Financial Glossary
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C
- A Nasdaq stock symbol indicating the issuer has been granted a continuance in Nasdaq under an exception to the qualification standards for a limited period.
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C-Share
- In a family of multi-class mutual funds, the class that has a constant load structure throughout the life of the fund.
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C-Suite
- A widely-used slang term used to collectively refer to a corporation's most important senior executives. C-Suite gets its name because top senior executives' titles tend to start with the letter C, for chief, as in chief executive officer, chief operating officer and chief information officer.
Also called "C-level executives".
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Cabinet Crowd
- Members of the NYSE that typically trade in inactive bonds. Also known as the inactive bond crowd or book crowd.
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Cabinet Security
- A stock or bond that is listed under a major financial exchange, but is not actively traded.
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Cable
- Slang used among forex traders referring to the exchange rate between the U.S. dollar and the British pound sterling. Because it is the norm in forex for most major currencies to be quoted against the U.S. dollar on a regular basis, "cable" is a commonly used term.
"Cable" can also be used to refer simply to the British pound sterling.
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CAC 40
- The French stock market index that tracks the 40 largest French stocks based on market capitalization on the Paris Bourse (stock exchange).
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CAD
- What currency is CAD?
CAD is the currency abbreviation or currency symbol for the Canadian dollar (CAD). The Canadian dollar is made up of 100 cents, and is often presented with the dollar sign as C$ to allow it to be distinguished from other currencies denominated in dollars, such as the U.S. Dollar (USD). CAD is considered to be a benchmark currency, meaning that many central banks across the globe keep Canadian dollars as a reserve currency.
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CAD (Canadian Dollar)
- The currency abbreviation or currency symbol for the Canadian dollar (CAD). The Canadian dollar is made up of 100 cents and is often presented with the dollar sign as C$ to allow it to be distinguished from other currencies denominated in dollars, such as the U.S. dollar (USD). CAD is considered to be a benchmark currency, meaning that many central banks across the globe keep Canadian dollars as a reserve currency.
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Cafeteria Plan
- An employee benefit plan that allows staff to choose from a variety of benefits to formulate a plan that best suits their needs. Cafeteria plan options may include health and accident insurance, cash benefits, tax advantages and/or retirement plan contributions.
Also known as "cafeteria employee benefit plan" or "flexible benefit plan".
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Cage
- A term used to describe the department of a brokerage firm that receives and distributes physical securities.
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Caisse Populaire
- A cooperative, member-owned financial institution that fulfills traditional banking roles as well as diverse activities such as lending, insurance, investment dealing. Caisses Populaires are primarily found in the province of Quebec in Canada, as caisses populaires are essentially the francophone equivalent of a credit union.
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Calamity Call
- A call feature of a Collateralized Mortgage Obligation (CMO) designed primarily to reduce the issuer's reinvestment risk. If the cash flow generated by the underlying collateral is not enough to support the scheduled principal and interest payments, then the issuer is required to retire a portion of the CMO issue.
Also known as a "clean-up call."
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Calculated Intangible Value - CIV
- A method of valuing a company's intangible assets. This calculation attempts to allocate a fixed value to intangible assets that does not change according to the company's market value. Examples of intangible assets include brand equity and proprietary technology.
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Calculation Agent
- An individual who calculates the value of a derivative or the amount owing from each party in a swap agreement.
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Calcutta Stock Exchange (CAL) .CL
- The securities market in Calcutta, India. The country's second-oldest exchange began in 1908 as the Calcutta Stock Exchange Association with the trading of securities in the East India Company. At this time, it had 150 members. In 1923, the Association became a limited liability concern. In 1980, the exchange was permanently recognized by India's government. In 1997, The Exchange was the largest in the country, and it replaced its manual trading system with a computerized trading system called C-Star.
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Calendar Effect
- A collection of assorted theories that assert that certain days, months or times of year are subject to above-average price changes in market indexes and can therefore represent good or bad times to invest. Some theories that fall under the calendar effect include the Monday effect, the October effect, the Halloween effect and the January effect.
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Calendar Spread
- An options or futures spread established by simultaneously entering a long and short position on the same underlying asset but with different delivery months. Sometimes referred to as an interdelivery, intramarket, time or horizontal spread.
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Calendar Year
- The one-year period that begins on January 1 and ends on December 31, based on the commonly used Gregorian calendar. For individual and corporate taxation purposes, a calendar year will generally comprise all of the year's financial information used to calculate income tax payable.
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Calendar Year Accounting Incurred Losses
- Calendar year accounting incurred losses is a term used in the insurance industry to describe the losses incurred by an insurance company by the payment of claims, the re-evaluation of claims already in the company's books and any negative or positive changes in loss reserves in a particular calendar year.
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Call
- 1. The period of time between the opening and closing of some future markets wherein the prices are established through an auction process.
2. An option contract giving the owner the right (but not the obligation) to buy a specified amount of an underlying security at a specified price within a specified time.
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Call Date
- The date on which a bond can be redeemed before maturity. If the issuer feels there is a benefit to refinancing the issue, the bond may be redeemed on the call date at par or at a small premium to par.
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Call Loan
- A loan provided to a brokerage firm and used to finance margin accounts. The interest rate on a call loan is calculated daily. The resulting interest rate is referred to as the call loan rate.
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Call Loan Rate
- The short term interest rate charged on a secured call loan, usually in margin accounts.
Also known as the broker's call.
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Call Market
- A type of market in which each transaction takes place at predetermined intervals and where all of the bid and ask orders are aggregated and transacted at once. The exchange determines the market clearing price based on the number of bid and ask orders. A call market is contrasted to an auction market, where orders are filled as soon as a buyer/seller is found for any given order at an agreed upon price.
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Call Option
- An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument at a specified price within a specific time period.
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Call Premium
- 1. The dollar amount over the par value of a callable fixed-income debt security that is given to holders when the security is called by the issuer.
2. The amount the purchaser of a call option must pay to the writer.
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Call Price
- The price at which a bond or a preferred stock can be redeemed by the issuer. This price is set at the time the security is issued. Also referred to as "redemption price".
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Call Protection
- A protective provision of a callable security prohibiting the issuer from calling back the security for a period early in its life.
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Call Provision
- A provision on a bond or other fixed-income instrument that allows the original issuer to repurchase and retire the bonds. If there is a call provision in place, it will typically come with a time window under which the bond can be called, and a specific price to be paid to bondholders and any accrued interest are defined.
Callable bonds will pay a higher yield than comparable non-callable bonds.
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Call Ratio Backspread
- A very bullish investment strategy that combines options to create a spread with limited loss potential and mixed profit potential. It is generally created by selling one call option and then using the collected premium to purchase a greater number of call options at a higher strike price. This strategy has potentially unlimited upside profit because the trader is holding more long call options than short ones.
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Call Report
- A report that must be filed by all regulated financial institutions in the U.S. on a quarterly basis and contains financial information about the banks. Banks are required to file no later than 30 days after the end of each quarter. The report is officially known as the Report of Condition and Income for banks and Thrift Financial Report for Thrifts.
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Call Risk
- The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem the issue prior to maturity. This means the bondholder will receive payment on the value of the bond and, in most cases, will be reinvesting in a less favorable environment (one with a lower interest rate).
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Call Rule
- A exchange rule whereby the official bidding price for a cash commodity is competitively established at the end of each trading day and held until the opening of the exchange the following trading day.
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Call Warrant
- A warrant that gives the holder the right to buy the underlying share for an agreed price, on or before a specified date.
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Callable Bond
- A bond that can be redeemed by the issuer prior to its maturity. Usually a premium is paid to the bond owner when the bond is called.
Also known as a "redeemable bond".
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Callable Certificate Of Deposit
- An FDIC insured certificate of deposit (CD) that contains a call feature similar to other types of callable fixed-income securities. Callable CDs can be redeemed (called away) by the issuing bank prior to their stated maturity, usually within a given time frame, and at a preset call price.
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Callable Common Stock
- Common stock that allows the issuer to call back the stock at a specific price.
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Callable Preferred Stock
- A type of preferred stock that carries the provision that the issuer has the right to call in the stock at a certain price and retire it. Also known as "redeemable preferred stock".
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Callable Security
- A security with an embedded call provision that allows the issuer to repurchase or redeem the security by a specified date. Since the holder of a callable security is exposed to the risk of the security being repurchased, the callable security is generally less expensive than comparable securities that do not have a call provision.
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Called Away
- A term used to describe the elimination of a contract due to the obligation of delivery. This occurs if an option is exercised, if a redeemable bond is called before maturity or if a short position held in a security requires delivery.
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Calmar Ratio
- A ratio used to determine return relative to drawdown (downside) risk in a hedge fund.
Calculated as:
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CalPERS
- The California Public Employees' Retirement System (CalPERS), an organization that provides numerous benefits to its more than 1.6 million members, including health insurance, long-term care insurance, death benefits, mortgage program, and distribution of pension and retirement-related financial benefits. CalPERS Investments is the nation's largest public pension fund and, given its size, it is able to exercise significant pressure to make desired changes within the companies in which it invests.
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Cambist
- An expert trader who rapidly buys and sells currency throughout the day.
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CAMELS Rating System
- An international bank-rating system where bank supervisory authorities rate institutions according to six factors.
The six factors are represented by the acronym "CAMELS."
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Camouflage Compensation
- Compensation that is granted to upper echelon employees, directors, consultants and related parties that is not fully disclosed in mandatory company filings. In other cases, compensation is fully disclosed, but in such a way that it is very difficult for the average investor to decipher the true value of gross pay compensation.
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CAN SLIM
- A system for selecting stocks created by Investor's Business Daily founder William J. O'Neil. Each letter in the acronym stands for a key factor to look for in a company.
Also referred to as "C-A-N-S-L-I-M" or "CANSLIM".
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Canada Education Savings Grant - CESG
- A grant from the Government of Canada paid directly into a beneficiary's Registered Education Savings Plan (RESP). It adds 20% to the first $2,000 in contributions made into an RESP on behalf of an eligible beneficiary each year.
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Canada Pension Plan - CPP
- One of three levels of Canada's retirement income system, which is responsible for paying retirement or disability benefits. The Canada Pension Plan was established in 1966 to provide a basic benefits package for retirees and disabled contributors. If the recipient dies, survivors receive the plan's provided benefits.
The CPP pays a monthly amount, which is designed to replace about 25% of the contributor's earnings on which initial contributions were based, and is indexed to the Consumer Price Index.
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Canada Premium Bond - CPB
- A debt instrument issued by the Bank of Canada that offers a higher interest rate than a Canada Savings Bond (CSB) with the same issuance date.
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Canada Revenue Agency - CRA
- Formerly known as "Revenue Canada", this is Canada's federal agency responsible for income tax and trade regulations.
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Canada Savings Bond - CSB
- A financial product issued by the Bank of Canada. It offers a competitive rate of interest and guarantees a minimum interest rate.
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Canada's New Stock Exchange - CNQ
- An alternative stock exchange for micro-cap and emerging companies in Canada. Canada's New Stock Exchange (CNQ) offers companies simplified reporting requirements and reduced barriers to entry, compared to the Toronto Stock Exchange and the TSX Venture Exchange. The CNQ does this through its model, which attempts to remove the duplication of regulation between the exchange and the provincial securities commissions.
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Canadian Capital Markets Association - CCMA
- A non-profit organization that was created to analyze issues arising in the Canadian and international capital markets. The organization is focused on being an active participant towards developing and implementing government legislation and regulatory policies relating to industry practices in the capital markets.
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Canadian Council Of Insurance Regulators - CCIR?
- An association that was created to advocate for an effective regulatory system in Canada. In addition, the CCIR frequently works jointly with other financial regulators to improve consumer protection laws and to promote harmonization of regulations across various jurisdictions.
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Canadian Deposit Insurance Corporation - CDIC
- A crown corporation owned by the Canadian government that insures bank deposits up to C$100,000 per personal account held in member Canadian banks in they event that the financial institution fails. The corporation was formed under the Financial Administration Act and Canada Deposit Insurance Corporation Act in 1967. The CDIC is similar to the Federal Deposit Insurance Corporation in the United States.
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Canadian Income Trust
- A qualified income trust as designated by the Canada Revenue Agency that operates as a profit-seeking corporation. This type of income trust, which pays out all earnings to unit holders before paying taxes, is usually traded publicly on a securities exchange. Canadian income trusts enjoy special corporate tax privileges.
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Canadian Institute Of Actuaries - CIA
- The Canadian Institute of Actuaries, or CIA, is an organization of the actuarial profession in Canada. The CIA's vision is to for actuaries to be recognized as the leading professionals in the financial modeling and risk management fields. It is the Canadian version of the American Academy of Actuaries.
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Canadian Investor Protection Fund - CIPF
- A Canadian not-for-profit organization set up by the investment industry designed to protect investors from the bankruptcy of an individual investment firm.
Accounts are covered for up to $1 million in shortfall of securities, commodity and futures contracts, segregated insurance funds and cash. Shortfall is the difference between the market value of the account and what the insolvent company can return to the customer.
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Canadian Mortgage and Housing Corporation - CMHC
- A division of the Government of Canada that acts as Canada's national housing agency. The CMHC's mandate is to help Canadians access a variety of affordable housing options. It also researches housing and real estate trends in Canada and around the world, providing research to consumers, businesses and other government divisions. The major activity of the CMHC, and the one for which it is best known, is mortgage loan insurance, which insures approved lenders (such as Canada's chartered banks) against borrower default. Mortgage loan insurance provides approved borrowers access to low-cost mortgage rates. CMHC approved buyers may purchase property with as little as 5% down payment.
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Canadian Orginated Preferred Securities - COPrS
- A long-term subordinated debt instrument, issued in Canada.
