Glossary of Terms

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Accretion	The addition of principal to a fund over a period of time as the result of a plan of accumulation. Similar to amortization, except that accretion results in an increase of accounting worth, while amortization results in a decrease. In portfolio accounting, discount bonds are accreted to par while premium bonds are amortized to par.
Accrual Bond	A bond that accrues interest which is added to the remaining principal and paid to the investor at maturity as opposed to periodically, over the term of the bond.
Accrued Interest	Interest accumulated on a fixed income security from its issue date or its last interest payment date up to but not including the settlement date of a purchase or sale transaction. The buyer pays the seller the market price of the bond plus accrued interest. Also refers to interest earned but not yet received on a fixed income security.
Actual/360	The actual/360 day-count method is used mainly for money-market securities: medium-term CDs, short-term CDs, and floating-rate notes (with the exception of mortgage products). The U.S. Treasury bill dollar discount is also calculated using this method. (When calculating a fraction of the normal coupon period, the actual number of calendar days in the interest period is used as the number of days for which interest is paid. The denominator is 360 (12 months of 30 days each).
Actual/365	The actual/365 day-count method is used primarily to calculate Treasury bond equivalent yields for U.S. Treasury bills, but also may be used to calculate foreign government bonds and floating-rate notes. (When calculating a fraction of the normal coupon period, the actual number of calendar days in the interest period is used as the number of days for which interest is paid, and 365 is used as the denominator).
Adjusted Rate Mortgage (ARM)	Mortgage agreement between a financial institution and a real estate buyer stipulating predetermined adjustments of the interest rate at specified intervals, usually one, three, or five years. Payments are tied to some index outside the control of the bank or savings and loan institution, such as the interest rates on U.S. Treasury bills or the average national mortgage rate. Borrowers get lower rates at the beginning of the ARM than they would if they took out a fixed rate mortgage covering the same term.
Adjusted Trading	The simultaneous purchase of one security and sale of another security at prices which are above current market values. This type of transaction is used to prevent realizing a loss on the security which is sold. Adjusted trading is not permissible for credit unions.
Agency	The debt of an agency (or frequently, government sponsored enterprises) of the U.S. Government. Payment of principal and interest are sometimes guaranteed by the government itself.
Agent	An individual authorized by a principal to execute orders for or act on behalf of that principal. The principal may pay the agent a fee or commission.
Amortization	The reduction of debt through regular payments of principal which pay off a loan by its maturity date.
Announcement Date	The day most of the terms of the bond are made public such as the issue size and maturity date.
Annual Return	The total return of a security over a specified period, expressed as an annual rate of interest.
Annualized	A figure (as in a percentage) calculated by a formula to find the "average" performance per year for a period greater than one year.
Arbitrage	Technically, the purchase of a security in one market and the simultaneous sale of it or its equivalent in the same market or other markets for the differential or spread prevailing, at least temporarily, because of conditions peculiar to each market. Commonly refers to a swap done between two similar issues based upon an anticipated change in price spreads.
ARM	Adjusted Rate Mortgage
Asked	The price at which securities are offered to a potential buyer; the price sellers offer to take.
Asked Price	Price at which a security is offered for sale on an exchange. Also called the ask price, asking price, or offering price.
Asset-Backed Security (ABS)	A security collateralized by loans, leases, unsecured receivables, or installment loans on personal property such as computers, automobiles or credit cards.
Asset-Liability Management	Financial institutions perform asset-liability management when they structure the term and repricing of their deposits against the interest rate risk exposure of their loan commitments or investments. This provides protection from the potentially adverse effects of rapid changes in interest rates.
Assign	To sign a document transferring ownership from one party to another. Registered bonds can be assigned by completing a form printed on the back of the certificate. For safety reasons, the completion of an "assignment separate from certificate" or "bond power" is preferred.
At or Better	In connection with a buy order, it means to purchase at the price specified or under; in a sell order, to sell at the price specified above.
Auction Market	Process through which securities are sold to investors at initial issuance. Original issue Treasury securities are sold through this system using competitive bidding.
Available for Sale (AFS)	Accounting classification under Statement of Financial Accounting Standards (SFAS) 115, Accounting for Certain Investments in Debt and Equity Securities. AFS securities are those which management does not have the positive intent and ability to hold to maturity. Securities classified AFS must be recorded at fair market value each period, with unrealized gains or losses recorded as a contra asset. AFS securities may be sold freely to generate liquidity or to rebalance the investment portfolio.
