eFinancialCareers

L
Fifth letter of a Nasdaq stock symbol specifying that the issue is a class of stock such as third preferred class of warrants, foreign preferred, sixth class of preferred stock, or preferred when issued stock.

LA
The two-character ISO 3166 country code for LAO PEOPLE'S DEMOCRATIC REPUBLIC.

Ladder strategy
A bond portfolio construction strategy that invests approximately equal amounts in every maturity within a given range.

Lady Macbeth Strategy
Strategy in which a third party poses as a white knight in a takeover bid, and then joins forces with an unfriendly bidder.

Laffer curve
A curve conjecturing that economic output will increase if marginal tax rates are cut. Named after economist Arthur Laffer.

Lag
Payment of a financial obligation later than is expected or required, as in lead and lag. Also, the number of periods that an dependent variable in a regression model is "held back" in order to predict the dependent variable.

Lag response of prepayments
A delay of typically about three months between the time the weighted-average coupon of an MBS pool crosses the threshold for refinancing and observation of an acceleration in prepayment speed is observed.

Lagging
Strategy used by a firm to stall payments, normally in response to exchange rate projections.

Lagging indicators
Economic indicators that follow rather than precede the country's overall pace of economic activity. See also: Leading indicators and coincident indicators.

Lagging indicators
Economic indicators that follow rather than precede the country's overall pace of economic activity. See also: Leading indicators and coincident indicators.

Laisse-faire
Doctrine that a government should not interfere with business and economic affairs.

LAK
The ISO 4217 currency code for Laos New Kip.

Lambda
The ratio of a change in the option price to a small change in the option volatility. It is the partial derivative of the option price with respect to the option volatility.

Land contract
A method of real estate financing; a mortgage-holding seller finances a buyer by taking a down payment and subsequent payments in installments, but holds the title until the mortgage is fully repaid.

Landlord
A property owner who rents property to a tenant.

Lapsed option
An option that no longer has any value because it has reached its expiration date without being exercised.

Large-cap
A stock with a high level of capitalization, usually at least $5 billion market value.

Last in, first out (LIFO)
An accounting method that fixes the cost of goods sold to the most recent purchases. Hence, if prices are generally rising, LIFO will lead to lower accounting profitability.

Last sale
The most recent trade performed in a security.

Last split
After a stock split, the number of shares distributed for each share held and the date of the distribution.

Last trading day
The final day under an exchange's rules during which trading may take place in a particular futures or options contract. Contracts outstanding at the end of the last trading day must be settled by delivery ofunderlying physical commodities or financial instruments, or by agreement for monetary settlement, depending futures contract specifications.

Late charge
A fee a credit grantor charges a borrower for a late payment.

Late tape
A delay in the display of price changes on the tape of an exchange because of heavy trading. In severe instances the first digit of each price is intentionally deleted.

Late trading
Late trading of mutual fund shares occurs when investors placing trades after 4 PM receive the 4 PM price. These late traders can use the information revealed after 4 PM to guide their trades: buying funds when their current value is greater than their 4 PM value and selling the funds when the reverse is true. Doing so allows them to earn expected abnormal returns at the expense of the fund's long-term shareholders.

Latent default
A potential default that may have always been present but unidentified.

Launder
To move illegally acquired cash through financial systems so that it appears to be legally acquired.

Law of large numbers
The mean of a random sample approaches the mean (expected value) of the population as sample size increases.

Law of one price
An economic rule stating that a given security must have the same price no matter how the security is created. If the payoff of a security can be synthetically created by a package of other securities, the implication is that the price of the package and the price of the security whose payoff it replicates must be equal. If it is unequal, an arbitrage opportunity would present itself.

Lay off
In the context of general equities, this eliminates all or part of a position by finding customers or other dealers to take the position.

Layup
Used in the context of general equities. Easily executed trade or order. See: Lead pipe.

LB
The two-character ISO 3166 country code for LEBANON.

LBO
See: Leveraged buyout

LBP
The ISO 4217 currency code for Lebanese Pound.

LC
The two-character ISO 3166 country code for SAINT LUCIA.

LCL
See: Less Than Container Load

LDC
See: Less developed countries

LDs
See: Liquidated damages

Lead
Payment of a financial obligation earlier than is expected or required.

