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: 2691


Corporate financial planning
Financial planning conducted by a firm that encompasses preparation of both long- and short-term financial plans.

Corporate processing float
The time that elapses between receipt of payment from a customer and the depositing of the customer's check in the firm's bank account; the time required to process customer payments.

Corporate tax view
The argument that double (corporate and individual) taxation of equity returns makes debt a cheaper financing method.

Corporate taxable equivalent
Rate of return required on a par bond to produce the same after-tax yield to maturity that the premium or discount bond quoted would.

Corporation
A legal 'person' that is separate and distinct from its owners. A corporation is allowed to own assets, incur liabilities, and sell securities, among other things.

Correlation
See: Correlation coefficient.

Correlation coefficient
A standardized statistical measure of the dependence of two random variables, defined as the covariance divided by the standard deviations of two variables.

Cost company arrangement
Arrangement whereby the shareholders of a project receive output free of charge but agree to pay all operating and financing charges of the project.

Cost of capital
The required return for a capital budgeting project.

Cost of carry
Related: Net financing cost

Cost of funds
Interest rate associated with borrowing money.

Cost of lease financing
A lease's internal rate of return.

Cost of limited partner capital
The discount rate that equates the after-tax inflows with outflows for capital raised from limited partners.

Cost-benefit ratio
The net present value of an investment divided by the investment's initial cost. Also called the profitability index.

Counter trade
The exchange of goods for other goods rather than for cash; barter.

Counterpart items
In the balance of payments, counterpart items are analogous to unrequited transfers in the current account. They arise because the double-entry system in balance of payments accounting and refer to adjustments in reserves owing to monetization or demonetization of gold, allocation or cancellation of SDRs, and revaluation of the various components of total reserves.

Counterparties
The parties to an interest rate swap.

Counterparty
Party on the other side of a trade or transaction.

Counterparty risk
The risk that the other party to an agreement will default. In an options contract, the risk to the option buyer that the option writer will not buy or sell the underlying as agreed.

Country beta
Covariance of a national economy's rate of return and the rate of return the world economy divided by the variance of the world economy.

Country economic risk
Developments in a national economy that can affect the outcome of an international financial transaction.

Country financial risk
The ability of the national economy to generate enough foreign exchange to meet payments of interest and principal on its foreign debt.

Country risk
General level of political and economic uncertainty in a country affecting the value of loans or investments in that country.

Country selection
A type of active international management that measures the contribution to performance attributable to investing in the better-performing stock markets of the world.

Coupon
The periodic interest payment made to the bondholders during the life of the bond.

Coupon equivalent yield
True interest cost expressed on the basis of a 365-day year.

Coupon payments
A bond's interest payments.

Coupon rate
In bonds, notes or other fixed income securities, the stated percentage rate of interest, usually paid twice a year.

Covariance
A statistical measure of the degree to which random variables move together.

Covenants
Provisions in a bond indenture or preferred stock agreement that require the bond or preferred stock issuer to take certain specified actions (affirmative covenants) or to refrain from taking certain specified actions (negative covenants).

Cover
The purchase of a contract to offset a previously established short position.

Coverage ratios
Ratios used to test the adequacy of cash flows generated through earnings for purposes of meeting debt and lease obligations, including the interest coverage ratio and the fixed charge coverage ratio.

Covered call
A short call option position in which the writer owns the number of shares of the underlying stock represented by the option contracts. Covered calls generally limit the risk the writer takes because the stock does not have to be bought at the market price, if the holder of that option decides to exercise it.

Covered call writing strategy
A strategy that involves writing a call option on securities that the investor owns in his or her portfolio. See covered or hedge option strategies.

Covered interest arbitrage
A portfolio manager invests dollars in an instrument denominated in a foreign currency and hedges his resulting foreign exchange risk by selling the proceeds of the investment forward for dollars.

Covered or hedge option strategies
Strategies that involve a position in an option as well as a position in the underlying stock, designed so that one position will help offset any unfavorable price movement in the other, including covered call writing and protective put buying. Related: naked strategies

Covered Put
A put option position in which the option writer also is short the corresponding stock or has deposited, in a cash account, cash or cash equivalents equal to the exercise of the option. This limits the option writer's risk because money or stock is already set aside. In the event that the holder of the put option decides to exercise the option, the writer's risk is more limited than it would be on an uncovered or naked put option.

Cramdown
The ability of the bankruptcy court to confirm a plan of reorganization over the objections of some classes of creditors.

Crawling peg
An automatic system for revising the exchange rate. It involves establishing a par value around which the rate can vary up to a given percent. The par value is revised regularly according to a formula determined by the authorities.

Credible signal
A signal that provides accurate information; a signal that can be distinguish among senders.

Credit
Money loaned.

Credit analysis
The process of analyzing information on companies and bond issues in order to estimate the ability of the issuer to live up to its future contractual obligations. Related: default risk

Credit enhancement
Purchase of the financial guarantee of a large insurance company to raise funds.

Credit period
The length of time for which the customer is granted credit.