Average life	A measure of how long it takes, on average, for a security to repay its principal. For a Treasury note, no principal is repaid until maturity, so the average life equals the term to maturity. A sinking-fund bond or a mortgage pool, on the other hand, pays down principal at various times in its life, and in this case, average life may be significantly different from the time to final maturity.
Average yield	The market-weighted yield to maturity of the specified portfolio.
Away	Refers to a trade, quote or market which does not originate with the dealer in question, I.e., "the market is 100 1/4-1/2 away (from me)."

The information contained herein has been obtained from sources deemed to be reliable: however Southeast Corporate does not guarantee its accuracy or completeness.

BA	Bankers' Acceptance
Bad Days	Refers to days delayed in the receipt of redemption proceeds because the maturity date falls on a weekend or a holiday.
Balloon	A mortgage-backed security (MBS) with periodic payments based on a 30-year amortization schedule, but with a balloon principal payment required at the end of five or seven years.
Bank Notes	Unsecured and uninsured medium-term notes issued by a bank. The issuing bank does not pay a Federal Deposit Insurance Corporation (FDIC) premium on bank notes.
Bankers' Acceptance (BA)	An order to pay a specified amount of money to the holder on a specified future date. The bank that accepts this draft assumes responsibility to make payment on the draft at maturity. BAs are usually created to finance the storage or shipment of foreign or domestic goods.
Bankers' bank	A designation for pass-through institutions. Bankers' banks are exempt from keeping Regulation D reserves at the Federal Reserve.
Barbell	Portfolio structuring technique using a mix of short and long-term securities to achieve a targeted average maturity or duration while gaining convexity.
Basis	The difference in price or yield between a futures position and the financial instrument being hedged: a difference that can change during the hedge period to produce a basis gain or a basis loss.
Basis Points	One one-hundredth of one percent. One hundred basis points equal one percent.
Basis Risk	The risk that the relationship between interest rate indices alters unfavorably.
Bear Market	A market characterized by a trend of falling prices.
Bearer Bond	A bond presumed to be owned by its holder, who collects interest by presenting one of the detachable interest coupons to the issuer's agent or bank.
Bearish	Pessimistic about the market; anticipating a decline in prices
Bid and Asked/Bid and Offer	The price at which as owner offers to sell (asked of offer) and the price at which a prospective buyer offers to purchase (bid).
Bid Price	The price a potential buyer is willing to pay for a desired security.
Bid-Ask Spread	The price or discount spread between the bid and asked prices of a security. The dealer will pay the bid price or offer the security for the asked price. Thus, the bid price is lower than the asked price, with the dealer earning the bid-ask spread. Also known as bid-offer spread.
Bond	An instrument of debt issued by a corporation or government to raise capital. Bonds are interest bearing and promise to pay the holder a specified sum of money at its maturity plus interest at given intervals.
Bond Equivalent Yield	Annual yield on a short-term, non-coupon bearing security calculated in a manner that results in a yield comparable to those quoted on coupon securities.
Bond Returns	Consist of two components, 1) current yield (see description below) and 2) price performance. Current Yield is the amount of coupon income received, expressed as a percentage of the current market value of the bond or portfolio. Price Performance of bonds is determined by changes in interest rates. If rates rise, bond prices fall. If rates fall, bond prices rise.
Book Loss	The difference between the original cost or book value and the proceeds from the sale of a security if sold at a loss.
Book Value	The value of a security as shown on the owner's balance sheet. Often much different from market value, book value is based on acquisition cost plus (minus) any unamortized (accreted) premium (discount).
Book Yield	The yield (current to maturity) of a security calculated using book value as the price. Alternatively, the yield at which a security was acquired.
Book-Entry Securities	Securities that are not represented by a paper certificate, but are maintained as computerized records at a Federal Reserve bank or other clearing center in the name of the member depository institution. The member depository institution, in turn, keeps records of the securities it owns and those being held for its customers.
BP	Basis Point(s)
Breakeven Analysis	A method of analyzing investments to determine under what circumstances the returns of different securities would be equal. Commonly used in reference to the calculation of how much yield change is needed to produce identical returns among securities.
