Campbell R. Harvey's Hypertextual Finance Glossary

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Fifth letter of a NASDAQ stock symbol specifying that the issue is the company's fourth class of preferred shares.
Measure of the U.S. money stock that consists of currency held by the public, travelers checks, demand deposits and other checkable deposits including NOW (negotiable order of withdrawal) and ATS (automatic transfer service) account balances and share draft account balances at credit unions.
Measure of the U.S. money stock that consists of M1, certain overnight repurchase agreements and certain overnight Eurodollars, savings deposits (including money market deposit accounts), time deposits in amounts of less that $100,000 and balances in money market mutual funds (other than those restricted to institutional investors).
Measure of the U.S. money stock that consists of M2, time deposits of $100,000 or more at all depository institutions, term repurchase agreements in amounts of $100,000 or more, certain term Eurodollars and balances in money market mutual funds restricted to institutional investors.
The two-character ISO 3166 country code for MOROCCO.
See: Master Air Waybill
The ISO 4217 currency code for the Moroccan Dirham.
See: Management buyout
See: Mortgage-Backed Securities Clearing Corporation
The two-character ISO 3166 country code for MONACO.
The two-character ISO 3166 country code for MOLDOVA, REPUBLIC OF.
See: Multiple discriminant analysis
The ISO 4217 currency code for the Moldovan Leu.
The two-character ISO 3166 country code for MADAGASCAR.
The ISO 4217 currency code for the Madagascar Franc.
The two-character ISO 3166 country code for MARSHALL ISLANDS.
See: Manufactured housing securities
The two-character ISO 3166 country code for MACEDONIA, THE FORMER YUGOSLAV REPUBLIC OF.
See: Monthly income preferred security
See: Market-if-touched
The ISO 4217 currency code for the Macedonian Denar.
The two-character ISO 3166 country code for MALI.
See: Master limited partnership
The two-character ISO 3166 country code for MYANMAR.
See: Money market demand account
The ISO 4217 currency code for the Myanmar (ex-Burma) Kyat.
See: Middle Market Manufacturing Exporter
The two-character ISO 3166 country code for MONGOLIA.
See: Multinational corporation
The ISO 4217 currency code for the Mongolian Tugrik.
The two-character ISO 3166 country code for MACAU.
See Market on Close.
The ISO 4217 currency code for the Macau Pataca.
The two-character ISO 3166 country code for NORTHERN MARIANA ISLANDS.
The two-character ISO 3166 country code for MARTINIQUE.
The two-character ISO 3166 country code for MAURITANIA.
The ISO 4217 currency code for the Mauritanian Ouguiya.
A short-form for Most Recent Quarter. Often used in the context of explaining company performance. MRQ earnings, for example.
The two-character ISO 3166 country code for MONTSERRAT.
See: Morgan Stanley Capital International
The two-character ISO 3166 country code for MALTA.
The ISO 4217 currency code for the Maltese Lira.
The two-character ISO 3166 country code for MAURITIUS.
The ISO 4217 currency code for the Mauritius Rupee.
The two-character ISO 3166 country code for MALDIVES.
The ISO 4217 currency code for the Maldive Islands Rufiyaa.
The two-character ISO 3166 country code for MALAWI.
The ISO 4217 currency code for the Malawian Kwacha.
The two-character ISO 3166 country code for MALAYSIA.
The ISO 4217 currency code for the Malaysian Ringgit.
The two-character ISO 3166 country code for MEXICO.
The ISO 4217 currency code for the Mexican Peso.
The two-character ISO 3166 country code for MOZAMBIQUE.
The ISO 4217 currency code for the Mozambique Metical.
Macaroni defense
A tactic used by a corporation that is the target of a hostile takeover bid involving the issue of a large number of bonds that must be redeemed at a higher value if the company is taken over.
Macaulay duration
The weighted-average term to maturity of the cash flows from a bond, where the weights are the present value of the cash flow divided by the price.
In the context of hedge funds, a style of management that takes long term strategic bets. For example, the manager might believe that the Yen will appreciate relative to the dollar over the next six months and alter the portfolio to capture this potential profit opportunity.
Macro country risks
Country risks or political risks that affect all foreign firms in a host country.
Overall risk assessment of a country without consideration of an MNC's business.
Analysis of a country's economy as a whole.
Madrid Stock Exchange (Bolsa de Madrid)
The largest of Spain's four stock exchanges.
Magic of diversification
The effective reduction of risk (variance) of a portfolio, achieved without reduction to expected returns through the combination of assets with low or negative correlations (covariances). Related: Markowitz diversification.
Mail Delay
Time a payment spends in the postal system before delivery.
Mail float
Time period that checks for payment spend in the postal system.
Mailing Date
A specific date set for the mailing of certain material to security holders such as interim reports, proxy material and dividend checks.
Appropriate ongoing adjustments to security holder records.
Maintenance call
A call for additional money or securities when a margin account falls below its exchange-mandated required level.
Maintenance fee
A yearly charge to maintain brokerage accounts, such as asset management accounts or IRAs.
Maintenance margin
The dollar amount required to be kept at the OCC throughout the life of an option contract; percentage of the dollar amount of securities that must always be kept as margin.
Maintenance margin requirement
A sum, usually smaller than but part of the original margin, that must be maintained on deposit at all times. If a customer's equity in any futures position drops to or below, the maintenance margin level, the broker must issue a margin call for the amount at money required to restore the customer's equity in the account to the original margin level. Related: Margin, margin call.
Majority shareholder
A shareholder who is part of a group that controls more than half the outstanding shares of a corporation.
Majority voting
Voting system under which corporate shareholders vote for each director separately. Related: Cumulative voting.
Make a market
Dealers are said to make a market when they quote bid and offered prices at which they stand ready to buy and sell.
Make whole provision
Related to the lump-sum payments made when a loan or bond is called, equal to the NPV of future loan or coupon payments not paid because of the call. The payment can be significant and negate the attractiveness of a call.
Making delivery
Refers to the seller's actually turning over to the buyer the assets agreed upon in a forward contract.
Malaysia Commodity Exchange
A subsidiary of the KLSE that trades interest rate futures on the three-month Kuala Lumpur Interbank offered rate.
