. 14
( 34 .)


General cash offer A public offering made to investors at large.

General obligation bonds Municipal securities secured by the issuer's pledge of its full faith, credit, and
taxing power.

General partner A partner who has unlimited liability for the obligations of the partnership.

General partnership A partnership in which all partners are general partners.

Generally Accepted Accounting Principals (GAAP) A technical accounting term that encompasses the
conventions, rules, and procedures necessary to define accepted accounting practice at a particular time.
Dictionary of Finantial and Business Terms
Lico Reis “ Consultoria & Línguas
Generic Refers to the characteristics and/or experience of the total universe of a coupon of MBS sector type;
that is, in contrast to a specific pool or collateral group, as in a specific CMO issue.

Geographic risk Risk that arises when an issuer has policies concentrated within certain geographic areas,
such as the risk of damage from a hurricane or an earthquake.

Geometric mean return Also called the time weighted rate of return, a measure of the compounded rate of
growth of the initial portfolio market value during the evaluation period, assuming that all cash distributions
are reinvested in the portfolio. It is computed by taking the geometric average of the portfolio subperiod

Gestation repo A reverse repurchase agreement between mortgage firms and securities dealers. Under the
agreement, the firm sells federal agency-guaranteed MBS and simultaneously agrees to repurchase them at a
future date at a fixed price.

Gilts British and Irish government securities.

Ginnie Mae See:Government National Mortgage Association.

Give up The loss in yield that occurs when a block of bonds is swapped for another block of lower-coupon
bonds. Can also be referred to as "after-tax give up" when the implications of the profit or loss on taxes are

Glass-Steagall Act A 1933 act in which Congress forbade commercial banks to own, underwrite, or deal in
corporate stock and corporate bonds.

Global bonds Bonds that are designed so as to qualify for immediate trading in any domestic capital market
and in the Euromarket.

Global fund A mutual fund that can invest anywhere in the world, including the U.S.

Globalization Tendency toward a worldwide investment environment, and the integration of national capital

GMCs (guaranteed mortgage certificates) First issued by Freddie Mac in 1975, GMCs, like PCs, represent
undivided interest in specified conventional whole loans and participations previously purchased by Freddie

GNMA-I Mortgage-backed securities (MBS) on which registered holders receive separate principal and
interest payments on each of their certificates, usually directly from the servicer of the MBS pool. GNMA-I
mortgage-backed securities are single-issuer pools.

GNMA-II Mortgage-backed securities (MBS) on which registered holders receive an aggregate principal and
interest payment from a central paying agent on all of their certificates. Principal and interest payments are
disbursed on the 20th day of the month. GNMA-II MBS are backed by multiple-issuer pools or custom pools
(one issuer but different interest rates that may vary within one percentage point). Multiple-issuer pools are
known as "Jumbos." Jumbo pools are generally longer and offer certain mortgages that are more
geographically diverse than single-issuer pools. Jumbo pool mortgage interest rates may vary within one
percentage point.

GNMA Midget A GNMA pass-through certificate backed by fixed rate mortgages with a 15 year maturity.
GNMA Midget is a dealer term and is not used by GNMA in the formal description of its programs.

Gnomes Freddic Mac's 15-year, fixed-rate pass-through securities issued under its cash program.
Dictionary of Finantial and Business Terms
Lico Reis “ Consultoria & Línguas
Go-around When the Fed offers to buy securities, to sell securities, to do repo, or to do reverses, it solicits
competitive bids or offers from all primary dealers.

Going-private transactions Publicly owned stock in a firm is replaced with complete equity ownership by a
private group. The shares are delisted from stock exchanges and can no longer be purchased in the open

Gold exchange standard A system of fixing exchange rates adopted in the Bretton Woods agreement. It
involved the U.S. pegging the dollar to gold and other countries pegging their currencies to the dollar.

Gold standard An international monetary system in which currencies are defined in terms of their gold
content and payment imbalances between countries are settled in gold. It was in effect from about 1870-1914.