Broker/Dealer	A broker/dealer engages in buying and selling securities both for its own account and for the accounts of others.
Bull Market	A market characterized by a trend of rising prices.
Bullet	An issue of securities with no amortization or sinking fund features.
Bullet Maturity	A bond whose principal is paid only on the final maturity date.
Bullish	Optimistic about the market; anticipating a rise in prices.

The information contained herein has been obtained from sources deemed to be reliable: however Southeast Corporate does not guarantee its accuracy or completeness.

Call	1. The right, but not the obligation, to purchase an asset at a predetermined price (strike price) prior to a specific date, referred to as the expiration date. Call options can be European, which allows the holder to exercise the option on the expiration date; American options which can be exercised any time prior to the expiration date; or Bermudan options, which can be exercised on specific dates prior to expiration. 2. An option contract, which for a consideration, gives the holder the right to purchase from the writer of the call a specified price, good for a specified time period.
Call Date	The date on which a call option may be exercised.
Call Provision	The call provision describes the details by which a bond may be redeemable by the issuer in whole or in part prior to the maturity.
Callable	A feature of a bond whereby it may be redeemed by the issuer prior to maturity under terms designated prior to issuance because the issuer owns a call option on the bond.
Cap	A feature of a floating-rate security that stipulates a maximum coupon (the cap), above which the variable coupon cannot adjust.
Capital	Sum of regular statutory reserves, other reserves and undivided earnings.
Capital Gain/Capital Loss	A realized gain or loss calculated at the time of sale or maturity of any capital asset or security. Refers to the profit or loss attributable to the difference between the purchase and sale prices.
Capital Markets	Markets where capital funds (debt and equity) are traded. Private placements, exchanges, and organized markets are capital markets.
Capital Spending	Nonresidential fixed investment in the GNP; consists of business outlays on long-lived productive facilities (plant and equipment) including office building and shopping center construction, as well as purchases of such long-lived items as trucks, office and farm equipment.
Carry	The cost of financing positions; the rate of interest earned from the securities held less the cost of funds borrowed to purchase them.
Cash Equivalents	Any kind of savings account, short-term bank account, commercial paper, or other type of instrument easily converted to cash.
Cash Flow	Money that the client is contributing to or withdrawing from an account during a specific period, including bank and manager fees.
Cash Settlement	A delivery made and settled on the day of the transaction for government securities.
Certificate of deposit (CD)	A money-market instrument that is a receipt for funds deposited in a financial institution for a specific period of time and at a specified rate of interest
Clearing Agent	An entity which clears transactions for institutions that buy and sell securities.
Collateral	Assets pledged to a lender until a loan is repaid. If the borrower defaults on the loan, the lender has the legal right to sell the collateral to pay off the loan.
Collateralized Mortgage Obligation (CMO)	Mortgage-backed pass-through security separates mortgage pools into separate classes called tranches. Interest on the outstanding principal balance of each class is paid at a specified coupon rate. Principal payments, unscheduled principal prepayments and interest are applied to each class according to a set of rules. The stated maturity of the class is the latest date on which the outstanding principal balance will be retired in full, assuming no prepayments.
Commercial Paper	Short-term debt obligations issued by banks, corporations, and other borrowers to investors with temporary idle cash. Commercial paper is unsecured and usually discounted, although some issues are interest-bearing. Maturities range from 1 to 365 days.
Commingling	Combining securities owned by a customer with those owned by its custodian.
Commission	A fee paid to an agent or broker for negotiating a transaction, based on a percentage of the selling price.
Commodity	A basic product, usually agricultural or mineral, traded on a commodity exchange. Examples include petroleum products, precious metals, and grains.
Compound Interest	Interest paid not only on the initial principal, but also on any interest accumulated from one period to the next. The more frequently interest is compounded, the higher the realized rate of interest.
Confirmation	A written document which confirms the previously agreed upon terms of a transaction.
Constant Maturity Treasury (CMT) Indices	The weekly average of the daily median of 5 primary dealers' bid-side quotations on various maturity Treasury securities. CMT is published for 3- and 6-month and 1-, 2-, 3,- 5,- 10- and 30-year maturities. Often used as a floating rate coupon index.
