|  |
D
Fifth letter of a NASDAQ stock symbol specifying that it is a new issue, such as the result of a reverse split.
D/A
See: Documents Against Acceptance
DCF
See: Discounted Cash Flows
DSCR
See: Debt-service coverage ratio
DDM
The ISO 4217 currency code for former East Germany Ostmark.
DDM
See: Discounted Dividend Model
DE
The two-character ISO 3166 country code for GERMANY.
DEM
The ISO 4217 currency code for Deutschemark.
DEQ
Abbreviation for the Incoterm "Delivered Ex Quay."
DES
Abbreviation for "Delivered Ex Ship."
DISC
See: Domestic International Sales Corporation
DITM
See: Deep in the money
DJ
The two-character ISO 3166 country code for DJIBOUTI.
DJF
The ISO 4217 currency code for Djibouti Franc.
DK
The two-character ISO 3166 country code for DENMARK.
DKK
The ISO 4217 currency code for Danish Krone.
DM
The two-character ISO 3166 country code for DOMINICA.
DNR Order
See: Do Not Reduce Order
DO
The two-character ISO 3166 country code for DOMINICAN REPUBLIC.
DOP
The ISO 4217 currency code for Dominican Republic Peso.
DOT
See: Designated Order Turnaround System
DOTM
See: Deep out of the money
D/P
Abbreviation for Documents Against Payment.
DRP
See: Dividend Reinvestment Plan
DTC
See: Depository Transfer Check
DTC
See: Depository Trust Company
DTCC
See: Depository Trust and Clearing Corporation
DZ
The two-character ISO 3166 country code for ALGERIA.
DZD
The ISO 4217 currency code for Algerian Dinar.
Daily price limit
The level within many commodity, futures, and options markets are allowed to rise or fall in a day. Exchanges usually impose a daily price limit on each contract.
Daisy chain
Manipulation of the market by traders to create the illusion of activevolume to attract investors.
Date of issue
Used in the context of bonds to refer to the date on which a bond is issued and when interest beings to accrue to the bondholder. Used in the context of stocks to refer to the date trading begins on a new stockissued to the public.
Date of payment
Date dividendchecks are mailed.
Date of record
Date on which holders of record in a firm's stock ledger are designated as the recipients of either dividends or stock rights.
Dated date
The date one uses to calculate accrued interest on various debt instruments, specifically bonds.
Dates convention
Treating cash flows as being received on exact dates-date 0, date 1, and so forth-as opposed to the end-of-year convention.
Dating
Credit extension beyond normal terms of a credit supplier.
Dawn raid
A term of British origin used to describe the purchase of all available shares of a target company at the market'sopen by a raider. A dawn raid is a surprise technique that allows the raider to gain a substantial share of the target company before the target company knows what is happening.
Day around order
A day order that supersedes (cancels and replaces) the previous order by altering its size or price limit.
Day of deposit to day of withdrawal account
A bank account that pays interest according to the number of days that the money is actually on deposit.
Day loan
A loan from a bank to a broker prior to the delivery of securities. Upon the delivery of the securities, a day loan becomes a regular brokercall loan for which securities serve as collateral.
Day order
In the context of general equities, request from a customer to either buy
or sell stock, that, if not canceled or executed
the day it is placed, expires automatically. All
orders are day orders unless
otherwise specified. Traders often make
calls before the opening to check for renewals.
Day trade
Also known as a "daylight trade." The purchase and sale or the short sale and cover of the same security in a margin account on the same day.
Day trading
Establishing and liquidating the same position or positions within one day's
trading.
Days in receivables
Average collection period.
Days' sales in inventory ratio
The average number of days' worth of sales that is held in inventory.
Days' sales outstanding
Average collection period.
De facto
Existing in actual fact although not by official recognition.
Dead cat bounce
A small upmove in a bearmarket.
Deal flow
In investment banking, the rate at which new deals are referred to a brokerage firm.
Deal stock
Stock subject to merger or acquisition, either publicly announced or rumored.
Dealing desk (Trading desk)
Personnel at an international bank who
trade spot
and forward foreign exchange.
Dealer
An entity that stands ready and willing to buy a
security for its own account (at its
bidprice) or sell from its own account (at its
ask price). Individual or
firm acting as a
principal in a
securitiestransaction.
Principals are
market makers in securities, and thus
trade for their own account and
risk. Antithesis of broker. See: Agency.
Dealer loan
Overnight, collateralizedloan from a money market bank made to a dealer financing his position by borrowing.
Dealer market
Where traders specializing in particular
commoditiesbuy
and sell assets for their own accounts.
