FINANCIAL DICTIONARY-L

L
A Nasdaq stock symbol specifying that it is a miscellaneous situation such as a depositary receipt, stub, additional warrant or unit.

Labor Intensive
A process or industry that requires large amounts of human effort to produce goods.

Lessee
The person who rents land or property from a lessor.

Leprechaun Leader
A corporate manager or an executive who, like the fabled Irish elf, is a mischievous and elusive creature said to possess buried treasures of money and gold.

Lemming
The act of following the crowd into an investment that will inevitably head for disaster.

Leasehold Improvement
Improvements on a leased asset that increase the value of the asset.

Labour-Sponsored Venture Capital Corporations - LSVCC
A type of Canadian corporation created by a labor union that deals exclusively with providing venture capital. Unlike other venture capital corporations, LSVCCs are subject to tight regulations. The investment funds from LSVCCs are called labor-sponsored investment funds (LSIFs).

Leg
1. Term describing an order entry technique used by brokers. A leg occurs when a broker executes contingent orders in separate phases, thus increasing the risk for price swings through time delays.
2. A description of different aspects in a combination

Ladder Option
An option that locks-in gains once the underlying reaches predetermined price levels or "rungs," guaranteeing some profit even if the underlying security falls back below these levels before the option expires.

Lender of Last Resort
An institution, usually a country's central bank, that offers loans to banks or other eligible institutions that are experiencing financial difficulty or are considered highly risky or near collapse. In the U.S. the Federal Reserve acts as the lender of last resort to institutions that do not have any other means of borrowing and whose failure to obtain credit would dramatically affect the economy.

Lemon
A very disappointing investment. Your expected return wasn't even close to being achieved.

Lehman Formula
A compensation formula developed by Lehman Brothers for investment banking services. The structure is as follows:

-5% of the first million dollars involved in the transaction
-4% of the second million
-3% of the third million
-2% of the fourth million
-1% of everything thereafter (above $4 million)

Lehman Aggregate Bond Index
An index used by bond funds as a benchmark to measure their relative performance. The index comprises government securities, mortgage-backed securities, asset-backed securities and corporate securities to simulate the universe of bonds in the market. The maturity of the bonds in the index are over one year.

Legislative Overkill
A law enacted to stop or prevent the abuse of a loophole, but ends up imposing more restrictions than are necessary for reasonable prevention.

Legend
A notification placed on certain stock certificates describing the terms and conditions of sale and ownership.

Legal List
A selection of eligible companies and investments, determined by local state governments, for institutions such as insurance companies and pension plans.

Leaseback
An arrangement where the seller of an asset leases back the same asset from the purchaser.

Lease
An agreement in which one party gains a long-term rental agreement, and the other party receives a form of secured long-term debt.

Leakage
A release of information to certain people before the official public announcement.

Leads And Lags
The alteration of normal payment or receipts in a foreign exchange transaction because of an expected change in exchange rates. An expected increase in exchange rates is likely to speed up payments, while an expected decrease in exchange rates will probably slow them down.

Leading Lipstick Indicator
An indicator based on the theory that a consumer turns to less-expensive indulgences, such as lipstick, when she (or he) feels less than confident about the future. Therefore, lipstick sales tend to increase during times of economic uncertainty or a recession.

Leading Indicator
A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators are used to predict changes in the economy, but are not always accurate.

Leader or Laggard
Refers to a company that is either outperforming or underperforming the general market. To look for top stocks in leading industry groups, refer to the Relative Price Strength Rating and Industry Group Relative Strength Rating in Investor's Business Daily.

Lady Godiva Accounting Principles - LGAP
A theoretical set of accounting principles under which corporations would have to fully disclose all information, including that which often doesn't get reported to investors under generally accepted accounting principles (GAAP).
These principles include disclosure of the following:
-all off-balance sheet items
-how new goodwill accounting rules (introduced in 2002) impact earnings per share (EPS)
-the impact on EPS of stock options issued in lieu of salaries
-how pension expenses are accounted for

Laddering
The promotion of inflated pre-IPO prices for the sake of obtaining a greater allotment of the offering.

Lady Macbeth Strategy
A corporate-takeover strategy with which a third party poses as a white knight to gain trust, but then turns around and joins with unfriendly bidders.

