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E
Fifth letter of a Nasdaq stock symbol specifying that an issue has not met the reporting date for the company's SEC regulatory filing requirements.
EAFE index
See: European Australian and Far East index
EASD
See: European Association of Securities Dealers
EBIAT
See: Earnings Before Interest after Taxes
EBIT
See: Earnings Before Interest and Taxes
EBITD
See: Earnings Before Interest, Taxes and Depreciation
EBITDA
See: Earnings Before Interest, Taxes, Depreciation, and Amortization
EBRD
See: European Bank for Reconstruction and Development
EBT
See: Earnings Before Taxes
EC
The two-character ISO 3166 country code for ECUADOR.
ECA
See: Export Credit Agency
EDC
See: Export Development Corp.
ECGD
See: Export Credit Guarantee Department
ECN
Electronic Communications Network. Defined under Rule 11Ac1- 1(a)(8) under the U.S. Securities Exchange Act of 1934.
ECS
The ISO 4217 currency code for the Ecuadorian Sucre.
EDGAR Electronic Data Gathering, Analysis and Retrieval System
The system through which companies
electronically file reports and registration
statements with the SEC. This requires converting the paper or word-processing document to be filed into a universal ASCII format, a process known as EDGAR-izing the document. The filings can then be accessed by the public through the SEC's Web site on the Internet.
EEK
The ISO 4217 currency code for the Estonian Kroon.
EFIC
See: Export Finance Insurance Corp.
EFTPOS
Acronynm for Electronic Funds Transfer at Point of Sale. Payment is transferred
usually from a checking account at the point of sale.
EG
The two-character ISO 3166 country code for EGYPT.
EGP
The ISO 4217 currency code for the Egyptian Pound.
ECU
See: European Currency Unit
EDI
See: Electronic Data Interchange
EE
The two-character ISO 3166 country code for ESTONIA.
EH
The two-character ISO 3166 country code for WESTERN SAHARA.
EM
See: Effective margin
EMS
See: European Monetary System
EOE
See: European Options Exchange
EOQ
See: Economic Order Quantity
ER
The two-character ISO 3166 country code for ERITREA.
ERM
See: Exchange Rate Mechanism
ES
The two-character ISO 3166 country code for SPAIN.
ESOP
See: Employee Stock Ownership Plan
ESP
The ISO 4217 currency code for the Spanish Peseta.
ET
The two-character ISO 3166 country code for ETHIOPIA.
ETB
The ISO 4217 currency code for the Ethiopian Birr.
ETF
See Exchange Traded Fund.
EU
See: European Union
EUR
The ISO 4217 currency code for Euro.
EUREX
The European derivatives exchange formed in 1998 by a merger of the Deutsche Terminbörse (DTB) and the Swiss Options and Financial Futures Exchange (SOFFEX).
EXDEC
See: Shipper's Export Declaration.
Each way
A broker'scommission from his or her involvement on both the purchase and the sale side of a security.
Early distribution
See: Premature
distribution
Early Exercise (assignment)
The exercise or assignment of an option contract before its expiration date.
Early withdrawal
See: Premature
distribution
Early withdrawal penalty
Penalty paid by the holder of a fixed-term investment penalizing an investor who withdraws money before the agreed-upon maturity date.
Earn-out
Refers to an additional payment in a merger or acquisition that is not part of the original acquisition cost, which is based on the acquiredcompany's future earnings relative to a level determined by the merger agreement.
Earned income
Compensation earned from employment, which includes wages, salary, tips,
and compensation.
Earned income credit
A tax credit for taxpayers with children.
Earned surplus
See: Retained earnings
Earnest money
Money given to a seller by a buyer to demonstrate the buyer's good faith. If the deal falls through, the deposit is usually forfeited.
Earning asset
An asset that generates income, e.g., income from rental property.
Earning power
Earnings before interest and taxes (EBIT) divided by total assets.
Earnings
Net income for the company during a period.
Earnings before interest after taxes (EBIAT)
A financial measure defined as revenues less cost of goods sold and selling, general and administrative expenses. In other words, operating and nonoperating profit before the deduction of interest plus cashincome taxes. Equivalent to EBIT minus cash taxes.
Earnings before interest and, taxes (EBIT)
A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and nonoperating profit before the deduction of interest and income taxes.
Earnings before interest, taxes, and depreciation (EBITD)
A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and nonoperating profit before the deduction of interest and income taxes. Depreciationexpenses are not included in the costs.
Earnings before interest, taxes, depreciation, and amortization (EBITDA)
A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and nonoperating profit before the deduction of interest and income taxes. Depreciation and amortization expenses are not included in the costs.
Earnings before taxes (EBT)
A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and nonoperating profit before the deduction of income taxes.
Earnings momentum
An increase in the earnings per share growth rate from one reporting period to the next.
