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

Stated conversion price
At the time of issuance of a convertible security, the price the issuer effectively grants the security holder to purchase the common stock, equal to the par value of the convertible security divided by the conversion ratio.

Stated maturity
For the CMO tranche, the date the last payment would occur at zero CPR.

Statement billing
Billing method in which the sales for a period such as a month (for which a customer also receives invoices) are collected into a single statement and the customer must pay all of the invoices represented on the statement.

Statement of cash flows
A financial statement showing a firm's cash receipts and cash payments during a specified period.

Statement-of-cash-flows method
A method of cash budgeting that is organized along the lines of the statement of cash flows.

Static theory of capital structure
Theory that the firm's capital structure is determined by a trade-off of the value of tax shields against the costs of bankruptcy.

Statutory surplus
The surplus of an insurance company determined by the accounting treatment of both assets and liabilities as established by state statutes.

Std Deviation
Rating

Std Deviation
Rating up to 7. 99 1, 20. 00-22. 99 6, 8. 00-10. 99 2, 23. 00-25. 99 7, 11. 00-13. 99 3,26. 00-28. 99 8, 14. 00-16. 99 4,29. 00 and up 9,17. 00-19. 99 5.

Steady state
As the MBS pool ages, or four to six months after it was passed at least once through the threshold for refinancing, the prepayment speed tends to stabilize within a fairly steady range.

Steepening 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 increased. Compare flattening of the yield curve and butterfly shift.

Step-up
To increase, as in step up the tax basis of an asset.

Step-up bond
A bond that pays a lower coupon rate for an initial period which then increases to a higher coupon rate. Related: Deferred-interest bond, Payment-in-kind bond

Sterilized intervention
Foreign exchange market intervention in which the monetary authorities have insulated their domestic money supplies from the foreign exchange transactions with offsetting sales or purchases of domestic assets.

Stochastic models
Liability-matching models that assume that the liability payments and the asset cash flows are uncertain. Related: Deterministic models.

Stock
Ownership of a corporation which is represented by shares which represent a piece of the corporation's assets and earnings.

Stock dividend
Payment of a corporate dividend in the form of stock rather than cash. The stock dividend may be additional shares in the company, or it may be shares in a subsidiary being spun off to shareholders. Stock dividends are often used to conserve cash needed to operate the business. Unlike a cash dividend, stock dividends are not taxed until sold.

Stock exchanges
Formal organizations, approved and regulated by the Securities and Exchange Commission (SEC), that are made up of members that use the facilities to exchange certain common stocks. The two major national stock exchanges are the New York Stock Exchange (NYSE) and the American Stock Exchange (ASE or AMEX). Five regional stock exchanges include the Midwest, Pacific, Philadelphia, Boston, and Cincinnati. The Arizona stock exchange is an after hours electronic marketplace where anonymous participants…

Stock index option
An option in which the underlying is a common stock index.

Stock market
Also called the equity market, the market for trading equities.

Stock option
An option in which the underlying is the common stock of a corporation.

Stock replacement strategy
A strategy for enhancing a portfolio's return, employed when the futures contract is expensive based on its theoretical price, involving a swap between the futures, treasury bills portfolio and a stock portfolio.

Stock repurchase
A firm's repurchase of outstanding shares of its common stock.

Stock selection
An active portfolio management technique that focuses on advantageous selection of particular stocks rather than on broad asset allocation choices.

Stock split
Occurs when a firm issues new shares of stock but in turn lowers the current market price of its stock to a level that is proportionate to pre-split prices. For example, if IBM trades at $100 before a 2-for-1 split, after the split it will trade at $50 and holders of the stock will have twice as many shares than they had before the split. See: split.

Stock ticker
This is a lettered symbol assigned to securities and mutual funds that trade on U.S.financial exchanges.

Stockholder
Holder of equity shares in a firm.

Stockholder equity
Balance sheet item that includes the book value of ownership in the corporation. It includes capital stock, paid in surplus, and retained earnings.

Stockholder's books
Set of books kept by firm management for its annual report that follows Financial Accounting Standards Board rules. The tax books follow IRS tax rules.

Stockholder's equity
The residual claims that stockholders have against a firm's assets, calculated by subtracting total liabilities from total assets.

Stockout
Running out of inventory.

Stop order (or stop)
An order to buy or sell at the market when a definite price is reached, either above (on a buy) or below (on a sell) the price that prevailed when the order was given.

