Campbell R. Harvey's

Hypertextual Finance Glossary

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A B C D E F G H I J K L M N O P Q R S T U V W X Y Z #
U-turn transactions
Refers to a way for U.S. dollar transactions to take place where the customer or the seller is facing U.S. sanctions. For example, before November 2008, the U.S. Department of Treasury's Office of Foreign Asset Controls allowed some transactions with Iran (in non-prohibited goods) as long the transfer was initiated by a non-Iranian bank and passed through the U.S. system (the U-turn) on the way to another non-Iranian bank. The U-turn practice was terminated on November 10, 2008 with amendments to the Iranian Transactions Regulations, 31 CFR Part 560.
UA
The two-character ISO 3166 country code for UKRAINE.
UAH
The ISO 4217 currency code for the Ukraine Hryvnia.
UBTI
See: Unrelated Business Tax Income
UCITS
See: Undertakings for Collective Investments in Transferable Securities
UCITS
See: Undertakings for Collective Investments in Transferable Securities I
UCITS II
See: Undertakings for Collective Investments in Transferable Securities II
UCITS III
See: Undertakings for Collective Investments in Transferable Securities III
UCITS IV
See: Undertakings for Collective Investments in Transferable Securities IV
UCITS V
See: Undertakings for Collective Investments in Transferable Securities V
UCITS VI
See: Undertakings for Collective Investments in Transferable Securities VI
UDN
PowerShares DB US Dollar Index Bearish. This index measures the dollar against a basket of six other currencies: the euro, the Japanese yen, the British pound, the Canadian dollar, the Swedish krona and the Swiss franc. Allows investors to make short bets on the direction of the dollar. See also UUP.
UG
The two-character ISO 3166 country code for UGANDA.
UGA
The three-character ISO 3166 country code for UGANDA.
UGX
The ISO 4217 currency code for the Uganda Shilling.
UKR
The three-character ISO 3166 country code for UKRAINE.
UM
The two-character ISO 3166 country code for UNITED STATES MINOR OUTLYING ISLANDS.
UMI
The three-character ISO 3166 country code for UNITED STATES MINOR OUTLYING ISLANDS.
URY
The three-character ISO 3166 country code for URUGUAY.
USA
The three-character ISO 3166 country code for UNITED STATES.
US
The two-character ISO 3166 country code for UNITED STATES.
USD
The ISO 4217 currency code for the USA Dollar.
UUP
PowerShares DB US Dollar Index Bullish. This index measures the dollar against a basket of six other currencies: the euro, the Japanese yen, the British pound, the Canadian dollar, the Swedish krona and the Swiss franc. Allows investors to make long bets on the direction of the dollar. See also UDN.
UY
The two-character ISO 3166 country code for URUGUAY.
UYU
The ISO 4217 currency code for the Uruguay Peso Uruguayo.
UZ
The two-character ISO 3166 country code for UZBEKISTAN.
UZB
The three-character ISO 3166 country code for UZBEKISTAN.
UZS
The ISO 4217 currency code for the Uzbekistan Sum.
Ultra vires activities
Corporate actions and operations that are not sanctioned by corporate charter, sometimes leading to shareholder lawsuits.
Ultradot
Applies to derivative products. Firm proprietary software that stores, and sends baskets of stock through SEAQ to either the NYSE or the curb for program trading.
Ultra-short-term bond fund
A mutual fund that invests in bonds with very short maturity periods, usually one year or less.
Umbrella personal liability policy
A liability insurance policy that provides protection against damages not covered by standard liability policies, such as large jury awards in lawsuits.
Umbrella policy
Insurance for exports of an exporter whose issuer handles all administrative requirements.
Unamortized bond discount
Par value of a bond less the proceeds received from the sale of the bond, less whatever portion has been amortized.
Unamortized premiums on investments
The unexpensed portion of the difference between the price paid for a security and its par value.
Unbiased expectations hypothesis
Theory that forward exchange rates are unbiased predictors of future spot rates. See Forward parity.
Unbiased predictor
A theory that spot prices at some future date will be equal to today's forward rates.
Unbundling
Separation of a multinational firm's transfers of funds into discrete flows for specific purposes. See: Bundling.
