Dictionary of Financial Words GREAT BASIN RESEARCH

C
C — The fifth letter of a NASDAQ stock descriptor specifying that issue is exempt from NASDAQ listing requirements for a
temporary period.
Calendar Effect — Describes the tendency of stocks to perform differently at different times of the year, including performance
anomalies like the January effect, month-of-the-year effect, day-of-the-week effect, and holiday effect.
Calendar Spread — With regard to Derivative products, a strategy in which there is a simultaneous purchase and sale of options
of the same class at different Strike Prices, but with the same expiration date. See Inter-Delivery Spread or Horizontal Spread.
Calendar Year (Basis) — Firms are said to be on a calendar year basis for financial reporting purposes when their accounting year
ends on December 31.
Call — (1) An Option to buy a specified number of shares of a certain security at a definite price within a specified period of time;
an option to buy (or “call”) a share of stock at a specified price within a specified period; the process of redeeming a bond or
preferred stock issue before its normal maturity. (2) A lender’s demand for early payment of a debt obligation based on the
borrower’s failure to meet contractual obligations associated with the loan agreement such as timely principal and interest
payments or maintaining compensating balances, etc. (3) Referred to as a Margin Call, a broker’s demand for additional margin
or collateral when the value of the client’s stock falls below a certain value.
Call Date — (1) A date before maturity, specified at issuance, when the issuer of a bond may retire part of the bond for a specified
call price. (2) The date before which previously issued securities may not be called or redeemed by the issuer. Frequently, a
security may have several call dates before its stated maturity, each of which may have different call provisions. Securities with
call dates generally must compensate investors for this feature by paying a high interest rate.
Call Feature — Part of the indenture agreement between the bond issuer and buyer describing the schedule and price of redemption’s
prior to maturity.
Call Option — (1) An option that gives the buyer the right, but not the obligation, to purchase (i.e., go “long”) the underlying
Futures Contract at the strike price on or before the expiration date. (2) An option to buy an asset at a specified exercise price
on or before a specified exercise date. (3) An option that gives the owner, or buyer, the right, but not the obligation, to purchase
a specified number of shares at a specified price up until the expiration date. Upon expiration, the call option become worthless.
Call options, essentially a bet that a stock’s price will increase, are used in speculative trading. The value of a call increases if
the stock goes up in value. Also see Warrant. Contrast with Put Option.
Call Premium — The amount in excess of Par Value that a company must pay when it calls a security before its maturity or
expiration date.
Call Price — The price that must be paid when a security is called. The call price is equal to the Par Value plus the Call Premium.
Call Privilege — A provision incorporated into a bond or a share of preferred stock that gives the issuer the right to redeem (call)
the security at a specified call price.
Call Provision — (1) A provision in a bond contract that gives the issuer the right to redeem the bonds under specified terms prior
to the normal maturity date. (2) Clauses in a loan that give the lender the right to accelerate the debt’s repayment schedule upon
the occurrence of a specific event or date.
Call Report — A quarterly report of income and financial condition required by the primary supervisory agency of a financial
institution: Comptroller of the Currency for national-chartered banks; Federal Reserve System (Fed) for state-charted banks
which are members of the Fed; Federal Deposit Insurance Corporation (FDIC) for FDIC insured banks which are not members
of the Federal Reserve System; or state banking regulatory agencies for state-chartered banks and trust companies.
Callable — (1) A stipulation of a bond allowing the issuer the right to redeem all or part of the issue before the maturity date, but
not before the stipulated first Call Date. (2) A bond issue, all or part of which may be redeemed by the issuing corporation under
specified conditions before maturity. The term also applies to preferred shares, which may be redeemed by the issuing
corporation.
Callable Bond — (1) A bond issue which may be redeemed or called, either all or in part, by the issuer under specified conditions,
before the maturity date. (2) A type of bond which permits the issuer to pay the obligation before the stated maturity date by
giving notice of redemption in a manner specified in the bond contract. Contrast with Irredeemable Bond.
Called Bond — A bond which the issuer or debtor has declared to be due and payable on a certain date and prior to its maturity date
in accordance with the terms specified in its issue.
CAMEL Rating — A measure of the relative soundness of a bank based on [C] capital, [A] asset, [M] management, [E] earnings,
and [L] liquidity. CAMEL ratings are used by bank regulatory agencies to evaluate bank’s overall financial and operational
conditions and are based on a 1-5 scale, with 1 given to banks with the strongest performance measures.
CAMPS — See Cumulative Auction Market Preferred Stocks.
Canceled Check — A check voided by endorsement indicating that it has been paid by the bank upon which it is drawn.
Canceling Order — An order that deletes a customer’s previous order.
Cancellation — The crossing out of a part of an instrument or a destruction of all the legal effects of the instrument, whether by act

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of party, upon breach by the other party, or pursuant to agreement or decree of a court.
Cancellation Clause — A contract provision that gives the right to terminate obligations upon the occurrence of specified conditions
or events.
Cap (Caps) — (1) The maximum allowable interest rate on a Floating-Rate Note (FRN) or Adjustable-Rate Mortgage (ARM). (2)
Caps are used on adjustable rate mortgages to limit the interest rate and/or the periodic payment amount. Most ARMs have a
periodic cap that is around 2 percent per year and a life cap of around 5-6 percent over the life of the loan and protect the
borrower from large increases in interest rates or the payment level. “Payment only” caps sometimes create negative amortization
where the principal balance of the loan increases rather than decreases over time. This is because the cap on the payment amount
may not even cover the interest due, let alone reduce the principal amount. Therefore, interest underpayments are added to the
principal balance of the loan. (3) The ceiling, upper limit price, or maximum interest rate which would be paid. It is analogous
to a Long Call position.
Cap Rate — Synonymous with Capitalization Rate.
Capacity — One of the five “C’s” of Credit Rating (i.e., character, capacity, capital, collateral, conditions) representing the
borrower’s ability to repay principal and interest on a loan obligation when due.
Capacity of Parties — One of the requirements for a valid contract. Parties with less than full capacity include minors, the mentally
insane, and those who are intoxicated.
Capacity Output — The output level associated with the minimum Average Total Cost (ATC) achievable from a given plant.
Capital — (1) Cash or goods accumulated and available for use in producing more cash or goods; the stock of all useful things or
assets that yield streams of income over time. (2) Accumulated wealth. A portion of wealth which is set aside for the production
of additional wealth; specifically, the funds belonging to the partners or shareholders of a business, invested with the expressed
intention of their remaining permanently in the business. (3) Basically, the sources of funds for a corporation. For examples, see
Working Capital and Net Working Capital. (4) (Factor of Production) Things which have been produced and are going to be used
as inputs to produce something else. (5) (Financial) Assets such as stocks or bonds, or funds available to a business for acquiring
capital goods (factors of production). (6) (Human) The educated, trained, and experienced human beings in the economy, that
is, productive people. Also see Capital Resources, Financial Capital, and Human Capital.
Capital Account — That part of the Balance of Payments statistics that records net changes in a nation’s international financial assets
and liabilities.
Capital Adequacy — The ability of a Financial Institution to continue providing banking services to the public while maintaining
at least the minimum legally-required ratio of capital to total assets. Typically, banking regulators rank depository financial
institutions according to five levels of capital adequacy:
[1] well capitalized;
[2] adequately capitalized;
[3] undercapitalized;
[4] significantly undercapitalized; and
[5] critically undercapitalized.
Capital Appreciation — A rise in the market value of a capital asset.
Capital Asset — (1) All of a company’s tangible property, including securities, real estate and other property. (2) An asset with a
life expectancy of more than one year that is not bought and sold in the ordinary course of business. (3) An asset purchased for
use in production over long periods of time rather than for resale. Such assets include (a) land, buildings, plant and equipment,
mineral deposits, and timber reserves; (b) patents, goodwill, trademarks, and leaseholds; and (c) investments in affiliated
companies. (4) (Taxation) Property held by a taxpayer, except cash, inventoriable assets, merchandise held for sale, receivables,
and certain intangibles. (5) Fixed assets usually consisting of tangible assets such as plant and equipment and intangible assets
such as a patent or copyright. (6) An asset defined in Section 1221 of the Internal Revenue Code that once received favorable
tax treatment upon sale. Excludes inventory, property held for resale, property used in a trade or business, copyrights in certain
instances, and certain U.S. government obligations. See Fixed Assets.
Capital Asset Pricing Model (CAPM) — (1) A model based on the proposition that any stock’s required rate of return is equal to
the risk free rate of return plus its risk premium. An economic theory that describes the relationship between risk and expected
return, and serves as a model for the pricing of risky securities. The CAPM asserts that the only risk that is priced by rational
investors is Systematic Risk, because that risk cannot be eliminated by diversification. The CAPM says that the expected return
of a security or a portfolio is equal to the rate on a risk-free security plus a risk premium multiplied by the assets systematic risk.
Theory was invented by William Sharpe (1964) and John Lintner (1965). (2) A methodology for assessing the risk of a security
by measuring its co-variance with a market portfolio, or Beta, and for comparing the expected risk against the security’s expected
return. (3) A tool that relates an asset’s expected return to the market’s expected return. It combines the concepts of efficient
capital markets with risk premiums. The idea of capital market efficiency assumes immediate, i.e., instantaneous, response to
perfect or near perfect information. The risk premiums relate an investment to the market’s risk-free or riskless rate of return.
Typically, this risk-free rate is viewed in terms of principal safety for short term U.S. government obligations. Here, beta relates
the volatility of an asset to the market. (4) A theory of asset pricing used to analyze the relationship between risk and rates of
return in securities. The return of an asset or security is the risk-free rate of return plus a risk premium based on the excess of
the return on the market over the risk-free rate multiplied by the asset’s systematic risk (which cannot be eliminated by
diversification). The model is represented by the mathematical expression:
r = rf + b(rm - rf)

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Dictionary of Financial Words GREAT BASIN RESEARCH

where:
r = the expected (or required) rate of return on a security;
rf = the risk-free rate of return (such as that on a U.S. Treasury bill);
rm = the expected rate of return on the market portfolio (such as Standard & Poor’s 500 Stock Composite Index or Dow
Jones 30 Industrials); and
b = beta, an index of systematic (nondiversifiable, uncontrollable) risk.
From this expression, it may be seen that the higher the degree of systematic risk (b), the higher will be the return on a given
security demanded by investors.
Capital Budget — (1) A company’s list of planned investment projects and a breakdown of planned investment outlays by plant
and division. (2) A plan of proposed capital outlays and the means of financing them for the current fiscal period. It is usually
a part of the current budget. If a capital program is in operation, it will be the first year thereof. A capital program is sometimes
referred to as a capital budget. (3) A plan of proposed acquisitions and replacements of long-term assets and their financing.
A capital budget is developed using a variety of Capital Budgeting techniques such as the payback method, the Net Present Value
(NPV) method, or the Internal Rate of Return (IRR) method. Also see Capital Program.
Capital Budgeting — (1) Planning long-term investments in plant and equipment. (2) The process of identifying available
investment opportunities, selecting investment projects to be carried out, and arranging for their financing. (3) The process of
planning expenditures on assets whose returns are expected to extend beyond one year. (4) The process of making long-term
planning decisions for capital investments. There are typically two types of investment decisions made in this regard: (a)
Selecting new facilities or expanding existing facilities, to include (i) investments in long-term assets such as property, plant,
and equipment, and (ii) resource commitments in the form of new product development, market research, refunding of long-term
debt, introduction of computer systems, etc.; and (b) Replacing existing facilities with new ones, such as replacing a manual
bookkeeping system with a computerized one and replacing an inefficient lathe with one that is controlled electronically. As
such, capital budgeting decisions are a key factor in the long-term profitability of a firm.
Capital Calls — Additional money to be invested by equity owners to fund deficits in construction costs or operating costs.
Capital Expenditures — (1) Funds used by a company to acquire or upgrade physical assets such as property, plant or equipment.
(2) An improvement (as distinguished from a repair) that will have a life of more than one year. Capital expenditures are
generally depreciated over their useful life, as distinguished from repairs, which are subtracted from income of the current year.
Also see Capital Outlays.
Capital Flows — Movements of financial assets across national borders.
Capital Gain — (1) The increase in the value of an asset over time. (2) The profit made when a security is sold for greater than its
original cost basis. (3) Gain on the sale of a capital asset. (4) The amount by which the sale price of a capital asset (securities,
real estate or equipment that has an expected life of more than one year) exceeds what was paid for it. For example, if you pay
$1,000 to buy 100 shares of XYZ corporation’s stock and then sell the stock two years later for $1,500, you would incur a capital
gain of $500 on which you are subject to capital gains tax. There are limits on the deduction of capital losses against ordinary
income.
Capital Gain or Loss — (1) The difference between what an investor paid for an asset and the price received upon redemption or
sale. (2) Profit or loss from the sale of a capital asset. A capital gain, under current federal income tax laws, may be either short-
term (six months or less) or long-term (more than six months). A short-term capital gain is taxed at the reporting individual’s
full income tax rate. A long-term capital gain is subject to a lower rate of taxation.
Capital Gains — (1) Taxable profits on the sale of an appreciated asset. (2) Profits on the sale of capital assets held for six months
or more.
Capital Gains Tax — The tax levied on profits from the sale of capital assets. A long-term capital gain, which is achieved once an
asset is held for at least 12 months, is taxed at a maximum rate of 20 percent (taxpayers in 28 percent tax bracket) and 10 percent
(taxpayers in 15 percent tax bracket). Assets held for less than 12 months are taxed at regular income tax levels, and, since
January 1, 2000, assets held for at least five years are taxed at 18 percent and 8 percent.
Capital Gains Yield — In any year, the capital gains yield (percent) is equal to the capital gain during the year divided by the
beginning price.
Capital Improvement — Synonymous with Capital Expenditure.
Capital Improvement Fund — A fund to accumulate revenues from current taxes levied for major repairs and maintenance to fixed
assets of a nature not specified at the time the revenues are levied. Appropriations of this fund are made in accord with state law
at the time specific projects become necessary.
Capital Intensity — (1) The amount of assets required to finance each dollar of sales. (2) The extent to which capital investment,
as opposed to labor, is used in the business of the firm.
Capital Intensive — (1) A term used to describe an industry or business with significant Capital Assets, for example, plant
equipment and machinery, relative to the use of labor. As a consequence, capital intensive businesses tend to have a higher
proportion of Fixed Costs than Labor Intensive businesses, which have a higher proportion of Variable Costs. Capital intensive
businesses therefore tend to run a higher risk as when there is a downturn in sales, as company profits will decline sharply
because fixed costs cannot be reduced in the short-term to meet declining demand. (2) Used to describe industries that require
large investments in capital assets to produce their goods, such as the automobile industry. These firms require large profit
margins and/or low costs of borrowing to survive.
Capital Lease — A long-term lease of capital equipment which for accounting purposes is treated as a borrowing of funds and a
balance sheet entry to be amortized. Also see Financial Lease.
Capital Loss — (1) Loss from the sale of a capital asset. (2) A capital loss occurs when the security is sold for less than its cost

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basis.
Capital Losses — Losses incurred on the sale of Capital Assets.
Capital Market — (1) The market that deals in long-term security issues of both debt and equity. The market in which corporate
equity and longer-term debt securities (those maturing in more than one year) are issued and traded. (2) The financial market
where corporations and governments raise typically long-term funds through a variety of financial instruments to include stocks,
bonds, and other forms of investment vehicles. (3) The trading center for long-term debt and corporate stocks. The New York
Stock Exchange (NYSE), which trades the stocks of many of the larger corporations, is a prime example of a capital market. The
American Stock Exchange (AMEX) and the regional stock exchanges are also examples. In addition, securities are issued and
traded through the thousands of brokers and dealers on the Over-the-Counter market. Generally, financial markets are divided
into three major components: (a) stock market; (b) bond market; and (c) money market. The stock and bond markets constitute
the capital market while the money market deals in short-term, i.e., less than one-year maturity, debt and financial obligations.
Capital Market Imperfections View — The view that issuing debt is generally valuable, but that the firm’s optimal choice of capital
structure involves various other views of capital structure (net corporate/personal tax, agency cost, bankruptcy cost, and pecking
order), that result from considerations of asymmetric information, asymmetric taxes, and transaction costs.
Capital Market Line — A graphical representation of the relationship between risk and the required rate of return. The line defined
by every combination of the risk-free asset and the market portfolio. The line represents the risk premium you earn for taking
on extra risk. The relationship is defined by the Capital Asset Pricing Model (CAPM).
Capital Outlays — Expenditures from general or special revenue funds which result in the acquisition of or addition to Fixed Assets.
Capital Program — A plan for Capital Expenditures to be incurred each year over a fixed period of years to meet capital needs
arising from a long-term work program or otherwise. It sets forth each project or other contemplated expenditure in which the
business entity is to have a part and specifies the full resources estimated to be available to finance the projected expenditures.
Capital Projects Fund — A fund created for all resources used for the construction or acquisition of designated Fixed Assets by
a financial unit except those financed by special assessment, proprietary, or fiduciary funds. Also see Bond Fund.
Capital Ratio — A key financial ratio in assessing a Financial Institution’s capital adequacy by measuring the ratio of various
measures of capital to total assets. As a general rule, the higher the ratio the more sound and financial secure the institution.
There exist several standard measures dealing with capital ratios and capital adequacy, to include:
[1] Risk-Adjusted Capital Ratio – Tier 1 capital (common stock and qualifying preferred stock) divided by risk-adjusted
assets;
[2] Total Capital to Total Assets Ratio – Tier 1 capital plus Tier 2 capital (preferred stock, subordinated debt, and loan
loss reserves) divided by total average assets;
[3] Leverage Ratio – Tier 1 capital divided by total average assets, excluding goodwill;
[4] Total Risk-Adjusted Capital Ratio – Total risk-based capital for certain loans and investments divided by risk-
adjusted assets.
Capital Rationing — A situation where a constraint is placed on the total size of capital investments during a particular period.
Placing limits on the amount of new investment undertaken by a firm, either by using a higher cost of capital, or by setting a
maximum on the entire capital budget or parts of it.
Capital Resources — Productive ingredients made by people, including structures, equipment, and inventories.
Capital Shares — With respect to a dual or leveraged-type Closed-End Investment Company, those shares to which all gains or
losses accrue and which have no claim on dividends. Also see Capital Stock.
Capital Stock — (1) The declared money value of the outstanding stock of a corporation. (2) All shares representing ownership of
a business, including preferred and common stock. (3) Stock authorized by a firm’s charter and having Par Value, stated value,
or no par value. The number and the value of issued shares are usually shown, together with the number of shares authorized,
in the capital accounts section of the balance sheet. Also see Common Stock.
Capital Structure — The percentage of each type of capital used by the firm – debt, preferred stock, and net worth (net worth
consists of capital stock, paid-in capital or surplus, and retained earnings).
Capital Surplus — The accounting difference between the amount received by the initial sale of a corporation’s stock less the Par
Value of that stock. Since many new issues are sold at prices in excess of the par value, the capital surplus component can be
significant. Other related terms are Paid-In Capital or Paid-In Surplus.
Capital Transactions (International Balance of Payments) — Long-term foreign investments.
Capital Turnover — Calculated by dividing annual sales by average Stockholder Equity (i.e., Net Worth). The ratio indicates how
much a company could grow its current capital investment level. Low capital turnover generally corresponds to high profit
margins.
Capitalism — (1) The name given for an economic system in which private individuals and businesses own the factors of production
(i.e., land, labor, capital) and make their resource-use decisions based on markets and prices. (2) An economic system in which
most resources are privately owned.
Capitalization — (1) The total amount of the various securities issued by a corporation. Capitalization may include bonds,
debentures, preferred and common stock, and surplus. Also referred to as Invested Capital. (2) Equivalent to a company’s long-
term debt, preferred stock, and net worth. (3) Figuring out the Capitalized Value of an asset. (4) In finance, a process whereby
anticipated future income is converted to one lump sum capital value. A capitalization rate is divided into the expected periodic
income to derive a capital value for the expected income. (5) Sum of interest rate and recapture rate. See Capitalized Value.
Capitalization of Earnings — A concept of valuing a business by determining the Net Present Value (NPV) of expected future
profits. In an economic sense, a company is worth the discounted amount of its net income. The concept can also be applied