Credit risk
The risk that an issuer of debt securities or a borrower may default on his obligations, or that the payment may not be made on a negotiable instrument. Related: Default risk

Credit scoring
A statistical technique wherein several financial characteristics are combined to form a single score to represent a customer's creditworthiness.

Credit spread
Related:Quality spread

Crediting rate
The interest rate offered on an investment type insurance policy.

Creditor
Lender of money.

Cross default
A provision under which default on one debt obligation triggers default on another debt obligation.

Cross hedging
The practice of hedging with a futures contract that is different from the underlying being hedged.

Cross holdings
One corporation holds shares in another firm.

Cross rates
The exchange rate between two currencies expressed as the ratio of two foreign exchange rates that are both expressed in terms of a third currency.

Cross-border risk
Refers to the volatility of returns on international investments caused by events associated with a particular country as opposed to events associated solely with a particular economic or financial agent.

Cross-sectional approach
A statistical methodology applied to a set of firms at a particular point in time.

Crossover rate
The return at which two alternative projects have the same net present value.

Crown jewel
A particularly profitable or otherwise particularly valuable corporate unit or asset of a firm.

Cum dividend
With dividend.

Cum rights
With rights.

Cumulative abnormal return (CAR)
Sum of the differences between the expected return on a stock and the actual return that comes from the release of news to the market.

Cumulative dividend feature
A requirement that any missed preferred or preference stock dividends be paid in full before any common dividend payment is made.

Cumulative preferred stock
Preferred stock whose dividends accrue, should the issuer not make timely dividend payments. Related: non-cumulative preferred stock.

Cumulative probability distribution
A function that shows the probability that the random variable will attain a value less than or equal to each value that the random variable can take on.

Cumulative voting
A system of voting for directors of a corporation in which shareholder's total number of votes is equal to his number of shares held times the number of candidates.

Currency
Money.

Currency arbitrage
Taking advantage of divergences in exchange rates in different money markets by buying a currency in one market and selling it in another market.

Currency basket
The value of a portfolio of specific amounts of individual currencies, used as the basis for setting the market value of another currency. It is also referred to as a currency cocktail.

Currency future
A financial future contract for the delivery of a specified foreign currency.

Currency option
An option to buy or sell a foreign currency.

Currency risk
Related: Exchange rate risk

Currency risk sharing
An agreement by the parties to a transaction to share the currency risk associated with the transaction. The arrangement involves a customized hedge contract embedded in the underlying transaction.

Currency selection
Asset allocation in which the investor chooses among investments denominated in different currencies.

Currency swap
An agreement to swap a series of specified payment obligations denominated in one currency for a series of specified payment obligations denominated in a different currency.

Current - noncurrent method
Under this currency translation method, all of a foreign subsidiary's current assets and liabilities are translated into home currency at the current exchange rate while noncurrent assets and liabilities are translated at the historical exchange rate, that is, the rate in effect at the time the asset was acquired or the liability incurred.

Current account
Net flow of goods, services, and unilateral transactions (gifts) between countries.

Current assets
Value of cash, accounts receivable, inventories, marketable securities and other assets that could be converted to cash in less than 1 year.

Current coupon
A bond selling at or close to par, that is, a bond with a coupon close to the yields currently offered on new bonds of a similar maturity and credit risk.

Current issue
In Treasury securities, the most recently auctioned issue. Trading is more active in current issues than in off-the-run issues.

Current liabilities
Amount owed for salaries, interest, accounts payable and other debts due within 1 year.

Current maturity
Current time to maturity on an outstanding debt instrument.

Current rate method
Under this currency translation method, all foreign currency balance-sheet and income statement items are translated at the current exchange rate.

Current ratio
Indicator of short-term debt paying ability. Determined by dividing current assets by current liabilities. The higher the ratio, the more liquid the company.

Current yield
For bonds or notes, the coupon rate divided by the market price of the bond.

Current-coupon issues
Related: Benchmark issues

Cushion bonds
High-coupon bonds that sell at only at a moderate premium because they are callable at a price below that at which a comparable non-callable bond would sell. Cushion bonds offer considerable downside protection in a falling market.

Custodial fees
Fees charged by an institution that holds securities in safekeeping for an investor.

Customary payout ratios
A range of payout ratios that is typical based on an analysis of comparable firms.

Customized benchmarks
A benchmark that is designed to meet a client's requirements and long-term objectives.

Customs union
An agreement by two or more countries to erect a common external tariff and to abolish restrictions on trade among members.

Date of payment
Date dividend checks are mailed.

Date of record
Date on which holders of record in a firm's stock ledger are designated as the recipients of either dividends or stock rights.

Dates convention
Treating cash flows as being received on exact dates - date 0, date 1, and so forth - as opposed to the end-of-year convention.

Day order
An order to buy or sell stock that automatically expires if it can't be executed on the day it is entered.

Day trading
Refers to establishing and liquidating the same position or positions within one day's trading.

Days in receivables
Average collection period.

Days' sales in inventory ratio
The average number of days' worth of sales that is held in inventory.

Days' sales outstanding
Average collection period.

DCF
See: Discounted cash flows.

De facto
Existing in actual fact although not by official recognition.

Dead cat bounce
A small upmove in a bear market.