Maloney Act
1938 legislation amending the Securities Exchange Act that regulates the OTC market.
Managed account
An investment portfolio one or more clients entrusted to a manager who decides how to invest it.
Managed float
Also known as "dirty" float, this is a system of floating exchange rates with central bank intervention to reduce currency fluctuations.
Managed Futures
In the context of hedge funds, a style of management that focuses on short-term trading in the futures market.
The people who administer a company, create policies, and provide the support necessary to implement the owners' business objectives.
Management buying
The acquisition of a controlling interest in a promising business by an outside investment group that retains existing management and places representatives on the board of directors.
Management buyout (MBO)
Leveraged buyout whereby the acquiring group is led by the firm's management.
Management/closely held shares
Percentage of shares held by persons closely related to a company, as defined by the Securities and Exchange Commission. Part of these percentages often are included in "institutional holdings"--making the combined total of these percentages over 100. There is overlap as institutions sometimes acquire enough stock to be considered by the SEC to be closely allied to the company.
Management contract
An agreement by which a company will provide its organizational and management expertise in the form of services.
Management fee
An investment advisory fee charged by the financial adviser to a fund typically on the basis of the fund's average assets, but sometimes determined on a sliding scale that declines as the dollar amount of the fund increases.
Management's discussion and analysis (MD&A)
A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial statements in the annual report.
The person or persons responsible for the overall investment decisions of a mutual fund.
Managerial decisions
Decisions concerning the operation of the firm, such as the choice of firm size, firm growth rates, and employee compensation.
Managerial flexibility
Flexibility in the timing and scale of investment provided by a real investment option.
Managing underwriter
The leading firm in an underwriting group, which originates the deal and acts as an agent for the group.
Mandatory convertibles
A debt instrument that is exchangeable at some point for equity in the form of common stock or a new issue.
Mandatory redemption schedule
Schedule according to which bond sinking fund payments must be made.
Dealing in a security to create a false appearance of active trading, in order to bring in more traders. Illegal.
Manufactured housing securities (MHS)
Loans on manufactured homes-that is, factory-built or prefabricated housing, including mobile homes.
Maple Leaf
A gold, silver, or platinum coin minted in Canada that usually trades at slightly more than its current bullion value.
Allows investors to buy securities by borrowing money from a broker. The margin is the difference between the market value of a stock and the loan a broker makes. Related: Security deposit (initial).
Margin account (stocks)
A leverageable account in which stocks can be purchased for a combination of cash and a loan. The loan in the margin account is collateralized by the stock; if the value of the stock drops sufficiently, the owner will be asked to either put in more cash, or sell a portion of the stock. Margin rules are federally regulated, but margin requirements and interest may vary among broker/dealers.
Margin requirement
A performance bond paid upon purchase of a futures contract that protects the exchange clearinghouse from loss.
Margin stock
Any stock listed on a national securities exchange, any over-the-counter security approved by the SEC for trading in the national market system, or appearing on the Board's list of over-the-counter margin stock and most mutual funds.
Margin trading
Buying securities, in part, with borrowed money.
Margin agreement
The agreement governing customers' margin accounts.
Marginal cost
The increase or decrease in a firm's total cost of production as a result of changing production by one unit.
Marginal efficiency of capital
The percentage yield earned on an additional unit of capital.
Marginal revenue
The change in total revenue as a result of producing one additional unit of output.
Marginal tax rate
The tax rate that would have to be paid on any additional dollars of taxable income earned.
Marginal utility
The change in total satisfaction as a result of consuming one additional unit of a specific good or service.
Margin call
A demand for additional funds because of adverse price movement. Maintenance margin requirement, security deposit maintenance.
Margin department
The department in a brokerage firm that monitors customers' margin accounts, ensuring that all short sales, stock purchases, and other positions are covered by the margin account balance.
Margin of profit
Gross profit divided by net sales. Used to measure a firm's operating efficiency and pricing policies in order to determine how competitive the firm is within the industry.
Margin of safety
With respect to working capital management, the difference between (1) the amount of long-term financing and (2) the sum of fixed assets and the permanent component of current assets.
Margin requirement (options)
The amount of cash an uncovered (naked) option writer is required to deposit and maintain to cover his daily position valuation and reasonably foreseeable intraday price changes.
Margin security
A security that may be bought or sold in a margin account as defined in Regulation T.
Marine Cargo Insurance
Insurance covering loss or damage to goods in transit.
Marital deduction
A tax deduction that allow spouses to transfer unlimited amounts of property to one another.
Marital trust
A trust created to allow one spouse to transfer, during life or upon death, an unlimited amount of property to his/her spouse without incurring gift or estate tax.
The amount subtracted from the selling price of securities when they are sold to a dealer in the OTC market. Also, the discounted price of municipal bonds after the market has shown little interest in the issue at the original price.
An arrangement whereby the profits or losses on a futures contract are settled each day.
Usually refers to the equity market. "The market went down today" means that the value of the stock market dropped that day.
Market analysis
An analysis of technical corporate and market data used to predict movements in the market.
Market-based forecasting
Analyzing future spot rates on the basis of a market-determined exchange rate (such as the current spot rate or forward rate).
Market-based corporate governance system
Organization of a corporation whereby the supervisory board represents a dispersed set of largely equity shareholders.
Market-book ratio
Market price of a share divided by book value per share.
Market break
See: Break
Market capitalization
The total dollar value of all outstanding shares. Computed as shares times current market price. Capitalization is a measure of corporate size.
Market capitalization rate
Expected return on a security. The market-consensus estimate of the appropriate discount rate for a firm's cash flow.
Market clearing
Total demand for loans by borrowers equals total supply of loans from lenders. The market, any market, clears at the equilibrium rate of interest or price.
Market conversion price
Also called conversion parity price, the price that an investor effectively pays for common stock by purchasing a convertible security and then exercising the conversion option. This price is equal to the market price of the convertible security divided by the conversion ratio.
Market correction
A relatively short-term drop in stock market prices, generally viewed as bringing overpriced stocks back to a level closer to companies' actual values.
Market cycle
The period between the two latest highs or lows of the S&P 500, showing net performance of a fund through both an up and a down market. A market cycle is complete when the S&P is 15% below the highest point or 15% above the lowest point (ending a down market).
