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Terms starting with 'A'
A
A NASDAQ stock symbol specifying that the stocks are Class "A" shares of the company.

A Priori Probability
Probability calculated by logically examining existing information.

A-Share
In a family of multi-class mutual funds, this is the class that is characterized by a front load structure. Not all fund companies follow this class structure, however it is the prominent method of distinction.

AAA
The highest rating given on bonds by bond rating agencies.

Abandonment
1. The act of surrendering a claim to, or interest in, a particular asset.

2. The permitted withdrawal from a forward contract that is made for the purchase of deliverable securities.

3. The act of allowing an option to expire unexercised.

Abandonment Option
A clause written in a contract, granting parties the option of withdrawing from the contract before the fulfillment or completion of all the contractual duties.

Abandonment Value
The value of a project or asset if it were immediately liquidated.

Abatement
In general, a decrease in the amount of taxation faced by an individual or company.

Abatement Cost
A cost borne by many businesses for the removal and/or reduction of an undesirable item that they have created.

ABC Agreement
An agreement made between a purchasing member of a seat on the NYSE and the firm in which he/she works. With the approval of the NYSE, this agreement stipulates that the employee of the firm may:

a) transfer the seat to another employee of the firm,
b) retain ownership and purchase a new seat for another individual designated by the firm
c) sell the seat and transfer any gains to the firm.

Ability to Pay
The principle that taxes should vary according to an individual's level of wealth or income.


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Abnormal Return
When the return on an asset or security is in excess of the expected rate of return.

Above the Market
An order to buy or sell at a price set higher than the current market price of the security.

Above Water
The condition of an asset's actual value when it is greater than the asset's book value.

Absolute Advantage
The ability of a country, individual, company, or region to produce a good or service at a lower cost per unit than the cost at which any other entity produces that good or service.

Absolute Priority
The principle in bankruptcy proceedings that requires senior creditors to be fully paid before junior creditors and stockholders may receive any payment. Also known as liquidation preference.

Absolute Rate
The fixed portion of an interest-rate swap, expressed as a percentage rather than as a premium or a discount to a reference rate.

Absorbed
1. In a general business sense, when a cost is treated as an expense instead of being passed on to the customer in the form of higher prices.

2. In underwriting, when an issue has been completely sold to the public.

3. In mergers, when an acquired firm is folded into the acquiring company.

Accelerated Cost Recovery System - ACRS
A system of depreciation introduced by the Economic Recovery Tax Act of 1981. ACRS depreciation is based on recovery periods instead of useful life. These periods were predetermined by the IRS.

Accelerated Depreciation
Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years of the life of an asset.

Acceleration Covenant
A clause included in certain debt securities and swap agreements stating that the immediate collection of payment and termination of contract will take place should default or a downgrade of debt occur.


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Accident and Health Benefits
Fringe benefits provided by for employees for sickness, accidental injury, or accidental death. These benefits include payment of hospital and medical expenses as well as income payments.

Account
1. A statement of indebtedness for goods or services from one person to another.

2. An account maintained by a bank to preserve a depositor's money or securities.

Account Balance
The net of debits and credits for an account at the end of a reporting period.

Accountable Plan
A plan for reimbursing employees for business expenses. Under this plan, the reimbursement that the employee receives for the expenses is not included in his/her income. Employees are required to account adequately for expenses with records and return any excess reimbursement within a reasonable period of time.

Accountant
A professional person who performs accounting functions.

Accountant's Opinion
A statement signed by an independent accountant outlining his or her opinion regarding the quality of information contained in a company's financial reports and records.

Accounting
To provide a record such as funds paid or received for a person or business. Accounting summarizes and submits this information in reports and statements. The reports are intended both for the firm itself and outside parties.

Accounting Earnings
A company's earnings as reported in the income statement.

Accounting Method
In terms of taxation, the method by which income and expenses are determined for taxation purposes.

Accounting Period
1. In general, the time period reflected by a set of financial statements.

2. In terms of taxation, it is the 12-month period a taxpayer uses to determine their income tax.


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Accounting Rate of Return - ARR
ARR provides a quick estimate of a project's worth over its useful life. ARR is derived by finding profits before taxes and interest.

Accounts Payable - AP
Money that is owed to suppliers.

Accounts Receivable - AR
Money that is owed by customers.

Accredited Investor
A term used by the SEC under Regulation D to define investors that are financially sophisticated and have no need for the protection provided by certain government filings. Also known as a qualified purchaser.

