Market

Financial Terms related to Market
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MARKET
Aftermarket
• Refers to trading in the secondary market following a new securities issuance.
Auction market
• Markets in which the prevailing price is determined through the free interaction of
prospective buyers and sellers, as on the floor of the stock exchange.
• A market in which buyers enter competitive bids, and sellers enter competitive
offers simultaneously. The NYSE is an auction market.
Bank market
• Is the spot and forward markets for currencies. Here, there are known
counterparties to the transactions.
Bear market
• Any market in which prices are in a declining trend.

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• A declining market or a period of pessimism when declines in the market are

anticipated. (A way to remember: "Bear down.")
• A market in which prices of a certain group of securities are falling or are expected
to fall. See also: Bull Market.
• A period of declining prices in a financial market.
Black market
• An illegal market.

Breadth of a market
• A characteristic of a ready market, determined by the number of participants

(buyers) in the market.
Brokered market
• A market where an intermediary offers search services to buyers and sellers.
Bull market
• A period of optimism when increases in market prices are anticipated. (A way to

remember "Bull ahead.")
• Any market in which prices are in an upward trend.
• A market or a certain group of securities in which prices are rising or are expected
to rise. See also: Bear Market.
• A period of rising prices in a financial market.
Bulldog market
• The foreign market in the United Kingdom.
Buyer's market
• Refers to a situation when a purchaser has greater flexibility and influence in

receiving concessions. Often the choices are more plentiful and the prices lower
than previously transacted.
Capital market
• The market that trades long-term debt securities and common and preferred equity
securities.
• The market for trading long-term debt instruments (those that mature in more than
one year).
Capital market efficiency

• Reflects the relative amount of wealth wasted in making transactions. An efficient
capital market allows the transfer of assets with little wealth loss. See: efficient
market hypothesis.
Capital market imperfections view
• The view that issuing debt is generally valuable but that the firm's optimal choice of
capital structure is a dynamic process that involves the other views of capital
structure (net corporate/personal tax, agency cost, bankruptcy cost, and pecking
order), which result from considerations of asymmetric information, asymmetric
taxes, and transaction costs.
Capital market line
• Abbreviated CML. The line defined by every combination of the risk-free asset and
the market portfolio.
Carrying charge market
• Is the implied term structure for a commodity market. It lists progressively higher
prices for the more distant delivery months. This progression in prices reflects the
assumption of cumulatively higher storage and financing costs over time.
Cash market
• Traditionally, this term has been used to denote the market in which commodities
were traded, for immediate delivery, against cash. Since the inception of futures
markets for T bills and other debt securities, a distinction has been made between
the cash markets in which these securities trade for immediate delivery and the
futures markets in which they trade for future delivery.
• Also called spot markets, these are markets that involve the immediate delivery of
a security or instrument. Related: derivative markets.
Common market
• An agreement between two or more countries that permits the free movement of

capital and labor as well as goods and services.
Common stock market
• The market for trading equities, not including preferred stock.
Complete capital market
• A market in which there is a distinct marketable security for each and every
possible outcome.
Corner a market
• To purchase enough of the available supply of a commodity or stock in order to

manipulate its price.
Crossed market
• Occurs when a broker/dealer's bid is greater than the lowest or best offer made by
another. This condition can also occur when a broker/dealer's offer is lower than
another's bid. Sometimes, this can occur because of slow updates in a
broker/dealer's range of marketing making activities. However, when a crossed
market occurs because of intention behavior, then this activity is prohibited by the
NASD.
Currencies and major foreign market hedge funds

• Invest in securities and derivatives which go across borders. These funds try to
capitalize on interest rate differentials between currencies, varying investment
climates for different countries, relative volatilities in equity or credit markets, and
variations of the other hedge fund themes.
Dealer market
• A market where traders specializing in particular commodities buy and sell assets
for their own accounts.
Debt market

• The market for trading debt instruments.
Depth of a market
• A characteristic of a ready market, determined by its ability to absorb the purchase

or sale of a large dollar amount of a particular security.
Derivative markets
• Markets for derivative instruments.
Direct search market
• Buyers and sellers seek each other directly and transact directly.
Domestic market
• Part of a nation's internal market representing the mechanisms for issuing and
trading securities of entities domiciled within that nation. Compare external market
and foreign market.
Efficient capital market
• A market in which new information is very quickly reflected accurately in share

prices.
Efficient market
• A market that allocates funds to their most productive uses due to competition
among wealth-maximizing investors; it determines and publicizes prices that are
believed to be close to their true or intrinsic value (inherent worth). It is an assumed
perfect market in which there are many small invewstors, each having the same
information and expectations with respect to securities; there are no restrictions on
investment, no taxes, and no transaction costs; and all investors are rational, view
securities similarly, and are risk-averse, preferring higher returns and lower risk.
Efficient market hypothesis

