Financial Glossary: B
Autor: Daniel Brandão de Castro | Publicado: 2009-02-14T00:56:00-02:00

BFifth letter of a Nasdaq stock descriptor specifying that issue is the Class B shares of the company. B2B An Internet strategy of dealing directly with businesses, rather than consumers, i.e. business to (2) business. BA The two-character ISO 3166 country code forBOSNIA AND HERZEGOVINA. BAM The ISO 4217 currency code for Bosnia & Herzegovinan Convertible Mark. BAN See: Bank anticipation notes BAR See: Builders' All Risk BB The two-character ISO 3166 country code for BARBADOS. BBD The ISO 4217 currency code for Barbadian Dollar. BD The two-character ISO 3166 country code for BANGLADESH. BDT The ISO 4217 currency code for Bangladeshi Taka currency. BE The two-character ISO 3166 country code for BELGIUM. BEACON See: Boston Exchange Automated Communication Order-Routing Network BEARS See: Bonds Enabling Annual Retirement Savings (BEARS) BEF The ISO 4217 currency code for Belgian Franc. BF The two-character ISO 3166 country code for BURKINA FASO. BG The two-character ISO 3166 country code for BULGARIA. BGL The pre-July 1999 ISO 4217 currency code for Bulgarian Lev. BGN The current ISO 4217 currency code for Bulgarian Lev. BH The two-character ISO 3166 country code for BAHRAIN. BHD The ISO 4217 currency code for Bahrainian Dinar. BI The two-character ISO 3166 country code for BURUNDI. BIC See: Bank Investment Contract BIF See: Bank Insurance Fund BIF The ISO 4217 currency code for Burundian Franc. BIPS See: Basis point. BIS See: Bank for International Settlements BJ The two-character ISO 3166 country code for BENIN. BM The two-character ISO 3166 country code for BERMUDA. BMD The ISO 4217 currency code for Bermudan Dollar. BN The two-character ISO 3166 country code for BRUNEI DARUSSALAM. BND The ISO 4217 currency code for Brunei Darussalam Dollar. BO The two-character ISO 3166 country code for BOLIVIA. BOB The ISO 4217 currency code for Bolivian Boliviano. BOT See: Build Own Transfer BPS See: Basis point. BR The two-character ISO 3166 country code for BRAZIL. BRL The ISO 4217 currency code for Brazilian Real. BS The two-character ISO 3166 country code for BAHAMAS. BSD The ISO 4217 currency code for Bahamas Dollar. BT The two-character ISO 3166 country code for BHUTAN. BTM See: Book to market. BTN The ISO 4217 currency code for Bhutan Ngultrum. BV The two-character ISO 3166 country code for BOUVET ISLAND. BW The two-character ISO 3166 country code for BOTSWANA. BWP The ISO 4217 currency code for Botswanan Pula. BY The two-character ISO 3166 country code for BELARUS. BYB The ISO 4217 currency code for Belarus Rouble. BZ The two-character ISO 3166 country code for BELIZE. BZD The ISO 4217 currency code for Belize Dollar. Baby bond A bond with a par value of less than $1000. Back away In the context of general equities, to withdraw from a previously declared interest, indication, or transaction; broker-dealer's failure, as a market maker in a given security, to make good on a bid/offer for the minimum quantity. Back fee The fee paid on the extension date if the buyer wishes to continue the option. Back months In the context of futures and optionstrading, refers to the months of contracts with expiration dates farthest away. See farthest month. Back office Brokerage house clerical operations that support, but do not include, the trading of stocks and other securities. All written confirmation and settlement of trades, record keeping, and regulatory compliance happen in the back office. Back on the shelf In the context of general equities, permanently canceledorder/interest in a stock by a customer. See: Take a powder. Back taxes Due taxes that have not been paid on time. Back up (1) When bondyields rise and prices fall, the market is said to back up. (2) An investor who swaps out of one security into another of shorter current maturity is said to back up. "Back up the truck" In the context of general equities, "Prepare for a very large buyer." Backdating In the context of mutual funds, a feature allowing fundholders to use an earlier date on a letter of intent to invest in a mutual fund in exchange for a reduced sales charge, e.g. Giving retroactive value to purchases from the earlier date. Backed in In the context of general equities, to describe the result of unanticipated events that allow for a purchase at a discount or a sale at a premium. Back-end load fund A mutual fund that charges investors a fee to sell (redeem) shares, often ranging from 4% to 6%. Some back-end load funds impose a full commission if the shares are redeemed within a designated length of time, such as one year. The commission decreases, the longer the investorholds the shares. The formal name for the back-end load is the contingent deferred sales charge, or CDSC Back-testing Creating a hypothetical portfolio performance history by applying current asset selection criteria to prior time periods. Back-to-back financing An intercompany loan channeled through a bank. Back-to-back loan A loan in which two companies in separate countries borrow each other's currency for a specific time period and repay the other's currency at an agreed-upon maturity. Backup line A commercial paper issuer's bank line of credit covering maturing notes if, for some reason, selling new notes to cover the maturing notes is not possible. Backup Line of Credit A bank assurance of funds obtained by an issuer of commercial paper to protect the CP investor from default. The issuer pays a commitment fee to the bank. Backwardation A market condition in which futures prices are lower in the distant delivery months than in the nearest delivery month. This may occur when the costs of storing the product until eventual delivery are effectively subtracted from the price today. The opposite of contango. Bad debt A debt that is written off and deemed uncollectible. Bad delivery Antithesis of good delivery. Bad title Title to property that does not distinctly confer ownership, usually in the context of real estate. Bai-kai Two-sided marketpicture, in Japanese terminology applies mainly to international equities. Bailing out In the context of securities, refers to selling a security or commodity quickly, regardless of the price. May occur when an investor no longer wants to sustain further losses on a stock. Also refers to relieving an individual, corporation, or government entity in financial trouble. Bailout bond A bondissued by the Resolution Funding Corporation (Refcorp) to save the failing savings and loan associations in the late 1980s and early 1990s. Baker Plan A plan by former U.S. Treasury Secretary James Baker under which 15 principal middle-income debtor countries (the Baker 15) would undertake growth-oriented structural reforms, to be supported by increased financing from the World Bank and continued lending from commercial banks. Balance of payments A statistical compilation formulated by a sovereign nation of all economic transactions between residents of that nation and residents of all other nations during a stipulated period of time, usually a calendar year. Balance of trade Net flow of goods (exports minus imports) between two countries. Balance on goods and services Netting of transaction balances, including the net amount of payments of interest and dividends to foreign investors and investments, as well as receipts and payments resulting from international tourism. Also known as Trade Balance. Balance sheet Also called the statement of financial condition, it is a summary of a company'sassets, liabilities, and owners' equity. Balance sheet exposure See: Accounting exposure. Balance sheet identity Total assets = Total liabilities + Total stockholders' equity. Balanced budget A budget in which the income equals expenditure. See: budget. Balanced fund An investment company that invests in stocks and bonds. The same as a balanced mutual fund. Balanced mutual fund This is a fund that buyscommon stock, preferred stock, and bonds. The same as a balanced fund. Balloon interest In the context of serial bondissues, the elevated coupon rate on bonds with late maturities. Balloon maturity Any large principal payment due at maturity for a bond or loan with or without a sinking fund requirement. Balloon Payment See: Bullet. Balloon Payment The final (large) payment that repays all the remaining principal and interest of a partially amortized or unamortized loan. Ballot The document distributed