<<

. 20
( 34 .)



>>


Market timing costs Costs that arise from price movement of the stock during the time of the transaction
which is attributed to other activity in the stock.

Market value (1) The price at which a security is trading and could presumably be purchased or sold. (2) The
value 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, with the weights proportional to outstanding market value.

Market-book ratio Market price of a share divided by book value per share.

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.

Marketability A negotiable security is said to have good marketability if there is an active secondary market
in which it can easily be resold.

Marketed claims Claims that can be bought and sold in financial markets, such as those of stockholders and
bondholders.

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.

Markowitz diversification A strategy that seeks to combine assets a portfolio 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.

Markowitz efficient set of portfolios The collection of all efficient portfolios, graphically referred to as the
Markowitz efficient frontier.

Master limited partnership (MLP) A publicly traded limited partnership.

Matador market The foreign market in Spain.
90
Dictionary of Finantial and Business Terms
Lico Reis “ Consultoria & Línguas
licoreis@terra.com.br
Match fund 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 distribution of maturities of its assets and liabilities are
equal.

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.

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.

Mature To cease to exist; to expire.

Maturity 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 factoring Factoring arrangement that provides collection and insurance of accounts receivable.

Maturity phase A phase of company development in which earnings continue to grow at the rate of the
general economy. Related: Three-phase DDM.

Maturity spread The spread between any two maturity sectors of the bond market.

Maturity value Related: par value.

Maximum price fluctuation The maximum amount the contract price can change, up or down, during one
trading session, as fixed by exchange rules in the contract specification. Related: limit price.

MBS Depository A book-entry depository for GNMA securities. The depository was initially operated by
MBSCC and is currently in the process of becoming 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.

Mean The expected value of a random variable.

Mean of the sample The arithmetic average; that is, the sum of the observations divided by the number of
observations.

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 that leads to biases in
estimated parameters.
91
Dictionary of Finantial and Business Terms
Lico Reis “ Consultoria & Línguas
licoreis@terra.com.br
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 the following maturity bands: 9 months to 1 year,
more than 1 year to 18 months, more than 18 months to 2 years, etc., up to 30 years.

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.

Merchandise All movable goods such as cars, textiles, appliances, etc. and 'f.o.b.' means free on board.

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.

Merger (1) Acquisition in which all assets and liabilities are absorbed by the buyer. (2) More generally, any
combination of two companies.

Mimic An imitation that sends a false signal.

Minimum price fluctuation Smallest increment of price movement possible in trading a given contract. Also
called point or tick. The zero-beta portfolio with the least risk.

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.

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).

Modeling The process of creating a depiction of reality, such as a graph, picture, or mathematical
representation.

Modern portfolio theory Principles underlying the analysis and evaluation of rational portfolio choices
based on risk-return trade-offs and efficient diversification.

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.
92
Dictionary of Finantial and Business Terms
Lico Reis “ Consultoria & Línguas
licoreis@terra.com.br
Monetary gold Gold held by governmental authorities as a financial asset.

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.

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 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 notes Publicly traded issues that may be collateralized by mortgages and MBSs.

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 and individual account plan.

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.

Monitor To seek information about an agent's behavior; a device that provides such information.

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.
93
Dictionary of Finantial and Business Terms
Lico Reis “ Consultoria & Línguas
licoreis@terra.com.br
Monthly income preferred security (MIP) Preferred stock issued by a subsidiary located in a tax haven.
The subsidiary relends the money to the parent.

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.

Mortality tables Tables of probability that individuals of various ages will die within one year.

Mortgage A loan secured by the collateral of some specified real estate property which obliges the borrower
to make a predetermined series of payments.

Mortgage bond A bond in which the issuer has granted the bondholders a lien against the pledged assets.
Collateral trust bonds

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.

Mortgage pass-through security Also called a passthrough, a security created when one or more mortgage
holders form a collection (pool) of mortgages 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 rate The interest rate on a mortgage loan.

Mortgage-Backed Securities Clearing Corporation A wholly owned subsidiary of the Midwest Stock
Exchange that operates a clearing service for the comparison, netting, and margining of agency-guaranteed
MBSs transacted for forward delivery.

Mortgage-backed securities Securities backed by a pool of mortgage loans.

Mortgagee The lender of a loan secured by property.

<<

. 20
( 34 .)



>>