Campbell R. Harvey's Hypertextual Finance Glossary

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F: Fifth letter of a NASDAQ stock symbol specifying that it is a foreign company.
F.A.S.B: See: Financial Accounting Standards Board
F.C.I.A.: See: Foreign Credit Insurance Association
F.D.I.: See: Foreign direct investment
F.D.I.C.: See: Federal Deposit Insurance Corporation
F.F.O.: See: Funds from operations
F.O.K.: See: Fill or Kill Order
F.R.A.: See: Forward rate agreement
F.R.N.: See: Floating Rate Note
F.S.C: See: Foreign Sales Corporation
Face value: See: Par value
Factor: A financial institution that buys a firm's accounts receivables and collects the debt.
Factor analysis: A statistical procedure that seeks to explain a certain phenomenon, such as the return on a common stock, in terms of the behavior of a set of predictive factors.
Factoring: Sale of a firm's accounts receivable to a financial institution known as a factor.
Factor model: A way of decomposing the forces that influence a security's rate of return into common and firm-specific influences.
Factor portfolio: A well-diversified portfolio constructed to have a beta of 1.0 on one factor and a beta of zero on any other factors.
Fade: Refers to over-the-counter trading. Fill another O.T.C. dealer's bid for, or offer of, stock.
Fail: A trade is said to fail if on settlement date either the seller fails to deliver securities in proper form or the buyer fails to deliver funds in proper form.
Fair-and-equitable test: A set of requirements for a plan of reorganization to be approved by the bankruptcy court.
Fair game: An investment prospect that has a zero risk premium.
Fair market price: Amount at which an asset would change hands between two parties, both having knowledge of the relevant facts. Also referred to as market prices.
Fair price: The equilibrium price for futures contracts. Also called the theoretical futures price, which equals the spot price continuously compounded at the cost of carry rate for some time interval.
Fair price provision: See:appraisal rights.
Fall Down: Used in the context of general equities. May not be able to produce as indicated in one's advertised market, due to getting less help from other parties (than anticipated) or due to changing market conditions.
Fallout risk: A type of mortgage pipeline risk that is generally created when the terms of the loan to be originated are set at the same time the sale terms are established. The risk is that either of the two parties, borrower or investor, fails to close and the loan "falls out" of the pipeline.
Fama, Eugene F.: Founder of the Efficient Markets Hypothesis. Finance professor at the University of Chicago.
Financial Accounting Standards Board (F.A.S.B.): Sets accounting standards for U.S. firms.
FASB No. 8: U.S. accounting standard that requires U.S. firms to translate their foreign affiliates' accounts by the temporal method. Gains and losses from currency fluctuations were reported in current income. It was in effect between 1975 and 1981 and became the most controversial accounting standard in the U.S. It was replaced by FASB No. 52 in 1981.
FASB No. 52: The U.S. accounting standard which replaced FASB No. 8. U.S. companies are required to translate foreign accounts by the current rate and report the changes from currency fluctuations in a cumulative translation adjustment account in the equity section of the balance sheet.
Fast market: Used in the context of general equities. Excessively rapid trading in a specific security that causes a delay in the electronic updating of its last sale and market conditions, particularly in options.
Feasible portfolio: A portfolio that an investor can construct given the assets available.
Feasible set of portfolios: The collection of all feasible portfolios.
Feasible target payout ratios: Payout ratios that are consistent with the level of excess funds available to make cash dividend payments.
Federal agency securities: Securities issued by corporations and agencies created by the U.S. government, such as the Federal Home Loan Bank Board and Ginnie Mae.
Federal credit agencies: Agencies of the federal government set up to supply credit to various classes of institutions and individuals, e.g. S&Ls, small business firms, students, farmers, and exporters.
Federal Deposit Insurance Corporation (F.D.I.C.): A federal institution that insures bank deposits.
Federal Financing Bank: A federal institution that lends to a wide array of federal credit agencies funds it obtains by borrowing from the U.S. Treasury.
Federal funds: Non-interest bearing deposits held in reserve for depository institutions at their district Federal Reserve Bank. Also, excess reserves lent by banks to each other.
