Definition of runup

runup

the period before a formal announcement of a takeover bid in which one or more bidders are either preparing to make an announcement or speculating that someone else will.

economic components model

Abrams’ model for calculating DLOM based on the interaction of discounts from four economic components.
This model consists of four components: the measure of the economic impact of the delay-to-sale, monopsony power to buyers, and incremental transactions costs to both buyers and sellers.

PPF (periodic perpetuity factor)

a generalization formula invented by Abrams that is the present value of regular but noncontiguous cash flows that have constant growth to perpetuity.

All or none

Requirement that none of an order be executed unless all of it can be executed at the specified price.

All-or-none underwriting

An arrangement whereby a security issue is canceled if the underwriter is unable
to re-sell the entire issue.

Announcement date

Date on which particular news concerning a given company is announced to the public.
Used in event studies, which researchers use to evaluate the economic impact of events of interest.

Annualized holding period return

The annual rate of return that when compounded t times, would have
given the same t-period holding return as actually occurred from period 1 to period t.

At-the-money

An option is at-the-money if the strike price of the option is equal to the market price of the
underlying security. For example, if xyz stock is trading at 54, then the xyz 54 option is at-the-money.

Average collection period, or days' receivables

The ratio of accounts receivables to sales, or the total
amount of credit extended per dollar of daily sales (average AR/sales * 365).

Before-tax profit margin

The ratio of net income before taxes to net sales.

Bid price

This is the quoted bid, or the highest price an investor is willing to pay to buy a security. Practically
speaking, this is the available price at which an investor can sell shares of stock. Related: Ask , offer.

Bid-asked

spread The difference between the bid and asked prices.

Bidder

A firm or person that wants to buy a firm or security.

Call money rate

Also called the broker loan rate , the interest rate that banks charge brokers to finance
margin loans to investors. The broker charges the investor the call money rate plus a service charge.

Competitive bidding

A securities offering process in which securities firms submit competing bids to the
issuer for the securities the issuer wishes to sell.

Compounding period

The length of the time period (for example, a quarter in the case of quarterly
compounding) that elapses before interest compounds.

Credit period

The length of time for which the customer is granted credit.

Discount period

The period during which a customer can deduct the discount from the net amount of the bill
when making payment.

Discounted payback period rule

An investment decision rule in which the cash flows are discounted at an
interest rate and the payback rule is applied on these discounted cash flows.

Dow Jones industrial average

This is the best known U.S.index of stocks. It contains 30 stocks that trade on
the New York Stock Exchange. The Dow, as it is called, is a barometer of how shares of the largest
U.S.companies are performing. There are thousands of investment indexes around the world for stocks,
bonds, currencies and commodities.

Earnings before interest and taxes (EBIT)

A financial measure defined as revenues less cost of goods sold
and selling, general, and administrative expenses. In other words, operating and non-operating profit before
the deduction of interest and income taxes.

Either/or facility

An agreement permitting a bank customer to borrow either domestic dollars from the
bank's head office or Eurodollars from one of its foreign branches.

Either-way market

In the interbank Eurodollar deposit market, an either-way market is one in which the bid
and offered rates are identical.

European Monetary System (EMS)

An exchange arrangement formed in 1979 that involves the currencies
of European Union member countries.

Evaluation period

The time interval over which a money manager's performance is evaluated.

Goodwill

Excess of the purchase price over the fair market value of the net assets acquired under purchase
accounting.

Holding period

Length of time that an individual holds a security.

Holding period return

The rate of return over a given period.

Hot money

Money that moves across country borders in response to interest rate differences and that moves
away when the interest rate differential disappears.

International Monetary Fund

An organization founded in 1944 to oversee exchange arrangements of
member countries and to lend foreign currency reserves to members with short-term balance of payment
problems.

International Monetary Market (IMM)

A division of the CME established in 1972 for trading financial
futures. Related: Chicago Mercantile Exchange (CME).

