1) Today's Term - equity Ownership interest in a corporation in the form of common stock or preferred sto ck.

It also refers to total assets minus total liabilities, in which case it is also referred to as shareholder's equity or net worth or book value. In real est ate, it is the difference between what a property is worth and what the owner ow es against that property (i.e. the difference between the house value and the re maining mortgage or loan payments on a house). In the context of a futures tradi ng account, it is the value of the securities in the account, assuming that the account is liquidated at the going price. In the context of a brokerage account, it is the net value of the account, i.e. the value of securities in the account less any margin requirements. ................ 2) Term of the Day put-call parity The relationship between the price of a call and the price of a put for an optio n with the same characteristics (strike price, expiration date, underlying). It is used in arbitrage theory. If different portfolios comprised of cals and puts have the same value at expiration, it is implied that they will have the same va lue leading up to the expiration point. Thus, the values of the portfolios move in lock step. Portfolio price equality is calculated as c + PV(x) = p + s, where c is the market value of the call, PV(x) is the present value of the strike pri ce, p is the market value of the put, and s is the market value of the underlyin g security. If the two sides of the equation are not equal, arbitrage profit cou ld be gained by investing in the less expensive portfolio. Analysis of the parit y relationship assumes that other factors, such as a dividend, are not taken int o account. ............................ 3) Term of the Day convertible term insurance An insurance policy in which the insurer is required to renew the policy for a s pecified amount of time regardless of changes to the health of the insured. The agreement requires that premiums are paid on time and that the insurer makes no changes except if a premium change is made for an entire class of policyholders. also called guaranteed renewable or conversion privilege or guaranteed insurabi lity. ........................................... 4) Term of the Day conversion privilege An insurance policy in which the insurer is required to renew the policy for a s pecified amount of time regardless of changes to the health of the insured. The agreement requires that premiums are paid on time and that the insurer makes no changes except if a premium change is made for an entire class of policyholders. also called guaranteed renewable or convertible term insurance or guaranteed in surability. ..................................................... 5) Term of the Day owner of record The name of an individual or entity that an issuer carries in its records as the registered holder (not necessarily the beneficial owner) of the issuer's securi ties. Dividends and other distributions are paid only to owners of record. also called stockholder of record or holder of record or shareholder of record. ....................................... 6) Term of the Day

exchange rate Rate at which one currency may be converted into another. The exchange rate is u sed when simply converting one currency to another (such as for the purposes of travel to another country), or for engaging in speculation or trading in the for eign exchange market. There are a wide variety of factors which influence the ex change rate, such as interest rates, inflation, and the state of politics and th e economy in each country.also called rate of exchange or foreign exchange rate or currency exchange rate. ............................. 7) Term of the Day ceiling 1. The maximum interest rate permitted by state law for a given loan. A ceiling is a common feature of floating rate notes. 2. An upper limit on the exchange ra te of a country's currency imposed by some regulatory authorities (the governmen t or regulators will step in and ensure that the exchange rate does not exceed t he ceiling). 3. More generally, any limit or maximum. .................. 8) Term of the Day stagging The practice of buying initial public offerings at the offering price and then r eselling them once trading has begun, usually for a substantial profit. This is more commonly done by institutional investors than retail investors, because ins titutional investors get most of the IPO shares at the offering price. Stagging is most profitable in a hot IPO market, when the price of an IPO often rises dra matically above the offering price on the first day. also called flipping. ......................... 9) Term of the Day basis point One hundredth of a percentage point (0.01%). Basis points are often used to measure changes in or differences between yields on fixed income securities, since these often change by very small amounts. ....................... 10) Term of the Day reversal arbitrage A riskless transaction consisting of the short sale of a security, the purchase of a call, and the writing of a put. If the value of the security increases, the call is exercised to negate the short sale. If the value of the security decreases, the put will be exercised by the holder and the received security will negate the short sale. 11) ........................... Term of the Day divestment Refers to the sale of an asset for financial, legal or personal reasons. For cor porations, divestment can refer to a company selling off a portion of its assets , such as a subsidiary, to raise capital or to focus the business on a smaller c ore of goods and services. For investors, divestment can be used as a social too l to protest particular corporate policies, such as a company trading with a cou ntry known for child labor abuses. Divestment can also be required of companies by the Federal Trade Commission in order to have a merger approved. A famous exa mple of this is the breakup of Bell System (Ma Bell) into AT&T and the Baby Bell s in 1984. opposite of investment.

