Initial Claims

A measure of the number of jobless claims filed by individuals seeking to receive state jobless benefits. This number is watched closely by financial analysts because it provides insight into the direction of the economy. Higher initial claims correlate with a weakening economy.

401(k) Plan

A qualified plan established by employers to which eligible employees may make salary deferral (salary reduction) contributions on a post-tax and/or pretax basis. Employers offering a 401(k) plan may make matching or non-elective contributions to the plan on behalf of eligible employees and may also add a profit-sharing feature to the plan. Earnings accrue on a tax-deferred basis.



60-Plus Delinquencies

Home loans that are more than 60 days past due on their monthly mortgage payments. 60-plus delinquency rates are typically expressed as a percentage of a group of loans written within a specified time period, such as a given calendar year. Another common grouping method are the interest rates for the pool of loans that make up a mortgage-backed security (MBS) or other securitized mortgage product.

60-plus delinquencies are less than 90 days past due, and have not yet entered the foreclosure process - loan in the latter status are expressed separately. The 60-plus rate may be split into one for prime loans and subprime loans. The 60-plus rate on subprime loans can be expected to be higher than for prime. Also, 60-Plus rates are often published separately for fixed-rate versus adjustable-rate loans

Absolute Breadth Index - ABI

A market indicator used to determine volatility levels in the market without factoring in price direction. It is calculated by taking the absolute value of the difference between the number of advancing issues and the number of declining issues. Typically, large numbers suggest volatility is increasing, which is likely to cause significant changes in stock prices in the coming weeks.

Account Freeze

An action taken by a bank or brokerage that prevents any transactions from occurring in the account. Typically, any open transactions will be cancelled, and checks presented on a frozen account will not be honored.

Ad Valorem Tax

A tax based on the assessed value of real estate or personal property. Ad valorem taxes can be property tax or even duty on imported items. Property ad valorem taxes are the major source of revenue for state and municipal governments. Municipal property ad valorem taxes are also known as "property taxes".

Affluenza

A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses". Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements. People said to be affected by affluenza typically find that the very economic success they have been so vigorously chasing ends up leaving them feeling unfulfilled, and wishing for yet more wealth.

Alligator Spread

An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market movements. An alligator spread is usually used in the options market to describe a collection of put and call options that may not be profitable.

American Clean Energy And Security Act Of 2009

A piece of legislation that was created in an attempt to establish an economy-wide climate and energy policy to help address the issue of climate change. The U.S House of Representatives passed the act on June 26, 2009, by a vote of 219 to 212.

American Recovery and Reinvestment Act

An act initiated and signed by U.S. President Barack Obama in February, 2009. The act was set into motion as a response to the weak economic state facing the country. The American Recovery and Reinvestment Act was created to stimulate the economy through individual and corporate tax cuts, leniency in unemployment benefits, increased domestic spending, and increased social welfare funding.

Angel Bond

Investment-grade bonds that pay a lower interest rate because of the issuing company's high credit rating. Angel bonds are the opposite of fallen angels, which are bonds that have been given a "junk" rating, and are therefore much more risky.

Asset-Light Debt

A corporate debt that has less than the usual amount of collateral, which is normally 30% or more of the company's value. With asset-light debt, that number is much lower, with many companies' collateralized debt percentage falling far below the previous standards. It can sometimes even be at zero.

Baby Bells

A common nickname given to the U.S. regional telephone companies that were formed from the breakup of AT&T ("Ma Bell") in 1984. Baby Bells were created in accordance with antitrust legislation, which is designed to create more competition within the industry.

Back-End Load

A fee (sales charge or load) that investors pay when selling mutual fund shares within a specified number of years, usually five to 10 years. The fee amounts to a percentage of the value of the share being sold. The fee percentage is highest in the first year and decreases yearly until the specified holding period ends, at which time it drops to zero.

Also known as a "contingent deferred sales charge or load."

Beacon Score

A number that is generated by the Equifax Credit Bureau to rank the credit-worthiness of individuals. Beacon scores are credit scores, which are determined through a complex algorithm. These numbers tell the lender how likely the chance is that the borrower will repay the loan. When NextGen FICO Scores started being used the Beacon score was replaced with the Pinnacle Score.

Mathematical criteria can include late payments, current debts, length of time account has been open, types of credit and new applications for credit.

Bear Hug

An offer made by one company to buy the shares of another for a much higher per-share price than what that company is worth. A bear hug offer is usually made when there is doubt that the target company's management will be willing to sell.

Bear Market

A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining. As investors anticipate losses in a bear market and selling continues, pessimism only grows. Although figures can vary, for many, a downturn of 20% or more in multiple broad market indexes, such as the Dow Jones Industrial Average (DJIA) or Standard & Poor's 500 Index (S&P 500), over at least a two-month period, is considered an entry into a bear market.

Black Swan

An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult to predict. This term was popularized by Nassim Nicholas Taleb, a finance professor and former Wall Street trader.

Blue Collar Trader

A trader who has another source of income, and does not trade as a means, but rather as a savings plan, or bonus, etc. This person typically does not trade in large volumes, leaning more towards trying to earn smaller returns. Such a trader is not significantly experienced or knowledgeable in the field, and will therefore tend to stick to less risky investments.

Bond Circular

A standardized legal document that contains an abbreviated version of the relevant terms from the prospectus of a new bond issue. The bond circular is made available to prospective investors and contains basic information including: issuer, amount of the issue, coupon, use of proceeds and final legal maturity of the bond.

Boston Snow Indicator

A market theory that states that a white Christmas in Boston will result in rising stock prices for the following year. For example, in Christmas of 1995, Boston received snow and the following year, the S&P 500 increased by more than 20%..

Bottom Fisher

An investor who looks for bargains among stocks whose prices have recently dropped dramatically. The investor believes that a price drop is temporary or is an overreaction to recent bad news and a recovery is soon to follow.

Breaking The Buck

A buzz phrase referring to the decline in net asset value (NAV) of a money market fund below $1. Breaking the buck can happen when the money market fund's investment income does not cover operating expenses or investment losses. This normally occurs when interest rates drop to very low levels, or the fund has used leverage to create capital risk in otherwise risk free instruments.

Breakup Fee

A common fee used in takeover agreements if the seller backs out of a deal to sell to the purchaser. A breakup fee, or termination fee, is required to compensate the prospective purchaser for the time and resources used to facilitate the deal. Breakup fees are normally 1-3% of the deal's value.

Bull Bond

A bond that is likely to increase in value in a bull market, when interest rates are declining. Most bonds tend to increase in value when interest rates decline, but bull bonds refer to types of bonds that do especially well in this environment.

Bullet Dodging

A form of option granting in which the award of options is delayed until a piece of bad news becomes known to the public and the stock's price falls. Because an option's strike price is often determined by what the underlying stock's price is on the grant date, waiting for the stock price to drop allows option holders to gain some additional benefit in the form of a lowered strike price.

Burgernomics

An economics term made popular by the Big Mac Index published by The Economist. Burgernomics makes reference to the idea of the Big Mac PPP, which examines the purchasing power parity between nations, using the cost of a Big Mac as the benchmark.

Cable

Slang used among forex traders referring to the exchange rate between the U.S. dollar and the British pound sterling. Because it is the norm in forex for most major currencies to be quoted against the U.S. dollar on a regular basis, "cable" is a commonly used term.

Cafeteria Plan

An employee benefit plan that allows staff to choose from a variety of benefits to formulate a plan that best suits their needs. Cafeteria plan options may include health and accident insurance, cash benefits, tax advantages and/or retirement plan contributions.

Also known as "cafeteria employee benefit plan" or "flexible benefit plan".

Calendar Year

The one-year period that begins on January 1 and ends on December 31, based on the commonly used Gregorian calendar. For individual and corporate taxation purposes, a calendar year will generally comprise all of the year's financial information used to calculate income tax payable.

Call Ratio Backspread

A very bullish investment strategy that combines options to create a spread with limited loss potential and mixed profit potential. It is generally created by selling one call option and then using the collected premium to purchase a greater number of call options at a higher strike price. This strategy has potentially unlimited upside profit because the trader is holding more long call options than short ones

Cap and Trade

A regulatory system that is meant to reduce certain kinds of emissions and pollution and to provide companies with a profit incentive to reduce their pollution levels faster than their peers. Under a cap-and-trade program, a limit (or "cap") on certain types of emissions or pollutions is set, and companies are permitted to sell (or "trade") the unused potion of their limits to other companies that are struggling to comply.

