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- Fifth letter of a
NASDAQ stock symbol specifying that it is the Class 'B' shares of the company.
- B.A.N.
- See:
Bank anticipation notes
- B.I.S.
- See:
Bank for International Settlements
- Back away
- Used 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.
- Backed in
- Used in the context of general equities. Scenario whereby unanticipated events allow for a purchase at a
discount or a sale at a
premium.
- Back-end loan 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 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 C.D.S.C.
- Back fee
- The fee paid on the extension date if the buyer wishes to continue
the
option.
- Back office
- Brokerage house clerical operations that support, but do not include, the trading of
stocks and other securities. Includes all written
confirmation and settlement of
trades, record keeping and regulatory compliance.
- Back on the shelf
- Used in the context of general equities. Permanently
cancelled
order/interest in a
stock by a customer. See:
take a powder.
- Back-to-back financing
- An intercompany
loan channeled through a bank.
- 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-up
- (1) When
bond
yields rise and prices fall, the
market is said to back-up. (2) When an investor
swaps out of one
security into another of shorter current
maturity, he/she is said to back up.
- "Back up the truck"
- Used in the context of general equities. "Prepare for a very large buyer."
- Backwardation
- A
market condition in which
futures prices are lower in the distant
delivery months than in the nearest delivery month. This situation may occur when the costs of storing the product until eventual delivery are effectively subtracted from the price today. The opposite of
contango.
- Bai-kai
- Mainly applies to international equities. Two-sided
market
picture, in Japanese terminology.
- 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 of trade
- Net flow of goods (exports minus imports) between countries.
- Balance sheet
- Also called the statement of financial condition, it is a summary of a company's
assets,
liabilities, and owners'
equity.
- Balance sheet exposure
- See:
accounting exposure.
- Balance sheet identity
- Total
Assets = Total
Liabilities + Total
Stockholders' Equity
- Balanced fund
- An investment company that invests in
stocks and
bonds. The same as a
balanced mutual fund.
- Balanced mutual fund
- This is a fund that buys common
stock,
preferred stock and
bonds. The same as a
balanced fund.
- Balloon maturity
- Any large
principal payment due at
maturity for a
bond or loan with or without a
sinking fund requirement.
- Bank anticipation notes (B.A.N.)
- 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 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 line
-
Line of credit granted by a bank to a customer.
- 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.
- Banker's Acceptance
- A short-term credit investment created by a non-financial 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.
-
Bank for International Settlements (B.I.S.)
- 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 U.S.
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.
- Bankruptcy
- State of being unable to pay
debts.
Thus, the ownership of the firm's
assets is transferred from the
stockholders to the
bondholders.
- 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 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 being financed entirely with
debt.
- Bar
- Slang for one million dollars.
- Barbell strategy
- A fixed income strategy in which the maturities of the securities included in the
portfolio are concentrated at two extremes.
- Bargain hunter
- Used 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.
- 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' performances.
- Barrier options
-
Option contracts with trigger points that, when crossed, automatically generate buying or selling of other
options. These are exotic
options.
- Base currency
- Mainly applies to international equities. Currency in which gains/losses from operating an international portfolio are measured.
- Base interest rate
- Related: Benchmark interest rate.
- Base probability of loss
- The probability of not achieving a
portfolio
expected return. Related:
Value at risk.
- 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 business strategies
- Key strategies a firm intends to pursue in carrying out its business plan.
- Basic IRR rule
- Accept the project if
IRR is greater 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
- Regarding a
futures contract,
the difference between the cash price and the futures price observed in the
market. Also, it is 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.
- 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 greater than an interest rate of 4.5%.
- Basis price
- Price expressed in terms of
yield to maturity or
annual rate of return.
- Basis risk
- The uncertainty about the
basis at
the time a hedge may be lifted.
Hedging substitutes
basis risk for
price risk.
- 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 Forex
market rate or at a prearranged rate of exchange. A basket option is generally used by multinational corporations with multicurrency cash flows since 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.