Dealer options
Over-the-counteroptions, such as those offered by government and mortgage-backed securitiesdealers.
Dealer's spread
See: markdown; underwriting spread.
Dear money
British term for tight money.
Death-backed bonds
Bonds backed by loans of a policyholder against a life insurance policy. The policyholder will repay the loans while alive or with the benefits from the insurance policy upon death.
Death play
A stock strategy that
buysstock on the belief that a key executive will die, the
company will be dissolved, and shares will command a higher price at their private market value.
Death Spiral Convertible
Used by companies that are in such bad shape, that there is no other way to get financing. This instrument is
similar to a convertible bond, but convertible at a discount to the share price at issuance and for a fixed dollar amount rather than a specific number of shares. The further the stock falls, the more shares you get. Popular in the mid to late 1990s. Also known as toxic convertibles or floorless convertibles.
Death Valley Curve
In venture capital, refers to the period before a new
company starts generating revenues, when it is difficult for the company to raise money.
Debenture
Any debtobligation backed strictly by the borrower's integrity, e.g. an unsecured bond. A debenture is documented in an indenture.
Debenture bond
An unsecured bond whose holder has the claim of a general creditor on all assets of the issuer not pledged specifically to secure other debt. Compare subordinated debenture bond and collateral trust bonds.
Debenture stock
A type of stock that makes fixed payments at scheduled intervals of time. Debenture stock differs from a debenture in that it has the status of equity, not debt, in liquidation.
Debit
An expense, or
money paid out from an account. A debit
transaction is one which the net cost is greater than the net sale proceeds. See also
Credit.
Debit balance
The amount that is owed to a broker by a margin customer for loans the customer uses to buysecurities.
Debit card
A card that resembles a credit card but which debits a
transaction account (checking account) with the transfers occurring contemporaneously with the customer's purchases. A debit card may be machine readable, allowing for the activation of an automated teller machine or other automated payments equipment.
Debit spread
Applies to derivative products. Difference in the value of two options, when the value of the option bought exceeds the value of the one sold. One buys a "debit spread." Antithesis of a credit spread.
Debt
Money borrowed.
Debt bomb
A default on debt and
obligations by a major
financial_institution that disrupts the stability of the economic system.
Debt capacity
Ability to borrow. The amount a firm can borrow up to the point where the firm value no longer increases.
Debt ceiling
See: Debt limit
Debt displacement
The amount of borrowing that leasing displaces. Firms that do a lot of leasing are curtailed in their debt capacity.
Debt/equity ratio
Indicator of financial leverage. Compares assets provided by creditors to assets provided by shareholders. Determined by dividing long-term debt by common stockholder equity.
Debt-for-equity swap
A swap agreement to exchange
equity/returns
for debt returns or the converse over a prearranged length of time.
Debt instrument
An asset requiring fixed dollar payments, such as a government or corporate bond.
Debt leverage
Amplification of the return earned on equity when an
investment or firm is financed partially with borrowedmoney.
Debt limit
The maximum amount that a municipality can borrow.
Debt limitation
A bond covenant that restricts the firm's ability to incur additional indebtedness in some way.
Debt market
The market for
tradingdebt instruments.
Debt outstanding
subject to limitation
Obligations incurred by the
Treasury subject to the statutory limit set by
Congress. Until World War 1, a specific amount of debt was authorized for each separate
security issue. Beginning with the Second Liberty
Loan Act of 1917, the nature of the limitation was modified until, in 1941, it developed
into an overall limit on the outstanding Federal debt. The statuatory limit may change from year to year.
Debt ratio
Total debt divided by total assets.
Debt relief
Reducing the principal and/or interest payments on Less developed country loans.
Debt retirement
The complete repayment of debt. See: Sinking fund.
Debt securities
IOUs created through loan-type transactions-commercial paper, bank CDs, bills, bonds, and other instruments.
Debt service
Interest payment plus repayments of principal to creditors (retirement of debt).
Debt service coverage
The ratio of cash flow available to the borrower to the annual interest and principal payments on a loan or other debt.
Debt-service coverage ratio
Earnings before interest and income taxes, divided by interest expense plus the quantity of principal repayments divided by one minus the tax rate.
Debt service parity approach
Payment alternatives that provide the firm with the exact same schedule of after-tax debt payments (including both interest and principal).
Debt swap
A set of transactions
in which a firmbuys a country's dollar bank debt at a discount and swaps this debt with the
central bank for local
currency that it can use to acquire local
equity. Also called a
debt-equity swap.
Debtholder
See: Bondholder
Debtor
Borrower of money.
Debtor in possession
A firm that continues to operate under the Chapter 11bankruptcy process.
