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

Category: Finance Dictionary

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.

TERM LOAN

A loan that lasts between 1 and 10 years. It has a specific amount to be repaid on a schedule at floatin interest. Refer to theta and time decay.

TIME DEPOSIT

A deposit made by a bank to pay coupons. This is done until maturity when the funds can be accessed. Refer to lockup certificate of deposit, certificate of deposit, interbank deposit, and

TRANCHE

A portion of securities with a unique set of characteristics. They are used in securitization.

TWIST

Moving a yield curve up or down to adjust the value of a portfolio or a fixed income transaction. This is done using basis points to move the long and short term

VALUED CONTRACT

Insurance that pays out an agreed upon amount if loss should occur. Commonly life insurance. Refer to indemnity contract.

WEAK HANDS

A holder of a derivative contract that plans to close out before maturity. Retail investors are commonly weak hands. Refer to strong hands.

WORKING CAPITAL

The shortterm operating resources of a company. Refer to loan, gross working and net working capital.

INDICATION OF INTEREST (IOI)

When an investor shows interest in new securities. It is nonbinding because the securities are not yet registered. Refer to the defenition of circle.

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