- Fifth letter of Nasdaq
stock symbol specifying issue is the company's first class of preferred shares.
- Business slang, usually used in reference to startups or internet startup,
refers to "path to profitability."
- The two-character ISO 3166 country Code for PANAMA.
- The ISO 4217 currency code for the Panama Balboa.
- See: Planned amortization
- See: Preauthorized checks
- See: Preauthorized
- See: Pension
Benefit Guaranty Corporation
- See: Participation certificates.
- The two-character ISO 3166 country code for PERU.
- See: Private Export
- PEG Ratio
- See: Prospective
earnings growth ratio
- The ISO 4217 currency code for the Peruvian Nuevo Sol.
- See: Preferred equity
- The two-character ISO 3166 country code for FRENCH POLYNESIA.
- The two-character ISO 3166 country code for PAPUA NEW GUINEA.
- The ISO 4217 currency code for the Papua New Guinea Kina.
- The two-character ISO 3166 country code for PHILIPPINES.
- The ISO 4217 currency code for the Philippines Peso.
- See: Philadelphia Stock
- See: Paris Interbank Offer
- See: Payment-in-kind bond
- The two-character ISO 3166 country code for PAKISTAN.
- The ISO 4217 currency code for the Pakistani Rupee.
- The two-character ISO 3166 country code for POLAND.
- See: Project loan certificate
- The ISO 4217 currency code for the Polish Zloty.
- The two-character ISO 3166 country code for SAINT PIERRE AND MIQUELON.
- The two-character ISO 3166 country code for PITCAIRN.
- See: Project notes
- See: Principal only
- The two-character ISO 3166 country code for PUERTO RICO.
- The two-character ISO 3166 country code for PALESTINIAN TERRITORY, OCCUPIED.
- The two-character ISO 3166 country code for PORTUGAL.
- The ISO 4217 currency code for the Portugese Escudo.
- See: Price value of a
- The two-character ISO 3166 country code for PALAU.
- The two-character ISO 3166 country code for PARAGUAY.
- The ISO 4217 currency code for the Paraguay Guarani.
- PAC Bond
- Stands for Planned Amortization Class bond. A tranche
class offered by some CMOs
that has a sinking fund schedule and an ability to make principal
payments that are not subordinated to other classes.
- Used for listed equity securities. Regional
exchange located in Los Angeles and San Francisco; only U.S. exchange
open between 4:00 and 4:30.
- Pac-Man strategy
- Takeover defense strategy in which the
prospective acquiree retaliates against
the acquirer's tender
offer by launching its own tender offer
for the other firm.
- Package mortgage
- A mortgage on a house and property in
- Paid-in capital
- Capital received from investors in exchange for stock, but not stock from
capital generated from earnings or donated. This account includes capital
stock and contributions of stockholders credited to accounts other than capital
stock. It would also include surplus resulting from recapitalization.
- Paid in surplus
- See: Paid-in capital
- Paid up
- When all payments that are due have been made.
- Paid-up policy
- A life insurance policy
in which all premiums that are due have
- Painting the
- Illegal practice by traders who manipulate
the market by buying and selling a security
to create the illusion of high trading activity and to attract other traders
who may push up the price.
- Paired off
- Used for listed equity securities. Matched buy
and sell market orders, usually pertaining
to the pre-opening market picture
in a stock, or MOC
orders (especially relating to futures/options
- Paired shares
- Stock of two companies under the same management
that are sold as one unit with one certificate.
- A buyback to offset and effectively liquidate
a prior sale of securities.
buying or selling
- Rapid trading of stocks
or bonds in high volume
in anticipation of sharply rising or falling prices, usually after unexpected
news is released.
- Money market instruments,
commercial paper, and other.
- Paper dealer
- A brokerage firm that buys and sells commercial
paper to make a profit.
- Paper gain (loss)
- Unrealized capital gain (loss) on
securities held in a portfolio
based on a comparison of current market
price to original cost.
- Equal to the nominal or face value
of a security. A bond
selling at par is worth an amount equivalent to its original issue value or
its value upon redemption at maturity-typically $1000/bond. See: Discount,
- Par bond
- A bond trading
at its face value.
- Par value
- Also called the maturity value
or face value; the amount that an issuer
agrees to pay at the maturity date.
- Par value
- The official exchange rate between
two countries' currencies.
- Parallel bonds
- Fixed income instruments denominated in the respective currencies of the
countries where they are placed.
- Parallel loan
- A process whereby two companies in different countries borrow each other's
currency for a specific period of time,
and repay the other's currency at an agreed maturity
for the purpose of reducing foreign
exchange risk. Also referred to as back-to-back
shift in the yield curve
- A shift in economic conditions in which the change in the interest rate
on all maturities is the same number of
basis points. In other words, if the three
month T-bill increases 100 basis
points (one %), then the 6-month, 1-year, 5-year, 10-year, 20-year, and 30-year
rates all increase by 100 basis points as well. Related: Non-parallel
shift in the yield curve.
- A model is a combination of variables, such as GDP growth, and coefficients
which multiply these variables. The coefficients are often estimated from
the data. The coefficients are called parameters.
- Parent company
- A company that controls subsidiaries through its ownership of voting stock,
as well as runs its own business.
- Paris Bourse
- National stock market of France.
Interbank Offer Rate (PIBOR)
- The deposit rate on interbank transactions in the Eurocurrency
market quoted in Paris.
- For convertibles, level at which a convertible security's
market price equals the aggregate
value of the underlying
common stock; value/worth of the convertible
bond considered only as an equity instrument
(Conversion ratio times common
price). See: Conversion value.
For international parity, US$ price of a foreign stock's last sale in an overseas
market (Local currency stock
price times forex rate times ADR
ratio). For listed parity, condition whereby no party has floor priority,
and matching thus occurs. For options parity, dollar amount by which an option
is in the money. See: Intrinsic
- Parity value
- Related: Conversion value
- Putting money into safe investments
such as money market investments while
deciding where to invest the money.
- Parking violation
- Often used in risk arbitrage. Illegal holding of stock
by a third party, or the financing of such a stock, in which the third party's
sole reason for holding the stock is to conceal ownership or control of a
raider, thus sidestepping the Williams
Act requirements of 5% holding limits. See:
- Part B prospectus
- See: Statement
of Additional Information
- Used in the context of general equities. Trade
whose size is only part of the total customer
usually made to avoid a compromise in price and also to get some business
instead of losing the customers inquiry/order
to a competitor.
- Incomplete payment for the delivery of goods to one party by buying back
a certain amount of product from the same party.
but do not initiate"
- Used for listed equity securities. "Participate in the side of the
market indicated by the order,
but do not initiate the interest that causes the trade
to take place." This kind of order can cause one to "miss stock"
because the broker of investor is at the mercy of the player who does initiate
the trade. See: Market
order go along, percentage order.
- Used for listed equity securities. (1) Customer willing to buy/sell
in line with market.
(2) Buyer/seller who goes along with another
buyer/seller in a percentage order.
convertible preferred stock
- Preferred stock that can be converted
into common stock at the option
of the holder. In contrast, to the usual preferred stock, the value of the
preferred stock is refunded to the holder. That is, one gets conversion plus
the value of the stock.
- Dividend received from ownership of participating
- The portion of total fees in a syndicated
credit that go to the participating banks.
- A guaranteed investment
contract whose policyholder is not guaranteed a crediting
rate, but instead receives a return based
on the actual experience of the portfolio
managed by the life insurance company.
life insurance policies
- Life insurance that pays
dividends to policyholders
depending on the company's success as provided by few claims and profitable
underwritings and investments.
- Preferred stock that provides
the holder with a specified dividend plus
the right to additional earnings under
- Used in the context of general equities. Investments representing an interest
in a pool of funds or in other instruments,
such as foreign securities, that allow
participation in the rise or fall of a security
or group of securities.
- A large loan made by a group of lenders,
that enables a borrower to obtain financing above the legal lending limit
of an individual lender.
- Business associate who shares equity in
- Shared ownership among two or more individuals, some of whom may, but do
not necessarily, have limited liability
with respect to obligations of the group. See: General
partnership, limited partnership,
and master limited partnership.
- A written agreement among partners detailing the terms and conditions of
participation in a business ownership arrangement.