Accreting Principal Swap
A swap whereby the notional value is increasing over time.

Accretion
1. Growth through addition or expansion.

2. In reference to discount bonds, the term is used to specifically describe the accumulation of value until maturity.

Accretive Acquisition
An acquisition that will increase the acquiring company's EPS.

Accrual Accounting
An accounting method that measures the performance and position of a company by recognizing economic events regardless of when cash transactions happen.

Accrued Expense
An accounting expense recognized in the books before it is paid for. It is a liability, usually current. These expenses are typically periodic and documented upon a company's balance sheet due to the high probability of collection.

Accrued Interest
The interest that has accumulated on a bond since the last interest payment up to but not including the settlement date. There are two methods for calculating accrued interest:

1)A 360 day year method, which is used for corporate and municipal bonds.

2) 365 day year method, which is used for government bonds.


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Accrued Market Discount
The gain in the value of a discount bond expected from holding it for any duration until its maturity.

Accumulated Earnings Tax
A tax imposed by the federal government upon companies with retained earnings deemed to be unreasonable and in excess of what is considered ordinary.

Accumulation/Distribution
A momentum indicator that associates changes in price and volume. It is based on the premise that a price move is more significant with larger volume.

Acid mine drainage
Acidic run-off water from mine waste dumps and mill tailings ponds containing sulphide minerals. Also refers to ground water pumped to surface from mines.

Acid-Test Ratio
A stringent test that indicates if a firm has enough short-term assets to cover its immediate liabilities without selling inventory. The acid-test ratio is far more strenuous than the working capital ratio, primarily because the working capital ratio allows for the inclusion of inventory assets. Calculated by:
Illustration for Acid-Test Ratio

Acidic precipitation
Snow and rain that have a low pH, caused by sulphur dioxide and nitric oxide gases from industrial activity released into the atmosphere.

Acidic rocks
Igneous rock carrying a high (greater than 65%) proportion of silica.

Acquisition
When one company purchases a majority interest in the acquired.

Acquisition Debt
Debt incurred to construct, improve, or acquire a principal or secondary residence.

Acquisition Fee
Charges and commissions paid out for the selection or purchase of property. Some examples are real estate commission, acquisition expense, and development/construction fees.


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Acquisition Premium
The difference between the actual cost for acquiring a target firm versus the estimate made of its value before the acquisition.

Act of God Bond
A bond issued by an insurance company, linking principal and interest to the company's losses due to natural disasters.

Active Bond
A term used to describe fixed-income securities that trade frequently on the floor of the NYSE.

Active Bond Crowd
The name given to members of the NYSE and their specific bond trading departments that are acknowledged as frequent traders in active bonds.

Active Box
A reference to the physical location in a brokerage where securities are kept.

Active Income
Income for which services have been performed. This includes wages, tips, salaries, commissions, and income from businesses in which there is material participation.

Active Investing
An investment strategy involving ongoing buying and selling actions of the investor. Active investors will purchase investments and continuously monitor their activity in order to exploit profitable conditions.

Active Management
An investing strategy that seeks returns in excess of a specified benchmark.

Active Participant Status
Active participant status is a reference to an individual's participation in an employer sponsored retirement plan. The plans which qualify must include:

1. Qualified plans, such as profit sharing plans, defined benefit plans, money purchase pension or target benefit plans and 401(k) plans

2. SEP IRAs

3. SIMPLE IRAs

4. 403(b) plans

5. Qualified annuity plans

6. Employee Funded Pension Trusts (created before June 25, 1959)

7. A plan established for its employees by the United States, by a State or political subdivision of the United States, or by an agency or instrumentality of the United States or any of its subdivisions

Activity Based Budgeting - ABB
A method of budgeting in which activities that incur costs in each function of an organization are established and relationships are defined between activities. This information is then used to decide how much resource should be allocated to each activity.


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Activity Based Management - ABM
Using an activity-based costing system to improve the operations of an organization.

Activity Ratio
Accounting ratios that measure a firm's ability to convert different accounts within their balance sheets into cash or sales.

Actual Return
The actual gain or loss of an investor. This can be expressed in the following formula: expected return (ex-ante) plus the effect of firm-specific and economy-wide news.

Actuals
1. A term used to describe the underlying in future and forward contracts, dealing with commodities rather than financial instruments.