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Dictionary of Financial Words GREAT BASIN RESEARCH

to valuing a particular asset, for example real estate, which should theoretically be worth the present value of future earnings
(lease income) to be derived from it.
Capitalization Rate — (1) A discount rate used to find the Present Value of a series of future cash receipts; sometimes called the
Discount Rate. (2) A rate of return used to derive the capital value of an income stream. The formula is Value = annual income
capitalization rate.
Capitalization Ratios — Financial ratios that compare debt to total capitalization and thus reflect the extent to which a corporation
is trading on its equity. Capitalization ratios can be interpreted only in the context of the stability of industry and company
earnings and cash flow. Also referred to as Financial Leverage Ratios.
Capitalize — (1) To estimate the present lump sum value of an income stream. (2) To set up the cost of an asset in the financial
records.
Capitalized — Recorded in asset accounts and then Depreciated or Amortized, as is appropriate for expenditures for items with
useful lives longer than one year.
Capitalized Interest — Interest that is not immediately expensed, but rather is considered as an asset and is then amortized through
the income statement over time.
Capitalized Value —(1) The value estimated by converting an income stream into a lump sum amount. (2) The value of an asset
as determined by the amount of (discounted) income which is expected to flow to its owner over the life of asset.
CAPM — See Capital Asset Pricing Model.
CAPS — See Convertible Adjustable Preferred Stock.
Capture Rate — The sales or leasing rate of a real estate development compared to the sales or leasing rate of all developments in
the market area.
CAR — See Certificates of Automobile Receivables.
CARD — See Certificates of Amortized Revolving Debt.
Carry — See Positive Carry and Negative Carry.
Carry-Back; Carry-Forward — For income tax purposes, losses that can be carried backward or forward to reduce federal income
taxes.
Carrying Amount — The amount at which assets and liabilities are reported in the financial statements. Carrying amount also is
known as Book Value.
Carrying Charge — (1) Expenses necessary for holding property, such as taxes and interest on idle property or property under
construction. (2) For physical commodities such as grains and metals, the cost of storage space, insurance, and finance charges
incurred by holding a physical commodity. (3) In interest rate Futures Markets, it refers to the differential between the yield on
a cash instrument and the cost of funds necessary to buy the instrument. (4) For Margin Accounts, it’s the fee that a broker
charges for carrying securities on credit. (5) In real estate, carrying cost comprises interest and taxes of owning land prior to its
development and resale. (6) In retailing, it’s the seller’s charge for installment credit, which is either added to the purchase price
or to unpaid installments. Also referred to as Cost of Carry or Carry.
Carrying Charge Market — The implied term structure for a commodity market. It lists progressively higher prices for the more
distant delivery months. This progression in prices reflects the assumption of cumulatively higher storage and financing costs
over time.
Carryover or Carryout — Is the amount of inventory or supply which exists at the end of a season or crop year and is added to the
supply for the new crop year.
Carryover Basis — In a tax-deferred exchange, the adjusted tax basis of the property surrendered that is used to determine the tax
basis of the property acquired. See Basis (Tax).
Cartel — (1) A group of sellers who work together to set their prices and outputs and therefore exercise Monopoly control in the
market for their products. (2) A group of conspiring sellers acting as one entity and making joint price-quantity decisions with
a view toward earning a larger profit than competition would allow. (3) A group of businesses or nations that act together as a
single producer to obtain market control and to influence prices in their favor by limiting production of a product. The United
States has laws prohibiting cartels. Also see Oligopoly.
Cash — (1) Currency in circulation plus checking account balances. (2) To convert a check to cash by endorsement. (3) Refers to
immediate funds, the settlement payment on the trade date, instruments which display high degrees of liquidity and act as cash
equivalents, or the spot or cash market. (4) The value of assets that can be converted into cash immediately, as reported by a
company. Usually includes bank accounts and marketable securities, such as U.S. government bonds and banker’s acceptances.
Cash equivalents on balance sheets also include securities that mature within 90 days (e.g., notes). Also referred to as Cash and
Equivalents.
Cash Advance — A cash loan made against a personal line of credit.
Cash and Cash Equivalents — The value of assets that can be converted into cash immediately, as reported by a company. Usually
includes bank accounts and marketable securities, such as government bonds and Banker’s Acceptances. Cash equivalents on
balance sheets include securities (e.g., notes) that mature within 90 days. Also referred to as Cash and Equivalents. Also see
Cash.
Cash and Equivalents — See Cash.
Cash Audit — An audit of the cash transactions for a stated period of time for the purpose of determining that all cash received has
been recorded, that all disbursements have been properly authorized and vouchered, and that the balance of cash is either on hand
or on deposit. A cash audit can range from a complete inquiry into all cash transactions to one involving only some of them.
Cash Basis (of Accounting) — A form of accounting in which revenues are recognized only when the cash is actually received and
the expenses are paid out. Cash-basis accounting systems typically result in wider swings in earnings due to timing differences

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between revenues and associated expenses. Federal law currently prohibits businesses with a certain minimum level of gross
receipts from using a cash basis accounting system. Also referred to as Cash Method. Contrast with Accrual Basis.
Cash Basis Loan — A loan which has been placed on Nonaccrual status due to the inability of the borrower to meet the contractual
obligations with respect to repayment of principal and interest. As such, income is recorded when the cash is received by the
lender. Also referred to as Nonaccrual Asset, Nonaccrual Loans or Nonperforming Loan.
Cash Budget — A schedule showing cash flows (receipts, disbursements, and net cash) for a firm over a specified period.
Cash Commodity — An actual physical commodity someone is buying or selling, e.g., soybeans, corn, gold, silver, U.S. Treasury
bonds, etc. Also referred to as Actuals.
Cash Contract — A sales agreement for either immediate or future delivery of the actual product. Contrast with Forward Contract.
Cash Cow — (1) A security, investment, project, or business line which generates or throws off considerable funds due to a favorable
market or product, or contacts or contracts. Sometimes, the basis for this asset is an excellent customer, a monopolistic market
position, or special advantages afforded by patents, licenses, or other business and economic properties. This cash flow can be
used for many purposes, including funding less desirable or less profitable ventures of the business.
Cash Cycle — The length of time between the purchase of raw materials and the collection of accounts receivable generated in the
sale of the final product.
Cash Discount — An allowance received or given if payment is completed within a stated period of time.
Cash Dividend — A dividend paid in cash to a corporation’s shareholders. The amount is normally paid from a company’s profits
and is taxable as income to the shareholders.
Cash Equivalent — The conversion of the price of property that sold with either favorable or unfavorable financing into the price
the property would have sold for had the seller accepted all cash in the transaction.
Cash Equivalent Security — Refers to high grade financial instruments which are very liquid and have very little time to maturity.
Among these are U.S. Treasury bills, commercial paper, and bankers’ acceptances. In a somewhat broader sense it can include
money market shares and short-term municipal paper.
Cash Flow — (1) The amount of cash a company generates during a period, calculated by adding noncash charges (such as
depreciation) to net income after taxes. (2) In investments and corporate finance, cash flow represents earnings before
depreciation, amortization, and non-cash charges. Sometimes called cash earnings. Cash flow from a firm’s operations (called
funds from operations by real estate and other investment trusts) is important because it indicates the ability to pay dividends.
(3) The amount of cash derived over a certain period of time from an income-producing property. Periodic amounts of money
available to an equity investor after deducting all periodic cash payments from rental income. The cash flow should be large
enough to pay the expenses of the income producing property (mortgage payment, maintenance, utilities, etc.). Cash flow per
share is calculated by dividing the cash flow by the number of outstanding shares, and is sometimes used in lieu of earnings per
share in analyzing the financial health of a company. Also see Cash Flows.
Cash Flow Coverage Ratio — The number of times that financial obligations (for interest, principal payments, preferred stock
dividends, and rental payments) are covered by earnings before interest, taxes, rental payments, and depreciation.
Cash Flow from Operations — A firm’s net cash inflow resulting directly from its regular operations (disregarding extraordinary
items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income
plus noncash expenses that are deducted in calculating net income.
Cash Flow per Share — Cash earnings per share before subtracting depreciation, amortization, deferred taxes, amortization of
goodwill, and other noncash expenses.
Cash Flow Statement — Also called statement of changes in financial position – cash basis. A statement of changes in financial
position that shows the sources and uses of cash rather than Net Working Capital.
Cash-Flow Underwriting — The practice of an insurance enterprise which depends on investment income rather than on positive
underwriting results to achieve a profit.
Cash Flows — (1) Cash distributions from an investment. (2) The flow of funds representing the movement of cash through a
business or financial institution. For operations, cash flows equal sales revenues less cost of goods sold, less other costs and
taxes. Basically, cash flows include the net income plus all non-cash charges against income, e.g., depreciation, amortization,
etc. For accounting purposes, cash flows for businesses are generally disaggregated into three distinct components:
[1] Cash flows from operating activities (sales revenues and expenses, or interest and non-interest income and interest and
non-interest expenses);
[2] cash flows from investment activities (sales and purchases of portfolio securities); and
[3] cash flows from financing activities (sales and redemption of corporate debt and stock).
Cash Investments — Short-term debt instruments such as Commercial Paper, Banker’s Acceptances, and U.S. Treasury bills that
mature in less than one year. Also known as Money Market Instruments or Cash Reserves.
Cash Management — A financial management technique used by financial officers and corporate treasurers to most efficiently and
effectively employ cash within the company. Such techniques would include a mix of the following:
[1] maintaining only minimum required cash, i.e., non-interest earning balances;
[2] maximizing use of interest-bearing accounts and investing available funds short-term;
[3] matching maturities on investments to funds requirements;
[4] accelerating the collection on checks and the processing of accounts receivable;
[5] decelerating the disbursement of funds to creditors;
[6] managing the company’s float; and
[7] concentrating the company’s funds into the minimum number of accounts for better control and access.

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Dictionary of Financial Words GREAT BASIN RESEARCH

Cash Market — A place where people buy and sell the actual commodities, i.e., grain elevator, a bank, etc. Also see Spot Market
and Forward Contract.
Cash Method — A method of accounting based on cash receipts and disbursements. Also referred to as Cash Basis (of Accounting).
Contrast with Accrual Method.
Cash-on-Cash — Synonymous with Equity Dividend Rate.
Cash on Delivery or C.O.D. (COD) Transaction — Occurs when the buyer of securities pays for them when the actual delivery
is made at the buyer’s bank. This transaction is also known as a DVP or Delivery versus Payment. Regulation T states other
conditions for DVPs.
Cash Over and Short — An account which records the difference between actual daily cash collections and the amounts recorded
as being collected.
Cash Payback Period — A method of capital outlay analysis that considers the time in years that it will take the related net future
cash inflows to equal the original investment.
Cash Position — (1) A measure of the cash assets in a bank or financial institution, synonymous with liquidity. (2) A bank’s reserve
position at a Federal Reserve Bank or at a Correspondent Bank.
Cash Reserve — (1) A bank’s vault cash that may be used to satisfy its reserve requirements, i.e., its requirement to hold cash on
hand against certain types of deposit balances. (2) A revolving line of credit attached to a checking account allowing the
customer to write checks greater than the account balance without incurring overdraft charges.
Cash Sale or Cash Transaction — A transaction which calls for cash payment, delivering and settlement on the same day as the
trade. This compares to a Regular Way transaction which are traded on one day and settled on a different day in accordance with
industry standards or special terms. These trades are sometimes made to receive a dividend, to be entitled to a rights offering,
or to be a shareholder on a record date in order to vote. It should be noted that the settlement process has been shrinking in order
to reduce the risk associated with an open trade and its still to be made settlement.
Cash Settlement — (1) Transactions generally involving index-based futures contracts that are settled in cash based on the actual
value of the index on the last trading day, in contrast to those that specify the delivery of a commodity or financial instrument.
(2) The practice of making a final cash payment or adjustment for an open position. This process differs from early or traditional
futures markets that required either a futures contract offset or the delivery of a physical commodity. The cash settlement process
recognizes the insurability factor of risk management products. This trend towards cash settlements reduces instability due to
squeezes, weather, or other disruptive variables.
Cash Surrender Value — The sum that will be paid the insured if he surrenders his policy to the insurer.
Cash Throw-Off — Synonymous with Cash Flow.
Cash-Value Insurance — A form of insurance providing a death benefit to beneficiaries, but part of the premium payment builds
up tax-deferred and is referred to as the policy’s “cash value.” Premiums often are fixed at a certain level.
Cashier’s Check — (1) A check drawn by a bank on itself authorizing payment to a specified payee. (2) A bill of exchange drawn
by the cashier of a bank, for the bank, upon the bank. The drawer bank cannot put a “stop order” against itself after the check
is delivered or issued to the payee or holder.
Categorical Variable — (Data Analysis) A Qualitative Variable created by classifying observations into categories. For example,
a series of household incomes could be classified into the categorical variables of low, medium, and high describing certain
specific ranges of income levels. Many statistical techniques are inappropriate for the use of categorical variables. Contrast with
Quantitative Variable.
CATS — See Certificate of Accrual on Treasury Securities.
Causal Model — (Data Analysis) A model that assumes that the variable to be forecast exhibits a cause-and-effect relationship with
one or more other variables.
Causal Modeling — (Data Analysis) The development of a forecasting model that quantifies the relationships between the variables
(i.e., the Independent Variables) thought to cause changes in an item under study (i.e., the Dependent Variable).
Causality (Causation) — (Data Analysis) The interaction of two or more variables such that the behavior of one variable may be
hypothesized to be explained, as in caused by, the changes in another variable or other variables. The concept that variable X
“causes” changes to Y is based on our beliefs; no scientific or statistical technique can prove such a fact. Only an explicit theory
allows us to specify that variable X causes changes in variable Y. In such a case, the variable(s) causing the effects are referred
to as the Independent or Explanatory Variable(s) and the variable being affected, the Dependent Variable. Typically, high
Correlation Coefficients or high Coefficients of Determination, as statistical measures of this degree of inter-dependency, are
not alone enough to show causation, and other factors, such as a priori knowledge of significant interactions, logical
interpretation of cause-and-effect relationships, prior proven interactions, intuition, etc., must be used.
Caveat Emptor — (1) A Latin term meaning “Let the buyer beware” indicating that in a transaction buyers bear the burden of risk
for their actions. (2)The buyer must inspect the property and satisfy himself it is adequate for his needs. The seller is under no
obligation to disclose defects but may not actively conceal a known defect or lie if asked.
Caveat Emptor, Caveat Subscriptor — Latin expressions for “buyer beware” and “seller beware,” which warn of overly risky,
inadequately protected markets.
CBO — See Collateralized Bond Obligation.
CBOE — See Chicago Board Options Exchange.
CBT — Acronym for the Chicago Board of Trade, the oldest and largest commodities exchange in the United States.
CC&R’s — Covenants, conditions, and restrictions. The basic rules establishing the rights and obligations of owners of real property
within a subdivision or other tract of land in relation to other owners organized for the purpose of operating and maintaining
property standards.

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Business and Economic Research Group Dictionary of Financial Words
CD — See Certificate of Deposit.
Cease-and-Desist Order — An order issued after notice and opportunity for hearing, requiring a depository institution, a holding
company, or a depository institution official to terminate unlawful, unsafe, or unsound banking practices. Cease-and-desist orders
are issued by the appropriate federal regulatory agencies under the Financial Institutions Supervisory Act and can be enforced
directly by the courts.
CEC — See Commodities Exchange Center.
Census — A complete counting, with classification, of a population or a group at a point in time, as regards to some well-defined
characteristics, e.g., tabulations produced the various federal census bureaus such as the Census of Population and Housing, the
Census of Agriculture, the Census of Manufacturing, etc.; usually has a governmental, economic and social connotation, but may
also be used in other areas such as environmental, plant, animal, and habitat surveys. Contrast with Sample.
Census of Agriculture — A Census taken by the U.S. Department of Commerce, Bureau of the Census, Agriculture Division, every
5 years to include the number of farms, land in farms, crop acreage and production, irrigated acreage, farm spending, farm
facilities and equipment, farm tenure, value of farm products sold, farm size, and other farm-related physical and economic data.
The Census of Agriculture represents the most comprehensive and extensive survey of farm operations at the state and county
level done on a regular basis in the United States.
Census of Population and Housing — A Census taken by the U.S. Department of Commerce, Bureau of the Census, every 10 years
to include the number of people and housing units and various population and housing characteristics. The Census of Population
and Housing is the most important of all the censuses taken as it has critical impacts on federal government programs affecting
a number of government grant and spending decisions. It is also used for redistricting the nation’s election districts and
determining representation in the U.S Congress and well as in State Legislatures. Also referred to as the Decennial Census of
Population and Housing.
Census X–11 (Seasonal Adjustment) Process — (Data Analysis) A seasonal adjustment process for decomposing time series data
into its Secular (long-term) Trend, seasonal index, trading day, and irregular components. It is primarily used to De-Seasonalize
official government statistics for publication, but is generally the most widely used and accepted Seasonal Adjustment Process
for Time Series Data.
Central Bank — The central monetary authority of a national government performing a number of key monetary, financial, business,
and economic functions to include:
[1] issuing the nation’s currency;
[2] facilitates the nation’s check clearing system as an underpinning of the nation’s payment system and check-clearing
process;
[3] conducting monetary policy and regulating the money supply and interest rates;
[4] managing, as practical, the foreign exchange rate (value of the nation’s currency in foreign markets relative to other
currencies);
[5] holding deposits of other banks and other central banks for transactions and clearing purposes;
[6] serving as the fiscal agent of the central government, selling securities and raising funds to finance its operations;
and
[7] attempting, by a variety of regulatory and oversight activities, to maintain orderly financial and commodity markets
and insure stable economic activity through the integrity of the nation’s financial system.
In the United States, the central bank is referred to as the Federal Reserve System, or simply the “Fed.”
Central Business District (CBD) — The downtown section of a city, generally consisting of retail, office, hotel, entertainment, and
governmental land uses with some high density housing.
Central Limit Theorem — (Statistical Analysis) The Law of Large Numbers states that as a sample of independent, identically
distributed random numbers approaches infinity, its probability density function approaches the Normal Distribution.
Centralization (of Government Expenditures) — The shifting of government expenditure functions upward from the local
governments to the state and national governments.
Certainty Equivalent — The amount of cash (or the rate of return) that a decision maker would require with certainty to make the
recipient indifferent between this certain sum and a particular uncertain, risky sum. Multiplying the expected cash inflow by the
certainty cash equivalent coefficient results in an equivalent certain cash inflow. Also see Risk Analysis and Risk Premium.
Certificate — The actual piece of paper that is evidence of ownership of stock in a corporation. Loss of a certificate may cause, at
least, a great deal of inconvenience; at worse, financial loss.
Certificate of Accrual on Treasury Securities (CATS) — Refers to a Zero-coupon U.S. Treasury issue that is sold at a deep
discount from the face value and pays no coupon interest during its lifetime, but returns the full face value at maturity.
Certificates of Amortized Revolving Debt (CARD) — Pass-through securities backed by credit card receivables.
Certificates of Automobile Receivables (CAR) — Pass-through securities backed by automobile loan receivables.
Certificate of Deposit (CD) — (1) A financial instrument, most typically provided by commercial banks and other depository
institutions, with specific characteristics to include amount, maturity, and interest rate. (2) A type of savings account that carries
a specified minimum deposit and term and generally provides a higher yield than regular savings accounts.
Certificate of Eligibility — A certificate obtained by a veteran from a Department of Veteran’s Affairs (VA) office which states
that the veteran is eligible for a VA insured loan. Certificates of eligibility may be obtained by sending DD-214 (Separation
Paper) to the local VA office with VA form 1880 (request for Certificate of Eligibility).
Certificate of Indebtedness — An IOU or promise by the issuer to make future payments of money to the holder.
Certificate of Insurance — A document issued by an insurance company to verify the specific coverage.

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Dictionary of Financial Words GREAT BASIN RESEARCH

Certificate of Occupancy — (1) Document issued by a local governmental agency that states a property meets the local building
standards for occupancy. (2) A document issued by a local government to a developer permitting the structure to be occupied
by members of the public. Issuance of the certificate generally indicates that the building is in compliance with public health
and building codes.
Certificate of Reasonable Value (CRV) — (1) An appraisal of property for the purpose of insurance by the Department of Veteran’s
Affairs (VA). (2) A document issued by the VA, based on an approved appraisal. Establishes a ceiling on the maximum VA
mortgage loan principal amount.
Certificate of Satisfaction — A document signed by the note holder and recorded in the land records evidencing release of a deed
of trust, mortgage, or other lien on the property.
Certificate of Title — (1) A certification issued by a title company or a written opinion rendered by an attorney that the seller has
good marketable and insurable title to the property which he is offering for sale. A certificate of title offers no protection against
any hidden defects in the title which an examination of the public records could not reveal. The issuer of a certificate of title is
liable only for damages due to negligence. The protection offered a homeowner under a certificate of title is not as great as that
offered in a title insurance policy. (2) A written opinion by an attorney setting forth the status of title to the property as shown
on the public records. The certificate does not certify as to matters not of record and affords no protection unless the author was
negligent. Compare with Title Insurance.
Certified Check — A business or personal check, which for a fee is validated by the issuing bank to the affect that (1) the maker’s
signature is genuine; and (2) sufficient funds exist to cover the amount of payment. Upon certification, the check becomes an
obligation of the issuing bank.
Certified Financial Planner (CFP) — A designation granted by the College for Financial Planning (Denver, Colorado) to
individuals who complete a six-part curriculum in financial planning (including risk management, investments, tax planning,
employee benefits, and estate planning).
Certified General Appraiser — One qualified to appraise any property, under the appraiser certification law recently adopted by
most states. Usually requires at least two years of general appraisal experience, 150 hours of education, and passing a state
examination.
Certified Property Manager (CPM) — A professional certification awarded to real estate managers by the Institute of Real Estate
Management, an affiliate of the National Association of Realtors.
Certified Public Accountant (CPA) — A professional license granted by a state board of accountancy to an individual who has
passed the Uniform CPA Examination (administered by the American Institute of Certified Public Accountants) and has fulfilled
that state’s educational and professional experience requirements for certification.
Certified Residential Appraiser — One qualified to appraise residences and up to four units of housing, under appraiser certification
law. Standards call for less education, less experience, and a less comprehensive exam than for general certification.
Certified Residential Broker (CRB) — A designation awarded by the Realtors National Marketing Institute, which is affiliated with
the National Association of Realtors.
Certified Residential Specialist (CRS) — A professional designation awarded by the Realtors National Marketing Institute, based
on education and experience in residential sales. Candidates must hold the GRI designation.
Cestui Que Trust — One having an equitable interest in property with the legal title being vested to the trustee.
Ceteris Paribus — A Latin term meaning “assuming that everything else remains unchanged.” For example, if the price of a good
or service goes down by 10 percent, then ceteris paribus, i.e., all other things held constant, people will buy more of that particular
good or service.
CFAT — See Cash Flow after Taxes.
CFC — See Controlled Foreign Corporation.
CFO — See Chief Financial Officer.
CFTC — See Commodity Futures Trading Commission.
Chain — A linear unit of land measurement used in surveying which is equivalent to 66 feet in length. Each chain consists of 100
links.
Chain of Title —(1) The chronological order of conveyance of a parcel of land from the original owner to the present owner. (2)
A history of conveyances and encumbrances affecting a title from the time that the original patent was granted, or as far back
as records are available. See Abstract of Title and Certificate of Title.
Change in Accounting Principle — A switch from one accounting principle to another. An example is changing from the straight-
line depreciation method to the units-of-output method. A change in principle is usually accounted for in the current year’s
income statement in an account called Cumulative Effect of a Change in Accounting Principle. A few changes in principle
require the restatement of previous years’ financial statements as if the new principle had been in effect in those years. An
example is going from the LIFO inventory method to another method. Disclosure should be made of the nature and justification
for a principle change.
Change in Demand — A fundamental shift in the Demand Curve brought about by changes to market tastes and preferences such
that a new quantity demanded exists at all price levels. This can be most readily observed by the graphical analysis of the
demand curve, which represents the basic relationship between the quantity demanded of a good or service (graphed on the
vertical or “Y” axis) and its market price (graphed on the horizontal or “X” axis). The resultant demand curve, which represents
all quantities demanded at specific price levels, is downward sloping (a negative slope) from upper left to lower right, indicating
that the quantity demanded for a good or service declines as its price increases. The movement along this curve reflects a Change
in the Quantity Demanded, while a shift, inward or outward, of the entire demand curve represents a change in demand.
Change in the Quantity Demand — A movement along a given Demand Curve representing the change in the quantity demanded

