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".
- 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.
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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.
- 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.
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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.
- What currency is CAD?
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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".
- 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.
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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."
- 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.
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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.
- 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.
- 1. The period of time between the opening and closing of some future markets wherein the prices are established through an auction process.
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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.
- The short term interest rate charged on a secured call loan, usually in margin accounts.
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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.
- 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.
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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.
- 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.
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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
- A report that must be filed by all regulated financial institutions in the
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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".
- 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.
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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:
- A ratio used to determine return relative to drawdown (downside) risk in a hedge fund.
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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."
- An international bank-rating system where bank supervisory authorities rate institutions according to six factors.
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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".
- 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.
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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.
- 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.
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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
- The Canadian
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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.
- A Canadian not-for-profit organization set up by the investment industry designed to protect investors from the bankruptcy of an individual investment firm.
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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.
- 1. A previously submitted order to purchase or sell a security that is canceled before it has been executed on an exchange.
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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.
- 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.
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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.
- 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.
- 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:
- 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.
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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.
- 1. Financial assets or the financial value of assets, such as cash.
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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.
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.
- This refers to profits that a company uses to increase its capital base.
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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.
- 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.
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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)."
- A measure of a bank's capital. It is expressed as a percentage of a bank's risk weighted credit exposures.
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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".
- 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.
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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).
- A model that describes the relationship between risk and expected return and that is used in the pricing of risky securities.
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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.
- 1. The capital acquired during an IPO, or the additional offerings of a company, plus any retained earnings.
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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".
- 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.
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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.
- 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.
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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.
- 1. The total amount of capital used for the acquisition of profits.
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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.
- 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.
- 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.
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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:
- 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.
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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.
- 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.
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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
- 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.
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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".
- 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.
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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".
- 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.
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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.
- 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.
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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.
- 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".
- 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.
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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.
- 1. The risk an investor faces that he or she may lose all or part of the principal amount invested.
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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.
- 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.
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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".
- 1. In accounting, it is where costs to acquire an asset are included in the price of the asset.
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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
- 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.
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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".
- 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.
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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".
- 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.
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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.
- An accounting method used to delay the recognition of expenses by recording the expense as long-term assets.
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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.
- A military term. Capitulation refers to surrendering or giving up.
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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.
- 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.
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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".
- 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.
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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.
- 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.
- 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.
- 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".
- 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.
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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.
- 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.
- 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.
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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.
- 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.
- 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).
- 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.
- 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.
- 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.
- 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
- 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.
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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.
- 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.
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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.
- 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.
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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.
- 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.
- 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.
- 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".
- Investment securities that are short-term, have high credit quality and are highly liquid.
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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.
- 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.
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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".
- 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.
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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
- 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:
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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:
- 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.
- 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.
- 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.
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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.
- 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
- 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.
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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:
- 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".
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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
A measure of the amount of cash generated by a company through its operations. It is computed by subtracting the 'operating cash flow demand' from the 'operating cash flow' from the cash flow statement.
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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".
- 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.
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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:
- 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.
- 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.
- 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.
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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.
- 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.
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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.
- Large companies that put less efficient and highly specialized merchants out of business.
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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.
- 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.
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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.
- 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
- 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:
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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.
- 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.
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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.
- 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.
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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.
- 1. For an option or futures contract, the difference between the current price and the previous day's settlement price.
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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.
- 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.
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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.
- 1. The system of intermediaries between the producers, suppliers, consumers, etcetera, for the movement of a good or service.
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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".
- 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.
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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.
- 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.
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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.
- 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.
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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.
- A term describing an expense on a company's income statement. A charge-off will fall under one of the following categories:
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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.
- 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.
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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".
- 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.
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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.
- 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).
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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
- A professional designation offered by the
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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.
- The illegal practice of issuing stock options at artificially low prices shortly before an initial public offering.
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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".
- 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.
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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.
- 1. The act of investors choosing investments that have performed well within another portfolio in anticipation that the trend will continue.
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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
- The currency abbreviation for the Swiss franc (CHF), the currency for Switzerland. Switzerland has four official languages; therefore, the currency is known as;
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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".
- 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.
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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.
- 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.
- 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".
- 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.
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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.
- 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.
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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.
- 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.
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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.
- 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.
- 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:
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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".
- 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.
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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.
- The percentage of subscribers to a service that discontinue their subscription to that service in a given time period.
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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.
- 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".
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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".
- A swap with the features of both a currency swap and an interest rate 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.
- 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.
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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.
- 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).
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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".
- The separation of company equity into more than one class of common shares, usually called "Class A" and "Class B."
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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."
- 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.
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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.
- 1. Previously given monies or benefits that are taken back due to specially arising circumstances.
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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:
- 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.
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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".
- 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.
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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.
- 1. The end of a trading session. The closing price is quoted in the newspaper.
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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.
- 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."
- The act of taking the opposite position of the current position thereby getting out of a position in a particular stock or security.
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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.
- 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."
- 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.
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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.
- 1. The end of a trading session. The closing price is quoted in the newspaper.
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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".
- 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.
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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 points or mortgage points. These point are often paid in order to lower the rate of interest on the loan.
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Closing Price
- The final price at which a security is traded on a given trading day. The closing price represents the most up-to-date valuation of a security until trading commences again on the next trading day.
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Closing Statement
- A document commonly used in real estate transactions, detailing the fees, commissions, insurance, etc. that must be transacted for a successful transfer of ownership to take place. This document is prepared by a closing agent and is also known as a "settlement sheet".
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Closing Tick
- The number of stocks which closed higher than their previous trade minus the number of stocks whose closing prices were lower than their previous trade. A positive closing tick means that there was buying at the close and indicates strength, the opposite is true for a down closing tick.
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Cloud On Title
- Any document, claim, unreleased lien or encumbrance that might invalidate or impair the title to real property or make the title doubtful. Clouds on title are usually discovered during a title search. Clouds on title are resolved through initiating a quitclaim deed or a commencement of action to quiet title.
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CLP (Chilean Peso)
- The currency abbreviation for the Chilean peso (CLP), the currency of Chile. The peso is often presented with the symbol $ and is made up of 100 centavos, even though there are no circulating centavo coins. Chilean peso banknotes are issued by the Banco Central de Chile.
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Club Deal
- A private equity buyout or the assumption of a controlling interest in a company that involves several different private equity firms. This group of firms pools its assets together and makes the acquisition collectively. The practice has historically allowed private equity to purchase much more expensive companies together than they could alone. Also, with each company taking a smaller position, risk can be reduced.
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Clunker
- A popular reference to the old vehicle traded in under the U.S. government's "cash-for-clunkers" program, rolled out in 2009, for a newer more fuel efficient vehicle. For a "clunker" to be eligible for the program it must have satisfied four conditions:
1) It has to be in drivable condition;
2) It has to have been continously insured for one year prior to the trade-in;
3) It has to have been manufactured more than 25 years ago on the date of trade in;
4) It has a combined fuel efficiency of 18 miles per gallon or less.
- A popular reference to the old vehicle traded in under the U.S. government's "cash-for-clunkers" program, rolled out in 2009, for a newer more fuel efficient vehicle. For a "clunker" to be eligible for the program it must have satisfied four conditions:
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Cluster Analysis
- An investment approach that places securities into groups based on the correlation found among their returns. Securities with high positive correlations are grouped together and segregated from those with negative correlation. Between each cluster, very little correlation should exist. Holding stocks in each cluster provides the investor with a diversified portfolio.
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CMBX Indexes
- A group of indexes made up of 25 tranches of commercial mortgage-backed securities (CMBS), each with different credit ratings. The CMBX indexes are the first attempt at letting participants trade risks that closely resemble the current credit health of the commercial mortgage market by investing in credit default swaps, which put specific interest rate spreads on each risk class. The pricing is based on the spreads themselves rather than on a pricing mechanism.
Daily trading involves cash settlements between the two parties to any transaction, and the CMBX indexes are rolled over every six months to bring in new securities and continuously reflect the current health of the commercial mortgage markets. This "pay as you go" settlement process considers three events in the underlying securities as "credit events": principal writedowns, principal shortfalls (failures to pay on an underlying mortgage) and interest shortfalls (when current cash flows pay less than the CMBX coupon).
- A group of indexes made up of 25 tranches of commercial mortgage-backed securities (CMBS), each with different credit ratings. The CMBX indexes are the first attempt at letting participants trade risks that closely resemble the current credit health of the commercial mortgage market by investing in credit default swaps, which put specific interest rate spreads on each risk class. The pricing is based on the spreads themselves rather than on a pricing mechanism.
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CMG Plan
- A mortgage plan in which a borrower's mortgage is structured like a checking account, where paychecks are deposited directly into the mortgage account and the mortgage balance is reduced by that amount. As checks are written against the account during the month, the mortgage balance rises. Any amount deposited in the account that is not withdrawn through the check-writing process is applied to the balance of the mortgage at the end of the month as repayment of principal.
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CNN Effect
- The temporary shifting of consumer spending that occurs as a result of gripping news.
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CNY
- In currencies, this is the abbreviation for the China Yuan Renminbi.
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CNY (China Yuan Renminbi)
- The currency abbreviation for the China yuan renminbi (CNY), the general term for the currency of the People's Republic of China (PRC). The renminbi (or yuan) is made up of 10 jiao and 100 fen and is often either abbreviated as RMB, or presented with the symbol ¥. Renminbi is issued by the People's Bank of China, which is controlled by the PRC. The yuan is issued in banknote (bills) multiples of one, five, 10, 20, 50 and 100.
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Co-borrower
- Any additional borrower(s) whose name(s) appear on loan documents and whose income and credit history are used to qualify for the loan. Under this arrangement, all parties involved have an obligation to repay the loan. For mortgages, the names of applicable co-borrowers also appear on the property's title.
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Co-branded Card
- Any credit card that is offered by a credit card company that is jointly sponsored by both a bank and a retail merchant. This type of card can generally be issued more cheaply than private label retail cards. This type of card is designed to give the issuing bank access to the retailer's customer base.
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Co-Insurance
- A co-sharing agreement between the insured and the insurer under a health insurance policy which provides that the insured will cover a set percentage of the covered costs after the deductible has been paid. Similar to co-pay insurance plans except co-pays require the insured to pay a set dollar amount at the time the service is rendered.
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Co-insurance Effect
- A theory on corporate debt that posits that the likelihood of default decreases when two firms' assets and liabilities are combined through a merger or acquisition compared to the likelihood of default in the individual companies. The co-insurance effect relates to the concept of diversification, as risky debt is spread across the new firm's operations.
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Co-mortgagor
- A party or individual who cosigns a mortgage loan. Co-mortgagors are jointly liable with the other mortgagor for the balance of the mortgage. Often the co-mortgagor will also receive a portion of the ownership in the asset in exchange for assisting with the loan.
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Co-pay
- A type of insurance policy where the insured pays a specified amount of out-of-pocket expenses for health-care services such as doctor visits and prescriptions drugs at the time the service is rendered, with the insurer paying the remaining costs. However, unlike coinsurance, where the insured is required to pay a certain percentage of the covered costs, co-pay plans require the insured to pay a specified dollar amount.
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Co-Tenancy Clause
- A common clause in retail lease contracts that allows tenants to get a reduction in rent from landlords if key tenants or a certain number of tenants leave the space. A large or key tenant is a big draw for traffic, especially in malls, and are often one of the major reasons a tenant chooses to locate in a specific mall. A co-tenancy clause provides the tenant with some form of protection in the form of reduced rent to compensate for loss of traffic.
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Coattail Investing
- An investment strategy in which investors mimic the trades of well-known and historically successful investors.
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Cockroach Theory
- A market theory that suggests that when a company reveals bad news to the public, there may be many more related negative events that have yet to be revealed. The term comes from the common belief that seeing one cockroach is usually evidence that there are many more that remain hidden.
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Coefficient of Determination
- A measure used in statistical model analysis to assess how well a model explains and predicts future outcomes. It is indicative of the level of explained variablity in the model. The coefficient, also commonly known as R-square, is used as a guideline to measure the accuracy of the model.
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Coefficient Of Variation - CV
- A statistical measure of the dispersion of data points in a data series around the mean. It is calculated as follows:
The coefficient of variation represents the ratio of the standard deviation to the mean, and it is a useful statistic for comparing the degree of variation from one data series to another, even if the means are drastically different from each other.
- A statistical measure of the dispersion of data points in a data series around the mean. It is calculated as follows:
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Coiled Market
- A market that is believed to have the potential to make a strong move in one direction after being pushed in the opposite direction. The idea is that if a market should be headed in one direction based on its fundamentals but is pushed in the other direction, it will eventually make a strong move in the original fundamental direction. This coiled move will often be more substantial than what might have been the case if it had gone in the expected direction to begin with.
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Coincident Indicator
- An economic factor that varies directly and simultaneously with the business cycle, thus indicating the current state of the economy.
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Cokurtosis
- A statistical measure that calculates the degree of peak of a variable's probability distribution in relation to another variable's peakedness. All other things equal, a higher cokurtosis means that the first variable has a flatter probability distribution.
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Cold Calling
- A method used by brokers to obtain new business by making unsolicited calls to potential clients.
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Collaborative Commerce - C-commerce
- Optimization of supply and distribution channels in order to capitalize upon the global economy and use new technology efficiently.
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Collar
- 1. A protective options strategy that is implemented after a long position in a stock has experienced substantial gains. It is created by purchasing an out of the money put option while simultaneously writing an out of the money call option.
Also known as "hedge wrapper".
2. A general restriction on market activities.
- 1. A protective options strategy that is implemented after a long position in a stock has experienced substantial gains. It is created by purchasing an out of the money put option while simultaneously writing an out of the money call option.
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Collateral
- Properties or assets that are offered to secure a loan or other credit. Collateral becomes subject to seizure on default.
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Collateral Trust Bond
- A bond that is secured by a financial asset - such as stock or other bonds - that is deposited and held by a trustee for the holders of the bond.
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Collateral Value
- The estimated fair market value of an asset that is being used as loan collateral. Collateral value is determined by appraisal from a qualified expert. If publicly traded securities are being used, then the current price of the securities is the collateral value. However, marketable securities are subject to the margin requirement restrictions mandated by the Federal Reserve Board.
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Collateral Value Insurance
- A type of business insurance used by lenders to guarantee the value of appraised property. Collateral value insurance also guarantees a minimum liquidation value in the event the property must be sold. In most cases, the property being used as collateral is appraised before a certificate of guarantee is issued.
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Collateralization
- The act where a borrower pledges an asset as recourse to the lender in the event that the borrower defaults on the initial loan. Collateralization of assets gives lenders a sufficient level of reassurance against default risk, which allows loans to be issued to individuals/companies with less than optimal credit history/debt rating.
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Collateralized Bond Obligation - CBO
- An investment-grade bond backed by a pool of junk bonds. Junk bonds are typically not investment grade, but because they pool several types of credit quality bonds together, they offer enough diversification to be "investment grade."
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Collateralized Borrowing And Lending Obligation - CBLO
- A money market instrument that represents an obligation between a borrower and a lender as to the terms and conditions of the loan. Collateralized borrowing and lending obligations (CBLOs) are used by those who have been phased out of or heavily restricted in the interbank call money market.
- A money market instrument that represents an obligation between a borrower and a lender as to the terms and conditions of the loan. Collateralized borrowing and lending obligations (CBLOs) are used by those who have been phased out of or heavily restricted in the interbank call money market.
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Collateralized Debt Obligation - CDO
- An investment-grade security backed by a pool of bonds, loans and other assets. CDOs do not specialize in one type of debt but are often non-mortgage loans or bonds.
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Collateralized Debt Obligation Cubed - CDO-Cubed
- A special purpose vehicle (SPV) with securitization payments in the form of tranches. Collateralized debt obligation cubeds (CDO-cubeds) are backed by a pool of collateralized debt obligation squared (CDO-squared) tranches.
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Collateralized Debt Obligation Squared - CDO-Squared
- A special purpose vehicle (SPV) with securitization payments in the form of tranches. A collateralized debt obligation squared (CDO-squared) is backed by a pool of collateralized debt obligation (CDO) tranches.
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Collateralized Loan Obligation - CLO
- A special purpose vehicle (SPV) with securitization payments in the form of different tranches. Financial institutions back this security with receivables from loans.
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Collateralized Mortgage Obligation - CMO
- A type of mortgage-backed security that creates separate pools of pass-through rates for different classes of bondholders with varying maturities, called tranches. The repayments from the pool of pass-through securities are used to retire the bonds in the order specified by the bonds' prospectus.
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Collection Agency
- A company hired by lenders to recover funds that are past due or accounts that are in default. The lending company itself may also have a division or subsidiary that acts as its collection agency. A collection agency is often hired after a company has made multiple attempts to collect its receivables.
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Collective Investment Fund
- A fund that is operated by a trust company or a bank and handles a pooled group of trust accounts. Collective investment funds combine the assets of various individuals and organizations to create a larger, well-diversified portfolio. The following are two types of collective investment funds:
A1 Fund: A fund of grouped assets contributed by either the holding bank or affiliated banks for the exclusive purpose of investment and reinvestment.
A2 Fund: A fund of grouped assets contributed by pension, profit sharing, retirement, or other trusts that are exempt from federal income tax
- A fund that is operated by a trust company or a bank and handles a pooled group of trust accounts. Collective investment funds combine the assets of various individuals and organizations to create a larger, well-diversified portfolio. The following are two types of collective investment funds:
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Collusion
- A non-competitive agreement between rivals that attempts to disrupt the market's equilibrium. By collaborating with each other, rival firms look to alter the price of a good to their advantage. The parties may collectively choose to restrict the supply of a good, and/or agree to increase its price in order to maximize profits. Groups may also collude by sharing private information, allowing them to benefit from insider knowledge.
