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

Variation margin
An additional required deposit to bring an investor's equity account up to the initial margin level when the balance falls below the maintenance margin requirement.

Venture capital
An investment in a start-up business that is perceived to have excellent growth prospects but does not have access to capital markets. Type of financing sought by early-stage companies seeking to grow rapidly.

Vertical acquisition
Acquisition in which the acquired firm and the acquiring firm are at different steps in the production process.

Vertical analysis
The process of dividing each expense item in the income statement of a given year by net sales to identify expense items that rise faster or slower than a change in sales.

Vertical merger
A merger in which one firm acquires another firm that is in the same industry but at another stage in the production cycle. For example, the firm being acquired serves as a supplier to the firm doing the acquiring.

Vertical spread
Simultaneous purchase and sale of two options that differ only in their exercise price. See: horizontal spread.

Virtual currency option
A new option contract introduced by the PHLX in 1994 that is settled in US$ rather than in the underlying currency. These options are also called 3-Ds (dollar denominated delivery).

Visible supply
New muni bond issues scheduled to come to market within the next 30 days.

Volatility
A measure of risk based on the standard deviation of investment fund performance over 3 years. Scale is 1-9; higher rating indicates higher risk. Also, the standard deviation of changes in the logarithm of an asset price, expressed as a yearly rate. Also, volatility is a variable that appears in option pricing formulas. In the option pricing formula, it denotes the volatility of the underlying asset return from now to the expiration of the option.

Volatility risk
The risk in the value of options portfolios due to the unpredictable changes in the volatility of the underlying asset.

Volume
This is the daily number of shares of a security that change hands between a buyer and a seller.

Voting rights
The right to vote on matters that are put to a vote of security holders. For example the right to vote for directors.

WACC
See: Weighted average cost of capital.

Waiting period
Time during which the SEC studies a firm's registration statement. During this time the firm may distribute a preliminary prospectus.

Wall Street
Generic term for firms that buy, sell, and underwrite securities.

Wall Street analyst
Related: Sell-side analyst.

Wallflower
Stock that has fallen out of favor with investors; tends to have a low P/E (price to earnings ratio).

Wanted for cash
A statement displayed on market tickers indicating that a bidder will pay cash for same day settlement of a block of a specified security.

Warehouse receipt
Evidence that a firm owns goods stored in a warehouse.

Warehousing
The interim holding period from the time of the closing of a loan to its subsequent marketing to capital market investors.

Warrant
A security entitling the holder to buy a proportionate amount of stock at some specified future date at a specified price, usually one higher than current market. This 'warrant' is then traded as a security, the price of which reflects the value of the underlying stock. Warrants are issued by corporations and often used as a 'sweetener' bundled with another class of security to enhance the marketability of the latter. Warrants are like call options, but with much longer time spans -- sometimes y…

Wash
Gains equal losses.

Wasting asset
An asset which has a limited life and thus, decreases in value (depreciates) over time. Also applied to consumed assets, such as gas, and termed 'depletion.'

Watch list
A list of securities selected for special surveillance by a brokerage, exchange or regulatory organization; firms on the list are often takeover targets, companies planning to issue new securities or stocks showing unusual activity.

Weak form efficiency
A form of pricing efficiency where the price of the security reflects the past price and trading history of the security. In such a market, security prices follow a random walk. Related: Semistrong form efficiency, strong form efficiency.

Weekend effect
The common recurrent low or negative average return from Friday to Monday in the stock market.

Weighted average cost of capital
Expected return on a portfolio of all the firm's securities. Used as a hurdle rate for capital investment.

Weighted average coupon
The weighted average of the gross interest rate of the mortgages underlying the pool as of the pool issue date, with the balance of each mortgage used as the weighting factor.

Weighted average life
See:Average life.

Weighted average maturity
The WAM of a MBS is the weighted average of the remaining terms to maturity of the mortgages underlying the collateral pool at the date of issue, using as the weighting factor the balance of each of the mortgages as of the issue date.

Weighted average portfolio yield
The weighted average of the yield of all the bonds in a portfolio.

Weighted average remaining maturity
The average remaining term of the mortgages underlying a MBS.

Well diversified portfolio
A portfolio spread out over many securities in such a way that the weight in any security is small. The risk of a well-diversified portfolio closely approximates the systemic risk of the overall market, the unsystematic risk of each security having been diversified out of the portfolio.

White knight
A friendly potential acquirer of a firm sought out by a target firm that is threatened by a less welcome suitor.

Whole life insurance
A contract with both insurance and investment components: (1) It pays off a stated amount upon the death of the insured, and (2) it accumulates a cash value that the policyholder can redeem or borrow against.

Wholesale mortgage banking
The purchasing of loans originated by others, with the servicing rights released to the buyer.

Wi
When issued.

Wi wi
Treasury bills trade on a wi basis between the day they are auctioned and the day settlement is made. Bills traded before they are auctioned are said to be traded wi wi.

Wild card option
The right of the seller of a Treasury Bond futures contract to give notice of intent to deliver at or before 8:00 p.m. Chicago time after the closing of the exchange (3:15 p.m. Chicago time) when the futures settlement price has been fixed. Related: Timing option.

Window contract
A guaranteed investment contract purchased with deposits over some future designated time period (the 'window'), usually between 3 and 12 months. All deposits made are guaranteed the same credit rating. Related: bullet contract.