- 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.
- 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 share
- Mainly applies to international equities.
Security not
registered on the books of the issuing corporation and thus payable to whoever possesses the shares. Negotiable without endorsement and transferred by
delivery, thus avoiding some of the administrative hassles associated with
ordinary shares.
Dividends are payable upon presentation of dividend
coupons, which are dated or numbered.
- 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 share so as to as to squeeze (hug) the
target into acceptance.
- Bear market
- Any market in which
prices are in a declining
trend. For a prolonged period, usually falling by 20% or more.
- Bear raid
- Used in the context of general equities. Attempt by investors to opportunistically move the price of a
stock by selling large numbers of
shares
short. These investors pocket the difference between the initial price and the new, lower price after this maneuver. This technique is illegal under
S.E.C rules, which stipulate that every
short sale must be on an
uptick.
- Bear spread
- Applies to derivative products. Strategy in the options
market designed to take advantage of a fall in the price of asecurity or
commodity, usually
executed by buying a combination of
calls and
puts on the same security at different strike prices in order to profit as the security's price falls.
- Beating the gun
- Used in the context of general equities. Gaining an advantageous price in a
trade through a quick response to
market developments.
- 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 where one country seeks 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.
- Bellwether issues
- Related:
Benchmark issues.
- 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 the 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 a comparable-maturity Treasury security that was most recently
issued ("on-the-run").
- Benchmark issues
- Also called
on-the-run or current
coupon
issues or
bellwether issues. In the
secondary market, it is the most recently auctioned Treasury issues for each
maturity.
- Beneath
- Used for listed equity securities. 1) Behind; 2) Lower in price.
- 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.)
- 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, where the underwriter agrees to sell a specific number of shares (with the securities firm holding 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 he would have if the debtor were liquidated.
- Beta
- The measure of a fund's or
stocks risk in relation to the
market, or an alternative
benchmark. A beta of 1.5 means that a stock's
excess return is expected to move 1.5 times the market excess returns. E.g. if market excess return is 10% then we expect, on average, the stock return to be 15%. Beta is referred to as an
index of the
systematic risk due to general market conditions that cannot be diversified away.
- Beta equation
- The
beta of a fund 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 (36 months)
- x = rate of
return for the S&P 500 Index
- y = rate of return for the fund
Related:
Alpha
- Beta equation (Stocks)
- The
beta of a
stock is determined as follows:
- [(n) (sum of (xy)) ]-[(sum of x) (sum of y)]
- [(n) (sum of (xx)) ]-[(sum of x) (sum of x)]
- where: n = # of observations (24-60 months)
- x = rate of
return
for the S&P 500 Index
- y = rate of return for the stock
-
Biased expectations theories
- Related:
pure expectations theory.
- 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-asked spread
- The difference between the
bid and
asked prices.
- Bid away
- Refers to over-the-counter trading.
Bid from another
dealer exists at the same (listed) or higher (O.T.C.) price.
- Bidder
- A firm or person that wants to buy a firm or
security.
- Bidding buyer
- Used in the context of general equities. Non-aggressive buyer who prefers to patiently await a
natural seller in the hope of paying a lower price.
- Bidding through the market
- Used in the context of general equities.
Aggressive willingness to purchase a
security at a
premium to the
inside market. Contrast with
bidding buyer.
- Bid wanted
- Used in the context of general equities. Announcement that a holder of securities wants to sell and will entertain
bids.
- Big Bang
- The term applied to the liberalization in 1986 of the London Stock Exchange (L.S.E.) in which trading was automated with the use of computers.
- Big Board
- A nickname for the
New York Stock Exchange (N.Y.S.E.). Also known as
The Exchange. More than 2,000 common and preferred
stocks are traded. Founded in 1792, the N.Y.S.E. is the oldest exchange in the United States, and the largest. It is located on Wall Street in New York City.