• In general the hypothesis states that all relevant information is fully and
immediately reflected in a security's market price thereby assuming that an investor
will obtain an equilibrium rate of return. In other words, an investor should not expect
to earn an abnormal return (above the market return) through either technical
analysis or fundamental analysis. Three forms of efficient market hypothesis exist:
weak form (stock prices reflect all information of past prices), semi-strong form
(stock prices reflect all publicly available information) and strong form (stock prices
reflect all relevant information including insider information).
• Theory describing the behaviour of an assumed perfect market in which securities

are typically in equilibrium, security prices fully reflect all public information available
and react swiftly to new information, and, since stocks are fairly priced, investors
need not waste time looking for mispriced securities. A market that allocates funds to
their most productive uses as a result of competition among wealth-maximizing
investors that determines and publicizes prices that are believed to be close to their
true value. An assumed perfect market in which there are many small investors,
each having the same information and expectations with respect to securities; there
are no restrictions on investment, no taxes, and no transaction costs; and all
investors are rational, they view securities similarly, and they are risk-averse,
preferring higher returns and lower risk.
Either way market
• In the interbank Eurodollar deposit market, an either-way market is one in which

the bid and offered rates are identical.
• In the interbank Eurodollar deposit market, an either-way market is one in which

the bid and asked rates are identical.
Emerging markets
• The financial markets of developing economies.

• Is a term which broadly categorizes countries in the midst of developing their
financial markets and economic infrastructures. This development is viewed in terms
of freer, more liquid markets, which facilitate trade. Privitization of former state
owned or administered businesses is a key factor in this process.
Emerging markets funds
• Are investment vehicles, either open-end or closed-end, which invest in countries

whose economies are becoming more capitalistic. Often this emergence is from
socialistic, communistic or other tightly controlled economic systems. There are also
Hedge Funds which participate in emerging markets.
Emerging markets hedge funds
• Narrow their investment horizon to issues in markets which are not as mature or
liquid as the previous group. However, these less developed markets are believed to
offer greater risk adjusted rates of return. A general perspective is akin to getting in
on the ground floor.
Equilibrium market price of risk
• The slope of the capital market line (CML). Since the CML represents the return
offered to compensate for a perceived level of risk, each point on the line is a
balanced market condition, or equilibrium. The slope of the line determines the
additional return needed to compensate for a unit change in risk.
Equity market
• Related: Stock market
Eurocurrency loan market
• A large number of international banks that make long-term, floating rate, hard-
currency (typically U.S. dollar-denominated) loans in the form of lines of credit to
international corporate and government borrowers.

Eurocurrency market
• The money market for borrowing and lending currencies that are held in the form of
deposits in banks located outside the countries of the currencies issued as legal
tender.
• The market for short-term bank deposits denominated in U.S. dollars or other
easily convertible currencies. International equivalent of the domestic money market.
The portion of the Euromarket that provides short-term, foreign-currency financing to
subsidiaries of MNCs.
Euroequity market
• The capital market around the world that deals in international equity issues;
London has become the center of Euro-equity activity.
Euromarket
• The international financial market that provides for borrowing and lending
currencies outside their country of origin.
European open market
• The transformation of the European Union into a single market at year-end 1992.
Excess return on the market portfolio

• The difference between the return on the market portfolio and the risk less rate.
External market
• Also referred to as the international market, the offshore market, or, more
popularly, the Euromarket, the mechanism for trading securities that (1) at issuance
are offered simultaneously to investors in a number of countries and (2) are issued
outside the jurisdiction of any single country. Related: internal market
Fair market price

• Amount at which an asset would change hands between two parties, both having
knowledge of the relevant facts. Also referred to as market price.
Fast market
• Is a trading condition when prices change quickly and volume is dramatic. At these
times, the price reports are behind and a trading range of prices is substituted for
price dissemination. Often special rules apply at such times.
Federal funds market
• The market where banks can borrow or lend reserves, allowing banks temporarily
short of their required reserves to borrow reserves from banks that have excess
reserves.
Federal open market committee
• Abbreviated FOMC. A committee that makes decisions concerning the Fed's

operations to control the money supply.
• Abbreviated FOMC. Consists of seven members of the Federal Reserve Board and
five of the twelve Federal Reserve Bank Presidents. The President of the New York
Federal Reserve Bank is a permanent member, while the other Presidents serve on
a rotating basis. The Committee periodically meets to set Federal Reserve
guidelines regarding purchases and sales of Government Securities in the open
market as a means of influencing the volume of bank credit and money. The FOMC
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establishes monetary policy and executes it through temporary and permanent

changes to the supply of bank reserves.
Financial market
• An organized institutional structure or mechanism for creating and exchanging

financial assets.
• Provide a forum in which suppliers of funds and demanders of loans and

investments can transact business directly.

