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Glossary of Stock Market Terms & Definitions - Mark Berch

Wed, 06 Aug 2014 11:26:19 +0100

Glossary of Stock Market Terms & Definitions - Mark Berch:

Participant risk
The risk associated with the credit of the participants and possibility of non-performance.

Integrated financial market
A market in which there are no barriers to financial flows, and the same risk asset commands the same expected return, irrespective of domicile. Mark E. Berch

Divestiture
A complete asset or investment disposal such as outright sale or liquidation. Mark E. Berch

Coverage
See: Fixed-charge coverage

Mark Berch:Greenshoe option
Option that allows the underwriter for a new issue to buy and resell additional shares.

Underfunded pension plan
A pension plan that has a negative surplus (i.e., liabilities exceed assets).

Subperiod return
The return of a portfolio over a shorter period of time than the evaluation period.Mark E. Berch

Interest-only loan
A loan in which payment of principal is deferred and interest payments are the only current obligation.

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Mark Berch:Program trading

Mon, 30 Jun 2014 10:02:30 +0100

Financial Dictionary - Mark E. Berch:

Fully valued
Used in the context of general equities. Said of a stock that has reached a price at which analysts think the underlyingcompany'sfundamentalearnings power has been fully recognized by the market.

Favorable Balance of Trade
The value of a nation's exports in excess of the value of its imports. Mark Berch

Risk lover
A person willing to accept lower expected returns on prospects with higher amounts of risk. Mark E. Berch

Marriage penalty
A tax that has the effect of penalizing a married couple because they pay more tax on a joint tax return than they would if they file tax returns individually.

Mark Berch:Program trading
Trades based on signals from computer programs, usually entered directly from the trader's computer in to the market's computer system and executed automatically. Applies to derivative products. A process of electronic execution of trading of a basket of stocks simultaneously, for index arbitrage, portfolio restructuring, or outright buy/sell interests. See: super dot. 0

Passive Activity Loss (PAL)
A loss incurred in participating in passiveinvesting.

The Desk
The trading desk at the Federal REserve Bank of New York through which open market purchases and sales of government and federal agancy securities are made. The desk maintains direct telephone communication with major government securities dealers. A "foreign desk" at the Federal Reserve Bank of New York conducts transactions in the foregin exchange market.Mark Berch

Well-diversified portfolio
A portfolio that includes a variety of securities so that the weight of any security is small. The risk of a well-diversified portfolio closely approximates the systematic risk of the overall market, and the unsystematic risk of each security has been diversified out of the portfolio.

Mark Berch

Thu, 25 Oct 2012 07:42:35 +0100

Mark Berch

Public debt
Issues of debt by governments to compensate for a lack of tax revenues.

Institutionalization
The gradual domination of financial markets by institutional investors, as opposed to individual investors. This process has occurred throughout the industrialized world.

Exact matching
A bondportfolio managementstrategy that involves finding the lowest cost portfolio generating cash inflows exactly equal to cash outflows that are being financed by investment.( - Ian Berch)

Eric Berch: Factor
A financial institution that buys a firm'saccounts receivable and collects the accounts.

Central bank intervention
The buying or selling of currency, foreign or domestic, by central banks in order to influence market conditions or exchange rate movements.

Purpose statement
A form filed by a borrower that describes the use of a loan backed by securities, and guarantees that the funds lent will not be used illegally to buysecurities against Federal Reserveregulations. ( Ian Berch )

BYB
The ISO 4217 currency code for Belarus Rouble.

Eric Berch

Nondiversifiability of human capital
The difficulty of hedging one's human capital (the unique capabilities and expertise of individuals) and employment effort.

Mark Berch: Matched orders
Used for listed equity securities. Participate in equal amounts of a trade at a certain price, particularly when two parties have the same level of priority on the exchangefloor (this requires standing in the trading crowd).

Ian Berch: Option writer
See: Option seller

Mark Berch

Tue, 25 Sep 2012 09:27:07 +0100

Mark Berch
Composite tape
See: Tape

Book to bill
The book-to-bill ratio is the ratio of orders taken (booked) to products shipped and bills sent (billed). The ratio measures whether the company has more orders than it can deliver (>1), equal amounts (=1), or less (

Mark Berch - Repatriation

Mon, 13 Aug 2012 07:16:58 +0100

Mark Berch

Repatriation
The return from abroad of the financialassets of an organization or individual.

