The highest rating given on bonds by bond rating agencies. AAA bonds are thought to have virtually no risk of default. Moody's and Standard & Poor's are the most widely used rating agencies.
Abandoned Baby - A rare reversal pattern characterized by a gap followed by a Doji, which is then followed by another gap in the opposite direction. The shadows on the Doji must completely gap below or above the shadows of the first and third day.
Above the Market- A limit order to buy or sell a security for a specified price that is higher than the current market price. If the market does not reach the specified price, the order will go unfilled.
Absolute Breadth Index ( ABI ) - Developed by Norman Fosback, the ABI is equal to the absolute value of the difference between the advancing issues and the declining issues. It shows how much activity and volatility is taking place on the New York Stock Exchange while totally ignoring the price direction. It is sometimes also referred to as an absolute swap yield.
Absolute Return - The return that an asset achieves over a period of time. This measure simply looks at the appreciation or depreciation (expressed as a percentage) that an asset - usually a stock or a mutual fund - faces over a period of time.
Absolute Rate - The fixed portion of an interest-rate swap, expressed as a percentage rather than as a premium or a discount to a reference rate. The absolute rate is a combination of the reference rate and the premium or discounted fixed percentage.
Absolute Price Oscillator (APO)- An indicator based on the difference between two exponential moving averages, and is expressed in absolute terms. Also known as the MACD indicator, the APO is calculated by subtracting the longer EMA from the shorter EMA.
Absolute Priority - Also known as 'liquidation preference'. The principle in bankruptcy proceedings that requires senior creditors to be fully paid before junior creditors and stockholders may receive any payment.
Acceleration Covenant - A clause included in certain debt securities and swap agreements stating that the immediate collection of payment and termination of contract will take place should default or a downgrade of debt occur.
Accretion:
1. Asset growth through addition or expansion.
2. In reference to discount bonds, it describes the accumulation of value until maturity.
3. Accretion can occur through a company's internal development or by way to mergers and acquisitions.
4. Bonds at discount are sold below face value and mature at par. In the duration between the bond's issuance and maturity, no additional value is actually being accumulated within the bond but accretion occurs with the paper or implied capital gain.
Account – Record of all transactions done by individual.
Account Balance - Amount of money in a trading account. The section of a trading screen that shows the amount of money in a trader's account, including net profit or loss of any open positions.
Accounts Payable Turnover Ratio - A short-term liquidity measure used to quantify the rate at which a company pays off its suppliers. Accounts payable turnover ratio is calculated by taking the total purchases made from suppliers and dividing it by the average accounts payable amount during the same period.
Accrual - The Apportionments Describes a currency strengthening in response to market demand rather than by official action of premiums and discounts on forward exchange transactions that relate directly to deposit swap (Interest Arbitrage) deals , over the period of each deal.
Accredited Investor- Term used by SEC in Regulation D of private placements. Concept: although 35 is the upper limit of persons who may purchase a private placement, accredited investors are not included in this number. General definition of accredited investors: institutional type accounts and persons of wealth (persons with a net worth of $1 Million or more, persons with annual income of $200,000 or more, persons who purchase $150,000 or more of the offering and this does not represent more than 20% of their net worth).
Accreting Principal Swap - A swap whereby the notional value is increasing over time. This type of swap is used mainly by companies willing to pay a fixed rate in return for an increasing notional as a result of increasing working capital requirements.
Accrued Interest- The amount of interest that has been earned since the last interest payment date. When a bond trades, the buyer pays the seller the accrued interest - a pro rata portion of the next interest
Accrued Market Discount - The gain in the value of a discount bond expected from holding it for any duration until its maturity. As discount bonds are sold below face value, it is expected that they will gradually rise in market price until reaching maturity. This rise in price is different than that which occurs in regular coupon bonds as a result of lowering interest rates.
Actualize - The underlying assets or instruments which are traded in the cash market.
Account Information- The section of a trading screen that shows the amount of money in a trader's account, including net profit or loss of any open positions.
Accounting Noise - The effect of complex and extensive accounting rules that regulate financial statement reporting and are thought to distort a company's true operating performance.
Accumulation/ Distribution - The act of buying more shares of a security without causing the price to increase significantly. After a decline, a stock may start to base and trade sideways for an extended period. While this base builds, well-informed traders and investors may seek to establish or increase existing long positions. In that case, the stock is said to have come under accumulation.
