Copy of `New York Times - Business and Finance Glossary`

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New York Times - Business and Finance Glossary
Category: Economy and Finance
Date & country: 11/09/2007, USA
Words: 1728

An entity that stands ready and willing to buy a security for its own account (at its bid price) or sell from its own account (at its ask price).

Dealer market
A market where traders specializing in particular commodities buy and sell assets for their own accounts.

Money borrowed.

Debt capacity
Ability to borrow. The amount a firm can borrow up to the point where the firm value no longer increases.

Debt displacement
The amount of borrowing that leasing displaces. Firms that do a lot of leasing will be forced to cut back on borrowing.

Debt leverage
The amplification of the return earned on equity when an investment or firm is financed partially with borrowed money.

Debt limitation
A bond covenant that restricts in some way the firm's ability to incur additional indebtedness.

Debt market
The market for trading debt instruments.

Debt ratio
Total debt divided by total assets.

Debt relief
Reducing the principal and/or interest payments on LDC loans.

Debt service parity approach
An analysis wherein the alternatives under consideration will provide the firm with the exact same schedule of after-tax debt payments (including both interest and principal).

Debt swap
A set of transactions (also called a debt-equity swap) in which a firm buys a country's dollar bank debt at a discount and swaps this debt with the central bank for local currency that it can use to acquire local equity.

Debt-equity ratio
Indicator of financial leverage. Compares assets provided by creditors to assets provided by shareholders. Determined by dividing long-term debt by common stockholder equity.

Debtor in possession
A firm that is continuing to operate under Chapter 11 bankruptcy process.

Debtor-in-possession financing
New debt obtained by a firm during the Chapter 11 bankruptcy process.

Decision tree
Method of representing alternative sequential decisions and the possible outcomes from these decisions.

Declaration date
The date on which a firm's directors meet and announce the date and amount of the next dividend.

Dedicating a portfolio
Related: cash flow matching.

Dedication strategy
Refers to multi-period cash flow matching.

Deductive reasoning
The use of general fact to provide accurate information about a specific situation.

Deed of trust

Failure to make timely payment of interest or principal on a debt security or to otherwise comply with the provisions of a bond indenture.

Default premium
A differential in promised yield that compensates the investor for the risk inherent in purchasing a corporate bond that entails some risk of default.

Practice whereby the borrower sets aside cash or bonds sufficient to service the borrower's debt. Both the borrower's debt and the offestting cash or bonds are removed from the balance sheet.

Deferred call
A provision that prohibits the company from calling the bond before a certain date. During this period the bond is said to be call protected.

Deferred equity
A common term for convertible bonds because of their equity component and the expectation that the bond will ultimately be converted into shares of common stock.

Deferred taxes
A non-cash expense that provides a source of free cash flow. Amount allocated during the period to cover tax liabilities that have not yet been paid.

Tax-advantaged life insurance product. Deferred annuities offer deferral of taxes with the option of withdrawing one's funds in the form of life annuity.

Defined benefit plan
A pension plan in which the sponsor agrees to make specified dollar payments to qualifying employees. The pension obligations are effectively the debt obligation of the plan sponsor. Related: defined contribution plan

Defined contribution plan
A pension plan in which the sponsor is responsible only for making specified contributions into the plan on behalf of qualifying participants. Related: defined benefit plan

Delayed issuance pool
Refers to MBSs that at the time of issuance were collateralized by seasoned loans originated prior to the MBS pool issue date.

Deliverable instrument
The asset in a forward contract that will be delivered in the future at an agree-upon price.

The tender and receipt of an actual commodity or financial instrument in settlement of a futures contract.

Delivery points
Those points designated by futures exchanges at which the financial instrument or commodity covered by a futures contract may be delivered in fulfillment of such contract.

Delivery price
The price fixed by the Clearing house at which deliveries on futures are in invoiced; also the price at which the futures contract is settled when deliveries are made.

Delta neutral
The value of the portfolio is not affected by changes in the value of the asset on which the options are written.

Demand deposits
Checking accounts that pay no interest and can be withdrawn upon demand.

Demand line of credit
A bank line of credit that enables a customer to borrow on a daily or on-demand basis.

Demand master notes
Short-term securities that are repayable immediately upon the holder's demand.

Demand shock
An event that affects the demand for goods in services in the economy.

Acceptance of a capital budgeting project contingent on the acceptance of another project.

Depository transfer check (DTC)
Check made out directly by a local bank to a particular firm or person.

To allocate the purchase cost of an asset over its life.

A non-cash expense that provides a source of free cash flow. Amount allocated during the period to amortize the cost of acquiring Long term assets over the useful life of the assets.

Depreciation tax shield
The value of the tax write-off on depreciation of plant and equipment.

Derivative instruments
Contracts such as options and futures whose price is derived from the price of the underlying financial asset.

Derivative markets
Markets for derivative instruments.

Detachable warrant
A warrant entitles the holder to buy a given number of shares of stock at a stipulated price. A detachable warrant is one that may be sold separately from the package it may have originally been issued with (usually a bond).

