eFinancialCareers

B
Fifth letter of a Nasdaq stock descriptor specifying that issue is the Class B shares of the company.

B2B
An Internet strategy of dealing directly with businesses, rather than consumers, i.e. business to (2) business.

BA
The two-character ISO 3166 country code forBOSNIA AND HERZEGOVINA.

Baby bond
A bond with a par value of less than $1000.

Back away
In the context of general equities, to withdraw from a previously declared interest, indication, or transaction; broker-dealer's failure, as a market maker in a given security, to make good on a bid/offer for the minimum quantity.

Back fee
The fee paid on the extension date if the buyer wishes to continue the option.

Back months
In the context of futures and options trading, refers to the months of contracts with expiration dates farthest away. See farthest month.

Back office
Brokerage house clerical operations that support, but do not include, the trading of stocks and other securities. All written confirmation and settlement of trades, record keeping, and regulatory compliance happen in the back office.

Back on the shelf
In the context of general equities, permanently canceled order/interest in a stock by a customer. See: Take a powder.

Back taxes
Due taxes that have not been paid on time.

Back up
(1) When bond yields rise and prices fall, the market is said to back up. (2) An investor who swaps out of one security into another of shorter current maturity is said to back up.

Back-end load fund
A mutual fund that charges investors a fee to sell (redeem) shares, often ranging from 4% to 6%. Some back-end load funds impose a full commission if the shares are redeemed within a designated length of time, such as one year. The commission decreases, the longer the investor holds the shares. The formal name for the back-end load is the contingent deferred sales charge, or CDSC

Back-testing
Creating a hypothetical portfolio performance history by applying current asset selection criteria to prior time periods.

Back-to-back loan
A loan in which two companies in separate countries borrow each other's currency for a specific time period and repay the other's currency at an agreed-upon maturity.

Back-to-back financing
An intercompany loan channeled through a bank.

Backdating
In the context of mutual funds, a feature allowing fundholders to use an earlier date on a letter of intent to invest in a mutual fund in exchange for a reduced sales charge, e.g. Giving retroactive value to purchases from the earlier date.

Backed in
In the context of general equities, to describe the result of unanticipated events that allow for a purchase at a discount or a sale at a premium.

Backup Line of Credit
A bank assurance of funds obtained by an issuer of commercial paper to protect the CP investor from default. The issuer pays a commitment fee to the bank.

Backup line
A commercial paper issuer's bank line of credit covering maturing notes if, for some reason, selling new notes to cover the maturing notes is not possible.

Backwardation
A market condition in which futures prices are lower in the distant delivery months than in the nearest delivery month. This may occur when the costs of storing the product until eventual delivery are effectively subtracted from the price today. The opposite of contango.

Bad debt
A debt that is written off and deemed uncollectible.

Bad delivery
Antithesis of good delivery.

Bad title
Title to property that does not distinctly confer ownership, usually in the context of real estate.

Bai-kai
Two-sided market picture, in Japanese terminology applies mainly to international equities.

Bailing out
In the context of securities, refers to selling a security or commodity quickly, regardless of the price. May occur when an investor no longer wants to sustain further losses on a stock.
Also refers to relieving an individual, corporation, or government entity in financial trouble.

Bailout bond
A bond issued by the Resolution Funding Corporation (Refcorp) to save the failing savings and loan associations in the late 1980s and early 1990s.

Baker Plan
A plan by former U.S. Treasury Secretary James Baker under which 15 principal middle-income debtor countries (the Baker 15) would undertake growth-oriented structural reforms, to be supported by increased financing from the World Bank and continued lending from commercial banks.

Balance of payments
A statistical compilation formulated by a sovereign nation of all economic transactions between residents of that nation and residents of all other nations during a stipulated period of time, usually a calendar year.

Balance sheet exposure
See: Accounting exposure.

Balance sheet identity
Total assets = Total liabilities + Total stockholders' equity.

Balance of trade
Net flow of goods (exports minus imports) between two countries.