Debtor-in-possession financing
New debt obtained by a firm during the Chapter 11bankruptcy process, Federal Bankruptcy Rule 4001 (c)(1). This financing is unique because it is secured, that is, it has priority over existing debt, equity and other claims.
Decile rank
Performance over time, rated on a scale of 1-10. 1 indicates that a mutual fund'sreturn is in the top 10% of funds being compared; while 3 means the return is in the top 30%.
Decimal trading
The quotation and trading of stock or bond prices in decimals, as opposed to the quotation of prices in fractions.
Decimalization
The quotation and trading of stock or bond prices in decimals, as opposed to fractions such as eighths.
Decision Break-Point
Analysis
A type of sensitivity analysis that indicates the value at which a key
variable will result in a negative
NPV for an
investment project.
Decision tree
Schematic way of representing alternative sequential decisions and the possible outcomes from these decisions.
Declaration date
The date on which a firm'sdirectors meet and announce the date and amount of the next dividend.
Declaration
The Board of Directors motion to authorize dividend payments.
Dedicated capital
Total par value (number of sharesissued, multiplied by the par value of each share). Also called dedicated value.
Dedicating a portfolio
Related: Cash flow matching
Dedication strategy
Refers to multiperiod cash-flow matching.
Deductible
An amount or period which must be deducted before an insurance payout
or settlement is calculated.
Deductible contribution
Amount paid into an
IRA, an employer-sponsored
retirement plan, or other type of retirement plan for a particular tax year that is a
deduction from income for tax purposes.
Deduction
An expense that is allowable as a reduction of gross taxable income by the IRS e.g., charity donations.
Deductive reasoning
Using known facts to draw a conclusion about a specific situation.
Deed of trust
See: Indenture
Deep-discount bond
A bondissued with a very low coupon or no coupon that sells at a price far below par value. A bond that has no coupon is called a zero-coupon bond.
Deep in the money
A call option with an exercise price substantially below the underlying stock's market price. Also put option with an exercise price substantially above the underlying stock's market price. Often substantially below is defined as more than one strike price below (for calls)/above (for puts) the current value of the underlying security.
Deep out of the money
A call option with an exercise price substantially above the market price. Also put option with an exercise price substantially below the underlying stock's market price. Often substantially below is defined as more than one strike price below (for calls)/above (for puts) the current value of the underlying security.
Default
The failure to make timely payment of interest or principal on a debt security or to otherwise comply with the provisions of a bond indenture. A breach of a covenant. In context of project financing, a technical default signals a project parameter is outside defined or agreed limits or a legal matter is not yet resolved.
Default interest
A higher interest rate payable after default.
Default premium
A differential in promised yield that compensates the investor for the risk inherent in purchasing a corporate bond that entails some risk of default. Often the premium is measured as the yield over and above a government bond yield of similar coupon and maturity.
Default risk
The risk that an issuer of a bond may be unable to make timely principal and interest payments. Also referred to as credit risk (as gauged by commercial rating companies).
Defeasance
The setting aside by a borrower of
cash or
bonds sufficient to service the borrower's
debt. Both the borrower's debt and the
offsetting cash or
bonds are removed from the
balance sheet. In securities
trading, where a clearing house becomes counterparty to each side of a trade, after the trade has been agreed. This is necessary to facilitate netting, and reduce counterparty
risk exposure. The term has become popular recently, because of
the growth of central counterparty clearing services in European cash equities markets.
Defensive securities
Low-risk stocks or bonds that will provide a predictable and safe return on an investor'smoney.
Deferred account
A type of account that delays taxes on that account until some later date. An example is an IRA account.
Deferred annuities
Tax-advantaged life insurance products. Deferred
annuitiesoffer deferral of taxes with
the option of withdrawing one's funds in the form of a life annuity.
Deferred call
A provision that prohibits the
company from calling the bond before a certain date. During this period the bond is said to be call protected.
Deferred charge
An expenditure treated as an asset that carries forward until it becomes pertinent to the business at hand, e.g., the underwriting fees on a corporate bond issue, which the corporation capitalizes as a deferred charge and then amortizes over the life of the bond issue.
Deferred compensation
An amount that has been earned but is not actually paid until a later date, typically through a payment plan, pension, or stock option plan.
Deferred equity
A common term for convertible bonds, which recognizes their equity component and the expectation that the bond will ultimately be converted into shares of common stock.
Deferred futures
The most distant months of a futures contract.
Deferred interest bond
A bond that pays interest at a later date, usually in one lump sum, effectively reinvesting interest earned over the life of the bond. See: Zero coupon bond.
