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

Expropriation
The official seizure by a government of private property. Any government has the right to seize such property, according to international law, if prompt and adequate compensation is given.

Extendable bond
Bond whose maturity can be extended at the option of the lender or issuer.

Extendable notes
Note the maturity of which can be extended by mutual agreement of the issuer and investors.

Extension
Voluntary arrangements to restructure a firm's debt, under which the payment date is postponed.

Extension date
The day on which the first option either expires or is extended.

Extension swap
Extending maturity through a swap, e.g. selling a 2-year note and buying one with a slightly longer current maturity.

External efficiency
Related: pricing efficiency.

External finance
Finance that is not generated by the firm: new borrowing or a stock issue.

External market
Also referred to as the international market, the offshore market, or, more popularly, the Euromarket, the mechanism for trading securities that (1) at issuance are offered simultaneously to investors in a number of countries and (2) are issued outside the jurisdiction of any single country. Related: internal market

Extinguish
Retire or pay off debt.

Extra or special dividends
A dividend that is paid in addition to a firm's 'regular' quarterly dividend.

Extraordinary positive value
A positive net present value.

Extrapolative statistical models
Models that apply a formula to historical data and project results for a future period. Such models include the simple linear trend model, the simple exponential model, and the simple autoregressive model.

Face value
See: Par value.

Factor
A financial institution that buys a firm's accounts receivables and collects the debt.

Factor analysis
A statistical procedure that seeks to explain a certain phenomenon, such as the return on a common stock, in terms of the behavior of a set of predictive factors.

Factor model
A way of decomposing the factors that influence a security's rate of return into common and firm-specific influences.

Factor portfolio
A well-diversified portfolio constructed to have a beta of 1.0 on one factor and a beta of zero on any other factors.

Factoring
Sale of a firm's accounts receivable to a financial institution known as a factor.

Fail
A trade is said to fail if on settlement date either the seller fails to deliver securities in proper form or the buyer fails to deliver funds in proper form.

Fair game
An investment prospect that has a zero risk premium.

Fair market price
Amount at which an asset would change hands between two parties, both having knowledge of the relevant facts. Also referred to as market price.

Fair price
The equilibrium price for futures contracts. Also called the theoretical futures price, which equals the spot price continuously compounded at the cost of carry rate for some time interval.

Fair price provision
See:appraisal rights.

Fair-and-equitable test
A set of requirements for a plan of reorganization to be approved by the bankruptcy court.

Fallout risk
A type of mortgage pipeline risk that is generally created when the terms of the loan to be originated are set at the same time as the sale terms are set. The risk is that either of the two parties, borrower or investor, fails to close and the loan 'falls out' of the pipeline.

FASB
Financial Accounting Standards Board. Sets accounting standards for U.S. firms.

FASB No. 52
The U.S. accounting standard which was replaced by FASB No. 8. U.S. companies are required to translate foreign accounts by the current rate and report the changes from currency fluctuations in a cumulative translation adjustment account in the equity section of the balance sheet.

FASB No. 8
U.S. accounting standard that requires U.S. firms to translate their foreign affiliates' accounts by the temporal method. Gains and losses from currency fluctuations were reported in current income. It was in effect between 1975 and 1981 and became the most controversial accounting standard in the U.S. It was replaced by FASB No. 52 in 1981.

FCIA
Foreign Credit Insurance Association. A private U.S. consortium of insurance companies that offers trade credit insurance to U.S. exporters in conjunction with the U.S. Export-Import Bank.

FDIC
Federal Deposit Insurance Corporation.

Feasible portfolio
A portfolio that an investor can construct given the assets available.

Feasible set of portfolios
The collection of all feasible portfolios.

Feasible target payout ratios
Payout ratios that are consistent with the availability of excess funds to make cash dividend payments.

Federal agency securities
Securities issued by corporations and agencies created by the U.S. government, such as the Federal Home Loan Bank Board and Ginnie Mae.

Federal credit agencies
Agencies of the federal government set up to supply credit to various classes of institutions and individuals, e.g. S&Ls, small business firms, students, farmers, and exporters.

Federal Financing Bank
A federal institution that lends to a wide array of federal credit agencies funds it obtains by borrowing from the U.S. Treasury.

Federal funds
Non-interest bearing deposits held in reserve for depository institutions at their district Federal Reserve Bank. Also, excess reserves lent by banks to each other.

Federal funds market
The market where banks can borrow or lend reserves, allowing banks temporarily short of their required reserves to borrow reserves from banks that have excess reserves.

Federal funds rate
This is the interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans. The Fed Funds rate, as it is called, often points to the direction of U.S. interest rates.

Federal Home Loan Banks
The institutions that regulate and lend to savings and loan associations. The Federal Home Loan Banks play a role analogous to that played by the Federal Reserve Banks vis-à-vis member commercial banks.

Federally related institutions
Arms of the federal government that are exempt from SEC registration and whose securities are backed by the full faith and credit of the U.S. government (with the exception of the Tennessee Valley Authority).

Fedwire
A wire transfer system for high-value payments operated by the Federal Reserve System.

FHA prepayment experience
The percentage of loans in a pool of mortgages outstanding at the origination anniversary, based on annual statistical historic survival rates for FHA-insured mortgages.

Fiat money
Nonconvertible paper money.

Field warehouse
Warehouse rented by a warehouse company on another firm's premises.

Figuring the tail
Calculating the yield at which a future money market (one available some period hence) is purchased when that future security is created by buying an existing instrument and financing the initial portion of its life with a term repo.

Fill
The price at which an order is executed.

Fill or kill order
A trading order that is canceled unless executed within a designated time period. Related: open order.