at the annual meeting to shareholders of record who wish to vote their shares in person. BAN See: Bond anticipation note. Bank-based corporate governance system Organization of a supervisory board so that it is dominated by bankers and corporate insiders. Bank anticipation notes (BAN) Notes issued by states and municipalities to obtain interim financing for projects that will eventually be funded longterm through the sale of a bond issue. Bank collection float The time that elapses between when a check is deposited into a bank account and when the funds are available to the depositor, during which period the bank is collecting payment from the payer's bank. Bank discount basis A convention used for quoting bids and offers for Treasury bills in terms of annualized yield, based on a 360-day year. Bank draft A draft addressed to a bank. Bank holding company A company that owns or has controllinginterest in two or more banks and/or other bank holding companies. Bank Insurance Fund (BIF) A unit of the Federal Deposit Insurance Corporation (FDIC) that provides deposit insurance for banks excluding thrifts. Bank for International Settlements (BIS) An international bank headquartered in Basel, Switzerland, which serves as a forum for monetary cooperation among several European central banks, the Bank of Japan, and the US Federal Reserve System. Founded in 1930 to handle the German payment of World War I reparations, it now monitors and collects data on international banking activity and promulgates rules concerning international bank regulation. Bank Investment Contract (BIC) Interestguaranteed by the bank in a portfolio over a specific time frame with a specific yield. Bank line Line of credit that a bank grants to a customer. Bank Letter of Credit Policy Standards allowing banks to confirm letters of credit by foreign banks supporting the purchase of US exports. Bank note A term used synonymously with paper money or currency issued by a bank. Notes are, in effect, a promise to pay the bearer on demand the amount stated on the face of the note. Today, only the Federal Reserve Banks are authorized to issue bank notes, i.e. Federal Reserve notes, in the United States. Bank regulation The formulation and issuance by authorized agencies of specific rules or regulations, under governing law, for the conduct and structure of banking. Bank run (bank panic) A series of unexpected cash withdrawals caused by a sudden decline in depositor confidence or fear that the bank will be closed by the charteringagency, i.e. many depositors withdraw cash almost simultaneously. Since the cash reserve a bank keeps on hand is only a small fraction of its deposits, a large number of withdrawals in a short period of time can deplete available cash and force the bank to close and possibly go out of business. Bank trust department Bank department that deals with estates, administers trusts, and provides services such as estate planning advice to its clients. Bank wire A computer message system linking major banks. It is used not for effecting payments, but as a mechanism to advise the receiving bank of some action that has occurred, e.g., the payment by a customer of funds into that bank's account. Banker's acceptance A short-termcredit investment created by a nonfinancial firm and guaranteed by a bank as to payment. Acceptances are traded at discounts to face value in the secondary market. These instruments have been a popular investment for money market funds. They are commonly used in international transactions. Banking Delay Time required for processing and clearing a check through the banking system. Bankmail An agreement between a company engaged in a takeoverbid and a bank that the bank will not finance the bid of another acquirer. Bankruptcy Inability to pay debts. In bankruptcy of a publicly owned entity, the ownership of the firm'sassets is transferred from the stockholders to the bondholders. Bankruptcy cost view The argument that expected indirect and direct bankruptcycostsoffset the other benefits from leverage so that the optimal amount of leverage is less than 100% debt financing. Bankruptcy risk The risk that a firm will be unable to meet its debtobligations. Also referred to as default or insolvency risk. Bankruptcy view The argument that expected bankruptcy costs preclude firms from financing entirely with debt. Bar Slang for one million dollars. Barbell strategy A fixed income strategy in which the maturities of the securities included in the portfolio are concentrated at two extremes. Barefoot Investor A popular Australian radio program focused on teaching young people financial literacy. Barefoot pilgrim A slang term for an unsophisticated investor who has lost everything on the stock market. Not to be confused with Barefoot Investor. Bargain hunter In the context of general equities, purchaser who is extremely selective in the price sought on a transaction. Bargain-purchase-price option Gives the lessee the option to purchase the asset at a price below fair market value when the lease expires. Barometer Economic and market data that represent an overall trend. The Dow Jones Industrial Average is an example of a stock market barometer. BARRA's performance analysis (PERFAN) A method developed by BARRA, a consulting firm in Berkeley, Calif. It is commonly used by institutional investors applying performance attribution analysis to evaluate their money managers' performance. Barrier options Option contracts that remain dormant until a trigger point (the barrier price) is reached, at which point the call or put option is activated, and results either in a long or short options position, or in the automatic exercise of an options position. One example is an up-and-in call. Assume an exercise price of $50 and a barrier price of $53. If the stock stays below $53, the call option cannot be exercised. If the stock price reaches the $53 barrier price, the holder then has a call option on the shares at $50. These are exotic options. Barron's confidence index Index measuring the ratio of the averageyield on 10 top-grade bonds to the average yield on 10 intermediate-grade bonds. The discrepancy between high-rated top-grade bonds and low-rated bond yields establishes a measure that is indicative of investor confidence. Barter The trading/exchange of goods or services without using currency. Base A technical analysis tool. A chart pattern depicting the period when the supply and demand of a certain stock are in relative equilibrium, resulting in a narrow trading range. The merging of the support level and resistance level. Base currency Applies mainly to international equities. Currency in which gains or losses from operating an international portfolio are measured. Base interest rate Related: Benchmark interest rate. Base market value The average market price of a group of securities at a specific time. Used for the purpose of indexing. Base period A particular period of time used for comparative purposes when measuring economic data. Base probability of loss The probability of not achieving a portfolioexpected return. Related: Value at risk. Base rate British equivalent of the US prime rate. Basel Accord Agreement concluded among country representatives in 1988 in Switzerland to develop standardized risk-based capital requirements for banks across countries. Basic balance In a balance of payments, the basic balance is the net balance of the combination of the current account and the capital account. Basic business strategies Key strategies a firm intends to pursue in carrying out its business plan. Basic IRR rule Accept the project if IRR is higher than the discount rate; reject the project if it is lower than the discount rate. It is wise to also consider net present value for project evaluation. Basis The price an investor pays for a security plus any out-of-pocket expenses. It is used to determine capital gains or losses for tax purposes when the stock is sold. Also, for a futures contract, the difference between the cash price and the futures price observed in the market. Basis point In the bondmarket, the smallest measure used for quoting yields is a basis point. Each percentage point of yield in bonds equals 100 basis points. Basis points also are used for interest rates. An interest rate of 5% is 50 basis points higher than an interest rate of 4.5%. Sometimes referred to as BPS, BIPS, and pronounced "Bips" Basis price Price expressed in