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 strategies
An unhedged strategy making exclusive use of one of the following: long call strategy (buying call options), short call strategy (selling or writing call options), long put strategy (buying put options), and short put strategy (selling or writing put options). By themselves, these positions are called naked stratgies because they do not involve an offsetting or risk-reducing position in another option or the underlying security. Related: Covered, Hedge option strategies
National Association of Securities Dealers Automatic Quotation (NASDAQ) System
An electronic quotation system that provides price quotations to market participants about the more actively traded common stock issues in the OTC market. About 4,000 common stock issues are included in the NASDAQ system.
National Futures Association (NFA)
The futures industry self regulatory organization established in 1982.
National market
Related: Internal market
Nearby futures contract
When several futures contracts are considered, the contract with the closest settlement date is called the nearby futures contract. The next futures contract is the one that settles just after the nearby futures contract. The contract farthest away in time from settlement is called the most distant futures contract.
The nearest active trading month of a financial or commodity futures market. Related: Deferred futures
Negative carry
Related: Net financing cost
Negative convexity
A bond characteristic such that the price appreciation will be less than the price depreciation for a large change in yield of a given number of basis points.
Neglected firm effect
The tendency of firms that are neglected by security analysts to outperform firms that are the subject of considerable attention.
Negotiable order of withdrawal (NOW) account
Demand deposits that pay interest.
Net asset value (NAV) per share
The basis of a mutual fund's share price, which is found by subtracting from the market value of the portfolio the mutual fund's liabilities and then dividing by the number of mutual fund shares outstanding.
Net financing cost
Also called the cost of carry or, simply, carry, the difference between the cost of financing the purchase of an asset and the asset's cash yield. Positive carry means that the yield earned is greater than the financing cost; negative carry means that the financing cost exceeds the yield earned.
Net operating margin
The ratio of net operating income to net sales.
Next futures contract
The contract settling immediately after the nearby futures contract.
No-load fund
A mutual fund that does not impose a sales commission. Related: Load fund
Nominal price
Price quotations on futures for a period in which no actual trading took place.
Non-cumulative preferred stock
Preferred stock whose holders must forgo dividend payments when the company misses a dividend payment. Related: Cumulative preferred stock
Non-insured plans
Defined benefit pension plans that are not guaranteed by life insurance products. Related: Insured plans
Non-parallel shift in the yield curve
A shift in the yield curve in which yields do not change by the same number of basis points for every maturity. Related: Parallel shift in the yield curve.
Non-reproducible assets
A tangible asset with unique physical properties, like a parcel of land, a mine, or a work of art.
Normal deviate
Related: Standardized value
Normal distribution
A probability distribution forming a symmetrical bell-shaped curve.
Normal portfolio
A customized benchmark that includes all the securities from which a manager normally chooses, weighted as the manager would weight them in a portfolio.
Normalizing method
The practice of making a charge in the income account equivalent to the tax savings realized through the use of different depreciation methods for shareholder and income tax purposes, thus washing out the benefits of the tax savings reported as final net income to shareholders.
Debt instruments with maturities of less than 10 years.
Notice day
A day on which notices of intent to deliver pertaining to a specified delivery month may be issued. Related: Delivery notice
Notional principal amount
In an interest rate swap, the predetermined dollar principal on which the exchanged interest payments are based.

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