|
- Value-added
tax
- Method of indirect taxation whereby a tax is levied
at each stage of production on the value added at that specific stage.
Value additivity principal
- Prevails when the value of a whole group of assets exactly equals the sum of the values of the individual
assets that make up the group of assets. Stated differently, the principle that the net present value of a set of independent
projects is just the sum of the net present values of the individual projects.
Value-at-Risk model (V.a.R.)
- Procedure for estimating the probability of portfolio
losses exceeding some specified proportion based on a statistical analysis of historical market price trends, correlations,
and volatilities.
Value date - In the market for Eurodollar
deposits and foreign exchange, value date
refers to the delivery date of funds traded. Normally, for spot transactions, it is on spot
transactions two days after a transaction is agreed upon. In the case of a forward foreign exchange trade, it is the future
date.
Value dating - Refers to when value or credit is given for funds
transferred between banks.
Value manager - A manager who seeks to buy
stocks that are at a discount
to their "fair value" and sell them at or in excess of that value. Often a value
stock is one with a low price to book value ratio. Opposite to growth stock.
Vanilla issue - A security issue that has no unusual features.
Variable - Refers to the series used in a model. For example,
in the model RS&Pt11 = a + b Tbillt + et, where
RS&Pt11 is the return on the S&P in month t11 and Tbill is
the Tbill return at month t, both RS&P and Tbill are 'variables' because
they change through time, i.e. they are not constant.
Variable annuities - Annuity contracts in which the issuer
pays a periodic amount linked to the investment performance of an underlying portfolio.
Variable cost - A cost that is directly proportional to the volume
of output produced. When production is zero, the variable cost is equal to zero.
Variable life insurance policy
- A whole
life insurance policy that provides a death benefit dependent on the insured's portfolio market value
at the time of death. Typically the company invests premiums in common stocks, and hence variable life policies are referred to as
equity-linked policies.
Variable price security
- A security, such
as stocks or bonds, that
sells at a fluctuating, market-determined price.
Variable rate CDs - Short-term certificate of deposits that pay interest periodically on roll
dates. On each roll date, the coupon on the CD is
adjusted to reflect current market rates.
Variable rated demand bond
(V.R.D.B.) - Floating
rate bond that can be sold back periodically to the issuer.
Variable rate loan - Loan made at an
interest rate that fluctuates based on a base interest
rate such as the Prime Rate or L.I.B.O.R..
Variance - A measure of dispersion of a set of data points
around their mean value. The mathematical expectation of
the average squared deviations from the mean. The square
root of the variance is the standard deviation.
Variance
minimization approach to tracking - An approach to bond
indexing that uses historical data to estimate the variance
of the tracking error.
Variance rule - Specifies the permitted minimum or maximum quantity
of securities that can be delivered to satisfy a T.B.A. trade. For Ginnie Mae, Fannie Mae,
and Freddie Mac pass-through securities, the
accepted variance is plus or minus 2.499999 percent per million of the par value of the T.B.A. quantity.
Variation margin - An additional required deposit to bring an
investor's equity account up to the initial margin level when the balance falls below the maintenance margin requirement.
Venture capital - An investment in a start-up business that is
perceived to have excellent growth prospects
but does not have access to capital markets. Type
of financing sought by early-stage companies seeking to grow rapidly.
Vertical acquisition - Acquisition
in which the acquired firm and the acquiring firm are at different steps in the production
process.
Vertical analysis - The process of dividing each expense item in the income
statement of a given year by net sales to identify expense items that rise faster or
slower than a change in sales.
Vertical merger - A merger in which
one firm acquires another firm that is in the same industry but at another stage in the
production cycle. For example, the firm being acquired
serves as a supplier to the firm doing the acquiring.
Vertical spread - Simultaneous purchase and sale of two options that differ only in their exercise price. See: horizontal spread.
Virtual currency option
- A new option contract introduced by the P.H.L.X.
in 1994 that is settled in US$ rather than in the underlying
currency. These options are also called 3-Ds (dollar denominated delivery).
Visible supply - New muni bond
issues scheduled to come to market
within the next 30 days.
- Volatility
- A measure of risk
based on the standard deviation of the asset
return. Also, volatility is a variable that appears in option pricing formulas. In the option pricing
formula, it denotes the volatility of the underlying
asset return from now to the expiration of the option.
Some have created volatility indices.
- Volatility
risk
- The risk in the value of options portfolios due
to the unpredictable changes in the volatility of the underlying asset.
Volume - This is the daily number of shares of a security that
change hands between a buyer and a seller.
Voting rights - The right to vote on matters that are put to a vote
of security holders. For example the right to vote for
directors.
Glossary created by Campbell R. Harvey, Professor of Finance, Fuqua
School of Business at Duke University. |
|