terms of yield to maturity or annual rate of return. Basis risk Unexpected changes in the basis between the placing and the lifting of a hedge. Basis risk is in excess of convergence. Basket Applies to derivative products. Group of stocks that is formed with the intention of either being bought or sold all at once, usually to perform index arbitrage or a hedging program. Basket options Packages that involve the exchange of more than two currencies against a base currency at expiration. The basket option buyer purchases the right, but not the obligation, to receive designated currencies in exchange for a base currency, either at the prevailing foreign exchangemarket rate or at a prearranged rate of exchange. Multinational corporations with multicurrency cash flows frequently use basket options because it is generally cheaper to buy an option on a basket of currencies than to buy individual options on each of the currencies that make up the basket. Basket trades Related: Program trades. BD form An SEC document required of brokerage houses that outlines the firm's finances and officers. BDS Statistic A statistic based upon the correlation integral which examines the probability that a purely random system could have the same scaling properties as the system under study. See: Correlation Integral. Boston Exchange Automated Communication Order-Routing Network (BEACON) This system permits the automatic execution of trades based on the current stock prices on the consolidated markets at any of the US securitiesexchanges. Bear An investor who believes a stock or the overall market will decline. A bear market is a prolonged period of falling stock prices, usually by 20% or more. Related: bull. Bear CD A bear CD pays the holder a fraction of any fall in a given market index. Bear hug Often used in risk arbitrage. Hostile takeover attempt in which the acquireroffers an exceptionally large premium over the market value of the acquiree's shares so as to as to squeeze (hug) the target into acceptance. Bear market Any market in which prices exhibit a declining trend. For a prolonged period, usually falling by 20% or more. Bear raid In the context of general equities, attempt by investors to move the price of a stock opportunistically by selling large numbers of sharesshort. The investors pocket the difference between the initial price and the new, lower price after this maneuver. This technique is illegal under SEC rules, which stipulate that every shortsale must be on an uptick. Bear spread Applies to derivative products. Strategy in the options or futures markets designed to take advantage of a fall in the price of a security or commodity. A bear spread with call options is created by buying a call option with a certain strike price and selling a call option on the same stock with a lower strike price (with the same expiration date). A bear spread with put options is where an investor buys a put with a high strike price and sells a put with a low strike price. With futures, the investor sells the nearby contract and purchases the next out contract. All of these strategies are designed to profit from a fall in the underlying asset's price. Bear trap The predicament facing short sellers when a bear market reverses its trend and becomes bullish. The assets continue to sell in anticipation of further declines in price, and short sellers then are forced to cover at higher prices. Bearer bond Bonds that are not registered on the books of the issuer. Such bonds are held in physical form by the owner, who receives interest payments by physically detaching coupons from the bond certificate and delivering them to the paying agent. Bearer form Describes issue form of security not registered on the issuingcorporation's books, and therefore payable to its bearer. See also: Bearer bond; coupon bond. Bearer share Security not registered on the books of the issuing corporation and thus payable to possessor of the shares. Negotiable without endorsement and transferred by delivery, thus avoiding some of the control associated with ordinary shares. Dividends are payable upon presentation of dividend coupons, which are dated or numbered. Applies mainly to international equities. Bearish Words used to describe investor attitude. A bearish investor believes that a particular asset or the market as a whole will decline in value. Beating the gun In the context of general equities, gaining an advantageous price in a trade through a quick response to market developments. Before-tax contributions The portion of an employee's salary contributed to a retirement plan before federal income taxes are deducted; this reduces the individual's gross income for federal tax purposes. Before-tax profit margin The ratio of net income before taxes to net sales. Beggar-thy-neighbor An international trade policy of competitive devaluations and increased protective barriers that one country institutes to gain at the expense of its trading partners. Beggar-thy-neighbor devaluation A devaluation that is designed to cheapen a nation's currency and thereby increase its exports at the expense of other countries. Devaluation can also reduce a nation's imports. Such devaluations often lead to trade wars. Behind Used for listed equity securities. At the same price but entered after your order/interest, such as on the specialist's book. Antithesis of ahead of you. Bell Signal on a stock exchange to indicate the open and close of trading. Bellwether issues Related: Benchmark issues. Below par Less than the nominal or face value of a security. Benchmark The performance of a predetermined set of securities, used for comparison purposes. Such sets may be based on published indexes or may be customized to suit an investment strategy. Benchmark error Use of an inappropriate proxy for the true market portfolio. Benchmark interest rate Also called base interest rate, it is the minimum interest rate investors will demand for investing in a non-Treasury security. It is also tied to the yield to maturityoffered on the comparable-maturity treasury security that was most recently issued (on-the-run). Benchmark issue Also called on-the-run or current-couponissue or bellwether issue. In the secondary market, the benchmark issue is the most recently auctioned Treasury issues for each maturity. Beneath Used for listed equity securities. 1) Behind; 2) Lower in price. Beneficial Owner As used for most purposes under the federal securities laws. A beneficial owner of stock is any person or entity with sole or shared power to vote or dispose of the stock. This SEC definition is intended to include a holder who enjoys the benefits of ownership although the shares may be held in another name. Beneficial ownership Often used in risk arbitrage. Person who enjoys the benefits of ownership even though title is in another name. (Abused through the illegal use of a parking violation.) Beneficiary Term used to refer to the person who receives the benefits of a trust or the recipient of the proceeds of a life insurance policy. Bequest Property left to an heir under the terms of a will. Best's rating A rating A.M. Best Co. assigns to insurance companies based on the company's ability to meet its obligations to its policyholders. Best efforts A high standard of undertaking, but nevertheless excusable in the event of a force majeure. Best-efforts sale A method of securitiesdistribution/underwriting in which the securities firm agrees to sell as much of the offering as possible and return any unsold shares to the issuer. As opposed to a guaranteed or fixed-pricesale or bought deal, in which the underwriter agrees to sell a specific number of shares (and holds any unsold shares in its own account if necessary). Best-interests-of-creditors test The requirement that a claim holder voting against a plan of reorganization must receive at least as much as if the debtor were liquidated. Beta The measure of an asset'srisk in relation to the market (for example, the S&P500) or to an alternative benchmark or factors. Roughly speaking, a security with a beta of 1.5, will have move, on average, 1.5 times the market return. [More precisely, that stock'sexcess return (over and above a short-term money market rate) is expected to move 1.5 times the market excess return).] According to asset pricing theory, beta represents the type of risk, systematic risk, that cannot be diversified away. When using beta, there are a number of