| Q |
|
| Quadratic formula |
A general formula for solving quadratic polynomial equations. |
| Quadratic interpolation |
Interpolation using a quadratic polynomial as an interpolation function. |
| Quadratic polynomial |
A polynomial of the form p(x) = cx2 + bx + a. |
| Quadratic portfolio |
In the context of value-at-risk, a portfolio whose portfolio mapping function is a quadratic polynomial. |
| Quadratic remapping |
A global remapping that replaces a portfolio mapping function with a quadratic polynomial. |
| Quadratic transformation |
For a VaR measure, a transformation procedure that is applicable to quadratic portfolios. |
| Quadratic VaR measure |
A category of VaR measures that are applicable to quadratic portfolios. |
| Qualification period |
Initial period on an insurance policy during which the policyholder's ability to make claims is severely restricted, to discourage fraud. |
| Qualification period |
(US) The period of time, as stated in an insurance policy, during which benefits are not payable to the insured. |
| Qualified plan |
(US) A tax-deferred pension plan set up by an employer to enable employees to accumulate tax-free savings for retirement benefits. |
| Qualified stock option |
(US) A US stock option, given to executives and employees, which complies with the requirements of the Internal Revenue Service. A qualified stock option is not subject to tax at the grant date or when exercised. |
| Qualifying annuity |
(US) An annuity which is purchased within a qualified plan. |
| Qualifying policy |
The proceeds from a life assurance policy to an individual are free of tax provided the policy is qualifying. |
| Quant |
A financial engineer. |
| Quantile |
A notion from probability. |
| Quantile |
A notion from probability. Quantiles are points taken at regular intervals from the cumulative distribution function of a random variable. |
| Quanto |
A cash settled derivative that has an underlier denominated in one currency, but settles in another currency based on a fixed exchange rate. |
| Quanto swap |
An interest rate swap linked to different currency's interest rates. |
| Quarterly compounding |
Compounding based on quarterly crediting of interest. |
| Quartile |
Any of the three values which divide the sorted data set into four equal parts, so that each part represents 1/4th of the sampled population. |
| Quartile |
A type of quantile. |
| Quartile |
The investment industry ranks the performance of collective funds on the total returns they have produced for investors. The rankings list the funds in descending order and the list is divided into four 'quartiles', with the best performing 25% in in the |
| Quick ratio |
A financial ratio which is similar to the current ratio, but more stringent. It is defined as: current assets minus stocks, divided by current liabilities. |
| Quota Share |
The basic form of pro-rata reinsurance whereby the reinsurer accepts a stated percentage of each and every risk within a defined category of business. |
| Quotation |
The highest bid price and the lowest offer price of a security available at any particular time. |
| Quoted company |
See: 'listed company'. |
| R |
|
| Rainbow option |
A single option linked to two or more underlying assets. Its payoff is determined by first identifying which of two assets performs the better (or the worse) relative to each other and then comparing the better (or worse) performer to the exercise price. |
| Rally |
A sudden upturn in a share or a market's performance, following a long fall. |
| RAN |
Revenue anticipation note. |
| Random walk |
The theory by French Mathematician Louis Bachelier in 1900 which states that past share prices are of no use in predicting future prices. |
| Range forward |
A type of derivatives hedge. |
| RAPM |
Risk-adjusted performance metric. |
| RAROC |
Risk-adjusted return on capital. |
| RARORAC |
Risk-adjusted return on risk-adjusted capital. |
| Ratchet cap |
A cap whose strike is reset to the current rate for each caplet. |
| Ratchet floor |
A floor whose strike is reset to the current rate for each floorlet. |
| Ratchet option |
Also known as a cliquet or reset option, it that allows buyers to lock-in gains on the underlying security during chosen intervals over the life time of the option. The option’s strike price is effectively reset on predetermined dates. Gains, if any, are locked in. |
| Rate of return |
The rate of return on an investment, expressed as a percentage of the total amount invested. Rate of return is usually, but not always, calculated annually. |
| Rate on Line |
A method used to judge the rates for excess of loss covers. It is derived by expressing the reinsurance premium as a percentage of the reinsurance limit. |
| Rating |
The classification of the quality of securities by various rating services. |
| Ratings migration mode |
A default model based upon historical patterns of changes in bonds' credit ratings. |
| Ratings transition matrix |
A matrix indicating probabilities of upgrades or downgrades in bonds' credit ratings. |
| Ratio call spread |
A call spread in which there is not a one-to-one ratio between the numbers of long and short calls. |
| Ratio put spread |
A unique bearish strategy. It involves a bearish strategy (Bear Put Spread) along with a bullish strategy (Short Put). |
| Ratio spread |
Option strategy using either puts or calls. The trader purchases a certain number of options and then sells a larger number of out-of-the money options. |
| Real account |
A ledger account detailing assets and capital (such as buildings and machinery). |
| Real estate |
A term that encompasses land along with anything permanently affixed to the land, such as buildings, specifically property that is stationary, or fixed in location. |