2. A term used to describe a securities historical volatility.

Actuarial Analysis
The analysis of an investment's risk done by an actuary.

Actuary
A professional statistician working for an insurance company. They evaluate your application and medical records to project how long you will live.

Ad Valorem Tax
A tax based on the assessed value of real estate or personal property. In other words ad valorem taxes can be property tax or even duty on imported items. Property ad valorem taxes are the major source of revenues for state and municipal governments.

Add-On Certificate of Deposit
A certificate of deposit that allows the bearer to deposit additional funds, after the initial purchase date, that will bear the same rate of interest.

ADF
In currencies, this is the abbreviation for the Andorrean Franc.

Adit
An opening driven horizontally into the side of a mountain or hill for providing access to a mineral deposit.


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Adjustable Rate Mortgage - ARM
A mortgage that allows adjustments of the loan interest rate at pre-specified regular intervals.

Adjusted Balance Method
A finance/accounting method where costs are based on the amount(s) owing at the end of the current time period (once credits and payments are posted).

Adjusted Basis
The proportionate value of an asset or security that reflects any deductions taken on, or capital improvements to the asset or security.

Adjusted Cost Base - ACB
An income tax term that refers to the change in an asset's book value resulting from improvements, new purchases, sales, payouts, or other factors.

Adjusted Debit Balance
The amount of money owed by a customer to his/her broker after paper profits and losses are taken into consideration.

Adjusted Exercise Price
1. An option's strike price after adjustments have been made for stock splits to its underlying security.

2. A term used to describe the strike prices for options written on Ginnie Mae pass through certificates.

Adjusted Gross Income - AGI
Used to determine how much of your income is taxable. AGI consists of gross income from taxable sources minus your maximum allowable adjustments.

Adjusted Present Value - APV
The Net Present Value (NPV) of a project if financed solely by equity plus the Present Value (PV) of any financing benefits (the additional effects of debt).

Adjustment in Conversion Terms
A term used to describe the adjustment made to a convertible securities' conversion factor when the exchangeable stock underlying the convertible undergoes a split.

Administrator
1. A person empowered by a court to act for another person who is deemed incapable of acting for himself/herself.

2. A court-appointed person or bank who takes charge of an estate if the deceased failed to leave a will.


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Adoption Credit
A per-child tax credit for adopting a child under 18.

ADP
In currencies, this is the abbreviation for the Androrean Peseta.

ADV Form
A form that is kept on file with the SEC that contains critical financial information about a registered investment advisor.

Advance Directive
A document expressing a person's wishes about critical care when he or she is unable to decide for him or herself. However, it does not authorize anyone to act on a person's behalf or make decisions the way a power of attorney would.

Advance Rate
A percentage of collateral that determines the loan amount that a lender will issue a company.

Advance/Decline Line - A/D
A technical analysis tool representing the total of differences between advances and declines of security prices. The advance/decline line is considered the best indicator of market movement as a whole. Stock indexes such as the DJIA only tell us the strength of 30 stocks where as the A/D line provides much more insight.

Adverse Opinion
A professional opinion made by an auditor indicating that a company's financial statements are misrepresented, misstated, and do not accurately reflect its financial performance and health.

Adverse Selection
1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance.

2. A situation where sellers have information that buyers don't (or vice versa) about some aspect of product quality.

Advisor
A person or company responsible for making investments on behalf of and/or giving advice to investors.

AED
In currencies, this is the abbreviation for the U.A.E. Dirham.


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Aerial magnetometer
An instrument used to measure magnetic field strength from an airplane.

Aeromagnetic survey
A geophysical survey using a magnetometer aboard, or towed behind, an aircraft.

AFA
In currencies, this is the abbreviation for the Afghanistan Afghani.

Affiliated Companies
A situation that occurs when one company owns a minority interest (less than 50%) in another company.

Affiliated Person
An individual who is in a position to influence the actions of a corporation. This includes people such as directors, executives, and owners.

Affirmative Obligation
An obligation of NYSE specialists to enter the market on a particular security (either by posting or bidding and ask) when there is not sufficient market demand and supply to efficiently match orders.

After Hours Trading - AHT
Trading after regular trading hours on the major exchanges.

After Tax Operating Income - ATOI
A company's total operating income after taxes. Calculated by deducting taxes from total operating income.

After The Bell
After the close of the stock market.

