Red herring

Similar financial terms

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.

Adjusted R-Squared
A goodness-of-fit measure in multiple regression analysis that penalizes additional explanatory variables by using a degrees of freedom adjustment in estimating the error variance.

Irredeemable bonds
Bonds with a fixed maturity but not subject to prior redemption; bonds that cannot be called for redemption by the issuer (payer or obligor) before maturity. They should not be confused with perpetual bonds or intermediate bonds. UK Irredeemable (undated) bonds have no final maturity date. They are callable by the government at any time within 3 months. As their coupons range between 2.5% and 4% they are unlikely to be called. War loan, issued by the UK government during the First World War ...

Creditors, short
This is all current liabilities payable on demand or within one year of the Balance Sheet date. For Banks this also includes short term bank liabilities such as deposits.

Creditors, long
This is all liabilities payable more than one year after the Balance Sheet date. This includes provisions and deferred taxation, loans and debt, including convertible debt, repayable more than one year after the Balance Sheet date.

Convertible preferred stock
Stock that can be converted to common stock if the investor wishes, at a set price per share or by a specified deadline.

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

Deferred assets
Payments that will be assigned as expenses in a later period, but that are paid in advance and temporarily set up as assets on the balance sheet.

Deferred credits
Deferred income listed in the liability section of the balance sheet.

Adjustable rate preferred stock (ARPS)
Publicly traded issues that may be collateralized by mortgages and MBSs.

Unsecured debt
Debt that does not identify specific assets that can be taken over by the debtholder in case of default.

Unleveraged required return
The required return on an investment when the investment is financed entirely by equity (i.e. no debt).

Uncovered put
A short put option position in which the writer does not have a corresponding short stock position or has not deposited, in a cash account, cash or cash equivalents equal to the exercise value of the put. Also called "naked" puts, the writer has pledged to buy the stock at a certain price if the buyer of the options chooses to exercise it. The nature of uncovered options means the writer's risk is unlimited.

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.

Unbiased predictor
A theory that spot prices at some future date will be equal to today's forward rates.

Trade credit
Credit granted by a firm to another firm for the purchase of goods or services.

Tax-deferred retirement plans
Employer-sponsored and other plans that allow contributions and earnings to be made and accumulate tax-free until they are paid out as benefits.

Structured settlement
An agreement in settlement of a lawsuit involving specific payments made over a period of time. Property and casualty insurance companies often buy life insurance products to pay the costs of such settlements.

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.

Structured debt
Debt that has been customized for the buyer, often by incorporating unusual options.

Structured arbitrage transaction
A self-funding, self-hedged series of transactions that usually utilize mortgage securities as the primary assets.

Single-premium deferred annuity
An insurance policy bought by the sponsor of a pension plan for a single premium. In return, the insurance company agrees to make lifelong payments to the employee (the policyholder) when that employee retires.

Secured debt
Debt that, in the event of default, has first claim on specified assets.

R squared
The square of the correlation coefficient is the proportion of the variability in one series that can be explained by the variability of one or more other series.

Revolving line of credit
A bank line of credit on which the customer pays a commitment fee and can take down and repay funds according to his needs. Normally the line involves a firm commitment from the bank for a period of several years.

Revolving credit agreement
A legal commitment wherein a bank promises to lend a customer up to a specified maximum amount during a specified period.

Retail credit
Credit granted by a firm to consumers for the purchase of goods or services.

Required yield
Generally referring to bonds, the yield required by the marketplace to match available returns for financial instruments with comparable risk.

Required return
The minimum expected return you would require to be willing to purchase the asset, that is, to make the investment.

Required reserves
The dollar amounts based on reserve ratios that banks are required to keep on deposit at a Federal Reserve Bank.

Registered trader
A member of the exchange who executes frequent trades for his or her own account.

Registered representative
A person registered with the US CFTC who is employed by, and soliciting business for, a commission house or futures commission merchant.

Registered bond
A bond whose issuer records ownership and interest payments. Differs from a bearer bond which is traded without record of ownership and whose possession is the only evidence of ownership.

Redemption cushion
The percentage by which the conversion value of a convertible security exceeds the redemption price (strike price).

Redemption charge
The commission charged by a mutual fund when redeeming shares. For example, a 2% redemption charge (also called a "back end load") on the sale of shares valued at €1000 will result in payment of €980 (or 98% of the value) to the investor. This charge may decrease or be eliminated as shares are held for longer time periods.

Redeemable
Eligible for redemption under the terms of the indenture.

Preferred stock agreement
A contract for preferred stock.

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. The stock shares characteristics of both common stock and debt.

Preferred shares
Preferred shares give investors a fixed dividend from the company's earnings. And more importantly: preferred shareholders get paid before common shareholders.

Preferred habitat theory
A biased expectations theory that believes the term structure reflects the expectation of the future path of interest rates as well as risk premium. However, the theory rejects the assertion that the risk premium must rise uniformly with maturity. Instead, to the extent that the demand for and supply of funds does not match for a given maturity range, some participants will shift to maturities showing the opposite imbalances. As long as such investors are compensated by an appropriate risk p ...