| Real estate broker |
(US) One who arranges the sale and purchase of property in return for a commission. Known as an estate agent in the UK. |
| Real estate investment trust (REIT) |
(US) A publicly traded investment trust which invests the capital of its shareholders in real estate. |
| Real interest rate |
The excess of the nominal interest rate less the inflation rate. |
| Real property |
See 'real estate'. |
| Real return |
The return provided by an investment after inflation has been taken into account. |
| Real time |
The processing of information that returns a result so rapidly that the interaction appears to be instantaneous. In share trading, real-time prices means the live prices of shares made available on a computer screen the moment they are updated on the stock exchange systems. |
| Reassured |
See 'Reinsured'. |
| Receiver |
A person appointed by the court to receive and preserve the property or funds that are the subject of litigation. |
| Receiver swaption |
An option to receive fixed on an interest rate swap. |
| Receivership |
When a company cannot meet its financial commitments, one or more of its main creditors may appoint a receiver. |
| Recession |
A decrease in economic activity (usually measured in terms of Gross National Product or GNP) for two consecutive quarters. |
| Recognised Clearing House |
(UK) A clearing house which meets the requirements for recognition under the Financial Services Act 1986 and is approved by the Financial Services Authority. |
| Recognised Investment Exchange (RIE) |
(UK) An investment exchange which meets the requirements for recognition under the Financial Services Act 1986 and is approved by the Financial Services Authority. |
| Recognised Professional Body (RPB) |
(UK) A body which regulates the practice of a profession such as the Institute of Chartered Accountants, The Law Society, the Institute of Actuaries and the Insurance Brokers' Registration Council. |
| Record date |
The date on which the owners of a security are identified for the purpose of making an upcoming interest or dividend payment. |
| Recovery rate |
In the event of a default, the fraction of the outstanding obligation expected to be recovered through bankruptcy proceedings or some other form of settlement. |
| Recovery shares |
Shares which have fallen in value but can recover their former value. |
| Red Book |
Informal name for the detailed Government spending and revenue forecasts which accompany each Budget speech. Formally known as the Financial Statement. |
| Redeemable |
A security which can be bought back by the original issuer. |
| Redeemable preference shares |
Preference shares which the issuing company reserves the right to redeem. The shares may, or may not have a specific redemption date or dates. |
| Redemption |
The re-purchase of a security, such as a bond or preferred stock, by the issuing company at or before maturity. |
| Redemption date |
The actual date on which repayment of a bond or loan stock takes place. |
| Redemption fees |
(US) Fees imposed by a mutual fund on shareholders who dispose of shares within a relatively short period after purchase. |
| Redemption price |
The price at which a bond or preferred stock can be redeemed by the issuer. |
| Redemption yield |
The IRR that a buyer would receive if they purchased the bond at the current market price. Also known as YTM (Yield to maturity). |
| Reduced form model |
A model having compiled an empirical record of parameter instability particularly in the face of breaks in the stochastic behavior of the exogenous variables and disturbances. |
| Reduced stable distribution |
Standardized stable distribution. |
| Refer to drawer |
A phrase used by banks in the UK when a cheque is dishonoured or 'bounced'. |
| Refunded bond |
Municipal bond for which assets have been set aside in an escrow account or trust to fully retire the debt. |
| Refunding |
A transaction in which bonds are called so they can be replaced with new debt, usually at a lower interest rate. |
| Regime switching model |
A category of stochastic processes. |
| Registered bond |
A bond for which ownership is evidenced by both a certificate and the issuer's records. |
| Registered Competitive Market Maker (RCMM) |
(US) It identifies New York Stock Exchange (NYSE) floor members with a specific NYSE-imposed obligation to enhance the quality of NYSE markets by injecting their own or their firms' capital into difficult market-making situations. |
| Registered Representative (RR) |
(US) Also known as account executive, customers' broker, or similar title. It describes full-time New York Stock Exchange member organisation sales people who have met the NYSE knowledge criteria. |
| Registered securities |
When holders have their names kept in a register maintained by the company issuing securities. |
| Registrar of Companies |
The official body responsible for the registration of all companies in the UK. |
| Regression analysis |
Analysis which examines the correlation between two or more variables in a mathematical model and attempts to prove whether or not the past relationships will be the same in the future. Regression analysis is used in the Black-Scholes option pricing model, portfolio theory and the capital asset pricing model. |
| Regular-way settlement |
The standard basis on which some security trades are settled: the delivery of the securities purchased is made against payment in Fed funds on the day following the transaction. |
| Regulation T |
(US) It refers to the federal regulation governing the amount of credit that may be advanced by brokers and dealers to customers for the purchase of securities. |
| Regulation U |
