Term of the day

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TERM OF THE DAY

Secondary Market

A market in which an investor purchases a security from another investor rather than the issuer, subsequent to the original issuance in the primary market. also called aftermarket.

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TERM OF THE DAY

Float

To allow the value of currency to be determined solely by supply and demand without outside interference.

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TERM OF THE DAY

CDO

Collateralized Debt Obligation. An investment-grade security backed by a pool of various other securities. CDOs can be made up of any type of debt, in the form of bonds or loans, and usually do not deal with mortgages. CDOs, like CBOs and CMOs, are divided into slices, each slice is made up of debt which has a unique amount of risk associated with it. CDOs are often sold to investors who want exposure to the income generated by the debt but do not want to purchase the debt itself.

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TERM OF THE DAY

Alpha

A coefficient which measures risk-adjusted performance, factoring in the risk due to the specific security, rather than the overall market. A high value for alpha implies that the stock or mutual fund has performed better than would have been expected given its beta (volatility).

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TERM OF THE DAY

Base Currency

The first currency in a currency pair. In a currency exchange, the exchange rate is quoted as the units of one currency in terms of a single unit of a base currency. For example, in a currency exchange of U.S. dollars for Japanese Yen, the base currency is the U.S. dollar.

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TERM OF THE DAY

HURDLE RATE

The required rate of return in a discounted cash flow analysis, above which an investment makes sense and below which it does not. Often, this is based on the firm's cost of capital or weighted average cost of capital, plus or minus a risk premium to reflect the project's specific risk characteristics. also called required rate of return.

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Asset Management account

A single account at a brokerage or bank which includes both banking
and brokerage services. Most asset management accounts allow
checking, a debit or credit card, automatic transfer of excess
funds into a money management account, and margin loans. also called
central assets account