D

Date of payment Date dividend checks are mailed.

Date of record Date on which holders of record in a firm's stock ledger are designated as the recipients of either dividends or stock rights.

Dates convention Treating cash flows as being received on exact dates - date 0, date 1, and so forth - as opposed to the end-of-year convention.

Day order An order to buy or sell stock that automatically expires if it can't be executed on the day it is entered.

Day trading Refers to establishing and liquidating the same position or positions within one day's trading.

Days in receivables Average collection period.

Days' sales in inventory ratio The average number of days' worth of sales that is held in inventory.

Days' sales outstanding Average collection period.

DCF See: Discounted cash flows.

De facto Existing in actual fact although not by official recognition.

Dead cat bounce A small upmove in a bear market.

Dealer An entity that stands ready and willing to buy a security for its own account (at its bid price) or sell from its own account (at its ask price).

Dealer loan Overnight, collateralized loan made to a dealer financing his position by borrowing from a money market bank.

Dealer market A market where traders specializing in particular commodities buy and sell assets for their own accounts.

Dealer options Over-the-counter options, such as those offered by government and mortgage-backed securities dealers.

Debenture bond An unsecured bond whose holder has the claim of a general creditor on all assets of the issuer not pledged specifically to secure other debt. Compare subordinated debenture bond, and collateral trust bonds.

Debt/equity ratio Indicator of financial leverage. Compares assets provided by creditors to assets provided by shareholders. Determined by dividing long-term debt by common stockholder equity.

Debt Money borrowed.

Debt capacity Ability to borrow. The amount a firm can borrow up to the point where the firm value no longer increases.

Debt displacement The amount of borrowing that leasing displaces. Firms that do a lot of leasing will be forced to cut back on borrowing.

Debt instrument An asset requiring fixed dollar payments, such as a government or corporate bond.

Debt leverage The amplification of the return earned on equity when an investment or firm is financed partially with borrowed money.

Debt limitation A bond covenant that restricts in some way the firm's ability to incur additional indebtedness.

Debt market The market for trading debt instruments.

Debt ratio Total debt divided by total assets.

Debt relief Reducing the principal and/or interest payments on LDC loans.

Debt securities IOUs created through loan-type transactions - commercial paper, bank CDs, bills, bonds, and other instruments.

Debt service Interest payment plus repayments of principal to creditors, that is, retirement of debt.

Debt service parity approach An analysis wherein the alternatives under consideration will provide the firm with the exact same schedule of after-tax debt payments (including both interest and principal).

Debt-service coverage ratio Earnings before interest and income taxes plus one-third rental charges, divided by interest expense plus one-third rental charges plus the quantity of principal repayments divided by one minus the tax rate.

Debt swap A set of transactions (also called a debt-equity swap) in which a firm buys a country's dollar bank debt at a discount and swaps this debt with the central bank for local currency that it can use to acquire local equity.

Debtor in possession A firm that is continuing to operate under Chapter 11 bankruptcy process.

Debtor-in-possession financing New debt obtained by a firm during the Chapter 11 bankruptcy process.

Decile rank Performance over time, rated on a scale of 1-10.1 indicates that a mutual fund's return was in the top 10% of funds being compared, while 3 means the return was in the top 30%. Objective Rank compares all funds in the same investment strategy category. All Rank compares all funds.

Decision tree Method of representing alternative sequential decisions and the possible outcomes from these decisions.

Declaration date The date on which a firm's directors meet and announce the date and amount of the next dividend.

Dedicated capital Total par value (number of shares issued, multiplied by the par value of each share). Also called dedicated value.

Dedication strategy Refers to multi-period cash flow matching.

Dedicating a portfolio Related: cash flow matching.

Deductive reasoning The use of general fact to provide accurate information about a specific situation.

Deed of trust Indenture.

Deep-discount bond A bond issued with a very low coupon or no coupon and selling at a price far below par value. When the bond has no coupon, it's called a zero coupon bond.

