adjustable rate: interest rate or dividend that is adjusted periodically, usually based on a standard market rate such as the prevailing rate on Treasury bonds or notes. Typically, such issues have set floors, ceilings or other rules that limit the adjustment.
alpha: the measure of the difference between a portfolio's actual returns and its expected performance, given its level of risk relative to the underlying market (as measured by beta).
antidilution clause: protection allowed to convertible security holders whereby the conversion ratio may be raised or lowered under certain conditions so as to not dilute the percentage share ownership of the convertible security. Stock dividends or stock splits are the most common occurrences that result in an adjustment to the conversion ratio via the antidilution clause.
arbitrage: the simultaneous purchase and sale of securities to take advantage of pricing differentials created by market conditions.
ask price: price at which a seller offers a security for sale; together with the bid, makes up a quotation; see bid.
auction-rate securities: fixed-income securities that have adjustable rate coupons that reset after a set period (known as the auction period); generally every 1, 7, 28 or 35 days or up to six months, based upon the underwriter's assessment of market demand.
balance sheet: a statement, used for accounting purposes, that delineates a business's assets, equity and liabilities; investors may utilize a company's balance sheet to help assess the underlying strength of the company and how well the company is being run.
basis point: unit of measurement representing one hundredth of a percentage point; in other words, there are 100 basis points in one percent; for example, 20 basis points are displayed as 0.20%.
bear market: a period during which security prices are falling; a bear market can be merely a temporary phase in the marketplace or it can be as serious as recession or depression; while a trying time for investors, bear markets can represent an opportune time to buy undervalued issues; see bull market.
benchmark: a gauge, typically an index, used for tracking the relative performance of an investment such as a mutual fund; an appropriate benchmark invests in generally similar securities to the investment (for example, a fund that invests in small-cap growth stocks should be compared to an index of small-cap growth stocks, not an index of corporate bonds).
beta: a measure of a portfolio's relative volatility in relation to the market. A beta of 1.0 represents average market volatility. A beta of 2.0 would reflect twice the market's volatility.
bid price: price at which a buyer is willing to purchase a security; together with the ask, makes up a quotation; see ask
Black-Scholes option pricing theory: a model used to calculate the value of an option by considering the stock price, strike price and expiration date, risk-free return and the volatility of the stock's return.
bond: debt instrument with a maturity of one year or more; bonds can be issued by a variety of entities, including corporations, municipal governments and the federal government; bonds (excluding zero-coupon bonds) typically provide periodic payments of interest as well as the repayment of the original loan (or principal) according to stated terms; bond holders are considered creditors of the issuer.
bond value: when utilized for regarding convertible securities, also known as investment value; the price at which a convertible bond would sell if priced as a straight debt instrument relative to yields of other bonds of like maturity, size and quality.
bottom up: selection of investments based on each individual security's attributes; investment processes can blend top-down and bottom-up analysis; see top down
break-even time: Bond yields typically are greater than dividend returns on the underlying common stock. The break-even measures the time it would take for the added return on the bonds to equal the conversion premium. This is also known as the payback period. Possible redemption of the bonds could invalidate the calculation.
bull market: a period of sustained growth in a security market; see bear market.
busted convertible: a convertible selling essentially as a straight bond; the underlying stock is far from its conversion price and, as a result, has little equity participation.
call feature, bond: a right to redeem debentures prior to maturity at a stated price, which usually begins at a premium to par (100 percent) and declines annually; of late, new convertible issues are non-callable for at least three years, except under very limited circumstances.
call option: an agreement that gives the purchaser the right—but not the obligation—to buy shares of a stock, index or other instrument at a certain price, during a pre-specified period; if the purchaser decides to buy the shares at the specified price, he or she is said to "exercise the option."
call terms and provisions: call terms typically indicate the circumstances under which a security can be called, and often involve date and price considerations. Convertible securities often have provisions that are subject to the underlying stock's price. For example, the convertible security cannot be called for three years from issuance unless the stock price exceeds 150 percent of the conversion price for 30 consecutive days. Call terms and provisions are outlined in the securities indenture and are determined at or prior to issuance.
capital gain: profit from the sale of a security.
capitalization: a measure of the firm's equity market value; to calculate capitalization, multiply the total common shares outstanding by the market price of the common stock.
cash-plus convertible: convertible security that requires payment of cash upon exercise.
change-of-control feature: certain options available to the holder in the event of a controlling-stake change by the issuer. This usually includes the right to sell the convertible back to the issuer.