Winners's curse
Problem faced by uninformed bidders. For example, in an initial public offering uninformed participants are likely to receive larger allotments of issues that informed participants know are overpriced.

Wire house
A firm operating a private wire to its own branch offices or to other firms, commission houses or brokerage houses.

With dividend
Purchase of shares in which the buyer is entitled to the forthcoming dividend. Related: ex-dividend.

With rights
Purchase of shares in which the buyer is entitled to the rights to buy shares in the company's rights issue.

Withdrawal plan
The ability to establish automatic periodic mutual fund redemptions and have proceeds mailed directly to the investor.

Withholding tax
A tax levied by a country of source on income paid, usually on dividends remitted to the home country of the firm operating in a foreign country. Tax levied on dividends paid abroad.

Without
If 70 were bid in the market and there was no offer, the quote would be '70 bid without.' The expression 'without' indicates a one-way market.

Without recourse
Without the lender having any right to seek payment or seize assets in the event of nonpayment from anyone other than the party (such as a special-purpose entity) specified in the debt contract.

Woody
Sexual slang for a market moving strongly upward, as in, 'This market has a woody.'

Working capital
Defined as the difference in current assets and current liabilities (excluding short-term debt). Current assets may or may not include cash and cash equivalents, depending on the company.

Working capital management
The management of current assets and current liabilities to maximize short-term liquidity.

Working capital ratio
Working capital expressed as a percentage of sales.

Workout
Informal arrangement between a borrower and creditors.

Workout period
Realignment period of a temporary misaligned yield relationship that sometimes occurs in fixed income markets.

World Bank
A multilateral development finance agency created by the 1944 Bretton Woods, New Hampshire negotiations. It makes loans to developing countries for social overhead capital projects, which are guaranteed by the recipient country. See: International Bank for Reconstruction and Development.

World investible wealth
The part of world wealth that is traded and is therefore accessible to investors.

Write-down
Decreasing the book value of an asset if its book value is overstated compared to current market values.

Writer
The seller of an option, usually an individual, bank, or company, that issues the option and consequently has the obligation to sell the asset ( if a call) or to buy the asset (if a put) on which the option is written if the option buyer exercises the option.

Yankee bonds
Foreign bonds denominated in US$ issued in the United States by foreign banks and corporations. These bonds are usually registered with the SEC. For example, bonds issued by originators with roots in Japan are called Samurai bonds.

Yankee CD
A CD issued in the domestic market, typically New York, by a branch of a foreign bank.

Yankee market
The foreign market in the United States.

Yard
Slang for one billion dollars. Used particularly in currency trading, e.g. for Japanese yen since on billion yen only equals approximately US$10 million. It is clearer to say, ' I'm a buyer of a yard of yen,' than to say, 'I'm a buyer of a billion yen,' which could be misheard as, 'I'm a buyer of a million yen.'

Yield
The percentage rate of return paid on a stock in the form of dividends, or the effective rate of interest paid on a bond or note.

Yield curve
The graphical depiction of the relationship between the yield on bonds of the same credit quality but different maturities. Related: Term structure of interest rates. Harvey (1991) finds that the inversions of the yield curve (short-term rates greater than long term rates) have preceded the last five U.S. recessions. The yield curve can accurately forecast the turning points of the business cycle.

Yield curve option-pricing models
Models that can incorporate different volatility assumptions along the yield curve, such as the Black-Derman-Toy model. Also called arbitrage-free option-pricing models.

Yield curve strategies
Positioning a portfolio to capitalize on expected changes in the shape of the Treasury yield curve.

Yield ratio
The quotient of two bond yields.

Yield spread strategies
Strategies that involve positioning a portfolio to capitalize on expected changes in yield spreads between sectors of the bond market.

Yield to call
The percentage rate of a bond or note, if you were to buy and hold the security until the call date. This yield is valid only if the security is called prior to maturity. Generally bonds are callable over several years and normally are called at a slight premium. The calculation of yield to call is based on the coupon rate, length of time to the call and the market price.

Yield to maturity
The percentage rate of return paid on a bond, note or other fixed income security if you buy and hold it to its maturity date. The calculation for YTM is based on the coupon rate, length of time to maturity and market price. It assumes that coupon interest paid over the life of the bond will be reinvested at the same rate.

Yield to worst
The bond yield computed by using the lower of either the yield to maturity or the yield to call on every possible call date.

Zero coupon bond
Such a debt security pays an investor no interest. It is sold at a discount to its face price and matures in one year or longer.

Zero prepayment assumption
The assumption of payment of scheduled principal and interest with no payments.

Zero uptick
Related: tick-test rules.

Zero-balance account (ZBA)
A checking account in which zero balance is maintained by transfers of funds from a master account in an amount only large enough to cover checks presented.

Zero-beta portfolio
A portfolio constructed to represent the risk-free asset, that is, having a beta of zero.

Zero-coupon bond
A bond in which no periodic coupon is paid over the life of the contract. Instead, both the principal and the interest are paid at the maturity date.

Zero-investment portfolio
A portfolio of zero net value established by buying and shorting component securities, usually in the context of an arbitrage strategy.

Zero-one integer programming
An analytical method that can be used to determine the solution to a capital rationing problem.

Zero-sum game
A type of game wherein one player can gain only at the expense of another player.