Investment Wiki

SEC Form N-1A is the required registration form for establishing open-end management companies. The form can be used for registering both open-end mutual funds and open-end exchange traded funds (ETFs).

A frequency distribution is a representation, either in a graphical or tabular format, that displays the number of observations within a given interval. The frequency is how often a value occurs in an interval while the distribution is the pattern of frequency of the variable.The interval size depends on the data being analyzed and the goals of the analyst. The intervals must be mutually exclusive and exhaustive. Frequency distributions are typically used within a statistical context. Generally, frequency distributions can be associated with the charting of a normal distribution.

The Merton model is a mathematical formula that stock analysts and commercial loan officers, among others, can use to judge a corporation’s risk of credit default. Named for economist Robert C. Merton, who proposed it in 1974, the Merton model assesses the structural credit risk of a company by modeling its equity as a call option on its assets.

The annual return is the return that an investment provides over a period of time, expressed as a time-weighted annual percentage. Sources of returns can include dividends, returns of capital and capital appreciation. The rate of annual return is measured against the initial amount of the investment and represents a geometric mean rather than a simple arithmetic mean.

A buyer's market refers to a situation in which changes to the underlying economic conditions that shape supply and demand mean that purchasers have an advantage over sellers in price negotiations.

The Lintner model is an economic formula for determining an optimal corporate dividend policy. It was proposed in 1956 by former Harvard Business School professor John Lintner and focuses on two core notions:Though originally a descriptive model intended to explain how firms are observed to set dividends, the model has also been used as a prescriptive model of how firms should set dividend policy.

In option trading, the term "uncovered" refers to an option that does not have an offsetting position in the underlying asset. Uncovered option positions are always written options, or in other words options where the initiating action is a sell order. This is also known as selling a naked option.

Allocational efficiency, also known as allocative efficiency, is a characteristic of an efficient market where the optimal distribution of goods in an economy meets the needs and wants of society. The goal of allocative efficiency is to ensure that resources are used so that their marginal benefit to society is equal to their marginal cost.

A Eurobond is a debt instrument that's denominated in a currency other than the home currency of the country or market in which it is issued. Eurobonds are frequently grouped together by the currency in which they are denominated, such as eurodollar or Euro-yen bonds. Since Eurobonds are issued in an external currency, they're often called external bonds. Eurobonds are important because they help organizations raise capital while having the flexibility to issue them in another currency.Issuance of Eurobonds is usually handled by an international syndicate of financial institutions on behalf of the borrower, one of which may underwrite the bond, thus guaranteeing the purchase of the entire issue.

Par value, also known as nominal or original value, is the face value of a bond or the value of a stock certificate, as stated in the corporate charter.Stock certificates issued for purchased shares show the par value. The par value of shares, or the stated value per share, is the lowest legal price for which a company sells its shares.Par value is required for a bond or a fixed-income instrument and shows its maturity value and the dollar value of the coupon, or interest, payments due to the bondholder.

Zero-based budgeting (ZBB) is a method of budgeting in which all expenses must be justified for each new period. The process of zero-based budgeting starts from a "zero base," and every function within an organization is analyzed for its needs and costs. The budgets are then built around what is needed for the upcoming period, regardless of whether each budget is higher or lower than the previous one.

An American option, aka an American-style option, is a version of an options contract that allows holders to exercise the option rights at any time before and including the day of expiration. It contrasts with another type of option, called the European option, that only allows execution on the day of expiration.An American-style option allows investors to capture profit as soon as the stock price moves favorably, and to take advantage of dividend announcements as well.