M - Return to Index
m or M - Has multiple meanings and usages. It may refer to one thousand or even to a million. Caution is required. The root is from the Latin and it is mille. The plural is millia which refers to thousands.
It has other uses, see below.
M - Is the Commodity Futures Symbol which represents the June Delivery Month.
Macaulay Duration - Is the present value of all cash flows, both principal and interest, weighted by time. It is a measurement expressed in years which is generally less than the stated maturity. An exception occurs for zero coupon bonds.
Macro Hedge - Is an enterprise-wide, trading desk, or portfolio risk management offset aimed at the net risk of the aggregated position. Generally, these hedges are more efficient than micro hedges for complex portfolios. Compare to Micro Hedge.
Macro Hedge Funds - Are those which are more benchmark or index oriented. They tend to be top-down in approach rather than bottom-up. These Macro Hedge Funds employ strategies using actual securities, commodities, currencies, futures, and derivatives. They also use various degrees of leverage to try to outperform the market or benchmark indices.
Maintenance Requirement - Is the level of margin necessary to support open positions given adverse price movements. If the maintenance level is violated, a variation call is issued which would be equal to the amount to restore an account to the initial margin level.
Maloney Act of 1938 - Was an amendment to the Securities and Exchange Act of 1934. It focused on self-regulatory activities of the over the counter market for securities. It provided the basis of the formation of the National Association of Securities Dealers (NASD).
Mapping - Refers to the presentation of financial positions. It is used in risk and portfolio management. It can be graphical or tabular.
Margin - Is the amount required to open a position. This amount is different for each futures market depending on each contract. Also, the dollar amount varies for each security and option account because of the variations in holdings among all accounts.
Margin Call - Is the phrase used to represent a call for additional funds. This demand for more funds in either cash and/or securities is to restore an account to its initial margin requirement level. Generally, this occurs when the price action is adverse to the account holders positions. It can also reflect an increase in margin requirements.
Margin Requirement - Is the amount of funds necessary for a position or a portfolio's entire holdings.
Mark Down or Markdown - Refers to the amount of spread or transaction fee subtracted from a security for purchase by a dealer from a client. There are various guidelines provided by regulatory and industry groups. Excessive mark downs are prohibited.
Mark-to-Market - Is the valuation process which provides an indication of reasonable prices for positions on a daily basis or some other proscribed time frame.
Mark Up or Markup - Refers to the amount of spread or transaction fee added to a security for sale by a dealer to a client. There are various guidelines provided by regulatory and industry groups. Excessive mark ups are prohibited.
Market - Is an order to buy or sell an instrument at the prevailing price (bids and offers). In the case of a buy order it means taking the offers whereas for a sell order it means hitting the bids.
Market Cap or Market Capitalization - Is a value placed on a company. It is computed by multiplying the number of outstanding shares by the current share price.
Market Efficiency Hypotheses - Refer to theories which try to explain financial market behavior. Some hypotheses state that the markets are rigorously efficient and operate by an immediate discounting of perfect information. Other theories state that the markets are relatively inefficient, particularly when socially-oriented goals are also to be considered. Other hypotheses state that information is good or even very good but not perfect. Also, not all market participants believe or simultaneously act on new data or information. The latter theorists believe that the markets try to attain pure efficiency. However, they also recognize that competition breeds asymmetrical change and this influences the discounting and adaption processes.
A simple example will highlight this view. While improvements in technology are reducing costs and communication times, not everyone updates their systems given each and every change in chip speeds and processing power. To do so would be too expensive and this creates one of example of a marketplace paradox.
Market if Touched - Is an order that becomes market action when a price is hit. Buy Market if Touched orders are activated when the market price declines to the stated level. Then the broker is authorized to buy to satisfy the quantity. This is different than a limit order where all the quantity must be executed at the stated price or better.
Market Maker - Is a party who is prepared to buy and sell securities from all parties at the market makerís bid and offer.
Market on Close - Is an order to buy or sell on the close of a market. Typically, there is a brief period prior to the day's cessation of trading which is defined as the close. This period varies from market-to-market and exchange-to-exchange.
Market on Opening - Is an order to buy or sell on the opening of a market. Typically, there is a brief period at the commencement of the day's trading which is defined as the opening. This period varies from market-to-market and exchange-to-exchange.
Market Value - Is the value of an open position. It is determined by multiplying the known or implied prevailing price by the quantity.
Married Put - Is the purchase of a put and its underlying stock at the same time. Effectively, it behaves like a synthetic long call but can have different of special tax implications.
Matched Funding - Is an asset and liability management technique which offsets fund sources to fund uses.
MATIF - Marche a Terme International de France.
MBS - See Mortgage Backed Securities.
MBSCC - Is the Mortgage Back Securities Clearing Corporation.
Mcf , mcf or MCF- Refers to 1,000 cubic feet.
Mean - Is often considered as the simple arithmetic average of the sum of the observed values divided by the number of observations. The simple unweighted mean of the listed four observations: 8,12, 10 and 14 is 11. This statistic is computed by (8+12+10+14=44) 44 divided by 4.
The geometric mean of the same four observations is 10.77. It is computed by multiplying each observed value and then deriving the nth root of that number. The geometric mean can only be equal to or less than the comparable arithmetic mean.
Mean Reversion - Is the postulate that short term rates or volatilities will move toward longer term averages.
MECs - Are Modified Endowment Contracts.
Mega or Megas - Is a Fannie Mae program. It allows investors to combine new or old FHLMC securities into these larger instruments. Megas have principal amounts equal to or greater than $5 million. The subpools used for Mega construction can be either fixed or adjustable rate securities.
