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Return to Glossary front
- V
-
Fifth letter of a NASDAQ stock symbol specifying that it is when-issued or when-distributed.
- V.a.R.
- See: Value-at-Risk model
- V.R.D.B.
- See: Variable rated demand bond
- Value-added tax
- Method of indirect taxation whereby a tax is levied at each stage of production on the value added at that specific stage.
- Value additivity principal
- Prevails when the value of a whole group of assets exactly equals the sum of the values of the individual assets that make up the group of assets. Stated differently, the principle that the net present value
of a set of independent projects is just the sum of the net present values of the individual projects.
- Value-at-Risk model (V.a.R.)
- Procedure for estimating the probability of portfolio losses exceeding some specified proportion based on a statistical analysis of historical market price trends, correlations, and volatilities.
- Value date
- In the market for Eurodollar deposits and foreign exchange, value date refers to the delivery date of funds traded. Normally, for spot transactions, it is on spot transactions two days after a transaction is agreed upon. In the case of a forward foreign exchange trade, it is the future date.
- Value dating
- Refers to when value or credit is given for funds transferred between banks.
- Value manager
- A manager who seeks to buy stocks that are at a discount to their "fair value" and sell them at or in excess of that value. Often a value stock is one with a low price to book value ratio. Opposite to growth stock.
- Vanilla issue
- A security issue that has no unusual features.
- Variable
- Refers to the series used in a model. For example, in the model RS&Pt11 = a + b Tbillt + et, where RS&Pt11 is the return on the S&P in month t11 and Tbill is the Tbill return at month t, both RS&P and Tbill are 'variables' because they change through time, i.e. they are not constant.
- Variable annuities
- Annuity contracts in which the issuer pays a periodic amount linked to the
investment performance of an underlying portfolio.
- Variable cost
- A cost that is directly proportional to the volume of output produced. When production is zero, the variable cost is equal to zero.
- Variable life insurance policy
- A whole
life insurance policy that provides a death benefit dependent on the insured's portfolio market value at the time of death. Typically the company invests premiums in common stocks, and hence variable life policies are referred to as equity-linked policies.
- Variable price security
- A security, such as stocks or bonds, that sells at a fluctuating, market-determined price.
- Variable rate CDs
- Short-term certificate of deposits that pay interest periodically on roll dates. On each roll date, the coupon on the CD is adjusted to reflect current market rates.
- Variable rated demand bond (V.R.D.B.)
- Floating rate bond
that can be sold back periodically to the
issuer.
- Variable rate loan
- Loan made at an interest rate that fluctuates based on a base interest rate such as the Prime Rate or L.I.B.O.R..
- Variance
- A measure of dispersion of a set of data points around their mean value. The mathematical expectation of the average squared deviations from the mean. The square root of the variance is the standard deviation.
- Variance minimization approach to tracking
- An approach to bond indexing that uses historical data to estimate the variance of the tracking error.
- Variance rule
- Specifies the permitted minimum or maximum quantity of securities that can be delivered to satisfy a T.B.A. trade. For Ginnie Mae, Fannie Mae, and Freddie Mac pass-through
securities, the accepted variance is plus or minus 2.499999 percent per million of the par value of the T.B.A. quantity.
- Variation margin
- An additional required deposit to bring an investor's equity account up to the initial margin level when the balance falls below the
maintenance
margin requirement.
- Venture capital
- An investment in a start-up business that is perceived to have excellent growth prospects but does not have access to capital markets. Type of financing sought by early-stage companies seeking to grow rapidly.
- Vertical acquisition
- Acquisition in which the acquired firm and the acquiring firm are at different steps in the production process.
- Vertical analysis
- The process of dividing each expense item in the income statement
of a given year by net sales to identify expense items that rise faster or slower than a change in sales.
- Vertical merger
- A merger in which one firm acquires another firm that is in the same industry but at another stage in the production cycle. For example, the firm being acquired serves as a supplier to the firm doing the acquiring.
- Vertical spread
- Simultaneous purchase and sale of two options that differ only in their exercise price. See: horizontal spread.
- Virtual currency option
- A new option contract introduced by the P.H.L.X. in 1994 that is settled in US$ rather than in the underlying currency. These options are also called 3-Ds (dollar denominated delivery).
- Visible supply
- New muni bond issues scheduled to come to market within the next 30 days.
- Volatility
- A measure of risk based on the standard deviation of the asset return.
Also, volatility is a variable that appears in option pricing formulas. In the option pricing
formula, it denotes the volatility of the underlying asset return from now to the expiration of the option. Some have created volatility indices. Here is an example, scale is 1-9; higher rating indirectly higher risk:
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