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: 2680

Flat benefit formula
Method used to determine a participant's benefits in a defined benefit plan by multiplying months of service by a flat monthly benefit.

Flat price (also clean price)
The quoted newspaper price of a bond that does not include accrued interest. The price paid by purchaser is the full price.

Flat price risk
Taking a position either long or short that does not involve spreading.

Flat trades
(1) A bond in default trades flat; that is, the price quoted covers both principal and unpaid, accrued interest. (2) Any security that trades without accrued interest or at a price that includes accrued interest is said to trade flat.

Flattening of the yield curve
A change in the yield curve where the spread between the yield on a long-term and short-term Treasury has decreased. Compare steepening of the yield curve and butterfly shift.

Flight to quality
The tendency of investors to move towards safer, government bonds during periods of high economic uncertainty.

Flip-flop note
Note that allows investors to switch between two different types of debt.

Float
The number of shares that are actively tradable in the market, excluding shares that are held by officers and major stakeholders that have agreements not to sell until someone else is offered the stock.

Floater
Floating rate bond.

Floating exchange rate
A country's decision to allow its currency value to freely change. The currency is not constrained by central bank intervention and does not have to maintain its relationship with another currency in a narrow band. The currency value is determined by trading in the foreign exchange market.

Floating lien
General lien against a company's assets or against a particular class of assets.

Floating supply
The amount of securities believed to be available for immediate purchase, that is, in the hands of dealers and investors wanting to sell.

Floating-rate contract
A guaranteed investment contract where the credit rating is tied to some variable ('floating') interest rate benchmark, such as a specific-maturity Treasury yield.

Floating-rate note (FRN)
Note whose interest payment varies with short-term interest rates.

Floating-rate payer
In an interest rate swap, the counterparty who pays a rate based on a reference rate, usually in exchange for a fixed-rate payment

Floating-rate preferred
Preferred stock paying dividends that vary with short-term interest rates.

Floor broker
A member who is paid a fee for executing orders for clearing members or their customers. A floor broker executing customer orders must be licensed by the CFTC.

Floor planning
Arrangement used to finance inventory. A finance company buys the inventory, which is then held in trust by the user.

Floor trader
A member who generally trades only for his own account, for an account controlled by him or who has such a trade made for him. Also referred to as a 'local'.

Flow-through basis
An account for the investment credit to show all income statement benefits of the credit in the year of acquisition, rather than spreading them over the life of the asset acquired.

Flow-through method
The practice of reporting to shareholders using straight-line depreciation and accelerated depreciation for tax purposes and 'flowing through' the lower income taxes actually paid to the financial statement prepared for shareholders.

Flower bond
Government bonds that are acceptable at par in payment of federal estate taxes when owned by the decedent at the time of death.

Force majeure risk
The risk that there will be an interruption of operations for a prolonged period after a project finance project has been completed due to fire, flood, storm, or some other factor beyond the control of the project's sponsors.

Forced conversion
Use of a firm's call option on a callable convertible bond when the firm knows that the bondholders will exercise their option to convert.

Foreign banking market
That portion of domestic bank loans supplied to foreigners for use abroad.

Foreign bond
A bond issued on the domestic capital market of anther company.

Foreign bond market
That portion of the domestic bond market that represents issues floated by foreign companies to governments.

Foreign currency
Foreign money.

Foreign currency option
An option that conveys the right to buy or sell a specified amount of foreign currency at a specified price within a specified time period.

Foreign currency translation
The process of restating foreign currency accounts of subsidiaries into the reporting currency of the parent company in order to prepare consolidated financial statements.

Foreign direct investment (FDI)
The acquisition abroad of physical assets such as plant and equipment, with operating control residing in the parent corporation.

Foreign equity market
That portion of the domestic equity market that represents issues floated by foreign companies.

Foreign exchange
Currency from another country.

Foreign exchange controls
Various forms of controls imposed by a government on the purchase/sale of foreign currencies by residents or on the purchase/sale of local currency by nonresidents.

Foreign exchange dealer
A firm or individual that buys foreign exchange from one party and then sells it to another party. The dealer makes the difference between the buying and selling prices, or spread.

Foreign exchange risk
The risk that a long or short position in a foreign currency might have to be closed out at a loss due to an adverse movement in the currency rates.

Foreign exchange swap
An agreement to exchange stipulated amounts of one currency for another currency at one or more future dates.

Foreign market
Part of a nation's internal market, representing the mechanisms for issuing and trading securities of entities domiciled outside that nation. Compare external market and domestic market.

Foreign market beta
A measure of foreign market risk that is derived from the capital asset pricing model.

Foreign Sales Corporation (FSC)
A special type of corporation created by the Tax Reform Act of 1984 that is designed to provide a tax incentive for exporting U.S.-produced goods.

Foreign tax credit
Home country credit against domestic income tax for foreign taxes paid on foreign derived earnings.

Forex
Foreign exchange.

Forfaiter
Purchaser of promises to pay issued by importers.

Formula basis
A method of selling a new issue of common stock in which the SEC declares the registration statement effective on the basis of a price formula rather than on a specific range.

Forward contract
A cash market transaction in which delivery of the commodity is deferred until after the contract has been made. It is not standardized and is not traded on organized exchanges. Although the delivery is made in the future, the price is determined at the initial trade date.

Forward cover
Purchase or sale of forward foreign currency in order to offset a known future cash flow.

Forward delivery
A transaction in which the settlement will occur on a specified date in the future at a price agreed upon on the trade date.

Forward differential
Annualized percentage difference between spot and forward rates.

Forward discount
A currency trades at a forward discount when its forward price is lower than its spot price.

Forward exchange rate
Exchange rate fixed today for exchanging currency at some future date.