Financial supermarket
• An institution at which the customer can obtain a full array of the financial services
now allowed under federal bank, trust and insurance company legislation.
Fixed income market
• The market for trading bonds and preferred stock.
Flat market
• Is a term structure whereby the various delivery months are basically trading at the
same price level or yield.
Foreign banking market
• That portion of domestic bank loans supplied to foreigners for use abroad.
Foreign bond market
• That portion of the domestic bond market that represents issues floated by foreign
companies to governments.
Foreign equity market
• That portion of the domestic equity market that represents issues floated by foreign
companies.
Foreign market
• Part of a nation's internal market, representing the mechanisms for issuing and
trading securities of entities domiciled outside that nation. Compare external market
and domestic market.
Foreign market beta
• A measure of foreign market risk that is derived from the capital asset pricing
model.
Forward market

• A market in which participants agree to trade some commodity, security, or foreign
exchange at a fixed price at some future date.
• A market in which participants agree to trade some commodity, security, or foreign

exchange at a fixed price for future delivery.
Fourth market
• Direct trading in exchange-listed securities between investors without the use of a

broker.
Futures market
• A continuous auction market in which participants buy and sell commodities

contracts for delivery on a specified future date. Trading is traditionally carried on
through open outcry and hand signals in a trading pit or ring.
• A market in which contracts for future delivery of a commodity or a security are

bought and sold on an organized futures exchange such as CBOT, CME.
• A market in which contracts for future delivery of a commodity or a security are

bought or sold.
Gray market
• Purchases and sales of eurobonds that occur before the issue price is finally set.
Index and option market

• Abbreviated IOM. A division of the CME established in 1982 for trading stock index
products and options. Related: Chicago Mercantile Exchange (CME).
Inside market
• The highest bid and the lowest offer prices among all competing Market Makers in
a NASDAQ security, i.e., the best bid and offer prices.
Intermarket sector spread
• The spread between the interest rate offered in two sectors of the bond market for

issues of the same maturity.
Intermarket spread swaps
• An exchange of one bond for another based on the manager's projection of a

realignment of spreads between sectors of the bond market.
Intermarket trading system
• Is the network which links the trading floors of several registered exchanges. It
encourages competition in issues listed on the American or New York Stock
Exchanges with the other participating regional exchanges. The competitive edge
occurs if there is a better price out in the network than on a particular exchange. If
so, then a broker or market maker can execute at that better price.
Internal market
• The mechanisms for issuing and trading securities within a nation, including its
domestic market and foreign market. Compare: external market.
Internally efficient market
• Operationally efficient market.
International equity market
• A vibrant equity market that emerged in the past 20 years to allow corporations to
sell large blocks of shares in several different countries simultaneously.
International market
• Related: See external market.
International monetary market
• Abbreviated IMM. A division of the CME established in 1972 for trading financial
futures. Related: Chicago Mercantile Exchange (CME).
Intramarket sector spread
• The spread between two issues of the same maturity within a market sector. For

instance, the difference in interest rates offered for five-year industrial corporate
bonds and five-year utility corporate bonds.
Inverted market
• A futures market in which the nearer months are selling at price premiums to the
more distant months. Related: premium.
• Is the market condition whereby the deferred or more forward delivery months are
at a progressive discount to the spot or nearby month. This condition is marked by
premiums for immediate or nearby deliveries. This is also known as a backwardation
market. This is opposite to a contango or carrying charge market.
Locked market
• A market is said to be locked if the bid price equals the asked price. This can
occur, for example, if the market is brokered and brokerage is paid by one side only,
the initiator of the transaction.
• A market is locked if the bid = ask price. This can occur, for example, if the market
is brokered and brokerage is paid by one side only, the initiator of the transaction.
Make a market
• A dealer is said to make a market when he quotes bid and offered prices at which
he stands ready to buy and sell.
• A dealer is said LO make a market when he quotes bid and offered prices at which
he stands ready to buy and sell.
• To stand ready to buy or sell a particular security as a dealer for its own account. A
market maker accepts the risk of holding the security. See also: Market Maker.
Mark to market
• The process whereby the book value or collateral value of a security is adjusted to
reflect current market value.