After-Acquired Clause
A provision included in legal contracts ensuring that subsequent acquisitions of assets will be included in the debtors liability to the lender.


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After-Tax Profit Margin
A ratio calculated by dividing net income after taxes by net sales.

Against Actual
A transaction generally used by two hedgers who want to exchange futures for cash positions.

Aged Fail
A fail that has occurred between two or more parties to a securities transactions and has lasted for over 30 days.

Agency Bonds
A bond issued by a government agency.

Agency Costs
The costs resulting from an agent performing services for a principal.

Agency Cross
A trade that has only one agent acting for the buyer and seller.

Agency Problem
When conflicts of interest rise between creditors, shareholders, and management, because of differing goals.

Agency Security
Low risk debt obligations issued by enterprises that the U.S. Government sponsors.

Agency Theory
A theory concerning the relationship between a principal (shareholder) and an agent of the principal (company's managers).

Agent
1. An individual or firm that places securities transactions for clients.

2. A person licensed by a state to sell insurance.

3. A securities salesperson who represents a broker-dealer or issuer when selling or trying to sell securities to the investing public.


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Agglomerate
A breccia composed largely or entirely of fragments of volcanic rocks.

Agglomeration
A method of concentrating valuable minerals based on their adhesion properties

Aggregate Exercise Price
The strike price of a put or call option multiplied by its contract size. Aggregate exercise prices are used to determine the dollar amount required should the option be exercised.

Aggregation
1. Used in corporate financial planning, aggregation is a process whereby a number of a firm's smaller projects are combined and treated as an individual project.

2. Used in futures markets, aggregation is a principal involving the combination of all future positions owned or controlled by a single trader or group of traders.

Aggressive Accounting
The practice of inappropriately misconstruing income statements for the purpose of pleasing investors and inflating stock prices.

Aggressive Investment Strategy
A method of portfolio management that attempts to achieve maximum return.

Aging
A method used by accountants and investors to evaluate and identify any irregularities within a company's account receivables. Aging is achieved by sorting and inspecting the accounts according to their length outstanding.

Agitation
In metallurgy, the act or state of being stirred or shaken mechanically, sometimes accomplished by the introduction of compressed air.

Air Pocket Stock
When the price of a stock plunges unexpectedly, similar to an airplane when it hits an air pocket.

Airbag Swap
An interest rate swap whose notional value adjusts according to rising interest rates by indexing the floating portion to a Constant Maturity Swap (CMS).


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Airborne survey
A survey made from an aircraft to obtain photographs, or measure magnetic properties, radioactivity, etc.

Alan Greenspan
Dr. Greenspan was the Chairman of the Board of Governors of the Federal Reserve System from 1987 to 2006. Dr. Greenspan also served as Chairman of the Federal Open Market Committee (FOMC), the Fed's principal monetary policymaking body.

ALGO
The name we have given an algorithm that calculates future price of a stock based on some proprietary math. We place the ALGO lines on a stock chart in Yellow. ALGO gives you "hidden pivots, resistance, support tops, bottom levels before a stock gets there. Its success rate is in excess of 70%

Alien
Any person who is not a citizen of the country in which he or she lives.

Alimony
Payments made to a spouse or former spouse under a separation or divorce agreement.

ALL
In currencies, this is the abbreviation for the Albanian Lek.

All or None - AON
Used on a buy or sell order to instruct the broker to fill the order completely or not at all.

All Weather Fund
A mutual fund that tends to perform well during all economic conditions.

All-Holders Rule
An SEC regulation that requires tender offers to be available to all holders of the identical class of the security.

All-In Cost
Shorthand for "all-included" costs, which are expressed as the interest paid or received for total costs of a financial transaction.


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Alligator Spread
A term referring to an unprofitable spread regardless of favorable market movements. This loss is due entirely to large commissions charged upon the transactions.

Allonge
A sheet of paper attached to a bill of exchange for the purpose of documenting endorsements.

Allotment
During an IPO, this is the number of shares granted to each participating underwriting firm that they are permitted to sell. Remaining surpluses are then given to other firms which have won the bid for the right to sell the IPO.

Allowance for Doubtful Accounts
An estimation made by a company and documented on its balance sheet for receivables that might go uncollected.

