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

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 loan
Overnight, collateralized loan made to a dealer financing his position by borrowing from a money market bank.

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

Dealer options
Over-the-counter options, such as those offered by government and mortgage-backed securities dealers.

Debenture bond
An unsecured bond whose holder has the claim of a general creditor on all assets of the issuer not pledged specifically to secure other debt. Compare subordinated debenture bond, and collateral trust bonds.

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 instrument
An asset requiring fixed dollar payments, such as a government or corporate bond.

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 securities
IOUs created through loan-type transactions - commercial paper, bank CDs, bills, bonds, and other instruments.

Debt service
Interest payment plus repayments of principal to creditors, that is, retirement of debt.

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.

Debt-service coverage ratio
Earnings before interest and income taxes plus one-third rental charges, divided by interest expense plus one-third rental charges plus the quantity of principal repayments divided by one minus the tax rate.

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.

Decile rank
Performance over time, rated on a scale of 1-10.1 indicates that a mutual fund's return was in the top 10% of funds being compared, while 3 means the return was in the top 30%. Objective Rank compares all funds in the same investment strategy category. All Rank compares all funds.

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.

Dedicated capital
Total par value (number of shares issued, multiplied by the par value of each share). Also called dedicated value.

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

Deep-discount bond
A bond issued with a very low coupon or no coupon and selling at a price far below par value. When the bond has no coupon, it's called a zero coupon bond.

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.

Default risk
Also referred to as credit risk (as gauged by commercial rating companies), the risk that an issuer of a bond may be unable to make timely principal and interest payments.

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 futures
The most distant months of a futures contract. A bond that sells at a discount and does not pay interest for an initial period, typically from three to seven years. Compare step-up bond and payment-in-kind bond.

Deferred nominal life annuity
A monthly fixed-dollar payment beginning at retirement age. It is nominal because the payment is fixed in dollar amount at any particular time, up to and including retirement.

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.

An excess of liabilities over assets, of losses over profits, or of expenditure over income.

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 notice
The written notice given by the seller of his intention to make delivery against an open, short futures position on a particular date. Related: notice day

Delivery options
The options available to the seller of an interest rate futures contract, including the quality option, the timing option, and the wild card option. Delivery options make the buyer uncertain of which Treasury Bond will be delivered or when it will be delivered.

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.

Delivery versus payment
A transaction in which the buyer's payment for securities is due at the time of delivery (usually to a bank acting as agent for the buyer) upon receipt of the securities. The payment may be made by bank wire, check, or direct credit to an account.

Also called the hedge ratio, the ratio of the change in price of a call option to the change in price of the underlying stock.

Delta hedge
A dynamic hedging strategy using options with continuous adjustment of the number of options used, as a function of the delta of the option.

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.

Depository Trust Company (DTC)
DTC is a user-owned securities depository which accepts deposits of eligible securities for custody, executes book-entry deliveries and records book-entry pledges of securities in its custody, and provides for withdrawals of securities from its custody.

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.

Derivative security
A financial security, such as an option, or future, whose value is derived in part from the value and characteristics of another security, the underlying security.

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

To remove the general drift, tendency or bent of a set of statistical data as related to time.

A decrease in the spot price of the currency.

Difference from S&P
A mutual fund's return minus the change in the Standard & Poors 500 Index for the same time period. A notation of -5.00 means the fund return was 5 percentage points less than the gain in the S&P, while 0.00 means that the fund and the S&P had the same return.

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.

Differential swap
Swap between two LIBO rates of interest, e.g. yen LIBOR for dollar LIBOR. Payments are in one currency.

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 placement
Selling a new issue not by offering it for sale publicly, but by placing it with one of several institutional investors.

Direct quote
For foreign exchange, the number of U.S. dollars needed to buy one unit of a foreign currency.

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.

Dirty price
Bond price including accrued interest, i.e., the price paid by the bond buyer.

Disbursement float
A decrease in book cash but no immediate change in bank cash, generated by checks written by the firm.

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

Referring to the selling price of a bond, a price below its par value. Related: premium.

Discount bond
Debt sold for less than its principal value. If a discount bond pays no interest, it is called a zero coupon bond.

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 rate
The interest rate that the Federal Reserve charges a bank to borrow funds when a bank is temporarily short of funds. Collateral is necessary to borrow, and such borrowing is quite limited because the Fed views it as a privilege to be used to meet short-term liquidity needs, and not a device to increase earnings.

Discount securities
Non-interest-bearing money market instruments that are issued at a discount and redeemed at maturity for full face value, e.g. U.S. Treasury bills.

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 basis
Selling something on a discounted basis is selling below what its value will be at maturity, so that the difference makes up all or part of the interest.

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.