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New York Times - Business and Finance Glossary Category: Economy and Finance Date & country: 11/09/2007, USA Words: 2680

Matador market
The foreign market in Spain.

Match fund
A bank is said to match fund a loan or other asset when it does so by buying (taking) a deposit of the same maturity. The term is commonly used in the Euromarket.

Matched book
A bank runs a matched book when the distribution of maturities of its assets and liabilities are equal.

Matching concept
The accounting principle that requires the recognition of all costs that are associated with the generation of the revenue reported in the income statement.

Materials requirement planning
Computer-based systems that plan backward from the production schedule to make purchases in order to manage inventory levels.

Mathematical programming
An operations research technique that solves problems in which an optimal value is sought subject to specified constraints. Mathematical programming models include linear programming, quadratic programming, and dynamic programming.

Mature
To cease to exist; to expire.

Maturity
For a bond, the date on which the principal is required to be repaid. In an interest rate swap, the date that the swap stops accruing interest.

Maturity factoring
Factoring arrangement that provides collection and insurance of accounts receivable.

Maturity phase
A phase of company development in which earnings continue to grow at the rate of the general economy. Related: Three-phase DDM.

Maturity spread
The spread between any two maturity sectors of the bond market.

Maturity value
Related: par value.

Maximum price fluctuation
The maximum amount the contract price can change, up or down, during one trading session, as fixed by exchange rules in the contract specification. Related: limit price.

MBS Depository
A book-entry depository for GNMA securities. The depository was initially operated by MBSCC and is currently in the process of becoming a separately incorporated, participant-owned, limited-purpose trust company organized under the State of New York Banking Law.

MBS servicing
The requirement that the mortgage servicer maintain payment of the full amount of contractually due principal and interest payments whether or not actually collected.

Mean
The expected value of a random variable.

Mean of the sample
The arithmetic average; that is, the sum of the observations divided by the number of observations.

Mean-variance analysis
Evaluation of risky prospects based on the expected value and variance of possible outcomes.

Mean-variance criterion
The selection of portfolios based on the means and variances of their returns. The choice of the higher expected return portfolio for a given level of variance or the lower variance portfolio for a given expected return.

Mean-variance efficient portfolio
Related: Markowitz efficient portfolio

Measurement error
Errors in measuring an explanatory variable in a regression that leads to biases in estimated parameters.

Medium-term note
A corporate debt instrument that is continuously offered to investors over a period of time by an agent of the issuer. Investors can select from the following maturity bands: 9 months to 1 year, more than 1 year to 18 months, more than 18 months to 2 years, etc., up to 30 years.

Merchandise
All movable goods such as cars, textiles, appliances, etc. and 'f.o.b.' means free on board.

Merchant bank
A British term for a bank that specializes not in lending out its own funds, but in providing various financial services such as accepting bills arising out of trade, underwriting new issues, and providing advice on acquisitions, mergers, foreign exchange, portfolio management, etc.

Merger
(1) Acquisition in which all assets and liabilities are absorbed by the buyer. (2) More generally, any combination of two companies.

Mimic
An imitation that sends a false signal.

Minimum price fluctuation
Smallest increment of price movement possible in trading a given contract. Also called point or tick. The zero-beta portfolio with the least risk.

Minimum purchases
For mutual funds, the amount required to open a new account (Minimum Initial Purchase) or to deposit into an existing account (Minimum Additional Purchase). These minimums may be lowered for buyers participating in an automatic purchase plan

Minimum-variance frontier
Graph of the lowest possible portfolio variance that is attainable for a given portfolio expected return.

Minimum-variance portfolio
The portfolio of risky assets with lowest variance.

Minority interest
An outside ownership interest in a subsidiary that is consolidated with the parent for financial reporting purposes.

Mismatch bond
Floating rate note whose interest rate is reset at more frequent intervals than the rollover period (e.g. a note whose payments are set quarterly on the basis of the one-year interest rate).

Modeling
The process of creating a depiction of reality, such as a graph, picture, or mathematical representation.

Modern portfolio theory
Principles underlying the analysis and evaluation of rational portfolio choices based on risk-return trade-offs and efficient diversification.

Modified duration
The ratio of Macaulay duration to (1 + y), where y = the bond yield. Modified duration is inversely related to the approximate percentage change in price for a given change in yield.