In-the-money

A put option that has a strike price higher than the underlying futures price, or a call option
with a strike price lower than the underlying futures price. For example, if the March COMEX silver futures
contract is trading at $6 an ounce, a March call with a strike price of $5.50 would be considered in-the-money
by $0.50 an ounce.
Related: put.

Law of one price

An economic rule stating that a given security must have the same price regardless of the
means by which one goes about creating that security. This implies that if the payoff of a security can be
synthetically created by a package of other securities, the price of the package and the price of the security
whose payoff it replicates must be equal.

Make a market

A dealer is said to make a market when he quotes bid and offered prices at which he stands
ready to buy and sell.

Monetary gold

Gold held by governmental authorities as a financial asset.

Monetary policy

Actions taken by the Board of Governors of the Federal Reserve System to influence the
money supply or interest rates.

Monetary / non-monetary method

Under this translation method, monetary items (e.g. cash, accounts
payable and receivable, and long-term debt) are translated at the current rate while non-monetary items (e.g.
inventory, fixed assets, and long-term investments) are translated at historical rates.

Money base

Composed of currency and coins outside the banking system plus liabilities to the deposit money banks.

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

Money markets are for borrowing and lending money for three years or less. The securities in
a money market can be U.S.government bonds, treasury bills and commercial paper from banks and
companies.

Money market demand account

An account that pays interest based on short-term interest rates.

Money market fund

A mutual fund that invests only in short term securities, such as bankers' acceptances,
commercial paper, repurchase agreements and government bills. The net asset value per share is maintained at
$1. 00. Such funds are not federally insured, although the portfolio may consist of guaranteed securities
and/or the fund may have private insurance protection.

Money market hedge

The use of borrowing and lending transactions in foreign currencies to lock in the
home currency value of a foreign currency transaction.

Money market notes

Publicly traded issues that may be collateralized by mortgages and MBSs.

Money purchase plan

A defined benefit contribution plan in which the participant contributes some part and
the firm contributes at the same or a different rate. Also called and individual account plan.

Money rate of return

Annual money return as a percentage of asset value.

Money supply

M1-A: Currency plus demand deposits
M1-B: M1-A plus other checkable deposits.
M2: M1-B plus overnight repos, money market funds, savings, and small (less than $100M) time deposits.
M3: M-2 plus large time deposits and term repos.
L: M-3 plus other liquid assets.

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.

Net period

The period of time between the end of the discount period and the date payment is due.

Neutral period

In the Euromarket, a period over which Eurodollars are sold is said to be neutral if it does not
start or end on either a Friday or the day before a holiday.

New money

In a Treasury auction, the amount by which the par value of the securities offered exceeds that of
those maturing.

Noncompetitive bid

In a Treasury auction, bidding for a specific amount of securities at the price, whatever it
may turn out to be, equal to the average price of the accepted competitive bids.

One man picture

The picture quoted by a broker is said to be a one-man picture if both the bid and offered
prices come from the same source.

One-factor APT

A special case of the arbitrage pricing theory that is derived from the one-factor model by
using diversification and arbitrage. It shows the expected return on any risky asset is a linear function of a
single factor.

One-way market

1) A market in which only one side, the bid or asked, is quoted or firm.
2) A market that is moving strongly in one direction.

Out-of-the-money option

A call option is out-of-the-money if the strike price is greater than the market price
of the underlying security. A put option is out-of-the-money if the strike price is less than the market price of
the underlying security.

Phone switching

In mutual funds, the ability to transfer shares between funds in the same family by
telephone request. There may be a charge associated with these transfers. Phone switching is also possible
among different fund families if the funds are held in street name by a participating broker/dealer.

Postponement option

The option of postponing a project without eliminating the possibility of undertaking it.

Precautionary demand (for money)

The need to meet unexpected or extraordinary contingencies with a
buffer stock of cash.

Risk prone

willing to pay money to transfer risk from others.

Seasoned datings

Extended credit for customers who order goods in periods other than peak seasons.