Deferred nominal life annuity
A monthly fixed-dollar payment beginning at retirement age. It is nominal because the payment is fixed in a dollar amount at any particular time, up to and including retirement.
Deferred payment annuity
An annuity that stipulates payments be made to the annuitant at a later date, such as when the annuitant reaches a certain age.
Deferred tax expense
A non-cash expense that provides a source of free cash flow. Amount allocated during the period to cover tax liabilities that have not yet been paid.
Deficiency
The amount by which a project's cash flow is not adequate to meet debt
service.
Deficiency Agreement
An agreement that calls on the sponsor or another party to provide the
shortfall when cash flow, working capital, or revenues are below agreed levels or are insufficient to meet debt service.
Deficiency letter
Notification from the SEC to a prospective issuer of securities that revisions or additions need to be made to the preliminary prospectus.
Deficit
An excess of liabilities over assets, of losses over profits, or of expenditure over income.
Deficit spending
When government spending overwhelms government revenue resulting in government borrowing.
Defined asset fund
A unit investment trust consisting of a fixed portfolio of securities, including blue chips, REITs, or high-yielding stocks on a major exchange such as the NYSE or FTSE.
Defined benefit plan
A pension plan obliging the sponsor to make specified dollar payments to qualifying employees at retirement. The pension
obligations are effectively the debt obligation of the plan sponsor. Related: Defined contribution plan
Defined contribution plan
A pension plan whose sponsor
is responsible only for making specified contributions into the plan on behalf
of qualifying participants. Related: Defined
benefit plan
Defined event
The definition applicable to the trigger of a loss in an insurance policy, particularly political risk insurance.
Deflation
Decline in the prices of goods and services. Antithesis of inflation.
Deflator
A statistical factor used to convert current dollar
purchasing power into inflation-adjusted purchasing power. Enables the comparison of prices while accounting for inflation in two different time periods.
Delayed issuance pool
Refers to mortgage backed securities (MBS) that at the time of issuance were collateralized by seasoned loans originated prior to the MBS pool issue date.
Delayed opening
Postponement of the start of
trading in a
stock until correction of a gross imbalance in buy and sell orders. Such an imbalance is likely to follow on the heels of a significant event such as a takeover offer. See: Suspended trading.
Delayed settlement/delivery
In the context of general equities, transaction in which a contract is settled in excess of five full business days. Seller's option. See: Dividend play, settlement.
Delinquency
Failure to make a payment on a debt or obligation by the specified due date.
Delisting
Removal of a company's security from listing on an exchange because the firm has not abided by specific regulations.
Deliver
The sale of a futures or forward contract may require the seller to deliver the commodity during the delivery month, if the short position is not offset prior to that time.
Deliverable bills
The Treasury bills that fulfill a set of guidelines set forth by the exchange on which the bills are traded.
Deliverable instrument
The asset in a forward contract that will be delivered in the future at an agreed-upon price.
Delivered at Frontier (DAF)
Seller must supply the goods at his or her own risk and expense delivered to a named place (usually a border location) by a specified time. The buyer is responsible
for the importation. This is normally is used with rail, truck, or multi-modal shipments.
Delivered Duty Paid (DDP)
Seller must supply the goods at his or her own risk and expense to a named place in the country of importation. The seller is responsible for importation, payment of duty, and on carriage to the location agreed upon with the buyer.
Delivered Duty Unpaid (DDU)
Seller fulfills the contractobligations when the goods have arrived at a named place in the importing country. The seller bears all the costs and risk except for import duties and other customs clearance costs.
Delivered Ex Ship (DES)
Seller fulfills the contractobligations when the goods have been made available to the buyer on board a ship at the named port of destination. The seller must bear all costs and risks associated in bringing the goods to the named port of destination. The buyer is responsible for all costs necessary to unload the goods and clear them through customs. Unloading costs are included the ocean freight charged by most ship lines. The DES is most often used for charter shipments.
Delivered Ex Quay (DEQ)
Seller fulfills the contractobligations to deliver when the goods are made available to the buyer at the wharf of the destination port. A DEQ can further specify "Duty Paid" or "Duty Unpaid." If "Duty Paid" is specified, the seller is responsible for all risks and costs, including duty, to the wharf of the destination port. If "Duty Unpaid" is specified, the buyer is to clear the goods and pay duty. Since unloading costs are included in the ocean freight charged by most ship lines. This is most often used for charter shipments.
Delivery
The tender and receipt of an actual commodity or financial instrument in settlement of a futures contract.
Delivery date
Date by which a seller must fulfill the
obligations of a forward or futures contract.
Delivery notice
The written notice given by the seller of its intention to make delivery against an open, shortfutures position on a particular date. Related: Notice day.
