Variable price security

Similar financial terms

Stochastic variable
A variable whose future value is uncertain.

Variable rate loan
Loan made at an interest rate that fluctuates based on a base interest rate such as the Prime Rate or LIBOR.

Variable rated demand bond
Variable rated demand bond (VRDB) is a floating rate bond that can be sold back periodically to the issuer.

Variable rate CDs
Short-term certificate of deposits that pay interest periodically on roll dates. On each roll date, the coupon on the CD is adjusted to reflect current market rates.

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.

Variable cost
A cost that is directly proportional to the volume of output produced. When production is zero, the variable cost is equal to zero. A variable is a cost of producing the product which a company sells. It would include such items as materials and labor that go directly into producing the shipped item. Another term for this is direct cost. These costs are usually shown directly under revenues on an income statement as the first costs associated with producing the revenues that are recorded.

Variable annuities
Annuity contracts in which the issuer pays a periodic amount linked to the investment performance of an underlying portfolio.

Variable
A value determined within the context of a model. Also called endogenous variable.

Random variable
A function that assigns a real number to each and every possible outcome of a random experiment.

Normal random variable
A random variable that has a normal probability distribution.

Continuous random variable
A random value that can take any fractional value within specified ranges, as contrasted with a discrete variable.

Variable Price Limit
A price limit schedule, determined by an exchange, that permits variations above or below the normally allowable price movement for any one trading day.

Exercise price
Price at which the holder of an option can buy (call option) or sell (put option) the underlying stock. Also referred to as strike price.

Ask price
The price at which a market maker is prepared to sell a security. Also known as offer price.

Offer price
The price at which a market maker is prepared to sell a security. Also known as ask price.

Bid price
The price at which a market maker is prepared to buy a security.

Settlement price
The average of the prices that a futures contract trades for immediately before the bell signaling the close trading for a day. It is used in mark-to-market calculations.

Transfer price
The price at which one unit of a firm sells goods or services to another unit of the same firm.

Theoretical futures price
Also called the fair price, the equilibrium futures price.

Subscription price
Price that the existing shareholders are allowed to pay for a share of stock in a rights issue.

Strike price
The stated price per share for which underlying stock may be purchased (in the case of a call) or sold (in the case of a put) by the option holder upon exercise of the option contract.

Stated conversion price
At the time of issuance of a convertible security, the price the issuer effectively grants the security holder to purchase the common stock, equal to the par value of the convertible security divided by the conversion ratio.

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

Reverse price risk
A type of mortgage-pipeline risk that occurs when a lender commits to sell loans to an investor at rates prevailing at application but sets the note rates when the borrowers close. The lender is thus exposed to the risk of falling rates.

Put price
The price at which the asset will be sold if a put option is exercised. Also called the strike or exercise price of a put option.

Price-volume relationship
A relationship espoused by some technical analysts that signals continuing rises and falls in security prices based on accompanying changes in volume traded.

Price-specie-flow mechanism
Adjustment mechanism under the classical gold standard whereby disturbances in the price level in one country would 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 back in balance.

Prices
Price of a share of common stock on the date shown. Highs and lows are based on the highest and lowest intraday trading price.

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.

Priced out
The market has already incorporated information, such as a low dividend, into the price of a stock.

Price takers
Individuals who respond to rates and prices by acting as though they have no influence on them.

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 terms being set for secondary market sale. If the general level of rates rises during the production cycle, the lender may have to sell his originated loans at a discount.

Price elasticity
The percentage change in the quantity divided by the percentage change in the price.

Price discovery process
The process of determining the prices of the assets in the marketplace through the interactions of buyers and sellers.

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/sales ratio
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 outstanding.

Price/earnings ratio
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 is 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.

Option price
Also called the option premium, the price paid by the buyer of the options contract for the right to buy or sell a security at a specified price in the future.

Opening price
The range of prices at which the first bids and offers were made or first transactions were completed.

Nominal price
Price quotations on futures for a period in which no actual trading took place.

Minimum price fluctuation
Smallest increment of price movement possible in trading a given contract. Also called point or tick. The zero-beta portfolio with the least risk.