- Party in interest
- An ERISA-specified
individualsuch as an administrator, officer, fiduciary, trustee, custodian,
or counselwho is prohibited from making certain transactions involving
a retirement plan. A trustee, for example, would be prohibited from using
an IRA as collateral
for a loan.
- Pass the book
- The process of transferring responsibility for a brokerage firm's trading
account from one office to another around the world in order to benefit from
trading 24 hours a day.
- The interest rate paid on a securitized
pool of assets, which is less than the rate
paid on the underlying loans
by an amount equal to the servicing and guaranteeing fees.
- The net interest rate passed through
to investors after deducting servicing,
management, and guarantee fees from the gross mortgage
- A pool of fixed income securities backed
by a package of assets (i.e., mortgages) where
the holder receives the principal and
interest payments. Related: Mortgage
- Income or loss from business activities in which a person does not materially
participate, such as a limited partnership.
Activity Loss (PAL)
- A loss incurred in participating in passive investing.
- Passive bond
- A bond without any interest
- Passive income
- Income (such as investment income)
that does not come from active participation in a business. Specified by the
U.S. tax code.
Income Generator (PIG)
- An investment that favors passive income,
such as an income-oriented real estate limited
- Passive investing
- Putting money into a profitable business
opportunity that is deemed passive by the IRS
and thus benefits from tax deductions.
- Buying a well diversified portfolio
to represent a broad-based market index
without attempting to search out mispriced securities.
- See: Passive investment
- Passive management
- See: Indexing
- Passive portfolio
- A market index
- A strategy that involves minimal expectational input, and instead relies
on diversification to match the
performance of some market
index. A passive strategy assumes that the marketplace will reflect all
available information in the price paid for securities,
and therefore, does not attempt to find mispriced securities. Related: Active
- The exclusive right to use documented intellectual property in producing
or selling a particular product or using a process for a designated period
- An option whose value depends on the sequence
of prices of the underlying asset rather
than just the final price of the asset.
- A technical chart formation used to make market
predictions by following the price movements of securities.
- A method of paying income tax in which
the employer deducts a portion of an employee's monthly salary to remit to
- Attempts by municipal bond underwriting
businesses to gain influence with political officials who decide which underwriters
are awarded the municipality's business.
- The loss of cash resulting from a swap into
higher-priced bonds or the need/willingness
of a bank or other borrower to pay a higher rate of interest
to get funds. Used in the context of general equities. (1) When an investor
who wants to buy a stock
at a particular price hesitates and the stock begins to rise; instead of letting
the stock go, he "pays up" to buy the shares
at the higher prevailing price. (2) Buy shares in a high-quality company at
what is felt to be a high, but supportable, price due to its quality.
- A method of making payment that is used to maintain control over payments
made on behalf of the firm by personnel in noncentral locations. The payer's
bank delivers the payable through draft to
the payer, which must approve it and return it to the bank before payment
can be received.
- Payable date
- The date when dividends or capital
gains are paid to shareholders
or reinvested in additional shares.
- Related: Accounts payable
- The length of time it takes to recover the initial cost of a project, without
regard to the time value of money.
- In a Treasury refunding, the amount by
which the par value of the securities
maturing exceeds that of those sold. In
the context of general equities, paying a lower price in an accumulation of
stock. Antithesis of pay-up.
- A person receiving payment through any form of money transfer method.
- The person making a payment to a payee.
- Paying agent
- An agent who makes principal
and interest payments to bondholders
on behalf of the issuer.
- Payment date
- The date on which shareholders of
record will be sent a check for the declared dividend.
- Payment float
- Company-written checks that have not yet cleared.
- A bond that gives the issuer
an option (during an initial period) either
to make coupon payments in cash or in the
form of additional bonds.
- Payments netting
- Reducing fund transfers between affiliates to only a netted amount. Netting
can occur on a bilateral basis (between pairs of affiliates), or on a multi-lateral
basis (taking all affiliates together).
- Payments pattern
- Describes the collection pattern of receivables.
The pattern might describe the probability that a 72-day-old account will
still be unpaid when it is 73 days-old.
- Payoff diagram
- In option pricing, a graph of the value
of the option position at expiration
as a function of the underlying asset
- Payoff profile
- The slope of a line graphed according to the value of an underlying
asset on the x-axis and the value of a position
taken to hedge against risk
exposure on the y-axis. Also used with changes in value. See: Risk
- Payout period
- The time period during which withdrawals from a retirement account or annuity
- Payout ratio
- Generally, the proportion of earnings
paid out to the common stockholders
as cash dividends. More specifically, the
firm's cash dividend divided by the firm's earnings in the same reporting
- Refers to west coast listed equity securities. See: Pacific
- See: Price/earnings ratio
- P/E effect
- That portfolios with low P/E
stocks exhibit higher average risk-adjusted
returns than those with high P/E stocks. Related: Value
- P/E ratio
- Current stock price divided by trailing
annual earnings per share or
expected annual earnings per share. Assume XYZ Co. sells for $25.50 per share
and has earned $2.55 per share this year; $25.50 = 10 times $2.55. XYZ stock
sells for ten times earnings.
- The high point at the end of an economic expansion until the start of a
view (of capital structure)
- The argument that external financing transactions
costs, especially those associated with the problem of adverse selection,
create a dynamic environment in which firms have a preference, or pecking-order
of preferred sources of financing, when all else is equal. Internally generated
funds are the most preferred, followed by new debt,
and debt-equity hybrids. Finally, new equity
is at the least preferred source.
- Exchange rate whose value is pegged
to another currency's value or to a unit of account.
- Making transactions in a security,
currency, or commodity in order to stabilize
or target its value through market intervention.
- Penalty clause
- A clause found in contract agreements
that provides for a penalty in the event of default.
- Penalty tax
- A federal tax that can be applied if a plan holder does not meet certain
requirements when making withdrawals from a tax-advantaged retirement plan
(for instance, if the plan holder has not reached age 59-1/2). This penalty
tax is owed in addition to any income taxes due.
- A chart pattern resembling a pointed flag,
with the point facing to the right, which shows a diminishing variance of
- Penny stock
- Used in the context of general equities. Stock
that typically sells for less than $1 a share,
although it may rise to as much as $10/share after the initial public
offering, usually because of heavy promotion. All are traded
OTC, many of them in the local markets of
Denver, Vancouver, or Salt Lake City.
Benefit Guaranty Corporation (PBGC)
- A federal agency that insures the vested
benefits of pension plan participants
(established in 1974 by the ERISA legislation).
- Pension fund
- A fund set up to pay the pension benefits of a company's workers after retirement.
- Future liabilities resulting from pension
commitments made by a corporation. Accounting for pension liabilities varies
widely by country.
- Pension parachute
- A form of poison pill providing that
in the event of a hostile takeover
attempt, any excess pension plan assets
can be used to benefit pension plan
participants. This prevents the raiding firm from using the pension assets
to finance the takeover.
- Pension plan
- A fund that is established for the payment of retirement benefits.
- Pension reversion
- Termination of an overfunded defined benefit pension
plan and replacement of it with a life
insurance company-sponsored fixed annuity
- Pension sponsors
- Organizations that have established a pension
profit prospect (PPP)
- The second-lowest-priced of the ten highest-yielding
stocks in the Dow
Jones Industrial Average that is said (by authors O'Higgins and Downes)
to be the Dow stock with the best possibility of outperforming the average
as a whole.
- People pill
- A form of poison pill providing that
the entire management threatens to resign in the event of a takeover.
- Per capita debt
- The total bonded debt
of a municipality divided by the population of the municipality.
- Per stirpes
- A method for distributing the assets
of an individual who dies without a valid will. The Latin means for each descendant.
- Percent to
- Percentage that the stock price has to rise (fall) to double the price of
the call (put).
- Balance sheet and income
statement represented as percentages.
- Used for listed equity securities. Market
limited price order to buy/sell
a specified percentage (usually 50%) of shares
traded (sometimes after a fixed number of
shares of the stock have already traded).
See: participating buyer/seller,
"Participate but do not initiate."
- Applies mainly to convertible securities. Premium
over parity of a convertible
bond divided by parity.
- A market in which there are never any arbitrage
- An idealized market environment in which
every market participant is too small to affect the market
price by acting on its own.
- Graph of a slope that matches the forecast of an exchange
rate with the actual exchange rate.
