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Investments Dictionary

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Data Mining
Sorting through large amounts of historical data to uncover systematic patterns that can be exploited.
Day Order
A buy order or a sell order expiring at the close of the trading day.
Days' Receivables
See average collection period.
Dealer Market
A market where traders specializing in particular commodities buy and sell assets for their own accounts. The OTC market is an example.
Debenture or Unsecured Bond
A bond not backed by specific collateral.
Debt Securities
Bonds; also called fixed‐income securities.
Dedication Strategy
Refers to multiperiod cash flow matching
Default Premium
A differential in promised yield that compensates the investor for the risk inherent in purchasing a corporate bond that entails some risk of default.
Defensive Industries
Industries with little sensitivity to the state of the economy.
Deferred Annuities
Tax-advantaged life insurance product. Deferred annuities offer deferral of taxes with the option of withdrawing one's funds in the form of a life annuity.
Defined Benefit Plans
Pension plans in which retirement benefits are set according to a fixed formula.
Defined Contribution Plans
Pension plans in which the employer is committed to making contributions according to a fixed formula.
Degree of Operating Leverage
Percentage change in profits for a 1% change in sales.
Delta (of option)
See hedge ratio.
Delta Neutral
The value of the portfolio is not affected by changes in the value of the asset on which the options are written.
Demand Shock
An event that affects the, demand for goods and services in the economy.
Derivative Asset/Contingent Claim
Securities providing payoffs that depend on or are contingent on the values of other assets such as commodity prices, bond and stock prices, or market index values. Examples are futures and options.
Derivative Security
See primitive security.
Direct Search Market
Buyers and sellers seek each other directly and transact directly.
Directional Strategy
Speculation that one sector or another will outperform other sectors of the market.
Discount Bonds
Bonds selling below par value.
Discretionary Account
An account of a customer who gives a broker the authority to make buy and sell decisions on the customer's behalf.
Diversifiable Risk
Risk attributable to firm‐specific risk, or nonmarket risk. Nondiversifiable risk refers to systematic or market risk.
Spreading a portfolio over many investments to avoid excessive exposure to any one source of risk.
Dividend Discount Model (DDM)
A formula stating that the intrinsic value of a firm is the present value of all expected future dividends.
Dividend Payout Ratio
Percentage of earning~ paid out as dividends.
Dividend Yield
The percent rate of return provided by a stock's dividend payments.
Dollar-weighted Rate of Return
The internal rate of return on an investment.
Doubling Option
A sinking fund provision that may allow repurchase of twice the required number of bonds at the sinking fund call price.
Dow Theory
A technical analysis technique that seeks to discern long‐ and short‐term trends in security prices.
DuPont System
Decomposition of firm profitability measures into the underlying factors that determine such profitability.
A measure of the average life of a bond, defined as the weighted average of the times until each payment is made, with weights proportional to the present value of the payment.
Dynamic Hedging
Constant updating of hedge positions as market conditions change.

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