• Is the valuation process which provides an indication of reasonable prices for
positions on a daily basis or some other proscribed time frame.
Marked to market
• An arrangement whereby the profits or losses on a futures contract are settled

each day.
Market
• Is an order to buy or sell an instrument at the prevailing price (bids and offers). In
the case of a buy order it means taking the offers whereas for a sell order it means
hitting the bids.
Market arbitrage
• The simultaneous purchase and sale of the same security in different markets to
take advantage of a price disparity between the two markets.
Market book ratio
• Market price of a share divided by book value per share.
Market cap or market capitalization
• Is a value placed on a company. It is computed by multiplying the number of

outstanding shares by the current share price.
Market capitalization
• The total dollar value of all outstanding shares. Computed as shares times current
market price. It is a measure of corporate size.
• The dollar valuation of the total number of shares times the current price. This
value is sometimes used by investors to classify stocks by size. It is not as reliable
as classifying by sales dollar value because the price of a stock can be inflated by
the market and not accurately representative of its size.
Market capitalization rate

• Expected return on a security. The market-consensus estimate of the appropriate
discount rate for a firm's cash flows.
Market clearing
• Total demand for loans by borrowers equals total supply of loans from lenders. The
market, any market, clears at the equilibrium rate of interest or price.
Market conversion price
• Also called conversion parity price, the price that an investor effectively pays for
common stock by purchasing a convertible security and then exercising the
conversion option. This price is equal to the market price of the convertible security
divided by the conversion ratio.
Market cycle
• The period between the 2 latest highs or lows of the S&P 500, showing net
performance of a fund through both an up and a down market. A market cycle is
complete when the S&P is 15% below the highest point or 15% above the lowest
point (ending a down market). The dates of the last market cycle are: 12/04/87 to
10/11/90 (low to low).
Market efficiency hypotheses

• Refer to theories which try to explain financial market behavior. Some hypotheses
state that the markets are rigorously efficient and operate by an immediate
discounting of perfect information. Other theories state that the markets are relatively
inefficient, particularly when socially-oriented goals are also to be considered. Other
hypotheses state that information is good or even very good but not perfect. Also,
not all market participants believe or simultaneously act on new data or information.
The latter theorists believe that the markets try to attain pure efficiency. However,
they also recognize that competition breeds asymmetrical change and this

influences the discounting and adaption processes. A simple example will highlight
this view. While improvements in technology are reducing costs and communication
times, not everyone updates their systems given each and every change in chip
speeds and processing power. To do so would be too expensive and this creates
one of example of a marketplace paradox.
Market if touched
• Abbreviated MIT. A price order, below market if a buy or above market if a sell, that
automatically becomes a market order if the specified price is reached.
• Is an order that becomes market action when a price is hit. Buy Market if Touched
orders are activated when the market price declines to the stated level. Then the
broker is authorized to buy to satisfy the quantity. This is different than a limit order
where all the quantity must be executed at the stated price or better.
Market impact costs
• Also called price impact costs, the result of a bid/ask spread and a dealer's price
concession.
Market maker
• On the NASDAQ system, a broker-dealer willing to accept the risk of holding a

particular number of shares of a particular security in order to facilitate trading in that
security. There are over 500 member firms that act as NASDAQ Market Makers.
One of the major differences between The NASDAQ Stock Market and other major
markets in the U.S. is NASDAQ's structure of competing Market Makers. Each
Market Maker competes for customer order flow by displaying buy and sell
quotations for a guaranteed number of shares. Once an order is received, the
Market Maker will immediately purchase for or sell from its own inventory, or seek
the other side of the trade until it is executed, often in a matter of seconds.
• Is a party who is prepared to buy and sell securities from all parties at the market
maker s bid and offer.

Market maker spread
• The difference between the price at which a Market Maker is willing to buy a
security and the price at which the firm is willing to sell it. Simply put, the Market
Maker Spread is the difference between the bid and ask for a given security. Since
each Market Maker can either buy or sell a stock at any given time, the spread is
representative of the profit Market Maker makes on each trade.
Market model
• This relationship is sometimes called the single-index model. The market model
says that the return on a security depends on the return on the market portfolio and
the extent of the security's responsiveness as measured, by beta. In addition, the
return will also depend on conditions that are unique to the firm. Graphically, the
market model can be depicted as a line fitted to a plot of asset returns against
returns on the market portfolio.
Market on close
• Is an order to buy or sell on the close of a market. Typically, there is a brief period
prior to the day's cessation of trading which is defined as the close. This period
varies from market-to-market and exchange-to-exchange.
Market on opening
• Is an order to buy or sell on the opening of a market. Typically, there is a brief

period at the commencement of the day's trading which is defined as the opening.
This period varies from market-to-market and exchange-to-exchange.
Market order
• This is an order to immediately buy or sell a security at the current trading price.
• Also known as an Unrestricted Order. An order to buy or sell a stock immediately at

the best available current price. A market order is the only order that guarantees
execution.