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of a good or service based on a change in its market price. This can be most readily be observed by the graphical analysis of the
Demand Curve, which represents the basic relationship between the quantity demanded of a good or service (graphed on the
vertical or “Y” axis) and its market price (graphed on the horizontal or “X” axis). The resultant demand curve, which represents
all quantities demanded at specific price levels, is downward sloping (a negative slope) from upper left to lower right, indicating
that the quantity demanded for a good or service declines as its price increases. The movement along this curve reflects a change
in the quantity demanded, while a shift, inward or outward, of the entire demand curve represents a more fundamental Change
in Demand, which is brought on by changing consumer tastes and preferences.
Change in the Quantity Supplied — A movement along a given Supply Curve representing the change in the quantity supplied of
a good or service based on a change in its market price. This can be most readily be observed by the graphical analysis of the
Supply Curve, which represents the basic relationship between the quantity supplied of a good or service (graphed on the vertical
or “Y” axis) and its market price (graphed on the horizontal or “X” axis). The resultant supply curve, which represents all
quantities supplied to the market at specific price levels, is upward sloping (a positive slope) from lower left to upper right,
indicating that the quantity supplied by producers of a good or service increases as its price increases. The movement along this
curve reflects a change in the quantity supplied, while a shift, inward or outward, of the entire supply curve represents a Change
in Supply, which may result from.
Change in Supply — A fundamental shift in the Supply Curve brought on by changes in technology, resource availability or
manufacturing processes such that a new quantity supplied exists at all price levels. This can be most readily be observed by
a graphical analysis of the supply curve, which represents the basic relationship between the quantity supplied of a good or
service (graphed on the vertical or “Y” axis) and its market price (graphed on the horizontal or “X” axis). The resultant supply
curve, which represents all quantities supplied to the market at specific price levels, is upward sloping (a positive slope) from
lower left to upper right, indicating that the quantity supplied by producers of a good or service increases as its price increases.
The movement along this curve reflects a Change in the Quantity Supplied, while a shift, inward or outward, of the entire supply
curve represents a change in supply.
Chaos Theory — A modern development in mathematics and science that provides a framework for understanding irregular or
erratic fluctuations in nature. Chaotic systems are found in many fields of science and engineering. Evidence of chaos occurs
in models and experiments describing convection and mixing in fluids, in wave motion, in oscillating chemical reactions, and
in electrical currents in semiconductors. It is also found in the dynamics of animal populations and attempts are being made to
apply chaotic dynamics in the social sciences, such as the study of business cycles. A chaotic system is defined as one that shows
“sensitivity to initial conditions.” That is, any uncertainty in the initial state of the given system, no matter how small, will lead
to rapidly growing errors in any effort to predict its future behavior. This “sensitivity to initial conditions” will make any
long-term prediction of such phenomenon virtually impossible in reality. In other words, the system is chaotic and as such its
behavior can be predicted only if the initial conditions are known to an infinite degree of accuracy, which is impossible. The
possibility of chaos in a natural, or Deterministic, system was first envisaged by the French mathematician Henri Poincare in the
late 19th century. More recently, predictions have been made that the transition to chaotic turbulence in a moving fluid would
take place at a well-defined critical value of the fluid’s velocity (or some other important factor controlling the fluid’s behavior).
The term chaotic dynamics refers only to the evolution of a system in time. Chaotic systems, however, also often display spatial
disorder – for example, in price variations in various financial markets.
Chaotic — See Chaos Theory.
CHAP — See Clearing House Automated Payments System.
Character — A basis for distinguishing expenditures according to the periods they are presumed to benefit. Also see Character
Classification.
Character Classification — A grouping of expenditures on the basis of the fiscal periods they are presumed to benefit. The three
groupings are: (1) current expenditures, presumed to benefit the current fiscal period; (2) debt service, presumed to benefit prior
fiscal periods primarily, but also present and future periods; and (3) capital outlays, presumed to benefit the current and future
fiscal periods.
Characteristic Line — A linear least squares regression line that shows the relationship between an individual security’s return and
returns on “the market.” The slope of the characteristic line is the Beta Coefficient, which measures the individual security’s price
volatility relative to the overall market’s price volatility.
Charge-Off — (1) Loans which are written off by a financial institution as uncollectable. (2) The process of removing uncollectable
loans or closed accounts from a bank’s balance sheet.
Charitable Remainder Trust — An irrevocable trust that pays income to a designated person or persons until the grantor’s death,
when the income is passed on to a designated charity. A Charitable Lead Trust, by contrast, allows the charity to receive income
during the grantor’s life, and the remaining income to pass to designated family members upon the grantor’s death.
Chart of Accounts — (1) A listing of the account titles and numbers of all accounts found in the General Ledger. (2) A listing of
ledger account names and numbers arranged in the order in which they customarily appear in the financial statements. The chart
serves as a useful source for locating a given account within the ledger. The numbering system for the chart of accounts must
leave room for new accounts. A range of numbers is assigned to each financial statement category. For example, asset accounts
may be assigned the numbers 100-199 and liability accounts numbers 200-299. For large businesses, a wider range of numbers
may be necessary for each grouping.
Charter — (1) The legal authorization from federal or state regulatory agencies giving a bank the authority to conduct its business.
In obtaining a charter, a Financial Institution must demonstrate that it has sufficient capital, possesses competent management,
can obtain deposit insurance, and has a commitment to its community. (2) A formal legal document which describes the scope
and nature of a corporation and defines the rights and duties of its stockholders and managers.

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Dictionary of Financial Words GREAT BASIN RESEARCH

Charting — The use of charts or graphical analysis to analyze market behavior and anticipate future price movements. Those who
use charting as a trading method plot such factors as high, low, and settlement prices; average price movements; volume; and
open interest. Two basic price charts are bar charts and point-and-figure charts. See Technical Analysis.
Chattel — (1) Personal property. (2) Anything owned and tangible, other than real estate.
Chattel Mortgage — (1) A mortgage on personal property (not real estate). A pledge of personal property as security for a debt.
A mortgage on equipment would be a chattel mortgage. (2) A security device by which the owner of personal property transfers
the title to a creditor as security for the debt owed. A loan, typically used to finance major consumer goods like household
appliances, which provides the lender a lien and security interest in personal property as opposed to real estate.
Cheap — (1) Colloquialism implying that a commodity is underpriced. (2) A term used in relative value analysis. The cash flow
characteristics, when analyzed against a benchmark or comparison bond, suggest an under-valued security. This implies that
the former security has Arbitrage potential against the comparative security.
Cheapest to Deliver — A method to determine which particular cash debt instrument is most profitable to deliver against a Futures
Contract.
Check — (1) A draft upon an account authorizing the payment of funds to a third party. (2) An order by a depositor on his bank
to pay a sum of money to a payee. (3) A bill of exchange drawn on a bank and payable on demand; a written order on a bank
to pay on demand a specified sum of money to a named person, to his order, or to bearer, out of money on deposit to the credit
of the maker. Also see Bill of Exchange.
Check Clearing — The movement of checks from banks or other depository institutions where they are deposited back to those on
which they are written, and funds movement in the opposite direction. This process results in credits to accounts at the
institutions of deposit and corresponding debits to the accounts at the paying institutions. The Federal Reserve System
participates in check clearing through its nationwide facilities, though many checks are cleared by private sector arrangement.
See Clearing House.
Check Hold — The number of days that a financial institution can legally hold uncollected funds before crediting a customer’s
account balance and allow the use of those funds. Also referred to as Account Hold.
Check Kiting — The illegal activity of drawing against bank balances which do not exist as against balances credited to uncollected
checks. Check kiting differs from “playing the float” in as much as kiting schemes intend to obtain funds when, in fact, none
exist. Such kiting schemes are best prevented by closely monitoring unpaid checks in the process of collection.
Check Register — A special journal used in place of a cash disbursements journal when the voucher system of controlling
expenditures is used for recording all checks written in payment of vouchers.
Checkable Deposit — Accounts against which the owner may write checks or drafts for payment to a third party. Such accounts
may include non-interest bearing Demand Deposit Accounts (DDAs) or interest-bearing accounts like Negotiable Orders of
Withdrawal (NOW) accounts.
Checking Account — An account maintained at a depository institution from which the owner of the funds may issue checks or
drafts for payment. Also referred to as a Demand Deposit.
CHESS — See Clearing House Electronic Subregister System.
Chicago Board Options Exchange (CBOE) — A securities exchange created in the early 1970s for the public trading of
standardized option contracts. Primary place for trading stock options, foreign currency options, and index options (Standard
& Poor 100, 500, and Over-the-Counter 250 index).
Chicago Board of Trade (CBOT) — The largest futures exchange in the United States, and was a pioneer in the development of
financial Futures and Options.
Chicago Mercantile Exchange (CME) — A not-for-profit corporation owned by its members. Its primary functions are to provide
a location for trading Futures and Options, to collect and disseminate market information, to maintain a clearing mechanism, and
to enforce trading rules. Applies to Derivative products. Primary place for trading futures (Over-the-Counter 250 industrial stock
price index, Standard & Poor 100 and 500 index) and futures options (Standard & Poor 500 stock index) are traded.
Chicago Stock Exchange (CHX) — A major exchange trading only stocks, with 90 percent of trades taking place on an automated
execution system, called MAX.
Chief Executive Officer (CEO) — A title held often by the Chairperson of the Board of Directors, or the president. The person
principally responsible for the activities of a company.
Chief Financial Officer (CFO) — The executive who directs all financial aspects of the business. Examples of functions performed
are keeping accounting records, designing accounting systems and procedures, financial forecasting, and using funds to carry
on the business activities of the firm. Large companies have financial vice-presidents and controllers and treasurers. A smaller
company may have one officer responsible for the accounting and treasury functions.
Chief Operating Officer (COO) — The officer of a firm responsible for day-to-day management, usually the president or an
executive vice-president.
Chinese Wall — A common term used to indicate the legal separation required between the activities of a commercial bank and its
trust department and/or between commercial banking and investment banking activities as required by the Glass-Steagall Act
of 1933. The intent is to preclude the use of depositors’ funds in speculative activities.
CHIPS — See Clearing House Interbank Payments System.
“Chollar” — Formerly referred to as New York Stock Exchange (NYSE) Rule 80A, the chollar restricts traders who simultaneously
buy stocks and sell stock-index futures, or vice versa, to profit from price discrepancies between the two. The chollar serves as
a trigger point for stock trading that is activated whenever the Dow Jones (DJ) Industrial Average has moved 50 points in either
direction during a trading day. When activated, the chollar curtails stock-index arbitrage, or back-and-forth trading between
stocks and stock-index futures. The chollar was first implemented in 1988 (and modified in 1990) in response to a widespread

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belief that Program Trading was fueling enormous intraday swings in the stock market. However, due to the rapid rise in the
level of the DJ Index, the chollar is now activated almost daily, and sometimes more than once. New trading-halt rules are based
on a percentage change in the overall index versus an absolute amount, thereby taking into account the overall level of the index.
Churning — (1) An unethical practice employed by some brokers to increase their commissions by excessively trading in a client’s
account. (2) Most commonly applied to excessive stock trading activity in a customer’s account so as to collect exorbitant
brokerage commissions. The practice is illegal under rules of the Securities and Exchange Commission (SEC).
CINS — The CUSIP International Numbering System for securities traded on a global basis and which originated outside the United
States or Canada.
Circuit Breakers — (1) Measures instituted by exchanges to stop trading temporarily when the market has fallen by a certain
percentage in a specified period. They are intended to prevent a market free fall by permitting buy and sell orders to rebalance.
(2) Procedures implemented and enforced by the Securities and Exchange Commission (SEC) intended to impose a “cooling off”
period for the stock market during periods of rapid price declines. Precipitated after the October 1987 stock market crash, circuit
breakers consist of halts in trading activity when certain price decline thresholds have been reached within a certain period of
time. More recent revisions (1997) call for a trading suspension of 30 minutes when the Dow Jones Industrial Average drops
by 350 points. Upon resumption of trading, should the Dow drop an additional 200 points (550 points total), trading will be
halted for one hour. Such procedures are intended to impose order on unstable markets, allowing investors to reassess their
investment decisions and thereby reduce the likelihood of outright panic selling.
Circular Flow (of the Economy) — A simplified view of a market-directed economic system. It illustrates payments from
businesses to households in exchange for input factors, and payments from households to businesses in exchange for output
products.
Civil Law — Specific rules and regulations. Law based on a codified system. Contrast with Common Law.
Class — The total of all Options of the same type, Put or Call, which have the same expiration date.
Class Action — A claim or legal action brought on behalf of a group of people.
Classical Economics (also Neoclassical Economics) — (1) The dominant macroeconomic theory prior to the 1930's. It viewed the
economy as being basically self-regulating or self-equilibrating. Consequently, the economy would always be at, or approaching,
a state of full employment of resources at stable prices. Thus, there was thought to be no need for government intervention to
“clear” the markets. (2) The generally accepted theories of economics of the 1800's and early 1900's; refers to pre-Keynesian
economics. Most of the generally accepted present-day economic theory comes from various concepts contained in the economic
disciplines of Classical Economics, Neoclassical Economics, Keynesian Economics, Neo-Keynesian Economics, and Monetary
Economics.
Classical Linear Regression (CLR) Model — (Data Analysis and Forecasting) The standard for the Ordinary Least Squares (OLS),
or Regression Analysis model; a form of statistical analysis used to predict future values of a target or Dependent Variable based
upon the behavior of a set of explanatory factors (i.e., the Independent Variable or variables). A basic underpinning of this form
of analysis is that the behavior of the target variable is predictable, that is it is not random or chaotic. The CLR model has five
basic assumptions:
[1] Linearity – The dependent variable, or the variable to be explained or forecasted, can be calculated as a linear
function of a specific set of independent, or explanatory variables;
[2] Randomness of Disturbance Terms – The expected value of the disturbance term, that is the term showing the
differences between the model’s estimated values and the actual observed values, is zero;
[3] Uncorrelated Disturbance Terms – The disturbance terms all have the same variance and are not correlated with
each other (termed Autocorrelation or Serial Correlation);
[4] Data Conformity – The observations on the independent variable can be considered fixed in repeated samples, i.e.,
it is possible to repeat the sample with the same independent variables;
[5] Sample Size and Selection – The number of observations is greater than the number of independent variables and
there are no linear relationships, i.e., no significant correlations, between or among the independent or explanatory
variables (termed Multicollinearity).
Classical Probability — (Probability Analysis) The number of outcomes favorable to the occurrence of an event divided by the total
number of possible outcomes. In order for this ratio to be valid, each of the outcomes must be equally likely, i.e., each outcome
is independent of all others. Distributions are gained from actual occurrences in long-run experience and experimentation. An
example is repeated trials under a constant-cause situation. It is useful in estimating dollar value, quantity, and other
characteristics of a given universe. For example, the probability of rolling a one on one die is one in six, or 1/6.
Classified Loan — A loan designated as a problem and questionable with respect to full repayment of principal and interest. Also
referred to as a Classified Credit.
Clayton Antitrust Act — An antitrust law passed in 1914 as an amendment to the Sherman Antitrust Act of 1890. The Act listed
four illegal practices in restraint of competition, specifically outlawing: (1) price discrimination; (2) typing contracts and
exclusive dealerships; (3) horizontal mergers; and (4) interlocking directorates, that is the practice of having the same people
serve as directors of two or more competing companies. Also see Antitrust Laws and Federal Trade Commission Act.
Clean Float — A floating exchange rate system in which there is absolutely no intervention by national governments to influence
or “peg” exchange rates and their own currency or any other.
Clear — (1) A term used in economics and market theory to describe the behavior of markets in which the Quantity Demanded is
equal to the Quantity Supplied and there is no tendency for the presence of persistent shortages (demand greater than supply) or
surpluses (supply greater than demand). (2) The process by which a Clearing House maintains records of all trades and settles

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Dictionary of Financial Words GREAT BASIN RESEARCH

margin flow on a daily mark-to-market basis for its clearing members. (3) To settle a trade is settled out by the seller delivering
securities and the buyer delivering funds in the proper form. A trade that does not clear is said to fail. Comparison of the details
of a transaction between broker/dealers prior to settlement; final exchange of securities for cash on delivery.
Clear Title Avulsion — A marketable title; one free of Clouds on the Title and disputed interests.
Clearing — The process of financial guarantee between clearing members. This activity intends to eliminate the risk of contractual
or transactional default. For example, two clients execute a trade through two different clearing member firms. The clients are
solvent but at the end of the day one of the clearing members is not. This transaction through a clearinghouse would preserve
the integrity of the trade.
Clearing Account — An account used to accumulate total charges or credits for the purpose of distributing them later among the
accounts to which they are allocable or for the purpose of transferring the net differences to the proper account. Synonymous
with Suspense Account.
Clearing Corporation — See Board of Trade Clearing Corporation.
Clearing House (Clearinghouse) — (1) A facility which serves as a buyer to the seller and a seller to the buyer. It effectively
guarantees the performance of transactions between its member participants. Trades processed by a clearinghouse are generally
assumed, though not guaranteed, to be free from financial failure. (2) A central collection activity where banks within a specified
geographic area exchange checks with one another. (3) An institution where mutual claims are settled between accounts of
member depository institutions. Clearinghouses among banks have traditionally been organized for check-clearing purposes,
but more recently have cleared other types of settlements, including electronic fund transfers. (4) An agency or separate
corporation of a futures exchange that is responsible for settling trading accounts, clearing trades, collecting and maintaining
margin monies, regulating delivery, and reporting trading data. Clearinghouses act as third parties to all futures and options
contracts – acting as a buyer to every clearing member seller and a seller to every clearing member buyer.
Clearing House Automated Payments System (CHAPS) — A computerized clearing system for sterling funds that began
operations in 1984. It includes 14 member banks, nearly 450 participating banks, and is one of the clearing companies within
the structure of the Association for Payment Clearing Services (APACS).
Clearing House Electronic Subregister System (CHESS) — The automatic transfer and settlement system for the majority of
Australian Stock Exchange (ASX) listed securities.
Clearing House Interbank Payments System (CHIPS) — An international wire transfer system for high-value payments operated
by a group of major banks.
Clearing Margin — Financial safeguards to ensure that clearing members (usually companies or corporations) perform on their
customers’ open futures and options contracts. Clearing margins are distinct from customer margins that individual buyers and
sellers of futures and options contracts are required to deposit with brokers.
Clearing Member — (1) A person who is designated as a responsible party for activities related to the clearance of Futures, Options,
or securities transactions. (2) A member of an exchange Clearinghouse. Memberships in clearing organizations are usually held
by companies. Clearing members are responsible for the financial commitments of customers that clear through their firm.
Clearinghouse Interbank Payments System (CHIPS) — An automated clearing system used primarily for international payments.
This system is owned and operated by the New York Clearinghouse banks. It engages Fedwire for settlement.
Client — The one who engages a broker, lawyer, accountant, appraiser, etc.
Clifford Trust — A short-term living trust created for a period of the lesser of ten years and a day or the life of the beneficiary, at
which time the assets revert to the original owner.
CLO — See Collateralized Loan Obligation.
Close Out — The action taken by a brokerage firm when a client has failed to pay for previously purchased securities. Here, the
brokerage firm will sell the aforementioned securities.
Closed-End Credit —Consumer installment loans made for a specified amount, periodic payments of principal and interest, and
a fixed maturity data. The borrower does not have the option of extending this credit or changing the credit terms during the life
of the loan.
Closed-End Fund — (1) An investment trust or Mutual Fund that pools the assets of investors and issues a fixed number of shares.
(2) Unlike the more common Open-End Fund, closed-end funds have a limited number of shares outstanding. The shares of a
closed-end fund often trade on an exchange, for a discount or premium to the Net Asset Value (NAV).
Closed-End Investment Company — (1) An investment company that issues a fixed number of shares and does not redeem them.
It may also issue senior securities and/or warrants. (2) Also called a Closed-End Fund, it is a pooled investment fund that issues
a set number of shares and then no more. When the initial offering of shares is sold out, the closed-end fund trades on the
secondary market at a price determined by investor supply and demand. Contrast with Mutual Fund.
Closed-End Lease — A consumer lease that does not give the lessee the option of purchasing the leased asset when the lease expires;
a most common form of automobile leasing. Contrast with Open-End Lease.
Closed-End Mortgage — A mortgage loan whose principal amount cannot be increased during the pay-out period. Contrast with
Open-End Mortgage.
Closed Shop — A place of employment in which only union members may be employed; generally prohibited by unfair labor
practice statutes. Contrast with Open Shop.
Closed Shops — Firms operating under a collective bargaining agreement that forbids the hiring of nonunion workers.
Closely Held Corporation — A closely held corporation is one that is not publicly owned; it is a corporation owned by a few
individuals who are typically associated with the management of the firm. Such a firm is also called a “closed corporation.”
Closely Held Shares — Shares held by individuals closely related to a company.
Closing — (1) Conclusion of a real estate sale where the title of the property is transferred to the new owners and funds are

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transferred to the appropriate parties (seller, old lender, real estate broker, etc.). (2) The act of transferring ownership of a
property from seller to buyer in accordance with a sales contract. (3) The time when a closing takes place. (4) The meeting
between the buyer, seller and lender or their agents where the property and funds legally change hands. Also called Settlement.
Closing Costs usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deed
recording fee, credit report, etc.
Closing Agent — A neutral third party that facilities the closing of a real estate transaction. The closing agent can be an escrow
company, title company, or attorney.
Closing Costs — (1) The fees, as listed in the closing statement, representing a borrower’s expenses associated with finalizing a real
estate mortgage loan. Various fees and expenses payable by the seller and buyer at the time of a real estate closing (also termed
transaction costs). (2) Expenses incurred by the buyer/borrower and the seller in a real estate or mortgage transaction. There
can be non-recurring costs that include a one time charge for points, appraisal fees, etc. or a proration of recurring costs such as
taxes and insurance incurred while the new buyer/borrower owns the real estate. Other costs may include loan origination fees
and closing points (percentage points on the loan amount), title insurance, attorney fees, land survey costs, and taxes and
insurance escrow payments. Some of the most common closing costs for both home sellers and buyers are listed below:
[1] Real estate sales commission;
[2] Mortgage loan fee;
[3] Title insurance;
[4] Transfer fees and taxes:
[5] Attorney and escrow charges;
[6] Recording fees;
[7] Loan documentation, credit report, appraisal, land survey and miscellaneous fees;
[8] One-year home warranty policy;
[9] Prorated property taxes and mortgage interest; and
[10] Fire insurance premium.
The table below shows examples of buyer’s closing costs and seller’s closing costs. The agreement of sale negotiated previously
between the buyer and the seller may state in writing who will pay each of the closing costs.