Modified pass-throughs
Agency pass-throughs that guarantee (1) timely interest payments and (2) principal payments as collected, but no later than a specified time after they are due. Related: fully modified pass-throughs

Modigliani and Miller Proposition I
A proposition by Modigliani and Miller which states that a firm cannot change the total value of its outstanding securities by changing its capital structure proportions. Also called the irrelevance proposition.

Monetary - non-monetary method
Under this translation method, monetary items (e.g. cash, accounts payable and receivable, and long-term debt) are translated at the current rate while non-monetary items (e.g. inventory, fixed assets, and long-term investments) are translated at historical rates.

Monetary gold
Gold held by governmental authorities as a financial asset.

Monetary policy
Actions taken by the Board of Governors of the Federal Reserve System to influence the money supply or interest rates.

Money base
Composed of currency and coins outside the banking system plus liabilities to the deposit money banks.

Money center banks
Banks that raise most of their funds from the domestic and international money markets , relying less on depositors for funds.

Money management
Related: Investment management.

Money manager
Related: Investment manager.

Money market
Money markets are for borrowing and lending money for three years or less. The securities in a money market can be U.S.government bonds, treasury bills and commercial paper from banks and companies.

Money market demand account
An account that pays interest based on short-term interest rates.

Money market fund
A mutual fund that invests only in short term securities, such as bankers' acceptances, commercial paper, repurchase agreements and government bills. The net asset value per share is maintained at $1. 00. Such funds are not federally insured, although the portfolio may consist of guaranteed securities and/or the fund may have private insurance protection.

Money market hedge
The use of borrowing and lending transactions in foreign currencies to lock in the home currency value of a foreign currency transaction.

Money market notes
Publicly traded issues that may be collateralized by mortgages and MBSs.

Money purchase plan
A defined benefit contribution plan in which the participant contributes some part and the firm contributes at the same or a different rate. Also called and individual account plan.

Money rate of return
Annual money return as a percentage of asset value.

Money supply
M1-A: Currency plus demand deposits M1-B: M1-A plus other checkable deposits. M2: M1-B plus overnight repos, money market funds, savings, and small (less than $100M) time deposits. M3: M-2 plus large time deposits and term repos. L: M-3 plus other liquid assets.

Monitor
To seek information about an agent's behavior; a device that provides such information.

Monte Carlo simulation
An analytical technique for solving a problem by performing a large number of trail runs, called simulations, and inferring a solution from the collective results of the trial runs. Method for calculating the probability distribution of possible outcomes.

Moral hazard
The risk that the existence of a contract will change the behavior of one or both parties to the contract, e.g. an insured firm will take fewer fire precautions.

Mortality tables
Tables of probability that individuals of various ages will die within one year.

Mortgage
A loan secured by the collateral of some specified real estate property which obliges the borrower to make a predetermined series of payments.

Mortgage bond
A bond in which the issuer has granted the bondholders a lien against the pledged assets. Collateral trust bonds

Mortgage duration
A modification of standard duration to account for the impact on duration of MBSs of changes in prepayment speed resulting from changes in interest rates. Two factors are employed: one that reflects the impact of changes in prepayment speed or price.

Mortgage pass-through security
Also called a passthrough, a security created when one or more mortgage holders form a collection (pool) of mortgages sells shares or participation certificates in the pool. The cash flow from the collateral pool is 'passed through' to the security holder as monthly payments of principal, interest, and prepayments. This is the predominant type of MBS traded in the secondary market.

Mortgage pipeline
The period from the taking of applications from prospective mortgage borrowers to the marketing of the loans.

Mortgage rate
The interest rate on a mortgage loan.

Mortgage-backed securities
Securities backed by a pool of mortgage loans.

Mortgage-pipeline risk
The risk associated with taking applications from prospective mortgage borrowers who may opt to decline to accept a quoted mortgage rate within a certain grace period.

Mortgagee
The lender of a loan secured by property.

Mortgager
The borrower of a loan secured by property.

Most distant futures contract
When several futures contracts are considered, the contract settling last. Related: nearby futures contract

Moving average
Used in charts and technical analysis, the average of security or commodity prices constructed in a period as short as a few days or as Long as several years and showing trends for the latest interval. As each new variable is included in calculating the average, the last variable of the series is deleted.