- Big picture
- Used in the context of general equities. To highlight trading interest due to the size of the
trade (i.e., Two-way size).
- 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 which limit its
liability. It is the exporter's receipt for the goods as well as proof that goods have been or will be received.
-
Binomial option pricing model
- An
option pricing model in which the
underlying asset can assume on only two possible, discrete values in the next time period for each value that it can take on in the preceding time period.
- Black market
- An illegal market.
-
Black-Scholes option-pricing model
- A model for pricing
call
options based on
arbitrage
arguments. Uses the
stock price, the
exercise price, the risk-free interest rate, the time to expiration, and the
expected standard deviation of the stock
return. Invented by Fischer Black and Myron Scholes in 1973.
- Blanket inventory lien
- A secured loan that gives the lender a
lien against all the borrower's inventories.
- Block
- Large quantity of stock or large dollar amount of bonds held or traded. As a rule of thumb, 10,000 sharesor more of stock and $200,000 or more worth of bonds would be described as a block.
- Block call
- Used in the context of general equities. Conference meeting during which customer indications and orders, along with the
traders' own
buy/sell preferences, are highlighted to the entire organization. See
block list.
- Block house
- Brokerage firms that help to find potential buyers or sellers of
large
block trades.
- Block list
- Used in the context of general equities. Listing of
stock the investment bank is looking for (wants to
buy) or in touch with (want to sell) at the beginning of the day, whether on an
agency or
principal basis. Input on the previous day's trading, objectives for the coming trading session, and information throughout the trading day is received from
O.T.C.,
international arbitrage, listed, and convertible
traders, for review and discussion during a
block call.
- Block trade
- A large trading
order, defined on the
New York Stock Exchange as an order that consists of 10,000
shares of a given
stock or a total
market-value of $200,000 or more.
- Block trader
- A
dealer who will take a position in the block transactions to accommodate customer buyers and sellers of blocks. See
dealer,
market maker,
principal.
- Block voting
- A group of
shareholders banding together to vote their
shares in a single block.
- Blocked currency
- A
currency that is not freely
convertible to other currencies due to
exchange controls.
- Blow-off top
- A steep and rapid increase in price followed by a steep and rapid drop. This is an
indicator seen in charts and used in
technical analysis of
stock price and
market trends.
- Blue-chip company
- Used in the context of general equities. Large and creditworthy company. Company renowned for the quality and wide acceptance of its products or services, and for its ability to make money and pay
dividends.
Gilt-edged security.
- Blue-sky laws
- State laws covering the
issue and trading of securities.
- Bogey
- The return an investment manager is compared to for performance evaluation.
- Boilerplate
- Standard terms and conditions.
- Bolt
- Used for listed equity securities.
Block trading version of
colt.
- Bond
- Bonds are
debt and are
issued for a period of more than one year. The U.S. government, local governments, water districts, companies and many other types of institutions sell bonds. When an
investor
buys bonds, he or she is lending money. The seller of the bond agrees to repay the
principal amount of the loan at a specified time. Interest-bearing bonds pay
interest periodically.
- Bond agreement
- A
contract for privately placed
debt.
- Bond covenant
- A contractual provision in a bond
indenture. A
positive covenant requires certain actions, and a
negative covenant limits certain actions.
- Bond equivalent yield
- Bond yield calculated on an
annual percentage rate method. Differs from
annual effective yield.
- Bondholder
- The firm often has
stockholders and
bondholders. In a
liquidation, the bondholders have first priority.
- Bond indenture
- The
contract that sets forth the promises of a corporate
bond
issuer and the rights of investors.
- Bond indexing
- Designing a bond
portfolio so that
its performance will match the performance of some
bond
index.
- Bond points
- A conventional unit of measure for bond prices set at $1 and equivalent to 1% of the $100 face value of the bond. A price of 80 means that the
bond is selling at 80% of its face, or
par value.
