| H |
|
| Hamanaka, Yasuo |
A rogue trader whose speculative activities during the 1980s and 1990s cost Sumitomo Corp. USD 1.8 billion. |
| Hammersmith and Fulham decision |
A 1992 legal decision that invalidated existing derivatives contracts with numerous UK local councils. |
| Hang Seng index |
The main Hong Kong share price index, similar to Australia's S&P/All Ordinaries index. |
| Hard currency |
A currency which is generally accepted throughout the world and which is unlikely to devalue. |
| Harmonization |
Making regulations consistent across industries. |
| Hazard Insurance |
An insurance policy that pays for loss raising from certain hazards, such as fire and flood. |
| Hazard rate |
Default intensity. |
| Head and shoulders top |
A common chart formation in which a share price reaches a peak and declines, rises above its former peak and again declines and rises again but not to the second peak and then again declines. |
| Head of risk management |
A senior manager with responsibility for financial risk management within a firm. |
| Headroom check |
The Inland Revenue limit on how much money can be paid into a free-standing additional voluntary contribution scheme. |
| Health insurance |
Generic term for insurance covering costs incurred due to illness, injury and disability. |
| Hedge fund |
A type of investment vehicle where investors in the fund allow its managers to use higher risk investment techniques to leverage up return potential. |
| Hedge ratio (for an option) |
The number of stocks required to hedge against the price risk of holding one option. |
| Hedging |
The practice of offsetting the price risk inherent in any cash market position by taking an equal but opposite position in the futures market. Hedgers use the futures markets to protect their business from adverse price changes. |
| Heir |
A person designated by a will or by the court to receive the assets of the deceased. |
| Her Majesty's Customs and Excise |
(UK) The government department which collects customs and excise duties and VAT. |
| Herd behaviour |
The tendency of investors to behave in the same way in response to rumoured market changes. |
| Herstatt Bank |
A German bank whose 1974 failure highlighted the dangers of settlement risk. |
| Herstatt risk |
Settlement risk. |
| Hessian |
In calculus, a matrix of second partial derivatives. |
| Heteroskedasticity |
A condition where a stochastic process has non-constant second moments. |
| Hidden values |
(US) Assets owned by a company but undervalued on the balance sheet. |
| High current income fund |
A fund which aims to pay a high dividend to its shareholders by investing in bonds or other companies which themselves produce good income, either through high rates of interest or high dividend yields. |
| High grade security |
(US) A bond issued by a highly regarded company or municipal authority with a rating of AAA or AA. |
| High lending charge |
A one-off insurance premium charged by lenders to cover themselves in high risk lending situations, usually where lending is over 90% of the property's value. |
| High yield bond |
A high yield bond (non-investment grade bond, speculative grade bond or junk bond) is a bond that is rated below investment grade at the time of purchase. |
| Higher rate adjustment |
An income tax coding allocated to people who pay tax at the higher rate. |
| Higher rate tax |
(UK) The highest rate of income tax in the UK which in the 2007-2008 tax year is 40%. |
| High-tech shares |
The shares of companies operating in technology fields such as computers, semiconductors and electronics. |
| High-water mark |
A provision that an incentive fee will not be payable until any prior losses have first been made up. |
| High-yield stocks |
Stocks whose dividend payouts are high as a proportion of their share price. |
| Hire purchase |
System of purchase by paying in instalments. |
| Historic volatility |
A measure of the price changes of a security over a specific period of time. |
| Historical transformation |
For a VaR measure, a transformation procedure that employs the Monte Carlo method with realizations constructed from historical market data. |
| Historical VaR |
A category of VaR measures that employ an historical transformation. |
| Historical volatility |
Volatility estimated from historical data. |
| Holder extendible option |
An option that grants the holder the right to extend the expiration date. |
| Holder of record |
The owner of securities whose name is registered by the issuing company or its transfer agent as from a particular date. |
| Holding company |
A company which holds the majority of shares in its subsidiaries. |
| Holding period |
(US) The length of time an individual retains an investment. |
| Holding period return |
The rate of return over a given period. |
| Holdings |
A row vector listing the number of units of specific assets held by a portfolio. |
| Holdings remapping |
A type of portfolio remapping. |
| Hold-over relief |
The practice of deferring capital gains tax liability on a gift by transferring the liability to the recipient. |
| Holiday insurance |
A policy which covers the insured for the duration of their holiday and covers for travel delays, cancellation, baggage loss and damage, loss of personal items including cash and credit cards, personal accident and medical expenses abroad. |