To be announced (TBA)
A contract for the purchase or sale of an MBS to be delivered at an agreed-upon future date but does not include a specified pool number and number of pools or precise amount to be delivered.

NRA (Non-Resident Alien) Tax
The tax which must be withheld by the corporation or its disbursing agent (usually 15% or 30%, depending on the hold's citizenship).( - Mark Berch)

Mark Berch: Refund
To retire existing bondissues through the sale of a new bondissue, usually to reduce the interest rate being paid.

Federal agency securities
Securitiesissued by corporations and agencies created by the US government, such as the Federal Home Loan Bank Board and Ginnie Mae.

Default premium
A differential in promised yield that compensates the investor for the risk inherent in purchasing a corporate bond that entails some risk of default. Often the premium is measured as the yield over and above a government bond yield of similar coupon and maturity. ( Mark Berch )

Restricted stock units
Similar to restricted stock. However, the unit represents a promise that employees will receive stock in the future. The units do not pay dividends until the stock is vested.

Mark Berch

Exchange privilege
A mutual fundshareholder's right to switch from one fund to another within one fund family, usually at no additional charge.

Mark Berch: Grantor trust
A mechanism of issuingMBS wherein the mortgages' collateral is deposited with a trustee under a custodial or trust agreement.

Mark Berch: Performance fund
A growth-oriented mutual fundinvesting in growth stock and performance stock with low dividends and high risk.

Mark Berch - Gilt-edged securities

Mon, 25 Jun 2012 12:17:44 +0100

Mark Berch
Gilt-edged securities
British and Irish government securities. Blue Chip.

Holder
The purchaser of an option.

Long leg
The part of an option spread in which an agreement to buy the underlying security is made.( - Mark Berch)

Mark Berch: Stable Paretian, or Fractal Hypothesis
In the characteristic function of the fractal family of distributions, the characteristic exponent alpha can range between one and two. See: Alpha, Fractal Distributions, Gaussian.

Disclaimer of opinion
An auditor's statement that does not express any opinion regarding the company's financial condition.

Hard capital rationing
A capital budget that under no circumstances can be violated. ( Mark Berch )

Death Spiral Convertible
Used by companies that are in such bad shape, that there is no other way to get financing. This instrument is similar to a convertible bond, but convertible at a discount to the share price at issuance and for a fixed dollar amount rather than a specific number of shares. The further the stock falls, the more shares you get. Popular in the mid to late 1990s. Also known as toxic convertibles or floorless convertibles.

Mark Berch

Currency basket
The value of a portfolio of specific amounts of individual currencies, used as the basis for setting the market value of another currency. It is also referred to as a currency cocktail.

Mark Berch: Trains
Refers to investment trusts which are populated by corporate bonds. In October 2001, Morgan Stanley's Tradable Custodial Receipts (Tracers) was launched. Tracers contain a number of coporate bonds and credit default swaps which are selected for liquidity and diversity. Lehman Brothers launched a similar product, Targeted Return Index Securities (Trains) in January 2002. Both contain investment grade bonds. If a bond falls out of the investment grade category, it is either liquidated from the trust or delivered to the investor. Both Tracers and Trains are 144a trust structures and are only available to qualified buyers because they are considered private securities due to the trust structure.

Mark Berch: Ex-warrants
Describes a stock sale during the time in which the buyer of the stock is not entitled to the warrant accompanying the stock.

Mark Berch - Overweight

Mon, 25 Jun 2012 12:15:04 +0100

Mark Berch
Overweight
Usually refers to recommendation that leads an investor to increase their investment in a particular security or asset class. The increase is usually with respect to a benchmark. Suppose that U.S. equities compose 40% of the benchmark portfolio. If one thinks the U.S. will outperform, the investor may increase the exposure to U.S. equity to more than 40%.

European exchange rate mechanism (ERM)
The system that countries in the European Union once used to pay exchange rates within bands around an ERM central value.

Risk-return tradeoff
The basic concept that higher expected returns accompany greater risk, and vice versa.( - Mark Berch)

Mark Berch: Stock power
A power of attorney form giving ownership of a security to another person, brokerage firm, bank, or lender after it has been sold or pledged to that party.

Straight
Direct telephone line, compared to an outside line that requires a telephone number to be dialed.

Listed stocks
Stocks that are traded on an exchange. ( Mark Berch )

Random variable
A function that assigns a real number to each and every possible outcome of a random experiment.

Mark Berch

Bought deal
Securityissue in which one or two underwritersbuy the entire issue. Also known as a guaranteed or fixed-price sale; opposite of a best-efforts sale.

