A MONEY.NET PROPERTY

A-B C-E F-I J-O P-R S-Z Abbreviations

This glossary is designed to outline common terms and calculations used throughout our web site. Some calculations may vary from one quote provider to another.

A - B

A-B-C AGREEMENT — An agreement signed by an applicant that is used in financing the purchase of a seat on the New York Stock Exchange.

ACCELERATED DEPRECIATION — Methods of depreciation in which depreciation expense is greater in early years and less in later years (vs. Straight-Line). See: Depreciation.

ACCREDITED INVESTOR — To qualify as an accredited investor for a Regulation D Private Placement, an investor must be either (a) an affiliate of the issuer, (b) a financial institution, or (c) an individual with $1 million net worth, or $200,000 annual income.

ACCRETION — A method of adjusting a taxpayer's cost basis of a bond bought at an original issue discount. The annual accretion is treated as interest for tax purposes. See: Original Issue Discount, Constant yield, and Straight-line.

ACCRUED INTEREST — The interest due on a bond since the last interest payment was made. The buyer of the bond pays the market price plus accrued interest.

ACCUMULATION ACCOUNT — An account used by the sponsor of a Unit Investment Trust to acquire securities for the eventual placement within the trust. See: Unit Investment Trust.

ACCUMULATION UNIT — An accounting measure that represents a contract owner's proportionate uit of interest in a separate account during the accumulation period of a variable annuity.

ACID TEST RATIO — A more stringent test of a corporation's liquidity than current ratio. It is calculated by adding cash, cash equivalents, and accounts and notes receivable and dividing that sum by the total current liabilities. It is also known as Quick Asset Ratio.

ACQUISITION — The acquiring of control of one corporation by another. In "unfriendly" take-over attempts, the potential buying company may offer a price well above current market values, new securities, and other inducements to stockholders. The management of the subject company might ask for a better price or try to join with a third company to foil the take-over attempt.

ACRS — Accelerated Cost Recovery system. The IRS approved method of calculating depreciation expense for tax purposes. See: Depreciation.

ADDITIONAL BONDS TEST — A requirement that before additional bonds, which will be secured by assets or revenues already pledged to existing bonds, can be issued, that specific financial requirements must be met. Generally, the main requirement is that debt service coverage for the original and new bonds must be at a specific level. See: Open-end Indenture.

ADDITIONAL TAKEDOWN — A portion of the underwriting spread for a municipal issue defined as total takedown less concession.

ADJUSTMENT BOND — See: Income Bond.

ADMINISTRATOR — The official or agency that is empowered to supervise or conduct the Uniform Securities Act in each state.

AD VALOREM TAX — A tax based on value of real property.

ADVANCED REFUNDED BONDS — Bonds whose debt service is paid by escrowed funds. Also called Pre-refunded Bonds.

ADVANCED REFUNDING — A method of eliminating a bond issue as an obligation of the issuer. This is accomplished by issuing a new bond issue and using the proceeds to purchase government obligations which will be escrowed and used to provide debt service on the original issue. The escrowed funds may provide debt service until maturity of the original issue (escrowed to maturity) or until the first call date (pre-refunded to the call). Also known as defeasance. See: Defeased Bonds.

AFFIDAVIT OF DOMICILE — A notarized affidavit executed by the legal representative of an estate reciting the residence of the decedent at the time of death. This document would be required when transferring ownership of a security from a deceased person's name.

AFFILIATE — See: Control Person.

AFTERMARKET — The Secondary Market. Used in reference to trading in a new issue. See: Effective Date; Secondary Market.

AGENCY — (1) Government securities issued by entities other than the U.S. Treasury (2) A transaction in which the broker/dealer acts as an agent (Broker). See: Agent.

AGENT — A security firm acting on behalf of a client. The agent acts as intermediary between buyer and seller, undertaking no financial risk, and charging a commission. (vs. Principal). See: Broker.

ALL OR NONE (AON) — (1) A type of order where the client wants the entire order executed or none of it. (2) A type of best efforts underwriting in which the issuer will only sell the entire amount, not just a part.

ALPHA — A statistical measure of a security's price volatility caused by factors other than the stock market as a whole. (vs. Beta.)

ALTERNATIVE MINIMUM TAX (AMT) — A tax designed to prevent wealthy investors from using tax shelters to avoid other (income) taxes. The calculation of the AMT takes into account tax preference items. See: Tax Preference Items.

