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

An upper and lower limit on the interest rate on a floating-rate note.

Assets than can be repossessed if a borrower defaults.

Collateral trust bonds
A bond in which the issuer (often a holding company) grants investors a lien on stocks, notes, bonds, or other financial asset as security. Compare mortgage bond.

Collection float
The negative float that is created between the time when you deposit a check in your account and the time when funds are made available.

Collection fractions
The percentage of a given month's sales collected during the month of sale and each month following the month of sale.

Collection policy
Procedures followed by a firm in attempting to collect accounts receivables.

Collective wisdom
The combination of all of the individual opinions about a stock's or security's value.

A bank that ranks just below a lead manager in a syndicated Eurocredit or international bond issue. Comanagers may assist the lead manger bank in the pricing and issue of the instrument.

Combination matching
Also called horizon matching, a variation of multiperiod immunization and cash flow matching in which a portfolio is created that is always duration matched and also cash-matched in the first few years.

Combination strategy
A strategy in which a put and with the same strike price and expiration are either both bought or both sold. Related: Straddle

Commercial draft
Demand for payment.

Commercial paper
Short-term unsecured promissory notes issued by a corporation. The maturity of commercial paper is typically less than 270 days; the most common maturity range is 30 to 50 days or less.

Commercial risk
The risk that a foreign debtor will be unable to pay its debts because of business events, such as bankruptcy.

The fee paid to a broker to execute a trade, based on number of shares, bonds, options, and/or their dollar value. In 1975, deregulation led to the creation of discount brokers, who charge lower commissions than full service brokers. Full service brokers offer advice and usually have a full staff of analysts who follow specific industries. Discount brokers simply execute a client's order -- and usually do not offer an opinion on a stock. Also known as a round-turn.

Commission broker
A broker on the floor of an exchange acts as agent for a particular brokerage house and who buys and sells stocks for the brokerage house on a commission basis.

Commission house
A firm which buys and sells future contracts for customer accounts. Related: futures commission merchant, omnibus account.

A trader is said to have a commitment when he assumes the obligation to accept or make delivery on a futures contract. Related: Open interest

Commitment fee
A fee paid to a commercial bank in return for its legal commitment to lend funds that have not yet been advanced.

Commodities Exchange Center (CEC)
The location of five New York futures exchanges: Commodity Exchange, Inc. (COMEX), the New York Mercantile exchange (NYMEX), the New York Cotton Exchange, the Coffee, Sugar and Cocoa exchange (CSC), and the New York futures exchange (NYFE). common size statement A statement in which all items are expressed as a percentage of a base figure, useful for purposes of analyzing trends and the changing relationship between financial statement items. For example, all items in each year's income statemen…

A commodity is food, metal, or another physical substance that investors buy or sell, usually via futures contracts.

Common market
An agreement between two or more countries that permits the free movement of capital and labor as well as goods and services.

Common stock
These are securities that represent equity ownership in a company. Common shares let an investor vote on such matters as the election of directors. They also give the holder a share in a company's profits via dividend payments or the capital appreciation of the security.

Common stock equivalent
A convertible security that is traded like an equity issue because the optioned common stock is trading high.

Common stock market
The market for trading equities, not including preferred stock.

Common stock ratios
Ratios that are designed to measure the relative claims of stockholders to earnings (cash flow per share), and equity (book value per share) of a firm.

Common stock-other equity
Value of outstanding common shares at par, plus accumulated retained earnings. Also called shareholders' equity.

Common-base-year analysis
The representing of accounting information over multiple years as percentages of amounts in an initial year.

Common-size analysis
The representing of balance sheet items as percentages of assets and of income statement items as percentages of sales.

Company-specific risk
Related: Unsystematic risk

Comparative credit analysis
A method of analysis in which a firm is compared to others that have a desired target debt rating in order to infer an appropriate financial ratio target.

Comparison universe
The collection of money managers of similar investment style used for assessing relative performance of a portfolio manager.

Compensating balance
An excess balance that is left in a bank to provide indirect compensation for loans extended or services provided.

Sufficient ability or fitness for ones needs. Possessing the necessary abilities to be qualified to achieve a certain goal or complete a project.

Intra- or intermarket rivalry between businesses trying to obtain a larger piece of the same market share.

Competitive bidding
A securities offering process in which securities firms submit competing bids to the issuer for the securities the issuer wishes to sell.

Competitive offering
An offering of securities through competitive bidding.

Complete capital market
A market in which there is a distinct marketable security for each and every possible outcome.

Complete portfolio
The entire portfolio, including risky and risk-free assets.

Completion bonding
Insurance that a construction contract will be successfully completed.

Completion risk
The risk that a project will not be brought into operation successfully.

Completion undertaking
An undertaking either (1) to complete a project such that it meets certain specified performance criteria on or before a certain specified date or (2) to repay project debt if the completion test cannot be met.

Voluntary arrangement to restructure a firm's debt, under which payment is reduced.

Compound interest
Interest paid on previously earned interest as well as on the principal.

Compound option
Option on an option.

The process of accumulating the time value of money forward in time. For example, interest earned in one period earns additional interest during each subsequent time period.

Compounding frequency
The number of compounding periods in a year. For example, quarterly compounding has a compounding frequency of 4.

Compounding period
The length of the time period (for example, a quarter in the case of quarterly compounding) that elapses before interest compounds.

Concentration account
A single centralized account into which funds collected at regional locations (lockboxes) are transferred.

Concentration services
Movement of cash from different lockbox locations into a single concentration account from which disbursements and investments are made.

