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.Kappa The ratio of the dollar price change in the price of an option to a 1% change in the expected pricevolatility.Kiretsu A network of Japanese companies organized around a major bank.Ladder strategy A bond portfolio strategy in which the portfolio is constructed to have approximately equalamounts invested in every maturity within a given range.Lag Payment of a financial obligation later than is expected or required, as in lead and lag.Also, the numberof periods that an independent variable in a regression model is "held back" in order to predict the dependentvariable.Lag response of prepayments There is typically a lag of about three months between the time the weightedaverage coupon of an MBS pool has crossed the threshold for refinancing and an acceleration in prepaymentspeed is observed.Lambda The ratio of a change in the option price to a small change in the option volatility.It is the partialderivative of the option price with respect to the option volatility.Last split After a stock split, the number of shares distributed for each share held and the date of thedistribution.Last trading day The final day under an exchange's rules during which trading may take place in a particularfutures or options contract.Contracts outstanding at the end of the last trading day must be settled by deliveryof underlying physical commodities or financial instruments, or by agreement for monetary settlementdepending upon futures contract specifications.Last-In-First-Out (LIFO) A method of valuing inventory that uses the cost of the most recent item ininventory first.Law of large numbers The mean of a random sample approaches the mean (expected value) of thepopulation as the sample grows.Law of one price An economic rule stating that a given security must have the same price regardless of themeans by which one goes about creating that security.This implies that if the payoff of a security can besynthetically created by a package of other securities, the price of the package and the price of the securitywhose payoff it replicates must be equal.Lead Payment of a financial obligation earlier than is expected or required.Lead manager The commercial or investment bank with the primary responsibility for organizing syndicatedbank credit or bond issue.The lead manager recruits additional lending or underwriting banks, negotiatesterms of the issue with the issuer, and assesses market conditions.Leading economic indicators Economic series that tend to rise or fall in advance of the rest of the economy.Leakage Release of information to some persons before official public announcement.LEAPS Long-term equity anticipation securities.Long-term options.Lease A long-term rental agreement, and a form of secured long-term debt.Lease Rate The payment per period stated in a lease contract. 76Dictionary of Finantial and Business TermsLico Reis  Consultoria & Línguaslicoreis@terra.com.brLedger cash A firm's cash balance as reported in its financial statements.Also called book cash.Legal capital Value at which a company's shares are recorded in its books.Legal bankruptcy A legal proceeding for liquidating or reorganizing a business.Legal defeasance The deposit of cash and permitted securities, as specified in the bond indenture, into anirrevocable trust sufficient to enable the issuer to discharge fully its obligations under the bond indenture.Legal investments Investments that a regulated entity is permitted to make under the rules and regulationsthat govern its investing.Lend To provide money temporarily on the condition that it or its equivalent will be returned, often with aninterest fee.Lessee An entity that leases an asset from another entity.Lessor An entity that leases an asset to another entity.Letter of comment A communication to the firm from the SEC that suggests changes to its registrationstatement.Letter of credit (L/C) A form of guarantee of payment issued by a bank used to guarantee the payment ofinterest and repayment of principal on bond issues.Letter stock Privately placed common stock, so-called because the SEC requires a letter from the purchaserstating that the stock is not intended for resale.Level pay The characteristic of the scheduled principal and interest payments due under a mortgage such thattotal monthly payment of P&I is the same while characteristically the principal payment component of themonthly payment becomes gradually greater while the monthly interest payment becomes less.Level-coupon bond Bond with a stream of coupon payments that are the same throughout the life of thebond.Leverage The use of debt financing.Leverage clientele A group of shareholders who, because of their personal leverage, seek to invest incorporations that maintain a compatible degree of corporate leverage.Leverage ratios Measures of the relative contribution of stockholders and creditors, and of the firm's abilityto pay financing charges.Value of firm's debt to the total value of the firm.Leverage rebalancing Making transactions to adjust (rebalance) a firm's leverage ratio back to its target.Leveraged beta The beta of a leveraged required return; that is, the beta as adjusted for the degree ofleverage in the firm's capital structure.Leveraged buyout (LBO) A transaction used for taking a public corporation private financed through the useof debt funds: bank loans and bonds.Because of the large amount of debt relative to equity in the newcorporation, the bonds are typically rated below investment grade, properly referred to as high-yield bonds orjunk bonds.Investors can participate in an LBO through either the purchase of the debt (i.e., purchase of thebonds or participation in the bank loan) or the purchase of equity through an LBO fund that specializes insuch investments. 77Dictionary of Finantial and Business TermsLico Reis  Consultoria & Línguaslicoreis@terra.com.brLeveraged equity Stock in a firm that relies on financial leverage.Holders of leveraged equity face thebenefits and costs of using debt.Leveraged lease A lease arrangement under which the lessor borrows a large proportion of the funds neededto purchase the asset and grants the lender a lien on the assets and a pledge of the lease payments to secure theborrowing.Leveraged portfolio A portfolio that includes risky assets purchased with funds borrowed.Leveraged required return The required return on an investment when the investment is financed partiallyby debt.Liability A financial obligation, or the cash outlay that must be made at a specific time to satisfy thecontractual terms of such an obligation.Liability funding strategies Investment strategies that select assets so that cash flows will equal or exceedthe client's obligations [ Pobierz caÅ‚ość w formacie PDF ]

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