| U |
|
| Uberrimae fidei |
All contracts of insurance are subject to 'utmost good faith' in that applicants for insurance are obliged to disclose any detail which may be of importance to the insurers whether or not it is requested. |
| UK Listing Authority (UKLA) |
The body authorised by the FSA which decides on the rules for the listing of public companies, reviews and approves the prospectuses of companies that want to list, and which in consultation with various departments of the London Stock Exchange, enforces those rules. |
| Ultimate Net Loss |
The sum paid by the reinsured in settlement of its contractual liability for losses or claims arising out of one event/risk/loss occurrence. |
| Umbrella Cover |
Reinsurance protection for several classes of business by combining the contracts of different classes of business into one reinsurance contract. |
| Umbrella fund |
A collective fund containing several sub-funds, each of which invests in a different market or country. |
| Umbrella personal liability insurance |
(US specific) In the US, liability insurance giving excess cover over and above that cover provided by other policies. For example if general policies give total liability insurance cover of $400,000, an umbrella policy could typically provide cover of $1 million. If a claim of $700,000 were made the umbrella policy would pay out only after the $400,000 has been first exhausted. |
| Unconditional heteroskedasticity |
A condition where a stochastic process has non-constant unconditional second moments. |
| Unconditional homoskedasticity |
A condition where a stochastic process has constant unconditional second moments. |
| Uncovered |
See: 'naked'. |
| Undated stocks |
Fixed interest stocks which have no redemption date. |
| Underlier |
A primary instrument or variable which will determine the value of a derivative instrument. |
| Underlying instrument |
The instrument such as shares and commodities on which a futures or options contract is based. |
| Undertakings for Collective Investment in Tradable Securities (UCITS) |
UCITs are collective funds which can be sold across national borders within the EU in accordance with the 'Undertakings for Collective Investment in Tradable Securities' Directive. For UK investors, one of their significance attributes is they can be sheltered from tax within the Stocks and Shares component of an ISA. |
| Underwriter |
1. An intermediary between an issuer of a security and the investing public, usually an investment bank; 2) The issuer of an insurance policy. |
| Underwriting Risk |
Risk that premiums will not be sufficient to cover future Incurred Losses and that losses and loss adjustment expenses' current reserves are not sufficient. |
| Underwriting Territory |
The geographical limits in which original insurances subject to the reinsurance agreement are written. |
| Underwriting Year Basis |
A basis of (normally proportional) reinsurance cover, under which the treaty responds according to the inception or renewal date of the original policy ceded to it. This means that premiums and claims of different underwriting years are accounted for separately until each runs off. |
| Unearned income |
Income received from sources such as dividends from shares and bonds, i.e.. income which has not been earned by working. |
| Unemployment benefit |
Benefit received from a government department when a person becomes unemployed. The claimant must be able to verify previous employment and that he/she is actively seeking new employment. |
| Unexpected loss |
A risk metric related to the second moment of a portfolio's losses due to default over a specified horizon. |
| Unfunded pension plan |
A pension plan which is funded by an employer from current income for the benefit of retirees. |
| Unfunded unapproved retirement benefits scheme |
An unfunded occupational pension scheme that is not designed to be approved by the Pension Schemes Office. |
| Unified Credit |
A federal tax credit that offsets gift and estate tax liability. |
| Unified tax credit |
(US) A federal tax credit which may be deducted from estate tax and gift tax liability. |
| Uniform distribution |
A continuous probability distribution that has constant probability on a finite interval. |
| Uniform Net Capital Rule |
The SEC's rule setting minimum capital requirements for broker-dealers trading non-exempt securities. |
| Uninsured motorist insurance |
(US) Automobile insurance which gives cover to the insured and passengers in the event of vehicle damage and personal injury caused by an uninsured motorist. |
| Unissued stock |
A company's authorised stock which has not yet been issued. |
| Unit linked |
See: 'unit linked policy'. |
| Unit linked endowment assurance |
See: 'endowment assurance'. |
| Unit linked life assurance |
See : 'unit linked policy'. |
| Unit linked policy |
(UK) A life assurance policy in which a portion of the premium is used to purchase life cover, with the balance invested in an authorised unit trust/trusts. The return on the policy is thus linked to the performance of the units in the unit trust. |
| Unit of trading |
