Financial Glossary
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M
- A Nasdaq stock symbol specifying that it is the company's fourth class of preferred shares.
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M0
- A measure of the money supply which combines any liquid or cash assets held within a central bank and the amount of physical currency circulating in the economy. In the United Kingdom, the M0 supply is also referred to as narrow money.
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M1
- A category of the money supply that includes all physical money such as coins and currency; it also includes demand deposits, which are checking accounts, and Negotiable Order of Withdrawal (NOW) Accounts.
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M2
- A category within the money supply that includes M1 in addition to all time-related deposits, savings deposits, and non-institutional money-market funds.
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M3
- The category of the money supply that includes M2 as well as all large time deposits, institutional money-market funds, short-term repurchase agreements, along with other larger liquid assets.
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Maastricht Treaty
- A treaty that is responsible for the creation of the European Union, signed in Maastricht, a city in the Netherlands. The Maastricht Treaty was signed on February 7, 1992, by the leaders of 12 member nations, and it reflected the serious intentions of all countries to create a common economic and monetary union.
Also known as the Treaty on European Union.
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Macaroni Defense
- An approach taken by a company that does not want to be taken over. The company issues a large number of bonds with the condition they must be redeemed at a high price if the company is taken over.
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Macaulay Duration
- The weighted average term to maturity of the cash flows from a bond. The weight of each cash flow is determined by dividing the present value of the cash flow by the price, and is a measure of bond price volatility with respect to interest rates.
Macaulay duration can be calculated by:
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Macro Environment
- The conditions that exist in the economy as a whole, rather than in a particular sector or region. In general, the macro environment will include trends in gross domestic product (GDP), inflation, employment, spending, and monetary and fiscal policy. The macro environment is closely linked to the general business cycle, as opposed to the performance of an individual business sector.
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Macro Risk
- A type of political risk in which political actions in a host country can adversely affect all foreign operations. Macro risk can come about from events that may or may not be in the reigning government's control.
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Macro-Hedge
- An investment technique used to eliminate the risk of a portfolio of assets. In most cases, this would mean taking a position that offsets the whole portfolio. But this technique is difficult in practice because there is rarely one asset that will offset the risk of a broader portfolio, so applying a macro-hedge most likely requires taking an offsetting position in each individual asset.
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Macroeconomics
- The field of economics that studies the behavior of the aggregate economy. Macroeconomics examines economy-wide phenomena such as changes in unemployment, national income, rate of growth, gross domestic product, inflation and price levels.
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Macroprudential Analysis
- A method of economic analysis that evaluates the health, soundness and vulnerabilities of a financial system. Macroprudential analysis looks at the health of the underlying financial institutions in the system and performs stress tests and scenario analysis to help determine the system's sensitivity to economic shocks. Macroeconomic and market data are also reviewed to determine the health of the current system. The analysis also focuses on qualitative data related to financial institutions' frameworks and the regulatory environment to get an additional sense of the strength and vulnerabilities in the system.
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MAD
- In currencies, this is the abbreviation for the Moroccan Dirham.
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MAD (Moroccan Dirham)
- The currency abbreviation for the Moroccan dirham (MAD), the currency for Morocco and the de facto currency of the Western Sahara region. The Moroccan dirham is made up of 100 santimat (plural); popular language often refers to five santimat as a "rial", and one santim as a "franc".
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Mad Hatter
- A CEO or managerial team whose ability to lead a company is highly suspect.
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Madrid Fixed Income Market .MF
- The market used for trading Spain's public debt (central government, some regional governments, and some public-sector organizations) and other securities. It is part of the Madrid Stock Exchange, which is the largest securities market in Spain and one of the four members of the Bolsas y Mercados Españoles, an organization designed to streamline Spain's four major securities exchanges (Madrid, Valencia, Barcelona and Bilbao).
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Madrid SE CATS (MSE) .MC
- The Computer Assisted Trading System (CATS) was developed by the Toronto Stock Exchange in 1977 and implemented in the Madrid Stock Exchange (MSE) in 1989. This was the world's first fully electronic trading system. The MSE initially traded seven large-cap stocks on the system and expanded to 51 by the end of the year.
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Madrid Stock Exchange (MAD) .MA
- The largest securities market in Spain, also known as the Bolsa de Madrid. In 1809, Jose I Bonaparte attempted to establish Spain's first stock exchange in Madrid but it failed because Madrid was not a major business center at the time. 1831 saw the enactment of the law creating the Madrid Stock Exchange with securities of banks, railways and iron and steel companies being the first traded.
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Magna Cum Laude
- An academic level of distinction used by educational institutions to signify an academic degree which was received "with great honor". Magna cum laude is one of three commonly used types of Latin honors which are recognized in the United States, the other two being summa cum laude and cum laude. Magna cum laude is typically more prestigious than cum laude honors but less prestigious than summa cum laude honors.
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Main Home
- A term used by the Internal Revenue Service (IRS) to define the home a taxpayer has lived in most of the time during a given taxation year, or the only home a taxpayer owns. The classification of a taxpayer's main home is important when considering gains resulting from the sale of a main home.
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Main Street
- Shorthand for "the investing public"--in the same way that "Wall Street" is used to refer to investment professionals and brokers.
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Maintenance Margin
- The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and NASD, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account. Keep in mind that this level is a minimum, and many brokerages have higher maintenance requirements of 30-40%.
Also referred to as "minimum maintenance" or "maintenance requirement".
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Major Pairs
- The four forex pairs which are considered to be the most heavily traded in the forex market. The four major pairs are: EUR/USD, USD/JPY, GBP/USD, USD/CHF.
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Majority Shareholder
- A person or conglomerate who owns more than 50% of the outstanding shares of a corporation.
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Make A Market
- An action whereby a dealer stands by ready, willing and able to buy or sell a particular security at the quoted bid and ask price.
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Make Whole Call (Provision)
- A type of call provision on a bond allowing the borrower to pay off remaining debt early. The borrower has to make a lump sum payment derived from a formula based on the net present value (NPV) of future coupon payments that will not be paid because of the call.
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Malfeasance
- Used in regards to performance on a contract, malfeasance is an act of outright sabotage in which one party to the contract commits an act which causes intentional damage. A party that incurs damages by malfeasance is entitled to settlement through a civil law suit.
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Man-Year
- A method of describing the amount of work done by an individual throughout the entire year. The man-year takes the amount of hours worked by an individual during the week and multiplies it by 52 (or the number of weeks worked in a year). The man-year calculated will be different for various industries depending on the average number of hours worked each week and the number of weeks worked per year.
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Managed Account
- An investment account that is owned by an individual investor and looked after by a hired professional money manager. In contrast to mutual funds (which are professionally managed on behalf of many mutual-fund holders), managed accounts are personalized investment portfolios tailored to the specific needs of the account holder.
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Managed Currency
- Any currency that can have its exchange rate affected by the intervention of a central bank. This is opposed to a currency that is determined solely by the forces of supply and demand in the world market. Virtually no currencies truly fall into this latter category.
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Managed Forex Accounts
- A type of forex account in which a money manager trades the account on a client's behalf for a fee. Managed forex accounts are similar to hiring an investment advisor to manage a traditional investment account of equities and bonds. Returns and fees between managed accounts can vary greatly; therefore, it is important to research your options thoroughly before assigning your account to a professional manager.
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Managed Futures Account
- An account that is like a mutual fund, except that positions in government securities, futures contracts and options on futures contracts are used to manage the portfolio.
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Managed Money
- A means of investment where the investor, rather than buying and selling their own securities, places their investment funds in the hands of a qualified investment professional for a predetermined annual fee.
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Management And Employee Buyout - MEBO
- A restructuring initiative that involves both managerial and non-managerial employees buying out a firm in order to concentrate ownership into a small group from a widely dispersed group of shareholders.
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Management Buy-In - MBI
- A corporate action in which an outside manager or management team purchases an ownership stake in the first company and replaces the existing management team. This type of action can occur due to a company appearing undervalued or having a poor management team.
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Management Buyout - MBO
- When the managers and/or executives of a company purchase controlling interest in a company from existing shareholders.
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Management Discussion and Analysis - MD&A
- A section of a company's annual report in which management discusses numerous aspects of the company, both past and present.
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Management Fee
- A charge levied by an investment manager for managing an investment fund. The management fee is intended to compensate the managers for their time and expertise. It can also include other items such as investor relations expenses and the administration costs of the fund.
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Management Investment Company
- A formal name for a company that sells and manages a portfolio of securities. A management investment company is one of the three fundamental types of investment companies, the other two being unit investment trusts and face-amount certificate companies. Management investment companies allow investors to pool their capital with that of other investors in order to purchase professionally-managed groups of diversified securities.
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Management Risk
- The risks associated with ineffective, destructive or underperforming management, which hurts shareholders and the company or fund being managed. This term refers to the risk of the situation in which the company and shareholders would have been better off without the choices made by management.
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Management Tenure
- The length of time that a manager(s) has been at the helm of a mutual fund. A long-term fund performance record, preferably of five to 10 years, is a key indicator of a fund manager's investing abilities.
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Manager Of Managers - MOM
- A class of financial intermediary that hires professional investment managers to oversee aspects of a client's investment fund. More specifically, the MOM tracks the performance of each investment manager and has the power to fire ineffective managers and then hire replacements on a client's behalf. Using a MOM to handle investments funds is an alternative to hiring a single investment portfolio manager that makes all the asset management decisions.
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Manager Universe (Benchmark)
- The comparison of an account's performance to that of a representative peer group of money managers.
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Managerial Accounting
- The process of identifying, measuring, analyzing, interpreting, and communicating information for the pursuit of an organization's goals.
This is also known as "cost accounting."
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Mancession
- When the unemployment rate is substantially higher among men than women. The term mancession was coined during the financail crisis of 2008-2009, during which men bore the brunt of the job losses in the United States, at times at rates close to 50% higher than women.
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Mandatory Convertible
- A type of convertible bond that has a required conversion or redemption feature. Either on or before a contractual conversion date, the holder must convert the mandatory convertible into the underlying common stock.
These securities provide investors with higher yields to compensate holders for the mandatory conversion structure.
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Mandatory Mortgage Lock
- The sale of a mortgage in the secondary mortgage market with terms that require the seller of the mortgage to make delivery to the buyer by a certain date or pair-out of the trade. The requirement to make delivery of the mortgage or pair-out of the trade makes a mandatory mortgage lock different from a best-efforts mortgage lock. A mandatory mortgage lock also carries more risk for the seller of the mortgage.
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Mandatory Redemption Schedule
- Specified dates when a bond issuer is required to redeem all or a portion of the outstanding issues of a bond prior to its maturity. The issuer might be required to redeem all or a portion of the bonds according to the call or prepayment provisions of the of the bond contract.
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Manipulation
- The act of artificially inflating or deflating the price of a security. In most cases, manipulation is illegal. It is much easier to manipulate the share price of smaller companies, such as penny stocks, because they are not as closely watched by analysts as the medium- and large-sized firms.
Also known as "price manipulation".
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Manufactured Housing - MH
- A housing unit constructed primarily off-site prior to being moved to a piece of property where it is set. The cost of construction per square foot is usually considerably less for manufactured housing than for traditional on-site homes (stick-built homes). In the 1990s, this style of housing accounted for nearly 25% of new home sales for families in the United States.
This type of housing also includes "modular homes" - homes divided into multiple sections that are constructed off-site, then assembled like building blocks at the property.
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Manufactured Payment
- A tax concept whereby the lender of a stock receives the equivalent dividend payment from the borrower of the stock.
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Manufacturing Resource Planning - MRP II
- An integrated information system used by businesses. Manufacturing Resource Planning (MRP II) evolved from early Materials Requirement Planning (MRP) systems by including the integration of additional data, such as employee and financial needs. The system is designed to centralize, integrate and process information for effective decision making in scheduling, design engineering, inventory management and cost control in manufacturing.
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Maple Bond
- A bond denominated in Canadian dollars that is sold in Canada by foreign financial institutions and companies. Similar to other foreign bonds, such as the bulldog bond, samurai bond and matilda bond, the maple bond gives domestic investors (in this case, Canadian investors) the opportunity to invest in foreign companies without worrying about the effects of currency exchange fluctuations.
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Margin
- 1. Borrowed money that is used to purchase securities. This practice is referred to as "buying on margin".
2. The amount of equity contributed by a customer as a percentage of the current market value of the securities held in a margin account.
3. In a general business context, the difference between a product's (or service's) selling price and the cost of production.
4. The portion of the interest rate on an adjustable-rate mortgage that is over and above the adjustment-index rate. This portion is retained as profit by the lender.
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Margin Account
- A brokerage account in which the broker lends the customer cash to purchase securities. The loan in the account is collateralized by the securities and cash. If the value of the stock drops sufficiently, the account holder will be required to deposit more cash or sell a portion of the stock.
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Margin Call
- A broker's demand on an investor using margin to deposit additional money or securities so that the margin account is brought up to the minimum maintenance margin. Margin calls occur when a you account value depresses to a value calculated by the broker's particular formula.
This is sometimes called a "fed call" or "maintenance call".
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Margin Debt
- 1. The dollar value of securities purchased on margin within an account. Margin debt carries an interest rate, and the amount of margin debt will change daily as the value of the underlying securities changes.
2. The aggregate value of all margin debt in a nation or across an exchange.
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Margin Loan Availability
- 1. The dollar amount in an existing margin account that is currently available for purchasing securities. For new accounts, this represents the percentage value of the current balance that is available for future margin purchases.
2. The dollar amount available for withdrawal from an account with existing marginable positions being used as collateral.
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Margin Of Safety
- A principle of investing in which an investor only purchases securities when the market price is significantly below its intrinsic value. In other words, when market price is significantly below your estimation of the intrinsic value, the difference is the margin of safety. This difference allows an investment to be made with minimal downside risk.