Lead arranger
The senior tier of arranger

Lead bank
A senior bank involved in the negotiations for a project financing.

Lead Manager
Subordinate to an arranger.

Lead pipe
Used in the context of general equities. Virtually certain that trade will take place; lead pipe cinch. See: Layup.

Lead regulator
A leading self-regulatory organization that over sees compliance with a particular section of the law, such as the NYSE, ASE, or NASDAQ.

Lead underwriter
The head of a syndicate of financial firms that are sponsoring an initial public offering of securities or a secondary offering of securities. Could also apply to bond issues.

Leader
A stock or group of stocks that is the first to move in a market upsurge or downturn.

Leading
Strategy used by a firm to accelerate payments, normally in response to exchange rate expectations.

Leading and lagging
Refers to timing of cash flows within a corporation.

Leading economic indicators
Economic series that tend to rise or fall in advance of the rest of the economy.

Leading indicator
A change in a measurable economic factor that is evident before the economy starts to follow a specific trend.

Leading the market
In the context of general equities, this is a stock or group of stocks moving with the market as a whole, but moving in advance of the general market.

League tables
A ranking of lenders and advisors according to the underwriting, final take, or number of project finance loans or advisory mandates.

Leakage
Release of information selectively or not before official public announcement.

LEAPS
See: Long-Term Anticipation Securities

Lease
A long-term rental agreement, and a form of secured long-term debt.

Lease acquisition cost
The legal fees and other expenses incurred when acquiring a lease.

Lease rate
The payment per period stated in a lease contract.

Lease term
The life of a lease, including any renewal options.

Lease-purchase agreement
An agreement that allows for portions of lease payments to be used to purchase the leased property.

Leaseback
A transaction that involves the sales of some property, and an agreement by the seller to lease the property back from the buyer after the sale.

Leasehold
An asset providing the right to use property under a lease agreement.

Leasehold improvement
An improvement made to leased property.

Leaves
Used in the context of general equities. Remains to buy or sell of a previously entered order after a report of partial execution has been given. If the floor broker to buy 20M IBM at $115, and he then buys 6M at this price, his report would be, "You bought 6M IBM at $115; leaves 14."

Ledger cash
A firm's cash balance as reported in its financial statements. Also called book cash.

Leg
A prolonged trend in stock market prices, such as a multiple-period bull market; or, an option that is one side of a spread transaction. See: Lifting a leg.

Leg up
Used in the context of general equities. (1)Have a portion of the offsetting side of a trade in your pocket (spoken for) so your capital risk in the transaction is reduced. (Purchase of 10,000 of a 50,000 buy order leaves the trader a "leg up".) (2) Complete one side of a two-sided transaction, as in a swap or contingency order.

LEGAL
A computerized database maintained by the NYSE to keep track of enforcement actions, audits, and complaints against member firms. This term is not an acronym but is referred to in capitals.

Legal bankruptcy
A legal proceeding for liquidating or reorganizating a business.

Legal capital
Value at which a company's shares are recorded in its books.

Legal defeasance
The deposit of cash and permitted securities, as specified in the bond indenture, into an irrevocable trust sufficient to enable the issuer to fully discharge its obligations under the bond indenture.

Legal entity
A person or organization that can legally enter into a contract, and may therefore be sued for failure to comply with the terms of the contract.

Legal investments
Investments that a regulated entity is permitted to make under the rules and regulations that govern its conduct.

Legal list
A list of high-quality debt and equity securities chosen by a state agency that are acceptable holdings for fiduciary institutions.

Legal monopoly
A government-regulated firm that is legally entitled to be the only company offering a particular service in a particular area.

Legal opinion
A statement, usually written by a specialized law firm, required for a new municipal bond issue stating that the issue is legally acceptable.

Legal risk
The risk associated with the impact of a defect in the documentation on cash flow or debt service.

Legal transfer
A stock transaction that requires special documentation in addition to standard stock or bond power to be legally valid.

Legislative risk
The risk that new or changed legislation will have a large positive or negative effect on an investment.

Legitimate
Used in the context of general equities. Real interest in trading as compared to a profile stance. See: Natural.