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Columbia Business School
- This is one of the top business schools in America and is located at Columbia University. Also known as the Columbia University Graduate School of Business Administration, Columbia Business School was founded in 1916 in New York, New York by A. Barton Hepburn. The school is highly regarded as one of the best in the world and is well known for its close ties to the Wall Street community.
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Com-Dev Company
- Short form for "Commercial Development Company." These companies build and sell/lease commercial real-estate, software, or applications for wide-scale commercial use.
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Combat Pay
- A tax-free form of compensation paid to members of the armed forces who are on active duty in a designated combat zone or hazardous duty area. Combat pay includes active duty pay, dislocation allowances, reenlistment bonuses, achievement awards, pay for accrued leave and other miscellaneous types of compensation that are paid as a result of military service.
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Combat Zone
- An area designated as a war zone during a specified period. Members of the military do not need to claim taxable income they earn while working in a combat zone.
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Combination
- When an investor holds a position in both call and put options on the same asset.
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Combination Bond
- A bond, typically a municipal bond, that has financial backing from two sources: the issuing agency and the revenue from an existing or proposed source that will benefit from the funding.
Also known as "double barrel bonds".
- A bond, typically a municipal bond, that has financial backing from two sources: the issuing agency and the revenue from an existing or proposed source that will benefit from the funding.
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Combination Loan
- 1. A transaction consisting of two separate loans for the same borrower by the same lender. The initial loan is used to finance the construction of a new home; upon completion of construction, the loan is repaid by a second loan, which is a permanent mortgage on the home. The initial construction loan is usually an adjustable-rate mortgage, while the subsequent mortgage might be any one of the mortgage types available.
2. The simultaneous use of a first and second mortgage to finance a home. The first loan is usually made for 80% of the home's value and has a first lien position, while the second loan is usually for 10-20% of the home's value and has a second lien position. This transaction is frequently used to avoid having to pay private mortgage insurance.
This type of combination loan is also known as a "piggy-back" or "80-10-10 transaction".
- 1. A transaction consisting of two separate loans for the same borrower by the same lender. The initial loan is used to finance the construction of a new home; upon completion of construction, the loan is repaid by a second loan, which is a permanent mortgage on the home. The initial construction loan is usually an adjustable-rate mortgage, while the subsequent mortgage might be any one of the mortgage types available.
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Combined Loan To Value Ratio - CLTV Ratio
- A ratio used by lenders to determine the risk of default by prospective homebuyers when more than one loan is used. In general, lenders are willing to lend at CLTV ratios of 80% and above to borrowers with a high credit rating.
- A ratio used by lenders to determine the risk of default by prospective homebuyers when more than one loan is used. In general, lenders are willing to lend at CLTV ratios of 80% and above to borrowers with a high credit rating.
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Combined Ratio
- A measure of profitability used by an insurance company to indicate how well it is performing in its daily operations. A ratio below 100% indicates that the company is making underwriting profit while a ratio above 100% means that it is paying out more money in claims that it is receiving from premiums.
The combined ratio is comprised of the claims ratio and the expense ratio. The claims ratio is claims owed as a percentage of revenue earned from premiums. The expense ratio is operating costs as a percentage of revenue earned from premiums. The combined ratio is calculated by taking the sum of incurred losses and expenses and then dividing them by earned premium.
Calculated as:
- A measure of profitability used by an insurance company to indicate how well it is performing in its daily operations. A ratio below 100% indicates that the company is making underwriting profit while a ratio above 100% means that it is paying out more money in claims that it is receiving from premiums.
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Combined Statement
- Also known as a descriptive or consolidated statement, combined statements aggregate all information about all of a customer's accounts onto a single periodic statement. For example, if a bank customer has a mortgage, line of credit, retail account, IRA and trust account, then the bank will mail one statement that gives a complete breakdown of all three accounts. This includes all deposits, withdrawals and other transactions, as well as beginning and ending balances.
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COMEX
- The primary market for trading metals such as gold, silver, copper and aluminum. Formerly known as the Commodity Exchange Inc., the COMEX merged with the New York Mercantile exchange in 1994 and became the division responsible for metals trading.
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Comfort Letter
- A letter given to organizations or persons of interest by external auditors regarding statutory audits, statements and reports used in a prospectus. The comfort letter will be attached to the preliminary statements as assurance that it will not be materially different from the final version.
Also known as "letter of comfort" or "solvency opinion".
- A letter given to organizations or persons of interest by external auditors regarding statutory audits, statements and reports used in a prospectus. The comfort letter will be attached to the preliminary statements as assurance that it will not be materially different from the final version.
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Commerce
- The buying and selling of goods, especially on a large scale.
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Commercial
- A term used to refer to any party or organization involved in producing, transporting, or merchandising a commodity.
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Commercial Account
- Any type of financial account that is owned and used by a business or corporation. Commerical account usually refers to a checking or other type of demand deposit account. Regulation Q of the Federal Reserve prohibits banks from paying interest on this type of account. They instead pay earnings credits that are based upon the average account balance.
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Commercial and Industrial (C&I) Loan
- Any type of loan made to a business or corporation and not to an individual. Commercial and industrial loans can be made in order to provide either working capital or to finance major capital expenditures. This type of loan is usually short-term in nature and is almost always backed with some sort of collateral.
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Commercial Bank
- A financial institution that provides services such as a accepting deposits and giving business loans.
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Commercial Credit
- A pre-approved amount of money issued by a bank to a company that can be accessed by the borrowing company at any time to help meet various financial obligations. Commercial credit is commonly used to fund common day-to-day operations and is often paid back once funds become available.
Also commonly referred to as a "commercial line of credit" or "business credit"
- A pre-approved amount of money issued by a bank to a company that can be accessed by the borrowing company at any time to help meet various financial obligations. Commercial credit is commonly used to fund common day-to-day operations and is often paid back once funds become available.
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Commercial Grain Stock
- A term used to describe any grain stored within U.S. Borders.
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Commercial Loan
- A debt-based funding arrangement that a business can set up with a financial institution. The proceeds of commercial loans may be used to fund large capital expenditures and/or operations that a business may otherwise be unable to afford.
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Commercial Mortgage-Backed Securities (CMBS)
- A type of mortgage-backed security that is secured by the loan on a commercial property. A CMBS can provide liquidity to real estate investors and to commercial lenders. As with other types of MBS, the increased use of CMBS can be attributable to the rapid rise in real estate prices over the years.
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Commercial Paper
- An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories and meeting short-term liabilities. Maturities on commercial paper rarely range any longer than 270 days. The debt is usually issued at a discount, reflecting prevailing market interest rates.
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Commercial Paper Funding Facility - CPFF
- An institution created by the Federal Reserve Bank of New York on October 27, 2008, as a result of the credit crunch faced by financial intermediaries in the commercial paper market. The Commercial Paper Funding Facility (CPFF) provides liquidity to U.S. issuers of commercial paper registered with the CPFF through a special purpose vehicle (SPV) that is funded by the Federal Reserve Bank of New York.
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Commercial Paper Funding Program - CPFP
- A program instituted in October of 2008 that created the Commercial Paper Funding Facility (CPFF). The Commercial Paper Funding Program (CPFP) was designed to increase the liquidity of the commercial paper market by providing funding to issuers. The program specifically provided a backup measure of liquidity for commercial paper issuers via a Special Purpose Vehicle (SPV).
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Commercial Property
- Real estate property that is used for business activities. Commercial properties fall into many categories and include including industrial properties, shopping centers, farms, offices, or even vacant land.
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Commercial Property/Casualty Market Index Survey
- A survey of its members in the Council of Insurance Agents & Brokers regarding the commercial property/casualty market. This quarterly Commercial Property/Casualty Market Index Survey covers the rate of premiums over small, medium and large commercial accounts; tracks regional trends; and provides member commentary on market conditions, pricing practices and trends. The council's other survey is the biannual Employee Benefits Market Index.
- A survey of its members in the Council of Insurance Agents & Brokers regarding the commercial property/casualty market. This quarterly Commercial Property/Casualty Market Index Survey covers the rate of premiums over small, medium and large commercial accounts; tracks regional trends; and provides member commentary on market conditions, pricing practices and trends. The council's other survey is the biannual Employee Benefits Market Index.
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Commercial Real Estate
- Property that is solely used for business purposes.
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Commercial Trader
- A classification used by the Commodity Futures Trading Commission (CFTC) to describe traders that use the futures market primarily to hedge their business activities.
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Commingled Fund
- A fund consisting of assets from several accounts that are blended together. Investors in commingled fund investments benefit from economies of scale, which allow for lower trading costs per dollar of investment, diversification and professional money management.
Sometimes called a "pooled fund."
- A fund consisting of assets from several accounts that are blended together. Investors in commingled fund investments benefit from economies of scale, which allow for lower trading costs per dollar of investment, diversification and professional money management.
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Commingling (Commingled)
- 1. In securities, it is the mixing of customer-owned securities with brokerage-owned securities.
2. In trust banking, it is the pooling of individual customer accounts into a fund, a share of which is owned by each contributing customer. This is similar to a mutual fund.
3. In real estate, it is the illegal act of a broker combining clients' funds with personal funds because, by law, a broker is required to use a separate trust or escrow fund to temporarily hold a client's funds.
- 1. In securities, it is the mixing of customer-owned securities with brokerage-owned securities.
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Commission
- A service charge assessed by a broker or investment advisor in return for providing investment advice and/or handling the purchase or sale of a security. Most major, full-service brokerages derive most of their profits from charging commissions on client transactions. Commissions vary widely from brokerage to brokerage.
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Commission House
- A brokerage or merchant firm which buys and sells futures contracts for customer accounts.
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Commissioner Of Banking
- A commissioner that oversees all of the banks in a state. The commissioner of banking supervises the liquidation of insolvent banks and performs other administrative functions. In most states, the commissioner is not an elected position but is appointed, usually by the governor.
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Commitment Fee
- A fee lenders charge their borrowers for unused credit or credit that has been promised at a specified future date.
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Commitments of Traders Report - COT
- A report published every Friday by the Commodity Futures Trading Commission (CFTC) that seeks to provide investors with up-to-date information on futures market operations and increase the transparency of these complex exchanges.
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Committed Capital
- A contractual agreement between an investor and a venture-capital fund that obligates the investor to contribute money to the fund. The investor may pay all of the committed capital at one time, or make contributions over a period of time. This often takes place over a number of years.
Also known as "commitments".
- A contractual agreement between an investor and a venture-capital fund that obligates the investor to contribute money to the fund. The investor may pay all of the committed capital at one time, or make contributions over a period of time. This often takes place over a number of years.
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Committed Facility
- A credit facility whereby terms and conditions are clearly defined by the lending institution and imposed upon the borrowing company.
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Commodities Exchange
- An entity, usually an incorporated non-profit association, that determines and enforces rules and procedures for the trading of commodities and related investments, such as commodity futures. Commodities exchange also refers to the physical center where trading takes place.
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Commoditization
- 1. A situation when illiquid financial contracts are changed or modified in a way that promotes trading and results in a more liquid market.
2. Making a product into a commodity.
- 1. A situation when illiquid financial contracts are changed or modified in a way that promotes trading and results in a more liquid market.
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Commoditize
- The act of making a process, good or service easy to obtain by making it as uniform, plentiful and affordable as possible. Something becomes commoditized when one offering is nearly indistinguishable from another. As a result of technological innovation, broad-based education and frequent iteration, goods and services become commoditized and, therefore, widely accessible.
- The act of making a process, good or service easy to obtain by making it as uniform, plentiful and affordable as possible. Something becomes commoditized when one offering is nearly indistinguishable from another. As a result of technological innovation, broad-based education and frequent iteration, goods and services become commoditized and, therefore, widely accessible.
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Commodity
- 1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often used as inputs in the production of other goods or services. The quality of a given commodity may differ slightly, but it is essentially uniform across producers. When they are traded on an exchange, commodities must also meet specified minimum standards, also known as a basis grade.
2. Any good exchanged during commerce, which includes goods traded on a commodity exchange.
- 1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often used as inputs in the production of other goods or services. The quality of a given commodity may differ slightly, but it is essentially uniform across producers. When they are traded on an exchange, commodities must also meet specified minimum standards, also known as a basis grade.
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Commodity Block Currency
- A currency that belongs to a country whose economy is strongly correlated with the price fluctuations of a certain commodity.
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Commodity Channel Index - CCI
- An oscillator used in technical analysis to help determine when an investment vehicle has been overbought and oversold. The Commodity Channel Index, first developed by Donald Lambert, quantifies the relationship between the asset's price, a moving average (MA) of the asset's price, and normal deviations (D) from that average. It is computed with the following formula:
- An oscillator used in technical analysis to help determine when an investment vehicle has been overbought and oversold. The Commodity Channel Index, first developed by Donald Lambert, quantifies the relationship between the asset's price, a moving average (MA) of the asset's price, and normal deviations (D) from that average. It is computed with the following formula:
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Commodity Credit Corporation - CCC
- An agency of the U.S. Department of Agriculture. The Commodity Credit Corporation (CCC) was created to support and protect the income of American farmers, as well as agricultural prices. This agency assists in maintaining an adequate variety and volume of agricultural commodity supplies. The CCC also helps to facilitate their systematic distribution.
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Commodity ETF
- Exchange-traded funds that invest in physical commodities such as agricultural goods, natural resources and precious metals. A commodity ETF may be focused on a single commodity and hold it in physical storage or may invest in futures contracts. Other commodity ETFs look to track the performance of a commodity index that includes dozens of individual commodities through a combination of physical storage and derivatives positions.
Because many commodity ETFs use leverage through the purchase of derivative contracts, they may have large portions of uninvested cash, which is used to purchase Treasury securities or other nearly risk-free assets.
- Exchange-traded funds that invest in physical commodities such as agricultural goods, natural resources and precious metals. A commodity ETF may be focused on a single commodity and hold it in physical storage or may invest in futures contracts. Other commodity ETFs look to track the performance of a commodity index that includes dozens of individual commodities through a combination of physical storage and derivatives positions.
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Commodity Exchange Act - CEA
- An act passed in 1936 by the U.S. Government that provides federal regulation of all futures trading activities. This act replaced the Grain Futures Act of 1922.
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Commodity Futures Contract
- An agreement to buy or sell a set amount of a commodity at a predetermined price and date. Buyers use these to avoid the risks associated with the price fluctuations of the product or raw material, while sellers try to lock in a price for their products. Like in all financial markets, others use such contracts to gamble on price movements.
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Commodity Futures Modernization Act - CFMA
- An act passed in 2000 by the U.S Government that reaffirmed the authority of the Commodity Futures Trading Commission for five years as the regulatory body of the American futures markets. The most significant outcome from this act was the allowance for the trading of single stock futures.
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Commodity Futures Trading Commission - CFTC
- A U.S. federal agency established by the Commodity Futures Trading Commission Act of 1974. It ensures the open and efficient operation of the futures markets. There are five futures markets commissioners who are appointed by the president (subject to Senate approval).
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Commodity Index
- An index that tracks a basket of commodities to measure their performance. These indexes will often be traded on exchanges, allowing investors to gain easier access to commodities without having to enter the futures market. The value of these indexes fluctuates based on the underlying commodities, and this value can be trade on the exchange much in the same way as stock-index futures.
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Commodity Pairs
- The three forex pairs which include currencies from countries that possess large amounts of commodities. The commodity pairs are: USD/CAD, USD/AUD, USD/NZD. These pairs are highly correlated to changes in commodity prices, therefore traders looking to gain exposure to commodity fluctuations often take advantage of these pairs.
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Commodity Pool
- A fund that collects investor contributions for use in futures and commodity option trading.
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Commodity Pool Operator - CPO
- Persons or limited partnerships responsible for investing a commodity pool's assets in commodity-futures and options positions.
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Commodity Research Bureau Index - CRB
- An index that measures the overall direction of commodity sectors. The CRB was designed to isolate and reveal the directional movement of prices in overall commodity trades.
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Commodity Selection Index - CSI
- A technical momentum indicator that attempts to identify which commodities are the most suitable for short-term trading. The larger the CSI value, the stronger is the trend and volatility characteristics associated with the asset. This indicator should only be used by traders who can handle large amounts of volatility as it indicates strong trending, but reversals are always possible.
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Commodity Swap
- A swap where exchanged cash flows are dependent on the price of an underlying commodity. This is usually used to hedge against the price of a commodity.
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Commodity Trading Advisor - CTA
- An individual or a firm, registered with the Commodity Futures Trading Commission, that receives compensation for giving people advice on options, futures and the actual trading of managed futures accounts. Registration for CTAs is done through the National Futures Association, a self-regulated organization responsible for reviewing and accepting registrations.
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Common Gap
- A price gap found on a price chart for an asset. These gaps are brought about by normal market forces and, as the name implies, are very common. They are represented graphically by a non-linear jump or drop from one point on the chart to another point.
- A price gap found on a price chart for an asset. These gaps are brought about by normal market forces and, as the name implies, are very common. They are represented graphically by a non-linear jump or drop from one point on the chart to another point.
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Common Law
- In the
- In the
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Common Law Property
- A system used by most states to determine ownership of property acquired during marriage. In contrast to the community property system, the common law property system states that property acquired by one member of a married couple belongs solely to that person unless the property is specifically put in the names of both spouses.
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Common Shareholder
- An individual, business or institution that holds common shares in a company, giving the holder an ownership stake in the company. This will also give the holder the right to vote on corporate issues such as board elections and corporate policy, along with the right to any common dividend payments.