Market Eye
A financial information service based in the U.K. sponsored by the ISE (International Stock Exchange of the UK and the Republic of Ireland) that provides current market and statistical information.
Market failure
The inability of arm's length markets to deliverer goods or services. A multinational corporation's market internalization advantages may take advantage of market failure.
Market-if-touched (MIT)
A price order, below market if a buy or above market if a sell, that automatically becomes a market order if the specified price is reached.
Market impact costs
The result of a bid/ask spread and a dealer's price concession. Also called price impact costs.
Market index
Market measure that consists of weighted values of the components that make up certain list of companies. A stock market tracks the performance of certain stocks by weighting them according to their prices and the number of outstanding shares by a particular formula.
Market interest rate
Rates of interest paid on deposits and other investments, determined by the interaction of the supply of and demand for funds in the money market.
Market internalization advantages
Conditions that allow a corporation to exploit the failure of an arm's length market to deliver goods or services efficiently.
Market jitters
Anxiety among many investors, causing them to sell stocks and bonds, pushing prices down.
Market letter
A newsletter analyzing the market that is written by an SEC-registered investment adviser who sells the letter to subscribers. See: Hulbert Rating.
Market maker
Used in the context of general equities. One who maintains firm bid and offer prices in a given security by standing ready to buy or sell round lots at publicly quoted prices. See: Agent, dealer, specialist.
Market microstructure
The functional setup of a market.
Market model
The market model says that the return on a security depends on the return on the market portfolio and the extent of the security's responsiveness as measured by beta. The return also depends on conditions that are unique to the firm. The market model can be graphed as a line fitted to a plot of asset returns against returns on the market portfolio. This relationship is sometimes called the single-index model.
Market Neutral
In the context of hedge funds, a style of management that has long and short equity exposure with nearly exposure on average to fluctuations in the market. However, the on average qualification is important. The risk of the longs and the shorts could fluctuate through time leading to negative returns when the market falls sharply.
Market Not Held Order
Also a market order, but the investor is allowing the floor broker to use his own discretion as to the exact timing of the execution. If the floor broker expects a decline in price and he is holding a "market not held buy order", he (she) may wait to buy, figuring that a better price will soon be available. There is no guarantee that a "market not held order" will be filled.
Market-on-Close (MOC) order
An order to trade stocks, options, or futures as close as possible to the market close. See also MOC.
Market opening
The start of formal trading on an exchange.
Market order
Used in the context of general equities. Order to buy or sell a stated amount of a security at the most advantageous price obtainable after the order is represented in the trading crowd. You cannot specify special restrictions such as all or none (AON) or good 'til canceled order (GTC) on market orders. See: Limit order.
Market order go-along/participating
Used for listed equity securities. See: Percentage order.
Market out clause
A clause that may appear in an underwriting firm commitment that releases it from its purchase requirement if there are negative securities market developments.
Market overhang
The theory that, in certain situations, institutions wish to sell their shares but postpone the sale because large orders under current market conditions would drive down the share price and that the consequent threat of securities sales will tend to retard the rate of share price appreciation. Support for this theory is largely anecdotal.
Market penetration/share
Used in the context of general equities. Percent of trading volume in a stock that a particular market maker trades.
Market Performance Committee (MPC)
A group of NYSE market oversight specialists who monitor specialists' efficiency in maintaining fair prices and orderly markets.
Market price
The last reported price at which a security was traded on an exchange.
Market research
A technical analysis of factors such as volume, price trends, and market breadth that are used to predict price movement.
Marketplace price efficiency
The degree to which the prices of assets reflect the available marketplace information. Marketplace price efficiency is sometimes estimated as the difficulty faced by active management of earning a greater return than passive management would, after adjusting for the risk associated with a strategy and the transactions costs associated with implementing a strategy.
Market portfolio
A portfolio consisting of all assets available to investors, with each asset held in proportion to its market value relative to the total market value of all assets.
Market price of risk
A measure of the extra return, or risk premium, that investors demand to bear risk. The reward-to-risk ratio of the market portfolio.
Market prices
The amount of money that a willing buyer pays to acquire something from a willing seller, when a buyer and seller are independent and when such an exchange is motivated by only commercial consideration.
Market return
The return on the market portfolio.
Market risk
Risk that cannot be diversified away. Related: Systematic risk
Market RRR (required rate of return) Schedule
A line that indicates the minimum return required by investors at each level of investment risk. The schedule begins at the risk-free interest rate and rises as risk increases.
Market sectors
The classifications of bonds by issuer characteristics, such as state government, corporate, or utility.
Market segmentation theory or preferred habitat theory
A biased expectations theory that asserts that the shape of the yield curve is determined by the supply of and demand for securities within each maturity sector.
Market share
The percentage of total industry sales that a particular company controls.
Market sweep
A second offering following a tender offer, allowing institutional investors to obtain a controlling interest at a price higher than the original offer.
Market timer
A money manager who assumes he or she can forecast when the stock market will go up and down.
Market timing
Asset allocation in which investment in the equity market is increased if one forecasts that the equity market will outperform T-bills and is decreased when the market is anticipated to underperform.
Market timing costs
Costs that arise from price movement of a stock during a transaction period but attributable to other activity in the stock.
Market tone
The general state of well-being of a securities market, based mostly on trading activity.
Market value
(1) The price at which a security is trading and could presumably be purchased or sold. (2) What investors believe a firm is worth; calculated by multiplying the number of shares outstanding by the current market price of a firm's shares.
Market value ratios
Ratios that relate the market price of the firm's common stock to selected financial statement items.
Market value-weighted index
An index of a group of securities computed by calculating a weighted average of the returns on each security in the index, where the weights are proportional to outstanding market value.
A negotiable security is said to have good marketability if there is an active secondary market in which it can easily be resold.
Marketable securities
Securities that are easily convertible to cash because there is high demand allowing them to be sold quickly.
Marketable title
A clear, reasonably incontestable title to a piece of real estate that is good for transaction purposes.
Marketed claims
Claims that can be bought and sold in financial markets, such as those of stockholders and bondholders.
Marking to market
Settling or reconciling changes in the value of futures contracts on a daily basis. Also refers to the practice of reporting the value of assets on a market rather than book value basis.