Chartered Financial Analyst (CFA): a designation awarded by the CFA Institute, which requires three years of investment experience and passing scores on three tests of economics, accounting, security analysis and asset management.
closed-end fund: a publicly traded investment company that raises its initial investment capital through the issuance of a fixed number of shares to investors in a public offering; shares are listed on a stock exchange or traded in the over-the-counter market.
common stock: an ownership position; common stocks are one type of equity investment; common stocks are issued by corporations and provide a claim on the issuer's assets and earnings in proportion to the number of shares the investor owns; common stocks also typically carry proportional voting rights.
conditional call: circumstances under which a company can effect an earlier call. Usually stated as a percentage of a stock's trading price during a particular period, such as 140 percent of the exercise price during a 40-day trading span. Also known as a provisional call.
contingent deferred sales charge (CDSC): for an open-end mutual fund, fee incurred upon sales of shares during a specified window; Class B and Class C shares typically carry contingent deferred sales charges that decline to zero over a multi-year period and have no or reduced front end sales charge; the prospectus for a fund includes more information about contingent deferred sales charges and other fees associated with an investment.
conversion premium: the amount by which the market price of a convertible bond or convertible preferred exceeds conversion value, expressed as a percentage. It is a gauge of equity participation.
conversion price: stated at the time of issue, the price at which conversion can be exercised. It is usually expressed as a dollar value.
conversion ratio: determines the number of shares of common stock for which a convertible can be exchanged. The conversion ratio is determined upon issuance of the security and is typically protected against dilution from stock splits, but not from secondary offerings. To determine conversion ratio, divide $1,000 par value by the conversion price.
conversion value (stock value): the equity portion of the convertible bond. It is based on the conversion price set by the company at the time the bond is issued. This price in turn determines the number of shares of stock into which each bond can be converted. This can be determined by multiplying the common stock price by the conversion ratio. Conversion value represents the intrinsic value or equity value of the bond in stock.
convertible arbitrage: the practice of investing in convertible securities and then short selling the underlying common stock; using this technique, an investor seeks to enhance income, and to hedge (or reduce) equity market risk; see short selling.
convertible bond downside protection: one of the benefits of convertible bonds, the potential for downside protection comes from the fixed-income component of the convertible, which provides a floor (the bond value) that helps to protect the investment on the downside. Convertible bonds can decline in value, however, and it is possible to lose money in a convertible bond investment.
convertible debenture (bond): a general debt or obligation of a corporation that can be converted into common stock under the conditions set forth in the indenture.
convertible debt spread: the difference between the convertible and the non-convertible debt yields of similar-quality securities.
convertible preferred stock: a preferred stock that is also convertible into common stock. It is similar to a convertible bond, except that it represents equity in the corporation. Unlike the interest payments made on a convertible bond, the dividend income paid by the convertible preferred stock is not a pretax income item for the issuing corporations.
convertible risk level: this is an indication of the broad overall risk level of the convertible, including both equity and bond risk measures. Relative risk is a means to distinguish among the various opportunities available in the market. Three levels of risk are recommended: low, medium, and aggressive.
convertible principal protected notes: one type of synthetic convertibles that are created by investment bankers; the main difference between convertible principal protected notes and traditional convertibles is that, for the former, the credit risk is not that of the company whose common stock underlies the convertible security and provides the convertibility feature, but, instead, that of a third party (typically the company that issued the note).
convertible security, convertible instrument: a bond or preferred stock that can be exchanged, hence converted, into the common stock of the issuing corporation.
covered call writing: writing (selling) of call (buy) options against owned stock positions; the option writer receives income from the option premium and is obligated, if and when assigned an exercise, to deliver stock according to the terms of the contract; only the option buyer can exercise an option; this strategy works well in a low volatility environment; see option premium.
credit quality: a company's ability to make good on its financial obligations. Credit quality is typically measured by ratings issued by agencies such as Standard and Poor's Corporation, a division of The McGraw Hill Companies, and Moody's Investor Services. Under certain circumstances, investment managers may also assign internal credit ratings for securities not rated by a major agency.
credit risk: the degree of probability that a bond's issuer will default in the payment of either principal or interest
credit spread: the spread reflects investor perception relating to how likely it is that the issuing company will be able to make timely interest payments and pay off the principal at maturity; the larger, or wider, the spread, the more concern investors have regarding the issuing company's ability to make timely interest payments. The smaller, or tighter, the spread, the less concern investors have. The credit spread assumption is used to calculate the investment value.