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Canadian Rollover Mortgage
- A home mortgage with an adjustable rate feature. The Canadian Rollover mortgage differs from a 30-year fixed rate mortgage, in that the loan's interest rate is adjusted every five years, with no cap on the interest rate adjustment. The Canadian Rollover Mortgage is also known as a Variable Rate Mortgage or a Renegotiable Rate Mortgage.
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Canadian Securities Administrators - CSA
- A collective forum composed of all the provincial and territorial securities regulators of Canada. The CSA's main goal is to collaborate on the creation and harmonization of securities regulations across Canada. In addition to its regulation-related functions, the organization seeks to better educate the public on all aspects of the Canadian securities market.
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Canadian Securities Course™ - CSC™
- An entry-level program offered by the Canadian Securities Institute (CSI) that allows an individual to become a qualified mutual fund representative.
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Canary Call
- A step-up bond that cannot be called after completing its first-step period. The issuer of the bond reserves the option to call back the bond until the first step is reached. A canary call may only be exercised on predetermined dates.
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Cancel Former Order - CFO
- An order given by an investor instructing his/her broker to cancel a previously placed order.
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Cancelable Insurance
- This is insurance that may be canceled, at any time, by the insured party or by the insurance company. Aside from life insurance, most insurance policies can easily be. If the insurer cancels the policy, it must first give notice and must also refund prepaid premium on a pro rata basis.
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Canceled Order
- 1. A previously submitted order to purchase or sell a security that is canceled before it has been executed on an exchange.
2. An order that can't be executed due to parameter limitations, such as a limit order that can't be filled because the price has moved outside of range.
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Cancellation
- A notice informing a customer of the cancellation of an erroneous trade that has been credited to his or her account by the broker.
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Cancellation Of Debt - COD
- When a creditor forgives a debt without requiring consideration in return. The amount of debt that is forgiven by cancellation of debt is considered income to the debtor and must be reported as a result. In most cases, it is taxable as ordinary income and is known as cancellation-of-debt (COD) income.
In some cases, this debt is from one country to another and is partially or fully wiped away to help rebuild the nation.
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Cancellation Provision Clause
- It is a provision in an insurance policy that permits an insurer or an insurance company to cancel a property and casualty or a health insurance policy at any time before its expiration date. Life insurance policies do not contain cancellation clauses, and while health insurance policies contain cancellation clauses, the clause does not allow the insurer to cancel the policy.
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Candlestick
- A price chart that displays the high, low, open, and close for a security each day over a specified period of time.
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Cap
- The highest point to which an adjustable rate mortgage (ARM) can rise in a given time period or the highest rate that investors can receive on a floating-rate type bond. The issuer typically sets the cap at the time the contract is issued. With an ARM, it is detailed in the terms of the mortgage document.
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Cap And Trade
- A regulatory system that is meant to reduce certain kinds of emissions and pollution and to provide companies with a profit incentive to reduce their pollution levels faster than their peers. Under a cap-and-trade program, a limit (or "cap") on certain types of emissions or pollutions is set, and companies are permitted to sell (or "trade") the unused portion of their limits to other companies that are struggling to comply.
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Capacity
- The maximum level of output of goods and/or services that a given system can potentially produce over a set period of time. In most cases, it is unlikely that any system will operate at full capacity for prolonged periods, because natural inefficiencies and other factors decrease potential output.
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Capacity Cost
- A fixed expense incurred by a company or organization in order to provide for or increase its ability to conduct business operations. Capacity costs generally do not vary with production levels and can be reduced or avoided only by shutting down business locations or outsourcing.
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Capacity Utilization Rate
- A metric used to measure the rate at which potential output levels are being met or used. Displayed as a percentage, capacity utilization levels give insight into the overall slack that is in the economy or a firm at a given point in time. If a company is running at a 70% capacity utilization rate, it has room to increase production up to a 100% utilization rate without incurring the expensive costs of building a new plant or facility.
Also known as "operating rate".
Graphically:
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Capital
- 1. Financial assets or the financial value of assets, such as cash.
2. The factories, machinery and equipment owned by a business.
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Capital Account
- The net result of public and private international investments flowing in and out of a country.
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Capital Accumulation
- This refers to profits that a company uses to increase its capital base. Capital accumulation involves acquiring more assets that can be used to create more wealth or that will appreciate in value.
Alternatively, capital accumulation can also refer to when an institutional broker or individual investor acquires a large number of shares of a particular stock or mutual fund over an extended period of time.
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Capital Addition
- The cost involved for adding new assets or bettering existing assets within a business. Capital additions can take the form of adding new parts that could be reasonably expected to increase useful life or potential, and/or adding new assets to increase production.
Capital additions are not to be confused with repairs, which only maintain the life of an asset. Capital additions are expected to increase the life or productivity of an asset.
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Capital Adequacy Ratio - CAR
- A measure of a bank's capital. It is expressed as a percentage of a bank's risk weighted credit exposures.
Also known as "Capital to Risk Weighted Assets Ratio (CRAR)."
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Capital Allocation
- A process of how businesses divide their financial resources and other sources of capital to different processes, people and projects. Overall, it is management's goal to optimize capital allocation so that it generates as much wealth as possible for its shareholders.
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Capital Allocation Line - CAL
- A line created in a graph of all possible combinations of risky and risk-free assets. Also known as the "reward-to-variability ratio".
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Capital Appreciation
- A rise in the value of an asset based on a rise in market price. Essentially, the capital that was invested in the security has increased in value, and the capital appreciation portion of the investment includes all of the market value exceeding the original investment or cost basis. Capital appreciation is one of the two main sources of investment returns, with the other being dividend or interest income.
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Capital Appreciation Fund
- A mutual fund that attempts to increase asset value primarily through investments in growth stocks. The heavy investment in growth stocks increases the risk associated with these types of funds.
Also called "aggressive growth fund".
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Capital Asset
- A type of asset that is not easily sold in the regular course of a business's operations for cash and is generally owned for its role in contributing to the business's ability to generate profit. Furthermore, it is expected that the benefits gained from the asset will extend beyond a time span of one year. On a business's balance sheet, capital assets are represented by the property, plant and equipment figure.
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Capital Asset Pricing Model - CAPM
- A model that describes the relationship between risk and expected return and that is used in the pricing of risky securities.
The general idea behind CAPM is that investors need to be compensated in two ways: time value of money and risk. The time value of money is represented by the risk-free (rf) rate in the formula and compensates the investors for placing money in any investment over a period of time. The other half of the formula represents risk and calculates the amount of compensation the investor needs for taking on additional risk. This is calculated by taking a risk measure (beta) that compares the returns of the asset to the market over a period of time and to the market premium (Rm-rf).
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Capital Assistance Program
- An element of the financial stability plan launched by the U.S. Department of Treasury to regain confidence in the financial industry. In this program, the U.S. Treasury makes capital available for financial institutions to borrow in order to enable them to continue to serve the public.
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Capital Base
- 1. The capital acquired during an IPO, or the additional offerings of a company, plus any retained earnings.
2. An initial investment plus subsequent investments made by an investor into their portfolio.
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Capital Blockade
- A form of economic sanction in which a country or a group of countries attempt to limit or entirely stop the amount of investment capital going into another country that is seen to be performing questionable actions. The main goal of a capital blockade is to hurt the offending country's economic growth to the point where it will agree to meet and resolve the issue(s) at hand.
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Capital Budgeting
- The process in which a business determines whether projects such as building a new plant or investing in a long-term venture are worth pursuing. Oftentimes, a prospective project's lifetime cash inflows and outflows are assessed in order to determine whether the returns generated meet a sufficient target benchmark.
Also known as "investment appraisal".
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Capital Control
- Any measure taken by a government, central bank or other regulatory body to limit the flow of foreign capital in and out of the domestic economy. This includes taxes, tariffs, outright legislation and volume restrictions, as well as market-based forces. Capital controls can affect many asset classes such as equities, bonds and foreign exchange trades.
Tight capital controls are most often found in developing economies, where the capital reserves are lower and more susceptible to volatility.
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Capital Cost Allowance - CCA
- A rate of depreciation used for income tax purposes only. This term primarily relates to Canadian taxation.
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Capital Dividend Account - CDA
- A unique account where untaxed gains are deposited within a private company.
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Capital Employed
- 1. The total amount of capital used for the acquisition of profits.
2. The value of all the assets employed in a business.
3. Fixed assets plus working capital.
4. Total assets less current liabilities.
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Capital Expenditure - CAPEX
- Funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment. This type of outlay is made by companies to maintain or increase the scope of their operations. These expenditures can include everything from repairing a roof to building a brand new factory.
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Capital Flight
- When investors move their securities out of a particular country because of a fear of country-specific risks or political instability, or because of the lure of higher returns in a different country.
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Capital Flows
- The movement of money for the purpose of investment, trade or business production. Capital flows occur within corporations in the form of investment capital and capital spending on operations and research & development. On a larger scale, governments direct capital flows from tax receipts into programs and operations, and through trade with other nations and currencies. Individual investors direct savings and investment capital into securities like stocks, bonds and mutual funds.
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Capital Formation
- A term used to describe net capital accumulation during an accounting period. Capital formation refers to net additions of capital stock such as equipment, buildings and other intermediate goods. A nation uses capital stock in combination with labour to provide services and produce goods; an increase in this capital stock is known as capital formation.
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Capital Gain
- 1. An increase in the value of a capital asset (investment or real estate) that gives it a higher worth than the purchase price. The gain is not realized until the asset is sold. A capital gain may be short term (one year or less) or long term (more than one year) and must be claimed on income taxes. A capital loss is incurred when there is a decrease in the capital asset value compared to an asset's purchase price.
2. Profit that results when the price of a security held by a mutual fund rises above its purchase price and the security is sold (realized gain). If the security continues to be held, the gain is unrealized. A capital loss would occur when the opposite takes place.
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Capital Gains Distribution
- Distributions that are paid to a mutual fund's shareholders out of the capital gains of the company's investment portfolio.
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Capital Gains Exposure - CGE
- An assessment of the extent to which a stock fund or other similar investment fund's assets have appreciated or depreciated, which may have tax implications for investors.
Positive exposure would mean that the assets in the fund have appreciated and that shareholders will have to pay taxes on any realized gains on the appreciated assets. Negative exposure denotes that the fund has a loss carryforward that can cushion some of the capital gains.
Calculated as:
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Capital Gains Tax
- A type of tax levied on capital gains incurred by individuals and corporations. Capital gains are the profits that an investor realizes when he or she sells the capital asset for a price that is higher than the purchase price.
Capital gains taxes are only triggered when an asset is realized, not while it is held by an investor. An investor can own shares that appreciate every year, but the investor does not incur a capital gains tax on the shares until they are sold.
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Capital Gains Treatment
- The specific taxes assessed on investment capital gains as determined by the U.S. Tax Code. When a stock is sold for a profit, the portion of the proceeds over and above the purchase value (or cost basis) is known as capital gains. Capital gains tax is broken down into two categories: short-term capital gains and long-term capital gains. Stocks held longer than one year are considered long term for the treatment of any capital gains, and are taxed a maximum of 15% depending on the investor's tax bracket. Stocks held less than one year are subject to short-term capital gains at a maximum rate of 35% depending again on the investor's tax bracket.
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Capital Gains Yield
- The price appreciation component of a security's (such as a common stock) total return. For stock holdings, the capital gains yield will be the change in price divided by the original (purchase) price.
Calculated as:
Where:
P0 = Original price of the security
P1 = Current/Selling price of the security
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Capital Gearing
- The degree to which a company acquires assets or to which it funds its ongoing operations with long- or short-term debt. Capital gearing will differ between companies and industries, and will often change over time.
Capital gearing is also known as "financial leverage".
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Capital Goods
- Any goods used by an organization to produce other goods.
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Capital Goods Price Index - CGPI
- An economic index computed by the New Zealand government that measures the change in fixed capital-asset prices in the New Zealand economy from one period to another. The index helps indicate the change in costs for capital assets, which are used by companies and the New Zealand government to produce other goods. The CGPI is produced every quarter.
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Capital Goods Sector
- A category of stocks related to the manufacture or distribution of goods. The sector is diverse, containing companies that manufacture machinery used to create capital goods, electrical equipment, aerospace and defense, engineering and construction projects.
Also referred to as the "industrials sector".
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Capital Growth Strategy
- An asset allocation strategy that seeks to maximize capital appreciation, or the increase in value of a portfolio or asset over the long term.
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Capital Guarantee Fund
- An investment vehicle offered by certain institutions that guarantees the investor's initial capital investment from any losses.
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Capital Improvement
- The addition of a permanent structural improvement or the restoration of some aspect of a property that will either enhance the property''''s overall value or increases its useful life. Although the scale of the capital improvement can vary, capital improvements can be made by both individual homeowners and large-scale property owners.
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Capital Intensive
- A business process or an industry that requires large amounts of money and other financial resources to produce a good or service. A business is considered capital intensive based on the ratio of the capital required to the amount of labor that is required.
Some industries commonly thought of as capital intensive include oil production and refining, telecommunications and transports such as railways and airlines.
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Capital Lease
- A lease considered to have the economic characteristic of asset ownership.
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Capital Loss
- The loss incurred when a capital asset (investment or real estate) decreases in value. This loss is not realized until the asset is sold for a price that is lower than the original purchase price.
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Capital Loss Carryover
- The net amount of capital losses that aren't deductible for the current tax year but can be carried over into future tax years. Net capital losses (total capital losses minus total capital gains) can only be deducted up to a maximum of $3,000 in a given tax year. Any amounts exceeding $3,000 can be put toward offsetting capital gains in the current year or simply deducted in the next year(s).
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Capital Market Line - CML
- A line used in the capital asset pricing model to illustrate the rates of return for efficient portfolios depending on the risk-free rate of return and the level of risk (standard deviation) for a particular portfolio.