issues that you need to be aware of: (1) betas may change through time; (2) betas may be different depending on the direction of the market (i.e. betas may be greater for down moves in the market rather than up moves); (3) the estimated beta will be biased if the security does not frequently trade; (4) the beta is not necessarily a complete measure of risk (you may need multiple betas). Also, note that the beta is a measure of comovement, not volatility. It is possible for a security to have a zero beta and higher volatility than the market. Beta equation (security) The market beta of a security is determined as follows: Regressexcess returns of stock y on excess returns of the market. The slope coefficient is beta. Define n as number of observation numbers. Beta= [(n) (sum of [xy]) ]-[ (sum of x) (sum of y)]/ [(n) (sum of [xx]) ]-[ (sum of x) (sum of x)] where: n = # of observations (usually 36 to 60 months) x = rate of return for the S&P 500 index y = rate of return for the security. Related: Alpha Biased expectations theories Related: Pure expectations theory. Bid The price a potential buyer is willing to pay for a security. Sometimes also used in the context of takeovers where one corporation is bidding for (trying to buy) another corporation. In trading, we have the bid-ask spread which is the difference between what buyers are willing to pay and what sellers are asking for in terms of price. Bid away Refers to over-the-counter trading. Bid from another dealer exists at the same (listed) or higher (OTC) price. Bid-asked spread The difference between the bid and the asked prices. Bid bond A bid "performance" bond consisting of a small percentage (1-3%) of the tender contract price, refunded to losers once the contract is awarded. Bid price This is the quotedbid, or the highest price an investor is willing to pay to buy a security. Practically speaking, this is the available price at which an investor can sell shares of stock. Related: Ask, offer. Bid-to-cover ratio The ratio of the number of bids received in a Treasury security auction compared to the number of accepted bids. Bid wanted Used in the context of general equities. Announcement that a holder of securities wants to sell and will entertain bids. Bidder A firm or person that wants to buy a firm or security. Bidding buyer In the context of general equities, a nonaggressive buyer who prefers to await a natural seller in the hope of paying a lower price. Bidding through the market In the context of general equities, aggressive willingness to purchase a security at a premium to the inside market. Contrasts with bidding buyer. Bidding up Moving the bid price higher. Bifurcation When a non-linear dynamic system develops twice the possible solutions that it had before it passed its critical level. A bifurcation cascade is often called the period doubling route to chaos because the transition from an orderly system to a chaotic system often occurs when the number of possible solutions begins increasing, doubling each time. Bifurcation Diagram A graph that shows the critical points where bifurcation occurs, and the possible solutions that exist at that point. Big Bang The term applied to the liberalization in 1986 of the London Stock Exchange (LSE) when trading was automated. Big Board A nickname for the New York Stock Exchange (NYSE). Also known as The Exchange. More than 2,000 common and preferred stocks are traded. Founded in 1792, the NYSE is the oldest exchange in the United States, and the largest. It is located on Wall Street in New York City. Big picture To highlight trading interest due to the size of the trade. Big producer A successful broker who generates a large volume of commission. See Rainmaker. Big uglies Unpopular stocks. Bilateral Netting Bilateral netting - the consolidation of all swap agreements between two counterparties into one master agreement. The result is that if one counterparty bankrupts, that counterparty cannot seek to collect on any swaps that are in-the-money to them while at the same time refusing to pay out on any that are out-of-the-money. Instead, the master agreement sets out that in this event all swaps between the two counterparties will be netted; only then will the bankrupt company receive money, and then only if they are net in-the-money. Bill of exchange General term for a document demanding payment. Bill of lading A contract between an exporter and a transportation company in which the latter agrees to transport the goods under specified conditions that limit its liability. It is the exporter's receipt for the goods as well as proof that goods have been or will be received. Billing cycle The time elapsed between billing periods for goods sold or services rendered. Binder An amount of money paid to indicategood faith in a transaction before the transaction is completed. Binomial option pricing model An option pricing model in which the underlying asset can assume one of only two possible, discrete values in the next time period for each value that it can take on in the preceding time period. Bi-weekly mortgage loan A mortgageloan on which interest and principal payments are made every half-month (total of 26 payments) as opposed to monthly payments. This results in earlier loan retirement. Black Friday A precipitous drop in a financial market . The original Black Friday occurred on September 24, 1869, when prospectors attempted to corner the gold market. Black market An illegal market. Black Monday Refers to October 19, 1987, when the Dow Jones Industrial Average fell 508 points on the heels of sharp drops the previous week. On Monday, October 27, 1997, the Dow dropped 554 points. While the point drop set a new record, the percentage decline was substantially less than in 1987. Black-Scholes option-pricing model A model for pricing call options based on arbitrage arguments. Uses the stock price, the exercise price, the risk-freeinterest rate, the time to expiration, and the expected standard deviation of the stock return. Developed by Fischer Black and Myron Scholes in 1973. Blank check A check that is duly signed, but the amount of the check is left blank to be supplied by the drawee. Blank check offering An initial public offering by a company whose business activities are undefined and therefore peculative. Blank Check Preferred Stock This is stock over which the board of directors has broad authority to determine voting, dividend, conversion, and other rights. While it can be used to enable a company to meet changing financial needs, its most important use is to implement poison pills or to prevent takeovers by placement of this stock with friendly investors. Blanket certification form See: NASD form FR-1 Blanket fidelity bond SEC-required insurance coverage that brokerage firms are required to have in order to cover fraudulent trading by employees. Blanket inventory lien A secured loan that gives the lender a lien against all the borrower'sinventories. Blanket Mortgage A mortgage that covers at least two pieces of real estate as collateral for the same mortgage. Blanket recommendation A recommendation by a brokerage firm sent to all its customers advising that they buy or sell a particular stock regardless of investment objectives or portfolio size. Blind pool A limited partnership that does not announce its intentions as to what properties will be acquired. Blind trust A trust in which a fiduciary third party has total discretion to make investments on behalf of a beneficiary while the beneficiary is uninformed about the holdings of the trust. Blitzkrieg tender offer In the context of a takeover, refers to a tender offer that is priced so attractively that the tender is completed quickly. Block Large quantity of stock or large dollar amount of bondsheld or traded. As a rule of thumb, 10,000 shares or more of stock and $200,000 or more worth of bonds would be described as a block. Block call In the context of general equities, conference meeting during which customer indications and orders, along with the traders' own buy/sell preferences, are conveyed to the entire organization. See block list. Block house Brokerage firms that help to find potential buyers or sellers of large block trades. Block list In the context of general equities, listing of stock the investment bank is looking for (wants to buy) or (wants to sell) at the beginning of the day, whether on an agency or principalbasis. Block trade A large