Financial Dictionary term a

Aging
A method used by accountants and investors to evaluate and identify any irregularities within a company's account receivables. Aging is achieved by sorting and inspecting the accounts according to their length outstanding

Air Pocket Stock
When the price of a stock plunges unexpectedly, similar to an airplane when it hits an air pocket

Airbag Swap
An interest rate swap whose notional value adjusts according to rising interest rates by indexing the floating portion to a Constant Maturity Swap (CMS

Alan Greenspan
The former chairman of the Board of Governors of the Federal Reserve System as well as the Federal Open Market Committee (FOMC), the Fed's principal monetary policymaking body. His tenure at the helm of the Fed lasted 18 years from 1987 until early 2006 when Ben Bernanke replaced him. He was first appointed to the post by then-president Ronald Reagan and kept at the Fed's helm by successors George H.W. Bush, Bill Clinton and President George W. Bush.

Algorithmic Trading
A trading system that utilizes very advanced mathematical models for making transaction decisions in the financial markets. The strict rules built into the model attempt to determine the optimal time for an order to be placed that will cause the least amount of impact on a stock's price. Large blocks of shares are usually purchased by dividing the large share block into smaller lots and allowing the complex algorithms to decide when the smaller blocks are to be purchased.
Alien
Any person who is not a citizen of the country in which he or she lives
Alimony
Payments made to a spouse or former spouse under a separation or divorce agreement.

ALL
In currencies, this is the abbreviation for the Albanian Lek.

All Or None - AON
A condition used on a buy or sell order to instruct the broker to fill the order completely or not at all.

All Weather Fund
A mutual fund that tends to perform well during all economic conditions.

All-Holders Rule
An SEC regulation that requires tender offers to be available to all holders of the identical class of the security.

All-In Cost
Shorthand for "all-included" costs, which are expressed as the interest paid or received for total costs of a financial transaction.

Alligator Property
In real estate, when the cost of mortgage payments, property taxes, insurance and maintenance on a rental property is greater than the income it brings in. If this situation is not corrected, it will eat up all of the owner's profit, leaving him or her with negative cash flow

Alligator Spread
A term referring to an unprofitable spread regardless of favorable market movements. This loss is due entirely to large commissions charged upon the transactions.

Allonge
A sheet of paper attached to a bill of exchange for the purpose of documenting endorsements

Allotment
During an IPO, this is the number of shares granted to each participating underwriting firm that they are permitted to sell. Remaining surpluses are then given to other firms which have won the bid for the right to sell the IPO.

Allowance for Doubtful Accounts
An estimation made by a company and documented on its balance sheet for receivables that might go uncollected.

Alpha
An expression of how much a stock would have appreciated or depreciated on average on a daily basis over the last year, assuming the S&P 500 remained unchanged during the period.

Alternative Asset
A term referring to any non-traditional asset with potential economic value that would not be found in a standard investment portfolio. Due to the unconventional nature of some of these investment assets, valuation may be a problem.

Alternative Minimum Tax - AMT
A tax calculation that adds certain tax preference items back into adjusted gross income. If AMT is higher than the regular tax liability for the year, the regular tax and the amount by which the AMT exceeds the regular tax are paid.

Alternative Order
A combination order whereby two separate orders are entered on the same security. The execution of one order cancels the other.

Altman Z-Score
A predictive model created by Edward Altman in the 1960s. This model combines five different financial ratios to determine the likelihood of bankruptcy amongst companies.

Amended Return
A return filed in order to make corrections to a tax return from a previous year. It can be used to correct errors and claim a more advantageous filing.

American Callable Bond
A bond that can be redeemed by the issuer at any time prior to its maturity. Usually a premium is paid to the bondholder when the bond is called

American Currency Quotation
A direct quotation in the foreign exchange markets whereby the value of the American dollar is stated as a per-unit measure of a foreign currency. This type of quotation shows how much U.S. currency it takes to purchase one unit of foreign currency.

American Depositary Receipt - ADR
A negotiable certificate issued by a U.S. bank representing a specified number of shares (or one share) in a foreign stock that is traded on a U.S. exchange. ADRs are denominated in U.S. dollars, with the underlying security held by a U.S. financial institution overseas. ADRs help to reduce administration and duty costs that would otherwise be levied on each transaction.

