Principal only (PO)

Similar financial terms

Principal value
The amount that the issuer of a bond agrees to repay the bondholder at the maturity date. The principal is also referred to redemption value, maturity value, par value or face value.

Principal Orders
Principal orders refers to hte activity by a broker or dealer who buys or sells for his or her own account and risk.

Principal
The par or face value of a debt instrument

Value additivity principal
Prevails when the value of a whole group of assets exactly equals the sum of the values of the individual assets that make up the group of assets. Stated differently, the principle that the net present value of a set of independent projects is just the sum of the net present values of the individual projects.

Remaining principal balance
The amount of principal dollars remaining to be paid under the mortgage as of a given point in time.

Principal-agent relationship
A situation that can be modeled as one person, an agent, who acts on the behalf of another person, the principal.

Principal of diversification
Highly diversified portfolios will have negligible unsystematic risk. In other words, unsystematic risks disappear in portfolios, and only systematic risks survive.

Notional principal amount
In an interest rate swap, the predetermined dollar principal on which the exchanged interest payments are based.

Original principal balance
The total amount of principal owed on a mortgage before any payments are made.

Corporate sector
Securities issued by U.S. corporations and non-U.S. corporations in the United States. Includes bonds, MTNs, structured notes and commercial paper. The corporate sector is divided into investment grade and non-investment grade sectors by rating agencies such as Moody’s and S&P.

Coupon rate
The interest rate that the issuer of a bond agrees to pay each year to the bondholder. The coupon rate multiplied by the principal of a bond provides the nominal amount of the coupon. For example, a bond with a 5.1% coupon rate and a principal of $1,000 provides an annual interest of $51. The coupon rate is also referred to as the nominal rate.

Coupon
The annual amount of the interest payment made to owners during the term of the bond.

Zero-coupon bonds
The holder of a zero-coupon bond realizes interest by buying the bond at a discount to its principal value. These bonds made their debut in the U.S. bond market in the early 1980s.

Deferred-coupon bonds
Bonds that let the issuer avoid using cash to make interest payments for a specified number of years. There are three types of deferred-coupon structures: (a) deferred-interest bonds, (b) step-up bonds and (c) payment-in-kind bonds.

IPO
Initial Public Offering. The first sale of stock by a private company to the public. IPOs are often smaller, younger companies seeking capital to expand their business. Also known as going public

Oligopoly
A few number of sellers.

Alternative Hypothesis
The hypothesis against which the null hypothesis is tested.

Null hypothesis
In classical hypothesis testing, we take the null hypothesis as true and require the data to provide substantial evidence against it.

Basis point
One hundredth of 1 percent (0.01%). In the bond market, the smallest measure used for quoting yields is a basis point. Each percentage point of yield in bonds equals 100 basis points. Basis points also are used for interest rates. An interest rate of 10% is 50 basis points greater than an interest rate of 10.5%.

Efficient portfolio
A portfolio that provides the superior expected return for a given level of risk

Standard & Poor's 500
The Standard & Poor's 500 Index (S&P 500) is based on a portfolio of 500 different stocks: 400 industrials, 40 utilities, 20 transportation companies, and 40 financial institutions. The weights of the stocks in the portfolio at any given time are proportional to their market capitalizations. The S&P 500 accounts for 80% of the market capitalization of all the stocks listed on the New York Stock Exchange (NYSE).

Standard & Poor's MidCap 400
The Standard & Poor's Midcap 400 Index is somewhat similar to the S&P 500, but is based on a portfolio of 400 stocks that have a lower market capitalization.

AMEX Composite
The American Stock Exchange introduced a new AMEX Composite Index with a new ticker symbol, XAX, on 2 January 1997. The XAX is a market capitalization-weighted, price appreciation index, and replaced the AMEX Market Value Index (XAM) which, since its inception, has been calculated on a "total return basis" to include the reinvestment of dividends paid by AMEX companies. The new AMEX Composite Index is more comparable with other major indexes, which reflect only the price appreciation of their re ...

Zero-coupon interest rate
The interest rate that would be earned on a bond that provides no coupons.

Vega-neutral portfolio
A vega-neutral portfolio has an asset combination which implies a vega of zero.

Spot volatilities
The volatilities used to price a cap when a different volatility is used for each caplet.

Exposure
The maximum loss suffered from a default by a counterparty.