Default Failure to make timely payment of interest or principal on a debt security or to otherwise comply with the provisions of a bond indenture.

Default premium A differential in promised yield that compensates the investor for the risk inherent in purchasing a corporate bond that entails some risk of default.

Default risk Also referred to as credit risk (as gauged by commercial rating companies), the risk that an issuer of a bond may be unable to make timely principal and interest payments.

Defeasance Practice whereby the borrower sets aside cash or bonds sufficient to service the borrower's debt. Both the borrower's debt and the offestting cash or bonds are removed from the balance sheet.

Deferred call A provision that prohibits the company from calling the bond before a certain date. During this period the bond is said to be call protected.

Deferred equity A common term for convertible bonds because of their equity component and the expectation that the bond will ultimately be converted into shares of common stock.

Deferred futures The most distant months of a futures contract. A bond that sells at a discount and does not pay interest for an initial period, typically from three to seven years. Compare step-up bond and payment-in-kind bond.

Deferred nominal life annuity A monthly fixed-dollar payment beginning at retirement age. It is nominal because the payment is fixed in dollar amount at any particular time, up to and including retirement.

Deferred taxes A non-cash expense that provides a source of free cash flow. Amount allocated during the period to cover tax liabilities that have not yet been paid.

Deferred-annuities Tax-advantaged life insurance product. Deferred annuities offer deferral of taxes with the option of withdrawing one's funds in the form of life annuity.

Deficit An excess of liabilities over assets, of losses over profits, or of expenditure over income.

Defined benefit plan A pension plan in which the sponsor agrees to make specified dollar payments to qualifying employees. The pension obligations are effectively the debt obligation of the plan sponsor. Related: defined contribution plan

Defined contribution plan A pension plan in which the sponsor is responsible only for making specified contributions into the plan on behalf of qualifying participants. Related: defined benefit plan

Delayed issuance pool Refers to MBSs that at the time of issuance were collateralized by seasoned loans originated prior to the MBS pool issue date.

Deliverable instrument The asset in a forward contract that will be delivered in the future at an agree-upon price.

Delivery The tender and receipt of an actual commodity or financial instrument in settlement of a futures contract.

Delivery notice The written notice given by the seller of his intention to make delivery against an open, short futures position on a particular date. Related: notice day

Delivery options The options available to the seller of an interest rate futures contract, including the quality option, the timing option, and the wild card option. Delivery options make the buyer uncertain of which Treasury Bond will be delivered or when it will be delivered.

Delivery points Those points designated by futures exchanges at which the financial instrument or commodity covered by a futures contract may be delivered in fulfillment of such contract.

Delivery price The price fixed by the Clearing house at which deliveries on futures are in invoiced; also the price at which the futures contract is settled when deliveries are made.

Delivery versus payment A transaction in which the buyer's payment for securities is due at the time of delivery (usually to a bank acting as agent for the buyer) upon receipt of the securities. The payment may be made by bank wire, check, or direct credit to an account.

Delta Also called the hedge ratio, the ratio of the change in price of a call option to the change in price of the underlying stock.

Delta hedge A dynamic hedging strategy using options with continuous adjustment of the number of options used, as a function of the delta of the option.

Delta neutral The value of the portfolio is not affected by changes in the value of the asset on which the options are written.

Demand deposits Checking accounts that pay no interest and can be withdrawn upon demand.

Demand line of credit A bank line of credit that enables a customer to borrow on a daily or on-demand basis.

Demand master notes Short-term securities that are repayable immediately upon the holder's demand.

Demand shock An event that affects the demand for goods in services in the economy.

Dependent Acceptance of a capital budgeting project contingent on the acceptance of another project.

Depository transfer check (DTC) Check made out directly by a local bank to a particular firm or person.