The minimum number of shares, bonds or commodities which are traded in a transaction on an exchange. This number is usually 100 for shares. |
| Unit trust |
(UK specific) Unit trusts are collective funds which allow private investors to pool their money in a single fund, thus spreading their risk, getting the benefit of professional fund management, and reducing their dealing costs. |
| Unitisation |
The conversion of an investment trust into unit trust. |
| Unitised with profits |
(UK) With-profits and investment-linked funds combined in the same contract with the choice of switching between them. |
| Universal bank |
A bank that engages in both commercial and investment banking activities. |
| Universal life insurance |
(US) A combination of term life insurance and a savings element. The policy is flexible in that the death benefit, savings element and premiums can be reviewed and altered from time to time as a policyholder's circumstances change. |
| Universal stock futures (USF) |
A range of standardised futures contracts on the shares of individual companies. The futures contract is an agreement between buyer and seller to buy or sell a given quantity of shares at some time in the future at a pre-determined price. The contract is cash-settled, which means that the stock does not actually have to be delivered, but the parties reconcile accounts based on the difference between the share price at the time of settlement and the contract price. |
| Universal volatility model |
Any of a class of option pricing models that model volatility skew by combining elements of local volatility, jump-diffusion and stochastic volatility models. |
| Unlisted securities |
(US) Shares which are not listed on a Recognised Investment Exchange. A limited number of unlisted securities have traded since 1980 on the unlisted securities market (USM) which however closed at the end of 1996. The USM was replaced by the alternative investment market (AIM). |
| Unpaid dividend |
A dividend which has been declared by a corporation but has not yet been paid. |
| Unsecured loan |
A loan where the lender has no entitlement to any of the borrower's assets if he/she defaults. |
| Up tick |
Refers to a transaction made at a price higher than the preceding transaction. |
| Upper earnings level |
(UK The earnings level of an employee above which no further Class 1 National Insurance contributions are payable. |
| Uptrend |
An uptrend line or rising trend is defined by successively higher prices for a share. There will be dips in the price throughout the uptrend, but each time the price drops, due to a small correction such as profit taking, the 'bottom' will be higher than the previous bottom. |
| US Federal Reserve |
See: 'Federal Reserve'. |
| US Treasury Securities |
Debt obligations secured an backed the US government. |
| Utilities |
Companies which provide essential services such as electricity, gas and water. |
| Utilization |
Given a risk limit, the amount of risk being taken as a fraction of the limit. |
| Utmost Good Faith |
The observance of honourable intent in business relations and the avoidance of any attempts to deceive. |
| V |
|
| Valuation |
The value of a share using a weighted average of the P/E ratio, DCF, price/net tangible assets and other measures. |
| Value added tax (VAT) |
(UK) An indirect tax levied on goods and services in the UK. A company or trader registered for VAT pays suppliers VAT additionally to the cost of goods or services purchased which is known as input tax. Also VAT is added to the sales cost of their product when invoicing customers which is known as output tax. |
| Value at risk (VAR) |
A category of risk metrics that describe probabilistically the market risk of a trading portfolio. Value-at-risk is widely used by banks, securities firms, commodity merchants, energy merchants, and other trading organizations. |
| Value date |
The date on which a trade is intended to settle. |
| Value investing |
An investment style which favors good stocks at great prices over great stocks at good prices. |
| Valued policy |
An insurance policy in which the value of the insured item is agreed at the start of the policy. |
| Vanilla currency swap |
A standardized fixed-for-floating or floating-for-floating currency swap. |
| Vanilla derivative |
A derivative instrument that is simple or of a common form. |
| Vanilla interest rate swap |
A standardized fixed-for-floating fixed income swap. |
| Vanilla option |
A simple put or call option. |
| Vanilla swap |
One of a few standardized forms of swaps that are widely quoted in the markets. |
| VaR |
Value-at-risk. |
| VaR horizon |
The period of time over which a VaR measure assesses a portfolio's market risk. |
| VaR implementation |
An implementation of a VaR measure, generally as software on a computer. |
| VaR limit |
A market risk limit that uses some VaR metric to quantify and limit risk. |
| VaR measure |
A set of operations through which a portfolio's VaR is calculated. |
| VaR measurement |
The numerical value a VaR measure assigns to a portfolio's market risk. |
| VaR metric |
