Financial Glossary
What are you looking for?
| Enter a Term: | Or Browse the Glossary: | |
| 0-9 A B C D E F G H I J K L M N O P Q R S T U V W X Y Z |
-
E
- A Nasdaq stock symbol specifying that the stock has been delinquent in required filings with the SEC.
-
e-CBOT
- An electronic trading platform that gives traders the ability to trade future contracts listed on the Chicago Board of Trade. The CBOT has primarily been regarded as an open outcry market, but the incorporation of electronic trading platforms is changing the standard way in which futures trading is done.
-
E-Meeting
- A meeting that takes place over an electronic medium rather than in the traditional face-to-face fashion. The most common form of an e-meeting is done through web-based software which allows individuals and groups from around the globe to facilitate meetings without physically travelling to an agreed upon location.
-
E-Mini (Stock Index Futures)
- An electronically traded futures contract on the Chicago Mercantile Exchange that represents a portion of the normal futures contracts. E-mini contracts are available on a wide range of indices such as the Nasdaq 100, S&P 500, S&P MidCap 400 and Russell 2000.
-
Each Way
- A slang phrase used when a broker earns commissions from both parties in a security sale. The purchaser and the seller of the security will pay a fee to the broker for facilitating the transaction.
-
EAFE Index
- An index created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia. This international index has been in existence for more than 30 years.
-
Early Amortization
- A type of credit enhancement used in certain asset backed securities (
- A type of credit enhancement used in certain asset backed securities (
-
Early Exercise
- When an option or other security is exercised prior to its maturity date.
-
Early Withdrawal
- The removal of funds from a fixed-term investment before the maturity date, or the removal of funds from a tax-deferred investment account or retirement savings account, such as an IRA or 401(k) before a prescribed time. Early withdrawal could be anything earlier than the account owner's attainment of a prescribed minimum age requirement, or the maturity of a fixed-term investment, such as a certificate of deposit (CD).
-
Earmarking
- Funds (or capital) that are set aside to pay for a specific project or event. In some cases, the term is also synonymous with the word "flagged", or "marked", especially when used in certain congressional settings.
-
Earned Income
- Income derived from active participation in a trade or business, including wages, salary, tips, commissions and bonuses. This is the opposite of unearned income.
-
Earned Income Credit - EIC
- A tax credit for low-income workers. Even workers whose incomes are too small to have paid taxes can get EIC.
-
Earned Premium
- The amount of total premiums collected by an insurance company over a period that have been earned based on the ratio of the time passed on the policies to their effective life. This pro-rated amount of paid-in-advance premiums have been "earned" and now belong to the insurer.
- The amount of total premiums collected by an insurance company over a period that have been earned based on the ratio of the time passed on the policies to their effective life. This pro-rated amount of paid-in-advance premiums have been "earned" and now belong to the insurer.
-
Earnest Money
- A deposit made to a seller showing the buyer's good faith in a transaction. Often used in real estate transactions, earnest money allows the buyer additional time when seeking financing. Earnest money is typically held jointly by the seller and buyer in a trust or escrow account.
-
Earning Assets
- Any income-earning asset owned by a company.
-
Earning The Points
- A currency trading term that describes when the forward ask price is lower than the spot bid price, resulting in a gain for the trader. A trader is gaining the points when he or she sells at one price now then agrees to buy for less in the future. Gaining the point only refers to the difference between sell and buy prices and does not take the time value of money into account.
This is the opposite of "losing the points".
- A currency trading term that describes when the forward ask price is lower than the spot bid price, resulting in a gain for the trader. A trader is gaining the points when he or she sells at one price now then agrees to buy for less in the future. Gaining the point only refers to the difference between sell and buy prices and does not take the time value of money into account.
-
Earnings
- The amount of profit that a company produces during a specific period, which is usually defined as a quarter (three calendar months) or a year. Earnings typically refer to after-tax net income.Ultimately, a business's earnings are the main determinant of its share price, because earnings and the circumstances relating to them can indicate whether the business will be profitable and successful in the long run.
-
Earnings Allowance
- Calculation on the net funds available in a checking account and the credit amount can be used to offset all or a portion of monthly service charges. The rate for the earnings allowance is set at the bank's discretion.
- Calculation on the net funds available in a checking account and the credit amount can be used to offset all or a portion of monthly service charges. The rate for the earnings allowance is set at the bank's discretion.
-
Earnings Before Interest & Tax - EBIT
- An indicator of a company's profitability, calculated as revenue minus expenses, excluding tax and interest. EBIT is also referred to as "operating earnings", "operating profit" and "operating income", as you can re-arrange the formula to be calculated as follows:
EBIT = Revenue - Operating Expenses
Also known as Profit Before Interest & Taxes (PBIT), and equals Net Income with interest and taxes added back to it.
- An indicator of a company's profitability, calculated as revenue minus expenses, excluding tax and interest. EBIT is also referred to as "operating earnings", "operating profit" and "operating income", as you can re-arrange the formula to be calculated as follows:
-
Earnings Before Interest After Taxes - EBIAT
- An indicator of a company's financial performance calculated as:
= Revenue - COGS - Expenses (including taxes and excluding interest)
- An indicator of a company's financial performance calculated as:
-
Earnings Before Interest, Depreciation And Amortization - EBIDA
- A measure of the earnings of a company that adds the interest expense, depreciation and amortization back to the net income number, but takes the tax expense into consideration. This measure is not as well known or used as often as its counterpart, earnings before interest, taxes, depreciation and amortization (EBITDA).
- A measure of the earnings of a company that adds the interest expense, depreciation and amortization back to the net income number, but takes the tax expense into consideration. This measure is not as well known or used as often as its counterpart, earnings before interest, taxes, depreciation and amortization (EBITDA).
-
Earnings Before Interest, Tax and Depreciation - EBITD
- An indicator of a company's financial performance, which is calculated as:
This measure attempts to gauge a firm's profitability before any legally required payments, such as taxes and interest on debt, are paid. Depreciation is removed because this is an expense the firm records, but does not necessarily have to pay in cash.
- An indicator of a company's financial performance, which is calculated as:
-
Earnings Before Interest, Tax, Amortization And Exceptional Items - EBITAE
- An accounting metric often used to deduct the amortization of intangible assets to arrive at a value. Companies will use EBITAE not only as a measure of performance, but also to determine interest coverage capabilities. The eliminated items are often seen as factors that distort earnings that are derived from the underlying business operations of a firm.
Calculated as:
Where expenses* represents expenses that exclude interest, taxes, amortization of intangible assets and exceptional items.
- An accounting metric often used to deduct the amortization of intangible assets to arrive at a value. Companies will use EBITAE not only as a measure of performance, but also to determine interest coverage capabilities. The eliminated items are often seen as factors that distort earnings that are derived from the underlying business operations of a firm.
-
Earnings Before Interest, Taxes, Depreciation and Amortization - EBITDA
- An indicator of a company's financial performance which is calculated in the following EBITDA calculation:
EBITDA is essentially Net Income with interest, taxes, depreciation, and amortization added back to it. EBITDA can be used to analyze and compare profitability between companies and industries because it eliminates the effects of financing and accounting decisions. However, this is a non-GAAP measure that allows a greater amount of discretion as to what is (and is not) included in the calculation. This also means that companies often change the items included in their EBITDA calculation from one reporting period to the next.
When a company is valued using EBITDA - it is known as a EBITDA Valuation.
- An indicator of a company's financial performance which is calculated in the following EBITDA calculation:
-
Earnings Before Interest, Taxes, Depreciation, Amortization And Special Losses - EBITDAL
- A measure of a company's financial performance that looks at earnings before the inclusion of interest, taxes, depreciation, amortization and losses. These losses can be related to non-recurring expenses such as a loss in derivatives used to hedge currency or expense risks.
-
Earnings Before Interest, Taxes, Depreciation, Amortization, and Restructuring or Rent Costs - EBITD
- A non-GAAP indicator of a company's financial performance calculated as:
= Revenue - Expenses (excluding tax, interest, depreciation, amortization and restructuring or rent costs)
Depending on the company and the goal of the user, the indicator can either include restructuring costs or rent costs, but usually not both. The EBITDAR indicator expands on EBITDA by adding an additional excluded item to give a better indication of financial performance.
- A non-GAAP indicator of a company's financial performance calculated as:
-
Earnings Before Interest, Taxes, Depreciation, Depletion, Amortization and Exploration Expenses - EB
- An indicator of a company's financial performance calculated as:
= Revenue - Expenses (excluding tax, interest, depreciation, depletion, amortization and exploration expenses)
- An indicator of a company's financial performance calculated as:
-
Earnings Before Tax - EBT
- An indicator of a company's financial performance calculated as:
= Revenue - Expenses (excluding tax)
- An indicator of a company's financial performance calculated as:
-
Earnings Credit Rate - ECR
- A daily calculation of interest paid on idle funds that reduce bank service charges. A calculated amount is then used to pay for banking fees. Therefore, customers with larger deposits and balances tend to pay lower bank fees for their accounts. The rate paid is often pegged to the U.S. Treasury bill rate.
-
Earnings Estimate
- An analyst's estimate for a company's future quarterly or annual earnings.
-
Earnings Momentum
- When corporate earnings per share (EPS) growth is accelerating or decelerating from the prior fiscal quarter or fiscal year. Earnings momentum typically coincides with accelerating revenues and/or expanding margins caused by increased sales, cost improvements or overall market expansion.
- When corporate earnings per share (EPS) growth is accelerating or decelerating from the prior fiscal quarter or fiscal year. Earnings momentum typically coincides with accelerating revenues and/or expanding margins caused by increased sales, cost improvements or overall market expansion.
-
Earnings Multiplier
- The estimated price-earnings ratio adjusted for the current level of interest rates.
-
Earnings Per Share - EPS
- The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company's profitability.
Calculated as:
When calculating, it is more accurate to use a weighted average number of shares outstanding over the reporting term, because the number of shares outstanding can change over time. However, data sources sometimes simplify the calculation by using the number of shares outstanding at the end of the period.
Diluted EPS expands on basic EPS by including the shares of convertibles or warrants outstanding in the outstanding shares number.
- The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company's profitability.
-
Earnings Power
- A business's ability to generate profit from conducting its operations. Earnings power is used to analyze stocks to assess whether the underlying company is worthy of investment. Possessing greater long-term earnings power is one indication that a stock may be a good investment.
-
Earnings Recast
- The act of amending and re-releasing a previously released earnings statement, with specified intent. Some of the most typical reasons for recasting earnings are to show the impact of a discontinued business or to separate out earnings-related events that are deemed to be non-recurring or otherwise non-representative of normal business earnings.
Also known as an "earnings restatement".
- The act of amending and re-releasing a previously released earnings statement, with specified intent. Some of the most typical reasons for recasting earnings are to show the impact of a discontinued business or to separate out earnings-related events that are deemed to be non-recurring or otherwise non-representative of normal business earnings.
-
Earnings Season
- The months in which a majority of quarterly corporate earnings are released to the public.
-
Earnings Surprise
- When the earnings reported in a company's quarterly or annual report are above or below analysts' earnings estimates.
-
Earnings Yield
- The earnings per share for the most recent 12-month period divided by the current market price per share. The earnings yield (which is the inverse of the P/E ratio) shows the percentage of each dollar invested in the stock that was earned by the company.
The earnings yield is used by many investment managers to determine optimal asset allocations.
- The earnings per share for the most recent 12-month period divided by the current market price per share. The earnings yield (which is the inverse of the P/E ratio) shows the percentage of each dollar invested in the stock that was earned by the company.
-
Earnout
- A contractual provision stating that the seller of a business is to obtain additional future compensation based on the business achieving certain future financial goals.
- A contractual provision stating that the seller of a business is to obtain additional future compensation based on the business achieving certain future financial goals.
-
Ease Of Movement
- A technical momentum indicator that is used to illustrate the relationship between the rate of an asset's price change and its volume. This indicator attempts to identify the amount of volume required to move prices. Generally a value greater than zero is an indication that the stock is being accumulated (bought) and negative values are used to signal increased selling pressure.
A high positive value appears when prices move upward on low volume. Strong negative numbers indicate that price is moving downward on low volume.
- A technical momentum indicator that is used to illustrate the relationship between the rate of an asset's price change and its volume. This indicator attempts to identify the amount of volume required to move prices. Generally a value greater than zero is an indication that the stock is being accumulated (bought) and negative values are used to signal increased selling pressure.
-
Easy Money
- In the most literal sense, money that is easily acquired. Academically speaking, the term specifically denotes a condition in the money supply. Easy money occurs when the Federal Reserve allows cash flow to build up within the banking system. This lowers interest rates and makes it easier for banks and lenders to loan money. Money is therefore easily acquired by borrowers.
-
Easy-To-Borrow List
- A list of securities deemed to be available for borrowing in short selling transactions because their delivery is assured. Availability is usually due to their accessible nature and/or high number of outstanding shares.
-
Eat Well, Sleep Well
- An adage that, referring to the risk/return trade-off, says that the type of security an investor chooses depends on whether he or she wants to eat well or sleep well.
-
Eat Your Own Dog Food
- An expression describing the act of a company using its own products for day-to-day operations.
-
Eating Someone's Lunch
- Aggressive competition that results in one company taking portions of another company's market share.
-
Eating Stock
- Purchasing stock not because you desire it but because you are forced to do so.
-
EBITA
- An acronym for "earnings before interest, taxes and amortization." EBITA is most commonly used when equating profitability and efficiency ratios for firms. The necessary figures for calculating EBITA can be found on a company's income statement.
-
EBITDA To Fixed Charges
- A ratio used to measure a company's ability to incur additional debt or its ability to pay off existing debt. The ratio is usually measured as EBITDA over fixed charges over a trailing four quarter period. In this ratio, fixed charges generally refers to interest expenses, but there are variations on this ratio. Compliance by debt holders to maintain a specific level of EBITDA to fixed charges is often required in debt agreements.
-
EBITDA to sales ratio
- A financial metric used to assess a company's profitability by comparing its revenue with earnings. More specifically, since EBITDA is derived from revenue, this metric would indicate the percentage of a company is remaining after operating expenses.
Sometimes referred to as "EBITDA margin".
Calculated as:
- A financial metric used to assess a company's profitability by comparing its revenue with earnings. More specifically, since EBITDA is derived from revenue, this metric would indicate the percentage of a company is remaining after operating expenses.
-
EBITDA-To-Interest Coverage Ratio
- A ratio that is used to assess a company's financial durability by examining whether it is at least profitably enough to pay off its interest expenses. A ratio greater than 1 indicates that the company has more than enough interest coverage to pay off its interest expenses.
The ratio is calculated as follows:
Also known as EBITDA Coverage.
- A ratio that is used to assess a company's financial durability by examining whether it is at least profitably enough to pay off its interest expenses. A ratio greater than 1 indicates that the company has more than enough interest coverage to pay off its interest expenses.
-
EBITDARM
- A financial performance measure that stands for earnings before interest, taxes, depreciation, amortization, rent and management fees. EBITDARM is used in comparison to more common measures such as EBITDA when a company's rent and management fees represent a larger-than-normal percentage of operating costs.
- A financial performance measure that stands for earnings before interest, taxes, depreciation, amortization, rent and management fees. EBITDARM is used in comparison to more common measures such as EBITDA when a company's rent and management fees represent a larger-than-normal percentage of operating costs.
-
ECB Announcement
- An announcement by the European Central Bank (ECB) Governing Council after their first meeting of the month which is devoted to monetary policy. The ECB Announcement comes about 45 minutes after the meeting in a press conference, and details their actions or lack of actions decided in the meeting.
Because the ECB does not publish the minutes of its meetings, the ECB Announcement is important to gather information regarding upcoming interest rate policy.
- An announcement by the European Central Bank (ECB) Governing Council after their first meeting of the month which is devoted to monetary policy. The ECB Announcement comes about 45 minutes after the meeting in a press conference, and details their actions or lack of actions decided in the meeting.