Laffer Curve
Invented by Arthur Laffer, this curve shows the relationship between tax rates and tax revenue collected by governments. The chart below shows the Laffer Curve:

The curve suggests that, as taxes increase from low levels, tax revenue collected by the government also increases. It also shows that tax rates increasing after a certain point (T*) would cause people not to work as hard or not at all, thereby reducing tax revenue. Eventually, if tax rates reached 100% (the far right of the curve), then all people would choose not to work because everything they earned would go to the government.

Lead Time
In terms of a supply chain, the total time needed for an order to be processed.

LBP
In currencies, this is the abbreviation for the Lebanese Pound

Layoff
1. When a company eliminates jobs regardless of how good the employees' performance. 2. A risk reduction, made by investment bankers, that minimizes the potential downside associated with a commitment to purchase and sell a stock issue unsubscribed by stockholders holding rights.

Law of Supply
A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity of goods or services offered by suppliers increases, and vice versa.

Law of Diminishing Marginal Utility
A law of economics stating that as a person increases consumption of a product--while keeping consumption of other products constant--there is a decline in the marginal utility that person derives from consuming each additional unit of that product.

Law of Diminishing Marginal Returns
A law of economics stating that, as the number of new employees increases, the marginal product of an additional employee will at some point be less than the marginal product of the previous employee.

Late-Stage Base
A base that forms after a stock has staged a series of technical breakouts from prior bases. They usually occur near a stock's top and are often referred to as fourth- or fifth-stage bases. Late-stage bases often show erratic, wide-and-loose trading.

Lagging Indicator
1. A measurable economic factor that changes after the economy has already begun to follow a particular pattern or trend.
2. A technical indicator that trails the price action of an underlying asset and is used by traders to generate transaction signals or to confirm the strength of a given trend. Since these indicators lag the price of the asset, a significant move will generally occur before the indicator is able to provide a signal.

Laissez Faire
An economic theory from the 18th century that is strongly opposed to any government intervention in business affairs. Sometimes referred to as "Let it be economics."

Late-Day Trading
An unethical (if not illegal) practice of a hedge fund purchasing and then selling securities (usually shares of a mutual fund) after the close of a trading day, but making the transactions appear as though they occurred before the market close.

Last-Sale Reporting
An electronic entry, to the Nasdaq Stock Market, of the amount and price of shares involved in a transaction's not less than a board lot.

Last Twelve Months - LTM
A term used to describe financial results during the period of the last 12 months.

Last Trading Day
The final day that a futures or options contract may trade or be closed out before delivery of the underlying asset must occur.

Last In, First Out - LIFO
An asset-management and valuation method that assumes that assets produced or acquired last are the ones that are used, sold or disposed of first.

Large Value Transfer System - LVTS
An electronic wire payment system in Canada, facilitating the transfer of funds between large financial institutions, including the central Bank of Canada.
Large Trader
A futures trader who holds or controls a single position that is equal to or greater than the CFTC specified reporting levels.

Large Cap (Big Cap)
Companies with a market capitalization between $10 billion and $200 billion.

Landominium
A type of residential property in which the owner owns both the home and the land on which the home is built. The home is a part of a community, like a condominium, where the landscaping, maintenance and other services are provided by a homeowners' association

Land Value
The total value of the land, including any upgrades or improvements to the land
Land
Property or real estate, not including buildings or equipment, that does not occur naturally. Depending on the title, land ownership may also give the holder the rights to all natural resources on the land. These may include water, plants, human and animal life, fossils, soil, minerals, electromagnetic features, geographical location, and geophysical occurrences.

Lame Duck
A person who has defaulted on his or her debts or has gone bankrupted due to the stock market. The financial use of the term is most commonly used in Europe.

Lambda
A ratio comparing change in option price to a 1% change in option volatility.

LAK
In currencies, this is the abbreviation for the Laos Kip.

Large Value Transfer System - LVTS
An electronic wire payment system in Canada, facilitating the transfer of funds between large financial institutions, including the central Bank of Canada.

Law of Diminishing Marginal Returns
A law of economics stating that, as the number of new employees increases, the marginal product of an additional employee will at some point be less than the marginal product of the previous employee.

Late-Stage Base
A base that forms after a stock has staged a series of technical breakouts from prior bases. They usually occur near a stock's top and are often referred to as fourth- or fifth-stage bases. Late-stage bases often show erratic, wide-and-loose trading.