Uncentillion
A unit of quantity equal to 10306 (1 followed by 306 zeros).
Uncollected funds
The amount of bank deposits in the form of checks that have not yet been paid by the banks on which the checks are drawn.
Uncollectible account
An account which cannot be collected by a company because the customer is not able to pay or is unwilling to pay.
Unconfirmed Letter of Credit
A letter of credit which has not been guaranteed or confirmed by any bank other than the bank that opened it. The advising bank merely informs the beneficiary of the letter of credit terms and conditions.
Uncovered call
A short call option position in which the writer does not own shares of underlying stock represented by the option contracts. Uncovered calls are much riskier for the writer than a covered call, where the writer of the uncovered call owns the underlying stock. If the buyer of a call exercises the option to call, the writer would be forced to buy the asset at the current market price. Also called a "naked" asset.
Uncovered call writing
A short call option position in which the writer does not own an equivalent position in the underlying security represented by his option contracts.
Uncovered options
See: Naked options
Uncovered put
A short put option position in which the writer does not have a corresponding short stockposition or has not deposited, in a cash account, cash or cash equivalents equal to the exercise value of the put. The writer has pledged to buy the asset at a certain price if the buyer of the option chooses to exercise it. Uncovered put options limit the writer's risk to the value of the stock (adjusted for premium received.) Also called "naked" puts.
Uncovered Put writing
A short put option position in which the writer does not have a corresponding short position in the underlying security or has not deposited, in a cash account.
Undecillion
A unit of quantity equal to 1036 (1 followed by 36 zeros).
Under the belt
Long position in a stock.
Underbanked
When an originating investment banker cannot find enough firms to underwrite a new issue.
Underbooked
Describes limited interest by prospective buyers in a new issue of a security during the preoffering registration period.
Undercapitalized
A business has insufficient capital to carry out its normal functions.
Underfunded pension plan
A pension plan that has a negative surplus (i.e., liabilities exceed assets).
Underinvestment problem
The mirror image of the asset substitution problem, in that stockholders refuse to invest in low-risk assets to avoid shifting wealth from themselves to debtholders.
Underlying
What supports the security or instrument that parties agree to exchange in a derivative contract.
Underlying asset
The security or property or loan agreement that an option gives the option holder the right to buy or to sell.
Underlying debt
Municipal bonds issued by government entities but under the control of larger government entities and for which the larger entity shares the credit responsibility.
Underlying futures contract
A futures contract that supports an option on that future, which is executed if the option is exercised .
Underlying security
For options, the security that is subject to purchase or sold upon exercise of an option contract. For example, IBM stock is the underlying security for IBM options. For Depository receipts, the class, series, and number of the foreign shares represented by the depository receipt.
Undermargined account
A margin account that no longer meets minimum maintenance requirements, requiring a margin call on the investor.
Underperform
In general, this means to do worse than some particular benchmark. Mutual Fund XYZ is said to underperform the S&P500 if its return falls short of the S&P500 return. However, this language does not take risk into account. That is, one might have a lower return than the benchmark in a particular year because of lower risk exposure. Underperform is also a term used by analysts to describe the prospects of a particular company. Usually, this means that the company will do worse than its industry average. Related: outperform.
Underpricing
Issuing securities at less than their market value.
Undertakings for Collective Investments in Transferable Securities (UCITS)
A European Union initiative where UCITS refers to a set of Directives establishing a harmonized legal framework for the creation, management and marketing of collective investment schemes in the EU (and EEA) Member States. There is a long history which is detailed below.
Undertakings for Collective Investments in Transferable Securities (UCITS I)
The aim of the original UCITS Directive 85/611/EEC, adopted in 1985, was to allow for open-ended funds investing in transferable securities to be subject to the same regulation in every Member State. Under UCITS I, derivatives could only be used for hedging and efficient portfolio management, that is with the aim of reducing risk or cost, or to replicate a position that could otherwise be achieved through investing in the underlying asset.