tradingorder, defined on the New York Stock Exchange as an order that consists of 10,000 shares of a given stock or at a total market value of $200,000 or more. Block trader A dealer who will take a position in the block trades to accommodate customer buyers and sellers of blocks. See: Dealer, market maker, principal. Block voting Describes a group of shareholders banding together to vote their shares in a single block. Blocked currency A currency that is not freely convertible to other currencies due to exchangecontrols. Blocked funds Cash flows generated by a foreign project that cannot be immediately repatriated to the parent firm because of capital flow restrictions imposed by the host government. Blow-off top A steep and rapid increase in price followed by a steep and rapid drop. This is an indicator seen in charts and used in technical analysis of stock price and markettrends. Blowout The rapid sale of all shares in a new securitiesoffering. See: hot issue. Blue list Daily financial publication featuring bondsoffered for sale by dealers and banks that represent billions of dollars in par value. Also available on-line at www.bluelist.com. Blue-chip company Used in the context of general equities. Large and creditworthycompany. Company renowned for the quality and wide acceptance of its products or services, and for its ability to make money and pay dividends. Gilt-edged security. Blue chip stocks Common stock of well-known companies with a history of growth and dividend payments. Blue-sky laws State laws covering the issue and trading of securities. Bo Derek stock High quality stock. Board broker Employee of the Chicago Board Options Exchange who manages away from the marketorders, which cannot be executed immediately. Board of Directors Individuals elected by the shareholders of a corporation who carry out certain tasks established in the charter. Board of Governors of the Federal Reserve System The managing body of the Federal Reserve System, which sets policies on bank practices and the money supply. Board room A room at a brokerage firm where its clients can watch an electronic board displaying stock prices and transactions. Also refers to the room where Board of Directors meetings take place. Bogey The return an investment manager is compared to for performance evaluation. Boiler room Used to describe place or operation in which unscrupulous salespeople call and try to sell people speculative, even fraudulent securities. Boilerplate Standard terms and conditions. Bollinger Bands Plus or minus two standard deviations where the standard deviations are calculated historically in a moving window estimation. Hence, the bands will widen if the most recent data is more volatile. If the prices break out of the band, this is considered a significant move. Bolsa Spanish for stock exchange. Bolsa de Commercio de Santiago (SSE) Chile's preeminent stock exchange. Bolsa de Valores de Rio de Janeiro (BVRJ) Brazil's second-largest stock exchange. Bolsa de Valores de Sao Paulo (BOVESPA) The largest stock exchange in Brazil. Bolt Used for listed equity securities. Block trading version of COLT. Bombay Stock Exchange (BSE) See: National Stock Exchange; Mumbai stock exchange. Bond Bonds are debt and are issued for a period of more than one year. The US government, local governments, water districts, companies and many other types of institutions sell bonds. When an investorbuys bonds, he or she is lendingmoney. The seller of the bond agrees to repay the principal amount of the loan at a specified time. Interest-bearing bonds pay interest periodically. Bond agreement A contract for privately placed debt. Bond anticipation note (BAN) A short-termdebt instrument issued by a state or municipality to borrow against the proceeds of an upcoming bondissue. Bond broker A broker on the floor of an exchange or in the over-the-counter market (OTC) who tradesbonds. Bond Buyer A daily publication featuring many essential statistics and index figures relevant to the fixed income markets. Bond Buyer's municipal bond index A municipal bond price tracking index published daily by the Bond Buyer. Bond counsel An attorney who prepares the legal opinion concerning a municipal bondissue. Bond covenant A contractual provision in a bond indenture. A positive covenant requires certain actions, and a negative covenant limits certain actions. Bond crowd Members of the stock exchange who transact bondorders on the floor of the exchange. Bond discount The difference by which a bond'smarket price is lower than its face value. The antithesis of a bond premium, which prevails when the market price of a bond is higher than its face value. See: Original issue discount. Bond-equivalent basis The method used for computing the bond-equivalent yield. Bond equivalent yield Bond yield calculated on an annual percentage rate method. Differs from annual effective yield. Bond fund A mutual fund that emphasizes income—consistent with risk, rather than growth—by investing in corporate, municipal, or US government debtobligations, or some combination of them. Bond indenture Contract that sets forth the promises of a bond issuer and the rights of investors. Bond indexing Designing a bond portfolio so that its performance will match the performance of some bondindex. Bond market association An international trade association of broker/dealers and banks in US government and federal agencysecurities, municipal securities, mortgage-backed securities, and money market securities. Bond mutual fund A mutual fund which primarily or exclusively holds bonds. Bond of Indemnity An insurance policy that indemnifies the corporation, the shareholder and the Transfer Agent against any and all claims arising from the replacement by the Transfer Agent of certificates lost or stolen. Bond points A conventional unit of measure for bond prices set at $1 and equivalent to 1% of the $100 face value of the bond. A price of 80 means that the bond is selling at 80% of its face or par value. Bond power A form used in the transfer of registered bonds from one owner to a different owner. Bond premium See: Bond discount Bond rating A rating based on the possibility of default by a bondissuer. The ratings range from AAA (highly unlikely to default) to D (in default). See: Rating, investment grade. Bond ratio The percentage of a company'scapitalization represented by bonds. The ratio is calculated by dividing the total bonds due after one year by that same figure plus all other equity. See: Debt-to-equity-ratio. Bond swap The sale of one bondissue and purchase of another bond issue simultaneously. See: Swap; swap order. Bond value With respect to convertible bonds, the value the security would have if it were not convertible. That is, the market value of the bondminus the value of the conversion option. Bondholder A firm often has stockholders and bondholders. In a liquidation, the bondholders have first priority. BONDPAR A system that monitors and evaluates the performance of a fixed income portfolio, as well as the individual securities held in the portfolio. BONDPAR decomposes the return into the elements beyond the manager's control--such as the interest rate environment and client-imposed duration policy constraints--and those that the management process contributes to, such as interest rate management, sector/quality allocations, and individual bond selection. Bonds Enabling Annual Retirement Savings (BEARS) Holders of BEARS receive the face value of the bondsunderlyingcall option, which is exercised by CUBS (an acronym for Calls Underwritten by Swanbrook). If the calls are exercised by CUBS, BEARS holders receive the total of the exercise price. Bon voyage bonus See: Greenmail. Boning Charging a lot more for an asset than its worth. Book A banker or trader'spositions. Book cash A firm'scash balance as reported in its financial statements. Also called ledger cash. Book to market The ratio of book value to market value of equity. A high ratio is often interpreted as a value stock (the market is valuing equity relatively cheaply compared to book value). This is the same as a low price-to-book value ratio. Value managers often form portfolios of securities with high book to market values. Book profit The cumulative book income plus any gain or loss on disposition of assets. Book runner The managing underwriter for a new issue. The book runner maintains the book of securities sold. Book to bill The book-to-bill