Melt Down or Meltdown - Is a sudden decline or collapse in financial values. Tends to be used for broader indicators such as market indices or asset classes.
Melt Up or Meltup - Is a sudden advance or increase in financial values. Tends to be used for broader indicators such as market indices or asset classes.
Merchandising - Is the delivery aspect of the futures market. It is secondary to the risk management role of the futures and options market. Merchandising occurs when a hedger delivers commodities or financials. Sometimes, this technique is used for the hedger to maintain anonymity.
MGE - Is the Minneapolis Grain Exchange.
Micro Hedge - Is a specific transaction aimed at the risk of a clearly identifiable trade or position. Generally, these hedges are less efficient than macro hedges for complex portfolios. Compare to Macro Hedge.
MidAM - Is the MidAmerica Commodity Exchange.
Middle Office - Is the area or function which relates to risk management. This area measures, monitors and occasionally proactively manages the firm's exposure. This proactive dimension is gradually being implemented in the industry. See Back Office and Front Office for related terms.
Midget - Is a 15 year maturity, fixed rate security issued by the Government National Mortgage Association (GNMA).
MIT - See Market if Touched.
mln or MLN - Refers to a million. Sometimes it is described as MM. At times, some use M to refer to a million. However, this can be confusing as M is often used to refer to a thousand.
MLS - Refers to the Multiple Listing Service.
MODD - See Modified Duration.
Modified Duration - Is considered a more accurate representation of a bond's weighted cash flow stream. This statistic adjusts the Macaulay Duration by taking into account the yield in the market and the frequency of coupon payments in a year. Modified Duration is less than the standard duration. It is computed as:
Modified Duration = ________Duration________________
( 1 + yield in market/coupons in year)
Money Market Funds - Are mutual funds which invest in short-term instruments such as treasury bills, commercial paper, and asset backed securities (ABS). Broadly defined, these investments have maturities, and for some, durations less than a year. Often, these funds try to keep the average maturity or quantitative duration within 2-3 months. Also, these funds try to maintain a net asset value (NAV) of $1 per share. However, this price level is not guaranteed and there have been cases where it was broken. In the latter case, it is known as "breaking a buck."
Mortgage - Is a pledge of real property in order to obtain a loan: It is not the note itself. The loan instrument is a note or bond. However, these two terms are frequently used synonymously.
Mortgage Backed Securities - Is a broad term which encompasses both generic and pool specific securities predicated on real property. The term also refers to private label or agency securities, pass-throughs, or derivatives such as Collateralized Mortgage Obligations. It can refer to the Over-the-Counter options on mortgage backed securities as well. These mortgage backed securities are viewed as either plain vanilla or exotic. Some of the more common issues are:
There are other types and the list is growing because of the unique nature of these instruments.
- Accrual or Accretion Bond,
- Companion or Support,
- Constant Maturity Treasury (CMT),
- Inverse Floaters or Reverse Floaters,
- IO or Interest Only,
- IO-ette or IOette,
- Jump Bonds,
- Jump Z,
- PAC PO,
- Pass Throughs,
- Planned Amortization Class,
- PO or Principal Only,
- Reverse TAC,
- Scheduled Bonds,
- Stripped Mortgage Backed Securities,
- Super Floater,
- Super PAC,
- Super PO,
- Targeted Amortization Class,
- Z Bond, and
- Z PAC.
Mortgage Backed Securities Hedge Funds - Generally focus on being long the actual mortgage backed securities and short some proxy such as TBAs (To Be Announced), futures, Treasuries or derivatives. These funds typically purchase highly rated agency paper, CMOs, or REMICs and finance the positions in the "repo market." This financing can often result in gross asset, principal or market values of $10 billion for an initial cash/equity position of $1 billion dollars. In some respects it is comparable to buying a house with borrowed money. It is the borrowing which magnifies the performance. If the market quickly jumps 10 percent higher, then the buyer doubled his investment. Here, it would be 10 percent of $10 billion or a $1 billion profit against an initial capitalization of $1 billion. However, if the market declines by 10 percent, then the original investor is out.
If the market went down 25 percent, then the original investor is gone but the lending institution (bank or brokergage firm) is on-the-hook for $1.5 billion. Effectively, this is what has been recently occurring in the financial industry. The lenders are becoming defacto new investors, holding losing positions, because of defaults.
Mortgage Tax - Is a tax which is assessed against a new mortgage. It is usually paid by the borrower.
Mortgagee - Is the lending party in a mortgage transaction.
Mortgagor - Is the borrowing party in a mortgage transaction.
MSRB - Is the Municipal Securities Rulemaking Board.
MTN - Is a Medium Term Note.
Multiple Listing Service - Is a network or system which provides detailed listing information to its members.
Multiplier - Is a factor which can increase the leverage of an instrument such as a floater or inverse floater. While sometimes the multiplier is less than 1.0, it is usually greater than 1.0. Multipliers are often seen in structured financings such as CMOs and Over-the-Counter derivatives.
Mutual Fund - Is an investment company which the number of shares outstanding varies according to demand. If investors seek to own more shares, the fund will sell new ones. If existing shareholders seek to reduce their holdings then the fund will purchase them at the Net Asset Value. In recent years, there have been new provisions which can slow down the redemption process. It had been the case that fund shares were to be redeemed immediately on demand. This type of investment company is also known as an Open End Fund because the number of shares outstanding can vary widely from day-to-day. Compare to Closed End Fund.
MV - Is the Market Value.
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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 Monday, January 27, 2020.