Marking up or down
The amount by which a securities dealer raises or lowers the price of a stock or bond due to changes in demand and supply.
Markowitz, Harry
Nobel laureate in economics. Father of modern portfolio theory.
Markowitz diversification
A strategy that seeks to combine in a portfolio assets with returns that are less than perfectly positively correlated, in an effort to lower portfolio risk (variance) without sacrificing return. Related: Naive diversification.
Markowitz efficient frontier
The graphical depiction of the Markowitz efficient set of portfolios representing the boundary of the set of feasible portfolios that have the maximum return for a given level of risk. Any portfolios above the frontier cannot be achieved. Any below the frontier are dominated by Markowitz efficient portfolios.
Markowitz efficient portfolio
Also called a mean-variance efficient portfolio, a portfolio that has the highest expected return at a given level of risk.
Markovian Dependence
The condition where observations in a time series are dependent on previous observations in the near term. Markovian dependence dies quickly, while long-memory effects like Hurst dependence, decay over very long time periods.
Markowitz efficient set of portfolios
The collection of all efficient portfolios, which can be graphed as the Markowitz efficient frontier.
Marks and Numbers
Identifying symbols and numbers placed by the shipper on each piece of cargo in a shipment.
Adjustment of the book value or collateral value of a security to reflect current market value.
Marriage penalty
A tax that has the effect of penalizing a married couple because they pay more tax on a joint tax return than they would if they file tax returns individually.
Married put
A put option bought at the same time as its underlying securities in order to hedge the price paid for the securities.
Marrried Put and Stock
The simultaneous purchase of stock and the corresponding number of put options. This is a limited risk strategy during the life of the puts because the stock can be sold at the strike price of the puts.
Married Put Strategy
A put and stock are considered to be married if they are bought on the same day, and the position is designated at that time as a hedge.
Master Air Waybill (MAB)
A document issued by the originating airline when and if a shipment involves more than one air carrier.
Master limited partnership (MLP)
A publicly traded limited partnership.
Master pension plan
See: Prototype plan
Matador market
The foreign market in Spain.
Matched and lost
The outcome of the flip of a coin used to determine which of two brokers who are locked in competition for equal trades may actually execute the trades.
A bank is said to match-fund a loan or other asset when it does so by buying (taking) a deposit of the same maturity. The term is commonly used in the Euromarket.
Matched book
A bank runs a matched book when the of maturities of its assets and liabilities is distribution equal.
Matched maturities
The coordination by a financial institution of the maturities of its assets (loans) and liabilities (deposits) in order to enable it to meet its obligations at the required times.
Matched orders
Used for listed equity securities. Participate in equal amounts of a trade at a certain price, particularly when two parties have the same level of priority on the exchange floor (this requires standing in the trading crowd).
Matched Sale Purchase Transactions
Transaction in which the Federal Reserve sells a government security to a dealer or a foregin central bank and agrees to buy back the security to a dealer or a foreign central bank and agrees to buy back the security on a specified date (usually within seven days) at eh same price (the reverse of a repurchase agreement). Such transaction allow the Federal Reserve to temporarily absorb excess reserves from the banking system, limiting the ability of banks to make new loans and investments.
Matched sale transaction
Applies mainly to convertible securities. Procedure whereby the Federal Reserve Bank of New York sells government securities to a nonbank dealer against payment in federal funds. The agreement requires the dealer to sell the securities back by a specified date, which ranges from 1 to 15 days. The Fed pays the dealer a rate of interest equal to the discount rate. These transactions, also called reverse repurchase agreements, decrease the money supply for temporary periods by reducing dealers' bank balances and thus excess reserves.
Matching concept
The accounting principle that requires the recognition of all costs that are associated with the generation of the revenue reported in the income statement.
Material Adverse Change or Effect
Many mergers and acquisitions contracts include a material adverse change clause that allows a company to renegotiate or walk away from a deal if the other company or its subsidiaries announces a significant event that may negatively affect its stock price or operations. See also materiality.
The importance of an event or information in influencing a company's stock price. Companies must report any material events within one month by filing SEC form 8-K.
Materials requirement planning
Computer-based systems that plan backward from the production schedule to make purchases in order to manage inventory levels.
Mathematical programming
An operations research technique that solves problems in which an optimal value is sought subject to specified constraints. Mathematical programming models include linear programming, quadratic programming, and dynamic programming.
Matif SA
The futures exchange of France.
Matrix trading
Swapping bonds in order to take advantage of temporary differences in the yield spread between bonds with different ratings or different classes.
To cease to exist; to expire.
Mature economy
The economy of a nation with a stable population and slowing economic growth.
Matured noninterest-bearing debt
Outstanding savings bonds and notes that have reached final maturity and no longer earn interest. Includes all Series A-D, F, G, 1, J, and K bonds. Series E bonds (issued between May 1941 and November 1965), Series EE (issued since January 1980), Series H (issued from June 1952 through December 1979), and savings notes issued between May 1967 and October 1970 have a final maturity of 30 years. Series HH bonds (issued since January 1980) mature after 20 years.
For a bond, the date on which the principal is required to be repaid. In an interest rate swap, the date that the swap stops accruing interest.
Maturity date
Usually used for bonds. Date that the bond finishes and is paid off. Date on which the principal amount of a note, draft, acceptance, bond, or other debt instrument becomes due and payable.
Maturity factoring
An arrangement that provides collection and insurance of accounts receivable.
Maturity phase
A stage of company development in which earnings to grow at the rate of the general economy. Related: Three-phase DDM.
Maturity spread
The difference in returns between bonds pfof different time lengths.
Maturity value
Related: Par value
Maximum capital gains mutual fund
A mutual fund whose objective is to produce capital gains by investing in small or risky rapid-growth companies.
Maximum expected return criterion (MERC)
Standard that one choose the asset with the highest anticipated return.
Maximum price fluctuation
The greatest amount by which the contract price can change, up or down, during one trading session, as fixed by exchange rules in the contract specification. Related: Limit price.
Maximum return criterion (MRC)
Standard that one choose the asset with the highest return.
May Day
The date of May 1, 1975, after which brokers were allowed to charge any brokerage commission, rather than a mandatory rate.
