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- Haircut
- The margin or
difference between the actual market value of a security and the value assessed by the lending side of a
transaction (i.e. a repo).
Handle - The whole-dollar price of a bid or offer is referred to as
the handle (ie. if a security is quoted at 101.10 bid
and 101.11 offered, 101 is the handle). Traders are
assumed to know the handle. See: Full
Hard capital rationing
- Capital
rationing that under no circumstances can be violated.
Hard currency - A freely convertible currency
that is not expected to depreciate in value in the foreseeable future.
Hard dollars - Used in the context of general equities. Actual,
separate payments made by a customer for services including research, provided by a
brokerage firm. Antithesis of soft dollars.
Harmless warrant - Warrant that
allows the user to purchase a bond only by surrendering an
existing bond with similar terms.
Hart-Scott-Rodino Act - Often used in risk arbitrage. Antitrust act
administered by U.S. Department of Justice and the F.T.C. that requires an investor to file a form with the government before he
acquires an economic interest in the lesser of $15 million or 15% in a specific security. The government has thirty days to respond to the
filer.
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- Harvey,
Campbell R.
- Author of this glossary. Finance professor at Duke
University. Author of research on international finance, asset allocation and emerging
markets.
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- Head & shoulders
- In technical
analysis, a chart formation in which a stock price
reaches a peak and declines, rises above its former peak and again declines and rises
again but not to the second peak and then again declines. The first and third peaks are
shoulders, while the second peak is the formation's head. Technical analysts generally consider a head and
shoulders formation to be a very bearish indication.
Heavy - Used in the context of general equities. Presently
dominated by sellers, or over-supply, in the market or security resulting in falling prices.
See: overbought, resistance level, tired
Hedge - A transaction that reduces the risk of an investment.
Hedge fund - A fund that may employ a variety of techniques to
enhance returns, such as both buying and shorting stocks based on a
valuation model.
Hedge ratio (delta) - The ratio of volatility
of the portfolio to be hedged
and the return of the volatility of the hedging instrument. For convertibles, percentage of a convertible bond representing the number of underlying common
shares sold against the shares into which bonds are convertible. If a preferred is convertible into 2.0 common shares, a
75% hedge ratio would be short (long)
1500 common for every 1000 preferred long (short). For options,
ratio between the change in an option's
theoretical value and the change in price of the underlying
stock at a given point in time. See: Delta
Hedged portfolio - A portfolio
consisting of the long position in the stock and the long
position in the put option, so as to be riskless
and produce a return that equals the risk-free interest rate.
Hedgie - Slang for a hedge
fund.
Hedging - A strategy designed to reduce investment risk using call options,
put options, short selling,
or futures contracts. A hedge can help lock in
existing profits. Its purpose is to reduce the volatility of a portfolio,
by reducing the risk of loss.
Hedging demands - Demands for securities
to hedge particular sources of consumption risk, beyond the usual mean-variance diversification motivation.
Held at the opening - Used for listed equity securities. Not open for trading due to specialist or
regulators disallowing trading to occur until imbalances
dissipate or news is allowed to disseminate.
Held order - Used for listed equity securities. Order which must be executed
without hesitation (market held - Hit the bid or take the offer in line) or if the stock can be bought or sold at that price (held limit order) in sufficient quantity.
Hell-or-high-water contract
- A contract that
obligates a purchaser of a project's output to make cash payments to the project in all
events, even if no product is offered for sale.
Helsinki Exchanges (HEX) - The Helsinki Exchanges (HEX Ltd, Helsinki
Securities and Derivatives Exchange and Clearing House) was formed at the beginning of
1998 following the merger of the Helsinki Stock Exchange Ltd and SOM Ltd, the Securities
and Derivatives Exchange and the Clearing House.
Herstatt risk - The risk of loss in foreign exchange
trading that one party will deliver foreign exchange but the counterparty financial institution will fail to
deliver its end of the contract. It is also referred to as settlement risk.
