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

Category: S

SHORT SALE

The sale of a short position. The market price will decline. Refer to short naked shorting.

SOFT LOAN

When a bank is interested in establishing good relationships with its borrowers by offering loans with below market interest rates, long repayment periods, and repeated rescheduling or rollover of the principal.

SQUARE ROOT RULE

The rule that states that a standard deviation of a market variable is in proportion to the square root of time.

STOP LIMIT ORDER

The buying or selling of securities once it reaches the stop level as opposed to the traditional stop order when securities are bought or sold at the market price.

SUBPRIME LOAN

An asset secured loan usually having a low loan to value ratio given to a client with a poor credit history such as a delinquency or default. Refer to B & C

SECONDARY RESERVES

Very liquid funds in excess of those required to be held as an emergency buffer.

SEVERITY RATE

A computation of the expected potential of loss to determine premium rates.

SHORT SELLER

An individual that encourages a short sale. This is done assuming the price will decline.

SOFT MARKET

When excess risk capacity lowers premiums. This causes an expansion of business due to a more affordable premium rate. The extra capital is used to cover the new risk. Refer to hard

SQUEEZE

When investors sell commodities that suddenly increase in price leading to distorted prices. Refer to short squeeze.

STOP LOSS ORDER

Selling securities once a determined price level is obtained to protect an investor

SUITABILITY RISK

Loss that occurs when clients are mismatched with investment opportunites. Refer to ultra vires.

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.

SECURITY MARKET LINE

The graphing of the relationship between the risk and the return of a specific investment at a specific time with the slope of the line indicating the market risk.

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