Maximum price fluctuation
The maximum amount the contract price can change, up or down, during one trading session, as fixed by exchange rules in the contract specification.

Marketplace price efficiency
The degree to which the prices of assets reflect the available marketplace information. Marketplace price efficiency is sometimes estimated as the difficulty faced by active management of earning a greater return than passive management would, after adjusting for the risk associated with a strategy and the transactions costs associated with implementing a strategy.

Market prices
The amount of money that a willing buyer pays to acquire something from a willing seller, when a buyer and seller are independent and when such an exchange is motivated by only commercial consideration.

Market price of risk
A measure of the extra return, or risk premium, that investors demand to bear risk. The reward-to-risk ratio of the market portfolio.

Market conversion price
Also called conversion parity price, the price that an investor effectively pays for common stock by purchasing a convertible security and then exercising the conversion option. This price is equal to the market price of the convertible security divided by the conversion ratio.

Low price-earnings ratio effect
The tendency of portfolios of stocks with a low price-earnings ratio to outperform portfolios consisting of stocks with a high price-earnings ratio.

Low price
This is the day's lowest price of a security that has changed hands between a buyer and a seller.

Limit price
Maximum price fluctuation

Law of one price
An economic rule stating that a given security must have the same price regardless of the means by which one goes about creating that security. This implies that if the payoff of a security can be synthetically created by a package of other securities, the price of the package and the price of the security whose payoff it replicates must be equal.

Bargain-purchase-price option
Gives the lessee the option to purchase the asset at a price below fair market value when the lease expires.

Basis price
Price expressed in terms of yield to maturity or annual rate of return.

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.

Clean price
Bond price excluding accrued interest.

Consumer Price Index
The CPI, as it is called, measures the prices of consumer goods and services and is a measure of the pace of U.S. inflation. The U.S. Department of Labor publishes the CPI very month.

Convertible price
The contractually specified price per share at which a convertible security can be converted into shares of common stock.

Daily price limit
The level within many commodity, futures, and options markets are allowed to rise or fall in a day. Exchanges usually impose a daily price limit on each contract.

Equilibrium price
The price when the supply of goods matches demand.

Equilibrium market price of risk
The slope of the capital market line (CML). Since the CML represents the expected return offered to compensate for a perceived level of risk, each point on the line is a balanced market condition, or equilibrium. The slope of the line determines the additional expected return needed to compensate for a unit change in risk. The equation of the CML is defined by the Capital Asset Pricing Model (CAPM).

Known price item
When a good whose price is widely known by members of the public is priced to attract customers.

Commodity Price Index
Index or average, which may be weighted, of selected commodity prices, intended to be representative of the markets in general or a specific subset of commodities (for example, grains or livestock).

Price discrimination
Price discrimination occurs whenever a firm charges differential prices across customers that are not related to differences in production and distribution costs. Thus, discriminating firms seek to exploit the perceived consumer surplus and maximize producer surplus.

Underlying security
For options it is the security subject to being purchased or sold upon exercise of an option contract. For example, Deutsche Bank stock is the underlying security to Deutsche Bank options.

For depository receipts it is the class, series and number of the foreign shares represented by the depository receipt.

Security selection decision
Choosing the particular securities to include in a portfolio.

Security market plane
A plane that shows the equilibrium between expected return and the beta coefficient of more than one factor.

Security market line
Line representing the relationship between expected return and market risk.

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.

Security characteristic line
A plot of the excess return on a security over the risk-free rate as a function of the excess return on the market.

Security
Piece of paper that proves ownership of stocks, bonds and other investments.

Primitive security
An instrument such as a stock or bond for which payments depend only on the financial status of the issuer.

Mortgage pass-through security
Also called a passthrough, a security created when one or more mortgage holders form a collection (pool) of mortgages sells shares or participation certificates in the pool. The cash flow from the collateral pool is "passed through" to the security holder as monthly payments of principal, interest, and prepayments. This is the predominant type of MBS traded in the secondary market.

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

Convertible security
A security that can be converted into common stock at the option of the security holder, including convertible bonds and convertible preferred stock.

Cabinet security
A stock or bond listed on a major exchange with low daily traded volume.