Campbell R. Harvey's Hypertextual Finance Glossary

Return to Glossary front

R: Fifth letter of a NASDAQ stock symbol specifying that the stock has rights.
R.A.M.: See: Reverse-annuity mortgage
R.A.P.: See: Regulatory accounting procedures
R.E.I.T.: See: Real Estate Investment Trust
R.E.M.I.C.: See: Real Estate Mortgage Investment Conduit
R.O.A.: See: Return on assets
R.O.E.: See: Return on equity
R.O.I.: See: Return on investment
R.P.P.P.: See: Relative purchasing power parity
Radar alert: Often used in risk arbitrage. Close monitoring of trading patterns in a company's stock by senior managers to uncover unusual buying activity that might signal a takeover attempt. See: shark watcher.
Raider: Often used in risk arbitrage. Individual or corporation investor who "intends" to take control (often ostensibly for greenmail) of a company by buying a controlling interest in its stock and installing new management. Raiders who accumulate 5% or more of the outstanding shares in the target company must report their purchases to the S.E.C., The exchange of listing, and the target itself. See: takeover.
Rally (recovery): An upward movement of prices. Opposite of reaction.
Reverse-Annuity Mortgages (R.A.M.s): Mortgages in which the bank makes a loan for an amount equal to a percentage of the appraisal value of the home. The loan is then paid to the homeowner in the form of an annuity.
Random variable: A function that assigns a real number to each and every possible outcome of a random experiment.
Random walk: Theory that stock price changes from day to day are at random; the changes are independent of each other and have the same probability distribution. Many believers of the random walk theory believe that it is impossible to outperform the market consistently without taking additional risk.
Randomized strategy: A strategy of introducing into the decision-making process a random element that is designed to reduce the information content of the decision-maker's observed choices.
Range: The high and low prices, or high and low bids and offers recorded during a specified time.
Range forward: A forward exchange rate contract that places upper and lower bounds on the cost of foreign exchange.
Rate anticipation swaps: An exchange of bonds in a portfolio for new bonds that will achieve the target portfolio duration, based on the investor's assumptions about future changes in interest rates.
Rate lock: An agreement between the mortgage banker and the loan applicant guaranteeing a specified interest rate for a designated period, usually 60 days.
Rate of interest: The rate, as a proportion of the principal, at which interest is computed.
Rate of return: Calculated as the (value now minus value when you purchased) divided by the value when you purchased. For equities, we often include dividends with the value now. See also: return, annual rate of return
Rate of return ratios: Ratios that are designed to measure the profitability of the firm in relation to various measures of the funds invested in the firm.
Rate risk: In banking, the risk that profits may decline or losses occur because a rise in interest rates forces up the cost of funding fixed-rate loans or other fixed-rate assets.
Ratings: An evaluation of credit quality Moody's, S&P, and Fitch Investors Service give to companies used by investors and analysts.
Rational expectations: The idea that people rationally anticipate the future and respond today to what they see ahead. This concept was pioneered by Nobel Laureate, Robert E. Lucas, Jr.
Raw material supply agreement: As used in connection with project financing, an agreement to furnish a specified amount per period of a specified raw material.
Reaction: A decline in prices following an advance. Opposite of rally.
Reading the tape: Used in the context of general equities. Judging the performance of stocks by monitoring changes in price as they are displayed on the ticker tape.
Real: Used in the context of general equities. (1) Natural, or not profile; (2) Not dividend roll nor program trading related; (3) not tax-related. "Real" indications have three major repercussions: a) pricing will be more favorable to the other side of the trade since Investment bank is not committing any capital; b) price pressure will be stronger if real since a natural buyer/seller may have information leading to his decision or more behind it, and c) an uptick may be required for the trader to transact if the indication is not real and he has no long position.
Real assets: Identifiable assets, such as buildings, equipment, patents, and trademarks, as distinguished from a financial obligation.
Real capital: Wealth that can be represented in financial terms, such as savings account balances, financial securities, and real estate.
Real cash flow: A cash flow is expressed in real terms if the current, or date 0, purchasing power of the cash flow is given.
Real exchange rates: Exchange rates that have been adjusted for the inflation differential between two countries.
Real interest rate: The rate of interest excluding the effect of expected inflation; that is, the rate that is earned in terms of constant-purchasing-power dollars. Interest rate expressed in terms of real goods, i.e. nominal interest rate adjusted for expected inflation.
