Your Free Online Legal Dictionary • Featuring Black’s Law Dictionary, 2nd Ed.

Category: Finance Dictionary

NO-LOAD DRIP

Shareholders can reinvest dividends they receive into more shares without any fees in this type of program offered by publicly-held companies. The company directly issues the resulting stock purchased.

OLIGOPSONY

A market with a few buyers who control the price paid.

OVERLINED

Temporarily paying off all commercial debt creating extra swingline availability.

PASSIVE LOSS RULES

Rules limiting tax deductions and income that go untaxed. This is limited by passive source earnings.

PFANDBRIEFE

A bond that converts its assets into negotiable securities. The assets remain on the balance sheet but are reserved for investors in the event of default.

PORTFOLIO DIVERSIFICATION

Combining non related securites to ensure more profit. Refer to diversification, diversifiable risk, nondiversifiable risk, and portfolio theory.

PRIMACY

The main insurer on a policy. Refer to apportionment, divided cover, overlapping insurance, and pro rata.

PUP COMPANY

A subsidiary company that writes special risk insurance for their parent company or group.

PUTCALL PARITY

Relationships used to decide option prices that must remain to prevent arbitrage conditions. The sum price of the call option and strike price. This price must equal the sum of the put

RATESENSITIVE ASSETS

Assets in a bank exposed to interest rate changes. Refer to asset liability management and ratesensitive liabilities.

REINSTATEMENT

Reactivating insurance cancelled due to nonpayment. The insurance company has the right to charge a higher premium.

RETROSPECTIVE AGGREGATE LOSS COVER

An insurance policy that covers existing and incurred but not yet reported losses up to a dollar amount. Refer to loss portfolio transfer and retrospective finite policy.

REVERSE MORTGAGE

When a lender gives monthly payments to a borrower using their property equity. This is usually done by elderly homeowners resulting in the borrower eventually owning the home.

RISK MANAGEMENT

A decision guided by cost/benefit analysis made by a firm to control, retain, eliminate, or expand its risks. Refer to risk identification, risk monitoring, and risk quantification.

ROADSHOW

Presentations organized by a firm introducing a new issue of securities to possible investors. AKA dog and pony show.

SCORCHED EARTH DEFENSES

The attempt of a takeover target to make itself look undesirable by threatening to liquidate or destroy assets in the event of a hostile takeover. Refer to crown jewel defense, dead hand

SELLOUT

Liquidating a loan or derivative when a payment is not recieved. This causes contract or loan cancellation.

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