- Bond value
- With respect to
convertible bonds, the value the
security would have if it were not
convertible apart from the conversion
option.
- Bond-equivalent basis
- The method used for computing the
bond-equivalent yield.
- Bond-equivalent yield
- The annualized
yield to maturity computed by doubling the semiannual
yield.
- BONDPAR
- A system that monitors and evaluates the performance of a fixed-income
portfolio, as well as the individual securities held in the portfolio. BONDPAR decomposes the
return into those elements beyond the manager's control--such as the
interest rate environment and client-imposed
duration policy
constraints--and those that the management process contributes to, such as interest rate management, sector/quality allocations, and individual
bond selection.
- Boning
- Charging a lot more for an
asset than it's worth.
- Book
- A banker or
trader's
positions.
- Book cash
- A firm's cash balance as reported in its financial statements. Also called ledger cash.
- Book profit
- The cumulative book income plus any gain or loss on disposition of the
assets on termination of the SAT.
- Book runner
- The managing
underwriter
for a new
issue. The book runner maintains the book of securities sold.
- Book to bill
- Used in the context of general equities. High technology industry's demand to supply ratio of orders on a firm's book to number of orders filled. Measures if companies have more orders than they can deliver (>1), equal amounts (=1), or less (<1). This monthly figure is of major interest to
investors/
traders in the high technology sector.
- Book value
- A company's book value is its total
assets minus
intangible assets and
liabilities, such as
debt. A company's book value might be more or less than its
market value.
- Book value per share
- The ratio of
stockholder
equity to the average number of
common shares. Book value per share should not be thought of as an indicator of economic worth, since it reflects accounting valuation (and not necessarily
market valuation).
- Book-entry securities
- The Treasury and federal agencies are moving to a book-entry system in which securities are not represented by engraved pieces of paper but are maintained in computerized records at the
Fed in the names of member banks, which in turn keep records of the securities they own
as well as those they are holding for customers. In the case of other securities where a book-entry has developed, engraved securities do exist somewhere in many cases. These securities do not move from holder to holder but are usually kept in a central clearinghouse or by another agent.
- Bootstrapping
- A process of creating a theoretical
spot rate curve using one
yield projection as the
basis for the yield of the next
maturity.
- Borrow
- To obtain or receive money on loan with the promise or understanding that it will be repaid.
- Borrower fallout
- In the
mortgage pipeline, the risk that prospective borrowers of loans committed to be closed will elect to withdraw from the
contract.
-
Bottom-up equity management style
- A management style that de-emphasizes the significance of economic and
market cycles, focusing instead on the analysis of individual
stocks.
- Bought deal
-
security
issue where one or two
underwriters
buy the entire issue.
- Bourse
- A term of French origin used to refer to
stock markets.
- Box
- Used in the context of general equities.
Quotation machine or battery march.
- Bracket
- A term signifying the extent of an
underwriter's commitment in a new
issue, e.g., major bracket or minor bracket.
- Brady bonds
- Bonds
issued by emerging countries under a
debt reduction plan.
- Branch
- An operation in a foreign country incorporated in the home country.
- Breadth of the market
- Used in the context of general equities. Percentage of
stocks participating in a particular
market move.
Technical analysts say there was significant 'breadth' if 2/3 of the stocks listed on an
exchange moved in the same direction during a trading session. See:
A/D line.
- Break
- A rapid and sharp price decline. Related:
Crash
- Break-even analysis
- An analysis of the level of sales at which a project would make zero profit.
- Break-even lease payment
- The
lease payment at which a party
to a prospective lease is indifferent between entering and not entering into the lease arrangement.
- Break-even payment rate
- The prepayment rate of an
MBS
coupon that will produce the same CFY as that of a predetermined benchmark MBS coupon. Used to identify for coupons higher than the benchmark coupon the prepayment rate that will produce the same CFY as that of the benchmark coupon; and for coupons lower than the benchmark coupon the lowest
prepayment rate that will do so.