- Perfect hedge
- A situation in which the profit and loss from the underlying
asset and the hedge position
- Conditions under which the law of one price holds. The assumptions include
frictionless markets, rational investors, and equal access to market
prices and information.
market view (of capital structure)
- Analysis of a firm's capital structure
decision, which shows the irrelevance of capital structure in a perfect capital
market view (of dividend policy)
- Analysis of a decision on dividend
policy, in a perfect capital market
environment, that shows the irrelevance of dividend policy.
- A first attachment on an asset that is duly recorded with the relevant government
body so that the lender will be able to act
on it should the borrower default.
competitive financial markets
- Markets in which no trader
has the power to change the price of goods or services. Perfect capital
markets are characterized by certain conditions: (1) Trading
is costless, and access to the financial markets is free; (2)information about
borrowing and lending opportunities is freely
available; and (3) there are many traders, and no single trader can have a
significant impact on market prices.
- The decomposition of a money manager's
performance results to explain the reasons why those results were achieved.
This analysis seeks to answer questions such as: (1) What were the major sources
of added value? (2) Was short-term factor timing statistically significant?
(3) Was market timing statistically significant?
and (4), was security selection statistically
- A surety bond between two parties, insuring
one party against loss if the terms of a contract
are not fulfilled.
- The assessment of a manager's results, which involves, first, determining
whether the money manager added value
by outperforming the established benchmark
(performance measurement) and, second, determining how the money manager achieved
the calculated return (performance attribution
- A growth-oriented mutual fund investing
in growth stock and performance
stock with low dividends and high risk.
- A risk-adjusted measure of how well a portfolio
- Calculation of the return a money
manager realizes over some time interval.
- Shares of stock
given to managers on the basis of performance as measured by earnings
per share and similar criteria. A control device shareholders
sometimes use to tie management to the self-interest of shareholders.
- High-growth stock in a company that
retains earnings for further growth and
therefore pays no dividends, but that an
investor feels has significant future potential.
- An annuity that provides guaranteed payments
to an annuitant for a specified period of time.
- Period of
- The time period of often high volatility
after a new issue is released when the trading
price of the security is established by
- Selling stocks by bid at intervals throughout
- Accumulation of capital in a mutual
fund by making regular payments on a monthly or quarterly basis.
- Periodic payments
- A series of payments from an annuity,
qualified retirement plan, or 403(b)(7) account made over a certain term of
years. A payment from an IRA,
even if over a period of years, is not considered a periodic payment for tax
purchase deferred contract
- A fixed or variable annuity contract
for which fixed-amount premiums are paid
either monthly or quarterly, and that does not begin paying out until a time
elected by the annuitant.
- Periodic rate
- The monthly effective interest rate.
For example, the periodic rate on
a credit card with an 18% annual
percentage rate is 1.5% per month.
- Permanent Assets
- Fixed assets (plant and equipment)
and permanent current assets.
- The minimum level of current assets
that a firm needs to continue operation. Because some level is always maintained,
they are called permanent current assets.
- Long-term financing using either debt or
spontaneous current Liabilities
- The minimum level of spontaneous liabilities
that is always maintained by a firm.
- Option strategy involving the purchase
of options with similar expiration
dates and different exercise prices.
- Perpetual bond
- Nonredeemable bond with no maturity
date that pays regular interest rates
- Recordkeeping system in which book inventory is updated daily.
- Warrants that have no expiration
- A constant stream of identical cash flows
without end, such as a British consol.
- Personal benefits, including direct benefits, such as the use of a firm
car or expense account for personal business, and indirect benefits, such
as up-to-date office decoration.
- Insurance policy attachment designed to cover specified personal valuables.
- Amount of money a taxpayer can exclude from personal income for each member
of the household in calculation of a tax obligation.
- Personal income
- Total income received from all sources, including wages, salaries, or rents,
and the like.
- The inflation rate as it affects a specific
- Personal property
- Any assets other than real estate.
- Personal tax
view (of capital structure)
- The argument that the difference in personal tax rates between income from
debt and income from equity
eliminates the disadvantage of the double taxation (corporate and personal)
of income from equity.
- Personal trust
- An interest in an asset held by a trustee
for the benefit of another person.
- Deposits by countries that receive dollar revenues from the sale of petroleum
to other countries; the term commonly refers to OPEC
deposits of dollars in the Eurocurrency
- Phantom income
- Income from a limited partnership
that creates taxability without generating cash
- Phantom stock
- An incentive scheme that awards management bonuses based on increases in
the market price of the company's stock.
- Phase space
- A graph which shows all possible states of a system. In phase space we plot
the value of a variable against possible values of the other variables at
the same time. If a system had three descriptive variables, we plot the phase
space in three dimensions, with each variable taking one dimension.
Board of Trade (PBOT)
- A subsidiary of the Philadelphia Stock
Exchange that trades currency futures.
Stock Exchange (PHLX)
- A securities exchange
trading American and European foreign
currency options on spot exchange
- Stock exchange based in the Philippines,
which operates two trading floors, at Manila and Makati.
- Phillips Curve
- A graph that supposedly shows the relationship between inflation and unemployment.
It is conjectured that there is a simple trade-off between inflation and unemployment
(high inflation and low unemployment, and low inflation and high unemployment).
Named after A.W. Phillips. Obviously, the relation between these important
macroeconomic variables is more complicated than this simple graph would suggest.
For a modern treatment, see work of Robert Lucas.
- Phone switching
- Transferring money between funds in the same mutual fund family by telephone
request. There may be a charge associated with these transfers. Phone
switching is also possible among different fund families if the funds
are held in street name by a participating broker/dealer.
- Physical asset
- Actual property such as precious metals or real estate. Also called real
or tangible assets.
- See: Commodity
- A procedure auditors use to ensure that inventory
recorded in the book is correct by actually
checking out the physical inventory.
- P & I
- Stands for principal and interest
on bonds or mortgage-backed
- The gain in yield that occurs when a block
of bonds is swapped for another block of higher-coupon
- Pickup bond
- A bond with a relatively high coupon
that is close to the date at which it is callable,
meaning that a fall in interest rates
will most likely cause early redemption
of the bond at a premium.
- Describes bid and asked
prices a broker
quotes for a given security. Used for listed
equity securities. Bid and ask prices and quantity information from a specialist
or from a dealer regarding a particular security
(i.e., "IBM's 1/4 to 1/2, 5m by 10m").
- Apply mainly to convertible securities. Increment of bonds
that trade in portions of $1000 minimum. Not
all bonds can be traded in "pieces," and the increments can vary.
model of capital structure
- A model of the debt-equity ratio
of the firms, graphically depicted in slices of a pie that represent the value
of the firm in the capital markets.
- When a securities underwriter allows existing holdings of shares in a corporation
to be sold in combination with an offering of new public shares.
- A broker who trading
stocks, bonds or commodities
in a personal account following a trade just made for a customer. The broker
assumes that the customer is making the trade on valuable inside information.
- PIK (Payment-in-kind) securities
- Highly speculative bonds or preferred
stock that pay interest or dividends
through additional bonds or preferred stock.
- Pink sheets
- Refers to over-the-counter trading. Daily
publication of the national quotation bureau that reports the bid
and ask prices
of thousands of OTC stocks, as well as the
market makers who trade
- Used for listed equity securities. Smallest unit of a currency
(i.e., cents for US dollars).
- The underwriting process that must
be completed with the SEC before a security
can be offered for sale to the public.
- A specific area of the trading floor that
is designed for the trading of commodities,
individual futures, or option
- Pit committee
- A committee of the exchange that determines
the daily settlement price of futures
- Stands for principal, interest, taxes, and insurance, the four main parts
of monthly mortgage obligations.
- Price level established as being significant by market's
failure to penetrate or as being significant when a sudden increase in volume
accompanies the move through the price level.
- Profit and loss statement for a trader.
- The marketing of new securities, usually
through sales to institutional
investors. See: Float.
- A bank depositing Eurodollars with
(selling Eurodollars to) another bank is often said to be making a placement.
- Placement ratio
- The percentages of last week's new municipal
bond offerings that have been bought
from the underwriters, according to
the Bond Buyer newspaper.
- Plain vanilla
- A term that refers to a relatively simple derivative
financial instrument, usually a swap
or other derivative that is issued with standard
- Plain vanilla
- See: Fixed for floating swap
- Plan agreement
- A document detailing the terms and conditions of a retirement plan such
as an IRA.
- Plan participants
- Employees or other beneficiaries who are eligible to receive benefits from
a company's employee benefit plan.
