investment terms

8/14/2019 Investment Terms

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INVESTMENT TERMS

F EDERAL HOME LOAN MORTGAGE CORPORATION: (FHLMC or

Freddie Mac.)

Government-chartered corporation which buys

qualified mortgage loans from the financial

institutions that originate them, securitizes the

loans, and distributes the securities through the

dealer community. The securities are not backed by

the U.S. Government. The market value of these

securities prior to maturity is not guaranteed and

will fluctuate.

OVER BOUGHT /OVERSOLD INDICATOR

A technical analysis tool that attempts to define

when prices have moved too far and fast in either

direction. This is usually calculated based on a

moving average of the difference between the

number of advancing and declining issues over a

certain period of time. If the market is considered

overbought, the technical analyst will sell, and if the

market is considered oversold, he/she will buy.

TIME VALUE OF MONEY
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The idea that a dollar now is worth more than a

dollar in the future, even after adjusting for

inflation, because a dollar now can earn interest or

other appreciation until the time the dollar in the

future would be received. This theory has its base in

the calculation for present value.

E QUITY (1)

Ownership interest in a corporation in the form of

common stock or preferred stock. It also refers to

total assets minus total liabilities, in which case it is

also referred to as shareholder'sequity or net worth

or book value. In real estate, it is the difference

between what a property is worth and what the

owner owes against that property (i.e. the difference

between the house value and the remaining

mortgage or loan payments on a house). In the

context of a futures tradingaccount, it is the value

of the securities in the account, assuming that the

account is liquidated at the going price. In the

context of a brokerage account, it is the net value of

the account, i.e. the value of securities in the

account less any margin requirements.

MARKET VOLATILITY INDEX (VIX)
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An index designed to track market volatility as an

independent entity. The Market Volatility Index is

calculated based on optionactivity and is used as an

indicator of investor sentiment, with high values

implying pessimism and low values implying

optimism. There are three volatility indexes in the

Chicago Board Options Exchange which track the

three main stock indexes: the VIX is the most widely

used, tracking the S&P 500, but there also is the

VXN which tracks the Nasdaq and the VXD which

tracks the Dow Jones Industrial Average.

CUSIP (Committee on Uniform Securities IdentificationProcedures)

The committee which supplies a unique nine-

character identification, called a CUSIP number, for

each class of security approved for trading in the

U.S., to facilitate clearing and settlement. These

numbers are used when any buy and sell orders are

recorded.

D OW

The most widely used indicator of the overall

condition of the stock market, a price-weighted

average of 30 actively traded blue chip stocks,

primarily industrials. The 30 stocks are chosen by

the editors of the Wall Street Journal (which is

published by Dow Jones &Company), a practice that

dates back to the beginning of the century. The Dow

was officially started by Charles Dow in 1896, at

which time it consisted of only 11 stocks. The Dow is
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computed using a price-weighted indexing system,

rather than the more common market cap-weighted

indexing system. Simply put, the editors at WSJ add

up the prices of all the stocks and then divide by the

number of stocks in the index. (In actuality, the

divisor is much higher today in order to account for

stock splits that have occurred in the past). also

called Dow Jones Industrial Average (DJIA).

VENDOR FINANCING

A loan from one company to another which is used

to buygoods from the company providing the loan.

In this way, the vendor increases sales, earns

interest, and may sometimes also acquire an interest

in the customer. This increases the riskprofile of a

company if it is carried out on a large scale, since

many companies do not have the skill to conduct

credit analysis. Large, creditworthy buyers are

unlikely to make use of this arrangement, since they

will be able to borrow money at lower rates from

other sources.

ASKING PRICE

The lowest price for which any investor or dealer has

declared that he/she will sell a given security or

commodity. For over-the-counterstocks, the asking

price is the best quoted price at which a Market
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Maker is willing to sell a stock. For mutual funds, the

asking price is the net asset value plus any sales

charges. also called asked price or offering price or

ask.