Acc/Dist = ((Close – Low) – (High – Close)) / (High – Low) * Period's volume
Accumulation Distribution Line- A momentum indicator that relates price changes with volume. It relates the closing price to the range of prices (H - L). The closer the close is to the high, the more volume is added to the cumulative total.
Accumulation Plan – 1) A general financial strategy in which an investor attempts to build the value of their portfolio to a desired size.
2) An accumulation plan can be useful for investors who wish to build their position in a mutual fund over time, and it also provides the benefits of dollar-cost averaging.
Act of God Bond - A bond issued by an insurance company, linking principal and interest to the company's losses due to natural disasters.
Accumulated Earnings Tax -A tax imposed by the federal government upon companies with retained earnings deemed to be unreasonable and in excess of what is considered ordinary.
Active Bond - A term used to describe fixed-income securities that trade frequently on the floor of the NYSE.
Active Bond Crowd - The name given to members of the NYSE and their specific bond trading departments that are acknowledged as frequent traders in active bonds.
Active Box – Also known asopen box. This refers to the physical location in a brokerage where securities are kept.
Active Investing -An investment strategy involving ongoing buying and selling actions of the investor. Active investors will purchase investments and continuously monitor their activity in order to exploit profitable conditions.
Active Management - An investing strategy that seeks returns in excess of a specified benchmark.
Actual:
1. A term used to describe the underlying in future and forward contracts, dealing with commodities rather than financial instruments.
2. A term used to describe a securities historical volatility.
Actual Return - The actual gain or loss of an investor. This can be expressed in the following formula: expected return (ex-ante) plus the effect of firm-specific and economy-wide news.
AD Line - Advance Decline Line. One of the most widely used indicators to measure the breadth of a stock market advance or decline. The AD line tracks the net difference between advancing and declining issues. It is usually compared to a market average where divergence from that average would be an early indication of a possible trend reversal.
ADB - Abbreviation for African Development Bank and the Asian Development Bank.
Adaptive Expectations Hypothesis- A hypothesis stating that individuals make investment decisions based on the direction of recent historical data, such as past inflation rates, and adjust the data (based on their expectations) to predict future rates.
Add-On Certificate of Deposit- A certificate of deposit that allows the bearer to deposit additional funds, after the initial purchase date, that will bear the same rate of interest.
Adding To A Loser - The action of a trader/investor increasing a position in an asset when its price is heading in the direction that's opposite to what the investor/trader desires.
Adjusted Debit Balance - The amount of money owed by a customer to his/her broker after paper profits and losses are taken into consideration.
Adjustment - Official action normally by either change in the internal economic policies to correct a payment imbalance or in the official currency rate.
Adjustment in Conversion Terms - A term used to describe the adjustment made to a convertible securities' conversion factor when the exchangeable stock underlying the convertible undergoes a split.
Adjustable Peg - Term for an exchange rate regime where a country's exchange rate is "pegged" (i.e. fixed) in relation to another currency, often the dollar or French Franc, but where the rate may be changed from time to time. This was the basis of the Bretton Woods system. See peg, and crawling peg for more details.
Adjusted Exercise Price
1. An option's strike price after adjustments have been made for stock splits to its underlying security.
2. A term used to describe the strike prices for options written on Ginnie Mae pass through certificates.
Advance Decline Ratio- The ratio of advancing issues over declining issues. Taking the moving average of the AD ratio will smooth it so it can be used as an overbought and oversold indicator.
Advance-Decline Index - A technical analysis tool representing the total difference between the number of advancing and declining security prices. It is calculated by adding the difference between the number of advancing and declining issues to the previous period's value. This index is considered one of the best indicators of market movements as a whole.
Advance Refunding –
1. A bond issuance used to pay off another outstanding bond. The new bond will often be issued at a lower rate than the older outstanding bond.
2. A bond issuance in which new bonds are sold at a lower rate than outstanding ones. The proceeds are then invested, and when the older bonds become callable they are paid off with the invested proceeds.
Advancing- A market stage of a stock that is characterized by an uptrend with subsequently higher highs and higher lows.