- A plan for reorganizing a firm during the Chapter 11 bankruptcy
- Plan sponsors
- The entities that establish pension plans,
including private business entities acting for their employees; state and
local entities operating on behalf of their employees; unions acting on behalf
of their members; and individuals representing themselves.
amortization class (PAC)
- (1) The class of CMO
that has the most stable cash flows and
the lowest prepayment risk
of any class of CMO Because of a stable cash
flow, it is considered the least risky
CMO (2) A CMO bond class that stipulates cash
flow contributions to a sinking fund. A PAC directs principal
payments to the sinking fund
on a priority basis in accordance with a predetermined
payment schedule, with prior claim to the cash flows before other CMO classes.
Similarly, cash flows received by the trust in excess of the sinking
fund requirement are also allocated to other bond
classes. The prepayment experience of the PAC is therefore very stable over
a wide range of prepayment experience.
capital expenditure program
- Budgeted or projected outlays for major expenditures on permanent or fixed
assets as outlined in the corporate financial
- Budgeted or projected ways need for reasons or to obtain short-term and
long-term financing as outlined in the corporate financial
- Planning horizon
- The length of time a model or investor or plan projects into the future.
- The assets of a business including land,
buildings, machinery, and all equipment permanently employed.
- Used in the context of general equities. Customer or trader
who is actively involved in a particular stock
or the market in general.
- Playing the
- Trading in high, uncalculated risk usually
refers to actions of amateur investors.
- Plaza Accord
- Agreement among country representatives in 1985 to implement a coordinated
program to weaken the dollar.
- See: Hypothecation
- Plow back
- To reinvest earnings in a business rather
than pay out them out as dividends. Common
practice in high-growth companies.
- Plowback rate
- Related: Retention rate
- A variable that handles financial slack
in the financial plan.
- Used to quote a price in 64ths. Dealers
in government bonds normally give price quotes
in 32nds. To quote a bid or offer
in 64ths, they use pluses; a dealer who bids
4+ is bidding the handle plus 4/32 + 1/64,
which equals the handle plus 9/64.
- Plus a match
- Used for listed equity securities. Floor indication
that someone is on the floor with equal priority
standing who wants to buy/sell at least the
same number of shares at the same price as
one's own order. Outside.
See: Matched orders. Compare to ahead.
- Plus tick
- Used in the context of general equities. Trade
occurring at a price higher than the previous sale. Uptick.
Antithesis of minus tick. See: Short sale.
- Plus tick seller
- Used for listed equity securities. A short
seller (referring to the regulation requiring a plus
tick to short).
- The smallest unit of price change quoted, or one one-hundredth of a percent.
Related: Minimum price fluctuation
and figure chart
- A price-only chart that takes into account only whole integer changes in
price, i.e., a 2-point change. Point and figure charting disregards the element
of time and is used solely to record changes in price.
- Point Attractor
- In non-linear dynamics, an attractor
where all orbits in phase space are
drawn to one point, or value. Essentially, any system which tends to a stable,
single valued equilibrium will have a point attractor. A pendulum which is
damped by friction will always stop, so its phase
space will always be drawn to the point where velocity
and position are equal to zero. See: Attractor,
- Points quote
- An abbreviated form of the outright quote used by traders
in the interbank market.
- Poison pill
- Anti-takeover device that gives a prospective
the right to buy shares
of the firm or shares of anyone who acquires the firm at a deep discount
to their fair market value. Named after
the cyanide pill that secret government agents are said to be instructed to
swallow if capture is imminent.
- Poison put
- A covenant allowing the bondholder
to demand repayment in the event of a hostile takeover.
- Way in which an investor seeks to assess
an appropriate long-term "normal" mix of assets that represents
an ideal blend of controlled risk and enhanced
- Policy limit
- The maximum dollar amount of coverage provided by an insurance company for
a certain policy.
- Policy loan
- A loan often made at a below-market
interest rate from an insurance company to a policyholder
that is secured by the cash surrender value of a life
- An individual who owns an insurance policy.
- Packaged loans acquired by policyholders
that are secured by the cash surrender value of the policies, and are offered
by a broker/dealer
- Political risk
- Possibility of negative events such as expropriation of assets,
changes in tax policy, restrictions on the exchange
of foreign currency, or other changes
in the business climate of a country.
- In capital budgeting, the concept that
investment projects are financed out
of a pool of bonds, preferred
stock, and common stock, and a
weighted-average cost of capital must be
used to calculate investment returns. In insurance, a group of insurers who
share premiums and losses in order to spread
risk. In investments, the combination of funds
for the benefit of a common project, or a group of investors
who use their combined influence to manipulate prices.
- Pool factor
- The outstanding principal
balance divided by the original principal balance with the result expressed
as a decimal. Pool factors are published monthly by the Bond Buyer newspaper
Mae, Fannie Mae, and
Freddie Mac (Federal Home Loan Mortgage Corporation) MBSs.
- An accounting method for reporting acquisitions
accomplished through the use of equity. The
combined assets of the merged entity are consolidated
using book value, as opposed to the purchase
method, which uses market value.
The merging entities' financial results are combined as though the two entities
have always been a single entity.
- Often used in risk arbitrage. See: Shark
- The character of benefits that may be carried from a previous job to the
- A collection of investments, real and/or financial.
allocation by region
- The distribution, by geographic region,
of a portfolio's holdings.
- The distribution, by type of asset,
of a portfolio's holdings.
- Portfolio beta
- Used in the context of general equities. The beta
of a portfolio is the weighted sum of
the individual asset betas, According to the proportions of the investments
in the portfolio. E.g., if 50% of the money is in stock A with a beta of 2.00,
and 50% of the money is in stock B with a beta of 1.00,the portfolio beta
is 1.50. Portfolio beta describes relative volatility
of an individual securities portfolio,
taken as a whole, as measured by the individual stock
betas of the securities making it up. A beta
of 1.05 relative to the S&P 500 implies
that if the S&P's excess return increases
by 10% the portfolio is expected to increase by 10.5%.
- Investing in different asset classes
and in securities of many issuers
in an attempt to reduce overall investment risk
and to avoid damaging a portfolio's performance
by the poor performance of a single security, industry, (or country).
- A weighted average of individual assets'
- A strategy using a leveraged portfolio
in the underlying stock
to create a synthetic put option. The
strategy's goal is to ensure that the value of the portfolio does not fall
below a certain level.
internal rate of return
- The rate of return computed by
first determining the cash flows for all
the bonds in the portfolio
and then finding the interest rate
that will make the present value of the cash flows equal to the market
value of the portfolio.
- Related: Investment management
- Used in the context of general equities. Professional responsible for the
of an individual or institutional
investor, such as a mutual fund,
pension fund, profit-sharing plan,
bank trust department, or insurance company. In return for a fee, the manager
has the fiduciary responsibility to manage the assets prudently and choose
which asset types are most appropriate over time. Related: Investment
- The expected return/standard
deviation pairs of all portfolios
that can be constructed from a given set of assets.
- Portfolio R2
- Used in the context of general equities. Number between 0 and 1 that measures
the strength of correlation of movement between the portfolio/stock
and the index. Indeed, the R2 is
the square of the correlation. For hedging
purposes, the higher the R2, the better.
- Applies to derivative products. Recomposition of a portfolio's
asset mix by selling off undesired asset types
or cash) or specific securities
within that class, while simultaneously buying
desired types or securities. Often a firm is asked to bid
on an old portfolio and give an offering of
the desired portfolio. See: Program
- Theory that an investor's choice of a
risky investment portfolio
is separate from his attitude towards risk.
Related: Fisher's separation
- Portfolio theory
- See: Modern portfolio theory.
- The expenses associated with buying and selling securities,
including commissions, purchase and redemption
fees, exchange fees, and other miscellaneous costs. In a mutual
fund prospectus, these expenses are
listed separately from the fund's expense
- For an investment company, an annualized rate found by dividing the lesser
of purchases and sales by the average of
- Weighted sum of the covariance and
variances of the assets
in a portfolio.
- A market commitment; the number of contracts
bought or sold for which no offsetting transaction
has been entered into. The buyer of a commodity
is said to have a long position, and
the seller of a commodity is said to have a short
position. Related: Open contracts.
- Position building
- Buying shares to build up a long
position or selling shares to create
a short position in a particular
security or group of securities.