Delivery options
The options available to the seller of an interest ratefutures contract, including the quality option, the timing option, and the wild card option. Delivery options mean that the buyer is uncertain of which Treasury bond will be delivered or when it will be delivered.
Delivery points
Locations designated by futures exchanges
at which the financial instrument or
commodity covered by a futures
contract may be delivered in fulfillment of such a contract.
Delivery price
The price fixed by the clearinghouse at which deliveries on futures are invoiced; also the price at which the futures contract is settled when deliveries are made.
Delivery versus payment
A in which the buyer's payment for securities is due at transaction the time of delivery (usually to a bank acting as agent for the buyer) upon receipt of the securities. The payment may be made by bank wire, check, or direct credit to an account.
Delphi technique
Collection of independent opinions without group discussion by the analysts
providing the opinions; used for various sorts of evaluations (such as country risk assessment).
Dependent variable
Term used in regression
analysis to represent the element or condition that is dependent on values of one or
more other independent variables.
Delta
The ratio of the change in price of an option to the change in price of the underlying asset. Also called the hedge ratio. Applies to derivative products. For a call option on a stock, a delta of 0.50 means that for every $1.00 that the stock goes up, the option price rises by $0.50. As options near expiration, in-the-money call option contracts approach a delta of 1.0, while in-the-moneyput options approach a delta of -1. See: hedge ratio, neutral hedge. Call deltas range from 0.00 to +1.00; put deltas range from 0.00 to -1.00. If the call delta is 0.69, the put delta is -0.31 (call delta minus 1 equals put delta; 0.69 -1 =-0.31).
Delta cross-hedge
A futures hedge that has both
maturity and
currency mismatches with an
underlying exposure.
Delta hedge
A dynamic hedgingstrategy using options that calls for constant adjustment of the number of options used, as a function of the delta of the option.
Delta neutral
Describes value of a portfolio not affected by changes in the value of the asset on which the options are written.
Delta Spread
A ratio spread that is established as a neutral position by utilizing the
deltas of the options involved. The neutral ratio is determined by dividing the
delta of the purchased option by the
delta of the written option. See also
Ratio Spread and
Delta.
Demand deposits
Checking accounts that pay no interest and from which funds can be withdrawn upon demand.
Demand line of credit
A bank line of credit that enables a customer to borrow on a daily or on-demand basis.
Demand loan
A loan which can be called by the lender at any time and carries no set maturity date.
Demand master notes
Short-termsecurities that are repayable immediately upon the holder's demand.
Demand-pull inflation
A theory of inflation or price increases resulting from so-called excess demand. Related: Cost-push inflation.
Demand shock
An event that affects the demand for goods and services in an economy.
Denomination
Corresponds to the face value of
currencyunits, coins, and
securities. An international transaction may be denominated in US dollars, for example, or in British pounds.
Dependent
Acceptance of a capital budgeting project contingent on the acceptance of another project.
Deposit insurance
See: FDIC: Federal Deposit Insurance Corporation
Depositary
An agent appointed for a
Tender or
Exchange Offer who accepts certificates from shareholders, processes them and assures that the appropriate cash or new securities are properly remitted to the tendering party.
Depository institution
A financial institution that obtains its funds mainly through deposits from the public. This includes commercial banks, savings and loan associations, savings banks and credit unions.
Depository Institutions Deregulation and Monetary Control Act
The 1980 federal legislation that ended the regulation of the banking industry.
Depository preferred
Device enabling an issuer to circumvent an arbitrary corporate limit on the number of preferred sharesissuable. Applies mainly to convertible securities.
Depository receipt
See: ADR American Depository Receipt
Depository transfer check (DTC)
Check made out directly by a local bank to a particular firm or person.
Depository Trust Company (DTC)
DTC is the world's largest central securities depository. It accepts
deposits of over 2 million equity and debt securities issues (valued at $23
trillion)
from over 65 countries for custody, executesbook-entrydeliveries (valued
at over $116 trillion in 2000)
records book-entry pledges of those securities, and processes related
income distributions..
DTC is a member of the
Federal Reserve System and is owned by The
Depository Trust and Clearing
Corporation (DTCC), which is in turn owned primarily by most of the
major banks, broker-dealers, and
exchanges on
Wall Street.