Caput

A type of exotic option that consists of a call option on a put option. Essentially, a caput gives the holder the right to purchase another option. This type of option is also known as a "compound option".

Cash For Clunkers

A program that allows car owners to trade in their old, less fuel-efficient vehicles in exchange for more fuel-efficient vehicles. Although commonly referred to as "cash for clunkers", the formal name for the program in the U.S. is the Car Allowance Rebate System (CARS). The CARS program gives people who qualify a potential credit of up to $4,500 depending on the vehicle purchased.

Charging Order

A court-authorized right granted to a judgment creditor to attach distributions made from a business entity, such as a limited partnership (LP) or limited liability company (LLC), to a debtor who is a partner of the LP or a member of the LLC.

The charging order is usually limited to the dollar amount of the judgment and is akin to a garnishment of wages or income. It does not give the creditor management rights in the entity, nor can the creditor interfere in the management of the entity to which the debtor is a partner/member.

Checkless Society

A hypothetical term that embraces the notion of a world that processes all financial transactions electronically. This would eliminate the need for any kind of paper transaction, as everything would be done via computer. A checkless society is the ultimate goal of many major banks and lending institutions.

Chill

Special restrictions that can be placed on a given security by the Depository Trust Company (DTC). Chill restrictions are intended to limit the potential for problems within the financial marketplace, and can be placed on a security for various reasons.

Christmas Tree

An options trading strategy that is generally achieved by purchasing one call option and selling two other call options at different strike prices. When drawn structurally, the strike price of the long option is located below the two successively higher written calls and loosely resembles a Christmas tree.

Coiled Market

A type of option that gives the holder the right, but not the obligation, to purchase or sell an interest rate floor at a specific price during a predetermined period of time. A floortion combines the benefits of both an interest rate floor and an option. The only upfront cost to the holder is the premium the holder has to pay to purchase the option.

Commodity Index

An index that tracks a basket of commodities to measure their performance. These indexes are often traded on exchanges, allowing investors to gain easier access to commodities without having to enter the futures market. The value of these indexes fluctuates based on their underlying commodities, and this value can be traded on an exchange in much the same way as stock index futures.

Conforming Loan

A mortgage that is equal to or less than the dollar amount established by the conforming loan limit set by Fannie Mae and Freddie Mac's Federal regulator, The Office of Federal Housing Enterprise Oversight (OFHEO) and meets the funding criteria of Freddie Mac and Fannie Mae.

Consolidated Tax Return

A comprehensive tax return that encompasses a group of smaller entities. Consolidated tax returns are often filed by business conglomerates on behalf of all subsidiary firms. They are filed both for simplicity and to allow the parent organization to receive tax benefits that may otherwise be forfeited. However, conglomerates do not need to file this type of return if they choose not to do so.

Conversion Arbitrage

An options trading strategy employed to exploit the inefficiencies that exist in the pricing of options. Conversion arbitrage is a risk-neutral strategy, whereby the trader buys a put and writes a covered call (on a stock that the trader already owns) with identical strike prices and expiration dates. A trader will profit through a conversion arbitrage strategy when the call option is overpriced.

Convexity

A measure of the curvature in the relationship between bond prices and bond yields that demonstrates how the duration of a bond changes as the interest rate changes. Convexity is used as a risk-management tool, and helps to measure and manage the amount of market risk to which a portfolio of bonds is exposed.

Cooler

A slang term used to describe someone considered to have bad luck with stock picking. Coolers are usually blamed for the poor performance of a stock after they have either purchased or recommended those shares.

Core Inflation

A measure of inflation that excludes certain items that face volatile price movements. Core inflation eliminates products that can have temporary price shocks because these shocks can diverge from the overall trend of inflation and give a false measure of inflation.

Corporate Refinancing

The process through which a company reorganizes its debt obligations by replacing or restructuring existing debts. Refinancing may also involve issuing equity to pay off a percentage of debt. Debt is replaced or refunded by a company with money that is raised by issuing or creating other borrowing. In restructuring, a company works with its creditor to change the terms of a loan; these terms can include the reduction of interest rates, the improvement of covenants or the extension of the loan's terms.

Country Club Billing

A now-defunct billing system used by credit card companies up until the 1970s. Country club billing includes copies of the original sales drafts with each monthly statement sent to customers. This was done to provide proof of each purchase that was recorded on the card.

Cover On A Bounce

The covering of a short position after it has reached and bounced off a level of support. This strategy waits for the price to move to a support level, instead of selling before, to see if the level will hold - because the trader will benefit if it doesn't hold. Once the security bounces, it is clear the security will have trouble moving down further, so the trade covers the short position.

Cover On Approach

The closing out of a profitable short position as the security moves toward a key level of support. As a security moves closer to a level of support the chances of it falling any further weaken because buying has come into the security at the support level, which keeps the price from a continued downward move and limits the continued success of the short trade.

Cramdown

A bankruptcy concept that is often employed to obtain a Chapter 11 bankruptcy reorganization plan while there are still objections from one or more creditors. Cramdown allows the bankruptcy courts to modify loan terms subject to certain conditions in an attempt to have all parties come out better than they would have without such modifications. The conditions are mainly that the new terms are fair and equitable to all parties involved.

Cramer Bounce

The sudden overnight appreciation of a stock's price after it has been recommended by Jim Cramer on his CNBC show, "Mad Money". This increase in price can be attributed to investors who buy stocks after seeing Cramer's recommendations.

Credit Cliff

A slang term referring to the compounding of a company's credit deterioration caused by provisions, such as financial covenants, or events that trigger a change in the company's credit rating. These can put pressure on the company's liquidity or its business to a material extent.

Cross-Listing

The listing of a company's common shares on a different exchange than its primary and original stock exchange. In order to be approved for cross-listing, the company in question must meet the same requirements as any other listed member of the exchange, such as basic requirements for the share count, accounting policies, filing requirements for financial reports and company revenues.

Cross Rate

The currency exchange rate between two currencies, both of which are not the official currencies of the country in which the exchange rate quote is given in. This phrase is also sometimes used to refer to currency quotes which do not involve the U.S. dollar, regardless of which country the quote is provided in.

Curb Trading

Trading that occurs outside of general market regulations. Curb trading commonly occurs through computers or telephones after the official exchanges have closed.

Also known as "kerb trading".

Currency Basket

A selected group of currencies in which the weighted average is used as a measure of the value or the amount of an obligation. A currency basket functions as a benchmark for regional currency movements - its composition and weighting depends on its purpose.

Currency Carry Trade

A strategy in which an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase a different currency yielding a higher interest rate. A trader using this strategy attempts to capture the difference between the rates, which can often be substantial, depending on the amount of leverage the investor chooses to use.

Currency Risk

A form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged.

Dollar Roll

A type of repurchase transaction in the mortgage pass-through securities market in which the buy side trade counterparty of a "to be announced" (TBA) trade agrees to a sell off the same TBA trade in the current month and to a buy back the same trade in a future month at a lower price.

In a dollar roll, the buy side trade counterparty gets to invest the funds that otherwise would have been required to settle the buy trade in the current month until the agreed upon future buy-back. The sell side trade counterparty benefits by not having to deliver the pass-through securities (which they might otherwise have shorted or committed to another trade) in the current month.

Deep Out Of The Money

An option with a strike price that is significantly above (for a call option) or below (for a put option) the market price of the underlying asset. To be deemed deep out of the money, an option's strike price should be at least one strike price below/above the market price of the underlying asset's option chain.

Debt Deflation

A situation in which the collateral used to secure a loan (or another form of debt) decreases in value. This can be detrimental because it may lead to a restructuring of the loan agreement or the loan itself.
Also known as "worst deflation" and "collateral deflation".

Discouraged Worker

A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment in the last four weeks. Discouraged workers have usually given up on searching for a job because they found no suitable employment options and/or were met with lack of success when applying.

Disclosable Event

A corporate event that is disclosed to shareholders. Securites law states that all material information be disclosed. When this occurs it is said to be a disclosable event. Non-disclosable events - in which material information is withheld from shareholders - go against securities law as enforced by the Securities and Exchange Commission (SEC).