(US) It refers to the federal regulation governing the amount of credit that may be advanced by a bank to its customers for the purchase of listed share. |
| Regulatory capital |
Capital held in accordance with statutory or regulatory requirements. |
| Regulatory News Service (RNS) |
The London Stock Exchange's service which ensures that price sensitive information from listed and AIM companies, and certain other bodies, is disseminated to all RNS subscribers at the same time. |
| Regulatory Pyramid |
(US) A network of safeguards that surrounds the US securities industry, from individual brokerages all the way up to the US Congress. |
| Rehypothecation |
The reuse of collateral for one's own purposes. |
| Reimbursement |
The repayment of a person who has incurred expenses on behalf of another. |
| Reinstatement Premium |
A Pro-Rata Reinsurance premium that may be charged for reinstating the amount of reinsurance coverage reduced as the result of a reinsurance loss payment under a catastrophe cover. |
| Reinsurance |
The practice whereby one party, the reinsurer, in consideration of premium paid, agrees to indemnify another party, the reinsured, for part or all of the liability assumed by the reinsured under a policy (or policies) of insurance. |
| Reinsurance Contract |
Reinsurance contract is an insurance contract issued by one insurer to compensate another insurer for losses on one or more contracts issued by the cedant. |
| Reinsurance Premium |
The premium paid by the reinsured to the reinsurer as consideration for the liability assumed by the reinsurer. |
| Reinsured |
An insurance company that transfers to another insurance company all or part of its assumed liabilities. |
| Reinvestment risk |
Risk from uncertainty in the interest rate at which future cash flows may be invested. |
| Relative pricing model |
An asset pricing model that assigns prices based on prices of other instruments quoted in the market. |
| Relative strength |
Relative strength compares the percentage gain in the price of a share to the percentage gain of a chosen index over the same period. |
| Relative strength index (RSI) |
A widely used index which compares a company's share price to a broadly-based market index like the FTSE All-Share. The point of the comparison is to show whether historically the company share price outperforms or underperforms the index. |
| Relative Strength Indicator (RSI). |
This indicator is used to measure the underlying strength of a market move. |
| Relative value strategy |
Market neutral strategy. |
| Remainder man |
In the case of a trust, this term refers to the individual who will receive the principal of a trust when final distribution takes place. |
| Remapping |
In value-at-risk, the approximation of one risk vector with another. |
| Rembrandt |
A foreign bond issued in the Netherlands. |
| Remortgage |
The process of paying off one mortgage with the proceeds from a new mortgage using the same property as security. |
| Renewable term assurance |
(UK) Term life insurance with a term of, for example, three years, at the end of which the policy can be renewed for a further period of time. |
| Renounceable documents |
Documents which provide temporary evidence of ownership of unregistered shares. |
| Rent |
Regular payment by a tenant to a landlord for the use of his/her land or buildings. |
| Rental yield |
This is what a landlord can expect to receive in rent, expressed as a percentage of the purchase price of the property. |
| Reopening |
A Treasury securities auction in which previously issued securities are again offered. |
| Repayment charges |
Most fixed, capped and discounted mortgages impose a financial penalty on customers who redeem their mortgages before their deal comes to an end. |
| Repayment mortgage |
A mortgage where throughout the term, regular payments are made to repay both the loan's interest and capital. |
| Replacement cost |
The cost of replacing an obligation of a counterparty. |
| Repo |
Repurchase agreement. |
| Repo market |
The repo market is one in which two participants agree that one will sell securities to another and make a commitment to repurchase equivalent securities on a future specified date, or on call, at a specified price. |
| Repo rate |
The rate of interest on a general collateral repo transaction. |
| Reporting level |
Sizes of positions set by the exchanges or the CFTC at or above which commodity traders and brokers who carry their accounts must make daily reports as to the size of the position by futures or options contract, delivery month and whether the position is speculative or hedging. |
| Reporting limit |
See: 'reporting level' |
| Repricing |
Resetting of an interest rate. |
| Repricing date |
Any date on which an interest rate is reset. |
| Repricing gap |
Interest rate gap. |
| Repricing risk |
Term structure risk. |
| Repurchase agreement |
1) An agreement to sell and subsequently repurchase a security. 2 ) The sale of Treasury bonds for a short period of time, with an agreement these bonds at a slightly higher price. |
| Reserve Bank of Australia |
Australia's central bank. |
| Reserves |
1) International reserves of a government or central bank. 2) Amounts held by commerical banks in their vaults or on deposit with the central bank as backing for deposits. |
| Reset date |
Any date on which the floating rate payable on a floater is reset. |
| Reset option |
See: 'Ratchet option'. |
| Residence status |
(UK) The definition of a person's status when living or working outside the UK with regard to his/her taxation liabilities. |
| Residual claim |
The claim of stockholders on corporate assets after claims to all other parties have been met. |
| Residuary legacy |
