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Mortgager The borrower of a loan secured by property.

Most distant futures contract When several futures contracts are considered, the contract settling last.
Related: nearby futures contract

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.

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 Give the borrower the possibility of drawing a loan in different currencies.

Multifactor CAPM A version of the capital asset pricing model derived by Merton that includes extra-
market sources of risk referred to as factor.
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Multinational corporation A firm that operates in more than one country.

Multifamily loans Loans usually represented by conventional mortgages on multi-family rental apartments.

Multiperiod immunization A portfolio strategy in which a portfolio is created that will be capable of
satisfying more than one predetermined future liability regardless if interest rates change.

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 rate of return.

Multiple regression The estimated relationship between a dependent variable and more than one explanatory
variable.

Multiples Another name for price/earnings ratios.

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.

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.

Multi-option financing facility A syndicated confirmed credit line with attached options.

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 notes Short-term notes issued by municipalities in anticipation of tax receipts, proceeds from a
bond issue, or other revenues.

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 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.

Mutual offset A system, such as the arrangement between the CME and SIMEX, which allows trading
positions established on one exchange to be offset or transferred on another exchange.

Mutually exclusive investment decisions Investment decisions in which the acceptance of a project
precludes the acceptance of one or more alternative projects.


Naive diversification A strategy whereby an investor simply invests in a number of different assets and
hopes that the variance of the expected return on the portfolio is lowered. Related: Markowitz diversification.
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Naked option strategies An unhedged strategy making exclusive use of one of the following: Long call
strategy (buying call options ), short call strategy (selling or writing call options), Long put strategy (buying
put options ), and short put strategy (selling or writing put options). By themselves, these positions are called
naked strategies because they do not involve an offsetting or risk-reducing position in another option or the
underlying security. Related: covered option strategies.

NASDAQ National Association of Securities Dealers Automatic Quotation System. An electronic quotation
system that provides price quotations to market participants about the more actively traded common stock
issues in the OTC market. About 4,000 common stock issues are included in the NASDAQ system.

National Futures Association (NFA) The futures industry self regulatory organization established in 1982.

National market Related: internal market

Nationalization A government takeover of a private company.

Natural logarithm Logarithm to the base e (approximately 2.7183).

Nearby The nearest active trading month of a financial or commodity futures market. Related: deferred
futures

Nearby futures contract When several futures contracts are considered, the contract with the closest
settlement date is called the nearby futures contract. The next futures contract is the one that settles just after
the nearby futures contract. The contract farthest away in time from settlement is called the most distant
futures contract.

Negative amortization A loan repayment schedule in which the outstanding principal balance of the loan
increases, rather than amortizing, because the scheduled monthly payments do not cover the full amount
required to amortize the loan. The unpaid interest is added to the outstanding principal, to be repaid later.

Negative carry Related: net financing cost

Negative convexity A bond characteristic such that the price appreciation will be less than the price
depreciation for a large change in yield of a given number of basis points.

Negative covenant A bond covenant that limits or prohibits altogether certain actions unless the bondholders
agree.

Negative duration A situation in which the price of the MBS moves in the same direction as interest rates.

Negative pledge clause A bond covenant that requires the borrower to grant lenders a lien equivalent to any
liens that may be granted in the future to any other currently unsecured lenders.

Neglected firm effect The tendency of firms that are neglected by security analysts to outperform firms that
are the subject of considerable attention.

Negotiated certificate of deposit A large-denomination CD, generally $1MM or more, that can be sold but
cannot be cashed in before maturity.

Negotiated markets Markets in which each transaction is separately negotiated between buyer and seller (i.e.
an investor and a dealer).

Negotiated offering An offering of securities for which the terms, including underwriters' compensation,
have been negotiated between the issuer and the underwriters.
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Negotiated sale Situation in which the terms of an offering are determined by negotiation between the issuer
and the underwriter rather than through competitive bidding by underwriting groups.

Negotiable order of withdrawal (NOW) Demand deposits that pay interest.

Net adjusted present value The adjusted present value minus the initial cost of an investment.

Net advantage of refunding The net present value of the savings from a refunding.

Net advantage to leasing The net present value of entering into a lease financing arrangement rather than
borrowing the necessary funds and buying the asset.

Net advantage to merging The difference in total post- and pre-merger market value minus the cost of the
merger.