Disinflation

A slowing in the rate of price inflation. Disinflation is used to describe instances when the inflation rate has reduced marginally over the short term. Although it is used to describe periods of slowing inflation, disinflation should not be confused with deflation. .

Dividend Arbitrage

An options trading strategy that involves purchasing put options and an equivalent amount of underlying stock before the ex-dividend date and then exercising the put after collecting the dividend. When used on a security with low volatility (causing lower options premiums) and a high dividend, dividend arbitrage can create profits while assuming very low to no risk.

Double No-Touch Option

A type of exotic option that gives an investor an agreed upon payout if the price of the underlying asset does not reach or surpass one of two predetermined barrier levels. An investor using this type of option pays a premium to his or her broker and in turn receives the right to choose the position of the barriers, the time to expiration, and the payout to be received if the price fails to breach either barrier. With this type of option, the maximum possible loss is just the cost of setting up the option.

A double no-touch option is the opposite of a double one-touch option.

Downswing

A reduction in overall level of economic or business activity. Downswings may be caused by fluctuations in the business cycle or a variety of macroeconomic events. Downswing may also refer to the downward movement in the value of a security following a period of stable or rising prices.

Dove

An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that inflation and its negative effects will have a minimal impact on society. This term is derived from the docile and placid nature of the bird of the same name, and is the opposite of the term "hawk".

Early Withdrawal

The removal of funds from a fixed-term investment before the maturity date, or the removal of funds from a tax-deferred investment account or retirement savings account, such as an IRA or 401(k) before a prescribed time. Early withdrawal could be anything earlier than the account owner's attainment of a prescribed minimum age requirement, or the maturity of a fixed-term investment, such as a certificate of deposit (CD).

Echo Bubble

A post-bubble rally that becomes another, smaller bubble. The echo bubble usually occurs in the sector in which the preceding bubble was most prominent, but the echo is less dramatic.

Economic Blight

The visible and physical decline of a property, neighborhood or city due to a combination of economic downturns, residents and businesses leaving the area, and the cost of maintaining the quality of older structures. These factors tend to feed on themselves, with each one contributing to an increase in the occurrence of the others.

Economic Collapse

A complete breakdown of a national, regional or territorial economy. An economic collapse is essentially a severe version of an economic depression, where an economy is in complete distress for months, years or possibly even decades.

A total economic collapse is characterized by economic depression, civil unrest and highly increased poverty levels. Hyperinflation, stagflation and financial-market crashes can all be causes. Government intervention is usually necessary to bring an economy back from collapse, but can often be slow to remedy the problem.

Elves

A slang term for the technical analysts who appeared on the PBS television show Wall Street Week, which aired from 1970 to 2005. The elves attempted to predict the direction of the market in the coming months; and gained popularity do to their inability to make accurate predictions.

Enterprise Value - EV

A measure of a company's value, often used as an alternative to straightforward market capitalization. Enterprise value is calculated as market cap plus debt, minority interest and preferred shares, minus total cash and cash equivalents.

Escrow

A financial instrument held by a third party on behalf of the other two parties in a transaction. The funds are held by the escrow service until it receives the appropriate written or oral instructions or until obligations have been fulfilled. Securities, funds and other assets can be held in escrow.

European Monetary System - EMS

A 1979 arrangement between several European countries which links their currencies in an attempt to stabilize the exchange rate. This system was succeeded by the European Monetary Union (EMU), an institution of the European Union (EU), which established a common currency called the euro.

Evergreen Loan

A loan that does not require the principal amount to be paid off within a specified period of time. Evergreen loans are usually in the form of a short-term line of credit that is routinely renewed leaving the principal remaining outstanding for the long term.

Also called a "standing" or "revolving loan".

Exchange Rate Mechanism - ERM

An exchange rate mechanism is based on the concept of fixed currency exchange rate margins. However, there is variability of the currency exchange rates within the confines of the upper and lower end of the margins. This currency exchange rate mechanism is also commonly called a semi-pegged currency system.

Exotic Currency

A foreign exchange term for a thinly traded currency. Exotic currencies are illiquid, lack market depth and trade at low volumes. Trading an exotic currency can be expensive, as the bid-ask spread is usually large.

Exotic Option

An option that differs from common American or European options in terms of the underlying asset or the calculation of how or when the investor receives a certain payoff. These options are more complex than options that trade on an exchange, and generally trade over the counter.

Fed Model

A model thought to be used by the Federal Reserve that hypothesizes a relationship between long-term Treasury notes and the market return of equities. Many security analysts use this model in valuing equities.

Federal Open Market Committee - FOMC

The branch of the Federal Reserve Board that determines the direction of monetary policy. The FOMC is composed of the board of governors, which has seven members, and five reserve bank presidents. The president of the Federal Reserve Bank of New York serves continuously, while the presidents of the other reserve banks rotate their service of one-year terms.

Financial Stability Plan - FSP

A plan unveiled by the Obama administration in April, 2009, that was designed to stabilize the U.S. economy during the financial crisis of 2008-2009. The Financial Stability Plan (FSP) promised to take measures to solidify the American banking system, securities markets, mortgage and consumer credit markets. This somewhat controversial plan came as a response to the 2008 fallout in the mortgage and financial markets.

Fiscal Year-End

The completion of a one-year, or 12-month, accounting period. A firm's fiscal year-end does not necessarily need to fall on December 31, and can actually fall on any day throughout the year.

Flash Trading

A controversial computerized trading practice offered by some stock exchanges. Flash trading uses highly sophisticated high-speed computer technology to allow traders to view orders from other market participants fractions of a second before others in the marketplace. This gives flash traders the advantage of being able to gauge supply and demand and recognize movements in market sentiment before other traders.

Flash orders are also known as "step-up orders" or "pre-routing orders".

Flat On A Failure

Closing out a position and taking profits when the security in question moves up to a target level but fails to break through it. This can be seen as a method of extracting what profit a trade has been able to produce so far because the trader believes that further movement past the target level is unlikely.

Foam The Runway

A term indicating the last-minute infusion of cash into a company about to go bankrupt. Airports foam runways prior to an imminent crash landing to help reduce friction and sparks. Just as foaming the runway is a last stand against a horrible crash landing, a company obtaining a loan to stay in business is a last stand against going under.

"Foam the runway" is also a general statement in business, which refers to preparing for a potential disaster.

Foreign Currency Option Trading

A security that allows currency traders to realize gains without having to purchase the underlying currency pair. By incorporating leverage, forex options magnify returns and set a firm downside risk level. Alternatively, currency trading options can be held alongside the underlying forex pair to lock in profits or minimize risk. In this case, limiting the upside potential is usually necessary for capping the downside as well.

Forex (FX)

The market in which currencies are traded. The forex market is the largest, most liquid market in the world with an average traded value that exceeds $1.9 trillion per day and includes all of the currencies in the world.

Forex Hedge

A transaction implemented by a forex trader to protect an existing or anticipated position from an unwanted move in exchange rates. By using a forex hedge properly, a trader who is long a foreign currency pair can be protected from downside risk, while the trader who is short a foreign currency pair can protect against upside risk

Forex Training

A form of instruction or mentorship that provides information on forex trading tactics, methods and successful practices. Forex training acts as a guide for the retail forex trader, providing insight into successful strategies, signals and systems as well as other general information on the foreign exchange market.

Freeze Out

An action taken by a firm's majority shareholders that pressures minority holders to sell their stakes in the company. A variety of maneuvers may be considered freeze-out tactics, such as the termination of minority shareholder employees or the refusal to declare dividends.

Also referred to as a "squeeze out"

Fugit

The amount of time that an investor believes is left until it would no longer be beneficial to exercise an option early, or the likelihood that an American-style option will be used before it expires. The fugit concept was named and created by Mark Garman, a Berkeley professor who studied the optimal time for exercising an American option using binomial trees.

Full Faith And Credit

A phrase used to describe the unconditional guarantee or commitment by one entity to back the interest and principal of another entity's debt. This full faith and credit commitment is typically employed by a government to help lower the borrowing costs of a smaller, less stable government or a government-sponsored agency. When this occurs, the smaller government or agency takes on the backer's credit quality.

