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Glossary of Financial Terms — Q, R 

Glossary_Q_R 

  

 

 


Terms — Q
Terms — R


Qualified

Entity that has acquired a recognized certificate, degree, or professional standing and/or has demonstrated the ability to handle and successfully completes qualifying tasks.

 

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Quality

Rating assigned to issue based upon issuer’s credit worthiness. Investment grade issues are BAAA—AAA (Moody’s rating).

 

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Quotation (Quote)

A price (bid and /or asked) in a subject market; not necessarily the price at which a security can be bought or sold, but an indication of market levels.

 

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Rally

An expression used in market parlance and literature to indicate a rise in prices following a flat or declining trend.

 

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Rate of Purchase

The yield obtainable on a security based on its purchase price or its current market price. This may be an amortized yield to maturity on a bond or the current income return.

 

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Rate of Return

The annualized return on a fixed income investment is a combination of the percentage change in the price of the security and the coupon interest earned over the same period. If a security is held to maturity its rate of return will equal the yield to maturity. This may be amortized yield to maturity on a bond or the current income return.

 

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Rating

The designation used by investor’s services to give relative indications of quality (I.e., AAA, Ba).

 

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Real Estate Mortgage Investment Conduit

A REMIC is a vehicle created under the Tax Reform Act of 1986 for issuing mortgage-backed securities. REMICs may be structured as corporations, partnerships, trusts, or as a segregated pool of assets and will not be subject to taxation at the issuer level in compliance with the requirements of the act.

 

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Real Interest Rate

Is the growth of your purchasing power. In other words, the real rate of interest is the nominal rate reduced by the rate of inflation.

 

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Reallowance

In securities underwriting, the amount paid to a broker/dealer who is not part of the syndicate in but who still sells shares in the offering.

 

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Real Return Bond

A security that adjusts either, or both, its principal and interest payments to compensate for rising inflation, thereby protecting an investor’s purchasing power.

 

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Real Yield

Describes the yield on a security adjusted for inflation.

 

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Recession

A decline in total physical output that lasts six consecutive months or more. A growth recession is marked by a six-month or longer slowdown (but no decline) in the growth rate. The National Bureau of Economic Research defines a recession as a “significant” decrease in activity over a sustained period of time. The declines would be visible in GDP, Payrolls, Production, Sales and Incomes.

 

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Reclamation

A claim for the right to return or the right to demand the return of a security that has been previously accepted as a result of bad delivery or other irregularities in the settlement process.

 

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Record Date

The date set by trustees for determining who will be paid principal and interest (and prepayment) on a security. The record date for most mortgage-backed securities is the last calendar date of the month.

 

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Redemption

The liquidation of indebtedness by retiring an outstanding obligation, usually at the issuer’s option and prior to a stated final maturity.

 

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Redemption Price

The price at which a bond may be redeemed (at the option of the company) prior to its maturity day. Redemption prices are determined when the bond is issued and are usually based on the original coupon and offering price.

 

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Red Herring

A preliminary prospectus giving the advance details of an expected offering of corporate securities, subject to amendment, with the sale contingent upon clearance by the SEC. So called because it contains a disclaimer printed in red.

 

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Refinancing

The retirement of existing securities and issuing of new securities to save interest costs, consolidate debt, lengthen maturity, or otherwise alter the capitalization of a company. The prepayment of a mortgage with funds borrowed at a lower interest rate.

 

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Refunding

A redemption with funds raised through the sale of a new issue. Most corporate bonds are protected for some stated period against refunding through sale of an issue with an interest cost lower than that on the outstanding bond.

 

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Refunding

A redemption with funds raised through the sale of a new issue. Most corporate bonds are protected for some stated period against refunding through sale of an issue with an interest cost lower than that on the outstanding bond.

 

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Registered Bond

A bond registered on the issuing company’s books in the name of the owner. Although interest can be collected upon presentation of the coupon, the principal can be transferred only with the endorsement of the registered owner. A fully registered bond pays interest to the owner by check for the issuer’s agent.

 

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Registered Holder

The name in which a security is registered as stated on the certificate itself or on the books of the paying agent. All principal and interest payments are made to the registered holder regardless of beneficial ownership on the record.

 

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Registration Statement

A document including a prospectus with exhibits prepared primarily by the issuing company, its counsel, and independent accountants, with the help of the managing underwriter and its counsel. Once prepared, it is filed with the SEC.

 

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Regular Dividend

An established dividend rate fixed by a corporation upon its stock and usually paid quarterly or semi-annually.

 

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Regular Way Settlement

The customary process by which purchases and sales of securities are determined and the balance paid. Regular Way Settlement of a corporate security is on the third full business day after the transaction date; on a government security, it is the first full business day after the trade date.

 

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Relative Returns

The return that an asset achieves over a period of time compared to a benchmark. The relative return is the difference between the absolute return achieved by the asset and the return achieved by the benchmark.