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Capital Markets
- A market in which individuals and institutions trade financial securities. Organizations/institutions in the public and private sectors also often sell securities on the capital markets in order to raise funds. Thus, this type of market is composed of both the primary and secondary markets.
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Capital Note
- Fixed income products issued by companies as a source of short term debt.
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Capital Purchase Program - CPP
- A program sponsored by the U.S. Treasury designed to provide new capital to banks, which will in turn allow them to loan more money to businesses and thus stimulate the economy. Under this program, the U.S. Treasury will purchase up to $250 billion of senior preferred shares of qualifying U.S. banks and savings institutions. Subscribing banks must be willing to sell an amount of stock equal to 1-3% of their risk-weighted assets.
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Capital Rationing
- The act of placing restrictions on the amount of new investments or projects undertaken by a company. This is accomplished by imposing a higher cost of capital for investment consideration or by setting a ceiling on the specific sections of the budget.
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Capital Reduction
- The process of decreasing a company's shareholder equity through share cancellations and share repurchases. The reduction of capital is done by companies for numerous reasons including increasing shareholder value and producing a more efficient capital structure.
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Capital Requirement
- The standardized requirements in place for banks and other depository institutions, which determines how much liquidity is required to be held for a certain level of assets through regulatory agencies such as the Bank for International Settlements, Federal Deposit Insurance Corporation or Federal Reserve Board. These requirements are put into place to ensure that these institutions are not participating or holding investments that increase the risk of default and that they have enough capital to sustain operating losses while still honoring withdrawals.
Also known as "regulatory capital".
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Capital Reserve
- A type of account on a municipality's or company's balance sheet that is reserved for long-term capital investment projects or any other large and anticipated expense(s) that will be incurred in the future. This type of reserve fund is set aside to ensure that the company or municipality has adequate funding to at least partially finance the project.
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Capital Risk
- 1. The risk an investor faces that he or she may lose all or part of the principal amount invested.
2. The risk a company faces that it may lose value on its capital. The capital of a company can include equipment, factories and liquid securities.
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Capital Share
- The class of shares offered by a dual-purpose fund that has opportunity for capital appreciation but does not offer the holder any portion of the fixed income earned within the portfolio.
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Capital Stock
- The common and preferred stock a company is authorized to issue, according to their corporate charter.
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Capital Stock Insurance Companies
- A capital stock insurance company is a company that gets its capital from contributions from its stockholders in addition to its surplus accounts and reserve accounts. In other words, a capital stock insurance company is one that gets a majority of its assets or money from the sale of shares or stock to stockholders.
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Capital Structure
- A mix of a company's long-term debt, specific short-term debt, common equity and preferred equity. The capital structure is how a firm finances its overall operations and growth by using different sources of funds.
Debt comes in the form of bond issues or long-term notes payable, while equity is classified as common stock, preferred stock or retained earnings. Short-term debt such as working capital requirements is also considered to be part of the capital structure.
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Capital Surplus
- Equity which cannot otherwise be classified as capital stock or retained earnings. It's usually created from a stock issued at a premium over par value.
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Capitalism
- An economic system based on a free market, open competition, profit motive and private ownership of the means of production. Capitalism encourages private investment and business, compared to a government-controlled economy. Investors in these private companies (i.e. shareholders) also own the firms and are known as capitalists.
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Capitalization
- 1. In accounting, it is where costs to acquire an asset are included in the price of the asset.
2. The sum of a corporation's stock, long-term debt and retained earnings. Also known as "invested capital".
3. A company's outstanding shares multiplied by its share price, better known as "market capitalization".
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Capitalization Of Earnings
- A method of determining the value of an organization by calculating the net present value (NPV) of expected future profits or cash flows. The capitalization of earnings estimate is done by taking the entity's future earnings and dividing them by the capitalization rate (cap rate). This will take into account the risk that earnings will stop or be lower than the estimate.
Where:
d = discount rate
g = growth rate
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Capitalization Rate
- A rate of return on a real estate investment property based on the expected income that the property will generate. Capitalization rate is used to estimate the investor's potential return on his or her investment. This is done by dividing the income the property will generate (after fixed costs and variable costs) by the total value of the property. If you want to get technical, it is basically the discount rate of a perpetuity.
Capitalization Rate = Yearly Income/Total Value
Also known as "cap rate".
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Capitalization-Weighted Index
- A type of market index whose individual components are weighted according to their market capitalization, so that larger components carry a larger percentage weighting. The value of a capitalization-weighted index can be computed by adding up the collective market capitalizations of its members and dividing it by the number of securities in the index.
Also known as a "market-value weighted index".
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Capitalize
- An accounting method used to delay the recognition of expenses by recording the expense as long-term assets.
In general, capitalizing expenses is beneficial as companies acquiring new assets with a long-term lifespan can spread out the cost over a specified period of time. Companies take expenses that they incur today and deduct them over the long term without an immediate negative affect against revenues.
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Capitalized Cost
- An expense that is added to the cost basis of a fixed asset on a company's balance sheet. Capitalized Costs are incurred when building or financing fixed assets. Capitalized Costs are not expensed in the period they were incurred, but recognized over a period of time via depreciation or amortization.
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Capitalized Interest
- An account created in the income statement section of a business' financial statements that holds a suitable amount of funds meant to pay off upcoming interest payments. Furthermore, this type of interest is seen as an asset and unlike most conventional types of interest, it also is expensed over time.
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Capitalized Lease Method
- An accounting approach that identifies a company's lease obligation as an asset on its balance sheet. This is done because although the company has not taken ownership of the asset, the transaction is still considered to be a beneficial economic exchange for the lease holder. Under this method, the expenses are higher in the early years and gradually decline over the term of the lease.
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Capitulation
- A military term. Capitulation refers to surrendering or giving up.
In the stock market, capitulation is associated with "giving up" any previous gains in stock price as investors sell equities in an effort to get out of the market and into less risky investments. True capitulation involves extremely high volume and sharp declines. It usually is indicated by panic selling.
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Capped Fund
- A mutual fund that has a limited amount of operating expenses that can be charged annually to shareholders. The limit is expressed as a ratio of total operating expenses divided by the fund's average net assets. The fund's investment advisor will disclose the expense limit in the prospectus.
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Capped Option
- An option with a pre-established profit cap. A capped option is automatically exercised when the underlying security closes at or above (for a call) or at or below (for a put) the Option's cap price.
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Capping
- 1. The practice of selling large amounts of a commodity or security close to the options expiry date in order to prevent a rise in market price.
2. An attempt to keep a stock's price low or move its price lower by putting selling pressure on it.
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Captive Finance Company
- A subsidiary whose purpose is to provide financing to customers buying the parent company's product.
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Caput
- A type of exotic option that consists of a call option on a put option. Essentially, a caput gives the holder the right to purchase another option. This type of option is also known as a "compound option".
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Car Title Loan
- A short-term loan in which the borrower's car title is used as collateral. The borrower must be the lien holder (i.e. own the car outright). Loans are usually for less than 30 days. If the loan is not repaid, the lender can take ownership of the car and sell it to recoup the loan amount.
These loans are also known as "auto title loans" or just "title loans".
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Caracas Stock Exchange (CCS) .CR
- The main securities market in Venezuela (the other two are the Maracaibo Stock Exchange and the Electronic Stock Exchange of Venezuela). The Caracas Stock Exchange (in Spanish, la Bolsa de Valores de Caracas) was founded in 1947 but traces its origins to 1805, when the Casa de Bolsa y Recreación de los Comerciantes y Labradores was established under Spanish colonialism.
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Carbon Credit
- A permit that allows the holder to emit one ton of carbon dioxide. Credits are awarded to countries or groups that have reduced their green house gases below their emission quota. Carbon credits can be traded in the international market at their current market price.
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Carbon Trade
- An idea presented in response to the Kyoto Protocol that involves the trading of greenhouse gas (GHG) emission rights between nations.
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Card Recovery Bulletin
- A paper listing of lost, stolen, past-due, over-limit, counterfeit or otherwise problem cards published by credit card companies, like Visa or MasterCard. Merchants will review the list to discover if a credit card seems suspicious or not.
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Cardboard Box Index
- An index used by some investors to gauge industrial production by using the output of cardboard boxes to predict the purchases of non-durable consumer goods.
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Cardholder Agreement
- A printed booklet a credit cardholder receives that contains all the "fine print" about the card's terms. The cardholder agreement ordinarily describes the annual percentage rate, how minimum payments are calculated, and the rights of the cardholder when disputes arise. It includes the terms for all the fees that the cardholder may be charged, including annual, balance transfer, closed account, late payment and over-the-limit fees, as well as any additional penalties that may be assessed.
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Carl Icahn
- An American billionaire investor with reputation for being a shrewd activist investor. Icahn is known for buying large amounts of stock in a specific company, and then pressuring the company to make significant changes to increase its value.
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Carried Interest
- A share of any profits that the general partners of private equity and hedge funds receive as compensation, despite not contributing any initial funds. This method of compensation seeks to motivate the general partner (fund manager) to work toward improving the fund's performance.
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Carrot Equity
- A type of equity where current equity owners can purchase additional equity if the company reaches certain financial goals or benchmarks. Financial goals include certain net income, earnings per share, economic value added and operating cash flow thresholds.
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Carrying Broker
- A term used to refer to a commodities exchange member who elects to clear trades on behalf of another party.
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Carrying Charge
- A cost associated with holding a financial instrument or storing a physical commodity over a defined period of time.
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Carrying Charge Market
- A futures market where contracts with maturities further into the future have higher future prices.
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Carrying Cost Of Inventory
- The cost of maintaining inventory in a company's warehouse.
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Carrying Value
- An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance sheet. For assets, the value is based on the original cost of the asset less any depreciation, amortization or impairment costs made against the asset. For a company, carrying value is a company's total assets minus intangible assets and liabilities such as debt.
Also known as "book value".
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Carryover Basis
- A method for determining the tax basis of an asset when it is transferred from one individual to another. Carryover basis is often used when property is given as a gift to someone else and is the method for determining the basis for future tax payments.
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Cartel
- A small group of producers of a good or service who agree to regulate supply in an effort to control or manipulate prices.
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Carve-out
- 1. Sometimes known as a partial spinoff, a carve out occurs when a parent company sells a minority (usually 20% or less) stake in a subsidiary for an IPO or rights offering.
2. Where an established brick-and-mortar company hooks up with venture investors and a new management team to launch an Internet spinoff.
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Cash
- Legal tender or coins that can be used in exchange goods, debt, or services. Sometimes also including the value of assets that can be converted into cash immediately, as reported by a company.
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Cash Account
- A regular brokerage account in which the customer is required by Regulation T to pay for securities within two days of when a purchase is made.
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Cash Accounting
- An accounting method where receipts are recorded during the period they are received, and the expenses in the period in which they are actually paid.
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Cash Accumulation Method
- A mathematical method of comparing the costs of different cash value life insurance policies. The cash accumulation method assumes that the death benefits for the policies are equal and unchanging. The aggregate total difference between the premiums paid into the two policies is then evaluated over time. Ultimately, this comparison is used to rank policies according to cost effectiveness.
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Cash Advance
- A loan taken out against a line of credit or credit card, typically imposing higher-than-normal interest charges.
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Cash Allowance
- An allowance that is paid out in cash, instead of being reimbursed at a later date. Employers usually give cash allowances to employees in order to cover the costs of, for example, meals and lodging.
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Cash and Carry Transaction
- A type of transaction in the futures market in which the cash or spot price of a commodity is below the futures contract price. Cash and carry transactions are considered arbitrage transactions.
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Cash And Cash Equivalents - CCE
- An item on the balance sheet that reports the value of a company's assets that are cash or can be converted into cash immediately.
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Cash Asset Ratio
- The current value of marketable securities and cash, divided by the company's current liabilities. Also known as the cash ratio, the cash asset ratio compares the dollar amount of highly liquid assets (such as cash and marketable securities) for every one dollar of short-term liabilities. This figure is used to measure a firm's liquidity or its ability to pay its short-term obligations. Ideal ratios will be different for different industries and for different sizes of corporations, and for many other reasons.
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Cash Available For Debt Service - CADS
- A ratio that measures the amount of cash a company has on hand as compared to its debt service obligations. Debt service obligations include all current interest payments due, as well as all current principal repayments due.
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Cash Awards
- An award given to an employee or contestant in the form of cash. Cash awards can either be the only award option or taken in lieu of a tangible item.
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Cash Balance Pension Plan
- A pension plan under which an employer credits a participant's account with a set percentage of his or her yearly compensation plus interest charges. A cash balance pension plan is a defined-benefit plan. As such, the plan's funding limits, funding requirements and investment risk are based on defined-benefit requirements: as changes in the portfolio do not affect the final benefits to be received by the participant upon retirement or termination, the company solely bears all ownership of profits and losses in the portfolio.
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Cash Basis
- A major accounting method that recognizes revenues and expenses at the time physical cash is actually received or paid out. This contrasts to the other major accounting method, accrual accounting, which requires income to be recognized in a company's books at the time the revenue is earned (but not necessarily received) and records expenses when liabilities are incurred (but not necessarily paid for).
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Cash Basis Loan
- A loan where interest is recorded as earned when payment is collected. Ordinarily, interest income is accrued on loans, since regular payment of both principal and interest is assumed. However, in the case of nonperforming loans (loans gone bad), continuing payments are doubtful. Cash basis loans are nonperforming loans, and interest income can only be recorded when funds are actually received.
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Cash Basis Taxpayer
- A taxpayer who reports income and deductions in the year that they are actually paid or received. Cash basis taxpayers cannot report receivables as income, nor deduct promissory notes as payments.