Lease
An agreement in which one party gains a long-term rental agreement, and the other party receives a form of secured long-term debt.

Leakage
A release of information to certain people before the official public announcement.

Lender of Last Resort
An institution, usually a country's central bank, that offers loans to banks or other eligible institutions that are experiencing financial difficulty or are considered highly risky or near collapse. In the U.S. the Federal Reserve acts as the lender of last resort to institutions that do not have any other means of borrowing and whose failure to obtain credit would dramatically affect the economy.

Lemon
A very disappointing investment. Your expected return wasn't even close to being achieved.

Leads And Lags
The alteration of normal payment or receipts in a foreign exchange transaction because of an expected change in exchange rates. An expected increase in exchange rates is likely to speed up payments, while an expected decrease in exchange rates will probably slow them do

Last-Sale Reporting
An electronic entry, to the Nasdaq Stock Market, of the amount and price of shares involved in a transaction's not less than a board lot.

Last Twelve Months - LTM
A term used to describe financial results during the period of the last 12 months.

Leprechaun Leader
A corporate manager or an executive who, like the fabled Irish elf, is a mischievous and elusive creature said to possess buried treasures of money and gold.

Lessee
The person who rents land or property from a lessor.

Layoff
1. When a company eliminates jobs regardless of how good the employees' performance. 2. A risk reduction, made by investment bankers, that minimizes the potential downside associated with a commitment to purchase and sell a stock issue unsubscribed by stockholders holding rights.

Lehman Formula
A compensation formula developed by Lehman Brothers for investment banking services. The structure is as follows:

-5% of the first million dollars involved in the transaction
-4% of the second million
-3% of the third million
-2% of the fourth million
-1% of everything thereafter (above $4 million)

Lehman Aggregate Bond Index
An index used by bond funds as a benchmark to measure their relative performance. The index comprises government securities, mortgage-backed securities, asset-backed securities and corporate securities to simulate the universe of bonds in the market. The maturity of the bonds in the index are over one year.

LBP
In currencies, this is the abbreviation for the Lebanese Pound.

Lead Time
In terms of a supply chain, the total time needed for an order to be processed

Legend
A notification placed on certain stock certificates describing the terms and conditions of sale and ownership.

Leader or Laggard
Refers to a company that is either outperforming or underperforming the general market. To look for top stocks in leading industry groups, refer to the Relative Price Strength Rating and Industry Group Relative Strength Rating in Investor's Business Daily.

Leading Indicator
A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators are used to predict changes in the economy, but are not always accurate.

Leading Lipstick Indicator
An indicator based on the theory that a consumer turns to less-expensive indulgences, such as lipstick, when she (or he) feels less than confident about the future. Therefore, lipstick sales tend to increase during times of economic uncertainty or a recession.

Leaseback
An arrangement where the seller of an asset leases back the same asset from the purchaser.

Leasehold Improvement
Improvements on a leased asset that increase the value of the asset.

Leg
1. Term describing an order entry technique used by brokers. A leg occurs when a broker executes contingent orders in separate phases, thus increasing the risk for price swings through time delays.
2. A description of different aspects in a combination option.

Legal List
A selection of eligible companies and investments, determined by local state governments, for institutions such as insurance companies and pension plans.

Lemming
The act of following the crowd into an investment that will inevitably head for disaster.

Legislative Overkill
A law enacted to stop or prevent the abuse of a loophole, but ends up imposing more restrictions than are necessary for reasonable prevention.

Lessor
The person who rents land or property to a lessee.

Let Your Profits Run
A saying often used in investing that acknowledges the tendency among investors to sell winning positions too early. Most traders tend to take gains off the table early out of fear that they will evaporate quickly, while they also tend to hold onto large losing positions in the hope that they will turn around. The key to letting your profits run is to not panic when volatility increases and to maintain your convictions about why you entered into the trade.

Letter of Comfort
A letter issued to a lending institution by a parent company acknowledging the approval of a subsidiary company's attempt for financing.

Letter Of Credit
A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. In the event that the buyer is unable to make payment on the purchase, the bank will be required to cover the full or remaining amount of the purchase.