Market overhang
• The theory that in certain situations, institutions wish to sell their shares but
postpone the share sales because large orders under current market conditions
would drive down the share price and that the consequent threat of securities sales
will tend to retard the rate of share price appreciation. Support for this theory is
largely anecdotal.
Market portfolio
• A portfolio consisting of all assets available to investors, with each asset held -in
proportion to its market value relative to the total market value of all assets.
Market premium convertible securities
• The amount by which the market value exceeds the straight or conversion value of
a convertible security.
Market price of risk
• A measure of the extra return, or risk premium, that investors demand to bear risk.
The reward-to-risk ratio of the market portfolio.
Market prices
• The amount of money that a willing buyer pays to acquire something from a willing
seller, when a buyer and seller are independent and when such an exchange is
motivated by only commercial consideration.
Market return
• The expected return on the market portfolio of all traded securities. Since it is an
expected return, it is always greater than the risk-free rate of return because market
participants are assumed to be risk-averse wealth maximizers.
• The return on the market portfolio.

Market risk
• Market risk is the risk that investments will change in value based on changes in
general market prices.
• Risk that cannot be diversified away. Related: systematic risk
• The potential for an investor to experience losses owing to day-to-day fluctuations

in the prices at which securities can be bought or sold. The Market Risk expresses
the volatility of a stock price relative to the overall market as indicated by beta.
Market risk return function
• A graph of the discount rates associated with each level of project risk.
Market sectors
• The classifications of bonds by issuer characteristics, such as state government,

corporate, or utility.
Market segmentation theory or preferred habitat theory
• Theory suggesting that the market for loans is segmented on the basis of maturity
and that the sources of supply and demand for loans within each segment determine
its prevailing interest rate; the slope of the yield curve is determined by the general
relationship between the prevailing rates in each segment.
• A biased expectations theory that asserts that the shape of the yield curve is
determined by the supply of and demand for securities within each maturity sector.
Market stabilization
• The process in which an underwriting syndicate places orders to buy the security
that it is attempting to sell to keep the demand for the issue, and therefore its price,
at the desired level.
Market surveillance
• The department responsible for investigating and preventing abusive, manipulative,

or illegal trading practices on The NASDAQ Stock Market. Considerable resources
are devoted to surveilling The NASDAQ Stock Market. A vast array of sophisticated
automated systems reviews each trade and price quotation on an on-line, real-time
basis. Off-line computer-based analyses are conducted to evaluate trading patterns
on a monthly, weekly, and daily basis.
Market timer
• A money manager who assumes he or she can forecast when the stock market will
go up and down.
Market timing
• Asset allocation in which the investment in the market is increased if one forecasts
that the market will outperform T-bills.
• An attempt to sell a stock or portfolio when a market is at a high and buying at a

low, or an attempt to leave the market entirely during downturns and reinvesting
when it heads back up. Requires a crystal ball to be effective, and is generally an
exercise in futility.
Market timing costs
• Costs that arise from price movement of the stock during the time of the transaction
which is attributed to other activity in the stock.
Market to book ratio
• See Price-to-Book Ratio.
Market value
• The price at which a security is trading and could presumably be purchased or

sold.
• (1) The price at which a security is trading and could presumably be purchased or
sold. (2) The value investors believe a firm is worth; calculated by multiplying the

number of shares outstanding by the current market price of a firm's shares.
• The price at which a security is trading and could presumably be purchased or

sold. Market Value accounting reflects the current prices of all assets and liabilities.
• The price at which investors buy or sell a share of common stock or a bond at a
given time. Market value is determined by the interaction between buyers and
sellers.
• Is the value of an open position. It is determined by multiplying the known or

implied prevailing price by the quantity.
Market value ratios
• Ratios that relate the market price of the firm's common stock to selected financial
statement items.
Market value weighted index
• An index of a group of securities computed by calculating a weighted average of

the returns on each security in the index, with the weights proportional to
outstanding market value.
Market value weights
• Weights that use market values to measure the proportion of each type of capital in
the firm's financial structure; used in calculating the weighted average cost of capital.
Marketability
• A negotiable security is said to have good marketability if there is an active

