Campbell R. Harvey's Hypertextual Finance Glossary

Return to Glossary front

A: Fifth letter of a NASDAQ stock symbol specifying Class 'A' shares.
A.B.O.: See: Accumulated Benefit Obligation
A.C.H.: See: Automated Clearing House
A.C.R.S.: See: Accelerated cost recovery system
A.C.U.: See: Asian currency units
A.D.R.: See: American Depository Receipt
A.D.S.: See: American Depository Share
A.E.X.: See: Amsterdam Exchange
A.F.M.: See: Amman Financial Market
A.I.B.D.: Association of International Bond Dealers
A.O.N.: See: All or none order
A.O.S.: See: Automated Order System
A.M.E.X.: See: American Stock Exchange
A.P.R.: See: Annual Percentage Rate
A.P.T.: See: Arbitrage Pricing Theory
A.P.T.: See: Automated Pit Trading
A.P.V.: See: Adjusted Present Value
A.P.Y.: See: Annual Percentage Yield
A.R.M.: See: Adjustable rate mortgage
A.R.P.S.: See: Adjustable rate preferred stock
A.R.P.S.: See: Auction rate preferred stock
A.R.R.: See: Average rate of return
A.S.X.: See: Australian Stock Exchange
Abandonment option: The option of terminating an investment earlier than originally planned.
Abnormal returns: The component of the return that is not due to systematic influences (market wide influences). In other words, abnormal returns are above those predicted by the market movement alone. Related: excess returns.
Absolute priority: Rule in bankruptcy proceedings whereby senior creditors are required to be paid in full before junior creditors receive any payment.
Absorbed: Used in context of general equities. Securities are "absorbed" as long as there are corresponding orders to buy and sell. The market has reached the absorption point when further assimilation is impossible without an adjustment in price. See: sell the book.
Accelerated cost recovery system (A.C.R.S.): Schedule of depreciation rates allowed for tax purposes.
Accelerated depreciation: Any depreciation method that produces larger deductions for depreciation in the early years of a asset's life. Accelerated cost recovery system (A.C.R.S.), which is a depreciation schedule allowed for tax purposes, is one such example.
Accounting exposure: The change in the value of a firm's foreign currency denominated accounts due to a change in exchange rates.
Accounting earnings: Earnings of a firm as reported on its income statement.
Accounting insolvency: Total liabilities exceed total assets. A firm with a negative net worth is insolvent on the books.
Accounting liquidity: The ease and quickness with which assets can be converted to cash.
Accounts payable: Money owed to suppliers.
Accounts receivable: Money owed by customers.
Accounts receivable turnover: The ratio of net credit sales to average accounts receivable, a measure of how quickly customers pay their bills.
Accretion (of a discount): In portfolio accounting, a straight-line accumulation of capital gains on a discount bond in anticipation of receipt of par at maturity.
Accrual bond: A bond on which interest accrues, but is not paid to the investor during the time of accrual. The amount of accrued interest is added to the remaining principal of the bond and is paid at maturity.
Accrued interest: Mainly applies to convertible securities. Interest that has accumulated between the most recent payment and the sale of a bond or other fixed-income security. At the time of sale, the buyer pays the seller the bond's price plus "accrued interest," calculated by multiplying the coupon rate by the fraction of the coupon period that has elapsed since the last payment. (If a bondholder receives $40 in coupon payments per bond semi-annually and sells the bond one quarter of the way into the coupon period, the buyer pays the seller $10 as the latter's proportion of interest earned.)
Accumulated Benefit Obligation (A.B.O.): An approximate measure of the liability of a pension plan in the event of a termination at the date the calculation is performed. Related: projected benefit obligation.
Acid-test ratio: Also called the quick ratio, the ratio of current assets minus inventories, accruals, and prepaid items to current liabilities.

Acquiree: A firm that is being acquired.
Acquirer: A firm or individual that is acquiring something.
Acquisition: When a firm buys another firm.
Acquisition of assets: A merger or consolidation in which an acquirer purchases the selling firm's assets.
Acquisition of stock: A merger or consolidation in which an acquirer purchases the acquiree's stock.