Fundamental Analysis

A method of evaluating a security that entails attempting to measure its intrinsic value by examining related economic, financial and other qualitative and quantitative factors. Fundamental analysts attempt to study everything that can affect the security's value, including macroeconomic factors (like the overall economy and industry conditions) and company-specific factors (like financial condition and management).

The end goal of performing fundamental analysis is to produce a value that an investor can compare with the security's current price, with the aim of figuring out what sort of position to take with that security (underpriced = buy, overpriced = sell or short).

This method of security analysis is considered to be the opposite of technical analysis.

Funemployment

Unemployed individuals who decide to enjoy the free time that unemployment provides. The term was coined during the financial crisis of 2008-2009 to describe those who had recently lost their jobs and were choosing to use their newfound freedom to travel, go to the beach, be physically active and generally enjoy themselves until they found a new job.

Fungibility

A good or asset's interchangeability with other individual goods/assets of the same type. Assets possessing this property simplify the exchange/trade process, as interchangeability assumes that everyone values all goods of that class as the same.

Futures

A financial contract obligating the buyer to purchase an asset (or the seller to sell an asset), such as a physical commodity or a financial instrument, at a predetermined future date and price. Futures contracts detail the quality and quantity of the underlying asset; they are standardized to facilitate trading on a futures exchange. Some futures contracts may call for physical delivery of the asset, while others are settled in cash. The futures markets are characterized by the ability to use very high leverage relative to stock markets.

Futures can be used either to hedge or to speculate on the price movement of the underlying asset. For example, a producer of corn could use futures to lock in a certain price and reduce risk (hedge). On the other hand, anybody could speculate on the price movement of corn by going long or short using futures.

Fuzzy Logic

A mathematical logic that attempts to solve problems by assigning values to an imprecise spectrum of data in order to arrive at the most accurate conclusion possible. Fuzzy logic is designed to solve problems in the same way that humans do: by considering all available information and making the best possible decision given the input.

Garbage Fees

Unnecessary fees tacked onto mortgage closing costs by lenders to pad the lender's profit. Garbage fees may have names such as "administrative fee", "application fee", appraisal review fee", "courier fee", "document preparation fee", "document review fee","loan origination fee" and "settlement fee". These charges are usually either blatantly illegitimate or are typical costs of business but either way, they are dramatically exaggerated before being passed on to the customer.

Garbatrage

An increase in price and trading volume in a particular sector of the economy that occurs as a result of a recent takeover, which initiates a change in sentiment toward the sector.

Garbatrage is also known as "rumortrage".

General Motors (GM) Indicator

An indicator based on the theory that the performance of U.S. automaker General Motors (GM) is a pre-cursor to the performance of the U.S. economy and stock market. The GM Indicator relies on the assumption that when people are confident and making money one of the first things they would do is buy a new car.

Gift Causa Mortis

A gift to be given at a later date in anticipation of the giver's death. If the giver dies of an ailment differing from the expected one, the gift is not effective. The gift may be revoked by the giver on any date prior to the expected date as long as no property, whether concrete or symbolic, has been delivered to the recipient.

Gift Of Equity

The sale of a home made to a family member or someone with whom the seller has had a previous relationship, at a price below the current market value. The difference between the actual sales price and the market value of the home is called the gift of equity. Most lenders allow the gift to count as a down payment on the home.

Gift Splitting

A taxation rule that allows a married couple to split a gift's total value as if each contributed half of the amount. Gift splitting

Gold Bug

An individual that is bullish on gold. Gold bugs believe that gold is still a stable source of wealth like it was during the years of the gold standard international currency system. A gold bug invests in gold for what he or she (perceives) as financial security in the event of a currency devaluation, and often also believes that the price of gold will continue to rise in the future. The term also refers to analysts who consistently recommend gold buys.

Gold Fix

The twice-daily act of setting gold prices by the five members of the London gold pool. This rate is used as a benchmark for pricing the majority of global gold products and derivatives.

Golden Coffin

A lucrative death-benefit policy given to top executives. A golden coffin is a death-benefit package awarded to the heirs of high ranking executives who die while still employed with a company. Benefits awarded can include unearned salary, accelerated stock options and insurance proceeds.

Graveyard Market

The period near the end of a prolonged bear market. In a graveyard market, long-time investors have taken large losses, while new investors prefer to stay liquid by sitting on the sidelines and keeping their money in cash or cash-equivalent securities until market conditions improve.

Greater Fool Theory

A theory that states it is possible to make money by buying securities, whether overvalued or not, and later selling them at a profit because there will always be someone (a bigger or greater fool) who is willing to pay the higher price.

Halloween Massacre

Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, announced that all income trusts would be taxed in a similar manner as corporations at a rate over 30% on taxable income, causing unit holders' values to decrease dramatically virtually overnight.

Hardship Withdrawal

An emergency withdrawal from a retirement plan that may be subject to certain tax or account penalties. In the United States, funds withdrawn prior to the age of 59.5 are typically subject to a 10% Internal Revenue Service (IRS) early withdrawal penalty, as well as standard income taxes.

Headline Inflation

The raw inflation figure as reported through the Consumer Price Index (CPI) that is released monthly by the Bureau of Labor Statistics. The CPI calculates the cost to purchase a fixed basket of goods as a way of determining how much inflation is occurring in the broad economy. The CPI uses a base year and indexes current year prices based on the base year's values.

The headline figure is not adjusted for seasonality or for the often volatile elements of food and energy prices, which are removed in the Core CPI. Headline inflation will usually be quoted on an annualized basis, meaning that a monthly headline figure of 4% inflation equates to a monthly rate that, if repeated for 12 months, would create 4% inflation for the year. Comparisons of headline inflation are typically made on a year-over-year basis.

Also known as "top-line inflation".

Hedge Fund

An aggressively managed portfolio of investments that uses advanced investment strategies such as leveraged, long, short and derivative positions in both domestic and international markets with the goal of generating high returns (either in an absolute sense or over a specified market benchmark).

Legally, hedge funds are most often set up as private investment partnerships that are open to a limited number of investors and require a very large initial minimum investment. Investments in hedge funds are illiquid as they often require investors keep their money in the fund for at least one year.

Himalayan Option

An exotic equity option belonging to a class known as mountain range options. Himalayan options are based on a basket of underlying securities, as opposed to the typical listed (vanilla) option, which has one underlying security.

Hobby Loss

A non-deductible loss incurred as a result of doing an activity for personal pleasure instead of for profit. A taxpayer cannot deduct the hobby loss as a business loss. A "hobby loss rule" is used to determine whether an activity is a hobby or a business.

Hockey Stick Bidding

An anti-competitive bidding practice in which a market participant (or trader) offers an extremely high price for a small portion of a good.

The name derives from the price curve of this practice, which resembles a hockey stick.

Holographic Will

A holographic will is a will that is handwritten and signed by the testator (the person who makes the will). Some states do not recognize holographic wills and those that do require the will to meet certain requirements. The minimal requirements that must be met for a holographic will to be recognized are:

a. Proof that the testator actually wrote the will
b. Proof that the testator had the mental capacity to write the will
c. The will must contain the testator's wish to disburse personal property to beneficiaries.

Hot Waitress Economic Index

An index that indicates the state of the economy by measuring the number of attractive people working as waiters/waitresses. According to the hot waitress index, the higher the number of good looking servers, the weaker the current state of the economy. It is assumed that attractive individuals do not tend to have trouble finding high-paying jobs during good economics times. During poor economic times, these jobs will be more difficult to find and therefore more attractive people will be forced to work in lower paying jobs such as being waiters/waitresses.

In-Service Withdrawal

A withdrawal made from a qualified plan account before the holder experiences a triggering event. A triggering event, such as reaching a certain age, or leaving an employer, is often needed to be able to withdraw funds from a plan, such as a 401(k).

Indemnity Insurance

An insurance policy that aims to protect business owners and employees when they are found to be at fault for a specific event such as misjudgment. Typical examples of indemnity insurance include professional insurance policies such as malpractice insurance, and errors and omissions insurance, which indemnify professionals against claims made in the workplace.

Independent 401(k)

A 401(k) plan set up for an individual running a sole proprietorship or a small business with a spouse/immediate family member. Plan contribution limits for the individual are equal to a typical company-sponsored 401(k), but the sole proprietor can also make an employer contribution to an independent 401(k), thereby raising the total contribution allowed.

The independent 401(k) may also be called a "solo 401(k)" or an "indie K".