-
Echo Bubble
- A post-bubble rally that becomes another, smaller bubble.
-
Eclectic Paradigm
- A theory that provides a three-tiered framework for a company to follow when determining if it is beneficial to pursue direct foreign investment.
-
Econometrics
- The application of statistical theories to economic ones for the purpose of forecasting future trends.
-
Economic Blight
- The visible and physical decline of a property, neighborhood or city due to a combination of economic downturns, residents and businesses leaving the area, and the cost of maintaining the quality of older structures. These factors tend to feed on themselves, with each one contributing to an increase in the occurrence of the others.
-
Economic Calendar
- A calendar used by traders for the purpose of tracking the occurrence of market-moving events. Investors will research the date and time of a specific event and pay close attention to the announcement because of the high probability that it will affect the direction of the market.
-
Economic Capital
- The amount of capital that a firm, usually in financial services, needs to ensure that the company stays solvent. Economic capital is calculated internally and is the amount of capital the firm should have to support any risks it takes on.
The measurement process involves converting a given risk to the amount of capital that is required to support it. The calculations are based on the institution's financial strength (e.g., credit rating) and expected losses.
Financial strength is represented by the probability of the firm not becoming insolvent over the measurement period and is the confidence level in the statistical calculation. Most banks will use a confidence measurement of between 99.96% and 99.98%, which is the insolvency rate expected for an institution with a AA or Aa credit rating.
The firm's expected loss is the anticipated average loss over the measurement period. Expected losses represent the cost of doing business and are usually absorbed by operating profits.
The relationship between frequency of loss, amount of loss, expected loss, financial strength and economic capital can be seen in the following graph:
- The amount of capital that a firm, usually in financial services, needs to ensure that the company stays solvent. Economic capital is calculated internally and is the amount of capital the firm should have to support any risks it takes on.
-
Economic Collapse
- A complete breakdown of a national, regional or territorial economy. An economic collapse is essentially a severe version of an economic depression, where an economy is in complete distress for months, years or possibly even decades.
A total economic collapse is characterized by economic depression, civil unrest and highly increased poverty levels. Hyperinflation, stagflation and financial-market crashes can all be causes. Government intervention is usually necessary to bring an economy back from collapse, but can often be slow to remedy the problem.
- A complete breakdown of a national, regional or territorial economy. An economic collapse is essentially a severe version of an economic depression, where an economy is in complete distress for months, years or possibly even decades.
-
Economic Cycle
- The natural fluctuation of the economy between periods of expansion (growth) and contraction (recession). Factors such as gross domestic product (GDP), interest rates, levels of employment and consumer spending can help to determine the current stage of the economic cycle.
-
Economic Depreciation
- A measure of the decrease in value of an asset over a specific period of time. This usually pertains to property such as real estate that can lose value due to indirect causes such as the addition of new construction in close proximity to the property, road additions or closures, a decline in the quality of the neighborhood, or other external factors.
-
Economic Derivative
- A relatively new form of derivative contract (the first ones were traded in 2002) that is based on the future value of some national economic indicator, such as non-farm payrolls, the purchasing manager's index, retail sales levels and the gross domestic product. Most of these economic derivatives are in the form of binary or "digital" options, whereby the only payout options are full payout (in the money) or nothing at all (out of the money). Other types of contracts currently traded include capped vanilla options and forwards.
Economic derivatives have become attractive for their ability to mitigate some of the market and basis risks found in standard investment vehicles.
- A relatively new form of derivative contract (the first ones were traded in 2002) that is based on the future value of some national economic indicator, such as non-farm payrolls, the purchasing manager's index, retail sales levels and the gross domestic product. Most of these economic derivatives are in the form of binary or "digital" options, whereby the only payout options are full payout (in the money) or nothing at all (out of the money). Other types of contracts currently traded include capped vanilla options and forwards.
-
Economic Efficiency
- A broad term that implies an economic state in which every resource is optimally allocated to serve each person in the best way while minimizing waste and inefficiency. When an economy is economically efficient, any changes made to assist one person would harm another. In terms of production, goods are produced at their lowest possible cost, as are the variable inputs of production.
Some terms that encompass phases of economic efficiency include allocational efficiency, production efficiency and Pareto efficiency.
- A broad term that implies an economic state in which every resource is optimally allocated to serve each person in the best way while minimizing waste and inefficiency. When an economy is economically efficient, any changes made to assist one person would harm another. In terms of production, goods are produced at their lowest possible cost, as are the variable inputs of production.
-
Economic Exposure
- An exposure to fluctuating exchange rates, which affects a company's earnings, cash flow and foreign investments. The extent to which a company is affected by economic exposure depends on the specific characteristics of the company and its industry.
-
Economic Forecasting
- The process of attempting to predict the future condition of the economy. This involves the use of statistical models utilizing variables sometimes called indicators. Some of the most well-known economic indicators include inflation and interest rates, GDP growth/decline, retail sales and unemployment rates.
- The process of attempting to predict the future condition of the economy. This involves the use of statistical models utilizing variables sometimes called indicators. Some of the most well-known economic indicators include inflation and interest rates, GDP growth/decline, retail sales and unemployment rates.
-
Economic Growth
- An increase in the capacity of an economy to produce goods and services, compared from one period of time to another. Economic growth can be measured in nominal terms, which include inflation, or in real terms, which are adjusted for inflation.
For comparing one country's economic growth to another, GDP or GNP per capita should be used as these take into account population differences between countries.
- An increase in the capacity of an economy to produce goods and services, compared from one period of time to another. Economic growth can be measured in nominal terms, which include inflation, or in real terms, which are adjusted for inflation.
-
Economic Growth And Tax Relief Reconciliation Act of 2001 - EGTRRA
- A U.S. tax law, effective for tax years beginning 2002, that made some of the most important changes to retirement plans, including increased contributions and deductibility limits for IRA and employer-sponsored plans, and expanded the portability rules for retirement plans in general. EGTRRA also increased the estate-tax exclusion and increased the generation-skipping transfer-tax exemption amounts.
-
Economic Growth Rate
- A measure of economic growth from one period to another in percentage terms. This measure does not adjust for inflation, it is expressed in nominal terms.
In practice, it is a measure of the rate of change that a nation's gross domestic product goes through from one year to another. Gross national product can also be used if a nation's economy is heavily dependent on foreign earnings.
- A measure of economic growth from one period to another in percentage terms. This measure does not adjust for inflation, it is expressed in nominal terms.
-
Economic Indicator
- A piece of economic data, usually of macroeconomic scale, that is used by investors to interpret current or future investment possibilities and judge the overall health of an economy. Economic indicators can potentially be anything the investor chooses, but specific pieces of data released by government and non-profit organizations have become widely followed - these include:
- The Consumer Price Index (CPI)
- Gross Domestic Product (GDP)
- Unemployment figures
- The price of crude oil
- A piece of economic data, usually of macroeconomic scale, that is used by investors to interpret current or future investment possibilities and judge the overall health of an economy. Economic indicators can potentially be anything the investor chooses, but specific pieces of data released by government and non-profit organizations have become widely followed - these include:
-
Economic Moat
- The competitive advantage that one company has over other companies in the same industry. This term was coined by renowned investor Warren Buffett.
-
Economic Order Quantity - EOQ
- An inventory-related equation that determines the optimum order quantity that a company should hold in its inventory given a set cost of production, demand rate and other variables. This is done to minimize variable inventory costs. The full equation is as follows:
where :
S = Setup costs
D = Demand rate
P = Production cost
I = Interest rate (considered an opportunity cost, so the risk-free rate can be used)
- An inventory-related equation that determines the optimum order quantity that a company should hold in its inventory given a set cost of production, demand rate and other variables. This is done to minimize variable inventory costs. The full equation is as follows:
-
Economic Profit (or Loss)
- The difference between the revenue received from the sale of an output and the opportunity cost of the inputs used. This can be used as another name for "economic value added" (EVA).
-
Economic Recovery Tax Act Of 1981 - ERTA
- A law that lowered income tax rates and allowed for expensing of depreciable assets. The Economic Recovery Tax Act of 1981 (ERTA) also included several incentives for small business and incentives for saving. The ERTA also provided for automatic adjustment of tax brackets, and indexing for inflation because inflation increased nominal income and pushed taxpayers into higher and higher tax brackets.
-
Economic Refugee
- A person seeking refugee status in another country for purely economic reasons.
-
Economic Rent
- The amount of money an owner of a factor of production must receive in order for that owner to rent out that factor of production. Factors of production include labor, capital and land.
-
Economic Shock
- An event that produces a significant change within an economy, despite occurring outside of it. Economic shocks are unpredictable and typically impact supply or demand throughout the markets.
-
Economic Spread
- 1. A performance metric that is equal to the difference between a company's weighted average cost of capital (WACC) and its return on invested capital (ROIC).
2. The difference between the real rate of return on an investment and the rate of inflation in the economy.
- 1. A performance metric that is equal to the difference between a company's weighted average cost of capital (WACC) and its return on invested capital (ROIC).
-
Economic Tsunami
- A term used to describe a set of economic forces that are propelled by a single triggering event and which creates significant financial distress and destruction. As with a natural tsunami, in an economic tsunami the resulting effects can be felt far and wide, across numerous geographic regions and/or industrial sectors.
-
Economic Value Added - EVA
- A measure of a company's financial performance based on the residual wealth calculated by deducting cost of capital from its operating profit (adjusted for taxes on a cash basis). (Also referred to as "economic profit".)
The formula for calculating EVA is as follows:
= Net Operating Profit After Taxes (NOPAT) - (Capital * Cost of Capital)
- A measure of a company's financial performance based on the residual wealth calculated by deducting cost of capital from its operating profit (adjusted for taxes on a cash basis). (Also referred to as "economic profit".)
-
Economic Value Of Equity - EVE
- A cash flow calculation that takes the present value of all asset cash flows and subtracts the present value of all liability cash flows. This calculation is used by banks for asset/liability management.
-
Economics
- A social science that studies how individuals, governments, firms and nations make choices on allocating scarce resources to satisfy their unlimited wants. Economics can generally be broken down into: macroeconomics, which concentrates on the behavior of the aggregate economy; and microeconomics, which focuses on individual consumers.
Economics is often referred to as "the dismal science".
- A social science that studies how individuals, governments, firms and nations make choices on allocating scarce resources to satisfy their unlimited wants. Economics can generally be broken down into: macroeconomics, which concentrates on the behavior of the aggregate economy; and microeconomics, which focuses on individual consumers.
-
Economies Of Scale
- The increase in efficiency of production as the number of goods being produced increases. Typically, a company that achieves economies of scale lowers the average cost per unit through increased production since fixed costs are shared over an increased number of goods.
There are two types of economies of scale:
-External economies - the cost per unit depends on the size of the industry, not the firm.
-Internal economies - the cost per unit depends on size of the individual firm.
- The increase in efficiency of production as the number of goods being produced increases. Typically, a company that achieves economies of scale lowers the average cost per unit through increased production since fixed costs are shared over an increased number of goods.
-
Economies of Scope
- An economic theory stating that the average total cost of production decreases as a result of increasing the number of different goods produced.
-
Economy
- The large set of inter-related economic production and consumption activities which aid in determining how scarce resources are allocated.
-
Edge Act Corporation
- A banking institution with a special charter from the U.S. Federal Reserve to conduct international banking operations and certain other forms of business without complying with state-by-state banking laws. By setting up or investing in Edge Act corporations, U.S. banks are able to gain portfolio exposure to financial investing operations not available under standard banking laws.
-
Education IRA
- A savings plan for higher education. Parents and guardians are allowed to make nondeductible contributions to an education IRA for a child under the age of 18. The education IRA is now refered to as the Coverdell ESA.
-
Education Loan
- Money borrowed to finance education or school related expenses. Payments are often deferred while in school and for a six-month grace period after graduation. Sallie Mae is the largest source of education loans and handles the two major types, the
- Money borrowed to finance education or school related expenses. Payments are often deferred while in school and for a six-month grace period after graduation. Sallie Mae is the largest source of education loans and handles the two major types, the
-
EEK
- The currency code for the Estonian kroon, the official currency of northeastern European country of Estonia. The Estonian kroon (EEK) became the official legal currency of Estonia in January of 1928, when it replaced the Estonian mark. In 1940, when the Soviets invaded Estonia, the kroon was replaced by the Soviet ruble, which remained the country's currency until 1992. The kroon was resurrected for a second time as the national currency that year and was pegged to the Deutsche mark.
-
Effective Annual Interest Rate
- An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following:
- An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following:
-
Effective Date
- The date, declared by the Securities & Exchange Commission (SEC), on which shares can start trading. This usually refers to the date when shares become available for sale in an initial public offering.
-
Effective Debt
- The net sum of all of a company's outstanding debt. In addition to standard debt issues, this figure will also aggregate and capitalize any payments that the company is regularly making, such as mortgage or lease payments.
-
Effective Duration
- A duration calculation for bonds with embedded options. Effective duration takes into account that expected cash flows will fluctuate as interest rates change.
-
Effective Tax Rate
- The rate a taxpayer would be taxed at if taxing was done at a constant rate, instead of progressively.
Calculated as total tax paid divided by taxable income.
- The rate a taxpayer would be taxed at if taxing was done at a constant rate, instead of progressively.
-
Effective Yield
- The yield of a bond, assuming that you reinvest the coupon (interest payments) once you have received payment.
-
Effects Test
- A method used in order to assess the discriminatory impact of credit policies. The statutory basis is the Equal Credit Opportunity Act which prohibits credit denials on the basis of marital status, national origin, age or whether applicants are receiving public assistance, as well as the Fair Housing Act.
- A method used in order to assess the discriminatory impact of credit policies. The statutory basis is the Equal Credit Opportunity Act which prohibits credit denials on the basis of marital status, national origin, age or whether applicants are receiving public assistance, as well as the Fair Housing Act.
-
Efficiency
- A level of performance that describes a process that uses the lowest amount of inputs to create the greatest amount of outputs. Efficiency relates to the use of all inputs in producing any given output, including personal time and energy.
-
Efficiency Principle
- An economic theory that states that the greatest benefit to society of any action is achieved when the marginal benefits from the allocation of resources are equivalent to the marginal social costs of the allocation.
-
Efficient Frontier
- A line created from the risk-reward graph, comprised of optimal portfolios.
- A line created from the risk-reward graph, comprised of optimal portfolios.
-
Efficient Market Hypothesis - EMH
- An investment theory that states it is impossible to "beat the market" because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information. According to the EMH, this means that stocks always trade at their fair value on stock exchanges, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices. As such, it should be impossible to outperform the overall market through expert stock selection or market timing, and that the only way an investor can possibly obtain higher returns is by purchasing riskier investments.
-
EGP
- The currency code for the Egyptian pound, the official currency of Egypt. The EGP replaced the Egyptian piastre in 1834. The pound was tied first to the gold standard and then the British pound, until 1962 when the country moderately devalued the pound and pegged it to the U.S. dollar. The EGP is unofficially used by residents of the Gaza Strip.
-
EIA Natural Gas Report
- A weekly report provided every Thursday by the Energy Information Administration. The report applies to natural gas reserves that are stored underground in the U.S. The amount of gas stored in inventory is a primary determinant for natural gas prices. Each report lists the data gathered from the previous week.
-
EIA Petroleum Status Report
- A report published every Wednesday by the Energy Information Administration. This report outlines the level of crude reserves held and produced by the U.S. both domestically and abroad. Each report contains data on oil reserves for the previous week ending on Friday.
-
Eighthed
- A slang term used to describe when one trader undercuts or outbids another's ask or bid by one-eighth of a dollar. This term carries a derogatory connotation, as it implies an attempt to steal a trade by a small change in price.
-
Either-Way Market
- A condition that exists in the eurodollar interbank deposit market when the bid and offer rates for a particular period are equal. Increasing levels of liquidity can narrow the spread between bid and offer rates until the two values are identical, resulting in an either-way market.
