S

COAT OF ARMS

SCARLET KNIGHT LTD.



S: Fifth letter of a NASDAQ stock symbol specifying a beneficial interest.
S.B.I.C.: See: Small Business Investment Company
S.D.R.: See: Special drawing rights
S.E.A.Q.: See: Stock Exchange Automated Quotation System
S.E.C.: See: Securities & Exchange Commission
S.E.H.K.: See: Stock Exchange of Hong Kong
S.I.A.C.: See: Security Industry Automated Corporation
S.I.C.: See: Standard Industrial Classification
S.I.M.E.X.: See: Singapore International Monetary Exchange
S.M.B.S.: See: Stripped mortgage backed securities
S.O.E.S.: See: Small Order Execution System
S.W.I.F.T.: See: Society for Worldwide Interbank Financial Telecommunications
Safe harbor: Often used in risk arbitrage. Form of shark repellent whereby a target company acquires a business so onerously regulated it makes the target less attractive, giving it, in effect, a safe harbor.
Safe harbor lease: A lease to transfer tax benefits of ownership (depreciation and debt tax shield) from the lessee, if the lessee could not use them, to a lessor that could use them.
Safekeep: For a fee, bankers will hold in their vault, clip coupons on, and present for payment at maturity bonds and money market instruments.
Safety cushion: In a contingent immunization strategy, the difference between the initially available immunization level and the safety-net return.
Safety-net return: The minimum available return that will trigger an immunization strategy in a contingent immunization strategy.
Sale and lease-back: Sale of an existing asset to a financial institution that then leases it back to the user. Related: lease.
Sales charge: The fee charged by a mutual fund when purchasing shares, usually payable as a commission to a marketing agent, such as a financial advisor, who is thus compensated for his assistance to a purchaser. It represents the difference, if any, between the share purchase price and the share net asset value.
Sales forecast: A key input to a firm's financial planning process. External sales forecasts are based on historical experience, statistical analysis, and consideration of various macroeconomic factors.
Sales-type lease: An arrangement whereby a firm leases out its own equipment, such as a printing company leases its own presses, thereby competing with an independent leasing company.
Salvage value: Scrap value of plant and equipment.
Samurai bond: A yen-denominated bond issued in Tokyo by a non-Japanese borrower. Related: bulldog bond and Yankee bond.
Samurai market: The foreign market in Japan.
Saturday night special: Often used in risk arbitrage. Sudden attempt by one company to takeover another by making a public tender offer.
Savings and Loan association: National- or state-chartered institution that accepts savings deposits and invests the bulk of the funds thus received in mortgages.
Savings deposits: Accounts that pay interest, typically at below-market interest rates, that do not have a specific maturity, and that usually can be withdrawn upon demand.
Scale: A bank that offers to pay different rates of interest on CDs of varying maturities is said to "post a scale." Commercial paper dealers also post scales.
Scale enhancing: Describes a project that is in the same risk class as the whole firm.
Scale in: When a trader or investor gradually takes a position in a security or market over time.
Scale order: Used in the context of general equities. Order to buy (sell) a security which specifies the total amount to be bought (sold) and the amount to be bought (sold) at successively decreasing (increasing) price intervals; often done in order to average the price.
Scalp: To trade for small gains. It normally involves establishing and liquidating a position quickly, usually within the same day.
Scattered: Used for listed equity securities. Unconcentrated buy or sell interest.
Scenario analysis: The use of horizon analysis to project bond total returns under different reinvestment rates and future market yields.
Scheduled cash flows: The mortgage principal and interest payments due to be paid under the terms of the mortgage not including possible prepayments.
Scorched-earth policy: Often used in risk arbitrage. Technique used by a company that has become the target of a takeover attempt to make itself unattractive to the acquirer. For example, it may agree to sell off its crown jewels or schedule all debt to become due immediately after a merger.
Search costs: Costs associated with locating a counterparty to a trade, including explicit costs (such as advertising) and implicit costs (such as the value of time). Related: information costs.