Buyer’s Expenses Seller’s Expenses

Documentary Stamps on Notes Cost of Abstract
Recording Deed and Mortgage Documentary Stamps on Deed
Escrow Fees Real Estate Commission
Attorney’s Fee Recording Mortgage
Title Insurance Survey Charge
Appraisal and Inspection Escrow Fees
Survey Charge Attorney’s Fee

Closing Date — The date on which the seller delivers the deed and the buyer pays for the property. Also referred to as Closing Day.
Closing Day — The day (i.e., closing date) on which the formalities of a real estate sale are concluded. The buyer signs the
mortgage, and closing costs are paid. The final closing merely confirms the original agreement reached in the agreement of sale.
Closing Points — The amount paid by the borrower on a mortgage loan at loan closing based on the value of the loan amount. One
point is equal to 1 percent of the loan amount.
Closing Price — See Settlement Price.
Closing Procedures — The final step in the accounting cycle in which the balances in all temporary accounts are transferred to the
owners’ capital account leaving the temporary accounts with zero balances.
Closing Range — A range of prices at which buy and sell transactions took place during the market close.
Closing Statement — (1) Statement prepared for the buyer and seller itemizing all of the costs of a real estate transaction. (2) An
accounting of funds from a real estate sale made to both the seller and the buyer separately. Most states require the broker to
furnish accurate closing statements to all parties to the transaction.
Closing Tick — The net of the number of stocks whose closing prices are higher than their previous trades (Uptick) against the
number of stocks whose closing prices were lower than their previous trades (Downtick). A positive closing tick indicates
“buying at the close,” or a bullish market; a negative closing tick indicates “selling at the close,” or a bearish market.
Cloud on the Title — (1) An evidence of encumbrances. (2) An outstanding claim or encumbrance which, if valid, adversely affects
the marketability of title. An outstanding claim or encumbrance that, if valid, would affect or impair the owner’s title. Compare
with Clear Title.
Cluster Analysis — A statistical technique that identifies clusters of stocks whose returns are highly correlated within each cluster
and relatively uncorrelated across clusters. Cluster analysis has identified groupings such as growth, cyclical, stable, and energy
stocks.
Cluster Housing — A subdivision technique in which detached dwelling units are grouped relatively close together, leaving open
spaces as common areas.
Cluster Sampling — (Statistical Analysis) A method of selecting groups of units. The first unit of each group is selected with the

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use of a random number table. This allows selection of more than one item at a time. In cluster sampling, the population is
broken into groups of items, and a Random Sample is selected from all the clusters. Each cluster becomes a sampling unit. After
determining the adequate number of clusters, the sampler has a choice of either examining all items in a cluster (one-stage) or
only a random number of items in the cluster (two-stage). Cluster sampling requires computing the mean for the individual
sampling unit and multiplying this by the number of units in the population to determine the population’s estimated value. The
precision limit on this estimate must also be computer. Cluster sampling lowers sampling cost and the cost to replace the sample,
as well as making sample selection is easier. However, less statistical efficiency exists in cluster sampling.
CMBS — See Commercial Mortgage Backed Securities.
CME — See Chicago Mercantile Exchange.
CML — See Capital Market Line.
CMO — See Collateralized Mortgage Obligation.
CMO REIT — A very risky type of Real Estate Investment Trust investing in the residual cash flows of Collateralized Mortgage
Obligations (CMOs). CMO cash flows are derived from the difference between the rates paid by the mortgage loan holders and
the lower, shorter-term rates paid to CMO investors.
Co-Maker — A person equally responsible for repayment of a financial obligation as the borrower.
Co-Mortgagor — One who signs a mortgage contract with another party or parties and is thereby jointly obligated to repay the loan.
Generally a co-mortgagor provides some assistance in meeting the requirements of the loan and receives a share of ownership
in the Encumbered property.
Co-Tenancy — Ownership in the same land by more than one person. Also see Tenants in Common, Joint Tenants, Tenants by the
Entirety.
Coase Theorem — Under Perfect Competition and in the absence of income effects and transactions costs, voluntary negotiated
agreements among private parties generating or being affected by Externalities will lead to the same resource allocation (and
output mix) regardless of how property rights are assigned among these parties.
Cobb-Douglas Production Function — A production function relating output, Q, to labor and capital inputs, L and K, in the form
of
Q = ALaKb
which has a constant elasticity of input substitution equal to unity and in which the sum of the parameters (a + b), if equal to,
greater than, or smaller than unity, indicates the presence of constant, increasing, or decreasing returns to scale, respectively.
Cobweb Cycle — The tendency of the prices and quantities of some goods to rise above and then fall below some intermediate level
in alternate periods.
Cobweb Theorem (or Cobweb Effect) — The tendency for some agricultural markets to be unstable from year to year with low
production and high prices in one year, followed by high production and low prices in the following year. Most of this instability
is due to the long lags between the awareness of market information (prices from shortages) to the market’s ability to plant and
harvest the crops necessary to satisfy these shortages.
Code — See Coding.
Code of Ethics — A statement of principles concerning the behavior of those who subscribe to the code.
Coding — A system of numbering or otherwise designating accounts, entries, invoices, vouchers, etc., in such a manner that the
symbol used reveals quickly certain required information. To illustrate the coding of accounts, the number “200" may be
assigned to expenditures made by the department of finance and the letter “A” may be used to designate expenditures for personal
services. Expenditures for personal services in the department of finance would then be designated, for posting and other
purposes, by the code “200-A.” Other examples are the numbering of monthly recurring journal entries so that the number
indicates the month and the nature of the entry and the numbering of invoices or vouchers so that the number reveals the date
of entry. Also see Symbolization.
Codicil — A writing by one who has made a will which is executed with all the formality of a will and is treated as an addition or
modification to the will.
Coefficient of Determination (R2) — A common measure of the “goodness of fit” in Regression Analysis used to assess the degree
of causation between two variables or between one or more Independent Variables and a single Dependent Variable. The
coefficient of determination is equivalent to the square of the correlation coefficient and reflects the percent of variation in the
dependent (explained) variable that is explained by the variations in the independent (explanatory) variable(s). The value of the
coefficient of determination varies between 0 (0%) and 1 (100%) with higher values representing better explanatory powers of
a Model in explaining the trends in historical data. It must be noted that causation is only presumed to exist from prior knowledge
or belief and is not proven by a high coefficient of determination. The coefficient of determination is the square of the
Correlation Coefficient (R).
Coefficient of Relative Effectiveness — The reciprocal of the Payback Period.
Coefficient of Variation — (1) A statistical measure of the variation of a series determined by the Standard Deviation of a series
of values divided by the Mean of the series. (2) A statistic which is used to determine the degree of relative dispersion. It extends
standard deviation analyses. By definition, standard deviations are statistical measures of absolute dispersion. Therefore, it is
difficult to compare the variability of two different asset classes or assets within those classes. It is computed by dividing the
standard deviation of Asset I by the mean of Asset I. Similarly, the standard deviation of Asset II is divided by the mean of Asset
II and so forth. These multiple coefficient of variations can then be compared against one another. By using the coefficient of
variation, an analyst can compare variation among relatively high and low priced securities. Similarly, the analyst can evaluate
the price volatility differences between commodities, currencies, stocks and bond markets.

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COFI — See Cost of Funds Index.
Coherent Market Hypothesis — A hypothesis that the probability density function of the market may be determined by a
combination of group sentiment and fundamental bias. Depending on combinations of these two factors, the market can be in
one of four states: (1) random walk; (2) unstable transition; (3) chaos; or (4) coherence.
Coincident (Economic) Indicator — An index or aggregation of economic or financial performance measures which tends to move
together with the business cycle. Contrast to Lagging Economic Indicator and Leading Economic Indicator.
Coinsurance — (1) An arrangement whereby the insured commit themselves to shoulder a fixed percentage of any loss. (2) When
more than one insurance company shares the risk of a particular transaction or series of transactions. Lenders may require co-
insurance on large commercial projects. (3) A clause in an insurance policy stating the minimum percentage of value to be
insured in order to collect the full amount of loss. (4) Represents the sharing of an insurance risk, a common practice when
claims could be of such large size that it wouldn’t be prudent for one company to underwrite the whole risk itself. Typically,
the underwriter is liable up to a stated limit, and the coinsurer’s liability is for amounts above that limit. (5) A Hedging or Risk
Management term. It refers to the amount of loss that the investor is positioned to take. When a firm is 85 percent hedged, then
it is said that the firm is coinsuring the remainder or 15 percent. When an individual holds 100 shares of stock priced at $80 per
share and is also long a put with a $75 strike price, the individual is said to be coinsuring for $500 or the difference between the
market price and the exercise price.
Cold Calling — The practice of brokers making unsolicited calls to people they don’t know in an attempt to drum up business. Also
see Cold Canvass.
Cold Canvass — The process of contacting homeowners in an area in order to solicit listings. Also see Cold Calling.
Collapsible Corporation — A term that applies to some corporations that are dissolved within three years. The Internal Revenue
Service (IRS) treats the gain on the sale or liquidation of the corporation as ordinary income to the stockholder.
Collar — The combination of a long Cap position and a short Floor position. It is sometimes called a range forward or a fence.
Generally, it is structured so that the net cost of the collar is zero or close to zero. This means that the debit expense for the long
cap premium is offset by the credit received for the short floor premium. This term is also used to define the prepayment speed
range for a credit instrument.
Collateral — (1) Assets that are used to secure a loan. Property pledged as security for a debt. (2) Securities or other property or
assets pledged by a borrower to secure repayment of a loan. (3) The underlying security, mortgage, or asset for the purposes of
Securitization or borrowing and lending activities. It is pledged or held in trust.
Collateral Loan — A loan secured by a pledge of assets. Commercial loans are typical of this type whereby repayment is secured
by the assets of the borrowers.
Collateral Note — A note accompanied by collateral security.
Collateral Pool — As applied to single financial institutions, a group of securities pledged by a single financial institution against
all the public deposits it holds. A multiple financial institution collateral pool is a group of securities pledged by various financial
institutions to provide common collateral for their deposits of public funds. In such a collateral pool, the assets of the pool and
the power to make additional assessments against the members of the pool, if necessary, ensure there will be no loss of public
funds because of the default of a member.
Collateral Trust Bond — A security issued by a corporation and is secured by other securities. This bond compares to Mortgage
Backed Securities which are secured by real property or unsecured bonds. Depending on the underlying collateral and the terms
of the issue, these bonds can offer somewhat better financing rates to the issuer.
Collateral Value — The estimated value of the assets pledged against a borrower’s loan.
Collateralize — To secure a debt in whole or part with assets of value, i.e., Collateral.
Collateralized Bond Obligation (CBO) — (1) A debt security which is backed or collateralized by a pool of investment grade or
high-yield bonds. (2) Investment-grade bonds backed by a collection of Junk Bonds with different levels of risk, called tiers,
that are determined by the quality of junk bond involved. CBOs backed by highly risky junk bonds receive higher interest rates
than other CBOs. Also see Collateralized Mortgage Obligation (CMO).
Collateralized Loan Obligation — A loan similar in structure to the Collateralized Mortgage Obligation (CMO).
Collateralized Mortgage Obligation (CMO) — (1) A mortgage-backed bond secured by the cash flow of a pool of mortgage
obligations. In a CMO, the normal interest and principal payments made by the borrowers are divided into two separate
payments, creating several financial instruments paying owners and investors different rates. (2) A security backed by a pool
of pass-through rates , structured so that there are several classes of bondholders with varying maturities, called Tranches. The
principal payments from the underlying pool of pass-through securities are used to retire the bonds on a priority basis as specified
in the prospectus. Also see Mortgage Pass-Through Security. (3) A security backed by a pool of mortgage loans that may be
separated into various classes with varying maturities. Note that Real Estate Mortgage Investment Conduits (REMICs),
introduced by the Tax Reform Act of 1986, are the standard vehicle for investing in mortgage instruments. (4) A complex bond
structure which reallocates interest and principal payment streams. These tranches, which are often designated as A to Z pieces
or securities, are engineered from mortgage backed securities used as the underlying collateral. CMOs come in many shapes and
sizes and are often viewed as unique constructions. Some of the more commonly named tranches are: Interest Only, Principal
Only, Floater, Inverse Floater, Planned Amortization Class, Support, Scheduled, Sequential, Targeted Amortization Class, and
Z or Accrual Bond. Often, many of these securities contain option characteristics. Related instruments include Collateralized
Bond Obligations and Collateralized Loan Obligations.
Collateralized Obligation — The generic term for a structure that carves up the initial cash flow from a similar set of assets into
a new and often unique arrangement. By dividing and redistributing the cash flows in terms of both principal and interest, the
structure alters the disbursement of the underlying collateral cash flows into several securities. Some of these securities may

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experience greater stability whereas others may absorb more of the risky characteristics of the underlying assets. Under various
circumstances, these structures can improve the credit rating of some of the deal’s components. Specific categories of these
structures are Collateralized Bond Obligations, Collateralized Loan Obligations, and Collateralized Mortgage Obligations
(CMOs).
Collected Balance — A checking account’s cash balance after deducting for checks drawn on other banks.
Collectibles — Tangible goods often purchased as investments, including, as examples, coins, stamps, books, antiques, art, oriental
rugs, and pottery.
Collecting Bank — Any bank handling an item for collection except the payor bank. (Article 4 of the U.C.C.: Bank Deposits and
Collections)
Collection Float — Checks written by customers that have not been received, deposited, and added to the company’s available
balance. Also see Payment Float.
Collective Bargaining — The negotiations conducted between a recognized union and management on behalf of a group of
employees.
Collusion — Sellers working together to set prices and outputs generally to the detriment of the buyer. Collusion is most typical
in an Oligopolistic market environment.
Color of Title — That which appears to be good title but is not.
Combination Bond — A bond issued by a governmental unit which is payable from the revenues of a governmental enterprise but
which is also backed by the full faith and credit of the governmental unit.
Combined Financial Statement — (1) The presentation in which the balance sheet accounts or income statement accounts of a
related group of entities have been added together so they are considered as one reporting entity. Intercompany transactions are
eliminated in a combined statement. (2) In governmental accounting, a statement in which the balance sheets of all fund and
account groups are shown without interfund transfers being eliminated. Compare to Consolidated Financial Statement.
Commercial Bank — (1) Any privately owned bank that has checking accounts and makes loans. (2) A Financial Institution
authorized to provide a variety of financial services, including consumer and business loans (generally short-term), checking
services, credit cards and savings accounts. Certain deposits at most commercial banks are insured by the Federal Deposit
Insurance Corporation (FDIC). Commercial banks may be members of the Federal Reserve System. Also see Bank.
Commercial Broker — One who lists and sells commercial property, which may include shopping, office, industrial, and apartment
projects. Contrast with Residential Broker.
Commercial Loan — Also referred to as a commercial and industrial loan, a loan made to a business, corporation, or commercial
enterprise as distinguished from a loan made to a consumer. Such loans are normally of a short-term nature, collateralized or
unsecured, and made at flexible interest rates, typically a rate over an index rate such as a prime lending rate.
Commercial Mortgage — A loan secured by commercial real estate, typically with a 20-40 day maturity. A commercial mortgage
differs from residential mortgages, carrying a rate pegged to an index or base rate, such as a prime lending rate. Repayment terms
are typically negotiated between the lender and the borrower, and such loans normally have commitment fees and compensating
balances associated with them.
Commercial Mortgage Backed Securities (CMBS) — Securities which are very similar to Mortgage Backed Securities (MBS) in
terms of structure, flexibility, and variety of tranches or tiers. The key difference is that CMBS are collateralized by commercial
properties and not residential mortgages. Commercial property includes multi-family residential, retail, office, etc. These
securities are not standardized so there exists considerable variety associated with structure, credit enhancement, diversification,
etc., that need to be understood when valuing these instruments.
Commercial Paper — (1) Short-term notes issued by corporations which can be purchased either at a discount (i.e., below par value)
or on an interest-bearing basis. (2) Unsecured notes issued by companies and maturing within nine months. Typically,
commercial paper is issued only by the larger and more credit worthy companies. (3) A short-term debt obligation or promissory
note issued by prime rated, large business firms with maturities less than 270 days, but typically with maturities under 30 days.
Such short-term financial instruments are negotiable and may be resold by the owner before its maturity date. While some
commercial paper is interest bearing, most paper is issued on a discount basis with the difference between the redemption value
and the purchase price determining the rate of interest.
Commercial Property — Property intended for use by all types of retail and wholesale stores, office buildings, hotels, and service
establishments.
Commingle — To mingle or mix, such as the deposit of another’s money in a broker’s personal account.
Commission — (1) The sum of money, interest, brokerage, compensation, or allowance given to a factor or broker for carrying on
the business of a principal. (2) The broker’s basic fee for purchasing or selling securities or property as an agent. (3) The fee
paid to a broker to buy or sell securities. A commission increases the tax basis of the purchased security (thereby reducing the
eventual capital loss or gain). Commissions vary widely from broker to broker. (4) The fee paid to a broker to execute a trade,
based on number of shares, bonds, options, and/or their dollar value. In 1975, deregulation led to the establishment of discount
brokers, who charge lower commissions than full service brokers. Full service brokers offer advice and usually have a staff of
analysts who follow specific industries. Discount brokers simply execute a client’s order and usually do not offer an opinion
on a stock.
Commission Fee — (1) A fee charged by a broker for executing a transaction. Also referred to as Brokerage Fee. (2) The official
body that enforces real estate license laws.
Commission Split — The arrangement of sharing commissions earned between a sales agent and sponsoring broker, or between the
selling broker and listing broker.
Commitment — A written promise to make or insure a loan for a specified amount and on specified items. A pledge or promise;

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a firm agreement.
Commitment Fee — (1) The fee paid to a lender for a formal line of credit. (2) A charge required by a lender to lock in specific
terms on a loan at the time of application.
Commitment Letter — An official notification to a borrower from a lender indicating that the borrower’s loan application has been
approved and stating the terms of the prospective loan.
Commitments — See Encumbrances, also Obligations.
Committee on Uniform Securities Identification Procedures — See CUSIP Number.
Commodities Futures — Contracts in which sellers promise to deliver a given commodity by a certain date at a predetermined price.
Price is agreed to by open outcry on the flow of the commodity exchange. The contract specifies the item, the price, the
expiration date, and a standardized unit to be traded (e.g., 10,000 pounds). Commodity contracts may run up to one year.
Investors must continually evaluate the effect of market activity on the value of the contract. While the futures contract mandates
that the buyer and seller exchange the commodity on the delivery date, the contract may be sold to another party prior to the
settlement date. This may occur when the trader wants to realize a profit now or limit the loss. Investors engage in commodity
trading in the hope of high rates of return and as inflation hedges.
Commodity (or Commodities) — (1) An article of commerce or a product that can be used for commerce. In a narrow sense,
products traded on an authorized commodity exchange. The types of commodities include agricultural products, metals,
petroleum, foreign currencies, and financial instruments and index, to name a few. (2) Often viewed as the Futures Markets of
both physical and financial items. Sometimes, the term commodities is used more narrowly to refer to physical goods such as,
gold, silver, wheat, and pork bellies. The term financial futures would refer to stock indices, eurodollars, U.S. Treasuries,
currencies, and other security-type instruments. In a more restrictive sense, commodity or commodities refer to the Actuals in
the Spot Market.
Commodity Credit Corporation (CCC) — A branch of the U.S. Department of Agriculture, established in 1933, that supervises
the government’s farm loan and subsidy programs.
Commodity Funds — Investment vehicles that invest in Futures and Options on futures. Commodities can include traditional
commodities such as grains, metals, and livestock as well as stock indices, currencies, and other financial instruments.
Commodity Futures — See Futures.
Commodity Futures Trading Commission (CFTC) — A federal regulatory agency established under the Commodity Futures
Trading Commission Act, as amended in 1974, that oversees futures trading in the United States. The commission is comprised
of five commissioners, one of whom is designated as chairman, all appointed by the President subject to Senate confirmation,
and is independent of all cabinet departments.
Commodity Market — The market for goods and services. Demand and supply interact in this market to determine the level of
output to be produced.
Commodity Month Alphabetic Symbols or Codes — Letters which represent different delivery months for Futures and Options
on futures contracts. For example:
[1] F – represents the January Delivery Month
[2] G – represents the February Delivery Month
[3] H – represents the March Delivery Month
[4] J – represents the April Delivery Month
[5] K – represents the May Delivery Month
[6] M – represents the June Delivery Month
[7] N – represents the July Delivery Month
[8] Q – represents the August Delivery Month
[9] U – represents the September Delivery Month
[10] V – represents the October Delivery Month
[11] X – represents the November Delivery Month
[12] Z – represents the December Delivery Month
There are other symbols for monthly deliveries in different years. The above list presents the most common symbols for the
nearest deliveries. Sometimes color codes are used to differentiate between delivery years and months. There has been a shift
in terminology over the years and across product lines.
Commodity Options — Option contracts involving Commodities.
Commodity Pool — An enterprise in which funds contributed by a number of persons are combined for the purpose of trading
Futures Contracts or Commodity Options.
Commodity Prices — An index of commodities (such as oil and steel) traded in worldwide markets.
Commodity Trading Adviser — A person who, for compensation or profit, directly or indirectly advises others as to the value or
the advisability of buying or selling futures contracts or commodity options. Advising indirectly includes exercising trading
authority over a customer’s account as well as providing recommendations through written publications or other media.
Commodity Year Color Codes — Color codes used to distinguish different years available for trading. The following list reflects
the 10-year Eurodollar strip.
[1] White – Year 1
[2] Red – Year 2
[3] Green v Year 3
[4] Blue v Year 4