Undertakings for Collective Investments in Transferable Securities II (UCITS II)
In the early 1990s attempts were made to amend the 1985 Directive and more successfully harmonize laws throughout Europe, since several obstacles become apparent in following UCITS I. Individual marketing rules in each Member State created obstacles to crossborder marketing of UCITS. The limited definition of permitted investments for UCITS also weakened the marketing possibilities of a UCITS. Attempts to reform UCITS in the 1990s faltered and it was not until the introduction in 2001 of Directive 2001/108/EC (generally known as the "Product Directive") and Directive 2001/107/EC (generally known as the "Management Directive") that substantive change was eventually introduced (the Product and Management Directives are UCITS III).
Undertakings for Collective Investments in Transferable Securities III (UCITS III)
A set of Directives adopted in December 2001 which amended UCITS I. UCITS III consists of two directives, a "Product Directive" and a "Management Directive".
1) Product Directive: Product Directive removes barriers to the cross border marketing of units of collective investment funds by allowing funds to invest in a wider range of financial instruments including derivatives.
2) Management Directive: Management Directive gives management companies a "European Passport" to operate throughout the EU, which widens the range of activities management companies are allowed to take and also assists the cross-border marketing.
The UCITS III revision gave asset managers a broader scope. At the same time, the requirements on investor protection were increased and called for an independent risk management function (to limit/monitor leverage, counterparty risk, concentration limits, etc.). UCITS III expanded the range of available investments to include derivatives for investment purposes, other UCITS and cash. This dramatically increased investor choice, allowing for cash funds, funds of fund, mixed asset funds and absolute return UCITS or UCITS hedge funds. This has allowed a number of hedge fund strategies to be accommodated within the UCITS format such as equity long/short, relative value, etc. Some strategies, however, remain difficult to implement within the UCITS framework because the underlying asset class is not permissible (for example, individual commodities or bank loans) or because of the lack of liquidity (for example, distressed debt).
Undertakings for Collective Investments in Transferable Securities IV (UCITS IV)
The proposal of UCITS IV was approved by the European Parliament on January 13, 2009 and also by the Council of European Union, to be implemented in 2011. UCITS IV will bring further uniformity in collective investments throughout European Union. The UCITS IV directive introduced the management company passport and allows a UCITS to be managed by a management company authorised and supervised in a Member State other than its home Member State. UCITS IV has increased the governance (“organisational”) requirements of UCITS Management Companies and funds and has brought these requirements more in line with the Markets in Financial Instruments Directive 2004/39/ED (known as MiFID). UCITS or its management company needs to establish independent compliance and audit functions in addition to the independent risk management which was already required under UCITS III but which has been expanded to formalise the management of a variety of risks.
Undertakings for Collective Investments in Transferable Securities V (UCITS V)
The initial draft directive was released in 2012 and UCITS V was adopted by the European Parliament and Council in February 2014. There are three key elements in this proposal: (1) A new depositary regime which includes a clarification of the depositaries‟ duties, responsibilities and liabilities and a set of the rules under which responsibilities, such as sub-custodian roles) can be delegated. (2) Rules governing remuneration of fund managers including bonus caps. (3) A sanctions regime.
Undertakings for Collective Investments in Transferable Securities VI (UCITS VI)
The UCITS VI consultation document is in circulation. The EU commission asks respondents whether there is a need to review the list of eligible assets under UCITS. Other topics in the consultation paper include efficient portfolio management, OTC derivatives, liquidity management and money market funds.
Undervalued
A stock price perceived to be too low or cheap, as indicated by a particular valuation model. For instance, some might consider a particular company's stock price cheap if the company's price-earnings ratio is much lower than the industry average. To refer to undervaluation or overvaluation implicitly assumes some model of valuation. It is always possible that the security is valued correctly and that model applied is wrong.
Undervalued security
A security selling below its market value or liquidation value.
Underweight
Usually refers to recommendation that leads an investor to reduce their investment in a particular security or asset class. The reduction is usually with respect to a benchmark. Suppose that U.S. equities compose 40% of the benchmark portfolio. If one thinks the U.S. will underperform, the investor may reduce the exposure to U.S. equity to less than 40%.
Underwithholding
When a taxpayer has withheld too little tax from salary and will therefore owe tax when filing a return.
Underwrite
To guarantee, as to guarantee the issuer of securities a specified price by entering into a purchase and sale agreement. To bring securities to market.