Constant Prepayment Rate (CPR)	A prepayment measure for mortgage-backed securities (MBS) calculated as the arithmetically annualized percentage of the previous month's principal balance that prepays (in excess of scheduled amortization) in a given month. Example: prepaid principal in month t divided by previous month's ending principal balance, raised to the 12th power.
Consumer Price Index	A measure of inflation. The CPI represents the market-weighted prices of a fixed basket of goods normally purchased by consumers. A measure of inflation, the CPI represents the market-weighted prices of a fixed basket of goods normally purchase by consumers and computed by the Bureau of Labor Statistics.
Consumer Spending	The sum of personal outlays on new (as opposed to used) goods and services other than housing.
Contraction	A period of negative economic growth, normally measured by Gross Domestic Product (GDP). Contraction is the opposite of expansion and is synonymous with recession.
Conventional Mortgage	A residential mortgage pool with collateral mortgage issued by a bank, commercial or savings and loan association, with a fixed rate and term. Conventional mortgages are guaranteed by FNMA or FHLMC,
Convexity	The second derivative of a bond's price change with respect to its yield, divided by its price. This number, used in conjunction with modified duration provides a more accurate approximation of the percentage price change resulting from a specified change in a bond's yield than does modified duration alone. Convexity is the price measure of how much a bond's price/yield curve deviates from a straight line (measure of the degree of curvature of the price/yield relationship). Measures the rate of change of a security's modified duration for a given change in yield.
Corporate Bond	Debt instrument issued by a corporation. Corporate bonds are typically taxable, have a par value of $1,000, and are traded on major exchanges or in the over the counter market. Corporate bonds are subject to default risk and are rated by a rating agency according to that risk.
Corporate Delivery (and Settlement)	Completion of a securities transaction at the office of the purchasing party or its receiving agent on, but not before, the third business day following the trade date.
COFI (11th District Cost of Funds Index)	The cost of funds of thrift institutions in the Federal Home Loan Bank System's 11th District (California, Arizona and Nevada). Often used as a floating rate coupon index.
Coupon	The rate of interest to be paid on a bond, most often it is paid semi-annually. Refers to the interest payment of par, or face value. Expressed as a percentage of par.
Coupon Bond	Bond issued with detachable coupons that must be clipped and submitted to a paying agent or the issuer for semi-annual interest payment. The holder of the coupon is entitled to the interest payment. Also known as bearer bonds.
Credit	An arrangement to receive cash, goods or services now and pay for them in the future.
Credit rating	An estimate of the financial health of a borrower, as well as the borrower's ability to repay principal and interest in a timely manner.
Credit risk	The possibility of loss to a lender resulting from nonpayment by a borrower.
Current Coupon	The pass through coupon in the mortgage-backed securities (MBS) market trading at or nearest to, but not exceeding, par.
Current Par	The current principal of a certificate calculated by multiplying the original face by the factor.
Current Yield	Annual interest on a bond divided by the current market value. This results in the actual income rate of return as opposed to the coupon rate.
Curve Duration	A measurement of a portfolio's price sensitivity to changes in the shape of the yield curve (i.e., steepening or flattening). A portfolio's curve duration is considered positive if it has more exposure to the 2- to 10-year part of the curve. A portfolio with positive curve duration will perform well as the yield curve steepens, but will perform poorly as the yield curve flattens. A portfolio with negative curve duration has greater exposure to the 10- to 30-year portion of the curve. It will be a poor performer as the yield curve steepens and a strong performer as the yield curve flattens.
CUSIP	Security ID number assigned by the American Bankers Association's Committee on Uniform Security Identification Procedures. Each security has it own unique nine-character CUSIP. (The first six numbers identify the organization issuing the security. The next two characters identify the issue itself. The last digit is a "check digit," which is used to test for transmission and data-entry errors. The check digit contains no identification information. Note: Privately-placed issues do not have CUSIPs. Medium-term notes may or may not have CUSIPs).

The information contained herein has been obtained from sources deemed to be reliable: however Southeast Corporate does not guarantee its accuracy or completeness.

Dated Date	Date from which interest is first accrued on newly issued debt instruments.
Day Order	An order to buy or sell securities which must be executed by the end of the trading day on which it was entered, otherwise it expires.
Daylight Overdraft	Being overdrawn in a deposit account during business hours. A daylight overdraft exposes the depository institution to a potential credit risk.