Federal funds market: The market where banks can borrow or lend reserves, allowing banks temporarily short of their required reserves to borrow reserves from banks that have excess reserves.
Federal funds rate: This is the interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans. The Fed Funds rate, as it is called, often points to the direction of U.S. interest rates. Mainly applies to convertible securities. The most sensitive indicator of the direction of interest rates, since it is set daily by the market, unlike the prime rate and the discount rate.
Federal Home Loan Banks: The institutions that regulate and lend to savings and loan associations. The Federal Home Loan Banks play a role analogous to that played by the Federal Reserve Banks vis-à-vis member commercial banks.
Federal National Mortgage Association (Fannie Mae): The publicly-owned, government-sponsored corporation chartered in 1938 to purchase mortgages from lenders and resell them to investors. Known by the nickname Fannie Mae, it packages mortgages backed by the Federal Housing Administration, but also sells some non-governmentally backed mortgages.
Federally related institutions: Arms of the federal government that are exempt from S.E.C. registration and whose securities are backed by the full faith and credit of the U.S. government (with the exception of the Tennessee Valley Authority).
Federal Reserve System: The central bank of the U.S., established in 1913, and governed by the Federal Reserve Board located in Washington, D.C. The system includes 12 Federal Reserve Banks and is authorized to regulate monetary policy in the U.S. as well as to supervise Federal Reserve member banks, bank holding companies, international operations of U.S. banks, and U.S. operations of foreign banks.
Fedwire: A wire transfer system for high-value payments operated by the Federal Reserve System.
FHA prepayment experience: The percentage of loans in a pool of mortgages outstanding at the origination anniversary, based on annual statistical historic survival rates for FHA-insured mortgages.
Fiat money: Nonconvertible paper money.
Field warehouse: Warehouse rented by a warehouse company on another firm's premises.
Figure: See: Full, Handle.
Figuring the tail: Calculating the yield at which a future money market (one available some period hence) is purchased when that future security is created by buying an existing instrument and financing the initial portion of its life with a term repo.
Fill: The price at which an order is executed.
Fill or kill order (F.O.K.): A trading order that is canceled unless executed within a designated time period. Used in the context of general equities. A market or limited price order which is to be executed in its entirety as soon as it is represented in the trading crowd, and, if not so executed, is to be treated as cancelled. For purposes of this definition, a stop is considered an execution. Equivalent to A.O.N. and I.O.C. simultaneously.
Filter: A rule that stipulates when a security should be bought or sold according to past price action.
Finance: A discipline concerned with determining value and making decisions. The finance function allocates resources, including the acquiring, investing, and managing resources.
Financial analysts: Also called securities analysts and investment analysts, professionals who analyze financial statements, interview corporate executives, and attend trade shows, in order to write reports recommending either purchasing, selling, or holding various stocks.
Financial assets: Claims on real assets.
Financial control: The management of a firm's costs and expenses in order to control them in relation to budgeted amounts.
Financial distress: Events preceding and including bankruptcy, such as violation of loan contracts.
Financial distress costs: Legal and administrative costs of liquidation or reorganization. Also includes implied costs associated with impaired ability to do business (indirect costs).
Financial engineering: Combining or dividing existing instruments to create new financial products.
Financial future: A contract entered into now that provides for the delivery of a specified asset in exchange for the selling price at some specified future date.
Financial intermediaries: Institutions that provide the market function of matching borrowers and lenders or traders.
Financial lease: Long-term, non-cancelable lease.
Financial leverage: Use of debt to increase the expected return on equity. Financial leverage is measured by the ratio of debt to debt plus equity.
Financial leverage clientele: A group of investors who have a preference for investing in firms that adhere to a particular financial leverage policy.
Financial leverage ratios: Related: capitalization ratios.
Financial market: An organized institutional structure or mechanism for creating and exchanging financial assets.
Financial objectives: Objectives of a financial nature that the firm will strive to accomplish during the period covered by its financial plan.
Financial plan: A financial blueprint for the financial future of a firm.
Financial planning: The process of evaluating the investing and financing options available to a firm. It includes attempting to make optimal decisions, projecting the consequences of these decisions for the firm in the form of a financial plan, and then comparing future performance against that plan.
