A - Return to Index

A&L Management - Is the analysis and management of the firm's assets and liabilities or balance sheet items. Related to GAP or Bucket operations.

AA - See Against Actuals.

AARP - Is the American Association of Retired Persons.

ABA - Is the American Bankers Association. The letters also represent the American Bar Association.

Abandon - Refers to the decision not to exercise an option or, sometimes, a clause.

It may also refer to the intentional or unintentional lack of use, maintenance or affirmation process about assets. These assets may include securities, bank accounts, refunds, trademarks and so on. In such cases the property can go to a jurisdiction such as a state or federal government.

ABS - See Asset Backed Securities.

ACATS - Is the Automated Customer Account Transfer Service.

ACB - Refers to Account Cash Balance.

Accelerated Depreciation - Is an accounting technique which provides larger than straight-line depreciation amounts in the early years and smaller than straight-line depreciation amounts in the later years.

Account Executive - Is the party who acts as an agent for his customer. The broker receives a commission as compensation. This person may also participate in spreads or other fees which generate revenue for the firm. This person is also known as an Associated Person (AP), Investment Executive (IE), Registered Representative (RR), Registered Customer Support Person or Securities Salesman. Brokers are required to be licensed according to product lines and states when required.

Accrued Interest - Is the amount of interest which has accumulated since the last coupon interest payment. It is the amount of interest which the holder is entitled but is not due until the payment date. The buyer pays the seller of the bond the accrued interest.

Accumulated Depreciation - Is the amount of depreciation already taken against an asset.

Assume that a computer costs $6,000 and has an expected life of 5 years and no residual value. After 3 years the accumulated depreciation would be $3,600 (3 x $1,200 annual depreciation).

Accumulation - Refers to buying often coincident with market bottoms or consolidations. It also refers to purchases by insiders, control people, or major investors.

ACH - Is the Automated Clearing House.

Acid Test Ratio - Is another term to describe the Quick Asset Ratio. It measures an organization's liquidity by adjusting current assets by subtracting inventories and then dividing by the current liabilities.

Actual Hedging - Is the risk management of a position when a hedger has a bona fide long or short actual position and is involved in an offsetting transaction. This offset is usually in the derivatives market.

Actual or Observed - Is the real or reported price, data, or event. It compares to the Theoretical, Implied or Hypothetical price, data, or event. The actual or observed data describe or define the underlying process or condition.

Actuals - Is the real or underlying asset for a derivative product or commodity market.

Adjustable Rate Mortgages - Is a loan which has a coupon or interest rate that is subject to change on predetermined reset dates. These loans use interest rate indices as the benchmark rate. Adjustable Rate Mortgages come in many variations. Typically, the reset dates recur every 1, 3, or 5 years; but there are other periods used as well. These loans may have cap and floor features which constrain each reset change in interest rates. There may also be lifetime cap and floor features. Adjustable Rate Mortgages may be strictly amortizing though some have negative amortization features.

Ad Valorem Tax - Is a tax placed on real property. This is a primary revenue source for many municipalities.

ADP - Is the Alternative Delivery Procedure at the New York Mercantile Exchange. It provides for longs and shorts to make and take delivery under terms which differ from those specified as good delivery for the contract. These transactions can occur at any time during a delivery period.

ADR - See American Depository Receipt.

ADS - Is an American Depository Share.

Advanced Refunding - Is the technique of replacing one bond issue by another. This typically occurs when a municipality can borrow at more favorable terms than the outstanding issue. The new issue's proceeds are used to purchase government obligations which are held in escrow. The income and/or appreciation of these government securities is then used to service the outstanding debt. The escrow may be held until the first call date or maturity of the initial bond issue. If the escrowed funds retire the original issue at the first call date then the issue is pre-refunded. This retirement and replacement process of debt is also known as defeasance.

AE - See Account Executive.

Aftermarket - Refers to trading in the secondary market following a new securities issuance.

Against Actuals - Is a commodity market transaction whereby futures are exchanged or transferred against a cash position.

Against Cash - See Against Actuals.

