Safety cushion
In a contingent immunization strategy, the difference between the initially available immunization level and the safety-net return.
Safety-net return
The minimum available return that will trigger an immunization strategy in a contingent immunization strategy.
Samurai market
The foreign market in Japan.
Savings deposits
Accounts that pay interest, typically at below-market interest rates, that do not have a specific maturity; and that usually can be withdrawn upon demand.
Scalp
To trade for small gains. It normally involves establishing and liquidating a position quickly, usually within the same day. scenario analysis The use of horizon analysis to project bond total returns under different reinvestment rates and future market yields.
Search costs
Costs associated with locating a counterparty to a trade, including explicit costs (such as advertising) and implicit costs (such as the value of time). Related: Information costs
Secondary market
The market where securities are traded after they are initially offered in the primary market.
Securities analysts
Related: Financial analysts
Securitization
The process of creating a passthrough, such as the mortgage pass- through security, by which the pooled assets become standard securities backed by those assets.
Security deposit (initial)
Synonymous with the term margin. A cash amount of funds that must be deposited with the broker for each contract as a guarantee of fulfillment of the futures contract. It is not considered as part payment or purchase. Related: Margin
Security deposit (maintenance)
Related: Maintenance margin security market line (SML) .
A description of the risk return relationship for individual securities, expressed in a form similar to the capital market line.
Sell hedge
Related: Short hedge
Sell limit order
conditional trading order that indicates that a, security may be sold at the designated price or higher. Related: Buy limit order
Sell-side analyst
Also called a Wall Street analyst, a financial analyst who works for a brokerage firm and whose recommendations are passed on to the brokerage firm's customers.
Selling short
A trade in which the investor (working through a broker) borrows a security, sells it, repurchases it at a later time, and then returns it to the party who initially loaned the security. If the price has fallen, the short seller profits. When the security is returned, the investor is said to have "covered the short position."
Semistrong form efficiency
A form of pricing efficiency where the price of the security fully reflects all public information (including, but not limited to, historical price and trading patterns). Compare weak form efficiency and strong form efficiency.
Serial bonds
Corporate bonds arranged so that specified principal amounts become due on specified dates. Related: Term bonds
Settlement date
Also called the delivery date, the designated date at which the parties to a futures contract must transact.
Settlement Price
A figure determined by the closing range which is used to calculate gains and losses in futures market accounts. Settlement prices are used to determine gains, losses, margin calls, and invoice prices for deliveries. Related: Closing range
Settlement rate
The rate suggested in Financial Accounting Standard Board (FASB) 87 for discounting the obligations of a pension plan. The rate at which the pension benefits could be effectively settled ff the pension plan wished to terminate its pension obligation.
Shareholders' letter
A section of an annual report where one can find jargon-free discussions by management of successful and failed strategies which provides guidance for the probing of the rest of the report.
Sharpe benchmark
A statistically created benchmark that adjusts for a managers' index-like tendencies.
Sharpe Index
A measure of a portfolio's excess return relative to the total variability of the portfolio. Related: Treynor Index
Short
One who has sold a contract to establish a market position and who has not yet closed out this position through an offsetting purchase; the opposite of a long. Related: Long
Short hedge
The sale of a futures contract(s) to eliminate or lessen the possible decline in value ownership of an approximately equal amount of the actual financial instrument or physical commodity. Related: Long hedge
Short position
In the cash market, a sale of securities not owned. The securities sold are borrowed. In the futures market, the sale of a futures contract with no offsetting long position. In the options market, the sale of an option with no offsetting long position.
Short selling
Establishing a market position by selling a futures contract.
Short squeeze
A situation in which a lack of supply tends to force prices upward. short straddle A straddle in which one put and one call are sold.
Short-term solvency ratios
Ratios used to judge the adequacy of liquid assets for meeting short-term obligations as they come due, including (1) the current ratio, (2) the acid-test ratio, (3) the inventory turnover ratio, and (4) the accounts receivable turnover ratio.
Shortfall risk
The risk of falling short of any investment target.
Simple linear regression
A regression analysis between only two variables, one dependent and the other explanatory.
Simple linear trend model
An extrapolative statistical model that asserts that earnings have a base level and grow at a constant amount each period.
Simple moving average
The mean, calculated at any time over a past period of fixed length.
Single-index model
Related: Market model
Single-premium deferred annuity
An insurance policy bought by the sponsor of a pension plan for a single premium. In return, the insurance company agrees to make lifelong payments to the employee (the policyholder) when that employee retires.
Sinking fund requirement
A condition included in some corporate bond indentures that requires the issuer to retire a specified portion of debt each year. Any principal due at maturity is called the balloon maturity.
Small-firm effect
The tendency of small firms (in terms of total market capitalization) to outperform the stock market (consisting of both large and small firms).
Specialist
On an exchange, the member firm that is designated as the market maker (or dealer for a listed common stock. Only one specialist can be designated for a given stock, but dealers may be specialists for several stocks. In contrast, there can be multiple market makers 'in the OTC market.
Speculator
One, who attempts to anticipate price changes and, through buying and selling contracts, aims to make profits. A speculator does not use the market in connection with the production, processing, marketing or handling of a product.
Speed
Related: Prepayment speed
Spot markets
Related: Cash markets
Spot month
The nearest delivery month on a futures contract.
Spot price
The current market price of the actual physical commodity. Also called cash price.
Spot rate
The theoretical yield on a zero-coupon Treasury security.
Spot rate curve
The graphical depiction of -the relationship between the spot rates and maturity.
Spread
The simultaneous purchase and sale of separate futures or options contracts for the same commodity for delivery in different months. Also known as a straddle.
Spread income
Also called margin income, the difference between income and cost. For a depository institution, the difference between the assets it invests in (loans and securities) and the cost of its funds (deposits and other sources).