The term was popularized by Benjamin Graham (known as "the father of value investing") and his followers, most notably Warren Buffett. Margin of safety doesn't guarantee a successful investment, but it does provide room for error in an analyst's judgment. Determining a company's "true" worth (its intrinsic value) is highly subjective. Each investor has a different way of calculating intrinsic value which may or may not be correct. Plus, it's notoriously difficult to predict a company's earnings. Margin of safety provides a cushion against errors in calculation.
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Margin Pressure
- A finanicial term for the effect of certain internal or market forces on a company's gross, operating or net margins. If something happens to make a company's costs rise or revenues fall, margins will become compressed, reducing net earnings.
Things that can cause margin pressure include:
1. When a new competitor enters the business and increases its product offering or lowers its costs
2. When commodity costs rise or other costs within the supply chain are rising
3. When increased regulatory controls are imposed on the company or industry
4. When new legislation is introduced that fundamentally changes the markets in which the company competes
5. When internal production problems or delays arise
6. When rising selling, general and administrative expense (SG&A) costs occur without a proportional rise in revenue
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Marginal Benefit
- The additional satisfaction, or utility, that a person receives from consuming an additional unit of a good or service. A person’s marginal benefit is the maximum amount they are willing to pay to consume that additional unit of a good or service. In a normal situation, the marginal benefit will decrease as consumption increases.
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Marginal Cost Of Funds
- The incremental cost of borrowing more money to fund additional asset purchases or investments. In its simplest calculation, the marginal cost of funds is simply the interest rate on the new loan balance. Marginal cost of funds is often confused with the average cost of funds, which would be calculated by computing a weighted-average of all the combined loans’ interest rates.
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Marginal Cost Of Production
- The change in total cost that comes from making or producing one additional item. The purpose of analyzing marginal cost is to determine at what point an organization can achieve economies of scale. The calculation is most often used among manufacturers as a means of isolating an optimum production level.
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Marginal Propensity To Consume - MPC
- A component of Keynesian theory, MPC represents the proportion of an aggregate raise in pay that is spent on the consumption of goods and services, as opposed to being saved.
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Marginal Rate of Substitution
- The rate at which an individual must give up “good A” in order to obtain one more unit of “good B”, while keeping their overall utility (satisfaction) constant. The marginal rate of substitution is calculated between two goods placed on an indifference curve, which displays a frontier of equal utility for each combination of “good A” and “good B”.
As such, the marginal rate of substitution is always changing for a given point on the indifference curve, and mathematically represents the slope of the curve at that point.
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Marginal Rate Of Transformation
- The rate at which one good must be sacrificed in order to produce a single extra unit (or marginal unit) of another good, assuming that both goods require the same scarce inputs. The marginal rate of substitution is tied to the production possibilities frontier (PPF), which displays the output potential for two goods using the same resources. To produce more of one good means producing less of the other because the resources are efficiently allocated.
The marginal rate of transformation is the absolute value of the slope of the production possibilities frontier. For each point on the frontier (which is displayed as a curved line), there is a different marginal rate of substitution, based on the economics of producing each product individually.
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Marginal Social Cost - MSC
- The total cost to society as a whole for producing one further unit, or taking one further action, in an economy. This total cost of producing one extra unit of something is not simply the direct cost borne by the producer, but also must include the costs to the external environment and other stakeholders.
Calculated as:
Where:
MSC = Marginal Social Cost
MPC = Marginal Private Cost
MEC = Marginal External Cost
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Marginal Tax Rate
- The amount of tax paid on an additional dollar of income. As income rises, so does the tax rate.
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Marginal Utility
- The additional satisfaction a consumer gains from consuming one more unit of a good or service.
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Marginalism
- The study of marginal theories and relationships within economics. The key focus of marginalism is how much extra use is gained from incremental increases in the quantity of goods created, sold, etc. and how those measures relate to consumer choice and demand.
Marginalism covers such topics as marginal utility, marginal gain, marginal rates of substitution, and opportunity costs, within the context of consumers making rational choices in a market with known prices.
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Marital Deduction
- A tax deduction that allows an individual to transfer some assets to his or her spouse tax free, creating a reduction in taxable income. A marital deduction is mainly used for the purposes of estates and gifts.
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Marital Property
- A U.S. state-level legal distinction of a married individual's assets. Property acquired by either spouse during the course of a marriage is considered marital property. For example, an IRA in the name of an individual with a spouse that is accumulated during the course of the marriage would be considered marital property.
Also known as "community property".
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Mark To Management
- The theory that a good, asset/liability or service can be assigned a fair market value based not necessarily on current or historical market price but rather on the holder's assumption of what the good, asset/liability or service could potentially be worth to a buyer in either an actual or hypothetical market. It involves not only evaluating historical market pricing and external market observations but also non-observable assumptions surrounding the good, service or asset/liability based on internal information.
It is cited as a way of determining the potential value of an item, service or asset for which there currently is not an existing market or because the market is experiencing enormous volatility, making fair value assignment difficult if not impossible under standard mark to market accounting.
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Mark To Market - MTM
- 1. A measure of the fair value of accounts that can change over time, such as assets and liabilities. Mark to market aims to provide a realistic appraisal of an institution's or company's current financial situation.
2. The accounting act of recording the price or value of a security, portfolio or account to reflect its current market value rather than its book value.
3. When the net asset value (NAV) of a mutual fund is valued based on the most current market valuation.
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Mark To Model
- The pricing of a specific investment position or portfolio based on internal assumptions or financial models. This contrasts with traditional mark-to-market valuations, in which market prices are used to calculate values as well as the losses or gains on positions. Assets that must be marked-to-model either don't have a regular market that provides accurate pricing, or valuations rely on a complex set of reference variables and time frames. This creates a situation in which guesswork and assumptions must be used to assign value to an asset.
These assets are typically derivative contracts or securitized cash flow instruments, and most do not have liquid trading markets.
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Markdown
- The difference between the highest current bid price among broker-dealers in the market and the lower price that a dealer charges a customer.
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Market
- 1. A medium that allows buyers and sellers of a specific good or service to interact in order to facilitate an exchange. The price that individuals pay during the transaction may be determined by a number of factors, but price is often determined by the forces of supply and demand.
2. The general market where securities are traded.
3. People with the desire and ability to buy a specific product/service.
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Market Arbitrage
- Purchasing and selling the same security at the same time in different markets to take advantage of a price difference between the two separate markets.
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Market Average
- A measure of the overall price level of a given market, as defined by a specified group of stocks or other securities. A market average equals the sum of all current values of stocks in the group divided by the total number of shares in the group.
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Market Basket
- A subset of products or securities that is designed to mimic the performance of an overall market. Market baskets contain a fixed selection of items, which are used to track such things as inflation, prices or performance levels.
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Market Breadth
- A technique used in technical analysis that attempts to gauge the direction of the overall market by analyzing the number of companies advancing relative to the number declining. Positive market breadth occurs when more companies are moving higher than are moving lower, and it is used to suggest that the bulls are in control of the momentum. Conversely, a disproportional number of declining securities is used to confirm bearish momentum.
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Market Cannibalization
- The negative impact of a company's new product on the sales performance of its existing related products.
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Market Capitalization
- The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determining a company's size, as opposed to sales or total asset figures.
Frequently referred to as "market cap".
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Market Capitalization Rule
- A rule set by the New York Stock Exchange (NYSE) to determine a minimum market value to be listed continuously. The Market Capitalization Rule states that companies must maintain a minimum value of $25 million over 30 consecutive days to remain listed. This standard value was set in 2004.
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Market Cycles
- 1. Trends or patterns that may exist in a given market environment, allowing some securities or asset classes to outperform others. The securities themselves may exhibit price patterns in their trading.
2. Trends within a particular sector or industry created by a particular innovation, product line, or regulatory environment. Revenue and net profits may exhibit similar growth patterns among many companies within a given industry.
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Market Depth
- The market's ability to sustain relatively large market orders without impacting the price of the security. This considers the overall level and breadth of open orders and usually refers to trading within an individual security.
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Market Discipline
- The onus on the banks, financial institutions and sovereigns to conduct business while considering the risks to their stakeholders. Market discipline is a market-based promotion of the transparency and disclosure of the risks associated with a business or entity. It works in concert with regulatory systems to increase the safety and soundness of the market
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Market Disruption
- A situation where markets cease to function in a regular manner, typically characterized by rapid and large market declines. Market disruptions can result from both physical threats to the stock exchange or unusual trading (as in a crash). In either case, the disruption creates widespread panic and results in disorderly market conditions.
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Market Distortion
- An economic scenario that occurs when there is an intervention in a given market by a governing body. The intervention may take the form of price ceilings, price floors or tax subsidies. Market distortions create market failures, which is not an economically ideal situation.
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Market Economy
- An economic system in which economic decisions and the pricing of goods and services are guided solely by the aggregate interactions of a country's citizens and businesses and there is little government intervention or central planning. This is the opposite of a centrally planned economy, in which government decisions drive most aspects of a country's economic activity.
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Market Efficiency
- The degree to which stock prices reflect all available, relevant information.
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Market Exposure
- The amount of funds invested in a particular type of security and/or market sector or industry and usually expressed as a percentage of total portfolio holdings. Thus, it is the amount an investor has at risk or the amount he/she can lose. Also known as "exposure".
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Market Failure
- An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers does not equate to the quantity supplied by suppliers. This is a direct result of a lack of certain economically ideal factors, which prevents equilibrium.
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Market Identifier Code - MIC
- A four-character code used to identify stock markets and other trading exchanges within global trading and referencing computer systems. The first letter of any MIC is "X", followed by a three-digit alphanumeric code for the market in which a trade takes place. The code is used to process and clear trades, and is being pushed toward global acceptance as the securities industries move toward straight-through-processing (STP). The London Stock Exchange uses MICs as part of its SEDOL security-identifying systems, which is an alternative to the U.S.-based CUSIP identifying system.
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Market If Touched - MIT
- A conditional order that becomes a market order when a security reaches a specified price. When using a buy market-if-touched order, a broker will wait until the security falls to a certain level before purchasing the asset. A sell market-if-touched order will activate when the price of a security rises to the specified level.
Also referred to as a "board order".
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Market Index
- An aggregate value produced by combining several stocks or other investment vehicles together and expressing their total values against a base value from a specific date. Market indexes are intended to represent an entire stock market and thus track the market's changes over time.
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Market Index Target-Term Security - MITTS
- A type of principal-protected note initially engineered by Merrill Lynch that is designed to limit the amount of downside risk an investor is exposed to while also providing a return that is proportional to that of a specified stock market index. Market Index Target-Term Securities (MITTS) typically do not afford their owner the right to redeem the security before maturity, nor do they usually afford the right to call the issue in early.
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Market Indicators
- A series of technical indicators used by traders to predict the direction of the major financial indexes. Most market indicators are created by analyzing the number of companies that have reached new highs relative to the number that created new lows, also known as market breadth.
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Market Is Off
- A common phrase meaning that the market (or a major market index) is trading below the previous closing price.
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Market Is Up
- A common phrase meaning the market (or a major market index) is trading higher than the previous closing price.
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Market Jitters
- Feelings of nervousness created by uncertainty or fear about the current investment environment.
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Market Maker
- A broker-dealer firm that accepts the risk of holding a certain number of shares of a particular security in order to facilitate trading in that security. Each market maker competes for customer order flow by displaying buy and sell quotations for a guaranteed number of shares. Once an order is received, the market maker immediately sells from its own inventory or seeks an offsetting order. This process takes place in mere seconds.
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Market Maker Spread
- The difference between the price at which a market maker is willing to buy a security and the price at which the firm is willing to sell it (the difference between the bid and ask for a given security). Because each market maker can either buy or sell a stock at any given time, the spread represents the market maker's profit on each trade.
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Market Maven
- Slang used to describe a good investor who is "in-the-know." It also implies opinion leadership.
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Market Momentum
- A measure of overall market sentiment, calculated as the change in the value of a market index multiplied by the aggregate trading volume occurring within the index components.
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Market Neutral
- A strategy undertaken by an investor or an investment manager that seeks to profit from both increasing and decreasing prices in a single or numerous markets. Market-neutral strategies are often attained by taking matching long and short positions in different stocks to increase the return from making good stock selections and decreasing the return from broad market movements. Market neutral strategists may also use other tools such as merger arbitrage, shorting sectors, and so on. There is no single accepted method of employing a market-neutral strategy.
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Market Neutral Fund
- An aggressive type of mutual fund that aims to deliver superior returns by balancing bullish stock picks with bearish ones. They can also generate income from the interest proceeds of the sales of short securities. The objective of these funds is to generate consistent returns that are at least three to six percent above the T-bill rate. These funds can also offer returns similar to leveraged ETFs which aim to deliver 200-300% returns on any given investment.
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Market On Close - MOC
- A market order to be executed as near to the end of the exchange day as possible. Also known as an "at-the-close order."
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Market Order
- An order to buy or sell a stock immediately at the best available current price.
A market order is sometimes referred to as an "unrestricted order".
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Market Out Clause
- A clause in an underwriting agreement allowing the underwriter to cancel the agreement for certain specified reasons without penalty.
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Market Overhang
- An observational theory stating that in certain stocks at certain times, there is a buildup of selling pressure. This occurs as a combined result of sales and a strong wish to sell among those who still hold the stock but fear that selling it may cause further declines. Depending on the overall liquidity in the stock, a market overhang can last for weeks, months or longer. Market overhang usually relates to trading in one security but can also apply to larger areas of the market, such as an entire sector.
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Market Penetration
- A measure of the amount of sales or adoption of a product or service compared to the total theoretical market for that product or service. The amount of sales or adoption can be an individual company’s sale or industry while the theoretical market can be the total population or an estimate of total potential consumers for the product.
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Market Perform
- An investment rating used by analysts when the expectation for a given stock or investment is that it will provide returns in line with those of the S&P 500 or other leading market averages.
Market perform is a neutral assessment of a stock and is neither strongly positive or negative. If, however, the stock has gone through a period of market underperformance, it is an indication that the stock is expected to improve its performance relative to market averages.
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Market Performance Committee
- A committee, consisting of members and allied members of the New York Stock Exchange (NYSE) who monitor the specialists' effectiveness in assuring an orderly market for their stocks. The Market Performance Committee has the additional responsibility of assigning new or existing issues to the specialists.