| Home income plan (HIP) |
(US) A plan which enables elderly owner or owners of a property to use the capital locked in the property to provide a regular income. |
| Home insurance |
A type of property insurance which provides cover against such items as damage to the building, personal property, theft, personal liability etc. |
| Home reversion plan |
(UK) A plan which offers elderly people the opportunity of raising cash on their property. A financial institution such as an insurance company makes a purchase at a price well below market value with the original owners being entitled to live in the property until their death. |
| Homeowners Association |
An organization of homeowners residing within a particular development whose major purpose is to maintain and provide community facilities and services. |
| Homeowners equity account |
A credit line offered by banks and mortgage lenders which grants the homeowner the opportunity of borrowing against the equity in the property. |
| Homeowners Policy |
A multiple peril insurance policy available to owners of private dwellings. It usually covers buildings and contents in the case of fire or wind damage, theft, liability for property damage, and personal liability. |
| Homoskedasticity |
A condition where a stochastic process has constant second moments. |
| Horizontal spread |
An options strategy involving the simultaneous purchase and sale of two options of the same type, having the same strike price, but different expiration dates.. |
| Hospital cash plan |
(UK) An insurance policy which pays a specified amount to the insured in the event that he/she is admitted into hospital. |
| Hostile takeover |
A takeover bid opposed by the target company's directors. |
| Hours Clause |
A clause used in catastrophe excess of loss reinsurance contracts to overcome the difficulties of applying the terms "event" or "occurrence" to multiple losses or losses occurring over a period of time all associated with the same phenomenon such as the operation of a natural peril. |
| House call |
(US) The notification to a client by a brokerage house that more funds are required to bring a margin account balance up to the required level. |
| Household insurance |
(UK) Insurance covering the structure or contents of a house. This type of insurance now tends to include the option of cover for additional items such as legal expenses. |
| Housing Expense Ratio |
A home owner's monthly housing expense in comparison to his/her monthly income. |
| Hull Identification Number ("HIN") |
A number assigned to the vessel by the manufacturer. Each number is unique and appears on the vessel’s registration and title. |
| Hurdle rate |
A provision that incentive fees will be paid only for returns exceeding some specified level. |
| Hybrid instrument |
A financial instrument that blend characteristics of debt and equity markets. |
| Hypothecation |
(US) The pledging of securities or assets as collateral to secure a loan. |
| I |
|
| IFA Association |
(UK) The trade association which represents IFAs. |
| IFA Promotion |
(UK) An organisation established in 1989 to improve the image of Independent Financial Advisers (IFAs) and their work and to encourage consumers to seek independent financial advice. |
| IFC |
International Financial Center |
| Iguchi, Toshihide |
A rogue trader whose speculative activities during the 1980s and 1990s cost Daiwa Bank Corp. USD 1.1 billion. |
| Imaginary number |
A complex number of the form bi, where b is real, and i is the imaginary number. |
| IMF (International Monetary Fund) |
An international organization of 185 member countries. It was established to promote international monetary cooperation, exchange stability, and orderly exchange arrangements as well as to provide temporary financial assistance to countries to help ease balance of payments adjustment. |
| Immediate-or-cancel order (IOC) |
A type of futures or option order which gives the trading crowd one opportunity to take the other side of the trade. After being announced, the order will be either be partially or totally filled with any remaining balance immediately cancelled. |
| Impact costs |
Transaction costs that arise for trades which are so large that they cannot be transacted at the best bid or ask price. |
| Impact Day |
The day on which the availability of a prospectus is advertised, and a flotation is officially announced. |
| Implementation shortfall |
A metric of total transaction costs—usually Perold's implementation shortfall. |
| Implied tree model |
Alternative name for a local volatility model. |
| Implied volatility |
The volatility of the underlying instrument implied by the market value option's price. |
| Importance sampling |
A technique of variance reduction for the Monte Carlo method. |
| In house |
A term used in banking which refers to settlement of payments between accounts both held at the same branch. |
| In the money |
An option that would generate profits if exercised now. A call is in-the-money if the underlier value is above the strike price. |
| Incapacity benefit |
(UK) A state benefit payable after the expiry of state sickness benefit if a person is still unfit to work. |