Alloy
A compound of two or more metals

Alluvium
Relatively recent deposits of sedimentary material laid down in river beds, flood plains, lakes, or at the base of mountain slopes. (adj. alluvial)

Alpha
1. A measure of a mutual fund's risk in relation and the market. The formula for alpha is the following:

[ (sum of y) - ((b)(sum of x)) ] / n

Where:
n =number of observations (36 mos.)
b = beta of the fund
x = rate of return for the market
y = rate of return for the fund

2. The abnormal rate of return on a security or portfolio in excess of what would be predicted by an equilibrium model like the CAPM.

Alternative Assets
A term referring to non-traditional assets with potential economic value.

Alternative Minimum Tax - AMT
A tax calculation that adds certain tax preference items back into adjusted gross income. If AMT is higher than the regular tax liability for the year, the regular tax and the amount by which the AMT exceeds the regular tax are paid.

Alternative Order
A combination order whereby two separate orders are entered on the same security. The execution of one order cancels the other.


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Altman Z-Score
A predictive model created by Edward Altman in the 1960s. This model combines five different financial ratios to determine the likelihood of bankruptcy amongst companies.

Amended Return
A return filed in order to make corrections to a tax return from a previous year. It can be used to correct errors and claim a more advantageous filing.

American Currency Quotation
A direct quotation in the foreign exchange markets whereby the value of the American dollar is stated as a per unit measure of a foreign currency.

American Depository Receipt - ADR
A stock representing a specified number of shares in a foreign corporation. ADRs are bought and sold in the American markets just like regular stocks. An ADR is issued by a U.S. bank, consisting of a bundle of shares of a foreign corporation that are being held in custody overseas. The foreign entity must provide financial information to the sponsor bank. ADRs do not eliminate the currency and economic risks for the underlying shares in another country. ADRs are listed on either the NYSE, AMEX, or NASDAQ.

American Depository Share - ADS
A share issued under deposit agreement that represents an underlying security in the issuer's home country. 

American Option
An option that can be exercised anytime during its life.

American Stock Exchange - AMEX
The third largest stock exchange in the United States. The AMEX is located in New York and handles approximately 10% of all securities traded in the States.

Amortization
1. The paying off of debt in regular installments over a period of time.

2. The deduction of capital expenses over a specific period of time. Similar to depreciation, it is a method of measuring the consumption of the value of long-term assets like equipment or buildings.

Analyst
A financial professional who has expertise in evaluating investments and puts together buy, sell, and hold recommendations on securities. Also known as a financial analyst or security analyst.

ANG
In currencies, this is the abbreviation for the NL Antillian Guilder.


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Angel Investor
A financial backer providing venture capital funds for small start-ups or entrepreneurs.

Ankle Biter
Stock issues that are worth less than $500 million in terms of market capitalization. They are known as "small cap" stocks.

Annual
An event that occurs once a year.

Annual Equivalent Rate - AER
Interest calculated under the assumption that interest is paid and compounded per year.

Annual General Meeting - AGM
A mandatory yearly meeting of shareholders that allows stakeholders to stay informed and involved with company decisions and workings.

Annual Percentage Rate - APR
The one year rate that is charged for borrowing (or made by investing). By law, credit card companies and loan issuers must show customers the APR.

Annual Percentage Yield - APY
The effective annual rate of return taking into account the effect of compounding interest. APY is calculated by:
Illustration for Annual Percentage Yield - APY

Annual Report
A corporation's annual statement of financial operations. Annual reports include a balance sheet, income statement, auditor's report, and a description of the company's operations.

Annualize
1. Converting the rate of return from a period of less than one year to an annual (yearly) basis.

2. Converting the taxation period from less than one year to an annual (yearly) basis.

Annuitant
1. A person whom a life insurance contract is based upon. The payment of the contract will
be given to the beneficiary, depending on the life of the annuitant.

2. A person who receives the benefits of an annuity.


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Annuity
A series of fixed-amount payments paid at regular intervals over the specified period of the annuity.

Annuity Contract
The written agreement between an insurance company and a customer outlining each party's obligations.

Annuity Due
An annuity whose payment is to be made immediately, rather than at the end of the period.

Anonymous Trading
Visible bids and offers on the market without the identity of the bidder and seller being revealed.

Anti-Dilution Provision
A provision in an option or a convertible security. It protects an investor from dilution resulting from later issues of stock at a lower price than the investor originally paid.

Anti-Greenmail Provision
A special clause located within a firm's corporate charter that acts as a deterrence against the board of directors passing a share buy-back.

Anti-Martingale System
A system of position sizing that correlates the levels of investment with the risk and portfolio size.