Repo
A repo is a repurchase agreement. A procedure for borrowing money by selling securities to a counterparty and agreeing to buy them back later at a slightly higher price.

Repo rate
The interest rate in a repo transaction.

Zero-beta portfolio
A zero-beta portfolio is constructed to have zero systematic risk, similar to the risk-free asset, that is, having a beta of zero. (i.e. in most cases, we assume the beta of debt to be zero).

Zero-coupon convertible
A zero-coupon bond convertible into the common stock of the issuing company after the stock reaches a certain price, using a put option inherent in the security. It might as well refer to zero-coupon bonds, which are convertible into an interest bearing bond at a certain time before maturity.

Zero-investment portfolio
A zero-investment portfolio consists of zero net value because of a balanced establishment between long and short position, usually in the context of an arbitrage strategy.

Overnight position
Trader's long or short position in a currency at the end of a trading day.

Current portion of long-term dept
Those liabilities that are payable within the next 12 months, including accounts and taxes payable, and the current portion (12 months' payments) of notes payable and current liabilities.

Initial public offering (IPO)
IPO: Initial Public Offering (IPO) is a company's offering of newly issued shares from treasury to the general public. It is generally the first time that a company does so - making the transition from being a closed-door privately operated company to being a publicly traded, highly visible, entity. When doing an IPO, an underwriter, i.e. a stockbroker firm, handles the distribution of shares to the public. Effectively, the brokerage firm subscribes (underwrites) for the shares and then sells th ...

Accounting exposure
The change in the value of a firm's foreign currency denominated accounts due to a change in exchange rates.

Active portfolio strategy
A strategy that uses available information and forecasting techniques to seek a better performance than a portfolio that is simply diversified broadly. Related: passive portfolio strategy.

American Depositary Receipts (ADRs)
Certificates issued by a U.S. depositary bank, representing foreign shares held by the bank, usually by a branch or correspondent in the country of issue. One ADR may represent a portion of a foreign share, one share or a bundle of shares of a foreign corporation. If the ADR's are "sponsored," the corporation provides financial information and other assistance to the bank and may subsidize the administration of the ADRs. "Unsponsored" ADRs do not receive such assistance. ADRs carry the same ...

Well diversified portfolio
A portfolio spread out over many securities in such a way that the weight in any security is small. The risk of a well-diversified portfolio closely approximates the systemic risk of the overall market, the unsystematic risk of each security having been diversified out of the portfolio.

Weighted average portfolio yield
The weighted average of the yield of all the bonds in a portfolio.

Annual report
Yearly record of a publicly held company's financial condition. It includes a description of the firm's operations, its balance sheet and income statement. SEC rules require that it be distributed to all shareholders. A more detailed version is called a 10-K.

Weighted average coupon
The weighted average of the gross interest rate of the mortgages underlying the pool as of the pool issue date, with the balance of each mortgage used as the weighting factor.

Eurodollar demand deposit
Eurodollar demand deposit accounts are not often used or available, as the balances of such accounts would be volatile and the transaction costs incurred in such a service would reduce the overall efficiency and competitiveness of the eurodollar market. It is the latter factor that stimulates interest-rate-conscious corporate treasures and investment agencies to make eurodollar time deposits with banks in offshore centres.

Variable life insurance policy
A whole life insurance policy that provides a death benefit dependent on the insured's portfolio market value at the time of death. Typically the company invests premiums in common stocks, and hence variable life policies are referred to as equity-linked policies.

Translation exposure
Risk of adverse effects on a firm's financial statements that may arise from changes in exchange rates.

Transaction exposure
Risk to a firm with known future cash flows in a foreign currency that arises from possible changes in the exchange rate.

Traditional view (of dividend policy)
An argument that "within reason," investors prefer large dividends to smaller dividends because the dividend is sure but future capital gains are uncertain.

Trading posts
The posts on the floor of a stock exchange where the specialists stand and securities are traded.

Time deposit
Interest-bearing deposit at a savings institution that has a specific maturity.

Tilted portfolio
An indexing strategy that is linked to active management through the emphasis of a particular industry sector, selected performance factors such as earnings momentum, dividend yield, P/E ratio, or selected economic factors such as interest rates and inflation.

Theoretical spot rate curve
A curve derived from theoretical considerations as applied to the yields of actually traded Treasury debt securities because there are no zero-coupon Treasury debt issues with a maturity greater than one year. Like the yield curve, this is a graphical depiction of the term structure of interest rates.