Act of state doctrine: This doctrine says that a nation is sovereign within its own borders and its domestic actions may not be questioned in the courts of another nation.
Active: A market in which there is frequent trading.
Active portfolio strategy: A strategy that uses available information and forecasting techniques to seek a better performance versus a portfolio that is simply diversified broadly. Related: passive portfolio strategy.
Actual market: Used in context of general equities. Firm market. Antithesis of subject market.
Actuals: The physical commodity underlying a futures contract. Cash commodity, physical.
A-D: Refers to Advance-Decline. Measurement of the number of issues trading above their previous closing prices less the number trading below their previous closing prices over a particular period. As a technical measure of market breadth, the steepness of the A-D line graphically shows whether a strong bull or bear market is underway.
Additional hedge: A protection against borrower fallout risk in the mortgage pipeline.
Adjustable rate: Mainly applies to convertible securities. Refers to interest rate or dividend which is adjusted periodically, usually based on a standard market rate outside the control of the bank or savings institution, such as that prevailing on Treasury bonds or notes. Typically, such issues have a set floor or ceiling, called caps and collars which limit the adjustment.
Adjustable rate preferred stock (A.R.P.S.): Publicly traded issues that may be collateralized by mortgages and M.B.S.s.
Adjusted present value (A.P.V.): The net present value analysis of an asset if financed solely by equity (present value of un-levered cash flows), plus the present value of any financing decisions (levered cash flows). In other words, the various tax shields provided by the deductibility of interest and the benefits of other investment tax credits are calculated separately. This analysis is often used for highly leveraged transactions such as a leveraged buy-out.
Administrative pricing rules: IRS rules used to allocate income on export sales to a foreign sales corporation.
Advance commitment: A promise to sell an asset before the seller has lined up purchase of the asset. This seller can offset risk by purchasing a futures contract to approximately fix the sales price.
Adverse selection: A situation in which market participation is a negative signal.
Affirmative covenant: A bond covenant that specifies certain actions the firm must take.
After-tax profit margin: The ratio of net income to net sales.
After-tax real rate of return: The after-tax rate of return minus the inflation rate.
Agencies: See: Federal agency securities.
Agency: Used in context of general equities. Act of buying or selling for the account and risk of a customer. Generally, an agent, or broker, acts as intermediary between buyer and seller, taking no financial risk personally or as a firm, and charging a commission for the service. The broker represents a customer buyer/seller to a customer seller/buyer and does not act as principal for the firm's own trading account. Antithesis of principal. See: dealer.
Agency bank: A form of organization commonly used by foreign banks to enter the U.S. market. An agency bank cannot accept deposits or extend loans in its own name; it acts as agent for the parent bank. It is also the financial institution that issues A.D.R.s to the general market.
Agency basis: A means of compensating the broker of a program trade solely on the basis of commission established through bids submitted by various brokerage firms.
Agency cost view: The argument that specifies that the various agency costs create a complex environment in which total agency costs are at a minimum with some, but less than 100%, debt financing.
Agency costs: The incremental costs of having an agent make decisions for a principal.
Agency incentive arrangement: A means of compensating the broker of a program trade using benchmark prices for issues to be traded in determining commissions or fees.
Agency pass-throughs: Mortgage pass-through securities whose principal and interest payments are guaranteed by government agencies, such as the Government National Mortgage Association ("Ginnie Mae"), Federal Home Loan Mortgage Corporation ("Freddie Mac") and Federal National Mortgage Association("Fannie Mae").
Agency problem: Conflicts of interest among stockholders, bondholders, and managers.
Agency theory: The analysis of principal-agent relationships, wherein one person, an agent, acts on behalf of another person, a principal.
Agent: The decision-maker in a principal-agent relationship.
Aggregation: Process in corporate financial planning whereby the smaller investment proposals of each of the firm's operational units are aggregated and effectively treated as a whole.
Aggressively: Used in context of general equities. For a customer it means working to buy or sell one's stock, with an emphasis on execution over price. For a trader it means acting in a way that puts the firm's capital at higher risk through paying a higher price, selling cheaper, or making a larger short sale or purchase than the trader would under normal circumstances.
