Macaulay duration
The weighted-average term to maturity of the cash flows from the bond, where the weights are the present value of the cash flow divided by the price.
Magic of diversification
The effective reduction of risk (variance) of a portfolio, achieved without reduction to expected returns through the combination of assets with low or negative correlations (covariances). Related: Markowitz diversification
Maintenance margin requirement
A sum, usually smaller than - but part of the original margin, which must be maintained on deposit at all times. If a customer's equity in any futures position drops to, or under, the maintenance margin level, the broker must issue a margin call for the amount at money required to restore the customer's equity in the account to the original margin level. Related: Margin, Margin call
Management fee
An investment advisory fee charged by the financial advisor to a fund based on the fund's average assets, but sometimes determined on a sliding scale that declines as the dollar amount of the fund increases.
Margin
Also called security deposit. An amount of funds that must be deposited with the broker for each contract as a good faith deposit on the contract. Related: Security deposit (initial).
Margin call
A demand for additional funds because of adverse price movement.
Maintenance margin requirement, Security deposit maintenace
Mark-to-Market
The daily adjustment of an account to reflect profits and losses.
Market-if-Touched (MIT)
A price order, below market if a buy or above market if a sell, that automatically becomes a market order if the specified price is reached. Related: Market order
Market conversion price
Also called conversion parity price, the price that an investor effectively pays for common stock by purchasing a convertible security and then exercising the conversion option. This price is equal to the market price of the convertible security divided by the conversion ratio.
Market impact costs
Also called price impact costs, the result of a bid/ask spread and a dealer's price concession.
Market model
This relationship is sometimes called the single-index model. The market model says that the return on a security depends on the return on the market portfolio and the extent of the security's responsiveness as measured, by beta ( i). In addition, the return will also depend on conditions that are unique to the firm. Graphically, the market model can be depicted as a line fitted to a plot of asset returns against returns on the market portfolio.
Market order
An order for immediate execution given to a broker to buy or sell at the best obtainable price.
Market portfolio
A portfolio consisting of all assets available to investors, with each asset held -in proportion to its market value relative to the total market value of all assets.
Market risk
Related: Systematic risk
Market sectors
The classifications of bonds by issuer characteristics, such as state government, corporate, or utility.
Market segmentation theory
A biased expectations theory that asserts that the shape of the yield curve is determined by the supply of and demand for securities within each maturity sector.
Market timer
A money manager who assumes he or she can forecast when the stock market will go up and down.
Market timing costs
Costs that arise from price movement of the stock during the time of the transaction which is attributed to other activity in the stock.
Marketplace price efficiency
The degree to which the prices of assets reflect the available marketplace information. Marketplace price efficiency is sometimes estimated as the difficulty faced by active management of earning a greater return than passive management would, after adjusting for the risk associated with a strategy and the transactions costs associated with implementing a strategy.
Markowitz diversification
A strategy that seeks to combine assets a portfolio with returns that are less than perfectly positively correlated, in an effort to lower portfolio risk (variance) without sacrificing return. Related: Naive diversification
Markowitz efficient frontier
The graphical depiction of the Markowitz efficient set of portfolios representing the boundary of the set of feasible portfolios that have the maximum return for a given level of risk. Any portfolios above the frontier cannot be achieved. Any below the frontier are dominated by Markowitz efficient portfolios.
Markowitz efficient portfolio
Also called a mean-variance efficient portfolio, a portfolio that has the highest expected return at a given level of risk.
Markowitz efficient set of portfolios
The collection of all efficient portfolios, graphically referred to as the Markowitz efficient frontier.
Matador market
The foreign market in Spain.
Matching concept
The accounting principle that requires the recognition of all costs that are associated with the generation of the revenue reported in the income statement.
Mathematical programming
An operations research technique that solves problems in which an optimal value is sought subject to specified constraints. Mathematical programming models include linear programming, quadratic programming, and dynamic programming.
Maturity date
For a bond, the date on which the principal is required to be repaid. In an interest rate swap, the date that the swap stops accruing interest.
Maturity phase
A phase of company development in which earnings continue to grow at the rate of the general economy. Related: Three-phase DDM
Maturity spread
The spread between any two maturity sectors of the bond market.
Maturity value
Related: Par value
Maximum price fluctuation
The maximum amount the contract price can change, up or down, during one trading session, as fixed by exchange rules in the contract specification. Related: Lmit price
Mean-variance efficient portfolio
Related: Markowitz efficient portfolio
Medium-term note
A corporate debt instrument that is continuously offered to investors over a period of time by an agent of the issuer. Investors can select from the following maturity bands: 9 months to 1 year, more than 1 year to 18 months, more than 18 months to 2 years, etc., up to 30 years.
Minimum price fluctuation
Smallest increment of price movement possible in trading a given contract. Also called point or tick. Related: Point, Tick minimum variance zero-beta portfolio The zero-beta portfolio with the least risk.
Modified duration
The ratio of Macaulay duration to (1 + y), where y = the bond yield. Modified duration is inversely related to the approximate percentage change in price for a given change in yield.
Modified pass-throughs
Agency pass-throughs that guarantee (1) timely interest payments and (2) principal payments as collected, but no later than a specified time after they are due. Related: Fully modified pass-throughs
Money center banks
Banks that raise most of their funds from the domestic and international money markets, relying less on depositors for funds.
Money management
Related: Investment management
Money manager
Related: Investment manager
Money market
The market for trading short-term debt instruments (those that mature in less than one year). Related: Capital market
Money market demand account
An account that pays interest based on short-term interest rates.
Mortgage
A loan secured by the collateral of some specified real estate property which obliges the borrower to make a predetermined series of payments.
Mortgage-backed securities
Securities backed by a pool of mortgage loans.
Mortgage bond
A bond in which the issuer has granted the bondholders a lien against the pledged assets.
Collateral trust bonds
Mortgage pass-through security
Also called a passthrough, a security created when one or more mortgage holders form a collection (pool) of mortgages and sell shares or participation certificates in the pool.
Mortgage rate
The interest rate on a mortgage loan.
Mortgagee
The lender of a loan secured by property.
Mortgager
The borrower of a loan secured by property.
Most distant futures contract
When several futures contracts are considered, the contract settling last. Related: Nearby futures contract
Multifactor CAPM
A version of the capital asset pricing model derived by Merton that includes extra-market sources of risk referred to as factor .
Multiperiod immunization
A portfolio strategy in which a portfolio is created that will be capable of satisfying more than one predetermined future liability regardless if interest rates change.
Multiple regression
The estimated relationship be-tween a dependent variable and more than one explanatory variable.
Multirule system
A technical trading strategy that combines mechanical rules, such as the CRISMA (cumulative volume, relative strength, moving average) Trading System of Pruitt and White.
Mutual fund
Related: Open-end fund
Mutual offset
A system, such as the arrangement between the CME and SIMEX, which allows trading positions established on one exchange to be offset or transferred on another exchange.

 

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