Term repo
A repurchase agreement with a term of more than one day.

Temporal method
Under this currency translation method, the choice of exchange rate depends on the underlying method of valuation. Assets and liabilities valued at historical cost (market cost) are translated at the historical (current market) rate.

Tax differential view ( of dividend policy)
The view that shareholders prefer capital gains over dividends, and hence low payout ratios, because capital gains are effectively taxed at lower rates than dividends.

Take a position
To buy or sell short; that is, to have some amount that is owned or owed on an asset or derivative security.

Support level
A price level below which it is supposedly difficult for a security or market to fall.

Structured portfolio strategy
A strategy in which a portfolio is designed to achieve the performance of some predetermined liabilities that must be paid out in the future.

Spot trade
The purchase and sale of a foreign currency, commodity, or other item for immediate delivery.

Spot rate curve
The graphical depiction of the relationship between the spot rates and maturity.

Spot rate
The theoretical yield on a zero-coupon Treasury security.

Spot price
The current marketprice of the actual physical commodity. Also called cash price.

Spot month
The nearest delivery month on a futures contract.

Spot lending
The origination of mortgages by processing applications taken directly from prospective borrowers.

Spot interest rate
Interest rate fixed today on a loan that is made today.

Spot futures parity theorem
Describes the theoretically correct relationship between spot and futures prices. Violation of the parity relationship gives rise to arbitrage opportunities.

Spot exchange rates
Exchange rate on currency for immediate delivery.

Simple compound growth method
A method of calculating the growth rate by relating the terminal value to the initial value and assuming a constant percentage annual rate of growth between these two values.

Signaling view (on dividend policy)
The argument that dividend changes are important signals to investors about changes in management's expectation about future earnings.

Short position
Occurs when a person sells stocks he or she does not yet own. Shares must be borrowed, before the sale, to make "good delivery" to the buyer. Eventually, the shares must be bought to close out the transaction. This technique is used when an investor believes the stock price will go down.

Security deposit (initial)
Synonymous with the term margin. A cash amount of funds that must be deposited with the broker for each contract as a guarantee of fulfillment of the futures contract. It is not considered as part payment or purchase.

Savings deposits
Accounts that pay interest, typically at below-market interest rates, that do not have a specific maturity, and that usually can be withdrawn upon demand.

Reverse repo
In essence, refers to a repurchase agreement. From the customer's perspective, the customer provides a collateralized loan to the seller.

Reporting currency
The currency in which the parent firm prepares its own financial statements; that is, US dollars for a US company.

Reported factor
The pool factor as reported by the bond buyer for a given amortization period.

Replicating portfolio
A portfolio constructed to match an index or benchmark.

Relative purchasing power parity (RPPP)
Idea that the rate of change in the price level of commodities in one country relative to the price level in another determines the rate of change of the exchange rate between the two countries' currencies.

Realized compound yield
Yield assuming that coupon payments are invested at the going market interest rate at the time of their receipt and rolled over until the bond matures.

Purchasing power parity (PPP)
The notion that the ratio between domestic and foreign price levels should equal the equilibrium exchange rate between domestic and foreign currencies.

Private 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.

Price value of a basis point (PVBP)
Also called the dollar value of a basis point, a measure of the change in the price of the bond if the required yield changes by one basis point.

Present value of growth opportunities (PVGO)
The net present value (NPV) of investments the firm is expected to make in the future.

Posttrade benchmarks
Prices after the decision to trade.

Postponement option
The option of postponing a project without eliminating the possibility of undertaking it.

Post-audit
A set of procedures for evaluating a capital budgeting decision after the fact.

Post
Particular place on the floor of an exchange where transactions in stocks listed on the exchange occur.

Possessions corporation
A type of corporation permitted under the U.S. tax code whereby a branch operation in a U.S. possessions can obtain tax benefits as though it were operating as a foreign subsidiary.

Positive covenant (of a bond)
A bond covenant that specifies certain actions the firm must take. Also called an affirmative covenant.

Positive convexity
A property of option-free bonds whereby the price appreciation for a large upward change in interest rates will be greater (in absolute terms) than the price depreciation for the same downward change in interest rates.

Position diagram
Diagram showing the possible payoffs from a derivative investment.

Position
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 .

