Copyright © 2002. All Worldwide Rights Reserved. Do not reproduce without explicit permission.
Order the popular hard copy version coauthored with the
2002 Pulitzer Prize winner for financial writing,
Gretchen Morgenson of the New York Times.
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Order via Barnes and Noble
- The two-character ISO 3166 country code for UKRAINE.
- The ISO 4217 currency code for the Ukraine Hryvnia.
- The two-character ISO 3166 country code for UGANDA.
- The ISO 4217 currency code for the Uganda Shilling.
- The two-character ISO 3166 country code for UNITED STATES MINOR OUTLYING ISLANDS.
- The two-character ISO 3166 country code for UNITED STATES.
- The ISO 4217 currency code for the USA Dollar.
- The two-character ISO 3166 country code for URUGUAY.
- The ISO 4217 currency code for the Uruguay Peso Uruguayo.
- The two-character ISO 3166 country code for UZBEKISTAN.
- 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.
- 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.
- Separation of a multinational firm's transfers of funds into discrete flows for specific purposes. See: Bundling.
- 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 stock position 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,
- Under the belt
- Long position in a stock.
- When an originating investment banker cannot find enough firms to underwrite a new issue.
- Describes limited interest by prospective buyers in a new issue of a security during the preoffering registration period.
- 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.
- 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.
- When a security is expected to, or does, appreciate at a slower rate than the overall market rate of performance.
- Issuing securities at less than their market value.
- 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.
- 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%.
- When a taxpayer has withheld too little tax from salary and will therefore owe tax when filing a return.
- 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.
- 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
- 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.
- 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.
- 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.
- 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.
- Unissued stock
- Shares authorized in a corporation's charter, but not issued.
- 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%.
- 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 organized exchange.
- Unlisted trading
- Trading in unlisted securities that occurs on an organized exchange to accommodate members. This practice is not permitted at the NYSE.
- 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.
- Unpaid dividend
- A dividend declared by the directors of a corporation that has not yet been paid.
- 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.
- 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.
- 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.
- 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.
- Unwind a trade
- Reverse a securities transaction through an offsetting transaction in the market.
- 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 tick
- Plus tick.
- 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.
- An upward turn in a security's price after a period of falling prices.
- 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.
- 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.
- Usury laws
- Laws limiting the amount of interest that can be charged on loans.
- 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 © 2002, Campbell R. Harvey. All Worldwide Rights Reserved. Do not reproduce without explicit permission.
[Version December 12, 2002.]
Order the popular hard copy version coauthored with the 2002 Pulitzer Prize winner for financial writing, Gretchen Morgenson of the New York Times.
Order via Amazon
Order via Barnes and Noble