Business / Finance Glossary

Nearest Month: The expiration date of an option or future that is closest to the present.

Need The Tick: Used for listed equity securities. A stock must trade up/down at least one tick (1/8) in order to comply with regulations governing short sales/corporate repurchases.

Negative Amortization: A loan repayment schedule in which the outstanding principal balance of the loan increases, rather than amortizing, because the scheduled monthly payments do not cover the full amount requir . . . View Full Definition

Negative Carry: Related: Net financing cost

Negative Cash Flow: Occurs when spending in a business is greater than earnings.

Negative Convexity: A bond characteristic such that the price appreciation will be less than the price depreciation for a large change in yield of a given number of basis points. For example, a fixed-rate mortg . . . View Full Definition

Negative Covenant: A bond covenant that limits or prohibits certain actions unless the bondholders agree.

Negative Duration: Occurs when the price of an MBS moves in the same direction as interest rates.

Negative Income Tax: A proposal to assist taxpayer with below-subsistence-level incomes. After filing a tax return, such persons would receive a subsidy to bring them up above the poverty level.

Negative Pledge Clause: A bond covenant that requires the borrower to grant lenders a lien equivalent to any liens that may be granted in the future to any other currently unsecured lenders.

Negative Working Capital: Occurs when current liabilities exceed current assets, which can lead to bankruptcy.

Negative Yield Curve: When the yield on a short-term security is higher than the yield on a long-term security, partially because high interest rates are creating a greater demand for short-term borrowing.

Neglected Firm Effect: The tendency of firms that are neglected by security analysts to outperform firms that are the subject of considerable attention.

Negotiable: A security whose title is transferable by delivery . See also: Negotiable instrument.

Negotiable Instrument: An unconditional order or promise to pay some amount of money, easily transferable from one party to another.

Negotiable Order Of Withdrawal (NOW): Demand deposits that pay interest.

Negotiated Certificate Of Deposit: A large-denomination CD, generally $1MM or more, that can be sold but cannot be cashed in before maturity.

Negotiated Commission: An unfixed broker's commission that is determined through negotiation, depending on the specifics of the trades performed.

Negotiated Markets: Markets in which each transaction is separately negotiated between buyer and seller (i.e., an investor and a dealer).

Negotiated Offering: An offering of securities for which the terms, including underwriters' compensation, have been negotiated between the issuer and the underwriters.

Negotiated Sale: Determining the terms of an offering by negotiation between the issuer and the underwriter rather than through competitive bidding by underwriting groups.

Negotiated Underwriting: A securities offering process in which the purchase price paid to the issuer and the public offering price are determined by negotiation rather than through competitive bidding.

NEO: Abbreviation for nonequity options, which are options contracts on foreign currencies, debt issues, commodities, and stock indexes.

Net: The gain or loss on a security sale as measured by the selling price of a security less the adjusted cost of acquisition.

Net Adjusted Present Value: The adjusted present value minus the initial cost of an investment.

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