BASIS SWAP

A specific type of interest rate swap, where the

interest rates exchanged are based on different

money markets or currencies.

MARGINAL COST OF CAPITAL GDR

The cost associated with raising one additional

dollar of capital. The marginal cost will vary

according to the type of capital used. For example,

raising funds through the use of unsecured or

subordinated debt, or through debt that requires

higher interest rates to offset risk, will be more

expensive than debt that is backed by collateral,

such as a secured bond.

DIVIDEND PER SHARE ( DPS ) .

The amount of dividend that a stockholder will

receive for each share of stock held. It can be

calculated by taking the total amount of dividends

paid and dividing it by the total shares outstanding.

If a companyissues a $1 million dividend and has 10

million shares, the dividend per share is 10 cents ($1

million divided by 10 million shares).
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TOTAL RETURN SWAP

A type ofswap where one partypays another based

on a set rate in return for payments based on the

return of a given asset. This asset is often a loan or a

bond. This situation is beneficial if a party wants to

benefit from an asset, but doesn't want to purchase

that asset. Total return swaps are often used by

hedge funds.

ALTERNATIVE MINIMUM TAX (AMT) .

An IRS system created to ensure that high-income

individuals, corporations, trusts, and estatespay at

least some minimum amount of tax, regardless of

deductions, credits or exemptions. It functions by

adding certain tax-preference items back into

adjusted gross income. While it was once only

important for a limited number of high-income

individuals who made extensive use of tax shelters

and deductions, more and more people are being

affected by it. The AMT was introduced in 1969, and

was originally intended only to affect 155 U.S.

households, but by 2010 it is projected that up to

20% of households may be affected by AMT. The

AMT is often triggered when there are large numbers

of personal exemptions on state and local taxes

paid, large numbers of miscellaneous itemized

deductions or medical expenses, or by Incentive

Stock Option (ISO) plans. The AMT has become one
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of the most controversial tax mechanisms in

existence.

HIPAA (Health Insurance Portability And Accountability Act)

A law mandating that anyone belonging to a group

health insurance plan must be allowed to purchase

health insurance within an interval of time beginning

when the previous coverage is lost. The law protects

employees, especially those with long term health

conditions who may be reluctant to leave jobs

because they are afraid pre-existing condition

clauses will limit coverage of any such conditions

under a new insurance plan, from losing health

insurance due a change in employment status. The

law also creates standards dealing with the privacy

of health information, which helps prevent improper

use of one's medical record.

BLOCK TRADE

A large amount ofsecurities being traded, typically

at least 10,000 shares of stock or $200,000 in

bonds. Normally, only institutional investors

undertake such large trades. Block trades can affect

the market price of the security, depending on the

liquidity of the market.