Balance on goods and services
Netting of transaction balances, including the net amount of payments of interest and dividends to foreign investors and investments, as well as receipts and payments resulting from international tourism. Also known as Trade Balance.

Balance sheet
Also called the statement of financial condition, it is a summary of a company's assets, liabilities, and owners' equity.

Balanced mutual fund
This is a fund that buys common stock, preferred stock, and bonds. The same as a balanced fund.

Balanced budget
A budget in which the income equals expenditure. See: budget.

Balanced fund
An investment company that invests in stocks and bonds. The same as a balanced mutual fund.

Balloon interest
In the context of serial bond issues, the elevated coupon rate on bonds with late maturities.

Balloon maturity
Any large principal payment due at maturity for a bond or loan with or without a sinking fund requirement.

Balloon Payment
The final (large) payment that repays all the remaining principal and interest of a partially amortized or unamortized loan.

Balloon Payment
See: Bullet.

Ballot
The document distributed at the annual meeting to shareholders of record who wish to vote their shares in person.

BAM
The ISO 4217 currency code for Bosnia & Herzegovinan Convertible Mark.

BAN
See: Bank anticipation notes

BAN
See: Bond anticipation note.

Bank anticipation notes (BAN)
Notes issued by states and municipalities to obtain interim financing for projects that will eventually be funded long term through the sale of a bond issue.

Bank Investment Contract (BIC)
Interest guaranteed by the bank in a portfolio over a specific time frame with a specific yield.

Bank collection float
The time that elapses between when a check is deposited into a bank account and when the funds are available to the depositor, during which period the bank is collecting payment from the payer's bank.

Bank discount basis
A convention used for quoting bids and offers for Treasury bills in terms of annualized yield, based on a 360-day year.

Bank draft
A draft addressed to a bank.

Bank for International Settlements (BIS)
An international bank headquartered in Basel, Switzerland, which serves as a forum for monetary cooperation among several European central banks, the Bank of Japan, and the US Federal Reserve System. Founded in 1930 to handle the German payment of World War I reparations, it now monitors and collects data on international banking activity and promulgates rules concerning international bank regulation.

Bank holding company
A company that owns or has controlling interest in two or more banks and/or other bank holding companies.

Bank Insurance Fund (BIF)
A unit of the Federal Deposit Insurance Corporation (FDIC) that provides deposit insurance for banks excluding thrifts.

Bank Letter of Credit Policy
Standards allowing banks to confirm letters of credit by foreign banks supporting the purchase of US exports.

Bank line
Line of credit that a bank grants to a customer.

Bank note
A term used synonymously with paper money or currency issued by a bank. Notes are, in effect, a promise to pay the bearer on demand the amount stated on the face of the note. Today, only the Federal Reserve Banks are authorized to issue bank notes, i.e. Federal Reserve notes, in the United States.

Bank regulation
The formulation and issuance by authorized agencies of specific rules or regulations, under governing law, for the conduct and structure of banking.

Bank run (bank panic)
A series of unexpected cash withdrawals caused by a sudden decline in depositor confidence or fear that the bank will be closed by the chartering agency, i.e. many depositors withdraw cash almost simultaneously. Since the cash reserve a bank keeps on hand is only a small fraction of its deposits, a large number of withdrawals in a short period of time can deplete available cash and force the bank to close and possibly go out of business.

Bank trust department
Bank department that deals with estates, administers trusts, and provides services such as estate planning advice to its clients.

Bank wire
A computer message system linking major banks. It is used not for effecting payments, but as a mechanism to advise the receiving bank of some action that has occurred, e.g., the payment by a customer of funds into that bank's account.

Bank-based corporate governance system
Organization of a supervisory board so that it is dominated by bankers and corporate insiders.

Banker's acceptance
A short-term credit investment created by a nonfinancial firm and guaranteed by a bank as to payment. Acceptances are traded at discounts to face value in the secondary market. These instruments have been a popular investment for money market funds. They are commonly used in international transactions.