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Common Size Balance Sheet
A company balance sheet that displays all items as percentages of a common base figure. This type of financial statement can be used to allow for easy analysis between companies or between time periods of a company.
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Common Size Financial Statement
- A company financial statement that displays all items as percentages of a common base figure. This type of financial statement allows for easy analysis between companies or between time periods of a company.
- A company financial statement that displays all items as percentages of a common base figure. This type of financial statement allows for easy analysis between companies or between time periods of a company.
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Common Size Income Statement
- An income statement in which each account is expressed as a percentage of the value of sales. This type of financial statement can be used to allow for easy analysis between companies or between time periods of a company.
- An income statement in which each account is expressed as a percentage of the value of sales. This type of financial statement can be used to allow for easy analysis between companies or between time periods of a company.
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Common Stock
- A security that represents ownership in a corporation. Holders of common stock exercise control by electing a board of directors and voting on corporate policy. Common stockholders are on the bottom of the priority ladder for ownership structure. In the event of liquidation, common shareholders have rights to a company's assets only after bondholders, preferred shareholders and other debtholders have been paid in full.
In the U.K., these are called "ordinary shares".
- A security that represents ownership in a corporation. Holders of common stock exercise control by electing a board of directors and voting on corporate policy. Common stockholders are on the bottom of the priority ladder for ownership structure. In the event of liquidation, common shareholders have rights to a company's assets only after bondholders, preferred shareholders and other debtholders have been paid in full.
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Community Currency
- A form of paper scrip issued at the county, town or community level for use at local participating businesses. The theory behind community currencies is to encourage spending at local businesses as opposed to chain or "big box" stores. Local residents can exchange dollars for community currencies at local bank branches that participate in the program, usually at a discount to encourage their use; for example, $0.90 buys $1 of community currency.
Business owners who accept community currencies may have to create separate accounting methods to deal with different taxation guidelines, but this is considered an acceptable tradeoff for increased business from local customers.
- A form of paper scrip issued at the county, town or community level for use at local participating businesses. The theory behind community currencies is to encourage spending at local businesses as opposed to chain or "big box" stores. Local residents can exchange dollars for community currencies at local bank branches that participate in the program, usually at a discount to encourage their use; for example, $0.90 buys $1 of community currency.
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Community Development Financial Institution - CDFI
- A private sector financial institution that focuses on personal lending and business development efforts in local communities. CDFIs can receive federal funding through the U.S. Department of the Treasury by completing an application. They can also receive funding from private sector sources such as individuals, corporations and religious institutions.
- A private sector financial institution that focuses on personal lending and business development efforts in local communities. CDFIs can receive federal funding through the U.S. Department of the Treasury by completing an application. They can also receive funding from private sector sources such as individuals, corporations and religious institutions.
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Community Income
- Income earned by taxpayers who live in community property states. Community income is considered to belong equally to both spouses, just as with all other property that is owned or acquired by either spouse during the marriage.
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Community Investing
- Investments made directly into low-income or disadvantaged communities through channels such as community development banks, credit unions, loan fund and microfinance institutions. Community investing is closely tied to socially responsible investing and focuses on economically improving run-down communities by offering banking services and small loans to fund businesses, non-profit groups and affordable housing initiatives.
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Community Property
- A U.S. state-level legal distinction of a married individual's assets. Property acquired by either spouse during the course of a marriage is considered community property. For example, an IRA in the name of an individual with a spouse, accumulated during the course of the marriage, would be considered community property.
Also known as "marital property".
- A U.S. state-level legal distinction of a married individual's assets. Property acquired by either spouse during the course of a marriage is considered community property. For example, an IRA in the name of an individual with a spouse, accumulated during the course of the marriage, would be considered community property.
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Community Reinvestment Act - CRA
- An act of Congress enacted in 1977 with the intention of encouraging depository institutions to help meet the credit needs of surrounding communities (particularly low and moderate income neighborhoods). The CRA requires federal regulators to assess the record of each bank or thrift in helping to fulfill its obligations to the community. This record will then be used in evaluating applications for future approval of bank mergers, charters, acquisitions, branch openings and deposit facilities.
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Commuting Expenses
- Expenses that are incurred as a result of the taxpayer's regular means of getting back and forth to his or her place of employment. Commuting expenses can include car expenses and public transportation costs.
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Companion Bond
- A class of tranche found in a planned amortization class (PAC) bond that is responsible for protecting the PAC tranche from both contraction and extension risk. The companion bond is designed to absorb excess principal payments during times of high prepayment speeds and defer receiving principal payments during times of low prepayment speeds.
Also known as a "support tranche" or "companion tranche"
- A class of tranche found in a planned amortization class (PAC) bond that is responsible for protecting the PAC tranche from both contraction and extension risk. The companion bond is designed to absorb excess principal payments during times of high prepayment speeds and defer receiving principal payments during times of low prepayment speeds.
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Company Owned Life Insurance - COLI
- A type of life insurance policy taken out by a company on the lives of employees whom the company considers to be of vital importance to its operations. Under this type of plan, the company in question pays the premium on the insurance but is also the plan's primary beneficiary.
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Comparables
- A valuation technique in which a recently sold asset is used to determine the value of a similar asset. This technique is often used in real estate to determine the initial sale price of a property.
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Comparative Advantage
- A situation in which a country, individual, company or region can produce a good at a lower opportunity cost than a competitor.
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Competitive Advantage
- An advantage that a firm has over its competitors, allowing it to generate greater sales or margins and/or retain more customers than its competition. There can be many types of competitive advantages including the firm's cost structure, product offerings, distribution network and customer support.
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Competitive Bid
- A process whereby an underwriter submits a sealed bid to the issuer. The issuer awards the contract to the underwriter with the best price and contract terms.
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Competitive Bid Option
- A form of the commercial loan syndication where banks submit competing bids on a loan. They can also sell their portion of the participation in a loan to other parties. The borrower has a choice of banks to choose from, and will generally pick the lender with lowest rates and/or fees. In most cases, the leading bank in the syndicate allocates the majority of the actual loan balance to other lenders and only keeps a small percentage of the loan for itself.
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Competitive Tender
- A method of distributing debt issues. Bids are submitted by primary distributors and those who bid the highest receive the debt issue.
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Complement
- A good or service that is used in conjunction with another good or service. Usually, the complementary good has little to no value when consumed alone but, when combined with another good or service, it adds to the overall value of the offering. Also, good tends to have more value when paired with a complement than it does by itself.
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Compliance Department
- The department within a brokerage firm that oversees the trading and market-making activities of the firm.
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Compliance Examination
- A periodic examination of banks to make sure banks are operating in compliance with consumer protection laws, fair lending statutes and the Community Reinvestment Act. Compliance examinations are typically focused on operational areas that pose the biggest compliance risks, and focuses on the procedures the institutions have in place
to ensure compliance with regulations.
- A periodic examination of banks to make sure banks are operating in compliance with consumer protection laws, fair lending statutes and the Community Reinvestment Act. Compliance examinations are typically focused on operational areas that pose the biggest compliance risks, and focuses on the procedures the institutions have in place
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Composite
- A grouping of equities, indexes or other factors combined in a standardized way, providing a useful statistical measure of overall market or sector performance over time. Also known as a "composite index".
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Composite Index
- A grouping of equities, indexes or other factors combined in a standardized way, providing a useful statistical measure of overall market or sector performance over time.
Also known simply as a "composite".
- A grouping of equities, indexes or other factors combined in a standardized way, providing a useful statistical measure of overall market or sector performance over time.
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Composite Index of Coincident Indicators
- An index published by the Conference Board that is a broad-based measurement of current economic conditions, helping economists and investors to determine which phase of the business cycle the economy is currently experiencing.. The Composite Index of Coincident Indicators comprises four cyclical economic data sets:
1. the number of employees on non-agricultural payrolls (released by the Bureau of Labor Statistics)
2. the Index of Industrial Production
3. the level of manufacturing and trade sales
4. the aggregate amount of personal income excluding transfer payments
- An index published by the Conference Board that is a broad-based measurement of current economic conditions, helping economists and investors to determine which phase of the business cycle the economy is currently experiencing.. The Composite Index of Coincident Indicators comprises four cyclical economic data sets:
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Composite Index Of Lagging Indicators
- An index published monthly by the Conference Board that is used to confirm the direction of the economy's movements in past months. The index is made up of the following seven economic components, whose changes tend to come after changes in the overall economy:
1. The value of outstanding commercial and industrial loans
2. The change in the Consumer Price Index for services from the previous month
3. The change in labor cost per unit of labor output
4. The ratio of manufacturing and trade inventories to sales made
5. The ratio of consumer credit outstanding to personal income
6. The average prime rate charged by banks
7. The inverted average length of employment
- An index published monthly by the Conference Board that is used to confirm the direction of the economy's movements in past months. The index is made up of the following seven economic components, whose changes tend to come after changes in the overall economy:
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Composite Index of Leading Indicators
- An index published monthly by the Conference Board used to predict the direction of the economy's movements in the months to come. The index is made up of 10 economic components, whose changes tend to precede changes in the overall economy. These 10 components include:
1. the average weekly hours worked by manufacturing workers
2. the average number of initial applications for unemployment insurance
3. the amount of manufacturers' new orders for consumer goods and materials
4. the speed of delivery of new merchandise to vendors from suppliers
5. the amount of new orders for capital goods unrelated to defense
6. the amount of new building permits for residential buildings
7. the S&P 500 stock index
8. the inflation-adjusted monetary supply (M2)
9. the spread between long and short interest rates
10. consumer sentiment
- An index published monthly by the Conference Board used to predict the direction of the economy's movements in the months to come. The index is made up of 10 economic components, whose changes tend to precede changes in the overall economy. These 10 components include:
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Compound
- The ability of an asset to generate earnings, which are then reinvested in order to generate their own earnings. In other words, compounding refers to generating earnings from previous earnings.
Also known as "compound interest".
- The ability of an asset to generate earnings, which are then reinvested in order to generate their own earnings. In other words, compounding refers to generating earnings from previous earnings.
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Compound Accreted Value - CAV
- A measure of the theoretical value of a zero-coupon bond at any given point in time. Because there are no interest payments like there are with traditional bonds, the interest of a zero-coupon bond accrues until maturity. Therefore, the CAV can be calculated by adding all of the interest earned up to a given point in time to the original price.
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Compound Annual Growth Rate - CAGR
- The year-over-year growth rate of an investment over a specified period of time.
The compound annual growth rate is calculated by taking the nth root of the total percentage growth rate, where n is the number of years in the period being considered.
This can be written as follows:
- The year-over-year growth rate of an investment over a specified period of time.
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Compound Interest
- Interest that accrues on the initial principal and the accumulated interest of a principal deposit, loan or debt. Compounding of interest allows a principal amount to grow at a faster rate than simple interest, which is calculated as a percentage of only the principal amount.
- Interest that accrues on the initial principal and the accumulated interest of a principal deposit, loan or debt. Compounding of interest allows a principal amount to grow at a faster rate than simple interest, which is calculated as a percentage of only the principal amount.
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Compound Option
- An option for which the underlying is another option. Therefore, there are two strike prices and two exercise dates. These are the four types of compound options:
- Call on a call
- Put on a put
- Call on a put
- Put on a call
- An option for which the underlying is another option. Therefore, there are two strike prices and two exercise dates. These are the four types of compound options:
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Compound Return
- The rate of return, usually expressed as a percentage, that represents the cumulative effect that a series of gains or losses have on an original amount of capital over a period of time. Compound returns are usually expressed in annual terms, meaning that the percentage number that is reported represents the annualized rate at which capital has compounded over time.
When expressed in annual terms, a compound return can be referred to as a "compound annual growth rate (CAGR)".
- The rate of return, usually expressed as a percentage, that represents the cumulative effect that a series of gains or losses have on an original amount of capital over a period of time. Compound returns are usually expressed in annual terms, meaning that the percentage number that is reported represents the annualized rate at which capital has compounded over time.
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Compounding
- The ability of an asset to generate earnings, which are then reinvested in order to generate their own earnings. In other words, compounding refers to generating earnings from previous earnings.
Also known as "compound interest".
- The ability of an asset to generate earnings, which are then reinvested in order to generate their own earnings. In other words, compounding refers to generating earnings from previous earnings.
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Comprehensive Income
- Equals net income minus all recognized changes in equity during a period.
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Comprehensive Tax Allocation
- An accounting term that describes a form of "interperiod" tax allocation, a method of income analysis. It signifies a means of quantifying the net effect of taxation upon all book income transactions within a given period, such as a fiscal year, measuring after-tax income.
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Comps
- A buzzword that refers to a retail firm's comparable same-store sales. Comps compare the degree of revenue growth/decline that a firm's stores achieve relative to their sales in previous years. Sales numbers from stores that have been operating for more than a full year are used in the comparison.
The metric can be used by investors to help determine what portion of new sales has come from sales growth and what portion from the opening of new stores. Comps are usually released by companies on a monthly basis.
Also known as "comparable same-store sales."
- A buzzword that refers to a retail firm's comparable same-store sales. Comps compare the degree of revenue growth/decline that a firm's stores achieve relative to their sales in previous years. Sales numbers from stores that have been operating for more than a full year are used in the comparison.
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Compulsive Shopping
- An unhealthy obsession with shopping that materially interferes with the daily life of the afflicted. This ailment goes beyond mere consumerism and is psychological in nature. Symptoms include obsession with shopping, anxiety when not shopping, the constant need to shop and the purchase of unnecessary or unwanted items.
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Compulsory Convertible Debenture - CCD
- A type of debenture in which the whole value of the debenture must be converted into equity by a specified time. The compulsory convertible debenture's ratio of conversion is decided by the issuer when the debenture is issued. Upon conversion, the investors become shareholders of the company.
- A type of debenture in which the whole value of the debenture must be converted into equity by a specified time. The compulsory convertible debenture's ratio of conversion is decided by the issuer when the debenture is issued. Upon conversion, the investors become shareholders of the company.
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Concentration Account
- A deposit account used to aggregate funds from several locations into one centralized account. Concentration accounts are used by institutions to process and settle internal bank transactions. Concentration accounts are typically used for fund transfers, private banking transactions, trust and custody accounts, and international transactions.
- A deposit account used to aggregate funds from several locations into one centralized account. Concentration accounts are used by institutions to process and settle internal bank transactions. Concentration accounts are typically used for fund transfers, private banking transactions, trust and custody accounts, and international transactions.
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Concentration Bank
- A financial institution that is the primary bank of an organization, or the bank where the organization does most of its transactions. Several organizations use multiple banks, but generally deal significantly with one bank in particular, which is referred to as the concentration bank.
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Concentration Ratio
- In economics, a ratio that indicates the relative size of firms in relation to their industry as a whole.
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Concession
- A selling group's compensation in a stock or bond underwriting agreement.
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Concession Agreement
- A right granted by a government to a corporation. It specifies rules under which the company can operate locally.
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Condensed Financials
- A summary form of a company's earnings statement, balance sheet and cash flow statement condensed to one page each. This is done for reprinting and simplified viewing purposes. This view of company financials is helpful for providing an overview of the business structure and income performance, but it lacks any line-item breakdowns or descriptive notes that can be found in a full filing.
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Conditional Order
- A type of order that will be submitted or canceled if set criteria are met, which are defined by the trader/investor entering the order. This allows for a greater customization of the order to meet the specific needs of the investor.
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Conditional Prepayment Rate - CPR
- A loan prepayment rate that is equal to the proportion of the principal of a pool of loans that is assumed to be paid off prematurely in each period. The calculation of this estimate is based on a number of factors such as historical prepayment rates for previous loans that are similar to ones in the pool and on future economic outlooks.
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Conditional Probability
- Probability of an event or outcome based on the occurrence of a previous event or outcome. Conditional probability is calculated by multiplying the probability of the preceding event by the updated probability of the succeeding event.
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Conditional Value at Risk - CVaR
- A risk assessment technique often used to reduce the probability a portfolio will incur large losses. This is performed by assessing the likelihood (at a specific confidence level) that a specific loss will exceed the value at risk. Mathematically speaking, CVaR is derived by taking a weighted average between the value at risk and losses exceeding the value at risk.
This term is also known as "Mean Excess Loss", "Mean Shortfall" and "Tail VaR".
- A risk assessment technique often used to reduce the probability a portfolio will incur large losses. This is performed by assessing the likelihood (at a specific confidence level) that a specific loss will exceed the value at risk. Mathematically speaking, CVaR is derived by taking a weighted average between the value at risk and losses exceeding the value at risk.
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Condominium
- A large property complex that is divided into individual units and sold. Ownership usually includes a non-exclusive interest in certain "common properties" controlled by the condominium management.
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Condor Spread
- Similar to a butterfly spread, a condor is an options strategy that also has a bear and a bull spread, except that the strike prices on the short call and short put are different.
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Condotel
- A condominium project that is operated as a hotel with a registration desk, cleaning service and more. The units are individually owned. Unit owners also have the option to place their unit in the hotels rental program where it is rented out like any other hotel room.
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Conduit Financing
- A financing arrangement involving a government or other qualified agency using its name in an issuance of fixed income securities for a non-profit organization's large capital project.
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Conduit IRA
- A traditional IRA that holds only assets that were distributed from a qualified plan.
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Conduit Issuer
- An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects where the funds generated are used by a third party (known as the "conduit borrower") to make payments to investors. The conduit financing is typically backed by either the conduit borrower's credit or funds pledged toward the project by outside investors. If a project fails and the security goes into default, it falls to the conduit borrower's financial obligation, not the conduit issuer.