| Incentive stock option |
(US) A stock option that specifies a set number of shares at a specific option price extending over a given period, which is free of tax when granted and when exercised. |
| Income |
Money received by an individual as a salary or from investments. |
| Income bond |
A corporate bond that only has to pay coupons if the issuer has sufficient income to do so. |
| Income dividend |
(US) The distribution of interest or dividends to the shareholders of a mutual fund. |
| Income drawdown |
A facility which allows a delay in buying an annuity if rates should be low when retirement age is reached. |
| Income endowment |
(UK) An endowment plan which carries an option at maturity for the proceeds to be paid in the form of a regular income. |
| Income from property |
Income received from property letting is subject to income tax. The amount taxable is the amount receivable in the tax year. If an owner occupier or tenant rents out a room he may receive up to a certain annual income without incurring a tax liability. |
| Income fund |
A fund that aims to pay a high dividend to its shareholders by investing in bonds or shares which themselves produce good income, either through high rates of interest or high dividend yields.The focus of such a fund is resolutely on income and it does not seek capital appreciation. |
| Income limit for age related allowances |
(UK) People aged 65 to 74 are entitled to an additional personal tax allowance provided total earnings do not exceed a given amount. |
| Income protection |
An insurance policy which pays out regular sums of money, up to retirement date, to the insured person in the event that they are no longer able to work. |
| Income pure endowment |
An endowment plan which carries an option at maturity for the proceeds to be paid in the form of a regular income. |
| Income shares |
Shares bought in anticipation of an above average income being produced. Also referred to as high yield shares. |
| Income statement |
A financial statement that shows a company's revenues and expenses (or profit/loss position) over a period of time. |
| Income Stock |
Common stock that pays dividends at a higher-than-average rate, resulting in a higher yield for stockholders. |
| Income tax |
A compulsory tax on employment and investment income. |
| Income tax allowances |
See: 'tax allowances' |
| incorporation by registration |
A 19th century legal innovation that streamlined the formation of corporations. |
| Increasing basis |
When the cover and premiums increase every year. |
| Increasing life annuity |
Another expression for escalating annuity. |
| Increasing term assurance |
An increasing term assurance policy provides either an automatically escalating sum assured, or includes an option to increase cover during the term of the policy. Unlike a level term assurance where, with inflation, the real value of the sum policy reduces over time. |
| Incurred But Not Enough Reserved |
See Incurred But Not Reported |
| Incurred But Not Reported |
The liability for future payments on losses that have already occurred, but have not yet been reported, either to the reinsured or to the reinsurer. |
| Indefinite matrix |
A square matrix that is neither positive semidefinite nor negative semidefinite. |
| Indemnity |
An indemnity is a sum paid by one person to another by way of compensation for a particular loss suffered by the second person. |
| Indemnity commission |
Where a life company pays commission to an agent, the company does so on the proviso it will be entitled to take back some or all of the commission if the policy is cancelled within a given period. Also known as 'clawback'. |
| Indemnity insurance |
A policy which covers the insured against the loss of an asset. |
| Indenture |
A bond's loan agreement. |
| Independence |
In the context of financial risk management, the segregation of risk management and risk taking functions. |
| Independent financial adviser (IFA) |
A person qualified to give financial advice to clients on life assurance, pensions, funds, and other financial products, who is not tied to any one financial institution. |
| Independent white noise |
A white noise with independent terms. |
| Index |
It reflects movements in financial markets, indicating market prices and shares of companies. Examples are: the Down Jones Industrial Index, the Russell 2000 Index, Standard & Poor's 500 Composite Stock Index, and the EAFE Index. |
| Index arbitrage |
An investment strategy that exploits divergences between actual futures prices and their theoretically correct prices to make a profit. |
| Index fund |
An index fund or index tracker is a collective investment scheme that aims to replicate the movements of an index of a specific financial market, or a set of rules of ownership that are held constant, regardless of market conditions. |
| Index linked |
Scaled proportional to the change in the retail price index or other measure of the cost of living. |
| Index linked family income assurance |
(UK) Family income assurance in which the assured may, if he or she chooses, increase premiums in line with the retail price index. |
| Index linked term assurance |