Depository Trust and Clearing Corporation (DTCC)
The Depository Trust and Clearing Corporation (DTCC), through its
subsidiaries, provides post-trade clearance, settlement, custody and
information services for equities, corporate and municipal debt,
money market instruments, American depositary receipts, exchange-traded
funds, unitinvestment trusts, mutual funds, insurance products and
other securities. The National Securities Clearing Corporation (NSCC)
subsidiary, which acts as a central counterparty (CCP), provides
trade guarantee, netting and risk management services for equity and debt
transactions from all U.S. stock exchanges and markets. The Depository Trust Company(DTC) subsidiary has
custody of and provides asset servicing for millions of securities
issues of issuers from the U.S. and over 60 other countries. DTC serves as a major clearinghouse for institutional
post-trade settlement. DTCC's two subsidiary businesses
have Standard and Poors' highest rating: AAA.
Depreciate
To allocate the purchase cost of an asset over its life.
Depreciated cost
In terms of economics: The measure of capital consumption during production, e.g., machine and equipment wear.
In terms of finance: The process of amortization of fixed assets (equipment) to spread the cost over the depreciable life of the assets.
Depreciation
A non-cash expense (also known as non-cash charge) that provides a source of free cash flow. Amount allocated during the period to amortize the cost of acquiring long-term assets over the useful life of the assets. To be clear, this is an accounting expense not a real expense that demands cash. The sum of depreciation expenses of prior years leads to the balance sheet item Accumulated Depreciation.
Depreciation tax shield
The value of the tax write-off on depreciation of plant and equipment.
Depressed market
Market in which supply overwhelms demand, leading to weak and lower prices.
Depressed price
In the context of stocks, stock whose market price is low in comparison to stocks in its sector.
Depression
Period when excess aggregate supply overwhelms aggregate demand, resulting in falling prices, unemployment problems, and economic contraction.
Deregulation
The reduction of government's role in controlling markets, which lead to freer markets, and presumably a more efficient marketplace.
Derivative
A financial contract whose value is based on, or "derived" from,
a traditional security (such as a
stock or bond),
an asset (such as a
commodity), or a
market index.
Derivative instruments
Contracts such as options and futures whose price is derived from the price of an underlying financial asset.
Derivative markets
Markets for derivative instruments.
Derivative security
A financial security such as an option or future whose value is derived in part from the value and characteristics of another security, the underlyingasset.
Descending tops
A chart pattern which in which each successive peak in a security's price is lower than the preceding peak over a period of time. Antithesis of ascending tops.
Descriptor
A variable describing
assets, used as an element of a
risk index. For example, a
volatility riskindex, distinguishing high
volatility assets from low volatility assets, could
consist of several descriptors based on short term volatility, long term volatility,
systematic and residual volatility, etc.
Design risk
The risk associated with the impact on project cash flow from deficiencies in design or engineering. Also known as engineering risk.
Designated order turnaround system (DOT)
Computerized order entry system that allows
orders to
buy or sell large
baskets of
stock to be transmitted immediately to the
specialist on the
exchange, where
execution will occur quickly, depending on the
basket size. Also used for
odd-lot transactions to occur at the
prices and quantities available. See: AOS.
Desk
The New York Federal Reserve Bank's trading desk (or securities department) where all transactions of the Federal Reserve System are executed in the money market or the government securitiesmarket.
Detachable warrant
A warrant entitles the holder to buy a given number of shares of stock at a stipulated price. A detachable warrant is one that may be sold separately from the package it may have originally been issued with (usually a bond).
Determinism
Fully ordained in advance. A deterministic
chaos system is one that gives random looking results,
even though the results are generated from a system of equations.
Deterministic models
Liability-matching models that assume that the liability payments and the assetcash flows are known with certainty. Related: Stochastic models.
Detrend
To remove the general drift, tendency, or bent of a set of statistical data as related to time. Often accomplished by
regressing a
variable or a time
index and perhaps the square of the time index and capturing the
residuals. A stochastic detrend would be to subtract a moving-average (say for five years) from the value of the variable.
Deutsche Börse
Germany's major securities market, including the Frankfurt Stock Exchange.
Deutsche Terminbörse (DTB)
Formerly the German financial futures and options market. Merged with the Swiss Options and Financial Futures Exchange (SOFFEX) in 1998 to form EUREX, the European derivatives exchange.
Deutsche Börse AG (DBAG)
Deutsche Börse AG (DBAG) is the operating
company for the German cash and derivatives markets. It has four subsidiaries: Deutsche Börse Clearing AG, Deutsche Börse Systems AG, Frankfurter Wertpapierbörse (FWB), and the derivatives market, EUREX Deutschland (formerly the Deutsche Terminbörse ).
Devaluation
A decrease in the spot price of a currency. Often initiated by a government announcement.
Diagonal spread
An optionsstrategy requiring a long and a short position in the same class of option at different strike prices and different expiration dates. For example, buying an XYZ April 50 call and selling an XYZ July 55 call. See: Calendar spread; vertical spread.