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Market Price
- The current price at which an asset or service can be bought or sold. Economic theory contends that the market price converges at a point where the forces of supply and demand meet. Shocks to either the supply side and/or demand side can cause the market price for a good or service to be re-evaluated.
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Market Proxy
- A broad representation of the overall market. A market proxy is chosen and used to simplify studies that require a market variable, statistic or comparison. The market proxy, once selected, is then used in performance evaluations and studies, or to test a hypothesis.
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Market Psychology
- The overall sentiment or feeling that the market is experiencing at any particular time. Greed, fear, expectations and circumstances are all factors that contribute to the group's overall investing mentality or sentiment.
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Market Risk
- The day-to-day potential for an investor to experience losses from fluctuations in securities prices. This risk cannot be diversified away.
Also referred to as "systematic risk".
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Market Risk Premium
- The difference between the expected return on a market portfolio and the risk-free rate.
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Market Saturation
- When the amount of product provided in a market has been maximized in the current state of the marketplace. At the point of saturation, further growth can only be achieved through product improvements, market share gains or a rise in overall consumer demand.
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Market Segmentation
- A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will respond similarly to a marketing action.
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Market Segmentation Theory
- A modern theory pertaining to interest rates stipulating that there is no necessary relationship between long and short-term interest rates. Furthermore, short and long-term markets fall into two different categories. Therefore, the yield curve is shaped according to the supply and demand of securities within each maturity length.
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Market Sentiment
- The feeling or tone of a market (i.e. crowd psychology). It is shown by the activity and price movement of securities.
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Market Share
- The percentage of an industry or market's total sales that is earned by a particular company over a specified time period. Market share is calculated by taking the company's sales over the period and dividing it by the total sales of the industry over the same period. This metric is used to give a general idea of the size of a company to its market and its competitors.
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Market Surveillance
- A department responsible for investigating and preventing abusive, manipulative, or illegal trading practices on the Nasdaq.
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Market Swoon
- A slang term for a decline in the overall value of the stock market. Market swoons can be seen when indexes, such as the Dow Jones Industrial Average (DJIA) , have a significant drop in price.
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Market Technicians Association - MTA
- A nonprofit organization located in the U.S. that promotes ethical trading practices among technical analysts.
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Market Timing
- 1. The act of attempting to predict the future direction of the market, typically through the use of technical indicators or economic data.
2. The practice of switching among mutual fund asset classes in an attempt to profit from the changes in their market outlook.
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Market Value
- 1. The current quoted price at which investors buy or sell a share of common stock or a bond at a given time. Also known as "market price".
2. The market capitalization plus the market value of debt. Sometimes referred to as "total market value".
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Market Value Added - MVA
- A calculation that shows the difference between the market value of a company and the capital contributed by investors (both bondholders and shareholders). In other words, it is the sum of all capital claims held against the company plus the market value of debt and equity.
Calculated as:
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Market versus Quote - MVQ
- A comparison between the last price at which a security traded and the current bid/ask prices.
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Market-Based Corporate Governance System
- A system relying on the investors of a firm to exert control over how the corporation is to be managed. A market-based corporate governance system defines the responsibilities of the different participants in the company, including shareholders, the board of directors, management, employees, suppliers and customers.
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Market-With-Protection Order
A type of market order that is canceled and re-submitted as a limit order if the price of the asset moves dramatically after the investor places the order. The limit on the limit order is placed at around the current market price as determined by a broker. This type of order adds a protective measure, helping the investor ensure his or her market order will not be completed at a price that is far off from the market price at the time of the order.
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Marketable Securities
- Very liquid securities that can be converted into cash quickly at a reasonable price.
Marketable securities are very liquid as they tend to have maturities of less than one year. Furthermore, the rate at which these securities can be bought or sold has little effect on their prices.
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Marketable Security
- Any equity or debt instrument that it readily salable and can be converted into cash, or exchanged with ease. Stocks, bonds, short-term commercial paper and certificates of deposit are all considered marketable securities because there is a public demand for them and because they can be readily converted into cash.
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Marketing
- The activities of a company associated with buying and selling a product or service. It includes advertising, selling and delivering products to people. People who work in marketing departments of companies try to get the attention of target audiences by using slogans, packaging design, celebrity endorsements and general media exposure. The four 'Ps' of marketing are product, place, price and promotion.
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Markets in Financial Instruments Directive - MiFID
- A directive that aims to integrate the European Union's financial markets and to increase the amount of cross border investment orders. The MiFID plans to implement new measures, such as pre- and post-trade transparency requirements and capital requirements that firms must hold. The directive officially took effect on November 1st, 2007.
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Marketweight
- A credit rating system for fixed-income instruments. The marketweight ranking system gives a subjective estimate of the accuracy of the current credit spread and determines whether an investment is attractive. The system includes three ranks: marketweight, overweight and underweight. The marketweight rating indicates that the current credit spread of an instrument is in line with expectations.
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Markowitz Efficient Set
- A set of portfolios with returns that are maximized for a given level of risk based on mean-variance portfolio construction. The efficient "solution set" to a given set of mean-variance parameters (a given riskless asset and a given risky basket of assets) can be graphed into what is called the Markowitz efficient frontier.
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Markup
- The difference between an investment's lowest current offering price among dealers and the higher price a dealer charges a customer. Markups occur when dealers act as principals (buying and selling securities from their own accounts, at their own risk), as opposed to brokers (receiving a fee for facilitating a transaction).
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Marlboro Friday
- A reference to Friday, Apr 2, 1993, when Philip Morris, the maker of Marlboro cigarettes, announced that it would be cutting the price of Marlboros to compete with generic cigarette makers. The company's stock tanked 26% following the announcement, losing about $10 billion off its market cap in a single day.
The day is remembered as a landmark moment in the 1990s consumer movement away from name brand products in favor of cheaper generic products with prices 50% lower than their branded competitors. In its wake, money managers moved cash from name brand consumer goods makers like Coca-Cola and Tambrands (the former maker of Tampax tampons) to technology stocks and generic consumer goods producers.
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Marquee Asset
- A company's most appealing asset. Also referred to as a "trophy asset".
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Married Filing Jointly
- A filing status for married couples that have wed before the end of the tax year. When filing under the married filing jointly status, couples can record their respective incomes, exemptions and deductions on the same tax return. Married filing jointly is best if only one spouse has a significant income. However, if both spouses work and the income and itemized deductions are large and very unequal, it may be more advantageous to file separately.
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Married Filing Separately
- A filing status for married couples who choose to record their respective incomes, exemptions and deductions on separate tax returns. In most cases, married filing jointly offers the most tax savings, especially when the spouses have different income levels. However, there is a potential tax advantage to filing separately when one spouse has significant medical expenses or miscellaneous itemized deductions.
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Married Put
- An option strategy whereby an investor, holding a long position in stock, purchases a put on the same stock to protect against a depreciation in the stock's price.
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Martingale System
- A money management system of investing in which the dollar values of investments continually increase after losses, or the position size increases with lowering portfolio size.
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Marubozo
- A type of candlestick charting formation that appears when a security's price does not trade outside the range of the opening and closing prices.
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Mass Customization
- The process of delivering wide-market goods and services that are customized to satisfy a specific customer need.
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Master Fund
- In general, an investment vehicle that enables individual investors to invest money into one or more underlying investments that are operated by professional managers.
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Master Limited Partnership - MLP
- A type of limited partnership that is publicly traded. There are two types of partners in this type of partnership: The limited partner is the person or group that provides the capital to the MLP and receives periodic income distributions from the MLP's cash flow, whereas the general partner is the party responsible for managing the MLP's affairs and receives compensation that is linked to the performance of the venture.
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Master Mortgage
- Documentation that is filed in the records for public land by mortgage originators as a matter of standard procedure. The master mortgage makes the lien-recording process less complicated and also aids in the sale of mortgages that trade in the secondary market.
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Master Notes
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Master Of Business Administration (MBA)
- A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates gain a better understanding of general business management functions. The MBA degree can have a specific focus such as accounting, finance or marketing.
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Master of Public Administration - MPA
- A Master's level degree in public affairs that prepares recipients of the degree to serve in executive positions in municipal, state, federal levels of government and non-governmental organizations (NGOs). The focus of the program centers on principles of public administration, policy developement and management, and implementation of policies. It also prepares the candidate to deal with specific challenges faced in public administration.
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Master Trust
- A collection of funds from individual investors that are pooled together in order to obtain wholesale prices and rates unavailable for regular investors.
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Masterbrand
- A specific overarching brand name that serves as the main anchoring point on which all underlying products are based. Masterbranding attempts to create a strong association between a company's products and what the brand represents. While individual products will always have their own names/brands, it is the masterbrand that contributes to the consumer's belief that the product is different compared to all others in its class.
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Mat Hold Pattern
- A pattern found in the technical analysis of stocks that ultimately indicates the stock will continue its previous directional trend (bullish or bearish). The pattern is initially indicated by a significant trading day in one direction or another, followed by three small opposite trending days. The fifth day then continues the first day's trend, pushing higher or lower, in the same direction as the first day's movement.
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Match-Rate Funds
- When the interest rate on a loan matches (or is extremely close to) the interest rate on the source of the funds loaned out. An example of this would be if a bank accepted a $100,000 deposit and agreed to pay 5% interest on it for five years, then loaned the $100,000 out at 5.25%.
A securitization lender would be a typical user of match-rate funds.
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Matched Book
- A bank is running a matched book when the maturities of its assets and liabilities are equally distributed. Also known as "asset/liability management".
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Matched Sale-Purchase Agreement - MSPA
- An arrangement whereby the Federal Reserve sells government securities (U.S. Treasuries) to an institutional dealer or the central bank of another country with the contractual agreement to purchase the security back within a short period of time, usually less than two weeks. The security is bought back at the same price at which it was sold, and decreases banking reserves during the term of the matched sale-purchase agreement.
This is also known as a "system MSP".
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Matching Contribution
- A type of contribution an employer chooses to make to his or her employee's employer-sponsored retirement plan. The contribution is based on elective deferral contributions made by the employee.
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Matching Orders
- Entering identical buy and sell orders at the same time to create the appearance of active trading in that security.
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Matching Strategy
- A strategy of creating investment portfolios that meet the individual needs of investors through tiered investment durations.
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Material Amount
- The movement of a security's price to the extent that it confirms or refutes the trader's original prediction. A movement of material amount that refutes the trader's original prediction should trigger a stop-loss trade.
It can also signify an amount worth mentioning, as in financial statements or conference calls. If it is not a material amount, then it is considered too insignificant to mention.
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Material Insider Information
- Material information, about certain aspects of a company, that has not yet been made public but that will have at least a small impact on the company's share price once released. It is illegal for holders of material insider information to use the information - however it was received - to their advantage in trading stock, or to provide the information to family members or friends so they can use it to make trades.
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Material News
- News released by a company that might affect the value of its securities or influence investors' decisions.
Also known as "materiality."
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Material Participation Test
- A set of criteria that determines whether a taxpayer is a material participant in a business venture. The material participation test will determine whether business income received by the taxpayer is active or passive.
According to the IRS, if the taxpayer participates in a business activity on a regular, continuous and substantial basis, then the taxpayer materially participates in the business.
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Material Weakness
- When one or more of a company's internal controls, put in place to prevent significant financial statement irregularities, is considered to be ineffective. If a deficiency in an internal control is thought to be of material weakness, this means that it could lead to a material misstatement in a company's financial statements.
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Materials Requirement Planning - MRP
- One of the first software based integrated information systems designed to improve productivity for businesses. A materials requirement planning (MRP) information system is a sales forecast-based system used to schedule raw material deliveries and quantities, given assumptions of machine and labor units required to fulfill a sales forecast.
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Matilda Bond
- An bond denominated in the Australian dollar and issued on the Australian market by a foreign entity.
Also known as a "kangaroo bond."
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Matrix Trading
- A fixed-income trading strategy that looks for discrepancies in the yield curve, which an investor can capitalize upon by instituting a bond swap. Discrepancies come about when current yields on a particular class of bond (corporate, municipal, etc.) don't match up with the rest of the yield curve or its historical norms.
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Mature Industry
- An industry which has passed both the emerging and the growth phases of industry growth. Earnings and sales grow slower in mature industries than in growth and emerging industries.
As can be seen above, the third phase is the mature industry phase.
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Matured RRSP
- A Canadian retirement savings vehicle that is registered with the Canadian government and is being used to produce retirement income for the beneficiary.
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Maturity
- 1. The length of time until the principal amount of a bond must be repaid.
2. The end of the life of a security.
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Maturity by Maturity Bidding - MBM
- A bond auction that allows bidders (who are underwriters) to submit bids for selected maturities in its issue, rather than requiring buyers to bid for the entire issue on an all-or-none (AON) basis.
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Maturity Date
- The date on which the principal amount of a note, draft, acceptance bond or other debt instrument becomes due and is repaid to the investor and interest payments stop. It is also the termination or due date on which an installment loan must be paid in full.
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Maturity Gap
- A measurement of interest rate risk for risk-sensitive assets and liabilities. The market values at each point of maturity for both assets and liabilities are assessed, then multiplied by the change in interest rate and summed to calculate the net interest income or expense.
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Maturity Guarantee
- The dollar amount of a contract (such as a life insurance policy or segregated fund contract) that is guaranteed after a certain amount of time has elapsed.
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Maturity Mismatch
- The tendency of a business to mismatch its balance sheet by possessing more short-term liabilities than short-term assets and having more assets than liabilities for medium- and long-term obligations. How a company organizes the maturity of its assets and liabilities can give details into the liquidity of its position.
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Max Pain (TM)
- The point at which options expire worthless.
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Maximizer
- A brand of customer relationship management software popularly used by brokers and investment advisors for tracking clients and leads.
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Maximum Loan Amount
- Describes the maximum amount that a borrower can borrow. The maximum loan amount is based on a combination of different factors involving the specific loan program, the value of the property that secures the loan and the borrower's qualifying ratios and credit history. Lenders typically offer various loan programs with maximum loan amounts tailored for different classes of borrowers.