Earnings per share (EPS)
A company'sprofit divided by its
number of common outstanding shares. If a company earning $2 million in one year had 2 million common shares of stockoutstanding, its EPS would be $1 per share. In calculating EPS, the company often uses a weighted average of shares outstanding over the reporting term. The one-year (historical or trailing) EPS growth rate is calculated as the percentage change in earnings per share. The prospective EPS growth rate is calculated as the percentage change in this year's earnings and the consensus forecast earnings for next year.
Earnings-price ratio
See: Earnings yield
Earnings response
coefficient
A measure of relation of stock
returns to earnings surprises around the time of corporate
earnings announcements.
Earnings retention ratio
Plowback rate.
Earnings surprises
Positive or negative differences from the consensus forecast of earnings by institutions such as First Call or IBES. Negative earnings surprises generally have a greater adverse effect on stockprices than a reciprocal positive earnings surprise.
Earnings yield
The ratio of earnings per share, after allowing for tax and interest payments on fixed interest debt, to the current share price. The inverse of the price-earnings ratio. It is the total twelve months earnings divided by number of outstandingshares, divided by the recent price, multiplied by 100. The end result is shown in percentage terms. We often look at earnings yield because this avoids the problem of zero earnings in the denominator of the price-earning ratio.
Easy money
See: Tight money
Eating stock
When an underwriter can't find buyers for a stock and therefore has to buy them for his own account.
ECN
See: Emerging company marketplace
Eclectic paradigm
A theory that posits three types of advantages benefiting a
multinational corporation:
ownership-specific, location-specific, and market internalization advantages.
Econometrics
The quantitative science of modelling the economy. Econometric models help explain and predict
variables of interest.
Economic assumptions
General market environment a firm expects to operate in over the life of a financial plan.
Economic defeasance
See: In-substance defeasance
Economic dependence
When the costs and/or revenues of one project depend on those of another.
Economic earnings
The real flow of cash that a firm could pay out forever in the absence of any change in the firm's productive capacity.
Economic exposure
The extent to which the value of a firm will change because of an exchange rate change.
Economic growth
An increase in the nation's capacity to produce goods and services. Usually refers to real GDP growth.
Economic growth rate
The annual percentage rate of change in the Gross National Product.
Economic income
Cash flow plus change in present value.
Economic indicators
The key statistics of the economy that reveal the direction the economy is heading in; for example, the unemployment rate and the inflation rate.
Economic Life
The time period over which an asset'sNPV is maximized. Economic life
can be less than absolute physical life for reasons of technological obsolescence, physical
deterioration, or product life cycle.
Economic order quantity (EOQ)
The order quantity that minimizes total inventory costs.
Economic rents
Profits in excess of the competitive level.
Economic risk
In project financing, the risk that the project's output will not be salable at a price that will cover the project's operating and maintenance costs and its debt service requirements.
Economic shock
Events that impact the economy which originate from outside it. They are unexpected and unpredictable (e.g., Hurricane Andrew in 1991, the rise in oil prices by OPEC).
Economic surplus
For any entity, the difference between the market value of all its assets and the market value of its liabilities.
Economic union
An agreement between two or more countries that allows the free movement of capital, labor, and all goods and services, and involves the harmonization and unification of social, fiscal, and monetary policies.
Economic value added (EVA)
A method of
performance evaluation that adjusts
accounting performance for investors' required
return on
investment. Suppose a division produces a 12%
return on capital invested. Given the risk of the division's business line, if investors would usually require 14% on capital invested for this level of risk, the division destroyed
shareholder value by the EVA metric. This
Stern-Stewart has a trade mark on this term.
Economics
The study of the economy. See also: Macroeconomics; microeconomics; Keynesian economics, monetarism, and supply-side economics.
Economies of scale
Achievement of lower average cost per unit through increased
production.
Economies of scale
The decrease in the marginal cost of production as a firm's extent of operations expands.
Economies of scope
Scope economies exist whenever the same investment can support multiple profitable activities less expensively in combination than separately.
Economies of vertical
integration
Produced by achieving lower operating costs by owning all components of
production and sometimes sales outlets rather than contracting with companies in the
outside marketplace.
EDGAR (Electronic Data Gathering and Retrieval)
The Securities & Exchange Commission uses Electronic Data Gathering and Retrieval to transmit company documents such as 10-Ks, 10-Qs, quarterly reports, and other SEC filings, to investors.
Edge Act corporation
Corporationchartered by the Federal Reserve to engage in international banking. The Board of Governors acts on applications to establish Edge Act corporations and also examines the corporations and their subsidiaries. Named after Senator Walter Edge of New Jersey, who sponsored the original legislation to permit formation of such organizations. See also: agreement corporation.