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Cash Book
- A financial journal that contains all cash receipts and payments, including bank deposits and withdrawals. Entries in the cash book are then posted into the general ledger. The cash book is periodically reconciled with the bank statements as an internal method of auditing.
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Cash Budget
- An estimation of the cash inflows and outflows for a business or individual for a specific period of time. Cash budgets are often used to assess whether the entity has sufficient cash to fulfill regular operations and/or whether too much cash is being left in unproductive capacities.
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Cash Card
- A cash card can be any card that you can insert into an ATM or other cash dispenser, or a pre-paid credit card, or a card with a preset cash value from a particular store (Costco or Subway), which is read by a cash card reader and used to pay for products or services at that retailer.
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Cash Charge
- A charge off made by a company against earnings that requires an initial outlay of cash.
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Cash Collateral
- Cash collected when liquid assets are sold during Chapter 11 bankruptcy proceedings. This can be obtained through the sale of cash equivalent securities or through the sale of personal property against which debt may be secured.
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Cash Commodity
- The actual or physical commodity underlying a futures contract.
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Cash Concentration And Disbursement (CCD)
- A type of electronic payment used to transfer funds between remote locations and so-called concentration (i.e., collection) accounts. CCD is also used between businesses. Cash Concentration and Disbursement accounts are tools used for cash management that seperate funds collection and disbursement. Transfers are cleared overnight through the Automated Clearing House (ACH) system.
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Cash Conversion Cycle - CCC
- A metric that expresses the length of time, in days, that it takes for a company to convert resource inputs into cash flows. The cash conversion cycle attempts to measure the amount of time each net input dollar is tied up in the production and sales process before it is converted into cash through sales to customers. This metric looks at the amount of time needed to sell inventory, the amount of time needed to collect receivables and the length of time the company is afforded to pay its bills without incurring penalties.
Also known as "cash cycle".
Calculated as:
Where:
DIO represents days inventory outstanding
DSO represents days sales outstanding
DPO represents days payable outstanding
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Cash Cost
- A cash basis accounting cost recognition process that classifies costs as they are paid for in cash, and is recognized in the general ledger at the point of sale. This method is contrary to the accrual cost recognition method, which directly influences the operating cash flow figure.
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Cash Cow
- 1. One of the four categories (quadrants) in the BCG growth-share matrix that represents the division within a company that has a large market share within a mature industry.
2. A business, product or asset that, once acquired and paid off, will produce consistent cash flow over its lifespan.
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Cash Delivery
- 1. The same-day settlement of a currency trade in the forex market. This means that delivery and settlement of the transaction occur on the same date that the currency trade is made. In order for this to occur, the forex position must be opened and closed within the same trading day.
Also referred to as "same-day settlement".
2. In the context of futures contracts, a settlement term in a contract that stipulates that the underlying asset of the contract will not be delivered on the delivery date - rather, the net cash value of the position will be transferred to the applicable party instead.
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Cash Discount
- An incentive that a seller offers to a buyer in return for paying a bill owed before the scheduled due date. The seller will usually reduce the amount owed by the buyer by a small percentage or a set dollar amount. If used properly, cash discounts improve the days-sales-outstanding aspect of a business's cash conversion cycle.
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Cash Distribution Per Unit - CDPU
- A measure, used in Canada, that refers to the amount of cash payments made to individual unitholders of a specified income trust, as designated by the Canada Revenue Agency. The ratio is calculated by taking the total amount of cash distributions divided by the total amount of unit shares issued.
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Cash Dividend
- Money paid to stockholders, normally out of the corporation's current earnings or accumulated profits. All dividends must be declared by the board of directors and are taxable as income to the recipients.
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Cash Earnings Per Share - Cash EPS
- A measure of financial performance that looks at the cash flow generated by a company on a per share basis. This differs from basic earnings per share (EPS), which looks at the net income of the company on a per share basis. The higher a company's cash EPS, the better it is considered to have performed over the period. A company's cash EPS can be used to draw comparisons to other companies or to the company's own past results.
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Cash Equivalents
- Investment securities that are short-term, have high credit quality and are highly liquid.
Also referred to as "cash and equivalents".
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Cash Flow
- 1. A revenue or expense stream that changes a cash account over a given period. Cash inflows usually arise from one of three activities - financing, operations or investing - although this also occurs as a result of donations or gifts in the case of personal finance. Cash outflows result from expenses or investments. This holds true for both business and personal finance.
2. An accounting statement called the "statement of cash flows", which shows the amount of cash generated and used by a company in a given period. It is calculated by adding noncash charges (such as depreciation) to net income after taxes. Cash flow can be attributed to a specific project, or to a business as a whole. Cash flow can be used as an indication of a company's financial strength.
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Cash Flow After Taxes - CFAT
- A measure of financial performance that looks at the company's ability to generate cash flow through its operations. It is calculated by adding back non-cash accounts such as amortization, depreciation, restructuring costs and impairments to net income.
Also known as "After-Tax Cash Flow".
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Cash Flow from Financing Activities
- A category in the cash flow statement that accounts for external activities such as issuing cash dividends, adding or changing loans, or issuing and selling more stock. The formula for cash flow from financing activities is as follows:
Cash Received from Issuing Stock or Debt - Cash Paid as Dividends and for Re-Acquisition of Debt/Stock
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Cash Flow From Investing Activities
- An item on the cash flow statement that reports the aggregate change in a company's cash position resulting from any gains (or losses) from investments in the financial markets and operating subsidiaries, and changes resulting from amounts spent on investments in capital assets such as plant and equipment.
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Cash Flow Loan
- Borrowing cash typically to meet day-to-day operations or acquisitions. Reasons for needing a cash flow loan could be seasonal-demand changes, business expansion or changes in the business cycle.
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Cash Flow Per Share
- A measure of a firm's financial strength, calculated as follows:
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Cash Flow Plans
- A method that an insured can use to control the premium payments that they must make on their policies. Cash flow plans allow the insured to coordinate the flow of premiums with his or her own cash flow. This allows the insured to keep his or her funds for as long as possible and thus earn a greater amount of interest on them.
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Cash Flow Return on Investment - CFROI
- A valuation model that assumes the stock market sets prices based on cash flow, not on corporate performance and earnings.
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Cash Flow Statement
- One of the quarterly financial reports any publicly traded company is required to disclose to the SEC and the public. The document provides aggregate data regarding all cash inflows a company receives from both its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given quarter.
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Cash Flow Underwriting
- A pricing tool used by insurance companies. Cash flow underwriting occurs when a given insurance product is priced below the rate of premium required to take into account the cost of expected losses that will be incurred. The purpose of this strategy is to generate substantial investment capital from the increased business that will come from the lower pricing.
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Cash for Bond Lending
- A lending structure used in the Federal Reserve's Term Auction Facility (TAF), whereby borrowers receive a cash loan, by using all or a portion of their own portfolio of bonds as collateral.
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Cash For Clunkers
- A program that allows car owners to trade in their old, less fuel-efficient vehicles in exchange for more fuel-efficient vehicles. Although commonly referred to as "cash for clunkers", the formal name for the program in the U.S. is the Car Allowance Rebate System (CARS). The CARS program gives people who qualify a potential credit of up to $4,500 depending on the vehicle purchased.
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Cash For Refrigerators
- A federal energy efficiency program introduced in the fall of 2009. Commonly referred to as cash for refrigerators, in reference to the cash for clunkers program that operated during the summer of 2009, the program offers U.S. customers a rebate of up to $200 when buying a new, energy efficient home appliance.
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Cash In Advance
- When an importer must pay the exporter in cash before a shipment is made. The logic behind the structure of such a transaction is that if an exporter ships a product to an importer and the importer does not pay for the item, the exporter has very little recourse. This term can be used in a variety of businesses, but it is most common in the import/export business.
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Cash Investment
- Short-term obligations, usually ninety days or less, that provide a return in the form of interest payments.
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Cash Management Bill - CMB
- A short-term security sold by the U.S. Department of the Treasury. The maturity on a CMB can range from a few days to six months. The money raised through these issues is used by the Treasury to meet any temporary shortfalls.
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Cash Market
- The market for a cash commodity or actual, as opposed to the market for its futures contract.
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Cash On Delivery - COD
- A type of transaction in which payment for a good is made at the time of delivery. If the purchaser does not make payment when the good is delivered, then the good will be returned to the seller.
Payment can be made by cash, certified check or money order, depending on what is stipulated in the shipping contract.
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Cash Plus Fund
- A type of fund, commonly found in Australia, that is formulated for conservative investors seeking preservation of capital and reasonable investment returns.
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Cash Position
- The amount of cash that a company, investment fund or bank has on its books at a specific point in time. The cash position is a sign of financial strength and liquidity. In addition to cash itself, it will often take into consideration highly liquid assets such as certificates of deposit, short-term government debt and other cash equivalents.
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Cash Price
- The price of the purchase and delivery of cash commodities.
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Cash Ratio
- The ratio of a company's total cash and cash equivalents to its current liabilities. The cash ratio is most commonly used as a measure of company liquidity. It can therefore determine if, and how quickly, the company can repay its short-term debt. A strong cash ratio is useful to creditors when deciding how much debt, if any, they would be willing to extend to the asking party.
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Cash Reserves
- In finance, cash reserves primarily refers to two things. One is a type of short-term, highly liquid investment that earns a low rate of return (perhaps 3% annually) such as investment company Fidelity's mutual fund called Fidelity Cash Reserves. This is where some individuals keep money that they want to have quick access to. The other type of cash reserves refers to the money a company or individual keeps on hand to meet its short-term and emergency funding needs.
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Cash Return On Assets Ratio
- A ratio used to compare a businesses performance among other industry members. The ratio can be used internally by the company's analysts, or by potential and current investors. The ratio does not however include any future commitments regarding assets, nor does it include the cost of replacing older ones.
Cash Return On Assets = cash flow from operations
total assets
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Cash Return On Capital Invested - CROCI
- A method of valuation that compares a company's cash return to its equity. Developed by the Deutsche Bank's global valuation group, CROCI provides analysts with a cash flow based metric for evaluating the earnings of a company. Also known as "cash return on cash invested".
CROCI is found by the following formula:
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Cash Return on Gross Investment - CROGI
- A measure of financial performance calculated as gross cash flow after taxes divided by gross investment.
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Cash Settlement
- A settlement method used in certain future and option contracts whereby, upon expiry or exercise, the seller of the financial instrument does not deliver the actual but transfers the associated cash position.
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Cash Surrender Value
- The sum of money an insurance company will pay to the policyholder or annuity holder in the event his or her policy is voluntarily terminated before its maturity or the insured event occurs. This cash value is the savings component of most permanent life insurance policies, particularly whole life insurance policies. Also known as "cash value", "surrender value" and "policyholder's equity".
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Cash Trading
- A method of buying or selling securities by providing the capital needed to fund the transaction without relying on the use of margin. Cash trading is achieved by using a cash account, which is a type of brokerage account that requires the investor to pay for securities within two days from when the purchase is made.
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Cash Transaction
- A transaction that is settled with cash on the same day as the trade.
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Cash Trigger
- A condition that triggers an investor to make a trade or take a specific action, such as a purchase, sale of the security, or the purchase or sale of a derivative (such as an option) of that security.
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Cash Value Added - CVA
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Cash-And-Carry Trade
- A trading strategy that involves the simultaneous trading of two similar securities in order to recognize an arbitrage profit. Also known as "basis trading" or "buying the basis."
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Cash-Based Option
- A type of option which is always settled in cash. Upon exercise, the net value to the involved parties are calculated and a cash payment is made to settle the difference. This option is advantageous for investors who want to capture movements in stock prices only, and not be required to enter a position following the exercise of an option.
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Cash-Flow Financing
- A form of financing in which the loan is backed by a company's expected cash flows. This differs from an asset-backed loan, where the collateral for the loan is based on the company's assets. The schedules or repayments for cash-flow loans are based on the company's projected future cash flows. Debt covenants on these loans are typically focused on adequate levels of EBITDA growth and margins, as well as manageable levels of interest expenses.
Also known as "Cash-Flow Loan".
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Cash-On-Cash Return
- A rate of return often used in real estate transactions. The calculation determines the cash income on the cash invested. Calculated as:
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Cash-on-Cash Yield
- A comparative measure using the total amount of distributions paid upon an income trust divided by its market value.
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Cash-or-Nothing Call
- A type of option whose payoff is set to a specified fixed price if the final asset price is above the strike price; if not, the payoff is set to zero.
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Cash-or-Nothing Put
- A type of option whose payoff is set to a specified fixed price if the final asset price is below the strike price; if not, the payoff is set to zero.
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Cash-Out Refinance
- A mortgage refinancing transaction in which the new mortgage amount is greater than the existing mortgage amount, plus loan settlement costs. The purpose of a cash-out refinance is to extract equity from the borrower's home. A cash-out refinance is an alternative to a home equity loan.
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Cash-Settled Options
- A type of option for which actual physical delivery of the security is not required, due to the high costs of transport, or simply when the purchaser does not wish to hold the physical evidence of an investment. Cash is sent in the amount of the difference between the option strike price and the current value of the security at the exercise date.
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Cashier's Check
- A check written by a financial institution on its own funds. It is then signed by a representative of the financial institution and made payable to a third party. A customers who purchases a cashier's check pays for the full face value of the check and usually also pays a small premium for the service. These checks are secured by the funds of the issuer - usually a bank - and include the name of a payee (the entity to which the check is payable), and the name of the remitter (the entity that paid for the check).
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Cashless Conversion
- The direct conversion of ownership (from one ownership type to another) of an underlying asset without any initial cash outlay from the investor. Many cashless conversions are automatically triggered on a specific date as specified in the original contract, and will typically affect an entire class of shares or contracts.
