  |
- 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 period after purchase, such
as one year, reducing the commission the longer the investor holds the
shares. The formal name for the back-end load is the contingent deferred
sales charge, or CDSC.
- Backwardation
- A market condition in which futures prices are lower in the distant
delivery months than in the nearest delivery month. balance sheet Also
called the statement of financial condition, a summary of the assets,
liabilities, and owners' equity.
- Balanced fund
- An investment company that invests in both stocks and bonds.
- Balloon maturity
- Any principal due at maturity for a bond with a sinking fund requirement.
- 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.
- Bankers acceptance
- A security representing a bank's promise to repay a loan created in a
commercial transaction in case the debtor fails to perform. Commonly used in
international transactions.
- Barbell strategy
- A strategy in which the maturities of the securities included in the
portfolio are concentrated at two extremes.
- BARRA's performance analysis (PERFAN) factor model
- A method developed by BARRA, a consulting firm in Berkeley, California,
which is commonly used by institutional investors applying performance
attribution analysis to evaluate their money managers' performances.
- Base interest rate
- Related: Benchmark interest rate
- Base probability of loss
- The probability of not achieving a portfolio expected return.
- Basis
- Regarding a futures contract, the difference between the cash price and
the futures price observed in the market.
- Basis risk
- The uncertainty about the basis at the time a hedge may be lifted. Hedging
substitutes basis risk for price risk.
- Basket trades
- Program trades.
- Before-tax profit margin
- The ratio of net income before taxes to net sales.
- Bear
- One who believes prices will move lower. Related: Bull
- Bear Market
- Any market in which prices are in a declining trend.
- Bellwether issues
- Related: benchmark issues.
- Benchmark
- The performance of a predetermined set of securities, for comparison
purposes. Such sets may be based on published indexes or may be customized
to suit an investment strategy.
- Benchmark interest rate
- Also called the base interest rate, the minimum interest rate that
investors will demand for investing in a non-Treasury security. 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, the most recently auctioned Treasury issues for each
maturity.
- Beta
- The slope of the market model for the asset,which measures the degree to
which the historical returns on the asset change systematically with changes
in the market portfolio's return. Hence, beta is referred to as an index of
that systematic risk due to general market conditions that cannot be
diversified away.
- Biased expectations theories
-
Related: Pure expectations theory.
- Bid
- A proposal to buy at a specified price. Related: Ask, Offer
- Break
- A rapid and sharp price decline.
- Black-Scholes option-pricing model
- A model for pricing call options based on arbitrage arguments that uses
the stock price, the exercise price, the risk-free interest rate, the time
to expiration, and the standard deviation of the stock return.
- 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 that has a total market
value of $200,000 or more.
- Bond
- An instrument in which the issuer (debtor/borrower) promises to repay to
the lender/investor the amount borrowed plus interest over some specified
period of time.
- 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.
- Bond indenture
- The contract that sets forth the promises of a corporate bond issuer and
the rights of investors.
- Bond indexing
- Designing a portfolio so that its performance will match the performance
of some bond index.
- 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.
- Book value
- The total owners' equity shown in the balance sheet.
- Book value per share
- The ratio of stockholders' 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).
- Bootstrapping
- A process of creating a theoretical spot rate curve, using one yield
projection as the basis for the yield of the next maturity.
- Bottom-up equity management style
- A management style that de-emphasizes the significance of economic and
market cycles and focuses instead on the analysis of individual stocks.
- Break-even time
- Related: Premium payback period
- 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.
- Broker loan rate
- Related: Call money rate
- Break
- A rapid and sharp price decline
- Bull
- One who expects prices to rise.
- Bear
- 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 and
fiances this purchase by selling an out-of-the money call option on the same
underlying.
- 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 strategy
- A strategy in which a portfolio is constructed so that the maturities of
its securities are highly concentrated at one point on the yield curve.
- 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
- Butterfly shift
- A non-parallel shift in the yield curve involving the humpedness of the
curve.
- Buy-and-hold strategy
- A passive investment strategy with no active buying and selling of stocks
once the portfolio is created until the end of the investment horizon. buy
hedge See long hedge.
- Buy in
- To cover, offset or close out a short position. Related: Evening
up, Liquidation, Offset
- Buy limit order
- A conditional trading order that indicates that a security may be
purchased only at the designated price or lower. Related: Sell limit
order
- 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 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.
Options Glossary
Home