Banking Delay
Time required for processing and clearing a check through the banking system.

Bankmail
An agreement between a company engaged in a takeover bid and a bank that the bank will not finance the bid of another acquirer.

Bankruptcy cost view
The argument that expected indirect and direct bankruptcy costs offset the other benefits from leverage so that the optimal amount of leverage is less than 100% debt financing.

Bankruptcy
Inability to pay debts. In bankruptcy of a publicly owned entity, the ownership of the firm's assets is transferred from the stockholders to the bondholders.

Bankruptcy risk
The risk that a firm will be unable to meet its debt obligations. Also referred to as default or insolvency risk.

Bankruptcy view
The argument that expected bankruptcy costs preclude firms from financing entirely with debt.

Bar
Slang for one million dollars.

BAR
See: Builders' All Risk

Barbell strategy
A fixed income strategy in which the maturities of the securities included in the portfolio are concentrated at two extremes.

Barefoot Investor
A popular Australian radio program focused on teaching young people financial literacy.

Barefoot pilgrim
A slang term for an unsophisticated investor who has lost everything on the stock market. Not to be confused with Barefoot Investor.

Bargain hunter
In the context of general equities, purchaser who is extremely selective in the price sought on a transaction.

Bargain-purchase-price option
Gives the lessee the option to purchase the asset at a price below fair market value when the lease expires.

Barometer
Economic and market data that represent an overall trend. The Dow Jones Industrial Average is an example of a stock market barometer.

BARRA's performance analysis (PERFAN)
A method developed by BARRA, a consulting firm in Berkeley, Calif. It is commonly used by institutional investors applying performance attribution analysis to evaluate their money managers' performance.

Barrier options
Option contracts that remain dormant until a trigger point (the barrier price) is reached, at which point the call or put option is activated, and results either in a long or short options position, or in the automatic exercise of an options position. One example is an up-and-in call. Assume an exercise price of $50 and a barrier price of $53. If the stock stays below $53, the call option cannot be exercised. If the stock price reaches the $53 barrier price, the holder then has a call option on the shares at $50. These are exotic options.

Barron's confidence index
Index measuring the ratio of the average yield on 10 top-grade bonds to the average yield on 10 intermediate-grade bonds. The discrepancy between high-rated top-grade bonds and low-rated bond yields establishes a measure that is indicative of investor confidence.

Barter
The trading/exchange of goods or services without using currency.

Base probability of loss
The probability of not achieving a portfolio expected return. Related: Value at risk.

Base
A technical analysis tool. A chart pattern depicting the period when the supply and demand of a certain stock are in relative equilibrium, resulting in a narrow trading range. The merging of the support level and resistance level.

Base currency
Applies mainly to international equities. Currency in which gains or losses from operating an international portfolio are measured.

Base interest rate
Related: Benchmark interest rate.

Base market value
The average market price of a group of securities at a specific time. Used for the purpose of indexing.

Base period
A particular period of time used for comparative purposes when measuring economic data.

Base rate
British equivalent of the US prime rate.

Basel Accord
Agreement concluded among country representatives in 1988 in Switzerland to develop standardized risk-based capital requirements for banks across countries.

Basic business strategies
Key strategies a firm intends to pursue in carrying out its business plan.

Basic balance
In a balance of payments, the basic balance is the net balance of the combination of the current account and the capital account.

Basic IRR rule
Accept the project if IRR is higher than the discount rate; reject the project if it is lower than the discount rate. It is wise to also consider net present value for project evaluation.

Basis
The price an investor pays for a security plus any out-of-pocket expenses. It is used to determine capital gains or losses for tax purposes when the stock is sold. Also, for a futures contract, the difference between the cash price and the futures price observed in the market.

Basis point
In the bond market, the smallest measure used for quoting yields is a basis point. Each percentage point of yield in bonds equals 100 basis points. Basis points also are used for interest rates. An interest rate of 5% is 50 basis points higher than an interest rate of 4.5%. Sometimes referred to as BPS, BIPS, and pronounced "Bips"

Basis price
Price expressed in terms of yield to maturity or annual rate of return.