Letter of Indemnity
1. A letter guaranteeing that contractual provisions will be met, otherwise financial reparations will be made.
2. A letter requesting replacements for lost shares from a company's treasury.

Letter of Intent - LOI
1. A letter that describes in detail a corporation's intention to act on something.
2. It is also a way to protect your son or daughter from unnecessary chaos and turmoil when he or she must depend upon someone other than you for care and support (if you suddenly pass away).

Letter Security
A security that is not registered with the SEC, and so cannot be sold publicly in the marketplace.

Level 1
A trading service consisting of real-time bid/ask quotes for securities trading on the Nasdaq stock market and comparable information for securities quoted in the OTC Bulletin Board Service.

Level 2
A trading service consisting of real-time access to the quotations of individual market makers registered in every Nasdaq listed security, as well as market makers' quotes in OTC Bulletin Board securities.

Level 3
A trading service consisting of everything in Level 2, plus the ability to enter quotes, execute orders, and send information. This service is restricted to NASD member firms that function as registered market makers.

Level Load
An annual load charged to a mutual fund holder for the time he or she is invested in the fund

Level-Premium Insurance
A type of term life insurance for which the premiums remain the same throughout the duration of the contract. The premium paid on this type of policy will be higher at the beginning of its life but lower towards the end of its life as compared to term policies that have rising premium rates.

Leverage
1. The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment.
2. The amount of debt used to finance a firm's assets. A firm with significantly more debt than equity is considered to be highly leveraged.
Leverage helps both the investor and the firm to invest or operate. However, it comes with greater risk. If an investor uses leverage to make an investment and the investment moves against the investor, his or her loss is much greater than it would've been if the investment had not been leveraged - leverage magnifies both gains

Leverage Ratio
1. Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to measure its ability to meet financial obligations. There are several different ratios, but the main factors looked at include debt, equity, assets and interest expenses.
2. A ratio used to measure a company's mix of operating costs, giving an idea of how changes in output will affect operating income. Fixed and variable costs are the two types of operating costs depending on the company and the industry, the mix will differ.

Leveraged Buyout - LBO
A strategy involving the acquisition of another company using a significant amount of borrowed money (bonds or loans) to meet the cost of acquisition. Often, the assets of the company being acquired are used as collateral for the loans in addition to the assets of the acquiring company. The purpose of leveraged buyouts is to allow companies to make large acquisitions without having to commit a lot of capital.

Leveraged Lease
A lease agreement wherein the lessor, by borrowing funds from a lending institution, finances the purchase of the asset being leased.

Liquidated Damages
Present in certain legal contracts, this provision allows for the payment of a specified sum should one of the parties be in breach of contract.

Leveraged Recapitalization
A strategy where a company takes on significant additional debt with the purpose of either paying a large dividend or repurchasing shares. The result is a far more financially leveraged company.

Levy
To collect or assess money that is due.

Liability
A company's legal debts or obligations that arise during the course of business operations. These are settled over time through the transfer of economic benefits including money, goods or services.

Liability Driven Investment - LDI
A form of investing in which the main goal is to gain sufficient assets to meet all liabilities, both current and future. This form of investing is most prominent with defined-benefit pension plans, whose liabilities can often reach into the billions of dollars for the largest of plans.

Lien
When a creditor or bank has the right to sell the mortgaged or collateral property of those who fail to meet the obligations of a loan contract.

Life Annuity
An insurance product that features a predetermined periodic payout amount until the death of the annuitant. These products are most frequently used to help retirees budget their money after retirement. Typically, the annuitant pays into the annuity on a periodic basis when he or she is still working. However, annuitants may also buy the annuity product in one large purchase. When the annuitant retires, the annuity makes periodic (usually monthly) payouts to the annuitant, providing a reliable source of income. When a triggering event (such as death) occurs, the periodic payments from the annuity usually cease.

Liquid Market
A market with many bid and ask offers. The market is characterized by high liquidity, low spreads, and low volatility.

Lintner's Model
A model stating that dividend policy has two parameters: (1) the target payout ratio and (2) the speed at which current dividends adjust to the target.

Linear Price Scale
A type of scale used on a chart that is plotted in such a way that the values on the scale are spaced equidistantly. Each unit change is represented by the same vertical distance on the chart, regardless of what price level the asset is at when the change occurs. This price scale is mainly used in short-term trading, and it is often used by traders of commodity futures. Contrast this to "logarithmic price scale".

