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Conversion value Also called parity value, the value of a convertible security if it is converted immediately.

Convertible bonds Bonds that can be converted into common stock at the option of the holder.

Convertible eurobond A eurobond that can be converted into another asset, often through exercise of
attached warrants.

Convertible exchangeable preferred stock Convertible preferred stock that may be exchanged, at the
issuer's option, into convertible bonds that have the same conversion features as the convertible preferred
stock.

Convertible preferred stock Preferred stock that can be converted into common stock at the option of the
holder.

Convertible security A security that can be converted into common stock at the option of the security holder,
including convertible bonds and convertible preferred stock.
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Dictionary of Finantial and Business Terms
Lico Reis “ Consultoria & Línguas
licoreis@terra.com.br
Convex Bowed, as in the shape of a curve. Usually referring to the price/required yield relationship for
option-free bonds.

Core competency Primary area of competence. Narrowly defined fields or tasks at which a company or
business excels. Primary areas of specialty.

Corner A Market To purchase enough of the available supply of a commodity or stock in order to
manipulate its price.

Corporate acquisition The acquisition of one firm by anther firm.

Corporate bonds Debt obligations issued by corporations.

Corporate charter A legal document creating a corporation.

Corporate finance One of the three areas of the discipline of finance. It deals with the operation of the firm
(both the investment decision and the financing decision) from that firm's point of view.

Corporate financial management The application of financial principals within a corporation to create and
maintain value through decision making and proper resource management.

Corporate financial planning Financial planning conducted by a firm that encompasses preparation of both
long- and short-term financial plans.

Corporate processing float The time that elapses between receipt of payment from a customer and the
depositing of the customer's check in the firm's bank account; the time required to process customer
payments.

Corporate tax view The argument that double (corporate and individual) taxation of equity returns makes
debt a cheaper financing method.

Corporate taxable equivalent Rate of return required on a par bond to produce the same after-tax yield to
maturity that the premium or discount bond quoted would.

Corporation A legal "person" that is separate and distinct from its owners. A corporation is allowed to own
assets, incur liabilities, and sell securities, among other things.

Correlation See: Correlation coefficient.

Correlation coefficient A standardized statistical measure of the dependence of two random variables,
defined as the covariance divided by the standard deviations of two variables.

Cost company arrangement Arrangement whereby the shareholders of a project receive output free of
charge but agree to pay all operating and financing charges of the project.

Cost of capital The required return for a capital budgeting project.

Cost of carry Related: Net financing cost

Cost of funds Interest rate associated with borrowing money.

Cost of lease financing A lease's internal rate of return.

Cost of limited partner capital The discount rate that equates the after-tax inflows with outflows for capital
raised from limited partners.
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Dictionary of Finantial and Business Terms
Lico Reis “ Consultoria & Línguas
licoreis@terra.com.br
Cost-benefit ratio The net present value of an investment divided by the investment's initial cost. Also called
the profitability index.

Counter trade The exchange of goods for other goods rather than for cash; barter.

Counterpart items In the balance of payments, counterpart items are analogous to unrequited transfers in the
current account. They arise because the double-entry system in balance of payments accounting and refer to
adjustments in reserves owing to monetization or demonetization of gold, allocation or cancellation of SDRs,
and revaluation of the various components of total reserves.

Counterparties The parties to an interest rate swap.

Counterparty Party on the other side of a trade or transaction.

Counterparty risk The risk that the other party to an agreement will default. In an options contract, the risk
to the option buyer that the option writer will not buy or sell the underlying as agreed.

Country economic risk Developments in a national economy that can affect the outcome of an international
financial transaction.

Country beta Covariance of a national economy's rate of return and the rate of return the world economy
divided by the variance of the world economy.

Country financial risk The ability of the national economy to generate enough foreign exchange to meet
payments of interest and principal on its foreign debt.

Country risk General level of political and economic uncertainty in a country affecting the value of loans or
investments in that country.

Country selection A type of active international management that measures the contribution to performance
attributable to investing in the better-performing stock markets of the world.

Coupon The periodic interest payment made to the bondholders during the life of the bond.

Coupon equivalent yield True interest cost expressed on the basis of a 365-day year.

Coupon payments A bond's interest payments.

Coupon rate In bonds, notes or other fixed income securities, the stated percentage rate of interest, usually
paid twice a year.

Covariance A statistical measure of the degree to which random variables move together.

Covenants Provisions in a bond indenture or preferred stock agreement that require the bond or preferred
stock issuer to take certain specified actions (affirmative covenants) or to refrain from taking certain specified
actions (negative covenants).

Cover The purchase of a contract to offset a previously established short position.

Coverage ratios Ratios used to test the adequacy of cash flows generated through earnings for purposes of
meeting debt and lease obligations, including the interest coverage ratio and the fixed charge coverage ratio.

Covered call A short call option position in which the writer owns the number of shares of the underlying
stock represented by the option contracts. Covered calls generally limit the risk the writer takes because the
stock does not have to be bought at the market price, if the holder of that option decides to exercise it.
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Dictionary of Finantial and Business Terms
Lico Reis “ Consultoria & Línguas
licoreis@terra.com.br
Covered call writing strategy A strategy that involves writing a call option on securities that the investor
owns in his or her portfolio. See covered or hedge option strategies.