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[5] Gold v Year 5

[6] Purple – Year 6
[7] Orange v Year 7
[8] Pink v Year 8
[9] Silver – Year 9
[10] Copper – Year 10
It should be noted that other color schemes have been used for different years by other exchanges over time. Codes are often
used in conjunction with other information to avoid errors in order transmission and execution.
Commodities Exchange Center (CEC) — The location of New York futures exchanges: (1) Commodity Exchange, Inc. (COMEX);
(2) the New York Mercantile Exchange (NYMEX); (3) New York Cotton Exchange, Coffee, Sugar & Cocoa Exchange
(CS;&;CE); and (4) New York Futures Exchange (NYFE).
Common Areas — Areas of a property that are used by all owners or tenants.
Common Elements — In a condominium, those portions of the property not owned individually by unit owners but in which an
indivisible interest is held by all unit owners. Generally includes the grounds, parking areas, recreational facilities, and external
structure of the building.
Common Law — (1) Rules based on usage as demonstrated by decrees and judgments from the courts. (2) Law based on precedents.
(3) The body of law that has grown out of legal customs and practices that developed in England. Common law prevails unless
superseded by other law. Contrast with Civil Law.
Common Property — Property shared by both spouses with each having a one-half interest in the earnings and appreciation of the
other.
Common-Size Statements — A form of financial statement analysis where only the relative percentages of financial statement items,
rather than their customary dollar amounts, are shown.
Common Stock — (1) Basic ownership class of corporate capital stock, carrying the right to vote, share in earnings, participate in
future stock issues, and share in any liquidation proceeds after prior claims have been settled. (2) Securities that represent an
ownership interest in a corporation. If the company has also issued preferred stock, both common and preferred have ownership
rights. Claims of both common and preferred stockholders are junior to claims of bondholders or other creditors of the company.
Consequently, common stockholders assume the greater risk, but generally they also exercise the greater control and may gain
the greater reward in the form of dividends and capital appreciation. (3) A class of stock in a company, normally with voting
rights. Corporations may have several classes of common stock, as well as preferred stock, or they may have a single class of
common stock. Common stockholders are on the bottom of the ladder in a corporation’s ownership structure, and have rights
to a company’s assets only after bond holders, preferred shareholders and other debt holders have been satisfied. (4) Units of
ownership of a company based upon the company’s residual value after payment of all existing debts and financial obligations
of a senior nature, e.g., debt, subordinated debt, preferred stock, etc. Unlike debt holders, common stock holders are allowed
to “vote” their shares (i.e., one share, one vote) on important corporate matters such as the selection of a board of directors,
selection of an outside accounting firm (auditors), and other appropriate matters.
Common Stock Fund — A mutual fund that has a stated policy of investing all of its assets in common stocks. The term is also
applied to funds that normally invest only in common stocks, though are not restricted to them by charter.
Common Trust Fund — A plan by which the assets of small trust estates are pooled into a larger common fund, with each trust
being given a certificate representing its proportionate ownership of the fund with the pooled proceeds invested in investments
of greater size than allowed if the trust funds had remained disaggregated.
Communism — (1) (Economic Philosophy or Doctrine) The Marxist ideas and predictions of the ultimate downfall of capitalism
and the development of a “classless society” of mutual production and sharing. (2) (Economic System) The economic and
political system of the former Soviet Union, China, and other Communist countries in which there is little private ownership and
most of the production and distribution choices are made by the government (i.e., Centralized Planning).
Community Association — General name for any organization of property owners to oversee some common interest. In a
condominium or planned unit development, the association has the responsibility of managing the common elements in the
project. A homeowners’ association may be established in a subdivision to enforce deed covenants.
Community Associations Institute (CAI) — A nonprofit educational and research organization concerned with the problems of
managing homeowners’ associations and other community associations (such as condominium owners associations). CAI
sponsors educational seminars and publishes various handbooks and brochures. Address: Community Associations Institute 1630
Duke Street Alexandria, VA 22314.
Community Bank — A bank which is locally owned and operated, derives is funds from, and makes its loans to, persons and entities
within the local community in which it operates branches, and is not associated with a Multi-Bank Holding Company. Also
referred to as an Independent Bank.
Community Property — (1) Property owned jointly by a husband and wife. (2) The co-tenancy held by husband and wife in
property acquired during their marriage under the law of some states, primarily the southwestern United States. (3) Refers to
assets or a method of ownership. Generally, it means that each spouse owns a 50 percent interest in an asset such as a bank
account. Upon the death of one spouse, the survivor claims his or her ownership of one-half of the asset. The other half will pass
in accordance with a formal will or by law. Each state is different in its laws and interpretations. (4) Property accumulated
through joint efforts of husband and wife and owned by them in equal shares. This doctrine of ownership now exists in Arizona,
California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington State, and Wisconsin.
Community Reinvestment Act (CRA) — (1) A federal law requiring banks to meet the credit needs of the entire community in
which they do business, i.e., accept deposits, make loans, etc. (2) A federal law that requires federal regulators of lending

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institutions to encourage lending within the local area of the institution, particularly to low-income and moderate-income
residents and those residing in inner-city neighborhoods. Bank regulatory agencies have been tasked to insure compliance with
the CRA and make such findings as to compliance available to the public.
Commutative Justice — A situation in which goods are apportioned among people as a result of free choices by people all of whom
enjoy as nearly equal opportunities as possible in the process of resource allocation.
Companion Bonds — A class of a Collateralized Mortgage Obligation (CMO) whose principal is paid off first when the underlying
mortgages are prepaid due to falling interest rates. When interest rates rise, there will be lower prepayments of the principal;
companion bonds therefore absorb most of the prepayment risk of a CMO.
Comparables — (1) Properties which are similar in value to a particular property and are used as comparisons to determine the fair
market value of a specified property. (2) Properties that are similar to the one being sold or appraised. See Market Approach.
(3) Refers to pricing or evaluation benchmarking efforts. In real estate the term is used to determine comparable properties for
evaluation or assessment purposes. In the securities markets, the term has similar implications for pricing bonds, stocks, and
derivatives. For credit instruments, it refers to isolating the key pricing characteristics. Among these, are issuer, type of collateral
or issue, maturity, maturity to first option date, average life, duration, option adjusted duration, and so forth. In the case of a
simple corporate bond, it would benchmark to a comparable term U.S. Treasury issue and adjust for credit rating and other
pertinent risk factors by a spread. This spread would be added to the prevailing treasury and indicate what a fair yield would
be for the corporate. For equity type securities, the process would involve finding similar companies in the same industry with
similar economic profiles and outlooks. Among the considerations would be utility stock or Internet stock, growth prospects,
cashflow, Earnings per Share (EPS), value per hit, and other determinative factors. Effectively, the process is pricing, marking-
to-market, or evaluating by analogy.
Comparative Advantage — (1) Refers to the relative advantage between trading parties. The concept of comparative advantage
explains why transactions occur even in the absence of absolute advantage. Comparative advantage creates the basis for trade,
specialization, and swap transactions. (2) The ability to produce a product for an Opportunity Cost which is lower than anyone
else’s opportunity cost in producing that same product. The concept of comparative advantage does not imply that an individual
is absolutely more efficient that others in the production of a good, but only that certain natural factor endowments suggest that
production in a certain product should be emphasized and then trade relationships established with other producers (or other
countries) to purchase other goods and services in which it does not possess a comparative advantage. As an example, suppose
A (person or country) can produce 12 “X’s” (as a product, X) or 6 “Y’s”, or some combination of these goods using all Factors
of Production available, while B can produce 5 “X’s” or 1 “Y”. Obviously, A has an Absolute Advantage in the production of
both good X or Y as it can produce more of either one than B. However, if A is to produce good Y exclusively, it would have
to give up (the opportunity cost) 2 X for each Y produced, whereas if B were to produce good Y it would have to forego the
production of a far greater 5 X. Consequently, A has a comparative advantage in the production of good Y (i.e., relatively less
X is “given up” to produce Y) and B has a comparative advantage in the production of good X as for every X produced by B only
1/5 Y is foregone. Whereas for A, for every X produced a greater 1/2 Y must be given up. Therefore, A should produce what
it has a comparative advantage in (i.e., the production of good Y) and B should produce what it has a comparative advantage in
(the production of good X) and then each should trade with each other (and others) for other goods and services required.
Comparative Financial Statements — A form of horizontal financial analysis involving the comparison of two or more periods’
statements with dollar and percentage changes shown.
Comparative Sales Approach — Synonymous with Market Comparison Approach.
Comparative Unit Method — An appraisal technique to establish relevant units as a guide to appraising the subject property.
Comparison Method — Synonymous with Market Comparison Approach.
Compensating Accounts — See Accommodating Accounts.
Compensating Balance — (1) A account balance required of a customer to pay for certain bank services. (2) A required minimum
checking or interest-bearing account balance that a firm must maintain with a commercial bank. The required balance is
generally equal to 15 to 20 percent of the amount of loans outstanding. Compensating balances can raise the effective rate of
interest on bank loans.
Compensating Wage Differentials — Wage differences that offset non-monetary differences in the perceived attractiveness of jobs.
Competent Parties — Persons legally capable of entering a contract must be of legal age, not be insane, or a drunkard, or otherwise
physically or mentally impaired.
Complementary Goods — (1) Goods which are used together, like lumber and nails. If the price of one (lumber) goes down, people
will tend to buy more of it so that the demand for the other (nails) will also increase. (2) Two goods such that the quantity
demanded of one varies inversely with the price of the other, all other things being equal; goods with a negative Cross-Price
Elasticity.
Complementary Inputs — Inputs with the characteristic that a change in the quantity of one changes the marginal physical products
of other inputs in the same direction (i.e., increase or decrease).
Completion Bond — A legal instrument used to guarantee the completion of a project development according to specifications.
Compliance — The area or the process which has responsibility for firm and employee adherence to the rules and regulations which
govern the broker/dealer business. This includes but is not limited to “The Powers and Authorities” for the firm’s position taking
and trading limits, guidelines indicated in the employee compliance handbook, registrations, continuing education, sales literature,
and employee trading activities. Generally, compliance functions are partitioned between registrations and other rules and
guidelines. Non-selling employees are usually in compliance to avoid conflicts-of-interest. However, there are exemptions for
very small organizations.
Compliance Auditing — Auditing for compliance with applicable laws and regulations. Tests of compliance with laws and

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regulations are substantive tests; therefore, the term “compliance auditing” should not be confused with the similar term
“compliance testing,” which usually refers to testing for compliance with internal control procedures.
Compliance Examination — A periodic examination conducted by bank regulatory agencies to insure compliance with consumer
protection regulations, such as the Community Reinvestment Act (CRA), the Equal Credit Opportunity Act (ECOA), or the Truth
in Lending Act.
Component Depreciation — Dividing real estate improvements into various parts such as the roof, plumbing, electrical system, and
shell, then depreciating each component part separately for tax purposes.
Composite Cost of Capital — A weighted average of the component costs of debt, preferred stock, and common equity. Also
referred to as the Weighted Cost of Capital and, less appropriately, the Weighted Average Cost of Capital, but, in effect, it reflects
the cost of each additional dollar raised, not the average cost of all capital the firm has raised throughout its history.
Composition — An informal method of reorganization in which creditors voluntarily reduce their claims on the debtor firm.
Composition of Creditors — An agreement among creditors that each shall accept a partial payment as full payment in consideration
of the other creditors doing the same.
Compound Amount of One Per Period — The amount that a series of deposits of $1.00 per period would grow to if left on deposit
with interest allowed to compound.
Compound Interest — (1) Interest paid on the original principal and also on the unpaid interest that has accumulated. (2) Interest
that is determined by retaining the interest earned in the current period, adding it to the principal amount, and computing the next
period’s interest on this “compounded” total amount. (3) An interest rate that is applicable when interest in succeeding periods
is earned not only on the initial principal but also on the accumulated interest of prior periods.
Compounding — (1) The arithmetic process of determining the final value of a payment or series of payments when Compound
Interest is applied. (2) Paying interest on interest in addition to principal. (3) The process of computing, with the help of the
interest rate, the Future Value of present dollars.
Comps — Appraisal term, short for Comparables.
(Office of the) Comptroller of the Currency (OCC) — The supervisory agency for nationally chartered banks. The Comptroller
of the Currency is the individual, appointed by the President and confirmed by the Senate and serving a five-year term who serves
as the chief regulator of national banks. The Comptroller of the Currency is an officer of the Treasury Department responsible
for chartering national banks and has primary supervisory authority over them. All national banks are required to be members
of the Federal Reserve System and must be insured by the Federal Deposit Insurance Corporation (FDIC).
Computerized Trading Reconstruction System — A Chicago Board of Trade (COBT) computerized surveillance program that
records and recalls any trade, the traders involved, the contract, the quantity, the price, and time of execution to the nearest
minute.
Concave Curve — A curve on a graph which bows outward from the zero point, so that it is concave when viewed from the zero
point of the graph. Contrast with Convex Curve.
Concentration — (1) The relative number of loans a bank or Financial Institution made to a particular industry sector. High levels
of concentration indicate a lack of loan portfolio diversification and the possibility of credit risk should economic conditions and
trends in that industry sector deteriorate. (2) In regards to deposits, the share of deposits owned by a single bank, or a few large
banks, in a given market which serves as a measure of the extensiveness of competition and is used to gauge the potential
detrimental effects of planned bank mergers and consolidations.
Concentration Ratio — (1) A number indicating what percentage of the total output of an industry is produced by the few largest
firms in the industry. It’s a rough way of measuring market structure. (2) The percentage of industry sales attributable to a given
number of largest firms, usually the 4, 8, 20, and 50 largest companies.
Concessions — Benefits granted by a seller/lessor to induce a sale/lease.
Concurrent Indicators — Economic and financial market measures or indicators that tend to move in conjunction with, i.e., at the
same time, as general economic activity (real Gross Domestic Product, employment, retail sales, etc.) or financial market trends
(interest rates, security prices, etc.). The movement of concurrent indicators does not have to be in the same direction, however.
For example, an increase in real GDP, for example, would most likely move concurrently with a decrease in unemployment.
Contrast with Leading Indicators and Lagging Indicators.
Condemnation — (1) A judicial proceedings through which a governmental body takes private property for public use. (2) The
taking of private property for public use by a government unit, against the will of the owner, but with payment of just
compensation under the government’s power of condemnation or eminent domain. (3) Taking private property for public use
with compensation to the owner under Eminent Domain. Used by governments to acquire land for streets, parks, schools, etc.,
and by utilities to acquire necessary property. (4) Declaring a structure unfit for use. For example, condemnation may consist
of a determination by a governmental agency that a particular building is unsafe or unfit for use or habitation. The U.S.
Constitution protects against taking without fair compensation. Also see Inverse Condemnation.
Condition(s) — (1) Provision(s) in a contract that some or all terms of the contract will be altered or cease to exist upon a certain
event. (2) A clause in a contract that has the effect of investing or divesting the legal rights and duties of the parties to the
contract.
Conditional Commitment — (1) A lender’s promise to issue a loan subject to certain conditions. Generally, the lender will not fund
the loan until the conditions have been met. (2) An agreement by a lender to provide a loan to a qualified borrower, within a
specified time period, but without stating who the borrower will be.
Conditional Estate — An estate that will come into being upon the satisfaction of a condition precedent or that will be terminated
upon the satisfaction of a condition subsequent, provided in the latter case that the grantor or his heirs re-enter and retake
possession of the subject property.

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Conditional Offer — (1) Purchase offer in which the buyer proposes to purchase property only after certain events (sale of another
home, finding a loan commitment, etc.) occur. (2) Purchase contract tendered to the seller that stipulates one or more
requirements to be satisfied before the purchaser is obligated to buy.
Conditional Sale — A credit transaction by which the buyer purchases on credit and promises to pay the purchase price in
installments, while the seller retains the title to the goods, together with the right of repossession upon default, until the condition
of payment in full has been satisfied.
Conditional Sales Contract — (1) A contract for the sale of property stating that the seller retains title until the conditions of the
contract have been fulfilled. (2) A method of financing new equipment by paying it off in installments over a one-to-five-year
period. The seller retains title to the equipment until payment has been completed.
Condominium — A system of ownership of individual living units in a multi-unit structure, combined with joint ownership of
commonly used property (sidewalks, hallways, stairs, etc.). The maintenance, improvement, and insurance on these common
areas is generally funded by means of a home owners’ association fee charged to all property owners.
Condominium Owners Association — An organization of all unit owners in a Condominium to oversee the maintenance and upkeep
of the common elements and enforce the bylaws of the association.
Condor — An option spread strategy which is akin to a Butterfly. Here, there are four different Strike Prices (instead of three for
the butterfly) for the same instrument and for the same date. Condors can be constructed with either Calls or Puts. They can
be either long or short. A long condor entails the purchase of a low strike call, the sale of 2 different intermediate strike calls,
and the purchase of a relatively higher strike call.
Confidence Limit — (Data Analysis and Statistics) Bounds of statistical probability, e.g., 95%, 98%, 99%, etc., established as part
of the testing criteria. The confidence limits express the statistical probability associated with the acceptance of the statistical
tests or model’s results. If we calculate a Confidence Interval (i.e., plus or minus, say, $1,000) based on a specified confidence
limit( say 95%), then we can say that if we did the same experiment or took the same sample 100 times, we would expect that
95 of those times the result would fall within this confidence limit.
Confirm — A ratification of an order. Usually it is in written form, however verbal confirms must be subsequently validated by
a written record of the transaction. See Confirmation.
Confirmation — (1) A written description of the terms of a transaction in securities supplied by a broker/dealer to his customer or
to another broker/dealer. (2) The written acknowledgment provided by a broker that a trade has been completed. It includes
details such as the date, price, commission, fees, settlement terms, and so on. All executed orders require a written record or
report which indicates an executed order or transaction. Depending on regulatory organization, confirms typically must be sent
by the next business day of a transaction.
Confirmatory Analysis (Mode) — (Data Analysis) Confirmatory analysis is used when the analyst has a specific model they desire
to test against the data. Hypothesis Testing is used in the confirmatory mode to determine whether the data fit the explicit
hypotheses of the model. A good research strategy is to begin in the Exploratory Analysis (Mode), and only towards the very
last steps of model building switch to the confirmatory mode.
Confirming Bank — A correspondent bank that adds its own engagement to that of the issuing bank in a letter of credit guaranteeing
that the credit will be honored by the issuer or a third bank.
Confiscation — The actual taking over of forfeited property by the government. Compare to Forfeiture.
Conflict Curve — Another name for the contract curve in the Edgeworth Box Diagram, so called because people in efficient
positions on the curve can make utility (satisfaction) gains only at the expense of other people.
Conforming Loan — A mortgage loan that is eligible for purchase by the Federal National Mortgage Association (FNMA) or the
Federal Home Loan Mortgage Corporation (FHLMC).
Conformity Principle — An appraisal principle that holds that property tends to reach maximum value when the neighborhood is
reasonably homogeneous in social and economic activity.
Congeneric Merger — A congeneric merger is one between firms in the same general industry, but where the merger partners are
neither customers nor suppliers of one another. This term was first used in connection with mergers among financial institutions
as, for example, when a Bank Holding Company (BHC) acquired a mortgage service company or a leasing company.
Conglomerate — A corporation that has diversified its operations, usually by acquiring enterprises in widely varied industries and/or
in different countries.
Conglomerate Merger — (1) The combining into one firm of two or more previously separate business firms which produce
unrelated products. The new combined firm would be called a Conglomerate corporation. (2) Mergers of firms that have neither
competitive nor buyer-seller relations.
Congressional Budget Office (CBO) — The Congress’s equivalent to the president’s Council of Economic Advisors (CEA). The
CBO is responsible for economic analysis of the budget and other congressional issues.
Consensus-Based Forecast — (Data Analysis and Forecasting) A forecast obtained from a combination of a number of other
forecasts. One such example would be a forecast derived from a simple averaging of a number of separate, individual forecasts.
While such a method typically produces a more stable forecast over time, it does not necessarily yield a more accurate forecast.
The construction of a forecast depends as much on the ability of the forecaster and forecasting technique as it does on the
assumptions (particularly the forecasts of the independent or explanatory variables) used to “drive” the forecast through the
“explanation” of the Dependent Variable by the appropriate selection of explanatory or Independent Variables. Without detailed
information on these assumptions, it may not always be appropriate to give equal weight to all forecasts, which is the implicit
assumption in a consensus forecast when individual forecasts are merely averaged. Also see Reconciliation of Forecasts.
Conservatism — (1) An accounting principle dictating that judgmental determinations in accounting should tend toward
understatement rather than overstatement of assets and income. (2) An accounting guideline that serves to understate assets and

