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

Category: Finance Dictionary

PAYOUT RATIO

The amount of earnings paid to stockholders over the investments lifetime. This payment takes the form of common stock dividends. Refer to dividend yield and plowback ratio.

PLOWBACK RATIO

The amount of capital reinvested that are not paid to shareholders in the form of dividends.

POSITIVE GAMMA

When option purchases expose an investment to a larger price market. Refer to gamma and negative gamma.

PREMIUMS IN FORCE

The amount an insurer underwrites based on its premiums collected on active policies.

PROPORTIONAL AGREEMENT

When an insurer must take their share of the losses based on a fixed or variable percentage or monetary value. Refer to excess of loss agreement.

PUT ON ACALL

An option where the buyer can sell underlying call option back to the seller. Refer to call on a call, call on a put, and put on a put.

RABBI TRUST

a trust wherein the employee is not taxed because the plan’s assets can be claimed by creditors. This name is used because the first of these type of trusts was set up

RECISSION

Cancelling insurance due to fraud or misrepresentation.

REPURCHASE AGREEMENT

Rebuying securities for cash value. Essentially money is borrowed, collateralized, and a repo rate is charged. AKA repo. Refer to dollar role, general collateral, gensaki, open repo, overnight repo, special, and term

RETURN PERIOD

The time a stock currency or commodity is held in order to produce profit when sold.

RIO TRADE

Named to illustrate an attempt of fleeing to Rio if this strategy fails, it is an attempt to reverse losses by executing a large and risky trade.

RISK REDUCTION

The attempt to reduce financial and operating risk by withdrawal from high risk ventures of risk pooling resulting in diversification. Refer to loss control and loss financing.

ROUND LOT

A securities order typically carrying lower returns or charges than odd lots that are traded in the standard size in accordance with the market.

SECTOR OPTION

When an entire industries, such as automobile manufacturers volatility is reflected in an over the counter or exchange trade.

SHORT SQUEEZE

When a group or institution buy a portion of an asset to cause their prices to go up. This way the short position has to cover it. Refer to bear trap.

SOFTS

Perishable commodities and derivatives. Excluding grain, cotton, and orange juice.

STAGFLATION

When the economy is plagued by little to no growth, rising prices, and high unemployment.

STOP OUT PRICE

The selling in an auction market of government bills at the lowest acceptable price.

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