- Break-even tax rate
- The tax rate at which a party to a prospective transaction is indifferent between entering into and not entering into the transaction.
- Break-even time
- Related:
Premium
payback period.
- Breakout
- A rise in a
security's price above a
resistance level (commonly its previous high price) or drop below a level of
support (commonly the former lowest price.) A breakout is taken to signify a continuing move in the same direction. Can be used by
technical analysts as a
buy or sell indicator.
- Break price
- Used in the context of general equities. Change one's
offering or
bid prices to move to a more realistic,
tight level where
execution is more feasible. Often done to trim one's
position, thus "breaking price" from where the
trades occurred (if
long, "break price" downward 1/8 a point or more).
- Breeden, Douglas T.
- Inventor of one of the foundational asset pricing models in finance, the consumption based capital asset pricing model. Duke University professor and Chairman of Smith Breeden Associates.
- Bretton Woods Agreement
- An agreement signed by the original United Nations members in 1944
that established the
International Monetary Fund (I.M.F.) and the post-World War II international monetary system of fixed
exchange rates.
- Bridge financing
- Interim financing of one sort or another used to solidify a
position until more permanent financing is arranged.
- "Bring it out"
- Used in the context of general equities. "Make stock available for sale to indicated buyers".
- British clearers
- The large clearing banks that dominate deposit taking and short-term lending in the domestic sterling
market.
- Broken up
- Used for listed equity securities. Prevented from
executing a
trade (committed to
upstairs) due to exchange
priority rules excluding one's
order (i.e., Higher
bid/lower
offer on floor,
market order must be satisfied).
- Broker
- An individual who is paid a
commission for
executing customer orders. Either a
floor broker who
executes orders on the floor of the
exchange, or an upstairs
broker who handles retail customers and their orders. Person who acts as an intermediary between a buyer and seller, usually charging a commission. A "broker" who specializes in
stocks,
bonds, commodities, or
options acts as
agent and must be registered with the exchange where the securities are traded. Antithesis of
dealer.
- Broker loan rate
- Related:
Call money rate.
- Brokered market
- A market where an intermediary offers search services to buyers and sellers.
- Bubble theory
-
Security prices sometimes move wildly above their true values until the "bubble bursts".
- Buck
- Slang for one million dollars.
- Budget
- A detailed schedule of financial activity, such as an advertising
budget, a sales budget, or a capital budget.
- Budget deficit
- The amount by which government spending exceeds government revenues.
- Buck investor
- An investor who knows the market will rise over the next 30+ years, using time as his greatest asset. Related:
Bull and
Bear
- Buck market
- Any 30+ year market where prices will be in an upward trend, where time is the greatest asset. Related:
Bull and
Bear
- Build a book
- Used in the context of general equities. Develop customer
orders to gather demand/supply in order to make a
bid or an
offer.
- Builder buydown loan
- A
mortgage loan on newly developed property that the builder subsidizes during the early years of the development. The builder uses cash to buy down the mortgage rate to a lower level than the prevailing
market loan rate for some period of time. The typical buydown is 3% of the interest-rate amount for the first year, 2% for the second year, and 1% for the third year (also referred to as a 3-2-1 buydown).
- Bull
- An
investor who thinks the
market will rise. Related:
bear.
- Bull-bear bond
-
Bond whose
principal repayment is linked to the price of another
security. The bonds are
issued in two
tranches: in the first tranche repayment increases with the price of the other security, and in the second tranche repayment decreases with the price of the other security.
- Bull CD, Bear CD
- A bull
CD
pays its holder a specified percentage of the increase in return on a specified
market index while guaranteeing a minimum
rate of return.
A bear CD pays the holder a fraction of any fall in a given market index.
- Bull market
- Any market in which
prices are in an upward
trend.
- Bull spread
- A
spread strategy in which an investor buys an
out-of-the-money
put option, financing it by selling an
out-of-the money call option on the same
underlying security.