Edge corporations
Specialized banking institutions, authorized and chartered by the Federal
Reserve Board of Governors in the U.S., that are allowed to engage in
transactions of a foreign or international character. They are not subject
to restrictions on interstate banking. Foreign banks operating in the U.S. are
permitted to organize and own an edge corporation.
Education IRA
A type of individual retirement account enabling the contribution of up to $500 per year tax free for each child up to the age of 18 by the parents in the family.
Effective annual interest rate
An annual measure of the time value of money that fully reflects the effects of compounding.
Effective annual yield
Annualizedinterest rate on a security computed using compound interest techniques.
Effective call price
The strike price in a marketredemption provision plus the accrued interest to the redemption date.
Effective convexity
The convexity of a bond calculated using cash flows that change with yields.
Effective date
In an interest rate swap, the date the swap begins accruing interest.
Effective debt
The total debt owed by a firm to its creditors.
Effective duration
The duration calculated using the approximate duration formula for a bond with an embedded option, reflecting the expected change in the cash flow caused by the option. Measures the responsiveness of a bond's price - taking into account that expected cash flows will change as interest rates change due to the embedded option.
Effective Interest Rate
The annual rate at which an
investment grows in value when interest is
credited more often than once a year.
Effective margin (EM)
Used with SAT performance measures, the amount equal to the net earned spread, or margin of income, on assets in excess of financing costs for a given interest rate and prepayment rate scenario.
Effective net worth
Net worth plus subordinated debt.
Effective rate
A measure of the time value of money that fully reflects the effects of compounding.
Effective sale
A sale based on the most recent round-lot price, which determines the price of the next odd lot. The difference created between the last round-lot price and the odd-lot price is referred to as the odd-lot differential.
Effective spread
The gross underwritingspread adjusted for the impact that a common stockoffering's announcement has on the firm's share price.
Effective tax rate
The net rate a taxpayer pays on income that includes all forms of taxes. It is calculated by dividing the total tax paid by taxable income.
Effective yield
Yield or return on a
short-terminvestment after adjustment for the change in
exchange rates over the period of
concern.
Efficiency
The degree and speed with which a market accurately incorporates information into prices.
Efficient capital market
A market in which new information is very quickly reflected accurately in share prices.
Efficient diversification
The organizing principle of portfolio theory, which maintains that any risk-averseinvestor will search for the highest expected return for any particular level of portfoliorisk.
Efficient frontier
The combinations of securitiesportfolios that maximize expected return for any level of expected risk, or that minimizes expected risk for any level of expected return. Pioneered by Harry Markowitz.
Efficient market
Market in which prices correctly reflect all relevant information.
Efficient Market Hypothesis
States that all relevant information is fully and immediately reflected in a security'smarket price, thereby assuming that an investor will obtain an equilibriumrate of return. In other words, an investor should not expect to earn an abnormal return (above the market return) through either technical analysis or fundamental analysis. Three forms of efficient market hypothesis exist: weak form (stockprices reflect all past information in prices), semistrong form (stock prices reflect all past and current publicly available information), and strong form (stock prices reflect all relevant information, including information not yet disclosed to the general public, such as insider information).
Efficient markets theory
(EMT)
Principle that all assets are correctly
priced by the market, and that there are no bargains.
Efficient portfolio
A portfolio that provides the greatest expected return for a given level of risk (i.e., standard deviation), or, equivalently, the lowest risk for a given expected return.
Efficient set
Graph representing a set of portfolios that maximize expected return at each level of portfolio risk.
Efficient surface
In meanvarianceskewness analysis, the set of portfolios that result from investor's preference for higher means, lower variance and higher (positive) skewness. The efficient surface is analogous (in three dimensions, mean, variance and skewness) to the efficient frontier (in two dimensions, mean and variance).
Eighth[-ed]
Historical term used in the context of general equities. A specialist or another broker is bidding higher or offering lower than we are, often topping or undercutting us by an eighth.
Either/or facility
An agreement permitting a bank customer to borrow either domestic dollars from the bank's head office or Eurodollars from one of its foreign branches.
Either-or order
Used in the context of general equities. See: Alternative order.
Either-way market
In the interbankEurodollar deposit market, an either-way market is one in which the bid and offered rates are identical.
Elasticity of demand
The degree of buyers' responsiveness to price changes. Elasticity is measured as the percent change in quantity divided by the percent change in price. A large value (greater than 1) of elasticity indicates sensitivity of demand to price, e.g., luxury goods, where a rise in price causes a decrease in demand. Goods with a small value of elasticity (less than 1) have a demand that is insensitive to price, e.g., food, where a rise in price has little or no effect on the quantity demanded by buyers.
Elasticity of supply
The degree of producers' responsiveness to price changes. Elasticity is measured as the percent change in quantity divided by the percent change in price. A large value (greater than 1) of elasticity indicates sensitivity of supply to price, e.g., luxury goods, where a rise in price causes an increase in supply. Goods with a small value of elasticity (less than 1) have a supply that is insensitive to price, e.g., food, where a rise in price has little or no effect on the amount that producers supply.