Stop-limit order
A stop order that designates a price limit. In contrast to the stop order, which becomes a market order once the stop is reached, the stop-limit order becomes a limit order once the stop is reached.

Stop-loss order
An order to sell a stock when the price falls to a specified level.

Stopping curve
A curve showing the refunding rates for different points in time at which the expected value of refunding immediately equals the expected value of waiting to refund.

Stopping curve refunding rate
A refunding rate that falls on the stopping curve.

Straddle
Purchase or sale of an equal number of puts and calls with the same terms at the same time. Related: spread

Straight line depreciation
An equal dollar amount of depreciation in each accounting period.

Straight value
Also called investment value, the value of a convertible security without the con-version option.

Straight voting
A shareholder may cast all of his votes for each candidate for the board of directors.

Stratified equity indexing
A method of constructing a replicating portfolio in which the stocks in the index are classified into stratum, and each stratum is represented in the portfolio.

Stratified sampling bond indexing
A method of bond indexing that divides the index into cells, each cell representing a different characteristic, and that buys bonds to match those characteristics.

Street
Brokers, dealers, underwriters, and other knowledgeable members of the financial community; from Wall Street financial community.

Street name
Describes securities held by a broker on behalf of a client but registered in the name of the Wall Street firm.

Strike index
For a stock index option, the index value at which the buyer of the option can buy or sell the underlying stock index. The strike index is converted to a dollar value by multiplying by the option's contract multiple. Related: strike price

Strike price
The stated price per share for which underlying stock may be purchased (in the case of a call) or sold (in the case of a put) by the option holder upon exercise of the option contract.

Strip, strap
Variants of a straddle. A strip is two puts and one call on a stock, a strap is two calls and one put on a stock. In both cases, the puts and calls have the same strike price and expiration date.

Stripped bond
Bond that can be subdivided into a series of zero-coupon bonds.

Strong-form efficiency
Pricing efficiency, where the price of a, security reflects all information, whether or not it is publicly available. Related: Weak form efficiency, semi strong form efficiency

Structured arbitrage transaction
A self-funding, self-hedged series of transactions that usually utilize mortgage securities as the primary assets.

Structured debt
Debt that has been customized for the buyer, often by incorporating unusual options.

Structured portfolio strategy
A strategy in which a portfolio is designed to achieve the performance of some predetermined liabilities that must be paid out in the future.

Structured settlement
An agreement in settlement of a lawsuit involving specific payments made over a period of time. Property and casualty insurance companies often buy life insurance products to pay the costs of such settlements.

Subject
Refers to a bid or offer that cannot be executed without confirmation from the customer.

Subject to opinion
An auditor's opinion reflecting acceptance of a company's financial statements subject to pervasive uncertainty that cannot be adequately measured, such as information relating to the value of inventories, reserves for losses, or other matters subject to judgment.

Subjective probabilities
Probabilities that are determined subjectively (for example, on the basis of judgement rather than using statistical sampling).

Subordinated debenture bond
An unsecured bond that ranks after secured debt, after debenture bonds, and often after some general creditors in its claim on assets and earnings. Related: Debenture bond, mortgage bond, collateral trust bonds.

Subordinated debt
Debt over which senior debt takes priority. In the event of bankruptcy, subordinated debtholders receive payment only after senior debt claims are paid in full.

Subordination clause
A provision in a bond indenture that restricts the issuer's future borrowing by subordinating the new lender's claims on the firm to those of the existing bond holders.

Subpart F
Special category of foreign-source 'unearned' income that is currently taxed by the IRS whether or not it is remitted to the U.S.

Subperiod return
The return of a portfolio over a shorter period of time than the evaluation period.

Subscription price
Price that the existing shareholders are allowed to pay for a share of stock in a rights offering.

Subsidiary
A foreign-based affiliate that is a separately incorporated entity under the host country's law.

Substitute sale
A method for hedging price risk that utilizes debt-market instruments, such as interest rate futures, or that involves selling borrowed securities as the primary assets.

Substitution swap
A swap in which a money manager exchanges one bond for another bond that is similar in terms of coupon, maturity, and credit quality, but offers a higher yield.

Sunk costs
Costs that have been incurred and cannot be reversed.

Supermajority
Provision in a company's charter requiring a majority of, say, 80% of shareholders to approve certain changes, such as a merger.

Supply shock
An event that influences production capacity and costs in an economy.