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Conduit Theory
- A theory stating that an investment firm that passes all capital gains, interest and dividends on to its customers/shareholders shouldn't be levied at the corporate level like most regular companies. An example of such a company is a real estate investment trust or a mutual fund company.
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Confederate Dollar
- A currency issued by the Confederate States of America during the U.S. Civil War, which served as the currency of the eleven southern states. Confederate dollars became worthless after the end of the Civil War and the fall of the Confederacy, when they ceased to be used in circulation.
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Conference Call
- An event during which investors can call in to a special phone number and hear company management report its quarterly results as well as forward, or projected, earnings. While the average investor can only listen to the call, the reporting company will often field questions from analysts. Also known as "earnings conference call", "analyst call" and "earnings call".
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Conference Of State Bank Supervisors - CSBS
- A national organization founded in 1902 to further advance the ideas and professionalism for state banking departments. The Conference of State Bank Supervisors (CSBS) is also an advocate for the interests of state banking to the respective state legislative and regulatory agencies. The CSBS also provides training and continued educations for examiner professionals.
- A national organization founded in 1902 to further advance the ideas and professionalism for state banking departments. The Conference of State Bank Supervisors (CSBS) is also an advocate for the interests of state banking to the respective state legislative and regulatory agencies. The CSBS also provides training and continued educations for examiner professionals.
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Confession Of Judgment
- A written agreement signed by the defendant that accepts the liability and amount of damages that was agreed on. A confession of judgment is a way to circumvent normal court proceedings and avoid a lengthy legal process to resolve a dispute. Signing a confession of forfeits any of the rights the defendant has to dispute a claim in the future.
- A written agreement signed by the defendant that accepts the liability and amount of damages that was agreed on. A confession of judgment is a way to circumvent normal court proceedings and avoid a lengthy legal process to resolve a dispute. Signing a confession of forfeits any of the rights the defendant has to dispute a claim in the future.
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Confidence Interval
- A term used in inferential statistics that measures the probability that a population parameter will fall between two set values. The confidence interval can take any number of probabilities, with the most common being 95% or 99%.
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Confidential Treatment Application
- A form filled out in accordance with a company's 8-K, 10-Q, or 10-K report. It allows for information in the SEC filing to be kept secret, if leaking such information could cause material or financial harm to the company or a business partner.
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Confidentiality Agreement
- A legal agreement between two or more parties that is used to signify that a confidential relationship exists between the parties. A confidentiality agreement is used in strategic meetings where various parties become privy to sensitive corporate information, which should not be made available to the general public or to various competitors.
Also known as a "non-disclosure agreement (NDA)".
- A legal agreement between two or more parties that is used to signify that a confidential relationship exists between the parties. A confidentiality agreement is used in strategic meetings where various parties become privy to sensitive corporate information, which should not be made available to the general public or to various competitors.
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Confirmation
- 1. The occurrence of two or more indicators corresponding with one another and thereby corroborating the predicted trend.
2. The written acknowledgment provided by a broker indicating that a trade has been completed. This includes details such as the date, price, commission, fees and settlement terms of the trade.
- 1. The occurrence of two or more indicators corresponding with one another and thereby corroborating the predicted trend.
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Confirmation On A Chart
- An indicator or chart pattern that provides evidence that the initial trading alert in question is indicative of an actual trading opportunity. Traders look to other technical indicators to confirm their expected prediction so that they can have as many technical factors working in their favor as possible. This increases the probability of making a highly successful trade.
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Confirmed Letter Of Credit
- A second guarantee, in addition to a letter of credit, that commits to payment of the letter of credit. A confirmed letter of credit is typically used when the issuing bank of the letter of credit may have questionable creditworthiness and the seller seeks to get a second guarantee to assure payment.
- A second guarantee, in addition to a letter of credit, that commits to payment of the letter of credit. A confirmed letter of credit is typically used when the issuing bank of the letter of credit may have questionable creditworthiness and the seller seeks to get a second guarantee to assure payment.
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Conflict Of Interest
- A situation where a professional, or a corporation, has a vested interest which may make them an unreliable source. The interest could be money, status, knowledge or reputation for example. When such a situation arises, the party is usually asked to remove themselves, and it is often legally required of them.
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Conforming Loan
- A mortgage that is equal to or less than the dollar amount established by the conforming loan limit set by Fannie Mae and Freddie Mac's Federal regulator, The Office of Federal Housing Enterprise Oversight (OFHEO) and meets the funding criteria of Freddie Mac and Fannie Mae.
- A mortgage that is equal to or less than the dollar amount established by the conforming loan limit set by Fannie Mae and Freddie Mac's Federal regulator, The Office of Federal Housing Enterprise Oversight (OFHEO) and meets the funding criteria of Freddie Mac and Fannie Mae.
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Conforming Loan Limit
- The limit on the size of a mortgage which Fannie Mae and Freddie Mac will purchase and/or guarantee. The conforming loan limit is set annually by Fannie Mae’s and Freddie Mac’s federal regulator, The Office of Federal Housing Enterprise Oversight (OFHEO). OFHEO uses the October to October percentage increase/decrease in the average house price in the monthly interest rate survey of the Federal Housing Finance Board (FHFB) to adjust the conforming loan limits for the subsequent year.
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Congeneric Merger
- A type of merger where two companies are in the same or related industries but do not offer the same products. In a congeneric merger, the companies may share similar distribution channels, providing synergies for the merger.
- A type of merger where two companies are in the same or related industries but do not offer the same products. In a congeneric merger, the companies may share similar distribution channels, providing synergies for the merger.
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Congestion
- 1. A market situation whereby the demand of contract holders wishing to exit their existing positions exceeds the supply of willing participants wishing to enter into the offsetting position.
2. A period of time when a stock trades either below resistance or above support, or both.
- 1. A market situation whereby the demand of contract holders wishing to exit their existing positions exceeds the supply of willing participants wishing to enter into the offsetting position.
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Conglomerate
- A corporation that is made up of a number of different, seemingly unrelated businesses. In a conglomerate, one company owns a controlling stake in a number of smaller companies, which conduct business separately. Each of a conglomerate's subsidiary businesses runs independently of the other business divisions, but the subsidiaries' management reports to senior management at the parent company.
The largest conglomerates diversify business risk by participating in a number of different markets, although some conglomerates elect to participate in a single industry - for example, mining.
- A corporation that is made up of a number of different, seemingly unrelated businesses. In a conglomerate, one company owns a controlling stake in a number of smaller companies, which conduct business separately. Each of a conglomerate's subsidiary businesses runs independently of the other business divisions, but the subsidiaries' management reports to senior management at the parent company.
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Conglomerate Discount
- A reference to the tendency of the stock market to undervalue the stocks of conglomerate businesses. Conglomerate discount is calculated by adding an estimation of the intrinsic value of each of the subsidiary companies in a conglomerate and subtracting the conglomerate's market capitalization from that value.
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Conglomerate Merger
- A merger between firms that are involved in totally unrelated business activities. There are two types of conglomerate mergers: pure and mixed. Pure conglomerate mergers involve firms with nothing in common, while mixed conglomerate mergers involve firms that are looking for product extensions or market extensions.
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Congressional Oversight Panel - COP
- A panel created by the U.S. Congress in 2008 to oversee for the U.S. Treasury's actions aimed at stabilizing the U.S. economy. The Congressional Oversight Panel (COP) is empowered to review official data and hold hearings in order to develop reports to assess the effect of the Treasury's actions on the economy.
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Connie Lee - College Construction Loan Insurance Association - CCLIA
- A formerly government-sponsored enterprise created by the Higher Education Amendments of 1986. The sole purpose of this organization was to insure and reinsure debt instruments that were issued by universities, colleges and other educational institutions to help fund building initiatives.
This organization's acronym has the same naming scheme as other government organizations like Fannie Mae, Ginnie Mae and Freddie Mac.
- A formerly government-sponsored enterprise created by the Higher Education Amendments of 1986. The sole purpose of this organization was to insure and reinsure debt instruments that were issued by universities, colleges and other educational institutions to help fund building initiatives.
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Consensus Estimate
- A figure based on the combined estimates of the analysts covering a public company. Generally, analysts give a consensus for a company's earnings per share and revenue; these figures are most often made for the quarter, fiscal year and next fiscal year. The size of the company and the number of analysts covering it will dictate the size of the pool from which the estimate is derived.
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Consent Solicitation
- A solicitation by one party to the stakeholders of a particular security for the consent of a material change.
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Conservative Growth
- An investment strategy that aims to grow invested capital over the long term. This strategy focuses on minimizing risk by making long-term investments in companies that show consistent growth over time. Conservative growth portfolios feature low asset turnover, or a high percentage of fixed assets on their balance sheets, and should employ a buy-and-hold investment philosophy.
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Conservative Investing
- An investing strategy that seeks to preserve an investment portfolio's value by investing in lower risk securities such as fixed-income and money market securities, and often blue-chip or large-cap equities.
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Conservatorship
- A circumstance in which the court declares an individual unable to take care of legal matters and appoints another individual, known as a conservator, to do so.
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Consignment
- When goods are delivered to another company with the understanding that payment for the goods is only made once the goods are sold.
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Consolidate
- To combine the assets, liabilities and other financial items of two or more entities into one.
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Consolidated Financial Statements
- The combined financial statements of a parent company and its subsidiaries.
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Consolidated Omnibus Budget Reconciliation Act - COBRA
- A COBRA health plan states that if you leave your job for any reason and were an active participant in the company's health plan prior to your departure date, you have the right, if you wish, to continue the health insurance coverage you and your family received, for 18 months.
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Consolidated Tape
- An electronic system that continuously reports data on the sales volume and price of exchange traded securities.
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Consolidated Tax Return
- A comprehensive tax return that encompasses a group of smaller entities. Consolidated tax returns are often filed by business conglomerates on behalf of all subsidiary firms. They are filed both for simplicity and to allow the parent organization to receive tax benefits that may otherwise be forfeited. However, conglomerates do not need to file this type of return if they choose not to do so.
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Consolidation
- In technical analysis, the movement of an asset's price within a well-defined pattern or barrier of trading levels. Consolidation is generally regarded as a period of indecision, which ends when the price of the asset breaks beyond the restrictive barriers. Periods of consolidation can be found in charts covering any time interval (i.e. hours, days, etc.), and these periods can last for minutes, days, months or even years. Lengthy periods of consolidation are often known as a base.
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Consolidation Phase
- A stage in the life of a company or an industry in which components in the company or industry start to merge to form fewer components. These components can include product lines at the company level or companies themselves at the industry level. The consolidation of companies differs from mergers in that consolidations create new entities while mergers do not.
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Consortium
- A group made up of two or more individuals, companies or governments that work together toward achieving a chosen objective. Each entity within the consortium is only responsible to the group in respect to the obligations that are set out in the consortium's contract. Therefore, every entity that is under the consortium remains independent in his or her normal business operations and has no say over another member's operations that are not related to the consortium.
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Constant Currencies
- An exchange rate that eliminates the effects of exchange rate fluctuations and that is used when calculating financial performance numbers. Companies with major foreign operations often use constant currencies when calculating their yearly performance measures.
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Constant Default Rate - CDR
- An annualized rate of default on a group of mortgages, typically within a collateralized product such as a mortgage-backed security (MBS). The constant default rate represents the percentage of outstanding principal balances in the pool that are in default, which typically equates to the home being past 60-day and 90-day notices and in the foreclosure process.
The constant default rate analysis assumes that if a home is in foreclosure (a process that can take 12 months or more to complete), the interest and principal payments are being advanced into the MBS by the mortgage servicing company.
- An annualized rate of default on a group of mortgages, typically within a collateralized product such as a mortgage-backed security (MBS). The constant default rate represents the percentage of outstanding principal balances in the pool that are in default, which typically equates to the home being past 60-day and 90-day notices and in the foreclosure process.
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Constant Dollar
- An adjusted value of currency used to compare dollar values from one period to another. Due to inflation, the purchasing power of the dollar changes over time, so in order to compare dollar values from one year to another they need to be converted to constant dollar values.
Calculated as:
- An adjusted value of currency used to compare dollar values from one period to another. Due to inflation, the purchasing power of the dollar changes over time, so in order to compare dollar values from one year to another they need to be converted to constant dollar values.
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Constant Maturity
- Used by the Federal Reserve Board to quote the yields on various treasury securities, adjusted to an equivalent maturity.
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Constant Maturity Swap - CMS
- A variation of the regular interest rate swap. In a constant maturity swap, the floating interest portion is reset periodically according to a fixed maturity market rate of a product with a duration extending beyond that of the swap's reset period.
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Constant Percent Prepayment
- Annualized estimate of mortgage loan prepayments, computed by multiplying the average monthly prepayment rate by 12. This is used to determine cash flow in structured finance transactions, often referred to as the secondary mortgage market. It models the risk of unscheduled return of principal, which affects fixed income returns.
- Annualized estimate of mortgage loan prepayments, computed by multiplying the average monthly prepayment rate by 12. This is used to determine cash flow in structured finance transactions, often referred to as the secondary mortgage market. It models the risk of unscheduled return of principal, which affects fixed income returns.
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Constant Proportion Debt Obligation - CPDO
- A type of synthetic collateralized debt instrument that is backed by a debt security index, such as an iTraxx index. CPDOs were first created by ABN AMRO in 2006, which sought to create a high interest bearing instrument that also contained the highest debt ratings against default.
- A type of synthetic collateralized debt instrument that is backed by a debt security index, such as an iTraxx index. CPDOs were first created by ABN AMRO in 2006, which sought to create a high interest bearing instrument that also contained the highest debt ratings against default.
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Constant Proportion Portfolio Insurance - CPPI
- A method of portfolio insurance in which the investor sets a floor on the dollar value of his or her portfolio, then structures asset allocation around that decision. The two asset classes used in CPPI are a risky asset (usually equities or mutual funds), and a riskless asset of either cash, equivalents or Treasury bonds. The percentage allocated to each depends on the "cushion" value, defined as (current portfolio value – floor value), and a multiplier coefficient, where a higher number denotes a more aggressive strategy.
- A method of portfolio insurance in which the investor sets a floor on the dollar value of his or her portfolio, then structures asset allocation around that decision. The two asset classes used in CPPI are a risky asset (usually equities or mutual funds), and a riskless asset of either cash, equivalents or Treasury bonds. The percentage allocated to each depends on the "cushion" value, defined as (current portfolio value – floor value), and a multiplier coefficient, where a higher number denotes a more aggressive strategy.
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Constant Yield Method
- One of two ways of calculating the accrued discount of bonds that trade in the secondary market. The constant yield method is an alternative to the ratable accrual method, and although it usually results in a lesser accrual of discount than the latter method, it is also requires more complex calculations.
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Constituent
- A single member of an index. A constituent is typically a stock or company that is part of a larger index such as the S&P500 or Dow Jones Industrial Average. The aggregate of all the constituents make up the index, and generally each constituent has to meet the requirements and be selected to be included in the index.
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Construction Loan Note - CLN
- A short-term obligation in the form of a note, used for the funding of construction projects such as housing developments. In most cases, the note issuers will repay the note obligation by issuing a longer term bond and using the proceeds from the bond to pay back the note.
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Construction Mortgage
- A loan borrowed to finance the construction of a home and typically only interest is paid during the construction period. Once the construction is over, the loan amount becomes due and it becomes a normal mortgage. The money is advanced incrementally during construction, as construction progresses.
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Construction Spending
- An economic indicator that measures the amount of spending towards new construction. Released monthly by the U.S. Department of Commerce's Census Bureau, it looks at residential and non-residential construction in the private sector, and state and federal at the public level.
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Constructive Receipt
- A tax term mandating that a taxpayer is liable for income, which has not been physically received, but has been credited to the taxpayer's account or otherwise becomes available for him or her to draw upon in the future. Constructive receipt of income prevents taxpayers from deferring tax on income or compensation they have not yet utilized or spent.
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Constructive Sale Rule - Section 1259
- A section of the Internal Revenue Code that expands the types of transactions that are considered to be sales and are subject to capital gains tax. According to this rule, transactions that effectively take an offsetting position to an already owned position are considered to be constructive sales. The purpose of the constructive sale rule is to prevent investors from locking in investment gains without paying capital gains and to limit their ability to transfer gains from one tax period to another.
This rule is Section 1259 of the Code. It is also referred to as "Constructive Sales Treatment for Appreciated Financial Positions".
- A section of the Internal Revenue Code that expands the types of transactions that are considered to be sales and are subject to capital gains tax. According to this rule, transactions that effectively take an offsetting position to an already owned position are considered to be constructive sales. The purpose of the constructive sale rule is to prevent investors from locking in investment gains without paying capital gains and to limit their ability to transfer gains from one tax period to another.
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Consular Invoice
- A document certifying a shipment of goods and shows information such as the consignor, consignee and value of the shipment. A consular invoice can be obtained through a consular representative of the country you're shipping to
- A document certifying a shipment of goods and shows information such as the consignor, consignee and value of the shipment. A consular invoice can be obtained through a consular representative of the country you're shipping to
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Consumables
- Goods used by individuals and businesses that must be replaced regularly because they wear out or are used up. Consumables can also be defined as the components of an end product that are used up or permanently altered in the process of manufacturing, such as semiconductor wafers and basic chemicals.
- Goods used by individuals and businesses that must be replaced regularly because they wear out or are used up. Consumables can also be defined as the components of an end product that are used up or permanently altered in the process of manufacturing, such as semiconductor wafers and basic chemicals.
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Consumer And Business Lending Initiative
- A plan initiated to aid in the government's goal of correcting the credit crisis by working on the secondary lending markets. Execution of the plan means extensive lending and reorganization of TALF.