Realistic on price: Used in the context of general equities. Understands that the size being considered requires price give, especially with illiquid stocks. See: takes price.
Real market: The bid and offer prices at which a dealer could do "size." Quotes in the brokers market may reflect not the real market, but pictures painted by dealers playing trading games.
Real time: A real time stock or bond quote is one that states a security's most recent offer to sell or bid (buy). A delayed quote shows the same bid and ask prices 15 minutes and sometimes 20 minutes after a trade takes place.
Realized compound yield: Yield assuming that coupon payments are invested at the going market interest rate at the time of their receipt and rolled over until the bond matures.
Realized return: The return that is actually earned over a given time period.
Rebalancing: Realigning the proportions of assets in a portfolio as needed.
Rebate: Used in the context of general equities. Negotiated return of a portion of the interest earned by the lender of stock to a short seller. When a stock is sold short, the seller borrows stock from an owner or custodian and delivers it to the buyer. The proceeds are delivered to the lender. The borrower, who is short, often wants a rebate of the interest earned on the proceeds under the lender's control, especially when the stock can be borrowed from many sources. Note: the seller must pay the lender any dividends paid out or, in the case of bonds, interest which accrues daily during the course of the borrow.
Recapitalization proposal: Often used in risk arbitrage. Plan by a target company to restructure the firm's capitalization (debt and equity) in a way to ward off a hostile or potential suitor.
Receivables balance fractions: The percentage of a month's sales that remain uncollected (and part of accounts receivable) at the end of succeeding months.
Receivables turnover ratio: Total operating revenues divided by average receivables. Used to measure how effectively a firm is managing its accounts receivable.
Receiver: A bankruptcy practitioner appointed by secured creditors in the United Kingdom to oversee the repayment of debts.
Reclamation: A claim for the right to return or the right to demand the return of a security that has been previously accepted as a result of bad delivery or other irregularities in the delivery and settlement process.
Record date: (1) Date by which a shareholder must officially own shares in order to be entitled to a dividend. For example, a firm might declare a dividend on Nov 1, payable Dec 1 to holders of record Nov 15. Once a trade is executed an investor becomes the "owner of record" on settlement, which currently takes 5 business days for securities, and one business day for mutual funds. Stocks trade ex-dividend the fourth day before the record date, since the seller will still be the owner of record and is thus entitled to the dividend. (2) The date that determines who is entitled to payment of principal and interest due to be paid on a security. The record date for most M.B.S.s is the last day of the month, however the last day on which they may be presented for the transfer is the last business day of the month. The record date for C.M.O.s and asset-backed securities vary with each issue.
Recourse: Term describing a type of loan. If a loan is with recourse, the lender has a general claim against the parent company if the collateral is insufficient to repay the debt.
Red herring: A preliminary prospectus containing information required by the S.E.C.. It excludes the offering price and the coupon of the new issue.
Redeemable: Eligible for redemption under the terms of the indenture.
Redemption: Mainly applies to convertible securities. Repayment of a debt security or preferred stock issue, at or before maturity, at par or at a premium price.
Redemption charge: The commission charged by a mutual fund when redeeming shares. For example, a 2% redemption charge (also called a "back end load") on the sale of shares valued at $1000 will result in payment of $980 (or 98% of the value) to the investor. This charge may decrease or be eliminated as shares are held for longer time periods.
Redemption cushion: The percentage by which the conversion value of a convertible security exceeds the redemption price (strike price).
Redemption or call: Right of the issuer to force holders on a certain date to redeem their convertibles for cash. The objective usually is to force holders to convert into common prior to the redemption deadline. Typically, an issue is not called away unless the conversion price is 15-25% below the current level of common. An exception might be where an issuer's tax rate is high, and the issuer could replace it with debt securities at a lower after-tax cost.
Reference rate: A benchmark interest rate (such as LIBOR), used to specify conditions of an interest rate swap or an interest rate agreement.
Refundable: Eligible for refunding under the terms of indenture.
Refunded bond: Also called a prerefunded bond, one that originally may have been issued as a general obligation or revenue bond but that is now secured by an "escrow fund" consisting entirely of direct U.S. government obligations that are sufficient for paying the bondholders.