Anti-Takeover Measure
Measures taken on a continual or sporadic basis by a firm's management in order to prevent or deter unwanted takeovers.

Anti-Takeover Statute
A set of state regulations that prevent or deter companies from attempting hostile takeovers. These regulations vary across state lines and typically affect only the companies incorporated within the state

Antitrust
The antitrust laws apply to virtually all industries and to every level of business, including manufacturing, transportation, distribution, and marketing. They prohibit a variety of practices that restrain trade.


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Any-and-All Bid
A bid made to purchase all stock being offered at a specific price.

AON
In currencies, this is the abbreviation for the Angolan New Kwanza.

APICS Business Outlook Index
A national manufacturing index that surveys several manufacturing firms on a monthly basis. If the index is above 50 it signals expansion, if it dips below 50 it indicates contraction.

Applicable Federal Rate - AFR
The interest rate published by the U.S. Treasury to calculate imputed interest charges.

Appraisal
A valuation of property (e.g. real estate, a business, an antique) by the estimate of an authorized person.

Appraisal Ratio
A ratio between the Alpha and "Residual Standard Deviation" of a product. This is mainly used by analysts.

Appraisal Right
The right of shareholders to demand the fair payment of securities undergoing a merger by a third party valuator.

Appreciation
The increase in value of an asset.

Approved Delivery Facility
An exchange authorized facility used as a location for the delivery of commodities tendered upon future contracts.

Arbitrage
The simultaneous purchase and selling of a security in order to profit from a differential in the price. This usually takes place on different exchanges or marketplaces.


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Arbitrage Bond
A lower-rate debt security issued by a municipality prior to the call date of the municipality's existing higher-rate security.

Arbitrage Pricing Theory - APT
An alternative to the CAPM, APT differs in its assumptions and explanation of risk factors associated with the risk of an asset.

Arbitrage Trading Program - ATP
A program used to place simultaneous orders for stock index futures and the underlying stocks.

Arbitration
An informal hearing regarding a dispute. The dispute is judged by a group of people (generally three) who have been selected by an impartial panel. Once a decision has been reached, there is no further appeal process.

Arithmetic Mean Average
The average return from a series of returns over a period of time. Calculated by dividing the sum of the series by the number of observations.

Arm's Length Transaction
A transaction in which the buyers and sellers of a product act independently of each other and have no relationship to each other.

Arms Index - TRIN
A short-term technical analysis breadth indicator calculated as the following:
Illustration for Arms Index - TRIN

Arrearage
An amount on a loan, cumulative preferred stock, or any credit instrument that is overdue.

ARS
In currencies, this is the abbreviation for the Argentine Peso.

Articles of Incorporation
A set of documents filed with a U.S. state for the purpose of legally documenting the creation of a corporation.


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Ascending Tops
This refers to a series of peaks, each peak higher than the previous one on the stock's chart pattern.

Asian Option
An option whose payoff depends on the average price of the underlying asset over a certain period of time as opposed to at maturity. Also known as an average option.

Asian Tail
An option feature whereby a reference price is activated at the end of an option should the underlying fall below a specified average before option expiry.

Ask
The price a seller is willing to accept for a security, also known as the offer price.

Ask Size
The number of shares a seller is selling at a quoted ask price.

Aspirin Count Theory
A market theory that states stock prices and aspirin production are inversely (opposite) related.

Assay
The act of testing the purity of precious metals.

Assessed Value
Dollar value assigned to property for purposes of assessing taxes.

Assessor
A local government official who determines the value of a property for taxation purposes.

Asset
Anything that an individual or a corporation owns that has economic value to its owner. Asset is also a balance sheet item showing what a firm owns.


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Asset Allocation
The process of dividing a portfolio among major asset categories, such as bonds, stocks, or cash. The purpose of asset allocation is to reduce risk by diversifying the portfolio.

Asset Allocation Fund - AAF
A mutual fund that splits its investment assets among stocks, bonds, and other investment vehicles in an attempt to provide a consistent return for the investor.

Asset Based Finance
A business loan in which the borrower uses assets to secure the loan.

Asset Based Lending
Extending a business loan or line of credit to companies (usually customers) secured by inventory, accounts receivable, or other balance sheet assets.

Asset Class
A specific category of assets or investments.

Asset Conversion Loan
A short term loan that is typically repaid by converting an asset into cash.