Underwriter
A firm, usually an investment bank, that buys an issue of securities from a company and resells it to investors. In general, a party that guarantees the proceeds to the firm from a security sale, thereby in effect taking ownership of the securities.
Underwriter's discount
See: Gross spread
Underwriting
Acting as the underwriter in the issue of new securities for a firm.
Underwriting agreement
The contract between a corporation issuing new publicly offered securities and the managing underwriter as agent for the underwriting group. Compare to agreement among underwriters.
Underwriting Commission
The fee investment bankers charge for underwriting a security issue.
Underwriting fee
The portion of the gross underwriting spread that compensates the securities firms that underwrite a public offering for their services.
Underwriting income
For an insurance company, the difference between the premiums earned and the costs of settling claims.
Underwriting spread
The income that is generated by the underwriting syndicate and the selling group, which is essentially the difference between the amount paid to the issuer of securities in a primary distribution and the public offering price.
Underwriting syndicate
A group of investment banks that work together to sell new security offerings to investors. The underwriting syndicate is led by the lead underwriter. See also: Lead underwriter.
Underwritten offering
A purchase and sale.
Undigested securities
Newly issued securities that are not purchased because of lack of demand during the initial public offering.
Undistributable reserve
See Capital reserve.
Undiversifiable risk
Related: Systematic risk
Unearned income (revenue)
Income received in advance of the time at which it is earned, such as prepaid rent.
Unearned interest
Interest that has been received on a loan, but that cannot be treated as a part of earnings yet, because the principal of the loan has not been outstanding long enough.
Unemployment rate
The percentage of the people classified as unemployed as compared to the total labor force.
Unencumbered
Property that is not subject to any claims by creditors. For example, securities bought with cash instead of on margin and homes with mortgages paid off.
Unequal Voting
These provisions limit the voting rights of some shareholders and expand those of others. Under time-phased voting, shareholders who have held the stock for a given period of time are given more votes per share than recent purchases. Another variety is the substantial shareholder provision, which limits the voting power of shareholders who have exceeded a certain threshold of ownership.
Unfavorable Balance of Trade
The value of a nation's imports in excess of the value of its exports.
Unfunded debt
Debt maturing within one year (short-term debt). See: Funded debt.
Unfunded pension plan
Provides for the employer to pay out amounts to retirees or beneficiaries as and when they are needed. There is no money put aside on a regular basis. Instead, it is taken out of current income.
Unified tax credit
A federal tax credit that reduces tax liability, dollar for dollar, on lifetime gifts and asset transfers at death.
Uniform Commercial Code (UCC)
Collection of laws dealing with commercial business.
Uniform Customs and Practices (Brochure 500)
International Chamber of Commerce rules (commonly referred to as UCP 500 or ICC 500), that are used for Letters of credit. These letters then become legally binding when written into the text of the letter.
Uniform Gifts to Minors Act (UGMA)
Legislation that provides a tax-effective manner of transferring property to minors without the complications of trusts or guardianship restrictions.
Uniform practice code
Standards of the NASD prescribing procedures for handling over-the-counter securities transactions, such as delivery, settlement date, and ex-dividend date.
Uniform Rules for Collections
International Chamber of Commerce rules on the handling of documentary and clean collections.
Uniform securities agent state law examination
A test required in some states for registered representatives who are employees of member firms of the NASD or over-the-counter brokers.
Uniform Transfers to Minors Act (UTMA)
A law similar to the Uniform Gifts to Minors Act that extends the definition of gifts to include real estate, paintings, royalties, and patents.
Unilateral transfers
Items in the current account of the balance of payments of a country's accounting books that correspond to gifts from foreigners or pension payments to foreign residents who once worked in the particular country.
Unincorporated joint venture
A joint venture in which the legal means of dividing the project's equity is by shareholdings in a company.
Uninsured motorist insurance
Insurance that covers the policyholder and family if they are injured by a hit-and-run or uninsured motorist, assuming the other driver is at fault.
Unique Diversification Benefit
Reduction in the likelihood of financial distress for a conglomerate firm that comes with its diversified investments.
Unique risk
Also called unsystematic risk or idiosyncratic risk. Specific company risk that can be eliminated through diversification. See: Diversifiable risk and unsystematic risk.