Financial press: That portion of the media devoted to reporting financial news.
Financial ratio: The result of dividing one financial statement item by another. Ratios help analysts interpret financial statements by focussing on specific relationships.
Financial risk: The risk that the cash flow of an issuer will not be adequate to meet its financial obligations. Also referred to as the additional risk that a firm's stockholder bears when the firm utilizes debt and equity.
Financial times (F-T)-actuaries indices: Used for listed equity securities. Share price indices for U.K. companies together with earnings yield, price earnings ratio, and dividend yield. The denominator in the index formula is the market capitalization at the base date, adjusted for all capital changes affecting the particular index since the base date. See: footsie.
Financing decisions: Decisions concerning the liabilities and stockholders' equity side of the firm's balance sheet, such as the decision to issue bonds.
FINEX: The financial futures and options division of the New York Cotton Exchange (NYCE), with a trading floor in Dublin, FINEX Europe, creating a 24-hour market in most FINEX contracts.
Finish: Used in the context of general equities. See: Fill.
Firm: Refers to an order to buy or sell that can be executed without confirmation for some fixed period. Also, a synonym for company.
Firm commitment underwriting: An undewriting in which an investment banking firm commits to buy the entire issue and assumes all financial responsibility for any unsold shares.
Firm market: Used in the context of general equities. Prices at which a security can actually be bought or sold in decent sizes, as compared to an inside market with very little depth. See: Actual market
Firm order: Used in the context of general equities. 1) Order to buy or sell for the proprietary account of the broker-dealerfirm; 2) buy or sell order not conditional upon the customer's confirmation.
Firm's net value of debt: Total firm value minus total firm debt.
Firm-specific risk: See:diversifiable risk or unsystematic risk.
First-call: With collateralized mortgage obligation (C.M.O.s), the start of the cash flow cycle for the cash flow window.
First-In-First-Out (F.I.F.O.): An accounting method for valuing the cost of goods sold that uses the cost of the oldest item in inventory first.
First notice day: The first day, varying by contracts and exchanges, on which notices of intent to deliver actual financial instruments or physical commodities against futures are authorized.
First-pass regression: A time series regression to estimate the betas of securities portfolios.
Fiscal agency agreement: An alternative to a bond trust deed. Unlike the trustee, the fiscal agent acts as an agent of the borrower.
Fiscal policy: The use of government spending and taxing for the specific purpose of stabilizing the economy.
Fisher effect: A theory that nominal interest rates in two or more countries should be equal to the required real rate of return to investors plus compensation for the expected amount of inflation in each country.
Fisher's separation theorem: The firm's choice of investments is separate from its owner's attitudes towards investments. Also referred to as portfolio separation theorem.
Fitch sheet: Used in the context of general equities. Chronological listing of trades in a security showing the price, size, exchange, and time (to the second) of the trades; obtained by hitting "#M" on Quotron.
Five Cs of credit: Five characteristics that are used to form a judgement about a customer's creditworthiness: character, capacity, capital, collateral, and conditions.
Fixed asset: Long-lived property owned by a firm that is used by a firm in the production of its income. Tangible fixed assets include real estate, plant, and equipment. Intangible fixed assets include patents, trademarks, and customer recognition.
Fixed asset turnover ratio: The ratio of sales to fixed assets.
Fixed-annuities: Annuity contracts in which the insurance company or issuing financial institution pays a fixed dollar amount of money per period.
Fixed-charge coverage ratio: A measure of a firm's ability to meet its fixed-charge obligations: the ratio of (net earnings before taxes plus interest charges paid plus long-term lease payments) to (interest charges paid plus long-term lease payments).
Fixed cost: A cost that is fixed in total for a given period of time and for given production levels.
Fixed-dates: In the Euromarket the standard periods for which Euros are traded (1 month out to a year out) are referred to as the fixed dates.
Fixed-dollar obligations: Conventional bonds for which the coupon rate is set as a fixed percentage of the par value.
Fixed-dollar security: A nonnegotiable debt security that can be redeemed at some fixed price or according to some schedule of fixed values, e.g., bank deposits and government savings bonds.
Fixed-exchange rate: A country's decision to tie the value of its currency to another country's currency, gold (or another commodity), or a basket of currencies.