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Maximum Loan-to-Value Ratio
- The maximum ratio of a loan’s size to the value of the property, which secures the loan. The loan-to-value ratio is a measure of risk used by lenders. Different loan programs are viewed to have different risk factors, and therefore, have different maximum loan-to-value ratios.
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May Day
- Refers to May 1, 1975, when brokerages changed from a fixed commission for securities transactions to a negotiated one.
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MBIA Insurance Corporation
- A division of publicly-traded MBIA, Inc, and a primary worldwide issuer of financial guarantee insurance. Used to back municipal bonds and structured finance products, MBIA insurance is used as an avenue to credit enhancement, as MBIA's insurance promises to pay interest and principal on any bonds that suffer an issuer default.
The presence of MBIA insurance on a municipal bond typically ensures an 'AAA' rating or its equivalent from the major ratings agencies and also makes the bonds much more marketable to investors.
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MBS Pool Number
- A number or alphanumeric character assigned to a mortgage-backed security (MBS) by the issuer as an identifier of that security. Pool numbers are typically six digits in length. Different issuers such as Freddie Mac, Fannie Mae and Ginnie Mae use different alpha characters as the initial digit in their pool numbers to identify the pool as their issue. For example, a Freddie Mac 30-year pool number might be D54321 while a Fannie Mae 30-year pool number might be F54321.
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McCallum Rule
- A monetary policy development guideline developed by economist Bennett T. McCallum. The rule describes the relationship between inflation and the growth in the money supply needed to create that level of inflation. Important inputs in this model are the target inflation rate and the long-term average rate of growth in real GDP.
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McClellan Oscillator
- A market breadth indicator that is based on the difference between the number of advancing and declining issues on the NYSE. It is primarily used for short and intermediate term trading.
To calculate subtract a 39 day EMA (of advancing issues - declining issues) from a 19 day EMA (of advancing issues - declining issues).
Simplified, it looks as follows: (19 Day EMA of Advances - Declines) - (39 Day EMA of Advances - Declines)
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McClellan Summation Index
- The McClellan Summation Index is a long-term version of the McClellan Oscillator. It is a market breadth indicator, and interpretation is similar to that of the McClellan Oscillator, except that it is more suited to major trends.
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McDonough Ratio
- A ratio that was developed during the Basel II conference by the Basel Committee on Banking Supervision. The ratio has evolved out of the Cooke ratio, which was originally developed during Basel I in 1998. Improvements were made to update the ratio because the development of new financial instruments were creating problems for determining the risk carried by banks.
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McFadden Act
- Federal legislation that gave individual states the authority to govern bank branches located within the state. This includes branches of national banks located within state lines. The act was intended to allow national banks to compete with state banks by permitting them to open branches within state limitations.
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McGinley Dynamic Indicator
- A technical-analysis indicator created by John McGinley. The McGinley Dynamic indicator uses both a short-term simple moving average and an exponential moving average to track price movements and to smooth out volatile data. This avoids most whipsaws that affect moving averages.
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McMansion
- Slang that describes a large, opulent house that may be generic in style and represents a good value for a homebuyer in terms of its size. This type of home is built to provide middle and/or upper middle class homeowners with the luxurious housing experience that was previously only available to high net worth individuals.
The name is derived as a play on words on McDonald's fast food restaurants, as these homes also represent the pervasiveness and excessive consumption that critics often associate with Mcdonald's.
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Mean
- The simple mathematical average of a set of two or more numbers. The mean for a given set of numbers can be computed in more than one way, including the arithmetic mean method, which uses the sum of the numbers in the series, and the geometric mean method. However, all of the primary methods for computing a simple average of a normal number series produce the same approximate result most of the time.
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Mean Return
1. In securities analysis, it is the expected value, or mean, of all the likely returns of investments comprising a portfolio. It is also known as "expected return".
2. In capital budgeting, it is the mean value of the probability distribution of possible returns.
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Mean Reversion
- A theory suggesting that prices and returns eventually move back towards the mean or average. This mean or average can be the historical average of the price or return or another relevant average such as the growth in the economy or the average return of an industry.
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Measuring Principle
- In techincal analysis, An intangible principle for finding mininum security price targets for traders. The measuring principle uses technical analysis to analyze chart patterns to detect stock levels that, if broken, could lead to a small down leg. More specifically, it allows traders to set a reasonable minimum price target on a stock by weighing the movements of the stock chart pattern against each other.
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Mechanical Investing
- Buying and selling stocks according to a screen based on predetermined criteria, usually with the help of technical indicators such as relative strength or momentum. This method allows traders to enter transactions without emotion and backtest their strategies by using historical data from any time period.
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Medallion Signature Guarantee
- A guarantee seal applied to securities, in the process of transfer, by member institutions of the Medallion program.
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Media Effect
- A theory that relates how stories published in the media influence or amplify current trends. Borrowers or investors will read an article and be influenced to act quickly on the news. The media effect is often seen in the mortgage market, when prepayment rates can sharply increase following specific news stories.
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Median
- The midpoint of the range numbers that are arranged in order of value.
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Medicaid
- A joint federal and state program that helps low-income individuals or families pay for the costs associated with long-term medical and custodial care, provided they qualify. Although largely funded by the federal government, Medicaid is run by the state where coverage may vary.
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Medical Savings Account - MSA
- A medical plan combining high-deductible medical insurance protection with a tax-deferred savings account that can be offered by employers as part of a benefits package. Medical savings accounts are designed to help participants pay for medical and healthcare expenses by allowing them to save for those expenses in a tax-sheltered environment. Participants pay healthcare expenses from this account up to the amount of the insurance deductible.
Also known as "Archer medical savings accounts" or "Archer MSAs."
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Medicare
- A U.S. federal health program that subsidizes people who meet one of the following criteria:
1. An individual over the age of 65 who has been a U.S. citizen or permanent legal resident for five years.
2. An individual who is disabled and has collected Social Security for a minimum of two years.
3. An individual who is undergoing dialysis for kidney failure or who is in need of a kidney transplant.
4. An individual who has Amyotrophic Lateral Sclerosis (Lou Gehrig's disease).
Medicare helps out people at a time in their lives when they may have serious health problems but lack the funding for treatment.
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Medicare Part D
- A prescription drug benefit program that was created through the U.S. Medicare Prescription Drug, Improvement, and Modernization Act of 2003. The "D" stands for "drugs". The program gives Medicare recipients these basic choices: stay in traditional Medicare without signing up for the prescription drug benefit outlined in the Act, stay in traditional Medicare and enroll in a Medicare drug plan, enroll in other Medicare plans, or enroll in a comprehensive private health plan (which may or may not cover prescription costs). The program began providing coverage for users on Jan 1, 2006.
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Medicare Wages
- The portion of a person's earnings that are subject to "Medicare tax."
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Medium Of Exchange
- An intermediary instrument used to facilitate the sale, purchase or trade of goods between parties. In modern economies the medium of exchange is currency.
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Medium Term
- An intermediate period of time to hold an asset.
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Medium Term Note - MTN
- 1. A note that usually matures in five to 10 years.
2. A corporate note continuously offered by a company to investors through a dealer. Investors can choose from differing maturities, ranging from nine months to 30 years.
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Mega Cap
- Companies having a market capitalization greater than $200 billion.
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Mello-Roos
- In the U.S., a form of financing that can be used by cities, counties and special districts (such as school districts) to finance major improvements and services within the particular district. Special taxes and bonds used for Mello-Roos financing can only be issued by counties or districts in which two-thirds of the voters in the area have voted in favor of becoming a Mello-Roos district.
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Member
- 1. In the most general context, a brokerage firm (or broker) holding membership on an organized stock or commodities exchange. Membership is generally required in order to fill trades for clients on the exchange.
2. For the New York Stock Exchange, one of more than 1,300 individuals or firms owning a seat on the exchange.
3. For the National Association of Securities Dealers (NASD), any broker-dealer admitted to membership in the association.
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Member Firm
- A broker-dealer in which at least one of the principal officers is a member of either the New York Stock Exchange (NYSE), another major stock exchange, a self-regulatory organization or a clearing house corporation.
Also referred to as "clearing member".
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Member Of Household
- A person who is claimed as a dependent when filing year-end tax forms. Such a dependent allows a taxpayer to qualify for the dependency exemption. A member of household can be a relative or a non-relative, but in order for a non-relative to be claimed as a member of household, he or she must meet the relationship requirements outlined by the IRS.
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Member Payment Dependent Note
- A note that is issued by Lending Club. The income from these notes is used to make loans to club members. Member Payment Dependent Notes, issued in 2008, had an initial maturity of just three years and four business days and accrued interest from the date of their issuance. Payments are made monthly, and the loans have no underwriters and therefore no discounts from underwriters.
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Member Short-Sales Ratio
- A ratio comparing the number of short sales transacted on behalf of NYSE members to the entire number of short sells transacted on the exchange.
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Memorandum of Understanding - MOU
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Memory-Of-Price Strategy
- A trading strategy that assumes the support and resistance points of double tops and double bottoms exert an influence on future price action after they have been broken. The memory-of-price strategy says that after support or resistance has been broken and the majority of stops have been cleared, the price will be attracted back to these support and resistance levels.
This strategy is based on the theory that it will take a very large amount of buying or selling to exceed the prior range of the double top or double bottom, respectively.
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Men's Underwear Index
- An unconventional measure of how well the economy is doing based on sales of men's underwear. The reasoning behind this measure assumes that men view underwear as a necessity (not a luxury item), so sales of this product should be steady - except during severe economic downturns, when men will wait longer to buy new underwear. The notable decrease in underwear sales is said to reflect the poor overall state of the economy. Conversely, when underwear sales pick up, the economy is considered to be improving.
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Mental Accounting
- An economic concept established by economist Richard Thaler, which contends that individuals divide their current and future assets into separate, non-transferable portions. The theory purports individuals assign different levels of utility to each asset group, which affects their consumption decisions and other behaviors.
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Mercantilism
- The main economic system used during the sixteenth to eighteenth centuries. The main goal was to increase a nation's wealth by imposing government regulation concerning all of the nation's commercial interests. It was believed that national strength could be maximized by limiting imports via tariffs and maximizing exports.
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Merchant Bank
- A bank that deals mostly in (but is not limited to) international finance, long-term loans for companies and underwriting. Merchant banks do not provide regular banking services to the general public.
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Merchant Discount Rate
- The rate chanrged to a merchant by a bank for providing debit and credit card services. The rate is determined based on factors such as volume, average ticket price, risk and industry. The merchant must set up this service with a bank, and agree to the rate prior to accepting debit and credit cards as payment.
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Merger
- The combining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock.
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Merger Arbitrage
- A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless profit.
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Merger Deficit
- An accounting term used to describe the situation when the total value of the share capital used to purchase another company is less then the total value of the equity purchased. The merger does not necessarily have to be an all stock acquisition.
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Merger Of Equals
- The combination of two firms of about the same size to form a single company. In a merger of equals, shareholders from both firms surrender their shares and receive securities issued by the new company.
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Merger Securities
- A non-cash asset paid to the shareholders of a corporation that is being acquired or is the target of a merger. Theses securities generally consist of bonds, options, preferred stock and warrants, among others.
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Mergers And Acquisitions - M&A
- A general term used to refer to the consolidation of companies. A merger is a combination of two companies to form a new company, while an acquisition is the purchase of one company by another in which no new company is formed.
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Merrill Lynch & Co.
- One of the better known management and advisory companies. Merrill Lynch provides a wide range of services to both individual and institutional investors.
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Merton Model
- A model, named after the financial scholar Robert C. Merton, that was developed in the 1970s and is used today to evaluate the credit risk of a corporation's debt. Brokerage firm analysts and some investors employ the model in order to determine a company's ability to service its debt, meet its financial obligations and to gauge the overall possibility of credit default.
Also referred to as, "Asset Value Model".
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Mesokurtic
- A term used in a statistical context where the kurtosis of a distribution is similar, or identical, to the kurtosis of a normally distributed data set. Kurtosis is a measure of a distribution’s peak, which means how much of the distribution is centered on the distributions mean.
The kurtosis coefficient of a normal distribution is 3.
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Message Authentication Code - MAC
- A security code that is typed in by the user of a computer to access accounts or portals. This code is attached to the message or request sent by the user. Message authentication codes (MACs) attached to the message must be recognized by the receiving system in order to grant the user access. MACs are commonly used in electronic funds transfers (EFTs) to maintain information integrity.
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Metrics
- Parameters or measures of quantitative assessment used for measurement, comparison or to track performance or production. Analysts use metrics to compare the performance of different companies, despite the many variations between firms.
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Metropolitan Statistical Area - MSA
- A formal definition of metropolitan areas established by the Office of Management and Budget, a division of the U.S. Government. Metropolitan statistical areas serve to group counties and cities into specific geographic areas for the purposes of a population census and the compilation of related statistical data.
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Mexican Stock Exchange (MEX) .MX
- Mexico's only securities market, the Mexican Stock Exchange (in Spanish, la Bolsa Mexicana de Valores, or BMV) has its headquarters in Mexico City. Established in 1886 as the Mexican Mercantile Exchange, it adopted its current name in 1975 and is the second-largest stock exchange in Latin America (after Brazil). Its trading system is fully electronic, and its main index is the IPC.
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Mezzanine Debt
- A general term describing a situation where a hybrid debt issue is subordinated to another debt issue from the same issuer. Mezzanine debt has embedded equity instruments (usually warrants) attached, which increase the value of the subordinated debt, and allows for greater flexibility when dealing with bond holders. Mezzanine debt is frequently associated with acquisitions and buyouts where it may be used to prioritize new owners ahead of existing owners in case of bankruptcy.
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Mezzanine Financing
- A hybrid of debt and equity financing that is is typically used to finance the expansion of existing companies. Mezzanine financing is basically debt capital that gives the lender the rights to convert to an ownership or equity interest in the company if the loan is not paid back in time and in full. It is generally subordinated to debt provided by senior lenders such as banks and venture capital companies.