Asset Coverage Ratio
A test that determines a company's ability to cover debt obligations with its assets after all liabilities have been satisfied. It is calculated as the following:
Illustration for Asset Coverage Ratio

Asset Financing
Using balance sheet assets (such as accounts receivable, short term investments, or inventory) to secure a loan or borrow money.

Asset Management
1. The management of the financial assets of a company in order to maximize return.

2. An account at a financial institution that includes checking services, credit cards, debit cards, margin loans, the automatic sweep of cash balances into a money market fund, as well as brokerage services.

Asset Play
An incorrectly valued stock that is attractive because its combined asset value is greater than its market capitalization.


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Asset Redeployment
The strategic relocation of company assets in order to increase profitability.

Asset Stripper
An individual who determines if the value of a company is worth more purchased as a whole or divided into separate assets which are sold off. This is usually done in order to fulfill debt agreements.

Asset Swap
Similar in structure to a plain vanilla swap, the key difference is the underlying of the swap contract. Rather than regular fixed and floating loan interest rates being swapped, fixed and floating investments are being exchanged.

Asset Turnover
The amount of sales generated for every dollar's worth of assets. It is calculated by dividing sales in dollars by assets in dollars.

Asset Valuation
The process of determining the current worth of a portfolio, company, investment, or balance sheet item.

Asset-Backed Security
A security backed by notes or receivables against assets other than real estate.

Asset-or-Nothing Call Option
An option payoff that is equal to the asset's price if the asset is above the strike price, otherwise the payoff is zero.

Asset-or-Nothing Put Option
An option payoff that is equal to the asset's price if the asset is below the strike price, otherwise the payoff is zero.

Asset/Liability Management
A technique companies employ in coordinating the management of assets and liabilities so that an adequate return may be earned. Also known as "surplus management."

Assets Under Management - AUM
In general, the market value of assets an investment company manages on behalf of investors.


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Assign
The act of clearing houses and brokerages selecting short option and future contract holders to deliver underlying securities or commodities of maturing or exercised/tendered contracts.

Assignable Contract
A futures contract with a provision permitting the contract holder to convey his or her rights of assignment to a third party.

Assignment
The transfer of an individual's rights or property to another person or business.

Assimilation
The absorption of stock by the public from a new issue.

Associated Person
The name given to participants within the futures market that are involved in the solicitation or facilitation of transacting customer orders, the maintenance of discretionary accounts, or the true participatory involvement in the futures market.

Association of Southeast Asian Nations - ASEAN
An organization of countries in southeast Asia set up to promote cultural, economic and political development in the region. ASEAN was officially formed in 1967 with the signing of the Bangkok Declaration.

Asymmetric Digital Subscriber Line - ADSL
A new technology that provides high transmission speeds for video and voice to homes over ordinary copper telephone wire. It will be most cost-effective in areas with a low market penetration of cable TV.

Asymmetric Information
Refers to information available to some people but not others.

At Risk Rules
Tax laws limiting the amount of losses an investor (usually a limited partner) can claim. Only the amount actually at risk can be deducted.

At The Market
An order to buy or sell a futures contract at the best available price upon entrance into the exchange for execution.


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At the Money
An option is at-the-money if the strike price of the option equals the market price of the underlying security.

At-The-Close-Order
An order specifying that a trade is to be executed at the close of the market, or as near to the closing price as possible.

At-The-Opening-Order
An order specifying that a trade is to be executed at the opening of the market, otherwise it's canceled.

Athens Stock Exchange - ATHEX
The stock exchange headquartered in Athens, Greece.

Atlanta Fed Index
A manufacturing survey that covers prominent manufacturing states like Georgia, Alabama, Florida, Tennessee, and Louisiana.

ATS
In currencies, this is the abbreviation for the Austrian Schillings.

Attachment
A legal term referring to the action of seizing property in anticipation of a favorable ruling for a plaintiff who claims to be owed money by the defendant.

Attestation
The act of witnessing the signing of a document and then also signing it to verify that it was properly signed by those bound by its contents.

Attornment
The act of granting authority or jurisdiction to a party even though no legal rights exist.

Attribution Rules
A set of rules created by Canada Customs and Revenue Agency (CCRA) that prevents investors from transferring assets between family members with the intention of avoiding taxes.


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Auction Market
A market in which buyers enter competitive bids and sellers enter competitive offers at the same time.

