Wall Street Journal

Popular daily newspaper that has been published since the late 1800s. The newspaper is published by Dow Jones & Company, a branch of News Corporation, and has the second largest circulation after the USA Today. The paper's primary focus is on business and investing related news, with the Money and Investing section providing an overview of the previous day's action on the major stock exchanges.

Closed-End Fund
A closed-end fund is a publicly traded investment company that raises a fixed amount of capital through an initial public offering (IPO). The fund is then structured, listed and traded like a stock on a stock exchange. Also known as a "closed-end investment" or "closed-end mutual fund."

Corporate Bond
A debt security issued by a corporation and sold to investors. The backing for the bond is usually the payment ability of the company, which is typically money to be earned from future operations. In some cases, the company's physical assets may be used as collateral for bonds. Corporate bonds are considered higher risk than government bonds. As a result, interest rates are almost always higher, even for top-flight credit quality companies.

Currency Futures
A transferable futures contract that specifies the price at which a currency can be bought or sold at a future date. Currency future contracts allow investors to hedge against foreign exchange risk.

Interest Rate Future

A futures contract with an underlying instrument that pays interest. An interest rate future is a contract between the buyer and seller agreeing to the future delivery of any interest-bearing asset. The interest rate future allows the buyer and seller to lock in the price of the interestbearing asset for a future date.

Money Market
A segment of the financial market in which financial instruments with high liquidity and very short maturities are traded. The money market is used by participants as a means for borrowing and lending in the short term, from several days to just under a year. Money market securities consist of negotiable certificates of deposit (CDs), bankers acceptances, U.S. Treasury bills, commercial paper, municipal notes, federal funds and repurchase agreements (repos).

Spot Price
The current price at which a particular security can be bought or sold at a specified time and place.

Forward Price
The predetermined delivery price for an underlying commodity, currency or financial asset decided upon by the long (the buyer) and the short (the seller) to be paid at predetermined date in the future.

Stock Option
A privilege, sold by one party to another, that gives the buyer the right, but not the obligation, to buy (call) or sell (put) a stock at an agreed-upon price within a certain period or on a specific date.

Treasury Bill - T-Bill

A short-term debt obligation backed by the U.S. government with a maturity of less than one year.

Warrant
A derivative security that gives the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Warrants are often included in a new debt issue as a "sweetener" to entice investors.

Weak Form Efficiency

One of the different degrees of efficient market hypothesis (EMH) that claims all past prices of a stock are reflected in today's stock price.

Wealth Added Index WAI

A metric designed by Stern Stewart & Co consulting firm that attempts to measure wealth created (or destroyed) for shareholders by a company. The WAI takes into account more variables than just the profits or share growth of a company. According to this theory, wealth is created only if the returns of a company exceed its cost of equity.

Weighted Average Cost Of Capital - WACC'

A calculation of a firm's cost of capital in which each category of capital is proportionately weighted. All capital sources - common stock, preferred stock, bonds and any other long-term debt - are included in a WACC calculation. All else equal, the WACC of a firm increases as the beta and rate of return on equity increases, as an increase in WACC notes a decrease in valuation and a higher risk.

Diversification
A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique contends that a portfolio of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio.

Whole Life Insurance Policy

A life insurance contract with level premiums that has both an insurance and an investment component. The insurance component pays a stated amount upon death of the insured. The investment component accumulates a cash value that the policyholder can withdraw or borrow against.

Wilshire 5000 Total Market Index - TMWX'

A market capitalization-weighted index composed of more than 6,700 publicly-traded companies that meet the following criteria: 1. The companies are headquartered in the United States. 2. The stocks are actively traded on an American stock exchange. 3. The stocks have pricing information that is widely available to the public.

Workout Period
The period of time when temporary yield discrepancies between fixed income securities are adjusted. A workout period can be viewed as a sort of reset period, in which bond issuers and credit rating agencies review outstanding fixed income issues and adjust any discrepancies in price/yield, in order to correct any inefficiencies in the market.

Workout Market
A market maker prediction as to the trading price range that a security will occupy within a reasonable period of time. The characteristics of a workout market are seen prevalently in thin markets.

Writing An Option
The expression "writing an option" refers to the act of selling an option. An option is the right, but not the obligation, to buy or sell a particular trading instrument at a specified price, on or before its expiration.

Yankee Bond
A bond denominated in U.S. dollars that is publicly issued in the U.S. by foreign banks and corporations. According to the Securities Act of 1933, these bonds must first be registered

with the Securities and Exchange Commission (SEC) before they can be sold. Yankee bonds are often issued in tranches and each offering can be as large as $1 billion.

Yield Curve
A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity dates.

Par Value
The face value of a bond.

Forward Rate
A rate applicable to a financial transaction that will take place in the future. Forward rates are based on the spot rate, adjusted for the cost of carry and refer to the rate that will be used to deliver a currency, bond or commodity at some future time. It may also refer to the rate fixed for a future financial obligation, such as the interest rate on a loan payment.

Interest Rate Parity

A theory in which the interest rate differential between two countries is equal to the differential between the forward exchange rate and the spot exchange rate. Interest rate parity plays an essential role in foreign exchange markets, connecting interest rates, spot exchange rates and foreign exchange rates.

Holding Period Return/Yield

The total return received from holding an asset or portfolio of assets. Holding period return/yield is calculated as the sum of all income and capital growth divided by the value at the beginning of the period being measured.

Yield To Call
The yield of a bond or note if you were to buy and hold the security until the call date. This yield is valid only if the security is called prior to maturity. The calculation of yield to call is based on the coupon rate, the length of time to the call date and the market price.

Yield To Maturity YTM

The rate of return anticipated on a bond if it is held until the maturity date. YTM is considered a long-term bond yield expressed as an annual rate. The calculation of YTM takes into account the current market price, par value, coupon interest rate and time to maturity. It is also assumed that all coupons are reinvested at the same rate. Sometimes this is simply referred to as "yield" for short.

Zero-Coupon Bond
A debt security that doesn't pay interest (a coupon) but is traded at a deep discount, rendering profit at maturity when the bond is redeemed for its full face value.

Default Risk
The event in which companies or individuals will be unable to make the required payments on their debt obligations. Lenders and investors are exposed to default risk in virtually all forms of credit extensions. To mitigate the impact of default risk, lenders often charge rates of return that correspond the debtor's level of default risk. The higher the risk, the higher the required return, and vice versa.

Holding Period Return/Yield

The total return received from holding an asset or portfolio of assets. Holding period return/yield is calculated as the sum of all income and capital growth divided by the value at the beginning of the period being measured.

Money Market Yield

The interest rate earned by investing in securities with high liquidity and maturities of less than one year such as negotiable certificates of deposit, U.S. Treasury bills and municipal notes. Money market yield is calculated by taking the holding period yield and multiplying it by a 360-day bank year divided by days to maturity. It can also be calculated using bank discount yield.

Z-Score
A Z-Score is a statistical measurement of a score's relationship to the mean in a group of scores. A Z-score of 0 means the score is the same as the mean. A Z-score can also be positive or negative, indicating whether it is above or below the mean and by how many standard deviations.

Zero-Sum Game
A situation in which one participant's gains result only from another participant's equivalent losses. The net change in total wealth among participants is zero; the wealth is just shifted from one to another.