In a will, the gift of whatever is left (the residue) after specific gifts are given. |
| Resiliency, market |
The speed with which prices return to equilibrium following a large trade. |
| Resistance |
When price levels in a market are expected to provide some barrier to a price rise. |
| Resistance level |
A price level identified by technical analysts at which persistent selling of a share or commodity takes place. |
| RESPA (Real Estate Settlement Procedures Act) |
RESPA is a federal law that requires lenders to provide home mortgage borrowers with information about known or estimated settlement costs. |
| Result of exercising option |
A term used by the London Stock Exchange to denote that a transaction was reported as a result of exercising a traditional option or a negotiated option. |
| Result of stock swap |
A term used by the London Stock Exchange to denote that a trade was reported as a result of a stock swap or stock switch (one report is required for each line of stock swapped or switched). |
| Retail investor |
A private investor who buys shares through a stockbroker for his/her private portfolio. |
| Retail price index (RPI) |
An index of the prices of consumer goods and services used to measure the rate of inflation. |
| Retailer card |
A plastic payment card issued by a specific retailer or group of retailers for limited use at their own outlets. |
| Retained earnings |
The proportion of a company's profits after tax which are not paid out as dividends but reinvested in the company. |
| Retention |
The amount of risk or loss that the reinsured or the reinsurer keeps for its own account or that of specified others. |
| Retirement pension forecast |
See: 'pension forecast' |
| Retirement relief |
A special relief for Capital Gains Tax purposes which applies when an individual aged 55 or over disposes of his business or an interest in a business. |
| Retracement |
The reversal of a stock's price counter to the recent trend. |
| Retroactive Reinsurance |
A plan or method that provides for the adjustment of final reinsurance ceding commission or premium on the basis of the actual loss experience under the reinsurance contract, subject to minimum and maximum limits. |
| Retrocession |
Amount of the risk accepted by the reinsurer which is then passed on to other reinsurance companies. |
| Retrospective Rating |
A plan for which the final premium is not determined until the end of the coverage period and is based on the insured's own loss experience for that same period. It is subject to a maximum and minimum. A plan of this type can be used in various types of insurance. |
| Retrospectively Rated Reinsurance |
Reinsurance in which the ultimate premium paid by the reinsured is based upon the ultimate liabilities assumed by the reinsurer under the contract. |
| Return |
Profit earned by a capital investment or other type of security. |
| Return on assets (ROA) |
Earnings after tax divided by total assets. |
| Return on capital |
A profitability ratio measured using net income divided by invested capital. This is equivalent to return on assets multiplied by the leverage ratio (assets/equity). |
| Return on capital employed (ROCE) |
A measure of a company's profitability. |
| Return on equity (ROE). |
Earnings after tax divided by shareholders' equity. |
| Return on investment |
The overall profit (or loss) on an investment expressed as a percentage of the total invested. |
| Return on risk-adjusted capital |
A risk based profitability measurement framework for analysing risk-adjusted financial performance and providing a consistent view of profitability across businesses. RAROC is defined as the ratio of risk adjusted return to economic capital. |
| Revenue account |
An investment trust term referring to analysis of investment income. This details whether income is franked or unfranked and whether the source of income is from UK investments, overseas or unlisted securities. |
| Revenue anticipation note |
Security issued in anticipation of future revenue which will be used for repayment. |
| Revenue bond |
Municipal bond issued to finance a specific revenue-producing projects, such as a toll road, airport or public housing. |
| Reverse annuity mortgage (RAM) |
(US) A mortgage that permits elderly people who own their home to receive an income for life in return for the property's equity. |
| Reverse floater |
Inverse floater. |
| Reverse inquiry |
A request by an investor that a medium-term note be issued based on terms other than those offered. |
| Reverse leverage |
(US) The investment of borrowed money where the return fails to match the interest payable on the loan. |
| Reverse mortgage |
A mortgage that permits elderly people who own their home to receive an income with the home as collateral. The loan is repaid plus interest either at the end of the term or on the death of the borrower when the property is sold. |
| Reverse Rating |
An experience rating where the reinsured pays higher reinsurance premium in good years (i.e. years with good results) and lower premium in bad years (i.e. with bad results). See Experience Rating. |
| Reverse repo |
The opposite side of a repo transaction. |
| Reversionary bonus |
(UK) A bonus added to the sum assured of a with profits life assurance policy out of a life company's surplus profits usually on an annual basis. |
| Reversionary interest |
The right to receive the property held in a trust at some future date. |
| Revocable Trust |
A type of trust that can be terminated by the settler. |
| Rho |
The Greek factor sensitivity measuring a portfolio's first order (linear) sensitivity to the risk-free rate. |
| Riding the yield curve |
Where bond market players buy longer-term bonds in anticipation of capital gains as yields fall with the declining maturity of their bond holdings. |