Concession agreement
An understanding between a company and the host government that specifies the rules under which the company can operate locally.

Conditional sales contracts
Similar to equipment trust certificates except that the lender is either the equipment manufacturer or a bank or finance company to whom the manufacturer has sold the conditional sales contract.

Confidence indicator
A measure of investors' faith in the economy and the securities market. A low or deteriorating level of confidence is considered by many technical analysts as a bearish sign.

Confidence level
The degree of assurance that a specified failure rate is not exceeded.

The written statement that follows any 'trade' in the securities markets. Confirmation is issued immediately after a trade is executed. It spells out settlement date, terms, commission, etc.

A firm engaged in two or more unrelated businesses.

Conglomerate merger
A merger involving two or more firms that are in unrelated businesses.

Consensus forecast
The mean of all financial analysts' forecasts for a company.

A type of bond that has an infinite life but is not issued in the U.S. capital markets.

The combining of two or more firms to form an entirely new entity.

Consortium banks
A merchant banking subsidiary set up by several banks that may or may not be of the same nationality. Consortium banks are common in the Euromarket and are active in loan syndication.

Constant-growth model
Also called the Gordon-Shapiro model, an application of the dividend discount model which assumes (1) a fixed growth rate for future dividends and (2) a single discount rate.

Consumer credit
Credit granted by a firm to consumers for the purchase of goods or services. Also called retail credit.

Consumer Price Index
The CPI, as it is called, measures the prices of consumer goods and services and is a measure of the pace of U.S. inflation. The U.S.Department of Labor publishes the CPI very month.

A market condition in which futures prices are higher in the distant delivery months.

Contingent claim
A claim that can be made only if one or more specified outcomes occur.

Contingent immunization
An arrangement in which the money manager pursues an active bond portfolio strategy until an adverse investment experience drives the then-available potential return down to the safety-net level. When that point is reached, the money manager is obligated to pursue an immunization strategy to lock in the safety-net level return.

Contingent pension liability
Under ERISA, the firm is liable to the plan participants for up to 39% of the net worth of the firm.

Continuous compounding
The process of accumulating the time value of money forward in time on a continuous, or instantaneous, basis. Interest is earned continuously, and at each instant, the interest that accrues immediately begins earning interest on itself.

Continuous random variable
A random value that can take any fractional value within specified ranges, as contrasted with a discrete variable.

A term of reference describing a unit of trading for a financial or commodity future. Also, the actual bilateral agreement between the buyer and seller of a transaction as defined by an exchange.

Contract month
The month in which futures contracts may be satisfied by making or accepting a delivery. Also called value managers, those who assemble portfolios with relatively lower betas, lower price-book and P/E ratios and higher dividend yields, seeing value where others do not.

Contribution margin
The difference between variable revenue and variable cost.

50% of the outstanding votes plus one vote.

Controlled disbursement
A service that provides for a single presentation of checks each day (typically in the early part of the day).

The corporate manager responsible for the firm's accounting activities.

Convenience yield
The extra advantage that firms derive from holding the commodity rather than the future.

Convention statement
An annual statement filed by a life insurance company in each state where it does business in compliance with that state's regulations. The statement and supporting documents show, among other things, the assets, liabilities, and surplus of the reporting company.

Conventional mortgage
A loan based on the credit of the borrower and on the collateral for the mortgage.

Conventional pass-throughs
Also called private-label pass-throughs, any mortgage pass-through security not guaranteed by government agencies. Compare agency pass-throughs.

Conventional project
A project with a negative initial cash flow (cash outflow), which is expected to be followed by one or more future positive cash flows (cash inflows).

The movement of the price of a futures contract toward the price of the underlying cash commodity. At the start, the contract price is higher because of the time value. But as the contract nears expiration, the futures price and the cash price converge.

Conversion factors
Rules set by the Chicago Board of Trade for determining the invoice price of each acceptable deliverable Treasury issue against the Treasury Bond futures contract.

Conversion parity price
Related:Market conversion price

Conversion premium
The percentage by which the conversion price in a convertible security exceeds the prevailing common stock price at the time the convertible security is issued.

Conversion ratio
The number of shares of common stock that the security holder will receive from exercising the call option of a convertible security.

Conversion value
Also called parity value, the value of a convertible security if it is converted immediately.

The degree of freedom to exchange a currency without government restrictions or controls.

Convertible bonds
Bonds that can be converted into common stock at the option of the holder.

Convertible eurobond
A eurobond that can be converted into another asset, often through exercise of attached warrants.

Convertible preferred stock
Preferred stock that can be converted into common stock at the option of the holder.

Convertible price
The contractually specified price per share at which a convertible security can be converted into shares of common stock.

Convertible security
A security that can be converted into common stock at the option of the security holder, including convertible bonds and convertible preferred stock.

Bowed, as in the shape of a curve. Usually referring to the price/required yield relationship for option-free bonds.

Core competency
Primary area of competence. Narrowly defined fields or tasks at which a company or business excels. Primary areas of specialty.

Corner A Market
To purchase enough of the available supply of a commodity or stock in order to manipulate its price.

Corporate acquisition
The acquisition of one firm by anther firm.

Corporate bonds
Debt obligations issued by corporations.

Corporate charter
A legal document creating a corporation.

Corporate finance
One of the three areas of the discipline of finance. It deals with the operation of the firm (both the investment decision and the financing decision) from that firm's point of view.

Corporate financial management
The application of financial principals within a corporation to create and maintain value through decision making and proper resource management.