-
Elastic
- A situation in which the supply and demand for a good or service can vary significantly due to the price. The elasticity of a good or service can vary according to the amount of close substitutes, its relative cost and the amount of time that has elapsed since the price change occurred.
-
Elasticity
- A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which individuals (consumers/producers) change their demand/amount supplied in response to price or income changes.
Calculated as:
- A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which individuals (consumers/producers) change their demand/amount supplied in response to price or income changes.
-
Elder-Ray Index
- A technical indicator developed by Alexander Elder that measures the amount of buying and selling pressure in the market. This indicator consists of two separate indicators known as "bull power" and "bear power". These figures allow a trader to determine the position of the price relative to a certain exponential moving average (EMA).
Bull Power = Daily High - n-period EMA
Bear Power = Daily Low - n-period EMA
- A technical indicator developed by Alexander Elder that measures the amount of buying and selling pressure in the market. This indicator consists of two separate indicators known as "bull power" and "bear power". These figures allow a trader to determine the position of the price relative to a certain exponential moving average (EMA).
-
Elderly and Disabled Credit
- A non-refundable tax credit available for taxpayers who are aged 65 or over, or who are permanently and totally disabled. The Elderly and Disabled Credit is designed to provide a measure of financial relief for low-income senior citizens and taxpayers who are unable to engage in any kind of gainful employment as a result of their disability.
-
Election Period
- The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether or not he or she will exercise his or her option.
-
Elective-Deferral Contribution
- A contribution arrangement of an employer-sponsored retirement plan under which participants can choose to set aside part of their pretax compensation as a contribution to the plan.
Also known as "salary-deferral" or "salary-reduction contributions".
- A contribution arrangement of an employer-sponsored retirement plan under which participants can choose to set aside part of their pretax compensation as a contribution to the plan.
-
Electronic Benefit Transfer - EBT
- A system that allows state governments to provide and track benefits to authorized recipients via a plastic debit card. Common benefits provided via EBT are Food Stamps and Cash benefits. Recipients receive a plastic payment card with a magnetic strip and a PIN is issued. Cash benefits include State General Assistance, TANF (Temporary Aid for Needy Families) benefits and refugee benefits.
- A system that allows state governments to provide and track benefits to authorized recipients via a plastic debit card. Common benefits provided via EBT are Food Stamps and Cash benefits. Recipients receive a plastic payment card with a magnetic strip and a PIN is issued. Cash benefits include State General Assistance, TANF (Temporary Aid for Needy Families) benefits and refugee benefits.
-
Electronic Bill Payment & Presentment - EBPP
- A process used by companies to collect payments via the internet, direct dial access, ATM or other electronic method. Electronic Bill Payment & Presentment (EBPP) is a core component of financial institutions' online bank offerings. There are typically two types of EBPPs: biller-direct and bank-aggregator. Biller-direct refers to electronic billing offered directly by the company providing the good or service. Bank-aggregator refers to paying multiple bills electronically through your bank.
- A process used by companies to collect payments via the internet, direct dial access, ATM or other electronic method. Electronic Bill Payment & Presentment (EBPP) is a core component of financial institutions' online bank offerings. There are typically two types of EBPPs: biller-direct and bank-aggregator. Biller-direct refers to electronic billing offered directly by the company providing the good or service. Bank-aggregator refers to paying multiple bills electronically through your bank.
-
Electronic Check
- A form of payment made via the internet that is designed to perform the same function as a conventional paper check. Because the check is in an electronic format, it can be processed in fewer steps and has more security features than a standard paper check. Security features provided by electronic checks include authentication, public key cryptography, digital signatures and encryption, among others.
Also referred to as an "echeck".
- A form of payment made via the internet that is designed to perform the same function as a conventional paper check. Because the check is in an electronic format, it can be processed in fewer steps and has more security features than a standard paper check. Security features provided by electronic checks include authentication, public key cryptography, digital signatures and encryption, among others.
-
Electronic Check Presentment - ECP
- A process that allows financial institutions to exchange digital images of checks instead of paper to increase the speed of of the check cashing process. The signing of the Check Clearing for the 21st Century Act by President Bush permitted the use of electronic check presentment (ECP). Electronic check presentment saves financial institutions the cost of sending checks and the storage of those checks, in addition to better customer service.
- A process that allows financial institutions to exchange digital images of checks instead of paper to increase the speed of of the check cashing process. The signing of the Check Clearing for the 21st Century Act by President Bush permitted the use of electronic check presentment (ECP). Electronic check presentment saves financial institutions the cost of sending checks and the storage of those checks, in addition to better customer service.
-
Electronic Commerce - ecommerce
- A type of business model, or segment of a larger business model, that enables a firm or individual to conduct business over an electronic network, typically the internet. Electronic commerce operates in all four of the major market segments: business to business, business to consumer, consumer to consumer and consumer to business.
Also sometimes written as "e-commerce" or "eCommerce".
- A type of business model, or segment of a larger business model, that enables a firm or individual to conduct business over an electronic network, typically the internet. Electronic commerce operates in all four of the major market segments: business to business, business to consumer, consumer to consumer and consumer to business.
-
Electronic Communication Network - ECN
- An electronic system that attempts to eliminate the role of a third party in the execution of orders entered by an exchange market maker or an over-the-counter market maker, and permits such orders to be entirely or partly executed.
-
Electronic Currency Trading
- A method of trading currencies through an online brokerage account. Electronic currency trading involves converting base currency to a foreign currency at the market exchange rates through an online brokerage account.
-
Electronic Data Gathering, Analysis and Retrieval - EDGAR
- The electronic filing system created by the Securities and Exchange Commission for the purpose of increasing efficiency and accessibility to corporate filings. This system is used by all publicly traded companies when submitting required documents to the SEC. Corporate documents are time sensitive, and the creation of EDGAR has greatly decreased the time it takes for corporate documents to become publicly available.
-
Electronic Federal Tax Payment System - EFTPS
- A service offered by the U.S. Department of the Treasury that allows taxpayers to make tax payments either online or via telephone. The Electronic Federal Tax Payment System is available 24 hours a day, 7 days a week, and can be used by individuals paying personal income taxes or by corporations. This service saves taxpayers the time and inconvenience of making payments by mail or in person.
- A service offered by the U.S. Department of the Treasury that allows taxpayers to make tax payments either online or via telephone. The Electronic Federal Tax Payment System is available 24 hours a day, 7 days a week, and can be used by individuals paying personal income taxes or by corporations. This service saves taxpayers the time and inconvenience of making payments by mail or in person.
-
Electronic Filing - E-File
- The process of submitting tax forms over the internet, using tax preparation software.
-
Electronic Payments Network - EPN
- An electronic automated clearing house (ACH) that serves as the sole ACH for the private sector in the United States. The Electronic Payments Network handles numerous types of credit transfers, such as payroll payments, dividends, etc., as well as debit transfers, such as loan payments and insurance premiums.
- An electronic automated clearing house (ACH) that serves as the sole ACH for the private sector in the United States. The Electronic Payments Network handles numerous types of credit transfers, such as payroll payments, dividends, etc., as well as debit transfers, such as loan payments and insurance premiums.
-
Electronic Transfer Account - ETA
- A bank account for federal payment recipients who do not have checking or savings accounts. Instead of receiving federal payments by check for Social Security, SSI, the Railroad Retirement Board, OPM retirement, VA benefits, DOL/Black Lung and civilian or military salary or wages, an ETA allows the recipient to receive his or her federal transfer payment by direct deposit, which is considered to be faster, more convenient and more secure than receiving payment by check.
-
Elephants
- Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants deal in, any investment decisions that they make will have a large influence on the price of the underlying financial asset.
-
Elevator Pitch
- A slang term used to describe a brief speech that outlines an idea for a product, service or project. The name comes from the notion that the speech should be delivered in the short time period of an elevator ride, usually 20-60 seconds.
In the financial world, the speech refers to an entrepreneur's attempt to convince a venture capitalist that a business idea is worth investing in.
- A slang term used to describe a brief speech that outlines an idea for a product, service or project. The name comes from the notion that the speech should be delivered in the short time period of an elevator ride, usually 20-60 seconds.
-
Eligible Automatic Contribution Arrangements - EACAs
- Also known as EACAs, these were created as part of the Pension Protection Act of 2006 to encourage more worker participation in self-funded defined contribution retirement plans. Like QACAs, all eligible employees must be enrolled in EACA plans and given adequate notice and information about the plan, as well as their contribution and withdrawal rights.
- Also known as EACAs, these were created as part of the Pension Protection Act of 2006 to encourage more worker participation in self-funded defined contribution retirement plans. Like QACAs, all eligible employees must be enrolled in EACA plans and given adequate notice and information about the plan, as well as their contribution and withdrawal rights.
-
Eligible Commercial Entity
- A contract participant who has proven abilities in risk management related to commodity trading and accepting or delivering the underlying commodities of a futures contract. The eligible commercial entity may be a dealer for hedging and risk management tools, or act as a market maker in commodity or derivative transactions. The requirements for eligible commercial entities are found in the Commodities Exchange Act.
-
Eligible Contract Participant
- A group or individual allowed to engage in financial transactions not open to retail customers. The Commodity Exchange Act outlines the requirements for eligibility, stating that those seeking to become eligible contract participants must have sufficient regulated status or a specified amount of assets.
-
Eligible Rollover Distribution
- A distribution from an IRA, qualified plan, 403(b) plan or 457 plan that is eligible to be rolled over to another eligible retirement plan.
-
Elimination Period
- The length of time between when an injury or illness begins and receiving benefit payments from an insurer. Also known as the "waiting" or "qualifying" period, policyholders must in the interim pay for these services and can be thought of as a deductible.
-
Elliott Wave Theory
- Theory named after Ralph Nelson Elliott, who concluded that the movement of the stock market could be predicted by observing and identifying a repetitive pattern of waves.
-
Elves
- A slang term for the technical analysts who appeared on the PBS television show "Wall Street Week", which aired from 1970 to 2005. The elves attempted to predict the direction of the market in the coming months and gained popularity due to their inability to make accurate predictions.
-
Email Money Transfer - EMT
- A retail banking service that allows users to transfer funds between personal accounts using email and their online banking service. Email money transfers are considered secure because only the notification of transfer is done through email. The actual funds are settled through the existing funds transfer networks that banks have used for years.
-
Embargo
- A government order that restricts commerce or exchange with a specified country. An embargo is usually created as a result of unfavorable political or economic circumstances between nations. The restriction looks to isolate the country and create difficulties for its governing body, forcing it to act on the underlying issue.
-
Embedded Option
- An option that is an inseparable part of another instrument. Compare this to a normal (or bare) option, which trades separately from the underlying security.
-
Embedded Value
- A common valuation measure used outside North America, particularly in the insurance industry. It is calculated by adding the adjusted net asset value and the present value of future profits of a firm. The present value of future profits considers the potential profits that shareholders will receive in the future, while adjusted net asset value considers the funds belonging to shareholders that have been accumulated in the past.
- A common valuation measure used outside North America, particularly in the insurance industry. It is calculated by adding the adjusted net asset value and the present value of future profits of a firm. The present value of future profits considers the potential profits that shareholders will receive in the future, while adjusted net asset value considers the funds belonging to shareholders that have been accumulated in the past.
-
Embezzlement
- A form of white-collar crime where a person misappropriates the assets entrusted to him or her. In this type of fraud the assets are attained lawfully and the embezzler has the right to possess them, but the assets are then used for unintended purposes. Embezzlement is a breach of the fiduciary responsibilities placed upon a person.
-
Emergency Banking Act Of 1933
- A bill passed during the administration of former U.S. President Franklin D. Roosevelt in reaction to the financially adverse conditions of the Great Depression. The measure, which called for a four-day mandatory shutdown of U.S. banks for inspections before they could be reopened, sought to re-instill investor confidence and stability in the banking system.
-
Emergency Credit
- A loan given by a federal reserve bank to a non-bank institution or organization when no other source of credit is available. The organization in need must examine all other potential sources of funds first. Most of these loans are longer-term, usually more than 30 days.
-
Emergency Economic Stabilization Act (EESA) of 2008
- One of the bailout measures taken by Congress in 2008 to help repair the damage from the subprime mortgage crisis. The act gives the Treasury Secretary the authority to buy up to $700 billion of troubled assets and restore liquidity in financial markets. The Emergency Economic Stabilization Act (EESA) was originally created and proposed by Henry Paulson.
-
Emergency Fund
- An account that is used to set aside funds to be used in an emergency, such as the loss of a job, an illness or a major expense. The purpose of the fund is to improve financial security by creating a safety net of funds that can be used to meet emergency expenses as well as reduce the need to use high interest debt, such as credit cards, as a last resort.
- An account that is used to set aside funds to be used in an emergency, such as the loss of a job, an illness or a major expense. The purpose of the fund is to improve financial security by creating a safety net of funds that can be used to meet emergency expenses as well as reduce the need to use high interest debt, such as credit cards, as a last resort.
-
Emerging Industry
- An industry, usually formed by a new product or idea, that is in the early stages of development.
-
Emerging Issues Task Force - EITF
- An organization formed in 1984 by the Financial Accounting Standards Board (FASB) to provide assistance with timely financial reporting. The EITF holds public meetings in order to identify and resolve accounting issues occurring in the financial world.
-
Emerging Market Economy
- A nation's economy that is progressing toward becoming advanced, as shown by some liquidity in local debt and equity markets and the existence of some form of market exchange and regulatory body.
Emerging markets generally do not have the level of market efficiency and strict standards in accounting and securities regulation to be on par with advanced economies (such as the United Stated, Europe and Japan), but emerging markets will typically have a physical financial infrastructure including banks, a stock exchange and a unified currency.
- A nation's economy that is progressing toward becoming advanced, as shown by some liquidity in local debt and equity markets and the existence of some form of market exchange and regulatory body.
-
Emerging Market ETF
- An exchange-traded fund that focuses on the stocks of emerging market economies, such as Latin America, Asia and Eastern Europe. The underling indexes tracked by emerging market ETFs vary from one fund manager to another, but all should be passively managed and contain equities from multiple countries, unless otherwise stated.
Within the broad class of emerging market ETFs, there are fund members that focus on certain market-capitalization ranges, high-dividend stocks, or funds with high allocations towards specific sectors.
- An exchange-traded fund that focuses on the stocks of emerging market economies, such as Latin America, Asia and Eastern Europe. The underling indexes tracked by emerging market ETFs vary from one fund manager to another, but all should be passively managed and contain equities from multiple countries, unless otherwise stated.
-
Emerging Market Fund
- A mutual fund or exchange-traded fund that invests the majority of its assets in the financial markets of a single developing country or a grouping of developing countries. For the most part, these countries are in Eastern Europe, Africa, the Middle East, Latin America, the Far East and Asia.
-
Emerging Markets Bond Index - EMBI
- A benchmark index for measuring the total return performance of international government bonds issued by emerging market countries that are considered sovereign (issued in something other than local currency) and that meet specific liquidity and structural requirements.
The most popular indexes are the J.P. Morgan Emerging Bond Index (EMBI) and EMBI+; the latter measures both Brady bonds and other sovereign debt while the EMBI measures only Brady bonds. In order to qualify for index membership, the debt must be more than one year to maturity, have more than $500 million outstanding, and meet stringent trading guidelines to ensure that pricing inefficiencies don't affect the index.
- A benchmark index for measuring the total return performance of international government bonds issued by emerging market countries that are considered sovereign (issued in something other than local currency) and that meet specific liquidity and structural requirements.
-
Emigration
- The relocation of people from one country to reside in another. People emigrate for many reasons, include increasing one's chance of employment or improving quality of life.
-
Eminent Domain
- The power the government has to obtain the property of an individual even without the person's full consent. In most countries, including the U.S., the land owner will be compensated for the land at fair market value. This power allows the government to seize land to be used in public enterprises such as roads, schools, or utilities installations. Eminent domain is generally found in some form in most common law nations.