Life Expectancy
1. The age until which a person is expected to live.
2. The remaining number of years an individual is expected to live, based on IRS issued life expectancy tables. The life expectancy, for required minimum distribution (RMD) calculation purposes, is determined by the current age of the individual.

Life Insurance
A protection against the loss of income that would result if the insured passed away. The named beneficiary receives the proceeds and is thereby safeguarded from the financial impact of the death of the insured.

Life Option
An annuitization-method option for a typical annuity offered by an insurance company with which the annuitant chooses to receive regular income payments from his or her annuity account for life. The insurance company guarantees that the annuitant will receive payments for the rest of his or her life, and structures the payment amounts to provide room for the insurance company's profit margin.

Life With Guaranteed Term
An annuitization-method option with which the annuitant chooses to receive regular income payments that are guaranteed to last the rest of his or her life but also guarantees income payments for a minimum number of years (the term) following the start of the annuitization period - even if the annuitant dies before the end of the term.

Lifelong Learning Plan
A provision applicable to the Canadian Registered Retirement Savings Plan (RRSP). The plan allows RRSP contributors a non-taxable temporary withdrawal of up to $20,000 from their accounts in order to finance their education or that of their spouse. The provision is subject to limitations, such as a $10,000 annual withdrawal limit and a maximum repayment period of 10 years, after which the ability to recontribute the borrowed sum is lost.

Lifestyle Fund
An investment fund featuring an asset mix determined by the level of risk and return that is appropriate for an individual investor. Factors that determine this mix include an investor's age, level of risk aversion, the investment's purpose and the length of time until the principal will be withdrawn.

Lifetime Learning Credit
A federal initiative whereby a person is eligible for a non-refundable credit for a specific amount spent on higher education tuition and fees during the year.

LIFO Liquidation
When a company using the LIFO (Last In, First Out) method of inventory costing liquidates their older LIFO inventory. A LIFO liquidation would occur if current sales are higher than current purchases, as a result, any inventory not sold in previous periods must be liquidated.

Like-for-Like Sales
The portion of current sales achieved through activities that are comparable to the activities of the previous year.

Like-Kind Property
Any two assets or properties that are considered to be the same type, making an exchange between them tax free. To qualify as like kind, two assets must be of the same type (e.g. two pieces of residential real estate), but do not have to be of the same quality.

Limit Down
The maximum amount by which the price of a commodity futures contract may decline in one trading day.

Limit Order
An order placed with a brokerage to buy or sell a set number of shares at a specified price or better. Limit orders also allow an investor to limit the length of time an order can be outstanding before being canceled.

Limit Order Book
A record of unexecuted limit orders maintained by the specialist.
Limit Up
The maximum amount by which the price of a commodity futures contract may advance in one trading day.

Limit-On-Close Order
A type of limit order to buy or sell shares near the market close only if the closing price is trading better than the limit price. This order is an expansion of the market-on-close order, adding to it a limit condition, which places a maximum on the entry price and minimum on the selling price.

Line Of Credit - LOC
An arrangement between a financial institution (usually a bank) and a customer establishing a maximum loan balance that the bank will permit the borrower to maintain

Limit-On-Open Order
A type of limit order to buy or sell shares at the market open if the market price meets the limit condition. This type of order is good only for the market opening and does not last for the whole trading day.

Limited Liability
A type of liability that does not exceed the initial amount a person invested into a partnership.

Limited Liability Company - LLC
A corporate structure whereby the shareholders of the company have a limited liability to the company's actions.

Limited Partnership - LP
Two or more partners formed to conduct a business jointly, and in which one or more of the partners is liable only to the extent of the amount of money they have invested. Limited partners do not receive dividends, but enjoy direct access to the flow of income and expenses.

Limited Partnership Unit
An ownership unit in a publicly traded limited partnership, or master limited partnership (MLP). This trust gives the unit holder a stake in the income generated by the partnership company. A MLP often distributes all available cash flow from operations to unit holders after the deduction of maintenance capital.
Also referred to as "master limited partnership units" and "limited partner units".

Limited Risk
The risk of an investment that has a predetermined maximum downside potential, which is usually the initial amount invested.