Seasonally adjusted: Mathematically adjusted by moderating a macroeconomic indicator (i.e., Oil prices/imports) so that relative comparisons can be drawn from month to month all year.
Seasoned: For seasoned equity, having gained a reputation for quality with the investing public and enjoying liquidity in the secondary market; when applied to convertibles, having traded for at least 90 days after issued in Europe, and is thus available for sale legally to U.S. investors.
Seasoned datings: Extended credit for customers who order goods in periods other than peak seasons.
Seasoned issue: Issue of a security for which there is an existing market. Related: Unseasoned issue.
Seasoned new issue: A new issue of stock after the company's securities have previously been issued. A seasoned new issue of common stock can be made by using a cash offer or a rights offer.
Second pass regression: A cross-sectional regression of portfolio returns on betas. The estimated slope is the measurement of the reward for bearing systematic risk during the period analyzed.
Secondary distribution/offering: Used in the context of general equities. Public sale of previously issued securities held by large investors, usually corporations, or institutions as distinguished from a primary distribution, where the seller is the issuing corporation. The sale is handled off the N.Y.S.E., by a securities firm or a group of firms and the shares are usually offered at a fixed price related to the current market price of the stock.
Secondary issue: (1) Procedure for selling blocks of seasoned issues of stocks. (2) More generally, sale of already issued stock.
Secondary market: The market where securities are traded after they are initially offered in the primary market. Most trading is done in the secondary market. The New York Stock Exchange, as well as all other stock exchanges, the bond markets, etc., are secondary markets. Seasoned securities are traded in the secondary market.
Section 482: United States Department of Treasury regulations governing transfer prices.
Sector: Refers to a group of securities that are similar with respect to maturity, type, rating, industry, and/or coupon.
Secured debt: Debt that, in the event of default, has first claim on specified assets.
Securities & Exchange Commission (S.E.C.): The S.E.C. is a federal agency that regulates the U.S. financial markets. This federal agency also oversees the securities industry and promotes full disclosure and protection of the investing public against malpractice in the securities markets.
Securities analysts: Related: financial analysts
Securitization: The process of creating a pass-through, such as the mortgage pass-through security, by which the pooled assets become standard securities backed by those assets. Also, refers to the replacement of nonmarketable loans and/or cash flows provided by financial intermediaries with negotiable securities issued in the public capital markets.
Security: Piece of paper that proves ownership of stocks, bonds and other investments.
Security characteristic line: A plot of the excess return on a security over the risk-free rate as a function of the excess return on the market. The slope of this line is the security's beta.
Security deposit (initial): Synonymous with the term margin. A cash amount of funds that must be deposited with the broker for each contract as a guarantee of fulfillment of the futures contract. It is not considered as part payment or purchase. Related: margin
Security deposit (maintenance): Related: Maintenance margin
Security Industry Automated Corporation (S.I.A.C.): Executes automated, D.O.T. orders.
Security market line: Line representing the relationship between expected return and market risk or beta. The slope of this line is the risk premium for beta.
Security market plane: A plane that shows the relationship between expected return and the beta coefficient of more than one factor.
Security selection: See: security selection decision.
Security selection decision: Choosing the particular securities to include in a portfolio.
Self-liquidating loan: Loan to finance current assets, the sale of the current assets provides the cash to repay the loan.
Self-selection: Consequence of a contract that induces only one group (e.g. low risk individuals) to participate.
Seller's option: Used in the context of general equities. Delayed settlement/delivery.
Sell hedge: Related: short hedge.
Selling group: All banks involved in selling or marketing a new issue of stock or bonds.
Selling short: If an investor thinks the price of a stock is going down, the investor could borrow the stock from a broker and sell it. Eventually, the investor must buy the stock back on the open market. For instance, you borrow 1000 shares of XYZ on July 1 and sell it for $8 per share. Then, on Aug 1, you purchase 1000 shares of XYZ at $7 per share. You've made $1000 (less commissions and other fees) by selling short.
