D - Return to Index
Dated Date - Is the date from which interest accrues on a newly issued municipal security.
Day Order - Is an order to trade securities, derivatives or futures which expires at the end of the trading day for which it was entered.
Day Trader - Is a market participant who has a same-day transaction horizon. Often the positions are held for minutes or hours but they are offset by the end-of-the-market-day.
Day Trading - Is the investment, speculation or risk management approach which is limited to intraday activity with little or no overnight carrying of positions.
DB, Db, db, or DR - Refers to a debit or the process of debiting an account.
DEA - Is the Designated Examination Authority.
Dealer - Is an organization which transacts trades on the behalf of its proprietary account. This activity is opposed to a broker which transacts trades for the account of its customer.
The dealer is usually compensated by the spread.
DEaR, DEAR, or Dear - Refers to the Daily Earnings at Risk. It is a proxy for maximum expected losses on a daily basis. It is usually viewed with a 95 percent probability or confidence level. This assumes an underlying normal distribution and independence of returns. At the 95 percent level, it is equivalent to 1.65 standard deviations.
Within a Value at Risk (VAR) context, a one-day horizon VAR would be equal to DEAR. Other VAR measurements would depart from DEAR's one-day view.
Debit Spread - Is an option position whereby the end result is a debit. For example, the investor who places a vertical bull call spread pays a net premium or is debited. Similarly, a risk manager who places a vertical bear put spread is charged a net premium or is debited.
Debt - Refers to a relationship which obligates a borrower to pay interest and principal. The terms are often in writing and define the relationship. Indentures and and mortgage notes are common types of these written instruments of indebtedness.
Debt Limit - Is the maximum amount of debt which a municipality may issue or incur.
Debt Service - Refers to the yearly obligation of interest and principal payable on a bond issue. Sometimes, the term is used collectively to refer to all debts outstanding.
Debt to Equity Ratio - Refers to the capitalization relationship of securities. Here, it is the amount of bonds and preferred stocks relative to the corporate equity position.
Deck - Refers to the orders held by a floor broker. Often, separate orders are written on individual cards or tickets and the collective amount is a deck.
Default - Occurs when a debtor fails to make interest or principal payments.
Defeasance - See Advanced Refunding.
Deferred Taxes - Are a temporary source of free cash flow. This liability is a non-cash expense until it is paid.
Defined Benefit Plan - Refers to a retirement plan that has a quantified amount to be disbursed or paid out each year. Depending on the plan, there may be maximum and minimum benefit dollar amounts. Often, these benefits depend on years of service, age that benefits start, and possible other income constraints. Some popular plans are pensions or Social Security. Here, benefits are defined in advance but there may not be inflation or cost of living adjustments. Also, better than average investment performance does not increase the level of plan benefits. Compare to Defined Contribution Plan.
Defined Contribution Plan - Refers to a retirement plan that has a quantified amount to be invested each year. Depending on the plan, there may be maximum and minimum contributory dollar amounts. Also, there may be years-of-employment and income constraints. Some popular plans are the 401K and IRA plans. Here, there are no guarantees as to eventual value of plan amount or plan benefits. Poor, moderate, or better than average investment performance directly impacts the value of the account and potential benefits. Compare to Defined Benefit Plan.
Deflate - Is the economic and financial process whereby the monetary and fiscal authorities act to stabilize or reverse an upward trend in general price levels. Monetarists would view this activity as decreasing the money supply.
Deflation - Deflation Is the economic and financial phenomenon which represents declining prices particularly for goods and services. It can occur in countries with strengthening currencies. Here, the cost of imports would tend to decline. It can also occur in countries which are experiencing depressed economic conditions. At such times of declining output, sales of assets generate considerable downside pressure on prices. Deflation can be viewed in monetary terms when the money supply is constracting to such an extent that one unit of currency purchases increased amounts of goods and services.
Delist - Is the removal of securities which were previously approved for trading on a recognized exchange.
Delivery Charges - Is used several ways. It refers to the amount of expense entailed in making or taking a delivery on the futures or cash markets. Also, it is used to reflect the fact that there may be additional risks associated with holding the nearest month in commodity futures contracts. These risks can be potential squeezes, lack of good delivery storage, transportation problems, and other impediments to a smooth and orderly market. To cover for these contingencies, a Delivery-Month Charge will be assessed for the calculation of margins or performance bonds.
