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Similar financial terms

Call feature on bonds
A call feature grants the issue the right to retire the debt, fully or partially, before the scheduled maturity date. Inclusion of a call feature benefits bond issuers by allowing them to replace an old bond issue with a lower-interest cost issue if interest rates in the market fall.

Call risk on bonds
Many bonds include a call feature that allows the issuer to redeem or “call” all or part of the issue before the maturity date. The issuer usually retains this right in order to have flexibility to refinance the bond in the future if the market interest rate drops below the coupon rate. This implies three risks from the investor: (a) The cash flow pattern becomes uncertain, (b) The investor becomes exposed to reinvestment risk because the issuer will call the bond when interest rates drop, and ( ...

Hard call protection
Hard call protection usually refers to callable bonds. The protection is the period of time when the bond cannot be called, no matter what the interest rate is. That is, if the interest rate falls sharply, most callable bonds will be called (so the bond issuer can reissue at a lower interest rate). Hard call protection ensures that the holder of the bond can benefit when rates fall.

Call
An option giving the owner of a call the right to buy 100 shares of stock at a specified price by a specified deadline.

Covered calls
A call option that is sold when the seller also owns 100 shares of the underlying stock.

Yield to call
The percentage rate of a bond or note, if you were to buy and hold the security until the call date. This yield is valid only if the security is called prior to maturity. Generally bonds are callable over several years and normally are called at a slight premium. The calculation of yield to call is based on the coupon rate, length of time to the call and the market price.

All equity rate
The discount rate that reflects only the business risks of a project and abstracts from the effects of financing.

All or none
Requirement that none of an order be executed unless all of it can be executed at the specified price.

All-in cost
Total costs, explicit and implicit.

All-or-none underwriting
An arrangement whereby a security issue is canceled if the underwriter is unable to re-sell the entire issue.

Wallflower
Stock that has fallen out of favor with investors. These stocks tends to have a low price-earnings (P/E) ratio.

Wall Street
Generic term for firms that buy, sell, and underwrite securities.

Uncovered call
A short call option position in which the writer does not own shares of underlying stock represented by his option contracts. Also called a "naked" call, it is much riskier for the writer than a covered call, where the writer owns the underlying stock. If the buyer of a call exercises the option to call, the writer would be forced to buy the stock at market price.

Tactical Asset Allocation
Tactical Asset Allocation (TAA) is an asset allocation strategy that allows active departures from the normal asset mix based upon rigorous objective measures of value. Often called active management. It involves forecasting asset returns, volatilities and correlations. The forecasted variables may be functions of fundamental variables, economic variables or even technical variables.

Small issues exemption
Securities issues that involve less than $1.5 million are not required to file a registration statement with the SEC. Instead, they are governed by Regulation A, for which only a brief offering statement is needed.

Small-firm effect
The tendency of small firms (in terms of total market capitalization) to outperform the stock market (consisting of both large and small firms).

Shortfall risk
The risk of falling short of any investment target.

Rally (recovery)
An upward movement of prices. Opposite of reaction.

Put-call parity 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 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).

Provisional call feature
A feature in a convertible issue that allows the issuer to call the issue during the non-call period if the price of the stock reaches a certain level.

Policy asset allocation
A long-term asset allocation method, in which the investor seeks to assess an appropriate long-term "normal" asset mix that represents an ideal blend of controlled risk and enhanced return.

Parallel shift in the yield curve
A shift in the yield curve in which the change in the yield on all maturities is the same number of basis points. In other words, if the 3 month T-bill increases 100 basis points (one percent), then the 6 month, 1 year, 5 year, 10 year, 20 year, and 30 year rates increase by 100 basis points as well.

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 loans.

Operationally efficient market
Also called an internally efficient market, one in which investors can obtain transactions services that reflect the true costs associated with furnishing those services.

Non-parallel shift in the yield curve
A shift in the yield curve in which yields do not change by the same number of basis points for every maturity.

Mutually exclusive investment decisions
Investment decisions in which the acceptance of a project precludes the acceptance of one or more alternative projects.

Margin call
A demand for additional funds because of adverse price movement. Maintenance margin requirement, security deposit maintenance

A rising tide that lifts all boats
Something that benefits all (Former U.S. President John F. Kennedy)

Hardball
A person dealing in a tough manner

Overallotment
More shares (or other instrument) has been alloted to buyers or investors (of an IPO, for example) than what is available.

Balloon maturity
Any large principal payment due at maturity for a bond or loan with or without a a sinking fund requirement.

Borrower fallout
In the mortgage pipeline, the risk that prospective borrowers of loans committed to be closed will elect to withdraw from the contract.

Call an option
To exercise a call option.

Call date
A date before maturity, specified at issuance, when the issuer of a bond may retire part of the bond for a specified call price.

Call money rate
Also called the broker loan rate , the interest rate that banks charge brokers to finance margin loans to investors. The broker charges the investor the call money rate plus a service charge.

Call option
An option contract that gives its holder the right (but not the obligation) to purchase a specified number of shares of the underlying stock at the given strike price, on or before the expiration date of the contract.

Call premium
Premium in price above the par value of a bond or share of preferred stock that must be paid to holders to redeem the bond or share of preferred stock before its scheduled maturity date.

Call price
The price, specified at issuance, at which the issuer of a bond may retire part of the bond at a specified call date.

Call protection
A feature of some callable bonds that establishes an initial period when the bonds may not be called.

Call provision
An embedded option granting a bond issuer the right to buy back all or part of the issue prior to maturity.

Call risk
The combination of cash flow uncertainty and reinvestment risk introduced by a call provision.

Call swaption
A swaption in which the buyer has the right to enter into a swap as a fixed-rate payer. The writer therefore becomes the fixed-rate receiver/floating rate payer.

Callable
A financial security such as a bond with a call option attached to it, i.e., the issuer has the right to call the security.

Capital allocation decision
Allocation of invested funds between risk-free assets versus the risky portfolio.

Chinese wall
Communication barrier between financiers (investment bankers) and traders. This barrier is erected to prevent the sharing of inside information that bankers are likely to have.

Covered call
A short call option position in which the writer owns the number of shares of the underlying stock represented by the option contracts. Covered calls generally limit the risk the writer takes because the stock does not have to be bought at the market price, if the holder of that option decides to exercise it.

Covered call writing strategy
A strategy that involves writing a call option on securities that the investor owns in his or her portfolio. See covered or hedge option strategies.

Fallen angels
Stocks or bonds that were originally considered good investments but which are now considered risky.

Odd-ball
Loner, person or thing left out of the group.

Death Valley Curve
In venture capital, refers to the period before a new company starts generating revenues, when it is difficult for the company to raise money.

Cold-calling
Calling potential new customers in the hope of selling stocks, bonds or other financial products and receiving commissions.

Great call
Used in the context of general equities. Customer does not have a working order in with the trader, but we feel has an interest in participating in a trade being constructed due to one's past inquiry or activity.

Equitize a Margin Call
An event whereby a previously unsatisfied margin call is eliminated by an effective transfer of ownership. In 1998, Long Term Capital Management transfered a portion of ownership to its creditors. In some respects, it was a debt for equity swap.

Call auction
In a call auction participants indicate their willingness to buy or sell units of a security by placing an order to buy or sell some number of units at their buying or selling price. At some point in time the orders collected so far are matched together to form contracts. Different auctions follow different rules about the acceptance of orders, feedback about orders in the system, rules for updating or withdrawing orders, when to do the match, how to do the match, and the form and content of ...