AMBAC INDEMNITY CORPORATION (AMBAC) — See: Insured Bonds.

AMERICAN DEPOSITORY RECEIPT (ADR) — A security issued by a U.S. bank in place of the foreign shares held in trust by that bank, thereby facilitating the trading of foreign shares in U.S. markets.

AMERICAN STOCK EXCHANGE (AMEX) — The second largest stock exchange in the United States, located in the financial district of New York City. Formerly known as the Curb Exchange from its origin in a Manhattan street).

AMORTIZATION — (1) Accounting procedure which gradually reduces the book value of an intangible asset through periodic charges to income; similar to depreciation for fixed assets. See: Capitalize. (2) Method of reducing a taxpayer's cost basis in a bond purchased at a premium (vs. Accretion.) (3) Reduction of debt through periodic payments of principal - as in "self-amortizing" mortgages.

ANNUAL REPORT — The formal financial statement issued yearly by a corporation. The annual report shows assets, liabilities, revenues, and expenses. Earnings and profits for the year are shown along with other information of interest to shareholders.

ANNUITANT — Investor receiving annuity payments.

ANNUITY — A contract between an insurance company and an individual. It generally guarantees lifetime income to the person on whose life the contract is based in return for either a lump sum or a periodic payment to the insurance company. A fixed annuity guarantees a specific amount of payment each month. In a variable annuity, the amount of the monthly check would fluctuate according to the value of the securities in the separate account.

ANNUITY UNIT — The accounting measure used to determine the amount of each payment to an annuitant during the payout period.

ARBITRAGE — A technique employed to take advantage of differences in price. If for example, ABC stock can be bought in New York for $10 a share and sold in London at $10.50, an arbitrageur may simultaneously purchase ABC stock in New York and sell the same amount in London, thereby making a profit of 50 cents a shares less expenses. Arbitrage may also involve the purchase of rights to subscribe to a security, or the purchase of a convertible security and the sale at or about the same time of the security obtainable through exercise of the rights or of the security obtainable through conversion.

ARBITRATION — A method of settling a dispute by utilizing an impartial individual or individuals. All exchanges and securities associations have adopted a Cod of Arbitration through which all disputes between firms, employees and firms, and firms and clearing corporations are settled.

ARREARAGE — A past due obligation such as interest, or dividends on a cumulative preferred stock. See: Cumulative Preferred.

ASCENDING YIELD CURVE — See: Positive yield Curve.

ASK — See: Offer, Bid, and Asked.

ASSESSED VALUATION — The value of real estate that is used for tax purposes.

ASSETS — Everything a corporation owns or is due to it. Cash, investments, accounts receivable, and materials and inventories are called current assets. Buildings, machinery, and furniture and fixtures are known as fixed assets. Patents and goodwill are called intangible assets.

ASSIGNMENT — (1) To sign a document to authorize transfer of ownership, either the stock/bond certificate itself or a separate form known as a stock power/bond power. (2) Notice that an option has been exercised.

ASSUMED INTEREST RATE — Rate of growth built into an annuity table which determines payout on a variable annuity.

AT THE CLOSE ORDER — An order to be executed as close to the closing price as possible. There is no guarantee that the execution price will be the closing price.

AT-THE-MONEY — An option in which the underlying stock is trading precisely at the exercise price of the option.

AT THE OPENING ORDER — An order to buy or sell at the opening price. If not executed at the opening, it will be cancelled.

AUCTION MARKET — The system of trading securities through brokers or agents on an exchange such as the New York Stock Exchange. Buyers compete with other buyers while sellers compete with other sellers for the most advantageous price.

AUDITOR'S REPORT — Often called the accountant's opinion. It is the statement of the accounting firm's work and its opinion of the corporation's financial statements, especially that they conform to the normal and generally accepted practices of accountancy.

AUTHORIZED SHARES — The maximum number of common shares which a corporation may issue. This amount is set at the time of incorporation and is part of the Corporation Charter.

AUTOMATED ORDER ENTRY SYSTEM — Computerized systems designed to by-pass floor brokers and speed executions of routing orders on an exchange. These systems have limits as to the size of order permitted. Examples include AUTO EX, DOT, OSE, PACE, SOES, and SOREX.

AUTOMATED EXECUTION SYSTEM (AUTO EX) — The American Stock Exchange automated system for efficiently executing orders. See: Automated Order Entry System.