current yield: stated interest or dividend rate, expressed as a percentage of the market price of the convertible security
CUSIP Number: an abbreviation for Committee on Uniform Securities Identification Procedures Number; numeric code designed to assist in the smooth completion of securities transactions; each share class of a mutual fund has a unique CUSIP number.
debt/capital ratio: indication of a firm's leverage; total debt divided by the sum of shareholder equity and debt; generally speaking, lower numbers indicate healthier use of debt.
discount: a closed-end fund is said to be trading at a discount when its market price is lower than its NAV; see market price, NAV, premium.
distribution rate: The percentage rate at which a fund distributes income to its shareholders. It is calculated by dividing a fund's annual distributions by its current price; this figure can vary from the SEC yield of the same fund because of the multiple ways of treating different asset classes.
diversification: strategy for managing portfolio risk by allocating investments across a variety of investments that tend to perform differently in a particular market or economic environment; diversification may help mitigate the overall risk of a portfolio because gains in one portion of the portfolio may offset declines in another; basic diversification strategies consider broad asset classes (stocks, bonds and cash); more enhanced diversification strategies would consider market capitalization (for example, large-, mid- and small-cap stocks), sector-specific funds, and asset class sub-sectors.
dividend reinvestment plan (DRIP): offers investors the ability to reinvest all dividends and capital gains distributions instead of receiving them as income; gives investors the opportunity to accumulate additional shares of a mutual fund. Benefits of DRIPs include compounded growth of reinvested money, potential for lower commission costs and convenience.
dollar cost averaging: long-term investment strategy that involves investing the same dollar amount at set intervals in a security, regardless of whether the value of the security is going up or down; more shares are bought when prices are low, while fewer shares are bought when prices are higher, which in time should result in a lower overall average per-share price; dollar cost averaging cannot guarantee against a loss, and investors should consider their ability to invest through periods of declines before embarking on a dollar-cost averaging program.
dollar premium: the difference between the market price and the conversion value, expressed in number of dollars or points.
downside semi-variance: shows how much of an investment's overall volatility came from downward price movements; compare to upside semi-variance.
duration: the weighted average time to full recovery of principal and interest payments for a fixed income security; typically used to discuss interest rate sensitivity of an investment; duration is a less useful measure for equity and equity sensitive investments.
dynamic asset allocation: allocation of investments among a variety of asset classes according to market conditions.
economic cycle: the movement of the economy through various phases of expansion and contraction/recession.
effective yield: a bond's yield, given reinvestment of interest payments.
equity: an ownership position; common stocks are one type of equity investment; common stocks are issued by corporations and provide a claim on the issuer's assets and earnings in proportion to the number of shares the investor owns; common stocks also typically carry proportional voting rights.
equity sensitivity: a measure of how much influence stock market movements have on the value of a security.
equity-linked convertibles: see mandatory convertibles
exchange traded fund: a pool of securities that trade on an exchange.
exchangeable investment: similar to a convertible bond or convertible preferred stock, but exchangeable into the common stock of a different public corporation; can also refer to an instrument exchangeable under certain circumstances into another security of the issuing company.
exercise price: price at which the underlying stock is either purchased or sold; exercise prices are stated in option contracts, convertible securities and warrants.
expense ratio: operating expenses deducted from fund assets on an annual basis, expressed as a percentage of fund assets; includes distribution and service fees (12b-1 fees), management fees and other expenses; the prospectus includes more information about contingent deferred sales charges and other fees associated with an investment
expiration date: the last date on which an option, warrant or right of convertibility can be exercised.
Federal Funds rate: also called the overnight lending rate, the target rate and the Federal Funds target rate; the Fed Funds rate is the interest rate at which banking institutions lend money to one another; it is set by the Federal Reserve Board of Governors; often, but not always, increases and decreases in the Fed Funds rate prompt similar changes in other interest rates.
forced conversion: to call a debenture; companies usually will force conversion when the underlying stock is selling well above the conversion price. In this way, they assure that the bonds will be retired without requiring any cash payment.
growth investing: selecting individual securities offered by companies that present above-average potential for earnings growth; see value investing.
hedge fund: investment portfolios that may engage in more sophisticated strategies than mutual funds; hedge funds are not subject to many of the rules and regulations applicable to mutual fund; a limited number of investors may invest in a hedge fund, and as a result, hedge funds typically require very high initial investment minimums.
hedge ratio: the number of underlying common shares sold short or represented by a put or call option divided by the number of shares into which the bonds are convertible.