American Depositary Share - ADS
A share issued under deposit agreement that represents an underlying security in the issuer's home country.

American Option
An option that can be exercised anytime during its life. The majority of exchange-traded options are American.

American Stock Exchange - AMEX
The third-largest stock exchange by trading volume in the United States. The AMEX is located in New York City and handles about 10% of all securities traded in the U.S

Amortization
1. The paying off of debt in regular installments over a period of time.
2. The deduction of capital expenses over a specific period of time. Similar to depreciation, it is a method of measuring the consumption of the value of long-term assets like equipment or buildings

Analyst
A financial professional who has expertise in evaluating investments and puts together buy, sell and hold recommendations on securities. Also known as a "financial analyst" or a "security analyst".

Anchoring
The use of irrelevant information as a reference for evaluating or estimating some unknown value or information. When anchoring, people base decisions or estimates on events or values known to them, even though these facts may have no bearing on the actual event or value.

Ancillary Revenue
Revenue generated from goods or services that differ from or enhance the main services or product lines of a company. By introducing new products and services or using existing products to branch into new markets, companies create additional opportunities for growth.

Andersen Effect
A reference to auditors performing more careful due diligence when auditing companies, in order to prevent accounting errors. This extra level of accounting scrutiny often leads to companies restating earnings even though they have not necessarily intentionally misrepresented material accounting information.

Andrew's Pitchfork
A technical indicator that uses three parallel trendlines to identify possible levels of support and resistance. The trendlines are created by placing three points at the end of identified trends. This is usually achieved by placing the points in three consecutive peaks or troughs. Once the points have been placed, a straight line is drawn from the first point that intersects the midpoint of the other two.
Also known as "median line studies".

ANG
In currencies, this is the abbreviation for the Netherlands Antilles Guilder.

Angel Bond
A slang term for investment-grade bonds. This is the opposite of fallen angels, which are bonds that have a 'junk' rating

Angel Investor
A financial backer providing venture capital funds for small start-ups or entrepreneurs

Ankle Biter
Stock issues with a market capitalization worth less than $500 million.
Also known as "small cap" stocks.

Annual
An event that occurs once a year.

Annual Addition
The maximum dollar amount that may be contributed to a participant's retirement account under a defined-contribution plan.

Annual earnings
A longer-term indicator of a company's growth. It commonly refers to a company's earnings per share for a particular year.

Annual Equivalent Rate - AER
Interest calculated under the assumption that interest is paid and compounded per year

Annual General Meeting - AGM
A mandatory yearly meeting of shareholders that allows stakeholders to stay informed and involved with company decisions and workings.

Annual Percentage Rate - APR
The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents the actual yearly cost of funds over the term of a loan. This includes any fees or additional costs associated with the transaction.

Annual Percentage Yield - APY
The effective annual rate of return taking into account the effect of compounding interest. APY is calculated by:

The resultant percentage number assumes that funds will remain in the investment vehicle for a full 365 days.

Annual Report
A corporation's annual statement of financial operations. Annual reports include a balance sheet, income statement, auditor's report, and a description of the company's operations

Annualize
1. To convert a rate of any length into a rate that reflects the rate on an annual (yearly) basis. This is most often done on rates of less than one year, and usually does not take into account the effects of compounding. The annualized rate is not a guarantee but only an estimate, and its accuracy depends on the variance of the rate. This rate is also known as "annualized return" and is similar to "run rate".
2. To convert a taxation period of less than one year to an annual (yearly) basis. This helps income earners to set out an effective tax plan and manage any tax implications

Annuitant
1. A person who receives the benefits of an annuity or pension.
2. The person upon whom a life-insurance contract is based

Annuitization
The process of converting an annuity investment into a series of periodic income payments. Annuities may be annuitized regularly, over a long or short time period, or in some cases, in one single payment.

Annuitization Method
A type of annuity distribution structure that gives the annuitant periodic income payments for the rest of his or her life, or a specified period of time. This is different than the systematic withdrawal method, with which the annuitant chooses the amount he or she would like to receive each month, which he or she receives until the amount in the account runs out.