Refunding: The redemption of a bond with proceeds received from issuing lower-cost debt obligations with ranking equal to or superior to the debt to be redeemed.
Regional fund: A mutual fund that invests in a specific geographical area overseas, such as Asia or Europe.
Regional stock exchanges: Used for listed equity securities. Organized national securities exchanges located outside of New York city and registered with the S.E.C. They include: Boston, Cincinnati, Intermountain (Salt Lake City - dormant, owned by COMEX), Midwest (Chicago), Pacific (Los Angeles and San Francisco), Philadelphia (Philadelphia and Miami), and Spokane (local mining & Canadian issues, non-reporting trades) stock exchanges.
Registered bond: A bond whose issuer records ownership and interest payments. Differs from a bearer bond which is traded without record of ownership and whose possession is the only evidence of ownership.
Registered representative: A person registered with the C.F.T.C. who is employed by, and soliciting business for, a commission house or futures commission merchant.
Registered security: Used in the context of general equities. Securities whose owner's name is recorded on the books of the issuer or the issuer's agent, called a registrar.
Registered trader: A member of the exchange who executes frequent trades for his or her own account.
Registrar: Financial institution appointed to record issue and ownership of company securities.
Registration: Used in the context of general equities. Process set up the Securities Exchange Acts of 1933 and 1934 whereby securities that are to be sold to the public are reviewed by the S.E.C.
Registration statement: A legal document that is filed with the S.E.C. to register securities for public offering. Used in the context of general equities. This document details the purpose of a proposed public offering of securities. The statement outlines financial details, a history of the company's operations and management, and other facts of importance to potential buyers. See: registration.
Regression: Usually linear regression is used to explain and/or predict. The general form is Y = a + bX + u, where Y is the variable that we are trying to predict; X is the variable that we are using to predict Y, a is the intercept; b is the slope and u is the regression residual. The a and b are chosen in a way to minimize the squared sum of the residuals. The ability to fit or explain is measured by the R-squared.
Regression analysis: A statistical technique that can be used to estimate relationships between variables.
Regression equation: An equation that describes the average relationship between a dependent variable and a set of explanatory variables.
Regression toward the mean: The tendency for subsequent observations of a random variable to be closer to its mean.
Regular settlement: Used in the context of general equities. Transaction in which the stock contract is settled and delivered on the fifth full business day following the date of the transaction (trade date). In Japan, regular settlement occurs three business days following the trade date, and in London, two weeks following the trade date (at times, three weeks). In France, once per month.
Regular way settlement: In the money and bond markets, the regular basis on which some security trades are settled is that the delivery of the securities purchased is made against payment in Fed funds on the day following the transaction.
Regulation A: The securities regulation that exempts small public offerings, those valued at less than $1.5MM, from most registration requirements with the S.E.C..
Regulation D: Fed regulation that currently requires member banks to hold reserves against their net borrowings from foreign offices of other banks over a 28-day averaging period. Regulation D has been merged with Regulation M.
Regulation M: Fed regulation that currently requires member banks to hold reserves against their net borrowings from their foreign branches over a 28-day averaging period. Reg M has also required member banks to hold reserves against Eurodollars lent by their foreign branches to domestic corporations for domestic purposes.
Regulation Q: Fed regulation imposing caps on the rates that banks may pay on savings and time deposits. Currently time deposits with a denomination of $100,000 or more are exempt from Reg Q.
Regulatory accounting procedures (R.A.P.): Accounting principals required by the F.H.L.B. that allow S&Ls to elect annually to defer gains and losses on the sale of assets and amortize these deferrals over the average life of the asset sold.
Regulatory pricing risk: Risk that arises when regulators restrict the premium rates that insurance companies can charge.
Regulatory surplus: The surplus as measured using regulatory accounting principles (R.A.P.) which may allow the non-market valuation of assets or liabilities and which may be materially different from economic surplus.
Reinvestment rate: The rate at which an investor assumes interest payments made on a debt security can be reinvested over the life of that security.
Reinvestment risk: The risk that proceeds received in the future will have to be reinvested at a lower potential interest rate.
Reinvoicing center: A central financial subsidiary used by an M.N.C. to reduce transaction exposure by having all home country exports billed in the home currency and then reinvoiced to each operating affiliate in that affiliate's local currency. It can also be used as a netting center.