Elasticity of an option
Percentage change in the value of an option given a 1% change in the value of the option's underlyingstock. Related: delta.
Elect
The conversion of a conditional order into a market order.
Election Period
The period of time during which the holder can elect to extend and extendible bond, or to retract a retractable bond.
Electronic data interchange (EDI)
The direct exchange of information electronically, from one firm's computer to another firm's computer in a structured format.
Electronic depository transfers
The transfer of funds between bank accounts through the Automated Clearing House (ACH) system.
Electronic funds transfer (EFT)
Transfer of funds electronically rather than by check or cash. The Federal Reserve's Fedwire and automated clearninghouse services are EFT systems.
Electronic Funds Transfer Systems
A variety of systems and technologies for transferring funds (money) electronically rather than by check. Includes Fedwire, automated clearringhouses (ACHs) and other automated systems.
Electronic Queriable Carrier
A transporter of goods which allows tracking of goods in transit electronically using a waybill number such as United Parcel, Federal Express, etc.
Elephants
A term used to refer to large institutional investors.
Eleven bond index
An index based on the averageyield of 11 municipal bonds that mature in 20 years and carry an average AA rating. The eleven bonds used to calculate the index are also found in the 20 bond index, which serves as a benchmark in tracking municipal bondyields.
Eligible bankers' acceptances
In the BA market, an acceptance may be referred to as eligible because it is acceptable by the Fed as collateral at the discount window and/or because the accepting bank can sell it without incurring a reserve requirement.
Elliott Wave Theory
Technical market timingstrategy that predicts price movements on the basis of historical price wave patterns and their underlying psychological motives. Robert Prechter is a famous Elliott Wave theorist.
Elves
A term the host uses to refer to guests on the PBS television show, "Wall Street Week", who are technical analysts attempting to predict the direction of stock prices over the next six months.
Embedded option
An option that is part of the structure of a bond that gives either the bondholder or the issuer the right to take some action against the other party, as opposed to a bare option, which trades separately from any underlying security.
Emergency fund
A reserve of cash kept available to meet the costs of any unexpected financial emergencies.
Emergency Home Finance Act of 1970
The federal legislation creating the Federal Home Loan Mortgage Corporation, a partially government-run program initiated to stimulate the development of a secondary mortgage market and expand mortgages available to veterans and other groups.
Emerging Company Marketplace (ECM)
A service once offered by the American Stock Exchange to help small growth companies fulfill special listing requirements. The service is no longer available.
Emerging markets
The financial markets of developing economies.
Emerging Markets Free index (EMF)
A Morgan Stanley Capital Internationalindex created to track stock markets in selected emerging markets that are open to foreign investment like Argentina, Chile, Jordan, Malaysia, Mexico, Philippines, and Thailand.
Emerging markets fund
A mutual fund that invests
primarily in countries with developing economies (that is, those that are becoming
industrialized). Emerging markets funds tend to be more volatile than domestic stock
funds due to currency fluctuation and political instability. Consequently, fund prices can
fluctuate dramatically.
Employee contribution
An employee's own deposit to a companyretirement plan.
Employee Retirement Income Security Act (ERISA)
The law that regulates the operation of private pensions and benefit plans.
Employee stock fund
A firm-sponsored program that enables employees to purchase shares of the firm's common stock on a preferential basis.
Employee stock ownership plan (ESOP)
A company contributes to a trust fund that buys stock on behalf of employees.
Employee Stock Purchase Plan (ESPP)
A plan usually linked to a corporation's payroll deduction system allowing employees to purchase shares at a discount from current market value.
Employer matching
contribution
The amount, if any, a company contributes on an employee's behalf to the
employee's retirement account, usually tied to the employee's own contribution.
Employment rate
The percentage of the labor force that is employed. The employment rate is one of the economic indicators that economists examine to help understand the state of the economy. See also: Unemployment rate.
Empty head and pure heart test
Securities and Exchange Commission rule that allows only the bidder of a tender offer to trade in the stock while possessing inside information.
Encumbered
A property owned by one party on which a second party reserves the right to make a valid claim, e.g., a bank's holding of a home mortgageencumbers property.
End-of-year convention
Treating cash flows as if they occur at the end of a year as opposed to the date convention. Under the end-of-year convention, the present is time 0, the end of year 1 occurs one year hence; and so on.
Endogenous uncertainty
Describes factors within the control of the firm, such as a decision to reveal
information about price or input costs. Converse of
exogenous.
Endogenous variable
A value determined within the context of a model. Related: Exogenous variable.
Endorse
Transferring asset ownership by signing
the back of the asset'scertificate.