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Consumer Bankers Association - CBA
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Consumer Confidence Index - CCI
- A survey by the Conference Board that measures how optimistic or pessimistic consumers are with respect to the economy in the near future.
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Consumer Credit
- A debt that someone incurs for the purpose of purchasing a good or service. This includes purchases made on credit cards, lines of credit and some loans.
Also referred to as "consumer debt".
- A debt that someone incurs for the purpose of purchasing a good or service. This includes purchases made on credit cards, lines of credit and some loans.
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Consumer Credit Delinquencies Bulletin
- A quarterly newsletter targeted to CEOs, senior bank executives and loan officers based on a quarterly survey that tracks closed-end consumer loans across 300 U.S. banks to help banks evaluate their loan portfolios and compare themselves to their peers in the same state and asset category. The bulletin also provides information on delinquencies and bankruptcy petitions by geographic region and by state.
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Consumer Cyclicals
- A category of stocks that rely heavily on the business cycle and economic conditions. Consumer cyclicals include industries such as automotive, housing, entertainment and retail. The category can be further divided into durable and non-durable sections. Durable cyclicals include physical goods such as hardware or vehicles, while non-durables represent items like movies or hotel services.
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Consumer Debt
- Debts that are owed as a result of purchasing goods that are consumable and/or do not appreciate. Possessing high levels of consumer debt is not typically beneficial for the average individual because it increases the strain on one's sources of income to maintain regular payments. If not managed well, consumer debt can lead to bankruptcy.
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Consumer Internet Barometer
- A quarterly survey report produced by the Conference Board and TNS NFO that records, analyzes and reports on the internet usage of 10,000 U.S. households. The survey seeks to measure:
1. the importance of the internet in the daily lives of households
2. overall satisfaction of internet users
3. online-purchase characteristics, times and dates
4. users' perceptions of security for online transactions and general internet usage
- A quarterly survey report produced by the Conference Board and TNS NFO that records, analyzes and reports on the internet usage of 10,000 U.S. households. The survey seeks to measure:
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Consumer Packaged Goods - CPG
- A type of good that is consumed every day by the average consumer. The goods that comprise this category are ones that need to be replaced frequently, compared to those that are usable for extended periods of time. While CPGs represent a market that will always have consumers, it is highly competitive due to high market saturation and low consumer switching costs.
- A type of good that is consumed every day by the average consumer. The goods that comprise this category are ones that need to be replaced frequently, compared to those that are usable for extended periods of time. While CPGs represent a market that will always have consumers, it is highly competitive due to high market saturation and low consumer switching costs.
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Consumer Price Index - CPI
- A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. The CPI is calculated by taking price changes for each item in the predetermined basket of goods and averaging them; the goods are weighted according to their importance. Changes in CPI are used to assess price changes associated with the cost of living.
Sometimes referred to as "headline inflation".
- A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. The CPI is calculated by taking price changes for each item in the predetermined basket of goods and averaging them; the goods are weighted according to their importance. Changes in CPI are used to assess price changes associated with the cost of living.
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Consumer Price Index For All Urban Consumers (CPI-U)
- A measure that examines the changes in the price of a basket of goods and services purchased by urban consumers. The urban consumer population is deemed by many as a better representative measure of the general public because most of the country's population lives in highly populated areas, which represent close to 90% of the total population.
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Consumer Price Index For Urban Wage Earners And Clerical Workers - CPI-W
- A variation of the consumer price index, as complied by the Bureau of Labor Statistics in the United States, that measures the consumer prices certain workers are exposed to. The index is primarily used on an annual basis, to reflect changes in the costs of benefits paid to Social Security beneficiaries.
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is updated monthly - usually with a one-month lag.
- A variation of the consumer price index, as complied by the Bureau of Labor Statistics in the United States, that measures the consumer prices certain workers are exposed to. The index is primarily used on an annual basis, to reflect changes in the costs of benefits paid to Social Security beneficiaries.
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Consumer Spending
- The amount of money spent by households in an economy. The spending includes durables, such as washing machines, and nondurables, such as food. It is also known as consumption, and is measured monthly. John Maynard Keynes considered consumer spending to be the most important determinant of short-term demand in an economy.
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Consumer Staples
- The industries that manufacture and sell food/beverages, tobacco, prescription drugs and household products.
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Consumer Surplus
- An economic measure of consumer satisfaction, which is calculated by analyzing the difference between what consumers are willing to pay for a good or service relative to its market price. A consumer surplus occurs when the consumer is willing to pay more for a given product than the current market price.
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Consumption Capital Asset Pricing Model - CCAPM
- A financial model that extends the concepts of the capital asset pricing model (CAPM) to include the amount that an individual or firm wishes to consume in the future. The CCAPM uses consumption measures, in terms of a consumption beta, in its calculation of a given investment's expected return.
To illustrate:
- A financial model that extends the concepts of the capital asset pricing model (CAPM) to include the amount that an individual or firm wishes to consume in the future. The CCAPM uses consumption measures, in terms of a consumption beta, in its calculation of a given investment's expected return.
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Consumption Function
- The consumption function is a mathematical formula laid out by famed economist John Maynard Keynes. The formula was designed to show the relationship between real disposable income and consumer spending, the latter variable being what Keynes considered the most important determinant of short-term demand in an economy.
The consumption function is represented as:
Where:
C = Consumer spending
A = Autonomous consumption, or the level of consumption that would still exist even if income was $0
M = Marginal propensity to consume, which is the ratio of consumption changes to income changes
D = Real disposable income
- The consumption function is a mathematical formula laid out by famed economist John Maynard Keynes. The formula was designed to show the relationship between real disposable income and consumer spending, the latter variable being what Keynes considered the most important determinant of short-term demand in an economy.
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Contagion
- The likelihood of significant economic changes in one country spreading to other countries. This can refer to either economic booms or economic crises.
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Contango
- When the futures price is above the expected future spot price. Consequently, the price will decline to the spot price before the delivery date.
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Contemporaneous Reserves
- A method of determining the amount of bank reserves that is based on currently outstanding balances. Contemporaneous reserves are calculated to see how much a bank must keep on hand for the cash in its vault and its deposit accounts. Banks were required to calculate contemporaneous reserves each Monday and report them on Wednesday of the same week.
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Contestable Market Theory
- An economic concept that refers to a market in which there are only a few companies that, because of the threat of new entrants, behave in a competitive manner.
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Continentals
- A form of paper currency used in the United States during the time of the revolutionary war (1775-1783). The paper money was used to help finance the cost of the war, but it quickly lost value because it was not backed by a physical asset such as gold or silver, sparking the term "not worth a Continental".
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Contingency
- An economic event, usually negative, that is in the process of occurring and, therefore, has not yet been resolved.
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Contingency Order
- An order that is executed only when certain conditions of the security being traded, or another security, have been fulfilled. Such prerequisite conditions range in scope and depth. In a simple case, a contingency order may depend on the potential purchaser's ability to sell a different security in his or her portfolio to free the funds to make the purchase. In a more complicated situation, an options contingency order's execution may depend on the share price of the options' underlying stock
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Contingent Asset
- An asset in which the possibility of an economic benefit depends solely upon future events that can't be controlled by the company. Due to the uncertainty of the future events, these assets are not placed on the balance sheet. However, they can be found in the company's financial statement notes.
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Contingent Beneficiary
- 1. A beneficiary specified by an insurance contract holder who will receive the benefits if the primary beneficiary has died at the time the benefit is to be paid.
2. A beneficiary who is only entitled to insurance proceeds if predetermined conditions have been met at the time of the insured's death (as can be found in a will).
- 1. A beneficiary specified by an insurance contract holder who will receive the benefits if the primary beneficiary has died at the time the benefit is to be paid.
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Contingent Convertibles - CoCos
- A security similar to a traditional convertible bond in that there is a strike price (the cost of the stock when the bond converts into stock). What differs is that there is another price, even higher than the strike price, which the company's stock price must reach before an investor has the right to make that conversion (known as the "upside contingency").
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Contingent Credit Default Swap (CCDS)
- A variation on the credit default swap (CDS). In a simple CDS, payment under the swap is triggered by a credit event, such as non-payment of interest. In a contingent credit default swap (CCDS), the trigger requires both a credit event and another specified event.
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Contingent Deferred Sales Charge (CDSC)
- A fee (sales charge or load) that mutual fund investors pay when selling Class-B fund shares within a specified number of years of the date on which they were originally purchased.
Also known as a "back-end load" or "sales charge".
- A fee (sales charge or load) that mutual fund investors pay when selling Class-B fund shares within a specified number of years of the date on which they were originally purchased.
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Contingent Guarantee
- A guarantee of payment that is dependent on one or more future events.
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Contingent Immunization
- A method of fixed income portfolio management, whereby managers are granted significant powers of control over the selection of products to be added and removed from the portfolio, as long as the products remain profitable. Should these products become unprofitable past a set threshold, the manager must then capitalize the security under immunization procedures.
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Contingent Liability
- 1. The possibility of an obligation to pay certain sums dependent on future events.
2. Defined obligations by a company that must be met, but the probability of payment is minimal.
- 1. The possibility of an obligation to pay certain sums dependent on future events.
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Contingent Order
- 1. An order involving the simultaneous execution of two or more transactions.
2. An order whose execution depends upon the execution and/or price of another security.
- 1. An order involving the simultaneous execution of two or more transactions.
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Contingent Value Rights - CVR
- A type of right given to shareholders of an acquired company (or a company facing major restructuring) that ensures they receive additional benefit if a specified event occurs. A contingent value right is similar to an option because it often has an expiration date that relates to the time the contingent event must occur.
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Contingent Voting Power
- A provision granting voting rights to preferred shareholders when the company cannot uphold the obligations outlined in the preferred shareholder arrangement. Contingent voting powers offer the shareholders additional security for holding preferred instruments.
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Continuation Pattern
- A technical analysis pattern that suggests a trend is exhibiting a temporary diversion in behavior and will eventually continue on its existing trend.
The symmetrical triangle charts displayed below are both exhibiting a continuation pattern. Notice how the chart extends above (below) its existing pattern.
- A technical analysis pattern that suggests a trend is exhibiting a temporary diversion in behavior and will eventually continue on its existing trend.
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Continuation Statement
- An amendment that is attached to a borrower's financing statement which extends the lender's lien on the borrower's collateral past the original expiration date. The actual continuation statement itself must be filed with the secretary of state or other appropriate authority before it can be attached to the financing statement.
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Continuous Compounding
- The process of earning interest on top of interest. The interest is earned constantly, and immediately begins earning interest on itself.
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Continuous Net Settlement - CNS
- An automated book-entry accounting system. CNS centralizes the settlement of compared transactions and maintains an efficient flow of security and money balances.
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Continuous Trading
- A method of transacting different securities orders. Continuous trading involves the immediate execution of orders upon their reception by market makers and specialists.
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Contra Account
- An account on the balance sheet of a corporation or entity that offsets the balance of a related and corresponding account.
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Contra Broker
- A term used to describe the broker participating on the opposite side of a transaction.
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Contract For Differences - CFD
- An arrangement made in a futures contract whereby differences in settlement are made through cash payments, rather than the delivery of physical goods or securities.
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Contract Holder
- An owner of a segregated fund contract.
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Contract Market
- Any board of trade designated to trade a specific options or futures contract. Basically it's another word for "designated exchange".
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Contract Month
- The month in which a futures contract expires. The contract can be delivered during the current month, provided that the terms and conditions set forth in the contract are met. Either delivery or expiration must take place in order to settle the contract.
Also known as the "delivery month".
- The month in which a futures contract expires. The contract can be delivered during the current month, provided that the terms and conditions set forth in the contract are met. Either delivery or expiration must take place in order to settle the contract.
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Contract Size
- The deliverable quantity of goods or commodities underlying futures, forward and option contracts.
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Contract Unit
- The actual amount of commodities represented by a single futures contract.
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Contraction
- A phase of the business cycle in which the economy as a whole is in decline. More specifically, contraction occurs after the business cycle peaks, but before it becomes a trough. According to most economists, a contraction is said to occur when a country's real GDP has declined for two or more consecutive quarters.
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Contraction Risk
- The risk of a security shortening in duration due to the acceleration of prepayments.
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Contractionary Policy
- A type of policy that is used as a macroeconomic tool by the country's central bank or finance ministry to slow down an economy. Contractionary policies are enacted by a government to reduce the money supply and ultimately the spending in a country.
This is done primarily through:
1. Increasing interest rates
2. Increasing reserve requirements
3. Reducing the money supply, directly or indirectly
This tool is used during high-growth periods of the business cycle, but does not have an immediate effect.
- A type of policy that is used as a macroeconomic tool by the country's central bank or finance ministry to slow down an economy. Contractionary policies are enacted by a government to reduce the money supply and ultimately the spending in a country.
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Contrarian
- An investment style that goes against prevailing market trends by buying assets that are performing poorly and then selling when they perform well.
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Contributed Capital
- An entry on the shareholders' equity section of a company's balance sheet that summarizes the total value of stock that shareholders have directly purchased from the issuing company.
Contributed capital is calculated by adding the par value of the shares to the value paid that was greater than par value.
- An entry on the shareholders' equity section of a company's balance sheet that summarizes the total value of stock that shareholders have directly purchased from the issuing company.
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Contributed Surplus
- The amount of money that a company earns from sources other than its profits, such as when a company issues and sells shares at a price greater than their par value. The contributed surplus figure helps both investors and the company to distinguish between non-operational and operational income. It is found within the balance sheet.
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Contribution Margin
- A cost accounting concept that allows a company to determine the profitability of individual products.
It is calculated as follows:
Product Revenue - Product Variable Costs
Product Revenue
The phrase "contribution margin" can also refer to a per unit measure of a product's gross operating margin, calculated simply as the product's price minus its total variable costs.
- A cost accounting concept that allows a company to determine the profitability of individual products.
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Contributory Value
- A real estate term that refers to the contribution a particular component has to the value of the whole property.
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Control Stock
- 1. Equity shares owned by major shareholders of a publicly traded corporation. These shareholders have either a majority of the shares outstanding or a portion of the shares that is significant enough to allow them to exert a controlling influence on the firm's decisions.
2. In situations where companies have more than one class of common shares, shares with superior voting power or vote weighting are considered to be control stocks, relative to the inferior class.
- 1. Equity shares owned by major shareholders of a publicly traded corporation. These shareholders have either a majority of the shares outstanding or a portion of the shares that is significant enough to allow them to exert a controlling influence on the firm's decisions.
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Controlled Disbursement
- A technique commonly employed in corporate cash management. Controlled disbursement is used to regulate the flow of checks through the banking system on a daily basis, usually by mandating once-daily distributions of checks (usually early in the day.) This is done in order to meet certain investment or fund management objectives.
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Controlled Foreign Corporation - CFC
- A corporate entity that is registered and conducts business in a different jurisdiction or country than the residency of the controlling owners. Control of the foreign company is defined, in the U.S., according to the percentage of shares owned by U.S. citizens.
Controlled foreign corporation (CFC) laws work alongside tax treaties to dictate how taxpayers declare their foreign earnings. A CFC is advantageous for companies when the cost of setting up a business, foreign branches or partnerships in a foreign country is lower even after the tax implications, or when the global exposure could help the business grow.
- A corporate entity that is registered and conducts business in a different jurisdiction or country than the residency of the controlling owners. Control of the foreign company is defined, in the U.S., according to the percentage of shares owned by U.S. citizens.
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Controller
- In most organizations the controller is the top managerial and financial accountant. The controller supervises the accounting department and assists management in interpreting and utilizing managerial accounting information.
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Controlling Interest
- When one shareholder or a group acting in kind holds a high enough percentage of ownership in a company to enact changes at the highest level. By definition, this figure is 50% of the outstanding shares or voting shares, plus one. However, controlling interest can be achieved with less than 50% ownership of the stock if that person/group owns a significant proportion of the voting shares, because in many cases, not every share carries a vote in shareholder meetings.
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Convenience Yield
- The benefit or premium associated with holding an underlying product or physical good, rather than the contract or derivative product.
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Convention Expenses
- Any travel expenses incurred while at a business convention. These expenses are tax-deductible if they are business or work-related.
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Conventional Mortgage
- A type of mortgage in which the underlying terms and conditions meet the funding criteria of Fannie Mae and Freddie Mac. About 35-50% of mortgages, depending on market conditions and consumer trends, are conventional mortgages. In other words, Fannie Mae and Freddie Mac guarantee or purchase 35-50% of all mortgages. Conventional mortgages may be fixed-rate or adjustable-rate mortgages.
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Convergence
- A movement in the price of a futures contract toward the price of the underlying cash commodity. At the start, the contract price is higher because of the time value.
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Conversion
- The exchange of a convertible type of asset into another type of asset, usually at a predetermined price, on or before a predetermined date. The conversion feature is a financial derivative instrument that is valued separately from the underlying security. Therefore, an embedded conversion feature adds to the overall value of the security.
- The exchange of a convertible type of asset into another type of asset, usually at a predetermined price, on or before a predetermined date. The conversion feature is a financial derivative instrument that is valued separately from the underlying security. Therefore, an embedded conversion feature adds to the overall value of the security.
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Conversion Arbitrage
- An options trading strategy employed to exploit the inefficiencies that exist in the pricing of options. Conversion arbitrage is a risk-neutral strategy, whereby the trader buys a put and writes a covered call (on a stock that the trader already owns) with identical strike prices and expiration dates. A trader will profit through a conversion arbitrage strategy when the call option is overpriced.