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Cashless Exercise
- A transaction that is used when exercising employee stock options (ESO). Essentially, what you do here is borrow enough money from your broker to exercise the options. You then simultaneously sell enough shares to pay for the purchase, taxes, and broker commissions.
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Casino Finance
- Any investment strategy that is classified as extremely high risk.
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Casualty And Theft Losses
- Deductible losses stemming from the loss or destruction of the taxpayer's personal property. In order to be deductible, casualty losses must result from a sudden and unforseeable event, such as fire or earthquake. Theft losses generally require proof that the property was actually stolen and not just lost or missing.
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Casualty Insurance
- A broad category of coverage against loss of property, damage or other liabilities. Casualty insurance includes vehicle insurance, liability insurance, theft insurance and elevator insurance.
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Cat Spread
- A cat spread is a type of derivative traded on the Chicago Board of Trade (CBOT) that takes the form of an option on a catastrophe futures contract. In other words, a cat spread is basically a call option spread bought by insurance companies on catastrophe futures contracts. Purchasing a cat spread involves buying or selling a call option whose underlying asset is a catastrophe contract, while simultaneously selling or buying the same number of call options at a higher strike price. A cat spread is used by insurance companies to hedge risk coverage of catastrophic events.
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Catalyst
- Something that initiates or causes an important event to happen. Originally a term used in chemistry for the volatile (active) chemical in a formula.
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Catastrophe Bond - CAT
- A high-yield debt instrument that is usually insurance linked and meant to raise money in case of a catastrophe such as a hurricane or earthquake. It has a special condition that states that if the issuer (insurance or reinsurance company) suffers a loss from a particular pre-defined catastrophe, then the issuer's obligation to pay interest and/or repay the principal is either deferred or completely forgiven.
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Catastrophe Call
- A call provision in municipal bonds that allows for the early redemption of the instrument if a catastrophic event occurs and severely damages the project financed by the issue. Possible catastrophes will be listed in the bond's indenture and are often callable at par.
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Catastrophe Excess Reinsurance
- Insurance for catastrophe insurers. Because of the unpredictable nature of catastrophes, the large amount of damage they cause and the high number of insurance claims that occur as a result, a catastrophe insurance company faces a significant risk of its business going under.
To mitigate this risk, catastrophe insurers rely on catastrophe excess reinsurance. The reinsurance company accepts a portion of the potential obligation in exchange for a share of the insurance premium.
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Catastrophe Futures
- Catastrophe futures are futures contracts traded on the Chicago Board of Trade (CBOT). These futures contracts are used by insurance companies to protect themselves against future catastrophe losses. The value of a catastophe futures contract is equal to $25,000 multiplied by the catastrophe ratio for the quarter. The catastrophe ratio is a numerical value proided by the CBOT every quarter.
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Catastrophic Illness Insurance
- A type of insurance that protects the insured, in the event of specified major health events, during a defined period of time. Catastrophic illness insurance coverage is usually a lump sum, and can be full or partial depending on the condition and the policy. Some conditions covered could include (but not limited to); long-term hospitalization, heart attack, stroke or cancer.
Also known as "critical illness insurance". Catastrophic illness insurance can be used to supplement a beneficiary's existing health and disability coverage. Restrictions are unique to the provider, but typically claims will be rejected due to: pre-existing conditions, not surviving 30 days after diagnosis, and any critical diagnosis within the first 90 days.
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Catch-Up Contribution
- A type of retirement savings contribution that allows people over 50 to make additional contributions to their 401(k) and/or individual retirement accounts. The catch-up contribution provision was created by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), so that older individuals would be able to set aside enough savings for retirement.
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Category Killer
- Large companies that put less efficient and highly specialized merchants out of business.
Category killers can attain this status by being cheaper, easier, bigger, or more popular than the competition.
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Cats And Dogs
- A slang term referring to speculative stocks that have short or suspicious histories for sales, earnings, dividends, etc. The origin for this term may have stemmed from the use of "dog" to refer to an underperforming stock.
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Caveat Emptor
- A Latin phrase for "let the buyer beware." The term is primarily used in real property transactions. Essentially it proclaims that the buyer must perform their due diligence when purchasing an item or service.
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CBOE Nasdaq Volatility Index - VXN
- A volatility index on the Chicago Board Options Exchange, known by its ticker symbol VXN. The VXN is a measure of implied volatility for the Nasdaq 100 (NDX).
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CD Ladder
- A CD ladder is a strategy where an investor divides the amount of money to be invested into equal amounts to certificates of deposit (CDs) with different maturity dates. This strategy decreases both interest rate and re-investment risks.
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Cease And Desist
- An order given by a government administrative agency or the courts to stop any suspicious or illegal activities. Falling under the Financial Institutions Regulator Act of 1978, a cease-and-desist order places an injunction on a company or person, prohibiting the activities that are deemed suspect.
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Ceiling
- The highest level of allowance permitted for a certain good, rate, or transaction.
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Celtic Tiger
- A nickname for Ireland during its boom years of the late 1990s, when it enjoyed an average annual growth rate of over 6.5%. The first boom was in the late 1990s when investors (many of them tech firms) poured in, drawn by the country's favorable tax rates - some as much as 20-50% lower than the rest of Europe. It ended with the bursting of the internet bubble in 2001.
The second boom in 2004 was largely the result of Ireland opening its doors to workers from new EU member nations. Increases in house prices, continued investment by multinationals, growth in jobs and tourism, a resurgence of the IT industry and the U.S. economic recovery have all been cited as contributing factors for the revival.
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Center For Research In Security Prices - CRSP
- A research center at the University of Chicago Graduate School of Business. The Center for Research In Security Prices (CRSP) is a vendor of historical time series data on securities. CRSP is a non-profit center that is used by academic, commercial and government agencies to access information such as price, dividends and rates or returns on stocks.
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Central Bank
- The entity responsible for overseeing the monetary system for a nation (or group of nations). Central banks have a wide range of responsibilities, from overseeing monetary policy to implementing specific goals such as currency stability, low inflation and full employment. Central banks also generally issue currency, function as the bank of the government, regulate the credit system, oversee commercial banks, manage exchange reserves and act as a lender of last resort.
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Central Counterparty Clearing House - CCP
- An organization that exists in various European countries that helps facilitate trading done in European derivatives and equities markets. These clearing houses are often operated by the major banks in the country. The house's prime responsibility is to provide efficiency and stability to the financial markets that they operate in.
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Central Limit Theorem - CLT
- A statistical theory that states that given a sufficiently large sample size from a population with a finite level of variance, the mean of all samples from the same population will be approximately equal to the mean of the population. Furthermore, all of the samples will follow an approximate normal distribution pattern, with all variances being approximately equal to the variance of the population divided by each sample's size.
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Central Provident Fund - CPF
- A mandatory benefit account set up to provide Singaporeans with a healthy retirement plan. The Central Provident Fund (CPF) was first introduced in 1948 by the Progressive Party to help ensure that Singaporeans would save up for retirement. Many people disagreed with the idea but it was believed that making this fund compulsory would give security and assurance to retirees.
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Central Registration Depository (CRD)
- A database used by the National Association Of Securities Dealers and the North American Securities Administrators Association to store and maintain information on registered securities and broker firms. The Central Registration Depository can be used like a background check on brokers, showing any complaints that may have been filed against them.
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Centralized Market
- A financial market structure that consists of having all orders routed to one central exchange with no other competing market. The quoted prices of the various securities listed on the exchange represent the only price that is available to investors seeking to buy or sell the specific asset.
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Centre for European Economic Research
- A nonprofit economic research institution based in Germany involved in providing economic issues and policy advice to its clients with a main focus on the European economies. It covers a wide range of economic areas, including environmental research, public finance, international finance and labor issues among others.
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Centre For European Policy Studies - CEPS
- An organization started to debate and research European Union affairs. It is a collaboration of the most intelligent individuals and groups with an interest in the EU. One of its main goals is to resolve some of the major issues currently facing the EU through a series of debates, as well as extensive research.
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CEO Confidence Survey
- A monthly survey of 100 CEOs from a variety of industries in the U.S. economy. The survey is conducted, analyzed and reported by the Conference Board, and it seeks to gauge the economic outlook of CEOs, determining their concerns for their businesses, and their view on where the economy is headed. A reading above 50 indicates that the CEOs surveyed are more bullish than bearish on their economic outlook.
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Certainty Equivalent
- The return that would be accepted for the chance at a higher, but uncertain, amount.
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Certificate in Investment Performance Measurement - CIPM
- A certificate which signifies competency in the area of evaluating the investment performance of investment firms. The Certificate in Investment Performance Measurement is issued by the Chartered Financial Analyst Institute and requires certificate holders to:
- Complete the Principals and Expert exams
- Obtain membership in the CIPM Association
- Complete the work experience requirements
- Pay the membership dues annually
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Certificate Of Deposit - CD
- A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate and can be issued in any denomination. CDs are generally issued by commercial banks and are insured by the FDIC. The term of a CD generally ranges from one month to five years.
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Certificate of Deposit Account Registry Service - CDARS
- A program that allows the public to spread money around various banks. The purpose of CDARS is to help people who invest in certificate of deposits or CDs to stay below FDIC insurance limits at any given bank. Usually, to avoid exceeding FDIC limits at a bank, consumers deposit their money in different banks. CDARS is a program that eliminates the need to go from bank to bank in order to deposit money, and is comprised of a network of banks.
Using CDARS is as simple as finding a participating bank close to you (local bank) and depositing your money with the bank. The local bank then spreads your money across several banks, ensuring that the amount of money in each bank is never above the FDIC limit. As part of the CDARS program, the consumer conducts business with only the local bank and receives one single statement that contains information for each account.
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Certificate Of Deposit Index - CODI Index
- The 12-month average of the most recently published dealer bid rates (yields) on nationally traded three-month certificates of deposit as reported in the H.15 Federal Reserve Statistical Release. The yields are annualized using a 360-day year. For purposes of determining CODI, "published" means first made available to the public by the Federal Reserve Board. The CODI index is calculated on or near the first Monday of each calendar month and is often used for adjustable rate mortgages.
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Certificate Of Government Receipts - COUGRs
- U.S. Treasury fixed-income securities that are stripped of their coupon payments and provide payment of face value. These are synthetic securities offered by the A.G. Becker Paribas firm.
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Certificate of Indebtedness
- A short-term fixed income security issued by the United States Treasury that has a coupon.
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Certificate Of Insurance
- A document issued by an insurance company/broker that is used to verify the existence of insurance coverage under specific conditions granted to listed individuals. More specifically, the document lists the effective date of the policy, the type of insurance coverage purchased, and the types and dollar amount of applicable liability.
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Certificate Of Origin - CO
- A document declaring in which country a commodity or good was manufactured. The certificate of origin contains information regarding the product's destination and country of export and is required by many treaty agreements before being accepted into another nation.
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Certificate of Participation - COP
- A type of financing where an investor purchases a share of the lease revenues of a program rather than the bond being secured by those revenues.
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Certificated Stock
- A stock of commodity that has been inspected by qualified representatives and determined to be of basis grade.
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Certified Annuity Specialist - CAS
- A certification indicating expertise and commitment to fixed-rate and variable annuities. Individuals with the CAS designation offer clients expert advice in regards to investment opportunities in annuities.
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Certified Check
- A type of check where the issuing bank guarantees the recipient of the check that there is enough cash available in the holder's account to be transfered when the check is used and also that the account holder's signature on the check is genuine. Certified checks are typically used in situations where the recipient is unsure about the creditworthiness of the account holder and doesn't want to the check to bounce.
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Certified Divorce Financial Analyst - CDFA
- A member of the Institute for Divorce Financial Analysts who specializes in the financial issues surrounding divorce. The role of the CDFA includes acting as an advisor to one party's divorce lawyer, or as a mediator for both parties. A CDFA uses his or her knowledge of tax law, asset distribution, and short- and long-term financial planning to achieve an equitable settlement.
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Certified Financial Divorce Practitioner - CFDP
- A member of the Academy of Financial Divorce Practitioners who is certified in the financial aspects of divorce. A certified financial divorce practitioner looks to explain the financial implications of divorce settlements, such as child support, asset distribution and alimony.
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Certified Financial Planner - CFP
- The CFP legal team has provided its official definition, along with trademarks: CFP and Certified Financial Planner marks are certification marks owned by the Certified Financial Planner Board of Standards, Inc. These marks are awarded to individuals who successfully complete the CFP Board's initial and ongoing certification requirements.
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Certified Financial Statement
- A financial statement, such as an income statement, cash flow statement or balance sheet, that has been audited and signed off on by an accountant. Once an auditor has fully reviewed the details of a financial statement following GAAP guidelines and is confident the numbers reported within it are accurate, they certify the documents.
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Certified Fund Specialist - CFS
- A certification indicating an individual's expertise in mutual funds and the mutual fund industry. These individuals advise clients on which mutual funds best suit their particular needs. The CFS designation does not license individuals to buy or sell mutual funds; however, in many cases Certified Fund Specialists do have this license, which enables them to buy and sell the funds for their clients.
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Certified Investment Management Consultant - CIMC
- CIMC's have completed extensive course work and passed NASD proctored examinations for Levels I and II of the Institute for Certified Investment Management Consultants' course. CIMCs must also meet the Institute's requirements concerning experience in consulting and managed accounts, and adhere to its Code of Ethics and continuing education requirements.
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Certified Investment Management Specialist - CIMS
- A designation by the Institute for Investment Management Consultants to associate members who pass an exam and meet financial services work-experience requirements.
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Certified Management Accountant - CMA
- An accounting designation whose holder has formally demonstrated a mix of expertise in financial accounting and strategic management. This certification expands on financial accounting by adding management skills that help to make strategic business decisions based on financial information.