Deterministic models
Liability-matching models that assume that the liability payments and the asset cash flows are known with certainty. Related: Compare stochastic models

A decrease in the spot price of the currency.

Differential disclosure
The practice of reporting conflicting or markedly different information in official corporate statements including annual and quarterly reports and the 10-Ks and 10-Qs.

Diffusion process
A conception of the way a stock's price changes that assumes that the price takes on all intermediate values. dirty price. Related: full price

Diminution in the proportion of income to which each share is entitled.

Dilutive effect
Result of a transaction that decreases earnings per common share.

Direct estimate method
A method of cash budgeting based on detailed estimates of cash receipts and cash disbursements category by category.

Direct lease
Lease in which the lessor purchases new equipment from the manufacturer and leases it to the lessee.

Direct paper
Commercial paper sold directly by the issuer to investors.

Direct search market
Buyers and sellers seek each other directly and transact directly.

Direct stock-purchase programs
The purchase by investors of securities directly from the issuer.

Dirty float
A system of floating exchange rates in which the government occasionally intervenes to change the direction of the value of the country's currency.

Disclaimer of opinion
An auditor's statement disclaiming any opinion regarding the company's financial condition.

Discount factor
Present value of $1 received at a stated future date.

Discount period
The period during which a customer can deduct the discount from the net amount of the bill when making payment.

Discount window
Facility provided by the Fed enabling member banks to borrow reserves against collateral in the form of governments or other acceptable paper.

Discounted cash flow (DCF)
Future cash flows multiplied by discount factors to obtain present values.

Discounted dividend model (DDM)
A formula to estimate the intrinsic value of a firm by figuring the present value of all expected future dividends.

Discounted payback period rule
An investment decision rule in which the cash flows are discounted at an interest rate and the payback rule is applied on these discounted cash flows.

Calculating the present value of a future amount. The process is opposite to compounding.

Discrete compoundingM
Compounding the time value of money for discrete time intervals.

Discriminant analysis
A statistical process that links the probability of default to a specified set of financial ratios.

Withdrawal of funds from a financial institution in order to invest them directly.

When two or more averages or indices fail to show confirming trends.

Diversifiable risk
Related: unsystematic risk.

A dividend is a portion of a company's profit paid to common and preferred shareholders. A stock selling for $20 a share with an annual dividend of $1 a share yields the investor 5%.

Dividend growth model
A model wherein dividends are assumed to be at a constant rate in perpetuity.

Dividend limitation
A bond covenant that restricts in some way the firm's ability to pay cash dividends.

Dividend payout ratio
Percentage of earnings paid out as dividends.

Dividend policy
An established guide for the firm to determine the amount of money it will pay as dividends.

Dividend rate
The fixed or floating rate paid on preferred stock based on par value.

Dividend rights
A shareholders' rights to receive per-share dividends identical to those other shareholders receive.

Dividend yield (Stocks)
Indicated yield represents annual dividends divided by current stock price.

Dividends per share
Amount of cash paid to shareholders expressed as dollars per share.

Deutsche (German) marks.

Doctrine of sovereign immunity
Doctrine that says a nation may not be tried in the courts of another country without its consent.

Documented discount notes
Commercial paper backed by normal bank lines plus a letter of credit from a bank stating that it will pay off the paper at maturity if the borrower does not. Such paper is also referred to as LOC (letter of credit) paper.

Dollar duration
The product of modified duration and the initial price.

Dollar price of a bond
Percentage of face value at which a bond is quoted.

Dollar roll
Similar to the reverse repurchase agreement - a simultaneous agreement to sell a security held in a portfolio with purchase of a similar security at a future date at an agreed-upon price.

Dollar safety margin
The dollar equivalent of the safety cushion for a portfolio in a contingent immunization strategy.

Domestic market
Part of a nation's internal market representing the mechanisms for issuing and trading securities of entities domiciled within that nation. Compare external market and foreign market.

Don't know (DK, Dked)
Don't know the trade. A Street expression used whenever one party lacks knowledge of a trade or receives conflicting instructions from the other party.

Double-dip lease
A cross-border lease in which the disparate rules of the lessor's and lessee's countries let both parties be treated as the owner of the leased equipment for tax purposes.

Double-tax agreement
Agreement between two countries that taxes paid abroad can be offset against domestic taxes levied on foreign dividends.

Doubling option
A sinking fund provision that may allow repurchase of twice the required number of bonds at the sinking fund call price.

Down-and-in option
Barrier option that comes into existence if asset price hits a barrier.

Down-and-out option
Barrier option that expires if asset price hits a barrier.

Drop lock
An arrangement whereby the interest rate on a floating rate note or preferred stock becomes fixed if it falls to a specified level.

Dual syndicate equity offering
An international equity placement where the offering is split into two tranches - domestic and foreign - and each tranche is handled by a separate lead manager.

Dual-currency issues
Eurobonds that pay coupon interest in one currency but pay the principal in a different currency.

Due bill
An instrument evidencing the obligation of a seller to deliver securities sold to the buyer. Occasionally used in the bill market.