Problems in Europe have shown Americans that markets worldwide affect the United States. Tom Busby reveals a formula he uses to gauge U.S. markets based on how Asian and European markets traded. Some simple math can give you some insight for the day....
By Michelle Van Dorn

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Letter A

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ABA
The American Bankers Association
abandon
Failure to exercise or offset an option before its expiration.
ABI
The Associazione Bancaria Italiana, the Italian Banking Association.
absolute advantage, theory of
The theory that trade between nations occurs when one nation is more efficient than other nations in the production of a good.
absolute rate
A quote made that is given as an absolute rate rather than in reference to a funding base such as LIBOR, U.S. treasury rates, etc. For example, rather than T-Bill rate + 0.25% the bid is expressed as 5.75%, (If T-Bill = 5.50%).
acceptance bank
The financial institution with a draft drawn on it and accepted by that same financial institution.
accommodating transaction
Transaction undertaken by a central bank solely to accommodate autonomous transactions; also called compensatory transaction.
accommodation
When the financial institution agrees to lend money or provide other special consideration to a customer even though the customer may not be qualified to receive special treatment.
account
The bookkeeping record of a customer’s transaction and credit (or debit) balances. This record usually includes confirmation of transactions, listing of holdings and/or open positions, cash and/or cash equivalents, beginning and ending liquidating value.
account audit trail
A record of transactions against a specific account or list of accounts.
account balance
The amount of money or debt in an account.
account blocking
Occurs when a certain amount of an account is reserved for a specified period. During the blockage, the blocked amount of the account cannot be touched by the account holder. An account can be totally or partially blocked.
account deactivation
Action of preventing any movement or action in an account.
account executive
The broker or clerk that is assigned to work with a customer and his/her account on behalf of a financial institution.
account fee condition
A fee condition (amount, percentage, charging date, etc.) that applies to a particular account.
account identification
(1) A series of characters (alpha and/or numeric) used to identify a customer account or relationship. (2) The remitting financial institution’s account serviced by the receiving bank. (3) The identification assigned by a financial institution.
account information
Refers to all data that can be recorded in a database about an account, e.g., address, financial information, etc.
account number
See account identification.
account officer
A financial institution staff member who looks after one or more client account relationships.
account position
The balance and current holdings of an account.
account reactivation
Action of reinstating an account to its normal condition after a blocking or deactivation operation.
account status
The status of an account often affects what and how many transactions can be performed on that account. For example, an account that is undermargined (insufficient funds) will not be allowed to add positions to the account.
accounting
(1) An information system conveying data in financial terms, about a specific entity, that can be made reasonably precise. (2) The method of recording all transactions affecting the financial condition of a given business.
accounts payable
Money a company owes for merchandise or services bought for delayed payment.
accounts receivable
Money owed to a company for merchandise or services bought on credit.
accrual (accounting)
A method of reporting income when earned and expenses when incurred, as opposed to reporting income when received and expenses when paid.
accrued fee
A cumulative fee to be paid to or received from an account holder but is not yet due. A fee that has been earned even though the related transaction is yet complete.
accrued interest
(1) The interest that has been earned but not yet been paid. (2) Interest due but not yet paid or received as from the last interest settlement date. In the securities market, for instance, the bond buyer pays the seller the agreed price of the bond plus interest.
actuals
The physical (cash) commodity or financial instrument rather than a futures or derivative contract for that commodity or financial instrument.
adjustable peg
A provision of the Bretton Woods system by which a country had a limited right to adjust the value of its currency in terms of gold.
administrative law judge (ALJ)
A CFTC official authorized to conduct a proceedings and render a decision in formal complaint procedures.
administrative services
A department of a financial institution that carries out tasks that deal with administrative affairs of the customers e.g. account opening and approval, etc.
advice
(1) The affirmation that an action has taken place. (2) A market recommendation.
advice of execution
A report to the executing party to give brief and early information about a transaction.
advised letter of credit
Letter of credit in which the seller’s bank advises the seller about the credit-worthiness of the bank issuing the letter of credit.
AFB
The French Bankers Association.
affiliate
Two companies are affiliated when one owns less than a majority stake of the other, or when both are subsidiaries of a third company. Any association between two companies that is short of a parent-subsidiary tie.
affiliated bank
Partly owned, separately incorporated foreign banking operation of a domestic bank.
aggregate
A total amount.
aggregation
The policy under which all futures positions owned or controlled by one trader or a group of traders are combined to determine reporting status and speculative limit compliance (CFTC regulation).
aggressive investment strategy
Portfolio allocation and management aimed at achieving maximum return. Aggressive investors place a high percentage of their investable assets in equity securities and a far lower percentage in safer debt securities and cash equivalents.