(UK) Term assurance in which premiums are increased in line with the retail price index. |
| Index options |
Call or put options on an index such as the Standard and Poor's 500 Index or the FTSE 100 Index. Index options are exercisable into cash rather than the underlying shares in the index. This differentiates them from equity options which are exercisable into the shares to which the option relates. |
| Indexation |
Indexation is an allowance which reduces the taxable gain on an investment by increasing its base cost. It does this by applying a percentage uplift to the acquisition cost which increases according to the length of time that you have held the investment. |
| Indexing |
A procedure that adjusts the reinsured's retention and limit under excess of loss reinsurance contracts in accordance with the fluctuations of a published economic index, such as wage, price and cost-of-living. |
| Indirect taxation |
Taxation which is levied in an indirect way rather than being charged directly on an individual's income or estate, such as value added tax (VAT) charged on goods and services in the UK. |
| Individual Investor Express Delivery Service (IIEDS) |
(US) A service for individual investors which puts their orders at the head of any Tandem Systems Queue. |
| Individual retirement account (IRA) |
(US) A tax-deferred retirement savings account which may be set up by employed people. |
| Individual Retirement Account "Rollover" |
Established specifically for taxable funds distributing from a tax-qualified retirement plan. |
| Individual Retirement Account (IRA) |
A method of planning for retirement that enables individuals to save up to $2,000 annually. |
| Individual savings account (ISA) |
(UK) A tax-free saving scheme which allows investors to chose two components: equities and cash. There are strict limits on how much they can put in each component. ISA plans are sold by stockbrokers, IFAs, fund managers, banks and other authorised financial institutions. |
| Individual Turnover Report (ITR) |
The London Stock Exchange's report provides historic turnover data for individual equity and fixed interest securities, in a report format, on a daily, monthly or yearly basis. |
| Industrial life assurance |
(UK) An assurance policy on the life of an individual where weekly or monthly premiums are regularly paid to the assurance company by way of their agent who collects directly from the policyholder's home. This type of assurance is now virtually extinct. |
| Industry Loss Warranty |
Certain catastrophe reinsurance contracts may have a clause requiring that the industry loss must be of a certain size for the cover to trigger. |
| Inference procedure |
The procedure within a VaR measure that characterizes a joint probability distribution for key factors. |
| Inflation |
Prices increase over a period of time, usually annualised for comparative purposes. |
| Inheritance tax (IHT) |
Tax payable to the government based on the value of assets inherited. |
| Initial charge |
A charge imposed by a fund management company to cover administrative costs and any commission that has to be paid to an intermediary (also known as front end load). |
| Initial margin |
(US) The payment which investors have to make to a broker to trade on margin, commonly used in trading futures and contracts for difference. Initial margin is usually set at a percentage of the value of the contracts being traded. |
| Initial margin |
A deposit the client gives to a broker before he/she can invest in a future position. |
| Initial public offering (IPO) |
Stock issued to the public for the first time by a privately owned company or a privatised government enterprise. |
| Inland Revenue |
(UK) The government department responsible to the Treasury for the collection of direct taxes including income tax, capital gains tax and inheritance tax. |
| Input tax |
When a company registered for value added tax (VAT) buys goods or services from another supplier, VAT is charged. This is known as input tax. |
| Insider dealing |
Illegal share dealings by employees of a company where they have used confidential information for their own gain or the gain of their associates. |
| Insider information |
Price-sensitive information about a company that has not yet been made public. |
| Insider trading |
An illegal activity that involves trading by management, major shareholders or employees of a firm using information that is not yet publicly available to the markets. |
| Insolvency |
The inability of a person or company to settle debts when they become payable. |
| Insolvency Clause |
A clause in a reinsurance contract which may be required by state insurance law or regulation, under which the reinsurer agrees that reinsurance proceeds will be paid directly to the liquidator of an insolvent insurer on claims allowed in the insolvency proceedings. |
| Inspector |
A property inspector evaluates the condition of the property. |
| Instinet |
An electronic 'stock market' service owned by Reuters which enables members to display bid and offer quotes for stocks and to transact between themselves without using brokers. |
| Institute of Financial Planning (IFP) |