- Position diagram
- Diagram showing the possible payoffs from a derivative
- Position limits
- Applies to derivative products. Maximum position
available in any one future or option
contract for a given institution. For "bona
fide" futures hedgers, there are no position
- Position self
- Used in the context of general equities. Going long
or short in anticipation of a stock's
- Position sheet
- Used in the context of general equities. List of long
and short positions for an individual
trader or desk, at times accompanied by
the trades from the previous trading
session that brought these closing positions.
- Position trader
- A commodities trader
who takes a long-term approach in maintaining positions
in the market and does not close out of these
positions until close to the delivery
- Positive carry
- Related: Net financing cost
- A property of option-free bonds that the
price appreciation for a large downward change in interest
rates will be greater (in absolute terms) than the price depreciation
for the same downward change in interest rates.
- Positive covenant
(of a bond)
- A bond covenant that specifies certain
actions the firm must take. Also called an affirmative
- Positive float
- See: Float
- When long-term debt interest
rates are higher than short-term debt rates (because of the increased
risk involved with long-term
- A type of corporation permitted under the US tax code whose branch operation
in a US possession can obtain tax benefits as though it were operating as
a foreign subsidiary.
- Particular place on the floor of an exchange
where transactions in stocks listed
on the exchange occur.
- A set of procedures for evaluating a capital
budgeting decision after the fact.
- Post-dated check
- A check that becomes payable and negotiable on a future date specified.
- The option of deferring a project without eliminating the possibility of
- Purposely delaying receipt of income to a later year in order to reduce
current tax liability.
- Prices after the decision to trade.
- The portion of stock or bond
issue that is returned to the managing underwriter
by the participating investment bankers
for sale to institutional investors.
- Pot is clean
- Phrase used when managing underwriter
has sold the entire pot.
- Power of attorney
- A written authorization allowing a person to perform certain acts on behalf
of another, such as moving of assets between
accounts or trading for a person's benefit.
- Possibly fraudulent practice whereby commodities
dealers carry out risk-free
trades at predetermined prices to acquire
- Checks that are authorized by a payer in advance, and written either by
the payee or by the payee's bank and then deposited in the payee's bank account.
electronic debits (PAD)
- Debits to a bank account in advance by the payer. The payer's bank sends
payment to the payee's bank through the Automated
Clearing House (ACH) system.
- Accelerating cash inflows by directly charging a customer's bank account
demand (for money)
- The need to meet unexpected or extraordinary contingencies with a buffer
stock of cash.
- A desire to hold cash in order to be able
to deal effectively with unexpected events that require cash outlay.
- The established system of priorities of trades
in an exchange. For example, the highest
bid and lowest offer
have highest precedence; the first bid or first
offer at a price has highest priority, and
large orders have priority over smaller orders.
- Precious metals
- Gold, silver, platinum, and palladium, which are used for their intrinsic
value or for their value in production. These may be traded
either in their physical state or by way of futures
and options contracts, mining company stocks,
funds, or other instrument.
- Method of charging interest in which
the annual interest is either deducted
from the face amount of the loan when the funds
are distributed or is added to the total amount and divided into the regular
- Common stockholders'
right to anything of value distributed by the company.
- Refers to over-the-counter trading. Selection of a dealer
to handle a trade despite the dealer's market
not being the best available. Often the "preferenced dealer" will
then move his market in line.
- Preferred shares of a corporation
that have first claim to preferred dividends.
- A security that ranks junior to preferred
stock but senior to common stock
in the right to receive payments from the firm; essentially junior preferred
- Net income after interest and taxes (before
common stock dividends)
divided by preferred stock dividends.
equity redemption stock (PERC)
- Preferred stock that converts
automatically into equity at a stated date.
A limit is placed on the value of the shares
the investor receives.
- A biased expectations
theory that believes the term
structure reflects the expectation of the future path of interest rates
as well as risk premium. The theory
rejects the assertion that the risk premium
must rise uniformly with maturity, but
instead profits that to the extent that the demand for and supply of funds
do not match for a given maturity range, some
participants will shift to maturities showing the opposite imbalances, as
long as they are compensated by an appropriate risk premium whose magnitude
will reflect the extent of aversion to either price or reinvestment
- Preferred shares
- Preferred shares give investors a fixed
dividend from the company's earnings
and entitle them to be paid before common shareholders. See: Preferred
- Preferred stock
- A security that shows ownership in a
corporation and gives the holder a claim, prior to the claim of common
stockholders, on earnings
and also generally on assets in the event
of liquidation. Most preferred stock
pays a fixed dividend that is paid prior
to the common stock dividend, stated
in a dollar amount or as a percentage of par
value. This stock does not usually carry voting rights. Preferred stock
has characteristics of both common stock and debt.
- A contract for preferred
- Preferred stock at par
value divided by total capitalization,
which gives the portion of capitalization that consists of preferred stock.
- Financial ratio defined as stock price divided by sales over earnings growth.
Often used in the valuation of Internet stocks. Related: PSSG.
- The second estimate of GDP released about
two months after the measurement period.
- An initial or tentative version of a prospectus.
- A distribution from an IRA
before the owner reaches age 59-1/2. Generally, a 10% penalty tax is owed
on such a distribution. Also known as an early
distribution or an early withdrawal.
- (1) A bond sold above its par
value. (2) The price of an option
contract; also, in futures trading,
the amount by which the futures price
exceeds the price of the spot commodity.
(3) For convertibles, amount by which
the price of a convertible exceeds parity,
and is usually expressed as a percentage. Suppose a stock
is trading at $45, and the bond is convertible
at a $50 stock price and the convertible bond trading at 105. A similar bond without the
conversion feature trades at $90. In this case, the premium is $15, or 16.66%=(105-90)/90. If the premium
is high, the bond trades like any fixed income bond; if low, like a stock.
See: Gross parity, net
parity. (4) For futures, excess of fair value of future over the spot
index, which in theory will equal the Treasury
bill yield for the period to expiration
minus the expected dividend yield
until the future's expiration. (5) For options, price of an option in the open
market (sometimes refers to the portion
of the price that exceeds parity). (6) For straight
equity, price higher than that of the last sale or
inside market. Related: Inverted
market premium payback period. Also
called break-even time; the time
it takes to recover the premium per share
of a convertible security.
- Premium bond
- A bond that is selling for more than its
- Premium income
- The income received by an investor who
sells an option.
- Premium raid
- An attempt to acquire a large portion of a company's stock
to gain control by offering stockholders
a premium over the market
value for their shares.
- A bankruptcy in which a debtor
and its creditors pre-negotiate a plan of reorganization and then file it
along with the bankruptcy petition.
- Prepaid interest
- An asset account showing interest
that has been paid in advance, which is expensed and charged to the borrower's
P & L statement.
- A fee a borrower pays a lender when the
borrower repays a loan before its scheduled
time of maturity.
- Also called speed, the estimated rate at
which mortgagors pay off their loans ahead of schedule, critical in assessing
the value of mortgage
- Payments made in excess of scheduled mortgage
- Refunded bond.
- Procedure of floating a second bond
at a lower interest rate in order
to pay off the first bond at the first call
date and to reduce overall borrowing
- Presale order
- An order to purchase part of a new municipal
bond issue that is accepted by an underwriting
syndicate before an official public
- Present value
- The amount of cash today that is equivalent in value to a payment, or to
a stream of payments, to be received in the future. To determine the present
value, each future cash flow is multiplied
by a present value factor.
For example, if the opportunity cost of funds is 10%, the present value of
$100 to be received in one year is $100 x [1/(1 + 0.10)] = $91.
Value Components Analysis
- An analytical tool that establishes a base NPV
for a project that can then be adjusted for the incremental NPV effect of
separate elements of the project's overall potential sales.
- Factor used to calculate an estimate of the present
value of an amount to be received in a future period. If the opportunity
cost of funds is 10% over next year, the factor is [1/(1 + 0.10)].
value of growth opportunities
- Net present value (NPV) of investments
the firm is expected to make in the future.
Value Index (PVI)
- The ratio of the NPV of a project
to the initial outlay required for it. The index
is an efficiency measure for investment
decisions under capital rationing.
- Highest-ranking officer in a corporation after the chief
election cycle theory
- A theory that stock market trends
can be predicted and explained by the four-year presidential election cycle.
