Glossary | C
|A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | Y | Z | 0-9|
Call Option: The right, but the not obligation, to buy a security (and requiring a party to sell such security) at a stated price, up to a predetermined expiration date.
Callable Securities: Preferred stocks or bonds which may be redeemed before maturity, at the option of the issuer.
Capital Appreciation: Rise in the market prices of assets owned.
Capital Gain: Gain realized from the sale or exchange of securities or other assets.
Capital Gain Distribution: Payment to mutual fund clients consisting of profits from the sale of stocks and bonds.
Capital Loss: Loss realized on the sale or exchange of securities or other assets.
Capital Market: There are two broad types of securities traded in the capital market: debt and equity. Buying stock allows investors to gain an equity interest in the company and become part owner. When investors buy bonds, they essentially loan money to the company or government that issued the bond and become creditors of that issuer.
Capital Preservation: Objective generally, of money market and bond funds which seek to maintain a level of principal stability. Money market funds seek to preserve capital by being managed to maintain a stable $1.00 share price; bond funds have fluctuating share prices but may be invested with the objective of seeking to preserve principal. Capital preservation is never guaranteed.
Capitalization: Total amount of money invested in a company that may include long-term bonds, debentures or stock.
Cash Account: Account in which a client is required to pay in full for securities purchased not later than the 7th business day from the trade date.
Cash Equivalents: Highly liquid investments with lower risk. Examples are money market funds and Treasury bills.
Cash Price: Price required for immediate settlement. The term "cash" or "spot" is used to differentiate from a futures transaction, where settlement is due at a predetermined time in the future. Also called "spot price."
CD: Certificate of Deposit. Debt instrument issued by a commercial bank that agrees to repay the principal and pay a fixed rate of interest at maturity. Maturity dates vary and interest rates are determined by the market, but do not fluctuate during the term of the CD.
CDSC: Contingent Deferred Sales Charge. Mutual fund fee structure providing for a sales charge to be paid at the time of redemption of fund shares at a rate based on the client's length of ownership. Typically, the charge is imposed on a declining scale in the investor's first 5 - 6 years of ownership.
Certificate Shares: Physically issued documents held by a client (mutual funds will issue certificates only at the request of the client) indicating ownership of a specific number of shares of stock.
Certified Check: Negotiable instrument indicating payment is guaranteed by a bank. Funds are immediately withdrawn from a depositor's account and it becomes the legal obligation of the bank to cover the check.
Charter: Generic term synonymous with a fund's Articles of Incorporation or Agreement and Declaration of Trust, as applicable.
Chicago Board of Trade (CBOT): A futures and futures options exchange located in Chicago .
Chicago Board Options Exchange (CBOE): Trades foreign currency options (e.g., British pound, deutsche mark), index options (e.g., S&P 100, S&P 500) and interest rate options (e.g., T-bonds, T-notes).
Chicago Mercantile Exchange: Trades futures and futures options.
Classified Stock: Separation of equity into more than one class of common, usually designated in 2 classes as Class A and Class B. The distinguishing features set forth in the corporation charter and bylaws usually give an advantage to the Class A shares in terms of voting power, though dividend and liquidation privileges can also be involved.
Clearing House: Organization handling the processing of securities that are purchased or sold by members of an exchange.
Closed-end Investment Company: Management investment company that will issue a fixed number of shares for sale and can issue senior securities too. The shares may be of several classes. Shares are bought and sold in the secondary marketplace; the fund does not offer to redeem shares. The market price of the shares is determined by supply and demand and not by their net asset value. The shares may be traded on an exchange or over-the-counter market.
CMO: Collateralized Mortgage Obligation. Bonds secured by mortgages and sold on a short-, medium- or long-term basis.
Collateral: Securities or other property pledged by a borrower to secure a loan.
Collateralized Mortgage Obligations ("CMOs"): Mortgage-backed, investment-grade bonds that separate mortgage pools (called tranches) into different maturity classes. CMOs are typically backed by government-guaranteed or other top-grade mortgages and have AAA ratings.
Collection Period: Time required for an investment check to clear the account on which it was drawn. Also called check clearing.