UK professional body which promotes the development of financial planning. The Institute was set up in 1986 and draws its members from accountancy, insurance, taxation, stock broking, education and legal professions. |
| Institutional investor |
A financial institution which invests large amounts of money in the stock, bond and other financial markets. |
| Insurance |
A contract in which payment of premiums covers the insured against something which may, or may not occur. In the UK insurance is differentiated from assurance (life assurance) which is protection against something which will inevitably occur. |
| Insurance broker |
A person specialising in insurance matters and who gives advice to and arrange cover on behalf of his/her clients. |
| Insurance Ombudsman |
See: 'ombudsman' |
| Insurance premium |
The amount payable by the insured in return for indemnification against specified risks. |
| Insurance premium tax (IPT) |
A tax imposed on certain insurance premiums where the risk is located in the UK. |
| Insured |
A person or company acquiring insurance. |
| Intangible assets |
Assets which are non-physical in form, such as patents, goodwill, trademarks and copyrights. |
| Integers |
The set of numbers {…, –2, –1, 0, 1, 2, …}. |
| Integrated Solution |
An insurance product that includes a combined lines policy with a financial product cover. |
| Intensity model |
A type of default model. |
| Inter bank clearing |
The process of payment clearance between two banks. |
| Inter branch clearing |
The process of payment clearance between two branches of the same bank. |
| Intercommodity spread |
A futures spread where the contracts are for different underliers. |
| Interest |
Earnings paid by a security such as a bond, a certificate of deposit or an annuity, or money paid for the use of money, for example in a loan. |
| Interest cover |
Interest cover measures the amount of interest paid by a company on its borrowings against its operating profit in the same period. |
| Interest coverage ratio |
A measure of a company's leverage. It equals earnings before interest and tax (EBIT) divided by interest expense, and provides an indication of a company's ability to meet interest payments. |
| Interest in possession |
The legal right to receive income from, or occupy, trust property. |
| Interest Paid Prior Year |
The total amount of interest charges paid in the previous year. |
| Interest Paid YTD (Year-to-Date) |
The total amount of interest charges paid so far in the current year. |
| Interest payable |
An accounting term which refers to the amount a company pays in the form of interest on cash borrowings. |
| Interest rate |
The percentage rate that is charged by the creditor for the money borrowed. This may be different from the APR. |
| Interest rate cap |
A derivative instrument which is linked to interest rates. |
| Interest rate floor |
A derivative instrument which is linked to interest rates. |
| Interest rate gap |
An imbalance in the assets and liabilities being repriced during a given period. |
| Interest rate parity |
An arbitrage condition that must hold between the spot interest rates of different currencies. |
| Interest rate risk |
The risk associated with holding a debt security such as a bond when interest rates are volatile. |
| Interest rate spreads |
Spreads between interest rates. |
| Interest rate swap |
Where two parties trade the cashflows corresponding to different securities without actually exchanging ownership on those securities. |
| Interest receivable |
An accounting term which refers to the amount of income a company receives in the form of interest payments on its cash. |
| Interest-only mortgage |
A mortgage where regular payments only meet the interest requirements. The capital amount outstanding remains the same and the borrower will need to make additional provision for repaying the loan. |
| Interim |
A term which means in the meantime. See 'interim bonus', 'interim dividend' and 'interim results'. |
| Interim bonus |
(UK) A bonus declared by life companies when maturity of a with profits policy or death of the assured occurs between normal bonus declaration dates. |
| Interim dividend |
The dividend declared before annual earnings are established. |
| Interim results |
The results reported by a company for the first six months of its financial year. In general, interim results are made public within three months of the end of the interim period. |
| Intermarket Surveillance Group (ISG) |
(US) It allows regulatory staffs of the US securities exchanges and the NASD to co-ordinate industry-wide efforts to exchange market data. |
| Intermarket Trading System (ITS) |
An electronic communications network that links nine US markets: the New York (NYSE), American (AMEX), Boston (BSE), Chicago (MSE), Cincinnati (CSE), Pacific (PSE) and Philadelphia (PHLX) stock exchanges, the Chicago Board Options Exchange (CBOE), and the NASD. The system enables market professionals to interact with their counterparts in other markets whenever the nationwide Consolidated Quote System (CQS) shows a better price. |
| Intermediary |
An agent, broker or financial institution who can give advice and act as a middle person between a company and a client. |
| Internal rate of return (IRR) |
The interest rate which, when used as the discount rate for a series of cash flows, gives a net present value of zero. |