Real Estate Investment Trust (R.E.I.T.): Real estate investment trust, which is similar to a closed-end mutual fund. R.E.I.T.s invest in real estate or loans secured by real estate and issue shares in such investments.
Relative purchasing power parity (R.P.P.P.): Idea that the rate of change in the price level of commodities in one country relative to the price level in another determines the rate of change of the exchange rate between the two countries' currencies.
Relative strength: A stock's price movement over the past year as compared to a market index (like the S&P 500). Value below 1.0 means the stock shows relative weakness in price movement (underperformed the market); a value above 1.0 means the stock shows relative strength over the 1-year period. Equation for Relative Strength: [current stock price/year-ago stock price] divided by [current S&P 500/year-ago S&P 500]. Note this is a potentially misleading indicator of performance because it does not take risk into account.
Relative value: The attractiveness measured in terms of risk, liquidity, and return of one instrument relative to another, or for a given instrument, of one maturity relative to another.
Relative yield spread: The ratio of the yield spread to the yield level. Used for bonds.
Release: Used in the context of general equities. Allow another party to a trade to be free from any previously-made obligation concerning that trade, hence allowing them to show the inquiry/order to a new broker.
Remainderman: One who receives the principal of a trust when it is dissolved.
Remaining maturity: The length of time remaining until a bond's maturity.
Remaining principal balance: The amount of principal dollars remaining to be paid under a mortgage as of a given point in time.
Rembrandt market: The foreign market in the Netherlands.
Real Estate Mortgage Investment Conduit (R.E.M.I.C.): A pass-through tax entity that can hold mortgages secured by any type of real property and can issue multiple classes of ownership interests to investors in the form of pass-through certificates, bonds, or other legal forms. A financing vehicle created under the Tax Reform Act of 1986.
Remote disbursement: Technique that involves writing checks drawn on banks in remote locations so as to increase disbursement float.
Renewal: Used in the context of general equities. Placement of an identical day order to that which was not completed on the previous day.
Rental lease: See: full-service lease.
Reoffering yield: In a purchase and sale, the yield to maturity at which the underwriter offers to sell the bonds to investors.
Reopen an issue: The Treasury, when it wants to sell additional securities, will occasionally sell more of an existing issue (reopen it) rather than offer a new issue.
Reorganization: Creating a plan to restructure a debtor's business and restore its financial health.
Replacement cost: Cost to replace a firm's assets.
Replacement cycle: The frequency with which an asset is replaced by an equivalent asset.
Replacement value: Current cost of replacing the firm's assets.
Replacement-chain problem: Idea that future replacement decisions must be taken into account in selecting among projects.
Replicating portfolio: A portfolio constructed to match an index or benchmark.
Repo: An agreement in which one party sells a security to another party and agrees to repurchase it on a specified date for a specified price. See: repurchase agreement.
Report: Used in the context of general equities. Written or oral confirmation that all or part of one's order has been executed, including the price and size parameters of the trade being reported; often followed by a fresh picture.
Reported factor: The pool factor as reported by the bond buyer for a given amortization period.
Reporting currency: The currency in which the parent firm prepares its own financial statements; that is, U.S. dollars for a U.S. company.
Reproducible assets: A tangible asset with physical properties that can be reproduced, such as a building or machinery.
Repurchase agreement: An agreement with a commitment by the seller (dealer) to buy a security back from the purchaser (customer) at a specified price at a designated future date. Also called a repo, it represents a collateralized short-term loan, where the collateral may be a Treasury security, money market instrument, federal agency security, or mortgage-backed security. From the purchaser (customer) perspective, the deal is reported as a reverse Repo.
Repurchase of stock: Device to pay cash to firm's shareholders that provides more preferable tax treatment for shareholders than dividends. Treasury stock is the name given to previously issued stock that has been repurchased by the firm. A repurchase is achieved through either a dutch auction, open market, purchase, or tender offer.
Required reserves: The dollar amounts, based on reserve ratios, that banks are required to keep on deposit at a Federal Reserve Bank.
Required return: The minimum expected return you would require in order to purchase the asset, that is, to make the investment.
Required yield: Generally referring to bonds, the yield required by the marketplace to match available expected returns for financial instruments with comparable risk.
Research portable: Used in the context of general equities. Service offered to clients which transmits Investment bank research via on-line computers.