Uninvested
Usually refers to cash that could be invested but is being held in reserve.
Unissued stock
Shares authorized in a corporation's charter, but not issued.
Unit
More than one class of securities traded together (e.g., one common share and three subscription warrants).
Unit benefit formula
Method used to determine a participant's benefits in a defined benefit plan. Involves multiplying years of service by the percentage of salary.
Unit investment trust
Money invested in a portfolio whose composition is fixed for the life of the fund. Shares in a unit trust are called redeemable trust certificates, and they are sold at a premium to net asset value.
Unit Share Investment Trust (USIT)
A unit investment trust comprising one unit of prime and one unit of score.
Unit of trading
See: Trading unit.
Unit trust
In the United Kingdom and other foreign markets, an open-end mutual fund.
United States Customs Service
An agency of the Treasury Department charged with enforcing laws relative to imports.
United States government securities
Debt issues of the U.S. government, as distinguished from government-sponsored agency issues.
Universal life
A whole life insurance product whose investment component pays a competitive interest rate rather than the below-market crediting rate.
Universe of securities
A group of stocks having a common feature, such as similar outstanding market capitalization or same product line.
Unleveraged beta
The beta of an unleveraged required return (i.e., no debt) on an investment when the investment is financed entirely by equity.
Unleveraged program
The use of borrowed funds to finance less than 50% of a purchase of assets. In a leveraged program borrowed funds are used to finance more than 50%.
Unleveraged required return
The required return on an investment when the investment is financed entirely by equity (i.e., no debt).
Unlevered cost of equity
The discount rate appropriate for an investment that it is financed with 100% equity.
Unlimited liability
Full liability for the debt and other obligations of a legal entity. The general partners of a partnership have unlimited liability.
Unlimited marital deduction
An Internal Revenue Service provision that allows an individual to transfer an unlimited amount of assets to a spouse, during life or at death, without incurring federal estate or gift tax.
Unlimited tax bond
A municipal bond secured by the pledge to levy taxes until full repayment at an unlimited rate.
Unlisted security
A security traded in the over-the-counter market that is not listed on an orgainzed exchange.
Unlisted trading
Trading in unlisted securities that occurs on an organized exchange to accommodate members. This practice is not permitted at the NYSE.
Unloading
Selling securities or commodities whose prices are dropping to minimize loss.
Unmargined account
A cash account held at a brokerage firm.
Unmatched book
If the average maturity of a bank's liabilities is shorter than that of its assets, it is said to be running an unmatched book. The term is commonly used with the Euromarket. Also refers to entering into OTC derivatives contracts and not hedging by making trades in the opposite direction to another financial intermediary. In this case, the firm with an unmatched book usually hedges its net market risk with futures and options. Related expressions: Open book and short book.
Unnonagintillion
A unit of quantity equal to 10276 (1 followed by 276 zeros).
Unpaid dividend
A dividend declared by the directors of a corporation that has not yet been paid.
Unquadragintillion
A unit of quantity equal to 10126 (1 followed by 126 zeros).
Unqualified opinion
An independent auditor's opinion that a company's financial statements comply with accepted accounting procedures. Antithesis of qualified opinion.
Unrealized capital gain/loss
An increase/decrease in the value of a security that is not "real" because the security has not been sold. Once a security is sold by the portfolio manager, the capital gains/losses are "realized" by the fund, and any payment to the shareholder is taxable during the tax year in which the security is sold.
Unrelated Business Tax Income
Income earned by a tax-exempt entity that does not result from tax-exempt activities. The entity may owe taxes on this income.
Upsize option
Upsize option is an option in IPO to increase the size of offering when the demand is high.
Usance
The time allowed for settlement of a draft.
Usance Draft
See: Time Draft
Usance Letter of Credit
A letter of credit payable at a determined future date after presentation of conforming documents.
Unoctogintillion
A unit of quantity equal to 10246 (1 followed by 246 zeros).
Unseasoned issue
Issue of a security for which there is no existing market. See: Seasoned issue.
Unsecured debt
Debt that does not identify specific assets that the debtholder is entitled to in case of default.
