Category: Investments glossary

A dead cat bounce is a temporary recovery of asset prices from a prolonged decline or a bear market that is followed by the continuation of the downtrend. A dead cat bounce is a small, short-lived recovery in the price of a declining security, such as a stock. Frequently, downtrends are interrupted by brief periods of recovery — or small rallies — where prices temporarily rise. The name dead cat bounce is based on the notion that even a dead cat will bounce if it falls far enough and fast enough. read more

Redlining is an unethical practice that puts services (financial and otherwise) out of reach for residents of certain areas based on race or ethnicity. It can be seen in the systematic denial of mortgages, insurance, loans, and other financial services based on location (and that area’s default history) rather than an individual’s qualifications and creditworthiness. Notably, the policy of redlining is felt the most by residents of minority neighborhoods.

Undersubscribed is a situation in which the demand for an initial public offering (IPO) or other offering of securities is less than the number of shares issued. Undersubscribed offerings are often a matter of overpricing the securities for sale.

Aggregate stop-loss insurance is a policy designed to limit claim coverage (losses) to a specific amount. This coverage ensures that a catastrophic claim (specific stop-loss) or numerous claims (aggregate stop-loss) do not drain the financial reserves of a self-funded plan. Aggregate stop-loss protects the employer against claims that are higher than expected. If total claims exceed the aggregate limit, the stop-loss insurer covers the claims or reimburses the employer.

A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt (loans) or assesses the ability of a company to meet its financial obligations. The leverage ratio category is important because companies rely on a mixture of equity and debt to finance their operations, and knowing the amount of debt held by a company is useful in evaluating whether it can pay off its debts as they come due. Several common leverage ratios are discussed below.

Undersubscribed is a situation in which the demand for an initial public offering (IPO) or other offering of securities is less than the number of shares issued. Undersubscribed offerings are often a matter of overpricing the securities for sale.

Zero-bound interest rate is a reference to the lower limit of 0% for short-term interest rates beyond which monetary policy is not believed to be effective in stimulating economic growth.

An unweighted index is comprised of securities with equal weight within the index. An equivalent dollar amount is invested in each of the index components. For an unweighted stock index, one stock’s performance will not have a dramatic effect on the performance of the index as a whole.

A hara-kiri swap is an interest rate or cross-currency swap devoid of profit potential for the originator. The term became popular in the 1980s when Japanese banks and brokers were offerings very attractive rates in order to obtain business from mostly foreign companies. In Japan, hara-kiri is a form of slow ritual suicide. The swaps were dubbed hara-kiri because not making a profit on these types of transactions was viewed as financial suicide.

Open kimono means to reveal what is being planned or to share important information freely. Similar to ”open the books” or an open door policy, opening the kimono means revealing the inner workings of a project or company to an outside party. The practice is also referred to as opening (up) one’s kimono.