Annuitization Phase
The period when the annuitant starts to receive payments from the annuity. This period is after the accumulation phase where money is invested into the annuity.

Annuity
A series of fixed payments paid at regular intervals over the specified period of the annuity. The fixed payments are received after a period of investments that are made into the annuity.

Annuity Contract
The written agreement between an insurance company and a customer outlining each party's obligations in an annuity coverage agreement. This document will include the specific details of the contract, such as the structure of the annuity (variable or fixed), any penalties for early withdrawal, spousal provisions such as a survivor clause and rate of spousal coverage, and more.

Annuity Due
An annuity whose payment is to be made immediately, rather than at the end of the period.

Annuity Unit
An accumulation unit for which the annuitant has annuitized their contract. This is a sub-account of the retiree's total accumulated annuity. These units represent a fixed share of ownership of the insurer's accounts portfolio.

Anonymous Trading
Visible bids and offers on the market without the identity of the bidder and seller being revealed

Anti-Dilution Provision
A provision in an option or a convertible security. It protects an investor from dilution resulting from later issues of stock at a lower price than the investor originally paid. Also known as an "anti-dilution clause".

Anti-Greenmail Provision
A special clause located within a firm's corporate charter that acts as a deterrence against the board of directors passing a share buy-back.

Anti-Martingale System
A system of position sizing that correlates the levels of investment with the risk and portfolio size.

Anti-Money Laundering - AML
A set of procedures, laws or regulations designed to stop the practice of generating income through illegal actions. In most cases money launderers hide their actions through a series of steps that make it look like money coming from illegal or unethical sources was earned legitimately

Anti-Reciprocal Rule
A rule created by the National Association of Securities Dealers (NASD) to protect individual investors from conflicts of interest that may arise when brokerage firms and mutual funds collaborate.

Anti-Takeover Measure
Measures taken on a continual or sporadic basis by a firm's management in order to prevent or deter unwanted takeovers

Anti-Takeover Statute
A set of state regulations that prevent or deter companies from attempting hostile takeovers. These regulations vary across state lines and typically affect only the companies incorporated within the state

Antitrust
The antitrust laws apply to virtually all industries and to every level of business, including manufacturing, transportation, distribution, and marketing. They prohibit a variety of practices that restrain trade.

Any-and-All Bid
A bid made to purchase all stock being offered at a specific price.

AON
In currencies, this is the abbreviation for the Angolan New Kwanza

APICS Business Outlook Index
A national manufacturing index that surveys several manufacturing firms on a monthly basis. If the index is above 50 it signals expansion, if it dips below 50 it indicates contraction.

Applicable Federal Rate - AFR
The interest rate published by the U.S. Treasury to calculate imputed interest charges.

Appraisal
A valuation of property (e.g. real estate, a business, an antique) by the estimate of an authorized person.

Appraisal Ratio
A ratio used to measure the quality of a fund's investment picking ability. It compares the fund's alpha (or the adjusted return of the fund assuming the market return is zero) to the portfolio's unsystematic risk (or the risk that could be diversified away).

Appraisal Right
The right of shareholders to demand the fair payment of securities undergoing a merger by a third party valuator.

Appraiser
A practitioner who has the knowledge and expertise necessary to estimate the value of an asset, or the likelihood of an event occurring, and the cost of such an occurrence. Ideally, an appraiser acts independently of the buying and selling parties in a transaction in order to arrive at the fair value of an asset without bias.

Appreciation
The increase in value of an asset.

Approved Delivery Facility
An exchange authorized facility used as a location for the delivery of commodities tendered upon future contracts.

Approved Participants
Institutional investors who are allowed direct access to an exchange's trading environment. Approved participant status usually affords trade execution cost savings and the right to install trading terminals in client offices.

Arbitrage
The simultaneous purchase and sale of an asset in order to profit from a difference in the price. This usually takes place on different exchanges or marketplaces.
Also known as a "riskless profit".
Arbitrage Bond
A lower-rate debt security issued by a municipality prior to the call date of the municipality's existing higher-rate security

Arbitrage Pricing Theory - APT
An alternative to the CAPM, APT differs in its assumptions and explanation of risk factors associated with the risk of an asset.

