G-2 Flashcards
American depository share
The underlying shares on which American depository receipts are based. They trade in the issuing company’s domestic market
American-style
Type of option contract that can be exercised at any time up to the option’s expiration data
Amortization
The process of allocating the cost of intangible long-term assets having a finite useful life to accounting periods;
the allocation of the amount of a bond premium or discount to the periods remaining until bond maturity
Amortized cost
The historical cost (initially recognized cost) of an asset, adjusted for amortization and impairment
Amortizing bond
Bond with a payment schedule that calls for periodic payments of interests and repayments of principal
Amortizing loan
Loan with a payment schedule that calls for periodic payments of interest and repayments of principal
Annual percentage rate
The cost of borrowing expressed as a yearly rate
Annuity
A finite set of level sequential cash flows
Annuity due
An annuity having a first cash flow that is paid immediately
Anticipation stock
Excess inventory that is held in anticipation of increased demand, often because of seasonal patterns of demand
Antidilutive
With reference to a transaction or a security, one that would increase earnings per share (EPS) or result in EPS higher than the company’s basic EPS; are not included in the calculation of diluted EPS
Arbitrage
1) The simultaneous purchase of an undervalued asset or portfolio and sale of an overvalued but equivalent asset or portfolio, in order to obtain a risk-less profit on the price differential. Taking advantage of a market inefficiency in a risk-free manner.
2) The condition in a financial market in which equivalent assets or combinations of assets sell for two different prices, creating an opportunity to profit at no risk with no commitment of money.
3) A risk-free operation that earns an expected positive net profit but requires no investment of money
Arbitrage-free pricing
The overall process of pricing derivatives by arbitrage and risk neutrality; also called the principle of no arbitrage.
Arbitrageurs
Traders who engage in arbitrage
Arithmetic mean
The sum of the observations divided by the number of observations
Arms index
A flow of funds indicator applied to a broad stock market index to measure the relative extent to which money is moving into or out of rising and declining stocks
Artifical intelligence
Computer systems that exhibit cognitive and decision-making ability comparable (or superior) to that of humans
Asian call option
A European-style option with a value at maturity equal to the difference between the stock price at maturity and the average stock price during the life of the option, or $0, whichever is greater
Ask
The price at which a dealer or trader is willing to sell an asset, typically qualified by a maximum quantity (ask size)
Ask size
The maximum quantity of an asset that pertains to a specific ask price from a trader (i.e.) if the ask for a share issue is $30 for a size of 1,000 shares, the trader is offering to sell at $30 up to a 1,000 shares.
Asset allocation
The process of determining how investment funds should be distributed among asset classes
Asset-backed securities
A type of bond issued by a legal entity called a “special purpose entity” (SPE) on a collection of assets that the SPE owns; also, securities backed by receivables and loans other than mortgages
Asset-based loan
A loan that is secured with company assets
Asset-based valuation models
Valuation based on estimates of the market value of a company’s assets
Asset beta
The unlevered beta; reflects the business risk of the assets; the asset’s systematic risk
Asset class
A group of assets that have similar characteristics, attributes, and risk/return characteristics
Asset swap
Converts the periodic fixed coupon of a specific bond to a Libor plus or minus a spread
Asset utilization ratios
Ratios that measure how efficiently a company performs day-to-day tasks, such as the collection of receivables and management of inventory
Assets
Resources controlled by an enterprise as a result of past events and from which future economic benefits to the enterprise are expected to flow
Assignment of accounts receivable
The use of accounts receivable as collateral for a loan
At the money
An option in which the underlying’s price equals the exercise price
Auction
A type of bond issuing mechanism often used for sovereign bonds that involves bidding
Autarkic price
The price of a good or service in an autarkic economy
Autarky
A state in which a country does not trade with other countries
Automated Clearing House (ACH)
An electronic payment network available to businesses, individuals, and financial institutions in the United States, US Territories, and Canada
Automatic stabilizer
A countercyclical factor that automatically comes into play as an economy slows and unemployment rises
Available-for-sale
Under U.S. GAAP, debt securities not classified as either held-to-maturity or held-for-trading securities. The investor is willing to sell but not actively planning to sell. In general, available-for-sale debt securities are reported at fair value on the balance sheet, with unrealized gains included as a component of other comprehensive income
Average accounting rate of return
(ARR) Over the life of a project, the AAR can be defined as the average net income divided by the average book value
Average fixed cost
Total fixed cost divided by quantity produced
Average life
See weighted average life
Average product
Measures the productivity of inputs on average and is calculated by dividing total product by the total number of units for a given input that is used to generate output
Average revenue
Total revenue divided by quantity debt
Average total cost
Total cost divided by quantity produced
Average variable cost
Total variable cost divided by quantity produced
Back simulation
Another term for the historical method of estimating VaR; the method involves not a simulation of the past but rather what actually happened in the past, sometimes adjusted to reflect the fact that a different portfolio may have existed in the past than is planned for the future