Also known as "compulsory purchase" (U.K, New Zealand and Ireland), "expropriation" (Canada) and "compulsory acquisition" (Australia).
- The power the government has to obtain the property of an individual even without the person's full consent. In most countries, including the U.S., the land owner will be compensated for the land at fair market value. This power allows the government to seize land to be used in public enterprises such as roads, schools, or utilities installations. Eminent domain is generally found in some form in most common law nations.
-
Emirates Interbank Offered Rate - EIBOR
- The interest rate charged by banks in the United Arab Emirates for interbank transactions. In most cases, EIBOR is the reference rate most commonly used by borrowers and lenders to conduct financial transactions in Dubai and the surrounding Emirates.
- The interest rate charged by banks in the United Arab Emirates for interbank transactions. In most cases, EIBOR is the reference rate most commonly used by borrowers and lenders to conduct financial transactions in Dubai and the surrounding Emirates.
-
Emissions Reduction Purchase Agreement - ERPA
- A transaction that transfers carbon credits between two parties under the Kyoto Protocol. The buyer pays the seller cash in exchange for carbon credits, thereby allowing the purchaser to emit more carbon dioxide into the atmosphere. The standards for this agreements are outlined by the International Emissions Trading Association.
-
Emotional Neutrality
- The concept of removing greed, fear and other human emotions from financial or investment decisions. The goal of emotional neutrality is to remove any weight that emotions may play in the process of making objective financial decisions, so that the best possible decision can be made, in spite of whatever emotions those decisions may trigger.
-
Empire Building
- The act of attempting to increase the size and scope of an individual or organization's power and influence. In the corporate world, this is seen when managers or executives are more concerned with expanding their business units, their staffing levels and the dollar value of assets under their control than they are with developing and implementing ways to benefit shareholders.
-
Empirical Duration
- The calculation of a bond's duration based on historical data. Empirical duration is estimated statistically using historical market-based bond prices and historical market-based Treasury yields. When the historical yields change, the historical bond prices will change accordingly, which forms that basis for empirical duration. Regression analysis is the statistical process used to estimate empirical duration.
Duration is the percentage change in a bond's price with a 100-basis-point change in yield.
- The calculation of a bond's duration based on historical data. Empirical duration is estimated statistically using historical market-based bond prices and historical market-based Treasury yields. When the historical yields change, the historical bond prices will change accordingly, which forms that basis for empirical duration. Regression analysis is the statistical process used to estimate empirical duration.
-
Empirical Probability
- A form of probability that is based on some event occurring, which is calculated using collected empirical evidence. An empirical probability is closely related to the relative frequency in a given probability distribution.
-
Empirical Rule
- A statistical rule stating that for a normal distribution, almost all data will fall within three standard deviations of the mean. Broken down, the empirical rule shows that 68% will fall within the first standard deviation, 95% within the first two standard deviations, and 99.7% will fall within the first three standard deviations of the mean.
Also referred to as the Three Sigma Rule, or the 68-95-99.7 Rule.
- A statistical rule stating that for a normal distribution, almost all data will fall within three standard deviations of the mean. Broken down, the empirical rule shows that 68% will fall within the first standard deviation, 95% within the first two standard deviations, and 99.7% will fall within the first three standard deviations of the mean.
-
Employee Benefits Security Administration - EBSA
- A division of the Department of Labor (DOL) charged with enforcing the rules governing the conduct of plan managers, the investment of plan assets, the reporting and disclosure of plan information, the fiduciary provisions of the law, and workers' benefit rights.
-
Employee Buyout - EBO
- A restructuring strategy in which employees buy a majority stake in their own firms. This form of buyout is often done by firms looking for an alternative to a leveraged buyout. Companies being sold can be either healthy companies or ones that are in significant financial distress.
-
Employee Contribution Plan
- A company-sponsored retirement plan where employees make deposits (contributions) to an account. Contributions are deducted from employee's pay; some companies match those payments.
-
Employee Retirement Income Security Act - ERISA
- The Employee Retirement Income Security Act of 1974 (ERISA) protects the retirement assets of Americans by implementing rules that qualified plans must follow to ensure that plan fiduciaries do not misuse plan assets.
-
Employee Savings Plan
- A pooled investment account provided by an employer that allows employees to set aside a portion of their pretax wages for retirement savings or other long-term goals (i.e. paying for college tuition, purchasing a home). Many employers match their employees' contributions up to a certain dollar amount, or by a certain percentage.
-
Employee Share Ownership Trust - ESOT
- A program that facilitates the acquisition and distribution of a company's shares to its employees.
-
Employee Stock Option - ESO
- A stock option granted to specified employees of a company. ESOs carry the right, but not the obligation, to buy a certain amount of shares in the company at a predetermined price. An employee stock option is slightly different from a regular exchange-traded option because it is not generally traded on an exchange, and there is no put component. Furthermore, employees typically must wait a specified vesting period before being allowed to exercise the option.
- A stock option granted to specified employees of a company. ESOs carry the right, but not the obligation, to buy a certain amount of shares in the company at a predetermined price. An employee stock option is slightly different from a regular exchange-traded option because it is not generally traded on an exchange, and there is no put component. Furthermore, employees typically must wait a specified vesting period before being allowed to exercise the option.
-
Employee Stock Ownership Plan - ESOP
- A qualified, defined contribution, employee benefit (ERISA) plan designed to invest primarily in the stock of the sponsoring employer. ESOPs are "qualified" in the sense that the ESOP's sponsoring company, the selling shareholder and participants receive various tax benefits. ESOPs are often used as a corporate finance strategy and are also used to align the interests of a company's employees with those of the company's shareholders.
-
Employee Stock Purchase Plan - ESPP
- A company-run program in which participating employees can purchase company shares at a discounted price. Employees contribute to the plan through payroll deductions, which build up between the offering date and the purchase date. At the purchase date, the company uses the accumulated funds to purchase shares in the company on behalf of the participating employees. The amount of the discount depends on the specific plan but can be as much as 15% lower than the market price.
-
Employee Trust
- A trust fund established by an employer on behalf of its empoyees, in which the company is the grantor and its employees are the beneficiaries. The person responsible for managing the employee trust or assets of the trust is called the trustee.
-
Employer-Sponsored Plan
- A type of benefit plan that an employer offers for the benefit of his/her employees at no or a relatively low cost to the employees. If employees participate in the plan, they will benefit from its low-cost method of obtaining discounted services. The benefit to the employer is that initiating these plans usually has some tax-deductible component, and sponsoring benefits is generally a good method of retaining valuable employees.
-
Employment Act Of 1946
- An act of legislation enacted by the United States Congress that charged the government with the responsibility of maintaining a high employment level of labor and price stability. These two goals are in direct conflict with each other, because as full employment is achieved consistently over time, demand-pull inflation will result.
-
Employment And Training Administration - ETA
- A federal agency that operates under the U.S. Department of Labor. The agency's responsibilities include monitoring and administering information to the U.S. labor market. It is focused on employee development and training, increasing employment opportunities and helping manage local and state unemployment insurance.
-
Employment Cost Index - ECI
- A quarterly report from the U.S. Department of Labor that measures the growth of employees' compensation (wages and benefits). The index is based on a survey of employer payrolls in the final month of each quarter. The ECI tracks movement in the cost of labor, including wages, fringe benefits and bonuses for employees at all levels of a company.
-
Employment Situation Report
- A monthly report compiling a set of surveys in an attempt to monitor the labor market. The Employment Situation Report, released by the Bureau of Labor Statistics, by the U.S. Department of Labor, consists of:
- The unemployment rate - the number of unemployed workers expressed as a percentage of the labor force.
- Non-farm payroll employment - the number of employees working in U.S. business or government. This includes either full-time or part-time employees.
- Average workweek - the average number of hours per week worked in the non-farm sector.
- Average hourly earnings - the average basic hourly rate for major industries.
- A monthly report compiling a set of surveys in an attempt to monitor the labor market. The Employment Situation Report, released by the Bureau of Labor Statistics, by the U.S. Department of Labor, consists of:
-
Employment-To-Population Ratio
- A macroeconomic statistic that takes the ratio of the total working age of the labor force currently employed to the total working age population of a region, municipality or country. It is calculated by:
The working force and population only include individuals within the working age.
- A macroeconomic statistic that takes the ratio of the total working age of the labor force currently employed to the total working age population of a region, municipality or country. It is calculated by:
-
Encumbered Securities
- Securities that are owned by one entity, but subject to a legal claim by another.
When an entity borrows from another, legal claim on the securities owned by the borrower can be taken as security by the lender should the borrower default on its obligation. The securities' owner still has title to the securities, but the claim or lien remains on record. In the event that the securities are sold, the party with the legal claim on them must be given first opportunity to be paid back. In some cases, encumbered securities cannot be sold until any outstanding debts belonging to the owner of the securities are paid to the lender who holds claim against the securities.
- Securities that are owned by one entity, but subject to a legal claim by another.
-
Encumbrance
- A claim against a property by another party. Encumbrance usually impacts the transferability of the property.
-
End Loan
- A permanent, long-term loan used to pay off a short-term construction loan or other form of interim financing. Although an end loan can have interest-only or other features that delay the repayment of principal, at some point, an end loan begins to amortize. This differs from construction loans or other forms of interim financing, which are typically interest-only loans that require full repayment of principal and accrued interest only upon dispersement of funds from the end loan.
-
End To End
- A term used in many business arenas referring to the beginning and end points of a method or service. End-to-end theory embraces the philosophy that eliminating as many middle layers or steps as possible will optimize performance and efficiency in any process.
- A term used in many business arenas referring to the beginning and end points of a method or service. End-to-end theory embraces the philosophy that eliminating as many middle layers or steps as possible will optimize performance and efficiency in any process.
-
Ending Inventory
- A book value of goods, inputs, or materials available for use or sale at the end of an inventory accounting period.
-
Ending Market Value (EMV)
- The value of an investment at the end of the investment period. Ending market value (EMV) is calculated by taking the beginning market value and adding the interest earned over the course of the investment.
Ending Market Value = Beginning Market Value x (1 + interest rate).
This is an important equation to consider when choosing an investment as the time value of money can be a valuable decision-making variable.
- The value of an investment at the end of the investment period. Ending market value (EMV) is calculated by taking the beginning market value and adding the interest earned over the course of the investment.
-
Endogenous Growth Theory
- An economic theory which argues that economic growth is generated from within a system as a direct result of internal processes. More specifically, the theory notes that the enhancement of a nation's human capital will lead to economic growth by means of the development of new forms of technology and efficient and effective means of production.
-
Endorsement
- 1. A legal term that refers to the signing of a document which allows for the legal transfer of a negotiable from one party to another.
2. An attachment to a document that amends or adds to it. Typically, it is an added provision to an insurance policy. Also referred to as a "rider".
- 1. A legal term that refers to the signing of a document which allows for the legal transfer of a negotiable from one party to another.
-
Endorser
- A person who is authorized to sign a negotiable security in order to transfer ownership from one party to another, or to approve the terms and conditions of a contract. Endorsing a check before it is cashed or deposited is the most common and widely known example, but an endorser is also required to complete such transactions as transferring a car title or trading a financial security.
-
Endowment
- A financial asset donation made to a non-profit group or institution in the form of investment funds or other property that has a stated purpose at the bequest of the donor. Most endowments are designed to keep the principal amount intact while using the investment income from dividends for charitable efforts.
- A financial asset donation made to a non-profit group or institution in the form of investment funds or other property that has a stated purpose at the bequest of the donor. Most endowments are designed to keep the principal amount intact while using the investment income from dividends for charitable efforts.
-
Endowment Fund
- An investment fund set up by an institution in which regular withdrawals from the invested capital are used for ongoing operations or other specified purposes. Endowment funds are often used by nonprofits, universities, hospitals and churches. They are funded by donations, which are tax deductible for donors.
-
Endowment Loan
- A type of mortgage in which the borrower makes only interest payments on the mortgage, while payments that would have gone to repay the principal are instead funneled into an endowment fund. Under an endowment loan, the borrower does not repay the principal until the mortgage expires.
-
Enduring Purpose
- Similar to a corporate mission statement, enduring purpose is a combination of a company's goals, attitudes, and beliefs.
-
Energy Derivatives
- A derivative instrument in which the underlying asset is based on energy products including oil, natural gas and electricity, which trade either on an exchange or over-the-counter. Energy derivatives can be options, futures or swap agreements, among others. The value of a derivative will vary based on the changes of the price of the underlying energy product.
-
Energy ETF
- A broad class of ETFs that includes funds focused on oil and gas exploration, the generation, distribution and retail sale of gas and other refined products, electric utilities and alternative energy production. Energy ETFs may invest in only United States-based companies, globally based energy companies, or a blend of the two.
The offerings within the energy ETF class include replications of the energy-sector stocks found in the S&P 500, U.S. energy producers, global energy producers and funds of a particular sub-sector designation, such as nuclear, coal, gas, etc. The weighting of stocks within these ETFs can be market-cap based, equally-weighted or fundamentally weighted, based on financial metrics like net earnings and dividend yield.
- A broad class of ETFs that includes funds focused on oil and gas exploration, the generation, distribution and retail sale of gas and other refined products, electric utilities and alternative energy production. Energy ETFs may invest in only United States-based companies, globally based energy companies, or a blend of the two.
-
Energy Improvement Mortgage
- A mortgage that sets money aside for home improvements that will increase energy efficiency within the home. Energy improvement mortgages are available when a house is being purchased or refinanced. A certified home energy rater will examine the home and suggest improvements; once the improvements have been made and confirmed, the lender will repay the expenses (which have already been approved under the mortgage contract) to the borrower from an escrow account.
-
Energy Information Administration - EIA
- A government agency formed in 1977 as an advisor to the U.S. Department of Energy. The EIA is responsible for objectively collecting energy data, conducting analysis and making forecasts. EIA's reports contain information regarding important energy-related factors such as future energy inventories, demand and prices. Its data, analysis and reports are available online to both members of the public and the private sector.
-
Energy Sector
- A category of stocks that relate to producing or supplying energy. This sector includes companies involved in the exploration and development of oil or gas reserves, oil and gas drilling, or integrated power firms.
-
Enhanced Index Fund - EIF
- A mutual fund that tracks a stock market index, but with certain modifications in place to allow for more equivalent position sizes, the exclusion of certain securities, or the use of leverage, all with the goal of beating the return of the tracking index. These types of funds are actively managed, and will often use the S&P 500 Index as the tracking index.
-
Enhanced Indexing
- An investment philosophy that attempts to amplify the returns of an underlying portfolio or index fund while also minimizing the effects of tracking error. This type of investing is considered a hybrid between active and passive management and is used to describe any strategy that is used in conjunction with index funds for the purpose of outperforming a specific benchmark.
-
Enrolled Agent - EA
- A tax professional authorized by the U.S. government to be able to represent taxpayers in matters concerning the Internal Revenue Service (IRS). Enrolled agents must pass an examination proving competence or having sufficient experience as an IRS employee, as well as passing a background check, before receiving the designation.
-
Enron
- A U.S. energy-trading and utilities company that housed one of the biggest accounting frauds in history. Enron's executives employed accounting practices that falsely inflated the company's revenues, which, at the height of the scandal, made the firm become the seventh largest corporation in the United States. Once the fraud came to light, the company quickly unraveled and filed for Chapter 11 bankruptcy on Dec. 2, 2001.
-
Enronomics
- A fraudulent accounting technique that involves a parent company making artificial paper-only transactions with its subsidiaries to hide losses the parent company has incurred through business activities.
By transferring losses to off-book entities or wholly-owned subsidiaries, the now-bankrupt energy corporation Enron created one of the largest accounting scandals and securities frauds in history.
- A fraudulent accounting technique that involves a parent company making artificial paper-only transactions with its subsidiaries to hide losses the parent company has incurred through business activities.
-
Enterprise Multiple
- A ratio used to determine the value of a company. The enterprise multiple looks at a firm as a potential acquirer would, because it takes debt into account - an item which other multiples like the P/E ratio do not include. Enterprise multiple is calculated as:
Also known as the EBITDA Multiple.