| Right of redemption |
(US) The right to recover property forfeited by foreclosure by paying the outstanding principal owed plus interest. |
| Right of survivorship |
The right of a joint owner to the full title of a property following the death of the other joint owner. |
| Rights issue |
An offer made to existing shareholders in a company to buy new shares of that company at discount price. |
| Rights offering |
See 'rights issue'. |
| Ring fence |
A protection-based transfer of assets from one destination to another, usually through the use of offshore accounting. |
| Risk |
The chance that an investment could lose or fail to maintain value. |
| Risk arbitrage |
Merger arbitrage. |
| Risk capital |
Funds made available for startup firms with exceptional growth potential. Also called venture capital (VC). |
| Risk committee |
A board level committee with responsibility for issues related to financial risk management. |
| Risk factor |
A random variable whose value will affect the value of a portfolio. |
| Risk limit |
A limit placed upon risk taking activity for the purpose of avoiding excessive risk. |
| Risk management department |
A department within a firm that is responsible for risk management. |
| Risk manager |
A professional who performs duties related to risk management. |
| Risk measure |
An operation for quantifying a risk. |
| Risk neutral valuation |
A concept that underlies many techniques for pricing options and other derivatives. |
| Risk oversight committee |
A committee of senior managers with responsibilities related to financial risk management. |
| Risk Premium |
The portion of the premium that is allocated to enable the reinsured to pay losses. |
| Risk Transfer |
The extent to which insurance risk is shifted from the reinsured to the reinsurer. |
| Risk vector |
A random vector whose components are risk factors. |
| Risk/reward |
The comparison of the returns which can be earned from different types of financial instruments (bank deposits, bonds, shares, unit trusts, investment trusts, property) and the risks that are attached to them. |
| Risk-adjusted capital ratio |
A firm's capital ratio with an adjustment made to the denominator to reflect the risk of its assets. |
| Risk-adjusted performance metric |
A standard accounting performance metric adjusted to reflect "true" or "economic" risk. |
| Risk-adjusted return on capital |
A Risk-Adjusted Performance Metric (RAPM) based on return on capital (ROC). |
| Risk-adjusted return on risk-adjusted capital |
A Risk-Adjusted Performance Metric (RAPM) based on return on capital (ROC). |
| Risk-averse investor |
An investor who only buys a risky asset if it provides compensation for risk via a risk premium. |
| Risk-Based Capital |
Risk-based capital is the amount of capital that is needed to absorb the risks of operating a business. |
| Risk-free rate |
An interest rate that can be earned with certainty. |
| Riskless principle |
A term used by the London Stock Exchange which means that a trade was reported as a riskless principle transaction between two non-members, where the two transactions are executed at different prices or on different terms (requiring two separate trade reports). |
| Risk-lover investor |
Investors who will accept lower expected returns on investments with higher levels of risk. |
| Risk-lover investor |
Investors who accept higher levels of risk. |
| RiskMetrics |
A free service launched by JP Morgan in 1994 to promote the use of value-at-risk. |
| Risk-return trade-off |
The risk attached to an investment, and the return one can attain by holding that investment. |
| ROA |
Return on assets. |
| Robber barons |
A term used disparagingly to refer to industrialists of America's Gilded Age. |
| ROC |
Return on capital. |
| ROE |
Return on equity. |
| Rolling settlement |
In a rolling settlement, each trading day is considered as a trading period and trades executed during the day are settled based on the net obligations for the day. |
| Rollover |
The transferring of funds from one investment to another such as rolling over the proceeds from a bond which has matured into another bond, or the rolling over of the proceeds of a share sale into a tax-efficient investment vehicle like a Venture Capital Trust. |
| Rollover relief |
A capital gains tax relief which applies when an individual disposes of a business or an asset used in a business and spends the proceeds on acquiring replacement assets during a qualifying period (normally up to one year before and up to three years after the date of the disposal of the original asset). |
| Rollover risk |
Rollover risk is the risk that a derivative associated with a government’s debt does not extend to the maturity of that debt. |
| RORAC |
Return on risk-adjusted capital. |
| Round lot |
(US) It refers to the normal trading unit on a securities exchange. A round lot on the New York Stock Exchange is $100 for shares and $1,000 face value for a bond. |
| Round trip |
The opening purchase or sale of a futures or options contract and the subsequent closing sale or purchase in the same contract. |
| Royal Mint |
The Royal Mint is the body permitted to manufacture, or mint, coins in the United Kingdom of Great Britain and Northern Ireland. It originated over one thousand years ago, but it has functioned since 1975 as a 'Government Trading Fund', operating in much the same way as a government-owned company. |
| RSP Gateway |
A centralised routing system for electronic links between stockbrokers and Retail Service Providers (RSPs), who provide electronic pricing and execution services. |
| Rule 415 |
SEC rule allowing shelf registration of medium-term notes. |
| Rule of 113 |