hedging: a trading technique involving the sale of one security or option against a purchase of another related security; the object is to minimize risk in one position while attempting to profit from inefficiencies in the market's valuation of the various securities.
high yield bonds: bonds or convertibles in this category are generally rated BB or below by Standard & Poor's Corporation or Ba or lower by Moody's; also called 'junk" bonds, speculative-grade bonds and non-investment-grade bonds. In exchange for their lower credit quality and greater potential credit risk, these bonds typically offer higher yields. High yield bonds typically perform well during periods of economic growth, and are less susceptible to rising interest rates. Because of this, high yield bonds offer diversification from traditional fixed income bonds, which are more sensitive to changes in interest rates.
income distributions: see distribution rate
index: an unmanaged pool of securities; indexes are used to gauge the overall performance of an asset class or group; indexes may also be used to benchmark the performance of a managed investment, such as a mutual fund; see also benchmark.
index options: calls and puts on indexes of stocks; options can also be written on exchange traded funds (ETFs); see also call option and put option.
interest rate risk: the risk associated with investments relating to their sensitivity to changes to current interest rates.
interest rate swaps: in its simplest form, an interest rate swap involves two parties agreeing to exchange or "swap" one set of cash flows for another set. In essence, the agreement allows a party that desires to avoid a variable rate to pay a fixed rate to a party that desires variability.
Investment Company Act of 1940: Federal laws governing open-end mutual funds and closed-end mutual funds, and unit investment trusts; the Act is enforced by the Securities and Exchange Commission.
investment premium: the amount that the market price of the convertible is above its investment value, expressed as a percent of the investment value.
investment value: the fixed-income component of the convertible; this is determined by calculating a bond value based on the assumption that the bond is not a convertible. The coupon rate and maturity date of an equivalent straight bond are used to decide this value. Over the short term, the investment value represents the investment floor; see bond value.
investment value yield: estimated yield to maturity utilized to calculate the straight bond portion of the convertible; this can be determined by evaluating any straight debt the company may have outstanding or yield to maturity of similar quality debt in the marketplace.
investment-grade securities: those rated as investment-grade quality by Standard & Poor's Corporation (BBB or better) or Moody's (Baa or better). These bonds typically offer lower yields than bonds with lower credit qualities. They may also have greater interest rate sensitivity.
junk bonds: see high yield bonds
level rate distribution policy: provides investors with a predictable, though not assured, level of cash flow, which includes short- and long-term realized gains and can include a return of capital; a level rate distribution policy allows a closed-end fund manager to distribute short-term capital gains on a monthly basis, as well as long-term capital gains twice per year, concurrent with the fund's fiscal and calendar year end, in addition to the monthly dividend and coupon income. A return of capital distribution may also be used if needed.
leverage: the use of borrowed assets to increase the return on invested capital; specifically, money is borrowed at short-term rates (which are typically lower) and invested at long-term rates (which are typically higher) such that when the money is paid back, the investor will have made money on the long-term investments.
liabilities: on a balance sheet, liabilities represent the outstanding debt that a company owes; this can include debt from any bonds the company has issued; see balance sheet.
liquidity risk: the risk that an investor may not be able to sell an investment as and when desired.
liquidity risk, convertible arbitrage: convertible arbitrage is subject to various liquidity risks, including the long convertible position not trading well and bid-ask spreads widening, the short stock borrow being called in, or a short squeeze occurring; lower credit quality convertibles face additional liquidity risks if they fall out of favor during certain market environments. Also, liquidity risk can occur simply because of the size of an issue when issued by small companies or in small amounts; see convertible arbitrage.
load/sales charge: the percentage taken from invested capital at the time shares are purchased, throughout the investment period or when shares are redeemed. For example, if an individual invested $10,000 in a fund with a 4.75% front-end load ("front-end" loads are those assessed at the time of purchase), the net investment would be $9,525. Different share classes of a fund may have different sales charges. Investors should read the prospectus for a fund carefully and speak with a financial advisor about the different types of sales charges, and which sales charge structure may be the most appropriate for their situation.
load-adjusted: figures for returns that reflect sales charges.
long-short: a strategy in which a portfolio manager or investor holds both long (buy) and short (sell) positions designed to offset each other and hedge against market volatility.
macroeconomic factors: broad economic trends that influence the overall economy; macro economic factors include, monetary policy, inflation, consumer trends and employment.
mandatory convertibles: unlike traditional convertible securities, which the holder has the right to convert at any time, mandatories will automatically be converted to stock at a specified time.
market capitalization: describes a company's value; can be calculated by multiplying the price of one share of the company and the number of outstanding shares; most often, companies are divided into small-, mid- and large-cap, but there is no industry standard for where these divisions should be made.
market price: the price of a security at the end of a given trading day; this is a dynamic number that changes through the day based on buying and selling activity.
market value: see market price.
market-neutral strategies: strategies seeking to provide a consistent return, regardless of whether the market is going up or down; see also long-short.
maturity: a bond's maturity is the date on which principal is due back to the borrower.