Mark Berch: Three-phase DDM
A version of the dividend discount model that applies a different expected dividend rate depending on a company'slife-cycle phase: growth phase, transition phase, or maturity phase.

Mark Berch: Risk-adjusted discount rate
The rate established by adding a expected risk premium to the risk-free rate in order to determine the present value of a riskyinvestment.

Mark Berch: Inventory loan

Mon, 25 Jun 2012 12:14:39 +0100

Mark Berch
Net present value (NPV)
The present value of the expected future cash flows minus the cost.

Information asymmetry
Condition that information is known to some, but not all, participants.

Yield advantage
The advantage gained by purchasing convertible securities instead of common stock, which equals the difference between the rates of return of the convertible security and the common shares.( - Mark Berch)

Mark Berch: Inventory loan
A securedshort-termloan to purchaseinventory. The three basic forms are a blanket inventory lien, a trust receipt, and field warehousing financing.

Declaration
The Board of Directors motion to authorize dividend payments.

Consensus forecast
The mean of all financial analysts' forecasts for a company. ( Mark Berch )

Exchangeable Security
Investment instrument that grants its holder the right to exchange it for the common stock of a firm other than the issuer of the instrument.

Mark Berch

Long-term debt ratio
The ratio of long-ter debt to total capitalization.

Mark Berch: Cash reserves
See: Cash investments

Mark Berch: Junior mortgage
A mortgage that will be satisfied only after more senior mortgages have been satisfied. E.g., a first mortgage will be satisfied prior to a second or a third mortgage.

Mark Berch, Mark E. Berch

Fri, 15 Jun 2012 08:37:50 +0100

Mark Berch

Income tax
A state or federal government's levy on individuals as personal income tax and on the earnings of corporations as corporate income tax.

Syndicated Eurocredit loans
Funding provided by a group (or syndicate) of banks in the Eurocreditmarket.( - Mark Berch)

Mark Berch: Right
Privilege granted 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.

Installment sale
The sale of an asset in exchange for a specified series of payments (the installments).

Perfect market view (of capital structure)
Analysis of a firm'scapital structure decision, which shows the irrelevance of capital structure in a perfect capital market. ( Mark Berch )

Gray knight
In a merger or acquisitions, a gray knight is an acquiringcompany that outbids a white knight in pursuit of its own best interests, although it is friendlier than a hostile bidder.

Mark Berch

Capitalization-Weighted Index
A stock index which is computed by adding the capitalization (float times price) of each individual stock in the index, and then dividing by the divisor. The stocks with the largest market values have the heaviest weighting in the index. See also Float, Divisor.

Mark Berch: Stock dividend
Payment of a corporate dividend in the form of stock rather than cash. The stock dividend may be additional shares in the company, or it may be shares in a subsidiary being spun off to shareholders. Stock dividends are often used to conserve cash needed to operate the business. Unlike a cash dividend, stock dividends are not taxed until sold.

Mark Berch: Fee-and-commission compensation
See: Fee-based compensation

Mark Berch - Trade house

Wed, 13 Jun 2012 12:54:05 +0100

Mark Berch

Trade house
A firm that deals in actual commodities.

Mortgage life insurance
A life insurance policy that pays off the remaining balance of the insured person's mortgage at death.

London Metal Exchange (LME)
A market for trading base metals, where tradedoptions contracts are available against the underlyingfutures contract.( - Mark Berch)

Mark Berch: Dirty price
Bond price including accrued interest, i.e., the price paid by the bond buyer.

Outstanding shares
Shares that are currently owned by investors.

Depository institution
A financial institution that obtains its funds mainly through deposits from the public. This includes commercial banks, savings and loan associations, savings banks and credit unions. ( Mark Berch )

Institutional Brokers' Estimate System (IBES)
Service that assembles analysts' estimates of future earnings for thousands of publicly traded companies, detailing how many estimates are available for each company and the high, low, and average estimates for each.

Mark Berch

CMO REIT
A very risky type of Real Estate Investment Trustinvesting in the residual cash flows of Collateralized Mortgage Obligation (CMOs). CMO cash flows are derived from the difference between the rates paid by the mortgageloan holders and the lower, shorter-term rates paid to CMO investors.

Mark Berch: Trend Ratio Analysis
The comparison of the successive values of each ratio for a single firm over a number of years.

Mark Berch: Mean-variance analysis
Evaluation of risky prospects based on the expected value and variance of possible outcomes.