Arbitrage Trading Program - ATP
A program used to place simultaneous orders for stock index futures and the underlying stocks.

Arbitrageur
A type of investor who attempts to profit from price inefficiencies in the market by making simultaneous trades that offset each other and capture risk-free profits. An arbitrageur would, for example, seek out price discrepancies between stocks listed on more than one exchange, buy the undervalued shares on the one exchange while short selling the same number of overvalued shares on the other exchange, thus capturing risk-free profits as the prices on the two exchanges converge.

Arbitration
An informal hearing regarding a dispute. The dispute is judged by a group of people (generally three) who have been selected by an impartial panel. Once a decision has been reached, there is no further appeal process.

Arithmetic Mean
A mathematical representation of the typical value of a series of numbers, computed as the sum of all the numbers in the series divided by the count of all numbers in the series.
Arithmetic mean is commonly referred to as "average" or simply as "mean

Arm's Length Transaction
A transaction in which the buyers and sellers of a product act independently of each other and have no relationship to each other.

Arms Index - TRIN
A short-term technical analysis breadth indicator calculated as the following

Aroon Indicator
A technical indicator developed by Tushar Chande used for identifying definable trends in an underlying security. It is made up of two lines: one line is called "Aroon up", which measures the strength of the uptrend, and the other line is called "Aroon down", which measures the downtrend. The indicator reports the time it is taking for the price to reach, from a starting point, the highest and lowest points over a given time period, each reported as a percentage of total time. Both the Aroon up and the Aroon down fluctuate between zero and 100, with values close to 100 indicating a strong trend, and zero indicating a weak trend. The lower the Aroon up, the weaker the uptrend and the stronger the downtrend, and vice versa. The main assumption underlying this indicator is that a stock's price will close at record highs in an uptrend, and record lows in a downtrend.

ARP
In currencies, this is the abbreviation for the Argentinian peso.

Arrearage
An amount on a loan, cumulative preferred stock, or any credit instrument that is overdue.
Also referred to as "Arrears."

ARS
In currencies, this is the abbreviation for the Argentinian Nuevo Peso.

Articles Of Incorporation
A set of documents filed with a government body for the purpose of legally documenting the creation of a corporation.
Also referred to as the "corporate charter."

Ascending Channel
An upward moving channel formed with two parallel, upward sloping trendlines. The upper trendline connects a stock's highs over a period, with each subsequent high price higher than the previous. Conversely, the lower trendline connects the stock's lows, with each subsequent low price higher than the previous.

Ascending Tops
This refers to a series of peaks, each peak higher than the previous one on the stock's chart pattern. The chart below illustrates a series of four ascending tops

Ascending Triangle
A bullish chart pattern used in technical analysis that is easily recognizable by the distinct shape created by two trendlines. In an ascending triangle, one trendline is drawn horizontally at a level that has historically prevented the price from heading higher, while the second trendline connects a series of increasing troughs. Traders enter into long positions when the price of the asset breaks above the top resistance. The chart below is an example of an ascending triangle:

Asia Ex-Japan
The region of countries located in Southeast Asia, not including Japan. These countries are generally considered emerging markets and are of interest to investors looking for high-growth investment opportunities.

Asian Option
An option whose payoff depends on the average price of the underlying asset over a certain period of time as opposed to at maturity. Also known as an average option.

Asian Tail
An option feature whereby a reference price is activated at the end of an option should the underlying fall below a specified average before option expiry.

Ask
The price a seller is willing to accept for a security, also known as the offer price. Along with the price, the ask quote will generally also stipulate the amount of the security willing to be sold at that price.
Sometimes called "the ask".

Ask Size
The number of shares a seller is selling at a quoted ask price.

Aspirin Count Theory
A market theory that states stock prices and aspirin production are inversely (opposite) related.

Assay
The act of testing the purity of precious metals.