Aging schedule: A table of accounts receivable broken down into age categories (such as 0-30 days, 30-60 days, and 60-90 days), which is used to determine if customer payments are keeping close to schedule.
Ahead of itself: Used in context of general equities. Refers to equities that are overbought or oversold on a fundamental basis.
"Ahead of you": Used for listed equity securities. At the same price but entered ahead of your order/interest, usually referring to the specialist's book. See: behind, matched orders, priority, stock ahead.
AIMR Performance Presentation Standards Implementation Committee: The Association for Investment Management and Research (AIMR's) Performance Presentation Standards Implementation Committee is charged with the responsibility to interpret, revise and update the AIMR Performance Presentation Standards (AIMR-PPS(TM) for portfolio performance presentations.
All equity rate: The discount rate that reflects only the business risks of a project, distinct from the effects of financing.
All or none order (A.O.N.): Used in context of general equities. A limited price order which is to be executed in its entirety or not at all (no partial transaction), and thus is testing the strength/conviction of the counterparty. Unlike an F.O.K. order, an A.O.N. order is not to be treated as cancelled if not executed as soon as it is represented in the trading crowd, but instead remains alive until executed or cancelled. The making of "all or none" bids or offers in stocks is prohibited and the making of "all or none" bids or offers in bonds is subject to the restrictions of Rule 61. A.O.N. orders are not shown on the specialist's book because they can not be traded in pieces. Antithesis of any-part-of order. See: F.O.K. order.
All-in cost: Total costs, explicit and implicit.
All-or-none underwriting: An arrangement whereby a security issue is canceled if the underwriter is unable to re-sell the entire issue.

Alpha: Measure of risk adjusted performance. An alpha is usually generated by regressing the security or mutual fund's excess return on the S&P 500 excess return. The beta adjusts for the risk (the slope coefficient). The alpha is the intercept. Example: Suppose the mutual fund has a return of 23% and the short-term interest rate is 5% (excess return is 20%). During the same time the market excess return is 9%. Suppose the beta of the mutual fund is 2.0 (twice as risky as the S&P 500). The expected return given the risk is 2x9%=18%. The actual excess return is 20%. Hence, the alpha is 2% or 200 basis points. Alpha is also know as Jensen Index. Related: Risk adjusted return.
Alpha equation: Regression usually run over 36-60 months of data: Return-Treasury bill= alpha + beta (S&P 500 - Treasury bill) + error. The alpha is the intercept. Note that the benchmark does not necessarily have to be the S&P 500. A mutual fund specializing in international investment might be benchmarked to a broader world market index, such as the MSCI World Index.
Alternative mortgage instruments: Variations of mortgage instruments such as adjustable-rate and variable-rate mortgages, graduated-payment mortgages,0 reverse-annuity mortgages, and several seldom-used variations.
Alternative order: Used in context of general equities. Order giving a broker a choice between two courses of action either to buy or sell, never both. Execution of one course automatically eliminates the other. An example is a combination buy limit/buy stop order, wherein the buy limit is below the current market and the buy stop is above. If the order is for one unit of trading when one part of the order is executed on the occurrence of one alternative, the order on the other alternative is to be treated as cancelled. If the order is for an amount larger than one unit of trading, the number of units executed determine the amount of the alternative order to be treated as cancelled. Either-or order.
American Depository Receipts (A.D.R.s): Certificates issued by a U.S. depositary bank, representing foreign shares held by the bank, usually by a branch or correspondent in the country of issue. One A.D.R. may represent a portion of a foreign share, one share or a bundle of shares of a foreign corporation. If the A.D.R.'s are "sponsored," the corporation provides financial information and other assistance to the bank and may subsidize the administration of the A.D.R.s. "Unsponsored" A.D.R.s do not receive such assistance. A.D.R.s carry the same currency, political and economic risks as the underlying foreign share. Arbitrage keeps the prices of A.D.R.s and underlying foreign shares, adjusted for the SDR/ordinary ration essentially equal. American depository shares(A.D.S.s) are a similar form of certification.