Liquidate
1. To convert assets into cash or equivalents by selling them on the open market.
2. When an entity chooses or is forced by a legal judgment or contract to turn assets into a "liquid" form (cash).

Liquid Yield Option Note - LYON
A zero coupon bond that is callable (by issuer), putable (by investor), and convertible. LYONs are synthetic products that are financially engineered by Merrill Lynch.

Liquidating Dividend
Payment by a firm to its owners from capital rather than from earnings.

Liquidation
1. When a business or firm is terminated or bankrupt, its assets are sold and the proceeds pay creditors. Any leftovers are distributed to shareholders.
2. Any transaction that offsets or closes out a long or short position.

Liquidation Level
In forex trading, the specific value of a trader's account below which the liquidation of the trader's positions is automatically triggered and executed at the best available exchange rate at the time. The liquidation level is expressed as a percentage value of assets. If a forex trader's positions go against him or her, his or her account will eventually reach the liquidation level, unless the trader contributes further margin to top up his or her account.

Liquidity
1. The degree to which an asset or security can be bought or sold in the market without affecting the asset's price. Liquidity is characterized by a high level of trading activity.
2. The ability to convert an asset to cash quickly. Also known as "marketability

Liquidity Cushion
A reserve fund for a company or person containing money market and highly liquid investments.

Liquidity Path
A way of referring to the process of taking a company public.

Liquidity Preference Theory
The hypothesis that forward rates offer a premium over expected future spot rates.
Liquidity Risk
The risk stemming from the lack of marketability of an investment that cannot be bought or sold quickly enough to prevent or minimize a loss.

Liquidity Trap
A situation in which prevailing interest rates are low and savings rates are high. As a result, monetary policy is ineffective.

Listed
Being included and traded on a given exchange. Most exchanges have specific requirements which companies must meet in order to be listed and continue to stay listed.

Listed Security
Securities that have been accepted for trading purposes by a recognized and regulated exchange.

Living Will
A legal document that sets out the medical care an individual, or the principal, wants or does not want in the event that he or she becomes incapable of communicating his or her wishes.

LKR
In currencies, this is the abbreviation for the Sri Lankan Rupee.

Load
A fee or commission charged to an investor when buying or redeeming shares in a mutual fund. The fee may be charged at the time the investor buys into the mutual fund (called a front-end load) or when the investor redeems his/her mutual fund shares (called a back-end load).

Load Fund
A mutual fund with shares sold at a price including a large sales charge. This sales fee may range from 3% to as high as 8% of the full purchase.

Load Spread Option
A method of collecting the annual fees from investors in load funds through periodic deductions. These periodic deductions often are taken off of regular investor contributions to the fund to spread out the burden of the load fees over time.

Loan
When a lender gives money or property to a borrower, and the borrower agrees to return the property or repay the borrowed money, along with interest, at a predetermined date in the future.

Loan Constant
The required annual cash flow needed to service both the principal and interest upon a loan obligation.

Loan Loss Provision
An expense set aside as an allowance for bad loans (customer defaults, or terms of a loan have to be renegotiated, etc).

Loan Sharking
When a borrower is charged interest above an established legal rate. Depending on where you live, lenders typically cannot charge more than 60% interest per annum.

Loan Syndication
The process of involving numerous different lenders in providing various portions of a loan

Loan To Value Ratio - LTV Ratio
A lending risk assessment ratio that financial institutions and others lenders examine before approving a mortgage. Typically, assessments with high LTV ratios are generally seen as higher risk and, therefore, if the mortgage is accepted, the loan will generally cost the borrower more to borrow or he or she will need to purchase mortgage insurance.

Lobster Trap
A strategy used by a target firm to prevent a hostile takeover. In a lobster trap, the company passes a provision preventing anyone with more than 10% ownership from converting convertible securities into voting stock.

Local
Traders on future exchanges who occasionally fill public orders, but mainly buy and sell for their own personal accounts.

Local Tax
An additional tax on top of federal and state taxes, usually collected in the form of property taxes.
Also called municipal tax.

Lock Limit
Commonly associated with the futures market, a lock limit occurs when the trading price of a futures contract arrives at the exchanges predetermined limit price. At the lock limit, trades above or below the lock price are not executed.