AVERAGE LIFE — The average length of time that a bond issue with a mandatory sinking fund is expected to be outstanding.

AVERAGES — Various ways of measuring the trend of securities prices. One of the most popular is the Dow Jones average of 30 industrial stocks listed on the New York Stock Exchange. The prices of the 30 stocks are totaled and then divided by a divisor which is intended to compensate for past stock splits and stock dividends and which is changed from time to time. As a result, point changes in the average have only the vaguest relationship to dollar price changes in the stocks included in the average. Other Dow Jones averages are the Transportation (20 stock), Utilities (15 stocks), and the Composite (65 stocks).

BABY BONDS — Bonds with denominations of less than $1000.

BACKING AWAY — The failure of a market maker to fulfill its obligation to buy or sell the minimum amount for a bona fide quote.

BALANCED FUND — A type of mutual fund which has a balanced portfolio consisting of bonds and preferred stock (providing income) as well as common stock (providing growth potential).

BALANCED PROGRAM — An oil/gas drilling program which drills in both areas of known production and in unproven areas. See: Developmental and Wildcatting.

BALANCE SHEET — A condensed financial statement showing the nature and amount of a company's assets, liabilities, and capital on a given date. In dollar amounts, the balance sheet shows what the company owned, what it owed, and the ownership interest in the company of its stockholders.

BALANCE SHEET EQUATION — Basic balance sheet equation: Total assets of a company equal total liabilities plus stockholders' equity.

BALLOON MATURITY — A type of maturity schedule for an issue of bonds that shows a relatively small number of bonds maturing serially (each year) and a large number maturing in a later year. Also known as "Serial with Team Maturity".

BANK GUARANTEE LETTER — The document supplied by an approved bank in which the bank certifies that a put writer has sufficient funds on deposit at the bank to equal the aggregate exercise price of the put.

BANKER'S ACCEPTANCES (BA) — A money market instrument used to finance international and domestic trade. They are checks drawn on a bank by an importer or exporter of goods and represent a bank's unconditional promise to pay the face amount of the note at maturity (which is normally less than three months).

BANKRUPTCY — An inability to pay debts; insolvency. Creditors may petition the courts which results in involuntary bankruptcy. Voluntary bankruptcy results from the debtor petitioning for court protection. Chapter 11 of the bankruptcy code deals with "reorganization" which allows the debitor to remain in business and negotiate for a restructuring of debt.

BANKS FOR THE COOPERATIVES — Co-ops: A government sponsored enterprise that is part of the Farm Credit System. It provides short-term loans to farmers' cooperative associations. See: Federal Farm Credit System.

BASIS — (1) Bonds: An investor's yield to maturity. (2) Taxation: Cost used to determine capital gain or loss on an investment. (3) Used in DPP's to calculate maximum losses allowed for tax purposes. In general, basis consists of the investor's original contribution plus recourse loans.

BASIS POINT — One gradation on a 100-point scale which is used in expressing variations in the yields of bonds. Fixed income yields vary often and slightly within one per cent and the basis point scale easily expresses these changes in hundredths of one per cent. For example, the difference between 12.83% and 12.88% is 5 basis points.

BEAR — Someone who believes the market will decline.

BEAR MARKET — A declining market.

BEAR SPREAD — An option spread position in which the investor profits from a decline in the underlying stock price (vs. Bull Spread).

BEARER BOND — A bond which does not have the owner's name registered on the books of the issuer. Interest is paid by means of attached coupons. Interest and principal, when due, are payable to the holder. (vs. Registered). See: Certificate.

BENEFICIAL OWNER — The person(s) entitled to the benefits of ownership even though another party (a broker or bank-the nominal owner) actually holds the security. See: All or None.

BEST EFFORTS — An offering in which the investment banker agrees to distribute as much of the offering as possible and to return to the issuer any unsold shares. See: All or None.

BETA — A statistical measure of the price volatility of a security in relation to the entire stock market's volatility. For example, if the stock market should increase 10%, the price of a stock with a Beta of 2 should increase 20%. A Beta of 2 indicates a stock which is twice as volatile as the market as a whole (vs. Alpha).

BID AND ASKED — Often referred to as a quotation or quote. The bid is the highest price anyone has declared that he wants to pay for a security at a given time and the asked is the lowest price anyone is willing to sell at the same time.