AUD
In currencies, this is the abbreviation for the Australian Dollar.

Audit
1. An unbiased examination and evaluation of the financial statements of an organization. It can be done internally (by employees of the organization) or externally (by an outside firm).

2. An IRS examination of a taxpayer's return or other transactions. The IRS performs this examination to verify the correctness of these filings.

Audit Trail
A step-by-step record by which accounting data can be traced to their source. The SEC and NYSE will use this method for the explicit reconstruction of trades when there are questions as to the validity or accuracy of an accounting figure.

Auditor's Report
Recorded in the annual report, the auditor's report tests to see that a corporation's financial statements comply with GAAP. This is sometimes referred to as the clean opinion.

Australian Stock Exchange - ASX
The stock exchange headquartered in Sydney, Australia.

Authorized Stock
The maximum number of shares that a corporation is legally permitted to issue under its articles of incorporation. This figure is usually listed in the capital accounts section of the balance sheet.

Auto Sales
The major producers of domestic automobiles report sales monthly. These numbers are seasonally adjusted by the U.S. Department of Commerce and are available to the public one to five business days after the end of each month.

Automated Bond System - ABS
The electronic system on the NYSE that records bids and offers for inactively traded bonds until they are canceled or executed.

Automated Confirmation Transaction Service - ACT
An automated system designed to document and report the clearing of trades in the NASDAQ market.


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Automated Customer Account Transfer - ACAT
A system that allows the transfer of securities from a non-equity trading account to an equity trading account in a brokerage firm.

Automatic Exercise
A procedure implemented to protect an option holder where the Option Clearing Corporation will automatically exercise an "in the money" option for the holder.

Automatic Investment Plan
An investment program that allows you to contribute small amounts of money (as little as $20 a month) in regular intervals. Funds are automatically deducted from your checking/savings account or your paycheck, and invested in a retirement account or mutual fund.

Automatic Stabilizer
An economic policy or program that increases or decreases automatically to offset the current economic trend without government assistance.

Automatic Stay
A provision under the U.S. Bankruptcy Code that prohibits creditors from beginning or continuing proceedings for collecting owed amounts from a firm who files for bankruptcy under Chapter 11.

Autoregressive
Using past data to predict future data.

Available Seat Miles - ASM
This refers to how many seat miles were actually available for purchase on an airline. If all of the seats on the plane are not sold, then the ASM indicates the overall capacity the airline is operating at.

Aval
A guarantee added to a debt obligation by a third party who ensures payment should the issuing person default.

Average Annual Growth Rate - AAGR
The average increase in the value of a portfolio over the period of a year.

Average Annual Return - AAR
A figure used when reporting the historical return of a mutual fund. The AAR is stated after expenses have been tallied, including administration fees, 12b-1 fees, and others.


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Average Daily Balance Method
A finance/accounting method where costs (and interest) are based on the amount(s) owing at the end of each day.

Average Down
The process of buying additional shares in a company at lower prices than you originally purchased. This brings the average price you've paid for all your shares down.

Average Life
An estimate of the number of terms to maturity, taking the possibility of early payments into account. Average life is calculated using the weighted average time to the receipt of all future cash flows.

Average Price
1. Sometimes used in determining a bond's yield to maturity. A bond's average price is calculated by adding its face value to the price paid for it and dividing the sum by two.

2. Average price is also sometimes known as Net Asset Value (NAV) for mutual funds.

Average Price Call
A type of option where the payoff is either zero or the amount by which the average price of the asset exceeds the strike.

Average Price Put
A type of option where the payoff is either zero or the amount by which the strike price exceeds the average price of the asset.

Average Qualitative Opinion - AQO
AQO is a number that summarizes analysts' ratings for a particular company.

Average True Range - ATR
A measure of volatility introduced by Welles Wilder in his book: New Concepts in Technical Trading Systems.

Average Up
The process of buying additional shares in a company at higher prices than you originally purchased. This brings the average price you've paid for all your shares up.

Away From Home
The IRS criteria used to establish whether or not you are within commuting distance from home. If you work away from home for longer than a normal workday and you require sleep, then the associated costs are tax deductible.


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Away from the Market
When the bid on an order is lower (or the ask price is higher) than the current market price for the security.

AWG
In currencies, this is the abbreviation for the Aruban Florin.

Axe
The interest a person or trader shows in buying or selling a bond. A trader may have specific interest in a certain type of bond based on his or her existing positions.





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