Dialing and smiling
See: Cold calling
Dialing for dollars
A term used to describe the practice of cold calling, but which has negative implications as it is frequently applied to salespeople selling speculative or fraudulent investments.
Diamonds
Units of interest in the diamonds trust, a unit investment trust that serves as an index to the Dow Jones Industrial Average in that its holdings consist of the 30 component stocks of the Dow.
Diff
Short version of Euro rate differential, which is a Chicago Mercantile Exchange Futurescontract that is founded on the interest ratespread between the U.S. dollar and the British pound, the German mark, or the Japanese yen.
Difference check
The difference in
interest
payments that is paid to a
swapcounterparty to close out a deal.
Difference from S&P
A mutual fund'sreturnminus the change in the Standard & Poor's 500 index for the same time period. A notation of -5.00 means the fund return is 5 percentage points less than the gain in the S&P, while 0.00 means that the fund and the S&P have the same return.
Differential
A small charge added to the purchase price and subtracted from the selling price by the dealer for odd-lot quantities.
Differential disclosure
The practice of reporting conflicting or markedly different information in official corporate statements including annual and quarterly reports and 10-Ks and 10-Qs.
Differential swap
Swap between two
LIBORrates of interest, e.g., yen LIBOR for dollar LIBOR Payments are in one
currency.
Diffusion process
A conception of the way a stock'sprice changes that assumes that the price takes on all intermediate values.
Digits deleted
Designation on
securities exchange tape meaning that because the tape has been delayed, some digits have been dropped (e.g., 26 1/2 becomes 6 1/2).
Dilution
Diminution in the proportion of income to which each share is entitled.
Dilution protection
Standard provision that changes the conversion ratio in the case of a stock dividend or extraordinary distribution to avoid dilution of a convertible bondholder's potential equityposition. Adjustment usually requires a split or stock dividend in excess of 5% or issuance of stock below book value.
Dilutive effect
Result of a
transaction that decreases earnings per common share (EPS).
Dip
Slight drop in securities prices after
a sustained uptrend. Analysts often advise
investors to buy on dips, meaning to buy when
a price is momentarily weak. See: Correction,
break, crash.
Direct Claim
A financial claim issued by a
deficitunit to acquire funds for
investment in
real assets.
Direct costs of financial
distress
Costs such as fees or penalties incurred as a result of
bankruptcy or
liquidation proceedings.
Direct deposit
A method of payment which electronically credits your checking or savings account.
Direct deposit service
A service that electronically transfers all or part of any recurring
payment—including dividends, paychecks, pensions, and Social Security
payments—directly to a shareholder's account.
Direct estimate method
A method of cash budgeting based on detailed estimates of cash receipts and cash disbursements category by category.
Direct Exchange Rate
The home currency price of one
unit of a foreign currency.
Discount Interest
Interest at a beginning of the loan. For example if you take out a one-year
loan of $100 at a discount interest rate of 10%, you would receive $90 at
the outset.
Direct investment
The purchase of a controlling interest in a company or at least enough interest to have enough influence to direct the course of the company.
Direct lease
Contract in which a lessor purchases new equipment from the manufacturer and leases it to the lessee.
Direct overhead
A fraction of overhead costs devoted to the manufacturing sector of a firm to cover expenses such as rent and utilities.
Direct paper
Commercial paper sold directly by the issuer to investors.
Direct participation program
An investment program enabling investors to directly participate in the cash flow and tax benefits of the partnership invested in by the investor, typically a form of passive investment.
Direct placement
Selling a new issue not by offering it for sale publicly, but by placing it with one of several institutional investors. Also known as a private placement.
Direct Purchase Plan
A plan that enables interested first-time individual investors to purchase a company'sstock directly from the company or without the direct intervention of a broker. The administrator also ensures the safekeeping of the shares by registering them directly on the books of the company. Eliminates the need for shareholders to hold on to physical certificates.
Direct quote
For foreign exchange, the number
of US dollars needed to buy one unit of a foreign
currency.
Direct Registration System
A system, sometimes referred to as DRS, that allows electronic direct registration of securities in an investor's name on the books for the transfer agent or issuer, and allows shares to be transferred between a transfer agent and broker electronically. DRS provides investors with a different way of holding their securities in certificate or street form. Under DRS, investors can elect to have their securities registered directly on the issuer's records in book-entry form. An investor electing to hold a security in a DRS book-entry position will receive a statement from the issuer or its transfer agent verifying ownership of the security. The investor can subsequently transfer electronically the DRS book-entry position to their bank or broker/dealer.
Direct rollover
Movement of tax-deferred retirement plan money from one qualified plan
or custodian to another. No immediate tax liabilities or penalties are incurred, but there is
an IRS reporting
requirement.