ratio is the ratio of orders taken (booked) to products shipped and bills sent (billed). The ratio measures whether the company has more orders than it can deliver (>1), equal amounts (=1), or less (<1). This ratio is of significant interest to investors/traders in the high-technology sector. Book value A company's total assetsminusintangible assets and liabilities, such as debt. A company'sbook value might be higher or lower than its market value. Book value per share The ratio of stockholder equity to the average number of common shares. Book value per share should not be thought of as an indicator of economic worth, since it reflects accounting valuation (and not necessarily market valuation). Book-Entry Registered ownership of stock without the issuance of a correspondingstock certificate, as is the case with dividend reinvestment and direct purchase plans, employee plans and Direct Registration System issuances. Periodic statements of ownership are issued instead of certificates. Book-entry securities Securities which are not represented by paper certificates but are maintained in computerized records at the Fed in the names of member banks, which in turn keep computer records of the securities they own as well as those they are holding for customers. In the case of other securities where a book-entry has developed, certificates reside in a central clearinghouse or are held by another agent. These securities do not move from holder to holder. Bootstrap Term used to describe the start-up of a company with very little capital. Bootstrapping Creating a theoretical spot rate curve using one yield projection as the basis for the yield of the next maturity. Bootstrapping follows the work of Efron. It involves a Monte Carlo approach. Borrow To obtain or receive money on loan with the promise or understanding that it will be repaid. Borrowed reserves Funds borrowed from a Federal Reserve Bank by member banks to maintain the required reserve ratios. Borrower fallout In the mortgage pipeline, the risk that prospective borrowers of loans committed to be closed will elect to withdraw from the contract. Bot Shorthand for bought. Antithesis of SL, meaning sold. Bottom Refers to the basesupport level for market prices of any type. Also used in the context of securities to refer to the lowest market price of a security during a specific time-frame. Bottom fisher An investor seeking stocks that have fallen to prices at or near their bottom, which he or she believes will trend up in the future. Bottomline growth Growth in net profit. Also see topline growth. Bottom-up equity management style A management style that de-emphasizes the significance of economic and marketcycles, focusing instead on the analysis of individual stocks. Bought deal Securityissue in which one or two underwritersbuy the entire issue. Also known as a guaranteed or fixed-price sale; opposite of a best-efforts sale. Bounce A check returned by a bank because it is not payable, usually because of insufficient funds. Also used in the context of securities to refer to the rejection and ensuing reclamation of a security; a stock price's abrupt decline and recovery. Bourse French for a stock market. Boutique A small, specialized brokerage firm that offers limited services and products to a limited number of clients. Antithesis of financial supermarket. Box The actual physical location at a brokerage house or bank where securities or other documents are stored for safekeeping. Alternatively, a quotation machine or battery march. Also known as 'the cage.' Box spread This strategy refers to a type of optionarbitrage in which both a bull spread and a bear spread are implemented for an almost-risklessposition. One spread is implemented using put options and the other is implemented with calls. The spreads may both be debit spreads (call bull spread vs. put bear spread) or both credit spreads (call bear spread vs. put bull spread). Bracket A term signifying the extent of an underwriter's commitment in a new issue, e.g., major bracket or minor bracket. Bracket creep The gradual movement into higher tax brackets when incomes increase as a result of inflation. Brady bonds Bondsissued by emerging countries under a debt reduction plan. Branch An operation in a foreign country incorporated in the home country. Breadth The percentage of assets or stocks advancing relative to those unchanged or declining. Also the number of independent forecasts available per year. A stock picker forecasting returns to 100 stocks every quarter exhibits a breadth of 400, assuming each forecast is independent (based on separate information). Breadth of the market In the context of general equities, percentage of stocks participating in a particular market move. Technical analysts say there was significant breadth if two-thirds of the stocks listed on an exchange move in the same direction during a trading session. See: A/D line. Break A rapid and sharp price decline. Related: Crash. Break even The reduction of a project's netcash flow to zero by altering an input variable such as price or costs. Break price Used in the context of general equities. Change one's offering or bid prices to move to a more realistic, tight level where execution is more feasible. Often done to trim one's position, thus "breaking price" from where the trades occurred (if long, "break price" downward by a certain amount). Break-even analysis An analysis of the level of sales at which a project would make zero profit. Break-even lease payment The lease payment at which a party to a prospective lease is indifferent between entering and not entering into a lease arrangement. Break-even payment rate The prepayment rate of an MBScoupon that will produce the same cash flow yield (CFY) as that of a predetermined benchmark MBS coupon. Used to identify for coupons higher than the benchmark coupon the prepayment rate that will produce the same cash flow yield (CFY) as that of the benchmark coupon; and for coupons lower than the benchmark coupon the lowest prepayment rate that will do so. Break-even point Refers to the price at which a transaction produces neither a gain nor a loss. In the context of options, the term has the additional definitions: 1. Longcalls and shortuncovered calls: strike price plus premium. 2. Longputs and shortuncovered puts: strike priceminuspremium. 3. Short covered call: purchase price of underlying stock minus premium. 4. Shortput covered by shortstock: shortsale price of underlyingstock plus premium. Break-even tax rate The tax rate at which a party to a prospective transaction is indifferent between entering into and not entering into the transaction. Break-even time Related: Premiumpayback period. Breaking the syndicate Terminating an agreement among underwriters, specifically the investment banking group assembled to underwrite the issue of a security. Breakout A rise in a security's price above a resistance level (commonly its previous high price) or a drop below a level of support (commonly the former lowest price.) A breakout is taken to signify a continuing move in the same direction. Can be used by technical analysts as a buy or sell indicator. Breakpoint For mutual funds, the point at which the amount invested reduces the sales charge is called the "breakpoint." Each mutual fund may have several breakpoints; the larger the investment, the greater the discount. Note that the actual reduction in the sales charge is known as the "breakpoint discount". Also, the term "breakpointing" is sometimes used to refer to the offering of breakpoint discounts. The practice of soliciting mutual fund purchases just below the breakpoint (to earn more commissions) is considered unethical and in violation of NASD rules. See: right of accumulation. Breakpoint Sale For mutual funds, this refers to the practice of soliciting mutual fund purchases just below the breakpoint (to earn more commissions). The practice is considered unethical and in violation of NASD rules. Breakup value See: Private market value. Breeden, Douglas T. Inventor of one of the foundational asset pricing models in finance, the consumption based capital asset pricing model. Chairman of Smith Breeden Associates, and Dean of the Fuqua School of Business. Bretton Woods Agreement An agreement signed by the original United Nations members in 1944 that established the International Monetary Fund (IMF) and the post-World War II international monetary