Delivery Notice - Is the document which expresses the intent of the seller to make good delivery to a long or buyer of a futures contract.
Delivery Price - Is the invoiced price for a futures contract.
Delta - Is the measurement of the price sensitivity of an option relative to the underlying instrument. Typically, the delta range is expressed between -1.0 to +1.0.
Delta Equivalency - Is used in determining the effective market behavior for combined derivative positions.
Delta Hedge - Is a risk management operation which uses derivative instruments against actual underlying securities or instruments. The composite option characteristic of the combined trade indicates the market exposure experienced by the trading or investing entity at that moment in time. When the market price or interest rate exposure is essentially minimized to zero, then the hedge is considered Delta Neutral.
Delta Neutral - Occurs when the market risk exposure, in terms of price or interest rate level, for an underlying position is completely offset with derivatives. This is a point in time concept because options are decaying assets that may have to be rebalanced in order to maintain delta neutrality.
Denomination - Is the stated Par Value of a credit instrument. A common amount is $1,000 however, other amounts may be specified.
Depreciation - Is the charge against revenues which represents a prorated capitalization of the cost of an asset.
For example, if a computer is expected to have a useful life of 5 years and cost $6,000 with no salvage value, then the annual, straight-line depreciation would be $1,200 per year. If the same computer had an estimated salvage or residual value of $500, then the annual depreciation would be $1,100 ($6,000 - 500 = $5,500 divided by 5 years).
Derivative - Is a financial product which is based upon another product. Futures are based on commodities, financial indices or securities. Options are based on futures, securities or cash markets. Forwards are extensions of the cash market across time. CMOs are derived from MBS and so on. Generally, derivatives are risk management tools, however they are also used for investment or speculative purposes.
For more information about DERIVATIVES, click here.
Designated Order Turnaround - Is the New York Stock Exchange's computerized order entry system. It is also known as DOT.
Devaluation - Refers to the action taken by a country via its central bank or monetary board which reduces the value of its currency vis a vis other currencies. Often, the result is more abrupt than would occur within a floating rate framework.
Diagonal Spread - Is the purchase and sale of puts or calls for the same instrument but for different strike prices and different delivery dates. These strategies can be done for debits or credits. Also, they are bullish or bearish depending on the relationship of the purchased to sold strike price. When the lower strike is purchased and the higher strike is sold then the strategy has a bullish configuration. When the lower strike is sold and the higher strike is purchased then the strategy has a bearish configuration.
Discount - Is the negative differential against the spot price. It can refer to an interest rate, price difference, amount under par, or other similar relationship.
Discount Rate - Is the interest rate used for adjusting for the time value of money for Net Present Value, Option Pricing or other Market Models. It can also refer to the rate that the Federal Reserve charges its members.
Discretionary - Is an order which given a client gives to the broker. The discretion is in terms of price or time and not in terms of buy or sell, instrument or quantity.
Discretionary Account - Is an account whereby another party holds limited or full Power of Attorney over the trading or investment account of another.
Discriminant Analysis - Is a mathematical approach which tries to differentiate between classes, categories or clusters or groups. It is mostly used for Credit Scoring or predicting bankruptcies. It partitions a sample into Yes or No groups, Positive and Negative, or Bullish and Bearish.
Dispersion - Is a statistical indication of variability, volatility, or risk. Some common measures of dispersion are:
There are other measures besides the above some of which refer to shape or skewness.
Distressed Securities - Refer to issues in bankruptcy or other severely impaired securities which have very low credit ratings.
Distribution - Refers to selling often coincident with market tops or consolidations. It also refers to the liquidation, partial or entire, by insiders, control people, or major investors.
The term also refers to a disbursement out of a retirement plan or mutual fund.
Distributions - Refers to the various underlying or assumed probabilistic processes. A few distributions are: the Binomial, the Normal, and the Uniform.
Divided Account - Refers to a new issue underwriting whereby each member is responsible to distribute his allocated portion of the deal. After the member sells his portion, his liability ceases with regard to the syndicate. This compares to an Undivided Account.
Dividend or Dividends - Refer to distributions made by a corporation to its shareholders. The shareholders can be common or preferred.
Dividends are usually paid in cash. However, dividends are sometimes paid in stock. There have been situations where the dividend was paid in product or a processed good such as a precious metal.