Forward Fed funds
Fed funds traded for future delivery.

Forward forward contract
In Eurocurrencies, a contract under which a deposit of fixed maturity is agreed to at a fixed price for future delivery.

Forward interest rate
Interest rate fixed today on a loan to be made at some future date.

Forward looking multiple
A truncated expression for a P/E ratio that is based on forward (expected) earnings rather than on trailing earnings.

Forward market
A market in which participants agree to trade some commodity, security, or foreign exchange at a fixed price for future delivery.

Forward premium
A currency trades at a forward premium when its forward price is higher than its spot price.

Forward rate
A projection of future interest rates calculated from either the spot rates or the yield curve.

Forward rate agreement (FRA)
Agreement to borrow or lend at a specified future date at an interest rate that is fixed today.

Forward sale
A method for hedging price risk which involves an agreement between a lender and an investor to sell particular kinds of loans at a specified price and future time.

Forward trade
A transaction in which the settlement will occur on a specified date in the future at a price agreed upon the trade date.

Fourth market
Direct trading in exchange-listed securities between investors without the use of a broker.

Free cash flows
Cash not required for operations or for reinvestment. Often defined as earnings before interest (often obtained from operating income line on the income statement) less capital expenditures less the change in working capital.

Free float
An exchange rate system characterized by the absence of government intervention. Also known as clean float.

Free on board
Implies that distributive services like transport and handling performed on goods up to the customs frontier of the economy from which the goods are classed as merchandise.

Free reserves
Excess reserves minus member bank borrowings at the Fed.

Free rider
A follower who avoids the cost and expense of finding the best course of action and by simply mimicking the behavior of a leader who made these investments.

Frequency distribution
The organization of data to show how often certain values or ranges of values occur.

Friction costs
Costs, both implied and direct, associated with a transaction. Such costs include time, effort, money, and associated tax effects of gathering information and making a transaction.

Frictions
The 'stickiness' in making transactions; the total hassle including time, effort, money, and tax effects of gathering information and making a transaction such as buying a stock or borrowing money.

Front fee
The fee initially paid by the buyer upon entering a split-fee option contract.

Full coupon bond
A bond with a coupon equal to the going market rate, thereby, the bond is selling at par.

Full faith-and-credit obligations
The security pledges for larger municipal bond issuers, such as states and large cities which have diverse funding sources.

Full price
Also called dirty price, the price of a bond including accrued interest. Related: flat price.

Full-payout lease
See: financial lease.

Full-service lease
Also called rental lease. Lease in which the lessor promises to maintain and insure the equipment leased.

Fully diluted earnings per shares
Earnings per share expressed as if all outstanding convertible securities and warrants have been exercised.

Fully modified pass-throughs
Agency pass-throughs that guarantee the timely payment of both interest and principal. Related: modified pass-throughs

Functional currency
As defined by FASB No. 52, an affiliate's functional currency is the currency of the primary economic environment in which the affiliate generates and expends cash.

Fund family
Set of funds with different investment objectives offered by one management company. In many cases, investors may move their assets from one fund to another within the family at little or no cost.

Fundamental analysis
Security analysis that seeks to detect misvalued securities by an analysis of the firm's business prospects. Research analysis often focuses on earnings, dividend prospects, expectations for future interest rates, and risk evaluation of the firm.

Fundamental beta
The product of a statistical model to predict the fundamental risk of a security using not only price data but other market-related and financial data.

Fundamental descriptors
In the model for calculating fundamental beta, ratios in risk indexes other than market variability, which rely on financial data other than price data.

Funded debt
Debt maturing after more than one year.

Funding ratio
The ratio of a pension plan's assets to its liabilities.

Funding risk
Related: interest rate risk

Funds From Operations (FFO)
Used by real estate and other investment trusts to define the cash flow from trust operations. It is earnings with depreciation and amortization added back. A similar term increasingly used is Funds Available for Distribution (FAD), which is FFO less capital investments in trust property and the amortization of mortgages.

Future
A term used to designate all contracts covering the sale of financial instruments or physical commodities for future delivery on a commodity exchange.

Future investment opportunities
The options to identify additional, more valuable investment opportunities in the future that result from a current opportunity or operation.

Future value
The amount of cash at a specified date in the future that is equivalent in value to a specified sum today.

Futures
A term used to designate all contracts covering the sale of financial instruments or physical commodities for future delivery on a commodity exchange.

Futures commission merchant
A firm or person engaged in soliciting or accepting and handling orders for the purchase or sale of futures contracts, subject to the rules of a futures exchange and, who, in connection with such solicitation or acceptance of orders, accepts any money or securities to margin any resulting trades or contracts. The FCM must be licensed by the CFTC. Related: commission house , omnibus account

Futures contract
Agreement to buy or sell a set number of shares of a specific stock in a designated future month at a price agreed upon by the buyer and seller. The contracts themselves are often traded on the futures market. A futures contract differs from an option because an option is the right to buy or sell, whereas a futures contract is the promise to actually make a transaction. A future is part of a class of securities called derivatives, so named because such securities derive their value from the wort…

Futures contract multiple
A constant, set by an exchange, which when multiplied by the futures price gives the dollar value of a stock index futures contract.

Futures market
A market in which contracts for future delivery of a commodity or a security are bought or sold.

Futures option
An option on a futures contract. Related: options on physicals.

Futures price
The price at which the parties to a futures contract agree to transact on the settlement date.

Gamma
The ratio of a change in the option delta to a small change in the price of the asset on which the option is written.

Gearing
Financial leverage.

GEMs (growing-equity mortgages)
Mortgages in which annual increases in monthly payments are used to reduce outstanding principal and to shorten the term of the loan.

General cash offer
A public offering made to investors at large.