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revenues and overstate liabilities and expenses. Expenses should be recognized earlier than later while revenues should be
recognized later than sooner, thus resulting in a lower net income figure. Conservatism holds that in financial reporting it is
preferable to be pessimistic (and understate) than optimistic (and overstate) since by so doing there is less chance that investors
will be hurt by relying on prepared financial statements.
Consideration — (1) Anything of value given to induce another to enter into a contract; it may be money, personal services, a
product etc. Earnest money deposit on a sales contract is consideration. (2) Something of value which is voluntarily exchanged
by the parties to an agreement thereby making the terms of the agreement a legally binding contract. (3) In banking, a loan
contract is consummated by the exchange of money by the lender with the promise to repay on the part of the borrower.
Consignee — A person to whom a shipper directs a carrier to deliver goods, generally the buyer.
Consignment — (1) The delivery, sending, or transferring of property (“goods, wares, and merchandise”) into the possession of
another, usually for the purpose of sale. Consignment may be a bailment or an agency for sale. (2) In real estate finance, the
process by which the Federal Savings and Loan Insurance Corporation (FSLIC) replaces the management of an insolvent Savings
and Loan Association, but allows the association to continue operating. As an example, under the Southwest Plan, many savings
and loan associations in Texas were placed under a consignment program, whereby experienced managers from other S&Ls were
recruited to run the associations under federal supervision.
Consistency — An accounting principle to the effect that, unless otherwise disclosed, accounting reports are to be prepared on a basis
consistent with the preceding period.
Consolidated Balance Sheet — A balance sheet statement that shows the financial position of an affiliated group of companies as
though they constituted a single economic unit. The effect of intercompany relationships and the results of intercompany
transactions will have been eliminated in the consolidation process. Also see Consolidated Financial Statement.
Consolidated Financial Statement — (1) A financial accounting statement which incorporates the financial activities of all related
and incorporated entities into a single statement. (2) Financial statements prepared with inter-company (reciprocal) accounts
eliminated so as to portray the financial position and operating results of two or more affiliated companies as a single economic
entity. (3) A statement that incorporates all assets, liabilities, and operating accounts of a parent company and its subsidiaries.
It presents the financial position and the results of operations of the parent company and its subsidiaries as if the group were a
single company with one or more branches. The technique for preparing consolidated financial statements is to take the
individual statements to be consolidated and to combine them on a worksheet after eliminating all intercompany transactions and
intercompany relationships. Most firms prepare consolidated statements when they hold more than 50 percent of the subsidiary’s
stock. Also see Combined Financial Statement and Consolidation.
Consolidated (Consolidation) Goodwill — The excess of cost over book value of the investment in a subsidiary. With
Consolidation, even when the assets and liabilities of the subsidiary are properly stated, and the net assets equal the values placed
on them by the parent, an investor may still expect that the advantages of the combination will enable it to earn more than the
two companies could earn separately. Therefore, the investor may be willing to pay an additional amount, which is, in effect,
a bonus for control of the subsidiary. This bonus is an intangible asset, i.e., Goodwill created as a result of consolidation.
Consolidation has a special meaning in mergers because a new company is formed to own the stock of the companies being
combined. In that type of reorganization, there is no goodwill created. Goodwill arises from a Purchase (Accounting) Method
merger and represents the difference between purchase price and book value of the acquired company. The meaning of the
difference is theoretically the increased earning power of the companies as a result of their combination, but that value is not
something superimposed on a balance sheet. It is what is actually paid for the merger less what is actually the company’s
valuation carried on the books (i.e., Net Worth).
Consolidated Tax Return — An income tax return that combines the income statements of several affiliated firms.
Consolidation — (1) A union of firms such that the existing firms exchange their properties for the securities of a new firm and the
old firms dissolve. (2) The presentation as one economic entity of the earnings of a parent and subsidiary or subsidiaries
subsequent to the date of acquisition. The parent company owns more than 50 percent of the voting common stock of the
subsidiary, and is therefore in control. In consolidation, the reporting mechanism is the entire group and not the separate
companies. It should be noted that the entities that make up the consolidated group retain their separate legal entity. Adjustments
and eliminations are for the Consolidated Financial Statements only.
Consolidation Loan — An installment loan which allows the borrower to combine the balances of several outstanding loans into
one loan.
Consolidation of Corporations — A combining of two or more corporations in which the corporate existence of each one ceases
and a new corporation is created.
Consortia Bank — A more or less permanent group of banks whose objective is to provide joint financing to customers.
Conspicuous Consumption — Buying consumer goods principally for the purpose of “showing off” to impress others. This term
was originated by the American economist Thorstein Veblen in the early 1900's.
Constant-Cost Industry — An industry in which the product’s normal price is unchanged after the industry has ceased to expand
or contract.
Constant Dollars — Dollar figures which have been deflated (by using an appropriate price index) to eliminate the effect of
inflation. Normally referred to with respect to a base or reference year, for example, in constant 1998 dollars. Also referred to
as Real Dollars. Constrast with Current Dollars.
Constant Maturity Treasuries (CMT) — Securities tied to an index which represents what the rate of interest would be for a
constant maturity treasury issue such as 3, 6, or 12 months. Other time periods can be specified. These type of securities and
indices are frequently used for adjustable rate securities.
Constant Payment Loan — A loan on which equal payments are made periodically so as to pay off the debt when the last payment

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is made. See Level Payment Mortgage and Variable Payment Plan.
Constant Returns to a Variable Input — Constancy in an input’s marginal (physical) product as a larger quantity of the input is
used, all else being equal.
Constant Returns to Scale — (1) A characteristic of the production function such that a simultaneous and equal percentage change
in the use of all physical inputs leads to an identical percentage change in physical output. (2) There are no Economies of Scale
and no Diseconomies of Scale. Large plants (firms) can produce just as efficiently as (but no more efficiently than) small ones.
(3) There exist no price advantages or price disadvantages for additional units produced.
Construction in Progress — A fixed asset account reflecting the cost of construction work for projects not yet completed.
Construction Loan — (1) Short-term financing for real estate construction. Generally followed by long term financing called a
“take out” loan issued upon completion of construction. (2) A short term interim loan to pay for the construction of buildings
or homes. These are usually designed to provide periodic disbursements to the builder as he progresses. These are generally done
by lenders with offices local to the site of the construction. This enables the lender or their agent to monitor the progress of the
construction and insure funds are disbursed for their intended purpose. (3) Also referred to as a Construction Mortgage, a loan
made on an interim basis specifically for the development and construction costs of a project and secured by a mortgage on the
property being financed. As opposed to a lump-sum extension, construction loan extensions are made at specific stages of the
project, commonly referred to as Progress Payments.
Constructive Eviction — The legal term describing a situation in which a Lessor’s breach of a lease contract causes the Lessee
(tenant) to cancel the contract and vacate.
Constructive Notice — A legal term referring to the fact that the law presumes that everyone has knowledge of a fact when the fact
is a matter of public record.
Constructive Receipt — (1) For tax purposes, the right to receive money that would be taxable and is taxable, even if receipt is
postponed. (2) A doctrine of the Internal Revenue Service (IRS) that requires the reporting of income (including capital gains)
in the year in which it could have been received had the taxpayer so wished. Thus, dividends of a mutual fund automatically
reinvested are taxable in the year in which they were actually reinvested on the basis that the taxpayer could have received them
by check and then reinvested them or not at his option. (3) In real estate exchanges, the receipt of cash or other non-like-kind
property or the acquisition of the right to use or benefit from such cash or property during an exchange transaction.
Consumer Advisory Council (CAC) — A statutory body established by Congress in 1976. The Council, with 30 members who
represent a broad range of consumer and creditor interests, advises the Board of Governors of the Federal Reserve System on
the exercise of its responsibilities under the Consumer Credit Protection Act and on other matters on which the Board seeks its
advice.
Consumer Credit — Loans extended to individuals for personal or household use as opposed to business or commercial lending.
Generally excludes loans secured by real estate such as home mortgages, but new forms of lending such as home equity loans
have tended to blur this distinction.
Consumer Durables — Consumer goods that have a lifetime longer than one year. The consumer derives satisfaction from the
services that the goods provide (e.g., a refrigerator) rather than from consuming the goods themselves (e.g., food).
Consumer Equilibrium — The consumer’s “maximum satisfaction” position, given the consumer’s preferences and the existing
constraints of the consumer’s income and market prices.
Consumer Installment Credit — Credit extended to consumers to facilitate the purchase of Durable Goods. The credit is usually
financed through a fixed number of equal payments.
Consumer Price Index (CPI) — (1) The most frequently used measure of changing consumer prices in the United States. The most
widely known of many such measures of price levels and inflation that are reported to the U.S. government. It measures and
compares, from month to month, the total cost of a statistically determined “typical market basket” of goods and services assumed
to be consumed by U.S. households. Calculated and published by the U.S. Department of Labor (DOL), Bureau of Labor
Statistics (BLS). The CPI is frequently mistaken for a “cost of living index,” which it is not because it does not include many
items (taxes, insurance, education and training costs, etc.) which go into the composition of all consumer expenditures. (2) A
major inflation measure measuring the change in prices of a fixed market basket of some 385 goods and services in the previous
month. The following information pertains to the CPI series:
[1] Data Available — Price indexes are available for the U.S., the four Census regions, size of city, cross-classifications
of regions and size-classes, and for 26 local areas. Indexes are available for major groups of consumer expenditures
(food and beverages, housing, apparel, transportation, medical care, recreation, education and communications, and
other goods and services), for items within each group and for special categories such as services. Indexes are
available for two population groups: (a) a CPI for All Urban Consumers (CPI-U) which covers approximately 87
percent of the total population; and (b) a CPI for Urban Wage Earners and Clerical Workers (CPI-W) which covers
32 percent of the population. Some series, such as the U.S. City Average All Items Index, begin as early as 1913.
[2] Coverage — The CPI represents changes in prices of all goods and services purchased for consumption by urban
households. User fees (such as water and sewer service) and sales and excise taxes paid by the consumer are also
included. Income taxes and investment items (like stocks, bonds, and life insurance) are not included. The CPI-U
includes expenditures by urban wage earners and clerical workers, professional, managerial, and technical workers,
the self-employed, short-term workers, the unemployed, retirees and others not in the labor force. The CPI-W
includes only expenditures by those in hourly wage earning or clerical jobs.
[3] Sources of Data — Prices for the goods and services used to calculate the CPI are collected in 87 urban areas
throughout the country and from about 23,000 retail and service establishments. Data on rents are collected from
about 50,000 landlords or tenants. The weight for an item is derived from reported expenditures on that item as

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estimated by the Consumer Expenditure Survey.

[4] Reference Period — Prices are taken throughout the month.
Consumer’s Surplus — (1) The satisfaction (i.e., utility) which a consumer receives and doesn’t have to pay for. (2) The difference
between the maximum sum of money consumers would pay for a given quantity of a good or a service and the actual sum they
do pay.
Consumption — (1) Expenditures for consumer goods. (2) The flow of expenditures on goods and services used to satisfy wants
and needs during the current period; household spending. (3) Also, using up goods and services, or wearing out goods.
Consumption Function — The idea that consumer expenditures depend on (or are a function of) Disposable Personal Income (DPI).
Consumption Function Curve — The curve on the Keynesian national income diagram showing the various rates of consumer
spending which would occur at the various rates of flow of national income.
Consumption-Indifference Curve — A graph of all the alternative combinations of two consumption goods that yield the same level
of satisfaction or utility and among which a utility-maximizing consumer would be indifferent.
Consumption Method — The method under which inventories are recorded as expenditures/expense when used. Also see Purchase
Method.
Consumption Possibility Curve (Budget Line) — A straight line on a graph showing the various combinations of two different
goods that could be purchased with a given amount of money. The slope of the line reflects the relative prices of the two goods.
Also referred to as the Consumption Possibility Frontier.
Contango — The normal or carrying charge structure for a commodity market. It lists progressively higher prices for the more
distant delivery months. This progression in prices reflects implicitly cumulatively higher storage and financing costs.
Contemporaneous Reserve Accounting (CRA) — A system under which a financial institution’s required reserves on a certain
date depend upon its level of deposit liabilities on the same date.
Contestable Markets — Markets into which entry is free and from which exit is costless.
Contiguous — Actually touching; contiguous properties have a common boundary.
Contingency — Condition which must be satisfied before the buyer can consummate the purchase of a property. Contingencies are
generally outlined in the purchase contract between the buyer and seller.
Contingent Beneficiary — The person to whom the proceeds of a life insurance policy are payable in the event that the primary
beneficiary dies before the insured.
Contingent Fund — Assets or other resources set aside to provide for unforeseen expenditures or for anticipated expenditures of
uncertain amount.
Contingent Liability — (1) A potential obligation the eventualization of which usually depends on some future event beyond the
control of the firm. Contingent liabilities may originate with lawsuits, credit guarantees, and contested income tax assessments.
(2) Items which may become liabilities as a result of conditions undetermined at a given date, such as guarantees, pending law
suits, judgments under appeal, unsettled disputed claims, unfilled purchase orders, and uncompleted contracts.
Continuous Compounding (Discounting) — (1) As opposed to discrete compounding, interest is added continuously rather than
at discrete points in time. (2) The process of accumulating the time value of money forward in time on a continuous, or
instantaneous, basis. Interest is earned constantly, and at each instant, the interest that accrues immediately begins earning
interest on itself.
Contra-Account — An account that reduces the gross amount of another account to derive a net balance. For example, accumulated
depreciation is a contra-account to fixed assets to obtain Book Value. Also referred to as an Offset Account.
Contract — (1) A legally enforceable agreement between two parties; an agreement between competent parties to do or not to do
certain things for a Consideration. (2) A binding agreement based upon the genuine assent of the parties, made for a lawful
object, between competent parties, in the form required by law, and generally supported by consideration.
Contract Based Models — Macroeconomic theories that focus on the fact that wage rates applicable to a significant portion of the
labor force are set in nominal terms for fixed time periods. While such contracts are in effect, the capacity of the economy to
adjust to supply or demand changes is limited.
Contract Curve — The locus of all the efficient points in the Edgeworth Box Diagram, so called because people in inefficient
positions not on the curve can make mutually beneficial contracts to achieve efficiency on the curve.
Contract for Deed — Also known as a Land Contract or Land Installment Contract. A method of financing where title remains
in the seller’s name until the buyer has paid the full purchase price. A contract for deed will normally trigger the Due on Sale
Clause in a deed of trust or mortgage. However, Department of Veterans Affairs (VA) regulations specifically allow contracts
for deed for VA-guaranteed mortgages without invoking the due on sale clause.
Contract of Purchase — An agreement between parties for the sale of real estate. In some states it is synonymous with a Purchase
Agreement, Sales Agreement, Land Contract or Earnest Money Contract.
Contract of Sale — A purchase transaction in which the buyer receives possession of the property, but the seller retains title.
Contract Price (Tax) — In an installment sale, for tax purposes, generally the selling price less existing mortgages assumed by the
buyer.
Contract Rate — Same as Face Interest Rate.
Contract Rent — The amount of rent that has been set forth in a contract. Contrast with Economic Rent.
Contract Sales Price — The full purchase price as stated in the contract.
Contractor — (1) One who contracts to supply specific goods or services, generally in connection with development of a property.
(2) In the construction industry, a contractor is one who contracts to erect buildings or portions of them. There are also
contractors for each phase of construction: heating, electrical, plumbing, air conditioning, road building, bridge and dam erection,

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and others.
Contrarian — (1) An investor who thinks and acts in opposition to the conventional wisdom. When the majority of investors are
Bearish, a contrarian is Bullish, and vice versa. (2) An investment style that leads one to buy assets that have performed poorly
and sell assets that have performed well. There are two possible reasons this strategy might work. The first is a mean-reversion
argument, that is, if the asset has deviated from its usual level, it should eventually return to that usual level. The second reason
has to do with overreaction. Investors might have overreacted to bad news sending the asset price lower than it should be.
Contributed Capital — The permanent fund capital of a Proprietary Fund. Contributed capital forms one of two classifications
of equity found on the balance sheet of a proprietary fund. Contributed capital is created when a residual equity transfer is
received by a proprietary fund, when a general fixed asset is “transferred” to a proprietary fund, or when a grant is received that
is externally restricted to capital acquisition or construction. Contributions restricted to capital acquisition and construction and
fixed assets received from developers and customers, as well as amounts of tap fees in excess of related costs, also would be
reported in this category.
Contribution — A principle of valuation that states that the value of any portion of a property is determined by how it affects the
performance of the total property. Therefore, a property is considered a combination of features, each of which adds something
to the total value based on its contribution to the property’s usefulness.
Contribution Margin — The excess of revenue over variable costs; thus the amount contributed toward the absorption of fixed cost
and eventually the generation of profit.
Contribution Margin Ratio — That portion of the sales price that is the Contribution Margin.
Control Environment — The collective effect of various factors on establishing, enhancing, or mitigating the effectiveness of
specific policies and procedures for an entity or business activity. Such factors include:
[1] management philosophy and operating style;
[2] organizational structure;
[3] the function of the authoritative bodies and committees;
[4] methods of assigning authority and responsibility;
[5] management control methods;
[6] the internal audit function;
[7] personnel policies and procedures; and
[8] external influences concerning the entity.
Control Procedures — The policies and procedures in addition to the control environment and accounting system that management
has established to provide reasonable assurance that specific entity objectives will be achieved.
Controller — Usually the highest ranking accounting officer in a firm.
Convenience Yield — The assumed or expected benefit of holding a Long Position in a physical commodity. Often this holding
is to satisfy existing near-term delivery commitments or to maintain uninterrupted manufacturing processes. It highlights the
marginal value of an inventory relative to the anticipated usage. High convenience yields tend to occur in inverted or
backwardation markets. In these situations, the costs of being without the physical commodity are greater than the premium paid
to hold the commodity. A positive convenience yield is greater than the sum of the financing plus other storage carrying costs.
Conventional Loan — (1) A mortgage loan that is not guaranteed or insured by the government. Federal Housing Administration
(FHA) and Department of Veterans Affairs (VA) loans are not conventional loans. (2) A fixed-rate, fixed-term mortgage loan.
See Conventional Mortgage.
Conventional Mortgage — (1) A fixed or variable-rate mortgage loan neither insured by the Federal Housing Administration (FHA)
nor guaranteed by the Department of Veterans Affairs (VA). (2) A conventional loan is subject to conditions established by the
lending institution and individual state statutes. The mortgage rates may vary with different institutions and between states.
(States may have various interest rate limits on such loans.)
Convergence — (1) A term referring to cash and futures prices tending to come together (i.e., the Basis approaches zero) as the
Futures Contract nears expiration. (2) The movement of the price of a futures contract toward the price of the underlying cash
commodity. At the start, the contract price is higher because of time value. But as the contract nears expiration, and time value
decreases, the futures price and the cash price converge.
Conversion — (1) Changing property to a different use or form of ownership, such as when apartments are transformed to
condominiums. (2) The taking away of property that belongs to another person. Also see Involuntary Conversion. (3) A change
in the ownership form of a Savings and Loan Association.
Conversion Clause — Refers to a mortgage loan provision. It defines and allows an Adjustable Rate Mortgage (ARM) to be
converted into a Fixed Rate Mortgage.
Conversion Factor — (1) A factor used to equate the price of U.S. Treasury bond and U.S. Treasury note futures contracts with the
various cash T-bonds and T-notes eligible for delivery. This factor is based on the relationship of the cash-instrument coupon
to the required percentage of deliverable grade of a Futures Contract as well as taking into account the cash instrument’s maturity
or Call. (2) For the credit futures markets, it is the number that relates different coupons and acceptable deliverable maturities
for delivery against the contract standard of an 8 percent coupon and the stipulated acceptable time remaining to maturity
specifications. For the security markets, it is the contractual number that indicates how many shares a convertible security can
be exercised into at any point in time.
Conversion Price — The effective price paid for common stock when the stock is obtained by converting either Convertible
Preferred Stock or Convertible Bonds. The face value of a convertible security divided by the Conversion Ratio gives the price
of the underlying common stock at which the security is convertible. For example, if a $1,000 bond is convertible into 10 shares