Net asset value (NAV) The value of a fund's investments. For a mutual fund, the net asset value per share
usually represents the fund's market price, subject to a possible sales or redemption charge. For a closed end
fund, the market price may vary significantly from the net asset value.

Net assets The difference between total assets on the one hand and current liabilities and noncapitalized long-
term liabilities on the other hand.

Net benefit to leverage factor A linear approximation of a factor, T*, that enables one to operationalize the
total impact of leverage on firm value in the capital market imperfections view of capital structure.

Net book value The current book value of an asset or liability; that is, its original book value net of any
accounting adjustments such as depreciation.

Net cash balance Beginning cash balance plus cash receipts minus cash disbursements.

Net change This is the difference between a day's last trade and the previous day's last trade.

Net errors and omissions In balance of payments accounting, net errors and omissions record the statistical
discrepancies that arise in gathering balance of payments data.

Net financing cost Also called the cost of carry or, simply, carry, the difference between the cost of financing
the purchase of an asset and the asset's cash yield. Positive carry means that the yield earned is greater than
the financing cost; negative carry means that the financing cost exceeds the yield earned.

Net float Sum of disbursement float and collection float.

Net income The company's total earnings, reflecting revenues adjusted for costs of doing business,
depreciation, interest, taxes and other expenses.

Net investment Gross, or total, investment minus depreciation.

Net lease A lease arrangement under which the lessee is responsible for all property taxes, maintenance
expenses, insurance, and other costs associated with keeping the asset in good working condition.

Net operating losses Losses that a firm can take advantage of to reduce taxes.

Net operating margin The ratio of net operating income to net sales.

Net period The period of time between the end of the discount period and the date payment is due.

Net present value (NPV) The present value of the expected future cash flows minus the cost.
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Net present value of growth opportunities A model valuing a firm in which net present value of new
investment opportunities is explicitly examined.

Net present value of future investments The present value of the total sum of NPVs expected to result from
all of the firm's future investments.

Net present value rule An investment is worth making if it has a positive NPV. Projects with negative NPVs
should be rejected.

Net profit margin Net income divided by sales; the amount of each sales dollar left over after all expenses
have been paid.

Net salvage value The after-tax net cash flow for terminating the project.

Net working capital Current assets minus current liabilities. Often simply referred to as working capital.

Net worth Common stockholders' equity which consists of common stock, surplus, and retained earnings.

Netting Reducing transfers of funds between subsidiaries or separate companies to a net amount.

Netting out To get or bring in as a net; to clear as profit.

Neutral period In the Euromarket, a period over which Eurodollars are sold is said to be neutral if it does not
start or end on either a Friday or the day before a holiday.

New York Stock Exchange (NYSE) Also known as the Big Board or The Exhange. More than 2,00 common
and preferred stocks are traded. The exchange is the older in the United States, founded in 1792, and the
largest. It is lcoated on Wall Street in New York City

New-issues market The market in which a new issue of securities is first sold to investors.

New money In a Treasury auction, the amount by which the par value of the securities offered exceeds that of
those maturing.

Next futures contract The contract settling immediately after the nearby futures contract.

Nexus (of contracts) A set or collection of something.

NM Abbreviation for Not Meaningful.

No load mutual fund An open-end investment company, shares of which are sold without a sales charge.
There can be other distribution charges, however, such as Article 12B-1 fees. A true "no load" fund will have
neither a sales charge nor a distribution fee.

Noise Price and volume fluctuations that can confuse interpretation of market direction.

No-load fund A mutual fund that does not impose a sales commission. Related: load fund

Nominal In name only. Differences in compounding cause the nominal rate to differ from the effective
interest rate. Inflation causes the purchasing power of money to differ from one time to another.

Nominal annual rate An effective rate per period multiplied by the number of periods in a year.

Nominal cash flow A cash flow expressed in nominal terms if the actual dollars to be received or paid out are
given.
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Nominal exchange rate The actual foreign exchange quotation in contrast to the real exchange rate that has
been adjusted for changes in purchasing power.

Nominal interest rate The interest rate unadjusted for inflation.

Nominal price Price quotations on futures for a period in which no actual trading took place.

Non-cumulative preferred stock Preferred stock whose holders must forgo dividend payments when the
company misses a dividend payment. Related: Cumulative preferred stock

Non-financial services Include such things as freight, insurance, passenger services, and travel.

Non-insured plans Defined benefit pension plans that are not guaranteed by life insurance products. Related:
insured plans

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