National Association of Securities Dealers (NASD): a private, self-regulatory organization entrusted with certain oversight responsibilities of the U.S. securities industry.
net asset value (NAV): the value of one share of an investment company, calculated by subtracting its liabilities from its assets; this is a dynamic number, which changes daily based on buying and selling activity in the open market. Per share NAV can be calculated by dividing NAV by the number of shares outstanding.
next call price: determined at or prior to issuance, this is the price at which the issuer may redeem the bond or preferred stock. The call price is usually above the par value of the security in order to compensate the holder for the loss of income prior to maturity. The earliest call price is most significant in evaluating a bond.
option premium: the amount that an option writer (seller) earns per share from the buyer; the price of an option premium depends on such factors as volatility and the difference between the current stock price and the strike price; see strike price.
par value: the dollar amount that a bond is worth at the time it is sold, without the influence of trading on the secondary market.
PEG: price/earnings ratio divided by earnings growth rate; a lower PEG indicates that less is being paid for each unit of earnings growth.
preferred stock: holders of preferred shares of a company's stock are granted preference on earnings over that of common stockholders.
premium: a closed-end fund is said to be trading at a premium when its market price is higher than its NAV; see NAV, market price, discount.
provisional call: see conditional call.
price-earnings (PE) ratio: the ratio of a company's price per share (stock price) to its earnings per share; for example, a PE ratio of 18 means that a stock is trading at 18 times the underlying companies earnings.
put feature: the right to sell a security, such as a convertible, back to the issuer at a predetermined price; typically, most zero-coupon convertibles have a put feature.
put option: an agreement that gives the purchaser the right—but not the obligation—to sell shares of stock at a certain price, during a pre-specified period.
R-squared: a mathematical measure that describes how closely a security's movement reflects movements in a benchmark.
realized gains/losses: gains or losses accumulated through the sale of individual positions in a fund.
rebalancing: to keep a fund's allocation within pre-established limits.
resets: convertibles featuring a reset schedule that would increase the conversion ratio if the stock were to decline over a predetermined time frame.
risk/reward ratio: the ratio of the potential degree of downside risk to the upside potential displayed in an investment. For a convertible security the risk/reward ratio is determined by examining various possible future market scenarios as well as by analyzing projected price movements of the underlying common stock.
ROIC: return on invested capital; a measure of an investment's growth prospects; measures the percentage earned on invested capital.
Rule 144A securities: securities that are exempted from the registration requirement of the Securities Act; these may be sold only to qualified institutional buyers, such as a mutual fund, and any resale of these securities must generally be effected through a sale that is registered under the Securities Act or otherwise exempted or excepted from such registration requirements; see Securities Act of 1933.
SEC yield: a standardized yield calculation based on a fund's filings with the SEC that allows investors to compare bond funds along a single metric; on a basic level, involves calculating an annualized figure for yield based on income earned over the 30 days prior.
Securities Act of 1933: established registration requirements for the resale of certain restricted securities to certain qualified institutional buyers.
Securities and Exchange Commission: created under the Securities Exchange Act of 1934, the SEC is a U.S. government agency that has jurisdiction over the securities industry.
securities lending: mutual funds may lend their portfolio securities to broker-dealers and banks; any such loans must be secured by collateral on an ongoing basis in cash or cash equivalents maintained on a current basis in an amount at least equal to the market value of the securities loaned by a fund. Investment advisors monitor the creditworthiness of the firms to which a fund lends securities.
seesaw market movements: unpredictable movements in the financial markets, marked by sharp gains and losses that can occur on a daily basis.
semi-variance: separates volatility on the upside from volatility on the downside; it's helpful to distinguish between the two because volatility on the upside means potentially higher returns, whereas downside volatility means greater risk of loss; see downside semi-variance, upside semi-variance.