Preferred 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.

Optimal redemption provision
Provision of a bond indenture that governs the issuer's ability to call the bonds for redemption prior to their scheduled maturity date.

Nonredeemable
Not permitted, under the terms of indenture, to be redeemed.

Non-insured plans
Defined benefit pension plans that are not guaranteed by life insurance products.

Non-cumulative preferred stock
Preferred stock whose holders must forgo dividend payments when the company misses a dividend payment.

Monthly income preferred security (MIP)
Preferred stock issued by a subsidiary located in a tax haven. The subsidiary relends the money to the parent.

Market segmentation or preferred habitat theory
A biased expectations theory that asserts that the shape of the yield curve is determined by the supply of and demand for securities within each maturity sector.

Manufactured housing securities (MHSs)
Loans on manufactured homes - that is, factory-built or prefabricated housing, including mobile homes.

Mandatory redemption schedule
Schedule according to which sinking fund payments must be made.

Line of credit
An informal arrangement between a bank and a customer establishing a maximum loan balance that the bank will permit the borrower to maintain.

Leveraged required return
The required return on an investment when the investment is financed partially by debt.

Letter of credit (L/C)
A form of guarantee of payment issued by a bank used to guarantee the payment of interest and repayment of principal on bond issues.

Whose ox gets gored
...who will be harmed by this plan

Best-interests-of-creditors test
The requirement that a claim holder voting against a plan of reorganization must receive at least as much as he would have if the debtor were liquidated.

Brokered market
A market where an intermediary offers search services to buyers and sellers.

Comparative credit analysis
A method of analysis in which a firm is compared to others that have a desired target debt rating in order to infer an appropriate financial ratio target.

Consumer credit
Credit granted by a firm to consumers for the purchase of goods or services. Also called retail credit.

Contingent deferred sales charge (CDSC)
The formal name for the load of a back-end load fund.

Convertible exchangeable preferred stock
Convertible preferred stock that may be exchanged, at the issuer's option, into convertible bonds that have the same conversion features as the convertible preferred stock.

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.

Covered interest arbitrage
A portfolio manager invests dollars in an instrument denominated in a foreign currency and hedges his resulting foreign exchange risk by selling the proceeds of the investment forward for dollars.

Covered or hedge option strategies
Strategies that involve a position in an option as well as a position in the underlying stock, designed so that one position will help offset any unfavorable price movement in the other, including covered call writing and protective put buying.

Covered Put
A put option position in which the option writer also is short the corresponding stock or has deposited, in a cash account, cash or cash equivalents equal to the exercise of the option. This limits the option writer's risk because money or stock is already set aside. In the event that the holder of the put option decides to exercise the option, the writer's risk is more limited than it would be on an uncovered or naked put option.

Credible signal
A signal that provides accurate information; a signal that can be distinguish among senders.

Credit analysis
The process of analyzing information on companies and bond issues in order to estimate the ability of the issuer to live up to its future contractual obligations.

Credit enhancement
Purchase of the financial guarantee of a large insurance company to raise funds.

Credit period
The length of time for which the customer is granted credit.

Credit risk
The risk that an issuer of debt securities or a borrower may default on his obligations, or that the payment may not be made on a negotiable instrument.

Credit scoring
A statistical technique wherein several financial characteristics are combined to form a single score to represent a customer's creditworthiness.

Crediting rate
The interest rate offered on an investment type insurance policy.

Creditor
Lender of money.

Cumulative preferred stock
Preferred stock whose dividends accrue, should the issuer not make timely dividend payments.

Hired guns
Lawyers, accountants and other business strategy consultants

Deferred charge
An expenditure treated as an asset that carries forward until it becomes pertinent to the business at hand, e.g., the underwriting fees on a corporate bond issue, which the corporation capitalizes as a deferred charge and then amortizes over the life of the bond issue.

Blank Check Preferred Stock
This is stock over which the board of directors has broad authority to determine voting, dividend, conversion, and other rights. While it can be used to enable a company to meet changing financial needs, its most important use is to implement poison pills or to prevent takeovers by placement of this stock with friendly investors.

Separate Trading of Registered Interest (STRIPS)
Separate Trading of Registered Interest and Principal Securities (STRIPS) are securities that have their periodic interest payments separated from the final maturity payment and the two cash flows are sold to different investors.

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.

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.

Layered Trusts
Trusts placed in series where the beneficiary of the first trust is the second trust; used for privacy.

Redemption Fee
A charge assessed against an invetor for redeeming shares or interests in a fund. Often this charge is used for early or premature withdrawals. This feature is more common for funds investing in illiquid securities or emerging market funds and annuity products.

Sacred Cow
An asset, position, or project which is considered protected by management. Often this investment is presented as "off-limits" or non-negotiable.

Preferred Stock
An (equity) security which has a priority relative to ordinary common shares for dividends and return of par amount in the event of a corporate dissolution. Often, preferred shares are nonvoting equity interests. However, a default in the payment of that issue's preferred dividend or other covenant breach may temporarily give the preferred holders voting powers. Preferred shares can have convertible, cumulative, participating, voting, or other special features.