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. Compare subordinated debenture bond,
and
collateral trust bonds.
Indicator
of financial leverage.
Compares assets provided by creditors to assets provided
by
shareholders. Determined by dividing long-term debt
by common
stockholder equity.
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.
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).
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.
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.
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.
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.
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.
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.
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.
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. Compare step-up bond and payment-in-kind bond.
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.
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. Related: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. Related:defined benefit plan
The written notice given by the seller of his intention to make delivery against an open, short futures position on a particular date. Related:notice day
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.
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.
The price fixed by the Clearing house at which deliveries on futures are in invoiced; also the price at which the futures contract
is settled when deliveries are made.
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.
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.
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.
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.
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).
Liability-matching models that assume that the liability payments and the asset cash flows are known with certainty. Related:
Compare stochastic models
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.
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.
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.
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.
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.
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).
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%.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Part of a nation's internal market
representing the mechanisms for issuing and trading securities of entities domiciled within that nation. Compare external market
and foreign market.
``Don't
know the trade.'' A Street
expression used whenever one party lacks knowledge of a trade or receives conflicting instructions from the other party.
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.
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.
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.
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.
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.
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.
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.
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.