A.D.R. Fees: Fees associated with the creating or releasing of A.D.R.s from ordinary shares, charged by the commercial banks with correspondent banks in the international sites.
A.D.R. Ratio: The number of ordinary shares into which an A.D.R. can be converted.
American depository share (A.D.S.): Foreign stock issued in the U.S. and registered in the A.D.R. system.
American option: An option that may be exercised at any time up to and including the expiration date. Related: European option
American shares: Securities certificates issued in the U.S. by a transfer agent acting on behalf of the foreign issuer. The certificates represent claims to foreign equities.
American Stock Exchange (A.M.E.X.): Stock exchange with the third largest volume of trading in the U.S. Located at 86 Trinity Place in downtown Manhattan. The bulk of trading on A.M.E.X. consists of index options (computer technology index, institutional index, major market index) and shares of small to medium-size companies is predominant. Recently merged with N.A.S.D.A.Q. See: Curb.
American-style option: An option contract that can be exercised at any time between the date of purchase and the expiration date. Most exchange-traded options are American style.
Amman Financial Market (A.F.M.): Established in 1976, the A.F.M. is the only stock exchange in Jordan.
Amortization: The repayment of a loan by installments.
Amortization factor: The pool factor implied by the scheduled amortization assuming no prepayemts.
Amortizing interest rate swap: Swap in which the principal or notional amount rises (falls) as interest rates rise (decline).
Amsterdam Exchanges (A.E.X.): Exchange that comprises the A.E.X.-Effectenbeurs, the A.E.X.-Optiebeurs (formerly the European Options Exchange or E.O.E.) and the A.E.X.-Agrarische Termijnmarkt. A.E.X.-Data Services is the operating company responsible for the dissemination of data from the Amsterdam Exchanges via its integrated Mercury 2000 system.
AMTEL: Used in context of general equities. In-house message system entered and displayed through Quotron A page.
Analyst: Employee of a brokerage or fund management house who studies companies and makes buy-and-sell recommendations on stocks of these companies. Most specialize in a specific industry.
Angels: Individuals providing venture capital.
Announcement date: Date on which particular news concerning a given company is announced to the public. Used in event studies, which researchers use to evaluate the economic impact of events of interest.
Annual effective yield: See: annual percentage yield.
Annual fund operating expenses: For investment companies, the management fee and "other expenses," including the expenses for maintaining shareholder records, providing shareholders with financial statements, and providing custodial and accounting services. For 12b-1 funds, selling and marketing costs are also included.
Annual percentage rate (A.P.R.): The periodic rate times the number of periods in a year. For example, a 5% quarterly return has an A.P.R. of 20%.
Annual percentage yield (A.P.Y.): The effective, or true, annual rate of return. The A.P.Y. is the rate actually earned or paid in one year, taking into account the affect of compounding. The A.P.Y. is calculated by taking one plus the periodic rate and raising it to the number of periods in a year. For example, a 1% per month rate has an A.P.Y. of 12.68% (1.01^12 -1).
Annual rate of return: There are many ways of calculating the annual rate of return. If the rate of return is calculated on a monthly basis, we sometimes multiply this by 12 to express an annual rate of return. This is often called the annual percentage rate (A.P.R.). The annual percentage yield annual percentage yield (A.P.Y.), described above, is used to include the affect of compounding interest.
Annual report: Yearly record of a publicly held company's financial condition. It includes a description of the firm's operations, as well as balance sheet, income statement and cash flow statement information. S.E.C. rules require that it be distributed to all shareholders. A more detailed version is called a 10-K.
Annualized gain: If stock X appreciates 1.5% in one month, the annualized gain for that stock over a twelve month period is 12*1.5% = 18%. Compounded over the twelve month period, the gain is (1.015)^12 -1 = 19.6%.
Annualized holding period return: The annual rate of return that when compounded t times, generates the same t-period holding return as actually occurred from period 1 to period t.
Annuity: A regular periodic payment made by an insurance company to a policyholder for a specified period of time.
