Financial Dictionary

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ABC Agreement

An agreement between a broker with a seat on the NYSE floor and a firm he or she works in. It dictates that in the case when an employee stops working for the firm, he must transfer the seat to another employee of the firm, keep his seat but purchase another for the company, or […]

Above the Market

An order to buy or sell a security at price higher than the current market price. Stop order, such as “buy stop above”, is usually placed at the price just above the resistance level and is called above the market. Examples of above the market orders are stop limit to buy orders, stop buy orders […]

Absolute Breadth Index

A market momentum indicator used in technical analysis that shows how much volatility and activity is taking place on the market, while dismissing price directions. Absolute breadth index is equal to absolute value of the difference between advancing and declining issues. Large ABI value means increasing volatility and probable significant change in stock prices in […]

Absolute Return Index

A stock index designed to measure absolute returns. The absolute return index is actually a composite index made up of five other indexes. This index is used to compare the absolute returns posted by the hedge fund market as a whole against individual hedge funds. For instance, the hedge fund absolute return index (HFRX) measures […]

Accommodative Monetary Policy

A policy of the national central bank used to boost economic growth by decreasing interest rates on short term loans. Done in order to make money less expensive to borrow and stimulate consumer and business spending. Also known as Easy Monetary Policy.

Account Aggregation

It is an online service which enables combining of different accounts and financial information into one interface, in order to simplify personal finance.

Account Receivable

Refers to money owed by a customer to another entity for goods that has not been paid yet. These goods are provided on credit. Accounts Receivable are usually due within a short period of time, a few days to a year.

Accreted Interest

The difference between par value of a zero coupon security and purchase price. Also called original issue discount. Yearly accreted interest is the amount of accreted interest “earned” each year that you hold a zero coupon investment.

Accrued Interest

The amount of interest that the buyer owes the seller on transactions involving fixed income securities, such as most bonds and notes.

ACH

Automated Clearing House – A method of transferring funds. Member banks wire instructions to the Automated Clearing House which then wires to the appropriate receiving bank.

Acid-Test Ratio (ATR)

It is a ratio of current assets, excluding inventory, to immediate liabilities, indicating whether the firm has enough strength to cover its short-term liabilities without selling its inventory. ATR = (current assets-inventory assets) / current liabilities Inventory is excluded from the total assets because it is one of the least liquid assets. The Acid-Test is […]

Acquisition Loan

A loan given to a company in order to purchase a specific asset, and can be used only for specific purposes and a short period of time. Acquisition loans are invoked when a company is in a need for a particular asset, usually one that has tangible value, but there is not enough liquid capital […]

Active Management

Refers to a portfolio management strategy where the manager makes specific investments with the goal of outperforming a benchmark index. Ideally, the manager selects securities that expose the portfolio to more risk than its index. If the additional risk generates excess return, the active management strategy has succeeded. Active management is the opposite of passive […]

Activist Investor

An individual or group that purchases large numbers of a public company’s shares and/or tries to obtain seats on the company’s board with the goal of effecting a major change in the company. A company can become a target for activist investors if it is mismanaged, has excessive costs, could be run more profitably as […]

Adaptive Price Zone (APZ)

A technical indicator that helps investors identify possible market turning points. The adaptive price zone (APZ) can be especially useful in a sideways-moving market. This indicator attempts to signal significant price movements by using a set of bands based on short-term, double-smoothed exponential moving averages. It can help day traders profit in volatile markets by […]

Additional Paid-In Capital

Represents the difference between Paid in Capital and Capital Stock. The formula is as follows: Additional Paid-In Capital = [(Issue Price – Par Value)] * Number of Shares Issued For example, if 10,000 shares of $20 per value is issued at a price of $22 per share, than the Additional Paid-In Capital is $20,000.

Adhesion Contract

A contract between two parties which does not allow negotiation. Often a contract between salesman and a customer, when the customer is in no position to negotiate. Also known as take-it-or-leave-it contract.

Adjusted Gross Income – AGI

A measure of income used to determine how much of your income is taxable. Adjusted gross income (AGI) is calculated as your gross income from taxable sources minus allowable deductions, such as unreimbursed business expenses, medical expenses, alimony and deductible retirement plan contributions.

Adjusted Present Value

The net present value analysis of an asset if financed solely by equity (present value of un-levered cash flows), plus the present value of any financing decisions (levered cash flows). In other words, the various tax shields provided by the deductibility of interest and the benefits of other investment tax credits are calculated separately. This […]

Admiralty Proceeding

A matter that comes before an admiralty court that involves shipping or a shipping vessel. Admiralty law (also known as maritime law) governs all private legal matters involving events happening in the seas or in bodies of water that have multiple national jurisdictions.

Advance/Decline Line

Refers to a market indicator that measures market breadth. Advance/Decline Line represents the total number of stocks advancing versus total number of stocks declining, and is presented with a line that simulates behavior of the stocks. If it rises, more stocks are rising than declining, and vice versa, if it declines, more stocks are falling […]

Advanced Option

Multiple option strategy. See Spread Order, Straddle, Strangle, Buy/Write, Sell/Write, and Unwind.

Affirmative Obligation

An obligation of NYSE specialists to enter the market on a particular security (either by posting or bidding and ask) when there is not sufficient market demand and supply to efficiently match orders.

After the Bell

Refers to the time period of the day after the close of the regular trading session. It is common practice for some earnings announcements to be reported after the bell. It is also common to see news releases announced after the bell.

After-Acquired Collateral

Collateral for a loan obtained after the borrower has already entered into a loan agreement. The necessity for after-acquired collateral arises when the borrower has insufficient collateral for the loan, but may be acquiring additional property in the near term. This property would serve as after-acquired collateral, and would be automatically collateralized.