Variance rule
Specifies the permitted minimum or maximum quantity of securities that can be delivered to satisfy a TBA trade. For Ginnie Mae, Fannie Mae, and Feddie Mac pass-through securities, the accepted variance is plus or minus 2.499999 percent per million of the par value of the TBA quantity. |
Similar financial terms
Variance-Covariance matrixThe variance-covariance matrix shows the variances and covariances between a number of different market variables.
Variance minimization approach to tracking
An approach to bond indexing that uses historical data to estimate the variance of the tracking error.
Serial covariance
The covariance between a variable and the lagged value of the variable. In econometrics referred to as autocovariance.
Portfolio variance
Weighted sum of the covariance and variances of the assets in a portfolio.
Minimum-variance portfolio
The portfolio of risky assets with lowest variance.
Minimum-variance frontier
Graph of the lowest possible portfolio variance that is attainable for a given portfolio expected return.
Mean-variance criterion
The selection of portfolios based on the means and variances of their returns. The choice of the higher expected return portfolio for a given level of variance or the lower variance portfolio for a given expected return.
Mean-variance analysis
Evaluation of risky prospects based on the expected value and variance of possible outcomes.
Covariance
A statistical measure of the degree to which random variables move together.
Administrative pricing rules
IRS rules used to allocate income on export sales to a foreign sales corporation.
Tick-test rules
SEC-imposed restrictions on when a short sale may be executed, intended to prevent investors from destabilizing the price of a stock when the market price is falling. A short sale can be made only when either (a) the sale price of the particular stock is higher than the last trade price (referred to as an uptick trade) or (b) if there is no change in the last trade price of the particular stock, the previous trade price must be higher than the trade price that preceded it (referred to as a zero ...
Rule 415
Rule enacted in 1982 that permits firms to file shelf registration statements.
Rule 144a
SEC rule allowing qualified institutional buyers to buy and trade unregistered securities.
Net present value rule
An investment is worth making if it has a positive NPV. Projects with negative NPVs should be rejected.
Multirule system
A technical trading strategy that combines mechanical rules, such as the CRISMA (cumulative volume, relative strength, moving average) Trading System of Pruitt and White.
Rule-of-72
This is a very handy "rule" that lets you mentally calculate how long it takes you to double an investment (i.e. compounding), given a particular interest rate. You divide 72 by the interest rate in order to get the number of years. For example, a 7% interest rate would require just over 10 years for an investment to double in value. A 15% interest rate would take between 4 and 5 years to double, and so on.
Basic IRR rule
Accept the project if IRR is greater than the discount rate; reject the project is lower than the discount rate.
Bayes rule
Treating probability as a logic, Thomas Bayes defined the following:
Pr(A|B)=Pr(B|A)Pr(A)/Pr(B)
For example, probability that the weather was bad given that our friends played soccer can be calculated as: Pr(play soccer in the rain)Pr(rain)/Pr(play soccer).