Annuity due: An annuity with n payments, wherein the first payment is made at time t = 0 and the last payment is made at time t = n - 1.
Annuity factor: Present value of $1 paid for each of t periods.
Annuity in arrears: An annuity with a first payment one full period hence, rather than immediately.
Anticipation: Arrangements whereby customers who pay before the final date may be entitled to deduct a normal rate of interest.
Antidilutive effect: Result of a transaction that increases earnings per common share (e.g. by decreasing the number of shares outstanding).

Any-or-all bid: Often used in risk arbitrage. Takeover bid where the acquirer offers to pay a set price for all outstanding shares of the target company, or any part thereof; contrasts with two tier bid.
Any-part-of order: Used in context of general equities. Order to buy or sell a quantity of stock in pieces if necessary. Antithesis of an all-or-none order (A.O.N.).
Appraisal ratio: The signal-to-noise ratio of an analyst's forecasts. The ratio of alpha to residual standard deviation.
Appraisal rights: A right of shareholders in a merger to demand the payment of a fair price for their shares, as determined independently.
Appropriation request: Formal request for funds for capital investment project.
Arbitrage: The simultaneous buying and selling of a security at two different prices in two different markets, resulting in profits without risk. Perfectly efficient markets present no arbitrage opportunities. Perfectly efficient markets seldom exist. However, arbitrage opportunities are often precluded because of transactions costs.
Arbitrage Pricing Theory (A.P.T.): An alternative model to the capital asset pricing model developed by Stephen Ross and based purely on arbitrage arguments. The A.P.T. implies that there are multiple risk factors that need to be taken into account when calculating risk adjusted performance or alpha.
Arbitrage-free option-pricing models: Yield curve option-pricing models.
Arbitrageur: Often used in risk arbitrage. One who profits from the differences in price when the same, or extremely similar, security, currency, or commodity is traded on two or more markets. He does so by simultaneously purchasing and selling these securities to take advantage of pricing differentials (spreads) created by market conditions. See: risk arbitrage, convertible arbitrage, index arbitrage, and international arbitrage.
"Are you open ": Used in context of general equities. "Can a new customer still participate on opposing side of the trade from that which the first customer initiated?", thus inquiring as to whether or not any portion of that trade is still available (i.e., If asking customer on buy side, " is there stock still available from the block sold by the initial customer?"). See: open.
Arithmetic average (mean) rate of return: Arithmetic mean return.
Arithmetic mean return: An average of the subperiod returns, calculated by summing the subperiod returns and dividing by the number of subperiods.
Arms index: Also known as a trading index (TRIN)= (number of advancing issues)/(number of declining issues)(Total up volume )/(total down volume). An advance/decline market indicator. Less than 1.0 indicates bearish demand, while above 1.0 is bullish. The index often is smoothed with a simple moving average.
Arm's length price: The price at which a willing buyer and a willing unrelated seller would freely agree to transact.
Adjustable rate mortgage (A.R.M.): A mortgage that features predetermined adjustments of the loan interest rate at regular intervals based on an established index. The interest rate is adjusted at each interval to a rate equivalent to the index value plus a predetermined spread, or margin, over the index, usually subject to per-interval and to life-of-loan interest rate and/or payment rate caps.
Around us: Used in context of general equities. See: away from us.
Articles of incorporation: Legal document establishing a corporation and its structure and purpose.
Asian currency units (A.C.U.s): Dollar deposits held in Singapore or other Asian centers.
Asian option: Option based on the average price of the underlying assets during the life of the option.
Ask: This is the quoted ask, or the lowest price an investor will accept to sell a stock. Practically speaking, this is the quoted offer at which an investor can buy shares of stock; also called the offer price.
Asked price: Used in context of general equities. Price at which a security or commodity is offered for sale on an exchange or in the O.T.C. Market.
Asked to bid/offer: Used in context of general equities. Usually a seller (buyer) looking to aggressively sell (buy) stock, usually asking for a capital commitment from an investment bank.
Asset: Any possession that has value in an exchange.
Asset activity ratios: Ratios that measure how effectively the firm is managing its assets.