Advancing Declining Issues- A market momentum indicator using the advancing issues and the declining issues. It subtracts the declining issues from the advancing ones and is usually smoothed to make it a good overbought oversold indictor.
Adverse Excursion- The loss attributable to price movement against the position in any single trade.
Affirmative Obligation - An obligation of NYSE specialists to enter the market on a particular security (either by posting or bidding and ask) when there is not sufficient market demand and supply to efficiently match orders.
After-Acquired Clause - A provision included in legal contracts ensuring that subsequent acquisitions of assets will be included in the debtor’s liability to the lender.
After-Hours Market Close - Also referred to as "after-hours close". The last transaction and final price of a security that is traded in the after-hours market.
After Hours Trading - AHT - Also known as the "after-hours market".
Trading after regular trading hours on the major exchanges.
After-Tax Profit Margin - A ratio of financial performance calculated by dividing net income after taxes, by net sales.
After The Bell- After the close of the Forex/Stock market.
AIBOR - Amsterdam Inter-bank Offered Rate.
ADX- Average Directional Index.
After Hours- Any trade posting, adjusting, or changes made by specialists or member firm after the official close of the market.
Agency Bonds - A bond issued by a government agency. These bonds are not fully guaranteed in the same sense as U.S. Treasury and Municipal bonds.
Agency Cross - Also known as Dual Agency. A trade that has only one agent acting for the buyer and seller.
Agency Security - Low risk debt obligations issued by enterprises that the U.S. Government sponsors.
Against Actual - A transaction generally used by two hedgers who want to exchange futures or cash positions.
Agent - An individual employed to act on behalf of another (the principal).
Agent Bank - (1) A bank acting for a foreign bank. (2) In the Euro market - the agent bank is the one appointed by the other banks in the syndicate to handle the administration of the loan.
Aggregate Exercise Price- Term in security options: the exercise (strike) price times the number of securities involved in the contract. For example, a call is purchased at $50 for 100 shares. The aggregate exercise price is $5000 ($50 x 100). Exception: GNMA (US Government National Mortgage Association) options and T-Bill, T-Note, and T-Bond options, in which the aggregate exercise price is the strike price times the face value of the underlying contract.
Aggregate Demand - Total demand for goods and services in the economy. It includes private and public sector demand for goods and services within the country and the demand of consumers and firms in other countries for good and services.
Aggressive Growth Fund - A mutual fund that attempts to achieve the highest capital gains. Investments held in these funds are companies that demonstrate high growth potential with usually a lot of share price volatility. These funds are only for non risk-adverse investors willing to accept a high risk-return trade-off.
Aggregate risk - Size of exposure of a bank to a single customer for both spot and forward contracts.
Aggregate Supply - Total supply of goods and services in the economy from domestic sources (including imports) available to meet aggregate demand.
Agio - Difference in the value between currencies. Also used to describe percentage charges for conversion from paper money into cash, or from a weak into a strong currency.
Agricultural Commodities Index ($GKX) - A weighted average of the important agricultural commodity contracts as compiled by Goldman Sachs. Commodities used include Wheat, Red Wheat, Corn, Soybeans, Cotton, Sugar, Coffee, Cocoa, and Orange Juice.
Air Pocket Stock - When the price of a stock plunges unexpectedly, similar to an airplane when it hits an air pocket. This is almost always caused by shareholders selling because of unexpected bad news.
Algorithmic Trading - A trading system that utilizes very advanced mathematical models for making transaction decisions in the financial markets.
All Weather Fund - A mutual fund that tends to perform well during all economic conditions.
All or None - A limit price order that instructs the broker to fill the whole order at the stated price or not at all.
Allonge - A sheet of paper attached to a bill of exchange for the purpose of documenting endorsements.
Alligator Spread - A term referring to an unprofitable spread regardless of favorable market movements. This loss is due entirely to large commissions charged upon the transactions.
Alternative Order - A combination order whereby two separate orders are entered on the same security. The execution of one order cancels the other.
Alpha- A measure of the residual risk that an investor takes for investing in a fund rather than a market index. It represents the difference between a mutual fund's actual performance and the performance that would be expected based on the level of risk taken by the fund's manager. If a fund produced the expected return for the level of risk assumed, the fund would have an Alpha of zero. A positive Alpha indicates the manager produced a return greater than expected for the risk taken. A negative Alpha indicates the manager has not adequately rewarded investors for the risks taken.