Golden parachute Compensation paid to top-level management by a target firm if a takeover occurs.

Good delivery A delivery in which everything - endorsement, any necessary attached legal papers, etc. - is in

Good delivery and settlement procedures Refers to PSA Uniform Practices such as cutoff times on delivery
of securities and notification, allocation, and proper endorsement.

Good 'til canceled Sometimes simply called "GTC", it means an order to buy or sell stock that is good until
you cancel it. Brokerages usually set a limit of 30-60 days, at which the GTC expires if not restated.

Goodwill Excess of the purchase price over the fair market value of the net assets acquired under purchase

Government bond See: Government securities.

Government National Mortgage Association (Ginnie Mae) A wholly owned U.S. government corporation
within the Department of Housing & Urban Development. Ginnie Mae guarantees the timely payment of
principal and interest on securities issued by approved servicers that are collateralized by FHA-issued, VA-
guaranteed, or Farmers Home Administration (FmHA)-guaranteed mortgages.

Government sponsored enterprises Privately owned, publicly chartered entities, such as the Student Loan
Marketing Association, created by Congress to reduce the cost of capital for certain borrowing sectors of the
economy including farmers, homeowners, and students.

Government securities Negotiable U.S. Treasury securities.

Graduated-payment mortgages (GPMs) A type of stepped-payment loan in which the borrower's payments
are initially lower than those on a comparable level-rate mortgage. The payments are gradually increased over
a predetermined period (usually 3,5, or 7 years) and then are fixed at a level-pay schedule which will be
higher than the level-pay amortization of a level-pay mortgage originated at the same time. The difference
between what the borrower actually pays and the amount required to fully amortize the mortgage is added to
the unpaid principal balance.

Graham-Harvey Measure 1 Performance measure invented by John Graham and Campbell Harvey. The
idea is to lever a fund's portfolio to exactly match the volatility of the S and P 500. The difference between the
fund's levered return and the S&P 500 return is the performance measure.

Graham-Harvey Measure 2 Performance measure invented by John Graham and Campbell Harvey. The
idea is to lever the S&P 500 portfolio to exactly match the volatility of the fund. The difference between the
fund's return and the levered S&P 500 return is the performance measure.
Dictionary of Finantial and Business Terms
Lico Reis “ Consultoria & Línguas
Grantor trust A mechanism of issuing MBS wherein the mortgages' collateral is deposited with a trustee
under a custodial or trust agreement.

Gray market Purchases and sales of eurobonds that occur before the issue price is finally set.

Greenmail Situation in which a large block of stock is held by an unfriendly company, forcing the target
company to repurchase the stock at a substantial premium to prevent a takeover.

Greenshoe option Option that allows the underwriter for a new issue to buy and resell additional shares.

Gross domestic product (GDP) The market value of goods and services produced over time including the
income of foreign corporations and foreign residents working in the U.S., but excluding the income of U.S.
residents and corporations overseas.

Gross interest Interest earned before taxes are deducted.

Gross national product (GNP) Measures and economy's total income. It is equal to GDP plus the income
abroad accruing to domestic residents minus income generated in domestic market accruing to non-residents.

Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying
for the cost of goods sold.

Gross spread The fraction of the gross proceeds of an underwritten securities offering that is paid as
compensation to the underwriters of the offering.

Group of five (G-5) The five leading countries (France, Germany, Japan, United Kingdom, and the U.S.) that
meet periodically to achieve some cooperative effort on international economic issues. When currency issues
are discussed, the monetary authorities of these nations hold the meeting.

Group of seven (G-7) The G-5 countries plus Canada and Italy.

Group rotation manager A top-down manager who infers the phases of the business cycle and allocates
assets accordingly.

Growing perpetuity A constant stream of cash flows without end that is expected to rise indefinitely.

Growth manager A money manager who seeks to buy stocks that are typically selling at relatively high P/E
ratios due to high earnings growth, with the expectation of continued high or higher earnings growth.

Growth opportunity Opportunity to invest in profitable projects.