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Certified Public Accountant - CPA
- A designation given by the American Institute of Certified Public Accountants to those who pass an exam and meet work-experience requirements.
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Certified Senior Consultant - CSC
- A certification indicating knowledge in key issues facing aging members of the population (individuals in their 50s, 60s and 70s) including Social Security, Medicare, Medicaid planning, housing and retirement.
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Ceteris Paribus
- Latin phrase that translates approximately to "holding other things constant" and is usually rendered in English as "all other things being equal". In economics and finance, the term is used as a shorthand for indicating the effect of one economic variable on another, holding constant all other variables that may affect the second variable.
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CFA Institute
- Formerly known as the Association for Investment Management and Research (AIMR), the CFA Institute is an international organization comprised of more than 70,000 members who hold the Chartered Financial Analyst (CFA) designation or are otherwise bound by its rules. Its primary mandate is to specify and maintain a high standard for the investment industry.
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Chaikin Oscillator
- An oscillator created by subtracting a 10-day EMA from a 3-day EMA of the accumulation/distribution line.
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Chain Banking
- Conceptually a form of bank governance that occurs when a small group of people control at least three banks that are independently chartered. Usually, the controlling parties are majority shareholders or the heads of interlocking directorates. Chain banking as an entity has declined with the surge in interstate banking.
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Chain Store Sales
- An indicator that provides information on the monthly sales volumes from chain stores. Chain store sales, released on the first Thursday of the month, correspond to about 10% of retail sales, and are thought to be a good indicator of trends in consumer spending and retail sales.
Chain store sales are reported as a percentage change from the same month one year earlier.
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Chain Weighted CPI
- An alternative measurement for the Consumer Price Index (CPI), removing the biases associated with new products, changes in quality and discounted prices. The chain weighted CPI incorporates the average changes in the quantity of goods purchased, along with standard pricing effects. This allows the chain weighted CPI to reflect situations where customers shift the weight of their purchases from one area of spending to another.
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Chair Of The Board - COB
- The most powerful member on the board of directors who provides leadership to the firm's officers and executives. The chair of the board ensures that the firm's duties to shareholders are being fulfilled by acting as a link between the board and upper management.
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Challenger Job-Cut Report
- A report, released monthly, that provides information on the number of announced corporate layoffs. The Challenger Job-Cut Report is produced by Challenger, Grey & Christmas and tracks layoffs by industry and region. The report is an indicator used by investors to determine the strength of the labor market.
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Chameleon Option
- An option that has the ability to change its structure, should certain pre-determined terms of the contract be met.
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Champagne Stock
- A slang term used to describe a stock which has appreciated a great amount. A champagne stock is one which has made a shareholder a great deal of money by holding the stock. Although champagne stocks can come from any industry and sector, bubble stocks have made and lost shareholders quite a bit of money before and after their bubble burst.
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Chande Momentum Oscillator
- A technical momentum indicator invented by the technical analyst Tushar Chande. It is created by calculating the difference between the sum of all recent gains and the sum of all recent losses and then dividing the result by the sum of all price movement over the period. This oscillator is similar to other momentum indicators such as the Relative Strength Index and the Stochastic Oscillator because it is range bounded (+100 and -100).
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Change
- 1. For an option or futures contract, the difference between the current price and the previous day's settlement price.
2. For an index or average, the difference between the current value and the previous day's market close.
3. For a stock or bond quote, the difference between the current price and the last trade of the previous day.
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Change In Demand
- A term used in economics to describe that there has been a change, or shift in, a market's total demand. This is represented graphically in a price vs. quantity plane, and is a result of more/less entrants into the market, and the changing of consumer preferences. The shift can either be parallel or nonparallel.
A parallel shift in demand means that there is no change in the elasticity of demand for the given market, but a nonparallel shift means there has been a change in elasticity.
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Change In Supply
- A term used in economics to describe when the suppliers of a given good or service have altered their production or output. A change in supply can be brought on by new technologies, making production more efficient and less expensive, or by a change in the number of competitors in the market.
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Changer
- The name given to a clearing member that is willing to assume the opposite position of a futures contract within a larger alternative exchange, of which it also is a clearing member.
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Channel
- 1. The system of intermediaries between the producers, suppliers, consumers, etcetera, for the movement of a good or service.
2. The technical range between support and resistance levels that a stock price has traded in for a specific period of time.
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Channel Check
- A method of independent stock analysis whereby company information is supplied by third parties.
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Channel Stuffing
- A deceptive business practice used by a company to inflate its sales and earnings figures by deliberately sending retailers along its distribution channel more products than they are able to sell to the public.
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Chaos Theory
- A mathematical concept that explains that it is possible to get random results from normal equations. The main precept behind this theory is the underlying notion of small occurrences significantly affecting the outcomes of seemingly unrelated events.
Also referred to as "non-linear dynamics".
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Chapter 10
- Named after the U.S. bankruptcy code 10, chapter 10 discusses how a company can file for court protection.
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Chapter 11
- Named after the U.S. bankruptcy code 11, Chapter 11 is a form of bankruptcy that involves a reorganization of a debtor's business affairs and assets. It is generally filed by corporations which require time to restructure their debts.
Chapter 11 gives the debtor a fresh start, subject to the debtor's fulfillment of its obligations under its plan of reorganization.
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Chapter 12
- A U.S. bankruptcy proceeding specifically for family farms or fisheries that gives the farm or fishery owner the ability to reorganize his or her finances and debts while still keeping the farm or fishery. The farm or fishery owner will work with a bankruptcy trustee and creditors to formulate a payment program that will meet his or her owner obligations. This proceeding is available for individually run family farms and fisheries as well as those owned by a corporation or partnership.
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Chapter 13
- A U.S. bankruptcy proceeding in which the debtor undertakes a reorganization of his or her finances under the supervision and approval of the courts. As part of the reorganization, the debtor must submit and follow through with a plan to repay outstanding creditors within three to five years. In most circumstances, the repayment plan must provide a substantial payback to creditors - at least equal to what they would receive under other forms of bankruptcy - and it must, if needed, use 100% of the debtor's income for repayment.
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Chapter 15
- A chapter under the U.S. Bankruptcy Code, added to foster a cooperative environment in international insolvencies. Chapter 15's primary goal is to promote cooperation between U.S. courts, appointed representatives and foreign courts.
This chapter of the Bankruptcy Code is designed to make legal proceedings of international bankruptcies more predictable and fair for debtors and creditors. Chapter 15 also tries to protect the value of the debtor's assets and, if possible, financially rescue the business.
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Chapter 7
- A bankruptcy proceeding in which a company stops all operations and goes completely out of business. A trustee is appointed to liquidate (sell) the company's assets, and the money is used to pay off debt.
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Chapter 9
- A bankruptcy proceeding that provides financially distressed municipalities with protection from creditors by creating a plan between the municipality and its creditors to resolve the outstanding debt. Municipalities include cities, counties, townships and school districts.
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Characteristic Line
- A line formed using regression analysis that summarizes a particular security or portfolio's systematic risk and rate of return. The rate of return is dependent on the standard deviation of the asset's returns and the slope of the characteristic line, which is represented by the asset's beta.
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Charge Card
- A card that charges no interest but requires the user to pay his/her balance in full upon receipt of the statement, usually on a monthly basis. While it is similar to a credit card, the major benefit offered by a charge card is that it has much higher, often unlimited, spending limits.
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Charge-Off
- A term describing an expense on a company's income statement. A charge-off will fall under one of the following categories:
1. A debt that is deemed uncollectible by the reporting firm and is subsequently written off. This type will be classified as 'bad debt expense' on the income statement, and removed from the balance sheet.
2. A probable one-time extraordinary expense incurred by a company that negatively affects earnings and results in a write-down of some of the firm's assets. The write-down arises due to impairments of assets.
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Chargeback
- The charge a credit card merchant pays to a customer after the customer successfully disputes an item on his or her credit card statement.
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Charging Order
- A court-authorized right granted to a judgment creditor to attach distributions made from a business entity, such as a limited partnership (LP) or limited liability company (LLC), to a debtor who is a partner of the business entity.
The charging order is usually limited to the dollar amount of the judgment and is akin to a garnishment of wages or income. It does not give the creditor management rights in the entity, nor can the creditor interfere in the management of the entity to which the debtor is a partner/member.
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Charitable Donation
- A gift made by an individual or an organization to a nonprofit organization, charity or private foundation. Charitable donations are commonly in the form of cash, but can also take the form of real estate, motor vehicles, appreciated securities, clothing and other assets or services.
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Charitable Lead Trust
- A trust designed to reduce beneficiaries' taxable income by first donating a portion of the trust's income to charities and then, after a specified period of time, transferring the remainder of the trust to the beneficiaries.
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Charitable Remainder Trust
- A tax-exempt irrevocable trust designed to reduce the taxable income of individuals by first dispersing income to the beneficiaries of the trust for a specified period of time and then donating the remainder of the trust to the designated charity.
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Charitable Split-Dollar Insurance Plan
- Identical to a standard split-dollar insurance plan, except that a charity, instead of an employer, owns the life insurance policy. Charitable split-dollar insurance plans pay death benefit proceeds to the beneficiaries of the donor, just as standard plans pay proceeds to the beneficiaries of the employee.
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Charter
- A legal document that provides for the creation of a corporate entity. A corporation's charter is issued by either a federal or a regional government and effectively creates a legal entity out of the business, which existed only as a partnership, sole proprietorship or similar business before incorporating.
Also referred to as "articles of incorporation".
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Chartered Accountant (CA)
- An accounting designation given to accounting professionals in many countries around the world outside of the United States. A Chartered Accountant (CA) designation typically proves the holder has the qualifications to audit financial statements and business practices as well as offer advisory services to clientèle. The equivalent to a CA designation in the U.S. is the CPA.
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Chartered Alternative Investment Analyst (CAIA)
- A professional designation given out by the Chartered Alternative Investment Analyst Association to establish an educational standard for individuals that specialize in the area of alternative investments (such as hedge funds, venture capital, private equity and real estate investment).
In order to receive the designation, individuals must have at least one year of professional experience, a U.S. bachelor's degree and must pass two levels of curriculum that include topics ranging from qualitative analysis, trading theories of alternative investments, to indexation and benchmarking.
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Chartered Asset Manager - CAM
- A professional designation offered by the American Academy of Financial Management (AAFM). The prerequisites for the Chartered Asset Manager (CAM) program are three years or more of financial planning experience in asset management and financial planning, and an AAFM-approved degree or other approved program.
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Chartered Bank
- A financial institution whose primary roles are to accept and safeguard monetary deposits from individuals and organizations, and to lend money out. The details vary from country to country, but usually a chartered bank in operation has obtained government permission on some level to do business in the banking sector.
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Chartered Business Valuator - CBV
- A designation offered by the Canadian Institute of Chartered Business Valuators (CICBV). A Chartered Business Valuator (CBV) is a financial professional who determines the value of all, or part of a business or company. CBVs take into account many factors and methods when determining the value of a business, including economic conditions, tangible and intangible assets and future cash flow.
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Chartered Financial Analyst - CFA
- A professional designation given by the CFA Institute (formerly AIMR) that measures the competence and integrity of financial analysts. Candidates are required to pass three levels of exams covering areas such as accounting, economics, ethics, money management and security analysis.
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Chartered Financial Consultant - ChFC
- A professional designation representing completion of a comprehensive course consisting of financial education, examinations and practical experience. Chartered Financial Consultant designations are granted by The American College upon completion of seven required courses and two elective courses. Those who earn the designation are understood to be knowledgeable in financial matters and to have the ability to provide sound advice.
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Chartered Insurance Professional - CIP
- A professional designation granted by the the Insurance Institute of Canada to insurance agents in the property and casual segments of the industry. The designation was created to promote a standard in the field and gives agents professional standing in the field for the benefit of both employers and clients.
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Chartered Investment Counselor - CIC
- A designation by the Investment Counsel Association to those holding CFAs and currently working as investment counselors.
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Chartered Life Underwriter - CLU
- A professional designation for individuals who wish to specialize in life insurance and estate planning. Individuals must complete five core courses and three elective courses, and successfully pass all eight two-hour, 100-question examinations in order to receive the designation.
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Chartered Market Technician - CMT
- A professional designation given by the Market Technicians Association (MTA) to financial professionals who prove their proficiency in technical analysis.
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Chartered Portfolio Manager - CPM
- A professional designation offered by the American Academy of Financial Management (AAFM). The prerequisites for the Chartered Portfolio Manager (CPM) program are three years actively managing portfolios and an AAFM-approved degree. The program teaches equity valuation techniques, dynamics that drive financial markets, how to construct and manage portfolios, and many other portfolio management topics.
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Chartered Wealth Manager - CWM
- A professional designation offered by the American Academy of Financial Management (AAFM). The prerequisites for the Chartered Wealth Manager (CWM) program are three years or more of experience in wealth management and an AAFM-approved degree or other approved program. The course focuses on topics such as relationship management, communication, sales and financial planning.
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Chartist
- Another name for a technical analyst. This is a person who uses charts to identify patterns that can suggest future activity.
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Chasing Nickels Around Dollar Bills
- A slang term describing what a company's management does when it decides to trim small, trivial costs instead of cutting larger, more serious costs. All too often, managers will cut the difficult costs as a last resort, when in fact the company would be much better off if the larger costs had been dealt with earlier.
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Chasing The Market
- Entering or exiting of a trend after the trend has already been well established. Investors are often unaware of the fact that they are chasing the market, which can dent the value of a portfolio. This type of investing is often seen as irrational as decisions are often based on emotion instead of careful analysis of the value of the investment.
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Chastity Bond
- A bond designed to prevent unwanted takeovers by having a maturity that is activated once a takeover is complete.