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of stock, then the conversion price is $1,000 divided by 10 equals $100 per share. An investor would usually not convert the
security into common stock unless the market price was greater than the conversion price.
Conversion Privilege — A feature contained in some Adjustable Rate Mortgages (ARMs) which allows for the borrower to switch
to a Fixed Rate Loan.
Conversion Ratio or Conversion Rate — (1) The number of common shares that a convertible bond or other security can be
exchanged upon exercise. (2) The number of shares of common stock that may be obtained by converting a Convertible Bond
or share of Convertible Preferred Stock. The conversion ratio is equal to the face value of the security divided by the Conversion
Price.
Convertibility — In Foreign Exchange, the ability to convert one currency into another.
Convertible — (1) A bond, debenture, or preferred share that may be exchanged by the owner for common stock or another security,
usually of the same company, in accordance with the terms of the issue. When held, convertible securities offer investors a yield,
just like a bond. However, when the common stock underlying them soars, convertibles might not keep pace because the terms
at which they can be exchanged are predetermined. In turbulent economic and financial times, however, they have become a
popular way to stay invested in volatile stocks or industry sectors because when stock markets hit the skids, convertibles typically
perform far better than more “typical” securities. (2) A security which can be exercised into another security. Examples of
convertibles are bonds, preferred stocks, warrants, and some swap agreements. Convertibles are related to options because they
have specified spans for exercise, conversion price levels which approximate strike prices, and there are inherent premium
structures. These premiums are related to volatility considerations. (3) An Adjustable Rate Mortgage (ARM) which may be
exchanged, at the borrower’s option, for a fixed rate mortgage, usually within a certain period of time. (4) Foreign currency
which may be readily exchanged for another currency.
Convertible ARMs — (1) Adjustable Rate Mortages (ARMs) that have a provision allowing the borrower to convert the mortgage
to a fixed rate term. The conversion feature is outlined in the mortgage note and has certain restrictions. (2) An adjustable rate
mortgage that offers the borrower the option to convert payments to a fixed-rate schedule at a specified period within the term
of the loan. Conversion is made for a nominal fee, and the interest rate on the fixed-rate loan is determined by a rule specified
in the ARM loan agreement.
Convertible Bond — (1) A bond incorporating the right of the bond holder to convert the bond to capital stock under prescribed
terms. (2) A bond that gives its owner the right to exchange it for other securities of the issuing company, typically on a preferred
basis at some future data or under specified conditions. (3) A bond that is exchangeable for a predetermined number of shares
of common stock in the same company. The appeal of a convertible is that it gives you a chance to cash in if the stock price of
the company soars. Some preferred stock is also convertible to common stock. (4) A credit instrument which is convertible into
equity. Usually, this conversion is done at the discretion and exercise of the bond holder and not the corporation. However, there
may be forced conversions due to stipulated events such as takeovers or call options in favor of the issuer. Generally, convertible
bonds are coupons paying but there are zero coupon convertible bonds as well. These bonds tend to have lower-than-market rates
of interest in exchange for a potential equity stake for the bondholder.
Convertible Bond Fund — A Mutual Fund that invests in Convertible Bonds.
Convertible Debt — A debt instrument, such as a Convertible Bond, which is exchangeable for a specified number of common
shares at a predetermined price, usually at the option of the bond holder. The investor in a convertible bond desires higher
income than is available from common stock and the greater potential for capital appreciation than is possible with regular bonds.
From the issuer’s perspective, the advantage of issuing a convertible bond is that its attractiveness results in greater marketability
and a lower interest rate on the debt issue.
Convertible Euro-Bond — A Euro-Bond that can be converted into equity of the issuing company under prescribed conditions.
Convertible Preferred — Preferred stock which is convertible into Common Stock.
Convertibles — Securities (generally bonds or preferred stocks) that are exchangeable at the option of the holder for common stock
of the issuing firm. See Convertible.
Convex Curve — A curve on a graph which bows inward toward the zero point, so that it appears convex when viewed from the
zero point of the graph. Contrast to Concave Curve.
Convey — To deed or transfer title to another.
Conveyance — (1) The transfer of title to real property by means of mortgage or deed of trust. (2) The transfer of the title of real
estate from one to another; the means or medium by which title of real estate is transferred.
Cooperating Broker — One who agrees to share the commission with another broker.
Cooperative — (1) A type of corporate ownership of real property whereby stockholders of the corporation are entitled to use a
certain dwelling unit or other units of space. Special income tax laws allow the tenant stockholders to deduct interest and
property taxes paid by the corporation.
Cooperative or Co-op — Refers to a form of real estate ownership. Here, the property is owned by shareholders. Each shareholder
owns proprietary rights to a specific unit or dwelling while also owning an interest in the entire property. In many places, loans
for such properties are effectively personal loans securitized by the shares of ownership. This is different from the usual real
estate mortgage loan which is directly secured by the underlying real property. The term can also refer to a business arrangement
whereby parties of similar interest combine their activities. One example of this would be a farmers cooperative to market grain
or produce; operate and own storage facilities; or operate and own equipment.
Cooperative Housing — An apartment building or a group of dwellings owned by a corporation, the stockholders of which are the
residents of the dwellings. It is operated for their benefit by their elected board of directors. In a cooperative, the corporation
or association owns title to the real estate. A resident purchases stock in the corporation which entitles him to occupy a unit in
the building or property owned by the cooperative. While the resident does not own his unit, he has an absolute right to occupy

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his unit for as long as he owns the stock.
Copyright — The exclusive right to the production, publishing, or sale of a literary, musical, or artistic work.
Core Deposits — Deposits acquired by a financial institution within its natural market area and considered as a stable source of funds
for lending purposes. Such deposit sources are typically relative small in terms of individual accounts, more predictable in terms
of deposit costs, and are less sensitive to interest-rates than other deposits forms, e.g., large Certificates of Deposit (CDs).
Contrast to Volatile Funds.
Corner a Market — To acquire enough of a particular security in order to manipulate its price.
Corporate Bond — (1) A debt obligation of a corporation. (2) An evidence of indebtedness issued by a corporation, rather than by
the U.S. government or a municipality. Also referred to simply as a Bond. Corporate bonds are frequently categorized as
follows:
[1] Intermediate Corporates;
[2] Distressed Securities;
[3] Junk Bonds;
[4] Long Industrials;
[5] Tennessee Valley Authority Bonds; and
[6] Utilities.
There are other categories and subcategories, such as, financials – bank and nonbank, foreign, Canadian, Yankee and so forth.
Corporate Bond Fund — A Mutual Fund that invests in Corporate Bonds.
Corporate Charter — A document which lists the objectives, powers, and authorities of a corporation. It indicates what the
corporation can and cannot do. Some corporations have relatively narrow charters whereas other basically state that they may
engage in any legal business activity. Some charters preclude speculative or outside investment activities. It is necessary to
obtain a copy of a corporate charter before opening a securities, futures, or derivatives account. This is used to determine whether
the corporation is empowered to conduct such activities, with whom, and by whom. Corporate charters are sometimes referred
to as Articles of Incorporation.
Corporate Joint Venture — A cooperative agreement between two or more corporate entities in which the purpose is to achieve
jointly a specified business goal. Upon attainment of that goal, the joint venture is terminated. A joint venture, which is typically
limited to a single project, differs from a Partnership that can work jointly on many projects. Also see Joint Venture.
Corporate Planning Model — An integrated business planning framework or model in which marketing and production models
are linked to the financial model. More specifically, it is a description, explanation, and interrelation of the functional areas of
a firm to include accounting, finance, marketing, production, etc., and expressed in terms of a set of mathematical and logical
equations so as to produce a variety of reports including Pro Forma financial statements. Corporate planning models are the
fundamental tools for risk analysis and simulation (“what if”) modeling of the firm. The desired goals of the model are to
improve the quality of planning and decision making, reduce the decision risk, and more importantly, favorably influence or even
shape the future business environment.
Corporate Repurchase (of Common Stock) — The active buying by a corporation of its own stock in the marketplace. Reasons
for repurchase include putting idle cash to use, raising the stock’s Earnings per Share (EPS), creating support for the stock’s
price, increasing internal control (Shark Repellant), or stock for an Employee Stock Ownership Plan (ESOP) or pension plans.
A company’s repurchase of its own stock is subject to rules, however, such as that buying must be on a Zero Minus Tick or a
Minus Tick, after the opening of trading and before 3:30 p.m.
Corporate Resolution — Is a document which empowers and lists which individuals and departments can trade, invest, speculate,
or hedge on the behalf of the corporation. Resolutions are passed on a case-by-case basis unlike the Corporate Charter. This
document is authorized by the corporation’s Board of Directors.
Corporate Risk — The combination of a company’s Business Risk and its Financial Risk.
Corporation — (1) A form of business organization in which the company is divided into shares of stock. A corporation is ongoing
and the owners face only limited liability. (2) An artificial legal person or being created by government grant, which for many
purposes is treated as a natural person. (3) An artificial legal entity created by the granting of a charter from an appropriate
governmental authority and owned by stockholders who have limited liability for corporate debt. (4) A form of business
organization in which the business is a “fictitious person,” an entity in its own right and owned by stockholders. The stockholders
elect the management, the management runs the corporation, and the corporation usually pays out a part of its profits as dividends
to stockholders. (5) An organization chartered by a state government. A legal entity which has limited liability, perpetual life,
freely transferable shares, and centralized management. When the term is used without qualification, it generally refers to an
organization carrying on a business for profit. However, there are nonprofit corporations and municipalities, which differ from
corporations organized for profit in that they do not issue stock. (5) A business organized as a separate legal entity with
ownership evidenced by shares of stock. The corporation is formed by filing the Articles of Incorporation with the appropriate
state authority (e.g., state Secretary of State’s office), which then returns it with a certificate of incorporation. These two
documents together become the corporate charter. Each founding stockholder receives from the company a specified number
of shares of capital stock, which may then be sold to other investors. The corporation is a legal entity separate from its owners.
Advantaged of a corporation are the ability to obtain large amounts of financing through a public offering, ease of transferring
shares, i.e., ownership, limited liability of its owners, unlimited life, and professional management.
Corporeal — Visible or tangible real or personal property such as buildings, pavement, fences, and the like. Easements are
incorporeal.
Corpus — Refers to the final or underlying principal amount which has been stripped, discounted, and sold as a Zero Coupon Bond.

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This compares to the interest only pieces which are often called Strips. Some people also count the discounted principal portions
as strips. It is from the Latin which means body.
Correlation — (Data Analysis) A statistical means to measure the degree of linear relationship or “coincidence of change” between
two variables, producing a value of Variance termed the Correlation Coefficient. In strict correlation analysis, no inference of
causation, i.e., one variable being “explained” by the variations of another, is made. Therefore, high correlations do not provide
for an inference of causality; one must use previous (a priori) information that the two sampled variables are indeed related to
one another. The concept of the Coefficient of Determination (R2), on the other hand, used as a common measure of “Goodness
of Fit” in Regression Analysis, is used to assess the degree of causation between two variables or between one or more
Independent Variables and a single Dependent Variable. For two variables, the coefficient of determination is equivalent to the
square of the correlation coefficient and reflects the percent of the change in the dependent (explained) variable that is explained
by the variations in the independent (explanatory) variable or variables. Two variables may be strongly related and have a low
or zero correlation because their relationship is not linear.
Correlation Coefficient (R) — (Data Analysis) A measure of the coincidence of change between two Variables appearing to show
a Linear relationship. The use of the correlation coefficient makes no inference as to causation, i.e., whether one variable causes
changes to occur in another; it only represents a measure of the simultaneous behavior between two variables which either are
related or are being affected similarly by a third variable. The value of the correlation coefficient will vary between –1.00
(–100%) and +1.00 (+100%). Higher (absolute) values represent stronger levels of coincidence of changes. Positive correlation
coefficients denote that the two series evidence changes in the same direction while negative correlation coefficients reflect an
inverse relationship between changes in one series and another. Two variables may be strongly related and have a low or zero
correlation coefficient because their relationship is not linear. See Correlation and Coefficient of Determination (R2).
Correspondent — A financial institution which performs activities or services for another financial institution. Sometimes, this
arrangement occurs because of a lack of physical presence in a particular geographic area. Other times it may be due to an
outsourcing or need for specialized services such as clearance and physical transfers of securities.
Correspondent Bank — (1) A bank that accepts deposits and performs banking services for other depository institutions. (2) A bank
which holds deposits of another bank, typically a smaller bank, and in turn provides certain specified banking services such as
check clearing, greater access to the financial markets, and loan participation, services which may not be readily available to the
smaller bank, or may be more expensive otherwise. (3) A bank that in its own country handles the business of a foreign bank.
There are also domestic correspondents in different areas of the same country.
Cosigner — Synonymous with Accommodation Party.
Cost — (1) Expense; a price of a good or service. (2) The disadvantage associated with an act of choice; the most highly valued
alternative benefit forgone; an opportunity lost. Compare to Opportunity Cost.
Cost Accounting — (1) An accounting system specifically designed to allocate direct and indirect costs of services and other
expenses to various departments and profit centers. Cost accounting systems allow for a more accurate and detailed assessment
of the profitability of certain corporate ventures and operations and allows management to most profitably price products and
services based not only on direct costs of service but also on support service costs. (2) A system for recording and reporting
measurements of the cost of manufacturing goods and performing services in the aggregate and in detail. It includes methods
for reorganizing, classifying, allocating, aggregating, and reporting actual costs and comparing them with standard costs.
Determination of unit costs to make a product or render a service is needed to establish a selling price or fee to be charged. Also,
costs for manufacturing a product for inventory valuation need to be known to prepare the balance sheet and income statements.
Cost accounting systems include job order, process, standard, and direct costing.
Cost Approach — (1) A method used by an appraiser to estimate replacement cost of improvements less depreciation. (2) A method
of appraising property based on the depreciated reproduction or replacement cost (new) of improvements, plus the market value
of the site.
Cost Basis — Accounting figure that includes original cost of property plus certain expenses to purchase, money spent on permanent
improvements and other costs, minus any depreciation claimed on tax returns over the years.
Cost Behavior Analysis — Study of the ways in which specific costs respond to changes in the volume of business activity.
Cost-Benefit Analysis — See Benefit-Cost Analysis.
Cost Center — Sometimes called Expense Centers. A division of a business with which specific costs can be identified.
Cost Depletion — A method by which the costs of natural resources are allocated to depletion over the accounting periods that make
up the life of the asset. Cost depletion is computed by (1) estimating the total quantity of a mineral or other resources acquired
and (2) assigning a proportionate amount of the total resource cost to the quantity extracted during the accounting period. Also
see Percentage Depletion.
Cost-Effectiveness Studies — See Benefit-Cost Analysis.
Cost Estimating — In construction, the act of predicting the total costs of labor, materials, capital, and professional fees required
to construct a proposed project.
Cost Ledger — A subsidiary record wherein each project, job, production center, process, operation, product, or service is given
a separate account to which all items entering into its cost are posted in required detail. Such accounts should be so arranged
and kept that the results shown in them may be reconciled with and verified by a control account or accounts in the general books.
Cost Method — A method of accounting by a parent company for investments in subsidiary companies in which the parent company
maintains the investment in subsidiary account at its cost, not recognizing periodically its share of subsidiary income or loss.
Also see Equity Method.
Cost of Capital — (1) The discount rate that should be used in the capital budgeting process. (2) In corporate finance, the weighted
rate of return expected by various parties financing the firm. The weights used to combine these rates of return are the

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proportions that each of these sources of funds contributes to the capitalization of the firm. The cost of capital traditionally is
used as a Hurdle Rate that capital projects must yield as a minimum in order to be accepted by the firm. (3) The rate of return
that is necessary to maintain market value (or stock price) of a firm. The firm’s cost of capital is calculated as a weighted average
of the costs of debt and equity funds used to fund its operations. Equity funds include both capital stock (both common and
preferred) and retained earnings. These costs are expressed as annual percentage rates. The weighted cost of capital is then
calculated by summing the share of each capital source times is interest cost. The cost of capital is used for Capital Budgeting
purposes. Under the Net Present Value method, the cost of capital is used as the Discount Rate to calculate the present value
of future cash inflows. Under the internal rate of return method, it is used to make an accept-or-reject decision by comparing
the cost of capital with the internal rate of return on a given project. Projects whose rate of return exceeds the company’s cost
of capital will typically be accepted. Also referred to as the Hurdle Rate, Cutoff Rate, or Minimum Required Rate of Return.
Cost of Carry (or Carry) — See Carrying Charge.
Cost of Goods Sold (CGS) — Raw materials and direct production costs of goods sold to customers. Calculated by subtracting
inventory value at the end of the accounting period in question from the cost of goods available for sale (i.e., inventory plus net
purchases) during the period.
Cost of Living Index — An indicator of the current price level for goods and services related to some base year price or price index.
Unlike a more restrictive price index, e.g., the Consumer Price Index (CPI), a more comprehensive cost of living index will
contain all items making up household expenditures, for example, insurance, taxes and the like.
Cost of Sales — The price of buying or making an item that is sold. For a retail business, the cost of sales is the purchase price of
the item. For a manufactured good, the cost of sales includes the direct material cost, direct labor cost, and the factory overhead
associated with production. Also referred to as Cost of Goods Sold.
Cost Plus — A method of determining the purchase price or contract price by providing for the payment of an amount equal to the
costs of the seller or the contractor to which is added a stated percentage of the price as his or her profit.
Cost-Plus Contract — A building contract setting the builder’s profit at a set percentage of actual cost of labor and materials. See
Cost-Plus-Percentage Contract.
Cost-Plus-Percentage Contract — An agreement on a construction project in which the contractor is provided a specified
percentage profit over and above the actual costs of construction. These contracts are considered a poor business practice because
the contractor has little incentive to hold down costs. A cost-plus-fixed-fee contract is a better approach. Also referred to as more
simply a Cost-Plus Contract.
Cost-Push Inflation — Price increases in the economy caused by increasing input costs, i.e., increased costs for factors of
production, like higher raw material costs or higher labor costs (and not by increased consumer demand for the output). Constrast
with Demand-Pull Inflation.
Cost Records — All ledgers, supporting records, schedules, reports, invoices, vouchers, and other records and documents reflecting
the cost of projects, jobs, production centers, processes, operations, products, or services, or the cost of any of the component
parts thereof.
Cost-Sharing Multiple-Employer Public Employees’ Retirement System (PERS) — Essentially, one large Pension Plan with
cost-sharing arrangements (i.e., all risks and costs, including benefit costs, are shared proportionately by the participating
entities). One actuarial valuation is performed for the PERS as a whole, and the same contribution rate generally applies to each
participating entity.
Cost Unit — A term used in cost accounting to designate the unit of product or service whose cost is computed. These units are
selected for the purpose of comparing the actual cost with a standard cost or with actual costs of units produced under different
circumstances or at different places and times.
Cost-Volume-Profit (CVP) Analysis — An analytical technique that deals with how profits and costs change with a change in the
volume or level of output of a firm. Specifically, CVP analysis looks at the effects on profits from changes in such factors as
variable costs, fixed costs, selling prices, volume (output), and the mix of products sold. CVP analysis is directed towards the
following: (1) the sales volume associated with a firm’s breakeven point; (2) the sales volume necessary to achieve a targeted
level of profit; (3) profit levels associated with various sales volumes; (4) affects on profits from changes in selling prices,
variable costs, fixed costs, and levels of output; and (5) the effects on the firm’s breakeven-point and profitability from changes
in the mix of products sold. Also see Breakeven Analysis.
Costs of Exchange — See Transactions Costs.
Cotenancy — Any of a number of forms of multiple ownership such as Tenancy in Common and Joint Tenancy.
Council of Economic Advisers (CEA) — A group of economic advisers to the President of the United States originally set up by
the Employment Act of 1946. The chairperson is appointed by the President and confirmed by Congress. The CEA is
responsible for the preparation of the annual Economic Report of the President.
Counselor of Real Estate (CRE) — A member of the American Society of Real Estate Counselors (ASREC). Membership is based
on experience and professional conduct as a real estate counselor.
Counter-Cyclical Policy — Government policy designed to work against, i.e., modify the extreme fluctuations of the “business
cycle.” The primary purpose of counter-cyclical fiscal, monetary, or incomes policies are to stabilize the rate of output and
income in the economy and smooth out the more typical peaks and troughs of the business cycle.
Counteroffer — (1) A new offer made as a result of another offer, which cancels the original offer. (2) Rejection of an offer to buy
or sell, with a simultaneous substitute offer.
Countervailing Power — The theory developed by U.S. economist John Kenneth Galbraith that in a modern economic system like
that of the United States, large and powerful groups tend to offset and balance each other in the form of economic checks and
balances.

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Coupon — (1) The interest rate on a debt instrument expressed in terms of a percent on an annualized basis that the issuer guarantees
to pay the holder until maturity. (2) The detachable certificates attached to a note or bond which show the dollar amount of
interest payable to the holder at specified intervals, normally semiannually.
Coupon Bond — A bond with interest Coupons attached, which are clipped as they mature and redeemed for the interest due and
payable.
Coupon Rate — (1) The stated rate of interest on a bond. (2) The stated nominal rate of interest that the issuer of a note or bond
agrees to pay to the bond holder during the life of the bond.
Coupon-Strip Bond — A bond sold separately from its interest-bearing coupons at a deep discount from its redemption or par value
in the Secondary Market. Such obligations are treated as Zero-Coupon Bonds.
Coupon Stripping — The process of separating the interest payments on a bond from the underlying principal payment, thereby
creating a new zero-coupon financial instrument.
Cournot Equilibrium — That output combination between two Oligopolists that does not elicit further reactions from either one
of them.
Covariance — (Data Analysis) A measure of the Linear association between two Variables. If both variables are always above and
below their means at the same time, the covariance is said to be positive. If one variable is above its mean when the other
variable is below its mean and vice versa, the covariance is said to be negative. The value of the covariance is dependent upon
the units in which each variable is measured whereas the Correlation Coefficient (R) is a measure of this association which has
been Normalized and is therefore “unit free.” Two variables may be strongly related and have a low or zero covariance because
their relationship is not linear.
Covenant — (1) Detailed clause contained in loan agreements. Formal conditions or clauses which are written into credit
agreements. Often the document which contains these covenants and terms is called the indenture. (2) An agreement written
into deeds and other instruments promising performance or nonperformance of certain acts or stipulating certain uses or non-uses
of the property. (3) A promise in writing. It is often used as a substitute for the word contract. There are covenants (promises)
in deeds, leases, mortgages, and other instruments under seal and in unsealed instruments such as insurance policies and
conditional sale contracts. Covenants are designed to protect the lender and include such items as limits on total indebtedness,
restrictions on dividends, minimum current ratio, and similar provisions. (4) A written agreement or restriction on the use of land
or promising certain acts. Homeowner associations often enforce restrictive covenants governing architectural controls and
maintenance responsibilities. However, land could be subject to restrictive covenants even if there is no Homeowner’s
Association.
Covenant Not to Compete — A clause in an agreement where one party promises not to offer to sell or produce the same goods
and services in proximity to the other party.
Covenant Running with the Land — A covenant restricting or limiting property rights to land, or a deed restriction, in which it
is specified that ownership of the land cannot be transferred unless the new owner agrees to continue to abide by the covenant.
Covenants of Title — Covenants of the grantor contained in a deed that guarantee such matters as his right to make the conveyance,
his ownership of the property, the freedom of the property from encumbrances, or that the grantee will not be disturbed in the
quiet enjoyment of the land.
Coverage — The ratio of pledged revenues to related debt service for a given year. Also see Net Revenue Available for Debt Service.
Coverage Ratios — A variety of financial ratios used to test the adequacy of cash flows generated through earnings for purposes
of meeting debt and lease obligations, including the interest coverage ratio and the fixed-charge coverage ratio. For example,
a loan loss coverage ratio would measure a financial institution’s ability to absorb potential losses from its nonperforming loans
and leases. It is calculated by dividing the loan loss reserve balance by the total volume of nonperforming loans and leases.
Covered Call — A short Call Option position in which the writer owns the number of shares of the underlying stock represented
by the option contracts. Covered calls generally limit the risk the writer takes because the stock does not have to be bought at
the market price, if the holder of that option decides to exercise it.
Covered Interest Arbitrage — A process of borrowing a currency, converting it into another currency where it is invested, and
selling this other currency for future delivery against the initial currency. The profits in this transaction are derived from
discrepancies between interest differentials and the percentage discounts or premiums among the currencies involved in the
transaction.
Covered or Hedge Option Strategies — Strategies that involve a position in an Option as well as a position in the underlying stock,
designed so that one position will help offset any unfavorable price movement in the other, including covered call writing and
protective put buying. Also see Naked Strategies.
Covered Put — A Put Option position in which the option writer also is short the corresponding stock or has deposited, in a cash
account, cash or cash equivalents equal to the exercise of the option. This limits the option writer’s risk because money or stock
is already set aside. In the event that the holder of the put option decides to exercise the option, the writer’s risk is more limited
than it would be on an uncovered or Naked Put Option.
Covered Warrant — A derivative contract written against the underlying stock position. However, these warrants are not issued
by the corporation of the underlying security but they are offered by investment underwriters. There are also put and call
warrants written against indices, baskets, and other securities.
Covered Write — The sale of an Option against a position in the underlying instrument. Often this is the sale of a Call against a
long position in the stock. It could also be the sale of a put against a short position in the stock. Here, if the put is exercised, a
long stock position is assigned to the seller of the option. Then this newly acquired long position is offset by the previously held
short position. The covered write can also apply to Warrant and other option positions.
Covering — The generation of cash flows in a given currency in the money market or in the forward exchange market at