- A ratio used to determine the value of a company. The enterprise multiple looks at a firm as a potential acquirer would, because it takes debt into account - an item which other multiples like the P/E ratio do not include. Enterprise multiple is calculated as:
-
Enterprise Resource Planning - ERP
- A process by which a company (often a manufacturer) manages and integrates the important parts of its business. An ERP management information system integrates areas such as planning, purchasing, inventory, sales, marketing, finance, human resources, etc.
-
Enterprise Value - EV
- A measure of a company's value, often used as an alternative to straightforward market capitalization. Enterprise value is calculated as market cap plus debt, minority interest and preferred shares, minus total cash and cash equivalents.
-
Enterprise-Value-To-Sales - EV/Sales
- A valuation measure that compares the enterprise value of a company to the company's sales. EV/sales gives investors an idea of how much it costs to buy the company's sales. This measure is an expansion of the price-to-sales valuation, which uses market capitalization instead of enterprise value. EV/sales is seen as more accurate because market capitalization does not take into account as well as enterprise value the amount of debt a company has, which needs to be paid back at some point. Generally the lower the EV/sales the more attractive or undervalued the company is believed to be.
- A valuation measure that compares the enterprise value of a company to the company's sales. EV/sales gives investors an idea of how much it costs to buy the company's sales. This measure is an expansion of the price-to-sales valuation, which uses market capitalization instead of enterprise value. EV/sales is seen as more accurate because market capitalization does not take into account as well as enterprise value the amount of debt a company has, which needs to be paid back at some point. Generally the lower the EV/sales the more attractive or undervalued the company is believed to be.
-
Entity-Purchase Agreement
- A type of business succession plan that is used by companies that have more than one owner. The plan involves having the company take out an insurance policy on the lives of owners in the amount equal to each owner's interest. In the event of death, the amount collected by the company from the insurance, which is equal to the deceased owners stake, is used to pay the deceased's estate for its share of the business.
-
Entrance Fee
- A term that can refer to any charge for admission. However, it is commonly used in reference to continuing-care retirement communities (CCRCs). Rather than purchase a unit in a CCRC, residents typically pay a high entrance fee and monthly payments. The entrance fee is paid in exchange for services provided at the CCRC, such as nursing care throughout the lifetime of the resident.
-
Entrepôt
- A seaport or warehouse where goods are stored until they are shipped. The goods do not face any import or export duties upon shipment from the port or warehouse.
-
Entrepreneur
- An individual who, rather than working as an employee, runs a small business and assumes all the risk and reward of a given business venture, idea, or good or service offered for sale. The entrepreneur is commonly seen as a business leader and innovator of new ideas and business processes.
-
Envelope
- A trading band composed of two moving averages, one of which is shifting upwards and the other shifting downwards.
-
Equal Credit Opportunity Act - ECOA
- A regulation created by the U.S. government that aims to give all legal individuals an equal opportunity to apply for loans from financial institutions and other loan granting organizations. Individuals cannot be discriminated upon via factors that are not directly related to their creditworthiness.
-
Equal Weight
- A type of weighting that gives the same weight, or importance, to each stock in a portfolio or index fund. The smallest companies are given equal weight to the largest companies in an equal-weight index fund or portfolio. This allows all of the companies to be considered on an even playing field.
-
Equalization Payments
- A payment to a state, province or individual from the federal government for the purpose of offsetting monetary imbalances between different parts of the country or between individuals. Equalization payments help create comparable levels of public services, such as education and healthcare, and to supplement disadvantaged individuals with disabilities or low income.
Also known as "transfer payments".
- A payment to a state, province or individual from the federal government for the purpose of offsetting monetary imbalances between different parts of the country or between individuals. Equalization payments help create comparable levels of public services, such as education and healthcare, and to supplement disadvantaged individuals with disabilities or low income.
-
Equalization Reserve
- A long-term reserve that an insurance company keeps for the purpose of preventing cash-flow depletion in the event of a significant unforeseen catastrophe.
-
Equalizing Dividend
- An additional dividend paid to eligible stockholders when their divided income is reduced due to a change the board of directors makes to the dividend payment schedule.
-
Equated Monthly Installment - EMI
- A fixed payment amount made by a borrower to a lender at a specified date each calendar month. Equated monthly installments are used to pay off both interest and principal each month, so that over a specified number of years, the loan is paid off in full.
-
Equation Of Exchange
- An economic equation that showcases the relationship between money supply, velocity of money, the price level and an index of expenditures. The equation was derived by John Stuart Mill, and based of the early ideas of David Hume. The equation of exchange is as follows:
Where:
M = money supply
V = velocity of money
P = average price level of goods
T = index of expenditures (such as the total number of economic transactions)
- An economic equation that showcases the relationship between money supply, velocity of money, the price level and an index of expenditures. The equation was derived by John Stuart Mill, and based of the early ideas of David Hume. The equation of exchange is as follows:
-
Equilibrium
- The state in which market supply and demand balance each other and, as a result, prices become stable. Generally, when there is too much supply for goods or services, the price goes down, which results in higher demand. The balancing effect of supply and demand results in a state of equilibrium.
-
Equipment Trust Certificate
- A debt instrument that allows a company to take possession of an asset and pay for it over time. The debt issue is secured by the equipment or physical assets, as the title for the equipment is held in trust for the holders of the issue. When the debt is paid off, the equipment becomes the property of the issuer, as the title is transfered to the company.
-
Equity
- 1. A stock or any other security representing an ownership interest.
2. On a company's balance sheet, the amount of the funds contributed by the owners (the stockholders) plus the retained earnings (or losses). Also referred to as "shareholders' equity".
3. In the context of margin trading, the value of securities in a margin account minus what has been borrowed from the brokerage.
4. In the context of real estate, the difference between the current market value of the property and the amount the owner still owes on the mortgage. It is the amount that the owner would receive after selling a property and paying off the mortgage.
5. In terms of investment strategies, equity (stocks) is one of the principal asset classes. The other two are fixed-income (bonds) and cash/cash-equivalents. These are used in asset allocation planning to structure a desired risk and return profile for an investor's portfolio.
- 1. A stock or any other security representing an ownership interest.
-
Equity Accounting
- A method of accounting whereby a corporation will document a portion of the undistributed profits for an affiliated company in which they own a position.
-
Equity Capital Market - ECM
- A market that exists between companies and financial institutions that is used to raise equity capital for the companies. Some activities that companies operate in the equity capital markets include: overall marketing, distribution and allocation of new issues; initial public offerings, special warrants, and private placements. Along with stocks, the equity capital markets deal with derivative instruments such as futures, options and swaps.
-
Equity Derivative
- A derivative instrument with underlying assets based on equity securities. An equity derivative's value will fluctuate with changes in its underlying asset's equity, which is usually measured by share price.
-
Equity Financing
- The act of raising money for company activities by selling common or preferred stock to individual or institutional investors. In return for the money paid, shareholders receive ownership interests in the corporation.
Also known as "share capital".
- The act of raising money for company activities by selling common or preferred stock to individual or institutional investors. In return for the money paid, shareholders receive ownership interests in the corporation.
-
Equity Fund
- A mutual fund that invests principally in stocks. It can be actively or passively (index fund) managed.
Also known as a "stock fund".
- A mutual fund that invests principally in stocks. It can be actively or passively (index fund) managed.
-
Equity Income
- 1. Dividend income that is earned through an investment in stocks (equity).
2. A type of mutual fund that invests in high-quality companies with a reliable history of dividend payments and growth in the dividend rate.
- 1. Dividend income that is earned through an investment in stocks (equity).
-
Equity Linked Foreign Exchange Option - ELF-X
- A put or call option that protects an investor from foreign-exchange risk for a future sale or purchase of a specified foreign-equity portfolio.
-
Equity Linked Note - ELN
- An instrument whose return is determined by the performance of a single equity security, a basket of equity securities, or an equity index.
-
Equity Market
- The market in which shares are issued and traded, either through exchanges or over-the-counter markets. Also known as the stock market, it is one of the most vital areas of a market economy because it gives companies access to capital and investors a slice of ownership in a company with the potential to realize gains based on its future performance.
-
Equity Market Capitalization
A measure of the total market value of an equity market. The measure is calculated by taking the market capitalization of all companies in the equity market and adding them together to arrive at the capitalization for the market as a whole.
-
Equity Market Neutral
- A hedge fund strategy that seeks to exploit differences in stock prices by being long and short in stocks within the same sector, industry, market capitalization, country, etc. This strategy creates a hedge against market factors.
-
Equity Method
- An accounting technique used by firms to assess the profits earned by their investments in other companies. The firm reports the income earned on the investment on its income statement and the reported value is based on the firm's share of the company assets. The reported profit is proportional to the size of the equity investment. This is the standard technique used when one company has significant influence over another.
-
Equity Multiplier
- A measure of financial leverage. Calculated as:
Total Assets / Total Stockholders' Equity
Like all debt management ratios, the equity multiplier is a way of examining how a company uses debt to finance its assets. Also known as the financial leverage ratio or leverage ratio.
- A measure of financial leverage. Calculated as:
-
Equity Premium Puzzle - EPP
- An phenomenon that describes the anomalously higher historical real returns of stocks over government bonds. The equity premium, which is defined as equity returns less bond returns, has been about 6% on average for the past century. It is supposed to reflect the relative risk of stocks compared to "risk-free" government bonds, but the puzzle arises because this unexpectedly large percentage implies a suspiciously high level of risk aversion among investors.
-
Equity Risk Premium
- The excess return that an individual stock or the overall stock market provides over a risk-free rate. This excess return compensates investors for taking on the relatively higher risk of the equity market. The size of the premium will vary as the risk in a particular stock, or in the stock market as a whole, changes; high-risk investments are compensated with a higher premium.
Also referred to as "equity premium".
- The excess return that an individual stock or the overall stock market provides over a risk-free rate. This excess return compensates investors for taking on the relatively higher risk of the equity market. The size of the premium will vary as the risk in a particular stock, or in the stock market as a whole, changes; high-risk investments are compensated with a higher premium.
-
Equity Stripping
- The process of reducing the overall equity in a property in order to avoid creditors. The theory behind equity stripping is simply that by reducing your interest in a given property, thereby reducing any equity, creditors will not go to great lengths to include the property in any claims.
-
Equity Style Box
- A visual representation of the principle investment characteristics of stocks and stock mutual funds. The style box was created by Morningstar and is a valuable tool for investors to use to determine the risk-return structures of their stocks/stock portfolios and/or how these investments fit into their investing criteria
Also known as a "stock style box".
- A visual representation of the principle investment characteristics of stocks and stock mutual funds. The style box was created by Morningstar and is a valuable tool for investors to use to determine the risk-return structures of their stocks/stock portfolios and/or how these investments fit into their investing criteria
-
Equity Swap
- An exchange of cash flows between two parties that allows each party to diversify its income, while still holding its original assets. The two sets of nominally equal cash flows are exchanged as per the terms of the swap, which may involve an equity-based cash flow (such as from a stock asset) that is traded for a fixed-income cash flow (such as a benchmark rate), but this is not necessarily the case. Besides diversification and tax benefits, equity swaps also allow large institutions to hedge specific assets or positions in their portfolios.
-
Equity Unit Investment Trust
- A registered trust in which investors purchase units from a fixed portfolio of equities, which are chosen and managed by a professional money manager. Securities in the trust remain there for the life of the trust, which is most often one year. At that point they can either be liquidated at market value or rolled over into a newer, current version of the trust.
-
Equity-Efficiency Tradeoff
- An economic situation in which there is a perceived tradeoff between the equity and efficiency of a given economy. This tradeoff is commonly viewed within the context of the production possibility frontier, where any additional gains in production efficiency must be offset by a reduction in the economy's equity.
-
Equity-Indexed Universal Life Insurance
- A permanent life insurance policy that allows policyholders to tie accumulation values to a stock market index. Indexed universal life insurance policies typically contain a minimum guaranteed fixed interest rate component along with the indexed account option. Indexed policies give policyholders the security of fixed universal life insurance with the growth potential of a variable policy linked to indexed returns.
-
Equity-Linked Security - ELKS
- A hybrid debt instrument that is linked to the equity markets. Equity-linked securities can be in the form of a single stock, a group of stocks or an equity-based index, such as the S&P 500.
The return on investment is dependent upon the performance of the underlying equities that are linked to the security. This type of security will often offer a guarantee of principal plus perhaps a small gain in return for a reduced payout of equity gains.
- A hybrid debt instrument that is linked to the equity markets. Equity-linked securities can be in the form of a single stock, a group of stocks or an equity-based index, such as the S&P 500.
-
Equivalent Annual Cost - EAC
- The annual cost of owning an asset over its entire life. Calculated as:
- The annual cost of owning an asset over its entire life. Calculated as:
-
Equivolume
- A chart that compares price and volume and plots them together as one piece of data. The height of each bar represents the high and low for each period and the width represents the volume relative to the total shares traded over the time period being analyzed.
- A chart that compares price and volume and plots them together as one piece of data. The height of each bar represents the high and low for each period and the width represents the volume relative to the total shares traded over the time period being analyzed.
-
Erasure Guarantee
- A guarantee made by accredited institutions assuring the legitimacy and accuracy of changes made to bonds and securities.
-
Error Resolution
- A procedure that allows consumers to dispute bookkeeping errors or unauthorized transactions related to their commercial bank accounts. Federal Reserve regulations require that financial institutions investigate all complaints and re-credit all funds debited in error.
-
Error Term
- A variable in a statistical and/or mathematical model, which is created when the model does not fully represent the actual relationship between the independent variable(s) and the dependent variable. As a result of this incomplete relationship, the error term is the amount at which the equation may differ during empirical analysis.
The error term is also known as the "residual", or the "remainder" term.
- A variable in a statistical and/or mathematical model, which is created when the model does not fully represent the actual relationship between the independent variable(s) and the dependent variable. As a result of this incomplete relationship, the error term is the amount at which the equation may differ during empirical analysis.
-
Errors And Omissions Insurance - E&O
- A professional liability insurance that protects companies and individuals against claims made by clients for inadequate work or negligent actions. Errors and omissions insurance often covers both court costs and any settlements up to the amount specified on the insurance contract.
-
Escalator Clause
- A contract provision allowing for one to pass an increase in costs to another party. Escalator clauses are usually related to influences beyond both parties control, such as inflation.
Also known as an "escalation clause".
- A contract provision allowing for one to pass an increase in costs to another party. Escalator clauses are usually related to influences beyond both parties control, such as inflation.
-
Escheat
- When property and/or an estate is transferred to the government because a person has died without a will or an heir to his or her estate.
-
Escrow
- A financial instrument held by a third party on behalf of the other two parties in a transaction. The funds are held by the escrow service until it receives the appropriate written or oral instructions or until obligations have been fulfilled. Securities, funds and other assets can be held in escrow.
-
Escrow Agent
- An entity that has fiduciary responsibilities in the transfer of property from one party to another. Typically associated with selling or buying a home or other property, the escrow agent will secure the property and examine documents to make sure that the terms of the sale are met on each end, serving both the buyer and seller in the transaction.
-
Escrow Agreement
- A certificate provided by an approved bank that guarantees the indicated securities are deposited at that particular bank.
-
Escrow Receipt
- A bank guarantee that an option writer has the underlying security on deposit and that the underlying security is readily available for delivery if the option is exercised.
-
Escrowed Shares
- Shares held in an escrow account and in most cases cannot be traded or transfered until certain circumstances like time horizon have been reached. The use of escrow for holding shares is often done during acquisitions and for performance-based executive incentives.
-
Escrowed To Maturity
- The condition of a bond that has been repaid in advance by means of an escrow account, which holds the funds needed to pay the periodic coupon payments and the principal.
-
Estate
- All of the valuable things an individual owns, such as real estate, art collections, collectibles, antiques, jewelry, investments and life insurance.