Reserve: An accounting entry that properly reflects contingent liabilities.
Reserve currency: A foreign currency held by a central bank or monetary authority for the purposes of exchange intervention and the settlement of inter-governmental claims.
Reserve ratios: Specified percentages of deposits, established by the Federal Reserve Board, that banks must keep in a non-interest-bearing account at one of the twelve Federal Reserve Banks.
Reserve requirements: The percentage of different types of deposits that member banks are required to hold on deposit at the Fed.
Reset frequency: The frequency with which the floating rate changes.
Residuals: (1) Parts of stock returns not explained by the explanatory variable (the market-index return). They measure the impact of firm-specific events during a particular period. (2) Remainder cash flows generated by pool collateral and those needed to fund bonds supported by the collateral.
Residual assets: Assets that remain after sufficient assets are dedicated to meet all senior debtholder's claims in full.
Residual claim: Related: equity claim.
Residual dividend approach: An approach that suggests that a firm pay dividends if and only if acceptable investment opportunities for those funds are currently unavailable.
Residual losses: Lost wealth of the shareholders due to divergent behavior of the managers.
Residual method: A method of allocating the purchase price for the acquisition of another firm among the acquired assets.
Residual risk: Related: unsystematic risk.
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Residual value: Usually refers to the value of a lessor's property at the time the lease expires.
Resistance level: A price level above which it is supposedly difficult for a security or market to rise. Used in the context of general equities. Price ceiling at which technical analysts note persistent selling of a commodity or security. Antithesis of support level.
Restricted: Used in the context of general equities. Placement on a list which dictates that the trader may not maintain positions, solicit business, or provide indications in a stock, but may serve as broker in agency trades after being properly cleared. Placement on a restricted list is due to Investment bank involvement with the company on non-public activity (i.e., mergers and acquisitions defense), affiliate ownership, or underwriting activities; signified on the Quotron by a flashing "R." A restricted list and the stocks on it should never be conveyed to anyone outside of the trading areas, much less outside of the firm. See: grey list.
Restricted stock: Used in the context of general equities. Stock which must be traded in compliance with special S.E.C. regulations concerning its purchase and resale. These restrictions generally result from affiliate ownership, M&A activity, and underwriting activity.
Restrictive covenants: Provisions that place constraints on the operations of borrowers, such as restrictions on working capital, fixed assets, future borrowing, and payment of dividend.
Retail: Individual and institutional customers as opposed to dealers and brokers.
Retail credit: Credit granted by a firm to consumers for the purchase of goods or services. See: consumer credit.
Retail investors: Small individual investors who commit capital for their personal account rater than on behalf of another company.
Retained earnings: Accounting earnings that are retained by the firm for reinvestment in its operations; earnings that are not paid out as dividends.
Retention rate: The percentage of present earnings held back or retained by a corporation, or one minus the dividend payout rate. Also called the retention ratio.
Retire: To extinguish a security, as in paying off a debt.
Retracement: A price movement in the opposite direction of the previous trend.
Return: The change in the value of a portfolio over an evaluation period, including any distributions made from the portfolio during that period.
Return on assets (R.O.A.): Indicator of profitability. Determined by dividing net income for the past 12 months by total average assets. Result is shown as a percentage. R.O.A. can be decomposed into return on sales (net income/sales) multiplied by asset utilization (sales/assets).
Return on equity (ROE): Indicator of profitability. Determined by dividing net income for the past 12 months by common stockholder equity (adjusted for stock splits). Result is shown as a percentage. Investors use R.O.E. as a measure of how a company is using its money. R.O.E. may be decomposed into return on assets (R.O.A.) multiplied by financial leverage (total assets/total equity).
Return on investment (ROI): Generally, book income as a proportion of net book value.
Return on total assets: The ratio of earnings available to common stockholders to total assets.
Return-to-maturity expectations: A variant of pure expectations theory which suggests that the return that an investor will realize by rolling over short-term bonds to some investment horizon will be the same as holding a zero-coupon bond with a maturity that is the same as that investment horizon.
Reuters: International news and quotation service based in London.
Revaluation: An increase in the foreign exchange value of a currency that is pegged to other currencies or gold.