Portfolio variance
Weighted sum of the covariance and variances of the assets in a portfolio.

Portfolio turnover rate
For an investment company, an annualized rate found by dividing the lesser of purchases and sales by the average of portfolio assets.

Portfolio separation theorem
An investor's choice of a risky investment portfolio is separate from his attitude towards risk.

Portfolio opportunity set
The expected return/standard deviation pairs of all portfolios that can be constructed from a given set of assets.

Portfolio 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.

Portfolio insurance
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.

Portfolio
A collection of investments, real and/or financial.

Pooling of interests
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.

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 for Ginnie Mae, Fannie Mae, and Freddie Mac(Federal Home Loan Mortgage Corporation) MBSs.

Political risk
Possibility of the expropriation of assets, changes in tax policy, restrictions on the exchange of foreign currency, or other changes in the business climate of a country.

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.

Poison put
A covenant allowing the bondholder to demand repayment in the event of a hostile merger.

Poison pill
Anit-takeover device that gives a prospective acquiree's shareholders 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 agents are instructed to swallow if capture is imminent.

Point 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 solely used to record changes in price.

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.

Perfect 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 in a perfect capital market.

Pension sponsors
Organizations that have established a pension plan.

Pension Benefit Guaranty Corporation (PBGC)
A federal agency that insures the vested benefits of pension plan participants (established in 1974 by the ERISA legislation).

Passive portfolio
A market index portfolio.

Pass-through coupon rate
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.

Passive portfolio strategy
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.

Overreaction hypothesis
The supposition that investors overreact to unanticipated news, resulting in exaggerated movement in stock prices followed by corrections.

Overnight repo
A repurchase agreement with a term of one day.

Optimal portfolio
An efficient portfolio most preferred by an investor because its risk/reward characteristics approximate the investor's utility function. A portfolio that maximizes an investor's preferences with respect to return and risk.

Opportunity set
The possible expected return and standard deviation pairs of all portfolios that can be constructed from a given set of assets.

Opportunity costs
The difference in the performance of an actual investment and a desired investment adjusted for fixed costs and execution costs. The performance differential is a consequence of not being able to implement all desired trades. Most valuable alternative that is given up.

Opportunity cost of capital
Expected return that is foregone by investing in a project rather than in comparable financial securities.

Operating exposure
Degree to which exchange rate changes, in combination with price changes, will alter a company's future operating cash flows.

Open repo
A repo with no definite term. The agreement is made on a day-to-day basis and either the borrower or the lender may choose to terminate. The rate paid is higher than on overnight repo and is subject to adjustment if rates move.

Open position
A net long or short position whose value will change with a change in prices.

Normal portfolio
A customized benchmark that includes all the securities from which a manager normally chooses, weighted as the manager would weight them in a portfolio.

Net present value of growth opportunities
A model valuing a firm in which net present value of new investment opportunities is explicitly examined.

Negotiated certificate of deposit
A large-denomination CD, generally $1MM or more, that can be sold but cannot be cashed in before maturity.

Multiple-issuer pools
Under the GNMA-II program, pools formed through the aggregation of individual issuers' loan packages.

Multinational corporation
A firm that operates in more than one country.

Mortgage-Backed Securities Clearing Corporation
A wholly owned subsidiary of the Midwest Stock Exchange that operates a clearing service for the comparison, netting, and margining of agency-guaranteed MBSs transacted for forward delivery.

Monetary policy
Actions taken by the Board of Governors of the Federal Reserve System to influence the money supply or interest rates.

Modigliani and Miller Proposition II
A proposition by Modigliani and Miller which states that the cost of equity is a linear function of the firm's debt/equity-ratio.

Modigliani and Miller Proposition I
A proposition by Modigliani and Miller which states that a firm cannot change the total value of its outstanding securities by changing its capital structure proportions. Also called the irrelevance proposition.

Modern portfolio theory
Principles underlying the analysis and evaluation of rational portfolio choices based on risk-return trade-offs and efficient diversification.

Minimum-variance portfolio
The portfolio of risky assets with lowest variance.

MBS Depository
A book-entry depository for GNMA securities. The depository was initially operated by MBSCC and is currently in the process of becoming a separately incorporated, participant-owned, limitedpurpose trust company organized under the State of New York Banking Law.

Markowitz efficient set of portfolios
The collection of all efficient portfolios, graphically referred to as the Markowitz efficient frontier.