-
Estate Freeze
- An asset management strategy whereby an estate owner aims to transfer assets to his or her beneficiaries without tax consequence. In most estate freezes, the estate owner transfers assets, usually common stock, to a company in exchange for preferred shares. The company issues new common stock to the beneficiaries at a nominal value.
-
Estate Planning
- The collection of preparation tasks that serve to manage an individual's asset base in the event of their incapacitation or death, including the bequest of assets to heirs and the settlement of estate taxes. Most estate plans are set up with the help of an attorney experienced in estate law.
Some of the major estate planning tasks include:
- Creating a will
- Limiting estate taxes by setting up trust accounts in the name of beneficiaries
- Establishing a guardian for living dependents
- Naming an executor of the estate to oversee the terms of the will
- Creating/updating beneficiaries on plans such as life insurance, IRAs and 401(k)s
- Setting up funeral arrangements
- Establishing annual gifting to reduce the taxable estate
- Setting up durable power of attorney (POA) to direct other assets and investments
- The collection of preparation tasks that serve to manage an individual's asset base in the event of their incapacitation or death, including the bequest of assets to heirs and the settlement of estate taxes. Most estate plans are set up with the help of an attorney experienced in estate law.
-
Estate Tax
- A tax levied on an heir's inherited portion of an estate if the value of the estate exceeds an exclusion limit set by law. The estate tax is mostly imposed on assets left to heirs, but it does not apply to the transfer of assets to a surviving spouse. The right of spouses to leave any amount to one another is known as the "unlimited marital deduction".
-
Estimated Current Return
- The estimated return for a unit investment trust over the short term. The estimated current return is calculated by taking the estimated annual interest income from the securities of the portfolio and dividing by the maximum public offering price, net of the maximum sales charge for the trust.
This measure is less exact than the estimated long-term return and is more susceptible to interest rate risk during the life of the portfolio.
- The estimated return for a unit investment trust over the short term. The estimated current return is calculated by taking the estimated annual interest income from the securities of the portfolio and dividing by the maximum public offering price, net of the maximum sales charge for the trust.
-
Estimated Long-Term Return
- A unit investment trust's estimated return over the life of the portfolio, calculated according to formulas proposed by the Securities and Exchange Commission (SEC). The return is calculated as the annual percentage return based on the yields of all the underlying securities in the portfolio, but is weighted to account for each security's market value and maturity. The return is presented net of estimated fees and the maximum offering price, but does not account for delays in income distributions from the fund.
- A unit investment trust's estimated return over the life of the portfolio, calculated according to formulas proposed by the Securities and Exchange Commission (SEC). The return is calculated as the annual percentage return based on the yields of all the underlying securities in the portfolio, but is weighted to account for each security's market value and maturity. The return is presented net of estimated fees and the maximum offering price, but does not account for delays in income distributions from the fund.
-
Estimated Tax
- Periodic advance payment of taxes which are based upon the amount of income that is earned and the amount of estimated tax liability that will be incurred as a result. Estimated taxes are assessed on income that is not subject to any type of withholding, which includes self-employment income, dividend income, rental income, interest income and capital gains.
- Periodic advance payment of taxes which are based upon the amount of income that is earned and the amount of estimated tax liability that will be incurred as a result. Estimated taxes are assessed on income that is not subject to any type of withholding, which includes self-employment income, dividend income, rental income, interest income and capital gains.
-
Estimated Ultimate Recovery - EUR
- A production method commonly used in the oil and gas industry. Estimated ultimate recovery (EUR) is an approximation of the quantity of oil or gas that is potentially recoverable or has already been recovered from a reserve or well.
-
ETB
- The currency for the Ethiopian birr, the official currency of Ethiopia. The currency was called the Abyssinian birr until 1931, when former Ethiopian Emperor Haile Selassie purchased and restructured the former Bank of Abyssinia (which served the country at that time) to create the current National Bank of Ethiopia.
-
ETF Sponsor
- The company or financial institution which creates and administers an exchange-traded fund.
To set up the ETF, the sponsor creates the underlying index around which the ETF will be passively managed. The initial securities chosen for the fund are then delivered to the ETF sponsor by various institutional investors, who in exchange receive creation units – large blocks of ETF shares numbering 100,000 or more.
The holders of the creation units then market individual ETF shares to retail investors via the open market (stock exchanges); the ETF sponsor typically will deal only with the creation units and institutional shareholders and will not trade shares directly with retail investors.
- The company or financial institution which creates and administers an exchange-traded fund.
-
ETF Wrap
- A type of special investment portfolio where an investor, with or without the aid of an investment advisor, invests solely in exchange traded funds (ETFs). The composition of each ETF class is initially based on a preselected asset allocation model, and will periodically need to be rebalanced in response to changes in market values.
-
Ethical Investing
- Using one's ethical principles as the main filter for securities selection. Ethical investing depends on an investor's views; some may choose to eliminate certain industries entirely (such as gambling, alcohol, or firearms) or to over-allocate to industries that meet the individual's ethical guidelines.
Ethical investing is sometimes used interchangeably with socially conscious investing, but socially conscious funds typically have one overarching set of guidelines that is used to select the portfolio, whereas ethical investing brings about a more personalized result.
- Using one's ethical principles as the main filter for securities selection. Ethical investing depends on an investor's views; some may choose to eliminate certain industries entirely (such as gambling, alcohol, or firearms) or to over-allocate to industries that meet the individual's ethical guidelines.
-
EUR
- The currency code used in the general industry to represent the euro, the official currency for more than half of the 27 members of the European Union (EU). The Eurozone states are Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain. As of March 2009, five other non-Eurozone members were also using the currency.
The name "euro" was selected in 1995; the currency replaced the former European Currency Unit (ECU). It was introduced on January 1, 1999, and began circulating in 2002. The most commonly used euro coins are 1, 2, 5, 10, 20, 50 cents and the most frequently used euro banknotes denominations are 5, 10, 20, 50 and 100.
- The currency code used in the general industry to represent the euro, the official currency for more than half of the 27 members of the European Union (EU). The Eurozone states are Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain. As of March 2009, five other non-Eurozone members were also using the currency.
-
EUREX
- The largest futures and options market in the world, dealing primarily with European-based derivatives. The products that trade on this exchange range from German and Swiss debt instruments to European stocks and STOXX indexes. Along with facilitating trade, EUREX also provides settlement of the contracts.
-
Euro
- The official currency of the European Union's (EU) member states. The euro was introduced by the EU in to the financial community in 1999 and physical euro coins and paper notes were introduced in 2002. Euros are printed and managed by the European System of Central Banks (ESCB).
The euro is abbreviated by the symbol "EUR".
- The official currency of the European Union's (EU) member states. The euro was introduced by the EU in to the financial community in 1999 and physical euro coins and paper notes were introduced in 2002. Euros are printed and managed by the European System of Central Banks (ESCB).
-
Euro Deposit
- The equivalent of a money market rate on cash deposits made in the euro currency. Euro deposit rates will usually be quoted as "money market euro deposit rates" and are typically only offered to U.S. investors with minimum investments of greater than 10,000 euros. Euro deposits pay a floating interest rate (like a money market account) and offer the chance for capital appreciation if the euro appreciates against the investor's home currency (presumably the dollar). Euro deposit rates are based on the euro interbank offer rate, which is set by the European Central Bank.
-
Euro ETF
- An exchange-traded fund that invests in the euro currency, either directly or through the holding of euro-denominated short-term debt instruments. Euro ETFs are often set up as currency trusts or grantor trusts, meaning that stakeholders have a specific claim to a set amount of euros per share.
- An exchange-traded fund that invests in the euro currency, either directly or through the holding of euro-denominated short-term debt instruments. Euro ETFs are often set up as currency trusts or grantor trusts, meaning that stakeholders have a specific claim to a set amount of euros per share.
-
Euro Feds
- A federal wire transmission advancing funds in Eurodollars from a U.S. bank with excess funds to another with insufficient reserves. Euro Feds settling in London clear through the clearingshouse interbank payments system (CHIPS) whereas transactions taking place in New York go through the Fedwire.
-
Euro Interbank Offer Rate - EURIBOR
- The rate of interest at which panel banks borrow funds from other panel banks, in marketable size, in the EU interbank market.
-
Euro LIBOR
- London Interbank Offer Rate denominated in euros. This is the interest rate that banks offer each other for large short-term loans in euros. The rate is fixed once a day by a small group of large London banks but fluctuates throughout the day. This market makes it easier for banks to maintain liquidity requirements because they are able to quickly borrow from other banks that have surpluses.
-
Euro Medium Term Note - EMTN
- A flexible medium-term debt instrument that is issued and traded outside of Canada and the United States and requires fixed dollar payments. EMTNs are issued directly to the market with maturities of less than five years and are offered continuously rather than all at once like a bond issue.
-
Euro Notes
- Legal tender in the form of a banknote that can be used in exchange for goods and services in the eurozone. Euro notes come in 5, 10, 15, 20, 50, 100, 200 and 500 euro denominations. The supply of euro notes is controlled by the European Central Bank, which controls the monetary policy in order to maintain price stability in the European Union.
-
Euro Overnight Index Average - EONIA
- The weighted average of overnight Euro Interbank Offer Rates for inter-bank loans.
-
Eurobank
- A financial institution that readily accepts foreign currency denominated deposits and makes foreign currency loans.
-
Eurobond
- A bond issued in a currency other than the currency of the country or market in which it is issued.
- A bond issued in a currency other than the currency of the country or market in which it is issued.
-
Eurocheck
- A check from a European bank that can be cashed at over 200,000 banks around the world displaying the "European Union" crest.
-
Euroclear
- One of two principal clearing houses for securities traded in the Euromarket. Euroclear specializes in verifying information supplied by two brokers in a securities transaction and the settlement of securities. Euroclear is market owned and governed, and has previously acquired London Crest, Necigef Netherlands, Sicovam Paris and CIK Brussels.
-
Eurocommercial Paper
- An unsecured, short-term loan issued by a bank or corporation in the international money market, denominated in a currency that differs from the corporation's domestic currency.
-
Eurocredit
- A type of loan whose denominated currency is not the lending bank's national currency.
-
Eurocurrency
- Currency deposited by national governments or corporations in banks outside their home market. This applies to any currency and to banks in any country. For example, South Korean won deposited at a bank in South Africa, is considered eurocurrency.
Also known as "euromoney".
- Currency deposited by national governments or corporations in banks outside their home market. This applies to any currency and to banks in any country. For example, South Korean won deposited at a bank in South Africa, is considered eurocurrency.
-
Eurocurrency Market
- The money market in which Eurocurrency, currency held in banks outside of the country where it is legal tender, is borrowed and lent by banks in Europe.
The Eurocurrency market allows for more convenient borrowing, which improves the international flow of capital for trade between countries and companies.
- The money market in which Eurocurrency, currency held in banks outside of the country where it is legal tender, is borrowed and lent by banks in Europe.
-
Eurodollar
- U.S.-dollar denominated deposits at foreign banks or foreign branches of American banks. By locating outside of the United States, eurodollars escape regulation by the Federal Reserve Board.
-
Eurodollar Bond
- A U.S.-dollar denominated bond issued by an overseas company and held in a foreign institution outside both the U.S. and the issuer's home nation. Eurodollar bonds are an important source of capital for multinational companies and foreign governments.
A eurodollar bond is a type of Eurobond.
- A U.S.-dollar denominated bond issued by an overseas company and held in a foreign institution outside both the U.S. and the issuer's home nation. Eurodollar bonds are an important source of capital for multinational companies and foreign governments.
-
Euroequity
- A term used to describe an IPO occurring simultaneously on more than one national market.
-
Euromarket
- The market that includes all of the European Union member countries - many of which use the same currency, the euro. All tariffs between Euromarket member countries have been abolished, and import duties from all non-member countries have been fixed for all of the member countries. The Euromarket also has one central bank for all of the member countries, the European Central Bank (ECB).
Also known as "the common market".
- The market that includes all of the European Union member countries - many of which use the same currency, the euro. All tariffs between Euromarket member countries have been abolished, and import duties from all non-member countries have been fixed for all of the member countries. The Euromarket also has one central bank for all of the member countries, the European Central Bank (ECB).
-
Euronext
- A cross-border European stock exchange, originally created in 2000 from the merger of the Amsterdam, Brussels and Paris stock exchanges.
In 2001 and 2002, respectively, Euronext acquired the London International Financial Futures and Options Exchange (LIFFE) and the Portuguese stock exchange, Bolsa de Valores de Lisboa e Porto (BVLP), in order to become one of the world's largest exchanges.
On April 4, 2007, Euronext completed their agreed merger with the NYSE Group, resulting in the formation of NYSE Euronext.
- A cross-border European stock exchange, originally created in 2000 from the merger of the Amsterdam, Brussels and Paris stock exchanges.
-
Europe, Australasia, Far East - EAFE
- An acronym referring to the geographical area that includes these three regions. These regions represent the most developed areas outside of North America.
-
Europe, Middle East and Africa - EMEA
- The region classification for a division of an international company that operates in Europe, the Middle East and Africa. The division that operates in the EMEA will often be run by a separate executive and focus the international brand towards the needs of the EMEA region.
-
European Bank for Reconstruction and Development - EBRD
- A bank was established in 1991 to aide ex-Soviet and Eastern European countries transitioning into democracies by developing free market economies. Today, the European Bank for Reconstruction and Developement (EBRD) continues its work in 27 countries from central Europe to central Asia, investing mainly in private banks and businesses including both new ventures and existing companies.
-
European Callable Bond
- A bond that can be redeemed by the issuer at a predetermined date prior to maturity.
-
European Capital Markets Institute - ECMI
- An independent research institution that strives to spread information pertaining to European markets. The ECMI's main goals are to instigate discussions and debates on the subject of the European markets and to be a major contributor in the discussions on behalf of the research conducted at the Institute. The ECMI is managed by the Centre For European Policy Studies.
- An independent research institution that strives to spread information pertaining to European markets. The ECMI's main goals are to instigate discussions and debates on the subject of the European markets and to be a major contributor in the discussions on behalf of the research conducted at the Institute. The ECMI is managed by the Centre For European Policy Studies.
-
European Central Bank - ECB
- The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed in Germany in June 1998 and works with the other national banks of each of the EU members to formulate monetary policy that helps maintain price stability in the European Union.
-
European Community - EC
- The European Community is one of the three pillars of the European Union (EU). The pillars represent the three different areas of cooperation within the union. The European Community is the first pillar and represents supranational cooperation. The policies within this area allow the EU to issue legislation that directly binds its citizens.
- The European Community is one of the three pillars of the European Union (EU). The pillars represent the three different areas of cooperation within the union. The European Community is the first pillar and represents supranational cooperation. The policies within this area allow the EU to issue legislation that directly binds its citizens.
-
European Credit Research Institute - ECRI
- An independent research center founded by European credit institutions with the help of the Centre for European Policy Studies. It works to research the implications of certain actions relating to credit and how they will have an impact on both the micro- and macroeconomic environment. Much of the research is done through economic and policy analysis and trend monitoring.
- An independent research center founded by European credit institutions with the help of the Centre for European Policy Studies. It works to research the implications of certain actions relating to credit and how they will have an impact on both the micro- and macroeconomic environment. Much of the research is done through economic and policy analysis and trend monitoring.
-
European Currency Quotation
- An indirect quotation in the foreign exchange markets whereby the value of a foreign currency is stated as a per-unit measure of the U.S. dollar. This type of quotation shows how much foreign currency it takes to purchase one U.S. dollar.
-
European Currency Unit - ECU
- The European Currency Unit (ECU) was the precursor to the Euro, the shared single currency of the European Union's member countries. While the Euro is the actual currency of the European Union, the ECU was artificial currency developed by the initial EU member states for their internal accounting purposes.
- The European Currency Unit (ECU) was the precursor to the Euro, the shared single currency of the European Union's member countries. While the Euro is the actual currency of the European Union, the ECU was artificial currency developed by the initial EU member states for their internal accounting purposes.