Depository Trust Company (DTC) DTC is a user-owned securities depository which accepts deposits of eligible securities for custody, executes book-entry deliveries and records book-entry pledges of securities in its custody, and provides for withdrawals of securities from its custody.

Depreciate To allocate the purchase cost of an asset over its life.

Depreciation A non-cash expense that provides a source of free cash flow. Amount allocated during the period to amortize the cost of acquiring Long term assets over the useful life of the assets.

Depreciation tax shield The value of the tax write-off on depreciation of plant and equipment.

Derivative instruments Contracts such as options and futures whose price is derived from the price of the underlying financial asset.

Derivative markets Markets for derivative instruments.

Derivative security A financial security, such as an option, or future, whose value is derived in part from the value and characteristics of another security, the underlying security.

Detachable warrant A warrant entitles the holder to buy a given number of shares of stock at a stipulated price. A detachable warrant is one that may be sold separately from the package it may have originally been issued with (usually a bond).

Deterministic models Liability-matching models that assume that the liability payments and the asset cash flows are known with certainty. Related: Compare stochastic models

Detrend To remove the general drift, tendency or bent of a set of statistical data as related to time.

Devaluation A decrease in the spot price of the currency.

Difference from S&P A mutual fund's return minus the change in the Standard & Poors 500 Index for the same time period. A notation of -5.00 means the fund return was 5 percentage points less than the gain in the S&P, while 0.00 means that the fund and the S&P had the same return.

Differential disclosure The practice of reporting conflicting or markedly different information in official corporate statements including annual and quarterly reports and the 10-Ks and 10-Qs.

Differential swap Swap between two LIBO rates of interest, e.g. yen LIBOR for dollar LIBOR. Payments are in one currency.

Diffusion process A conception of the way a stock's price changes that assumes that the price takes on all intermediate values. dirty price. Related: full price

Dilution Diminution in the proportion of income to which each share is entitled.

Dilutive effect Result of a transaction that decreases earnings per common share.

Direct estimate method A method of cash budgeting based on detailed estimates of cash receipts and cash disbursements category by category.

Direct lease Lease in which the lessor purchases new equipment from the manufacturer and leases it to the lessee.

Direct paper Commercial paper sold directly by the issuer to investors.

Direct placement Selling a new issue not by offering it for sale publicly, but by placing it with one of several institutional investors.

Direct quote For foreign exchange, the number of U.S. dollars needed to buy one unit of a foreign currency.

Direct search market Buyers and sellers seek each other directly and transact directly.

Direct stock-purchase programs The purchase by investors of securities directly from the issuer.

Dirty float A system of floating exchange rates in which the government occasionally intervenes to change the direction of the value of the country's currency.

Dirty price Bond price including accrued interest, i.e., the price paid by the bond buyer.

Disbursement float A decrease in book cash but no immediate change in bank cash, generated by checks written by the firm.

Disclaimer of opinion An auditor's statement disclaiming any opinion regarding the company's financial condition.

Discount Referring to the selling price of a bond, a price below its par value. Related: premium.

Discount bond Debt sold for less than its principal value. If a discount bond pays no interest, it is called a zero coupon bond.

Discount factor Present value of $1 received at a stated future date.

Discount period The period during which a customer can deduct the discount from the net amount of the bill when making payment.

Discount rate The interest rate that the Federal Reserve charges a bank to borrow funds when a bank is temporarily short of funds. Collateral is necessary to borrow, and such borrowing is quite limited because the Fed views it as a privilege to be used to meet short-term liquidity needs, and not a device to increase earnings.

Discount securities Non-interest-bearing money market instruments that are issued at a discount and redeemed at maturity for full face value, e.g. U.S. Treasury bills.

Discount window Facility provided by the Fed enabling member banks to borrow reserves against collateral in the form of governments or other acceptable paper.

Discounted basis Selling something on a discounted basis is selling below what its value will be at maturity, so that the difference makes up all or part of the interest.