COMEX: The primary market for trading metals such as gold, silver, copper and aluminum. Formerly known as the Commodity Exchange Inc., the COMEX merged with the New York Mercantile Exchange in 1994 and became the division responsible for metals trading.
Commercial Bank: State or nationally chartered lending institution owned by stockholders offering services such as demand deposits and short-term business loans.
Commercial Paper: Unsecured, short-term bearer obligations typically issued by a corporation or similar entity at a discount from face value and offering fixed rate of return. Maturity is usually 270 days or less.
Commission: Broker's basic fee for buying or selling securities or property for a customer. Also known as sales charge or load in the context of mutual funds.
Commodities: Bulk goods such as grains, metals, and foods traded on a commodities exchange or on the spot market.
Common Stock: Unit of equity ownership in a corporation allowing owners to share in corporate profits and exercise control over corporate affairs.
Common Stock Fund: Mutual fund that invests principally in equity securities.
Community Property: Property and income jointly belonging to a married couple. Each have equal rights to the assets. A legal relationship created by operation of state law.
Confirmation: Broker/Dealer's written statement provided to a client giving details of the securities transaction processed for the client account.
Consumer Price Index (CPI): A measure of the average change in prices for a fixed market basket of goods and services for All Urban Consumers that covers about 80% of the population. It is compiled by the Bureau of Labor Statistics. It includes food, clothing, shelter, fuels, transportation fares, charges for doctors' and dentists' services, drugs, etc. The survey includes 85 urban areas with 57,000 housing units and 19,000 retail establishments. Taxes directly associated with purchase and use of items are included. The Bureau uses visits by trained representatives and mail questionnaires to obtain data.
Contractual Plan: Program to accumulate mutual fund shares by regularly investing a fixed amount over a 10- or 15-year period.
Conversion Ratio and Price: The number of shares of common stock into which a bond or a preferred stock can be converted is the conversion ratio. The conversion price indicates the stated value per share at which the common stock will be delivered to the investor in exchange for the convertible.
Convertible Bonds: Convertible bonds carry the provision that within a stipulated time period, the bond may be converted into a certain number of shares of the issuing corporation's common stock at a prestated price.
Convertible Preferred Stock: Convertible preferred stck carries the same type of conversion features as convertible bonds, except the original security is issued as preferred stock rather than a bond.
Convertible Securities: Securities, like bonds or preferred stock, which can be exchanged for a set number of another security.
Corporate Bonds: Debt instruments issued by private corporations.
Corporate Bond Funds: Invest primarily in debt obligations of companies and provide investors with monthly income that is fully taxable.
Corporate Retirement Plans: Programs like the Money Purchase Pension and Profit Sharing Plans which provide employee benefits after retirement and are based on employer contributions.
Corporation: Form of business organization created pursuant to a state charter, offering perpetual existence and limited financial liability.
Cost Basis: Original purchase price or appraised value of an asset used in determining capital gains.
Coupon Bond: Security issued with small detachable certificates entitling the holder to the interest due. Also known as Bearer Bond.
Coupon Interest: Money paid to the holder of a coupon bond.
Credit Risk: Failure of an issuer to make timely interest or principal payments, or a decline or perception of a decline in the credit quality of a bond, can cause a bond's price to fall, potentially lowering the fund's share price.
Cumulative Preferred Stock: Preferred stock that accrues unpaid dividends as a claim against the company, which must be satisfied before dividends are paid to common stockholders.
Current Yield: Current yield indicates the amount of current income a bond provides relative to its prevailing market price. To calculate current yield, divide the annual interest income by the current market price of the bond. The current yield will fluctuate as the current market price of the bond fluctuates.
CUSIP Number: Committee on Uniform Security Identification Procedures. Unique identification number appearing on the face of publicly traded securities.
Custodian: Bank or other financial institution that keeps custody of stock certificates and other assets of a mutual fund, individual, or corporate client.
Custodian for a Minor: Appointed legal representative acting in the interest of a minor under the Uniform Transfers to Minors Act (UTMA) or the Uniform Gifts to Minors Act (UGMA).
Cyclical Stock: Cyclical stocks are those issued by companies whose earnings are closely linked to the general level of business activity. They tend to reflect the general state of the economy, and move up and down with the business cycle.