Revenue bond: A bond issued by a municipality to finance either a project or an enterprise where the issuer pledges to the bondholders the revenues generated by the operating projects financed, for instance, hospital revenue bonds and sewer revenue bonds.
Revenue fund: A fund accounting for all revenues from an enterprise financed by a municipal revenue bond.
Reversal: Used in the context of general equities. Turn, Unwind. For convertible reversal, selling a convertible and buying the underlying common, usually done by an arbitrageur. For market reversal, change in direction in the stock or commodity futures markets, as charted by technical analysts in trading ranges. For options reversal, closing the positions of each aspect of an options spread or combination strategy.
Reverse price risk: A type of mortgage-pipeline risk that occurs when a lender commits to sell loans to an investor at rates prevailing at the time of mortgage application but sets the note rates when the borrowers close. The lender is thus exposed to the risk of falling rates.
Reverse repo: In essence, refers to a repurchase agreement. From the customer's perspective, the customer provides a collateralized loan to the seller.
Reverse stock split: A proportionate decrease in the number of shares, but not the total value of shares of stock held by shareholders. Shareholders maintain the same percentage of equity as before the split. For example, a 1-for-3 split would result in stockholders owning 1 share for every 3 shares owned before the split. After the reverse split, the firm's stock price is, in this example, worth three times the pre-reverse split price. A firm generally institutes a reverse split to boost its stock's market price. Some think this supposedly attracts investors.
Reversing trade: Entering the opposite side of a currently held futures position to close out the position.
Revolving credit agreement: A legal commitment wherein a bank promises to lend a customer up to a specified maximum amount during a specified period.
Revolving line of credit: A bank line of credit on which the customer pays a commitment fee and can take down and repay funds according to his needs. Normally the line involves a firm commitment from the bank for a period of several years.
Reward-to-volatility ratio: Ratio of excess return to portfolio standard deviation.
Rich: Used in the context of general equities. Term for a security whose price seems too high in light of its price history.
Riding the yield curve: Buying long-term bonds in anticipation of capital gains as yields fall with the declining maturity of the bonds.
Right: Privilege granted to existing shareholders of a corporation to subscribe to shares of a new issue of common stock before it is offered to the public. Such a right, which normally has a life of two to four weeks, is freely transferable and entitles the holder to buy the new common stock below the public offering price. See: warrant.
Right here: Used in the context of general equities. In-line, emphasizing that this is a customer inquiry that is ready to be executed and not distant on price. See: Tight.
Rights offering: Issuance of "rights" to current shareholders allowing them to purchase additional shares, usually at a discount to market price. Shareholders who do not exercise these rights are usually diluted by the offering. Rights are often transferable, allowing the holder to sell them on the open market to others who may wish to exercise them. Rights offerings are particularly common to closed end funds, which cannot otherwise issue additional common stock.
Rights-on: Shares trading with rights attached to them.
Rings: Trading arenas located on the floor of an exchange in which traders execute orders. Sometimes called a pit.
"Ring the cash register": Used in the context of general equities. "Take a profit." See: profit taking.
Risk: Often defined as the standard deviation of the return on total investment. Degree of uncertainty of return on an asset. In context of asset pricing theory. See: Systematic risk
Risk-adjusted profitability: A probability used to determine a "sure" expected value (sometimes called a certainty equivalent) that would be equivalent to the actual risky expected value.
Risk adjusted return: Often we subtract from the rate of return on an asset a rate of return from another asset that has similar risk. This gives an abnormal rate of return that shows how the asset performed over and above a benchmark asset with the same risk. We can also use the beta against the benchmark to calculate an alpha which is also risk adjusted preformance.
Risk arbitrage: Traditionally, the simultaneous purchase of stock in a company being acquired and sale of stock of the acquirer. Modern "risk arbitrage" focuses on capturing the spreads between the market value of an announced takeover target and the eventual price at which the acquirer will buy the target's shares.
Risk averse: A risk-averse investor is one who, when faced with two investments with the same expected return but different risks, prefers the one with the lower risk.
Risk classes: Groups of projects that have approximately the same amount of risk.
Risk controlled arbitrage: A self-funding, self-hedged series of transactions that generally utilize mortgage securities (M.B.S.) as the primary assets.
Risk factor: In arbitrage pricing theory or the multibeta central asset pricing model, the set of common factors that impact returns. E.g. market return, interest rates, inflation, and industrial production.