Endowment
Gift of money or property to a specified institution for a specified purpose.
Endowment funds
Investment funds established for the support of institutions such as colleges, private schools, museums, hospitals, and foundations. The investment income may be used for the operation of the institution and for capital expenditures.
Energy mutual fund
Mutual fund investing in energy stocks only, e.g., oil and gas companies.
Engineering risk
The risk associated with the impact on a project's cash flows from deficiencies in design or engineering. Also known as design risk.
Enhanced indexing
Also called indexing-plus, an indexingstrategy whose objective is to exceed or replicate the total return performance of some predetermined index.
Enhancement
An innovation that has a positive impact on one or more of a firm's existing products.
Enterprise
A business firm.
Enterprise Value
The market capitalization of a firm'sequity plus the market value of the firm's debt. Often the value of assets that are non-core are excluded from the final calculation.
Entrepreneur
A person starting a new company who takes on the risks associated with starting the enterprise, which may require venture capital to cover start-up costs.
Entropy
The level of disorder in a system.
Environmental fund
A mutual fund that invests strictly in stocks of companies that are environmentally friendly and/or have the goal of environmental betterment. The investors are trying to support and profit from opportunities related to the environmental movement.
Environmental risk
The risk associated with economic or administrative consequences of slow or catastrophic environmental pollution.
EPS
See: Earnings per share
Equal dollar swap
Selling common stock/convertibles in one company and reinvesting the proceeds in as many shares of (1) another type of securityissued by the company, or (2) another security of the same type but of another company -- as can be bought with the proceeds of the sale. See: Equal shares swap.
Equal percentage
contribution rule (EPCoR)
Principle that each assetcontributes
the same proportion to the equilibriumportfolio rate
premium and risk.
Equal shares swap
Applies mainly to convertible securities. Selling the underlying common and reinvesting the proceeds in as much of the convertible as can be converted into the number of shares of common just sold. See equal dollar swap.
Equalizing dividend
Special dividends received by investors of a firm for income the investor lost because the firm altered the dividends payment schedule.
Equilibrium
The stable state of the system. See:
Attractor.
Equilibrium exchange
rate
Exchange rate at which
demand for a currency is equal to the supply of the currency in the economy.
Equilibrium market price of risk
The slope of the capital market
line (CML). Since the CML
represents the expected return offered
to compensate for a perceived level of risk,
each point on the line is a balanced market
condition, or equilibrium. The slope of the line determines the additional
expected return needed to compensate
for a unit change in risk. The equation of
the CML is defined by the capital
asset pricing model.
Equilibrium price
The price at which the supply of goods matches demand.
Equilibrium rate of interest
The interest rate that clears the market. Also called the trade-clearing interest rate.
Equipment leasing partnership
A limited partnership that receives income and tax benefits such as depreciation costs by purchasing equipment and leasing it to other parties.
Equipment trust certificates
Certificatesissued by a trust that is formed to purchase an asset and lease it to a lessee. When the last of the certificates has been repaid, title and ownership of the asset transfers to the lessee.
Equitable owner
The beneficiary of a property held in a trust.
Equity
Ownership interest in a firm. Also, the
residual dollar value of a
futurestrading account, assuming its
liquidation is at the going trade price. In real estate, dollar difference between what a property could be sold for and debts claimed against it. In a brokerage account, equity equals the value of the account'ssecurities minus any debit balance in a margin account. Equity is also shorthand for stock marketinvestments.
Equity cap
An agreement in which one party, for an up-front premium, agrees to pay the other at specific time periods if a designated stock marketbenchmark tops a predetermined level.
Equity carve out
Usually occurs when a company decides to IPO one of their subsidiaries or divisions. The company usually only
offers a minority share to the equity market. Also known as carve out.
Equity claim
Also called a residual claim; a claim to a share of earnings after debtobligations have been satisfied.
Equity collar
The simultaneous purchase of an equity floor and sale of an equity cap.
Equity contribution agreement
An agreement to contribute equity to a project under certain specified conditions.
Equity floor
An agreement in which one party agrees to pay the other at specific time periods if a specific stock marketbenchmark falls below a predetermined level.
Equity funding
An investment consisting of a life insurance policy and a mutual fund. The insurance policy is paid by the collateral value of fund shares, giving the investor the advantages of insurance protection with the growth potential of a mutual fund.
Equity kicker
Stockwarrantsissued attached to a new debt, preferred or common stock issue to improve the salability of the issue.
Equity-linked Eurobonds
A Eurobond including a convertibility option or
warrant.
Equity-linked policies
Related: Variable life
Equity market
Related: stock market
Equity multiplier
Total assets divided by total commonstockholders' equity; the total assets per dollar of stockholders' equity.