Dividend Date - Is sometimes used to refer to the Date of Record for entitlement to the dividend or the actual Payment Date.
Dividend Payout Ratio - Is computed by dividing the dividends paid on common shares by the net income which would be available for common stockholders.
Dividend Reinvestment - Occurs when a dividend paying organization such as a corporation or mutual fund automatically reinvest the payable dividend into additional shares of that organization. There can be tax implications for this activity.
Dividend Yield - Is a term that can have several different meanings. It can refer to an annualized (cash) dividend rate of return. This is computed by dividing the cash dividend by the price per share at the time of purchase. If the stock were trading at 100 and the dividends equaled $2.80, then the yield would be 2.80 percent.
Also, the term is used on the assumption that the current trading price is the implied purchase price. The computation process remains the same.
DK - See Don't Know.
DNR - See Do Not Reduce.
Dog or Dogs - Are underperforming assets or those securities which are out-of-favor. Frequently, the term refers to stocks or other financial positions.
Dollar Cost Averaging - Is the practice of purchasing securities at periodic intervals with fixed dollar amounts regardless of market conditions. The investor does not intend to purchase an equal number of shares at each interval.
Dollar Price - Is the price of a bond expressed as a percentage of face, par, or principal. For example, a dollar price of 98 for a $1,000 denominated bond would be $980 for that bond.
Don't Know - Is a term used brokers, dealers, and traders when there are transaction comparisons. When a transaction does not match up on a party's books or records then a DK notice is sent to the other party.
Do Not Reduce - Is an instruction on an order that notifies the broker or specialist that the client does not want the price to be adjusted for cash dividends.
DOT - See the Designated Order Turnaround.
Double Taxation - Refers to corporate income which is subject to both corporate taxes and individual taxes. Frequently, it is viewed as the case whereby the company's income is taxed and the distribution of that income in the form of a dividend paid to the shareholder as taxed again.
Down-and-In - Is an option feature by which a derivative contract becomes active when an indicator, such as price, drops through a trigger point or threshold. Related topics are Down-and-Out, Up-and-In, and Up-and-Out.
Down-and-Out - Is an option feature by which a derivative contract dies or ceases to exist when an indicator, such as price, drops through a trigger point or threshold. Related topics are Down-and-In, Up-and-In, and Up-and-Out.
Down-Tick - Refers to a trading transaction which is executed at a lower price than the preceding one. It is also known as a Minus-Tick.
Downgrade - Is the lowering, reduction, or negative change in an company's or country's credit rating. Often it can refer to one or more issues.
DPMs - Are Designated Primary Market Makers.
DRIP or DRIPS - Refer to Dividend Reinvestment Programs whereby an investor acquires additional shares of the corporation by having the dividends automatically reinvested.
DSO - Refers to Days Sales Outstanding or Day's Sales Outstanding. It measures the relationship of Accounts Receivables relative to Sales. Different users apply time factors to adjust for quarterly or annual views.
DTB - Is the Deutsche Terminborse.
DTC - Is the Depository Trust Company.
Dual Trading - Occurs when a member of an exchange trades for both his own personal account and executes customer orders as well. Sometimes, it is viewed that the potential for a conflict of interest may be present.
Due on Sale - Is a clause which requires the immediate and full payment of the existing mortgage in the event of a transfer of ownership, sale, death, or some refinancings. This clause is usually specific as to what events will trigger the repayment of the mortgage.
Duration - Is computed by using zero coupon equivalencies to discount all the cash flows of a credit instrument. This statistic is a surrogate for the expected life of the security. In general, the term refers to a quantification of a bond as to its yield and price sensitivity.
It should be noted that duration is additive. This means that assets, liabilities, swaps, and other credit instruments can be added to arrive at a portfolio or book duration. Some guidelines are:
See Effective Duration, Macaulay Duration, and Option Adjusted Duration.
- Duration of a zero coupon is its maturity.
- Duration of a coupon security is less than its maturity.
- Duration extends with maturity.
- Duration is inversely related to coupon rate.
- Duration is inversely related to the market rate.
Dynamic Analysis - Is the approach to study market conditions over time. This compares to Static Analysis.
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Copyright © 1998-2003 Barkley International Inc. All Rights Reserved. - Page created Tuesday, May 19, 1998 by Oasis Management®. Last Modified on Tuesday, December 10, 2019.