-
European Depository Receipt - EDR
- A negotiable security (receipt) that is issued by a European bank, and that represents securities which trade on exchanges outside of the bank’s home country. Abbreviated as "EDRs", these securities are traded on local exchanges and used by banks - and issuing companies in the U.S. and other countries - to attract investment capital from the European region.
Also known as "Euro Depository Receipts", which may or may not imply that the euro is the currency the receipt is issued upon.
- A negotiable security (receipt) that is issued by a European bank, and that represents securities which trade on exchanges outside of the bank’s home country. Abbreviated as "EDRs", these securities are traded on local exchanges and used by banks - and issuing companies in the U.S. and other countries - to attract investment capital from the European region.
-
European Economic and Monetary Union - EMU
- The successor to the European Monetary System (EMS), the combination of European Union member states into a cohesive economic system, most notably represented with the adoption of the euro as the national currency of participating members.
-
European Monetary System - EMS
- A 1979 arrangement between several European countries which links their currencies in an attempt to stabilize the exchange rate. This system was succeeded by the European Monetary Union (EMU), an institution of the European Union (EU), which established a common currency called the euro.
-
European Option
- An option that can only be exercised at the end of its life, at its maturity. European options tend to sometimes trade at a discount to its comparable American option. This is because American options allow investors more opportunities to exercise the contract.
-
European Terms
- A foreign exchange quoting convention where the domestic currency is quoted in terms of a foreign currency. In other words, it is the amount of foreign currency that one unit of the domestic currency can buy.
-
European Union - EU
- A group of European countries that participates in the world economy as one economic unit and operates under one official currency, the euro. The EU's goal is to create a barrier-free trade zone and to enhance economic wealth by creating more efficiency within its marketplace.
-
Euroyen
- Japanese yen-denominated deposits held in banks outside Japan. Also a term that refers to yen traded in the Eurocurrency market.
-
Euroyen Bond
- A Eurobond that is denominated in Japanese yen and issued by a non-Japanese company outside of Japan. Despite what the name suggests, Euroyen bonds can be found in bond markets around the world, not just in European markets.
-
Eurozone
- A geographic and economic region that consists of all the European Union countries that have fully incorporated the euro as their national currency.
Also referred to as "euroland".
- A geographic and economic region that consists of all the European Union countries that have fully incorporated the euro as their national currency.
-
Eva Longoria Stock Index
- A stock index comprised of companies related to the actress Eva Longoria. Some analysts believe that Eva Longoria has enough influence over consumers that her endorsements will materially affect product sales.
-
Even Lot
- Quantities established by futures exchanges as benchmarks for quoting commodity prices.
-
Evening Star
- A bearish candlestick pattern consisting of three candles that have demonstrated the following characteristics:
1. The first bar is a large white candlestick located within an uptrend.
2. The middle bar is a small-bodied candle (red or white) that closes above the first white bar.
3. The last bar is a large red candle that opens below the middle candle and closes near the center of the first bar's body.
As shown by the chart below, this pattern is used by traders as an early indication that the uptrend is about to reverse.
- A bearish candlestick pattern consisting of three candles that have demonstrated the following characteristics:
-
Evening Up
- A slang phrase used to describe an investor who closes a position by making an offsetting transaction. An investor will eliminate his or her exposure to a security's risk by evening up.
Also referred to as "even up."
- A slang phrase used to describe an investor who closes a position by making an offsetting transaction. An investor will eliminate his or her exposure to a security's risk by evening up.
-
Event Driven Strategy
- A hedge fund strategy in which the manager takes significant positions in a certain number of companies with "special situations."
-
Event Risk
- 1. The risk due to unforeseen events partaken by or associated with a company.
2. The risk associated with a changing portfolio value due to large swings in market prices. Also referred to as "jump risk" or "fat-tails".
- 1. The risk due to unforeseen events partaken by or associated with a company.
-
Event Study
- An empirical study performed on a security that has experienced a significant catalyst occurrence, and has subsequently changed dramatically in value as a result of that catalyst. The event can have either a positive or negative effect on the value of the security.
-
Event-Linked Bond
- A type of bond whose interest and principal payments are determined based on the non-occurrence of certain events, such as earthquakes and hurricanes, which are outlined in the prospectus of the bond issue. Event-linked bonds helps insurance and reinsurance companies obtain funding and at the same time mitigate risks against major claims or catastrophe. If an event - usually referred to as a "trigger event" - occurs, then the holder of the bond could see a loss of all future interest payments or a loss of most principal.
Also known as "catastrophe bonds" or "cat bonds".
- A type of bond whose interest and principal payments are determined based on the non-occurrence of certain events, such as earthquakes and hurricanes, which are outlined in the prospectus of the bond issue. Event-linked bonds helps insurance and reinsurance companies obtain funding and at the same time mitigate risks against major claims or catastrophe. If an event - usually referred to as a "trigger event" - occurs, then the holder of the bond could see a loss of all future interest payments or a loss of most principal.
-
Everest Option
- A type of exotic equity option belonging to a class known as mountain range options. The value of an Everest option is based on a basket of underlying securities, as opposed to the typical listed option which has just one underlying asset.
Everest options are in effect for very long time periods – up to 10 years or more – and the payoff of the option is based on the aggregate performance of the worst-performing stock over the full time period.
- A type of exotic equity option belonging to a class known as mountain range options. The value of an Everest option is based on a basket of underlying securities, as opposed to the typical listed option which has just one underlying asset.
-
Evergreen
- A contract provision that automatically renews the length of the agreement after a predetermined period, unless notice for termination is given. Evergreens are often used for long term agreements such as memberships or maintenance contracts.
-
Evergreen Funding
- 1. A British term that describes a revolving credit arrangement in which the borrower periodically renews the debt financing rather than having the debt reach maturity.
2. The gradual infusion of capital into a new or recapitalized enterprise. This type of funding differs from the situation in which the aggregate capital required for a business venture is supplied up-front, in which case the company invests in short-term, low-risk securities until it is ready to use the money for business operations.
- 1. A British term that describes a revolving credit arrangement in which the borrower periodically renews the debt financing rather than having the debt reach maturity.
-
Evergreen Loan
- A loan that does not require the principal amount to be paid off within a specified period of time. Evergreen loans are usually in the form of a short-term line of credit that is routinely renewed leaving the principal remaining outstanding for the long term.
Also called a "standing" or "revolving loan".
- A loan that does not require the principal amount to be paid off within a specified period of time. Evergreen loans are usually in the form of a short-term line of credit that is routinely renewed leaving the principal remaining outstanding for the long term.
-
Evergreen Option
- An employee option plan that grants additional shares to the plan every year. Also known as an "evergreen plan".
-
Ex Works - EXW
- A trade term requiring the seller to deliver goods at his or her own place of business. All other transportation costs and risks are assumed by the buyer.
-
Ex-Ante
- A term that refers to future events, such as future returns or prospects of a company. Using ex-ante analysis helps to give an idea of future movements in price or the future impact of a newly implemented policy.
-
Ex-Date
- The date on or after which a security is traded without a previously declared dividend or distribution. After the ex-date, a stock is said to trade ex-dividend.
-
Ex-Dividend
- A classification of trading shares when a declared dividend belongs to the seller rather than the buyer. A stock will be given ex-dividend status if a person has been confirmed by the company to receive the dividend payment.
-
Ex-Legal
- Municipal bonds that are delivered without a legal opinion from a bond law firm.
-
Ex-Post
- Another term for actual returns. Ex-post translated from Latin means "after the fact". The use of historical returns has traditionally been the most common way to predict the probability of incurring a loss on any given day. Ex-post is the opposite of ex-ante, which means "before the event".
-
Ex-Post Risk
- A type of risk measurement technique that uses historic returns to predict the riskiness of a certain investment in the future. This type of risk measure is the equivalent of the statistical variance of an asset's returns relative to its mean.
-
Ex-Rights
- Shares of stock that are trading but no longer have rights attached because they have either expired, been transferred to another investor or been exercised. The rights originally assigned to the stockholder are, for whatever reason, no longer valid or no longer applicable to the stock.
-
Ex-Warrant
- The trading of shares when a warrant has been declared but not distributed.
-
Exception Item
- A banking term used to describe a check that cannot be processed. Reasons may include the fact that a stop payment order has been made, the customer's account has been closed or the check is missing a signature.
- A banking term used to describe a check that cannot be processed. Reasons may include the fact that a stop payment order has been made, the customer's account has been closed or the check is missing a signature.
-
Exceptional Item
- Charges incurred that must be noted on a company's balance sheet, in accordance with GAAP principles. Even though they are considered to be part of ordinary business charges, exceptional items must be disclosed due to their sheer size or frequency.
-
Excess Accumulation Penalty
- The penalty a retirement account owner or the beneficiary of a retirement account must pay when he or she fails to distribute a minimum amount due for a year from the retirement account.
-
Excess Capacity
- A situation in which actual production is less than what is achievable or optimal for a firm. This often means that the demand in the market for the product is below what the firm could potentially supply to the market.
-
Excess Cash Flow
- A term used to describe the income derived from mortgages or other assets backing a bond that is in excess of what is needed to retire the bond. The excess cash flow may be passed to investors who purchased a residual interest in the securities or used by the bond issuer to pay out to bond holders.
-
Excess Employer Withholding
- When one or more employers withhold more than the aggregate maximum amount of Social Security and/or railroad retirement contributions that should have been withheld from a single taxpayer during a taxation year.
Excess employer withholdings are reported on line 67 of Form 1040, and all Copy Bs of the taxpayer's W-2s must be filed with Form 1040.
- When one or more employers withhold more than the aggregate maximum amount of Social Security and/or railroad retirement contributions that should have been withheld from a single taxpayer during a taxation year.
-
Excess Kurtosis
- A statistical term describing that a probability, or return distribution, has a kurtosis coefficient that is larger then the coefficient associated with a normal distribution, which is around 3. This will signal that the probability of obtaining an extreme value in the future is higher than a lower level of kurtosis.
Kurtosis is a measure of the likelihood that an event occurring is extreme in relation to a given distribution.
- A statistical term describing that a probability, or return distribution, has a kurtosis coefficient that is larger then the coefficient associated with a normal distribution, which is around 3. This will signal that the probability of obtaining an extreme value in the future is higher than a lower level of kurtosis.
-
Excess Loans
- A loan made by a state chartered or national bank to an individual that is over the loan lending limit as established by law. The legal lending limit establishes the rule that state-chartered banks cannot loan more than 10% of their capital to any one borrower; national banks cannot lend more than 15% of their capital.
-
Excess Reserves
- Capital reserves held by a bank or financial institution in excess of what is required by regulators, creditors or internal controls. For commercial banks, excess reserves are measured against standard reserve requirement amounts set by central banking authorities. These required reserve ratios set the minimum liquid deposits (such as cash) that must be in reserve at a bank; more is considered excess.
- Capital reserves held by a bank or financial institution in excess of what is required by regulators, creditors or internal controls. For commercial banks, excess reserves are measured against standard reserve requirement amounts set by central banking authorities. These required reserve ratios set the minimum liquid deposits (such as cash) that must be in reserve at a bank; more is considered excess.
-
Excess Returns
- Returns in excess of the risk-free rate or in excess of a market measure, such as an index fund.
-
Excess Spread
- Remaining net interest payments from the underlying assets of an asset-backed security, after all payables and expenses are covered.
-
Exchange
- A marketplace in which securities, commodities, derivatives and other financial instruments are traded. The core function of an exchange - such as a stock exchange - is to ensure fair and orderly trading, as well as efficient dissemination of price information for any securities trading on that exchange. Exchanges give companies, governments and other groups a platform to sell securities to the investing public.
An exchange may be a physical location where traders meet to conduct business or an electronic platform.
May also be referred to as "share exchange" or "bourse" depending on geographical location.
- A marketplace in which securities, commodities, derivatives and other financial instruments are traded. The core function of an exchange - such as a stock exchange - is to ensure fair and orderly trading, as well as efficient dissemination of price information for any securities trading on that exchange. Exchanges give companies, governments and other groups a platform to sell securities to the investing public.
-
Exchange Control
- Types of controls that governments put in place to ban or restrict the amount of foreign currency or local currency that is allowed to be traded or purchased. Common exchange controls include banning the use of foreign currency and restricting the amount of domestic currency that can be exchanged within the country.
-
Exchange Distribution
- A type of trade made on the floor of a securities exchange in which a large block of shares traded actually represents many buy and sell orders that have been pooled and executed as one transaction.
-
Exchange Fund
- A stock fund that allows an investor to exchange his or her large holding of a single stock for units in a portfolio. Exchange funds provides investors with a easy way to diversify their holdings, while deferring any taxes from capital gains.
Also known as a "swap fund".
- A stock fund that allows an investor to exchange his or her large holding of a single stock for units in a portfolio. Exchange funds provides investors with a easy way to diversify their holdings, while deferring any taxes from capital gains.
-
Exchange of Futures for Cash
- A method by which opposite parties of a futures contract that has underlying cash commodities aim to close out their positions simultaneously. Also know as exchange for physicals (EFP).
-
Exchange Privilege
- The opportunity given to mutual fund shareholders to exchange their investment in a fund for another within the same fund family at no additional cost. This privilege allows investors to switch funds when market conditions change.
-
Exchange Rate
- The price of one country's currency expressed in another country's currency. In other words, the rate at which one currency can be exchanged for another. For example, the higher the exchange rate for one euro in terms of one yen, the lower the relative value of the yen.
-
Exchange Rate Mechanism - ERM
- An exchange rate mechanism is based on the concept of fixed currency exchange rate margins. However, there is variability of the currency exchange rates within the confines of the upper and lower end of the margins. This currency exchange rate mechanism is also commonly called a semi-pegged currency system.
-
Exchange Stabilization Fund - ESF
- Money available to the U.S. Treasury Department primarily used for participating in the foreign-exchange market in an attempt to maintain currency stability. It holds U.S. dollars, foreign currencies and special drawing rights.
-
Exchange Traded Notes - ETN
- A type of unsecured, unsubordinated debt security that was first issued by Barclays Bank PLC. This type of debt security differs from other types of bonds and notes because ETN returns are based upon the performance of a market index minus applicable fees, no period coupon payments are distributed and no principal protections exists.
-
Exchange-Traded Fund - ETF
- A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold.
-
Exchange-Traded Option
- An option traded on a regulated exchange where the terms of each option are standardized by the exchange. The contract is standardized so that underlying asset, quantity, expiration date and strike price are known in advance. Over-the-counter options are not traded on exchanges and allow for the customization of the terms of the option contract.
Exchange-traded options are also known as "listed options".
- An option traded on a regulated exchange where the terms of each option are standardized by the exchange. The contract is standardized so that underlying asset, quantity, expiration date and strike price are known in advance. Over-the-counter options are not traded on exchanges and allow for the customization of the terms of the option contract.
-
Exchangeable Debt
- Similar to convertibles, except this type of debt can be converted into the shares of a company other than the issuing company (usually a subsidiary).
-
Exchangeable Security
- A security that grants its holder the right to exchange it for the common stock of a firm other than the issuer.
-
Excise Tax
- 1. An indirect tax charged on the sale of a particular good.
2. A penalty tax applied to ineligible transactions in retirement accounts. This penalty is assessed by and paid to the Internal Revenue Service (IRS).
- 1. An indirect tax charged on the sale of a particular good.
-
Excluded Commodity
- A commodity that is not susceptible to measures of influence or manipulation. Excluded commodities include most financial products and any relevant event associated with the commodity that is outside the control of any interested party. Excluded commodities can also include intangible assets.
-
Excluding Items
- The common practice of leaving certain factors out of an overall calculation to remove the volatility that might otherwise impact is comparability or distort long-term forecasting. Excluding items can often refer to items left out of the calculation of some earnings per share numbers. Such items may include one-time items, extraordinary expenses or income.
-
Exclusion Ratio
- The portion of the return on investments that is income tax exempt. It represents a payback of initial investments rather than capital gains.