algorithm
1. A specified mathematical process for computation. 2. A sequence of steps to be followed to perform a task. Often used when talking about computer programming.
all-in cost
The total cost of a financial transaction including interest cost, periodic charges and all front-end compensation expressed as a per cent per annum figure.
amendment
A request to change something. Also referred to as an amendment request, or an update request.
amendment date
The date on which amendment or change was made.
American depository receipt (ADR)
A negotiable certificate (receipt) representing a given number of shares of stock in a foreign corporation; it is bought and sold in the American securities markets, just as stock is traded. Syn. American depository share.
American Stock Exchange (AMEX)
A stock exchange, a private, not-for-profit corporation, located in New York City. The third most-active market in the U.S. The exchange was founded in 1842. Also called Amex, and the curb exchange.
American-style option
An option that may be exercised at any time prior to expiration.
amortization
(1) The paying off of debt in regular installments over a period of time. (2) The ratable deduction of capitalized expenditures over a specified period of time. (3) The cost of the asset has been amortized when this period is over.
amount
The amount of debits: value in units of currency.
amount of credits
The sum amount of all credit transactions, exclusive of any fees.
annual effective yield
The actual annual return on an account after interest is compounded.
annual percentage rate
The interest rate borrowers pay on a loan. A loan’s up-front fees are usually factored into the APR.
appreciate
The increase in an asset’s value. A gradual increase in the value of currency, usually occurring over a period as the result of market forces of supply and demand in a system of floating exchange rates. When the value of currency is substantially changed
arbitrage
A classic trading strategy to profit from different prices for the same security, commodity or financial instrument in different markets. Market forces will normally ensure that these arbitrage differences are short-lived. The simultaneous purchase and sale of an asset.
arbitrage pricing theory
A theory that if an investor earns a higher-than-normal return, then that is because he/she is accepting a higher-than-normal risk.
arbitration
Dispute resolution technique in which both parties agree to submit their cases to a private individual or body for resolution. A forum for the fair and impartial settlement of disputes.
Article 65
The Japanese Securities and Exchange regulation, modeled on the Glass-Steagall Act in the United States. Article 65 separates merchant/investment banking from commercial banking. It does not permit a financial institution to engage in both types of banking.
ask
An indication by a trader or a dealer of a willingness to sell a security, a futures or other financial instrument. The price at which an investor can buy. Syn. offer. See also bid; quotation.
asked
The price that someone is willing to accept for a security, futures or other financial instrument. The ask portion of a quote is the lowest price anyone is willing to accept at that time.
asked price
The price at which sellers offer securities, futures or other financial instrument to buyers. Also called offer price.
asset
Anything owned by an individual, a business or a financial institution that has commercial or exchange value. Assets may consist of property or claims against others, in contrast to obligations or liabilities due to others. Assets may be tangible or intangible, short-term (current) or long-term (noncurrent).
assets and liabilities
The basic classification of financial items in the financial institution’s balance sheet.
assigned arrangements
Management arrangement in which one partner in a strategic alliance assumes primary responsibility for the operations of the alliance.
associated person (AP)
An individual who solicits orders, customers or customer funds on behalf of a futures commission merchant, an introducing broker, a commodity trading adviser or a commodity pool operator and who is registered with the Commodity Futures Trading Commission (CFTC) via the National Futures Association (NFA).
at or better
(1) In a buy order for securities, futures or other financial instruments it is purchasing at the specified price or under it (2) For a sell order, it is selling at the specified price or above it. See limit order.
at the market
See market order.
at the money
An option with a strike price equal to the current price of the instrument, such as a stock, upon which the option was granted.
at-the-opening order
An order that specifies it is to be executed at the opening of the market or of trading or else it is to be canceled. The order does not have to be executed at the opening price, but within the opening range of prices.
auction market
A market in which buyers enter competitive bids, and sellers enter competitive offers simultaneously.
audit
The action of checking that the corporation, individual, partnership or other institution is following the correct procedures as required by the regulatory authorities and by the firm’s own procedures.
authentication
The checking of a request (e.g. to execute a financial transaction) to ensure that it is bona fide.
authorization
(1) The approval of a financial transaction or a change. (2) To have power of attorney.
autonomous transaction
Transaction conducted for the economic self-interest of a market participant.
available balance
The balance at the disposal of the account owner at the close of the statement period. The cleared balance of an account.
available funds
Funds available for transfer or withdrawal in cash.
average balance
The average of the daily balances over a period of time (such as a month or quarter).
award
See reparations award.
award
The amount of damages (usually monetary) a respondent may be ordered to pay to complainant.

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