Covered interest arbitrage A portfolio manager invests dollars in an instrument denominated in a foreign
currency and hedges his resulting foreign exchange risk by selling the proceeds of the investment forward for
dollars.

Covered or hedge option strategies Strategies that involve a position in an option as well as a position in the
underlying stock, designed so that one position will help offset any unfavorable price movement in the other,
including covered call writing and protective put buying. Related: naked strategies

Covered Put A put option position in which the option writer also is short the corresponding stock or has
deposited, in a cash account, cash or cash equivalents equal to the exercise of the option. This limits the
option writer's risk because money or stock is already set aside. In the event that the holder of the put option
decides to exercise the option, the writer's risk is more limited than it would be on an uncovered or naked put
option.

Cramdown The ability of the bankruptcy court to confirm a plan of reorganization over the objections of
some classes of creditors.

Crawling peg An automatic system for revising the exchange rate. It involves establishing a par value around
which the rate can vary up to a given percent. The par value is revised regularly according to a formula
determined by the authorities.

Credible signal A signal that provides accurate information; a signal that can be distinguish among senders.

Credit Money loaned.

Credit analysis The process of analyzing information on companies and bond issues in order to estimate the
ability of the issuer to live up to its future contractual obligations. Related: default risk

Credit enhancement Purchase of the financial guarantee of a large insurance company to raise funds.

Credit period The length of time for which the customer is granted credit.

Credit risk The risk that an issuer of debt securities or a borrower may default on his obligations, or that the
payment may not be made on a negotiable instrument. Related: Default risk

Credit scoring A statistical technique wherein several financial characteristics are combined to form a single
score to represent a customer's creditworthiness.

Credit spread Related:Quality spread

Crediting rate The interest rate offered on an investment type insurance policy.

Creditor Lender of money.

Cross default A provision under which default on one debt obligation triggers default on another debt
obligation.

Cross hedging The practice of hedging with a futures contract that is different from the underlying being
hedged.

Cross holdings One corporation holds shares in another firm.
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Dictionary of Finantial and Business Terms
Lico Reis “ Consultoria & Línguas
licoreis@terra.com.br
Cross rates The exchange rate between two currencies expressed as the ratio of two foreign exchange rates
that are both expressed in terms of a third currency.

Cross-border risk Refers to the volatility of returns on international investments caused by events associated
with a particular country as opposed to events associated solely with a particular economic or financial agent.

Cross-sectional approach A statistical methodology applied to a set of firms at a particular point in time.

Crossover rate The return at which two alternative projects have the same net present value.

Crown jewel A particularly profitable or otherwise particularly valuable corporate unit or asset of a firm.

Cum dividend With dividend.

Cum rights With rights.

Cumulative abnormal return (CAR) Sum of the differences between the expected return on a stock and the
actual return that comes from the release of news to the market.

Cumulative dividend feature A requirement that any missed preferred or preference stock dividends be paid
in full before any common dividend payment is made.

Cumulative preferred stock Preferred stock whose dividends accrue, should the issuer not make timely
dividend payments. Related: non-cumulative preferred stock.

Cumulative probability distribution A function that shows the probability that the random variable will
attain a value less than or equal to each value that the random variable can take on.

Cumulative Translation Adjustment (CTA) account An entry in a translated balance sheet in which gains
and/or losses from translation have been accumulated over a period of years. The CTA account is required
under the FASB No. 52 rule.

Cumulative voting A system of voting for directors of a corporation in which shareholder's total number of
votes is equal to his number of shares held times the number of candidates.

Currency Money.

Currency arbitrage Taking advantage of divergences in exchange rates in different money markets by
buying a currency in one market and selling it in another market.

Currency basket The value of a portfolio of specific amounts of individual currencies, used as the basis for
setting the market value of another currency. It is also referred to as a currency cocktail.

Currency future A financial future contract for the delivery of a specified foreign currency.

Currency option An option to buy or sell a foreign currency.

Currency risk Related: Exchange rate risk

Currency risk sharing An agreement by the parties to a transaction to share the currency risk associated with
the transaction. The arrangement involves a customized hedge contract embedded in the underlying
transaction.

Currency selection Asset allocation in which the investor chooses among investments denominated in
different currencies.
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Dictionary of Finantial and Business Terms
Lico Reis “ Consultoria & Línguas
licoreis@terra.com.br
Currency swap An agreement to swap a series of specified payment obligations denominated in one currency
for a series of specified payment obligations denominated in a different currency.

Current account Net flow of goods, services, and unilateral transactions (gifts) between countries.

Current assets Value of cash, accounts receivable, inventories, marketable securities and other assets that
could be converted to cash in less than 1 year.

Current coupon A bond selling at or close to par, that is, a bond with a coupon close to the yields currently
offered on new bonds of a similar maturity and credit risk.

Current liabilities Amount owed for salaries, interest, accounts payable and other debts due within 1 year.

Current issue In Treasury securities, the most recently auctioned issue. Trading is more active in current

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