Agency - Is a security issued by a government organization but not the treasury. These organizations include: the Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac), the Federal National Mortgage Association (FNMA or Fannie Mae), the Government National Mortgage Association (GNMA or Ginnie Mae).

Agent - Is a party who acts on the behalf of another. This occurs when a broker executes a trade for the benefit of the customer. Here, the broker receives a commission. This compares to a dealer transaction.

AGI - Refers to Adjusted Gross Income.

Aging - Is the concept which assumes that newly issued mortgages tend to prepay slower than mortgages which are older or seasoned. This aging refers to the underlying collateral and not the securities created upon that collateral.

AICPA - Is the American Institute of Certified Public Accountants.

ALCO - is the acronym for Asset and Liability Committee. Term used frequently in banking industry.

All or None (AON) - Is also called All or Nothing. The order must be completed in its entirety or not at all. Here, there are no partial fills.

ALM - See Asset and Liability Management.

Alpha - Is a measure of the incremental reward (or loss) that an investor gained in relation to the market. Typically, this is measured as performance of a selected portfolio relative to a market benchmark. An enhanced S&P 500 portfolio might have an alpha of .25 which means that the pickup was .25% or a quarter point better than the standard.

Alternative Investments - Are usually investments other than mutual funds, certificates of deposit, or direct investments in equities and bonds. Some of these alternatives are: art, collectibles, commodities, commodity funds, commodity pools, derivatives, foreign exchange, hedge funds, oil and gas, precious metals, and real estate ventures.

Ambac - Is the holding company that provides financial guarantee insurance for both public and private sector clients. This insurance can improve credit ratings.

American Depository Receipt (ADR) - Is an instrument which is issued in the United States but based on foreign securities. This security facilitates trading and investment because it is quoted in terms of the U.S. Dollar. This compares to the initial situation of the underlying shares quoted and traded in currencies other than the U. S. dollar.

American Style - Is an option which permits exercise prior to the indicated expiration date. This compares to an European Style option which can only be exercised on the expiration date.

AMEX - Is the American Stock Exchange.

Amortization - Is the periodic paydown of principal. This is a common feature of most mortgages. Amortize also refers to the accounting write down or reduction in an intangible asset. This creates a charge against income. Amortization can also refer to the reduction in the cost basis of a bond purchased at a premium to par. Sometimes, amortization is used as a synonym for depreciation or other write down of an asset or liability. In the later capacity it tends to apply to intangible assets. See Interest Impact on Instalment to Amortize or Amortization.

Annual Report - Is the yearly statement of financial condition for a financial organization. It includes balance sheet and income statement items. It may also include a descriptive synopsis of organizational highlights.

Annuitant - Is the party receiving annuity payments.

Annuity - Is an insurance product which comes in two basic forms: fixed and variable. The fixed version can make a lump sum or periodic lifetime payments to the annuitant. The variable version has a separate account attached to the annuity contract. This type of contract is considered a security because it is dependent on equities and its total value is subject to fluctuate due to market risk.

There are many annuity varieties. Some are: Annuity Certain, Annuity Due, Deferred Annuity, Fixed Annuity, Life Annuity, Ordinary Annuity, Perpetuity, and Variable Annuity.

Also, see Interest Impact on Present Value of Ordinary Annuity of 1 Per Period.

Anticipatory Hedging - Refers to the placement of a hedge prior to placement of the actual position. Sometimes, this occurs when a firm knows that it will receive investment funds later that day or week and prefers to hedge numerous potential risks at the earlier date. Similarly, a commodity producer may prefer to hedge prior to the harvest of a crop, production of an energy product or processing a raw material into a deliverable lot.

AO or A/O - Refers to As Of. This indicates that while a transaction was processed on one date, it was actually conducted on a different date. Often backlogs or delays in reports or inaccuracies in previous reports trigger this report.

AON - Is a type of order. See All or Nothing.

AP - See Associated Person.

API - Is the American Petroleum Institute.

Appraisal - Is an expert evaluation of the current, probable market value for a property. It is not necessarily the market value or transaction price.

Approved Carriers - Refers to armored car services which are approved by the exchange for the transportation of precious metals.