An arithmetic equation used to calculate how many years it would take for an investment to triple in value, given knowledge of its annual rate of return and reinvestment (compounding) of income. |
| Rule of 72 |
An arithmetic equation used to calculate how many years it would take for an investment to double in value, given knowledge of its annual rate of return and reinvestment (compounding) of income. |
| Run |
A sustained period of selling which drives down the price of a security or commodity. |
| Run-Off Cancellation |
A termination provision of a reinsurance contract stipulating that the reinsurer shall remain liable for losses under reinsured policies in force at the date of termination. |
| S |
|
| S&P/All Ordinaries share price index |
A share price index that measures the market prices of the major stocks listed on the Australian Stock Exchange (ASX). |
| Salary reduction plan |
A plan which allows employees to contribute pre-tax compensation to a qualified tax deferred retirement plan. |
| Sales charge |
A brokerage fee charged to a buyer of shares in a mutual fund. |
| Sales ledger |
It contains the personal accounts of customers to whom the business has sold on credit. |
| Sales tax |
(US) A state or local government tax levied on goods and services. The amount of tax is based on a percentage of the selling price. |
| Sales/Use Taxes |
Sales/use taxes vary from state to state and are assessed on purchased units. |
| Samurai |
A foreign bond issued in Japan. |
| Samurai bond |
A foreign bond issued in Japan. |
| Sarbanes-Oxley Act of 2002 |
US legislation enacted in response to the accounting scandals of 2001-2002. |
| Sargeted amortization class |
A type of CMO bond structured to minimize risk due to high prepayment rates. |
| Save as you earn (SAYE) |
(UK) A former government scheme, abolished in 1994, which allowed tax concessions to people making regular savings from their salaries into certain building society, bank and National Savings accounts. |
| Savings account |
An account with a bank or financial institution which pays interest on balances held. |
| Savings and Loan Association |
(US) A financial institution in which depositors' savings are used to provide home mortgages loans. |
| Savings element |
(US) The cash value which accumulates within a life insurance policy. The premium is applied to give both life cover plus a savings element which is allowed to grow tax deferred until withdrawn. |
| Sax and revenue anticipation note |
A type of municipal security. |
| Scalper |
A trader who buys and sells quickly to take advantage of small price fluctuations. |
| Scenario analysis |
Formalized "what if" analysis performed as a part of asset-liability management or corporate risk management. |
| Schedule |
The part of an insurance or assurance policy which sets out the particular details relevant to the contract. |
| Schedule D |
The tax schedule under which a self-employed person's profits are assessed. |
| Schedule E |
The tax schedule under which directors and employees of a company are assessed. |
| Scrip dividend |
(UK) The issue of additional shares by a company to a shareholder in lieu of a dividend. The shares have an equivalent cash value to the dividend. No dealing charges or stamp duty is payable the issue of the new shares. |
| Scrip issue |
A scrip issue is the issue of new shares to existing shareholders at no charge, pro-rata to their existing shareholdings. |
| Scripophily |
A term coined in the mid-1970s to describe the hobby of collecting antique bonds, stocks and other financial instruments. |
| SEAQ trade |
A term used by the London Stock Exchange to denote a single uncrossing trade, detailing the total executed volume and uncrossing price as a result of a SEAQ auction. |
| Seasoned issue |
A security issued by a well established and sound performing company with generally high liquidity. |
| Seat |
Membership of a securities or commodities exchange. |
| SEATS |
Stock Exchange Automated Trading System, a computer network that allows stockbrokers to trade via computer terminals. |
| SEC |
Securities and Exchange Commission |
| SEC 7-DAY YIELD |
Income earned as defined by the Securities Exchange Commission, over the seven-day period and annualized. |
| Second Banking Coordination Directive |
1989 European financial legislation. |
| Second Event Cover |
Catastrophe excess of loss cover with an annual aggregate deductible of one limit, so that the sub total loss is retained by the reinsured. |
| Second Event Retention |
A provision under which the reinsured's retention for excess of loss protection (especially under catastrophe covers) is reduced for subsequent catastrophes during the same reinsurance period. |
| Second hand endowment |
See: 'traded endowment policy'. |
| Second mortgage |
A mortgage on real estate which has already been pledged as collateral for an earlier mortgage. The second mortgage carries rights which are subordinate to those of the first. |
| Second mortgage bond |
A subordinate mortgage bond. |
| Secondary capital |
A bank's transient capital. |
| Secondary market |
The financial market for trading of securities that have already been issued in an initial private or public offering. |
| Secondary market |
The trading of shares amongst investors which does not involve the company itself. |
| Section 32 transfer |
(UK) A reference to section 32 of the Finance Act 1981 which defined the original legislation allowing a person to transfer a payment representing pension benefits from a previous employer to a personal pension plan operated by an insurance company. |
| Sector |
A group of listed companies operating in the same industry, such as energy, financials, general industries, pharmaceutical and technology. |