Sell limit order: Conditional trading order that indicates that a security may be sold at the designated price or higher. Related: buy limit order.
Sell off: Used in the context of general equities. Selling of securities under pressure. See: dumping.
Sell plus order: Used in the context of general equities. Market or limit order to sell a stated amount of stock provided that the price to be obtained is not lower than the last sale if the last sale was a plus, or zero plus tick, and is not lower than the last sale plus the minimum fractional change in the stock if the last sale was a minimum or zero minimum tick. (if a limit order, sale cannot be lower than the limit regardless of tick).
Sell-side analyst: Also called a Wall Street analyst, a financial analyst who works for a brokerage firm and whose recommendations are passed on to the brokerage firm's customers.
Sell the book: Used for listed equity securities. Order to a broker by the holder of a large quantity of shares of a security to sell all that can be absorbed at the current bid price. The term derives from the specialist's book -- the record of all the buy and sell orders members have placed in the stock one handles. In this scenario, the buyers potentially include those in the specialists book, the specialist for his own account, and the broker-dealer crowd.
Semi-strong form efficiency: A form of pricing efficiency where the price of the security fully reflects all public information (including, but not limited to, historical price and trading patterns). Compare weak form efficiency and strong form efficiency.
"Send it in": Used in the context of general equities. "I bought your stock -- 'send it in' (and possibly more)."
Senior debt: Debt that, in the event of bankruptcy, must be repaid before subordinated debt receives any payment.
Seniority: The order of repayment. In the event of bankruptcy, senior debt must be repaid before subordinated debt is repaid.
Sensitivity analysis: Analysis of the effect on a project's profitability due to changes in sales, cost, and so on.
Separation property: The property that portfolio choice can be separated into two independent tasks: 1) determination of the optimal risky portfolio, which is a purely mathematical problem, and 2) the personal choice of the best mix of the optimal risky portfolio and the risk-free asset which depends on a person's risk aversion.
Separation theorem: The value of an investment to an individual is not dependent on consumption preferences. All investors will want to accept or reject the same investment projects by using the N.P.V. rule, regardless of personal preference.
Serial bonds: Corporate bonds arranged so that specified principal amounts become due on specified dates. Related: term bonds.
Serial covariance: The covariance between a variable and the lagged value of the variable; the same as auto covariance.
Series: Options: All option contracts of the same class that also have the same unit of trade, expiration date, and exercise price. Stocks: shares which have common characteristics, such as rights to ownership and voting, dividends, par value, etc. In the case of many foreign shares, one series may be owned only by citizens of the country in which the stock is registered.
Series bond: Bond that may be issued in several series under the same indenture.
Set of contracts perspective: View of corporation as a set of contracting relationships, among individuals who have conflicting objectives, such as shareholders or managers. The corporation is a legal contrivance that serves as the nexus for the contracting relationships.
Settlement: When payment is made for a trade.
Settlement date: The date on which payment is made to settle a trade. For stocks traded on US exchanges, settlement is currently 3 business days after the trade. For mutual funds, settlement usually occurs in the U.S.the day following the trade. In some regional markets, foreign shares may require months to settle.
Settlement price: A figure determined by the closing range which is used to calculate gains and losses in futures market accounts. Settlement prices are used to determine gains, losses, margin calls, and invoice prices for deliveries. Related: closing range.
Settlement rate: The rate suggested in Financial Accounting Standard Board (F.A.S.B.) 87 for discounting the obligations of a pension plan. The rate at which the pension benefits could be effectively settled if the company sponsoring pension plan wished to terminate its pension obligation.
Settlement risk: The risk that one party will deliver and the counterparty will not be able to pay and vice versa.
Set up: Mainly applies to convertible securities. Arbitrage involving going long the convertible and short a certain percentage of the underlying common. Antithesis of Chinese hedge.