- Pre-sold issue
- An issue that is sold out before the coupon
- Payment to an account made with funds from a worker's paycheck before federal
income taxes are deducted.
earnings or profits
- Net income before federal income taxes are subtracted.
rate of return
- Gain on a security before taxes.
- Prices occurring before or at the decision
- Method of calculating finance charges based on the account balance at the
end of the previous month.
- Price of
- Used in the context of general equities. Cost to become a player
in a stock in an inordinately aggressive
locking on one side, size or price concessions); trader
becomes aggressive in order to break the domination of customer activity by
- Compares a stock's market
value to the value of total assets less
total liabilities (book
value). Determined by dividing current stock
price by common stockholder
equity per share (book
value), adjusted for stock splits. Also called Market-to-Book.
- Price change
- Increase or decrease in the closing price of a security
compared to the previous day's closing price.
- Price compression
- The limitation of the price appreciation
potential for a callable bond in a declining
interest rate environment, based on
the expectation that the bond will be redeemed
at the call price.
- Price continuity
- Minimal price changes due to transactions.
- The process of determining the prices of
assets in the marketplace through the interactions
of buyers and sellers.
- Shows the multiple of earnings at which
a stock sells. Determined by dividing current
stock price by current earnings
per share (adjusted for stock splits). Earnings per share for the P/E
ratio are determined by dividing earnings for past 12 months by the number
of common shares outstanding.
Higher multiple means investors have higher expectations for future growth,
and have bid up the stock's price.
- Price effect
- Impact of a change in interest rates on bond
- Price elasticities
- The percentage change in quantity divided by a percentage change in the
price. Answers the question: How much will the demand for my product decrease
if I raise prices by 10%?
- Price gap
- A term used when the price of a stock rockets
or dives in a direction away from its last price range,
such as a stock with a trading range of $10-$12
that closes at $12 and climbs to $14 the next day.
- Price give
- Used in the context of general equities. Willingness of a buyer
or seller to negotiate on price, within reason, from the price at the last
sale or the indicated level. See: Takes
- Price immunization
- Portfolio protection strategy that focuses on the current market
value of assets and liabilities.
- Price impact
- Related: Market impact costs
- Price indexes
- See: Consumer price index
and producer price index
- Price leadership
- A price charged by the dominant producer that becomes the price adopted
by all the other producers.
- Price momentum
- Related: Relative strength
- Price persistence
- Related: Relative strength
- Price range
- The interval between the high and low prices over which a stock
has traded over a particular period of time.
- Price risk
- The risk that the value of a security
(or a portfolio) will decline in the future.
Or, a type of mortgage pipeline
risk created in the production segment when loan terms are set for the
borrower in advance of setting terms for secondary
market sale. If the general level of rates rises during the production
cycle, the lender may have to sell the originated
loans at a discount.
- Determined by dividing current stock price
by revenue per share (adjusted for stock
splits). Revenue per share for the P/S
ratio is determined by dividing revenue for past 12 months by number of shares
- Adjustment mechanism under the classic gold standard allowing disturbances
in the price level in one country to be wholly or partly offset
by a countervailing flow of specie (gold coins) that would act to equalize
prices across countries and automatically bring international payments into
- Price spread
- An options strategy that involves buying
and selling two options on the same security
with the same expiration month, but with different exercise
- Price support
- Government intervention to set an artificially high price through the use
of a price floor designed to aid producers.
- Price takers
- Individuals who respond to rates and prices
by acting as though prices have no influence on them.
- Price uncertainty
- Chance that the future price of an asset
value of a basis point (PVBP)
- Also called the dollar value of a basis point; a measure of the change in
the price of a bond if the required
yield changes by one basis point.
- A relationship espoused by some technical
analysts that signals continuing rises or falls in security
prices that are related to changes in volume
- An index giving a greater influence to higher-valued
stocks by weighting all component stocks by
- Prices (of equity)
- Price of a share of common
stock on the date shown. Highs and lows are based on the highest and lowest
intraday trading price.
- Priced out
- The market has already incorporated information,
such as a low dividend, into the price
of a stock.
- Term used for an unrealistically low bid price
or unrealistically high offer price.
- Pricing efficiency
- Also called external efficiency; a market
characteristic that prices at all times fully
reflect all available information that is relevant to the valuation of securities.
- Primary dealer
- Usually refers to the select list of securities firms that are authorized
to deal in new issues of government bonds.
- Sale of a new issue of stock or bonds,
as distinguished from a
earnings per (common) share
- Earnings available for the payment of
dividends to common
stockholders divided by the number of common
- Primary market
- Where a newly issued security
is first offered. All subsequent trading
of this security occurs is done in the secondary
- Primary offering
- Direct/Sale of a firm's newly issued shares
by the firm to investors.
- Primary trend
- General movement in price data that lasts 4 to 4 1/2 years.
- Stands for prescribed right to income and maximum equity, a certificate
that entitles the owner to the dividend/income
from an underlying security,
but not to the capital appreciation
of that security.
- Prime paper
- The highest-quality, investment-grade
debt of corporations as decided by rating
agencies such as Moody's.
- Prime rate
- The interest rate at which banks
lend to their best (prime) customers. More often than not, a bank's most creditworthy
customers borrow at rates below the prime rate.
- Prime rate fund
- A mutual fund that buys portions of
corporate loans from banks and pays the interest
- An instrument such as a stock
or bond for which payments depend only on the
financial status of the issuer.
- (1) The total amount of money being borrowed or lent. (2) The party affected
by agent decisions in a principal-agent
- Occurs when one person, an agent, acts on
the behalf of another person, the principal.
- Principal amount
- The face amount of debt; the amount borrowed
or lent. Often called principal.
Exchange-Rated-Linked Securities (PERLS)
- A debt instrument with its principal
and interest denominated in US dollars,
but with principal repayment depending
on the exchange rate of the U.
S. dollar against a foreign currency.
- A mortgage-backed security
(MBS) whose holder receives only principal
cash flows on the underlying
mortgage pool. All the principal distribution
due from the underlying collateral
pool is paid to the registered holder of the stripped MBS on the basis of
the current face value of the underlying
- A stockholder who owns 10% or more
of the voting stock of a company. Such stockholders
must report all trading in the stock to the SEC
pursuant insider trading rules.
- That portfolios of different sorts of assets differently correlated with
one another will have negligible unsystematic
risk. In other words, unsystematic risks disappear in diversified portfolios,
and only systematic risks persist,
those related to particular assets.
- Used in the context of general equities. As a verb execute
a trade, evidenced by its printing on the
ticker tape. As a noun, a trade.
- Prior-lien bond
- A bond usually arising from reorganization
with precedence over another bond of the same
issuing company that is equally secured.
- Preferred stock that has a higher
claim on all dividends and assets
in liquidation than claims of other
- Used for listed equity securities. System used in an auction market,
in which the first bid or offer
price is executed before other bid
and offer prices, even if subsequent orders
are larger. NYSE rules stipulate
that the bid made first should be executed first, or if two bids came in at
once, the bid for the large number of shares
receives "priority." The bid not executed is then turned to the
broker, who informs the customer that the
trade was not completed because there was
stock ahead. See: Standing.
Export Funding Corporation (PEFCO)
- Company that mobilizes private capital for financing the export of big-ticket
items by US firms by purchasing at fixed interest
rates the medium- to long-term debt obligations
of importers of US products.
- Related: Conventional pass-throughs.
- A ruling by the IRS in
response to a request for interpretation of a tax law.
- A limited partnership with
no more than 35 participants that is not registered with the SEC.
market value (PMV)
- The break-up market value of all
divisions of a company if divisions were each independent and established
their own market stock
Mortgage Insurance (PMI)
- Policy protecting the holder against loss resulting from default
on a mortgage loan.
- Private placement
- The sale of a bond or other security
directly to a limited number of investors.
For example, sale of stocks, bonds,
or other investments directly to an institutional
investor like an insurance company, avoiding the need for SEC
registration if the securities are
purchased for investment as opposed to resale. Antithesis of
- A municipal bond allowing more
than 10% of the proceeds go to private activities.
- Resident immigrant workers' remittances to their country of origin as well
as, e.g., gifts, dowries, inheritances, prizes, charitable contributions.