Discounted cash flow (DCF) Future cash flows multiplied by discount factors to obtain present values.

Discounted dividend model (DDM) A formula to estimate the intrinsic value of a firm by figuring the present value of all expected future dividends.

Discounted payback period rule An investment decision rule in which the cash flows are discounted at an interest rate and the payback rule is applied on these discounted cash flows.

Discounting Calculating the present value of a future amount. The process is opposite to compounding.

Discrete compoundingM Compounding the time value of money for discrete time intervals.

Discrete random variable A random variable that can take only a certain specified set of discrete possible values - for example, the positive integers 1, 2, 3, . . .

Discretionary account Accounts over which an individual or organization, other than the person in whose name the account is carried, exercises trading authority or control.

Discretionary cash flow Cash flow that is available after the funding of all positive NPV capital investment projects; it is available for paying cash dividends, repurchasing common stock, retiring debt, and so on.

Discriminant analysis A statistical process that links the probability of default to a specified set of financial ratios.

Disintermediation Withdrawal of funds from a financial institution in order to invest them directly.

Distributed After a Treasury auction, there will be many new issues in dealer's hands. As those issues are sold, it is said that they are distributed.

Distributions Payments from fund or corporate cash flow. May include dividends from earnings, capital gains from sale of portfolio holdings and return of capital. Fund distributions can be made by check or by investing in additional shares. Funds are required to distribute capital gains (if any) to shareholders at least once per year. Some Corporations offer Dividend Reinvestment Plans (DRP).

Divergence When two or more averages or indices fail to show confirming trends.

Diversifiable risk Related: unsystematic risk.

Diversification Dividing investment funds among a variety of securities with different risk, reward, and correlation statistics so as to minimize unsystematic risk.

Dividend A dividend is a portion of a company's profit paid to common and preferred shareholders. A stock selling for $20 a share with an annual dividend of $1 a share yields the investor 5%.

Dividend clawback With respect to a project financing, an arrangement under which the sponsors of a project agree to contribute as equity any prior dividends received from the project to the extent necessary to cover any cash deficiencies.

Dividend clientele A group of shareholders who prefer that the firm follow a particular dividend policy. For example, such a preference is often based on comparable tax situations.

Dividend discount model (DDM) A model for valuing the common stock of a company, based on the present value of the expected cash flows.

Dividend growth model A model wherein dividends are assumed to be at a constant rate in perpetuity.

Dividend limitation A bond covenant that restricts in some way the firm's ability to pay cash dividends.

Dividend payout ratio Percentage of earnings paid out as dividends.

Dividends per share Amount of cash paid to shareholders expressed as dollars per share.

Dividend policy An established guide for the firm to determine the amount of money it will pay as dividends.

Dividend rate The fixed or floating rate paid on preferred stock based on par value.

Dividend reinvestment plan (DRP) Automatic reinvestment of shareholder dividends in more shares of a company's stock, often without commissions. Some plans provide for the purchase of additional shares at a discount to market price. Dividend reinvestment plans allow shareholders to accumulate stock over the Long term using dollar cost averaging. The DRP is usually administered by the company without charges to the holder.

Dividend rights A shareholders' rights to receive per-share dividends identical to those other shareholders receive.

Dividend yield (Funds) Indicated yield represents return on a share of a mutual fund held over the past 12 months. Assumes fund was purchased 1 year ago. Reflects effect of sales charges (at current rates), but not redemption charges.

Dividend yield (Stocks) Indicated yield represents annual dividends divided by current stock price.

Dividends per share Dividends paid for the past 12 months divided by the number of common shares outstanding, as reported by a company. The number of shares often is determined by a weighted average of shares outstanding over the reporting term.

DM Deutsche (German) marks.

Doctrine of sovereign immunity Doctrine that says a nation may not be tried in the courts of another country without its consent.