Fixed-income equivalent: Also called a busted convertible, convertible security that is trading like a straight security because the optioned common stock is trading well below the conversion price.
Fixed-income instruments: Assets that pay a fixed-dollar amount, such as bonds and preferred stock.
Fixed-income market: The market for trading bonds and preferred stock.
Fixed price basis: An offering of securities at a fixed price.
Fixed-price tender offer: A one-time offer to purchase a stated number of shares at a stated fixed price, usually a premium to the current market price.
Fixed-rate loan: A loan where the rate paid by the borrower is fixed for the life of the loan.
Fixed-rate payer: In an interest rate swap the counterparty who pays a fixed rate, usually in exchange for a floating-rate payment.
Flat: Used in the context of general equities.
Convertibles: earning interest on the date of payment only.
General: having neither a short nor long position in a stock. Clean.
Market: characterized by horizontal price movement, usually the result of low activity.
Equities: to execute without commission or markup.
Flat benefit formula: Method used to determine a participant's benefits in a defined benefit plan by multiplying months of service by a flat monthly benefit.
Flat price (also clean price): The quoted newspaper price of a bond that does not include accrued interest. The price paid by purchaser is the full price.
Flat price risk: Taking a position either long or short that does not involve spreading.
Flattening of the yield curve: A change in the yield curve where the spread between the yield on a long-term and short-term Treasury has decreased. Compare steepening of the yield curve and butterfly shift.
Flat trades: (1) A bond in default trades flat; that is, the price quoted covers both principal and unpaid, accrued interest. (2) Any security that trades without accrued interest or at a price that includes accrued interest is said to trade flat.
Flight to quality: The tendency of investors to move towards safer, government bonds during periods of high economic uncertainty.
Flip-flop note: Note that allows investors to switch between two different types of debt.
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Flipside: Used in the context of general equities. Opposite side to that which was just mentioned (buy, if sell mentioned and vice versa).
Float: Used in the context of general equities.
Currency: exchange rate policy whereby the authorities do not accept an obligation to limit the range of the market rate.
Equities: number of shares of a corporation that are outstanding and available for trading by the public, excluding insiders or restricted stock on a when issued basis. A stock's volatility is inversely correlated to its Float.
Floater: Floating rate bond.
Floating exchange rate: A country's decision to allow its currency value to freely change. The currency is not constrained by central bank intervention and does not have to maintain its relationship with another currency in a narrow band. The currency value is determined by trading in the foreign exchange market.
Floating lien: General lien against a company's assets or against a particular class of assets.
Floating-rate contract: A guaranteed investment contract where the credit rating is tied to some variable ("floating") interest rate benchmark, such as a specific-maturity Treasury yield.
Floating-rate note (F.R.N.): Note whose interest payment varies with short-term interest rates.
Floating-rate payer: In an interest rate swap, the counterparty who pays a rate based on a reference rate, usually in exchange for a fixed-rate payment
Floating-rate preferred: Preferred stock paying dividends that vary with short-term interest rates.
Floating supply: The amount of securities believed to be available for immediate purchase, that is, in the hands of dealers and investors wanting to sell.
Floor broker: Used for listed equity securities. Member of an exchange who is an employee of a member firm and executes orders, as agent, on the floor of the exchange for clients.
Floor picture: Used for listed equity securities. Details of the trading crowd for a stock, such as the major players, their sizes, and the outside market +/- an eighth.
Floor planning: Arrangement used to finance inventory. A finance company buys the inventory, which is then held in trust for the user.
Floor ticket: Used for listed equity securities. Summary of a stock or commodities exchange order ticket by the registered representative on receipt of a buy or sell order from a client; gives the floor broker the information needed to execute a securities transaction.
Floor trader: A member who generally trades only for his own account, for an account controlled by him or who has such a trade made for him. Also referred to as a "local".
Flower bond: Government bonds that are acceptable at par in payment of federal estate taxes when owned by the decedent at the time of death.
Flow-through basis: An account for the investment credit to show all income statement benefits of the credit in the year of acquisition, rather than spreading them over the life of the asset acquired.