Support level
A price level below which it is supposedly difficult for a security or market to fall.

Surplus funds
Cash flow available after payment of taxes in the project.

Surplus management
Related: asset management

Sushi bond
A eurobond issued by a Japanese corporation.

Sustainable growth rate
Maximum rate of growth a firm can sustain without increasing financial leverage.

Swap
An arrangement whereby two companies lend to each other on different terms, e.g. in different currencies, and/or at different interest rates, fixed or floating.

Swap assignment
Related: swap sale.

Swap buy-back
The sale of an interest rate swap by one counterparty to the other, effectively ending the swap.

Swap option
See:Swaption. Related: Quality option.

Swap rate
The difference between spot and forward rates expressed in points, e.g., $0.0001 per pound sterling.

Swap reversal
An interest rate swap designed to end a counterparty's role in another interest rate swap, accomplished by counterbalancing the original swap in maturity, reference rate, and notional amount.

Swap sale
Also called a swap assignment, a transaction that ends one counterparty's role in an interest rate swap by substituting a new counterparty whose credit is acceptable to the other original counterparty.

Swaption
Options on interest rate swaps. The buyer of a swaption has the right to enter into an interest rate swap agreement by some specified date in the ' future. The swaption agreement will specify whether the buyer of the swaption will be a fixed-rate receiver or a fixed-rate payer. The writer of the swaption becomes the counterparty to the swap if the buyer exercises.

Sweep account
Account in which the bank takes all of the excess available funds at the close of each business day and invests them for the firm.

Swingline facility
Bank borrowing facility to provide finance while the firm replaces U.S. commercial paper with eurocommercial paper.

Swissy
Jargon for the Swiss Franc.

Switching
Liquidating an existing position and simultaneously reinstating a position in another futures contract of the same type. Symmetric cash matching An extension of cash flow matching that allows for the short-term borrowing of funds to satisfy a liability prior to the liability due date, resulting in a reduction in the cost of funding liabilities.

Symmetric cash matching
An extension of cash flow matching that allows for the short-term borrowing of funds to satisfy a liability prior to the liability due date, resulting in a reduction in the cost of funding liabilities.

Synchronous data
Data available at the same time. In testing option-pricing models, the price of the option and of the underlying should be synchronous, representing the same moment in the market.

Syndicate
A group of banks that acts jointly, on a temporary basis, to loan money in a bank credit (syndicated credit) or to underwrite a new issue of bonds.

Synergistic effect
A violation of value-additivity whereby the value of the combination is greater than the sum of the individual values.

Synthetics
Customized hybrid instruments created by blending an underlying price on a cash instrument with the price of a derivative instrument.

Systematic
Common to all businesses.

Systematic risk
Also called undiversifiable risk or market risk, the minimum level of risk that can be obtained for a portfolio by means of diversification across a large number of randomly chosen assets. Related: unsystematic risk.

Systematic risk principle
Only the systematic portion of risk matters in large, well-diversified portfolios. The, expected returns must be related only to systematic risks.

Tactical Asset Allocation (TAA)
An asset allocation strategy that allows active departures from the normal asset mix based upon rigorous objective measures of value. Often called active management. It involves forecasting asset returns, volatilities and correlations. The forecasted variables may be functions of fundamental variables, economic variables or even technical variables.

Tail
(1) The difference between the average price in Treasury auctions and the stopout price. (2) A future money market instrument (one available some period hence) created by buying an existing instrument and financing the initial portion of its life with a term repo. (3) The extreme end under a probability curve. (4) The odd amount in a MBS pool.

Take
(1) A dealer or customer who agrees to buy at another dealer's offered price is said to take that offer. (2) Also, Euro bankers speak of taking deposits rather than buying money.

Take a position
To buy or sell short; that is, to have some amount that is owned or owed on an asset or derivative security.

Take-or-pay contract
A contract that obligates the purchaser to take any product that is offered to it (and pay the cash purchase price) or pay a specified amount if it refuses to take the product.

Take-out
A cash surplus generated by the sale of one block of securities and the purchase of another, e.g. selling a block of bonds at 99 and buying another block at 95. Also, a bid made to a seller of a security that is designed (and generally agreed) to take him out of the market.

Take-up fee
A fee paid to an underwriter in connection with an underwritten rights offering or an underwritten forced conversion as compensation for each share of common stock he underwriter obtains and must resell upon the exercise of rights or conversion of bonds.