Lock-Up Agreement
A legally binding contract between the underwriters and insiders of a company prohibiting these individuals from selling any shares of stock for a specified period of time. Lock-up periods typically last 180 days (six months) but can on occasion last for as little as 120 days or as long as 365 days (one year).

Lock-Up Option
A stock option offered by a target company to a white knight for additional equity or for the purchase of a valuable portion of their company.

Lockdown
A specified period when an employee of a public company is barred from selling - and occasionally buying - their company's stock.

Locked Market
A short-term situation occurring within a market where both the bid and ask are identical, resulting in no bid-ask spread.

Logarithmic Price Scale
A type of scale used on a chart that is plotted in such a way that two equivalent percent changes are represented by the same vertical distance on the scale, regardless of what the price of the asset is when the change occurs. The distance between the numbers on the scale decreases as the price of the underlying asset increases. This is the case because a $1 increase in price becomes less influential as the price heads higher since it now corresponds to less of a percentage change than it did when the price of the asset was at a lower level. Also referred to as a "log scale".

Logistics
The overall management of the way resources are moved to the areas where they are required.

Lombard Rate
The rate charged to banks by the German central bank for collateralized loan obligations.

London Interbank Bid Rate - LIBID
This is the rate bid by banks on eurocurrecy deposits.
London Interbank Offered Rate - LIBOR
An interest rate at which banks can borrow funds, in marketable size, from other banks in the London interbank market. The LIBOR is fixed on a daily basis by the British Bankers' Association. The LIBOR is derived from a filtered average of the world's most creditworthy banks' interbank deposit rates for larger loans with maturities between overnight and one full year.

London International Financial Futures And Options Exchange - LIFFE
A futures and options exchange in London, England that was modeled after the Chicago Board of Trade and the Chicago Mercantile Exchange. Similar to its American counterparts, this exchange used to deal with futures, options and commodities contracts. However, in 2002, LIFFE was acquired by Euronext as part of its strategy to increase its presence as a derivatives market. LIFFE has been renamed Euronext.liffe.

London Metal Exchange - LME
A commodities exchange in London, England, that deals in metal futures. Contracts on the exchange include aluminum, copper and zinc. Trading on the LME can be done in three main ways: through open outcry, a telephone system between member companies or the LME Select, an electronic trading platform. The LME is a non-ferrous exchange, which means that iron and steel are not traded on the exchange.

London Stock Exchange - LSE
The primary stock exchange in the U.K. and the largest in Europe. Originated in 1773, the regional exchanges were merged in 1973 to form the Stock Exchange of Great Britain and Ireland, later renamed the London Stock Exchange (LSE). The Financial Times Stock Exchange (FTSE) 100 Share Index, or "Footsie", is the dominant index, containing 100 of the top blue chips on the LSE.

Long (or Long Position)
1. The buying of a security such as a stock, commodity or currency, with the expectation that the asset will rise in value.
2. In the context of options, the buying of an options contract.
Opposite of "short (or short position)".

Long Bond
A bond that matures in more than 10 years. When people refer to "the long bond," this typically is the 30-year U.S. treasury.

Long Jelly Roll
An option strategy that aims to profit from a time value spread through the sale and purchase of two call and two put options, each with different expiration dates.

Long Market Value
The aggregate worth, in dollars, of a group of securities held in a cash or margin brokerage account, calculated using the prior trading day's closing prices of each security in the account.
Long Run
In terms of operating activities, a period of time in which all costs are variable.

Long Run Incremental Cost - LRIC
Forward-looking incremental costs that can be accounted for by a company.
Long Term
Holding an asset for an extended period of time. Depending on the type of security, a long-term asset can be held for as little as one year or for as long as 30 years or more.

Long-Term Assets
1. Reported on the balance sheet, it's the value of a company's property, equipment and other capital assets, less depreciation.
2. A stock, bond or other asset that you plan on holding in your portfolio for a lengthy period of time.

Long-Term Capital Management - LTCM
A large hedge fund led by Nobel Prize-winning economists and renowned Wall Street traders that nearly collapsed the global financial system in 1998 as a result of high-risk arbitrage trading strategies.
The fund formed in 1993 and was founded by renowned Salomon Brothers bond trader John Meriwether.

Long-Term Care (LTC) Insurance
Coverage that provides nursing-home care, home-health care, personal or adult day care usually for individuals above the age of 65 or with a chronic or disabling condition that needs constant supervision. LTC insurance offers more flexibility and options than many public assistance programs.