Since mezzanine financing is usually provided to the borrower very quickly with little due diligence on the part of the lender and little or no collateral on the part of the borrower, this type of financing is aggressively priced with the lender seeking a return in the 20-30% range.
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Miami Stock Exchange
- Provides electronic trading software and services for stock, futures and currencies. The Miami Stock Exchange also offers a full range of processing and distribution services to the worldwide financial community. This is not an actual with pits and traders but merely facilitates those who use its services to make markets and fill orders.
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Michael Milken
- As an executive at investment bank Drexel Burnham Lambert Inc during the 1980s, Milken used high-yield junk bonds for corporate financing and mergers and acquisitions. He amassed an enormous personal fortune, but in 1989 he was indicted by a federal grand jury and eventually spent nearly two years in prison after pleading guilty to charges of securities fraud. While he is credited with founding the high-yield debt market, he was banned for life from the securities industry.
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Michigan Consumer Sentiment Index - MCSI
- A survey of consumer confidence conducted by the University of Michigan. The Michigan Consumer Sentiment Index (MCSI) uses telephone surveys to gather information on consumer expectations regarding the overall economy.
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Micro Cap
- Companies with market capitalizations between $50 million and $300 million.
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Micro Risk
- A type of political risk that refers to political actions in a host country that can adversely affect selected foreign operations. Micro risk can come about from events that may or may not be in the reigning government's control.
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Micro-Hedge
- An investment technique used to eliminate the risk of a single asset. In most cases, this means taking an offsetting position in that single asset.
If this asset is part of a larger portfolio, the hedge will eliminate the risk of the one asset but will have less of an effect on the risk associated with the portfolio.
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Microcredit
- An extremely small loan given to impoverished people to help them become self employed.
Also known as "microlending" or "microloan".
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Microeconomics
- The branch of economics that analyzes the market behavior of individual consumers and firms in an attempt to understand the decision-making process of firms and households. It is concerned with the interaction between individual buyers and sellers and the factors that influence the choices made by buyers and sellers. In particular, microeconomics focuses on patterns of supply and demand and the determination of price and output in individual markets (e.g. coffee industry).
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Microenterprise
- A small business that employs a small number of employees. A microenterprise will usually operate with fewer than 10 people and is started with a small amount of capital. Most microenterprises specialize in providing goods or services for their local areas.
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Microfinance
- A type of banking service that is provided to unemployed or low-income individuals or groups who would otherwise have no other means of gaining financial services. Ultimately, the goal of microfinance is to give low income people an opportunity to become self-sufficient by providing a means of saving money, borrowing money and insurance.
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Microinsurance
- A category of insurance products that offer coverage for smaller sums to low income households. A microinsurance plan provides protection to individuals who have little savings and is tailored specifically for lower valued assets and compensation for illness, injury or death.
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Microsavings
- A branch of microfinance, consisting of a small deposit account offered to lower income families or individuals as an incentive to store funds for future use. Microsavings accounts work similar to a normal savings account, however, are designed around smaller amounts of money. The minimum balance requirements are often waived, or very low, allowing users to save small amounts of money and not be charged for the service.
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Mid Cap
- A company with a market capitalization between $2 and $10 billion, which is calculated by multiplying the number of a company''''s shares outstanding by its stock price. Mid cap is an abbreviation for the term "middle capitalization".
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Mid-Atlantic Option
- An option that can be exercised at different times during the life of the option. The various times set for exercise are written within the option and allow for flexibility for both the writer and holder of the option.
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Mid-Cap Fund
- A type of stock fund that invests in mid-sized companies. A company's size is determined by its market capitalization, with mid-sized firms generally ranging from $2 billion to $10 billion in market cap.
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Mid-Value Stock
- A description of the shares of a company with a medium (or mid-sized) market capitalization that are trading below the stock's intrinsic value.
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Middle Office
- The group of employees in a financial services company that manages risk, calculates profits and losses, and (generally) is in charge of information technology. The middle office draws on the resources of both the front and the back offices.
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Middle Rate
- A term used to describe the average rate agreed upon when conducting foreign exchange. The middle rate is calculated using the median average of the bid and offer rates. The middle rate intuitively is the rate in the middle of the prices offered by the market makers.
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Middleman
- A slang term for an intermediary in a transaction or process chain. A middleman will facilitate interaction between parties, typically for a commission or fee. Some critics say that businesses and customers should try to "cut out the middleman" by dealing directly with each other, avoiding any increased costs or commissions.
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Midgets
- A slang term referring to a Government National Mortgage Association (GNMA) bond, which has a 15 year maturity. The midget is secured by mortgages backed by federal agencies. GNMA is also known as "Ginnie Mae".
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Milan Stock Exchange (MIL) .MI
- Italy's primary securities market, the Milan Stock Exchange (in Italian, Borsa Italiana) traces its origins to the 1808 establishment of Milan's Borsa di Commercio (commodities exchange). The first company share was listed in 1859, and banking and railway companies joined the exchange in the 1870s. Electronic trading became fully operational in 1994, and the Exchange became privatized in 1998.
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Mileage Allowance
- A deduction of automobile expenses for people using their vehicles for business, charity, moving, medical or any other purpose that qualifies for a deduction.
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Mill Levy
- The assessed property tax rate used by local governments and other jurisdictions to raise revenue in order to cover annual expenses. The mill levy is calculated by determining how much revenue each taxing jurisdiction will need for the upcoming year, then dividing that projection by the total value of the property within the area, and finally adding up the rate from each jurisdiction to get the mill levy for the entire area.
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Mill Rate
- The amount of tax paid per dollar of the assessed property value.
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Millage Rate
- The amount per $1,000 that is used to calculate taxes on property. Millage rates are most often found in personal property taxes, where the expressed millage rate is multiplied by the total taxable value of the property to arrive at the property taxes due. Millage rates are also used by school boards to calculate local school taxes to be collected, based on a derivation of the total property value within school district boundaries.
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Mine and Yours
- Terms used by floor traders to signify buying and selling. Mainly used in forex transactions.
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Mini Forex Account
- A type of forex account that allows the trader to enter positions that are one-tenth the size of the standard lot of 100,000 units. A one-pip change in a currency pair (based in U.S. dollars), is equal to $1 when trading a mini lot, compared to $10 for a standard-lot trade. Mini lots are available to trade if you open a mini account with a forex dealer.
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Mini Madoff
- Financial con men that are accused of or have commited crimes similar to those of Bernard Madoff. Mini Madoffs tend to orchestrate ponzi or pyramid schemes that are similar in nature to Bernard Madoff's, but are smaller in size and notoriety.
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Mini Perm
- Short-term financing used to pay off income-producing construction or commercial properties, usually payable in three to five years.
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Mini-Branch
- A special type of bank branch that offers only limited products and services to its customers. Mini-branches are usually smaller than conventional branch locations and are often located inside grocery or discount stores. Often, ATMs may be the only thing inside a mini-branch.
Mini-branches are also known as "convenience branches."
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Mini-Lot
- A currency trading lot size that is 1/10 the size of the standard lot of 100,000 units. One pip of a currency pair based in USD is equal to $1 when trading a mini-lot, compared to $10 for a standard-lot trade. Mini-lots are available to trade if you open a mini-account with a forex dealer.
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Mini-Sized Dow Options
- A type of option for which the underlying assets are Dow Jones Industrial Average futures contracts. The option has a 5 times multiplier, which means that each option contract on the index controls 5 times the value of the index. This gives the option holder more leverage on his/her investment compared to cash index options at a lower cost. The option is traded on the Chicago Board of Trade.
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Mini-Tender
- A type of third-party offer made to a company's shareholders as an attempt to purchase the underlying shares. Unlike conventional tenders, mini-tenders usually involve less than 5% of a company's outstanding shares and typically represent a discount compared to the stock's current market price.
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Minimum Balance
- The minimum dollar amount that a customer must have in an account in order to receive some sort of service, such as keeping the account open or receive interest. There can be more than one minimum balance for the same account. For example, a lower balance may be required to keep the account open, while a higher balance can get fees waived or increase the rate of interest paid into the account.
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Minimum Deposit
- The smallest amount of money that an investor/trader must initially deposit into a new brokerage account. Minimum deposits are required to cover the baseline costs associated with setting up a new account and maintaining it thereafter.
Also referred to as "Minimum to Open an Account."
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Minimum Down Payment
- The minimum cash contribution that must be made by a borrower toward the purchase of a home in order to qualify for a mortgage. The minimum down payment requirements vary by loan program and from lender to lender.
Typically, a minimum down payment of 20% of the total loan balance is required to qualify for a loan without having to pay private mortgage insurance.
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Minimum Efficient Scale
- The smallest amount of production a company can achieve while still taking full advantage of economies of scale with regards to supplies and costs. In classical economics, the minimum efficient scale is defined as the lowest production point at which long-run total average costs (LRATC) are minimized.
The minimum efficient scale may be expressed as a range of production values, but its relationship to the total market size or demand will determine how many competitors can effectively operate in the market.
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Minimum Investment
- The smallest dollar or share quantity that an investor can purchase when investing in a specific security or fund. Most often seen in relation to mutual funds, minimum investments are also found consistently in fixed-income securities hedge funds, collateralized mortgage obligations (CMO) and limited partnerships (LP) where $1,000 units is typically the smallest cut allowed.
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Minimum Margin
- The initial amount required to be deposited in a margin account before trading on margin or selling short. For example, the NYSE and the NASD require investors to deposit a minimum of $2,000 in cash or securities to open a margin account. Keep in mind that this amount is only a minimum - some brokerages may require you to deposit more than $2,000.
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Minimum Price Contract
- A forward contract with a provision guaranteeing a minimum price at delivery of the underlying agricultural commodity.
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Minimum Wage
- The minimum amount of compensation an employee must receive for performing labor. Minimum wages are typically established by contract or legislation by the government. As such, it is illegal to pay an employee less than the minimum wage.
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Minimum-Interest Rules
- A law that requires that a minimum rate of interest be charged on any loan transaction between two parties. The minimum-interest rules mandate that even if no rate is charged by the lender, an arbitrary rate shall be automatically imposed upon the loan. The minimum-interest rules are at least partly intended to prevent excess gifting between taxpayers via intra-family loans with no or below-market interest rates.
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Minority Interest
- 1. A significant but non-controlling ownership of less than 50% of a company's voting shares by either an investor or another company.
2. A non-current liability that can be found on a parent company's balance sheet that represents the proportion of its subsidiaries owned by minority shareholders.
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Minority IPO
- An initial public offering in which a parent company spins off one of its subsidiaries or divisions, but retains a majority stake in the company after issuance. This means that after the public offering, the parent company will still have a controlling stake of the new public company.
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Minsky Moment
- When a market fails or falls into crisis after an extended period of market speculation or unsustainable growth. A Minsky moment is based on the idea that periods of speculation, if they last long enough, will eventually lead to crises; the longer speculation occurs the worse the crisis will be. This crisis is named after Hyman Minsky, an economist and professor famous for arguing the inherent instability of markets, especially bull markets. He felt that long bull markets only ended in large collapses.
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Mint
- The primary producer of a country's coin currency. The mint has the consent of the government to manufacture coins to be used as legal tender. Along with production, the mint is also responsible for the distribution of the currency, protection of the mint's gold and silver assets, and overseeing its various production facilities.
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Minus Tick
- Designates a trade that occurs at a lower price than the immediately preceding trade. Also referred to as "downtick" or "zero minus tick".
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Mirror Fund
- A type of mutual fund, typically run by a life insurance company, that enables an investor to access another company's mutual fund through his or her life insurance policies.
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Misappropriation Theory
- A perspective that defines the act of stealing confidential information from an employer and then trading securities based on the misappropriated insider knowledge. In the United States, a person guilty according to the misappropriation theory will likely be convicted of insider trading.
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Miscellaneous Tax Credits
- A group of less common tax credits that apply to taxpayers in various situations. As with all other tax credits, miscellaneous tax credits are designed to reward and promote certain types of economic activities, such as the purchase of hybrid automobiles or to reward those who have taken appropriate measures to make their homes more energy-efficient.
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Misery Index
- A measure of economic well-being for a specified economy, computed by taking the sum of the unemployment rate and the inflation rate for a given period. An increasing index means a worsening economic climate for the economy in question, and vice versa.
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Misfeasance
- With regards to performance on a contract, misfeasance is engaging in a proper action or duty, but failing to perform the duty correctly. Misfeasance often occurs in the business world when management does not comply with rules and procedures, not out of intent to harm, but to perhaps create a shortcut. Management may do this because they believe it is helping the company, but it could result in negative consequences in the future.
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Mismatch
- In general, this means to match incorrectly or unsuitably. In the banking world, it refers to a situation pertaining to asset and liability management. A mismatch occurs when assets that earn interest do not balance with liabilities upon which interest must be paid. For example, an asset that is funded by a liability with a different maturity creates a mismatch.
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Mismatch Risk
- 1) A category of risk that refers to the possibility that a swap dealer will be unable to find a suitable counterparty for a swap transaction for which it is acting as an intermediary.
2) The risk that an investor has chosen investments that are not suitable for his or her circumstances.
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Misselling
- The ethically questionable practice of a salesperson misrepresenting or misleading an investor about the characteristics of a product or service. In an effort to make a sale to a potential customer, a financial products salesperson could leave out certain information or describe a financial product as something the investor urgently needs, even though sound financial judgment would come to the opposite conclusion.
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Missent Item
- Quite simply, a check written by a bank customer that is not sent to the right bank. This is typically due to a clerical error by an employee of the bank or depository institution. Missent items result in a delay of payment from the sending bank to the receiving bank.
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Mission Statement
- A short sentence or paragraph used by a company to explain, in simple and concise terms, their purposes for being. These statements serve a dual purpose by helping employees to remain focused on the tasks at hand, as well as encouraging them to find innovative ways of moving towards an increasingly productive achievement of company goals. It is not uncommon for the largest companies to spend many years and millions of dollars developing and refining their mission statement, with many of these mission statements eventually becoming household phrases.