| Internal Revenue Service (IRS) |
The US agency responsible for the collection of federal taxes including personal and corporate income taxes, excise and gift taxes. |
| International fund |
(UK) A fund whose portfolio comprises a range of securities from markets around the world. |
| International Monetary Fund (IMF) |
A fund formed in the mid 1940s by industrialised countries to stabilise exchange rates, promote international trading and provide short term loans to member countries with balance of payments problems. |
| International Organization of Securities Commissioners ( IOSCO) |
The international standard setter for securities markets. The Organization's wide membership regulates more than 90% of the world's securities markets. |
| International Organization of Securities Commissions |
An international organization representing securities regulators. |
| International Petroleum Exchange (IPE) |
Europe's leading energy futures and options exchange and the second largest in the world. |
| International Securities Identification Number (ISIN) |
International code for a listed security. |
| Internet banking |
A facility provided by banks which enables customers to conduct banking transactions online. |
| Interpolation |
In the mathematical subfield of numerical analysis, interpolation is a method of constructing new data points from a discrete set of known data points. |
| Interpolation remapping |
A global remapping implemented using interpolation. |
| Intestacy |
The condition of the estate of a person who dies owning property greater than the sum of his/her enforceable debts and funeral expenses without having made a valid will or other binding declaration. |
| Intestate |
A person who did not have a will when he/she died. |
| In-the-money |
A condition where an option has a positive intrinsic value. |
| Intracommodity spread |
A futures spread where both futures are on the same underlier but have different maturities. |
| Intrinsic value |
The component of an option's market value that could be realized by exercising the option immediately. |
| Introducing broker (IB) |
(UK) An individual or firm who can perform all the functions of a broker except to accept money, securities, or property from a customer. |
| Invasion of a Trust |
Distribution of assets made from the principal of a trust. |
| Inverse floater |
A floater whose coupon varies inversely to its reference rate. |
| Inverse floater CMO |
A CMO tranch structured as an inverse floater. |
| Investment |
The act of investing; using money or capital in an enterprise to make profits. |
| Investment bank |
A firm, acting as underwriter or agent, that serves as an intermediary between an issuer of securities and investing institutions, and which advises corporate, institutional and sovereign clients on their acquisitions, disposals, capital raising, structuring and risk management. |
| Investment bond |
(UK) A unit-linked single premium whole life assurance policy. Part of the premium gives life cover whilst the balance is invested in unitised funds. |
| Investment business |
The Financial Services Act 1986 defines investment business to include dealing, arranging deals in, managing and advising on investments in addition to the setting up and operation of collective investment schemes. |
| Investment club |
A group of individuals who invest their capital collectively. |
| Investment company |
A company which invests the funds of small private investors in a range of securities. This enables fund shareholders to partake in ownership of a diversified portfolio of shares. |
| Investment Company Act of 1940 |
US legislation authorizing the SEC to regulate investment companies. |
| Investment Company with Variable Capital (ICVC) |
An open-ended collective investment vehicle, similar to a unit trust. As with unit trusts, the money invested by savers is pooled, and then invested in the markets by professional fund managers appointed by the ICVC. |
| Investment grade |
It refers to bonds issued by companies or institutions with a higher level of financial standing (rated AAA to BBB). |
| Investment grade bond |
A bond whose credit rating is BBB or better. |
| Investment income |
Income, paid from an investment, such as dividends and interest. |
| Investment Management Account |
An account whereby a financial institution is given discretionary power with regard to investment decisions on behalf of the investor. |
| Investment portfolio |
A set of financial assets chosen by an investor. |
| Investment Services Directive |
A Directive produced by the European Commission in 1993 regarding the provision of investment services within the member states of the European Union. The Directive has been described as the ‘passport to Europe’ for securities houses. |
| Investment trust |
A closed-end fund with a fixed number of shares which are traded on the secondary markets similarly to corporate stocks. |
| Investor Protection Scheme |
See: 'Financial Services Compensation Scheme'. |
| Investors Compensation Scheme (ICS) |
(UK) A compensation scheme for investors with operating rules set by the Financial Services Authority (FSA). This scheme was replaced by the Financial Services Compensation Scheme (FSCS) in December 2001. |