May expand
Used in the context of general equities. Warning that the size of the order/total may be increased. See: "more behind it."
MBS depository
A book-entry depository for GNMA securities. The depository was initially operated by MBSCC and is now a separately incorporated, participant-owned, limited-purpose trust company organized under the State of New York Banking Law.
MBS servicing
The requirement that the mortgage servicer maintain payment of the full amount of contractually due principal and interest payments whether or not actually collected.
Meals and entertainment expense
A tax deduction allowed for meals and entertainment expenses incurred in the course of business.
The expected value of a random variable. Arithmetic average of a sample.
Mean of the sample
The arithmetic average; that is, the sum of the observations divided by the number of observations.
Mean return
See: Expected return
Mean-variance analysis
Evaluation of risky prospects based on the expected value and variance of possible outcomes.
Mean-variance criterion
The selection of portfolios based on the means and variances of their returns. The choice of the higher expected return portfolio for a given level of variance or the lower variance portfolio for a given expected return.
Mean-variance efficient portfolio
Related: Markowitz efficient portfolio
Measurement error
Errors in measuring an explanatory variable in a regression, which leads to biases in estimated parameters.
Measurement Noise
See: Observational Noise.
Medallion Stamp Program
A program approved by the Securities Transfer Association that enables participating financial institutions to guarantee signatures. The Medallion programs ensure that the individual signing the certificate or stock,power is in fact the registered owner as it appears on the stock certificate or stock power. Any U.S. financial institution that belongs to a Medallion Stamp Program can provide Medallion guarantees. Such institutions include banks, savings and loans, credit unions and U.S. brokerages.
Median market cap
The midpoint of market capitalization (market price multiplied by the number of shares outstanding) of the stocks in a portfolio. Half the stocks in the portfolio will have higher market capitalizations; half will have lower.
Medium-term bond
A bond maturing in two to ten years.
Medium-Term Guarantee Program
Ex-Im Bank effort encouraging commercial lenders to finance the sale of U.S. capital equipment and services to approved foreign buyers. The Ex-IM Bank guarantees the principal and interest on these loans.
Medium-term note
A corporate debt instrument that is continuously offered to investors over a period of time by an agent of the issuer. Investors can select from maturity bands of: 9 months to 1 year, more than 1 year to 18 months, more than 18 months to 2 years, etc., up to 30 years.
Meff Renta Fija
The derivatives exchange in Barcelona, Spain, listing futures and options on fixed-interest securities and on interest rates, including the MIBOR (Madrid Interbank Offered Rate).
Meff Renta Variable
Stock index and equity derivatives market in Spain trading futures and options on the Iberian Exchange (IBEX)-35 index and on individual stocks.
Member bank
A national- or state-chartered bank that is a member of the Federal Reserve System.
Member firm
Used for listed equity securities. Brokerage firm that has at least one membership on a major stock exchange even though, by exchange rules, the membership in the name of an employee and not of the firm itself.
Membership or a seat on the exchange
A limited number of exchange positions that enable the holder to trade for the holder's own accounts and charge clients for the execution of trades for their accounts. Related: member firm.
Member short sale ratio
The total shares sold short by NYSE members divided by total short sales, which is used to analyze market expectations and bullish or bearish trends.
Used in the context of general equities. Hierarchy of choices concerning price and volume of bids or offers proposed to a customer (e.g. Menu of offerings to a customer buyer - a) 10m @ 24 1/4; b) 25m @ 24 1/2; or c) 50m @ 24 3/4).
Member short sale ratio
The total shares sold short by NYSE members divided by total short sales, which is used to analyze market expectations and bullish or bearish trends.
Mercantile agency
An organization that supplies credit ratings and reports on firms that are prospective customers.
Mercato Italiano Futures (MIF)
The Italian futures market trading Italian >Treasury bond (BTB) futures.
All movable goods such as cars, textiles, appliances, etc. and 'f.o.b.' means free on board.
Merc, the
Chicago Mercantile Exchange.
Merchant bank
A British term for a bank that specializes not in lending out its own funds, but in providing various financial services such as accepting bills arising out of trade, underwriting new issues, and providing advice on acquisitions, mergers, foreign exchange, portfolio management, etc.
The "Common Market of the South," which includes Argentina, Brazil, Paraguay, and Uruguay in a regional trade pact that reduces tariffs on intrapact trade by up to 90%.
(1) Acquisition in which all assets and liabilities are absorbed by the buyer. (2) More generally, any combination of two companies. The firm's activity in this respect is sometimes called M&A (Merger and Acquisition)
Merger Arbitrage
In the context of hedge funds, a style of management that involves the simultaneous purchase of stock in a company being acquired and the sale of stock in its acquirer.
Method of payment
The way a merger or acquisition is financed.
Mexican Stock Exchange
The only stock exchange in Mexico. The Indice de Precios y Cotizaciones, or IPC index, consists of the 35 most representative stocks chosen every two months.
Mezzanine bracket
The members of an underwriting group with involvement large enough to be in the second participation tier from the top.
Mezzanine level
The period in a company's development just before it goes public.
Mezzanine financing
The next stage of financing that follows venture capital financing.
Micro-cap stock
See: Penny stock
Micro country risks
Country or political risks that are specific to an industry, company, or project within a host country.
The risk assessment of a country as related to an MNC's type of business.
Analysis of the behavior of individual economic units such as companies, industries, or households.
Mid cap
A stock with a capitalization usually between $1 billion and $5 billion.
Mid-cap SPDRs
This is the same as a SPDR except the index it tracks is Standard&Poor's Mid-cap 400. This SPDR also trades on the AMEX, under the symbol MDY.
Middle Market Manufacturing Exporter (MMME)
An exporter with the following traits: 1) Manufacturer with less than 500 employees 2) Ships less than $1 Million per year (on average) overseas.
A 15 year GNMA bond; similar to a Dwarf.
Price around which a market maker derives bid and asked prices.
Milan Stock Exchange
The largest regional stock exchange in Italy, facilitating more than 90% of the country's trading volume.
Miller and Modigliani's irrelevance proposition
Theory that if financial markets are perfect, corporate financial policy (including hedging policy) is irrelevant.