Assessable Stock
A class of stock in which the issuing company is allowed to impose levies on stockholders for more funds. In the past, there was no restriction on how much additional money a company could demand or on how often a company could impose a levy on its stocks.
These are the opposite of non-assessable stocks.

Assessed Value
Dollar value assigned to property for purposes of assessing taxes

Assessor
A local government official who determines the value of a property for taxation purposes.

Asset
1. A resource having economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit.
2. A balance sheet item representing what a firm owns.

Asset Allocation
The process of dividing a portfolio among major asset categories such as bonds, stocks or cash. The purpose of asset allocation is to reduce risk by diversifying the portfolio.

Asset Allocation Fund - AAF
A mutual fund that splits its investment assets among stocks, bonds and other investment vehicles in an attempt to provide a consistent return for the investor. Also referred to as a "diversification fund

Asset Class
A specific category of assets or investments, such as stocks, bonds, cash, international securities and real estate. Assets within the same class generally exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations.

Asset Coverage Ratio
A test that determines a company's ability to cover debt obligations with its assets after all liabilities have been satisfied. It is calculated as the following:

Asset Financing
Using balance sheet assets (such as accounts receivable, short-term investments or inventory) to obtain a loan or borrow money - the borrower provides a security interest in the assets to the lender. This differs from traditional financing methods, such as issuing debt or equity securities, as the company simply pledges some of its assets in exchange for a quick cash loan.

Asset Management
1. The management of a client's investments by a financial services company, usually an investment bank. The company will invest on behalf of its clients and give them access to a wide range of traditional and alternative product offerings that would not be to the average investor.
2. An account at a financial institution that includes checking services, credit cards, debit cards, margin loans, the automatic sweep of cash balances into a money market fund, as well as brokerage services.
Also known as an "asset management account" or a "central asset account".

Asset Play
An incorrectly valued stock that is attractive because its combined asset value is greater than its market capitalization.

Asset Redeployment
The strategic relocation of company assets in order to increase profitability

Asset Stripper
An individual who determines if the value of a company is worth more purchased as a whole or divided into separate assets which are sold off. This is usually done in order to fulfill debt agreements.

Asset Stripping
The process of buying an undervalued company with the intent to sell off its assets for a profit. The individual assets of the company, such as its equipment and property, may be more valuable than the company as a whole due to such factors as poor management or poor economic conditions.

Asset Swap
Similar in structure to a plain vanilla swap, the key difference is the underlying of the swap contract. Rather than regular fixed and floating loan interest rates being swapped, fixed and floating investments are being exchanged.

Asset Swapped Convertible Option Transaction - ASCOT
An option on a convertible bond that is used to separate a convertible bond into its two components: 1) a bond and 2) an option to acquire stock. When the bond is stripped of its conversion feature, the holder has a bond featuring fairly stable returns on debt, and a volatile - but potentially very valuable - option

Asset Turnover
The amount of sales generated for every dollar's worth of assets. It is calculated by dividing sales in dollars by assets in dollars

Asset Valuation
The process of determining the current worth of a portfolio, company, investment, or balance sheet item

Asset-Backed Security - ABS
A financial security backed by a loan, lease or receivables against assets other than real estate and mortgage-backed securities. For investors, asset-backed securities are an alternative to investing in corporate debt.

Asset-Based Finance
A specialized method of providing structured working capital and term loans that are secured by accounts receivable, inventory, machinery, equipment and/or real estate. This type of funding is great for startup companies, refinancing existing loans, financing growth, mergers and acquisitions, and management buy-outs (MBOs) and buy-ins (MBIs

Asset-Based Lending
A business loan secured by collateral (assets). The loan, or line of credit, is secured by inventory, accounts receivable and/or other balance-sheet assets.
Also known as "commercial finance" or "asset-based financing".

Asset-Conversion Loan
A short-term loan that is typically repaid by converting an asset, usually inventory or receivables, into cash.

Asset-or-Nothing Call Option
An option payoff that is equal to the asset's price if the asset is above the strike price, otherwise the payoff is zero.

Asset-or-Nothing Put Option
An option payoff that is equal to the asset's price if the asset is below the strike price, otherwise the payoff is zero.