secondary market in which it can easily be resold.
• A negotiable security is said to have good marketability if there is an active

secondary market in which it can easily be resold.
Marketable securities
• Short-term debt instruments, such as Government of Canada treasury bills,

commercial paper, and negotiable certificates of deposit issued by government,
business, and financial institutions, respectively.
Marketed claims
• Claims that can be bought and sold in financial markets, such as those of
stockholders and bondholders.
Marketplace price efficiency
• The degree to which the prices of assets reflect the available marketplace
information. Marketplace price efficiency is sometimes estimated as the difficulty
faced by active management of earning a greater return than passive management
would, after adjusting for the risk associated with a strategy and the transactions
costs associated with implementing a strategy.
Marking to market
• The process of posting current market values for securities in a portfolio.
Matador market
• The foreign market in Spain.
Money market
• The market in which short-term debt instruments (bills, commercial paper, bankers'
acceptances, etc.) are issued and traded.
• The market where debt securities that will mature within one year are traded.
• Money markets are for borrowing and lending money for three years or less. The
securities ina money market can be U.S.government bonds, treasury bills and
commercial paper from banks and companies.
• The securities market that deals in short-term debt. Money-market instruments are
forms of debt that Mature in less than one year and are very Liquid. Treasury bills
make up the bulk of the money-market instruments.
• The market in which short-term debt instruments (bills, commercial paper, bankers'

acceptances, etc.) are issued and traded.
Money market center bank
• A bank that is one of the nation's largest and consequently plays an active and
important role in every sector of the money market.
Money market certificates
• Abbreviated MMCs. Six-month certificates of deposit with a minimum denomination

of $10,000 on which banks and thrifts may pay a maximum rate tied to the rate at
which the U.S. Treasury has most recently auctioned 6-month bills.
Money market demand account
• An account that pays interest based on short-term interest rates.
Money market fund
• A mutual fund that invests only in short term securities, such as bankers'
acceptances, commercial paper, repurchase agreements and government bills. The
net asset value per share is maintained at $1. 00. Such funds are not federally
insured, although the portfolio may consist of guaranteed securities and/or the fund
may have private insurance protection.
• Mutual fund that invests solely in money market instruments.

• A Mutual Fund that invests in short-term debt instruments. The fund's objective is
to earn interest while maintaining a stable net asset value of $1.00 per share.
Generally sold with no load, the fund may also offer draft-writing privileges and low
opening investments.
• Are mutual funds which invest in short-term instruments such as treasury bills,
commercial paper, and asset backed securities (ABS). Broadly defined, these
investments have maturities, and for some, durations less than a year. Often, these
funds try to keep the average maturity or quantitative duration within 2-3 months.

Also, these funds try to maintain a net asset value (NAV) of $1 per share. However,
this price level is not guaranteed and there have been cases where it was broken. In
the latter case, it is known as breaking a buck.
Money market hedge
• The use of borrowing and lending transactions in foreign currencies to lock in the
home currency value of a foreign currency transaction.
Money market mutual funds
• Professionally managed portfolios of various popular marketable securities, having

instant liquidity, competitive yields, and low transaction costs.
Money market notes
• Publicly traded issues that may be collateralized by mortgages and MBSs.
National market
• Related: internal market
Negotiated markets
• Markets in which each transaction is separately negotiated between buyer and

seller (i.e. an investor and a dealer).
New issues market

• The market in which a new issue of securities is first sold to investors.
• The market in which a new issue of securities is first sold to investors.
Nonmarketed claims
• Claims that cannot be easily bought and sold in the financial markets, such as
those of the government and litigants in lawsuits.
Normal market
• Is the typical activity for an instrument or exchange. It is also a pricing term

structure which exhibits appropriate financing and storage costs over time. In its
general form it shows prices to be progressively higher as delivery dates are further
away from the current or spot market.
One sided one way market
• A market in which only one side, the bid or the asked, is quoted or firm.
One way market
• (1) A market in which only one side, the bid or asked, is quoted or firm. (2) A
market that is moving strongly in one direction. OPEC (Organization of Petroleum
Exporting Countries) A cartel of oil-producing countries.
Open market operation
• Purchases and sales of government and certain other securities in the open market
by the New York Federal Reserve Bank or directed by the FOMC in order to
influence the volume of money and credit in the economy. Purchases inject reserves
into the bank system and stimulate growth of money and credit; sales have the
opposite effect. Open market operations are the Federal Reserve's most important
and most flexible monetary policy tool.
• Purchase or sale of government securities by the monetary authorities to increase

or decrease the domestic money supply.
Open market purchase operation
• A systematic program of repurchasing shares of stock in market transactions at

current market prices, in competition with other prospective investors.
Open market share repurchases
• Company purchases of its own shares on a stock exchange at the market price
once approval from the stock exchange is received; termed a normal course issuer
bid in Canada.