Miller, Merton
Nobel Laureate and coauthor of the famous Miller-Modigliani theorems. Finance professor at the University of Chicago.
An imitation that sends a false signal.
Trading in the underwriting security of an option contract in order to manipulate its price so that the options will become in-the-money.
Minimum maintenance
The lowest required equity level that must be held with a broker in a margin account. See: margin call.
Minimum price fluctuation
Smallest increment of price movement possible in trading a given contract. Also called point or tick.
Minimum purchases
For mutual funds, the amount required to open a new account (Minimum Initial Purchase) or to deposit into an existing account (Minimum Additional Purchase). These minimums may be lowered for buyers participating in an automatic purchase plan
Minimum-variance frontier
Graph of the lowest possible portfolio variance that is attainable for a given portfolio expected return.
Minimum-variance portfolio
The portfolio of risky assets with lowest variance.
Minority interest
An outside ownership interest in a subsidiary that is consolidated with the parent for financial reporting purposes.
The symbol (-) that precedes the change figure in a stock table to indicate a closing sale lower than that of the previous day.
Minus tick
See: downtick .
Misery index
An index that sums the unemployment and inflation rates, used as a political rating or measure of consumer confidence.
Mismatch bond
Floating rate note whose interest rate is reset at more frequent intervals than the rollover period (e.g. a note whose payments are set quarterly on the basis of the one-year interest rate).
Miss the price/market
Used for listed equity securities. 1) Have an order in hand but fail to execute a transaction on terms favorable to a customer and, thus, be negligent as a broker; 2) receive an order just after a print has transpired.
Mixed account
A brokerage account holding both long and short positioned securities.
Mixed bag
Used in the context of general equities. Group of stocks which consists of some which are up, down, and neutral.
Mixed forecasting
Development of forecasts using a combination of forecasting techniques.
Mob spread
The yield spread between a tax-free municipal bond and a Treasury bond with the same maturity.
Mock trading
The simulated trading of securities used as a learning device in training investors and broker.
The process of creating a depiction of reality, such as a graph, picture, or mathematical representation.
Modern portfolio theory
Principals underlying the analysis and evaluation of rational portfolio choices based on risk-return trade-offs and efficient diversification.
Modified Accelerated Cost Recovery System (MACRS)
A 1986 act that set out rules for the depreciation of qualifying assets, allowing for greater acceleration over longer periods of time.
Modified duration
The ratio of Macaulay duration to (1 + y), where y = the bond yield. Modified duration is inversely related to the approximate percentage change in price for a given change in yield.
Modified pass-throughs
Agency pass-throughs that guarantee (1) timely interest payments and (2) principal payments as collected, but no later than a specified time after they are due. Related: fully modified pass-throughs
Modigliani and Miller Proposition I
A proposition by Modigliani and Miller which states that a firm cannot change the total value of its outstanding securities by changing its capital structure proportions. Also called the irrelevance proposition.
Modigliani and Miller Proposition II
A proposition by Modigliani and Miller which states that the cost of equity is a linear function of the firm's debt/equity-ratio.
The amount of acceleration of an economic, price, or volume movement. A trader that follows a movement strategy will purchase stocks that have recently risen in price.
Momentum indicators
Indicators used in market analysis to quantify the momentum of upward and downward price movements.
M-1, M-2 and M-3
See: money supply.
MONEP (Marche des Options Negociables de Paris)
A subsidiary of the Paris Bourse that trades stock and index options.
An economist who believes that changes in the money supply are the most important determinants of economic activity and economic cycles.
Monetary assets and liabilities
Assets and liabilities with contractual payoffs.
Monetary Control Act of 1980 (MAC)
Act which requires that all banks and all institutions that accept deposits from the public make periodic reports to the Federal Reserve System. Starting in September 1981, the Fed charged banks for a range of services that it had provided free in the past, including check clearing, wire transfer of funds and the use of automated clearinghouse facilities.
Monetary gold
Gold held by governmental authorities as a financial asset.
Monetary indicators
Economic indicators of the effects of monetary policy, such as the condition of the credit market.
Monetary policy
Actions taken by the Board of Governors of the Federal Reserve System to influence the money supply or interest rates.
Monetary/non-monetary method
Under this translation method, monetary items (e.g. cash, accounts payable and receivable, and long-term debt) are translated at the current rate while non-monetary items (e.g. inventory, fixed assets, and long-term investments) are translated at historical rates.
Monetize the debt
Financing the national debt by printing new money, which causes inflation due to a larger money supply.
Currency and coin that are guaranteed as legal tender by the government, a regulatory agency or bank.
Money base
Composed of currency and coins outside the banking system plus liabilities to the deposit money banks.
Money center banks
Banks that raise most of their funds from the domestic and international money markets , relying less on depositors for funds.
Money management
Related: Investment management.
Money manager
Related: Investment manager.
Money market
Money markets are for borrowing and lending money for three years or less. The securities in a money market can be U.S.government bonds, Treasury bills and commercial paper from banks and companies.
Money market demand account (M.M.D.A.)
An account that pays interest based on short-term interest rates.
Money market fund
A mutual fund that invests only in short term securities, such as bankers' acceptances, commercial paper, repurchase agreements and government bills. The net asset value per share is maintained at $1.00. Such funds are not federally insured, although the portfolio may consist of guaranteed securities and/or the fund may have private insurance protection.
Money market hedge
The use of borrowing and lending transactions in foreign currencies to lock in the home currency value of a foreign currency transaction.
Money market instruments
See: Cash investments
Money market notes
Publicly traded issues that may be collateralized by mortgages and Mortgage Backed Securities (MBSs).
Money market security
Short-term investment usually of less than one year.
Money market yield
A bond quotation convention based on a 360-day year and semiannual coupons. See: Bond equivalent yield.
Money purchase plan
A defined benefit contribution plan in which the participant contributes some part and the firm contributes at the same or a different rate. Also called an individual account plan.
Money order
A financial instrument backed by a deposit at a certain firm such as a bank that can be easily converted into cash.
Money rate of return
Annual money return as a percentage of asset value.
Money supply
M1-A: Currency plus demand deposits
M1-B: M1-A plus other checkable deposits.