Markowitz efficient portfolio
Also called a mean-variance efficient portfolio, a portfolio that has the highest expected return at a given level of risk.

Market portfolio
A portfolio consisting of all assets available to investors, with each asset held -in proportion to its market value relative to the total market value of all assets.

Low-coupon bond refunding
Refunding of a low coupon bond with a new, higher coupon bond.

Long position
An options position where a person has executed one or more option trades where the net result is that they are an "owner" or holder of options (i. e. the number of contracts bought exceeds the number of contracts sold). Occurs when an individual owns securities. An owner of 1,000 shares of stock is said to be "Long the stock."

Long coupons
(a) Bonds or notes with a long current maturity. (b) A bond on which one of the coupon periods, usually the first, is longer than the other periods or the standard period.

Liquidity preference hypothesis
The argument that greater liquidity is valuable, all else equal. Also, the theory that the forward rate exceeds expected future interest rates.

Limitation on asset dispositions
A bond covenant that restricts in some way a firm's ability to sell major assets.

Leveraged portfolio
A portfolio that includes risky assets purchased with funds borrowed.

Level-coupon bond
Bond with a stream of coupon payments that are the same throughout the life of the bond.

Lag response of prepayments
There is typically a lag of about three months between the time the weighted average coupon of an MBS pool has crossed the threshold for refinancing and an acceleration in prepayment speed is observed.

CPO
Chief product officer

The 800 pound gorilla
Slang for the most important party to a transaction/or in a group

Incorporation
Incorporation is the process of creating a legal, tax-paying entity. Businesses or companies can be incorporated or unincorporated. If unincorporated, the owner(s) of the business personally take on the assets and liabilities of the business and are personally responsible for all taxes. When incorporating, which is simply a legal registration process, a new, tax-payer is, in essence, created. Incorporating a business is a straightforward process. Lawyers and other agencies usually provide this s ...

Hypothecation
This is the act of pledging a mortgage or lien as collateral against a loan. It refers to the right a lender has to liquidate an asset if necessary to pay a debt. A borrower is said to hypothecate the mortgage.

Bond points
A conventional unit of measure for bond prices set at $10 and equivalent to 1% of the $100 face value of the bond. A price of 80 means that the bond is selling at 80% of its face, or par value.

Cash-flow break-even point
The point below which the firm will need either to obtain additional financing or to liquidate some of its assets to meet its fixed costs.

Certificate of deposit (CD)
Also called a time deposit, this is a certificate issued by a bank or thrift that indicates a specified sum of money has been deposited. A CD bears a maturity date and a specified interest rate, and can be issued in any denomination. The duration can be up to five years.

Changes in Financial Position
Sources of funds internally provided from operations that alter a company's cash flow position: depreciation, deferred taxes, other sources, and capital expenditures.

Clear a position
To eliminate a long or short position, leaving no ownership or obligation.

Collection policy
Procedures followed by a firm in attempting to collect accounts receivables.

Complete portfolio
The entire portfolio, including risky and risk-free assets.

Composition
Voluntary arrangement to restructure a firm's debt, under which payment is reduced.

Compound interest
Interest paid on previously earned interest as well as on the principal.

Compound option
Option on an option.

Compounding
The process of accumulating the time value of money forward in time. For example, interest earned in one period earns additional interest during each subsequent time period.

Compounding frequency
The number of compounding periods in a year. For example, quarterly compounding has a compounding frequency of 4.

Compounding period
The length of the time period (for example, a quarter in the case of quarterly compounding) that elapses before interest compounds.

Continuous compounding
The process of accumulating the time value of money forward in time on a continuous, or instantaneous, basis. Interest is earned continuously, and at each instant, the interest that accrues immediately begins earning interest on itself.

Corporate acquisition
The acquisition of one firm by anther firm.

Corporate bonds
Debt obligations issued by corporations.

Corporate charter
A legal document creating a corporation.

Corporate finance
One of the three areas of the discipline of finance. It deals with the operation of the firm (both the investment decision and the financing decision) from that firm's point of view.

Corporate financial management
The application of financial principals within a corporation to create and maintain value through decision making and proper resource management.

Corporate financial planning
Financial planning conducted by a firm that encompasses preparation of both long- and short-term financial plans.

Corporate processing float
The time that elapses between receipt of payment from a customer and the depositing of the customer's check in the firm's bank account; the time required to process customer payments.