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Conversion Option
- A clause associated with some adjustable-rate mortgages that allows the borrower to convert the variable interest rate to a fixed rate within a certain time period, or at certain future dates. The conversion option is not free; an adjustable-rate mortgage with a conversion option will typically have a higher margin, and therefore higher fully indexed interest rate, or higher costs than an adjustable-rate mortgage without a conversion option.
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Conversion Premium
- The amount by which the price of a convertible security exceeds the current market value of the common stock into which it may be converted.
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Conversion Price
- The price per share at which a convertible security, such as corporate bonds or preferred shares, can be converted into common stock.
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Conversion Ratio
- The number of common shares received at the time of conversion for each convertible security. It is calculated by using this formula:
- The number of common shares received at the time of conversion for each convertible security. It is calculated by using this formula:
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Convertible Adjustable Preferred Stock - CAPS
- A preferred, floating rate issue, whose interest rate is tied to Treasury security rates. They can be exchanged for common stock or cash after the next period's dividend rates are announced. The shares received upon conversion are equal in market value to the par value of the preferred.
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Convertible Arbitrage
- An investing strategy that involves the long position on a convertible security and a short position in its converting common stock.
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Convertible ARM
- An Adjustable Rate Mortgage (ARM) that gives the borrower the option to convert to a fixed-rate mortgage. Convertible ARMs are marketed as a way to avoid rising interest rates and usually include specific conditions. The financial institution often charges a fee to switch the ARM to a fixed-rate mortgage.
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Convertible Bond
- A bond that can be converted into a predetermined amount of the company's equity at certain times during its life, usually at the discretion of the bondholder.
Convertibles are sometimes called "CVs".
- A bond that can be converted into a predetermined amount of the company's equity at certain times during its life, usually at the discretion of the bondholder.
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Convertible Debenture
- Any type of debenture that can be converted into some other security.
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Convertible Preferred Stock
- Preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date.
Also known as "convertible preferred shares".
- Preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date.
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Convertible Subordinate Note
- A short-term debt security (note), that can be changed into common stock (convertible) and ranks below other loans (subordinate).
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Convertibles
- Securities, usually bonds or preferred shares, that can be converted into common stock.
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Convexity
- A measure of the curvature in the relationship between bond prices and bond yields that demonstrates how the duration of a bond changes as the interest rate changes. Convexity is used as a risk-management tool, and helps to measure and manage the amount of market risk to which a portfolio of bonds is exposed.
- A measure of the curvature in the relationship between bond prices and bond yields that demonstrates how the duration of a bond changes as the interest rate changes. Convexity is used as a risk-management tool, and helps to measure and manage the amount of market risk to which a portfolio of bonds is exposed.
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Conveyance
- A written instrument, such as a deed or lease, that transfers some ownership interest in real property from one person to another.
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Conveyance Tax
- A tax imposed on the transfer of real estate property.
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Cook The Books
- A buzzword describing fraudulent activities performed by corporations in order to falsify their financial statements. Typically, cooking the books involves augmenting financial data to yield previously non-existent earnings.
Examples of techniques used to cook the books involve accelerating revenues, delaying expenses, manipulating pension plans and implementing synthetic leases.
- A buzzword describing fraudulent activities performed by corporations in order to falsify their financial statements. Typically, cooking the books involves augmenting financial data to yield previously non-existent earnings.
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Cooke Ratio
- A ratio that calculates the amount of capital a bank should have as a percentage of its total risk-adjusted assets. The calculation is used to determine a minimum capital adequacy standard that must be maintained by banks in case of unexpected losses.
From the First Basel Accord of 1988, the minimum requirement was determined to be a Cooke ratio of greater than or equal to 8%.
- A ratio that calculates the amount of capital a bank should have as a percentage of its total risk-adjusted assets. The calculation is used to determine a minimum capital adequacy standard that must be maintained by banks in case of unexpected losses.
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Cookie Jar Accounting
- An accounting practice where a company uses generous reserves from good years against losses that might be incurred in bad years.
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Cooler
- A slang term used to describe someone considered to have bad luck with stock picking. Coolers are usually blamed for the poor performance of a stock after they have either purchased or recommended those shares.
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Cooling Degree Day - CDD
- The number of degrees that a day's average temperature is above 65o Fahrenheit and people start to use air conditioning to cool their buildings. The price of weather derivatives trading in the summer are based on an index made up of monthly cooling degree day (CDD) values. The settlement price for a weather futures contract is calculated by summing a month's CDD values and multiplying by $20.
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Cooling-Off Rule
- A term referring to law pertaining to newly-entered contracts that allows both sides of the party a period of time (after the contract has been signed) to release themselves from any obligations without penalty.
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COP
- The currency abbreviation for the Columbian peso. The COP has been the currency of the Republic of Columbia - a South American country - since 1837. The peso was fixed to the U.S. dollar for a period, but now floats freely.
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Copenhagen Stock Exchange - CSE
- The Copenhagen Stock Exchange serves as Denmark's official market for securities. The CSE became a limited company in 1996 and lists shares, fixed income instruments and derivatives. The exchange uses an electronic ordering system to facilitate efficient order matching.
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Coppock Curve
- A long-term price momentum indicator used primarily to recognize major bottoms in the stock market. It is calculated as a 10-month weighted moving average of the sum of the 14-month rate of change and the 11-month rate of change for the index.
Also known as the "Coppock Guide".
- A long-term price momentum indicator used primarily to recognize major bottoms in the stock market. It is calculated as a 10-month weighted moving average of the sum of the 14-month rate of change and the 11-month rate of change for the index.
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Copula
- A statistical measure that represents a multivariate uniform distribution, which examines the association or dependence between many variables. Although the statistical calculation of a copula was invented in 1957, it was not applied to financial markets and finance until the late '90s.
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Copyright
- The ownership of intellectual property by the item's creator. Copyright law gives creators of original ideas, art, etc. the exclusive right to further develop them for a given amount of time, at which point the copyrighted item becomes public domain.
- The ownership of intellectual property by the item's creator. Copyright law gives creators of original ideas, art, etc. the exclusive right to further develop them for a given amount of time, at which point the copyrighted item becomes public domain.
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Core Competencies
- The main strengths or strategic advantages of a business. Core competencies are the combination of pooled knowledge and technical capacities that allow a business to be competitive in the marketplace. Theoretically, a core competency should allow a company to expand into new end markets as well as provide a significant benefit to customers. It should also be hard for competitors to replicate.
- The main strengths or strategic advantages of a business. Core competencies are the combination of pooled knowledge and technical capacities that allow a business to be competitive in the marketplace. Theoretically, a core competency should allow a company to expand into new end markets as well as provide a significant benefit to customers. It should also be hard for competitors to replicate.
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Core Competency
- A narrowly defined field or task at which a company excels. A firm's core competencies are difficult for its competitors to mimic, allowing the company to differentiate itself. Most core competencies will be applicable to a wide range of business activities, transcending product and market borders.
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Core Deposits
- The deposits made in a bank's natural demographic market. Banks count on core deposits as a stable source of funds for their lending base. Core deposits offer many advantages to banks, such as predictable costs and a measurement of the degree of customer loyalty.
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Core Earnings
- The revenue derived from a company's main or principal business less all associated expenses.
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Core Holding
- An investment that you plan on keeping in your portfolio for a very long period of time, sometimes permanently.
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Core Inflation
- A measure of inflation that excludes certain items that face volatile price movements. Core inflation eliminates products that can have temporary price shocks because these shocks can diverge from the overall trend of inflation and give a false measure of inflation.
- A measure of inflation that excludes certain items that face volatile price movements. Core inflation eliminates products that can have temporary price shocks because these shocks can diverge from the overall trend of inflation and give a false measure of inflation.
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Core Liquidity
- Cash and other financial assets that banks possess that can easily be liquidated and paid out as part of operational cash flows. Examples of core liquidity assets would be cash, government bonds and money market funds. Banks typically use forecasts to anticipate the amount of cash that account holders will need to withdraw, but it is important that banks do not over-estimate the amount of cash and cash equivalents required for core liquidity because unused cash left in core liquidity cannot be used by the bank to earn increased returns.
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Core Liquidity Provider
- An underwriter or a market maker that is a sizable holder of a given security or that facilitates the trading of the security. Core liquidity providers ideally bring greater price stability and distribute securities to both retail and institutional investors.
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Core Plus
- A fixed-income investment management style that permits managers to add instruments with greater risk and greater potential return - high-yield, global and emerging market debt, for example - to core portfolios of investment-grade bonds.
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Corner
- 1. The act of securing enough controlling interest or ownership within a single security so that manipulation of price can occur.
2. A rare situation occurring in commodity markets wherein the quantity of underlying securities and commodities available are exceeded by the commitments of delivery quantities on future contracts.
- 1. The act of securing enough controlling interest or ownership within a single security so that manipulation of price can occur.
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Corner A Market
- To acquire enough shares of a particular security in order to manipulate its price.
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Corporate Action
- Any event that brings material change to a company and affects its stakeholders. This includes shareholders, both common and preferred, as well as bondholders. These events are generally approved by the company's board of directors; shareholders are permitted to vote on some events as well.
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Corporate Agent
- A type of trust company that acts on behalf of corporations and some types of governmental entities. Corporate agents provide various types of banking services for corporate clients, such as check clearing, payment of interest and dividends and stock purchase and redemption. They can also collect taxes on behalf of governmental agencies.
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Corporate Bond
- A debt security issued by a corporation and sold to investors. The backing for the bond is usually the payment ability of the company, which is typically money to be earned from future operations. In some cases, the company's physical assets may be used as collateral for bonds.
Corporate bonds are considered higher risk than government bonds. As a result, interest rates are almost always higher, even for top-flight credit quality companies.
- A debt security issued by a corporation and sold to investors. The backing for the bond is usually the payment ability of the company, which is typically money to be earned from future operations. In some cases, the company's physical assets may be used as collateral for bonds.
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Corporate Cannibalism
- An act of self-infringement upon market share by corporations through the issuance of new products.
Also known as "market cannibalization".
- An act of self-infringement upon market share by corporations through the issuance of new products.
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Corporate Capital
- The assets a business possesses that can serve as an income shock absorber to a specific class of stakeholders. Should the company experience financial difficulty, the capital in one class of stakeholder would be decreased in order to protect another stakeholder with a senior priority.
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Corporate Charter
- A written document filed with a U.S. state by the founders of a corporation detailing the major components of a company such as its objectives, its structure and its planned operations. If the charter is approved by the state government, the company becomes a legal corporation.
Also referred to as "charter" and "articles of incorporation".
- A written document filed with a U.S. state by the founders of a corporation detailing the major components of a company such as its objectives, its structure and its planned operations. If the charter is approved by the state government, the company becomes a legal corporation.
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Corporate Citizenship
- The extent to which businesses are socially responsible for meeting legal, ethical and economic responsibilities placed on them by shareholders. The aim is for businesses to create higher standards of living and quality of life in the communities in which they operate, while still preserving profitability for stakeholders.
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Corporate Debt Restructuring
- The reorganization of a company's outstanding obligations, often achieved by reducing the burden of the debts on the company by decreasing the rates paid and increasing the time the company has to pay the obligation back. This allows a company to increase its ability to meet the obligations. Also, some of the debt may be forgiven by creditors in exchange for an equity position in the company.
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Corporate Finance
- Any financial or monetary activity that deals with a company and its money.
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Corporate Governance
- The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy and rule of law.
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Corporate Governance Quotient - CGQ
- A metric developed by Institutional Shareholder Services (ISS) that rates publicly traded companies in terms of the quality of their corporate governance. Each public company covered by the metric is assigned a rating based on a number of factors that are considered by the ISS model. Factors used in the CGQ formula include board structure and composition, the executive and director compensation charter, and bylaw provisions.
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Corporate Headquarters
- A place where a company's executive offices and executives' direct support staff are located. Corportate headquarters is considered a business' most prestigious location. A corporation's headquarters may also bring prestige to the city it is located in and help attract other businesses to the area. Businesses frequently locate their corporate headquarters in large cities because of the greater business opportunities available there.
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Corporate Inflation-Linked Securities
- Corporate debt financing securities that offer their holders protection against fluctuations in the rate of inflation as measured by the consumer price index (CPI). The yields of these securities adjust monthly with respect to the current rate of inflation.
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Corporate Inversion
- The act of a parent company, whose headquarters are located within U.S. borders, switching registration with their offshore subsidiary in order to take advantage of foreign tax benefits.
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Corporate Kleptocracy
- Buzzword that describes the greed of corporate executives who use underhanded tactics to siphon off wealth at the expense of shareholders. This buzzword is attributed to how ex-Hollinger CEO, Conrad Black, and his fellow associates allegedly embezzled hundreds of millions of dollars over a seven-year period from Hollinger.
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Corporate Pension Plan
- A formal arrangement between a company and its employees - or the employees' union - that provides funding for the employees' retirement. This pool of funds can be financed in several ways and will eventually be used to make periodic payments to retired employees. In most cases, both employer and employees make regular contributions to the plan. In the past, employers were wholly responsible for contributing to the plan based on an employee's work, length of employment and position held.
- A formal arrangement between a company and its employees - or the employees' union - that provides funding for the employees' retirement. This pool of funds can be financed in several ways and will eventually be used to make periodic payments to retired employees. In most cases, both employer and employees make regular contributions to the plan. In the past, employers were wholly responsible for contributing to the plan based on an employee's work, length of employment and position held.
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Corporate Profit
- A statistic reported quarterly by the Bureau of Economic Analysis (BEA) that summarizes the net income of corporations in the National Income and Product Accounts (NIPA). Corporate profits is an economic indicator that calculates net income using several different measures:
- Profits From Current Production: Net income with inventory replacement and differences in income tax and income statement depreciation taken into consideration. Also known as operating or economic profits.
- Book Profits: Net income less inventory and depreciation adjustments.
- After-Tax Profits: Book profits after taxes are subtracted. After-tax profits are believed to be the most relevant number.
- A statistic reported quarterly by the Bureau of Economic Analysis (BEA) that summarizes the net income of corporations in the National Income and Product Accounts (NIPA). Corporate profits is an economic indicator that calculates net income using several different measures:
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Corporate Raider
- An investor who buys a large number of shares in a corporation whose assets appear to be undervalued. The large share purchase would give the corporate raider significant voting rights, which could then be used to push changes in the company’s leadership and management. This would increase share value and thus generate a massive return for the raider.
- An investor who buys a large number of shares in a corporation whose assets appear to be undervalued. The large share purchase would give the corporate raider significant voting rights, which could then be used to push changes in the company’s leadership and management. This would increase share value and thus generate a massive return for the raider.
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Corporate Refinancing
- The process through which a company reorganizes its debt obligations by replacing or restructuring existing debts. Refinancing may also involve issuing equity to pay off a percentage of debt.
Debt is replaced or refunded by a company with money that is raised by issuing or creating other borrowing. In restructuring, a company works with its creditor to change the terms of a loan; these terms can include the reduction of interest rates, the improvement of covenants or the extension of the loan's terms.
- The process through which a company reorganizes its debt obligations by replacing or restructuring existing debts. Refinancing may also involve issuing equity to pay off a percentage of debt.
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Corporate Resolution
A written statement made by the board of directors detailing which officers are authorized to act on behalf of the corporation. The corporate resolution will be found in the board minutes detailing decisions made by the board during the meeting.
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Corporate Social Responsibility
- Corporate initiative to assess and take responsibility for the company's effects on the environment and impact on social welfare. The term generally applies to company efforts that go beyond what may be required by regulators or environmental protection groups.
Corporate social responsibility may also be referred to as "corporate citizenship" and can involve incurring short-term costs that do not provide an immediate financial benefit to the company, but instead promote positive social and environmental change.
- Corporate initiative to assess and take responsibility for the company's effects on the environment and impact on social welfare. The term generally applies to company efforts that go beyond what may be required by regulators or environmental protection groups.
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Corporate Tax
- A levy placed on the profit of a firm; different rates are used for different levels of profits.
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Corporate Trade Exchange - CTX
- A monetary transfer system used by corporations and governmental agencies. Corporate trade exchanges are used to pay trading partners via the automated clearing house (ACH) system. The CTX format allows for payment to several parties with a single fund transfer.
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Corporate Trade Payment (CTP)
- A previous form of transferring funds electronically. The corporate trade payment (CTP) system was used by corporate and governmental entities to pay creditors using the automated clearing house (ACH) system. This form of payment became obsolete, due to its lack of flexibility.
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Corporation
- A legal entity that is separate and distinct from its owners. Corporations enjoy most of the rights and responsibilities that an individual possesses; that is, a corporation has the right to enter into contracts, loan and borrow money, sue and be sued, hire employees, own assets and pay taxes.
The most important aspect of a corporation is limited liability. That is, shareholders have the right to participate in the profits, through dividends and/or the appreciation of stock, but are not held personally liable for the company's debts.
Corporations are often called "C Corporations".
- A legal entity that is separate and distinct from its owners. Corporations enjoy most of the rights and responsibilities that an individual possesses; that is, a corporation has the right to enter into contracts, loan and borrow money, sue and be sued, hire employees, own assets and pay taxes.
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Corporatization
- The act of reorganizing the structure of government owned entity into a legal entity with the corporate structure found in publicly trade companies. These companies tend to have a board of directors (B of D), management and shareholders. However, unlike publicly traded companies, the government is typically the company's only shareholder and that the shares in the company are not traded publicly.
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Correction
- A reverse movement, usually negative, of at least 10% in a stock, bond, commodity or index. Corrections are generally temporary price declines, interrupting an uptrend in the market or asset.
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Correlation
- In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used in advanced portfolio management.