Shadow Stock: First, a public company may create a stock that strips out the market wide movements for the purpose of rewarding managers. That is, the management might have done a great job - but the traded stock plummets because the market as a whole plummets. A second interpretation of shadow stock is a phantom stock that is created by a private company (i.e. that does not have stock traded either on exchange or over the counter) again for the purpose of performance evaluation and rewards.
Shareholders: Person or entity that owns share in a corporation.
Shareholders' equity: This is a company's total assets minus total liabilities. A company's net worth is the same thing.
Shareholders' letter: A section of an annual report where one can find jargon-free discussions by management of successful and failed strategies. Provides guidance for the probing of the rest of the report.
Share repurchase: Program by which a corporation buys back its own shares in the open market. It is usually done when shares are undervalued. Since it reduces the number of shares outstanding and thus increases earnings per share, it tends to elevate the market value of the remaining shares held by stockholders.
Shares: Certificates or book entries representing ownership in a corporation or similar entity.
Shark repellant: Often used in risk arbitrage. Examples include golden parachutes, poison pills, safe harbor, and scorched-earth policy. Porcupine provision. Amendment to company charter intended to protect it against takeover.
Shark watcher: Often used in risk arbitrage. Firm specializing in the early detection of takeover activity. Such a firm, whose primary business is usually the solicitation of proxies for client corporation, monitors trading patterns in a client's stock and attempts to determine the identity of parties accumulating shares.
Sharpe benchmark: A statistically created benchmark that adjusts for a managers' index-like tendencies. Named after William Sharpe, Nobel Laureate, and inventor of the capital asset pricing model.
Sharpe ratio: A measure of a portfolio's excess return relative to the total variability of the portfolio. Related: Treynor index. Named after William Sharpe, Nobel Laureate, and inventor of the capital asset pricing model.
Shelf offering: Used in the context of general equities. Offering of registered securities covered by a prospectus where the distribution is not underwritten on a firm commitment basis. The shares may be sold in one block or in small amounts from time to time in agency or principal transactions. See: Rule 415.
Shelf registration: A procedure that allows firms to file one registration statement covering several issues of the same security. It is the term used for S.E.C. Rule 415 adopted in the 1980's, which allows a corporation to comply with registration requirements up to two years prior to a public offering of securities. With the registration "on the shelf," the corporation, by simply updating regularly filed annual, quarterly, and related reports to the S.E.C., can go to the market as conditions become favorable with a minimum of administrative preparation and expense.
Shirking: The tendency to do less work when the return is smaller. Owners may have more incentive to shirk if they issue equity as opposed to debt, because they retain less ownership interest in the company and therefore may receive a smaller return. Thus, shirking is considered an agency cost of equity.
Shogun bond: Dollar bond issued in Japan by a nonresident.
Shop: Wall Street jargon for a firm.
Shopped stock: Used in the context of general equities. Sell inquiry that has been seen/shown to other dealers before coming to an investment bank.
Shopping: Seeking to obtain the best bid or offer available by calling a number of dealers and/or brokers.
Short: One who has sold a contract to establish a market position and who has not yet closed out this position through an offsetting purchase; the opposite of a long position. Related: Long.
Shortage cost: Costs that fall with increases in the level of investment in current assets.
Short bonds: Bonds with short (not much time to maturity) current maturities.
Short book: See: unmatched book.
Short covering: Used in the context of general equities. Actual purchase of securities by a short seller to replace those borrowed at the time of a short sale.
Short exempt: Used for listed equity securities. Trading status whereby the owner of a convertible trading at parity can sell the equivalent amount of common short on a minus tick, assuming he has the firm intention to convert.
Shortfall risk: The risk of falling short of any investment target.
Short hedge: The sale of a futures contract(s) to eliminate or lessen the possible decline in value of an approximately equal amount of the actual financial instrument or physical commodity. Related: Long hedge.
Short interest: This is the total number of shares of a security that investors have sold short and that have not been repurchased to close out the short position. Usually, investors sell short to profit from price declines. As a result, the short-interest is often an indicator of the amount of pessimism in the market about a particular security. It should be noted that there are other reasons to short that are not related to pessimism. For example, hedging strategies for mergers and acquisition as well as derivative positions may involve short sales.