Long-Term Debt
Loans and financial obligations lasting over one year.
In the U.K., long-term debts are known as "long-term loans."

Long-Term Debt/Capitalization
A ratio showing the financial leverage of a firm, calculated by dividing long-term debt by the amount of capital available:

Long-Term Equity Anticipation Securities - LEAPS
An options contract that expires more than nine months in advance, and can last as long as two years. Normal options tend to last no longer than nine months.
Long-Term Liabilities
Recorded on the balance sheet, a company's liabilities for leases, bond repayments and other items due in more than one year.

Long/Short Equity
A hedge fund strategy that involves buying certain stocks long and selling others short. There usually isn't a restriction on the country that the stocks trade in either.

Long/Short Fund
A type of mutual fund that mimics some of the trading strategies typically employed by a hedge fund. Unlike most mutual funds, long/short funds use leverage, derivatives and short positions in an attempt to maximize total returns, regardless of market conditions. The amount of leverage used and the number of derivatives and short positions that long/short funds may contain are limited by law. These funds invest primarily in stocks.

Look Thru
An accounting method for calculating taxes owed on income from controlled foreign corporations.

Look-Ahead Bias
Bias created by the use of information or data in a study or simulation that would not have been known or available during the period being analyzed. This will usually lead to inaccurate results in the study or simulation.

Lookback Option
An exotic option that allows investors to "look back" at the underlying prices occurring over the life of the option, and then exercise based on the underlying asset's optimal value.

Loonie
A slang term for a Canadian dollar. It is derived from the picture of a loon on one side of the coin.

Loophole
A technicality that allows a person or business to avoid the scope of a law without directly violating the law.

Losing Your Shirt
In the investment world, this expression is used to describe a very bad investment that causes an investor to lose everything he or she has invested (and more, in some cases).

Loss Carryback
An accounting technique with which a company retroactively applies net operating losses to a preceding year's income in order to reduce tax liabilities present in that previous year.

Loss Carryforward
An accounting technique that applies the current year's net operating losses to future years' profits in order to reduce tax liability. Generally accepted accounting principles (GAAP) specify that loss carryforwards can be used in any one of the seven years following the loss.

Loss Leader Strategy
The strategy of offering a product or service at a considerable discount and loss of profit in order to attract future business

Lot
In general, any group of goods or services making up a transaction. In the financial markets, a lot represents the standardized quantity of a financial instrument as set out by an exchange or similar regulatory body. For exchange-traded securities, a lot may represent the minimum quantity of that security that may be traded

Lottery Bond
A bond issued in the U.S. and U.K. with a rate of return dependent upon a lottery style payout.

Love Money
Seed money or capital given by family or friends to an entrepreneur to start a business. In this type of situation, the decision to lend money and the terms of the agreement are usually based on qualitative factors and the relationship between the two parties, rather than on a formulaic risk analysis

Low
The lowest price a security traded at within that trading day.

Low Ball
A slang term for an offer that is significantly below the fair value of an asset or group of assets.

Lower of Cost and Market Method
A requirement of GAAP in the United States that inventory be recorded at the lower of either the cost to produce it, the cost to repurchase it or the market value of the inventory.

Lowest Price/Earnings (P/E) Ratio Tab (Best Value Rating)
Theoretically measures the value of a stock by dividing the current price by its earnings per share over the last twelve months. When a stock's P/E ratio is high, it is considered by the majority of investors as pricey or overvalued. Stocks with low P/Es are typically considered a good value.
This tab in IBD's "Top Rated Stocks Under $10" product screens stocks for a P/E of under 10, and minimum of 25,000 shares traded per day (Filtering for a minimum daily quantity traded allows us to provide "Top Rated" users with better overall quality stocks.)

LRD
In currencies, this is the abbreviation for the Liberian Dollar

LSL
In currencies, this is the abbreviation for the Lesotho Loti.

LTL
In currencies, this is the abbreviation for the Lithuanian Litas.

LYD
In currencies, this is the abbreviation for the Libyan Dinar.

Lump-Sum Distribution
A one-time payment for the entire amount due, rather than breaking payments into smaller installments. Some lump-sum distributions receive special tax treatment.