- Bulldog bond
- Foreign
bond
issue made in London.
- Bulldog market
- The
foreign market in the United Kingdom.
- Bullet contract
- A guaranteed investment
contract purchased with a single (one-shot)
premium. Related:
Window contract.
- Bullet loan
- A bank
term loan that calls for no
amortization.
- Bullet strategy
- A fixed income strategy in which a
portfolio is constructed so that the maturities of its securities are highly concentrated at one point on the
yield curve.
- Bullish, bearish
- Words used to describe investor attitudes. Bullish refers to an optimistic outlook while bearish means a pessimistic outlook.
- Bundling, unbundling
- A
trend allowing creation of securities either by combining
primitive and
derivative securities into one composite hybrid or by separating returns on an
asset into
classes.
- Business cycle
- Repetitive cycles of economic expansion and recession. The official peaks and troughs of the U.S. cycle are determined by the National Bureau of Economic Research in Cambridge, MA.
- Business failure
- A business that has terminated with a loss to
creditors.
- Business risk
- The risk that the
cash flow
of an
issuer will be impaired because of adverse economic conditions, making it difficult for the issuer to meet its operating expenses.
- Busted convertible
- Related:
Fixed-income equivalent. Mainly applies to
convertible securities.
Convertible bond selling essentially as a straight
bond. Assuming the
issuer is "money good," or will continue to meet credit obligations, such
issues can be highly attractive since the price virtually makes no allowance for the bond's call on the
common stock; however, such issues usually carry high
premiums.
- Butterfly shift
- A
non-parallel shift in the yield curve involving the height of the curve.
- Butterfly spread
- Applies to derivative products. Complex
option strategy that involves selling two
calls and buying two calls on the same or different markets, with several
maturity dates. One of the options has a higher
exercise price and the other has a lower
exercise price than the other two options. The
payoff diagram resembles the shape of a butterfly.
- Buy
- To purchase an
asset; taking a
long position.
- Buy-and-hold strategy
- A passive investment strategy with no active buying and selling of
stocks from the time the
portfolio is created until the end of the investment horizon.
- Buy-back
- Another term for a
repo.
- Buydowns
-
Mortgages in which monthly payments consist of
principal and
interest. During the early part of the loan positions of these payments are provided by a third party to reduce the borrower's monthly payments.
- Buyers/sellers on balance
- Used for listed equity securities. Indicates that at a given point in time (usually before the opening of a stock/market or at
expiration time), there are more buyers/sellers in the marketplace, usually with
market orders. See:
imblance of orders.
- Buy in
- To cover,
offset or close out a
short position. Related:
evening up,
liquidation.
- Buying the index
- Purchasing the
stocks in the
S&P 500 in the same proportion as the
index to achieve the same return.
- Buy limit order
- A conditional trading
order that indicates a
security may be purchased only at the designated price or lower. Related:
Sell limit order.
- Buy minus order
- Used in the context of general equities. Rare
market or
limit order to
buy a stated amount of a
stock provided that the price to be obtained is not higher than the last sale if the last sale was a minus or zero-minus
tick, and is not higher than the last sale minus the minimum fractional change in the stock if the last sale was a plus or zero-plus
tick. (if limit, then the
buy cannot occur above the limit, regardless of
tick.)
- Buy on close
- To
buy at the end of the trading session at a price within the
closing range.
- Buy on margin
- A transaction in which an
investor
borrows to
buy additional
shares, using the shares themselves as
collateral.
- Buy on opening
- To buy at the beginning of a trading session at a price within the opening
range.
- Buyout
-
Purchase of a controlling
interest
(or percent of
shares) of a company's
stock. A
leveraged buy-out is done with borrowed money.
- Buy-side analyst
- A financial
analyst
employed by a non-brokerage firm, typically one of the larger
money management firms that purchase securities on their own accounts.
- "Buy them back"
- Used for listed equity securities. "Cover my
short position that resulted from my
print."
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