BID FORM — Form used to submit a bid on a competitive municipal bond underwriting.

BIG BOARD — See: New York Stock Exchange.

BLIND POOL — A limited partnership that does not specify the assets or properties to be acquired.

BLOCK — A large holding or transaction of stock (popularly considered to be 10,000 shares or more).

BLOTTER — A record, usually handwritten, of daily activity such as orders placed and executed, securities received or delivered, etc.

BLUE CHIP — A company known nationally for the quality and wide acceptance of its products or services, and for its ability to profit and pay dividends.

BLUE LIST, THE — A daily trade publication that lists current dealer to dealer municipal bond offerings.

BLUE SKY LAWS — A popular name for laws that various states have enacted to protect the public against securities frauds. The term is believed to have originated when a judge ruled that a particular stock had about the same value as a patch of blue sky.

BOLLINGER BANDS — Lines drawn above and below the moving average, varying in distance from the moving average of a security's price based on the security's volatility.

  Chart Keys: Period: 10
Standard Deviation: 2

BOND — Basically an IOU or promissory note of a corporation, municipality, or the U.S. Government. They are usually issued in multiples of $1,000 or $5,000. A bond is evidence of a debt on which the issuer usually promises to pay the bondholder a specified amount of interest for a specified length of time and to repay the loan on the expiration date. In every case, a bond represents debt. Its holder is a creditor of the issuer.

BOND ANTICIPATION NOTE (BAN) — A short-term security issued by a municipality. Payment of the note at maturity will be accomplished with the proceeds of a bond issue.

BOND COUNSEL — The attorney or law firm who reviews the legal documents pertaining to a municipal new issue and who writes the legal opinion. See: Legal Opinion.

BOND EQUIVALENT YIELD — A discount yield restated to make it directly comparable to an interest bearing investment. See: Discount Yield.

BOND INVESTOR GUARANTY CO (BIGI) — See: Insured bonds.

BOOK-ENTRY — A method of registering securities. There is no physical certificate since ownership is solely reflected by an entry in the books of the issuer.

BOOK VALUE — An accounting term. Book value of a stock is determined from a company's balance sheet by adding all current and fixed assets and then deducting all debts, other liabilities, and the liquidation price of any preferred issues. The sum arrived at is divided by the number of common shares outstanding and the result is book value per common share. Book value of the assets of a company or a security may have little relationship to market value.

BOX — The physical location in a brokerage house where securities are kept. These securities are used to meet immediate obligations. Also known as Active Box.

BREAKOUT — Movement of a stock price out of an established trading range either above a resistance level or below a support level.

BREAKPOINT — The dollar level of an investment in a mutual fund at which a purchaser qualifies for a reduction in sales charges.

BREAKPOINT SALES — Solicited sales at dollar amounts just below the point where a breakpoint (reduced sales charges) would occur. Usually this is within $1,000 of the breakpoint. A breakpoint sale is a violation of NASD rules.

BROKER — An agent who handles the public's orders to buy and sell securities, commodities, or other property. For this service a commission is charged. See: Agent.

BROKER'S BROKER — A security firm acting as agent on behalf of another security firm. The term can refer to a specialist on an exchange, or a specialized firm servicing municipal bond traders. See: Agent, Specialist.

BROKERS' LOANS — Money borrowed by brokers from banks or other brokers for a variety of uses. It may be used by specialists to help finance inventories of stock they deal in, by brokerage firms to finance the underwriting of new issues of corporate and municipal securities, to help finance a firm's own investments, and to help finance the purchase of securities for customers who prefer to use the broker's credit when they buy securities. See: Call Loan, Call Loan Rate.

BULL — One who believes the market will rise.

BULL MARKET — An advancing market.

BULL SPREAD — An option spread position in which the investor profits from a rise in the underlying security's price (vs. Bear Spread).

BUNCHING ORDERS — Combining odd-lot orders from different clients into a round lot in order to save the clients the odd-lot differential.

BUSINESS CYCLE — As measured by GNP. The recurring periods of expansion and contraction in economic activity which affect inflation, unemployment, business profits, and interest rates.

BUY-IN — Procedure that occurs when the seller of a security fails to complete the contract to sell by not delivering the securities according to the contract's terms. The buyer can close-out the contract by buying the securities in the open market and charging them to the account of the seller who failed to complete the contract.

BUYING POWER — The amount of securities which could be purchased in a margin account by using the SMA.