Equity options
Securities that give the holder the right (but not the obligation) to buy or sell a specified number of shares of stock, at a specified price for a certain (limited) time period. Typically one option equals 100 shares of stock.
Equity REIT
A Real Estate Investment Trust that assumes ownership status in the property it invests in enabling investors of the REIT to earn dividends on rental income from the property and appreciation in property resale. Antithesis of a Mortgage REIT.
Equity swap
A swap in which the cash flows exchanged are based on the total return on some stock marketindex and an interest rate (either a fixed rate or floating rate). Related: Interest rate swap.
Equityholders
Stockholders; those holding shares of the firm'sequity.
Equivalent annual annuity
The amount per year for some number of years that has a present value equal to a given amount.
Equivalent annual benefit
The annual annuity with the same value as the net present value of an investment project.
Equivalent annual cash flow
Annuity with the same net present value as the company's proposed investment.
Equivalent annual cost
The cost per year of owning an asset over its entire life.
Equivalent bond yield
Effective annual yield on a short-term, noninterest-bearing security calculated for comparison to yields quoted on coupon securities.
Equivalent loan
Given the after-tax stream associated with a lease, the maximum amount of conventional debt that the same period-by-period after-tax debt service stream is capable of supporting.
Equivalent taxable yield
The yield that must be offered on a taxable bondissue to give the same after-tax yield as a tax-exempt issue.
Erosion
A negative impact on one or more of a firm's existing assets.
Escalator clause
Provision in a contract allowing cost increases to be passed on. In an employment contract, for example an escalator clause may call for wage increases in line with inflation.
Escheat
Reversion of monies or securities to the state in which the securityholder was last known to reside, when no claim by the securityholder has been made after a certain period of time fixed by state law. This is known as the holding period or cut-off date.
Escheat Period
The period of elapsed time required by applicable state law for property to
be presumed abandoned.
Escheatment
The process of turning over unclaimed or abandoned property to a state
authority. Escheatment laws require mutual funds to turn over uncashed or returned check dollars and/or client account fund shares if the owner cannot be located within a length of
time determined by each state.
Escrow
Property or money held by a third party until the agreed upon obligations of a contract are met.
Escrow receipt
A document provided by a bank in optionstrading to guarantee that the underlying security is on deposit and available for potential delivery.
Escrowed to Maturity (ETM)
Holding of the proceeds from a new bondissue to pay off an existing bondissue at its maturation date.
Essential purpose (or function) bond
See: Public purpose bond
Estate planning
The preparation of a plan to carry out an individual's wishes as to the
administration and disposition of his/her property before or after his/her death.
Estate tax
A federal or state tax imposed on an individual's assets inherited by heirs.
Estimated tax
Tax to be paid quarterly on income that is not subject to
withholding tax, including self-employed
income, investment income,
alimony, rent, and capital gains.
Ethical fund
See: Social conscious mutual fund.
Ethics
Standards of conduct or moral judgment.
Euclidean Geometry
The Plane geometry learned in high school, based upon a few ideal,
smooth, symmetric shapes.
Euro
Originally, the term for a deposit made outside one's home country but denominated in the home country currency. This terminology is confusing now since the new European Currency unit, also called the Euro, was introduced on January 1, 1999.
Euro CDs
CDsissued
by a U.S. bank branch or foreign bank located outside the U.S. Almost all Euro
CDs are issued in London.
Eurodollar obligations
Certificates of deposit
issued in U.S. dollars by foreign banks and foreign branches of U.S. banks.
Euro lines
Lines of credit granted by banks
(foreign or foreign branches of U.S. banks) for Eurocurrencies.
Euro straight
A fixed-rate couponEurobond.
Eurobank
A bank that regularly accepts foreign currency-denominated deposits and makes foreign currency loans.
Eurobond
A bond that is (1) underwritten by an international syndicate, (2)
issued simultaneously to investors in a number of countries, and (3) issued
outside the jurisdiction of any single country. Eurobonds are often bearer
bonds.
Euroclear
The Euroclear group is the world's largest settlement system for domestic
and international securities transactions, covering both bonds and
equities for financial institutions located in over 80 countries.
Euro-commercial paper
Short-termnotes with maturities up to 360 days that are issued by companies in international money markets.
Eurocredit market
Comprises banks that accept deposits and provide loans in large
denominations and in a variety of
currencies. The banks that constitute this
market are the same banks that constitute the
Eurocurrencymarket; the difference is that Eurocredit loans are longer-term than so-called
Eurocurrency loans.
Eurocredits
Intermediate-termloans of Eurocurrencies made by banking syndicates to corporate and government borrowers.
Eurocurrency
Instrument issued outside your country, but denominated in your currency.
A Eurodollar is a Certificate
of Deposit in U.S. dollars issued in some other country (though mainly traded
in London). A Euroyen is a CD
issued in yen outside Japan.