H-H page - Quotron display page that shows new listed inquiries/orders received
after the block call.
High-coupon bond refunding
- Refunding of a high-coupon bond with a new, lower coupon bond.
High flyer - Used in the context of general equities.
High-priced and highly speculative stock that moves up and
down sharply over a short period. Generally glamorous in nature due to the capital gains potential associated with them; also
used to describe any high-priced stock. Antithesis of sleeper.
High price - The highest (intraday) price of a stock over the past 52 weeks, adjusted for any stock splits.
High-yield bond - See: junk bond.
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- Highly leveraged transaction (HLT)
- Bank loan to a
highly leveraged firm.
Historical cost - Terminology for the accounting cost that is carried
in the books for a current cost of the item.
Historical exchange rate
- An accounting term that refers to the exchange rate in effect when an asset or liability was
acquired.
Hit the bid - A dealer who
agrees to sell at the bid price quoted by another dealer is
said to "hit" that bid. Antithesis of take
the offer.
Hit the ribbon - Used in the context of general equities. See: Print
Holder of record date
- The date on which holders of record in a firm's stock ledger are designated as the recipients of either dividends or stock rights. Also called date of record.
Holding company - A corporation that owns enough voting stock in
another firm to control management and operations by influencing or electing its board of
directors.
Holding period - Length of time that an individual holds a security.
Holding period return
- The rate of
return over a given period.
Homemade dividend - Sale of some shares of
stock to get cash that would be similar to receiving a cash dividend.
Homemade leverage - Idea that as long as individuals borrow (or lend)
on the same terms as the firm, they can duplicate the affects of corporate leverage on their own. Thus, if levered firms are priced
too high, rational investors will simply borrow on
personal accounts to buy shares
in unlevered firms.
Home run - Used in the context of general equities. Large capital gain in a stock
in a short period of time.
Homogeneity - The degree to which items are similar.
Homogeneous - Exhibiting a high degree of homogeneity.
Homogenous expectations
assumption - An assumption of Markowitz
portfolio construction that investors have the same
expectations with respect to the inputs that are used to derive efficient portfolios: asset returns, variances, and covariances.
Hong Kong Futures Exchange
(H.K.F.E.) - Established in 1976, the Hong Kong Futures Exchange
(H.K.F.E.) operates futures and options markets in index, stock, interest rate and foreign
exchange products.
Horizon analysis - An analysis of returns
using total return to assess performance over some investment horizon.
Horizon return - Total return over
a given horizon.
Horizontal acquisition - Merger between two
companies producing similar goods or services.
Horizontal analysis - The process of dividing each expense item of a
given year by the same expense item in the base year. This allows for the exploration of
changes in the relative importance of expense items over time and the behavior of expense
items as sales change.
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- Horizontal
merger
- A merger involving
two or more firms in the same industry that are both at the same stage in the production
cycle; that is two or more competitors.
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- Horizontal
spread
- The simultaneous purchase and sale of two options that differ only in their exercise date.
Host security - The security to which a warrant is attached.
Hot - Used in the context of general equities. Active, usually with positive price implications.
Hot money - Money that moves across country borders in response
to interest rate differences and that moves away
when the interest rate differential disappears.
"How are you making XXX?"
- "What is your market in a particular
stock?" See: quotation
Hubris - An arrogance due to excessive pride and an
insolence toward others.
Human capital - The unique capabilities and expertise of
individuals.
Hurdle rate - The required
return in capital budgeting. E.g. if the
project has an expected rate of return greater
than the hurdle rate, the project may be accepted.
Hybrid - A package containing two or more different kinds of
risk management instruments
that are usually interactive.
Hybrid security - A convertible
security whose optioned common stock is trading in a middle range, causing the convertible security
to trade with the characteristics of both a fixed-income security and a common stock instrument.
Glossary created by Campbell R. Harvey, Professor of Finance, Fuqua
School of Business at Duke University. |
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