| Sector fund |
A mutual fund or unit trust which invests in a specific sector. |
| Sector, Inc. |
(US) Sector, Inc., is a wholly owned subsidiary of the US Securities Industry Automation Corporation (SIAC). It provides a variety of communications and outsourcing services to organisations that require high-availability for critical operations in both data center and network operations. |
| Secured bond |
A bond which is secured by the guarantee of assets or collateral. |
| Secured creditor |
A creditor who has a charge over the assets of a debtor in the event of the debtor failing to meet his/her obligations. |
| Secured lending |
Collateralized lending. |
| Secured loan |
A loan backed by an asset, which can seized in the event of default. |
| Securities |
Financial instruments (such as bonds or stocks) that can be traded freely on the open market. |
| Securities Act of 1933 |
US legislation to regulate the primary (underwriting) market for securities. |
| Securities and Exchange Commission (SEC) |
(US) The US federal agency empowered to regulate US financial markets in order to protect investors. All quoted American companies have to comply with SEC rules and regulations. |
| Securities and Investments Board (SIB) |
(UK) A private limited company formerly reporting to the Chancellor of the Exchequer with responsibility for the regulation of the UK investment market in accordance with the Financial Services Act 1986. It was replaced by the Financial Services Authority (FSA) in October 1997. |
| Securities Exchange Act of 1934 |
US legislation to regulate the secondary market for securities. |
| Securities firm |
A firm that brokers or sells securities. |
| Securities Industry Association (SIA) |
(US) It represents the collective business interests of more than 500 brokerages and investment banking firms in the US Membership includes most NYSE member organisations, major firms of all US and Canadian exchanges, and the OTC market. |
| Securities Industry Automation Corporation (SIAC) |
(US) SIAC operates the New York and American Stock Exchanges automation and communications systems to support trading, market data reporting, and surveillance activities. |
| Securities Investor Protection Corporation (SIPC) |
(US) A not-for-profit organisation which provides insurance for cash and securities in customer accounts held by approved brokerage firms. Brokers and dealers registered with the Securities and Exchange Commission are obliged to be members of SIPC. |
| Securities lending |
The lending of securities by one party to another. |
| Securities Masterfile (SMF) |
It provides up-to-date information on securities traded on UK and international markets (from the London Stock Exchange). |
| Securitisation |
The process through which an issuer creates a financial instrument by combining other financial assets and then marketing different tiers of the repackaged instruments to investors. |
| Securitised derivative |
A derivative which is freely traded and listed on a stock exchange. |
| Securitize |
To legally structure or package a financial interest as a security. |
| Security |
A financial instrument (such as bonds or stocks) that can be traded freely on the open market. |
| Security Agreement |
An agreement between a borrower and a lender which allows the lender or creditor to place a lien on specific collateral. |
| Self assessment |
(UK) It is a tax return which has to be completed individuals who are self employed, a business partner, a company director, or have complex tax affairs. |
| Self regulating organization |
In the United States, a private organization that performs a regulatory function under the supervision of the SEC. |
| Self Regulatory Organisation (SRO) |
(UK) Following the Financial Services Act 1986, SROs were set up to regulate companies dealing in investment business, but all regulatory functions of SROs were taken over by the Financial Services Authority as of December 2001. |
| Self-administered pensions scheme |
A pension scheme with no more than 12 members where one or more of the members is a trustee or the company which established the scheme is a trustee. |
| Self-Insurance |
When companies or individuals set funds aside to pay for possible losses. |
| Self-invested personal pension (SIPP) |
(UK) A type of personal pension which allows wider investment freedom. |
| Self-select ISA |
An ISA in which the investor makes decisions about what investments go into the tax-free shelter, rather than relying on advice from a broker or IFA. |
| Sell side |
A broker/dealer who sells expertise in research, order execution or any other service to an individual or institution. |
| Selling price |
The price at which units in a unit trust are sold by investors. Also known as the bid price. |
| Semi-annual compounding |
Compounding based on semi-annual crediting of interest. |
| Semi-variance |
An alternative to variance that focuses on negative values of a distribution. |
| Senior debt |
(US) A debt which receives priority for repayment in the event of a corporation's liquidation. |
| Senior mortgage bond |
(US) A mortgage bond which receives priority on the assets of a company over other bonds in the event of liquidation. |
| Separation theorem |
The result that portfolio composition and portfolio leveraging are two unrelated decisions. |
| Sequential pay CMO bond |
A type of CMO bond whose structure comprises three or four tranches that mature sequentially. All tranches participate in interest payments from the mortgage collateral, but initially, only the first tranch receives principal payments. |
| Serial bond |
A bond which is arranged to be repaid in instalments over a period of time. |
| Series |