Operationally efficient market
• Also called an internally efficient market, one in which investors can obtain
transactions services that reflect the true costs associated with furnishing those
services.
Otc market
• See Over The Counter Market.
Over the counter market
• Abbreviated OTC. A decentralized market (as opposed to an exchange market)

where geographically dispersed dealers are linked together by telephones and
computer screens. The market is for securities not listed on a stock or bond
exchange. The NASDAQ market is an OTC market for U.S. stocks.
• Abbreviated OTC. Not an organization but an intangible market consisting of

electronic communication links established between securities dealers to permit the
purchase and sale of securities not listed on the organized exchanges. For example
NASDAQ,
• The term used to describe a security that is traded through the telephone- and
computer-connected OTC Market rather than through an exchange.
• The security exchange system in which broker-dealers negotiate directly with one
another rather than through an auction on an exchange floor. The trading takes
place over computer and telephone networks that link brokers and dealers around
the world. Both listed and OTC securities, as well as municipal and U.S. government
securities, are traded in the OTC market.
• Is the marketplace where securities are not listed on an exchange. Many

derivatives, fixed income securities, and very small capitalization stocks belong in
this group. Another notable difference between Over the Counter instruments and
listed securities is that OTC instruments tend to be customized whereas listed

instruments are standardized.
Over the counter otc market
• Market created by dealer trading as opposed to the auction market prevailing on

organized exchanges.
Perfect capital market
• A market in which there are never any arbitrage opportunities.
Perfect market view of capital structure
• Analysis of a firm's capital structure decision, which shows the irrelevance of

capital structure in a perfect capital market.
Perfect market view of dividend policy
• Analysis of a decision on dividend policy, in a perfect capital market environment,

that shows the irrelevance of dividend policy in a perfect capital market.
Perfectly competitive financial markets
• Markets in which no trader has the power to change the price of goods or services.
Perfect capital markets are characterized by the following conditions: 1) trading is
costless, and access to the financial markets is free, 2) information about borrowing
and lending opportunities is freely available, 3) there are many traders, and no single
trader can have a significant impact on market prices.
Primary market
• The first buyer of a newly issued security buys that security in the primary market.
All subsequent trading of those securities is done in the secondary market.
• Market in which financial securities are initially issued and where the issuer
receives the proceeds from the sale of the financial security (ie. capital formation
occurs).

• The first opportunity that investors have to buy a newly-issued security occurs in
the Primary Market. After the first purchases, subsequent trading is said to occur in
the Secondary Market.
Range markets
• Markets with lots of sidewise motion.
Ratio of exchange in market price
• The ratio of the market price per share of the acquiring firm paid to each dollar of
market price per share of the target firm.
Real market
• The bid and offer prices at which a dealer could do size. Quotes in the brokers
market may reflect not the real market, but pictures painted by dealers playing
trading games.
• The bid and offer prices at which a dealer could do size. Quotes in the brokers
market may reflect not the real market, but pictures painted by dealers playing
trading games.
Rembrandt market
• The foreign market in the Netherlands.
Samurai market
• The foreign market in Japan.
Secondary market
• A market made for the purchase and sale of outstanding issues following the initial
distribution.
• The market that allows the owner of a previously created financial security to sell
this security, to buy more of this or other securities, or for a buyer to express an
interest in acquiring a financial security.

• The market in which previously issued securities are traded.
• A market in which an investor purchases an asset from another investor rather than
the issuing corporation. An example is the New York Stock Exchange. All stock
exchanges are part of the Secondary Market, where investors buy securities from
other investors (as opposed to an issuing company). See also: Primary Market.
• Is the aftermarket or the status for trades after an initial public offering (IPO). See
Initial Public Offering.
• The market where securities are traded after they are initially offered in the primary
market. Most trading is done in the secondary market. The New York stock
Exchange, as well as all other stock exchanges, the bond markets, etc., are
secondary markets. Seasoned securities are traded in the secondary market.
Security market line
• Abbreviated SML. The depiction of the capital asset pricing model (CAPM) as a
graph that reflects the required return for each level of nondiversifiable risk (beta).
• Line representing the relationship between expected return and market risk.
Security market plane
• A plane that shows the equilibrium between expected return and the beta
coefficient of more than one factor.
Seller's market
• Refers to a situation when a holder of assets has greater flexibility and influence in
receiving improved bids or proposals. Often the number of potential buyers is
greater and the prices higher than those previously transacted.
Side of the market
• Refers to the underlying market-driven or market directional position. For example,

a long stock position is considered as a long side-of-the-market position. Similarly, a
purchased call on the same security is viewed as long the same-side-of-the-market.