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predetermined rates with the purpose of matching the cash flows generated by operations in that currency. The purpose of
covering is to make cash inflows equal cash outflows for the given currency for specified maturities. This produces a “square
position.” Covering usually refers to trade transactions that produce a payable or a receivable in foreign exchange to be
liquidated at a future date. The covering transaction eliminates the risk of fluctuations in foreign exchange rates during the
intervening period. Covering and hedging are terms often used interchangeably. Also see Hedging.
CPA — Certified Public Accountant, a professional accountant who has passed the Uniform CPA Examination, satisfied other
requirements regarding education, professional experience, and character, and been licensed to practice public accounting by a
state, district, or territory.
CPV — See Current Principal Value.
CR, Cr, or cr — Refers to a Credit or the process of crediting an account.
Crack Spread — The purchase of crude oil against the sale of the refined products. In futures trading, it is the simultaneous
purchase of crude oil futures versus the sale of heating oil and gasoline futures. The spread differentials reflect the potential
refining margins or profitability. The spread computes the cost of the raw commodity input, crude oil, and its refined products,
gasoline and heating oil. Compare to Reverse Crack Spread.
Craft Union — A trade union. A labor union made up of skilled workers all of whom are in the same trade, or craft.
Cram Down — In bankruptcy, the reduction of various classes of debt to a lower amount, with acceptance by the bankruptcy court.
Crawling Peg — An automatic system for revising the Exchange Rate. It involves establishing a par value around which the
exchange rate can vary up to a given percent. The par value is revised regularly according to a formula determined by the
monetary and exchange rate authorities.
Creative Accounting — Efforts by management to manipulate a firm’s financial statements, most typically to overstate net income
and/or understate unusual events such as losses or extraordinary or one-time expenses. Typical examples of this practice of
income “management” include selling off low-cost basis assets to report one-time gains, unjustifiably lengthening the expected
life (i.e., depreciable life) of an asset to reduce its depreciation expense, and under-accruing expenses, for example a bad debt
or loan loss provision.
Creative Financing — Any financing arrangement other than a traditional mortgage from a third-party lending institution.
Credibility — Believability. Policymakers are said to have credibility when their statements about policy are believed by most
people. Also, a theory of expectation formation suggested by William Fellner.
Credit — (1) (Finance) The availability of money. (2) (Accounting) A liability or equity entered on the right side of the ledger.
Credit (Crediting) (Abbreviation: Cr.) — An entry on the left side of an account. Under the Double Entry Bookkeeping system,
credits increase liabilities, equity, and revenues and decrease assets and expenses. Compare to Debit (Debiting) (Abbreviation:
Dr.). The following conventions apply for credits and debits:
[1] An Asset Account: Credits (Cr.) decrease; Debits (Dr.) increase
[2] A Liability Account: Credits increase; Debits decrease
[3] An Equity Account: Credits increase; Debits decrease
[4] Revenues: Credits increase; Debits decrease
[5] Expenses: Credits decrease; Debits increase
Credit Crunch — Occurs when credit availability is so restricted that normal economic or financial activity is adversely impacted.
It is a more extreme case of credit rationing which has tightened.
Credit Entry in Balance of Payments — The part of an international transaction that represents a source of funds or international
purchasing power to the country reporting the balance of payments. A credit entry reflects a decrease in the holdings of foreign
assets owned by local residents or an increase in the liabilities to foreigners owed by the residents of the reporting country.
Credit Line — The maximum amount of funds available in an open-end credit arrangement such as a bank credit card, a credit line
account, or overdraft protection.
Credit Rating — (1) A lender’s estimate of the credit worthiness of an individual based on a number of factors to include past
borrowing and repayment history, employment, and other information to include tax returns and financial statements. (2) An
evaluation of a person’s capacity (or history) of debt repayment. Generally available for individuals from a local retail credit
association; for businesses publicly held by companies such as Dunn and for bonds by Moody’s, Standard & Poors, and Fitch’s.
Individuals have access to their own files. Quite often a borrower’s credit rating is based on the “five C’s” of credit worthiness
to include:
[1] Character – the nature of the borrower to include historical consideration of prior borrowing and repayments,
employment, background checks, prior bankruptcies, etc.;
[2] Capacity – the ability of the borrower to undertake the new credit extension and repay outstanding obligations from
existing and prospective earnings;
[3] Capital – the amount of funding available to the project, particularly funds which may be draw upon should business
and economic conditions worsen;
[4] Collateral – the value of the assets available for recourse, that is, the available financial resources pledged to repay
the loan should the relationship so dictate; and
[5] Conditions – general business and economic conditions, both present and prospective, which may affect the outcome
of the credit extension and are generally beyond the control of either the borrower or the lender.
Credit Rating Services — Refers to companies that rate public, private or consumer credit ratings. The primary credit rating
companies for sovereign or country and corporate ratings are: Duff and Phelps Credit Rating Company, Moody’s, and Standard
and Poors. For consumer scoring a major company is Fair, Isaac.

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Credit Rationing — A situation which occurs when the terms a borrowing relationship become more restrictive. For example,
higher Margin Requirements for security transactions indicate tighter credit requirements. Sometimes, credit rationing may occur
in some industries and not in others to promote or discourage specific types of lending activities. Credit rationing can occur when
interest rates have been trending either up or down. In the latter, defaults often prompt new and higher margin requirements.
Thus, credit availability is more limited and interest rates can move higher in the near-term as cash demands increase.
Credit Report — A report documenting the credit history and current status of a borrower’s credit standing.
Credit Risk — The likelihood that a borrower will not pay on a debt obligation and may eventually default on the loan agreement.
Also, the risk that a counter-party to an investment transaction will not fulfill its obligations. Credit risk can be associated with
the issuer of a security, with a financial institution holding deposits, or with parties holding securities or collateral. Credit risk
exposure can be adversely affected by a concentration of deposits or investments in any one investment type or with any one
counter-party.
Credit Scoring — A statistical method of evaluating the credit worthiness of a business or individual loan application based on a
number of informational sources including the credit application and a credit bureau report.
Credit Spread — An Option position whereby the end result is a credit. For example, the investor who places a vertical bear call
spread receives a credit. Similarly, the trader who places a vertical bull put spread receives a premium credit.
Credit Union — A nonprofit financial intermediary dealing with more restricted sources and uses of funds than full-service banking
institutions. Credit unions most typically offer consumer banking services to a group of customers having a common bond, such
as employment in the same company, or within the same industry sector, e.g., a public employees credit union covering all public
employees or a teachers credit union.
Credited Projected Benefits — Those Pension Plan benefit amounts expected to be paid at various future times under a particular
set of actuarial assumptions, taking into account such items as the effect of advancement in age and past and anticipated future
compensation and service credits. That portion of an individual’s projected benefit allocated to service to date, determined in
accordance with the terms of a pension plan and based on future compensation as projected to retirement, is called the credited
projected benefit.
Creditor — One who is owed money. A lender in a financial transaction.
Criteria, Testing (R2, t–Statistic, and F–Statistic) — (Data Analysis and Forecasting) In criteria testing of the appropriateness of
a Econometric Forecast Model’s structure (Specification), certain testing criteria are used most frequently. Specifically, the
Coefficient of Determination, R2, is used as an overall measure of the “Goodness of Fit,” and reflects the joint ability of all
explanatory variables to simultaneously describe the variations in the Dependent Variable. Similarly, the t–Statistic is used as
a measure of the appropriateness of individual Explanatory or Independent Variables, and the F–Statistic, is used as a measure
of the appropriateness of the inclusion or exclusion of a set of explanatory variables simultaneously. Also see Model and
Regression Analysis.
Crop (Marketing) Year — The time span from harvest to harvest for agricultural commodities. The crop marketing year varies
slightly with each agricultural commodity, but it tends to begin at harvest and end before the next year’s harvest, for example,
the marketing year for soybeans begins September 1 and ends August 31. The futures contract month of November represents
the first major new-crop marketing month, and the contract month of July represents the last major old-crop marketing month
for soybeans.
Crop Reports — Reports compiled by the U.S. Department of Agriculture (USDA) on various agricultural commodities that are
released throughout the year. Information in the reports includes estimates on planted acreage, yield, and expected production,
as well as comparison of production from previous years.
Cross Hedge — The use of a Futures or other Derivative contract as a risk management tool where the specifications of the
underlying and the derivative do not match. However, there should be a reasonable economic rationale for doing this action.
Also see Cross-Hedging.
Cross-Hedging — Hedging a Cash Commodity using a different but related Futures Contract when there is no futures contract for
the cash commodity being hedged and the cash and futures markets follow similar price trends (e.g., using soybean meal futures
to hedge fish meal).
Cross-Price Elasticity of Demand — The percentage change in the quantity demanded of one good divided by the percentage
change in the price of another good, all else being equal. Also see Elasticity of Demand.
Cross Rate — The calculation of a Foreign Exchange Rate from two separate quotes that contain the same currency. For example,
if one has the rate of French francs per U.S. dollar and the rate of Deutsche marks per U.S. dollar, one can calculate the cross
rate between French francs and Deutsche marks.
Cross-Sectional Analysis — (Data Analysis) Observations or characteristics of a variable or set of observations analyzed without
respect to variations due to time. Cross-sectional econometric models provide information on the behavior of a variable due to
external factors. Contrast with Time-Series Analysis.
Cross-Sectional Data — (1) Economic data collected on different economic units but at the same point in time. (2) Data which
describe the activities or behavior of individual persons, firms, or other phenomena at a given point in time. Contrast with Time-
Series Data.
Cross Trade — A transaction that is not exposed to the public by outcry or usual trading practices. This type of matching trade is
permissible provided it is done in accordance with the rules and regulations of the particular exchange and other regulatory
organizations. The letter “X” can indicate this type of transaction on a ticker tape. It may be also used on a ticket or blotter.
See the related Ex-Pit and Exchange for Physicals.
Crossed Market — Occurs when a broker/dealer’s bid is greater than the lowest or best offer made by another. This condition can
also occur when a broker/dealer’s offer is lower than another’s bid. Sometimes, this can occur because of slow updates in a

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broker/dealer’s range of marketing making activities. However, when a crossed market occurs because of intentional behavior,
then this activity is prohibited by the NASD.
Crowding-Out Effect — The idea that too much government borrowing (i.e., the selling of public debt) will reduce the funds
available to private borrowers, push up interest rates (and push down security prices in general), and cause a decrease in private
investment spending in the economy. This concept carries with it adverse implications on private firms being able to raise capital
in the financial markets at reasonable interest rates, given the increasing debt burden of the public sector.
CTA — See Cumulative Translation Adjustment.
Cum Dividend — With dividend. Said of a stock whose buyer is eligible to receive a declared dividend. Stocks are usually “cum
dividend” for trades made on or before the fifth trading day preceding the record date, when the register of eligible holders is
closed for that dividend period. Contrast with Ex-Dividend.
Cumulative Abnormal Return (CAR) — The sum of the differences between the expected return on a stock (Systematic Risk
multiplied by the realized market return) and the actual return often used to evaluate the impact of news on a stock’s price.
Cumulative Dividends — A protective feature on Preferred Stock that requires all past preferred dividends which have been deferred
by the Board of Directors to be paid before any Common Stock dividends are paid.
Cumulative Effect of a Change in Accounting Principle — The income statement account reflecting the net of tax effect of
switching from one accounting principle to another. Cumulative effect equals the difference between the actual retained earnings
reported at the beginning of the year using the old method and the retained earnings that would have been reported at the
beginning of the year if the new method had been used in prior years. Also see Change in Accounting Principle.
Cumulative Preferred Stock — A Preferred Stock with a provision that if one or more dividends payable are omitted by board
action, then the omitted dividends must be paid completely before dividends may be paid on the company’s Common Stock.
Cumulative Translation Adjustment (CTA) — An entry in a translated balance sheet in which gains and/or losses from currency
translations have been accumulated over a period of years. The CTA account is required under the Financial Accounting
Standards Board (FASB) Statement 52. See Currency Translation.
Cumulative Voting — (1) A type of shareholder voting in which the number of shares held by a stockholder is multiplied by the
number of directors to be elected to determine the number of votes a shareholder may cast. He may cast all votes for one director
or may allocate them in any way he sees fit. (2) A system of voting for a company’s Board of Directors in which each
stockholder has as many votes as the number of voting shares he owns multiplied by the number of directors to be elected. Votes
can be distributed for the various candidates as he desires.
Currencies and Major Foreign Market Hedge Funds — Investments in securities and Derivatives which go across borders. These
funds try to capitalize on interest rate differentials between currencies, varying investment climates for different countries,
relative volatilities in equity or credit markets, and variations of the other hedge fund themes.
Currency — Coins and paper money. Also, in international economics the money of another country is often referred to as “foreign
currency.”
Currency Diversification — Using more than one currency as an investing or financing strategy. Exposure to a diversified currency
portfolio typically entails less exchange rate risk than if all the portfolio exposure were in a single foreign currency.
Currency Futures — A contract in the futures markets to exchange currencies at a specific exchange rate at a specified future date.
A Futures Contract is a standard contract (normally undertaken in major currencies such as the U.S. or Canadian dollar, British
pound, Japanese yen, German mark, etc.) used as a hedge against currency risk, i.e., foreign exchange rate volatility. Contrast
with Currency Options.
Currency Options — A contract giving the right, but not the obligation, to buy (Call Option) or sell (Put Option) a specific amount
of one foreign currency in exchange for another at a fixed price or rate of exchange, called the Exercise Price or Strike Price.
Currency Overvaluation — Applies mainly to international finance. (1) Consideration that a currency is overvalued if private
demand for the currency at the going exchange rate is less than total private supply (in this cash central banks are buying up the
difference, thereby supporting the value of the currency through active Foreign Exchange Intervention). (2) Currency value
exceeds Purchasing Power Parity.
Currency Swap — An agreement to exchange one country’s currency for that of another at an agreed rate of exchange.
Currency-to-Deposit Ratio — The ratio of the public’s demand for currency (cash) to its demand for demand deposits (i.e.,
transaction accounts).
Currency Translation — The process of restating balance sheet and income statement items denominated in one currency in terms
of another country. U.S. based multinational companies are required by Financial Accounting Standards Board (FASB)
Statement 52 to restate foreign assets and liabilities plus earnings of foreign subsidiaries in terms of a national reference currency.
See Cumulative Translation Adjustment (CTA).
Current — A term which, applied to budgeting and accounting, designates the operations of the present fiscal period as opposed
to past or future periods.
Current Account — (1) In the Balance of Payments, the section that records the trade in goods and services and the exchange of
gifts among countries. (2) That part of the balance of payments statistics that records all real (as opposed to financial)
international transactions that enter a nation’s Gross Domestic Product (GDP).
Current Account Balance — The difference between the nation’s total exports of goods, services, and transfers and its total imports
of them. It excludes transactions in financial assets and liabilities.
Current Assets — (1) Those assets of a company that are reasonably expected to be realized in cash, or sold, or consumed during
the normal operating cycle of the business, typically one year. (2) Appears on a company’s balance sheet representing cash,
accounts receivable, inventory, marketable securities, prepaid expenses and other assets that can be converted to cash within one
year.

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Current Liabilities — (1) Money owed and payable by a company, usually within one year. (2) All obligations that will require
within the coming year or the operating cycle, whichever is longer, either (a) the use of existing current assets or (b) the creation
of other current liabilities. (3) Appears on a company’s balance sheet, representing amounts owed for interest, accounts payable,
short-term loans, expenses incurred but unpaid and other debts due within one year.
Current Principal Factor — A statistic which is multiplied against the initial principal amount to indicate the current outstanding
principal amount.
Current Principal Value (CPV) — The adjusted outstanding amount of mortgage indebtedness. It is computed by multiplying the
initial principal amount by the Current Principal Factor. This factor reflects any accretions in part due to negative amortization,
any ordinary principal payments and accelerated principal payments. The greater the divergence between the ordinary
expectation for principal and current principal amount is a reflection of the prepayment events.
Current Ratio — (1) Current Assets divided by Current Liabilities. (2) Measures a company’s ability to pay current financial
obligations from current assets. Calculated by taking current assets (cash, accounts receivable, inventory, and other assets that
can be liquidated within a year) and dividing this amount by current liabilities (debts or other obligations due within a year). For
some companies, it’s a concern when current assets fall significantly below 1.5 times current liabilities. (3) An indicator of a
company’s ability to pay short-term obligations, calculated by dividing current assets by current liabilities. Used to compare
companies within a single industry: the higher the ratio, the more liquid the company.
Current Resources — Resources to which recourse can be had to meet current obligations and expenditures. Examples are
estimated revenues of a particular period not yet realized, transfers from other funds authorized but not received, and in the case
of certain funds, bonds authorized and unissued.
Current Special Assessments — (1) Special assessments levied and becoming due during the current fiscal period, from the date
special assessment rolls are approved by the proper government authority to the date on which a penalty for nonpayment is
attached. (2) Special assessments levied in a prior fiscal period but becoming due in the current fiscal period, from the time they
become due to the date on which a penalty for nonpayment is attached.
Current Taxes — (1) Taxes levied and becoming due during the current fiscal period, from the time the amount of tax levy is first
established to the date on which a penalty for nonpayment is attached. (2) Taxes levied in the preceding fiscal period but
becoming due in the current fiscal period, from the time they become due until a penalty for nonpayment is attached.
Current Value — The market or economic value of some item at a point in time.
Current Year’s Tax Levy — Taxes levied for the current fiscal period.
Current Yield — (1) A measurement of investment returns based on the percentage relationship of annual cash income to the
investment cost. (2) The average annual rate of return received from an investment, based on income received during a year
divided by the security’s market price. (3) Equivalent to the annual interest payment divided by the current price; the ratio of
the coupon to the current market price of the debt instrument. Not the same as Yield to Maturity.
Curtesy — The right of a husband to all or part of his deceased wife’s realty regardless of the provisions of her will. Exists in only
a few states.
CUSIP Number — The nine-digit identifying number (seven numbers and two letters) used to uniquely identify all U.S. securities
issued on book-entry or certificate form after 1970. CUSIP stands for Committee on Uniform Securities Identification
Procedures. Beginning in 1989, the system was expanded to include foreign securities.
Custodial Agreement — A written contract establishing the responsibilities of a custodian who holds collateral for deposits with
financial institutions, investment securities or securities underlying repurchase agreements.
Custodian — The corporation, usually a bank, charged with the safekeeping of an investment company’s portfolio securities.
Custom Builder — One who builds unique houses as opposed to a builder specializing in the construction of tract homes.
Customer — As used in letters of credit, a customer is a buyer or other person who causes credit to be issued. The term also refers
to a bank which procures issuance or confirmation on behalf of that bank’s customer.
Customer Identification File (CIF) — A computerized central repository of information on a bank’s customers to include account
information, credit relationships, trust accounts, etc. The CIF improves the institution’s knowledge of its customers and allows
products and services to be better tailored to individual needs.
Customer Margin — Within the futures industry, financial guarantees required of both buyers and sellers of futures contracts and
sellers of options contracts to insure fulfilling of contract obligations. Futures Commission Merchants (FCMs) are responsible
for overseeing customer margin accounts. Margins are determined on the basis of market risk and contract value. Also referred
to as Performance-Bond Margin. See Clearing Margin.
Customs Duties — Tariffs or taxes levied on imported goods. May be of an ad valorem nature, which is a percentage fee based on
the cost or value of the item, on a specific duty, which is a flat or fixed fee based on the type of the item being assessed.
Cut-Throat Competition — Using pricing and other policies designed to destroy competitors of a firm.
Cutoff Point — In the Capital Budgeting process, the minimum rate of return on acceptable investment opportunities.
CVP Analysis — See Cost-Volume-Profit (CVP) Analysis.
Cy-Pres Doctrine — The rule under which a charitable trust will be carried out as nearly as possible in the way the settlor desired,
when for any reason it cannot be carried out exactly in the way or for the purposes he had expressed.
Cycle — A periodic, repetitive fluctuation in time series data (observations of an event or events taken over an extended period of
time) from either a constant mean or trend line. Typically, the oscillations of a cycle will be greater than one year in length.
Cycles within a year (i.e., within a twelve month period) are termed Seasonality or Seasonal Patterns.
Cycle Billing — A practice followed by utilities, retail stores, and other organizations with a large number of credit customers of
billing part of the customers each working day during a month, instead of billing all customers as of a certain day during the
month.

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Cyclical Comparison — A technique for forecasting variables that show some regular cyclical behavior. The technique involves
assessing where in the current cycle the variable currently stands and which previous cycle(s) the current cycle most closely
resembles.
Cyclical Industry — An industry, such as manufacturers of durable goods, whose performance is closely tied to the business cycle
of the general economy.
Cyclical Variables — Variables that show a tendency to rise and fall at regular intervals over time. Cycles may be long-term,
typically over one year in length, or seasonal, cyclical behavior occurring within a 12–month period.

©2001-2002 Great Basin Research

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