Sharpe ratio: risk-adjusted measure developed by William F. Sharpe, calculated using standard deviation and excess return to determine reward per unit of risk. The higher the Sharpe ratio, the better the historical risk-adjusted performance.
short interest credit: Short interest refers to interest the short seller earns by reinvesting the proceeds of the short sale; the short interest credit is this interest, less the borrowing costs associated with the original borrowing transaction and any dividends on the borrowed stock (as the original lender is entitled to the dividends earned on the stock loaned to the short seller).
short selling: borrowing a stock and then selling it; short sellers believe the value of a stock will drop after it is sold; in a successful short sale, the price of the stock drops after the short seller has sold it; the short seller then purchases the stock at this lower price, and returns these less expensive shares to the lender.
standard deviation: a calculation that indicates how tightly a set of data points are grouped around the mean; the higher the standard deviation, the higher the historic volatility (fluctuation) of returns.
standardized yield: see SEC yield
step-up convertible: a convertible whose original coupon payment increases, or "steps up," on a designated date; the added cash flow gained upon the coupon's increase gives the convertible an extra degree of interest-rate protection, decreasing the downside risk.
stock value (of a convertible): see conversion value
strike price: the pre-established price per share at which an option can be exercised (bought or sold) according to the option contract.
swap: to sell one security to purchase another; the aim is usually to enhance yield while maintaining equity position in a security.
synthetic convertible: a combination of a non-convertible debt instrument with a warrant or option to create the characteristics of a convertible issue.
systematic risk: the portion of a stock risk attributable to the general movement of stock prices.
ticker symbol: a code used to identify a security on a stock exchange.
top down: selection of individual investments based on economic sector analysis or investment themes, investment processes can blend top-down and bottom-up analysis; see bottom up.
total return: for a fund, measures net investment income and capital gain or loss from portfolio investments, assuming reinvestment of dividends and capital gains; does not reflect the effect of sales charges, contingent deferred sales charges or the deduction of taxes that a shareholder would pay on fund distributions or sale of shares.
trading flat: bonds trading flat are bought and sold without the payment of accrued interest; income bonds and bonds in default trade flat.
Treasury note: Treasury notes are U.S. government debt securities with maturities between 1 and 7 years that earn a fixed rate of interest every six months until maturity. Treasury notes are backed by the full faith and credit of the U.S. government.
Treasury bond: Treasury bonds are U.S. government debt securities with maturities of more than 7 years that earn a fixed rate of interest every six months until maturity. Treasury bonds are backed by the full faith and credit of the U.S. government.
turnover ratio: percentage of assets in a portfolio (such as a mutual fund) that changed over a certain period, often a year; higher turnover indicates greater buying and selling activity.
TTM: trailing twelve months.
underwriter: the lead underwriter for the security; useful to know because the lead underwriter often makes markets in the security and can provide information on the security and its issuer.
upside beta and downside beta: indicates the convertible's price sensitivity to changes in the overall stock market (not including the income portion of the convertible).
upside participation: the extent to which an investment benefits from the upward movement of the financial markets; in convertible bonds, the upside participation comes from the equity component.
upside semi-variance: shows how much of investment's overall volatility is the result of upward price movements; compare to downside semi-variance.
unsystematic risk: risk of a stock specific to the company's financial condition or industry group.
value investing: selecting investments that are, based on the investor's assessment, selling at a price that is lower than fair value according to financial measurements of their intrinsic value; the expectation is that the price will rise to meet or exceed fair value; see growth investing.
volatility: fluctuation of an investment's performance over a specified period of time, often interpreted as a measure of risk; standard deviation is a commonly cited measure of volatility; volatility may also be called variance or standard risk.
warrant: an option to buy a stock at a stated price, extending up to 10 years; warrants themselves bear no dividend and no voting rights.
warrant premium: the difference between the market value of the warrant and its exercise price expressed as a percentage.
year-to-date (YTD): period from the start of a calendar year through a specified date.
yield: the amount earned on a bond, taking into account the amount paid for the bond above or below par value as well as interest payments accrued over the life of the bond.
yield advantage: a convertible's yield minus the common stock dividend yield.
yield curve: representation of yields of comparable securities with different maturities (for example, 1-year Treasuries and 10-year Treasuries); in a "normal" yield curve, long-term yields are higher than short-term yields; the yield curve is said to be "flat" when the yields of the short-term and long-term bond are similar; the yield curve is said to be "inverted" when long-term yields are less than short-term yields.
yield to maturity: the rate of return on a bond, which takes into account the market price, interest payments and time until date of maturity.