Abnormal returns

Related: Excess returns

Accounts receivable turnover

The ratio of net credit sales to average account receivable, a measure of how quickly customers pay their bills.

Accrued interest

The accumulated coupon interest, paid to the seller of a bond by the buyer (unless the bond is in default).

Accumulated benefit obligation (ABO)

An approximate measure of the liability of the plan in the event of a termination at the date the calculation is performed. Related: Projected benefit obligation.

Acid-test ratio

Also called the quick ratio, the ratio of current assets minus inventories, accruals, and prepaid items to current liabilities.

Active portfolio strategy

A strategy that uses available information and forecasting techniques to seek a better performance than a portfolio that is simply diversified broadly. Related: Passive portfolio strategy

Actuals

The physical commodity underlying a futures contract.

Cash commodity, Physical

After-tax profit margin

The ratio of net income to net sales.

Agency basis

A means of compensating the broker of a program trade solely on the basis of commission established through bids submitted by various brokerage firms. agency incentive arrangement A means of compensating the broker of a program trade using benchmark prices for issues to be traded in determining commissions or fees.

Agency pass-throughs

Mortgage pass-through securities whose principal and interest payments are guaranteed by government agencies, such as the Government National Mortgage Association ("Ginnie Mae"), Federal Home Loan Mortgage Corporation ("Freddie Mac"), and Federal National Mortgage Association ("Fannie Mae").

Alpha

In a Jensen Index, a factor to represent the portfolio's performance that diverges from its beta, representing a measure of the manager's performance.

American Depositary Receipt (ADR)

The U.S. version of the International Depositary Receipt.

American option

An option that may be exercised at any time up to and including the expiration date. Related: European option

Annual fund operating expenses

For investment companies, the management fee and "other expenses," including the expenses for maintaining shareholder records, providing shareholders with financial statements, and providing custodial and accounting services. For 12b-1 funds, selling and marketing costs are included.

Annuity

A regular periodic payment made by an insurance company to a policyholder for a specified period of time.

Arbitrage

The simultaneous buying and selling of a security at two different prices in two different markets, resulting in profits without risk. Perfectly efficient markets present no arbitrage opportunities.

Arbitrage-free option-pricing models

Yield curve option-pricing models

Arbitrage pricing theory (APT)

An alternative model to the capital asset pricing model developed by Stephen Ross and based purely on arbitrage arguments.

Arithmetic mean return

An average of the subperiod returns, calculated by summing the subperiod returns and dividing by the number of subperiods.

Arithmetic average (mean) rate of return

Arithmetic mean return

Ask price

A dealer's price to sell a security

Bid price

Asset

Any possession that has value in an exchange.

Asset allocation decision

The decision regarding how the institution's funds should be distributed among the major classes of assets in which it may invest.

Asset-backed securities

Securities backed by assets that are not mortgage loans. Examples include assets backed by automobile loans and credit card receivables.

Asset classes

Categories of assets, such as stocks, bonds, real estate, and foreign securities.

Asset/equity ratio

The ratio of total assets to stockholders' equity.

Asset/liability management

Also called surplus management, the task of managing funds of a financial institution to accomplish the two goals of a financial institution: (1) to earn an adequate return on funds invested and (2) to maintain a comfortable surplus of assets beyond liabilities.

Asset swap

An interest rate swap used to alter the cash flow characteristics of an institution's assets so as to provide a better match with its liabilities.

Asset turnover

The ratio of net sales to total assets.

At-the-Money

An option which has a strike price that is nearest to the underlying futures price.

Attribute bias

The tendency of stocks preferred by the dividend discount model to share certain equity attributes such as low price-earnings ratios, high dividend yield, high book-value ratio, or membership in a particular industry sector.

Auditor's report

A section of an annual report containing the auditor's opinion about the veracity of the financial statements.

Average (across-day) measures

An estimation of price that uses the average or representative price of a large number of trades.

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