Glossary
Bond market terms used in the world of fixed income investing.

Account
1. The entire group of underwriters in any one offering
2. Any retail customer

Accretion
The addition of principal to a fund over a period of time as the result of a plan of accumulation. Similar to amortization, except that accretion results in an increase of accounting worth, while amortization results in a decrease. In portfolio accounting, discount bonds are accreted to par while premium bonds are amortized to par.

Accrued Interest
The interest accumulated on a bond since issue date of the last coupon payment. The buyer of the bond pays the market price and accrued interest, which is payable to the seller.

Accumulator
An investor whose goal is to acquire as much of a specific sinking fund issue as possible in order to control the floating supply of the issue and affect its market value.

Active
1. Refers to a market, customer or security that trades frequently.
2. In reference to sinking funds, those which are currently operating.

Active Management
A portfolio strategy of aggressively managing assets by continually repositioning portfolios to take advantage of the most favorable opportunities.

Activities
Event level used in describing the work flow; detailed further by Tasks and preceded by Processes. Activities describe "what" is done. Tasks describe "how" the activity is done.

Adjusted Rate Mortgage (ARM)
Mortgage agreement between a financial institution and a real estate buyer stipulating predetermined adjustments of the interest rate at specified intervals, usually one, three, or five years. Payments are tied to some index outside the control of the bank or savings and loan institution, such as the interest rates on U.S. Treasury bills or the average national mortgage rate. Borrowers get lower rates at the beginning of the ARM than they would if they took out a fixed rate mortgage covering the same term.

ADR
American Depository Receipt

ADRs
American Depository Receipts. A depository receipt issued against foreign securities by an American bank that holds those securities. In September 1988, the French Treasury announced that two OATs will be traded on the New York Stock Exchange through ADRs. Several other countries are expected to follow suit.

After-Tax Yield
The net return a bond earns after income taxes are paid on interest income and capital gains taxes are assessed on changes in book value. It is common practice to disregard any long-term capital losses in calculating after-tax yield.

Agency
The debt of an agency of the U.S. Government. Payment of principal and interest are sometimes guaranteed by the government itself.

Agency Trade
A trade in which the executing dealer acts as an agent for the seller or buyer and is paid an agreed commission which is specifically identified on the customer's confirmation.

Agent
A person who acts on behalf of another (the principal) and is subject to his control and authority.

Agreement Among Underwriters (AAU)
The legal document that binds underwriters together into a syndicate and grants the managing underwriters the power to act on behalf of the group.

AGY
Agency

AI
Accrued Interest

AL
Average Life

All or None (AON)
A requirement that the total amount of a given order be executed at the specified price - no lesser amount will be acceptable.

Alternative Mortgage Instrument (AMI)
A non-traditional mortgage; a mortgage with terms varying from those of traditional mortgages in one or more ways. Among the AMIs in use today are:

Variable Rate Mortgage (VRM): characterized by interest rates that vary according to a formula tied to the lender's cost of money or other index.

Graduated Payment Mortgage (GPM): characterized by a fixed interest rate and term to maturity, but payments that are at first relatively small and which rise by a fixed percentage per year for a fixed number of years.

Flexible Loan Insurance Program Mortgage (FLIP): a mortgage similar to a GPM from the borrower's standpoint, but in which a portion of the down payment is used to create a pledged savings account which is used to subsidize the mortgage payment. The lender receives level payments comprised of loan payments plus savings accounts withdrawals.

Rollover Mortgage (ROM): a Series of short-term loans periodically renegotiated as to interest rate in order to provide long-term financing. The interest rate on each individual loan is fixed and principal is amortized over the entire term of all loans.

Shared Appreciation Mortgage (SAM): a mortgage in which the lender receives some percentage of any appreciation in the value of the property upon sale or maturity of the loan in return for offering the borrower a lower interest rate than prevailing traditional mortgage rates.

Reverse Annuity Mortgage (RAM): a means of receiving fixed annuity payments for some fixed period of time using the equity value of the property as collateral.

Amortization
A reduction of debt by means of periodic payments sufficient to meet current interest and liquidate the debt at maturity.

Amount
Value given/received when security was bought or sold.

Analyst
Securities department staff member responsible for analyzing current market securities, as well as strategies for buying and selling them.

Annual Return
The total return of a security over a specified period, expressed as an annual rate of interest.

Annualized
A figure (as in a percentage) calculated by a formula to find the "average" performance per year for a period greater than one year.

AON
All or None

Applied Proceeds Swap
The sale of one block of securities, using the proceeds or monies of that sale to purchase as large a block of another security as possible.

Arbitrage
Technically, the purchase of a security in one market and the simultaneous sale of it or its equivalent in the same market or other markets for the differential or spread prevailing, at least temporarily, because of conditions peculiar to each market. Commonly refers to a swap done between two similar issues based upon an anticipated change in price spreads.

ARM
Adjusted Rate Mortgage

ASE
American Stock Exchange

Asked
The price at which securities are offered to a potential buyer; the price sellers offer to take.

Assets
All stocks, bonds, cash, interest earned, etc., owned by a given account.

Assets Under Management
The sum total of the market value of all assets for which a company acts as Investment Manager.

Assumption
In any market, refers to the takeover of a seller's mortgage loan by the buyer of the home. The buyer "assumes" responsibility for making the mortgage payments.

At or Better
In connection with a buy order, it means to purchase at the price specified or under; in a sell order, to sell at the price specified above.

Average Life
The arithmetic weighted average life of a bond where the weights are the proportion of the principal amount being redeemed.

AVG
Average

Away
Refers to a trade, quote or market which does not originate with the dealer in question, I.e., "the market is 100 1/4-1/2 away (from me)."

Axe
Short for "axe to grind". Refers to a trading position or preference.