M2: M1-B plus overnight repos, money market funds, savings, and small (less than $100M) time deposits.
M3: M-2 plus large time deposits and term repos.
L: M-3 plus other liquid assets.
To seek information about an agent's behavior; a device that provides such information.
Absolute control of all sales and distribution in a market by one firm, due to some barrier to entry of other firms, allowing the firm to sell at a higher price than the socially optimal price.
The existence of only one buyer in a market, forcing sellers to accept a lower price than the socially optimal price.
Monte Carlo simulation
An analytical technique for solving a problem by performing a large number of trail runs, called simulations, and inferring a solution from the collective results of the trial runs. Method for calculating the probability distribution of possible outcomes.
Monthly income preferred security (MIP)
Preferred stock issued by a subsidiary located in a tax haven. The subsidiary relends the money to the parent.
Monthly investment plan
A plan in which a certain amount is invested each month in order to benefit from dollar cost averaging.
Montreal Exchange/Bourse de Montreal
The oldest stock exchange in Canada trading stocks, bonds, futures, and options. The Canadian Market Portfolio Index (XXM) tracks the market performance of the 25 highest capitalized stocks traded on at least two Canadian exchanges.
Moody's investment grade
A rating of one through four assigned by Moody's Investors Service to municipal short-term bonds.
Moody's Investors Service
A leading global credit rating, research and risk analysis firm.
Moral hazard
The risk that the existence of a contract will change the behavior of one or both parties to the contract, e.g. an insured firm will take fewer fire precautions.
Moral obligation bond
A tax-exempt bond issued by a municipality or a state financial intermediary that is backed by the moral, but not legal, obligation of a state government to appropriate funds in case of default .
"More behind it"
Used in the context of general equities. More stock exists to be bought or sold by the same buyer or seller, respectively. Often, the buyer or seller does not disclose the full size of his buy or sell interest as not to affect the market adversely. See: May expand.
More flexible exchange rate system
The International Monetary Fund's name for an exchange rate system in which rates float freely.
Morgan Stanley Capital International (MSCI)
This firm publishes a number of well known benchmarks, such as the MSCI World Index.
Morgan Stanley Capital International Emerging Markets Global Index
A market capitalization-weighted benchmark index made up of equities from 29 developing countries.
Morgan Stanley Capital International Europe, Australia, Far East Index
See: EAFE Index
Morgan Stanley Capital International Europe Index
A market capitalization-weighted benchmark index made up of equities from 15 European countries. France, Germany, and the United Kingdom represent about two-thirds of the index.
Morgan Stanley Capital International Pacific Free index
A market capitalization-weighted benchmark index made up of equities from Pacific Basin countries. Japan represents about three-fourths of the index.
Morgan Stanley Capital International World Index
A market capitalization-weighted benchmark index made up of equities from 23 countries, including the United States.
Morgan Stanley REIT Index
A capitalization-weighted benchmark index of the most actively traded real estate investment trusts (REITs), designed to measure real estate equity performance.
Morningstar rating system
A system used in rating mutual funds and annuity by Morningstar Incorporated of Chicago.
Mortality tables
Tables of probability that individuals of various ages will die within one year.
A loan secured by the collateral of some specified real estate property which obliges the borrower to make a predetermined series of payments.
Mortgage-Backed Securities Clearing Corporation (MBSCC)
"Founded" in 1979, MBSCC is the sole provider of automated post-trade comparison, netting, risk management and pool notification services to the mortgage-backed securities market. The organization is a registered clearing agency with the Securities and Exchange Commission and majority-owned by its members -- MBS dealers, inter-dealer brokers and other non-broker/dealers. MBSCC provides its specialized services to major market participants active in various Government National Mortgage Association (GNMA), Fannie Mae(FNMA) and Federal Home Loan Mortgage Corporation (FHLMC) MBS programs.
Mortgage-backed securities (MSBs)
Securities backed by a pool of mortgage loans.
Mortgage banker
A company or individual that originates mortgage loans and sells them to investors, while taking care of borrowers' loan payments, records, taxes, and insurance.
Mortgage bond
A bond in which the issuer has granted the bondholders a lien against the pledged assets. See: Collateral trust bonds
Mortgage broker
A company or individual that places mortgage loans with lenders, but does not originate or service loans like a mortgage banker.
Mortgage duration
A modification of standard duration to account for the impact on duration of MBSs of changes in prepayment speed resulting from changes in interest rates. Two factors are employed: one that reflects the impact of changes in prepayment speed or price.
The lender of a loan secured by property.
Mortgage interest deduction
A federal tax deduction for interest paid on a mortgage used to acquire, construct, or improve a residence.
Mortgage life insurance
A life insurance policy that pays off the remaining balance of the insured person's mortgage at death.
Mortgage pass-through security
Also called a passthrough, a security created when one or more mortgage holders form a collection (pool) of mortgages and sells shares or participation certificates in the pool. The cash flow from the collateral pool is "passed through" to the security holder as monthly payments of principal, interest, and prepayments. This is the predominant type of MBS traded in the secondary market.
Mortgage pipeline
The period from the taking of applications from prospective mortgage borrowers to the marketing of the loans.
Mortgage-pipeline risk
The risk associated with taking applications from prospective mortgage borrowers who may opt to decline to accept a quoted mortgage rate within a certain grace period.
Mortgage pool
A group of mortgages with similar class, interest rate, and maturity characteristics.
The borrower of a loan secured by property.
Mortgage rate
The interest rate on a mortgage loan.
Mortgage REIT
An REIT that invests in loans secured by real estate which derive income from mortgage interest and fees.
Mortgage servicing
The collection of monthly payments and penalties, record keeping, payment of insurance and taxes, and possible settlement of default , involved with a mortgage loan.
Moscow Interbank Currency Exchange (MICEX)
Established in 1992, the most liquid and best organized financial exchange in Russia.
Most active list
The stocks with the highest volume of trading on a certain day.
Most distant futures contract
When several futures contracts are considered, the contract settling last. Related: nearby futures contract
Most Favored Nation
A privilege granted by one country to another whereby the products of the privileged country pay the lowest delivered duty paid charged by the granting country.