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Mississippi Company
- An example of a famous speculative bubble that occurred from 1719-1720. In 1715 the country of France was in a dire economic straits, with an unstable treasury and a wildly fluctuating currency. John Law, a Scotsman and noted gambler living in exile in France, helped the government convert to paper currency (by taking metallic coinage deposits and giving banknotes equal to value of the currency on the day of deposit) and find its economic footing. In 1717 he acquired the Mississippi Company, to which the French government gave a monopoly on trading rights with its colonies in gratitude for his assistance.
In 1719 Law created a plan to restructure the French national debt under the Mississippi Company's auspices, exchanging company shares for debt and guaranteeing significant profits. Investors flocked, the national bank (now effectively owned by Law) printed money in response and massive inflation ensued. A bank run followed in May 1721 and the French treasury admitted that it did not have enough metallic currency to cover its paper instruments. It attempted to devalue Mississippi Company shares to no avail and finally the bank stopped paying in coinage. Shares in the company quickly plummeted to zero, the company was overtaken and divested of its assets divested and Law went into exile once more.
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MIT Sloan School Of Management
- One of the top business schools in America, located at the Massachusetts Institute of Technology in Cambridge, Massachusetts. The Sloan School of Management was originally founded as the engineering administration curriculum in the department of economics and statistics, before implementing a master's degree in management in 1925.
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Mixed Lot
- A type of order for a number of securities that is not a round (or whole) lot order amount. This type of order is comprised of a round lot order and an odd lot order. A round lot is the exchange-established trading unit, which defines the interval at which securities typically should be traded. An odd lot is an order that falls below the initial round lot amount.
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MJSD
- An acronym representing the months March, June, September, and December.
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MMK
- In currencies, this is the abbreviation for the Myanmar Kyat.
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MMK (Myanmar Kyat)
- The currency abbreviation for the Myanmar kyat (MMK), the currency for Myanmar. The Myanmar kyat is made up of 100 pya and is often presented with the symbol K. Pya coins are very rare, but notes up to 1,000 kyat are commonly used.
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MNT
- In currencies, this is the abbreviation for the Mongolian Tughrik.
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MNT (Mongolian Tugrug)
- The currency abbreviation for the Mongolian tugrug (or tögrög) (MNT), the currency for Mongolia. The Mongolian tugrug is made up of 100 möngö and is often presented with a symbol that looks like the letter "T" with two horizontal slashes through the stem, or Tg preceding the number (i.e. Tg100). Möngö are not used anymore because inflation has rendered them worthless.
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Mode
- A statistical term referring to the most frequently occurring term in a set of numbers.
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Model Risk
- A type of risk that occurs when a financial model used to measure a firm's market risks or value transactions does not perform the tasks or capture the risks it was designed to.
Model risk is considered a subset of operational risk, as model risk mostly affects the firm that creates and uses the model. Traders or other investors who use the model may not completely understand its assumptions and limitations, which limits the usefulness and application of the model itself.
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Modern Portfolio Theory - MPT
- A theory on how risk-averse investors can construct portfolios to optimize or maximize expected return based on a given level of market risk, emphasizing that risk is an inherent part of higher reward.
Also called "portfolio theory" or "portfolio management theory."
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Modified Accelerated Cost Recovery System - MACRS
- The new accelerated cost recovery system, created after the release of the Tax Reform Act of 1986, which allows for greater accelerated depreciation over longer time periods.
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Modified Accrual Accounting
- An accounting method commonly used by government agencies that combines accrual-basis accounting with cash-basis accounting. Modified accrual accounting recognizes revenues when they become available and measurable and, with a few exceptions, recognizes expenditures when liabilities are incurred. This system divides available funds into separate entities within the organization to ensure that the money is being spent where it was intended.
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Modified Adjusted Gross Income - MAGI
- The amount of income that determines how much of an individual's IRA contribution is deductible. The modified adjusted gross income is found by taking the individual's adjusted gross income and adding back certain items such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs.
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Modified Dietz Method
- A method of evaluating a portfolio's return based upon a time weighted analysis.
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Modified Duration
- A formula that expresses the measurable change in the value of a security in response to a change in interest rates. Calculated as:
Where:
n = number of coupon periods per year
YTM = the bond's yield to maturity
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Modified Following
- A contractual feature in an exchange involving the implied automatic change of one or more set dates within the arrangement, such as the payment date. Modified following is used to streamline the exchange process.
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Modified Internal Rate Of Return - MIRR
- While the internal rate of return (IRR) assumes the cash flows from a project are reinvested at the IRR, the modified IRR assumes that all cash flows are reinvested at the firm's cost of capital. Therefore, MIRR more accurately reflects the profitability of a project.
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Modified Pass-Through Certificate
- A fixed-income security that passes through an undivided interest in a pool of mortgages. Modified pass-through certificates are backed by federal loans of identical maturity and coupon date. Principal and interest payments are made to investors each month, and these payments are guaranteed by the Government National Mortgage Association (GNMA).
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Modified Payoff
- The partial insurance reimbursement that is paid to depositors of failed banks. Customers who have lost money in excess of what is covered by FDIC insurance can expect to receive a modified payoff. Based on an FDIC estimate of what they could collect from liquidation, a dividend to uninsured depositors would be paid.
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Modified Sharpe Ratio
- A ratio used to calculate the risk-adjusted performance of an asset or a business strategy. The modified Sharpe ratio is a version of the original Sharpe ratio amended to include skewed/abnormal data. It is calculated by dividing the excess returns by the modified value at risk.
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Modigliani-Miller Theorem - M&M
- A financial theory stating that the market value of a firm is determined by its earning power and the risk of its underlying assets, and is independent of the way it chooses to finance its investments or distribute dividends. Remember, a firm can choose between three methods of financing: issuing shares, borrowing or spending profits (as opposed to dispersing them to shareholders in dividends). The theorem gets much more complicated, but the basic idea is that, under certain assumptions, it makes no difference whether a firm finances itself with debt or equity.
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Mom And Pop
- An adjective denoting a small-scale and family-like atmosphere, often used to describe these types of businesses and investors.
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Momentum
- The rate of acceleration of a security's price or volume.
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Momentum Fund
- Investment funds that invest in companies based on current trends in such things as earnings or price movement. The portfolio manager will look for companies that have been trending in a certain direction (e.g. a series of extremely positive earnings releases or upward price momentum in the short term). The manager will then take positions in the same direction as the trend and attempt to ride the wave and sell once it has peaked.
These funds are also known as "momo funds".
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Momentum Investing
- An investment strategy that aims to capitalize on the continuance of existing trends in the market. The momentum investor believes that large increases in the price of a security will be followed by additional gains and vice versa for declining values.
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Momo Play
- A slang term used to describe an investment purely as a momentum play, not worrying about the company's fundamentals.
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Monday Effect
- A theory that states that returns on the stock market on Mondays will follow the prevailing trend from the previous Friday. Therefore, if the market was up on Friday, it should continue through the weekend and, come Monday, resume its rise.
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Mondustrial Policy
- A fusion of "monetary policy" and "industrial policy," mondustrial policy describes the Fed's creation of new money during the 2008-2009 financial crisis in order to rescue certain firms, such as Bear Stearns and AIG, and certain markets, such as commercial paper and money-market mutual funds, at the expense of others, by purchasing securities and making loans.
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Monetarism
- A set of views based on the belief that inflation depends on how much money the government prints. It is closely associated with Milton Friedman, who argued, based on the quantity theory of money, that the government should keep the money supply fairly steady, expanding it slightly each year mainly to allow for the natural growth of the economy.
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Monetarist
- An economist who holds the strong belief that the economy's performance is determined almost entirely by changes in the money supply.
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Monetarist Theory
- An economic concept which contends that changes in the money supply are the most significant determinants of the rate of economic growth and the behavior of the business cycle.
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Monetary Aggregates
- Broad categories measuring the total value of the money supply within an economy. In the United States, the standardized monetary aggregates and their measured contents are known as:
M0 – Physical cash and coin
M1 – All of M0 plus demand deposits, traveler’s checks
M2 – All of M1 plus savings deposits, money market shares
There is also an M3 aggregate that includes larger (greater than $100,000) time deposits and institutional funds. The M3 measure is no longer tracked by the Federal Reserve as of 2006, although analysts still calculate the figure broadly. The Federal Reserve uses monetary aggregates to measure the effects of open-market operations, like changing the discount rate or trading in Treasury securities.
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Monetary Base
- The total amount of a currency that is either circulated in the hands of the public or in the commercial bank deposits held in the central bank's reserves. This measure of the money supply typically only includes the most liquid currencies.
Also known as the "money base".
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Monetary Conditions Index - MCI
- A measure of monetary conditions in the Canadian economy, giving an idea of the relative ease or tightness of monetary policy. MCI gauges the effect that Canada's monetary policy has on the Canadian economy through changes in the exchange rate and interest rates.
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Monetary Control Act
- Title 1 of a two-title act passed in 1980 that represented the first significant reform in the banking industry since the Great Depression. One of the major highlights of the Monetary Control Act was the deregulation of interest rates paid by depository institutions such as banks. It also opened the Fed discount window and extended reserve requirements to all domestic banks.
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Monetary Policy
- The actions of a central bank, currency board or other regulatory committee that determine the size and rate of growth of the money supply, which in turn affects interest rates.
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Monetary Reserve
- A nation's assets in foreign currency and/or commodities like gold and silver, which are used to back up the national currency. Monetary reserves also provide a cushion for executing central banking functions like adding to the money supply and settling foreign exchange contracts in local currencies.
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Monetary Theory
- A set of ideas about how monetary policy should be conducted within an economy. Monetary theory suggests that different monetary policies can benefit nations depending on their unique set of resources and limitations. It is based on core ideas about how factors like the size of the money supply, price levels and benchmark interest rates affect the economy. Economists and central banking authorities are typically those most involved with creating and executing monetary policy.
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Monetary Union Index Of Consumer Prices - MUICP
- An average measure of inflation for all countries located in the Eurozone. It is a statistical indicator whose objective is to facilitate making comparisons of inflation between the European Union and other economies such as the U.S.
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Monetize
- 1. To convert into money.
2. To convert from securities into currency that can be used to purchase goods and services.
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Money
- 1. A commodity or asset, such as gold, an officially issued currency, coin or paper note, that can be legally exchanged for something equivalent, such as goods or services.
2. As defined by common law: a medium of exchange that is authorized or adopted by a domestic or foreign government and includes a monetary unit of account established by an intergovernmental organization or by agreement between two or more nations.
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Money Factor
- The alternative method of presenting the amount of interest charged on a lease with monthly payments. A money factor can be translated into the more common annual percentage rate (APR) interest by multiplying the money factor by 2,400.
Also known as a "lease factor".
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Money Flow
- Calculated by averaging the high, low, and closing prices, and multiplying by the daily volume. Comparing that result with the number for the previous day tells you whether money flow was positive or negative for the current day.
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Money Flow Index - MFI
- A momentum indicator that is used to determine the conviction in a current trend by analyzing the price and volume of a given security. The MFI is used as a measure of the strength of money going in and out of a security and can be used to predict a trend reversal. The MFI is range-bound between 0 and 100 and is interpreted in a similar fashion as the RSI.
The money flow index is calculated by using the following formula:
Typical Price = (High + Low + Close) / 3
Money Flow = Typical price * Volume
Money Ratio = Positive Money Flow/Negative Money Flow
Note: Positive money values are created when the typical price is greater than the previous typical price value. The sum of positive money over the number of periods used to create the indicator is used to create the positive money flow - the values used in the money ratio. The opposite is true for the negative money flow values.
Money Flow Index = 100 - (100/ (1 + Money Ratio))
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Money Illusion
- An economic theory stating that many people have an illusory picture of their wealth and income based on nominal dollar terms, rather than real terms. Real prices and income take into account the level of inflation in an economy.
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Money Laundering
- The process of creating the appearance that large amounts of money obtained from serious crimes, such as drug trafficking or terrorist activity, originated from a legitimate source.
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Money Management
- The process of budgeting, saving, investing, spending or otherwise in overseeing the cash usage of an individual or group. The predominant use of the phrase in financial markets is that of an investment professional making investment decisions for large pools of funds, such as mutual funds or pension plans.
Also referred to as "investment management" and/or "portfolio management".
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Money Manager
- A business or bank responsible for managing the securities portfolio of an individual or institutional investor. Typically, a money manager employs people with various expertise ranging from research and selection of investment options to monitoring the assets and deciding when to sell them. In return for a fee, the money manager has the fiduciary duty to choose and manage investments prudently for his or her clients, including developing an appropriate investment strategy, and buying and selling securities to meet those goals.
Also known as "portfolio manager" or "investment manager".
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Money Market
- A segment of the financial market in which financial instruments with high liquidity and very short maturities are traded. The money market is used by participants as a means for borrowing and lending in the short term, from several days to just under a year. Money market securities consist of negotiable certificates of deposit (CDs), bankers acceptances, U.S. Treasury bills, commercial paper, municipal notes, federal funds and repurchase agreements (repos).
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Money Market Account
- A savings account that offers the competitive rate of interest (real rate) in exchange for larger-than-normal deposits.
Also known by the acronym "MMDA", which stands for "money market demand account" or "money market deposit account".
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Money Market Fund
- An investment fund that holds the objective to earn interest for shareholders while maintaining a net asset value (NAV) of $1 per share. Mutual funds, brokerage firms and banks offer these funds. Portfolios are comprised of short-term (less than one year) securities representing high-quality, liquid debt and monetary instruments.
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Money Market Investor Funding Facility - MMIFF
- A facility created by the Federal Reserve board on November 24, 2008, in an effort to stimulate institutional investors to assume investments that have longer terms. The Money Market Investor Funding Facility (MMIFF) is designed to support a private sector initiative to provide liquidity to money market investors. Financial crisis fears caused an influx of institutional investors to assume overnight positions toward the end of 2008, placing a strain on short-term debt markets. Funding is provided by the Federal Reserve Bank of New York through special purpose vehicles (SPVs).