Corporate tax view
The argument that double (corporate and individual) taxation of equity returns makes debt a cheaper financing method.

Corporate taxable equivalent
Rate of return required on a par bond to produce the same after-tax yield to maturity that the premium or discount bond quoted would.

Corporation
A legal "person" that is separate and distinct from its owners. A corporation is allowed to own assets, incur liabilities, and sell securities, among other things.

Coupon equivalent yield
True interest cost expressed on the basis of a 365-day year.

Coupon payments
A bond's interest payments.

Current coupon
A bond selling at or close to par, that is, a bond with a coupon close to the yields currently offered on new bonds of a similar maturity and credit risk.

Dog-and-pony show
Simple, planned presentation, too often dog-and-pony shows insult the intelligence of their audience.

"However, after a dog-and-pony show purporting to consider new missions, Clinton and O'Leary have joined two factions in Congress--unreconstituted Cold Warriors and delegates seeking to preserve weapons spending in their districts--to endorse continuing the same costly, and ecologically disastrous mission despite the lack of a significant nuclear threat."
Positive Alternatives, ...

Corporate Social Responsibility
CSR stands for corporate social responsibility. Some companies defines corporate social responsibility as open and transparent business practices based on ethical values and respect for its stakeholders.

Extrapolative statistical models
Statistical models that apply a formula to historical data and project results for a future period. Such models include the simple linear trend model, the simple exponential model, and the simple autoregressive model.

Fair Credit Reporting Act
A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record.

Earnest money deposit
A deposit made by the potential home buyer to show that he or she is serious about buying the house.

Equal Credit Opportunity Act (ECOA)
A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

Freeports
Areas close to air and shipping ports into which imports are allowed without paying tariffs on the condition that they are exported.

Controlled Foreign Corporation (CFC)
An offshore company which, because of ownership or voting control of U.S. persons, is treated by the IRS as a U.S. tax reporting entity. IRC 951 and 957 collectively define the CFC as one in which a U.S. person owns 10 percent or more of a foreign corporation or in which 50 percent or more of the total voting stock is owned by U.S. shareholders collectively or 10 percent or more of the voting control is owned by U.S. persons.

International Fiscal Police (INTERFIPOL)
The tax crime counterpart to INTERPOL.

International Criminal Police Organization
Commonly known as INTERPOL. The network of multinational law enforcement authorities established to exchange information regarding money laundering and other criminal activities. Currently more than 130 member nations.

The Securities Industry Protection Corporation
Commonly named the SIPC. Provides up to $500,000 insurance protection for your U.S. stock brokerage account.

Pooling
The combination of different loans into standardized or predefined units for trading purposes. This activity increases the homogenization of the underlying collateral. A key benefit of pooling is a diverse, generic security.

Positive Carry
The condition whereby a portfolio after financing considerations still generates a positive income.

Power Cap
A derivative that pays off from the long's perspective in an exponential manner. If the current market price of the benchmark is greater than the strike, then the long receives payment. The payment is determined by raising to the predetermined power the difference between the current price and the strike price. For the case of a 2 power cap, or raised to the second power, the difference between the current market and the strike is squared. For a cubed power cap, the payoff would be the differenc ...

Power Grid™
A matrix which enables an analyst, investor, portfolio or risk manager a quick and incisive look at the option characteristics of a group of countries or corporations. In the case of countries, such as the G-7, the equity, credit and currency markets are comparable in terms of standardized statistics such as volatility. This tool helps to identify imbalances and potential arbitrage situations.

Position liquidation
The closing out of a long position. The term is sometimes used to denote closing out a short position, but this is more often referred to as covering.

Commodity Pool
An investment trust, syndicate or similar form of enterprise operated for the purpose of trading commodity futures or option contracts.

Point-And-Figure
A method of charting which uses prices to form patterns of movement without regard to time. It defines a price trend as a continued movement in one direction until a reversal of a predetermined criterion is met.

Point
A measure of price change equal to 1/100 of one cent in most futures traded in decimal units. In grains, it is of one cent; in T-bonds, it is one percent of par.

Deposit Notes
A term deposit in a bank. Deposit notes, like medium-term notes, may serve as the basis for an equity or currency-linked risk management structure.

Market Index Deposits (MIDs)
Bank certificates of deposit or deposit notes with a return linked to the performance of an index, usually a stock market index.