- The transfer of government-owned or government-run companies to the private
sector, usually by selling them.
forma capital structure analysis
- A method of analyzing the impact of alternative possible capital
structure choices on a firm's credit statistics and reported financial
results, especially to determine whether the firm will be able to use projected
tax shield benefits fully.
forma financial statements
- A firm's financial statements as adjusted to reflect a projected or planned
transaction. "What-if" analysis.
- Pro forma
- A financial statement showing the forecast or projected operating results
and balance sheet, as in pro forma
income statements, balance sheets,
and statements of cash flows.
- The relative likelihood of a particular outcome among all possible outcomes.
- The function that describes the change of certain realizations for a continuous
- A function that describes all the values a random variable can take and
the probability associated with each. Also called a probability
- A measure that assigns a likelihood of occurrence to each and every possible
- Money received by the seller of an asset.
- Proceeds sale
- OTC securities
sale whose revenue is used to buy another security.
- Time a selling firm takes to record receipt of a payment and deposit it.
Price Index (PPI)
- Index measuring changes in wholesale prices,
published by the US Bureau of Labor Statistics every month.
- Product cycle
- The time it takes to bring new and/or improved products to market.
- Theory suggesting that a firm initially establish
itself locally and expand into foreign markets
in response to foreign demand for its product; over time, the MNC
will grow in foreign markets; after some
point, its foreign business may decline unless it can differentiate its product
- A source of competitive advantage that depends on producing some item that
is regarded to have unique and valuable characteristics.
- Product risk
- A type of mortgage pipeline
risk that occurs when a lender has an unusual loan
in production or inventory but does not have a sale commitment at a prearranged
- A source of competitive advantage that depends on producing some product
or service at the lowest cost.
- An agreement by the loan purchaser to allow
a monthly loan quota to be delivered in batches.
- A method of nonrecourse asset-based
financing in which a specified percentage of revenue realized from the
sale of the project's output is used to pay debt
- The maximum amount of goods (i.e., food and clothing) that a country is
able to produce given its labor supply.
- Production rate
- The coupon rate at which a pass-through
security guaranteed by Ginnie Mae
- The amount of output per unit of input, such as the quantity of a product
produced per hour of capital employed.
- Trader trying to get involved in a stock
who presents self as a buyer/seller to draw
a call from a customer. That is the trader has nothing real,
- Revenue minus cost. The amount one makes on a transaction.
- Profit center
- A division of an organization held responsible for producing its own profits.
- Profit forecast
- A prediction of future profits of a company,
which may affect investment decisions.
- Profit margin
- Indicator of profitability. The ratio of earnings
available to stockholders to net sales. Determined by dividing net
income by revenue for the same 12-month period. Result is shown as a percentage.
Also known as net profit margin.
- An incentive system providing that employees share in company profits
through a cash fund or a deferred plan used to buy stock
- Profit taking
- Action by short-term securities traders
to cash in on gains created by a sharp market
rise, which pushes prices down temporarily but implies an upward market
trend. See: Ring
the [cash] register.
- The present value of the future
cash flows divided by the initial investment.
Also called the benefit-cost ratio.
- Ratios that focus on how well a firm is performing. Profit
margins measure performance with relation to sales. Rate of return ratios
measure performance relative to some measure of size of the investment.
- Program trades
- Orders requiring the execution
of trades in a large number of different stocks at as near the same time as
possible. Also called basket trades.
Related: Block trade
- Program trading
- Trades based on signals from computer programs,
usually entered directly from the trader's
computer in to the market's computer system
and executed automatically. Applies to
derivative products. A process of electronic execution of trading of a basket
of stocks simultaneously, for index
arbitrage, portfolio restructuring,
or outright buy/sell interests. See: super
- Progress payments
- Periodic payments to a supplier, contractor, or subcontractor for work as
it is completed as desired, in order to reduce working
- Progress review
- A periodic review of a capital investment project to evaluate its continued
- A tax system providing that the average tax rate
- Characterizes a convex tax schedule that results in a higher effective tax
rate on higher income levels. Increases for some increases in income, but
never decreases with an increase in income.
Finance Loan Program
- Program under which banks, the Ex-Im
Bank, or a combination of both may extend long-term
financing for capital equipment and related
services for major projects.
- Project financing
- A form of asset-based financing
in which a firm finances a discrete set of assets
on a stand-alone basis.
- Project link
- An econometric model forecasting and describing the effects of changes in
different economies on other economies.
loan certificate (PLC)
- A primary program of Ginnie Mae for
securitizing FHA-insured and coinsured
multifamily, hospital, and nursing home loans.
- Project loans
- Usually FHA-insured and HUD-guaranteed mortgages on multiple-family housing
complexes, nursing homes, hospitals, and other special development.
- Securities backed by a variety of FHA-insured loans-primarily multifamily
apartment buildings, hospitals, and nursing homes.
- Project notes
- Notes issued by municipalities to finance
federally sponsored programs in urban renewal and housing and guaranteed by
the U.S. Department of Housing and Urban Development.
benefit obligation (PBO)
- A measure of a pension plan's liability
at the calculation date assuming that the plan is ongoing and will not terminate
in the foreseeable future. Related: Accumulated
- With CMOs,
the date at the end of the estimated cash flow window where final payment
- The use of econometric models to forecast the future performance of a company,
country, or other financial entity using historical and current information.
- Promissory note
- Written pledge to pay.
- A list of personal property with corresponding values and initial costs
often used to substantiate insurance claim
and tax losses.
- Property rights
- Rights of individuals and companies to own and use property as they see
fit and to receive the stream of income that their property generates.
- Property tax
- A tax levied on real property based on its use and its assessed value.
- A method of stockholder voting that
allows minority shareholders and groups
of small shareholders to have a better
chance of getting representation on a board of directors than under statutory
- Principal trading in which firm seeks
direct gain rather than commission dollars.
- An unincorporated business that is owned and operated by only one person
who has complete liability for all assets,
and complete rights to all profits.
Earnings Growth (PEG Ratio)
- Based on forecasts from proprietary sources such as Institutional
Brokers' Estimate System (IBES), First Call, or Zach's. Growth is forecast
of earnings minus current earnings divided by current earnings. Forward-looking
measure rather than typical earnings growth measures, which look back in time
- Formal written document to sell securities that describes the plan for a
proposed business enterprise, or the facts concerning an existing one, that
an investor needs to make an informed decision.
Prospectuses are used by mutual funds
to describe fund objectives, risks, and other
- Assure the salesperson or trader that
interest, buy or sell, will be attended to,
given any change in the trading circumstances, as follows:
At a price: If the stock trades
at a certain price or price range, the trader
will show this market to the salesperson
and thus allow participation under these favorable circumstances.
Floor protection: Representation of a client on the floor of the exchange-so
that if size were to trade at his price or
a better price, salesperson would participate.
Volume (OTC): If a certain amount of volume trades (that parallels the
protectee's interest), trader assures salesperson of reasonable participation
in the trading activity. The extent of this protection depends on liquidity,
number of market makers, and other
aspects of the stock.
- Notion that governments should protect domestic industry from import competition
by means of tariffs, quotas, and other trade
- A part of an indenture or loan agreement
that limits certain actions a company may take during the term of the loan
to protect the lender's interests.
put buying strategy
- A strategy that involves buying a put
option on the underlying security
that is held in a portfolio. Related:
- Prototype plan
- A qualified retirement plan sponsored by a financial
institution. It may be adopted by executing a written agreement. A prototype
is generally more flexible than the IRS Form 5305 or 5305-A and may have additional
special features. Also called a master
for income taxes
- An amount on the P & I
statement that estimates a company's total income
tax liability for the year.
- A stipulation in a convertible issue that
allows the issuer to call
the issue during the noncall period if the price of the stock
reaches a certain level. In the case of convertible securities, right of an
issuer to accelerate the first
redemption date if the underlying
common should trade at or above a certain
level for a sustained period. Most typical terms are 150% of conversion
price for 20 consecutive days. Note that under these circumstances the
security has appreciated, at a minimum,
50% since being issued.
- Authorization, whether written or electronic, that shareholders' votes may
be cast by others. Shareholders can and often do give management their proxies,
delegating the right and responsibility to vote their shares
- Proxy contest
- A battle for the control of a firm in which a dissident group seeks, from
the firm's other shareholders, the
right to vote those shareholders' shares
in favor of the dissident group's slate of directors. Also called proxy
- Proxy fight
- Often used in risk arbitrage. Technique used by an acquiring company to
attempt to gain control of a takeover
target. The acquirer tries to persuade the shareholders
of the target company that the present management of the firm should be ousted
in favor of a slate of directors favorable to the acquirer, thus enabling
the acquiring company to gain control of the company without paying a premium
- Proxy Fight
- Competition of outside group with management for stockholders'
proxies in order to accumulate votes to elect
a new board of directors.