Growth phase A phase of development in which a company experiences rapid earnings growth as it produces
new products and expands market share.

Growth rates Compound annual growth rate for the number of full fiscal years shown. If there is a negative
or zero value for the first or last year, the growth is NM (not meaningful).

Growth stock Common stock of a company that has an opportunity to invest money and earn more than the
opportunity cost of capital.

Guaranteed insurance contract A contract promising a stated nominal interest rate over some specific time
period, usually several years.

Guaranteed investment contract (GIC) A pure investment product in which a life company agrees, for a
single premium, to pay the principal amount of a predetermined annual crediting (interest) rate over the life of
the investment, all of which is paid at the maturity date.
Dictionary of Finantial and Business Terms
Lico Reis “ Consultoria & Línguas
Guarantor program Under the Freddie Mac program, the aggregation by a single issuer (usually an S&L)
for the purpose of forming a qualifying pool to be issued as PCs under the Freddie Mac guarantee.

Haircut The margin or difference between the actual market value of a security and the value assessed by the
lending side of a transaction (ie. a repo).

Handle The whole-dollar price of a bid or offer is referred to as the handle (ie. if a security is quoted at
101.10 bid and 101.11 offered, 101 is the handle). Traders are assumed to know the handle.

Hard capital rationing Capital rationing that under no circumstances can be violated.

Hard currency A freely convertible currency that is not expected to depreciate in value in the foreseeable

Harmless warrant Warrant that allows the user to purchase a bond only by surrendering an existing bond
with similar terms.

Head & shoulders In technical analysis, a chart formation in which a stock price reaches a peak and declines,
rises above its former peak and again declines and rises again but not to the second peak and then again
declines. The first and third peaks are shoulders, while the second peak is the formation's head. Technical
analysts generally consider a head and shoulders formation to be a very bearish indication.

Hedge A transaction that reduces the risk of an investment.

Hedge fund A fund that may employ a variety of techniques to enhance returns, such as both buying and
shorting stocks based on a valuation model.

Hedge ratio (delta) The ratio of volatility of the portfolio to be hedged and the return of the volatility of the
hedging instrument.

Hedged portfolio A portfolio consisting of the long position in the stock and the short position in the call
option, so as to be riskless and produce a return that equals the risk-free interest rate.

Hedgie Slang for a hedge fund.

Hedging A strategy designed to reduce investment risk using call options, put options, short selling, or futures
contracts. A hedge can help lock in existing profits. Its purpose is to reduce the volatility of a portfolio, by
reducing the risk of loss.

Hedging demands Demands for securities to hedge particular sources of consumption risk, beyond the usual
mean-variance diversification motivation.

Hell-or-high-water contract A contract that obligates a purchaser of a project's output to make cash
payments to the project in all events, even if no product is offered for sale.

Herstatt risk The risk of loss in foreign exchange trading that one party will deliver foreign exchange but the
counterparty financial institution will fail to deliver its end of the contract. It is also referred to as settlement

High-coupon bond refunding Refunding of a high-coupon bond with a new, lower coupon bond.

High price The highest (intraday) price of a stock over the past 52 weeks, adjusted for any stock splits.

High-yield bond See:junk bond.

Highly leveraged transaction (HLT) Bank loan to a highly leveraged firm.
Dictionary of Finantial and Business Terms
Lico Reis “ Consultoria & Línguas
Historical exchange rate An accounting term that refers to the exchange rate in effect when an asset or
liability was acquired.

Hit A dealer who agrees to sell at the bid price quoted by another dealer is said to "hit" that bid.

Holder-of-record date The date on which holders of record in a firm's stock ledger are designated as the
recipients of either dividends or stock rights. Also called date of record.

Holding company A corporation that owns enough voting stock in another firm to control management and
operations by influencing or electing its board of directors.

Holding period Length of time that an individual holds a security.

Holding period return The rate of return over a given period.

Homemade dividend Sale of some shares of stock to get cash that would be similar to receiving a cash


. 14
( 34 .)