Lehman Brothers Adjustable-Rate Mortgage Index
A benchmark index that includes all agency-guaranteed securities with coupons that periodically adjust based on a spread over a published index.

Lehman Brothers Aggregate Bond Index
A benchmark index made up of the Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed Securities Index, and Asset-Backed Securities Index, including securities that are of investment-grade quality or better, have at least one year to maturity, and have an outstanding par value of at least $100 million.

Lehman Brothers California Municipal Bond Index
A benchmark index that includes investment-grade, tax-exempt, and fixed-rate bonds issued in California. All securities have long-term maturities (greater than two years) and are selected from issues larger than $50 million.

Lehman Brothers Corporate Bond Index
A benchmark index that includes all publicly issued, fixed-rate, nonconvertible, dollar-denominated, SEC-registered, investment-grade corporate debt.

Lehman Brothers Government Bond Index
A benchmark index made up of the Treasury Bond Index and the Agency Bond Index as well as the 1-3 Year Government Index and the 20+ Year Treasury Index.

Lehman Brothers Government/Corporate Bond Index
A benchmark index made up of the Lehman Brothers® Government and Corporate Bond indexes, including U.S. government Treasury and agency securities as well as corporate and Yankee bonds.

Lehman Brothers Mortgage-Backed Securities Index
A benchmark index that includes 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal Home Loan Mortgage Corporation (FHLMC), and Federal National Mortgage Association (FNMA).

Lehman Brothers Municipal Bond Index
A benchmark index that includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than two years) selected from issues larger than $50 million.

Lehman Brothers New York Municipal Bond Index
A benchmark index that includes investment-grade, tax-exempt, and fixed-rate bonds issued in the state of New York. All securities have long-term maturities (greater than two years) and are selected from issues larger than $50 million.

Lemon
An investment with poor results.

Lemons problem
Named after 2001 Nobel Laureate George Akerlof's 1970 paper "The Market for Lemons". His original example had to do with used cars. Why does the seller want to get rid of the car? It might be a lemon. The buyer and seller have asymmetric information. Hence, the buyer will demand a deep discount on the car because of the possibility it is a lemon.

Lend
To provide money temporarily on the condition that it or its equivalent will be returned, often with an interest fee.

Lendable funds
The pool of funds available to borrows; typically categorized by currency and maturity.

Lender
Businesses that provide loans to others.

Lender liability lawsuits
Legal action of debtor against creditors that alleges unfair enforcement of loan covenants or violation of implied terms of a loan agreement.

Lender of last resort
Traditionally the Federal Reserve Bank in the US, which assists banks that face large withdrawals of funds and in so doing stabilizes the banking system.

Lending agreement
A contract regarding funds transferred between a lender and a borrower.

Lending at a premium
A loan from one broker to another of securities to cover a customer's short position, with a borrowing fee included. A fee is unusual since securities are normally lent freely between brokers.

Lending at a rate
Interest paid to a customer on the credit balance received from a short sale.

Lending securities
Securities borrowed from a broker's inventory, from another customer's margin account, or from another broker, when a customer is required to deliver on a short sale.

Leptokurtosis
The condition of a probability density curve to have fatter tails and a higher peak at the mean than the normal distribution.

Less Than Container Load
Shipments of less than container load size (<$50,000).

Less-developed countries (LDCs)
Also known as emerging markets. Countries who's per capita GDP is below a World Bank-determined level.

Lessee
An entity that leases an asset from another entity.

Lessor
An entity that leases an asset to another entity.

Letter of Administration
A certificate issued by the Court evidencing the appointment of the Administrator of an Estate.

Letter of comment
A communication to the firm from the SEC that suggests changes to its registration statement.

Letter of credit (LOC)
A form of guarantee of payment issued by a bank on behalf of a borrower that assures the payment of interest and repayment of principal on bond issues.

Letter of Guarantee
A letter from a bank to a brokerage firm which states that a customer (who has written a call option) does indeed own the underlying stock and the bank will guarantee delivery if the call is assigned. Thus the call can be considered covered. Not all brokerage firms accept letters of guarantee. Also: letter issued to Option Clearing Corporation by member firms covering a guarantee of any trades made by one of its customers, (a trader or broker on the exchange floor).