-
Executing Broker
- The broker or dealer that finalizes and processes an order on behalf of a client. The orders sent to executing brokers are assessed for appropriateness, and if the order is deemed practical, the executing broker will then carry out the order. If the order is rejected, the customer is notified and the stock is not traded.
-
Execution
- The completion of a buy or sell order for a security. The execution of an order happens when it is completely filled, not when it is placed by the investor. When the investor places the trade, it goes to a broker, who then determines the best way for it to be executed.
-
Executives' Meeting of East Asia and Pacific Central Banks - EMEAP
- An organization of 11 central banks from the southeast and Pacific regions of Asia whose mandate is foster good relations among its member countries. The organization conducts annual and semiannual meetings, and creates working groups in order to discuss and analyze ongoing economical and financial happenings within the region.
-
Executor
- An individual appointed to administrate the estate of a deceased person. The executor's main duty is to carry out the instructions and wishes of the deceased. The executor is appointed either by the testator of the will (the individual who makes the will) or by a court, in cases where there was no prior appointment.
-
Exempt Commodity
- Any commodity other than an excluded or agricultural commodity. Transactions in an exempt commodity may only be between eligible contract participants or commercial entities, and cannot be executed on a trading facility.
-
Exempt Income
- Certain types or amounts of income not subject to federal income tax. Examples of exempt income include municipal bond income, which may also be exempt from state income taxes, a portion of retirement benefits, qualified Roth IRA distributions and academic scholarships. Also exempt are gifts of less than $10,000 and certain death benefits.
- Certain types or amounts of income not subject to federal income tax. Examples of exempt income include municipal bond income, which may also be exempt from state income taxes, a portion of retirement benefits, qualified Roth IRA distributions and academic scholarships. Also exempt are gifts of less than $10,000 and certain death benefits.
-
Exempt Transaction
- A type of securities transaction where a business does not need to file registrations with any regulatory bodies, provided the number of securities involved is relatively minor compared to the scope of the issuer's operations and that no new securities are being issued.
-
Exemption
- A deduction allowed by law to reduce the amount of income that would otherwise be taxed. An exemption is based on a status or circumstance rather than economic standing.
-
Exemption Trust
- A trust whose purpose is to drastically reduce or eliminate federal estate taxes for a married couple's estate. This type of estate plan sets up an irrevocable trust that will hold the assets of the first spouse to die.
-
Exercise
- An action by a stockholder taking advantage of a privilege offered by a company or other financial institution. This includes warrants, options and other exotic financial instruments.
-
Exercise Backdating
- A practice where option holders fraudulently claim to have exercised their call options at a specific time in the past, where in reality, the options were exercised much later. Exercise backdating is often performed by executives who wish to illegally reduce the amount of capital gains taxes they have to pay as a result of exercising the options.
-
Exercise Limit
- A restriction on the amount of option contracts of a single class that any one person or company can exercise within a fixed time period (usually a period of five business days). This limit is in place so that no one person or company can corner or greatly impact the option market.
- A restriction on the amount of option contracts of a single class that any one person or company can exercise within a fixed time period (usually a period of five business days). This limit is in place so that no one person or company can corner or greatly impact the option market.
-
Exercise Price
- The price at which the underlying security can be purchased (call option) or sold (put option). The exercise price is determined at the time the option contract is formed.
Also known as the "strike price".
- The price at which the underlying security can be purchased (call option) or sold (put option). The exercise price is determined at the time the option contract is formed.
-
Exhaust Price
- A discount price at which a broker must liquidate a client's equity position, which was purchased on margin, to meet a margin call. The stocks are sold at the exhaust price when the client cannot provide the funds or refuses to maintain the margin.
-
Exhaustion
- Situation in which a majority of participants trading in the same asset are either long or short, leaving few investors to take the other side of the transaction when participants wish to close their positions. Exhaustion signals the reversal of the current trend because it illustrates excess levels of supply or demand.
-
Exhaustion Gap
- A gap that occurs after the rapid rise in a stock's price begins to tail off. An exhaustion gap usually reflects falling demand for a particular stock.
The image shows a gap at the end of a large upward movement, signaling a reversal.
- A gap that occurs after the rapid rise in a stock's price begins to tail off. An exhaustion gap usually reflects falling demand for a particular stock.
-
Existing Home Sales
- An economic indicator of both the number and prices of existing single-family homes, condos and co-op sales over a one-month period. The existing home sales report is released monthly by the U.S. National Association of Realtors. It is a lagging indicator as it tends to react after a change in mortgage rates.
-
Exit Fee
- A fee or charge assessed to an investor for withdrawing money prior to a previously stipulated date. This is almost always expressed and charged as a percentage of assets rather than a flat fee.
May also be known as a "redemption fee", "back-end load" or "contingent deferred sales charge".
- A fee or charge assessed to an investor for withdrawing money prior to a previously stipulated date. This is almost always expressed and charged as a percentage of assets rather than a flat fee.
-
Exit Strategy
- 1. The method by which a venture capitalist or business owner intends to get out of an investment that he or she has made in the past. In other words, the exit strategy is a way of "cashing out" an investment. Examples include an initial public offering (IPO) or being bought out by a larger player in the industry. Also referred to as a "harvest strategy" or "liquidity event".
2. In the context of an active trader, a plan as to when a trade will be closed out.
- 1. The method by which a venture capitalist or business owner intends to get out of an investment that he or she has made in the past. In other words, the exit strategy is a way of "cashing out" an investment. Examples include an initial public offering (IPO) or being bought out by a larger player in the industry. Also referred to as a "harvest strategy" or "liquidity event".
-
Exon-Florio Provision
- A provision that allows the president of the United States to suspend or block the foreign acquisition of a U.S.-based company for reasons of national security. The Exon-Florio provision only allows for the acquisition to be blocked if there is clear evidence that the foreign acquiring party could threaten national security through its control of the acquired company and the provisions of law don't provide the adequate authority for the U.S. to protect national security.
-
Exordium Clause
- A clause most often at the opening of a will that declares that the document is a will and effectively lays out to the readers a few basic premises upon which the rest of the document is based. Contents of an exordium clause are likely to include:
1. Identity of the person who has left the will.
2. The name of the place of residence of that person.
3. A revocation of all previous wills made by that person existing before the date that the current will was produced.
4. Declaration that the current document is the will belonging to the named person.
- A clause most often at the opening of a will that declares that the document is a will and effectively lays out to the readers a few basic premises upon which the rest of the document is based. Contents of an exordium clause are likely to include:
-
Exotic Currency
- A foreign exchange term for a thinly traded currency. Exotic currencies are illiquid, lack market depth and trade at low volumes. Trading an exotic currency can be expensive, as the bid-ask spread is usually large.
-
Exotic Option
- An option that differs from common American or European options in terms of the underlying asset or the calculation of how or when the investor receives a certain payoff. These options are more complex than options that trade on an exchange, and generally trade over the counter.
-
Expansion
- The phase of the business cycle when the economy moves from a trough to a peak. It is a period when business activity surges and gross domestic product expands until it reaches a peak.
Also known as an "economic recovery".
- The phase of the business cycle when the economy moves from a trough to a peak. It is a period when business activity surges and gross domestic product expands until it reaches a peak.
-
Expansionary Policy
- A macroeconomic policy that seeks to expand the money supply to encourage economic growth or combat inflation (price increases). One form of expansionary policy is fiscal policy, which comes in the form of tax cuts, rebates and increased government spending. Expansionary policies can also come from central banks, which focus on increasing the money supply in the economy.
-
Expectations Index
- A sub-index that measures overall consumer sentiments toward the short-term (6-month) future economic situation, and is used to derive (about 60% of) the Consumer Confidence Index, a widely used economic indicator. The sub-index is compiled from data gathered from a survey of 5,000 households on questions regarding expected business and employment conditions as well as expected income in the near term.
-
Expectations Theory
- A theory proposing that long-term interest rates can act as a predictor of future short-term interest rates.
-
Expected Return
- The average of a probability distribution of possible returns, calculated by using the following formula:
- The average of a probability distribution of possible returns, calculated by using the following formula:
-
Expected Utility
- An economic term summarizing the utility that an entity or aggregate economy is expected to reach under any number of circumstances. The expected utility is calculated by taking the weighted average of all possible outcomes under certain circumstances, with the weights being assigned by the likelihood, or probability, that any particular event will occur.
-
Expense
- 1. The economic costs that a business incurs through its operations to earn revenue. In order to maximize profits, businesses must attempt to reduce expenses without also cutting into revenues. Because expenses are such an important indicator of a business's operations, there are specific accounting rules on expense recognition.
2. Money spent or costs incurred that are tax-deductible and reduce taxable income.
- 1. The economic costs that a business incurs through its operations to earn revenue. In order to maximize profits, businesses must attempt to reduce expenses without also cutting into revenues. Because expenses are such an important indicator of a business's operations, there are specific accounting rules on expense recognition.
-
Expense Limit
- A limit placed on the operating expenses incurred by a mutual fund. The expense limit is expressed as a percentage of the fund's average net assets and represents a cap to the fees a shareholder may be charged.
-
Expense Ratio
- A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual calculation, where a fund's operating expenses are divided by the average dollar value of its assets under management. Operating expenses are taken out of a fund's assets and lower the return to a fund's investors.
Also known as "management expense ratio" (MER).
- A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual calculation, where a fund's operating expenses are divided by the average dollar value of its assets under management. Operating expenses are taken out of a fund's assets and lower the return to a fund's investors.
-
Expiration Cycle
- The calendar cycle of expiration months that is assigned to basic exchange-traded stock options. With a few exceptions (some options will have contracts in every month), most equity options are set up to trade with expiration months in one of the following three formats:
January Cycle: Expirations in January, April, July, October (the first month of each quarter)
February Cycle: Expirations in February, May, August, November (second month)
March Cycle: Expirations in March, June, September, December (third month)
- The calendar cycle of expiration months that is assigned to basic exchange-traded stock options. With a few exceptions (some options will have contracts in every month), most equity options are set up to trade with expiration months in one of the following three formats:
-
Expiration Date
- The day on which an options or futures contract is no longer valid and, therefore, ceases to exist.
-
Expiration Time
- A specified time, after which the options contract is no longer valid. The expiration time gives a more specific deadline to an options contract on top of the expiration date by giving a time of day. The expiration time will not be the same as the last time to trade the option.
-
Explicit Cost
- A business expense that is easily identified and accounted for. Explicit costs represent clear, obvious cash outflows from a business that reduce its bottom-line profitability. This contrasts with less-tangible expenses such as goodwill amortization, which are not as clear cut regarding their effects on a business's bottom-line value.
-
Exponential Moving Average - EMA
- A type of moving average that is similar to a simple moving average, except that more weight is given to the latest data. The exponential moving average is also known as "exponentially weighted moving average".
-
Export
- A function of international trade whereby goods produced in one country are shipped to another country for future sale or trade. The sale of such goods adds to the producing nation's gross output. If used for trade, exports are exchanged for other products or services. Exports are one of the oldest forms of economic transfer, and occur on a large scale between nations that have fewer restrictions on trade, such as tariffs or subsidies.
- A function of international trade whereby goods produced in one country are shipped to another country for future sale or trade. The sale of such goods adds to the producing nation's gross output. If used for trade, exports are exchanged for other products or services. Exports are one of the oldest forms of economic transfer, and occur on a large scale between nations that have fewer restrictions on trade, such as tariffs or subsidies.
-
Export Credit Agency - ECA
- A financial institution or agency that provides trade financing to domestic companies for their international acitivites. Export credit agencies (ECAs) provide financing services such as guarantees, loans and insurance to these companies in order to promote exports in the domestic country. The primary objective of ECAs is to remove the risk and uncertainty of payments to exporters when exporting outside their country. ECAs take the risk away from the exporter and shift it to themselves, for a premium. ECAs also underwrite the commercial and political risks of investments in overseas markets that are typically deemed to be high risk.
-
Export Trading Company - ETC
- An independent company that provides support services for firms engaged in exporting. This may include warehousing, shipping, insuring and billing on behalf of the client. In addition, export trading companies may help manufacturers find overseas buyers and provide them with other pertinent market information. A group of producers can also form its own ETC.
-
Export-Import Bank Of The United States - Ex-Im Bank
- A federal agency responsible for facilitating international trade by financing the purchase of domestic exports and providing guarantees or insurance for foreign lines of credit. The Ex-Im bank was created in 1934, after congress established it to be the official export credit agency in the United States.
-
Exposure At Default - EAD
- A total value that a bank is exposed to at the time of default. Each underlying exposure that a bank has is given an EAD value and is identified within the bank's internal system. Using the internal ratings board (IRB) approach, financial institutions will often use their own risk management default models to calculate their respective EAD systems.
-
Expropriation
- The act of removing property from an owner.
-
Expunge
- An action that destroys any record of an AUTEX indication. Expunging an indication will permanently remove an trace of a trader's advertisement for a block order.
-
Extendable Bond
- A bond issue with a maturity that can be extended to a longer period at the option of the issuer.
-
Extended IRA
- An IRA that allows a second generation beneficiary to continue to distribute the assets over the life expectancy used by the first generation beneficiary, thereby extending the IRA.
-
Extended Trading
- Trading conducted on electronic exchanges either after regular trading hours are over or before they begin. Usually such trading is limited in its volume compared to regular trading hours. Pre-market trading in the U.S. markets usually runs between 8am and 9:30am EST, and after-market trading typically runs from 4pm until 6:30pm EST.
-
eXtensible Business Reporting Language - XBRL
- A standard that was developed to improve the way in which financial data is communicated, making it easier to compile and share this data. XBRL is a type of XML (extensible markup language), which is a specification that is used for organizing and defining data. XBRL uses tags to identify each piece of financial data, which then allows it to be used programmatically by an XBRL-compatible program.
-
Extension Risk
- The risk of a security lengthening in duration due to the deceleration of prepayments.
-
External Claim
- A claim against an individual that does not arise out of any relationship he or she may have to a business in which the individual has an ownership interest. Depending on how the business is owned, the creditor may be able to pursue the business to satisfy the external claim against the individual business owner/debtor.
-
External Debt
- The portion of a country's debt that was borrowed from foreign lenders including commercial banks, governments or international financial institutions. These loans, including interest, must usually be paid in the currency in which the loan was made. In order to earn the needed currency, the borowing country may sell and export goods to the lender's country.
-
External Diseconomies Of Scale
- External factors beyond the control of a company increases its total costs, as output in the rest of the industry increases. The increase in costs can be associated with market prices increasing for some or all of the factors of production.
-
External Economies Of Scale
- The lowering of a firm's costs due to external factors. External economies of scale will increase the productivity of an entire industry, geographical area or economy. The external factors are outside the control of a particular company, and encompass positive externalities that reduce the firm's costs.
-
Externality
- A consequence of an economic activity that is experienced by unrelated third parties. An externality can be either positive or negative.
-
Extra Dividend
- A non-recurring distribution of company assets, usually in the form of cash, to shareholders which is of unusually large size or different date of issue compared to normal dividends paid out by the given company. Also referred to as a "special dividend".
-
Extraordinary General Meeting - EGM
A meeting other than the annual general meeting between a company's shareholders, executives and any other members. An EGM is usually called on short notice and deals with an urgent matter.
-
Extraordinary Item
- Gains or losses included in a company's financial statements, which are infrequent and unusual in nature. These are usually explained further in the "notes to the financial statements."
-
Extraordinary Redemption
- A provision which gives a bond issuer the right to call the bonds due to a one-time occurrence, as specified in the offering statement. The circumstances could range from natural disasters and cancelled projects to almost anything else.
Also known as an "extraordinary call" or "extraordinary redemption provision".
- A provision which gives a bond issuer the right to call the bonds due to a one-time occurrence, as specified in the offering statement. The circumstances could range from natural disasters and cancelled projects to almost anything else.
-
Extrinsic Value
- The difference between an option's price and the intrinsic value.
Sponsored by
|
|
Free investing newsletters