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Correlation Coefficient
- A measure that determines the degree to which two variable's movements are associated.
The correlation coefficient is calculated as:
- A measure that determines the degree to which two variable's movements are associated.
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Correspondent
- The name given to a bank, broker, dealer, or financial institution that acts on behalf of another financial institution with limited or restricted access to the financial markets where a transaction must occur.
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Cosign
- The act of signing for another person's debt which involves a legal obligation made by the cosigner to make payment on the other person's debt should that person default. Having a cosigner is way for individuals with a low income or poor/limited credit history to obtain financing.
This term is also commonly spelled "co-sign".
- The act of signing for another person's debt which involves a legal obligation made by the cosigner to make payment on the other person's debt should that person default. Having a cosigner is way for individuals with a low income or poor/limited credit history to obtain financing.
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Coskewness
- A statistical measure that calculates the symmetry of a variable's probability distribution in relation to another variable's probability distribution symmetry. All else being equal, a positive coskewness means that the first variable's probability distribution is skewed to the right of the second variable's distribution.
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Cost Accounting
- A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step of production as well as fixed costs such as depreciation of capital equipment. Cost accounting will first measure and record these costs individually, then compare input results to output or actual results to aid company management in measuring financial performance.
- A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step of production as well as fixed costs such as depreciation of capital equipment. Cost accounting will first measure and record these costs individually, then compare input results to output or actual results to aid company management in measuring financial performance.
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Cost Accounting Standards Board - CASB
- A U.S. federal government body that has the mandate of promoting consistency and uniformity in cost accounting activities involving government grants and contracts. Established by Congress in 1970, The Cost Accounting Standards Board (CASB) was dissolved in 1980, but was permanently re-established in 1988.
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Cost and Freight - CFR
- A trade term requiring the seller to arrange for the carriage of goods by sea to a port of destination, and provide the buyer with the documents necessary to obtain the goods from the carrier. Under CFR, the seller does not have to procure marine insurance against the risk of loss or damage to the goods during transit.
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Cost Basis
- 1. The original value of an asset for tax purposes (usually the purchase price), adjusted for stock splits, dividends and return of capital distributions. This value is used to determine the capital gain, which is equal to the difference between the asset's cost basis and the current market value. Also known as "tax basis".
2. The difference between the cash price and the futures price of a given commodity.
- 1. The original value of an asset for tax purposes (usually the purchase price), adjusted for stock splits, dividends and return of capital distributions. This value is used to determine the capital gain, which is equal to the difference between the asset's cost basis and the current market value. Also known as "tax basis".
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Cost Of Acquisition
- A business sales term referring to the expense required to attain a customer or a sale. In setting a marketing and sales strategy, a company must decide what the maximum cost of acquisition will be, which effectively determines the highest amount the company is willing to spend to attain each customer.
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Cost Of Capital
- The required return necessary to make a capital budgeting project, such as building a new factory, worthwhile. Cost of capital includes the cost of debt and the cost of equity.
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Cost Of Carry
- Costs incurred as a result of an investment position. These costs can include financial costs, such as the interest costs on bonds, interest expenses on margin accounts and interest on loans used to purchase a security, and economic costs, such as the opportunity costs associated with taking the initial position.
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Cost Of Debt
- The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; however, because interest expense is deductible, the after-tax cost is seen most often. This is one part of the company's capital structure, which also includes the cost of equity.
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Cost Of Equity
- In financial theory, the return that stockholders require for a company. The traditional formula for cost of equity (COE) is the dividend capitalization model:
A firm's cost of equity represents the compensation that the market demands in exchange for owning the asset and bearing the risk of ownership.
- In financial theory, the return that stockholders require for a company. The traditional formula for cost of equity (COE) is the dividend capitalization model:
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Cost Of Funds
- The interest rate paid on an outstanding loan.
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Cost Of Goods Sold - COGS
- The direct costs attributable to the production of the goods sold by a company. This amount includes the cost of the materials used in creating the good along with the direct labor costs used to produce the good. It excludes indirect expenses such as distribution costs and sales force costs. COGS appears on the income statement and can be deducted from revenue to calculate a company's gross margin.
Also referred to as "cost of sales".
- The direct costs attributable to the production of the goods sold by a company. This amount includes the cost of the materials used in creating the good along with the direct labor costs used to produce the good. It excludes indirect expenses such as distribution costs and sales force costs. COGS appears on the income statement and can be deducted from revenue to calculate a company's gross margin.
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Cost Of Living Adjustment - COLA
- An adjustment made to Social Security and supplemental security income in order to adjust benefits to counteract the effects of inflation. COLAs are generally equal to the percentage increase in the consumer price index for urban wage earners and clerical workers (CPI-W) for a specific period.
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Cost Of Savings Index - COSI Index
- A popular index used for certain adjustable-rate mortgages (ARMs). The index is a weighted average of the rates of interest on the deposit accounts (sometimes called cost of savings) of the federally insured depository institution subsidiaries of Golden West Financial Corporation (GDW). These subsidiaries currently operate under the name World Savings.
GDW computes the COSI on the last day of each calendar month and announces it on or near the last business day prior to the fifteenth day of the following calendar month.
- A popular index used for certain adjustable-rate mortgages (ARMs). The index is a weighted average of the rates of interest on the deposit accounts (sometimes called cost of savings) of the federally insured depository institution subsidiaries of Golden West Financial Corporation (GDW). These subsidiaries currently operate under the name World Savings.
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Cost Of Tender
- The total charges associated with the delivery and certification of commodities underlying a futures contract.
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Cost Per Click - CPC
- A website that uses CPCs would bill by the number of times a visitor clicks on a banner instead of by the number of impressions. Cost per click is often used when advertisers have a set daily budget. When the advertiser's budget is hit, the ad is removed from the rotation for the remainder of the period.
- A website that uses CPCs would bill by the number of times a visitor clicks on a banner instead of by the number of impressions. Cost per click is often used when advertisers have a set daily budget. When the advertiser's budget is hit, the ad is removed from the rotation for the remainder of the period.
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Cost Per Gross Addition - CPGA
- A ratio used to quantify the costs of acquiring one new customer to a business. Often, the CPGA ratio is used by companies that offer subscription services to clients, such as wireless communication companies and satellite radio companies.
- A ratio used to quantify the costs of acquiring one new customer to a business. Often, the CPGA ratio is used by companies that offer subscription services to clients, such as wireless communication companies and satellite radio companies.
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Cost Per Thousand - CPM
- Web sites that sell advertising will guarantee an advertiser a certain number of impressions quoted at X dollars per CPM.
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Cost Synergy
- In the context of mergers, cost synergy is the savings in operating costs expected after two companies that compliment each other's strengths join.
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Cost, Insurance and Freight - CIF
- A trade term requiring the seller to arrange for the carriage of goods by sea to a port of destination, and provide the buyer with the documents necessary to obtain the goods from the carrier.
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Cost-Benefit Analysis
- A process by which business decisions are analyzed. The benefits of a given situation or business-related action are summed and then the costs associated with taking that action are subtracted. Some consultants or analysts also build the model to put a dollar value on intangible items, such as the benefits and costs associated with living in a certain town. Most analysts will also factor opportunity cost into such equations.
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Cost-Push Inflation
- A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.
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Coterminous
- A suppplemental loan with a maturity that is the same as the senior, or original, loan. Coterminous is most often used to describe mortgage loans, such as those for residential and commercial borrowers.
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Council of Economic Advisors - CEA
- A panel of three noted economists who advise the president of the United States on macroeconomic matters. The council consists of a chairman and two other members, all of whom are appointed by the president and approved by the Senate. Its primary goals are interpreting macroeconomic data, formulating economic policy for the White House, and overseeing other parts of the government to ensure all departments promote the current economic agenda.
Past chairman of the CEA include Alan Greenspan, and current Federal Reserve Chairman Ben Bernanke.
- A panel of three noted economists who advise the president of the United States on macroeconomic matters. The council consists of a chairman and two other members, all of whom are appointed by the president and approved by the Senate. Its primary goals are interpreting macroeconomic data, formulating economic policy for the White House, and overseeing other parts of the government to ensure all departments promote the current economic agenda.
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Council of Insurance Agents & Brokers
- A global organization representing the leading commercial insurance agencies and brokerage firms. Membership in this organization, which is also known as "the Council", comes with industry intelligence and continuing education opportunities. The Council of Insurance Agents and Brokers also produces a quarterly Commercial Insurance Market Index that tracks pricing trends, underwriting practices and availability of commercial property/casualty lines.
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Council of Petroleum Accountants Societies - COPAS
- A council created to discuss and solve the difficulties inherent in accounting in the oil and gas industry.
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Count
- A trend analysis using point and figure charts to estimate the vertical movement of prices.
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Counter-Cyclical Stock
- A type of stock in which the underlying company belongs to an industry or niche with financial performance that is negatively correlated to the overall state of the economy. As a result, the stock's price will also tend to move in a direction that is opposite to the general economic trend, meaning appreciation occurs during times of recession and depreciations in value occur in times of economic expansion.
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Counterbid
- A purchase offer made in counter to the offer of another potential purchaser. The term is often used in discussing the sale of one business to another. During a bargaining process it is not uncommmon for each side to issue multiple counter offers during the negotiation process.
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Countermove
- The movement of a security's price against the current trend. A countermove occurs soon after the original trend and in the opposite direction, but by a lesser amount. Countermoves allow investors to try to "buy low, sell high," by taking advantage of the price retreating along the current trend to obtain a better entrance.
Also known as a retracement.
- The movement of a security's price against the current trend. A countermove occurs soon after the original trend and in the opposite direction, but by a lesser amount. Countermoves allow investors to try to "buy low, sell high," by taking advantage of the price retreating along the current trend to obtain a better entrance.
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Counteroffer
- A type of offer made in response to another offer, which was seen as unacceptable. A counteroffer revises the initial offer, making it more appealing for the person making the new offer. Responding with a counteroffer allows a person to decline on a previous offer, while allowing negotiations to continue.
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Counterparty
- The other party that participates in a financial transaction. Every transaction must have a counterparty in order for the transaction to go through. More specifically, every buyer of an asset must be paired up with a seller that is willing to sell and vice versa.
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Counterparty Risk
- The risk to each party of a contract that the counterparty will not live up to its contractual obligations. Counterparty risk as a risk to both parties and should be considered when evaluating a contract.
In most financial contracts, counterparty risk is also known as "default risk".
- The risk to each party of a contract that the counterparty will not live up to its contractual obligations. Counterparty risk as a risk to both parties and should be considered when evaluating a contract.
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Counterpurchase
- An exchange of goods between two parties that, by means of two contracts, agree to act as purchaser and supplier to each other and to purchase all goods in cash.
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Countersignature
- An additional signature on a document that has already been signed. The countersignature is provided as confirmation or authentication. In most cases, countersignatures are provided by an official or professional, such as a doctor or attorney. This is done to certify that the action or provisions in the document have been approved by both the signer and the other pertinent party.
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Countertrade
- A trade between two countries by which goods are exchanged for other goods rather than for hard currency.
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Countertrend Strategy
- A trading strategy where an investor attempts to make small gains through a series of trades against the current trend. It is also known as "counter-trend trading".
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Countervailing Duties
- A duty placed on imported goods that are being subsidized by the importing government. This helps to even the playing field between the domestic producers and the foreign producers receiving subsidies.
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Country Basket
- A derivative security designed to mimic the major index of an international exchange.
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Country Club Billing
- A now-defunct billing system used by credit card companies up until the 1970s. Country club billing includes copies of the original sales drafts with each monthly statement sent to customers. This was done to provide proof of each purchase that was recorded on the card.
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Country Exposure Lending Survey
- A periodic survey published by the Interagency Country Exposure Review Committee. This survey breaks down all lending by U.S. banks to foreign sources according to various categories. The country exposure lending survey is designed to provide quick insight into where U.S. lenders are willing to send their money overseas.
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Country Fund
- An international mutual fund with a portfolio that consists entirely of securities, generally stocks, of companies located exclusively in a given country.
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Country Limit
- The aggregate limit that a bank places on all borrowers in a given foreign country. Country limits typically apply to all borrowers, regardless of whether they are public or private, individual or institutional. The creditworthiness of the borrower and the unit of currency involved are also irrelevant for the purposes of this restriction.
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Country Risk
- A collection of risks associated with investing in a foreign country. These risks include political risk, exchange rate risk, economic risk, sovereign risk and transfer risk, which is the risk of capital being locked up or frozen by government action. Country risk varies from one country to the next. Some countries have high enough risk to discourage much foreign investment.
- A collection of risks associated with investing in a foreign country. These risks include political risk, exchange rate risk, economic risk, sovereign risk and transfer risk, which is the risk of capital being locked up or frozen by government action. Country risk varies from one country to the next. Some countries have high enough risk to discourage much foreign investment.
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Coupon
- The interest rate stated on a bond when it's issued. The coupon is typically paid semiannually.
This is also referred to as the "coupon rate" or "coupon percent rate".
- The interest rate stated on a bond when it's issued. The coupon is typically paid semiannually.
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Coupon Bond
- A debt obligation with coupons attached that represent semiannual interest payments. Also known as a "bearer bond".
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Coupon Equivalent Rate - CER
- A alternative calculation of coupon rate used to compare zero-coupon and coupon fixed-income securities.
Formula:
- A alternative calculation of coupon rate used to compare zero-coupon and coupon fixed-income securities.
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Coupon Equivalent Yield - CEY
- A method of calculation used to calculate the yield on bonds with maturities of less than one year and which normally sell at a discount and do not pay coupons.
Formula
- A method of calculation used to calculate the yield on bonds with maturities of less than one year and which normally sell at a discount and do not pay coupons.
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Coupon Pass
- The purchase of treasury notes or bonds from dealers, by the Federal Reserve.
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Covariance
- A measure of the degree to which returns on two risky assets move in tandem. A positive covariance means that asset returns move together. A negative covariance means returns move inversely.
One method of calculating covariance is by looking at return surprises (deviations from expected return) in each scenario. Another method is to multiply the correlation between the two variables by the standard deviation of each variable.
- A measure of the degree to which returns on two risky assets move in tandem. A positive covariance means that asset returns move together. A negative covariance means returns move inversely.
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Covenant
- A promise in an indenture, or any other formal debt agreement, that certain activities will or will not be carried out.
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Covenant-Lite Loans
- A type of loan whereby financing is given with limited restrictions on the debt-service capabilities of the borrower. The issuance of covenant-lite loans means that debt is being issued, both personally and commercially, to borrowers with less restrictions on collateral, payment terms, and level of income.
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Cover
- The act of completing a transaction in order to remove any obligations.
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Cover On A Bounce
- The covering of a short position after it has reached and bounced off a level of support. This strategy waits for the price to move to a support level, instead of selling before, to see if the level will hold - because the trader will benefit if it doesn't hold. Once the security bounces, it is clear the security will have trouble moving down further, so the trade covers the short position.
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Cover On Approach
- The closing out of a profitable short position as the security moves toward a key level of support. As a security moves closer to a level of support the chances of it falling any further weaken because buying has come into the security at the support level, which keeps the price from a continued downward move and limits the continued success of the short trade.
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Coverage Initiated
- When a brokerage or analyst issues his/her first rating on a particular stock.
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Coverage Ratio
- An accounting ratio that helps measure a company's ability to meet its obligations satisfactorily.
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Coverdell Education Savings Account - ESA
- A tax-deferred trust account created by the U.S. government to assist families in funding educational expenses for beneficiaries 18 years old or younger. While more than one ESA can be set up for a single beneficiary, the total maximum contribution per year for any single beneficiary is $2,000.
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Covered Bond
- Securities created from public sector loans or mortgage loans where the security is backed by a seperate group of loans. Covered bonds typically carry a 2-10 year maturity rate and enjoy relatively high credit ratings, depending on the quality of the pool of loans ("cover pool") backing the bond. Covered bonds are often attractive to investors looking for high-quality instruments that offer attractive yields. They provide an efficient, lower-cost way for lenders to expand their business rather than issuing unsecured debt instruments.
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Covered Call
- An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset in an attempt to generate increased income from the asset. This is often employed when an investor has a short-term neutral view on the asset and for this reason hold the asset long and simultaneously have a short position via the option to generate income from the option premium.
This is also known as a "buy-write".
- An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset in an attempt to generate increased income from the asset. This is often employed when an investor has a short-term neutral view on the asset and for this reason hold the asset long and simultaneously have a short position via the option to generate income from the option premium.
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Covered Interest Rate Parity
- This term refers to a condition where the relationship between interest rates and the spot and forward currency values of two countries are in equilibrium. As a result, there are no interest rate arbitrage opportunities between those two currencies.
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Covered Security
- A class of securities, created by the National Securities Market Improvement Act, that enjoys federally imposed exemptions from state restrictions and regulations. Most stocks trading in the U.S. are covered securities.
Also known as a "federal covered security".
- A class of securities, created by the National Securities Market Improvement Act, that enjoys federally imposed exemptions from state restrictions and regulations. Most stocks trading in the U.S. are covered securities.
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Covered Warrant
- A type of warrant that allows the holder to buy or sell a specific amount of equities, currency or other financial instruments from the issuer, usually a bank or a similar financial institution, at a specific price and time.
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Cowboy Marketing
- A slang term to describe a situation in which a company is unaware that a marketer hired to produce legitimate opted-in email campaigns is actually using mass spam emails to promote the company's stock. This is a very unethical practice because marketers are often compensated with stock options, allowing them to capitalize on the unfounded demand they create for the stock they are promoting.
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Crack
- A trading strategy used in energy futures to establish a refining margin.