Initial Claims

A measure of the number of jobless claims filed by individuals seeking to receive state jobless benefits. This number is watched closely by financial analysts because it provides insight into the direction of the economy. Higher initial claims correlate with a weakening economy.

Inside Day

A candlestick formation that occurs when the entire daily price range for a given security falls within the price range of the previous day. Inside day often refers to all versions of the harami pattern and can be very useful for spotting changes in the direction of a trend.

Intrapreneur

An inside entrepreneur, or an entrepreneur within a large firm, who uses entrepreneurial skills without incurring the risks associated with those activities. Intrapreneurs are usually employees within a company who are assigned a special idea or project, and are instructed to develop the project like an entrepreneur would. Intrapreneurs usually have the resources and capabilities of the firm at their disposal. The intrapreneur's main job is to turn that special idea or project into a profitable venture for the company.

IPO ETF

An exchange-traded fund that focuses on stocks that have recently held an initial public offering (IPO). The underlying indexes tracked by IPO ETFs vary from one fund manager to another, but index IPO ETFs are usually passively managed and contain equities that have recently been offered to the public. By investing in an IPO ETF, investors hope to gain exposure to IPOs during their initial introduction to the market, while diversifying their investment across a pool of IPOs from varying sectors and industries.

January Effect

A general increase in stock prices during the month of January. This rally is generally attributed to an increase in buying, which follows the drop in price that typically happens in December when investors, seeking to create tax losses to offset capital gains, prompt a sell-off.

Junk Fees

Nebulous charges assessed at the closing of a mortgage that go to the originator or lender. These fees are hidden in the mortgage documents and are usually assessed as raw dollars rather than "points" or a percentage of the loan. Junk fees may or may not pay for an actual service to the borrower, but they typically are not known to the borrower prior to signing. Some common fees that may be considered junk fees include settlement fees, sign-up fees, underwriting fees, funding fees, translation fees and messenger fees.

Also known as "padding fees" or "garbage fees".

Legacy Hedge

A hedge position held by a company that's held for an extended period of time. Commodity companies, such as gold and oil producers, will often have legacy hedges on its reserves, which give the companies a more stable stream of revenue as the hedge provides price guarantees.

Leprechaun Leader

A corporate manager or an executive who, like the fabled Irish elf, is a mischievous and elusive creature said to possess buried treasures of money and gold.

Also spelled "Lepre-con Leader".

Leveraged Loan

Leveraged loans are loans extended to companies or individuals that already have considerable amounts of debt. Lenders consider these loans to carry a higher risk of default and, as a result, a leveraged loan is more costly to the borrower.

Life-Cycle Fund

A special category of balanced, or asset-allocation, mutual fund in which the proportional representation of an asset class in a fund's portfolio is automatically adjusted during the course of the fund's time horizon. The automatic portfolio adjustment run from a position of higher risk to one of lower risk as the investor ages and/or nears retirement.

Also referred to as "age-based funds".

Liar Loan

A category of mortgages known as low-documentation or no-documentation mortgages that have been abused to the point where the loans are sometimes referred to as liar loans. On certain low-documentation loan programs, such as stated income/stated asset (SISA) loans, income and assets are simply stated on the loan application. On other loan programs, such as no income/no asset (NINA) loans, no income and assets are given on the loan application form. These loan programs open the door for unethical behavior by unscrupulous borrowers and lenders.

Loan Modification

A modification to an existing loan made by a lender in response to a borrower's long-term inability to repay the loan. Loan modifications typically involve a reduction in the interest rate on the loan, an extension of the length of the term of the loan, a different type of loan or any combination of the three. A lender might be open to modifying a loan because the cost of doing so is less than the cost of default.

Long Squeeze

A long squeeze, which involves a single stock, occurs when a sudden drop in price incites further selling, pressuring long holders of the stock into selling their shares to protect against a dramatic loss. Less popular than its more famous brother, the short squeeze, long squeezes are most apt to be found in smaller, more illiquid stocks, where a few determined or panicking shareholders can create unwarranted price volatility in a short period of time.

Love Money

Seed money or capital given by family or friends to an entrepreneur to start a business. The decision to lend money and the terms of the agreement are usually based on qualitative factors and the relationship between the two parties, rather than on a formulaic risk analysis.

Macroprudential Analysis

A method of economic analysis that evaluates the health, soundness and vulnerabilities of a financial system. Macroprudential analysis looks at the health of the underlying financial institutions in the system and performs stress tests and scenario analysis to help determine the system's sensitivity to economic shocks. Macroeconomic and market data are also reviewed to determine the health of the current system. The analysis also focuses on qualitative data related to financial institutions' frameworks and the regulatory environment to get an additional sense of the strength and vulnerabilities in the system.

Market Identifier Code - MIC

A four-character code used to identify stock markets and other trading exchanges within global trading and referencing computer systems. The first letter of any MIC is "X", followed by a three-digit alphanumeric code for the market in which a trade takes place. The code is used to process and clear trades, and is being pushed toward global acceptance as the securities industries move toward straight-through-processing (STP). The London Stock Exchange uses MICs as part of its SEDOL security-identifying systems, which is an alternative to the U.S.-based CUSIP identifying system.

Market Performance Committee

A committee, consisting of members and allied members of the New York Stock Exchange (NYSE) who monitor the specialists' effectiveness in assuring an orderly market for their stocks. The Market Performance Committee has the additional responsibility of assigning new or existing issues to the specialists.

McMansion

A slang term that describes a large, opulent house that may be generic in style and represents a good value for a homebuyer in terms of its size. This type of home is built to provide middle and/or upper middle class homeowners with the luxurious housing experience that was previously only available to high-net-worth individuals.

The McMansion term is as a play on McDonald's fast food restaurants, as these homes also represent the pervasiveness and excessive consumption that critics often associate with Mcdonald's.

Men's Underwear Index

An unconventional measure of how well the economy is doing based on sales of men's underwear. The reasoning behind this measure assumes that men view underwear as a necessity (not a luxury item), so sales of this product should be steady - except during severe economic downturns, when men will wait longer to buy new underwear. The notable decrease in underwear sales is said to reflect the poor overall state of the economy. Conversely, when underwear sales pick up, the economy is considered to be improving.

Mini-Lot

A currency trading lot size that is 1/10 the size of the standard lot of 100,000 units. One pip of a currency pair based in USD is equal to $1 when trading a mini-lot, compared to $10 for a standard-lot trade. Mini-lots are available to trade if you open a mini-account with a forex dealer.

Mini Forex Account

A type of forex account that allows the trader to enter positions that are one-tenth the size of the standard lot of 100,000 units. A one-pip change in a currency pair (based in U.S. dollars), is equal to $1 when trading a mini lot, compared to $10 for a standard-lot trade. Mini lots are available to trade if you open a mini account with a forex dealer.

Naked Shorting

The illegal practice of short selling shares that have not been affirmatively determined to exist. Ordinarily, traders must borrow a stock, or determine that it can be borrowed, before they sell it short. But due to various loopholes in the rules and discrepancies between paper and electronic trading systems, naked shorting continues to happen.

National Bank

In the United States, a commercial bank chartered by the comptroller of the currency of the U.S. Treasury. A national bank functions as a member bank of the Federal Reserve in the capacity of investing member of its district Federal Reserve Bank. These banks may facilitate the auction process of U.S. Treasury bonds and must be members of the Federal Deposit Insurance Corporation (FDIC). Internationally, "national bank" is synonymous with "central bank," or a bank controlled by the national government of a country. Central banks set monetary policies within national economies.

Natural Gas ETF

Exchange-traded funds (ETFs) that invest in natural gas futures and other products in an effort to closely track the price of delivered natural gas at market. Natural gas ETFs are set up as commodity pools, which issue limited partnership interests as opposed to shares. The fund may also invest in heating oil, crude oil and gasoline futures.

Net Operating Loss - NOL

A period in which a company's allowable tax deductions are greater than its taxable income, resulting in a negative taxable income. This generally occurs when a company has incurred more expenses than revenues during the period. The net operating loss for the company can generally be used to recover past tax payments or reduce future tax payments. The reasoning behind this is that because corporations are required to pay taxes when it earns money, it deserves some form of tax relief when it loses money.

