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- Ultradot
- Applies to derivative products. Firm proprietary software that stores, edits and sends
baskets of
stock through
S.E.A.Q. to either the
N.Y.S.E. or the curb for
program trading.
- Unbiased predictor
- A theory that
spot prices at some future date will be equal to today's
forward rates.
- Unbundling
- When a multinational firm unbundles its transfer of funds into separate flows for specific purposes. See:
bundling.
- Uncovered call
- A
short
call option
position in which the
writer does not own
shares of
underlying
stock represented by his
option
contracts. Also called a "naked" asset, it is much
riskier for
the writer than a
covered call, where the writer owns the
underlying stock.
If the buyer of a
call
exercises the option to call, the writer would be forced to
buy the asset at current
market price.
- Uncovered put
- A
short
put option
position in which the
writer does not have a corresponding short
stock
position or has not deposited, in a cash account, cash or cash equivalents equal to the
exercise value of the
put. Also called "naked" puts, the writer has pledged to
buy the asset at a certain price if the
buyer of the
options chooses to exercise it. The nature of uncovered call options means the writer's
risk is unlimited. With uncovered put options, the risk is limited to the value of the stock (adjusted for premium received.)
- Underfunded pension plan
- A
pension plan
that has a negative surplus (i.e.,
liabilities exceed
assets).
- Underinvestment problem
- The mirror image of the
asset substitution problem, wherein
stockholders refuse to invest in low-risk
assets to avoid shifting wealth from themselves to the
debtholders.
- Underlying
- The "something" that the parties agree to exchange in a
derivative
contract.
- Underlying asset
- The
asset
that an
option gives the option holder the right to
buy or to sell.
- Underlying security
- For options, the
security
subject to being purchased or sold upon
exercise of an
option
contract. For example, IBM stock is the
underlying security to IBM options. For
Depository receipts, the
class,
series and number of the foreign
shares represented by the depository receipt.
- Underperform
- When a
security is expected to, or does appreciate at a slower rate than the overall
market.
- Underpricing
-
Issue of
securities below their
market value.
- Under the belt
- Used in the context of general equities.
Long position in a
stock.
- Underwrite
- To guarantee, as to guarantee the
issuer of
securities a specified price by entering into a
purchase and sale agreement. To bring securities to
market.
- Underwriter
- A party that guarantees the proceeds to the firm from a
security sale, thereby in effect taking ownership of the securities. Or, stated differently, a
firm,
usually an
investment
bank, that buys an
issue of securities from a company and resells it to
investors.
- Underwriting syndicate
- A group of
investment
banks that work together to sell new
security
offerings to investors. The
underwriting
syndicate is led by the
lead underwriter. See also:
lead underwriter.
- Underwriting
- Acting as the
underwriter
in a
purchase and sale.
- Underwriting fee
- The portion of the gross underwriting spread that compensates the securities firms that
underwrite a
public offering for their
underwriting
risk.
- Underwriting income
- For an insurance company, the difference between the
premiums earned and the costs of settling claims.
- Underwritten offering
- A
purchase and
sale.
- Undiversifiable risk
- Related:
Systematic risk
- Unemployment rate
- The ratio of the number of people classified as unemployed
to the total labor force.
- Unfunded debt
-
Debt maturing within one year (short-term debt). See:
funded debt.
- Unilateral transfers
- Items in the
current account
of the
balance of payments of a country's accounting books that correspond to gifts from foreigners or pension payments to foreign residents who once worked in the country whose balance of payments is being considered.
- Unique risk
- Also called
unsystematic risk or idiosyncratic risk. Specific company
risk that can be eliminated through
diversification. See:
diversifiable risk and
unsystematic risk.
- Unit
- Used in the context of general equities. More than one
class of
securities
traded together (i.e., one common
share and three
subscription warrants).
- Unit benefit formula
- Method used to determine a participant's benefits in a
defined benefit plan. Involves multiplying years of service by the percentage of salary.
- Unit investment trust
- Money invested in a
portfolio
whose composition is fixed for the life of the fund.
Shares in a unit trust are called
redeemable trust certificates, and they are sold at a
premium to
net asset value.
- Universal life
- A
whole life insurance product whose investment component pays a competitive
interest rate rather than the below-market
crediting rate.
- Unleveraged beta
- The
beta of an
unleveraged required return (i.e. no debt) on an investment when the investment is financed entirely by
equity.
- Unleveraged
required return
- The
required return
on an investment when the investment is financed entirely by
equity (i.e. no
debt).
- Unlimited liability
- Full
liability for the
debt and other obligations of a legal entity.
The
general partners of a
partnership have unlimited liability.
- Unmatched book
- If the
average
maturity of a bank's
liabilities is less than that of its
assets, it is said to be running
an unmatched book. The term is commonly used with the
Euromarket. Term also refers to the condition when a firm enters into
O.T.C.
derivatives
contracts and chooses to
hedge that
risk by not making
trades in the opposite direction to another financial intermediary. In this case, the firm
with an unmatched book hedges its net
market risk with
futures and
options, usually. Related expressions:
open book and
short book.
- Unseasoned issue
-
Issue of a
security for which there is no existing
market. See:
seasoned issue.
- Unsecured debt
-
Debt that does not identify specific
assets that can be taken over by the
debtholder in case of
default.
- Unsterilized intervention
-
Foreign exchange
market intervention in which the monetary authorities have not insulated their domestic money supplies from the foreign exchange transactions.
- Unsystematic risk
- Also called the
diversifiable risk or residual risk. The
risk that is unique to a company such as a strike, the outcome of unfavorable litigation, or a natural catastrophe that can be eliminated through
diversification. Related:
Systematic risk
- Unwind a trade
- Used in the context of general equities. Reverse a securities transaction through an
offsetting transaction.
- Up
- Used in the context of general equities. Market
indication, willingness to go both ways (buy or sell) at the mentioned volume and
market.
Print, up on the
ticker tape, confirming that the
trade has been
executed. Telephone board refers to the upper (versus the lower) board.
- Upstairs market
- A network of
trading desks for the major brokerage firms and
institutional
investors that communicate with each other by means of electronic display systems and telephones to facilitate
block trades and
program trades.
- Upstairs order
- Used for listed equity securities.
Off-floor order.
- Up tick
- Used in the context of general equities.
Plus tick.
- Uptick trade
- A term used to describe a transaction that took place at a higher price than the preceding transaction involving the same
security. Related:Tick-test rules
- U.S. Treasury bill
- U.S. government
debt
with a
maturity of less
than a year.
- U.S. Treasury bond
- U.S. government
debt with
a
maturity of more than 10 years.
- U.S. Treasury note
- U.S. government
debt
with a
maturity of one to 10 years.
- Utility function
- A mathematical expression that assigns a value to all possible choices. In
portfolio theory, the utility function expresses the preferences of economic entities with respect to perceived
risk and
expected return.
- Utility value
- The welfare a given
investor
assigns to an investment with a particular
expected return and
risk.
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