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Chattel Mortgage
- A term used when describing a mobile or manufactured home mortgage. Specifically when the home is not financed with the land.
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Cheap Stock
- The illegal practice of issuing stock options at artificially low prices shortly before an initial public offering.
Often underwriters will require a company to have more qualified management before they can go public. They attract these qualified individuals by giving options with a low exercise price.
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Cheapest to Deliver - CTD
- The least expensive underlying product that can be delivered upon expiry to satisfy the requirements of a derivative contract.
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Check
- A written, dated and signed instrument that contains an unconditional order from the drawer that directs a bank to pay a definite sum of money to a payee.
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Check Clearing For The 21st Century Act - Check 21
- A federal law that took effect on October 28, 2004, and gives banks and other organizations the ability to create electronic image copies of consumers' checks. The images are then sent to the relevant financial institutions to be processed, where money from a consumer's account is transferred to the receiving party's account.
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Check Conversion
- A reformatting service offered by banking merchants. Check conversion allows banks to convert paper checks into electronic ones and then send them to the appropriate receiving bank. The electronic check is forwarded on via the automated clearing house.
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Check Hold
- Denotes a period of time equal to the maximum number of days that a bank can legally hold the money from a check that was deposited. After this time it must credit the funds to the account of the party making the deposit. The check holding period is normally the same number of days as it takes for the check to go through the bank's clearing cycle.
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Check Representment
- A method whereby checks from accounts with insufficient funds are repeatedly deposited until funds are available.
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Check Routing Symbol
- A set of numbers appearing as the denominator of a fraction that is printed in the upper right corner of any check that is paid through the federal reserve system. The check routing symbol contains three or four digits and provides three pieces of information: the district of the paying bank, the facility that processed the check and the funds' availability status assigned by the Fed. The upper number in the numerical fraction is the ABA transit number.
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Check Safekeeping
- A safekeeping service offered by banks and other depository institutions. With check safekeeping, the bank holds all of a customer's cancelled checks (or at least a copy of them) and does not return them to the parties that wrote the checks. Instead, the customer is sent a detailed statement outlining all checks that were paid, plus the amounts and names of the payees.
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Checkable Deposits
- Any demand deposit account against which checks or drafts of any kind may be written. Checkable deposit accounts include checking, savings and money market accounts. They also include any kind of negotiable draft, such as a Negotiable Order of Withdrawal (NOW) or Super Now account.
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Checking Account
- A transactional deposit account held at a financial institution that allows for withdrawals and deposits. Money held in a checking account is very liquid, and can be withdrawn using checks, automated cash machines and electronic debits, among other methods.
In exchange for the liquidity, checking accounts typically do not offer a high interest rate, but if held at a chartered banking institution will be FDIC guaranteed up to $100,000 per individual depositor.
A checking account may also be called a "demand account" or "transactional account".
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Checkless Society
- A hypothetical term that embraces the notion of a world that processes all financial transactions electronically. This would eliminate the need for any kind of paper transaction, as everything would be done via computer. A checkless society is the ultimate goal of many major banks and lending institutions.
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Cherry Picking
- 1. The act of investors choosing investments that have performed well within another portfolio in anticipation that the trend will continue.
2. Relating to bankruptcy proceedings whereby the courts uphold contracts favorable to bankrupt companies, but annul those that are unfavorable.
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CHF
- In currencies, this is the abbreviation for the Swiss franc.
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CHF (Swiss Franc)
- The currency abbreviation for the Swiss franc (CHF), the currency for Switzerland. Switzerland has four official languages; therefore, the currency is known as;
| Language | Currency Name | Sub-unit 1/100 |
| German | Schweizer Franken | Rappen (Rp.) |
| French | Franc Suisse | Centime (c.) |
| Italian | Franco Svizzero | Centesimo (ct.) |
| Romanish | Franc Svizzer | Rap (rp.) |
The Swiss franc is often presented with the symbol CHF, Fr., SFr. It is one of the most traded currencies in the world
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Chicago Board Of Trade - CBOT
- A commodity exchange established in 1848 that today trades in both agricultural and financial contracts. The CBOT originally traded only agricultural commodities such as wheat, corn and soybeans. Now, the CBOT offers options and futures contracts on a wide range of products including gold, silver, U.S. Treasury bonds and energy.
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Chicago Board Options Exchange - CBOE
- Founded in 1973, the CBOE is an exchange that focuses on options contracts for individual equities, indexes and interest rates. The CBOE is the world's largest options market. It captures a majority of the options traded. It is also a market leader in developing new financial products and technological innovation, particularly with electronic trading.
The CBOE is also referred to as the "See-bo".
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Chicago Mercantile Exchange - CME
- The world's second-largest exchange for futures and options on futures and the largest in the U.S. Trading involves mostly futures on interest rates, currency, equities, stock indices and a small amount on agricultural products.
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Chicago School
- An economic school of thought that originated at the University of Chicago in the 1940s. The main tenets of the Chicago school are that free markets best allocate resources in an economy, and that minimal government intervention is best. The Chicago school includes monetarist beliefs about the economy, and contends that the money supply should be kept in equilibrium with the demand for money. To this end, macroeconomic variables like output and wages are viewed in aggregate for the entire economy.
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Chief Executive Officer - CEO
- The highest ranking executive in a company whose main responsibilities include developing and implementing high-level strategies, making major corporate decisions, managing the overall operations and resources of a company, and acting as the main point of communication between the board of directors and the corporate operations. The CEO will often have a position on the board, and in some cases is even the chair.
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Chief Financial Officer - CFO
- This is the senior manager who is responsible for overseeing the financial activities of an entire company. This includes signing checks, monitoring cash flow, and financial planning.
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Chief Information Officer - CIO
- A company executive who is responsible for the management, implementation and usability of information and computer technologies. The CIO will analyze how these technologies can benefit the company or improve an existing business process and will then integrate a system to realize that benefit or improvement.
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Chief Investment Officer - CIO
- The executive position responsible for a company's investment portfolios. The chief investment officer (CIO) usually oversees a team of professionals that have responsibilities such as managing and monitoring investment activity, managing pensions, working with external analysts and maintaining good investor relations. They will also develop short-term and long-term investment policies.
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Chief Operating Officer - COO
- The senior manager who is responsible for managing the company's day-to-day operations and reporting them to the chief executive officer (CEO).
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Chief Security Officer - CSO
- The company executive responsible for the security of personnel, physical assets and information in both physical and digital form. The importance of this position has increased in the age of information technology as it has become easier to steal sensitive company information.
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Chikou Span
- A component of the Ichimoku Kinko Hyo indicator that is created by plotting recent price movement 26-periods behind the latest closing price. The number of periods used to lag the Chikou span is customizable so that transaction signals are generated more or less frequently.
Also known as the "lagging span".
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Child And Dependent Care Credit
- A non-refundable tax credit for unreimbursed childcare expenses paid by working taxpayers. The Child and Dependent Care Credit is designed to encourage taxpayers to pay childcare expenses so that they can remain gainfully employed.
The Child and Dependent Care Credit is claimed on Form 2441 for taxpayers that are filing Form 1040, or Schedule 2 for Form 1040A.
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Child Tax Credit
- A credit given to taxpayers for each dependent child that is under the age of 17 at the end of the tax year.
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Chill
- Special restrictions that can be placed on a given security by the Depository Trust Company (DTC). Chill restrictions are intended to limit the potential for problems within the financial marketplace, and can be placed on a security for various reasons.
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China Concepts Stock
- The stock of a company whose assets or earnings have significant activities in China. China concepts stocks will trade on different stock exchanges such as the Hong Kong exchange, under the name of H-Shares or "red chip" stocks. The People's Republic of China is undergoing major financial transformation, so many leading mainland-based companies chose to list themselves elsewhere to gain access to investor capital as quickly as possible.
The China concepts stocks are considered one of the purest investment plays on China's long-term economic growth outside of direct mainland investment.
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China ETF
- Exchange traded funds that invest in and track the equity stakes of China-based companies, either through investment on Chinese stock exchanges or via foreign-listed shares such as American depositary receipts (ADRs). Because of regulations against certain types of foreign investment and the existence of many large state-run companies operating in China, ETFs that represent the nation are limited in their investment choices to companies that have public shares to offer. As with all ETFs, intraday trading is offered for China ETFs, which makes for increased liquidity and flexibility over China-based mutual funds.
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China Investment Corporation (CIC)
- A government-sponsored entity of the People's Republic of China that seeks to invest in securities and commodities abroad. The CIC was initially funded with around $200 billion, which originated from the issuance of long-term treasury bonds by the People's Bank of China (PBOC). The bond proceeds were then converted into dollars through the foreign exchange market.
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China Securities Regulatory Commission - CSRC
- The main securities regulatory body in China, which was created in 1992 and governs over all securities exchanges and futures markets activity within the People's Republic of China. Similar in its charge to the Securities and Exchange Commission (SEC), the CSRC is mandated to perform functions such as:
-Creating and reviewing securities legislation
-Regulating the trading, issuing, and settlement of stocks, fixed income securities, and securities funds
-Supervising the conduct of shareholders and securities brokers
-Overseeing the issuance of overseas company listings and offerings (such as H-Shares listed on the Hong Kong Exchange)
The CSRC includes more than 30 regulatory bureaus that cover different geographic regions of the country, and two supervisory bureaus at the nation's two largest stock exchanges in Shanghai and Shenzhen.
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Chinese Depositary Receipt - CDR
- A type of depositary receipt that is traded on Chinese stock exchanges. A CDR is a certificate issued by a Chinese bank that represents a pool of foreign equity that is traded on local Chinese exchanges. Foreign companies can use CDRs to allow both Chinese institutional and private investors to own their stock.
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Chinese Hedge
- A hedge involving a short position in a convertible security and a long position in its underlying asset. The Chinese hedge looks to capitalize on mispriced conversion factors. The trader will profit when the underlying asset depreciates, diminishing the premium on the convertible security.
Also known as a "Reverse Hedge".
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Chinese Wall
- The ethical barrier between different divisions of a financial (or other) institution to avoid conflict of interest. A Chinese Wall is said to exist, for example, between the corporate-advisory area and the brokering department of a financial services firm to separate those giving corporate advice on takeovers from those advising clients about buying shares. The "wall" is thrown up to prevent leaks of corporate inside information, which could influence the advice given to clients making investments, and allow staff to take advantage of facts that are not yet known to the general public.
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Chip Card
- Also known as a smart card or memory card. A chip card is a plastic card that has a computer chip implanted into it that enables the card to perform certain functions. These could include financial transactions, security system access, and storage of medical or other records.
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Choice Market
- A market in which the spread between the bid and the ask for a given financial instrument is zero - meaning that, at any point in time, the instrument can be bought for the same price as it can be sold in the market. This type of market only occurs when there is extreme liquidity and a limited number of intermediaries.
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Choke Price
- An economic term used to describe the price at which the quantity demanded of a good is equal to zero.
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Chooser Option
- An option where the investor has the opportunity to choose whether the option is a put or call at a certain point in time during the life of the option.
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Choppy Market
- A stock market condition whereby prices swing up and down considerably but with no resulting overall price movement in either direction.
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Christmas Club
- A short-term savings account that usually pays out the full account balance to its account holders once each year, right before Christmas. Christmas club accounts pay depositors monthly interest on their account balances and often punish early withdrawals by retracting interest earned if money is taken out before a given date.
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Christmas Tree
- An options trading strategy that is generally achieved by purchasing one call option and selling two other call options at different strike prices. When drawn structurally, the strike price of the long option is located below the two successively higher written calls and loosely resembles a Christmas tree.
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Churn Rate
- The percentage of subscribers to a service that discontinue their subscription to that service in a given time period.
In order for a company to expand its clientele, its growth rate (i.e. its number of new customers) must exceed its churn rate.
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Churning
- 1. An unethical practice employed by some brokers to increase their commissions by excessively trading in a client's account. This practice violates the NASD Fair Practice Rules. It is also referred to as "churn and burn", "twisting" and "overtrading".
2. A period of heavy trading with few sustained price trends and little movement in stock market indexes.
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CINS Number
- An acronym standing for the "CUSIP International Numbering System," which provides identification of international securities.
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Circuit Breaker
- Refers to any of the measures used by stock exchanges during large sell-offs to avert panic selling. Sometimes called a "collar."
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Circular Trading
- A fraudulent trading scheme where sell orders are entered by a broker who knows that offsetting buy orders, the same number of shares at the same time and at the same price, either have been or will be entered.
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Circulating Capital
- The portion of an organization's investment that is continually used and replenished in ongoing operations. Circulating capital can consist of operating expenses, raw material stock, inventories of finished goods or physical capital on hand. Circulating capital is the opposite of constant (fixed) capital.
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Circus Swap
- A swap with the features of both a currency swap and an interest rate swap.
Also known as "cross-currency swap" or "currency coupon swap".
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Civil Money Penalty - CMP
- A punitive fine imposed by a civil court on an entity that has profited from illegal or unethical activity. The Securities and Exchange Commission imposes civil money penalties that are usually equal to the gains made from whatever activity it has deemed to be illegal or unethical.
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Civil Service Retirement System - CSRS
- A system that provided the retirement, disability and survivor benefits for most U.S. civilian service employees working for the federal government. It was replaced in 1987 by the Federal Employees Retirement System (FERS), but employees who were originally set up through the CSRS still receive their benefits through that program, unless they were hired after 1983.
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Class A Shares
- A classification of common stock that may be accompanied by more or fewer voting rights than Class B shares. Although Class A shares are often thought to carry more voting rights than Class B shares, this is not always the case. Companies will often try to disguise the disadvantages associated with owning shares with fewer voting rights by naming those shares "Class A", and those with more voting rights "Class B".