Eurocurrency deposit
A short-term fixed-rate time depositdenominated in a currency other than the
local currency (e.g., U.S. dollars deposited in a London bank).
Eurocurrency market
The money market for borrowing and lendingcurrencies that are held in the form of deposits in banks located outside the countries where the currencies are issued as legal tender.
Eurodollar
Refers to a certificate of
deposit in U.S. dollars in a bank that is not located in the U.S. Most of
the Eurodollar deposits are in London banks, but Eurodeposits may be anywhere
other than the U.S. Similarly, a Euroyen or EuroDM deposit represents a CD
in yen or DM outside Japan and Germany,
respectively.
Eurodollar bonds
Eurobondsdenominated in U.S.dollars.
Eurodollar certificate of deposit
A certificate of deposit paying interest and principal in dollars, but issued by a bank outside the United States, usually in Europe.
Euroequity issues
Securities sold in the Euromarket. That is, securities initially sold to investors simultaneously in several national markets by an international syndicate. Related: External market.
Euro-medium term note (Euro-MTN)
A nonunderwrittenEuronoteissued directly to the market. Euro-MTNs are offered continuously rather than all at once as a bond issue is. Most Euro-MTN maturities are under five years.
Euro.NM
Created on March 1, 1996, Euro.NM is a pan-
network of regulated markets dedicated to growth companies, regardless of their sector of activity or country of origin. Euro.NM member exchanges and their respective new markets consist of the Paris Stock Exchange (Le Nouveau Marché), the Deutsche Börse AG (Neuer Markt), the Amsterdam Exchanges (NMAX), and the Brussels Stock Exchange (Euro.NM Belgium).
Euro-note
Short- to medium-term debt instrument sold in the Eurocurrency market.
Euroyen bonds
Eurobondsdenominated in Japanese yen.
European,
Australia, and Far East index (EAFE index)
Stock index, computed by Morgan Stanley Capital International.
European Association of Securities Dealers Automated Quotation (EASDAQ)
European equivalent of Nasdaq.
European Bank for Reconstruction and Development
Bank targeted at Eastern Europe and the former Soviet Union.
European Central Bank (ECB)
Bank created to monitor the monetary policy of the countries that have converted to the Euro from their local currencies. The original 11 countries are: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain.
European Currency Unit (ECU)
An index of foreign exchange consisting of European currencies, originally devised in 1979. Also see Euro.
European exchange rate
mechanism (ERM)
The system that countries in the
European Union once used to pay
exchange rates within bands around an
ERM central value.
European Exercise
A feature of an option that stipulates that the option may only be exercised at its expiration. Therefore, there can be no early assignment with this type of option. Most index options are European-style exercise.
European Monetary System (EMS)
A system adopted by European Community members with the aim of promoting
stability by limiting exchange-rate fluctuations. The system was originated in 1979 by the nine
members of the European Community (EC). The EMS comprised three principal elements: the European Currency Unit
(ECU), the monetary unit used in EC transactions; the
Exchange Rate Mechanism, ERM,
whereby those member states taking part agreed to maintain currency fluctuations within
certain agreed limits; and the European Monetary Cooperation Fund, which issues the ECU and
oversees the ERM. The 1992 Maastricht Treaty provided for the move to Economic and
Monetary Union (EMU), including a European Monetary Institute to coordinate the economic and
monetary policy of the EU, a European Central Bank (ECB) to govern these policies, and the presentation of a single European currency.
European option
Option that may be exercised only at the expiration date. Related: American option.
European Options Exchange (EOE)
Now AEX-Optiebeurs. See: Amsterdam Exchanges (AEX).
European-style exercise
A method of exercisingoptions contracts in which the buyer can only exercise the contract on the last day before expiration.
European-style option
An option contract that can be exercised only on the expiration date.
European terms
A foreign exchange quotation that states the
foreign currency price of one U.S. dollar. Opposite of direct quote.
European Union (EU)
An economic association of European countries founded by the Treaty of Rome in 1957 as a common market for six nations. It was known as the European Community until January 1, 1994 and currently comprises 15 European countries. Its goals are a single market for goods and services without any economic barriers, and a common currency with one monetary authority.
Evaluation period
The time interval over which funds assess a money manager's performance.
Even lot
See: Round lot
Evening up
Buying or selling to offset an existing market position.
Event anomalies
Occurrences such as earnings surprises or stock splits that seem to present
opportunity to generate abnormal returns for those trading on the news.
Event driven
In the context of hedge funds, a style of management that combines many different types of hedge fund investing such as merger arbitrage, distressed securities and high yield investing, in conjunction with an important "event" that is supposed to unlock firm value (like a merger announcement, earnings announcement, or a regulator decision).