Multi-option financing facility
A syndicated confirmed credit line with attached options.

Multicurrency clause
Such a clause on a Euro loan permits the borrower to switch from one currency to another currency on a rollover date.

Multicurrency loans
Give the borrower the possibility of drawing a loan in different currencies.

Multifactor CAPM
A version of the capital asset pricing model derived by Merton that includes extra-market sources of risk referred to as factor.

Multifamily loans
Loans usually represented by conventional mortgages on multi-family rental apartments.

Multinational corporation
A firm that operates in more than one country.

Multiperiod immunization
A portfolio strategy in which a portfolio is created that will be capable of satisfying more than one predetermined future liability regardless if interest rates change.

Multiple rates of return
More than one rate of return from the same project that make the net present value of the project equal to zero. This situation arises when the IRR method is used for a project in which negative cash flows follow positive cash flows. For each sign change in the cash flows, there is a rate of return.

Multiple regression
The estimated relationship between a dependent variable and more than one explanatory variable.

Multiple-issuer pools
Under the GNMA-II program, pools formed through the aggregation of individual issuers' loan packages.

Multiples
Another name for price/earnings ratios.

Multirule system
A technical trading strategy that combines mechanical rules, such as the CRISMA (cumulative volume, relative strength, moving average) Trading System of Pruitt and White.

Municipal bond
State or local governments offer muni bonds or municipals, as they are called, to pay for special projects such as highways or sewers. The interest that investors receive is exempt from some income taxes.

Municipal notes
Short-term notes issued by municipalities in anticipation of tax receipts, proceeds from a bond issue, or other revenues.

Mutual fund
Mutual funds are pools of money that are managed by an investment company. They offer investors a variety of goals, depending on the fund and its investment charter. Some funds, for example, seek to generate income on a regular basis. Others seek to preserve an investor's money. Still others seek to invest in companies that are growing at a rapid pace. Funds can impose a sales charge, or load, on investors when they buy or sell shares. Many funds these days are no load and impose no sales charge…

Mutual fund theorem
A result associated with the CAPM, asserting that investors will choose to invest their entire risky portfolio in a market-index or mutual fund.

Mutual offset
A system, such as the arrangement between the CME and SIMEX, which allows trading positions established on one exchange to be offset or transferred on another exchange.

Naive diversification
A strategy whereby an investor simply invests in a number of different assets and hopes that the variance of the expected return on the portfolio is lowered. Related: Markowitz diversification.

Naked option strategies
An unhedged strategy making exclusive use of one of the following: Long call strategy (buying call options ), short call strategy (selling or writing call options), Long put strategy (buying put options ), and short put strategy (selling or writing put options). By themselves, these positions are called naked strategies because they do not involve an offsetting or risk-reducing position in another option or the underlying security. Related: covered option strategies.

NASDAQ
National Association of Securities Dealers Automatic Quotation System. An electronic quotation system that provides price quotations to market participants about the more actively traded common stock issues in the OTC market. About 4,000 common stock issues are included in the NASDAQ system.

National market
Related: internal market

Nationalization
A government takeover of a private company.

Natural logarithm
Logarithm to the base e (approximately 2.7183).

Nearby
The nearest active trading month of a financial or commodity futures market. Related: deferred futures

Nearby futures contract
When several futures contracts are considered, the contract with the closest settlement date is called the nearby futures contract. The next futures contract is the one that settles just after the nearby futures contract. The contract farthest away in time from settlement is called the most distant futures contract.

Negative amortization
A loan repayment schedule in which the outstanding principal balance of the loan increases, rather than amortizing, because the scheduled monthly payments do not cover the full amount required to amortize the loan. The unpaid interest is added to the outstanding principal, to be repaid later.

Negative carry
Related: net financing cost

Negative convexity
A bond characteristic such that the price appreciation will be less than the price depreciation for a large change in yield of a given number of basis points.

Negative covenant
A bond covenant that limits or prohibits altogether certain actions unless the bondholders agree.

Negative duration
A situation in which the price of the MBS moves in the same direction as interest rates.

Negative pledge clause
A bond covenant that requires the borrower to grant lenders a lien equivalent to any liens that may be granted in the future to any other currently unsecured lenders.

Neglected firm effect
The tendency of firms that are neglected by security analysts to outperform firms that are the subject of considerable attention.