A sold or short put position in the same security is considered as long the same-
side-of-the market. However, a purchased put is viewed as short or short side of the
market. This term enables firms, exchanges, and clearinghouses to quantify
positions as to market-side or market direction. This is very useful when evaluating
complex positions.
Specific issues market
• The market in which dealers reverse in securities they want to short.
• The market in which dealers reverse in securities they wish to short.
Spot market
• Market for immediate as opposed to future delivery. In the spot market for foreign
exchange, settlement is two business days ahead.
• Related: cash markets
Stock market
• Also called the equity market, the market for trading equities.
Technical condition of a market
• Demand and supply factors affecting price, in particular the net position-long or
short-of dealers.
• Demand and supply factors affecting price, in particular the net position, either long
or short, of the dealer community.
Thin market
• A market in which trading volume is low and in which consequently bid and asked
quotes are wide and the liquidity of the instrument traded is low.
• A market in which trading volume is low and in which consequently bid and asked
quotes are wide and the liquidity of the instrument traded is low.

Third market
• Exchange-listed securities trading in the OTC market.
• Is when a listed security is traded over-thecounter by non-exchange member

brokers.
Tight market
• A tight market, as opposed to a thin market, is one in which volume is large, trading
is active and highly competitive, and spreads between bid and ask prices are
narrow.
• A tight market, as opposed to a thin market, is one in which volume is large, trading
is active and highly competitive, and spreads between bid and ask prices are
narrow.
Two sided market
• A market in which both bid and asked prices, good for the standard unit of trading,
are quoted.
• A market in which both bid and asked prices, good for the standard unit of trading,
are quoted.
Two way market
• Market in which both a bid and an asked price are quoted.

Underlying market price
• Is the price of the designated or benchmark security or index. For example, if a

security had a call strike price of 110 and was trading at 107, then the underying
market price would be 107 and that call would be $3 out-of-the-money.
Upstairs market
• A network of trading desks for the major brokerage firms and institutional investors
that communicates with each other by means of electronic display systems and
telephones to facilitate block trades and program trades.

Yankee market
• The foreign market in the United States.

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Financial Terms related to Market

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• Refers to trading in the secondary market following a new securities issuance.

• Any market in which prices are in a declining trend.

• A declining market or a period of pessimism when declines in the market are

• A period of declining prices in a financial market.

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• A characteristic of a ready market, determined by the number of participants

• A market where an intermediary offers search services to buyers and sellers.

• A period of optimism when increases in market prices are anticipated. (A way to

• Any market in which prices are in an upward trend.

• A period of rising prices in a financial market.

• The foreign market in the United Kingdom.

• Refers to a situation when a purchaser has greater flexibility and influence in

than previously transacted.

Capital market efficiency

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Capital market imperfections view

Capital market line

Carrying charge market

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Common stock market

• The market for trading equities, not including preferred stock.

Complete capital market

• To purchase enough of the available supply of a commodity or stock in order to

Currencies and major foreign market hedge funds

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• A characteristic of a ready market, determined by its ability to absorb the purchase

• Markets for derivative instruments.

Direct search market

Efficient capital market

• A market in which new information is very quickly reflected accurately in share

Efficient market hypothesis

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• Theory describing the behaviour of an assumed perfect market in which securities

Either way market

• In the interbank Eurodollar deposit market, an either-way market is one in which

• In the interbank Eurodollar deposit market, an either-way market is one in which

• The financial markets of developing economies.

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Emerging markets funds

• Are investment vehicles, either open-end or closed-end, which invest in countries

Emerging markets hedge funds

Equilibrium market price of risk

additional return needed to compensate for a unit change in risk.

• Related: Stock market

Eurocurrency loan market

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European open market

Excess return on the market portfolio

Fair market price

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Federal funds market

Federal open market committee

• Abbreviated FOMC. A committee that makes decisions concerning the Fed's

establishes monetary policy and executes it through temporary and permanent

• An organized institutional structure or mechanism for creating and exchanging

• Provide a forum in which suppliers of funds and demanders of loans and

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Fixed income market

• The market for trading bonds and preferred stock.

Foreign banking market