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Money Order
- A certificate that allows the stated payee to receive cash on-demand, usually issued by governments and banking institutions. A money order functions much like a check, in that the person who purchased the money order may stop payment.
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Money Supply
- The entire quantity of bills, coins, loans, credit and other liquid instruments in a country's economy.
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Money Zero Maturity - MZM
- A measure of the liquid money supply within an economy. MZM represents all money in M2 less the time deposits, plus all money market funds.
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Money-Purchase Pension Plan
- A defined-contribution plan to which employer contributions are fixed.
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Money-Purchase Provisions
- The terms of a registered pension plan that detail the specific amounts that an employer and employee contribute to the plan. The amounts may be stated in dollars or percentages. The provisions of the pension plan states the maximum amount of the employee's contribution that can be matched by the employer. Money-purchase provisions for registered plans must fall under the governing requirements outlined by the Government of Canada
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Money-Weighted Rate Of Return
- A measure of the rate of return for an asset or portfolio of assets. It is calculated by finding the rate of return that will set the present values of all cash flows and terminal values equal to the value of the initial investment. The money-weighted rate of return is equivalent to the internal rate of return (IRR).
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Moneyness
- A description of a derivative relating its strike price to the price of its underlying asset. Moneyness describes the intrinsic value of an option in its current state.
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Monoline
- A business that focuses on operating in one specific financial area. The main advantage of monolines is that these companies have specialized skills and provide expertise beyond what can usually be expected from companies that businesses are spread across many different financial areas.
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Monoline Insurance Company
- An insurance company that provides guarantees to issuers, often in the form of credit wraps, that enhance the credit of the issuer. These insurance companies first began providing wraps for municipal bond issues, but now provide credit enhancement for other types of bonds, such as mortgage backed securities and collateralized debt obligations.
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Monopolist
- A person, group or organization with a monopoly. In other words, an individual or company that controls all of the market for a particular good or service.
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Monopolistic Competition
- A type of competition within an industry where:
1. All firms produce similar yet not perfectly substitutable products.
2. All firms are able to enter the industry if the profits are attractive.
3. All firms are profit maximizers.
4. All firms have some market power, which means none are price takers.
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Monopolistic Market
- A type of market that features one, if not all, of the traits of a monopoly such as high price levels, supply constraints, or excessive barriers to entry. Because this type of market would be comprised of one supplying firm, consumers would have no choice but to purchase solely from this firm. Without proper legislation or controls, this firm possesses the power to raise prices without adversely affecting demand for its products/services. This type of market stands in contrast to a perfectly competitive market.
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Monopoly
- A situation in which a single company or group owns all or nearly all of the market for a given type of product or service. By definition, monopoly is characterized by an absence of competition, which often results in high prices and inferior products.
According to a strict academic definition, a monopoly is a market containing a single firm.
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Monopsony
- A market similar to a monopoly except that a large buyer not seller controls a large proportion of the market and drives the prices down. Sometimes referred to as the buyer's monopoly.
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Monster Employment Index
- An index created by information collected from job postings on more than 1,500 job search websites (including Monster.com in the U.S.). The Monster Employment Index tracks job availability to help provide insight on the strength of the economy.
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Monte Carlo Simulation
- A problem solving technique used to approximate the probability of certain outcomes by running multiple trial runs, called simulations, using random variables.
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Monthly Income Plan - MIP
- A type of investment vehicle that provides a specified monthly payment to the investor. This monthly payment is intended to be a stable form of income and is therefore typically suited for retired persons or senior citizens without other substantial sources of monthly income.
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Monthly Income Preferred Securities - MIPS
- Shares that are an interest in a limited partnership existing solely for the purpose of issuing preferred securities and lending the proceeds of the sales to its parent company. MIPS usually have a $25 par value, NYSE listing and cumulative monthly distributions.
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Monthly Treasury Average Index - MTA Index
- The 12-month moving average of the one-year constant maturity treasury (CMT) used as an index for adjustable rate mortgages. The index is calculated by adding the 12 most recent monthly CMT values and dividing by 12. Since the MTA index is a moving average it has a lag effect. In other words, when the 12 monthly CMT values used to calculate the average are sequentially increasing, the current MTA value will not be as high as the current CMT value, and visa versa when the CMT values are sequentially falling.
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Montreal Exchange
- A Canadian derivatives exchange that facilitates the trading of stock options, interest rate futures and options, as well as index options and futures. Located in Montreal, Quebec, it is the country's main financial derivative market, while the Winnipeg Commodities Exchange in Manitoba is the home to Canadian commodity derivative trading.
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Moody's
- An independent, unaffiliated research company that rates fixed income securities. Moody's assigns ratings on the basis of risk and the borrower's ability to make interest payments. Moody's backs its ratings with exhaustive financial research and unbiased commentary and analysis.
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Moody's Bond Survey
- A weekly publication that reports changes in corporate bond quality ratings for publicly traded companies, lists new debt registrations and provides market commentary. Also known as "Moody's Credit Survey".
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Moore's Law
- An observation made by Intel co-founder Gordon Moore in 1965. He noticed that the number of transistors per square inch on integrated circuits had doubled every year since their invention. Moore predicted the trend would continue for the foreseeable future.
Although the pace has slowed, the number of transistors per square inch has since doubled approximately every 18 months. This is used as the current definition of Moore's Law.
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MOP
- In currencies, this is the abbreviation for the Macau Pataca.
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MOP (Macanese Pataca)
- The currency abbreviation for the Macanese pataca, the currency for Macau. The Macanese pataca is made up of 100 avo or 10 ho, and is often presented with the symbol MOP$ (ex. MOP$100). The Macanese pataca is 100% backed by the foreign exchange reserves of the Hong Kong dollar (HKD).
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Moral Hazard
- The risk that a party to a transaction has not entered into the contract in good faith, has provided misleading information about its assets, liabilities or credit capacity, or has an incentive to take unusual risks in a desperate attempt to earn a profit before the contract settles.
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Moral Obligation Bond
- A type of revenue bond issued by a municipality or similar government body. A moral obligation bond not only gives investors the tax exemption benefits inherent in a municipal bond, but also provides an additional moral pledge of commitment against default. The issuing body's commitment is supported by a reserve fund established to meet any debt service costs the government may be unable to make.
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Moral Suasion
- A persuasion tactic used by an authority (i.e. Federal Reserve Board) to influence and pressure, but not force, banks into adhering to policy. Tactics used are closed-door meetings with bank directors, increased severity of inspections, appeals to community spirit, or vague threats. A good example of moral suasion is when the Fed Chairman speaks on the markets - his opinion on the overall economy can send financial markets falling or flying.
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Moratorium
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Morgan Stanley Capital International - MSCI
- A leading provider of equity, fixed-income and hedge fund indexes. MSCI has been providing global equity indexes for more than 30 years. In 2003, it launched a new family of U.S. equity indexes.
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Morgan Stanley Capital International All Country World Index Ex-U.S. - MSCI ACWI Ex-U.S.
- A market-capitalization-weighted index maintained by Morgan Stanley Capital International (MSCI) and designed to provide a broad measure of stock performance throughout the world, with the exception of U.S.-based companies. The MSCI All Country World Index Ex-U.S. includes both developed and emerging markets.
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Morganization
- This refers to the monopolization techniques used by J.P. Morgan in the nineteenth century. He used his reputation to lure European financiers into America by taking over an industry and stabilizing it through monopoly. Morgan would then turn the industry into a single, stable, profitable entity that was much more palatable to European bankers.
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Morning Star
- A bullish candlestick pattern that consists of three candles that have demonstrated the following characteristics:
1. The first bar is a large red candlestick located within a defined downtrend.
2. The second bar is a small-bodied candle (either red or white) that closes below the first red bar.
3. The last bar is a large white candle that opens above the middle candle and closes near the center of the first bar's body.
As shown by the chart, this pattern is used by traders as an early indication that the downtrend is about to reverse.
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Morningstar Inc.
- A Chicago-based investment research firm that compiles and analyzes fund, stock and general market data. Morningstar also provides an extensive line of internet, software and print-based products for individual investors, financial advisors and institutional clients. Among its many offerings, Morningstar's comprehensive, one-page mutual and exchange-traded fund reports are widely used by investors to determine the investment quality of the more than 2,000 funds it covers.
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Morningstar Risk Rating
- A rating system that measures how often a fund loses money compared to the risk-free rate of return (T-bill return).
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Mortality And Expense Risk Charge
- A variable annuity fee included in certain annuity or insurance products which serves to compensate the insurance company for various risks it assumes under the annuity contract.
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Mortality Table
- A table that shows the rate of deaths occurring in a defined population during a selected time interval, or survival from birth to any given age. Statistics included in the mortality table show the probability a person's death before their next birthday, based on their age.
Death-rate data help determine prices paid by people who have recently purchased life insurance.
A mortality table is also known as a "life table," an "actuarial table" or a "morbidity table."
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Mortgage
- A debt instrument that is secured by the collateral of specified real estate property and that the borrower is obliged to pay back with a predetermined set of payments. Mortgages are used by individuals and businesses to make large purchases of real estate without paying the entire value of the purchase up front.
Mortgages are also known as "liens against property" or "claims on property".
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Mortgage Accelerator
- A type of mortgage loan program popular in the United Kingdom and Australia that resembles the combination of a home equity loan and a checking account. Borrowers' paychecks are deposited directly into the mortgage account and the mortgage balance is reduced by that amount, then as checks are written against the account during the month, the mortgage balance rises. Any amount deposited in the account that is not withdrawn through the check writing process is applied to the balance of the mortgage at the end of the month as repayment of principal.
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Mortgage Allocations
- A process used in the settlement of mortgage-backed security to-be-announced (TBA) trades. This process requires that the sell side of a TBA trade inform the its buy-side counterpart of the exact securities that will be delivered into the trade by no later than 3 pm EST, and 48 hours prior to the established trade settlement date. In addition, each trade must be broken down into $1 million lots, and each lot can contain no more than three pools. A 0.01% variance is allowed on each $1 million lot. Most participants in the TBA market have software that helps them with mortgage allocations.
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Mortgage Banker
- A company, individual or institution that originates mortgages. Mortgage bankers use their own funds, or funds borrowed from a warehouse lender, to fund mortgages. After a mortgage is originated, a mortgage banker might retain the mortgage in portfolio, or they might sell the mortgage to an investor. Additionally, after a mortgage is originated, a mortgage banker might service the mortgage, or they might sell the servicing rights to another financial institution. A mortgage banker's primary business is to earn the fees associated with loan origination. Most mortgage bankers do not retain the mortgage in portfolio.
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Mortgage Bankers Association - MBA
- The national association that represents the real estate finance industry. The Mortgage Bankers Association, headquartered in Washington is frequently referred to as the MBA. The MBA works to help their members conduct business of single and multifamily mortgage finance by promoting fair and ethical lending practices, fostering professional excellence through educational programs and publications, providing news and information, and holding conferences.
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Mortgage Bond
- A bond secured by a mortgage on one or more assets. These bonds are typically backed by real estate holdings and/or real property such as equipment. In a default situation, mortgage bondholders have a claim to the underlying property and could sell it off to compensate for the default.
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Mortgage Broker
- An intermediary who brings mortgage borrowers and mortgage lenders together, but does not use its own funds to originate mortgages. A mortgage broker gathers paperwork from a borrower, and passes that paperwork along to a mortgage lender for underwriting and approval. The mortgage funds are then lent in the name of the mortgage lender. A mortgage broker collects an origination fee and/or a yield spread premium from the lender as compensation for its services.
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Mortgage Cash Flow Obligation - MCFO
- A type of pay-through unsecured general obligation bond that has several classes. Mortgage cash flow obligations (MCFOs) use cash flow from a pool of mortgages that generate revenue to repay investors their principal plus interest. Payments are received from mortgages in the pool and passed on to holders of the MCFO security.
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Mortgage Company
- A company engaged in the business of originating and/or funding mortgages for residential or commercial property. A mortgage company is often just the originator of a mortgage; they market themselves to potential borrowers and seek funding from one of several client financial institutions that provide the capital for the mortgage itself.
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Mortgage Constant
- A ratio between the annual amount of debt servicing to the total value of the loan. The mortgage constant is only applicable to mortgages that pay a fixed rate.
Also known as the "mortgage capitalization rate".
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Mortgage Credit Certificates
- A certificate provided by the originating mortgage lender to the borrower that directly converts a portion of the mortgage interest paid by the borrower into a non-refundable tax credit. Mortgage credit certificates can be issued by either loan brokers or the lenders themselves, and are typically available only to low- or moderate-income buyers. These certificates are designed to help first-time homebuyers qualify for a home loan by reducing their tax liabilities below what they would otherwise have to pay.
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Mortgage Equity Withdrawal
- The amount of equity that consumers withdraw from their homes through home equity loans or lines of credit and cash-out refinances. Mortgage equity withdrawal is a relevant variable in the prediction of consumer spending and, therefore, gross domestic product (GDP). This statistic is often expressed as a percentage.
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Mortgage Equity Withdrawal - MEW
- The removal of equity from the value of a home through the use of a loan against the market value of the property. A mortgage equity withdrawal (MEW) reduces the real value of a property by the number of new liabilities against it.
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Mortgage Excess Servicing
- The percentage of the monthly cash flow that remains after the cash flow has been divided into a coupon and principal payment for the mortgage backed securities (MBS) holder. This servicing fee typically goes to the servicer of the loan, and is possibly a guarantee fee for the underwriter of the MBS.
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Mortgage Fallout
- A term used to describe the percentage of loans that do not close in a mortgage originator's pipeline. Mortgage originators adjust the fallout assumptions used in their hedge ratios as interest rates change relative to the loans they have in their pipelines.
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Mortgage Forbearance Agreement
- An agreement made between a mortgage lender and delinquent borrower in which the lender agrees not to exercise its legal right to foreclose on a mortgage and the borrower agrees to a mortgage plan that will, over a certain time period, bring the borrower current on his or her payments. A forbearance agreement is not a long-term solution for delinquent borrowers; it is designed for borrowers who have temporary financial problems caused by unforeseen problems such as temporary unemployment or health problems.