American Callable Bond - A bond that can be redeemed by the issuer at any time prior to its maturity. Usually a premium is paid to the bondholder when the bond is Called.
American Currency Quotation : A direct quotation in the foreign exchange markets whereby the value of the American dollar is stated as a per unit measure of a foreign currency.
American Depositary Share - ADS - A share issued under deposit agreement that represents an underlying security in the issuer's home country.
American Depository Receipt (ADR)- Securities issued by commercial banks that represent the shares of a foreign company. ADRs trade just like normal stocks on various US stock exchanges. Their performance usually parallels that of the parent company on its domestic exchange.
American Option - An option which may be exercised at any valid business date through out the life of the option.
AMEX - The term used for the American Stock Exchange.
AMEX Composite Index ($XAX)- A weighted index of the stocks listed on the American Stock Exchange. The market capitalization of each company is used to construct the index.
Amex Index Options- The American Stock Exchange trades put and call options based on a number of sector, industry and international indices. These indices cannot be bought or sold like stocks, their price movements are simply used for trading options.
Amortization- The paying off of debt in regular installments over a period of time.
Analysis of Variance- A technique used to improve the analysis over regression techniques. It can be used for identifying relationships between predictor and criterion
variables, whether the predictor variables are quantitative or qualitative in nature.
Analyst- A person with expertise in evaluating financial instruments; he or she performs investment research and makes recommendations to institutional and retail investors to buy, sell, or hold their positions. Most analysts specialize in a single industry or business sector.
Andrew's Pitchfork- Developed by Alan Andrews, this concept that uses three parallel lines drawn from three points that you select. The points selected to begin the pitchfork are usually three consecutive major peaks or troughs. The three parallel lines extending out to the right are used as normal support and resistance points.
Angel Bond - A slang term for investment-grade bonds . This is the opposite of fallen angels, which are bonds that have a 'junk' rating.
Ankle Biter – Also known as Small cap Stock - Stock issues with a market capitalization worth less than $500 million.
Anonymous Trading - Visible bids and offers on the market without the identity of the bidder and seller being revealed.
Anti-Reciprocal Rule - A rule created by the National Association of Securities Dealers (NASD) to protect individual investors from conflicts of interest that may arise when brokerage firms and mutual funds collaborate.
Announcement Date -The date on which a company first publicly announces a data.
Annual Report- Popular term for the yearly report made by a company to its stockholders. Federal law requires all registered corporations to make such reports. They usually contain a balance sheet, an income statement, a list of changes in retained earnings, and how income of the corporation was used.
Annualized- The translation of periods of less than a year into an annual rate for comparative purposes. To annualize quarterly figures, you multiply them by four.
Antitrust - The antitrust laws apply to virtually all industries and to every level of business, including manufacturing, transportation, distribution, and marketing. They prohibit a variety of practices that restrain trade.
Answerback - Code name of a telex subscriber, printed automatically by the telex machine.
Application Programming Interface - API - A set of functions used by computer programmers that allows them to communicate with other outside applications.
Appreciation- A currency is said to 'appreciate' when it strengthens in price in response to market demand or Describes a currency strengthening in response to market demand rather than by official action
Appraisal Ratio - A ratio between the Alpha and "Residual Standard Deviation" of a product. This is mainly used by analysts.
Arbitrage - The purchase or sale of an instrument and simultaneous taking of an equal and opposite position in a related market, in order to take advantage of small price differentials between markets.
Arbitrage Trading Program - ATP - A program used to place simultaneous orders for stock index futures and the underlying stocks.
Arrearage - Also referred to as "Arrears." An amount on a loan, cumulative preferred stock, or any credit instrument that is overdue.
Arbitrage Bond - A lower-rate debt security issued by a municipality prior to the call date of the municipality's existing higher-rate security.
Arbitrageur - A type of investor who attempts to profit from price inefficiencies in the market by making simultaneous trades that offset each other and captures risk-free profits.
Ascending Triangles - A bullish continuation pattern that is shaped like a right triangle consisting of two or more equal highs forming a horizontal line at the top.
Asset Swap - An interest rate swap used to alter the cash flow characteristics of an institution's assets in order to provide a better match with its liabilities.
