Financial Terms Main Page

This site contains comprehensive definitions for a wide range of terms that cover topics such as financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit...

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Monthly Financial Term Picks:

Compounding

The process of accumulating the time value of money forward in time. For example, interest
earned in one period earns additional interest during each subsequent time period.

Convention statement

An annual statement filed by a life insurance company in each state where it does
business in compliance with that state's regulations. The statement and supporting documents show, among
other things, the assets, liabilities, and surplus of the reporting company.

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.

Multifactor CAPM

A version of the capital asset pricing model derived by Merton that includes extramarket
sources of risk referred to as factor.

Open-end fund

Also called a mutual fund, an investment company that stands ready to sell new shares to the
public and to redeem its outstanding shares on demand at a price equal to an appropriate share of the value of
its portfolio, which is computed daily at the close of the market.

Preauthorized electronic debits (PADs)

Debits to its bank account in advance by the payer. The payer's
bank sends payment to the payee's bank through the _ACH)Automated Clearing House (ACH) system.

Prices

Price of a share of common stock on the date shown. Highs and lows are based on the highest and
lowest intraday trading price.

Principal only (PO)

A mortgage-backed security in which the holder receives only principal cash flows on
the underlying mortgage pool. The principal-only portion of a stripped MBS. For PO securities, all of the
principal distribution due from the underlying collateral pool is paid to the registered holder of the stripped
MBS based on the current face value of the underlying collateral pool.

Gearing

A measure of the extent of long-term debt in comparison with shareholders’ funds.

Transaction

The financial description of a business event.

Closing entries

The entries that transfer the balances in the revenue, expense, and dividend accounts to Retained earnings and zero out the revenue, expense, and dividend accounts for the next period.

Swap

A contract between two parties to exchange cash flows in the future
according to some formula.

Federal Open Market Committee (FOMC)

Fed committee that makes decisions about open-market operations.

Loan Capital

Borrowed funds having a fixed interest rate.

Index Portfolio Rebalancing Service (IPRS)

Index Portfolio Rebalancing Service (IPRS) is a comprehensive investment service that can help increase potential returns while reducing volatility. Several portfolios are available, each with its own strategic balance of Index Funds. IPRS maintains your personal asset allocation by monitoring and rebalancing your portfolio semi-annually.