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Z-Bond A CMO tranche that resembles a Zero Coupon Bond and ordinarily has neither the first, nor the last claim on the CMO’s underlying cash flows and asset value. Hence, the Z-Bond has significant Credit […]
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Xerxes The sensitivity of Convexity to a change in yield. The “Convexity” of Modified Duration The third derivative of a financial instrument’s value with respect to its yield. Hedging so that Xerxes equals zero is […]
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Warrant An option that a corporation issues, with its own shares as the underlying asset. The crucial implication is that exercise of the option changes the number of claims against the corporation’s assets. Thus, the […]
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U.K. Mips Goldman, Sachs’s variation on its Mips structure, tailored to maximize its advantages for the UK market in ways that the U.S. government wouldn’t allow. Grand Metropolitan Delaware (limited partnership) issued 20 million “preferred […]
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Naive diversification A strategy whereby an investor simply invests in a number of different assets and hopes that the variance of the expected return on the portfolio is lowered. Related: Markowitz diversification. Naked The opposite […]
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Macaulay Duration 1. A measure of the sensitivity of a financial instrument’s value to a change in its yield. Macaulay Duration is an overestimate, and Modified Duration (q.v.) is a more precise measure. 2. The […]
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January Effect A recurring trend in the stock market during the month of January (mostly the first half of the month) wherein stock prices tend to go up. Jamming Executing a large sell (buy) order […]
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CAC 40 index A broad-basedindex of common stocks composed of 40 of the 100 largest companies listed on the forward segment of the official list of the Paris Bourse. Cage A section of a brokerage […]
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Back-end loan 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 […]
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Accrued Interest Interest earned between the most recent interest payment and the present date but not yet paid to the lender. Accredited investor Refers to a person whose net worth, or joint net worth with […]
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