Asset/Liability Management
A technique companies employ in coordinating the management of assets and liabilities so that an adequate return may be earned. Also known as "surplus management."

Assets Under Management - AUM
In general, the market value of assets an investment company manages on behalf of investors.

Assign
The act of clearing houses and brokerages selecting short option and future contract holders to deliver underlying securities or commodities of maturing or exercised/tendered contracts.

Assignable Contract
A futures contract with a provision permitting the contract holder to convey his or her rights of assignment to a third party. This enables the contract holder to assign the rights and obligations of a contract to another to perform and receive the benefits of that contract before it closes

Assignment
1. The transfer of an individual's rights or property to another person or business.
2. A notice received by an option writer stating that the option sold has been exercised by the purchaser of the option.

Assimilation
The absorption of stock by the public from a new issue.

Associated Person
The name given to participants within the futures market that are involved in the solicitation or facilitation of transacting customer orders, the maintenance of discretionary accounts, or the true participatory involvement in the futures market.

Association of Southeast Asian Nations - ASEAN
An organization of countries in southeast Asia set up to promote cultural, economic and political development in the region. ASEAN was officially formed in 1967 with the signing of the Bangkok Declaration.

Assumable Mortgage
A type of financing arrangement in which the outstanding mortgage and its terms can be transfered from the current owner to a buyer. By assuming the previous owner's remaining debt, the buyer can avoid having to obtain his or her own mortgage.

Assumed Interest Rate - AIR
The rate of interest, or growth rate, selected by an insurance company. The assumed interest rate is provided to determine the value of an annuity contract and, therefore, the periodic income payment which can be provided to the annuitant. Combined with other factors such as the annuitant's age upon annuitization, spousal coverage options and the type of annuity coverage chosen, the AIR determines the monthly payment the annuitant will receive.

Assurance
Coverage of an event that is certain to happen. Assurance is similar to insurance (and sometimes the terms are interchangeable) except that insurance protects policy holders from events that might happen.

Asymmetric Digital Subscriber Line - ADSL
A new technology that provides high transmission speeds for video and voice to homes over ordinary copper telephone wire. It will be most cost-effective in areas with a low market penetration of cable TV.

Asymmetric Information
Information available to some people but not others.

At Risk Rules
Tax laws limiting the amount of losses an investor (usually a limited partner) can claim. Only the amount actually at risk can be deducted.

At The Market
An order to buy or sell a futures contract at the best available price upon entrance into the exchange for execution

At the Money
An option is at-the-money if the strike price of the option equals the market price of the underlying security

At-The-Close Order
An order specifying that a trade is to be executed at the close of the market, or as near to the closing price as possible.

At-The-Opening-Order
An order specifying that a trade is to be executed at the opening of the market, otherwise it's canceled

Athens Stock Exchange - ATHEX
The stock exchange headquartered in Athens, Greece.

Atlanta Fed Index
A manufacturing survey that covers prominent manufacturing states like Georgia, Alabama, Florida, Tennessee and Louisiana.

ATS
In currencies, this is the abbreviation for the Austrian Schillings.

Attachment
A legal term referring to the action of seizing property in anticipation of a favorable ruling for a plaintiff who claims to be owed money by the defendant.

Attestation
The act of witnessing the signing of a document and then also signing it to verify that it was properly signed by those bound by its contents.

Attornment
The act of granting authority or jurisdiction to a party even though no legal rights exist

Attractiveness Rank
This ranks a stock's Attractiveness Rating within its industry group. If a stock ranks 10th out of 100, for example, its Attractiveness Rating is in the top 10% of its industry. If 2 or more stocks within a group have the same 1-99 rating, they will receive the same Attractiveness Rank. For example, if 3 stocks have a 99 Attractiveness Rating, they will all three be ranked best in group. The stock with the next best rating will be ranked 4th in group.

Attractiveness Rating
This timely rating assesses a stock's attractiveness based on investor demand. It measures current price and volume gauges for each stock and its industry group, and compares the results to all other stocks. Rated on a scale from 1 to 99. A 90 rating, for example, indicates the stock’s attractiveness is greater than 90 percent of all other companies.
The Attractiveness Rating factors in:
·Recent and past price and volume activity
·Alpha
·Up volume vs. down volume
·Recent price performance vs. its industry
·Its industry group’s price performance vs. the S&P 500 index.
Components are not equally weighted.