Letter of intent
An assurance by a mutual fund shareholder that a certain amount of money will be invested monthly, in exchange for lower sales charges. In mergers, a preliminary merger agreement between companies after significant negotiations.

Letter of Testamentary
A certificate issued by the court evidencing the appointment of an executor of estate.

Letter of Transmittal
A document used by security holder to accompany certificates surrendered in an exchange or other corporate action.

Letter stock
Privately placed common stock, so-called because the SEC requires a letter from the purchase stating that the stock is not intended for resale.

Level
Used in the context of general equities. Price measure of an indication.

Level debt service
A municipal charter provision that debt payments must be relatively equal from year to year so that required revenue projections are easier.

Level load
A mutual fund that charges a permanent sales charge, usually at some fixed percentage. See: Front-end loads and back-end loads.

Level pay
Scheduling principal and interest payments (P&I) due under a mortgage so that total monthly payment of P&I is the same. Different from the typical mortgage for which the principal payment component of the monthly payment becomes gradually greater while the monthly interest component shrinks.

Level term insurance
A life insurance policy with a fixed face value and increasing premiums.

Level-coupon bond
Bond with a stream of coupon payments that remain the same throughout the life of the bond.

Leverage
The use of debt financing, or property of rising or falling at a proportionally greater amount than comparable investments. For example, an option is said to have high leverage compared to the underlying stock because a given price change in the stock may result in a greater increase or decrease in the value of the option. Also, commonly known as Gearing in Europe.

Leverage clientele
A group of shareholders who, because of their personal leverage, seek to invest in corporations that maintain a compatible degree of corporate leverage.

Leverage ratios
Measures of the relative value of stockholders, capitalization, and creditors obligations, and of the firm's ability to pay financing charges. Value of firm's debt to the total value of the firm (debt plus stockholder capitalization).

Leverage rebalancing
Making transactions to adjust (rebalance) a firm's leverage ratio to a target ratio.

Leveraged beta
The beta of a leveraged required return; that is, the beta as adjusted for the degree of leverage in the firm's capital structure.

Leveraged buyout (LBO)
A transaction used to take a public corporation private that is financed through debt such as bank loans and bonds. Because of the large amount of debt relative to equity in the new corporation, the bonds are typically rated below investment-grade, properly referred to as high-yield bonds or junk bonds. Investors can participate in an LBO through either the purchase of the debt (i.e., purchase of the bonds or participation in the bank loan) or the purchase of equity through an LBO fund that specializes in such investments.

Leveraged company
A company that has debt in its capital structure.

Leveraged equity
Stock in a firm that relies on financial leverage. Holders of leveraged equity experience the benefits and costs of using debt.

Leveraged investment company
An investment company or mutual fund entitled to borrow capital for its operations. Also, an investment company that issues both income shares and capital shares.

Leveraged lease
A lease arrangement under which the lessor borrows a large proportion of the funds needed to purchase the asset. The lender has a lien on the assets and a pledge of the lease payments to secure the borrowing.

Leveraged portfolio
A portfolio that includes risky assets purchased with funds borrowed.

Leveraged recapitalization
Often used in risk arbitrage. A public company takes on significant additional debt with the purpose of either paying an extraordinary dividend or repurchasing shares, leaving the public shareholders with a continuing interest in a more financially leveraged company. Popular form of shark repellent See: Stub.

Leveraged required return
The required return on an investment when the investment is financed partially by debt.

Leveraged stock
Stocks financed with credit, such as that purchased on a margin account.

Levered portfolio
Investment at least partially financed by borrowing.

LI
The two-character ISO 3166 country code for LIECHTENSTEIN.

Liability
A financial obligation, or the cash outlay that must be made at a specific time to satisfy the contractual terms of such an obligation.

Liability funding strategies
Investment strategy that select assets so that cash flows will equal or exceed the client's obligations.

Liability insurance
Insurance guarding against damage or loss that the policyholder, may cause another person in the form of bodily injury or property damage.

Liability swap
An interest rate swap used to alter the cash flow characteristics of an institution's liabilities so as to provide a better match with its assets.