Risk indexes: Categories of risk used to calculate fundamental beta, including (1) market variability, (2) earnings variability, (3) low valuation, (4) immaturity and smallness, (5) growth orientation, and (6) financial risk.
Riskless rate: The rate earned on a riskless investment, typically the rate earned on the 90-day U.S. Treasury Bill.
Riskless rate of return: The rate earned on a riskless asset.
Riskless arbitrage: The simultaneous purchase and sale of the same asset to yield a profit.
Riskless or risk-free asset: An asset whose future return is known today with certainty. The risk free asset is commonly defined as short-term obligations of the U.S. government.
Risk lover: A person willing to accept lower expected returns on prospects with higher amounts of risk.
Risk management: The process of identifying and evaluating risks and selecting and managing techniques to adapt to risk exposures.
Risk neutral: Insensitive to risk.
Risk prone: Willing to pay money to transfer risk from others.
Risk premium: The reward for holding the risky equity market portfolio rather than the risk-free asset. The spread between Treasury and non-Treasury bonds of comparable maturity.
Risk premium approach: The most common approach for tactical asset allocation to determine the relative valuation of asset classes based on expected returns.
Risk-reward ratio: Used in the context of general equities. Concept of demanding substantial reward that corresponds to the amount of risk taken; mathematical represented by dividing the expected return by the standard deviation.
Risky asset: An asset whose future return is uncertain.
Risk-adjusted return: Return earned on an asset normalized for the amount of risk associated with that asset.
Risk-free asset: An asset whose future normal return is known today with certainty.
Risk-free rate: The rate earned on a riskless asset.
Roll, Richard: Author of numerous seminal works on asset pricing including the famous Roll Critique. Finance professor at UCLA.
Roll order: Used for listed equity securities. (1) Dividend roll; (2) Replace a maturing position with an identical one in the new maturity; (3) Recognize capital gain or loss while reestablishing the position at the risk of the market.
Roll over: Reinvest funds received from a maturing security in a new issue of the same or a similar security.
Rollover: Most term loans in the Euromarket are made on a rollover basis, which means that the loan is periodically repriced at an agreed spread over the appropriate, currently prevailing LIBO rate.
Ross, Stephen: Inventor of the Arbitrage Pricing Theory. Finance professor at MIT.
Round lot: A trading order typically of 100 shares of a stock or some multiple of 100. Related: odd lot.
Round-trip transactions costs: Costs of completing a transaction, including commissions, market impact costs, and taxes.
Round-turn: Procedure by which the long or short position of an individual is offset by an opposite transaction or by accepting or making delivery of the actual financial instrument or physical commodity.
R squared (R²): Square of the correlation coefficient. The proportion of the variability in one series that can be explained by the variability of one or more other series in context of regression. A measure of the quality of fit. 100% R-square means perfect predictability.
Rule 13-d: Often used in risk arbitrage. Requirement under Section 13-d of the Securities Act of 1934 in which a form must be filed within ten business days of acquiring direct or beneficial ownership of 5% or more of any class of equity securities in a publicly held corporation. In addition to filing with the S.E.C., The purchaser of such stock must also file the 13-d with the stock exchange on which the shares are listed (if any) and the target company itself. Required information includes the way the shares were acquired, the purchaser's background, and future plans regarding the target company. The law is designed to protect against insidious takeover attempts and to keep the investing public aware of information that could affect the price of their stock. See: Williams Act.
Rule 14-d: Often used in risk arbitrage. Tender offers regulations and restrictions covering public tender offers and related disclosure requirements.
Rule 144: Used in the context of general equities. Restricts solicitation of buyers to complete the sell order of an insider (unless the firm is already a buyer); signified by a flashing "E" on Quotron.
Rule 144a: S.E.C. rule allowing qualified institutional buyers to buy and trade unregistered securities.
Rule 415: Used in the context of general equities. Permits corporations to file a registration for securities they intend to issue in the future when market conditions are favorable. See: shelf registration.
Run: A run consists of a series of bid and offer quotes for different securities or maturities. Dealers give to and ask for runs from each other.
Runoff: Used for listed equity securities. Series of trades printed on the ticker tape that occur on the N.Y.S.E. before 4:00 p.m., but are not reported until afterwards due to heavy trading and hence the late tape.

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