N - Return to Index

N - Is the Commodity Futures Symbol which represents the July Delivery Month.

NAII - Is the National Association of Independent Insurers.

Naked Option - Is an open option position which is not covered or hedged. Frequently, it is used in the context of a sold option position.

Narrowing - Is the movement towards convergence between the cash and futures market or the cash and forwards market. Here, the price or interest rate differentials are becoming smaller over time between the comparative delivery dates.

NASD - Is the for National Association of Securities Dealers.

NASDAQ - Is the acronym for the National Association of Securities Dealers Automated Quotations or Quote system. This network links brokers and dealers in an unified price quotation system. It has three levels. Level I displays the highest bid and lowest offer. Level II displays market maker's quotes. Level III permits the entry and revision of quotes by market makers.

Natural Hedge - Is the occurrence when a firm's or investor's holdings are such that some components directly offset others.

NAV - See Net Asset Value.

NDF or NDFs - Refers to Non Deliverable Forward (Contracts). Non-Deliverable Forwards do not stipulate a delivery. Rather, they require a cash settlement depending on the outcome. This outcome may be predicated on the initial transaction price and then related to the terminal date or offsetting date price. Non deliverable forward contracts are similar to cash settled futures markets.

NDFS - Is the Next-Day Funds Settlement system.

Negative Amortization - Is the increment to principal over time. This feature reflects the inadequacy of the periodic payment to service both principal and interest. It usually is the result of the addition of interest to the outstanding loan balance.

Negative Carry - Is the condition whereby a portfolio after financing considerations generates a negative income stream or loss.

Negative Leverage - Is a concept which states that there is an opportunity cost loss associated with the purchase of an option on a future. This is due to the fact that futures can be initially margined with certain approved securities whereby the client continues to collect interest.

Negotiated Issues - Are new security issues where the issuer selects an underwriter or underwriting group. This compares to a competitive offering where different underwriters compete for the intended business.

Nest Egg - Refers to savings. Often this savings is for retirement.

Net - Is the difference between long and short positions or the bottom line impact of a transaction.

Net Asset Value - Refers to the value of a share or unit of investment. It is computed by adjusting the market value of all investments by the liabilities. Then this net dollar amount is divided by the number of shares or units outstanding. Unless there are additional charges to be imposed upon redemption, the Net Asset Value becomes the bid and transaction market price. Most open end funds only calculate transactional net asset values once a day based on the closing and settlement prices.

Net Coupon - Is the coupon or interest payment made to the investor of a mortgage backed security. It is lower than the gross coupon of the collateral by an amount equal to the servicing, guarantee, and other applicable fees.

Net Interest Margin - Is the difference between the interest revenue and the interest expense. Sometimes, it is referred to as the spread.

Net Position - Is the difference between longs and comparable shorts. It can also refer to the dollar difference for the combined market values of all long and short positions. Often it refers to the net trading exposure on a market directional basis. However, some firms use different definitions depending on whether the analysis is originating from accounting or trading.

Net Present Value - Is one of the building block processes for finance. It provides a methodology for evaluating and pricing securities and projects. In a simple case it is the discount mechanism for a zero coupon security. Here, there is one payment predicated either on interest or principal. By knowing the time left to maturity, assuming no option features, and knowing the discount rate, one can price or evaluate the zero coupon. Pricing bonds is an extension of this process. Now, instead of evaluating, one payment, there is an entire interest and principal payment stream. For equities, the process evaluates expected cash or dividend flows and the residual value of the enterprise. Complexity arises when there are multiple discount rates (bids and offers), yield curve shapes, and credit differences. Even the selection of discrete, compounding or accretion modeling can make a substantial impact on the value of a simple zero coupon bond.

Netting - Is a process used by institutions and clearinghouses to determine the marginal risks and demands for funds.

Neutral Spread - Is an option strategy which is non-directional in terms of price or interest rate movement. It seeks to profit by collecting time value. One such strategy is the Calendar or Horizontal Spread.

Neutral Spreads - Is a term used to describe various positions. It can refer to a position that attempts to capitalize on flat or stable market price conditions, to be relatively immune to market swings, or to benefit from volatility. In these cases, the spread tries to minimize the impact of adverse price, duration, or volatility movements.