Flow-through method: The practice of reporting to shareholders using straight-line depreciation and using accelerated depreciation for tax purposes and "flowing through" the lower income taxes actually paid on to financial statement prepared for shareholders.
Focus list: Used in the context of general equities. Investment banks published list of buy and sell recommendations from its research department; signified by a flashing "F" on Quotron.
Footsie: Mainly applies to international equities. Financial times (f-t)-actuaries 100 index: "Dow average" of London.
For a number: Used in the context of general equities. Implies that the quantity mentioned is not his total but instead is only approximate, and to open him up more will obligate one to participate.
"For/At": Used in the context of general equities. Conjunctions used in an order, market summary, or trade recap that signify a bid or an offer, respectively. See: On.
Forced conversion: Mainly applies to convertible securities. Occurs when a convertible security is called in by the issuer, usually when the underlying stock is selling well above the conversion price. Thus, they assure the bonds will be retired without requiring any cash payment. Upon conversion into common, the carrying value of the bonds becomes part of a corporation's equity, thus strengthening the balance sheet and enhancing future debt issuing capability.
Force majeure risk: The risk that there will be an interruption of operations for a prolonged period after a project finance project has been completed due to fire, flood, storm, or some other factor beyond the control of the project's sponsors.
Foreign banking market: That portion of domestic bank loans supplied to foreigners for use abroad.
Foreign bond: A bond issued on the domestic capital market of another company.
Foreign bond market: That portion of the domestic bond market that represents issues floated by foreign companies or governments.
Foreign Credit Insurance Association (F.C.I.A.): A private U.S. consortium of insurance companies that offers trade credit insurance to U.S. exporters in conjunction with the U.S. (Ex-Im Bank) Export-Import Bank.
Foreign currency: Foreign money.
Foreign currency forward contract: Mainly applies to international equities. Agreement that obliges its parties to exchange given quantities of currencies at a pre-specified exchange rate on a certain future date.
Foreign currency futures contract: Mainly applies to international equities. Standardized and easily transferable obligation between two parties to exchange currencies at a specified rate during a specified delivery month; standardized contract on specified underlying currencies, in multiples of standard amounts. Purchased and traded on a regulated exchange to which margins are posted.
Foreign currency option: An option that conveys the right (but not the obligation) to buy or sell a specified amount of foreign currency at a specified price within a specified time period.
Foreign currency translation: The process of restating foreign currency accounts of subsidiaries into the reporting currency of the parent company in order to prepare consolidated financial statements.
Foreign direct investment (F.D.I.): The acquisition abroad of physical assets such as plant and equipment, with operating control residing in the parent corporation.
Foreign equity market: That portion of the domestic equity market that represents issues floated by foreign companies.
Foreign exchange: Currency from another country.
Foreign exchange controls: Various forms of controls imposed by a government on the purchase/sale of foreign currencies by residents or on the purchase/sale of local currency by nonresidents.
Foreign exchange dealer: A firm or individual that buys foreign exchange from one party and then sells it to another party. The dealer makes the difference between the buying and selling prices, or spread.
Foreign exchange risk: The risk that a long or short position in a foreign currency might have to be closed out at a loss due to an adverse movement in the exchange rates.
Foreign exchange swap: An agreement to exchange stipulated amounts of one currency for another currency at one or more future dates.
Foreign market: Part of a nation's internal market, representing the mechanisms for issuing and trading securities of entities domiciled outside that nation. Compare external market and domestic market.
Foreign market beta: A measure of foreign market risk that is derived from the capital asset pricing model.
Foreign Sales Corporation (F.S.C.): A special type of corporation created by the Tax Reform Act of 1984 that is designed to provide a tax incentive for exporting U.S.-produced goods.
Foreign tax credit: Home country credit against domestic income tax. Received in return for foreign taxes paid on foreign derived earnings.
Forex: See: Foreign exchange.
Forfaiter: Purchaser of promises to pay issued by importers.
Formula basis: A method of selling a new issue of common stock in which the S.E.C. declares the registration statement effective on the basis of a price formula rather than on a specific range.
48-hour rule: The requirement that all pool information, as specified under the PSA Uniform Practices, in a to be announced (T.B.A.) transaction be communicated by the seller to the buyer before 3 p.m. EST on the business day 48-hours prior to the agreed upon trade date.