| Invoice |
A document, issued by a person or company, indicating to the recipient the amount of money owed to that person or company for goods and/or services supplied. |
| In-warehouse |
A method for settling physical commodity trades. |
| IO (Interest Only) |
A mortgage-backed security whose payments derive exclusively from the interest payments on the underlying mortgages. Unexpected prepayments or defaults impair the value of IOs, curtailing payments of interest on the mortgages. |
| IOSCO |
An international organisation representing securities regulators designed to promote high standards of regulation, exchange information, establish standards and carry out an effective surveillance of international securities transactions by the means of a rigorous application of the standards and by effective enforcement against offenses. |
| Iron butterfly |
An option strategy with limited risk and limited profit potential that involves both a long (or short) straddle, and a short (or long) combination. |
| Irredeemable securities |
(UK) Securities, such as some debentures and certain government loan stock which do not have a redemption date. |
| Irrevocable Trust |
A type of trust that cannot be revoked or changed in any way. |
| Issue |
The number of shares of a company on sale to the public at a given time. |
| Issue price |
The price at which a company's shares are offered to the market for the first time. |
| Issued capital |
That part of a company's authorized capital that has already been issued to shareholders. |
| Issued share capital |
The amount of authorised share capital that shareholders have subscribed to a company for share ownership. |
| Issuer |
A company or public sector entity which has shares, bonds or other security listed on a stock exchange. |
| Issuing house |
A financial institution which launches the shares of new companies on a stock exchange. |
| L |
|
| Lancer Offshore Fund |
A hedge fund that defrauded investors during the early 2000s. |
| Landlord |
A property owner who rents it to another party called a tenant. |
| Lapse |
A policy is deemed to have lapsed when the policyholder fails to pay the renewal premiums. |
| Lapsed option |
(US) The expiry of an option without being exercised by the holder. In the UK this is known as abandonment. |
| Large cap |
The term refers to the very largest companies with the highest market capitalisations. So companies in the FTSE 100 would certainly be large caps and those in the FTSE MID 250 would be large caps or mid caps. |
| Last notice day |
The final day on which notices of intent to deliver on futures contracts may be issued. |
| Last Payment Amount |
The total amount of money on most recent payment. |
| Last Payment Date |
The date that the most recent payment was received. |
| Last trading day |
It refers to the last day for trading in a contract for a particular delivery or expiry month. |
| Last Will |
The will last executed by an individual, which revokes any former existing wills. |
| Late charge |
A charge imposed by a lender to a borrower when the borrower fails to make payment on the due date. |
| Late reported trade |
A term used by the London Stock Exchange to denote that a trade was not reported in accordance with the Exchange's rules on trade reporting. |
| Lauer, Michael |
Manager of the Lancer Offshore Fund, a hedge fund that defrauded investors during the early 2000s. |
| Laundering |
The process of cleaning illicitly gained money so that it appears to others to have come from a legitimate source. |
| Law of one price |
The notion that, if two assets have identical cash flows, they should have the same market value. |
| Law Society |
(UK) The professional body for solicitors in England and Wales. |
| Lay, Kenneth |
Chairman of energy trading firm Enron, which failed spectacularly in 2001. |
| Layer |
Term used to denote a stratum of cover, e.g. for the part of a loss between 10,000 and 50,000, or between 50,000 and 250,000. |
| Layer Policy |
Insurance policy arranged in layers. |
| Leading Reinsurer |
This term is used when two or more reinsurers participate in a reinsurance contract. The leading reinsurer usually has the largest participation and sets the terms. |
| Lease |
A contract in which the legal owner of property or other asset agrees to another person using that property or asset in return for a regular specified payment over a set term. |
| Lease back |
A situation whereby a property is sold by its owner to another person or company on condition that the purchaser leases the property back to the original owner for an agreed rent over a set term. |
| Leasehold land |
Land which is rented from the owner for a specified term under a lease. |
| Ledger |
A book in which the accounts of a business are kept. In the UK the main ledgers operating within a business are the nominal ledger, the sales ledger and the purchase ledger. |
| Leeson, Nick |
The rogue trader who brought down Barings Bank in February 1995. |
| Leg |
A term describing one side of a position with two or more sides. When a trader legs into a spread, they establish one side first, hoping for a favourable price movement so the other side can be executed at a better price. |
