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Perpetual warrants Warrants that have no expiration date.

Perpetuity A constant stream of identical cash flows without end, such as a British consol.

Perquisites Personal benefits, including direct benefits, such as the use of a firm car or expense account for
personal business, and indirect benefits, such as up-to-date office d©cor.

Personal tax view (of capital structure) The argument that the difference in personal tax rates between
income from debt and income from equity eliminates the disadvantage from the double taxation (corporate
and personal) of income from equity.

Personal trust An interest in an asset held by a trustee for the benefit of another person.

Philadelphia Stock Exchange (PHLX) A securities exchange where American and European foreign
currency options on spot exchange rates are traded.

Phone switching In mutual funds, the ability to transfer shares between funds in the same family by
telephone request. There may be a charge associated with these transfers. Phone switching is also possible
among different fund families if the funds are held in street name by a participating broker/dealer.

PIBOR (Paris Interbank Offer Rate) The deposit rate on interbank transactions in the Eurocurrency market
quoted in Paris.

Pickup The gain in yield that occurs when a block of bonds is swapped for another block of higher-coupon
bonds.

Picture The bid and asked prices quoted by a broker for a given security.
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Pie model of capital structure A model of the debt/equity ratio of the firms, graphically depicted in slices of
a pie that represent the value of the firm in the capital markets.

Pit A specific area of the trading floor that is designed for the trading of commodities, individual futures, or
option contracts.

Pit committee A committee of the exchange that determines the daily settlement price of futures contracts.

Pivot Price level established as being significant by market's failure to penetrate or as being significant when
a sudden increase in volume accompanies the move through the price level.

Placement A bank depositing Eurodollars with (selling Eurodollars to) another bank is often said to be
making a placement.

Plain vanilla A term that refers to a relatively simple derivative financial instrument, usually a swap or other
derivative that is issued with standard features.

Plan for reorganizationA plan for reorganizing a firm during the Chapter 11 bankruptcy process.

Plan sponsors The entities that establish pension plans, including private business entities acting for their
employees; state and local entities operating on behalf of their employees; unions acting on behalf of their
members; and individuals representing themselves.

Planned amortization class CMO (1) One class of CMO that carries the most stable cash flows and the
lowest prepayement risk of any class of CMO. Because of that stable cash flow, it is considered the least risky
CMO. (2) A CMO bond class that stipulates cash-flow contributions to a sinking fund. With the PAC,
principal payments are directed to the sinking fund on a priority basis in accordance with a predetermined
payment schedule, with prior claim to the cash flows before other CMO classes. Similarly, cash flows
received by the trust in excess of the sinking fund requirement are also allocated to other bond classes. The
prepayment experience of the PAC is therefore very stable over a wide range of prepayment experience.

Planned capital expenditure program Capital expenditure program as outlined in the corporate financial
plan.

Planned financing program Program of short-term and long-term financing as outlined in the corporate
financial plan.

Planning horizon The length of time a model projects into the future.

Plowback rate Related: retention rate.

Plug A variable that handles financial slack in the financial plan.

Plus Dealers in government bonds normally give price quotes in 32nds. To quote a bid or offer in 64ths, they
use pluses; a dealer who bids 4+ is bidding the handle plus 4/32 + 1/64, which equals the handle plus 9/64.

Point The smallest unit of price change quoted or, one one-hundredth of a percent. Related: minimum price
fluctuation and tick.

Point and figure chart A price-only chart that takes into account only whole integer changes in price, i.e., a
2-point change. Point and figure charting disregards the element of time and is solely used to record changes
in price.

Poison pill Anit-takeover device that gives a prospective acquiree's shareholders the right to buy shares of the
firm or shares of anyone who acquires the firm at a deep discount to their fair market value. Named after the
cyanide pill that secret agents are instructed to swallow if capture is imminent.
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Poison put A covenant allowing the bondholder to demand repayment in the event of a hostile merger.

Policy asset allocation A long-term asset allocation method, in which the investor seeks to assess an
appropriate long-term "normal" asset mix that represents an ideal blend of controlled risk and enhanced
return.

Political risk Possibility of the expropriation of assets, changes in tax policy, restrictions on the exchange of
foreign currency, or other changes in the business climate of a country.

Pool factor The outstanding principal balance divided by the original principal balance with the result
expressed as a decimal. Pool factors are published monthly by the Bond Buyer newspaper for Ginnie Mae,
Fannie Mae, and Freddie Mac(Federal Home Loan Mortgage Corporation) MBSs.

Pooling of interests An accounting method for reporting acquisitions accomplished through the use of equity.
The combined assets of the merged entity are consolidated using book value, as opposed to the purchase
method, which uses market value. The merging entities' financial results are combined as though the two
entities have always been a single entity.

Portfolio A collection of investments, real and/or financial.

Portfolio insurance A strategy using a leveraged portfolio in the underlying stock to create a synthetic put
option. The strategy's goal is to ensure that the value of the portfolio does not fall below a certain level.

Portfolio internal rate of return The rate of return computed by first determining the cash flows for all the
bonds in the portfolio and then finding the interest rate that will make the present value of the cash flows
equal to the market value of the portfolio.

Portfolio opportunity set The expected return/standard deviation pairs of all portfolios that can be
constructed from a given set of assets.

Portfolio management Related: Investment management

Portfolio manager Related: Investment manager

Portfolio separation theorem An investor's choice of a risky investment portfolio is separate from his
attitude towards risk. Related:Fisher's separation theorem.

Portfolio turnover rate For an investment company, an annualized rate found by dividing the lesser of
purchases and sales by the average of portfolio assets.