Basis risk
Unexpected changes in the basis between the placing and the lifting of a hedge. Basis risk is in excess of convergence.

Basket
Applies to derivative products. Group of stocks that is formed with the intention of either being bought or sold all at once, usually to perform index arbitrage or a hedging program.

Basket options
Packages that involve the exchange of more than two currencies against a base currency at expiration. The basket option buyer purchases the right, but not the obligation, to receive designated currencies in exchange for a base currency, either at the prevailing foreign exchange market rate or at a prearranged rate of exchange. Multinational corporations with multicurrency cash flows frequently use basket options because it is generally cheaper to buy an option on a basket of currencies than to buy individual options on each of the currencies that make up the basket.

Basket trades
Related: Program trades.

BB
The two-character ISO 3166 country code for BARBADOS.

BBD
The ISO 4217 currency code for Barbadian Dollar.

BD
The two-character ISO 3166 country code for BANGLADESH.

BD form
An SEC document required of brokerage houses that outlines the firm's finances and officers.

BDS Statistic
A statistic based upon the correlation integral which examines the probability that a purely random system could have the same scaling properties as the system under study. See: Correlation Integral.

BDT
The ISO 4217 currency code for Bangladeshi Taka currency.

BE
The two-character ISO 3166 country code for BELGIUM.

BEACON
See: Boston Exchange Automated Communication Order-Routing Network

Bear
An investor who believes a stock or the overall market will decline. A bear market is a prolonged period of falling stock prices, usually by 20% or more. Related: bull.

Bear CD
A bear CD pays the holder a fraction of any fall in a given market index.

Bear hug
Often used in risk arbitrage. Hostile takeover attempt in which the acquirer offers an exceptionally large premium over the market value of the acquiree's shares so as to as to squeeze (hug) the target into acceptance.

Bear market
Any market in which prices exhibit a declining trend. For a prolonged period, usually falling by 20% or more.

Bear raid
In the context of general equities, attempt by investors to move the price of a stock opportunistically by selling large numbers of shares short. The investors pocket the difference between the initial price and the new, lower price after this maneuver. This technique is illegal under SEC rules, which stipulate that every short sale must be on an uptick.

Bear spread
Applies to derivative products. Strategy in the options or futures markets designed to take advantage of a fall in the price of a security or commodity. A bear spread with call options is created by buying a call option with a certain strike price and selling a call option on the same stock with a lower strike price (with the same expiration date). A bear spread with put options is where an investor buys a put with a high strike price and sells a put with a low strike price. With futures, the investor sells the nearby contract and purchases the next out contract. All of these strategies are designed to profit from a fall in the underlying asset's price.

Bear trap
The predicament facing short sellers when a bear market reverses its trend and becomes bullish. The assets continue to sell in anticipation of further declines in price, and short sellers then are forced to cover at higher prices.

Bearer bond
Bonds that are not registered on the books of the issuer. Such bonds are held in physical form by the owner, who receives interest payments by physically detaching coupons from the bond certificate and delivering them to the paying agent.

Bearer form
Describes issue form of security not registered on the issuing corporation's books, and therefore payable to its bearer. See also: Bearer bond; coupon bond.

Bearer share
Security not registered on the books of the issuing corporation and thus payable to possessor of the shares. Negotiable without endorsement and transferred by delivery, thus avoiding some of the control associated with ordinary shares. Dividends are payable upon presentation of dividend coupons, which are dated or numbered. Applies mainly to international equities.

Bearish
Words used to describe investor attitude. A bearish investor believes that a particular asset or the market as a whole will decline in value.

BEARS
See: Bonds Enabling Annual Retirement Savings (BEARS)

Beating the gun
In the context of general equities, gaining an advantageous price in a trade through a quick response to market developments.

BEF
The ISO 4217 currency code for Belgian Franc.

Before-tax contributions
The portion of an employee's salary contributed to a retirement plan before federal income taxes are deducted; this reduces the individual's gross income for federal tax purposes.