| Legacy |
The making of a gift by will. |
| Legal expenses insurance |
Insurance that covers the cost of legal proceedings. |
| Legal list |
(US) A list of approved securities in which institutions such as banks, life insurance companies and pension funds may invest. |
| Legal personality |
A legal concept under which corporations are treated as artificial people, with a similar capacity for legal rights and obligations. |
| Legal risk |
Risk from uncertainty due to legal actions or uncertainty regarding the interpretation of contracts, laws or regulations. |
| Lender |
A person or company that offers to lend money to a borrower for a given period of time. |
| Lender of last resort |
An institution, usually a central bank, that can step in and lend funds to a bank facing a panic (sudden withdrawal of funds by depositors). In the US the lender of last resort is the Federal Reserve Bank whilst in the UK the Bank of England has this role. |
| Leptokurtosis |
Leptokurtosis describes a probability function which is similar to the bell curve. People studying the volatility of stocks usually find that the variance of a stock is leptokurtic. This means that most of the time the stock moves around somewhat randomly. |
| Lessee |
A person to whom a lease is granted, known as a tenant. |
| Lessor |
A person who grants a lease, known as a landlord. |
| Letter of Credit |
A financial instrument obtained from a bank that guarantees the availability of funds to be collected in the future under a reinsurance contract. In the non-commercial setting, these are known as standby credits in the event of non-performance by the obligor. |
| Letter of renunciation |
In a rights issue of shares, a letter of renunciation is the form attached to an allotment letter which the holder completes should he wish to transfer entitlement to another person or to renounce his rights absolutely. |
| Letter of wishes |
See: 'memorandum of wishes'. |
| Letters of administration |
An order made by the court empowering the administrator to settle the affairs of a deceased person in accordance with his/her will. |
| Level basis |
Fixed premiums for a fixed number of years, and a full payout on a claim at any point. |
| Leverage |
Leverage is used to amplify investment gains and losses on money invested. Financial leverage is created by using other people's money to increase the earning power of the person's investment. |
| Leverage on a warrant |
A measure of 'true gearing' which measures how much more a warrant will move in percentage terms against the underlying asset. Calculated by multiplying the delta by gearing. |
| Leverage ratio |
A ratio of a company's debt to that same company's shareholders' equity. |
| Leveraged buyout (LBO) |
The takeover of a company by investors who use the company's own assets as collateral to raise the money to finance the bid. |
| Leveraged inverse floater |
An inverse floater with coupon leverage greater than one. |
| Levine, Dennis |
Investment banker who formed an insider trading ring during the 1980s. |
| Liabilities |
The debts of a person or company. |
| Liability sensitive |
Having liabilities that reprice earlier than assets. |
| Liability swap |
A non-vanilla swap customized to change the character of a specific liability. |
| Libid |
London interbank bid rate. |
| Libor |
London Interbank Offered Rate. |
| Lien |
A legal security interest, held by a lender, on an asset taken as collateral. |
| Liened Vehicle/Vessel |
A liened vehicle/vessel is a vehicle/vessel that has an outstanding loan obligation. The Certificate of Title for the vehicle/vessel lists the individual(s) as the registered owner with the lender listed as the lienholder. |
| Lien-Free Vehicle/Vessel |
A lien-free vehicle/vessel is owned outright by an individual(s), listing that individual(s) on the title as the registered owner. There is no outstanding loan obligation on a lien-free vehicle/vessel. |
| Life assurance |
An insurance policy which pays a lump sum on the death of the insured. |
| Life assurance premium relief |
A tax relief of 15% on the premiums paid into long-term insurance policies. It applies only to policies lasting for more than 10 years and issued before 13 March 1984. |
| Life of another |
A life assurance policy taken out on the life of another person rather than the policyholder. |
| Lifelong individual savings account (LISA) |
See 'individual savings account'. |
| Limean |
The average of Libor and Libid |
| Limit |
Risk limit. |
| Limit |
1. The limit of indemnity to be the maximum sum that an excess of loss reinsurer will pay for any event, occurrence, accident or in the aggregate any one year; 2. The capacity made available to the cedant by a surplus treaty; 3. The maximum gross sum insured, after facultative reinsurance, the cedant may write on a policy to be ceded to a quota share. |
| Limit moveday |
A price that has advanced or declined the permissible amount during one trading session, as fixed by the rules of a contract market. |
| Limit order |
An order to buy shares up to a maximum price or sell down to a minimum price. |
| Limit price |
The maximum buying price or minimum selling price a client is prepared to pay or accept for shares or commodities. |