NIM - See Net Interest Margin.

NMS - Refers to the National Market System.

No Load - Is a transaction, particularly for a mutual fund whereby no assessment is charged for either the purchase or redemption of the funds shares. Transactions are executed at the single Net Asset Value (NAV). There are no separate and distinct bid and offer prices.

Note that some brokerage firms may charge a commission for dealings in these funds, particularly when the client is purchasing so called "outside funds." Outside Funds are those sponsored by firms affiliated with other brokerage firms.

Nominal - Is used in the sense of an indication. For example, a security may have a nominal price, nominal bid, or nominal offer. This not reflects a broker or dealer's willingness to execute at that price, for that security, and at that time. It shows a level or point from which subsequent price discovery may evolve.

Non - Discretionary - Is an order which given a client gives to the broker. All the terms are specified.

Non-Discretionary Account - Is an account which the client makes all the trading decisions. However, the client may give very limited discretion to the broker or account executive. This limited discretion is in terms of price or time. However, an order as to whether to buy or sell, quantity and exact instrument is required to be given.

Nonstationary - Refers to a time series or time series process which has no natural mean. This condition is an accurate representation of many financial time series such as stocks or volatilities. This compares to Stationary.

Normal Distribution - Is one of the most popular and well documented probability distributions. It is frequently depicted as the bell-shaped curve. This process underlies much of financial theory and practice.

It is often relied upon for modeling efforts because two variables define its location and shape. These two variables are the mean and the standard deviation. It should be noted that normal distributions with larger standard deviations (or variances) are wider or flatter. This is because the greater volatility is dispersed over a wider range. Conversely, smaller standard deviations generate tighter formations which have a pronounced peak appearance.

When the mean value of a normal distribution is bounded by one standard deviation (plus or minus) then it is expected that 68.3 percent of the values will occur in that region.

When the mean value of a normal distribution is bounded by two standard deviations (plus or minus) then it is expected that 95.5 percent of the values will occur in that wider region.

When the mean value of a normal distribution is bounded by three standard deviations (plus of minus) then it is expected that 99.7 percent of the values will occur in that still wider region.

When the distribution's mean is bounded by a plus and a minus standard deviation, the design is considered as Two-Tailed because both sides of the distribution are being evaluated.

These parameterized regions are crucial to the understanding of Value at Risk (VAR) programs and many option pricing models. Also, many linear analysis techniques depend on the assumption and stability of a normal and independent probability functions. Many option pricing models use the annualized standard deviation as the volatility proxy.

Normal Market - Is the typical activity for an instrument or exchange. It is also a pricing term structure which exhibits appropriate financing and storage costs over time. In its general form it shows prices to be progressively higher as delivery dates are further away from the current or spot market.

Not Held - Is an instruction which qualifies an order. It states that the client will not hold the broker liable in the event of failing to execute or complete a transaction. Also, the order can give a degree of latitude, pricing or time, to the broker in order to more favorably execute a transaction.

Note - Is the instrument which represents the actual indebtedness. However, the term mortgage is often used as a synonym for the note.

Notice of Sale - Refers to the advertisement placed by a municipality. This notice includes the municipality's intention to sell new securities and invites underwriters to bid for the new issues. Compare to Negotiated Issues.

Notional - Is the stipulated principal amount for a swap transaction. There is no transfer of ownership in the principal for a swap; but there is an exchange in the cash flows for the designated coupons.

NPV - See Net Present Value.

NRCE - Is the Northeast Regional Check Exchange.

NSCC - Is the National Securities Clearing Corporation.

NYCE - Is the New York Cotton Exchange.

NYACH - Is the New York Automated Clearing House.

NYCHA - Is the New York Clearing House Association.

NYMEX - Is the New York Mercantile Exchange.

NYSE - Is the New York Stock Exchange.

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Copyright © 1998-2019 Barkley International, Inc. All Rights Reserved. - Page created Tuesday, May 19, 1998 by Oasis Management®. Last Modified on Monday, August 19, 2019.