Spread strategy
A strategy that involves a position in one or more options so that the cost of buying an option is funded entirely or in part by selling another option in the same underlying.
Standard deviation
The square root of the variance. A measure of dispersion of a set of data from their mean.
Standardized value
Also called the normal deviate, the distance of one data point from the mean, divided by the standard deviation of the distribution.
Stated conversion price
At the time of issuance of a convertible security, the price the issuer effectively grants the securityholder to purchase the common stock, equal to the par value of the convertible security divided by the conversion ratio.
Statutory surplus
The surplus of an insurance company determined by the accounting treatment of both assets and liabilities as established by state statutes. Related: Regulatory surplus, Economic surplus
Steepening of the yield curve
A change in the yield curve where the spread between the yield on a long-term and short-term Treasury has increased. Compare flattening of the yield curve and butterfly shift.
Step-up bond
A bond that pays a lower coupon rate for an initial period which then increases to a higher coupon rate. Related: Deferred-interest bond, Payment-in-kind bond
Stochastic models
Liability-matching models that assume that the liability payments and the asset cash flows are uncertain. Related: Deterministic models
Stock exchanges
Formal organizations, approved and regulated by the Securities and Exchange Commission (SEC), that are made up of members that use the facilities to exchange certain common stocks. The two major national stock exchanges are the New York Stock Exchange (NYSE) and the American Stock Exchange (ASE or AMEX). Five regional stock exchanges include the Midwest, Pacific, Philadelphia, Boston, and Cincinnati. The Arizona Stock Exchange is an after hours electronic marketplace where anonymous participants trade stocks via personal computers.
Stock index option
An option in which the underlying is a common stock index.
Stock market
Also called the equity market, the market for trading equities.
Stock option
An option in which the underlying is the common stock of a corporation.
Stock replacement strategy
A strategy for enhancing a portfolio's return, employed when the futures contract is expensive based on its theoretical price, involving a swap between the futures, Treasury bills portfolio and a stock portfolio.
Stop-limit order
A stop order that designates a price limit. In contrast to the stop order, which becomes a market order ff the stop is reached, the stop-limit order becomes a limit order ff the stop is reached.
Stop order (or stop)
An order to buy or sell at the market when a definite price is reached, either above (on a buy) or below (on a sell) the price that prevailed when the order was given.
Straddle
urchase or sale of an equal number of puts and calls with the same terms at the same time. Related: Spread
traight value
Also called investment value, the value of a convertible security without the con-version option.
Stratified equity indexing
A method of constructing a replicating portfolio in which the stocks in the index are classified into stratum, and each stratum is represented in the portfolio.
Stratified sampling approach to indexing
An approach in which the index is divided into cells, each representing a different characteristic of the index, such as duration or maturity.
Stratified sampling bond indexing
A method of bond indexing that divides the index into cells, each cell representing a different characteristic, and that buys bonds to match those characteristics.
Strike index
For a stock index option, the index value at which the buyer of the option can buy or sell the underlying stock index. The strike index is converted to a dollar value by multiplying by the option's contract multiple. Related: Strike price
Strike price
The price at which an option can be converted by exercise into the underlying futures contract.
Strong form efficiency
Pricing efficiency, where the price of a, security reflects all information, whether or not it is publicly available. Related: Weak form efficiency, Semistrong form efficiency
Structured portfolio strategy
A strategy in which a portfolio is designed to achieve the performance of some predetermined liabilities that must be paid out in the future.
Structured settlement
An agreement in settlement of a lawsuit involving specific payments made over a period of time. Property and casualty insurance companies often buy life insurance products to pay the costs of such settlements.
Subject to opinion
An auditor's opinion reflecting acceptance of a company's financial statements subject to pervasive uncertainty that cannot be adequately measured, such as information relating to the value of inventories, reserves for losses, or other matters subject to judgment.
Subordinated debenture bond
An unsecured bond that ranks after secured debt, after debenture bonds, and often after some general creditors in its claim on assets and earnings. Related: Debenture bond, Mortgage bond, Collateral trust bonds
Subperiod return
The return of a portfolio over a shorter period of time than the evaluation period.
Substitution swap
A swap in which a money manager exchanges one bond for another bond that is similar in terms of coupon, maturity, and credit quality, but offers a higher yield.
Surplus management
Related: Asset management
Swap assignment
Related: Swap sale
Swap buy-back
The sale of an interest rate swap by one counterparty to the other, effectively ending the swap.
Swap option
Related: Quality option
Swap reversal
An interest rate swap designed to end a counterparty's role in another interest rate swap, accomplished by counterbalancing the original swap in maturity, reference rate, and notional amount.
Swap sale
Also called a swap assignment, a transaction that ends one counterparty's role in an interest rate swap by substituting a new counterparty whose credit is acceptable to the other original counterparty.
Swaptions
Options on interest rate swaps. The buyer of a swaption has the right to enter into an interest rate swap agreement by some specified date in the ' future. The swaption agreement will specify whether the buyer of the swaption will be a fixed-rate receiver or a fixed-rate payer. The writer of the swaption becomes the counterparty to the swap if the buyer exercises.
Switching
Liquidating an existing position and simultaneously reinstating a position in another futures contract of the same type. symmetric cash matching An extension of cash flow matching that allows for the short- term borrowing of funds to satisfy a liability prior to the liability due date, resulting in a reduction in the cost of funding liabilities.
Synchronous data
Data available at the same time. In testing option-pricing models, the price of the option and of the underlying should be synchronous, representing the same moment in the market.
Systematic risk
Also called undiversifiable risk or market risk, the minimum level of risk that can be obtained for a portfolio by means of diversification across a large number of randomly chosen assets. Related: Unsystematic risk


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