Arcru ( Arab Currencies ) - A unit of account based on the movement of 12 Arab currencies against the US dollar.
Area Pattern- A pattern of sideways price movement that follows a stalled uptrend or downtrend of a stock or commodity. Some of these patterns (triangles, flags, wedges etc.) have good predictive value.
Arithmetic (Linear) Scaling- On an Arithmetic (Linear) scale chart, the spacing between each point on the vertical scale is identical. Thus the vertical distance between 10 and 20 is the same as the vertical distance between 90 and 100.
Article 8 Currency - A senior currency in IMF terminology, which should be freely convertible.
Arms Index (TRIN) –Trading Index - A market indicator showing the ratio between the average volume of declining stocks and the average volume of advancing stocks. Generally, a rising TRading INdex is bearish and a falling TRIN is bullish.
Aroon- An indicator system that can be used to determine whether or not a stock is trending and the strength of its trend. The Aroon Oscillator signals an upward trend when it rises above zero and a downward trend when it falls below zero. The farther away the oscillator is from the zero line, the stronger the trend.
Aroon Oscillator- An indicator called the Aroon Oscillator can be constructed by subtracting Aroon(down) from Aroon(up). Since Aroon(up) and Aroon(down) oscillate between 0 and +100, the Aroon Oscillator oscillate between -100 and +100 with zero as the center crossover line.
Around - Used in quoting forward "premium / discount". "Five-five around" would mean five point on either side of the present spot value.
As you like option - Enables the holder to convert from one style of option to a different style of option over a preset period of time. Sometimes referred to as either a "call-or-put option" or "chooser option".
Ascending Trend Channel -An ascending line that connects the bottoms of the down waves and is parallel to a trend line. The ascending channel line and the trend line form borders on an uptrend.
Ascending Channel - An upward moving channel formed with two parallel, upward sloping trendlines. The upper trendline connects a stock's highs over a period, with each subsequent high price higher than the previous. Conversely, the lower trendline connects the stock's lows, with each subsequent low price higher than the previous.
Ascending Tops - This refers to a series of peaks, each peak higher than the previous one on the stock's chart patterns.
Ascending Triangle- A sideways price pattern between two converging trendlines in which the lower line is rising while the upper line is flat. This is generally a bullish pattern.
Asian Monetary Unit ( EMU ) - An accounting unit for the Asian Clearing Union with the same value as an SDR( Special drawing rights ) .
Asian option - A contract where the exercise price is based on the difference between the strike price and the average spot rate over the contract period. Usually known as Average Rate Option .
Asian Tail - An option feature whereby a reference price is activated at the end of an option should the underlying fall below a specified average before option expiry.
Ask - The price at which the currency or instrument is offered.
Ask (Offer) Price- The price at which the market is prepared to sell a specific Currency in a Foreign Exchange Contract or Cross Currency Contract. At this price, the trader can buy the base currency. In the quotation, it is shown on the right side of the quotation.
Ask Price/Ask Rate- The price at which a currency is offered for sale (as in bid/ask spread).
Ask Size- The number of lots being offered for sale at the ask rate.
Aspirin Count Theory - A market theory that states stock prices and aspirin production are inversely (opposite) related.
Asset - In the context of foreign exchange is the right to receive from a counterparty an amount of currency either in respect of a balance sheet asset (e.g. a loan) or at a specified future date in respect of an unmatched forward or spot deal.
Asset Allocation - Dividing instrument funds among markets to achieve diversification or maximum return.
Asset Allocation Fund - AAF - A mutual fund that splits its investment assets among stocks, bonds and other investment vehicles in an attempt to provide a consistent return for the investor. Also referred to as a "diversification fund".
Asset-Backed Security – ABS - A financial security backed by a loan, lease or receivables against assets other than real estate and mortgage backed securities . As an investor, asset-backed securities are an alternative to investing in corporate debt.
Asset-or-Nothing Call Option - An option payoff that is equal to the asset's price if the asset is above the strike price, otherwise the payoff is zero.
Asset-or-Nothing Put Option - An option payoff that is equal to the asset's price if the asset is below the strike price, otherwise the payoff is zero.
Asset Play - An incorrectly valued stock that is attractive because its combined asset value is greater than its market capitalization.
