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An arrangement whereby a security issue is canceled if the underwriter is unable to re-sell the entire issue.
Alpha
Measure of risk adjusted performance. An alpha is usually generated by regressing the security or mutual
funds excess return on the S&P 500 excess return. The beta adjusts for the risk (the slope coefficient). The
alpha is the intercept. Example: Suppose the mutual fund has a return of 23% and the short-term interest
rate is 5% (excess return is 20%). During the same time the market excess return is 9%. Suppose the beta
of the mutual fund is 2.0 (twice as risky as the S&P 500). The expected return given the risk is 2x9%=18%.
The actual excess return is 20%. Hence, the alpha is 2% or 200 basis points. Alpha is also know as Jensen
Index. Related: Risk adjusted return.
Alternative mortgage instruments
Variations of mortgage instruments such as adjustable-rate and variable-rate mortgages, graduated-
payment mortgages,0 reverse-annuity mortgages, and several seldom-used variations.
Alternative order
Used in context of general equities. Order giving a broker a choice between two courses of action either to
buy or sell, never both. Execution of one course automatically eliminates the other. An example is a
combination buy limit/buy stop order, wherein the buy limit is below the current market and the buy stop is
above. If the order is for one unit of trading when one part of the order is executed on the occurrence of one
alternative, the order on the other alternative is to be treated as cancelled. If the order is for an amount
larger than one unit of trading, the number of units executed determine the amount of the alternative order to
be treated as cancelled. Either-or order.
American Depository Receipts (ADRs)
Certificates issued by a U.S. depositary bank, representing foreignshares held by the bank, usually by a
branch or correspondent in the country of issue. One A.D.R. may represent a portion of a foreign share, one
share or a bundle of shares of a foreign corporation. If the A.D.R.s are sponsored, the corporation provides
financial information and other assistance to the bank and may subsidize the administration of the A.D.R.s.
Unsponsored A.D.R.s do not receive such assistance. A.D.R.s carry the same currency, political and
economic risks as the underlying foreign share. Arbitrage keeps the prices of A.D.R.s and underlying foreign
shares, adjusted for the SDR/ordinary ration essentially equal. American depository shares(A.D.S.s) are a
similar form of certification.
American depository share (ADS)
Foreign stock issued in the U.S. and registered in the A.D.R. system.
American option
An option that may be exercised at any time up to and including the expiration date. Related: European
option
American shares
Securities certificates issued in the U.S. by a transfer agent acting on behalf of the foreign issuer. The
certificates represent claims to foreign equities.
American Stock Exchange (AMEX)
Stock exchange with the third largest volume of trading in the U.S. Located at 86 Trinity Place in downtown
Manhattan. The bulk of trading on A.M.E.X. consists of glossary options (computer technology glossary,
institutional glossary, major market glossary) and shares of small to medium-size companies is predominant.
Recently merged with N.A.S.D.A.Q. See: Curb.
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