Direct search market
Buyers and sellers seek each other directly and transact directly.
Direct stock-purchase programs
Investors purchase securities directly from the issuer.
Direct terms
The price of a unit of
foreign currency in domestic currency
terms, such as $.9850/Euro for a US resident. See:
Indirect terms.
Director
See: Board of directors.
Director Exception
A proxy or ballot that withholds its votes from one or more, but not all, individuals on the slate of nominated directors.
Directors' Duties
In the context of corporate governance, Directors' Duties refers to stated responsibilities of the company'sBoard of Directors. These provisions allow directors to consider constituencies other than shareholders when considering a merger. These constituencies may include, for example, employees, host communities, or suppliers. This provision provides boards of directors with legal basis for rejecting a takeover that would have been beneficial to shareholders. A majority of states have Directors Duties Laws.
Directorship
Used in the context of general equities. Stock status whereby a trader may not maintain positions in the security, due to an investment bank employee serving as a director on the corporation'sBoard of Directors done to avoid conflicts of interest; signified by a flashing "D" on Quotron. Contrast to restricted.
Dirty float
A system of floating exchange rates in which a government may intervene to change the direction of the value of the country's currency.
Dirty price
Bond price including accrued interest, i.e., the price paid by the bond buyer.
Dirty stock
A stock that fails to fulfill prerequisites to attain good delivery status.
Disability income insurance
An insurance policy that insures a worker in the event of an occupational mishap resulting in disability. Insurance benefits compensate the injured worker for lost pay.
Disbursement float
A decrease in book cash but no immediate change in bank cash, generated by checks written by the firm.
Discharge of bankruptcy
The termination of bankruptcy proceedings, resulting in cancellation of the debtor'sobligations.
Discharge of lien
An order terminating a lien on property.
Disclaimer of opinion
An auditor's statement that does not express any opinion regarding the company's financial condition.
Disclosure
A company's release of all information pertaining to the company's business activity, regardless of how that information may influence investors.
Discontinued operations
Divisions of a business that have been sold or written off and that no longer are maintained by the business.
Discount
Convertible: Difference between gross parity and a given convertible price. Most often invoked when a redemption is expected before the next coupon payment, making it liable for accrued interest. Antithesis of premium.
General: Information that has already been taken into account and is built into a stock or market.
Straight equity: Price lower than that of the last sale or inside market.
Discount Arbitrage
A riskless arbitrage in which a discount option is purchased and an opposite position is taken in the underlying security. The arbitrageur may either buy a call at a discount and simultaneously sell the underlying security (basic call arbitrage) or may buy a put at a discount and simultaneously buy the underlying security (basic put arbitrage). See also Discount.
Discount bond
Debt sold for less than its principal value. If a discount bond pays no coupon, it is called a zero coupon bond.
Discount broker
A brokerage house featuring relatively low commission rates in comparison to a full-service broker.
Discount factor
Present value of $1 received at a stated future date.
Discount payment
The difference between the face value and the price paid for a security.
Discount period
The period during which a customer can deduct the discount from the net amount of the bill when making payment.
Discount rate
The interest rate that the Federal Reserve charges a bank to borrow funds when a bank is temporarily short of funds. Collateral is necessary to borrow, and such borrowing is quite limited because the Fed views it as a privilege to be used to meet short-term liquidity needs, and not a device to increase earnings. In context of NPV or PV calculations, the discount rate is the annual percentage applied. In the context of project financing, the discount rate is often the all-in interest rate or the interest rate plus margin.
Discount securities
Non-interest-bearing money marketinstruments that are issued
at a discount and redeemed at maturity
for full face value, e.g., US Treasury
bills.
Discount window
Facility provided by the Fed enabling member banks to borrow reserves against collateral in the form of government securities or other acceptable paper.
Discount yield
The yield or annual interest rate on a security sold to an investor at a discount. A bond that is sold at $4875 that matures to $5000 has a discount of $125. To calculate the discount yield: (discount divided by the face value of the security) multiplied by the (number of days in the year divided by the number of days to maturity).
Discounted basis
To sell a debt instrument below maturity value, so that the difference makes up all or part of the interest.
Discounted cash flow (DCF)
Future cash flows multiplied by discount factors to obtain present values.
Discounted dividend model (DDM)
A formula to estimate the intrinsic value of a firm by figuring the present value of all expected future dividends.
Discounted payback
The length of time needed to recoup the
present value of an
investment.
Discounted payback period rule
An investment decision rule in which cash flows are discounted at an interest rate and then one determines how long it takes for the sum of the | |