Asset allocation decision: The decision regarding how an institution's funds should be distributed among the major classes of assets in which it may invest.
Asset-backed security: A security that is collateralized by loans, leases, receivables, or installment contracts on personal property, not real estate.
Asset-based financing: Methods of financing in which lenders and equity investors look principally to the cash flow from a particular asset or set of assets for a return on, and the return of, their financing.
Asset classes: Categories of assets, such as stocks, bonds, real estate and foreign securities.
Asset-coverage test: A bond indenture restriction that permits additional borrowing on if the ratio of assets to debt does not fall below a specified minimum.
Asset/equity ratio: The ratio of total assets to stockholder equity.
Asset for asset swap: Creditors exchange the debt of one defaulting borrower for the debt of another defaulting borrower.
Asset/liability management: Also called surplus management, the task of managing the funds of a financial institution to accomplish the two goals of a financial institution: (1) to earn an adequate return on funds invested and (2) to maintain a comfortable surplus of assets beyond liabilities.
Asset pricing model: A model for determining the required or expected rate of return on an asset. Related: Capital asset pricing model and arbitrage pricing theory.
Assets: A firm's productive resources.
Assets requirements: A common element of a financial plan that describes projected capital spending and the proposed uses of net working capital.
Asset substitution: Occurs when a firm invests in assets that are riskier than those that the debtholders expected.
Asset substitution problem: Arises when the stockholders substitute riskier assets for the firm's existing assets and expropriate value from the debtholders.
Asset swap: An interest rate swap used to alter the cash flow characteristics of an institution's assets in order to provide a better match with its liabilities.
Asset turnover: The ratio of net sales to total assets.
Assignment: The receipt of an exercise notice by an options writer that requires the writer to sell (in the case of a call) or purchase (in the case of a put) the underlying security at the specified strike price.
Asymmetry: A lack of equivalence between two things, such as the unequal tax treatment of interest expense and dividend payments.
Asymmetric information: Information that is known to some people but not to other people.
Asymmetric taxes: A situation wherein participants in a transaction have different 0 net tax rates.
Asymmetric volatility: Phenomenon that volatility is higher in down markets than in up markets.
"At"/"for": Used in context of general equities. Paramount terms used to differentiate an offering (offer stock at) and bid (bid for stock), respectively. In an offering, the trading syntax followed is "Quantity-at-Price"; however, in a bid, the syntax followed is "Price-for-Quantity".
At the bell: Used in context of general equities. At the opening or close. See: M.O.C. Order.
At the figure: Used in context of general equities. At the whole integer price (excluding the fraction) closest to the side of the market (bid/ask) being discussed. At the full.
At the full: Used in context of general equities. At the figure.
At-the-money: An option is at-the-money if the strike price of the option is equal to the market price of the underlying security. For example, if xyz stock is trading at 54, then the xyz 54 option is at-the-money.
At the opening order: Used in context of general equities. Market order or limited price order which is to be executed at the opening (and corresponding price) of the stock or not at all, and any such order or the portion thereof not so executed is to be treated as cancelled.
Attribute bias: The tendency of stocks preferred by the dividend discount model to share certain equity attributes such as low price-earnings ratios, high dividend yield, high book-value ratio or membership in a particular industry sector.
Asymmetric volatility: Phenomenon that volatility is higher in down market than in up markets.
Auction markets: Markets in which the prevailing price is determined through the free interaction of prospective buyers and sellers, as on the floor of the stock exchange.
Auction rate preferred stock (A.R.P.S.): Floating rate preferred stock, the dividend on which is adjusted every seven weeks through a Dutch auction.
Auditor's report: A section of an annual report containing the auditor's opinion about the veracity of the financial statements.
Australian Stock Exchange (A.S.X.): Established in 1987 following the amalgamation of the six independent stock exchanges operating in the Australian State capitals. The A.S.X. is the tenth largest stock exchange in the world on the basis of domestic capitalization.