An interpretation of a VaR measure. |
| VaR model |
The financial theory, mathematics, and logic that motivate a VaR measure. |
| Variable interest rate |
Interest rates offered by banks and financial institutions on loans or deposits. Variable rates can fluctuate according to market conditions. |
| Variable life insurance |
(US) A form of cash value life insurance in which the cash value of the policy may be invested in shares and bonds according to the insured's choice. |
| Variable Rate |
Any interest rate or dividend that changes on a periodic basis. |
| Variable rate demand note |
Variable rate demand obligation. |
| Variable rate demand obligation |
A type of floating-rate municipal security. |
| Variable rate mortgage (VRM) |
A mortgage whose interest rate can fluctuate according to market conditions. |
| Variables remapping |
A type of remapping used in value-at-risk measures. |
| Variance |
A parameter describing the dispersion of a probability distribution. |
| Variance-covariance VaR |
Linear VaR. |
| Variation margin |
A margin payment to restore a margin account to the initial margin level. |
| Vcv VaR |
Shorthand for "variance-covariance VaR". |
| Vega |
The Greek factor sensitivity measuring a portfolio's first order (linear) sensitivity to the implied volatility of an underlier. |
| Vehicle Identification Number ("VIN") |
A number assigned to the vehicle by the manufacturer. |
| Vendor |
A person or company selling goods and property. |
| Vendor placing |
An arrangement in which the vendor (seller) of a business who receives shares in the acquiring company as part of the deal immediately sells them on to an institutional investor. |
| Venture capital |
Capital invested into small and young companies in return for equity ownership. Venture capitalists (VCs) supply capital to companies that are small and high risk, and which could not get funds by listing on the stock market or borrowing from banks. |
| Venture capital trust (VCT) |
(UK) A type of investment trust which invests in small unquoted companies with assets of under £15 million, including AIM and OFEX companies, and which is designed to attract risk capital from higher rate taxpayers by giving them tax concessions. |
| Vesting |
Conversion. For example the vesting of a pension fund is its conversion into a pension. |
| Void periods |
Periods 'between tenants' when a rental property is generating no rental income but the landlord still has to cover overhead costs, such as mortgage repayments. |
| Volatility |
The tendency of financial markets to change abruptly at the whims of investors. |
| Volatility clustering |
A property of some stochastic processes that they experience periods of high and low variance. |
| Volatility skew |
A condition where implied volatilities vary by strike |
| Volatility smile |
A condition where implied volatilities for in-the-money and out-of-the-money strikes exceed those for at-the-money strikes. |
| Volatility surface |
A function describing implied volatilities' dependence on both strike and expiration. |
| Volatility term structure |
A curve that describes volatility as a function of expiration for a given strike. |
| Volume |
The number of shares traded on a stock exchange for a given period, also known as market turnover. Low volume is sometimes referred to as 'thin' trading. |
| Volume data |
See 'volume'. |
| Volume weighted average price (VWAP) |
The average price paid for an instrument in all trading of that instrument during a given day. |
| Voluntary deductible employee contribution plan |
(US) A type of pension plan in which an employee elects to have regular payments deducted from each pay check. |
| Voluntary liquidation |
When a company goes into liquidation with the agreement of its shareholders. |
| Voting right |
The entitlement of the owner of common stock or ordinary shares to vote in person or by proxy at annual meetings or annual general meetings. |
| Voting stock |
(US) It gives its owner the right to vote on election of directors and other corporate matters. |
| VRDO |
Variable rate demand obligation. |
| VWAP |
Volume-weighted average price |
| W |
|
| Waiting period |
(US) It refers to the prior payments by the insurers to a policyholder of disability income insurance after a claim, during which no payments are made. This is typically several months. Known as deferment period in the UK. |
| Waiver of premium |
In the event of the policyholder becoming disabled or ill, and unable to work for longer than (usually) six months, the insurance company will pay the premiums for on his/her behalf until he/she is able to return to work. |
| Warrant |
A certificate, usually issued along with a bond or preferred stock, entitling the holder to buy a specific amount of securities at a specific price, usually above the current market price. |
| Warrant premium |
The warrant premium measures the extra cost incurred by buying a warrant and exercising the warrant into the shares, over simply buying the shares directly in the market. |
| Warranty |
A warranty is a written statement agreeing to maintain the said property in good working condition for the period mentioned in the warranty agreement. |
