Glossary

Maintenance Margin

Minimum margin that must be maintained on a futures contract.

Voting system under which each board of director is voted upon separately.

Cash or securities set aside by an investor as evidence for ability to honor a financial commitment.

When an investor borrows from his/her broker to finance the purchase of an asset. The Fed determines what the maximum borrowing rate is.

The tax rate that would be applied to the next dollar of income.

An arrangement whereby the profits or losses on a futures contract are settled up each day.

The exchange member firms that use their own capital to represent a stock and compete with each other to buy and sell the stocks they represent. There are over 500 member firms that act as NASDAQ market makers. One of the major differences between The NASDAQ Stock Market and other major markets in the US is Nasdaq's structure of competing market makers. Each market maker competes for customer order flow by displaying buy and sell quotations for a guaranteed number of shares. Once an order is received, the market maker will immediately purchase for or sell from its own inventory, or seek the other side of the trade until it is executed, often in a matter of seconds.

This is the company's market capitalization. If a company has 1 million shares and the company's shares are selling for $10, the market cap is $10 million. Also called Market Capitalization.

When an investor instructs his/her broker to buy or sell an asset at the price prevailing in the market. In such a case, the investor, unlike the case of the limit order, does not put any restrictions on price.

Uncertainty from factors influencing a large number of stocks, such as inflation, interest rates, oil-shocks, etc.

A conceptual construct of a value-weighted index of all securities. In practice, the S&P 500 index is used as a proxy, to represent the average investor's return.

Ability to determine the time occurrence of peaks and troughs of stock markets.

The value observed in the market place, whereby buyers and sellers negotiate mutually acceptable price for the asset.

Security investments that the firm can quickly convert into cash balances.

News released by a NASDAQ company that might reasonably be expected to affect the value of a company's securities or influence investors' decisions. Material news includes information regarding corporate events of an unusual and non-recurring nature, news of tender offers, unusually good or bad earnings reports, and a stock split or stock dividend. (See also Trading Halt.)

The practice of financing long-term projects with long-term assets, while financing short-term projects with short-term financing.

The date on which the last payment on a bond is due.

Risk associated with interest rate uncertainty. The longer the time to maturity, the higher the premium.

An LBO with the new investor group is the firm's management.

Mortgage "pass-through" securities.

Debt with a typical maturity of 1 to 10 years at the time of issue that is offered by a company.

Acquisition in which all assets and liabilities of a company are absorbed by the buyer to form a combined business entity.

Japan's Ministry of International Trade & Industry.

An agency cost that arises when bondholders take steps to ensure that protective covenants in the bond indenture are adhered to by the firm. Similarly, shareholders take steps to ensure that management is acting in the best interest of the owners, i.e., that managers are maximizing the wealth of shareholders.

Refers to human nature's increased incentive to take risk when insured.

Risk associated with interest rate uncertainty. The longer the time to maturity, the higher the premium.

State or local government offer "muni" bonds, as they are called, to finance special projects such as highways or sewers. The interest that investors receive is exempt from some income taxes.

Two projects that cannot both be undertake as they perform essentially the same task.

Managed investment fund whose shares are sold to investors.

Two projects that cannot both be undertaken.