Short position: Occurs when a person sells stocks he or she does not yet own. Shares must be borrowed, before the sale, to make "good delivery" to the buyer. Eventually, the shares must be bought back to close out the transaction. This technique is used when an investor believes the stock price will go down.
Short-run operating activities: Events and decisions concerning the short-term finance of a firm, such as how much inventory to order and whether to offer cash terms or credit terms to customers.
Short sale: Selling a security that the seller does not own but is committed to repurchasing eventually. It is used to capitalize on an expected decline in the security's price.
Short selling: Establishing a market position by selling a security one does not own in anticipation of the price of that security falling.
Short settlement: Used in the context of general equities. Trade settlements done prior to the standard five-day period due to customer request.
Short squeeze: A situation in which a lack of supply tends to force prices upward. In particular, a situation when prices of a stock or commodity futures contracts start to move up sharply and many traders with short positions are forced to buy stocks or commodities in order to cover their positions and prevent (limit) losses. This sudden surge of buying leads to even higher prices, further aggravating the losses of short sellers who have not covered their positions.
Short straddle: A straddle in which one put and one call are sold.
Short-term financial plan: A financial plan that covers the coming fiscal year.
Short-term investment services: Services that assist firms in making short-term investments.
Short-term solvency ratios: Ratios used to judge the adequacy of liquid assets for meeting short-term obligations as they come due, including (1) the current ratio, (2) the acid-test ratio, (3) the inventory turnover ratio, and (4) the accounts receivable turnover ratio.
Short-term tax exempts: Short-term securities issued by states, municipalities, local housing agencies, and urban renewal agencies.
Show & tell list: Used in the context of general equities. Block list which is full of real customer indications (rather than profile).
Show me buyer/seller: Used in the context of general equities. Customer who has not placed a firm order to buy stock but has requested that the salesman show him/her available stock for sale or purchase, along with the asking/bid price, due to his/her interest in buying/selling the stock. See: bidding buyer.
Shut out the book: Used for listed equity securities. Exclude a public bid or offer from participation in a print.
Standard Industrial Classification (S.I.C.): Each code represents a unique business activity classified by industry.
Side effects: Effects of a proposed project on other parts of the firm.
Sidelines: Used in the context of general equities. Hypothetical area referring to non-involvement, merely watching, in a stock.
Sight draft: Demand for immediate payment.
Singapore International Monetary Exchange (S.I.M.E.X.): A leading futures and options exchange in Singapore.
Simple prospect: An investment opportunity where a certain initial wealth is placed at risk and only two outcomes are possible.
Single country fund: A mutual fund that invests in individual countries outside the United States.
Single factor model: A model of security returns that acknowledges only one common factor. The single factor is usually the market return. See: factor model.
Single index model: A model of stock returns that decomposes influences on returns into a systematic factor, as measured by the return on the broad market index, and firm specific factors.
Signal: The process of conveying information through a firm's actions. The more costly it is to provide a signal, the more credibility it has. For example, to call a press conference and tell everyone that the firm's prospects have improved is less effective than saying the same thing and raising the dividend.
Signaling approach: Approach to the determination of the optimal capital structure asserting that insiders in a firm have information that the market does not have; therefore, the choice of capital structure by insiders can signal information to outsiders and change the value of the firm. This theory is also called the asymmetric information approach.
Signaling view (on dividend policy): The argument that dividend changes are important signals to investors about changes in management's expectation about future earnings.
Simple compound growth method: A method of calculating the growth rate by relating the terminal value to the initial value and assuming a constant percentage annual rate of growth between these two values.
Simple interest: Interest calculated only on the initial investment. Related: compound interest.
Simple linear regression: A regression analysis between only two variables, one dependent and the other explanatory.
Simple linear trend model: An extrapolative statistical model that asserts that earnings have a base level and grow at a constant amount each period.
Simple moving average: The mean, calculated at any time over a past period of fixed length.