Seasoned issue

Issue of a security for which there is an existing market. Related: Unseasoned issue.

Seasoned new issue

A new issue of stock after the company's securities have previously been issued. A
seasoned new issue of common stock can be made by using a cash offer or a rights offer.

SIMEX (Singapore International Monetary Exchange)

A leading futures and options exchange in Singapore.

Speculative demand (for money)

The need for cash to take advantage of investment opportunities that may arise.

Stand-alone principle

Investment principle that states a firm should accept or reject a project by comparing it
with securities in the same risk class.

Subperiod return

The return of a portfolio over a shorter period of time than the evaluation period.

T-period holding-period return

The percentage return over the T-year period an investment lasts.

Takeover

General term referring to transfer of control of a firm from one group of shareholder's to another
group of shareholders.

Target zone arrangement

A monetary system under which countries pledge to maintain their exchange rates
within a specific margin around agreed-upon, fixed central exchange rates.

Time value of money

The idea that a dollar today is worth more than a dollar in the future, because the dollar
received today can earn interest up until the time the future dollar is received.

Tombstone

Advertisement listing the underwriters to a security issue.

Transaction demand (for money)

The need to accommodate a firm's expected cash transactions.

Unseasoned issue

Issue of a security for which there is no existing market. See: seasoned issue.

Waiting period

Time during which the SEC studies a firm's registration statement. During this time the firm
may distribute a preliminary prospectus.

Workout period

Realignment period of a temporary misaligned yield relationship that sometimes occurs in
fixed income markets.

Zero-one integer programming

An analytical method that can be used to determine the solution to a capital
rationing problem.

Accounting period

The period of time for which financial statements are produced – see also financial year.

Earnings before interest and taxes (EBIT)

The operating profit before deducting interest and tax.

Earnings before interest, taxes, depreciation and amortization (EBITDA)

The operating profit before deducting interest, tax, depreciation and amortization.

Make-ready

See set-up.

Period costs

The costs that relate to a period of time.

Profit before interest and taxes (PBIT)

See EBIT.

Periodic inventory system

An inventory system in which the balance in the Inventory account is adjusted for the units sold only at the end of the period.

earnings before interest and income tax (EBIT)

A measure of profit that
equals sales revenue for the period minus cost-of-goods-sold expense
and all operating expenses—but before deducting interest and income
tax expenses. It is a measure of the operating profit of a business before
considering the cost of its debt capital and income tax.

Average Collection Period

Average number of days necessary to receive cash for the sale of
a company's products. It is calculated by dividing the value of the
accounts receivable by the average daily sales for the period.

Money Market

A market that specializes in trading short-term, low-risk, very liquid
debt securities

Payback Period

The number of years necessary for the net cash flows of an
investment to equal the initial cash outlay

compounding period

the time between each interest computation

make-or-buy decision

a decision that compares the cost of
internally manufacturing a component of a final product
(or providing a service function) with the cost of purchasing
it from outside suppliers (outsourcing) or from another
division of the company at a specified transfer price

payback period

the time it takes an investor to recoup an
original investment through cash flows from a project

period cost

cost other than one associated with making or acquiring inventory

periodic compensation

a pay plan based on the time spent on the task rather than the work accomplished

takeover

the acquisition of managerial control of the corporation
by an outside or inside investor; control is achieved
by acquiring enough stock and stockholder votes to control
the board of directors and management

Odd first or last period

Fixed-income securities may be purchased on dates
that do not coincide with coupon or payment dates. The length of the first and
last periods may differ from the regular period between coupons, and thus the
bond owner is not entitled to the full value of the coupon for that period.
Instead, the coupon is pro-rated according to how long the bond is held during
that period.

Goodwill

The excess of the price paid to buy another company over the book value of
its assets and the increase in cost of its fixed assets to fair market value.

Negative goodwill

A term used to describe a situation in which a business combination
results in the fair market value of all assets purchased being more than the purchase
price.

Reporting period

The time period for which transactions are compiled into a set of financial statements.

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