Attribution Rules
A set of rules created by Canada Customs and Revenue Agency (CCRA) that prevents investors from transferring assets between family members with the intention of avoiding taxes.

Attrition
The reduction in staff and employees in a company through normal means, such as retirement and resignation. This is natural in any business and industry.

Auction Market
A market in which buyers enter competitive bids and sellers enter competitive offers at the same time.

Auction Rate
The interest rate that will be paid on a specific security as determined by the Dutch auction process. The auctions take place at periodic intervals, and the interest rate is fixed until the next auction is held. This process is commonly used to determine the interest rate on Treasury bills

AUD
In the currency market, this is the abbreviation for the Australian dollar

Audit
1. An unbiased examination and evaluation of the financial statements of an organization. It can be done internally (by employees of the organization) or externally (by an outside firm).
2. An IRS examination of a taxpayer's return or other transactions. The IRS performs this examination to verify the accuracy of these filings.

Audit Trail
A step-by-step record by which accounting data can be traced to their source. The SEC and NYSE will use this method for the explicit reconstruction of trades when there are questions as to the validity or accuracy of an accounting figure.

Auditor's Report
Recorded in the annual report, the auditor's report tests to see that a corporation's financial statements comply with GAAP. This is sometimes referred to as the clean opinion.

Australian Stock Exchange - ASX
The stock exchange headquartered in Sydney, Australia.

Authorized Participant
An entity chosen by an exchange-traded fund's sponsor to undertake the responsibility of obtaining the underlying assets needed to create an ETF. Authorized participants are typically large institutional organizations, such as market makers or specialists.

Authorized Stock
The maximum number of shares that a corporation is legally permitted to issue, as specified in its articles of incorporation. This figure is usually listed in the capital accounts section of the balance sheet.
Also known as "authorized shares" or "authorized capital stock".

Auto Sales
The major producers of domestic automobiles report sales monthly. These numbers are seasonally adjusted by the U.S. Department of Commerce and are available to the public one to five business days after the end of each month.

Autocorrelation
A mathematical representation of the degree of similarity between a given time series and a lagged version of itself over successive time intervals. It is the same as calculating the correlation between two different time series, except that the same time series is used twice - once in its original form and once lagged one or more time periods.
The term can also be referred to as "lagged correlation" or "serial correlation".

Automated Bond System - ABS
The electronic system on the NYSE that records bids and offers for inactively traded bonds until they are canceled or executed

Automated Clearing House - ACH
An electronic funds-transfer system run by the National Automated Clearing House Association. This payment system deals with payroll, direct deposit, tax refunds, consumer bills, tax payment, and many more payment services.

Automated Confirmation Transaction Service - ACT
An automated system designed to document and report the clearing of trades in the Nasdaq market

Automated Customer Account Transfer Service - ACATS
A system that facilitates the transfer of securities from one trading account to another at a different brokerage firm or bank. The National Securities Clearing Corporation (NSCC) developed the ACATS system, replacing the previous manual asset transfer system with a fully automated and standardized one.

Automatic Exercise
A procedure implemented to protect an option holder where the Option Clearing Corporation will automatically exercise an "in the money" option for the holder

Automatic Investment Plan
An investment program that allows you to contribute small amounts of money (as little as $20 a month) in regular intervals. Funds are automatically deducted from your checking/savings account or your paycheck, and invested in a retirement account or mutual fund.

Automatic Reinvestment Plan
An investment program in which capital gains or other income received from investments are automatically used for reinvestment purposes. In the case of a mutual fund, for example, capital gains produced by the fund would be used to automatically purchase more shares of the fund, instead of being distributed to the investor as cash.

Automatic Rollover
A rollover of a participant's qualified-plan balance to an IRA without the participant's authorization.

Automatic Stabilizer
An economic policy or program that increases or decreases automatically to offset the current economic trend without government assistance.