system of fixed exchange rates. Bridge financing Interim financing of one sort or another used to solidify a position until more permanent financing is arranged. "Bring it out" In the context of general equities, "make stock available for sale to indicatedbuyers." British clearers The large clearing banks that dominate deposit taking and short-termlending in the domestic sterling market. Broad-Base Generally referring to an index, it indicates that the index is composed of a sufficient number of stocks or of stocks in a variety of industry groups. See also: Narrow-Based. Broad Market Usually refers to indices such as the Wilshire 5000 that track the performance of 5,000 securities, rather than the more narrow measures such as the Dow Jones Industrial Average and the S&P 500. Broad tape An expanded version of the ticker tape, which is displayed on a screen in the board room of a brokerage firm and shows constantly updated financial information and news. Broken up Used for listed equity securities. Prevented from executing a trade (committed to upstairs) due to exchange priority rules excluding one's order (e.g., higher bid/lower offer on floor, market order to satisfy). Broker An individual who is paid a commission for executing customer orders. Either a floor broker who executesorders on the floor of the exchange, or an upstairs broker who handles retail customers and their orders. Also, person who acts as an intermediary between a buyer and seller, usually charging a commission. A "broker" who specializes in stocks, bonds, commodities, or options acts as an agent and must be registered with the exchange where the securities are traded. Antithesis of dealer. Broker-dealer Any person, other than a bank, engaged in the business of buying or selling securities on its own behalf or for others. See: Dealer. Broker loan rate Related: Call money rate. Brokered CD A certificate of deposit issued by a bank or thrift institution bought by a brokerage firm in bulk for the purpose of reselling to brokerage customers. A broker CD features a higher interest rate, usually 1% higher, and are FDIC insured and do not usually have commissions. Brokered market A market in which an intermediaryoffers search services to buyers and sellers. Brokers' loans Money borrowed by brokers from banks for uses such as financing specialists's inventories of stock, financing the underwriting of new issues of corporate and municipal securities, and financing customer margin accounts. Brought over the wall Compelling a research analyst of an investment bank to work in the underwriting department for a corporate client, therefore allowing for the transmission of insider information. Also called "Over the Chinese wall". Brussels Stock Exchange (BSE) Stock exchange that handles the majority of securitiestransactions in Belgium. Bubble theory A theory under which security prices sometimes move wildly above their true values, or the price falls sharply until the "bubble bursts". It is also possible for a bubble to deflate gradually. Budget A detailed pro forma schedule of financial activity, such as an advertising budget, a sales budget, or a capital budget. Budget authority Broad responsibility conferred by Congress that empower government agencies to spend federal funds. Congress can specify criteria for the spending of these funds. For example, it may stipulate that a given agency must spend within a specific year, number of years, or any time in the future. The basic forms of budget authority are; appropriations, authority to borrow, contract authority, and authority to obligate and expend offsettingreceipts and collections. The period of time during which Congress makes funds available may be specified as one-year, multiple years or no year. The available amount may be classified as either definite or indefinite; a specific amount or an unspecified amount can be made available. Authority may also be classified as current or permanent. Permanent authority requires no current action by Congress. Budget deficit The amount by which government spending exceeds government revenues. Buck Slang for one million dollars. Bucket shop An illegal brokerage firm that accepts customer orders but does not attain immediate executions. A bucket shop broker promises the customer a certain price, but waits until a price discrepancy is present and the trade is advantageous to the firm and then keeps the difference as profit. Alternatively, the broker may never fill the customer's order but keep the money. Budapest Stock Exchange Established in 1864, the major securities market of Hungary. Budget surplus The amount by which government revenues exceed government spending. Buenos Aires Stock Exchange (Bolsa de Comercio de Buenos Aires) Argentina's major securitiesmarket. Build a book In the context of general equities, develop customer orders to gather demand/supply in order to make a bid or an offer. Also refers to a commissioned salesperson amassing a 'book' of regular clients. Build Own Transfer The transfer of a project back to the party granting the concession, either with or at no cost. Builder buydown loan A mortgageloan on newly developed property that the builder subsidizes during the early years of the development. The builder uses cash to buydown the mortgage rate to a lower level than the prevailing marketloan rate for some period of time. The typical buydown is 3% of the interest rate amount for the first year, 2% for the second year, and 1% for the third year (also referred to as a 3-2-1 buydown). Builders' All Risk A standard construction insurance package. Bulge A short-lived stock price increase. Synonymous with bubble. Bulge bracket A tier of firms in an underwriting syndicate that have the highest participation level. See: Mezzanine bracket. Bull An investor who thinks the market will rise. Related: Bear. Bull-bear bond Bond whose principal repayment is linked to the price of another security. The bonds are issued in two tranches: In the first tranche repayment increases with the price of the other security, and in the second tranche repayment decreases with the price of the other security. Bull CD A bullCD pays its holder a specified percentage of the increase in return on a specified marketindex while guaranteeing a minimum rate of return. Bull market Any market in which prices are in an upward trend. Bull spread A spread strategy used in options and futures trading that is designed to capitalize on expected price appreciation. A bull spread using call options is created by buying a call option on an asset with a certain strike price and selling a call option on the same asset with a higher strike price (same expiration date). A bull spread with put options is created by buying a put option with a low strike and selling a put option with a high strike price (same expiration date). Less frequently, the bull spread is implemented by buying the nearby futures contract and selling the next out contract. Bulldog bond Foreign bondissue made in London. Bulldog market The foreign market in the United Kingdom. Bullet A one-time repayment, often after little or no amortization of the loan. See: Balloon Payment. Bullet contract A guaranteed investment contractpurchased with a single (one-shot) premium. Related: Window contract. Bullet loan A bank term loan that calls for no amortization. Bullet strategy A fixed income strategy in which a portfolio is constructed so that the maturities of its securities are highly concentrated at one point on the yield curve. Bullion coins Metal coins consisting of gold, silver, platinum, or palladium that are activelytraded. Some examples include the American eagle and the Canadian maple leaf. Their price is directly connected to the underlying price of their metal. Bullish Word used to describe an investor's attitude. Bullish refers to an optimistic outlook, while bearish means a pessimistic outlook. Bump-up CD A certificate of deposit granting the owner the right to increase its yield one time for the remaining term of the CD. The power is exercised by the owner in the event of an interest rate hike. Bunching Describes the act of traders combining round-lot orders for execution at the same time. Bunching can also be used to combine odd-lot orders to save the odd-lot differential for customers. Also used to refer to the pattern on the ticker tape when a series of trades for a security appear consecutively. Bundling, unbundling