CONTINGENT ORDER

An order which is to be executed only if another

order is executed first. An example of a contingent

order would be to sell one specific security if another
http://t.pm0.net/s/c?u.f5j2.4.cerp.1ibughttp://t.pm0.net/s/c?u.f5j2.5.cerq.1ibughttp://t.pm0.net/s/c?u.f5j2.6.7536.1ibughttp://t.pm0.net/s/c?u.f5j2.7.7n3j.1ibughttp://t.pm0.net/s/c?u.f5j2.8.7n3k.1ibughttp://t.pm0.net/s/c?u.f5j2.9.751n.1ibughttp://t.pm0.net/s/c?u.f5j2.10.9b57.1ibughttp://t.pm0.net/s/c?u.f5j2.11.9b57.1ibughttp://t.pm0.net/s/c?u.f5j2.12.673w.1ibughttp://t.pm0.net/s/c?u.f5j2.13.752v.1ibughttp://t.pm0.net/s/c?u.f5j2.14.7sah.1ibughttp://t.pm0.net/s/c?u.f5j1.5.73p1.1ibughttp://t.pm0.net/s/c?u.f5j1.6.7afl.1ibughttp://t.pm0.net/s/c?u.f5j1.7.659d.1ibughttp://t.pm0.net/s/c?u.f5j1.8.751o.1ibughttp://t.pm0.net/s/c?u.f5j1.9.751p.1ibughttp://t.pm0.net/s/c?u.f5j1.10.cern.1ibughttp://t.pm0.net/s/c?u.f5j1.11.7h4n.1ibughttp://t.pm0.net/s/c?u.f5j1.12.7h3w.1ibughttp://t.pm0.net/s/c?u.f5j1.13.7ddr.1ibughttp://t.pm0.net/s/c?u.f5j1.14.7agt.1ibughttp://t.pm0.net/s/c?u.f5j1.15.752p.1ibughttp://t.pm0.net/s/c?u.f76d.4.7525.1ibughttp://t.pm0.net/s/c?u.f76d.5.ch46.1ibughttp://t.pm0.net/s/c?u.f76d.6.659e.1ibughttp://t.pm0.net/s/c?u.f76d.7.7ddr.1ibughttp://t.pm0.net/s/c?u.f5j2.4.cerp.1ibughttp://t.pm0.net/s/c?u.f5j2.5.cerq.1ibughttp://t.pm0.net/s/c?u.f5j2.6.7536.1ibughttp://t.pm0.net/s/c?u.f5j2.7.7n3j.1ibughttp://t.pm0.net/s/c?u.f5j2.8.7n3k.1ibughttp://t.pm0.net/s/c?u.f5j2.9.751n.1ibughttp://t.pm0.net/s/c?u.f5j2.10.9b57.1ibughttp://t.pm0.net/s/c?u.f5j2.11.9b57.1ibughttp://t.pm0.net/s/c?u.f5j2.12.673w.1ibughttp://t.pm0.net/s/c?u.f5j2.13.752v.1ibughttp://t.pm0.net/s/c?u.f5j2.14.7sah.1ibughttp://t.pm0.net/s/c?u.f5j1.5.73p1.1ibughttp://t.pm0.net/s/c?u.f5j1.6.7afl.1ibughttp://t.pm0.net/s/c?u.f5j1.7.659d.1ibughttp://t.pm0.net/s/c?u.f5j1.8.751o.1ibughttp://t.pm0.net/s/c?u.f5j1.9.751p.1ibughttp://t.pm0.net/s/c?u.f5j1.10.cern.1ibughttp://t.pm0.net/s/c?u.f5j1.11.7h4n.1ibughttp://t.pm0.net/s/c?u.f5j1.12.7h3w.1ibughttp://t.pm0.net/s/c?u.f5j1.13.7ddr.1ibughttp://t.pm0.net/s/c?u.f5j1.14.7agt.1ibughttp://t.pm0.net/s/c?u.f5j1.15.752p.1ibughttp://t.pm0.net/s/c?u.f76d.4.7525.1ibughttp://t.pm0.net/s/c?u.f76d.5.ch46.1ibughttp://t.pm0.net/s/c?u.f76d.6.659e.1ibughttp://t.pm0.net/s/c?u.f76d.7.7ddr.1ibug


8/8

specific security has been bought. Brokers often do

not like to work with these orders, given the

uncertainty and extra work involved.
http://t.pm0.net/s/c?u.f76d.8.7afl.1ibughttp://t.pm0.net/s/c?u.f76d.9.7afp.1ibughttp://t.pm0.net/s/c?u.f76d.10.7525.1ibughttp://t.pm0.net/s/c?u.f76d.11.ch47.1ibughttp://t.pm0.net/s/c?u.f76d.8.7afl.1ibughttp://t.pm0.net/s/c?u.f76d.9.7afp.1ibughttp://t.pm0.net/s/c?u.f76d.10.7525.1ibughttp://t.pm0.net/s/c?u.f76d.11.ch47.1ibug

investment terms

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