New York Dollar

The buying power of a U.S. dollar in the city of New York. The New York dollar is calculated by subtracting the additional cost of living in New York, and then adding back the additional income residents tend to command as a result. Once calculated, the remaining amount is a rough estimate of what your dollar is worth in this very expensive city.

No Documentation Mortgage - No Doc

A type of reduced-documentation-required mortgage program in which income and assets aren't disclosed on the loan application and employment isn't verified. However, a credit check is typically required as lenders are counting on the fact that the borrower has a good credit history. No doc mortgages usually fall into the Alt-A classification, and tend to carry a higher interest rate and require a higher down-payment than a prime mortgage.

Non-Qualifying Investment

An investment that does not qualify for any level of tax-deferred or tax-exempt status. Investments of this sort are made with after-tax money. They are purchased and held in tax-deferred accounts, plans or trusts. Returns from these investments are taxed on an annual basis.

Nonpersonal Time Deposit

Time deposit accounts held by corporate bank customers that pay a fixed amount of interest for a specified time period. Money may not be withdrawn without advance notice at the risk of incurring an early withdrawal penalty.

Notching

When rating agencies reduce their ratings on structured financial collateral based on ratings from another agency without rating the collateral themselves. Notching arises when collateral, such as mortgage backed securities (MBS), and other asset backed securities (ABS) are included within investment vehicles that are rated, such as collateralized debt obligations (CDOs).

October Effect

The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological expectation rather than an actual phenomenon. Most statistics go against the theory.

Open-End Credit

A pre-approved loan between a financial institution and borrower that may be used repeatedly up to a certain limit and can subsequently be paid back prior to payments coming due. The pre-approved amount will be set out in the agreement between the lender and the borrower.

Open-end credit is also refered to as a "line of credit" or "revolving line of credit".

Organization for Economic Cooperation and Development - OECD

A group of 30 member countries that discuss and develop economic and social policy. OECD countries are democratic countries that support free market economies.

Overreaction

A market hypothesis stating that investors and traders react disproportionately to new information about a given security. This will cause the security's price to change dramatically, so that the price will not fully reflect the security's true value immediately following the event. Typically, the price swing from overreaction is not long lasting, as the stock price will tend to return back to its true value over time.

Overseas Private Investment Corporation - OPIC

A U.S. government agency that assists businesses looking to invest abroad. Operated out of Washington, D.C., the Overseas Private Investment Corporation (OPIC) helps companies investing overseas analyze and manage risks and tries to promote development in emerging markets in addition to supporting domestic foreign policies.

Passive Income

Earnings an individual derives from a rental property, limited partnership or other enterprise in which he or she is not actively involved. As with non-passive income, passive income is usually taxable; however it is often treated differently by the Internal Revenue Service (IRS).

Pay Yourself First

A phrase commonly used in personal finance and retirement planning literature that means to automatically route your specified savings contribution from each paycheck at the time it is received.

Because the savings contributions are automatically routed from each paycheck to your investment account, this process is said to be "paying yourself first"; in other words, paying yourself before you begin paying your monthly living expenses and making discretionary purchases.

Pent Up Demand

When the demand for a service or product is unusually strong. Pent up demand is used by economists to describe the general public's strong return to consumerism following a period of decreased spending.

Phantom Gain

A situation that arises when a gain on an investment is offset by a loss in the same investment, which usually comes from an income tax provision. Phantom gains are named as such because there is no actual true return, although it may initially seem otherwise.

Phased Retirement

A broad range of employment arrangements that allow an employee who is approaching retirement age to continue working with a reduced workload, and eventually transition from full-time work to full-time retirement. Phased retirement may include a pre-retirement, gradual reduction in hours (or days) of work and/or post-retirement, part-time work for pensioners who wish to remain employed.

Part-time, seasonal and temporary work or job-sharing are all work arrangements that can be a form of phased retirement.

Physical Option

An option that is based on a physical asset. Physical options give the owner the right to buy or sell physical assets at a predetermined price and date. They are called "physical" because they are based on assets such as currencies, Treasury debts and commodities, rather than stocks, futures and indexes.

Piercing Pattern

A technical trading signal that is marked by a closing down day with a good-sized trading range, followed by a trading gap (drop) lower the following day that covers at least half of the upward length of the previous day's real body (the range between the opening and closing prices), and then closes up for the day. A piercing pattern often signals the end of a small to moderate downward trend.

Pink Slip Party

A party that brings together professionals and recruiters who have recently been laid off. Pink slip parties are usually held during tough economic times, when unemployment is rising and businesses are closing. Often, these casual gatherings will raise money for charity, and provide job search advice to the attendees.

Pip

The smallest price change that a given exchange rate can make. Since most major currency pairs are priced to four decimal places, the smallest change is that of the last decimal point - for most pairs this is the equivalent of 1/100th of one percent, or one basis point.

Plain Vanilla

The most basic or standard version of a financial instrument, usually options, bonds, futures and swaps. Plain vanilla is the opposite of an exotic instrument, which alters the components of a traditional financial instrument, resulting in a more complex security.

PLUS Loan

A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, the parent borrows money on the student's behalf. To be eligible for a PLUS Loan, a student must be enrolled at least part-time, and the parent has to pass a standard credit check.

Poison Pill

A strategy used by corporations to discourage hostile takeovers. With a poison pill, the target company attempts to make its stock less attractive to the acquirer. There are two types of poison pills:

1. A "flip-in" allows existing shareholders (except the acquirer) to buy more shares at a discount.

2. A "flip-over" allows stockholders to buy the acquirer's shares at a discounted price after the merger.

Political Futures

An investment wherein the payout comes after an election, based on the winning party. Investors pay a flat fee to purchase the future and will receive $100 if the candidate they chose wins, and $0 in the event of a loss. The price of the future fluctuates throughout the election, based on candidate support.

Ponzi Scheme

A fraudulent investing scam promising high rates of return with little risk to investors. The Ponzi scheme generates returns for older investors by acquiring new investors. This scam actually yields the promised returns to earlier investors, as long as there are more new investors. These schemes usually collapse on themselves when the new investments stop.

Pre-Encashable Deposit

A deposit made in a term deposit or CD that allows the account holder to withdraw funds without penalty to the principal. A pre-encashable deposit is a popular investment vehicle for individuals looking for full flexibility while saving in a guaranteed account.

Predatory Lending

Unscrupulous actions carried out by a lender to entice, induce and/or assist a borrower in taking a mortgage that carries high fees, a high interest rate, strips the borrower of equity, or places the borrower in a lower credit rated loan to the benefit of the lender. As with most things of a dishonest nature, new and different predatory lending schemes frequently arise.

Presidential Election Cycle (Theory)

A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a new U.S. president. According to this theory, after the first year, the market improves until the cycle begins again with the next presidential electionA theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a new U.S. president. According to this theory, after the first year, the market improves until the cycle begins again with the next presidential election.

Private Equity

Equity capital that is not quoted on a public exchange. Private equity consists of investors and funds that make investments directly into private companies or conduct buyouts of public companies that result in a delisting of public equity. Capital for private equity is raised from retail and institutional investors, and can be used to fund new technologies, expand working capital within an owned company, make acquisitions, or to strengthen a balance sheet.

The majority of private equity consists of institutional investors and accredited investors who can commit large sums of money for long periods of time. Private equity investments often demand long holding periods to allow for a turnaround of a distressed company or a liquidity event such as an IPO or sale to a public company.

Private Placement

The sale of securities to a relatively small number of select investors as a way of raising capital. Investors involved in private placements are usually large banks, mutual funds, insurance companies and pension funds. Private placement is the opposite of a public issue, in which securities are made available for sale on the open market.

Product Recall

The process of retrieving defective goods from consumers and providing those consumers with compensation. Recalls often occur as a result of safety concerns over a manufacturing defect in a product that may harm its user.

Pump Priming

The action taken to stimulate an economy, usually during a recessionary period, through government spending, and interest rate and tax reductions. The term "pump priming" is derived from the operation of older pumps; a suction valve had to be primed with water so that the pump would function properly. As with these pumps, pump priming assumes that the economy must be primed to function properly once again. In this regard, government spending is assumed to stimulate private spending, which in turn should lead to economic expansion.