Asset Stripper - An individual who determines if the value of a company is worth more purchased as a whole or divided into separate assets which are sold off. This is usually done in order to fulfill debt agreements.
Asset Swap - Similar in structure to a plain vanilla swap, the key difference is the underlying of the swap contract. Rather than regular fixed and floating loan interest rates being swapped, fixed and floating investments are being exchanged. In a plain vanilla swap, a fixed libor is swapped for a floating libor. In an asset swap, a fixed investment such as a bond with guaranteed coupon payments is being swapped for a floating investment such as an index.
Assets Under Management - AUM - In general, the market value of assets an investment company manages on behalf of investors.
Assignment - Notice to an option holder, usually by the clearing house of an exchange traded option that the option has been exercised.
Assignable Contract - A futures contract with a provision permitting the contract holder to convey his or her rights of assignment to a third party. Not all futures contacts have this provision. In fact, most exchange traded contracts are not assignable.
Assimilation - The absorption of stock by the public from a new issue.
Association Cambiste International - The international society of foreign exchange dealers consisting of national "Forex clubs" affiliated on a worldwide basis.
At Best - An instruction given to a dealer to buy or sell at the best rate that can be obtained.
At or Better- An order to deal at a specific rate or better.
At Par Forward Spread - When the forward price is equivalent to the spot price.
At The Market - An order to buy or sell a futures contract at the best available price upon entrance into the exchange for execution. This is identical to a market order in the securities markets. When an investor places an order at the market, he or she is willing to forgo price discrimination for speediness of entry to or exit from a futures contract.
At the Price Stop-Loss Order - A stop-loss order that must be executed at the requested level regardless of market conditions.
Attorney in Fact - Person who is allowed to transact business and execute documents on behalf of another person because one holds power of attorney.
At the Money An option whose strike price is equal to the price of the underlying security.
Average Annual Return - AAR - A figure used when reporting the historical return of a mutual fund. The AAR is stated after expenses have been tallied, including administration fees, 12b-1 fees, and others.
Average Directional Index (ADX)- Part of the Directional Movement Indicator system developed by J. Welles Wilder, the ADX line is based on the spread between the +DI and -DI lines from that same system.
Average Life - An estimate of the number of terms to maturity, taking the possibility of early payments into account. Average life is calculated using the weighted average time to the receipt of all future cash flows.
Average Price
1. Sometimes used in determining a bond's yield to maturity. A bond's average price is calculated by adding its face value to the price paid for it and dividing the sum by two.
2. Average price is also sometimes known as Net Asset Value (NAV) for mutual funds.
Average Price Put - A type of option where the payoff is either zero or the amount by which the strike price exceeds the average price of the asset.
Average Price Call - A type of option where the payoff is either zero or the amount by which the average price of the asset exceeds the strike.
Average Rate Option - A contract where the exercise price is based on the difference between the strike price and the average spot rate over the contract period. Sometimes called an "Asian option".
Average True Range (ATR) -An indicator that measures a security's volatility. High ATR values indicate high volatility and may be an indication of panic selling or panic buying. Low ATR readings indicate sideways movement by the stock.
Authorized Dealer - A financial institution or bank authorized to deal in foreign exchange.
Automated Clearing House - ACH A US term for an organization set up by financial institutions agreeing to initiate and receive among themselves electronic transfers of funds authorized by their customers.
Automated Bond System – ABS - The electronic system on the NYSE that records bids and offers for inactively traded bonds until they are canceled or executed.
Automatic Investment Plan - An investment program that allows you to contribute small amounts of money (as little as $20 a month) in regular intervals. Funds are automatically deducted from your checking/savings account or your paycheck, and invested in a retirement account or mutual fund.
Automatic exercise - A procedure for exchange traded options under which the in the money options are exercised on a given date.
Automatic Reinvestment Plan - An investment program in which capital gains or other income received from investments is automatically used for reinvestment purposes.
Automatic Stabilizer - An economic policy or program that increases or decreases automatically to offset the current economic trend without government assistance.
Away from the Market - When the bid on an order is lower (or the ask price is higher) than the current market price for the security.
Axe - The interest a person or trader shows in buying or selling a bond. A trader may have specific interest in a certain type of bond based on his or her existing positions.
A-Share - In a family of multi-class mutual funds, this is the class that is characterized by a front load structure.
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