- Proxy statement
- Document intended to provide shareholders
with information necessary to vote in an informed manner on matters to be
brought up at a stockholders' meeting. Includes information on closely held
shares. Information required by the SEC
that must be provided to shareholders
who wish to vote for directors and on other company decisions by proxy.
- Proxy vote
- Vote cast by one person or entity on behalf of another.
- A common law standard against which those investing the money of others
(fiduciaries) are judged.
- Purchase and sale statement. A statement provided by the broker
showing change in the customer's net ledger balance after the offset
of any previously established positions.
- PSA Prepayment
- The Bond Market Trade Association's Mortgaged Asset-Backed Securities Division's
prepayment model based on an assumed
rate of prepayment each month of the then unpaid principal
balance of a pool of mortgages. PSA is
used primarily to derive an implied prepayment speed of new production loans.
100% PSA assumes a prepayment rate of 2% per month in the first month following
the date of issue, increasing at 2% percentage
points per month thereafter until the 30th month. Thereafter, 100%
PSA is the same as 6% CPR (Constant prepayment rate).
- Financial ratio defined as stock price divided by sales over sales growth.
Often used in the valuation of Internet stocks. Related: PREG.
- Public debt
- Issues of debt
by governments to compensate for a lack of tax revenues.
housing authority bond
- Bonds of local public housing agencies that
are secured by the federal government and whose proceeds are used to provide
- A limited partnership with
an unlimited number of partners that is
registered with the SEC and is available
for public trading by broker/dealers
- Public offering
- Used in the context of general equities. Offering
to the investment public, after compliance with registration
requirements of the SEC,
usually by an investment banker or a
syndicate made up of several investment bankers, at a price agreed upon between
the issuer and the investment bankers. Antithesis
of private placement. See: Primary
distribution and secondary
- The price of a new issue of securities
at the time that the issue is offered to the public.
- Public ownership
- The portion of a company's stock that is
held by the public.
- A specific type of municipal bond
used to finance public projects such as roads or government buildings. Interest
on municipal bonds is federal income tax-free.
Securities Administration (PSA)
- The trade association for primary dealers
in US government securities, including MBSs.
- A securities issue
placed with the public through an investment
or commercial bank.
- The Public
- Individual investors who trade
single securities independently or invest
in intermediaries such as mutual funds,
as opposed to professional investors.
Utility Holding Company Act of 1935
- Legislation intended to eliminate many holding company abuses by reorganizing
the financial structures of holding companies in the gas and electric utility
industries and regulating their debt and dividend
- Public warehouse
- Storage facility operated by an independent warehouse company on its own
- Publicly held
- Describes a company whose stock is held by the public, whether individuals
or business entities.
- Assets that can be traded in a public market,
such as the stock market.
- Slang for a trader selling a
position, usually a losing position, as in, "When in doubt, puke
- Used in the context of general equities. See: Cancel.
- The downward reversal of a prolonged upward price trend.
in their horns
- Investors selling off positions after
a stock or bond
market has increased sharply or setting up
to guard against a negative turn of the market.
- Buy; be long;
have an ownership position.
- Method of accounting for a merger that
treats the acquirer as having purchased
the assets and assumed the liabilities
of the acquiree, which are then written
up or down to their respective fair market
values. The difference between the purchase price and the net assets acquired
is attributed to goodwill.
- Used in connection with project financing; an agreement to purchase a specific
amount of project output per period.
- Purchase fee
- A charge assessed by an intermediary,
such as a broker-dealer
or a bank, for assisting in the sale or purchase of a security.
- Purchase fund
- Resembles a sinking fund,
except that money is used to purchase bonds
only if they are selling below their par value.
- Purchase group
- See: Underwriting syndicate
- Purchase loan
- A consumer loan taken to finance a purchase.
- Purchase method
- Accounting for an acquisition using
market value for the consolidation
of the two entities' net assets on the balance
sheet. Generally, depreciation/amortization
will increase for this method (due to the creation of goodwill)
compared to the pooling method
resulting in lower net income.
- A mortgage given by a buyer in lieu of
cash when the buyer is unable to borrow
commercially for the purchase of property.
- Purchase order
- A written order to buy specified goods at
a stipulated price.
- Purchase and
- A method of securities distribution in
which a firm purchases securities from the issuer
for its own account at a stated price and then resells them, as contrasted
with a best-efforts sale.
- The amount of credit available for securities
trading in a margin account, after
taking margin requirements into
power of the dollar
- The amount of goods and services that can be exchanged for a dollar as compared
with amount of a previous time period.
- The notion that the ratio between domestic and foreign price levels should
equal the equilibrium exchange rate
between domestic and foreign currencies.
- Related: Inflation risk
- Pure discount
- A bond that will make only one payment of
principal and interest.
Also called a zero-coupon bond
or a single-payment bond.
- A theory that asserts that forward
rates exclusively represent the expected future rates. In other words,
the entire term structure
reflects the market's expectations of future short-term rates. For example,
an increasing slope to the term
structure implies increasing short-term interest rates. Related: Biased
- Pure index fund
- A portfolio that is managed so as to
perfectly replicate the performance of the market
- Pure monopoly
- A market in which only one firm has total
control over the entire market for a product
due to some sort of barrier to entry for other firms, often a patent
held by the controlling firm.
- Pure play
- A company involved in only one line of business.
yield pickup swap
- Moving to higher yield-bonds.
- Purpose loan
- A loan that is backed by securities
and that is used to buy other securities
under certain government regulations.
- Purpose statement
- A form filed by a borrower that describes the use of a loan
backed by securities, and guarantees that
the funds lent will not be used illegally to buy securities
against Federal Reserve regulations.
- An option granting the right to sell the
contract. Opposite of a call.
- Put bond
- A bond that the holder may choose either
to exchange for par value at some date
or to extend for a given number of years. If the price is above par,
the put is a "premium put."
- Put-call parity
- Applies to derivative products. Option
pricing principle that says, given a stock's
price, a put and call
of the same class must have a static price
relationship because arbitrage opportunities
or activities will always reestablish such a relationship.
- The relationship between the price of a put
and the price of a call on the same underlying
security with the same expiration
date, which prevents arbitrage opportunities.
Holding the underlying stock and buying a
put will deliver
the exact payoff as buying one call and investing
the present value (PV) of the exercise
price. The call value equals C = S + P - PV(k).
- Put-call ratio
- The ratio of the volume of put
options traded to the volume
of call options traded, which is used
as an indicator of investor sentiment (bullish
- Put guarantee
- A bank's letter certifying that the person writing a put
option has sufficient funds in an account to cover the exercise
price if required.
- Put on
- Used for listed equity securities. Trade,
or cross, a block
of stock at the designated price and quantity.
- "Put it on "
- Used for listed equity securities. "Go to the floor to transact."
- Put option
- This security gives investors
the right to sell (or put) a fixed number of
shares at a fixed price within a given period.
An investor, for example, might wish to
have the right to sell shares of a stock
at a certain price by a certain time in order to protect, or hedge,
an existing investment.
- Put an option
- To exercise a put
- "Put pants
on it "
- Used in the context of general equities. "Elaborate on your intentions
or your inquiry," especially with respect
to size, side, and price. See: Open up.
- Put price
- The price at which an asset will be sold
if a put option is exercised.
Also called the strike or exercise
price of a put option.
- Put provision
- Gives the holder of a floating-rate bond
the right to redeem the note at par on
the coupon payment date.
- Put ratio
- A complex options strategy adopted when one believes a stock price will
decline but wants to protect against it rising.
- Put to seller
- Exercise a put option; require that
the option writer to purchase the
stock at the strike
- Put swaption
- A financial instrument giving the buyer the right, or option,
to enter into a swap as a floating-rate
payer. The writer of the swaption
therefore becomes the floating-rate receiver/fixed-rate
- Put up
- See: Print
- Pyramid scheme
- An illegal, fraudulent scheme in which a con artist convinces victims to
invest by promising an extraordinary return
but instead simply uses newly invested funds to pay off any investors
who insist on terminating their investment.