Options contracts on the same instrument which have the same exercise price and expiry date are known as the same series. |
| Service Agreement |
A contract binding a company to compensate the covered party for the repairs of a vehicle/vessel above and beyond the original manufacturer's warranty. |
| Servicing agent |
The party who performs servicing on collateral of a securitization. |
| Servicing fee |
A fee subtracted from the cash flows of a securitization to cover the cost of servicing. |
| Servicing rights |
Rights to process payments and perform related tasks associated with the collateral of a securitization. |
| Settlement |
The process whereby securities or interests in securities are delivered, usually against payment, to fulfill contractual obligations, such as those arising under securities trades. |
| Settlement date |
The date on which a trade settles. |
| Settlement options |
(US) The various options available to the beneficiaries of a life insurance policy in the event of the death of the insured. |
| Settlement price |
A price set for a futures contract at the close of trading for the purpose of calculating margin payments. |
| Settlement risk |
A form of credit risk that arises at the settlement of a transaction. |
| Settlor |
The term given to an individual setting up assets under a trust. |
| Share |
An individual unit of ownership in a publicly-owned corporation or mutual fund. |
| Share account |
(UK) A building society account where there is no cheque book facility. Share account holders are members of the society and are entitled to vote and attend annual general meetings. |
| Share buyback |
The purchase by a listed company of its own shares either in the open market or by tender offers. |
| Share capital |
The proportion of a company's capital which derives from the issue of ordinary shares and preference shares. |
| Share certificate |
A certificate denoting ownership of shares in a company. |
| Share exchange |
A facility offered by some investment trusts which enables investors to convert individual shares they hold into shares in the investment trust. |
| Share option |
A right to acquire shares in the future, usually at a fixed price. |
| Share perks |
When a company gives their shareholders a discounted price on the company's goods and services. |
| Share to buy |
A mortgage scheme which enables groups people to jointly buy a property. |
| Shared appreciation mortgage (SAM) |
(US) A mortgage in which a borrower pays lower rate of interest to the lender on the understanding that the latter shares a proportion of the appreciation of the property. |
| Shared ownership schemes |
With shared ownership an affordable share of a property is purchased and rent is paid on the remaining share, which is owned by a housing association. Gradually, further shares may be bought until the home is owned outright. |
| Shareholder |
Person who owns shares in a company. |
| Sharpe, William |
1990 Nobel Prize winner who published the original capital asset pricing model. |
| Shelf registration |
A flexible form of SEC registration applicable to medium-term notes. |
| Shell company |
A company which exists in name only but has ceased to trade. |
| Short bond |
A bond with a near maturity date, generally under two years. |
| Short covering |
The act of buying back a commodity, security or opposing futures contract to close out a short position. |
| Short position |
In the case of a futures contract, the promise to sell a certain quantity of a good at a particular price in the future. opposite of a long position. |
| Short sale |
Sale of a borrowed security. |
| Short seller |
Someone who sells an asset short. |
| Short selling |
The strategy which involves selling shares you don't yet own in the expectation that the price will fall and you can buy them back at a lower price later and make a profit. |
| Short squeeze |
Situation in which those who are short cannot repurchase their contracts, except at a price substantially higher than the value of those contracts in relation to the rest of the market. |
| Short term debt |
(US) Debts or current liabilities which are due within one year. |
| Shortfall Cover |
A facultative reinsurance cover, usually temporary, that is used to fill in the shortfalls in the reinsured's programme. |
| Shorting a market |
A strategy where the investor sells an asset that she does not own. It entails the investor borrowing the asset from a broker, and then giving it back to the broker when the loan is repaid. |
| Shorts |
Redeemable gilts or bonds with a redemption date within five years. |
| Short-Tail Business |
A term used in insurance business when claims will generally be notified and settled quickly. |
| Short-Term Securities |
Securities which have less than one year between issue date and maturity. |
| Sickness benefit |
(UK) A benefit payable by the state to employed people who become ill and are unable to work. |
| Siegel, Martin |
Kidder Peabody investment banker who became embroiled in the 1980s insider trading scandals. |
| Sight draft |
A draft on which payment is to be made immediately. |
| Simple interest |
Interest, normally paid annually, which is earned on deposited capital only. Unlike compound interest, the annual interest is not added to the capital. |
| Simple Interest Loan |
In contracts which use simple interest, the customer promises to pay back the principal balance of the purchase price, plus interest to the lender. Interest accrues daily on the daily outstanding balance. |
| Simple random walk |
A random walk whose increments form a strong white noise whose terms only take on the values 1 or –1, each with probability 0.5. |
| Simple reversionary bonus |
A with profits life assurance bonus, normally declared |