Filter
A rule that stipulates when a security should be bought or sold according to past price action.

Finance
A discipline concerned with determining value and making decisions. The finance function allocates resources, which includes acquiring, investing, and managing resources.

Financial analysts
Also called securities analysts and investment analysts, professionals who analyze financial statements, interview corporate executives, and attend trade shows, in order to write reports recommending either purchasing, selling, or holding various stocks.

Financial assets
Claims on real assets.

Financial control
The management of a firm's costs and expenses in order to control them in relation to budgeted amounts.

Financial distress
Events preceding and including bankruptcy, such as violation of loan contracts.

Financial distress costs
Legal and administrative costs of liquidation or reorganization. Also includes implied costs associated with impaired ability to do business (indirect costs).

Financial engineering
Combining or dividing existing instruments to create new financial products.

Financial future
A contract entered into now that provides for the delivery of a specified asset in exchange for the selling price at some specified future date.

Financial intermediaries
Institutions that provide the market function of matching borrowers and lenders or traders.

Financial lease
Long-term, non-cancelable lease.

Financial leverage
Use of debt to increase the expected return on equity. Financial leverage is measured by the ratio of debt to debt plus equity.

Financial leverage clientele
A group of investors who have a preference for investing in firms that adhere to a particular financial leverage policy.

Financial leverage ratios
Related: capitalization ratios.

Financial market
An organized institutional structure or mechanism for creating and exchanging financial assets.

Financial objectives
Objectives of a financial nature that the firm will strive to accomplish during the period covered by its financial plan.

Financial plan
A financial blueprint for the financial future of a firm.

Financial planning
The process of evaluating the investing and financing options available to a firm. It includes attempting to make optimal decisions, projecting the consequences of these decisions for the firm in the form of a financial plan, and then comparing future performance against that plan.

Financial press
That portion of the media devoted to reporting financial news.

Financial ratio
The result of dividing one financial statement item by another. Ratios help analysts interpret financial statements by focussing on specific relationships.

Financial risk
The risk that the cash flow of an issuer will not be adequate to meet its financial obligations. Also referred to as the additional risk that a firm's stockholder bears when the firm utilizes debt and equity.

Financing decisions
Decisions concerning the liabilities and stockholders' equity side of the firm's balance sheet, such as the decision to issue bonds.

Firm
Refers to an order to buy or sell that can be executed without confirmation for some fixed period. Also, a synonym for company.

Firm commitment underwriting
An undewriting in which an investment banking firm commits to buy the entire issue and assumes all financial responsibility for any unsold shares.

Firm-specific risk
See:diversifiable risk or unsystematic risk.

Firm's net value of debt
Total firm value minus total firm debt.

First notice day
The first day, varying by contracts and exchanges, on which notices of intent to deliver actual financial instruments or physical commodities against futures are authorized.

First-call
With CMOs, the start of the cash flow cycle for the cash flow window.

First-In-First-Out (FIFO)
A method of valuing the cost of goods sold that uses the cost of the oldest item in inventory first.

First-pass regression
A time series regression to estimate the betas of securities portfolios.

Fiscal agency agreement
An alternative to a bond trust deed. Unlike the trustee, the fiscal agent acts as an agent of the borrower.

Fiscal policy
The use of government spending and taxing for the specific purpose of stabilizing the economy.

Fisher effect
A theory that nominal interest rates in two or more countries should be equal to the required real rate of return to investors plus compensation for the expected amount of inflation in each country.

Fisher's separation theorem
The firm's choice of investments is separate from its owner's attitudes towards investments. Also refered to as portfolio separation theorem.

Five Cs of credit
Five characteristics that are used to form a judgement about a customer's creditworthiness: character, capacity, capital, collateral, and conditions.

Fixed asset
Long-lived property owned by a firm that is used by a firm in the production of its income. Tangible fixed assets include real estate, plant, and equipment. Intangible fixed assets include patents, trademarks, and customer recognition.

Fixed asset turnover ratio
The ratio of sales to fixed assets.

Fixed cost
A cost that is fixed in total for a given period of time and for given production levels.

Fixed price basis
An offering of securities at a fixed price.

Fixed-annuities
Annuity contracts in which the insurance company or issuing financial institution pays a fixed dollar amount of money per period.

Fixed-charge coverage ratio
A measure of a firm's ability to meet its fixed-charge obligations: the ratio of (net earnings before taxes plus interest charges paid plus long-term lease payments) to (interest charges paid plus long-term lease payments).

Fixed-dates
In the Euromarket the standard periods for which Euros are traded (1 month out to a year out) are referred to as the fixed dates.

Fixed-dollar obligations
Conventional bonds for which the coupon rate is set as a fixed percentage of the par value.

Fixed-dollar security
A nonnegotiable debt security that can be redeemed at some fixed price or according to some schedule of fixed values, e.g., bank deposits and government savings bonds.

Fixed-exchange rate
A country's decision to tie the value of its currency to another country's currency, gold (or another commodity), or a basket of currencies.

Fixed-income equivalent
Also called a busted convertible, a convertible security that is trading like a straight security because the optioned common stock is trading low.

Fixed-income instruments
Assets that pay a fixed-dollar amount, such as bonds and preferred stock.

Fixed-income market
The market for trading bonds and preferred stock.

Fixed-price tender offer
A one-time offer to purchase a stated number of shares at a stated fixed price, usually a premium to the current market price.

Fixed-rate loan
A loan on which the rate paid by the borrower is fixed for the life of the loan.

Fixed-rate payer
In an interest rate swap the counterparty who pays a fixed rate, usually in exchange for a floating-rate payment.