LIBOR
See: London Interbank Offered Rate

License agreement
A contract by which a domestic company (the licensor) allows a foreign company (the licensee) to market its products in a foreign country in return for royalties, fees, or other forms of compensation.

Licensing
Arrangement in which a local firm in the host country produces goods in accordance with another firm's (the licensing firm's>) specifications; as the goods are sold, the local firm can retain part of the earnings.

Lien
A security interest in one or more assets that lenders hold in exchange for secured debtfinancing.

Life annuity
An annuity that pays a fixed amount for the lifetime of the annuitant.

Life cycle
The lifetime of a product or business, from its creation to its demise or transformation.

Life expectancy
The length of time that an average person is expected to live, which is used by insurance companies use to make projections of benefit payouts.

Life insurance
An insurance policy that pays a monetary benefit to the insured person's survivors after death.

Life insurance in force
The dollar amount of life insurance that a company has issued, measured as the sum of policy face values and dividends paid.

Life insurance policy
The contract that sets out the terms of life insurance coverage.

Lifetime reverse mortgage
A type of mortgage in which a homeowner borrows against the value a home, while retaining title, and making no payments while residing in the home. When the owner ceases living in the house, the property is sold, and the loan repaid.

LIFFE
See: London International Financial Futures and Options Exchange

LIFO
See: Last in, first out

Lift
An increase in securities prices, as shown by some economic indicator.

Lifted
Refers to over-the-counter trading. Having an offer taken in a stock, followed by the market maker raising the offer price.

Lifting a leg
Closing out one side of a long-short arbitrage before the other is closed.

Lighten up
Selling some part of a stock or bond position in a portfolio to realize capital gains or to losses or increase cash assets.

Lima Stock Exchange
Peru's major securities market.

Limit
See Trading Limit.

Limit Cycles
An attractor for non-linear dynamic systems which has periodic cycles or orbits in phase space. An example is an undamped pendulum which will have a closed circle orbit equal to the amplitude of the pendulum's swing. See: Attractor, Phase Space.

Limit on close order
An order to buy or sell stock at the closing price only if the price is at a predetermined level or better.

Limit order
An order to buy a stock at or below a specified price, or to sell a stock at or above a specified price. For instance, you could tell a broker "buy me 100 shares of XYZ Corp at $8 or less" or "sell 100 shares of XYZ at $10 or better" The customer specifies a price, and the order can be executed only if the market reaches or betters that price. A conditional trading order designed to avoid the danger of adverse unexpected price changes.

Limit order book
A record of unexecuted limit orders maintained by the specialist. These orders are treated equally with other orders in terms of priority of execution.

Limit order information system
The electronic system supplying information about securities traded on participating exchanges so that the best securities prices can be found.

Limit price
See: Maximum price fluctuation

Limit up, limit down
The maximum price change allowed for a commodity futures contract per trading day.

Limitation on asset dispositions
A bond covenant that restricts in some way a firm's ability to sell major assets.

Limitation on conversion
Applies mainly to convertible securities. Possible delay in convertibility. More frequently, the right to convert may be terminable prior to a redemption date, preventing the holder from receiving a final coupon or dividend. See: Accrued interest.

Limitation on liens
A bond covenant that restricts in some way a firm's ability to grant liens on its assets.

Limitation on merger, consolidation, or sale
A bond covenant that restricts in some way a firm's ability to merge or consolidate with another firm.

Limitation on sale-and-leaseback
A bond covenant that restricts in some way a firm's ability to enter into sale-and-leaseback transactions, financing techniques that could affect creditor thinness.

Limitation on subsidiary borrowing
A bond covenant that restricts in some way a firm's ability to borrow at the level of firm subsidiary.

Limited company
A form of business commonly used in the U.K. comparable to incorporation in the U.S.

Limited discretion
Permission by a client that allows a broker to make certain stock and option trades without first consulting the client about the trade.

Limited flexibility exchange rate system
The International Monetary Fund's name for an exchange rate system with a managed float.

Limited liability
Limitation of loss to what has already been invested.

Limited partner
A partner who has limited legal liability for the obligations of the partnership.

Limited partnership
A partnership that includes one or more partners who have limited liability.

Limited payment policy