Unseptuagintillion
A unit of quantity equal to 10216 (1 followed by 216 zeros).
Unsexagintillion
A unit of quantity equal to 10186 (1 followed by 186 zeros).
Unsterilized intervention
Foreign exchange market intervention in which the monetary authorities have not insulated their domestic money supplies from the foreign exchange transactions.
Unsystematic risk
Also called the diversifiable risk or residual risk. The risk that is unique to a company such as a strike, the outcome of unfavorable litigation, or a natural catastrophe that can be eliminated through diversification. Related: Systematic risk.
Unquinquagintillion
A unit of quantity equal to 10156 (1 followed by 156 zeros).
Untrigintillion
A unit of quantity equal to 1096 (1 followed by 96 zeros).
Unvigintillion
A unit of quantity equal to 1066 (1 followed by 66 zeros).
Unwind a trade
Reverse a securities transaction through an offsetting transaction in the market.
Up
Market indication; willingness to go both ways (buy or sell) at the mentioned volume and market. Print; up on the ticker tape, confirming that the trade has been executed.
Up market
The period of time after a market bottom during which a security's price trends upwards.
Up tick
Plus tick.
Up volume
When a stock closes increases in value on a particular day, the volume in that stock is considered up volume. Related: Down volume.
Upgrading
Raising the quality rating of a security because of new optimism about the prospects of a firm due to tangible or intangible factors. This can increase investor confidence and push up the price of the security.
Upset price
The minimum price at which a seller of property will accept a bid at an auction.
Upside potential
The amount by which analysts or investors expect the price of a security may increase.
Upstairs market
A network of trading desks for the major brokerage firms and institutional investors, which communicate with each other by means of electronic display systems and telephones to facilitate block trades and program trades.
Upstairs order
Used for listed equity securities. Off-floor order.
Upswing
(1) An upward turn in a security's price after a period of flat or falling prices (market bottom). (2) The period during which a security's price trends upwards.
Uptick rule
SEC rule that selling short is allowed only on an up tick.
Uptick trade
A transaction that takes place at a higher price than the preceding transaction involving the same security. Related: Tick test rules.
Upturn
(1) A period of growth or rising economic activity, especially real GDP, but typically employment as well. (2) The transition of an economy from contraction to growth, also known as a trough of economic activity.
U.S. Dollar Index
Measures the U.S. dollar’s value against a basket of six overseas denominations. See also UDN, UUP.
Useful life
The expected period of time during which a depreciating asset will be productive.
US Treasury bill
US government debt with a maturity of less than a year.
US Treasury bond
US government debt with a maturity of more than 10 years.
US Treasury note
US government debt with a maturity of one to 10 years.
U.S. Treasury securities
Interest-bearing obligations if the U.S. government issued by the U.S. Department of the Treasury as a means of borrowing money to meet government expenditures not covered by tax revenues. There are three types of marketable Treasury securities-bills, notes and bonds.
Usufruct
A temporary legal right to derive profits from property owned by others, given that the property is not damaged. See: Beneficial ownership
Usury
This term is generally used to denote an illegal predatory lending practice in which a lender charges an interest rate on a loan that is considered to be excessive or in violation with interest rate limits as established by some state governments. An excessively high interest rate that is overly burdensome for the borrower. A lender may set an interest rate unreasonably high if they believe that the borrower may not be able to repay the loan and interest. Limits on interest rates vary from state to state within the U.S. See: Loan shark, Usury laws
Usury laws
Laws limiting the amount of interest that can be charged on loans.
Utility
A power company that owns or operates facilities used for the generation, transmission, or distribution of electric energy, which is regulated at state and federal levels.
Utility function
A mathematical expression that assigns a value to all possible choices. In portfolio theory, the utility function expresses the preferences of economic entities with respect to perceived risk and expected return.
Utility revenue bond
A municipal bond issued to finance the construction of public utility services. These bonds are repaid from the operating revenues the project produces after the utility is finished.
Utility value
The welfare a given investor assigns to an investment with a particular expected return and risk.

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Copyright © 2017, Campbell R. Harvey. All Worldwide Rights Reserved. Do not reproduce without explicit permission.

[Version 8 November 2016.]


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