Forward: See: forward contract.
Forward contract: A cash market transaction in which delivery of the commodity is deferred until after the contract has been made. It is not standardized and is not traded on organized exchanges. Although the delivery is made in the future, the price is determined at the initial trade date.
Forward cover: Purchase or sale of forward foreign currency in order to offset a known future cash flow.
Forward delivery: A transaction in which the settlement will occur on a specified date in the future at a price agreed upon on the trade date.
Forward differential: Annualized percentage difference between spot and forward rates.
Forward discount: A currency trades at a forward discount when its forward price is lower than its spot price.
Forward exchange rate: Exchange rate fixed today for exchanging currency at some future date.
Forward Fed funds: Fed funds traded for future delivery.
Forward forward contract: In Eurocurrencies, a contract under which a deposit of fixed maturity is agreed to at a fixed price for future delivery.
Forward interest rate: Interest rate fixed today on a loan to be made at some future date.
Forward looking multiple: A truncated expression for a P/E ratio that is based on forward (expected) earnings rather than on trailing earnings.
Forward market: A market in which participants agree to trade some commodity, security, or foreign exchange at a fixed price for future delivery.
Forward premium: A currency trades at a forward premium when its forward price is higher than its spot price.
Forward rate: A projection of future interest rates calculated from either the spot rates or the yield curve.
Forward rate agreement (F.R.A.): Agreement to borrow or lend at a specified future date at an interest rate that is fixed today.
Forward sale: A method for hedging price risk which involves an agreement between a lender and an investor to sell particular kinds of loans at a specified price and future time.
Forward trade: A transaction in which the settlement will occur on a specified date in the future at a price agreed upon the trade date.
Fourth market: Direct trading of large in exchange-listed securities between investors without the use of a broker.
Freddie Mac (Federal Home Loan Mortgage Corporation): A Congressionally chartered corporation that purchases residential mortgages in the secondary market from S&Ls, banks, and mortgage bankers and securities these mortgages for sale into the capital markets.
Free cash flows: Cash not required for operations or for reinvestment. Often defined as earnings before interest (often obtained from the operating income line on the income statement) less capital expenditures less the change in working capital.
Free delivery: Used in the context of general equities. Securities industry procedure whereby delivery of securities sold is made to the buying customer's bank without the requirement of immediate payment, thus a credit agreement of sorts. Antithesis of delivery vs. Payment.
Free float: An exchange rate system characterized by the absence of government intervention. Also known as clean float.
Free on board: Implies that distributive services like transport and handling performed on goods up to the customs frontier of the economy from which the goods are classed as merchandise.
Free reserves: Excess reserves minus member bank borrowings at the Fed.
Free rider: A follower who avoids the cost and expense of finding the best course of action and by simply mimicking the behavior of a leader who made these investments.
Free to trade: Used in the context of general equities. Removed from any internal (restricted list) or external restrictions on trading, and hence the trader is free to solicit interest as well.
Frequency distribution: The organization of data to show how often certain values or ranges of values occur.
Fresh picture: Used for listed equity securities. Updated picture of a stock or market, usually following recent trading activity or news which has changed the previous look.
Fresh signal: Used in the context of general equities. Piece of information (fundamental or technical) leading one to believe a stock will move in a certain manner.
Friction costs: Costs, both implied and direct, associated with a transaction. Such costs include time, effort, money, and associated tax effects of gathering information and making a transaction.
Frictions: The "stickiness" in making transactions; the total hassle including time, effort, money, and tax effects of gathering information and making a transaction such as buying a stock or borrowing money.
Front ending: Used in the context of general equities. Trading a partial of relatively small size in comparison to the remainder of the total order, at times without giving the opposite side (the buyer/seller of this small "partial") adequate disclosure of the extent of the latter end of the total order, and thus disadvantaging this party when this sizable latter end moves the stock's price against his initial buy or sell price of the smaller, "front end".
Front fee: The fee initially paid by the buyer upon entering a split-fee option contract.