Creation of securities either by combining primitive and derivative securities into one composite hybrid or by separating returns on an asset into classes. Bureau of Labor Statistics (BLS) A research agency of the U.S. Department of Labor; it compiles statistics on hours of work, average hourly earnings, employment and unemployment, consumer prices and many other variables. Burn rate Used in venture capital financing to refer to the rate at which a startup company expends capital to financeoverheadcosts prior to the generation of positive cash flow. Burnout Depletion of a tax shelter's benefits. In the context of mortgage backed securities it refers to the percentage of the pool that has prepaid their mortgage. Business combination See: Merger Business Combination laws These laws impose a moratorium on certain kinds of transactions (e.g., asset sales, mergers) between a large shareholder and the firm for a period usually ranging between three and five years after the shareholder's stake passes a pre-specified (minority) threshold. These laws are in place in more than half the U.S. states. Business cycle Repetitive cycles of economic expansion and contractions. The official peaks and troughs of the US cycle are determined by the National Bureau of Economic Research in Cambridge, MA. Business day A day in which financial markets are open for trading. Business failure A business that has terminated operations with a loss to creditors. Business risk The risk that the cash flow of an issuer will be impaired because of adverse economic conditions, making it difficult for the issuer to meet its operating expenses. Business segment reporting Reporting the results of the separate divisions or subsidiaries of a business. Busted convertible Related: Fixed income equivalent. Mainly applies to convertible securities. Convertible bond selling essentially as a straightbond. Assuming the issuer is "money good," or will continue to meet credit obligations, such issues can be highly attractive since the price makes virtually no allowance for the bond's call on the common stock, when most such issues usually carry premiums. Bust-up takeover A leveraged buyout in which the buyer sells off the assets of the target company to repay the debt that financed the takeover. Butterfly In the context of equities, a firm with two divisions may split into two companies and issue original shareholders two shares (one in each of the new companies) for every old share they have. Butterfly shift A nonparallel shift in the yield curve involving the height of the curve. Butterfly spread Applies to derivative products. Complex optionstrategy that involves buying a call option with a relatively low strike price; buying a call option with a relatively high strike price; and selling two call options with an intermediate strike price. Essentially, this is a bear call spread stacked on top of a bull call spread. One can also do this with puts. The investor buys a put with a low strike, buys a put at high strike and sells two puts at intermediate strike price. The payoff diagram resembles the shape of a butterfly. Buy To purchase an asset; taking a long position. Buy-and-hold strategy A passive investment strategy with no activebuying and selling of stocks from the time the portfolio is created until the end of the investment horizon. Opposite of active strategy. Buy-and-write strategy An optionsstrategy that calls for the purchase of stocks and the writing of covered call options on them. Buy the book An order typically from a large institutional investor to a broker to purchase all the shares available at the market from the specialist and other brokers and dealers at the current offer price. The book refers to the record a specialist kept before the advent of computers. Buydown A lump sum payment made to the creditor by the borrower or by a third party to reduce the amount of some or all of the consumer's periodic payments to repay the indebtedness. Buy hedge See: Long hedge Buy in To cover, offset, or close out a short position. Related: Evening up, liquidation. Buy limit order A conditional tradingorder that indicates a security may be purchased only at the designated price or lower. Related: Sell limit order. Buy minus order In the context of general equities, rare market or limit order to buy a stated amount of a stock, provided that the price to be obtained is not higher than the last sale if the last sale is a minus or zero-minus tick, and is not higher than the last sale minus the minimum fractional change in the stock if the last sale is a plus or zero-plus tick. (If limit, then the buy cannot occur above the limit, regardless of tick.) Buy on the bad news Buyingstock shortly after a price drop resulting from bad news from the company. Investors believe that the price has hit bottom and will trend upward. See: Bottom fisher. Buy on close Buying at the end of the trading session at a price within the closing range. Buy on margin Borrowing to buy additional shares, using the shares themselves as collateral. Buy on opening Buying at the beginning of a trading session at a price within the opening range. Buy order An order to a broker to purchase a specific quantity of a security. Buy-side analyst A financial analyst employed by a nonbrokerage firm, typically one of the larger money managementfirms that purchasessecurities on its own account. Buy stop order A buy order not to be executed until the market price rises to the stop price. Once the security has broken through that price, the order is then treated as a market order. Also known as a suspended market order. Often used to protect against loss on a short sale. "Buy them back" Used for listed equity securities. "Cover my short position. Buy write See also Covered Call. Buyback The covering of a short position by purchasing a longcontract, usually resulting from the short sale of a commodity. See: Short covering, stock buyback. Also used in the context of bonds. The purchase of corporate bonds by the issuing company at a discount in the open market. Also used in the context of corporate finance. When a firm elects to repurchase some of the sharestrading in the market. Buydown Mortgages in which monthly payments consist of principal and interest. During the early part of the loan, portions of these payments are provided by a third party to reduce the borrower's monthly payments. In the context of project financing, refers to a one-time payment out of liquidated damages to reflect cash flowlosses from sustained underperformance. Buyer credit A financing provided to a buyer to pay for the supply of goods or services usually by an exporting country or by the supplier company. Buyer's market Market in which the supply exceeds the demand, creating lower prices. Antithesis of seller's market. Buyers/sellers on balance Used for listed equity securities. Indicates that at a given time (usually before the opening of a stock market or at expiration time), there are more buyers than sellers in the marketplace, usually with market orders. See: Imbalance of orders. Buying climax A rapid rise in the price of a stock resulting from heavy buying, which usually creates the market condition for a rapid fall in the price. Buying the index Purchasing the stocks in the S&P 500 in the same proportion as the index to achieve the same return. Buying power The amount of money available to buysecurities, determined by adding the totalcash held in brokerage accounts and the amount that could be spent if securities were margined to the limit. Buyout Purchase of a controllinginterest (or percent of shares) of a company'sstock. A leveraged buy out is effected with borrowedmoney. Bylaws Rules and practices that govern management of an organization. Bylaw Amendment Limitations These provisions limit shareholders' ability to amend the governing documents of the corporation. This might take the form of a supermajority vote requirement for charter or bylaw amendments, total elimination of the ability of shareholders to amend the bylaws, or the ability of directors beyond the provisions of state law to amend the bylaws without shareholder approval. Bypass trust An irrevocable trust that is designed to pay trust income (and principal, if needed) to an individual's spouse for the duration of the spouse's lifetime. The bypass trust is not part of the beneficiary spouse's estate and is not subject to federal estate taxes upon his/her death.