Recession Proof

A term used to describe an asset, company, industry or other entity that is believed to be economically resistant to the outcomes of a recession. Oftentimes, recession-proof stocks are added to many investment portfolios during times of economic decline, which may be the onset of a recession. Securities that are believed to be recession proof often have a negative beta values, which would indicate an inverse relationship to the greater market.

Recessionista

A person who is able to remain stylish during times of economic hardship. A recessionista can shop on a limited budget and still manage to be up to date on the most current fashions. A recessionista does not let a bad economy, inflation, or a strong recession damage his or her wardrobe and opts to search for sales and shop at thrifty discount stores instead.

Recession Rich

A slang term used to describe an individual who manages to do well financially, relative to broader population, during a recession. Someone that is recession rich does not necessarily need to be considered wealthy, but rather has managed to maintain a good standard of living during a time when others worry about their financial stability.

Recessionship

A slang term used to describe an intimate relationship that forms during a recession. People in a recessionship usually meet after losing their jobs or after incurring some sort of financial hardship. The term recessionship was originally coined during the financial crisis of 2008-2009.

Redlining

The unethical practice whereby financial institutions make it extremely difficult or impossible for residents of poor inner-city neighborhoods to borrow money, gain approval for a mortgage, take out insurance or gain access to other financial services because of high default rates. In this case, the rejection does not take the individual's qualifications and creditworthiness into account.

Refi Bubble

A period during which old debt obligations are being replaced with newer obligations with different terms. A typical refi bubble usually occurs when homeowners refinance their home mortgages because rates have fallen to an attractive level. Lowering interest costs or the interest rate leaves homeowners with more discretionary income.

Repackaging

When a private equity firm takes a public firm private by purchasing all of its common stock with leverage loans. The private equity firm then makes changes to the company, in effect "dressing up" the company, with an eye toward bringing it public again via an initial public offering (IPO).

Retirement Planner

A practicing professional who helps individuals prepare a retirement plan. A retirement planner identifies sources of income, estimates expenses, implements a savings program and helps manage assets. Estimating future cash flows and assets is also a central part of a retirement planner's work. He or she may use a web-based calculator or software program that will predict future cash flows and assets based on the data entered.

Risk Of Ruin

The probability of an individual losing sufficient trading or gambling money (known as capital base) to the point at which continuing on is no longer considered an option to recover losses.

Risk of ruin is calculated by taking into account the probability of winning (or making money on a trade), the probability of incurring losses, and the portion of an individual's capital base that is in play or at risk. Also known as the "probability of ruin".

Rose-Colored Recession

The unexpected optimism market observers sometimes experience during a recession. A rose-colored recession reflects the sometimes unwarranted positivity of the general public following news or data released during a recession; it is still considered bad news, but is better than expected.

Rule Of 70

A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate the number of years for a variable to double, take the number 70 and divide it by the growth rate of the variable. This rule is commonly used with an annual compound interest rate to quickly determine how long it would take to double your money.

Santa Claus Rally

A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations for the Santa Claus Rally phenomenon, including tax considerations, happiness around Wall Street, people investing their Christmas bonuses and the fact that the pessimists are usually on vacation this week.

Settlement Risk

The risk that one party will fail to deliver the terms of a contract with another party at the time of settlement. Settlement risk can be the risk associated with default at settlement and any timing differences in settlement between the two parties. This type of risk can lead to principal risk.

Shareholder Value

The value delivered to shareholders because of management's ability to grow earnings, dividends and share price. In other words, shareholder value is the sum of all strategic decisions that affect the firm's ability to efficiently increase the amount of free cash flow over time.

Short Selling

The selling of a security that the seller does not own, or any sale that is completed by the delivery of a security borrowed by the seller. Short sellers assume that they will be able to buy the stock at a lower amount than the price at which they sold short.

Silver Thursday

A steep fall in the price of silver that occurred on Thursday March 27, 1980. The sharp drop, on Silver Thursday, was triggered by a failed attempt to corner the silver market and it led to massive panic in other commodities.

Soft Patch

A period of economic slowdown amid a larger trend of economic growth. This buzzword is most often used in the financial media and by the U.S. Federal Reserve to describe a period of economic weakness.

Spoo

A slang term for an S&P 500 contract that trades on the Chicago Mercantile Exchange (CME). The S&P 500 contracts trade on the CME independent of the S&P 500 index itself, and expire quarterly in the months of March, June, September and December.

The word originated in the XMI pit on the America Stock Exchange (AMEX) in New York. It comes from the symbol for the September contract: "SPU". Even though the name is based on the September contract symbol, the term is used to describe contracts of all expiries. When somebody speaks of the spoo, they are referring to the current most active month trading.

Spring Loading

An option-granting practice in which options are granted at a time that precedes a positive news event. Spring loading relies on the fact that positive news typically causes the underlying company's stock to surge in value. Timing an option grant to precede the public news release provides the option holder with an almost instant profit.

Stabilization Policy

A macroeconomic strategy enacted by governments and central banks to keep economic growth stable, along with price levels and unemployment. On going stabilization policy includes monitoring the business cycle and adjusting benchmark interest rates to control aggregate demand in the economy. The goal is to avoid erratic changes in total ouput, as measured by Gross Domestic Product (GDP) and large changes in inflation; stabilization of these factors generally leads to moderate changes in the employment rate as well.

Standard & Poor's 500 Index - S&P 500

An index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe.

Companies included in the index are selected by the S&P Index Committee, a team of analysts and economists at Standard & Poor's. The S&P 500 is a market value weighted index - each stock's weight is proportionate to its market value.

Standard Of Living Bubble

The concept of consumers living beyond their means for an extended period of time. The notion of a standard of living bubble is characterized by flat inflation-adjusted earnings for members of the workforce over several years, during which the use of consumer credit and spending increases in order to provide the illusion of increases in standard of living.

Sterilization

A form of monetary action in which a central bank or federal reserve attempts to insulate itself from the foreign exchange market to counteract the effects of a changing monetary base. The sterilization process is used to manipulate the value of one domestic currency relative to another, and is initiated in the forex market.

Stop-Loss Order

An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit an investor's loss on a security position.

Also known as a "stop order" or "stop-market order"

Stress Testing

A simulation technique used on asset and liability portfolios to determine their reactions to different financial situations. Stress tests are also used to gauge how certain stressors will affect a company or industry. They are usually computer-generated simulation models that test hypothetical scenarios.

This is also known as a "stress test".

Stuckholder

The owner of a stock that can't be sold. The term stuckholder has a negative connotation, usually because the value of the stock is dropping and circumstances prevent the owner from liquidating the position.

Sucker Rally

A temporary rise in a specific stock or the market as a whole. A sucker rally occurs with little fundamental information to back the movement in price. This rally may continue just long enough for the "suckers" to get on board, after which the market or specific stock falls.

Also known as a "dead cat bounce" or a "bull trap".

Sugar No. 11

A futures contract for the physical delivery of raw cane sugar. The Sugar No.11 contract includes shipping costs to the purchaser's ship at a port inside the country selling the sugar, a type of shipping called free on board. One Sugar No.11 contract represents 112,000 pounds of raw cane sugar.

Super Currency

A supranational currency printed by the International Monetary Fund (IMF) that would be tied to a basket of reserve currencies. The concept of a global "super currency" has been periodically discussed between world leaders as well as endorsed by 2001 Nobel Memorial Prize-winner Joseph Stiglitz and well-known business leader George Soros for years. A super currency could also be tied to a single currency, but the interconnectedness of world financial markets and concerns about the volatility that can occur as a result of the system being tied to one currency have made this idea much less popular.

Surrender Period

The amount of time an investor must wait until he or she can withdraw funds from an annuity without facing a penalty. Withdrawing money before the agreed-upon holding period can result in a surrender charge.

Takeover Artist

An investor or company whose primary goal is to identify companies that are attractive to buy and that can be turned around to make a profit. A takeover artist will usually use a lot of debt (leverage) to make the purchase, and restructure the company for resale or add the company to an existing group of companies.

TARP Bonuses

A buzz word coined by the financial media during the financial crisis of 2008/09 to describe bonuses paid to employees and executives of banks and other financial firms that received Troubled Asset Relief Program (TARP) funds. TARP bonuses were controversial because employees were receiving additional pay even as their companies required bailout funds.

Tax Fairness

A tax platform based on an ideal that aims to create a system of taxation that is fair, clear and equivalent for all taxpayers. Overall, tax fairness looks to limit the amount of tax legislation and rules that benefit one segment of the tax-paying population over another.