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Class Action
- An action where an individual represents a group in a court claim. The judgment from the suit is for all the members of the group (class).
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Class B Shares
- A classification of common stock that may be accompanied by more or fewer voting rights than Class A shares. Although Class A shares are often thought to carry more voting rights than Class B shares, this is not always the case. Companies will often try to disguise the disadvantages associated with owning shares with fewer voting rights by naming those shares "Class A", and those with more voting rights "Class B".
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Class Of Shares
- 1. Types of listed company stock that are differentiated by the level of voting rights shareholders receive. For example, a listed company might have two share classes, or classes of stock, designated as Class A and Class B.
2. With load mutual funds, there are three share classes, Class A, Class B and Class C, which carry different sales charge, 12b-1 fees and operating expense structures.
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Classical Economics
- Classical economics refers to work done by a group of economists in the eighteenth and nineteenth centuries. They developed theories about the way markets and market economies work. The study was primarily concerned with the dynamics of economic growth. It stressed economic freedom and promoted ideas such as laissez-faire and free competition.
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Classical Growth Theory
- A theory on economic growth that argues that economic growth will end because of an increasing population and limited resources. Classical Growth Theory economists believed that temporary increases in real GDP per person would cause a population explosion that would consequently decrease real GDP.
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Classified Board
- A structure for a board of directors in which a portion of the directors serve for different term lengths, depending on their particular classification. Under a classified system, directors serve terms usually lasting between one and eight years; longer terms are often awarded to more senior board positions (i.e. chairman of the corporate governance committee).
Classified boards are often referred to as "staggered boards", although staggered boards and classified boards have somewhat different structures. Staggered boards need not be classified, but classified boards are inherently staggered.
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Classified Loan
- Any bank loan that is in danger of default. Classified loans have unpaid interest and principal outstanding, and it is unclear whether the bank will be able to recoup the loan proceeds from the borrower. Banks usually categorize such loans as adversely classified assets on their books.
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Classified Shares
- The separation of company equity into more than one class of common shares, usually called "Class A" and "Class B."
Also known as "classified stock".
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Claused Bill Of Lading
- A bill of lading that shows a shortfall or damage in the delivered goods. Typically, if the shipped products deviate from the delivery specifications or expected quality, the receiver may declare a claused bill of lading.
Also known as a "dirty bill of lading" or "foul bill of lading."
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Clawback
- 1. Previously given monies or benefits that are taken back due to specially arising circumstances.
2. A retraction of stock prices or of the market in general.
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Clayton Antitrust Act
- An amendment passed by the U.S. Congress in 1914 that provides further clarification and substance to the Sherman Antitrust Act of 1890. The Clayton Antitrust Act attempts to prohibit certain actions that lead to anti-competitiveness.
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Clean Balance Sheet
- Refers to a company whose balance sheet has very little or no debt.
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Clean Bill Of Lading
- A bill of lading issued by a carrier declaring that the goods have been received in an appropriate condition, without the presence of defects. The product carrier will issue a clean bill after thoroughly inspecting the packages for any damage, missing quantities or deviations in quality.
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Clean Float
- Also known as a pure exchange rate, a clean float occurs when the value of a currency, the exchange rate, is determined purely by supply and demand. Clean floats can only exist where there is no government interference, as would be the case in a purely capitalistic economy. Clean floats are a result of Laissez-Faire or free market economics.
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Clean Price
- The price of a coupon bond not including any accrued interest. A clean price is the discounted future cash flows, not including any interest accruing on the next coupon payment date. Immediately following each coupon payment, the clean price will equal the dirty price.
Calculated as:
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Clean Sheeting
- The fraudulent act of purchasing a life insurance policy without disclosing a pre-existing terminal illness or disease. This type of fraud is often done with both the knowledge of the purchaser and the agent involved.
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Clean Your Skirts
- A slang phrase used in the equity market to refer to a trader's obligation to make calls and check possible prior obligations related to a security transaction. Prior obligations may include confirming certain transaction details, such as limit prices or conditional events.
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Clean-Up Requirement
- A requirement that is often written into the contracts of annually renewable lines of credit. Clean-up requirements can require the borrower to pay off any outstanding balance on the line of credit and then cease to use the line of credit for a specified period of time. Clean-up requirements are usually implemented as a means of preventing borrowers from using lines of credit as ongoing permanent financing.
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Cleantech
- A shortened form of "clean technologies", a term used to describe an investment philosophy used by investors seeking to profit from environmentally friendly companies. Cleantech firms seek to increase performance, productivity and efficiency by minimizing negative effects on the environment.
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Clear Business Setting Test
- A test for deductibility of business-related dining and entertainment expenses. The clear business setting test mandates that there can be no other motive for incurring these expenses except to further the taxpayer's business. For example, paying dining and entertainment expenses for an associate with whom the taxpayer has no social or personal connection will usually qualify as a deductible business expense.
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Clear Title
- Also known as "clean title," "just title," "good title" and "free and clear title." A clear title is a title without any kind of lien or levy from creditors or other parties and poses no question as to legal ownership. For example, an owner of a car with a clear title is the sole undisputed owner, and no other party can make any kind of legal claim to its ownership.
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Clearance Certificate
- A certificate that verifies that an entity has paid all its tax liabilities at the time that the entity ceases to exist or is transferred to a new owner. A clearance certificate is not required in all jurisdictions.
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Clearing
- The procedure by which an organization acts as an intermediary and assumes the role of a buyer and seller for transactions in order to reconcile orders between transacting parties.
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Clearing Broker
- A member of an exchange that acts as a liaison between an investor and a clearing corporation. A clearing broker helps to ensure that the trade is settled appropriately and the transaction is successful. Clearing brokers are also responsible for maintaining the paper work associated with the clearing and executing of a transaction.
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Clearing Corporation
- An organization associated with an exchange to handle the confirmation, settlement and delivery of transactions, fulfilling the main obligation of ensuring transactions are made in a prompt and efficient manner. They are also referred to as "clearing firms" or "clearing houses".
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Clearing Fee
- A fee charged by clearing corporations for their services provided to investment firms.
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Clearing House
- An agency or separate corporation of a futures exchange responsible for settling trading accounts, clearing trades, collecting and maintaining margin monies, regulating delivery and reporting trading data. Clearing houses act as third parties to all futures and options contracts - as a buyer to every clearing member seller and a seller to every clearing member buyer.
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Clearing House Automated Payments System - CHAPS
- A British company that facilitates the trading of European currency. CHAPS provides same-day fund transfers for the sterling and the euro. CHAPS transfers are used when money needs to be moved from one account to another. CHAPS transfers are fairly costly, with an average fee of 30 pounds per transfer. CHAPS eliminates float time that occurs with cheque writing and prohibits the sender from rescinding the payment.
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Clearing House Electronic Subregister System - CHESS
- A computer system operated by the Australian Stock Exchange (ASX) that facilitates the transfer of a security's legal ownership from a seller to a buyer and also any monetary transactions between the two parties. In the ASX, the Clearing House Electronic Subregister System (CHESS) serves to facilitate the exchange and registration of securities.
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Clearing House Funds
- Money that passes between Federal Reserve Banks in the form of personal or business checks prior to approval of credit. These funds are in the process of clearing and reconciliation through a central processing mechanism. Because of this, they are often not available for withdrawal on the day of deposit.
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Clearing House Interbank Payments System - CHIPS
- The primary clearing house in the U.S. for large banking transactions. CHIPS settles over 250,000 of trades per day, valued in excess of $1 trillion. CHIPS and the Fedwire funds service used by the Federal Reserve Bank combine to constitute the primary network in the U.S. for both domestic and foreign large transactions denominated in U.S. dollars.
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Clearing Member Trade Agreement - CMTA
- An agreement by which an investor may enter derivative trades with a limited number of different brokers and later consolidate these trades with one brokerage house for clearing.
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Clearing Price
- The specified monetary value assigned to a security or asset. This price is determined by the bid and ask process of buyers and sellers interested in trading the security.
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Clearstream International
- A European clearing corporation, this organization supports over 2500 different companies in 80 locations worldwide.
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Cleave
- The occurrence of a gemstone breaking into two or more pieces during the cutting or polishing process. Naturally occurring impurities in the stones increase the likelihood that a stone will break apart.
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Click And Mortar
- A type of business model that includes both online and offline operations, which typically include a website and a physical store. A click-and-mortar company can offer customers the benefits of fast, online transactions or traditional, face to face service.
This model is also referred to as "clicks and bricks".
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Click Through Rates
- The percent of individuals viewing a Web page who click on a specific banner ad appearing on the page.
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Clientele Effect
- The theory that a company's stock price will move according to the demands and goals of investors in reaction to a tax, dividend or other policy change affecting the company. The clientele effect assumes that investors are attracted to different company policies, and that when a company's policy changes, investors will adjust their stock holdings accordingly. As a result of this adjustment, the stock price will move.
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Cliff Vesting
- A type of vesting that occurs entirely at a specified time rather than gradually.
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Climax
- Following a protracted period of selling or buying, a point wherein market trends are retarded or discontinued.
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Clinton Bond
- A bond that is said to have no principal, no interest and no maturity.
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Cliquet
- An extended option that periodically settles and resets its strike price at the level of the underlying during the time of settlement.
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Clone Fund
- A mutual fund that replicates the performance or strategy of an existing mutual fund or index through the use of derivatives.
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Close
- 1. The end of a trading session. The closing price is quoted in the newspaper.
2. The final procedure in a home sale in which documents are signed and recorded. This is the time when the ownership of the property is transferred.
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Close Location Value - CLV
- A measure used in technical analysis to determine where the price of the asset closes relative to the day's high and low. The CLV ranges between +1 and -1, where a value of +1 means the close is equal to the high and a value of -1 means the close is equal to the day's low.
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Close Period
- The time period between the completion of a company's balance sheet and the announcing of the results to the public.
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Close Position
- The act of taking the opposite position of the current position thereby getting out of a position in a particular stock or security.
Also referred to as "Closing Transaction."
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Closed Account
- In the simplest sense, any account that has been closed out or otherwise terminated, either by the customer or the custodian. From an accounting perspective, closed accounts can also mean an account that is made ready for the new year by closing out the previous year's amount. A legal definition of this term denotes a statement of debits and credits between parties that cannot be altered.
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Closed Corporation
- A business that is set up using a corporate business structure, but in which all the shares are held by a select few individuals who are usually closely associated with the business. Participating in a closed corporation enables a partnership to benefit from liability protection without dramatically changing the way that the business operates.
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Closed Fund
- A mutual fund that has been closed - either temporarily or permanently - to new investors because the investment advisor has determined that the fund's asset base is getting too large to effectively execute its investing style.
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Closed To New Accounts
- When an investment vehicle is no longer accepting new investors, but is still operating for existing investors. This can apply to mutual funds, hedge funds or any professionally managed pooled investment vehicle. In addition, institutional money managers may close certain portfolio groups to new accounts, while leaving others open. There will be an "as of" date when the fund will officially close to new investors. Depending on the situation, this may or may not also affect the ability for current investors to add to their holdings in the fund.
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Closed-End Credit
- A loan or extension of credit in which the proceeds are dispersed in full when the loan closes and must be repaid, including any interest and finance charges, by a specified date. The loan may require periodic principal and interest payments, or may require the entire payment of principal at maturity.
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Closed-End Fund
- A closed-end fund is a publicly traded investment company that raises a fixed amount of capital through an initial public offering (IPO). The fund is then structured, listed and traded like a stock on a stock exchange.
Also known as a "closed-end investment" or "closed-end mutual fund."
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Closed-End Indenture
- A term in a bond contract that guarantees that the collateral used to back the bond issue cannot be used again to back another bond issue. This is the opposite of an open-end indenture in which more than one bond can be backed by a single collateral.
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Closed-End Lease
- A rental agreement that puts no obligation on the lessee (the person making periodic lease payments) to purchase the leased asset at the end of the agreement. Also called a "true lease", "walkaway lease" or "net lease".
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Closed-End Management Company
- An investment-management company that sells a limited number of shares to investors on an exchange by way of an initial public offering. For investors to sell the shares they purchased from the closed-end management company, there must be buyers willing to buy the shares at a price determined by the market. The most common type of closed-end management company is a closed-end mutual fund.
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Closed-Market Transaction
- An order placed by a company's insider to buy or sell restricted securities from within the company's own treasury. Appropriate documentation must be filed before the order can be placed.
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Closely Held Shares
- The shares held by individuals closely related to a company.
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Closely Held Stock
- A company whose common shares are owned by one individual owner or by a small group of controlling stockholders. This is in contrast to a widely held stock, in which thousands or even millions of different investors may own shares in a large company.
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Closet Indexing
- A portfolio strategy used by some portfolio managers to achieve returns similar to those of their benchmark index, without exactly replicating the index.
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Closing
- 1. The end of a trading session. The closing price is quoted in the newspaper.
2. The final procedure in a home sale in which documents are signed and recorded. This is the time when the ownership of the property is transferred.
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Closing Bell
- A bell that rings to signify the end of a trading session.
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Closing Costs
- The expenses, over and above the price of the property that buyers and sellers normally incur to complete a real estate transaction. Costs incurred include loan origination fees, discount points, appraisal fees, title searches, title insurance, surveys, taxes, deed-recording fees and credit report charges.
Also known as "settlement costs".
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Closing Entry
- A journal entry made at the end of the accounting period. The closing entry is used to transfer data in the temporary accounts to the permanent balance sheet or income statement accounts. The purpose of the closing entry is to bring the temporary journal account balances to zero for the next accounting period, which aids in keeping the accounts reconciled.
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Closing Points
- Points that are paid at the time of closing of a mortgage transaction. Closing points are paid to either the lender or the broker, and one point equals one percent of the total loan amount. Closing points are also known as discount po