12) ............................... phantom stock plan A benefit plan for company employees that gives the employees benefits that woul d come from holding company stock, without actually giving any stock to these em ployees. The employees would receive benefits if the stock performed well over a certain amount of time. This is a way for companies to provide a bonus and ince ntive for employees, without granting them any of the specific benefits that wou ld come from actually being a shareholder. The rules and payout arrangements are similar to that of a deferred compensation plan. .......................... 13) ............................ Term of the Day inflation risk The possibility that the value of assets or income will decrease as inflation sh rinks the purchasing power of a currency. Inflation causes money to decrease in value at some rate, and does so whether the money is invested or not. ........... 14) ......................... Term of the Day risk margin A value that takes into account the potential movement of a stock in relation to its option position . A more volatile investment would have a higher risk margi n , since the potential for large swings in price is greater than that of a more stable investment. Premium margin and risk margin are the two components compri sing the margin requirement .......... 15) ....................... Term of the Day convenience yield The amount of benefit that is associated with physically owning a particular goo d, rather than owning a futures contract for that good. When a good is easy to c ome by, an investor doesn't have need to own the actual good at that time, and c an buy or sell as he pleases. When there is a shortage of a particular good, how ever, it is better to already own the good than to have to purchase it during th e shortage because it is likely to be at a higher price due to the demand. The c onvenience yield is the benefit derived in the second scenario. .......... 16) Term of the Day holding period return The return earned from the act of holding an asset rn is equal to the income and other gains (such as asset, divided by the original cost of the asset. be calculated for any asset, including a bond, an te portfolio. 17) ...............................

over a given period. The retu appreciation) earned from the The holding period return can individual stock, or a comple

Term of the Day UIT Unit Investment Trust. An SEC-registered investment company which purchases a fi xed, unmanaged portfolio of income-producing securities and then sells shares in the trust to investors. The major difference between a Unit investment Trust an d a mutual fund is that a mutual fund is actively managed, while a unit investme nt trust is not managed at all. Capital gains, interest and dividend payments fr om the trust are passed on to shareholders at regular periods. If the trust is o ne that invests only in tax-free securities, then the income from the trust is a lso tax-free. A unit investment trust is generally considered a low-risk, low-re turn investment. Some investors prefer UITs to mutual funds because UITs typical ly incur lower annual operating expenses (since they are not buying and selling shares); however, UITs often have sales charges and entrance/exit fees. also cal led fixed investment trust or participating trust or unit trust. ........................................................... 18) ............................. Term of the Day maintenance margin requirement The required amount of collateral or equity needed to maintain a margin account with an exchange . The minimum must be met at all times, but the particular amou nt required can vary. In the case of two major U.S. indices , the New York Stock Exchange and Nasdaq , the maintenance margin is 25% of the value of the stocks in the margin account . An investor will face a margin call if unable to maintai n this minimum level . ............................................................. 19) ........................ Term of the Day stock purchase plan A trust established by a corporate which acts as a tax-qualified, defined contri bution plan by making the corporation's employees partial owners. contributions are made by the sponsoring employer, and can grow tax-deferred, just as with an IRA or 401(k) plan. But unlike other retirement plans, the contributions must be invested in the company's stock. The benefits for the company include increased cash flow, tax savings, and increased productivity from highly motivated worker s. The main benefit for the employees is the ability to share in the company's s uccess. Due to the tax benefits, the administration of stock purchase plans is r egulated, and numerous restrictions apply. also called Employee Stock Ownership Plan (ESOP). .................................................... 20) ........................ Term of the Day education credit A tax credit available for education expenses, such as a Hope Credit or a Lifeti me Learning Credit. Education credits can be applied to many situations includin g education expenses, deposits in Education Savings Accounts, and withdrawals fr om IRAs in order to finance education and student interest loan payments. .......................................................... 21) ............................. Term of the Day

right of first offer A contractual right that the seller must first give the rights holder the opport unity to purchase an asset, but does not set requirements for the transaction. T he seller agrees to negotiate with the rights holder, and attempt to reach an ag reement. If the seller and rights holder cannot reach an agreement, the seller m ay then negotiate with or sell to any other party. also called right of first ne gotiation. ........................................................ 22) ............................ Term of the Day unsterilized foreign exchange intervention A passive approach to the manipulation of foreign exchange rates that can be use d to influence the relative value of domestic currency. In contrast to sterilize d interventions, where the overall supply of currency is altered, an unsterilize d intervention does not affect the money supply in order to influence exchange r ates. .............................................. 23) Term of the Day European Economic and Monetary Union EMU. A monetary union in Europe which succeeded the European Monetary System. Th is union began to take effect in 1990, over a series of three steps. The first s tep abolished individual member exchange rate control, the second step establish ed the European Central Bank, and the third step created the Euro as the common currency. ..................................... 24) Term of the Day loss given default LGD. The actual total loss that is experienced by a bank when a debtor defaults on a loan from that bank. The loss given default is not always equal to the tota l amount of the loan; for example, if the debtor pledged collateral against the loan, the bank could receive these assets, and their total loss would not be gre ater than the amount of the loan minus the value of the assets. ................................