Before-tax profit margin
The ratio of net income before taxes to net sales.

Beggar-thy-neighbor
An international trade policy of competitive devaluations and increased protective barriers that one country institutes to gain at the expense of its trading partners.

Beggar-thy-neighbor devaluation
A devaluation that is designed to cheapen a nation's currency and thereby increase its exports at the expense of other countries. Devaluation can also reduce a nation's imports. Such devaluations often lead to trade wars.

Behind
Used for listed equity securities. At the same price but entered after your order/interest, such as on the specialist's book. Antithesis of ahead of you.

Bell
Signal on a stock exchange to indicate the open and close of trading.

Bellwether issues
Related: Benchmark issues.

Below par
Less than the nominal or face value of a security.

Benchmark
The performance of a predetermined set of securities, used for comparison purposes. Such sets may be based on published indexes or may be customized to suit an investment strategy.

Benchmark error
Use of an inappropriate proxy for the true market portfolio.

Benchmark interest rate
Also called base interest rate, it is the minimum interest rate investors will demand for investing in a non-Treasury security. It is also tied to the yield to maturity offered on the comparable-maturity treasury security that was most recently issued (on-the-run).

Benchmark issue
Also called on-the-run or current-coupon issue or bellwether issue. In the secondary market, the benchmark issue is the most recently auctioned Treasury issues for each maturity.

Beneath
Used for listed equity securities. 1) Behind; 2) Lower in price.

Beneficial Owner
As used for most purposes under the federal securities laws. A beneficial owner of stock is any person or entity with sole or shared power to vote or dispose of the stock. This SEC definition is intended to include a holder who enjoys the benefits of ownership although the shares may be held in another name.

Beneficial ownership
Often used in risk arbitrage. Person who enjoys the benefits of ownership even though title is in another name. (Abused through the illegal use of a parking violation.)

Beneficiary
Term used to refer to the person who receives the benefits of a trust or the recipient of the proceeds of a life insurance policy.

Bequest
Property left to an heir under the terms of a will.

Best efforts
A high standard of undertaking, but nevertheless excusable in the event of a force majeure.

Best's rating
A rating A.M. Best Co. assigns to insurance companies based on the company's ability to meet its obligations to its policyholders.

Best-efforts sale
A method of securities distribution/underwriting in which the securities firm agrees to sell as much of the offering as possible and return any unsold shares to the issuer. As opposed to a guaranteed or fixed-price sale or bought deal, in which the underwriter agrees to sell a specific number of shares (and holds any unsold shares in its own account if necessary).

Best-interests-of-creditors test
The requirement that a claim holder voting against a plan of reorganization must receive at least as much as if the debtor were liquidated.

Beta
The measure of an asset's risk in relation to the market (for example, the S&P500) or to an alternative benchmark or factors. Roughly speaking, a security with a beta of 1.5, will have move, on average, 1.5 times the market return. [More precisely, that stock's excess return (over and above a short-term money market rate) is expected to move 1.5 times the market excess return).] According to asset pricing theory, beta represents the type of risk, systematic risk, that cannot be diversified away. When using beta, there are a number of issues that you need to be aware of: (1) betas may change through time; (2) betas may be different depending on the direction of the market (i.e. betas may be greater for down moves in the market rather than up moves); (3) the estimated beta will be biased if the security does not frequently trade; (4) the beta is not necessarily a complete measure of risk (you may need multiple betas). Also, note that the beta is a measure of comovement, not volatility. It is possible for a security to have a zero beta and higher volatility than the market.

Beta equation (security)
The market beta of a security is determined as follows: Regress excess returns of stock y on excess returns of the market. The slope coefficient is beta. Define n as number of observation numbers. Beta= [(n) (sum of [xy]) ]-[ (sum of x) (sum of y)]/ [(n) (sum of [xx]) ]-[ (sum of x) (sum of x)] where: n = # of observations (usually 36 to 60 months) x = rate of return for the S&P 500 index y = rate of return for the security. Related: Alpha

BF
The two-character ISO 3166 country code for BURKINA FASO.