Portfolio variance Weighted sum of the covariance and variances of the assets in a portfolio.

Position A market commitment; the number of contracts bought or sold for which no offsetting transaction
has been entered into. The buyer of a commodity is said to have a long position and the seller of a commodity
is said to have a short position . Related: open contracts

Position diagram Diagram showing the possible payoffs from a derivative investment.

Positive carry Related:net financing cost

Positive convexity A property of option-free bonds whereby the price appreciation for a large upward change
in interest rates will be greater (in absolute terms) than the price depreciation for the same downward change
in interest rates.

Positive covenant (of a bond) A bond covenant that specifies certain actions the firm must take. Also called
and affirmative covenant.
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Positive float See:float.

Possessions corporation A type of corporation permitted under the U.S. tax code whereby a branch operation
in a U.S. possessions can obtain tax benefits as though it were operating as a foreign subsidiary.

Post Particular place on the floor of an exchange where transactions in stocks listed on the exchange occur.

Post-audit A set of procedures for evaluating a capital budgeting decision after the fact.

Postponement option The option of postponing a project without eliminating the possibility of undertaking
it.

Posttrade benchmarks Prices after the decision to trade.

Preauthorized checks (PACs) Checks that are authorized by the payer in advance and are written either by
the payee or by the payee's bank and then deposited in the payee's bank account.

Preauthorized electronic debits (PADs) Debits to its bank account in advance by the payer. The payer's
bank sends payment to the payee's bank through the _ACH)Automated Clearing House (ACH) system.

Precautionary demand (for money) The need to meet unexpected or extraordinary contingencies with a
buffer stock of cash.

Precautionary motive A desire to hold cash in order to be able to deal effectively with unexpected events
that require cash outlay.

Preemptive right Common stockholder's right to anything of value distributed by the company.

Preferred equity redemption stock (PERC) Preferred stock that converts automatically into equity at a
stated date. A limit is placed on the value of the shares the investor receives.

Preference stock A security that ranks junior to preferred stock but senior to common stock in the right to
receive payments from the firm; essentially junior preferred stock.

Preferred habitat theory A biased expectations theory that believes the term structure reflects the
expectation of the future path of interest rates as well as risk premium. However, the theory rejects the
assertion that the risk premium must rise uniformly with maturity. Instead, to the extent that the demand for
and supply of funds does not match for a given maturity range, some participants will shift to maturities
showing the opposite imbalances. As long as such investors are compensated by an appropriate risk premium
whose magnitude will reflect the extent of aversion to either price or reinvestment risk.

Preferred shares Preferred shares give investors a fixed dividend from the company's earnings. And more
importantly: preferred shareholders get paid before common shareholders. See: preferred stock.

Preferred stock A security that shows ownership in a corporation and gives the holder a claim, prior to the
claim of common stockholders, on earnings and also generally on assets in the event of liquidation. Most
preferred stock pays a fixed dividend that is paid prior to the common stock dividend, stated in a dollar
amount or as a percentage of par value. This stock does not usually carry voting rights. The stock shares
characteristics of both common stock and debt.

Preferred stock agreement A contract for preferred stock.

Preliminary prospectus A preliminary version of a prospectus.

Premium (1) Amount paid for a bond above the par value. (2) The price of an option contract; also, in futures
trading, the amount the futures price exceeds the price of the spot commodity. Related: inverted market
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premium payback period. Also called break-even time, the time it takes to recover the premium per share of a
convertible security.

Premium bond A bond that is selling for more than its par value.

Prepackaged bankruptcy A bankruptcy in which a debtor and its creditors pre-negotiate a plan or
reorganization and then file it along with the bankruptcy petition.

Prepayment speed Also called speed, the estimated rate at which mortgagors pay off their loans ahead of
schedule, critical in assessing the value of mortgage pass-through securities.

Prepayments Payments made in excess of scheduled mortgage principal repayments.

Prerefunded bond Refunded bond.

Present value The amount of cash today that is equivalent in value to a payment, or to a stream of payments,
to be received in the future.

Present value factor Factor used to calculate an estimate of the present value of an amount to be received in
a future period.

Present value of growth opportunities (NPV) Net present value of investments the firm is expected to make
in the future.

Presold issue An issue that is sold out before the coupon announcement.

Pre-trade benchmarks Prices occurring before or at the decision to trade.

Price/book ratio Compares a stock's market value to the value of total assets less total liabilities (book
value). Determined by dividing current stock price by common stockholder equity per share (book value),
adjusted for stock splits. Also called Market-to-Book.

Price/earnings ratio Shows the "multiple" of earnings at which a stock sells. Determined by dividing current
stock price by current earnings per share (adjusted for stock splits). Earnings per share for the P/E ratio is
determined by dividing earnings for past 12 months by the number of common shares outstanding. Higher
"multiple" means investors have higher expectations for future growth, and have bid up the stock's price.

Price/sales ratio Determined by dividing current stock price by revenue per share (adjusted for stock splits).
Revenue per share for the P/S ratio is determined by dividing revenue for past 12 months by number of shares
outstanding.

Price compression The limitation of the price appreciation potential for a callable bond in a declining interest
rate environment, based on the expectation that the bond will be redeemed at the call price.

Price discovery process The process of determining the prices of the assets in the marketplace through the
interactions of buyers and sellers.

Price elasticities The percentage change in the quantity divided by the percentage change in the price.

Price impact costs Related: market impact costs

Price momentum Related: Relative strength

Price persistence Related: Relative strength
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