 

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Reopening

The offering by the issuer of an additional amount of an outstanding security.

 

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Rep Account

Representative Account

 

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Repurchase Agreements

A method of borrowing by using a security as collateral for a loan. The interest rate and term of the loan are agreed upon in advance, an upon repayment of the loan the security Is returned to the owner. The borrower retains possession of the security and continues to receive any interest payments during the term of the agreement. Also known as a repo. In reference to Federal Reserve actions, a means of temporarily adding to reserves. The fed buys securities under a contract to sell them back at an agreed price and date. (General RP’s mature within 1–7 days, the maximum term being 15 days.) Dealers may repurchase prior to the maturity of the RP if they wish.

 

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Required Minimum Distribution

The minimum annual required distribution amount for an IRA holder who reaches age 70 ½. Also called minimum distribution.

 

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Reserve Requirements

The percentage of deposits required to be held as reserves. This is set by the Fed, within limits legislated by Congress. Generally, reserve requirements are higher on demand deposits than on savings deposits. Reserve requirements change infrequently.

 

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Reserves

That part of a financial institution’s assets held in vault or on deposit at the Fed.

 

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Resource

Assigned in the activity screen with Process Charter. Resources are used to perform activities; these include: human, system and application resources.

 

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Retail (Sales, Clients)

Intermediary or individual investors overseeing personal wealth as opposed to fund managers, pension plans, foundations, etc. overseeing assets on behalf of businesses, philanthropies, large group beneficiaries.

 

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Retention

That percentage of a syndicate member’s underwriting participation which is retained for his own, retail sales, the balance of the underwriting commitment being set aside for the pot.

 

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Return

The amount of money received annually from an investment, usually expressed as a percentage.

 

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Return Correlation

The relationship between the returns on investments. A negative return correlation between two investments means that most of the time when investment A has a positive return, investment B will have a negative return.

 

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Reversal

A bond swap that is the “reverse” of a prior bond swap. If the initial bond swap consisted of selling bond A and buying bond B, the reversal is the sale of B and the purchase of A.

 

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Rich

Expensive; having a price which is perceived to be overvalued.

 

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Right

An option to subscribe to new shares issued by a company which enables a stockholder to maintain his proportionate ownership in the company.

 

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Rights of Accumulation

Mutual fund shareholder’s right to count existing shares along with the new purchases in determining the sales fee charged by the fund which is lower for high volume purchases.

 

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Risk

A measure of the probability of financial loss. In the fixed income markets there are several types of risk:

 

Credit risk: is the risk that an issuer will default on its bonds at some time prior to maturity.

 

Market risk: is the risk that an investor will experience a financial or book loss from an adverse change in market prices.

Liquidity risk: is the risk that an issue will be illiquid and force an investor to take a loss if he attempts to sell the issue prior to maturity.

 

Prepayment risk: is the risk that a pass-through issue will have an adverse paten of prepayments (i.e., low prepayments for discount issues, high prepayments for premium issues).

 

Reinvestment Risk: is the risk that an investor will be forced to reinvest cash flow from an issue at substantially lower rates that the yield of the original investment. Risk can be either systematic or unsystematic (diversifiable).

 

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Risk Free Rate

A theoretical interest rate that would be returned on an investment which was completely free of risk. The 3-month Treasury Bill is a close approximation, since it is virtually risk-free.

 

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Riskless

Without credit risk. Treasury issues and government-guaranteed issues are regarded as the only riskless issues. With respect to bond trading, simultaneous buying and selling so as to eliminate market risk.

 

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Risk Premium

The extra return that investors require, to hold a risky asset instead of a risk free one.

 

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Risk-vs.-Return

Risk measures the probability of financial loss. Investors often compare risk, as measured by standard deviation of returns, to historical or expected return when making investment decisions. Typically, investors demand higher returns for investments they consider more risky.

 

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Roll Over

Reinvestment of funds received from a maturity security in a new issue of the same or like security.

 

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Round Lot

An amount of bonds of USD 100,000 par amount. For trades involving par amounts greater that USD 100,000, a good delivery requires that the bonds delivered be in units that are multiples of USD 100,000 or units that can be grouped into blocks of USD 100,000. Colloquially and in institutional context, the smallest amount of bonds acceptable for dealing, ranging from USD 100,000 to USD 1 million, depending on the liquidity of the issue and the size of the institution involved. The smallest amount of bonds traded in a tight market without a price differential or adjustment.

 

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Rule 144

An SEC rule permitting the sale of restricted investment letter stock by affiliated persons in small amounts without first registering the stock with the SEC. It is designed to prohibit the creation of public markets in securities of issuers for which adequate current information is not available to the public. (The rule permits the public sale in ordinary trading transactions of limited amounts of securities owned by persons controlling, controlled by, or under common control with the issuer and by persons who have acquired restricted securities of the issuer).

 

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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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