A fixed-income investment with a floating rate tied to a specific index with less than a one for one payback ratio. |||These investment products are generally linked to different rates like the Fed Fund rate, LIBOR, or Treasury rates. This provides investors with the ability to match the differing cashflows of their assets and liabilities.
A broker's demand on an investor using margin to deposit additional money or securities so that the margin account is brought up to the minimum maintenance margin. Margin calls occur when a you account value depresses to a value calculated by the broker's particular formula. This is sometimes called a "fed call" or "maintenance call". Taobiz explains Margin Call You would receive a margin call from a broker if one or more of the securities you had bought (with borrowed money) decreased in value past a certain point. You would be forced either to deposit more money in the account or to sell off some of your assets.
Securities that are issued in the form of a paper certificate as opposed to book-entry securities which are electronic entries into a computer. Examples of definitive securities include bearer and registered bonds. |||Con artists use scams offering the opportunity to "rent" or "lease" Treasury securities. These assets typically exist in book entry form and allow the scam to appear legitimate while providing the con artist with ample excuses when asked to present proof of ownership.
A brokerage account in which the broker lends the customer cash to purchase securities. The loan in the account is collateralized by the securities and cash. If the value of the stock drops sufficiently, the account holder will be required to deposit more cash or sell a portion of the stock. Taobiz explains Margin Account In a margin account, you are investing with your broker's money. By using leverage in such a way, you magnify both gains and losses.
A tax concept whereby the lender of a stock receives the equivalent dividend payment from the borrower of the stock. Taobiz explains Manufactured Payment When lending stock, the lender usually maintains the right to ownership of dividend payments and special disbursements. Thus, the borrower is responsible for payment of such distributions when they occur.
A mortgage loan that allows the borrower to make minimum payments that are less than the entire amount of interest owed. The remaining interest is added to the amount of loan to be paid off. This is considered to be a negative amortization. The homeowner will let interest accrue, and will ultimately owe more than the original value of the loan. An adjustable rate mortgage (ARM) might offer this sort of payment structure. |||By making minimum payments that do not cover the loan principal, the balance on the loan is unlikely to get smaller since the interest is calculated on the outstanding principal. While low minimum payments do give the borrower payment flexibility, homeowners might not fully understand how complex this sort of mortgage can be.
A method of trading with the help of a dealer or broker, versus trading automatically. Manual executions tend to be slower than automatic ones, in which trades are inputted quickly and often in real time, thus giving investors a time advantage. Different fees are charged by exchanges for manual executions versus automatic executions. Taobiz explains Manual Execution Securities traded manually require several extra steps to process the trade and can take several minutes to actually be executed. Since stock and forex markets are so fast paced where millions of transactions are done in minutes and the price of a stock or currency can rise or fall almost instantly, a manual execution could place investors at a disadvantage.
A subset of products or securities that is designed to mimic the performance of an overall market. Market baskets contain a fixed selection of items, which are used to track such things as inflation, prices or performance levels. Taobiz explains Market Basket For investors, the market basket is the principal idea behind index funds. A sample of stocks, bonds or other securities are placed in a portfolio that is expected to represent all aspects of the market. This provides investors with a benchmark against which to compare their investment returns. Another popular market basket relates to the Consumer Price Index (CPI), which tracks a variety of consumer goods. The CPI looks at the price levels of consumer products and provides an estimate for inflation.
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