Moving average
Used in charts and technical analysis, the average of security or commodity prices constructed in a period as short as a few days or as long as several years and showing trends for the latest interval. As each new variable is included in calculating the average, the last variable of the series is deleted.
Medium term notes issued by corporations, much like shorter-term commercial paper.
A municipal utility district, which is a political subdivision that administers utility-related services, sometimes requiring the issue of special assessment bonds.
Multibuyer policy
Ex-Im Bank program that provides credit risk insurance on export sales to many different buyers.
Multicurrency clause
Such a clause on a Euro loan permits the borrower to switch from one currency to another currency on a rollover date.
Multicurrency loans
Gives the borrower the possibility of drawing a loan in different currencies.
Multifactor CAPM
A version of the capital asset pricing model derived by Robert Merton that includes extra-market sources of risk referred to as factors. Related: arbitrage pricing theory
Multifamily loans
Loans usually represented by conventional mortgages on multi-family rental apartments.
Multilateral Investment Guarantee Agency (MIGA)
Agency established by the World Bank that offers various forms of political risk insurance to corporations.
Multilateral netting system
Elimination of offsetting cash flows between a parent and several subsidiaries.
Multinational corporation (MNC)
A firm that operates in more than one country.
Multinational netting
Elimination of offsetting cash flows within a multinational corporation's books.
Multinational restructuring
Changing the terms of an MNC's assets or liabilities by mutual agreement.
Multi-option financing facility
A syndicated confirmed credit line with attached options.
Multiperiod immunization
A portfolio strategy in which a portfolio is created that will be capable of satisfying more than one predetermined future liability regardless of interest rate changes.
Multiple Arbitrage
In the context of hedge funds, a style of management where by the fund employs more than one arbitrage strategy. Portfolio manager opportunistically allocates capital among the various strategies in order to create the best risk/reward profile for the overall fund. Common strategies include merger arbitrage, convertible arbitrage, fixed income arbitrage, long/short equities pairs trading, and volatility arbitrage. In the context of equity and private equity investment, this refers to an investment in a firm where by standard multiples (earnings/price, book/price) indicate the price is far cheaper than industry averages.
Multiple-discriminant analysis (MDA)
Statistical technique for distinguishing between two groups on the basis of their observed characteristics.
Multiple-issuer pools
Under the GNMA-II program, pools formed through the aggregation of individual issuers' loan packages.
Multiple listing
An agreement used by a broker who is a member of a multiple-listing organization, providing the exclusive right to sell with an additional authority and obligation on the part of the listing broker to distribute the listing to the other brokers.
Multiple peril insurance
insurance policy which covers a wide variety of property damage.
Multiple rates of return
More than one rate of return from the same project that make the net present value of the project equal to zero. This situation arises when the IRR method is used for a project in which negative cash flows follow positive cash flows. For each sign change in the cash flows, there is a different rate of return.
Multiple regression
The estimated relationship between a dependent variable and more than one explanatory variable.
Another name for price/earnings ratios.
The investment multiplier which quantifies the overall effects of investment spending on total income. The deposit multiplier which shows the effects of a change in bank deposits on the total amount of outstanding credit and the money supply.
Multirule system
A technical trading strategy that combines mechanical rules, such as the CRISMA (cumulative volume, relative strength, moving average) Trading System of Pruitt and White.
Municipal bond
State or local governments offer muni bonds or municipals, as they are called, to pay for special projects such as highways or sewers. The interest that investors receive is exempt from some income taxes.
Municipal bond insurance
An insurance policy which guarantees payment on municipal bonds in the event of default .
Municipal bond fund
A mutual fund that invests in tax-exempt bonds issued by state, city, and/or local governments. The interest obtained from these bonds is passed through to shareholders and is generally free of federal (and sometimes state and local) income taxes.
Municipal improvement certificate
A certificate used to finance local government projects and services which is financed by a special tax assessment and provides tax-free interest .
Municipal Investment Trust (MIT)
A unit investment trust that buys municipal bonds and usually holds them until maturity, passing the bond income on to shareholders, usually tax-free.
Municipal notes
Short-term notes issued by municipalities in anticipation of tax receipts, proceeds from a bond issue, or other revenues.
Municipal revenue bond
A bond issued to finance a public project that is funded by the revenues of the project.
Mutilated security
A certificate on which the name of the issue, the issuer, or some other identifying detail cannot be read.
Mutual association
A savings and loan association organized as a cooperative, with members purchasing shares, voting on association affairs, and receiving income in the form of dividends.
Mutual company
A corporation that is owned by a group of members and that distributes income in proportion to the amount of business that members do with the company.
Mutual exclusion doctrine
The doctrine that ruled that municipal bond interest is federal tax-free. In return for this federal tax exemption, states and localities cannot tax interest generated by federal government securities.
Mutual fund
Mutual funds are pools of money that are managed by an investment company. They offer investors a variety of goals, depending on the fund and its investment charter. Some funds, for example, seek to generate income on a regular basis. Others seek to preserve an investor's money. Still others seek to invest in companies that are growing at a rapid pace. Funds can impose a sales charge, or load, on investors when they buy or sell shares. Many funds these days are no load and impose no sales charge. Mutual funds are investment companies regulated by the Investment Company Act of 1940. Related: open-end fund, closed-end fund.
Mutual fund cash-to-assets ratio
The portion of the assets of a mutual fund which exists in cash instruments.
Mutual fund custodian
A commercial bank or trust company that holds securities owned by a mutual fund and sometimes acts as transfer agent for the mutual fund.
Mutual savings bank
A state-chartered savings bank which is owned by its depositors and managed by a fiduciary board of trustees.
Mutual fund theorem
A result associated with the CAPM, asserting that investors will choose to invest their entire risky portfolio in a market-index or mutual fund.
Mutually exclusive investment decisions
Investment decisions in which the acceptance of a project precludes the acceptance of one or more alternative projects.
Mutual offset
A system, such as the arrangement between the Chicago Mercantile Exchange (CME) and Singapore International Monetary Exchange (SIMEX), which allows trading positions established on one exchange to be offset or transferred on another exchange.

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Copyright © 2002, Campbell R. Harvey. All Worldwide Rights Reserved. Do not reproduce without explicit permission.

[Version December 4, 2002.]

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