A contractual agreement detailing the specifics of the voting trust, including the name of its trustee, the effective timeframe, and the nature of its formation. Taobiz explains Voting Trust Agreement As with many different trusts, the purpose and goals must be stated in order to create a guideline for the trustee and protect stockholders that have decided to transfer their ownership rights to the trust.
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. Also known as an "accrual bond". |||Some zero-coupon bonds are issued as such, while others are bonds that have been stripped of their coupons by a financial institution and then repackaged as zero-coupon bonds. Because they offer the entire payment at maturity, zero-coupon bonds tend to fluctuate in price much more than coupon bonds.
Slang for the reserve of cash a corporation sets aside to attempt a takeover or to defend against a hostile takeover. Taobiz explains War Chest For example, you might hear, "Look for XYZ Company to make an acquisition soon; they've been selling off assets in order to build up their war chest."
A name given to securities in companies that are defense contractors. Also known as "defense stocks". Taobiz explains War Babies A good example of this are firms that build aircraft and ammunition. When a war is imminent, these stocks tend to outperform the market because of the potential for increased business.
An economic model of a market process in which orders are collected into batches of buys and sells and then analyzed to determine a clearing price that will decide the market price. Also referred to as "call market". Taobiz explains Walrasian Market The NYSE uses a similar process before the opening bell in order to determine opening prices. A specialist will look at all the collected orders for a particular security and select the price that will clear the greatest number of trades. In fact, up until 1871 all trading on the NYSE was executed in this fashion.
The supposition that scheduled principal and interest will be paid off with no installments. This is typically done as a means of providing a benchmark to gauge other, more complex assumptions. By determining what a product or service will cost without financing, individuals or companies can better budget their resources and plan for future expenditures and/or revenue growth. |||Prepayment assumptions are critical in valuing mortgage-backed securities with various models making assumptions about prepayment patterns under various interest rate changes. Thus, having an established standard can be helpful in determining the fair value of such investments.
1. A procedure whereby a company gradually builds up a holding of shares in a company it wishes to takeover in the future. 2. The process of storing goods within a storage facility. Taobiz explains Warehousing 1. The acquiring company "warehouses" small lots of shares by holding them under the name of a nominee. Companies use the warehousing technique of share acquisition when they wish to remain anonymous or are unable to make a public tender offer.
A special type of bond class in a sequential pay collateralized mortgage obligation. This class of bond does not receive any interest or principal payments until all other tranches have been completely paid off. In a Z-tranche, the interest that is not paid is accrued and added to the principal for future interest calculation purposes. |||The main purpose of the Z-tranche is to speed up the maturity of the senior tranches by disbursing payment that the Z-tranche was suppose to receive to the higher priority tranches. Investors that possess long-term liabilities or those who worry about reinvestment risk would benefit from investing in a Z-tranche bond.
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