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Mortgage Index
- The benchmark interest rate an adjustable-rate mortgage's fully indexed interest rate is based on. An adjustable-rate mortgage's interest rate, known as the fully indexed interest rate, is comprised of an index value plus a margin. The margin tends to be constant, but the index's value is variable. Several benchmark interest rates serve as mortgage indexes.
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Mortgage Insurance
- An insurance policy that protects a mortgage lender or title holder in the event that the borrower defaults on payments, dies, or is otherwise unable to meet the contractual obligations of the mortgage. Mortgage insurance can refer to private mortgage insurance (PMI), mortgage life insurance, or mortgage title insurance. What these have in common is an obligation to make the lender or property holder whole in the event of specific cases of loss.
Private mortgage insurance may be called "lender's mortgage insurance" (LMI) if the premium on a PMI policy is paid by the lender and not the borrower. This is typically done in exchange for a higher rate or fee structure on the mortgage itself.
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Mortgage Interest
- The interest charged on a loan used to purchase a residence. Mortgage interest is charged for both primary and secondary loans, home equity loans, lines of credit, and as long as the residence is used to secure the loan.
Mortgage interest is deductible on form 1040.
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Mortgage Life Insurance
- An insurance policy designed specifically to repay mortgage debt in the event of the death of the borrower. These policies differ from traditional life insurance policies in that, for a traditional policy, the death benefit is paid out when the borrower dies; however, a mortgage life insurance policy doesn't pay unless the borrower dies while the mortgage itself is still in existence.
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Mortgage Originator
- An institution or individual that works with a borrower to complete a mortgage transaction. A mortgage originator can be either a mortgage broker or a mortgage banker, and is the original mortgage lender. Mortgage originators are part of the primary mortgage market.
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Mortgage Par Rate
- An interest rate used as the reference point for which a mortgage lender will neither pay a rebate (yield spread premium or negative points) or require discount points for a mortgage.
Also, an interest rate used as a reference point for which a mortgage lender will pay another lender par value (100% of the principal balance of a mortgage) for an existing mortgage. The lender will pay a premium for mortgages with interest rates above their par rate, and a discount for mortgages with interest rates below their par rate.
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Mortgage Pipeline
- Mortgage loans that have been locked in with a mortgage originator by borrowers, mortgage brokers or other lenders. A loan will stay in an originator's pipeline from the time it is locked until it falls out, is sold into the secondary mortgage market or is put into the originator's loan portfolio. Mortgages in the pipeline are hedged against interest-rate movements.
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Mortgage Pool
- A group of mortgages held in trust as collateral for the issuance of a mortgage-backed security. Some mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae are known as "pools" themselves. These are the simplest form of mortgage-backed security. They are also known as "pass-throughs" and trade in the to-be-announced (TBA) forward market.
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Mortgage Rate Lock
- An agreement between a borrower and a lender that allows the borrower to lock in the interest rate on a mortgage over a specified time period at the prevailing market interest rate.
The lender may charge a lock fee, which the borrower must pay if he or she does not lock the interest rate. Alternatively, the lender may charge a marginally higher interest rate to begin with, just in case the borrower chooses not to lock the interest rate.
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Mortgage Rate Lock Deposit
- A fee that a lender charges a borrower that allows the borrower to lock in an interest rate for a certain time period with the expectation that the borrower's mortgage will fund within that time period. The longer the lock period, the larger the required lock deposit. The lock deposit is credited to the borrower when the mortgage funds. If the borrower walks away from the lock agreement, he or she loses the lock deposit.
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Mortgage Rate Lock Float Down
- A mortgage rate lock with the option to reduce the locked interest rate if market interest rates fall during the lock period. A rate lock with a float-down option can provide the borrower with security against an increase during the rate lock period, while the float-down option allows the borrower to take advantage of a fall in interest rates during the lock period.
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Mortgage Recast
- A feature in some types of mortgages where the remaining scheduled principal and interest payments are recalculated based on a new amortization schedule. Some mortgages may allow for a recast in order to help a financially distressed borrower, in which case the interest rate might be reduced and/or the remaining term of the mortgage extended. Most often, a recast is associated with a negative amortization mortgage which must recast at some point so that the mortgage will be paid off by the end of its scheduled term.
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Mortgage Revenue Bond - MRB
- A funding source for home mortgages. Mortgage revenue bonds help low- and middle-income first-time home buyers by offering long-term mortgages at below-market rates. A state can issue mortgage revenue bonds (a form of tax-free municipal bond) to investors, then use the capital proceeds to invest in that state’s MRB home loan program.
In order to qualify, prospective home buyers must earn below stated threshold levels for annual income, and must otherwise financially qualify for a mortgage from a conventional lender. Many mortgages that were funded by MRBs first originated through the Federal Housing Administration (FHA), Freddie Mac and Fannie Mae.
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Mortgage Servicing Rights - MSR
- A contractual agreement where the right, or rights, to service an existing mortgage are sold by the original lender to another party who specializes in the various functions of servicing mortgages. Common rights included are the right to collect mortgage payments monthly, set aside taxes and insurance premiums in escrow, and forward interest and principle to the mortgage lender.
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Mortgage Short Sale
- The sale of a property by a financially distressed borrower for less than the outstanding mortgage balance due where the proceeds from the sale will be used to repay the lender. The lender then accepts the less-than-full repayment of the mortgage (and the borrower is released from the mortgage obligation) in order to avoid what would amount to larger losses for the lender if it were to foreclose on the mortgage.
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Mortgage Subsidy Bond
- One of the few types of municipal bonds ever issued that may be subject to taxation, provided that the funds raised were used for home mortgages. Mortgage subsidy bonds were issued by cities and other municipalities, and may be either taxable or tax-free.
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Mortgage Suitability
- A standard to which mortgage lenders can adhere when directing consumers to a mortgage loan. Under such a standard, mortgage lenders would be held liable for steering consumers toward an unsuitable mortgage. While no federal suitability standard currently exists, lenders are vehemently opposed to such a standard because they argue that they cannot possibly collect and know all of the information required to make a decision for a consumer.
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Mortgage-Backed Security (MBS)
- A type of asset-backed security that is secured by a mortgage or collection of mortgages. These securities must also be grouped in one of the top two ratings as determined by a accredited credit rating agency, and usually pay periodic payments that are similar to coupon payments. Furthermore, the mortgage must have originated from a regulated and authorized financial institution.
Also known as a "mortgage-related security" or a "mortgage pass through".
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Mortgagee
- An entity that lends money to a borrower for the purpose of purchasing a piece of real property. By accepting a mortgage on the real property, the lender creates security in the full repayment of the loan in the future.
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Mortgagor
- An individual or company who borrows money to purchase a piece of real property. By granting the lender an interest in the property, which allows it to lend the funds with an accurate assessment of risk, the mortgagor provides the lender with a guarantee for the full repayment of the loan. Also known as a "chargor".
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Mosaic Theory
- A method of analysis used by security analysts to gather information about a corporation. Mosaic theory involves collecting public, non-public and non-material information about a company in order to determine the underlying value of the company's securities and to enable the analyst to make recommendations to clients based on that information.
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Most Active
- The stocks on an exchange that had the highest volume over a given period. The most common time period used is a single trading day.
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Most Favored Nation Clause
- A level of status given to one country by another and enforced by the World Trade Organization. A country grants this clause to another nation if it is interested in increasing trade with that country. Countries achieving most favored nation status are given specific trade advantages such as reduced tariffs on imported goods.
Special consideration is given to countries that are classified as "developing" by the World Trade Organization.
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Most Recent Quarter - MRQ
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Mothballing
- The preservation of a production facility without using it to produce. Machinery in a mothballed facility is kept in working order so that production may be restored quickly if needed.
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Motor Vehicle Sales
- The number of domestically produced units of cars, SUVs, mini-vans and light trucks that are sold. Motor vehicle sales are an economic indicator that records the reported sales by individual manufacturers on the first business day of every month.
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Mountain Range Options
- A family of exotic options based on multiple underlying securities. Mountain range options were first created by French securities firm Société Générale in the late 1990s. These options blend some of the key characteristics of basket-style or rainbow options (which have more than one underlying security or asset) and range options, which have multiyear time ranges.
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Moving Average - MA
- An indicator frequently used in technical analysis showing the average value of a security's price over a set period. Moving averages are generally used to measure momentum and define areas of possible support and resistance.
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Moving Average Chart
- A tool used by technical analysts to track the price movements of a security or commodity. It plots average daily settlement prices over a defined period of time, anywhere from a few days to a couple years.
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Moving Average Convergence Divergence - MACD
- A trend-following momentum indicator that shows the relationship between two moving averages of prices. The MACD is calculated by subtracting the 26-day exponential moving average (EMA) from the 12-day EMA. A nine-day EMA of the MACD, called the "signal line", is then plotted on top of the MACD, functioning as a trigger for buy and sell signals.
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Moving Average Ribbon
- A technique used in technical analysis to identify changing trends. It is created by placing a large number of moving averages onto the same chart. When all the averages are moving in the same direction, the trend is said to be strong. Reversals are confirmed when the averages crossover and head in the opposite direction.
The moving averages used in the diagram start with the 50-day moving average and increase by 10-day periods up to the final average of 200. (50, 60, 70, 80 ... 190, 200)
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Moving Expenses
- Potentially tax-deductible expenses that are incurred when an individual and his or her family relocates for a new job or due to the location transfer of an existing job. After certain baseline criteria are met for time and distance, individuals can deduct qualifying expenses for roughly one year after beginning the new job
Basic categories of qualifying expenses include costs to pack and ship personal possessions, temporary storage fees and transportation costs.
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Mr. Copper
- Otherwise known as Yasuo Hamanaka, Mr. Copper was a trader in the copper market who lost over $2.5 Billion for his employer, Sumitomo Corp. (in Japan). The losses amassed from unauthorized trading in secret accounts between 1985 and 1996.
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MRO
- In currencies, this is the abbreviation for the Mauritanian Ouguiya.
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MRO (Mauritanian Ouguiya)
- The currency abbreviation or currency symbol for the Mauritanian ouguiya (MRO), the currency for Mauritania. The Mauritanian ouguiya is made up of 5 khoums (Arabic for "one fifth") and is often presented with the symbol UM. Khoum and 1 ouguiya coins are rarely used in Mauritania, do to their low value.
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MSCI Emerging Markets Index
- An index created by Morgan Stanley Capital International (MSCI) that is designed to measure equity market performance in global emerging markets.
The Emerging Markets Index is a float-adjusted market capitalization index. As of May 2005, it consisted of indices in 26 emerging economies: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Jordan, Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, Turkey and Venezuela.
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MSCI EMU Index
- A market capitalization weighted index maintained by Morgan Stanley Capital International (MSCI). The MSCI EMU Index measures the performance of stocks based in the European Economic and Monetary Union (EMU).
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MTL
- In currencies, this is the abbreviation for the Maltese Lira.
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MTL (Maltese Lira)
- The currency abbreviation for the Maltese lira (MTL), the currency for Malta from 1972 until December of 2007. The Maltese lira was made up of 100 cents or 1,000 mils, although mils stopped circulating in 1994. The Maltese lira was often presented with the symbol Lm or £ (used locally), and was sometimes referred to as the Maltese pound in English.
Malta adopted the Euro in January 2008.
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Muhammad Yunus
- A professor of economics that won a Nobel Peace Prize in 2006 for his efforts in developing social and economic improvements through microcredit operations. Most notably, Yunus founded the Grameen Bank, which is known for loaning billions of dollars to the less fortunate all over the world.
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Multi-Advisor Fund
- An investment fund that is managed by more than one investment manager, each with a particular specialty. The goal of the multi-advisor fund is to make investment decisions based on multiple professional opinions, rather than relying on a single person to have comprehensive knowledge of investment options.
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Multi-Asset Class
- A combination of asset classes (such as cash, equity or bonds) used as an investment. A multi-asset class investment would contain more than one asset class, thus creating a group or portfolio of assets. The weights and types of classes will vary according to the individual investor.
Also known as a multiple-asset class.
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Multi-Discipline Account
- A type of investment account that allows access by several specialized investment managers within one main account. The account is split into several sub-accounts that are separately run by managers with relevant expertise. The multi-discipline account provides investors with an efficient way to get professional investment management and asset diversification. It is also referred to as a "multi-style" and "multi-strategy account".
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Multi-Factor Model
- A financial model that employs multiple factors in its computations to explain market phenomena and/or equilibrium asset prices. The multi-factor model can be used to explain either an individual security or a portfolio of securities. It will do this by comparing two or more factors to analyze relationships between variables and the security’s resulting performance.
Factors are compared using the following formula:
Ri = ai + βi(m) Rm + βi(1)F1 + βi(2)F2 +…+βi(N)FN + ei
Where:
Ri is the returns of security i
Rm is the market return
F(1,2,3…N) is each of the factors used
β is the beta with respect to each factor including the market (m)
e is the error term
a is the intercept
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Multi-Leg Options Order
- A type of order that allows an option trader to simultaneously buy or sell a number of different options that traditionally could only be achieved by placing separate orders. This type of order is primarily used in multi-legged strategies such as a straddle, strangle, ratio spread and butterfly.
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Multilateral Development Bank - MDB
- A financial institution that provides financing for national development. The bank is formed by a group of countries, consisting of both donor and borrowing nations. Furthermore, an MDB offers financial advice regarding development projects.
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Multilateral Trading Facility - MTF
- A trading system that facilitates the exchange of financial instruments between multiple parties. Multilateral trading facilities allows eligible contract participants to gather and transfer a variety of securities, especially instruments that may not have an official market. These facilities are often electronic systems controlled by approved market operators or larger investment banks. Traders will usually submit orders electronically, where a matching software engine is used to pair buyers with sellers.
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Multiline Insurance
- An insurance instrument used to bundle the risk exposures of multiple insurance obligations into one insurance contract. The risk exposures put together often are related, such as property and casualty risks.