12b-1 fees
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Annual fees charged by a mutual fund to pay for marketing and distribution costs
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Active management
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Attempting to identify mis-priced securities or to forecast broad market trends
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Agency problem
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Conflicts of interest between managers and stockholders
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Arithmetic average
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The sum of returns in each period divided by the number of periods
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Ask price
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Price at which a dealer will sell a security
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Asset allocation
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Allocation of an investment portfolio across broad asset classes
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Auction market
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A market where all traders meet at one place to buy or sell an asset
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Bankers’ acceptance
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An order to a bank by a customer to pay a sum of money at a future date
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Bid price
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Price at which a dealer is willing to purchase a security
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Bid-ask spread
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The difference between a dealer’s bid and asked price
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Block transactions
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Large transactions in which at least 10,000 shares of stock are bought or sold
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Bundling, unbundling
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Creation of new securities either by combining primitive and derivative securities into one composite hybrid or by separating returns on an asset into classes
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Call option
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The right to buy an asset at a specified price on or before a specified expiration date
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Capital allocation line
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Plot of risk-return combinations available by varying portfolio allocation between a risk-free asset and a risky portfolio
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Capital Market line
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Capital allocation line using the market index portfolio as the risky asset
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