Business / Finance Glossary

Additional Hedge: A protection against borrower fallout risk in the mortgage pipeline.

Additional Paid-In Capital: The amount paid by investors for stock over and above its par value. See also contributed capital.

Adequacy Of Coverage: A test that measures the extent to which the value of an asset is protected from potential loss either through insurance or hedging.

Adjustable Rate: Applies mainly to convertible securities. Refers to interest rate or dividend that is adjusted periodically, usually according to a standard market rate outside the control of the bank or sa . . . View Full Definition

Adjustable-Rate Mortgage (ARM): A mortgage that features predetermined adjustments of the loan interest rate at regular intervals based on an established index. The interest rate is adjusted at each interval to a rate equi . . . View Full Definition

Adjustable-Rate Preferred Stock (ARPS): Publicly traded issues that may be collateralized by mortgages and MBS

Adjusted Balance Method: Method of calculating finance charges that uses the account balance remaining after adjusting for all transactions posted during the given billing period as its basis. Related: Average daily . . . View Full Definition

Adjusted Basis: Price from which to calculate and derive capital gains or losses upon sale of an asset. Account actions such as any stock splits that have occurred since the initial purchase must be accounted for.

Adjusted Debit Balance (ADB): The account balance for a margin account that is calculated by combining the balance owed to a broker with any outstanding balance in the special miscellaneous account, and any paper profits . . . View Full Definition

Adjusted Exercise Price: Term used in options on Ginnie Mae (Government National Mortgage Association) contracts. The final exercise price of the option accounts for the coupon rates carried on Ginnie Mae mortgages. . . . View Full Definition

Adjusted Gross Income (AGI): Gross income less allowable adjustments, is the income on which an individual is taxed by the federal government.

Adjusted Present Value (APV): The net present value analysis of an asset if financed solely by equity (present value of unlevered cash flows), plus the present value of any financing decisions (levered cash flows). In ot . . . View Full Definition

Adjustment Bond: A bond issued in exchange for outstanding bonds when a corporation facing bankruptcy is recapitalized.

Administrative Pricing Rules: IRS rules used to allocate income on export sales to a foreign sales corporation.

Advance: Increase in the market price of stocks, bonds, commodities, or other assets.

Advance Commitment: A promise to sell an asset before the seller has lined up purchase of the asset. This seller can offset risk by purchasing a futures contract to fix the sales price approximately.

Advance Computerized Execution System (ACES): Refers to the Advance Computerized Execution System, run by Nasdaq. ACES automates trades between order entry and market maker firms that have established trading relationships with each oth . . . View Full Definition

Advance Funded Pension Plan: A pension plan in which funds are set aside in advance of the date of retirement.

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