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Glossary of Financial Terms — G, H 





Terms — G
Terms — H

General Mortgage Bond

A bond which is secured by a blanket mortgage on the issuer’s property, but may be subordinate to one or more other mortgages.


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General Obligation Bond

A federal tax-exempt bond backed by the “full faith, credit and taxing power” of the issuing municipality.


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Geometric Average Return

Also known as time-weight average return, an unbiased performance calculation since it does not take flow or funds under management into consideration.


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(of yield) results from the sale of bonds at one yield and the purchase of an equivalent amount of bonds at a lower yield. (of a name) the standard practice, involving NYSE bond trades only, whereby a broker upon execution notifies the seller of the buyer’s identity so that delivery can be effected via the Stock Clearing Corporation.


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Good Delivery

A delivery with everything in order; certificates must be properly endorsed and any necessary legal papers attached before the transfer agent will accept delivery.


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Good Faith Deposit

A cash deposit required on a competitive bid. Deposits usually range from one to five percent of the value of an issue, and are due at the time of the bid.


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Good Till Canceled

An open order to buy or sell securities which remains in effect until the order is executed or canceled.


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A security issued by the U.S federal government and its agencies (all are U.S. treasury obligations).


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Government Agencies

Obligations of the federal government other than direct obligations such as Treasury Notes, Bonds, or Bills. Examples of these are GNMAs, FHLMCs, etc.


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Government Bonds

Bonds backed by the federal government, whether issued by the Treasury or one of the government agencies.


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Government National Mortgage Association

“Ginnie Mae.” This is a federal agency which backs home loan mortgages. A wholly-owned U.S. Government cooperation within the Department of Housing and Urban Development, established in 1968 as a spin-off from the Federal National Mortgage Association (FNMA). GNMA took over the assets and liabilities and operations of the Special Assistance Functions and the Management and Liquidating functions of FNMA. GNMA can raise funds by issuing securities backed by pools of mortgages. Primary functions of GNMA are the purchase and sale of certain FHA and VA mortgages pursuant to various programs for support of the housing market, and the guaranteeing of mortgage-backed securities issued against pools of FHA and VA mortgages.


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Graduated Payment Mortgages

A mortgage which calls for monthly payments that are initially relatively small and which rise by a fixed percentage each year for some specified period of time.


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Green Shoe Provision

A provision in the underwriting agreement that allows the underwriter to purchase up to an additional amount (usually 10–15 %) of the offering from the company on the same terms as the original offering. It provides the underwriter with a cushion against covering any short position incurred by the syndicate.


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Gross Domestic Product

A region’s gross domestic product, or GDP, is one of the ways for measuring the size of its economy. The GDP of a country is defined as the market value of all final goods and services produced within a country in a given period of time. The most common approach to measuring and understanding GDP is the expenditure method: GDP = consumption + investment + (government spending) + (exports - imports).


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Gross National Product

The total dollar value of final goods and services produced by the economy. When the proper accounting adjustments are made, this is equivalent to adding up total income and taxes in the economy; or total final sales plus the change in inventory stock; or the total value of each industry’s output. Real GNP is the figure derived by deflating each component of GNP for the increase in prices since an arbitrary base period (currently 1972) and adding up the results. The relationship between this total and the actual dollar GNP yields the implicit GNP price deflator that is commonly cited as a measure of general price change.


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Gross Spread

The dollar difference between the price which the issuing company receives for its securities and the price which the public pays for those securities. The sum of the selling concession, management fee and the underwriting fee equals the gross spread.


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Group Sale

As opposed to a designated order in which only certain underwriters participate in a pot order, a sale shared pro rata by every member of the account.


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Growth Stock

The earnings of stock in a corporation that have increased consistently over a number of years and show every indication of considerable further expansion. Due to this, most growth stocks do not pay dividends because management reinvests earnings to feed the growth.


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Guaranteed Coupon

In the GNMA forward market, a trade in which the seller guarantees the buyer delivery of a specific-coupon GNMA at the agreed price, thereby avoiding the yield maintenance and par cap procedures associated with delivery of different coupons.


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Guaranteed Mortgage Certificate

A bond issued by FHLMC backed by a pool of conventional mortgages and similar to a pass-through except that FHLMC guarantees that some minimum principal amount will be paid each year. Unlike pass-throughs GMC’s pay interest semi-annually and principal annually. The investor also has the option to put his remaining principal balance to FHLMC at par some time prior to maturity.


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GNMA Graduated Payment Mortgage Securities.


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The amount of time that must elapse until half the principal amount of a block of bonds has been retired (via a sinking fund or other Process).


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Refers to the dollar price of a bond without additional fractions. Quoting a bond only in fractions presumes that the “handle” is known by market participants.


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Headline CPI

The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services. Headline CPI includes the volatile components of food and energy prices. Core CPI excludes food and energy prices.


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Hedge Clause

A disclaimer that disavows legal claim of and responsibility for the accuracy of information obtained from outside sources.


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Hedging is the process of offsetting risk by simultaneously taking two or more positions in assets with prices that are negatively correlated (correlation coefficient near -1). A “perfect hedge” can be achieved by buying or selling derivatives or entering into forward purchase or sale agreements against specific assets on hand (sell the derivative) or required (buy the derivative). “Imperfect” or “partial hedges” may be constructed by buying or selling generic assets believed to be significantly negatively correlated with the asset owned or needed but with a correlation coefficient less than -1.


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High Grade Bonds

A bond of superior merit upon which the principal and interest will be paid under most conceivable circumstances, as with U.S. Government obligations.


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High-Powered Money

Refers to financial institutions’ reserve balances on the books of the Fed as each dollar of reserves supports several dollars of deposits. The total quantity of high-powered money can be precisely controlled by the Federal Reserve.


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High-Yield Bond (Junk Bond)

A bond offering a high yield or interest rate, commonly due to less robust financial security or short company track record. Generally includes securities rated BB+ (or BA+) or below by a nationally recognized rating agency.


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Sellers hit bids when they agree to sell at the bid price.


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Holding Company

A corporation that owns a large number of shares in other companies. Holding companies use the voting rights that come with their shares to exert influence over the companies under them.


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Honest-To-God Yield

A yield computed on a mortgage-related security based on an actual or an assumed prepayment rate on the underlying mortgages.


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Hung Deal

A new issue of which a large portion remains unsold and in the hands of the underwriters.


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The pledging of customers’ securities as collateral for loans to brokers and dealers.


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Information contained herein is believed to be reliable, but the accuracy and completeness of this material cannot be guaranteed.


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