BG
The two-character ISO 3166 country code for BULGARIA.

BGL
The pre-July 1999 ISO 4217 currency code for Bulgarian Lev.

BGN
The current ISO 4217 currency code for Bulgarian Lev.

BH
The two-character ISO 3166 country code for BAHRAIN.

BHD
The ISO 4217 currency code for Bahrainian Dinar.

BI
The two-character ISO 3166 country code for BURUNDI.

Bi-weekly mortgage loan
A mortgage loan on which interest and principal payments are made every half-month (total of 26 payments) as opposed to monthly payments. This results in earlier loan retirement.

Biased expectations theories
Related: Pure expectations theory.

BIC
See: Bank Investment Contract

Bid
The price a potential buyer is willing to pay for a security. Sometimes also used in the context of takeovers where one corporation is bidding for (trying to buy) another corporation. In trading, we have the bid-ask spread which is the difference between what buyers are willing to pay and what sellers are asking for in terms of price.

Bid away
Refers to over-the-counter trading. Bid from another dealer exists at the same (listed) or higher (OTC) price.

Bid bond
A bid "performance" bond consisting of a small percentage (1-3%) of the tender contract price, refunded to losers once the contract is awarded.

Bid price
This is the quoted bid, or the highest price an investor is willing to pay to buy a security. Practically speaking, this is the available price at which an investor can sell shares of stock. Related: Ask, offer.

Bid wanted
Used in the context of general equities. Announcement that a holder of securities wants to sell and will entertain bids.

Bid-asked spread
The difference between the bid and the asked prices.

Bid-to-cover ratio
The ratio of the number of bids received in a Treasury security auction compared to the number of accepted bids.

Bidder
A firm or person that wants to buy a firm or security.

Bidding buyer
In the context of general equities, a nonaggressive buyer who prefers to await a natural seller in the hope of paying a lower price.

Bidding through the market
In the context of general equities, aggressive willingness to purchase a security at a premium to the inside market. Contrasts with bidding buyer.

Bidding up
Moving the bid price higher.

BIF
See: Bank Insurance Fund

BIF
The ISO 4217 currency code for Burundian Franc.

Bifurcation Diagram
A graph that shows the critical points where bifurcation occurs, and the possible solutions that exist at that point.

Bifurcation
When a non-linear dynamic system develops twice the possible solutions that it had before it passed its critical level. A bifurcation cascade is often called the period doubling route to chaos because the transition from an orderly system to a chaotic system often occurs when the number of possible solutions begins increasing, doubling each time.

Big Bang
The term applied to the liberalization in 1986 of the London Stock Exchange (LSE) when trading was automated.

Big Board
A nickname for the New York Stock Exchange (NYSE). Also known as The Exchange. More than 2,000 common and preferred stocks are traded. Founded in 1792, the NYSE is the oldest exchange in the United States, and the largest. It is located on Wall Street in New York City.

Big picture
To highlight trading interest due to the size of the trade.

Big producer
A successful broker who generates a large volume of commission. See Rainmaker.

Big uglies
Unpopular stocks.

Bilateral Netting
Bilateral netting - the consolidation of all swap agreements between two counterparties into one master agreement. The result is that if one counterparty bankrupts, that counterparty cannot seek to collect on any swaps that are in-the-money to them while at the same time refusing to pay out on any that are out-of-the-money. Instead, the master agreement sets out that in this event all swaps between the two counterparties will be netted; only then will the bankrupt company receive money, and then only if they are net in-the-money.

Bill of exchange
General term for a document demanding payment.

Bill of lading
A contract between an exporter and a transportation company in which the latter agrees to transport the goods under specified conditions that limit its liability. It is the exporter's receipt for the goods as well as proof that goods have been or will be received.

Billing cycle
The time elapsed between billing periods for goods sold or services rendered.

Binder
An amount of money paid to indicate good faith in