| Wash sales |
An illegal process in which simultaneous purchases and sales are made in the same commodity futures contract, on the same exchange, and in the same month. No actual position is taken, although it appears that trades have been made. The intention is that the apparent activity will induce legitimate trades, thus increasing trading volume and commissions. |
| Wasting asset |
An asset with an expected useful life of less than 50 years. |
| Watered stock |
Stock sold for a price below its par value. |
| Weak market |
A stock market where volume is low and the spread is high. |
| Wedding insurance |
Insurance to give protection against financial loss in relation to a wedding. Typically it cover costs arising out of unavoidable cancellation, damage to hired dress wear, loss/damage to or retaking of photographs and loss of or damage to wedding presents and wedding rings etc. |
| Weekend effect |
A theory of stock market growth which claims that traders optimism normally fades between Friday and Monday. |
| When-issued security |
A government security that trades forward in advance of being issued. |
| Whipsaw |
When a share price moves in one direction, and then abruptly reverses direction. |
| White knight |
A company which comes to the rescue of another listed company which is under siege from an unwelcome bidder. |
| White noise |
A simple form of stochastic process. |
| Whole Account Cover |
Reinsurance contract which covers all classes of business. |
| Whole life insurance |
(US) A life insurance policy, with level premiums, which provides a stated benefit on the death of the life insured and a savings element which accumulates a cash value. The dividends or interest are allowed to build up tax-deferred. |
| Wiener process |
A continuous-time stochastic process named in honor of Norbert Wiener. Also known as Brownian motion. |
| Wiener, Norbert |
Mathematician who proved the existence of Brownian motion. |
| Will |
A legal document expressing the wishes of an individual regarding distribution of his or her assets after death. |
| Windfall shares |
(UK) Free shares issued to members of demutualised societies. |
| Windfall tax |
(UK) One-off tax imposed by the government in the budget of July 1997 on the profits of privatised utilities companies. It was applied to fund the government's Welfare to Work programme. |
| Winding up |
The process of paying creditors and distributing assets that occurs before the dissolution of a corporation. See also 'liquidation' |
| Wireless Data System (WDS) |
New technology used to transmit orders, reports, and administrative messages between brokers and clerks. |
| Withholding |
(US) It refers to a deduction from an employee's salary by an employer for federal, state and local tax liabilities. |
| Withholding tax |
An amount of an employee's income that an employer sends directly to the tax authority as partial payment of that individual's tax liability for the year. |
| Without prejudice |
The basic meaning is 'without loss of any rights'. It is a term used when two parties are in dispute, and one makes a settlement offer to the other. It puts 'without prejudice' on its offer to make it clear that the settlement offer should not be construed as a waiver of rights. |
| With-profits bond |
With-profits bond funds are designed to be low risk investments which produce growth, but which also allow investors to take out income if they want to. The insurance company invests the fund's money in a variety of assets including shares, gilts, property and cash. |
| With-profits policy |
A savings plan, often an endowment linked to a mortgage, which is sold as low risk because your money is invested in a mix of shares, property and bonds. Each year, the insurance company running the plan announces a bonus which is added to your policy and cannot be taken away. And when the plan matures, you usually get a terminal bonus. |
| Worked principle trade |
A term used by the London Stock Exchange to denote that a reported trade was from a worked principle agreement for a single security. |
| Working capital |
A company's current assets (cash, debtors, work in progress) less its current liabilities (creditors, taxes due). This capital is used by a company to run its business. |
| WorldCom bankruptcy |
The largest bankruptcy in US history. |
| Worst-of option |
A form of rainbow option. |
| Wrangle |
An options spread that is long (short) both a ratio call spread and a ratio put spread. |
| Writ |
A written order issued by a court instructing the defendant to appear in court to answer charges made by the plaintiff. |
| Writer |
A person who makes an opening sale of an option contract. Upon notification of exercise by the option holder (the buyer), the writer is obliged to deliver or take delivery of the underlying instrument (for example, shares, commodities). |
| Writer extendible option |
An option whose expiration is extended if some pre-defined condition is met. |
| Written Premium |
Premium income in respect of business written (new or renewed) during a certain period. |