Tax Gain/Loss Harvesting

Selling securities at a loss to offset a capital gains tax liability. Tax gain/loss harvesting is typically used to limit the recognition of short-term capital gains, which are normally taxed at higher federal income tax rates than long-term capital gains. Also known as "tax-loss selling".

Tax Liability

The total amount of tax that an entity is legally obligated to pay to an authority as the result of the occurrence of a taxable event. Tax liability can be calculated by applying the appropriate tax rate to the taxable event's tax base. Taxable events include, but are not limited to, annual income, the sale of an asset, a fiscal year-end or an inheritance.

Tax Selling

A type of sale whereby an investor sells an asset with a capital loss in order to lower or eliminate the capital gain realized by other investments. Tax selling allows the investor to avoid paying capital gains tax on recently sold or appreciated assets.

Teaser Rate

An initial rate on an adjustable-rate mortgage (ARM). This rate will typically be below the going market rate, and is used by lenders to entice borrowers to choose ARMs over traditional mortgages. The teaser rate will be in effect for only a few months, at which point the rate will gradually climb until it reaches the full indexed rate, which will be a static margin rate plus the floating rate index to which the mortgage is tied (usually the LIBOR index).

Technical Analysis

A method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity.

Tenbagger

A stock whose value increases ten times its purchase price. This expression was coined by Peter Lynch, one of the greatest investors of all time, in his book "One Up On Wall Street" (1989).

Too Big To Fail

The idea that a business has become so large and ingrained in the economy that a government will provide assistance to prevent its failure. "Too big to fail" describes the belief that if an enormous company fails, it will have a disastrous ripple effect throughout the economy.

Topless Meeting

A meeting in which participants are not allowed to use laptops. A topless meeting organizer can also ban the use of smartphones, cellphones and other electronic devices. The purpose of this is to create an environment free from distraction, to foster enhanced focus and to generate more discussions.

Total Debt Service Ratio

A debt service measure that financial lenders use as a rule of thumb to give a preliminary assessment of whether a potential borrower is already in too much debt. More specifically, this ratio shows the proportion of gross income that is already spent on housing-related and other similar payments.

Receiving a ratio of less than 40% means that the potential borrower has an acceptable level of debt.

Troubled Asset Relief Program - TARP

A government program created for the establishment and management of a Treasury fund, in an attempt to curb the ongoing financial crisis of 2007-2008. The TARP gives the U.S. Treasury purchasing power of $700 billion to buy up mortgage backed securities (MBS) from institutions across the country, in an attempt to create liquidity and un-seize the money markets. The fund was created by a bill that was made law on October 3, 2008 with the passage of H.R. 1424 enacting the Emergency Economic Stabilization Act of 2008. The Treasury will be given $250 billion immediately, and the President must certify additional funds as they are needed. The additional funds will be distributed as $100 billion, and then as the final $350 billion is given, Congress has the right to not approve the additional amounts..

Twinternship

An internship in which the intern is charged with using social media such as Twitter and Facebook to drive attention to a company and its products. A twinternship is usually an unpaid (although paid positions are not uncommon), temporary position in which a "twintern" will use popular social media outlets to publicize products and promotions for a business.

Also known as a "brand advocate"

Uneconomic Growth

When economic growth produces negative external consequences to the extent that the growth is unproductive with respect to the broader global systems in which it is viewed. Uneconomic growth occurs at a faster rate than what is considered sustainable. Uneconomic growth studies deal with the negative social and/or environmental impacts of too much growth in a broad economic sense (such as a nation's gross domestic product).

The term was popularized by former World Bank economist Herman Daly in the late 1990s, but the core ideas of unproductive growth have a long and varied history.

Uptick Rule

A former rule established by the SEC that requires that every short sale transaction be entered at a price that is higher than the price of the previous trade. This rule was introduced in the Securities Exchange Act of 1934 as Rule 10a-1 and was implemented in 1938. The uptick rule prevents short sellers from adding to the downward momentum when the price of an asset is already experiencing sharp declines.

The uptick rule is also known as the "plus tick rule".

Vested Interest

1. The lawful right of an individual, or entity, to gain access to tangible or intangible property now or in the future. A vested interest is an entitled benefit, which can be conveyed to a separate party. There is usually a vesting period before the claimant can gain access to the asset or property. Due to the right of ownership the benefit can not be taken away i.e. the vested funds are not contingent on any action or inaction.

2. A financial or personal stake one entity has in an action, separate entity or commitment, with the expectation of realized benefits in the present or the future.

Vintage

A slang term used by mortgage-backed securities (MBS) traders and investors to refer to an MBS that is seasoned over some time period. MBSs typically have maturities around 30 years, and a particular issue's 'vintage' will expose the holder to less prepayment and default risk, although this decreased risk also limits price appreciation.

Viral Marketing

Internet advertising or marketing that spreads exponentially whenever a new user is added. Viral marketing assumes that as each new user starts using the service or product, the advertising will go to everyone with whom that user interacts with.

Voluntary Simplicity

A lifestyle that minimizes consumption and the pursuit of wealth and material goods. Individuals choose voluntary simplicity in order to attain a simpler but more meaningful life. Voluntary simplicity is quite different from those who are forced to spend less and live a more simple life involuntarily, such as those who lose their job and cannot find work.

Also known as "simple living."

W-Shaped Recovery

An economic cycle of recession and recovery that resembles a "W" in charting. A W-shaped recovery represents the shape of the chart of certain economic measures such as employment, GDP, industrial output, etc. A W-shaped recovery involves a sharp decline in these metrics followed by a sharp rise back to the previous peak, followed again by a sharp decline and ending with another sharp rise. The middle section of the W can represent a significant bear market rally or a recovery that was stifled by an additional economic crisis.

Wage-Price Spiral

A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. The wage-price sprial suggests that rising wages increase disposable income, thus raising the demand for goods and causing prices to rise. Rising prices cause demand for higher wages, which leads to higher production costs and further upward pressure on prices.

Weather Future

A type of weather derivative that obligates the buyer to purchase the value of the underlying weather index - measured in heating degree days (HDD) or cooling degree days (CDD) - at a future date. The settlement price of the underlying weather index is equal to the value of the relevant month's HDD/CDD multiplied by $20. Weather futures enable businesses to protect themselves against losses caused by unexpected shifts in weather conditions.

Weekend Effect

A phenomenon in financial markets in which stock returns on Mondays are often significantly lower than those of the immediately preceding Friday. Some theories that explain the effect attribute the tendency for companies to release bad news on Friday after the markets close to depressed stock prices on Monday. Others state that the weekend effect might be linked to short selling, which would affect stocks with high short interest positions. Alternatively, the effect could simply be a result of traders' fading optimism between Friday and Monday.

Whisper Number

1. Traditionally, the unofficial and unpublished earnings per share (EPS) forecasts that circulate among professionals on Wall Street. In this context, whisper numbers were generally reserved for the favored (wealthy) clients of a brokerage.

2. A company's forecasted future earnings or revenues according to the collective expectations of individual investors. In this sense, a whisper number would be compiled by a website polling its visitors. Individuals come up with a whisper number using their own analyses of company financials, market trends, gut feel, etc.

Witching Hour

The last hour of stock trading between 3 p.m. (when the bond market closes) and 4 p.m. EST. It is typically controlled by large professional traders, program traders and large institutional traders, and can be characterized by higher than average volatility.

Worthless Securities

Securities that have a market value of zero. Worthless securities can include stocks or bonds that are either publicly traded or privately held. These securities result in a capital loss for the owner and can be claimed as such when filing taxes.

Write-Off

A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues.

Year Over Year - YOY

A method of evaluating two or more measured events to compare the results at one time period with those from another time period (or series of time periods), on an annualized basis. Year-over-year comparisons are a popular way to evaluate the performance of investments. Any measurable events that recur annually can be compared on a year-over-year basis - from annual performance, to quarterly performance, to daily performance.

Zombie Debt

A type of bad debt that is so old a person may have forgotten they owed it in the first place. The debt has likely been given up on by the company to which it was owed. Zombie debt can haunt a debtor, if a debt collector buys the debt for a low price from the company in attempt to recover the owed funds.


Source: www.investopedia.com