Event risk
The risk that the ability of an issuer to make interest and principal payments will change because of rare, discontinuous, and very large, unanticipated changes in the market environment such as (1) a natural or industrial accident or some regulatory change or (2) a takeover, or corporate restructuring.
Event study
A statistical study that examines how the release of information affects prices at a particular time.
Events of default
Contractually specified events that allow lenders to demand immediate repayment of a debt.
Evergreen
A contract that rolls over after each agreed (short-term) period until cancelled by one party.
Evergreen credit
Revolving credit without maturity.
Evergreen funding
A British term referring to the gradual injection of capital into a new or existing enterprise.
Ex Works (EXW)
A transaction in which the seller's only responsibility is to make the ordered goods available to the buyer at the seller's premises. The buyer bears the cost and risk in transporting the goods from the seller's premises to destination. Since this includes pre- carriage and export clearance in the seller's country, EXW is not a very practical Incoterm for U.S. exports.
Ex-all
The sale of a security without the
privileges associated with the
security such as
dividends,
voting rights, or
warrants.
Ex ante return
The expected return or anticipation return of an asset or portfolio.
Ex ante value
The forecasted price or value.
Exception
A proxy which does not authorize the proxy
committee to act on its behalf concerning any other business, adjournments or substitutions.
Exceptional Return
Residual return plus
benchmarktiming return. For a given
asset with
beta
equal to one, if its residual return is 2%, and the
benchmarkportfolio exceeds its consensus expected returns by
1%, then the asset's exceptional return is 3%.
Excess accumulation
The amount of a required minimum
distribution that an
IRA holder fails to remove
from an IRA in a timely manner. Excess accumulations are subject to a 50% IRS penalty tax.
Excess contribution
The amount by which an
IRAcontribution exceeds the
allowable limits. If an excess contribution is not properly corrected, a 6% IRS penalty applies.
Excess reserves
Amount of reserves held by an institution in excess of its reserve requirement and required clearing balance. Also see reserves.
Exchange Ratio
The number of new shares in an
acquiringfirm that are given for each
outstanding share of an acquired firm.
Exchange Traded Fund
Similar to an index mutual fund, these tracking stocks trade continuously. Two popular ETFs are the Standard and Poor's depositary receipt (SPDR) launched in 1993 and the NASDAQ-100 Index Tracking Stock (QQQ) which was launched in 1999. These vehicles are popular for hedging as well as investment.
Ex-dividend
This literally means "without dividend." The buyer of shares when they are quoted ex-dividend is not entitled to receive a declared dividend. It is the interval between the record date and the payment date during which the stock trades without its dividend-the buyer of a stock selling ex-dividend does not receive the recently declared dividend. Antithesis of cum dividend (with dividend).
Ex-dividend date
The first day of trading when the buyer of a stock is no longer entitled to the most recently announced dividend payment ( i.e. the trade will settle the day after the record date, too late for the buyer to appear on the shareholder record and receive the dividend.) The date set by the NYSE
(and generally followed on other U.S. exchanges) is currently two business days
before the record date. A stock
that has gone ex-dividend is denoted
by an x in newspaper listings on that date.
Executor
An individual or trust institution nominated in a will and appointed by a court to settle the estate of a deceased person.
Ex-legal
A municipal bond offered without a law firm'slegal opinion. A majority of bonds are issued with legal opinions.
Expatriate
An employee who is a U.S. citizen living and working in a foreign country.
Ex-pit transaction
The closing out of a futures position off the exchange floor. Effected when two hedgers, one long and one short, make a private deal in the cash market, and no longer need their (equal and opposite) futures contracts to hedge. The hedgers contact the exchange and request the contracts be nullified without making a trade on the floor. This must be done (1) to ensure neither contract results in delivery/the requirement to deliver; (2) to properly reflect open interest; and (3) to eliminate the uncertainty of the fill price should a trade actually be done to offset the positions. Extremely rare. Also known as an EFP transaction, an exchange-for-physicals transaction or an against-actuals transaction.
Ex post return
Related: Holding-period return
Ex-rights
Shares of stock that are trading without rights attached.
Ex-rights date
The date on which a share of common stock with rights on it begins tradingex-rights.
Expropriation
The taking over of a company or project by the state, implying compensation will be paid. Nationalization.
Ex-warrants
Describes a stock sale during the time in which the buyer of the stock is not entitled to the warrant accompanying the stock.
Exact interest
Interest paid based on the basis of a 365-day/year schedule by a bank or other financial_institution as opposed to a 360-day basis (ordinary interest). Difference can be material when large principal sums of money are involved.
Exact matching
A bondportfolio managementstrategy that involves finding the lowest cost portfolio generating cash inflows exactly equal to cash outflows that are being financed by investment.
Except for opinion
An auditor's opinion reflecting the fact that the auditor is unable to audit certain areas of the company's operations because of restrictions imposed by management or other conditions beyond the auditor's control.
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