Documented discount notes Commercial paper backed by normal bank lines plus a letter of credit from a bank stating that it will pay off the paper at maturity if the borrower does not. Such paper is also referred to as LOC (letter of credit) paper.

Dollar bonds Municipal revenue bonds for which quotes are given in dollar prices. Not to be confused with "U.S. Dollar" bonds, a common term of reference in the Eurobond market.

Dollar duration The product of modified duration and the initial price.

Dollar price of a bond Percentage of face value at which a bond is quoted.

Dollar return The return realized on a portfolio for any evaluation period, including (1) the change in market value of the portfolio and (2) any distributions made from the portfolio during that period.

Dollar roll Similar to the reverse repurchase agreement - a simultaneous agreement to sell a security held in a portfolio with purchase of a similar security at a future date at an agreed-upon price.

Dollar safety margin The dollar equivalent of the safety cushion for a portfolio in a contingent immunization strategy.

Dollar-weighted rate of return Also called the internal rate of return, the interest rate that will make the present value of the cash flows from all the subperiods in the evaluation period plus the terminal market value of the portfolio equal to the initial market value of the portfolio.

Domestic International Sales Corporation (DISC) A U.S. corporation that receives a tax incentive for export activities.

Domestic market Part of a nation's internal market representing the mechanisms for issuing and trading securities of entities domiciled within that nation. Compare external market and foreign market.

Don't know (DK, Dked) "Don't know the trade." A Street expression used whenever one party lacks knowledge of a trade or receives conflicting instructions from the other party.

Double-declining-balance depreciation Method of accelerated depreciation.

Double-dip lease A cross-border lease in which the disparate rules of the lessor's and lessee's countries let both parties be treated as the owner of the leased equipment for tax purposes.

Double-tax agreement Agreement between two countries that taxes paid abroad can be offset against domestic taxes levied on foreign dividends.

Doubling option A sinking fund provision that may allow repurchase of twice the required number of bonds at the sinking fund call price.

Dow Jones industrial average This is the best known U.S.index of stocks. It contains 30 stocks that trade on the New York Stock Exchange. The Dow, as it is called, is a barometer of how shares of the largest U.S.companies are performing. There are thousands of investment indexes around the world for stocks, bonds, currencies and commodities.

Down-and-in option Barrier option that comes into existence if asset price hits a barrier.

Down-and-out option Barrier option that expires if asset price hits a barrier.

Downgrade A classic negative change in ratings for a stock, and or other rated security.

Draft An unconventional order in writing - signed by a person, usually the exporter, and addressed to the importer - ordering the importer or the importer's agent to pay, on demand (sight draft) or at a fixed future date (time draft), the amount specified on its face.

Drop, the With the dollar roll transaction the difference between the sale price of a mortgage-backed pass-through, and its re-purchase price on a future date at a predetermined price.

Drop lock An arrangement whereby the interest rate on a floating rate note or preferred stock becomes fixed if it falls to a specified level.

Dual syndicate equity offering An international equity placement where the offering is split into two tranches - domestic and foreign - and each tranche is handled by a separate lead manager.

Dual-currency issues Eurobonds that pay coupon interest in one currency but pay the principal in a different currency.

Due bill An instrument evidencing the obligation of a seller to deliver securities sold to the buyer. Occasionally used in the bill market.

Dupont system of financial control Highlights the fact that return on assets (ROA) can be expressed in terms of the profit margin and asset turnover.

Duration A common gauge of the price sensitivity of an asset or portfolio to a change in interest rates.

Dutch auction Auction in which the lowest price necessary to sell the entire offering becomes the price at which all securities offered are sold. This technique has been used in Treasury auctions.

Dynamic asset allocation An asset allocation strategy in which the asset mix is mechanistically shifted in response to -changing market conditions, as in a portfolio insurance strategy, for example.

Dynamic hedging A strategy that involves rebalancing hedge positions as market conditions change; a strategy that seeks to insure the value of a portfolio using a synthetic put option.