Autex: Used in context of general equities. Video communication network through which brokerage houses alert institutional investors of their desire to transact block business (a purchase or sale) in a given security. Indications transmit small, medium, and large sizes only, with occasional limits mentioned. Supers are messages with specific size and price included. Both "indications" and "supers" can only be seen by customers (institutional subscribers to Autex). Trade recaps, advertised block trades entered by the dealer/subscribers, are also displayed, but can be seen by both institutions and dealers. See: expunge, size.
Authorized shares: Number of shares authorized for issuance by a firm's corporate charter.
Autocorrelation: The correlation of a variable with itself over successive time intervals. Sometimes called serial correlation
Automated Clearing House (A.C.H.): A collection of 32 regional electronic interbank networks used to process transactions electronically with a guaranteed one-day bank collection float.
Automated Order System (A.O.S.): Investment banks computerized order-entry system which sends single order entries to D.O.T. (Odd-Lot) or to investment banks floor brokers on the exchange. (Round lot, G.T.C. orders)
Automated Pit Trading (A.P.T.): Introduced in 1989, A.P.T. is the L.I.F.F.E. screen-based trading system that replicates the open outcry method of trading on screen. A.P.T. is used to extend the trading day for the major futures contracts as well as to provide a daytime trading environment for non-floor trading products.
Automatic stay: The restricting of liability holders from collection efforts related to collateral seizure. Automatically imposed when a firm files for bankruptcy under Chapter 11.
Autoquote: Autoquote indicative prices are generated for many of the financial options contracts traded at LIFFE using standard mathematical models as derived by Black and Scholes and Cox-Ross-Rubenstein. Autoquote calculates prices for all series by processing variables captured in real-time from other systems and trading members each time the underlying price changes. Autoquotes indicate where a series may trade given the current level of the underlying instrument.
Autoregressive: Using past data or variable of interest to predict future values of the same variable.
Available on the way in: Used in context of general equities. Stock is available to new customer as trade initiated by another customer is about to be consummated (on the exchange floor). Usually said to an inquiring salesman. See: open.
Availability float: Checks deposited by a company that have not yet been cleared.
Average: An arithmetic mean return of selected stocks intended to represent the behavior of the market or some component of it. One good example is the widely quoted Dow Jones Industrial Average, which adds the current prices of the 30 DJIA's stocks, and divides the results by a predetermined number, the divisor.
Average accounting return: The average project earnings after taxes and depreciation divided by the average book value of the investment during its life.
Average age of accounts receivable: The weighted-average age of all of the firm's outstanding invoices.
Average collection period, or days' receivables: The ratio of accounts receivables to sales, or the total amount of credit extended per dollar of daily sales (average AR/sales * 365).
Average cost of capital: A firm's required payout to the bondholders and to the stockholders expressed as a percentage of capital contributed to the firm. Average cost of capital is computed by dividing the total required cost of capital by the total amount of contributed capital.
Average life: Also referred to as the weighted-average life (W.A.L.). The average number of years that each dollar of unpaid principal due on the mortgage remains outstanding. Average life is computed as the weighted average time to the receipt of all future cash flows, using as the weights the dollar amounts of the principal paydowns.
Average maturity: The average time to maturity of securities held by a mutual fund. Changes in interest rates have greater impact on funds with longer average life.
Average (across-day) measures: An estimation of price that uses the average or representative price of a large number of trades.
Average rate of return (A.R.R.): The ratio of the average cash inflow to the amount invested.
Average tax rate: Taxes as a fraction of income; total taxes divided by total taxable income.
Away: A trade, quote, or market that does not originate with the dealer in question, e.g., "the bid is 98-10 away from me."
Away from the market: Used in context of general equities. Out of line with the inside market at this point in time, such as when a bid on a limit order is lower or the offer price is higher than the current market price for the security; held by the specialist for later execution unless F.O.K. Antithesis of in-line.
Away from us: Used in context of general equities. Involving a competing broker/dealer. Trading away from us signifies that stock was being bought and/or sold with institutions using other trading firms. Markets "away" signify that the bid or offering being quoted is from another firm, but the Investment bank may be getting a preference call.
Away from you: Used for listed equity securities. See: outside of you.
Axe to grind: Used in context of general equities. Involvement in a security, whether through a position, order, or inquiry.

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