APR - Is the Annual Percentage Rate of Interest.

APY - Is the Annual Percentage Yield of Interest.

Arbitrage - Is a form of trading which attempts to profit by discrepancies in price due to location, funding, volatility, communications, response to information, or other differences. Typically, the price differences are small and only the quickest, most cost efficient or funding efficient parties participate. Compare with Risk Arbitrage.

Arbitration - Is a process to resolve disputes for securities and futures markets. It can involve broker/dealers, clients, and employees of broker/dealers. There are different forums such as the NASD and NYSE.

Arbitration Panel - Is the group of Arbitrators selected to resolve a dispute.

Arbitrator - Is a person who is selected to resolve a dispute in the financial industry. Usually there are three arbitrators on a panel. The composition of the arbitrators is from a pool of candidates viewed either as "Public" or "Industry."

ARCH - Is Autoregressive Conditional Heteroskedasticity. It is a time series approach that models volatility as function of previous returns.

ARMs - See Adjustable Rate Mortgages.

ASCNI - Is Available Separate Consolidated Net Income.

Asian - Is an option which uses the averaged prices of the underlying security, index or commodity, during its life as the determinant of the payoff amount.

Ask - Is the price requested, at the minimum, for an order to be acceptable and executed for the seller.

Assessed Value - Is the taxable basis of a property. It is imposed by the municipality. Often it is at a fraction of the market value. Equally, as important, is the rate of taxation on that assessed value. Assessed values may differ substantially from market values and appraised values.

Asset and Liability Management - Is the process for financial institutions and corporations to adjust their funding and usage of funds. Some approaches are the Bucket, GAP, Hedging, Matched Book, Matched Funding, Financial Swaps, and Structured Products. With the lowering of various insurance, investment and commercial banking barriers, the definition is now more inclusive. Previously, it tended to be reserved for non-investment banking and brokerage operations. Broker/dealer institutions tended to describe their hedging activities as risk management.

Asset Backed Securities - Is a security backed by notes or receivables against assets other than real estate. Some examples are autos, credit cards, and royalties.

Assets - Refer to properties owned or are due to a person or organization. Assets are typically viewed in three categories. These three classifications are: Current, Fixed or Long-term, and Intangible.

Assignment - Is the action for the seller of the option of acquiring the opposite position when an option is exercised. When a put is exercised, the writer receives a long position in securities or a long futures contract. When a call is exercised, the writer receives a short position in the securities or a short futures contract.

Associated Person - Is the registered person who handles orders in the commodities and futures business. Here, registration is at the National Level.

Assumable Mortgage - Is a mortgage loan which can be assumed by a new buyer. Generally, the new owner must pass a credit approval process.

Assumption of Mortgage - Is a provision which allows a new buyer of a property to assume or use an existing mortgage provided such buyer is approved by the lender.

At-the-Money - Is an option which has an exercise or strike price that is the same as the underlying instrument at current market valuations.

ATM - Is an Automated Teller Machine. It also refers to an At-the-Money option.

Authorized Shares - Are the number of shares that a corporation may issue. They represent the maximum shares that can be outstanding. See Issued Shares and Treasury Stock for related terms.

Autocorrelation - Is the statistical dependency of items within a time series. This compares to Serial Correlation.

Automatic Exercise - Occurs after an option expires. Each exchange and its clearing house has rules which govern this exercise. There are minimum in-the-money requirements. A holder of an option must inform the clearing house not to automatically exercise an option. These instructions not to exercise may be due to relatively high transaction costs, increases in position limits, or unacceptable alterations in position profiles. Also, after hours trading indications may suggest dramatically different prices than those used to determine the automatic exercise in-the-money amounts.

Await Instructions - Is the designation for a special pairing or matching of transactions. It also refers to additional handling instructions for a transaction for a specific account. These instructions supercede the standard or default instructions.

Award - Is the decision of an Arbitration Panel.

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Copyright © 1998-2017 Barkley International, Inc. All Rights Reserved. - Page created Tuesday, May 19, 1998 by Oasis Management®. Last Modified on Monday, October 16, 2017.