Automatic Stay
A provision under the U.S. Bankruptcy Code prohibiting creditors from beginning or continuing proceedings for collecting owed amounts from a firm who files for bankruptcy under Chapter 11

Autoregressive
Using past data to predict future data.

Available Seat Miles - ASM
This refers to how many seat miles were actually available for purchase on an airline. If all of the seats on the plane are not sold, then the ASM indicates the overall capacity the airline is operating at.

Aval
A guarantee added to a debt obligation by a third party who ensures payment should the issuing person default

Average Annual Growth Rate - AAGR
The average increase in the value of a portfolio over the period of a year.

Average Annual Return - AAR
A figure used when reporting the historical return of a mutual fund. The AAR is stated after expenses have been tallied, including administration fees, 12b-1 fees, and others

Average Daily Balance Method
A finance/accounting method where costs (and interest) are based on the amount(s) owing at the end of each day.

Average Directional Index - ADX
An indicator used in technical analysis to determine the strength of a prevailing trend. The ADX is measured on a scale between 0 and 100. Readings below 20 are used to indicate a weak trend, while readings over 40 indicate a strong trend. ADX is not used to determine the direction of a particular trend, but only to gauge its strength.

Average Down
The process of buying additional shares in a company at lower prices than you originally purchased. This brings the average price you've paid for all your shares down

Average Industrial Wage
The mean hourly rate of pay for workforce members of a given geographical area, such as a country or province, excluding farm employees. This measurement serves as a reasonable proxy for the wage rate of the average worker in a given country, and is used by labor organizations and employers as a benchmark.

Average Life
An estimate of the number of terms to maturity, taking the possibility of early payments into account. Average life is calculated using the weighted average time to the receipt of all future cash flows.

Average Price Call
A type of option where the payoff is either zero or the amount by which the average price of the asset exceeds the strike.

Average Price Put
A type of option where the payoff is either zero or the amount by which the strike price exceeds the average price of the asset.

Average Qualitative Opinion - AQO
AQO is a number that summarizes analysts' ratings for a particular company.

Average Revenue Per Unit - ARPU
A measure of the revenue generated per user or unit. This measure allows for the analysis of a companies revenue generation and growth at the per unit level, which can identify which products are high or low revenue-generators.

Average True Range - ATR
A measure of volatility introduced by Welles Wilder in his book: New Concepts in Technical Trading Systems.
The True Range indicator is the greatest of the following:
-current high less the current low.
-the absolute value of the current high less the previous close.
-the absolute value of the current low less the previous close.
The Average True Range is a moving average (generally 14-days) of the True Ranges.

Average Up
The process of buying additional shares at higher prices. This raises the average price that the investor pays for all the shares. In the context of short selling, averaging up is achieved by selling additional shares at a price higher than that of the first transaction.

Average-Cost Method
A costing method by which the value of a pool of assets or expenses is assumed to be equal to the average cost of the assets or expenses in the pool

Averaging up or down in price
After an initial stock purchase, averaging up is the purchase of additional shares of the stock as it moves up in price. Additional purchases might be warranted if the stock is originally purchased at a correct “pivot point” (or buy point) and its price has increased 2% or 3% from the original purchase price. Averaging down is the purchase of additional stock as it declines in price. This is risky. You never know how low a stock could drop. Averaging refers to the combination of prices paid for each purchase of stock divided by the total number of shares purchased. If an initial purchase of 100 shares is made at $50 and a second purchase of 75 shares is made at $51 Â½, the average share price for 175 shares is approximately $50 5/8.

Away From Home
The IRS criteria used to establish whether or not you are within commuting distance from home. If you work away from home for longer than a normal workday and you require sleep, then the associated costs are tax deductible.

Away from the Market
When the bid on an order is lower (or the ask price is higher) than the current market price for the security

AWG
In currencies, this is the abbreviation for the Aruba Guilder.

Ax
The market maker who is most central to the price action of a specific security. The ax can be identified by spending several days studying level II quotes and noting which market maker seems to have the greatest effect on the security's price.

Axe
The interest a person or trader shows in buying or selling a bond. A trader may have specific interest in a certain type of bond based on his or her existing positions.