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Crack Spread
- In commodity markets, the spread created by purchasing oil futures and offsetting the position by selling gasoline and heating oil futures. This investment alignment allows the investor to hedge against risk due to the offsetting nature of the securities.
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Cramdown
- A bankruptcy concept that is often employed to obtain a Chapter 11 bankruptcy reorganization plan while there are still objections from one or more creditors. Cramdown allows the bankruptcy courts to modify loan terms subject to certain conditions in an attempt to have all parties come out better than they would have without such modifications. The conditions are mainly that the new terms are fair and equitable to all parties involved.
- A bankruptcy concept that is often employed to obtain a Chapter 11 bankruptcy reorganization plan while there are still objections from one or more creditors. Cramdown allows the bankruptcy courts to modify loan terms subject to certain conditions in an attempt to have all parties come out better than they would have without such modifications. The conditions are mainly that the new terms are fair and equitable to all parties involved.
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Cramer Bounce
- The sudden overnight appreciation of a stock's price after it has been recommended by Jim Cramer on his CNBC show, "Mad Money". This increase in price can be attributed to investors who buy stocks after seeing Cramer's recommendations.
- The sudden overnight appreciation of a stock's price after it has been recommended by Jim Cramer on his CNBC show, "Mad Money". This increase in price can be attributed to investors who buy stocks after seeing Cramer's recommendations.
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Crammed Down
- 1. A situation in which venture capitalists refuse to invest in a new project unless the preceding investors of the company lower the value of their original investment.
2. A bankruptcy procedure that allows a bankruptcy court to initiate a reorganization plan for a company despite objections from creditors. The creditors will still maintain collateral on the company as long as the firm offers repayment of the "secured portion" or fair market value of the collateral in their repayment plan.
- 1. A situation in which venture capitalists refuse to invest in a new project unless the preceding investors of the company lower the value of their original investment.
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Crash
- A major decline in a financial market.
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Crawling Peg
- A system of exchange rate adjustment in which a currency with a fixed exchange rate is allowed to fluctuate within a band of rates. The par value of the stated currency is also adjusted frequently due to market factors such as inflation. This gradual shift of the currency's par value is done as an alternative to a sudden and significant devaluation of the currency.
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CRC
- The currency abbreviation for the Costa Rican colon. The CRC is subdivided into 100 centimos, which is similar to how a dollar is divided into 100 cents. Historically, the colon has had a peg-like relationship with the U.S. dollar, which is described as a crawling peg. This means the colon is allowed to float within a currency band with upper and lower limits determined by the U.S. dollar's value.
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Creation Unit
- A set of shares or securities that makes up one unit of a fund held by the trust that underlies an exchange-traded fund (ETF). One creation unit is the denomination of underlying assets that can be redeemed for a certain number of ETF shares.
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Creative Destruction
- A term coined by Joseph Schumpeter in his work entitled "Capitalism, Socialism and Democracy" (1942) to denote a "process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one."
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Credit
- 1. A contractual agreement in which a borrower receives something of value now and agrees to repay the lender at some date in the future, generally with interest. The term also refers to the borrowing capacity of an individual or company.
2. An accounting entry that either decreases assets or increases liabilities and equity on the company's balance sheet. On the company's income statement, a debit will reduce net income, while a credit will increase net income.
- 1. A contractual agreement in which a borrower receives something of value now and agrees to repay the lender at some date in the future, generally with interest. The term also refers to the borrowing capacity of an individual or company.
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Credit Agreement
- A legal contract in which a bank arranges to loan a customer a certain amount of money for a specified amount of time. The credit agreement outlines all the rules and regulations associated with the contract. This includes the interest that must be paid on the loan.
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Credit Analysis
- A type of analysis an investor or bond portfolio manager performs on companies or other debt issuing entities encompassing the entity's ability to meet its debt obligations. The credit analysis seeks to identify the appropriate level of default risk associated with investing in that particular entity.
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Credit Application
- A request for an extension of credit, either orally or in written form. The request must follow the lender's extension request procedures in order to be valid. The application must legally contain all pertinent information relating to the cost of the credit, including the annual percentage yield (APY) and all associated fees. Regulation Z of the Federal Reserve governs the credit application process.
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Credit Balance
- In a margin account, the amount of funds deposited in the customer's account following the successful execution of a short sale order. The credit balance amount includes both the proceeds of the short sale itself and the specified margin amount the customer is required to deposit under Regulation T.
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Credit Bureau
- An agency that researches and collects individual credit information and sells it for a fee to creditors so they can make a decision on granting loans. Typical clients include banks, mortgage lenders, credit card companies and other financing companies. Also commonly referred to as consumer reporting agency or credit reporting agency.
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Credit Card
- A card issued by a financial company giving the holder an option to borrow funds, usually at point of sale. Credit cards charge interest and are primarily used for short-term financing. Interest usually begins one month after a purchase is made and borrowing limits are pre-set according to the individual's credit rating.
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Credit Checking
- A check performed on the financial backing of the counterparties in a forex transaction. This credit check ensures that both parties have the means necessary to cover their leveraged positions in the trade and is done before the transaction takes place.
- A check performed on the financial backing of the counterparties in a forex transaction. This credit check ensures that both parties have the means necessary to cover their leveraged positions in the trade and is done before the transaction takes place.
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Credit Cliff
- A slang term referring to the compounding of a company's credit deterioration caused by provisions such as financial covenants, or events that trigger a change in the company's credit rating. These can put pressure on the company's liquidity or its business to a material extent.
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Credit Control
- A strategy employed by manufacturers and retailers to promote good credit among the creditworthy and deny it to delinquent borrowers. This will both increase sales and decrease bad debts, thus improving a company's cash flow. Credit control is an important component in the overall profitability of many firms.
Also known as "credit management".
- A strategy employed by manufacturers and retailers to promote good credit among the creditworthy and deny it to delinquent borrowers. This will both increase sales and decrease bad debts, thus improving a company's cash flow. Credit control is an important component in the overall profitability of many firms.
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Credit Counseling
- Personalized counseling services that provide guidance and support for those who have gotten in over their heads financially. The objective of most credit counseling is to help the creditor avoid bankruptcy, as well as provide basic education on financial management. Many counseling services also negotiate with creditors on behalf of the borrower to reduce interest rates and late fees.
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Credit Crisis
- A crisis that occurs when several financial institutions issue or are sold high-risk loans that start to default. As borrowers default on their loans, the financial institutions that issued the loans stop receiving payments. This is followed by a period in which financial institutions redefine the riskiness of borrowers, making it difficult for debtors to find creditors.
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Credit Criteria
- The various financial characteristics that lenders analyze when scrutinizing a prospective borrower. Credit criteria include a borrower's assets and liabilities, income and expenses and credit history. Favorable criteria will usually result in approval, with poor criteria typically having the opposite effect.
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Credit Crunch
- An economic condition in which investment capital is difficult to obtain. Banks and investors become wary of lending funds to corporations, which drives up the price of debt products for borrowers.
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Credit Cycle
- A cycle involving the access to credit by borrowers. Credit cycles first go through periods in which funds are easy to borrow; these periods are characterized by lower interest rates, lowered lending requirements and an increase in the amount of available credit. These periods are followed by a contraction in the availability of funds. During the contraction period, interest rates climb and lending rules become more strict, meaning that less people can borrow. The contraction period continues until risks are reduced for the lending institutions, at which point the cycle starts again.
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Credit Default Contract
- Security with a risk level and pricing based on the risk of credit default by one or more underlying security issuers. Credit default contracts include credit default swaps (CDSs), credit default index contracts, credit default options and credit default basket options. Credit default contracts are also used as part of the mechanism behind many collateralized debt obligations (CDOs); in these cases, the contracts may have unique covenants that exclude company events, such as a debt restructuring as a "credit event".
- Security with a risk level and pricing based on the risk of credit default by one or more underlying security issuers. Credit default contracts include credit default swaps (CDSs), credit default index contracts, credit default options and credit default basket options. Credit default contracts are also used as part of the mechanism behind many collateralized debt obligations (CDOs); in these cases, the contracts may have unique covenants that exclude company events, such as a debt restructuring as a "credit event".
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Credit Default Insurance
- The use of a financial agreement - usually a credit derivative such as a credit default swap, total return swap, or credit linked note - to mitigate the risk of loss from default by a borrower or bond issuer.
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Credit Default Swap (CDS)
- A swap designed to transfer the credit exposure of fixed income products between parties.
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Credit Denial
- The rejection of a credit application by the prospective lender. Usually credit denial comes as a result of the borrower's perceived inability to pay back the loan. This is often due to previous blemishes on the borrower's credit history, but it can also stem from an incomplete credit application or lack of any kind of borrowing history.
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Credit Derivative
- Privately held negotiable bilateral contracts that allow users to manage their exposure to credit risk. Credit derivatives are financial assets like forward contracts, swaps, and options for which the price is driven by the credit risk of economic agents (private investors or governments).
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Credit Event
- Any sudden and tangible (negative) change in a borrower's credit standing or decline in credit rating. A credit event brings into question the borrower's ability to repay its debt. It is the defining trigger in a credit derivative contract, or credit default swap. If the borrower experiences a credit event, then the buyer of the contract must pay the seller an agreed-upon sum to cover the loss.
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Credit Facility
- A type of loan made in a business or corporate finance context. Specific types of credit facilities are: revolving credit, term loans, committed facilities, letters of credit and most retail credit accounts.
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Credit For Qualified Retirement Savings Contribution
- Also known as IRS Form 8880, the Credit for Qualified Retirement Savings Contribution form is a one-page tax form used to calculate the amount of an individual or married couple's saver's credit. As of 2009, the credit is available to individuals with income up to $26,500, heads of household with with incomes up to $39,750 and married couples filing jointly with incomes up to $53,000.
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Credit History
- A record of a consumer's ability to repay debts and demonstrated responsibility in repaying debts. A consumer's credit history consists of information such as: number and types of credit accounts, how long each account has been open, amounts owed, amount of available credit used, whether bills are paid on time, and number of recent credit inquiries. It also contains information regarding whether the consumer has any bankruptcies, liens, judgments or collections. This information is all contained on a consumer's credit report.
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Credit Insurance
- Credit insurance is a type of life insurance policy purchased by a borrower that pays off one or more existing debts in the event of a death, disability, or in rare cases, unemployment. Credit insurance is marketed most often as a credit card feature, with the monthly cost charging a low percentage of the card's unpaid balance.
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Credit Life Insurance
- A life insurance policy designed to pay off a borrower's debt if that borrower dies. The face value of a credit life insurance policy decreases proportionately with an outstanding loan amount as the loan is paid off over time until both reach zero value.
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Credit Limit
- The amount of credit that a financial institution extends to a client. Credit limit also refers to the maximum amount a credit card company will allow someone to borrow on a single card. Credit limits are usually determined based on information contained in the application of the person seeking credit, or that person's credit rating.
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Credit Linked Note - CLN
- A security with an embedded credit default swap allowing the issuer to transfer a specific credit risk to credit investors.
CLNs are created through a Special Purpose Company (SPC), or trust, which is collateralized with AAA-rated securities. Investors buy securities from a trust that pays a fixed or floating coupon during the life of the note. At maturity, the investors receive par unless the referenced credit defaults or declares bankruptcy, in which case they receive an amount equal to the recovery rate. The trust enters into a default swap with a deal arranger. In case of default, the trust pays the dealer par minus the recovery rate in exchange for an annual fee which is passed on to the investors in the form of a higher yield on the notes.
- A security with an embedded credit default swap allowing the issuer to transfer a specific credit risk to credit investors.
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Credit Loss Ratio
- The ratio of current credit-related losses to the current par value of a mortgage-backed security (MBS), or the ratio of total credit-related losses to the original par value of an MBS. Different MBSs and different sections within an MBS have different credit-risk profiles, and are therefore likely to have different credit loss ratios.
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Credit Market
- 1. The broad market for companies looking to raise funds through debt issuance. The credit market encompasses both investment-grade bonds and junk bonds, as well as short-term commercial paper.
2. The market for debt offerings as seen by investors of bonds, notes and securitized obligations such as mortgage pools and collateralized debt obligations (CDOs).
- 1. The broad market for companies looking to raise funds through debt issuance. The credit market encompasses both investment-grade bonds and junk bonds, as well as short-term commercial paper.
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Credit Money
- Any future monetary claim against an individual that can be used to buy goods and services. There are many forms of credit money, such as IOUs, bonds and money market accounts. Virtually any form of financial instrument that cannot be repaid immediately is considered credit money.
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Credit Netting
- A system whereby the number of credit checks on financial transactions is reduced by entering into agreements that simply net all transactions. These agreements are made between large banks and other financial institutions and place all current and future transactions into one agreement, removing the need for credit checks on each transaction.
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Credit Quality
- One of the principal criteria for judging the investment quality of a bond or bond mutual fund. As the term implies, credit quality informs investors of a bond or bond portfolio's credit worthiness, or risk of default.
Also known as a "bond rating."
- One of the principal criteria for judging the investment quality of a bond or bond mutual fund. As the term implies, credit quality informs investors of a bond or bond portfolio's credit worthiness, or risk of default.
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Credit Rating
- An assessment of the credit worthiness of individuals and corporations. It is based upon the history of borrowing and repayment, as well as the availability of assets and extent of liabilities.
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Credit Reference
- A credit reference can be a report from a credit agency for either a business or an individual. The term can also be used to mean a letter from a bank or other financial institution with whom a company has done business, confirming to third party that the company or individual is known to the financial firm as a good client.
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Credit Repair
- Credit repair is the process of fixing a bad credit report, for whatever reason it deteriorated in the first place. It may be as simple as fixing mistakes with the credit agencies. Identity theft may require extensive credit repair work. The second form of credit repair is to deal with fundamental financial issues, such as budgeting, and begin to address legitimate concerns on the part of lenders.
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Credit Report
- A detailed report of an individual's credit history prepared by a credit bureau and used by a lender to in determining a loan applicant's creditworthiness, including:
1. Personal data (current and previous addresses, social security number, employment history)
2. Summary of credit history (number and type of accounts that are past-due or in good standing)
3. Detailed account information
4. Inquires into applicant's credit history (number and type of inquiries into applicant's credit report)
5. Details of any accounts turned over to credit agency (such as information about liens, wages garnishments via federal, state or county records)
6. Information on how to dispute any of the above information.
- A detailed report of an individual's credit history prepared by a credit bureau and used by a lender to in determining a loan applicant's creditworthiness, including:
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Credit Reporting Agency
- This term refers to businesses that maintain historical information pertaining to credit experience on individuals or businesses. The data is collected from various sources, most commonly firms extending credit such as credit card companies, banks and credit unions. They also collect information from public records, such as bankruptcies.
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Credit Review
- A credit review refers to the periodic reviews conducted by creditors on their customers with outstanding loans or credit lines. It can also refer to the service provided by credit repair firms as a preliminary step in assisting those with financing or debt problems.
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Credit Risk
- The risk of loss of principal or loss of a financial reward stemming from a borrower's failure to repay a loan or otherwise meet a contractual obligation. Credit risk arises whenever a borrower is expecting to use future cash flows to pay a current debt. Investors are compensated for assuming credit risk by way of interest payments from the borrower or issuer of a debt obligation.
Credit risk is closely tied to the potential return of an investment, the most notable being that the yields on bonds correlate strongly to their perceived credit risk.
- The risk of loss of principal or loss of a financial reward stemming from a borrower's failure to repay a loan or otherwise meet a contractual obligation. Credit risk arises whenever a borrower is expecting to use future cash flows to pay a current debt. Investors are compensated for assuming credit risk by way of interest payments from the borrower or issuer of a debt obligation.
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Credit Score
- A statistically derived numeric expression of a person's creditworthiness that is used by lenders to access the likelihood that a person will repay his or her debts. A credit score is based on, among other things, a person's past credit history. It is a number between 300 and 850 - the higher the number, the more creditworthy the person is deemed to be.
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Credit Scoring
- A statistical analysis performed by lenders and financial institutions to access a person's credit worthiness. Lenders use credit scoring, among other things, to arrive at a decision on whether to extend credit. A person's credit score is a number between 300 and 850, 850 being the highest credit rating possible.
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Credit Shelter Trust - CST
- A type of trust that allows a married investor to avoid estate taxes when passing assets on to heirs. The trust is structured so that upon the death of the investor, the assets specified in the trust agreement (up to a specified maximum dollar value) are transferred to the beneficiaries named in the trust (normally the couple's children). However, a key benefit to this type of trust is that the spouse maintains rights to the trust assets and the income they generate during the remainder of his or her lifetime.
This type of trust is also referred to as an "AB Trust".
- A type of trust that allows a married investor to avoid estate taxes when passing assets on to heirs. The trust is structured so that upon the death of the investor, the assets specified in the trust agreement (up to a specified maximum dollar value) are transferred to the beneficiaries named in the trust (normally the couple's children). However, a key benefit to this type of trust is that the spouse maintains rights to the trust assets and the income they generate during the remainder of his or her lifetime.
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Credit Sleeve
- A form of credit agreement, backed by physical assets, where the lending party will provide working capital and collateral to another company, known as the "sleeve provider". The lending party will essentially co-guarantee certain outstanding credit arrangements the sleeve provider has with other lenders and increase the overall credit quality of the sleeve provider.
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Credit Spread
- 1. The spread between Treasury securities and non-Treasury securities that are identical in all respects except for quality rating.
2. An options strategy where a high premium option is sold and a low premium option is bought on the same underlying security.
- 1. The spread between Treasury securities and non-Treasury securities that are identical in all respects except for quality rating.