Front running: Used in the context of general equities. Entering into option or futures contracts with advance knowledge of a block transaction that will influence the price of the underlying security to capitalize on the trade. This practice is forbidden by the S.E.C. and should never be followed within any brokerage firm.
Fry a bigger fish: Used in the context of general equities. Work on a trade of larger size than that which was just disclosed.
Full: Handle.
Full faith-and-credit obligations: The security pledges for larger municipal bond issuers, such as states and large cities which have diverse funding sources.
Full coupon bond: A bond with a coupon equal to the going market rate, thereby, the bond is selling at par.
Full-service lease: Also called rental lease. Lease in which the lessor promises to maintain and insure the equipment leased.
Fully diluted earnings per shares: Earnings per share expressed as if all outstanding convertible securities and warrants have been exercised.
Fully modified pass-throughs: Agency pass-throughs that guarantee the timely payment of both interest and principal. Related: modified pass-throughs
Fully valued: Used in the context of general equities. Said of a stock that has reached a price at which analysts think the underlying company's fundamental earnings power has been fully recognized by the market.
Full-payout lease: See: financial lease
Full price: Also called dirty price, the price of a bond including accrued interest. Related: flat price.
Functional currency: As defined by FASB No. 52, an affiliate's functional currency is the currency of the primary economic environment in which the affiliate generates and expends cash.
Fundamental analysis: Security analysis that seeks to detect misvalued securities through an analysis of the firm's business prospects. Research analysis often focuses on earnings, dividend prospects, expectations for future interest rates, and risk evaluation of the firm. Used in the context of general equities. Antithesis of technical analysis. In macroeconomic analysis, information such as interest rates, G.N.P., inflation, unemployment, and inventories are used to predict the direction of the economy, and henceforth the Stock market. In microeconomic analysis, information such as balance sheet, income statement, products, management and other market items are used to forecast a company's imminent success or failure, and hence the future price action of the stock.
Fundamental beta: The product of a statistical model to predict the fundamental risk of a security using not only price data but other market-related and financial data.
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Fundamental descriptors: In the model for calculating fundamental beta, ratios in risk indexes other than market variability, which rely on financial data other than price data.
Funded debt: Debt maturing after more than one year.
Fund family: Set of funds with different investment objectives offered by one management company. In many cases, investors may move their assets from one fund to another within the family at little or no cost.
Funding ratio: The ratio of a pension plan's assets to its liabilities.
Funding risk: Related: interest rate risk
Funds From Operations (F.F.O.): Used by real estate and other investment trusts to define the cash flow from trust operations. It is earnings with depreciation and amortization added back. A similar term increasingly used is Funds Available for Distribution (FAD), which is F.F.O. less capital investments in trust property and the amortization of mortgages.
Future: A term used to designate all contracts covering the sale of financial instruments or physical commodities for future delivery on a commodity exchange.
Future investment opportunities: The options to identify additional, more valuable investment opportunities in the future that result from a current opportunity or operation.
Futures: A term used to designate all contracts covering the sale of financial instruments or physical commodities for future delivery on a commodity exchange.
Futures commission merchant: A firm or person engaged in soliciting or accepting and handling orders for the purchase or sale of futures contracts, subject to the rules of a futures exchange and, who, in connection with such solicitation or acceptance of orders, accepts any money or securities to provide margin for any resulting trades or contracts. The FCM must be licensed by the C.F.T.C.. Related: commission house, omnibus account
Futures contract: Agreement to buy or sell a set number of shares of a specific stock in a designated future month at a price agreed upon today by the buyer and seller. The contracts themselves are often traded on the futures market. A futures contract differs from an option because an option is the right to buy or sell, whereas a futures contract is the promise to actually make a transaction. A future is part of a class of securities called derivatives, so named because such securities derive their value from the worth of an underlying investment.
Futures contract multiple: A constant, set by an exchange, which when multiplied by the futures price gives the dollar value of a stock index futures contract.
Futures market: A market in which contracts for future delivery of a commodity or a security are bought or sold.
Futures option: An option on a futures contract. Related: options on physicals.
Futures price: The price at which the parties to a futures contract agree to transact upon the settlement date.
Future value: The amount of cash at a specified date in the future that is equivalent in value to a specified sum today.

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