Dealer	A person or firm acting as a principal in buying and selling securities, usually compensated by the spread.
Debenture	An obligation secured by the general credit of the issuer rather than being backed by a specific lien on property.
Debt Instrument	Written promise to repay a debt. Bills, notes, bonds, bankers' acceptances, certificates of deposit, debentures and commercial paper are debt instruments.
Deep Discount Bond	A bond issued at a very low issue price. Deep discounts have low coupons offering an investor high principal return and low interest income. An extreme example is a zero coupon bond which pays all of its return in principal on the redemption date.
Default	Failure to make timely payment of interest or principal on a debt security or to adhere to other provisions of a bond indenture.
Deficit	The amount by which expenditures exceed revenues.
Deflation	A progressive reduction in the general price level, which would make real interest rates greater than nominal rates.
Delivered Floater	Floating rate security whose coupon adjusts as a fraction of the change in the underlying index through use of a multiplier less than 1 in the coupon formula. For example, a coupon formula of .5 X Prime would result in a 50 basis point change in the coupon for every 100 basis point change in Prime.
Delivery Date	The date on which the securities involved in a securities transaction are paid for and delivered.
Delivery versus payment (DVP)	An industry standard control ensuring the owner is always in possession of either the security or the proceeds of the transaction. With DVP, payment for the security occurs simultaneous with the delivery of the security.
Delivery versus Receipt	Delivery of securities with an exchange of a signed receipt for the securities.
Denomination	The minimum purchase amount, or multiples thereof, of a new issue when it is priced.
Deposit Insurance	Insurance of deposits in federally-insured financial institutions up to $100,000 per account.
Depository	An institution which accepts securities for deposit. Deliveries and transfers between security owners are conducted by accounting entries which reflect ownership as opposed to physically moving securities.
Depository Trust Company (DTC)	A securities depository where physical stock and bond certificates are delivered and electronically transferred between members. The DTC is a member of the Federal Reserve System and is owned by most of the brokerage houses on Wall Street and the New York Stock Exchange. Securities eligible for DTC include most corporate bonds, collateralized mortgage obligations (CMOs), equities, unit investment trusts, commercial paper, certificates of deposit and municipal bonds.
Depression	A severe recession.
Derivative	A contractual agreement between two counterparties, recorded off-balance sheet, calling for the exchange of cash flows on a notional principal basis. Examples of derivatives include swap agreements, futures contracts, and options contracts. As defined, derivatives are not permissible credit union investments.
Direct Hedge	A futures purchase or sale intended to reduce price-level risk for a deliverable financial instrument.
Discount	Amount by which a bond sells below its face value. If a bond with a face value of $1,000 sells for $900, it is selling at a $100 discount.
Discount Basis	A method for quoting non-coupon securities (which always sell at a discount) in which the discount from par is annualized based on a 360-day year.
Discount Brokerage	A brokerage organization that executes orders to buy and sell securities at commission rates sharply lower than those charged by a full-service broker.
Discount Margin	The adjusted margin above the index on a floating rate security. The discount margin (DM) plus the index equals the security's yield. Floating rate securities are quoted on a discount margin basis.
Discount Rate	The rate of interest charged by the Federal Reserve to member institutions that borrow at the discount window.
Discount Securities	Non-coupon bearing securities that are issued at a discount (less than par) and redeemed at maturity for full face value; e.g., U.S. Treasury bills.
Discount Window	The Federal Reserve facility that extends last-resort credit directly to eligible depository institutions.
Discounting	The process of calculating the present value of a series of cash flows by dividing each cash flow by one plus an appropriate discount rate.
Discretionary Account	Type of account in which the broker or advisor has the authority to buy and sell securities without the client's prior knowledge of consent.
Discretionary Consumer Spending	Consists of purchases deemed postponable rather that routine- I.e., "luxuries" vs. "necessities."
Disinflation	A slowing of the rate of growth in prices, normally resulting from a decline in the pace of economic activity.
Disintermediation	Systemic trend of the withdrawal of funds from intermediary financial institutions, in order to directly access investment products offering higher returns.
Dividend	1. A cash or other distribution to preferred or common stockholders. 2. A share of earnings distributed to shareholders of a credit union.
Dividend Rate	In the case of bonds, it is the coupon rate on the bonds. In the case of stocks, it is the current annual dividend amount per share expressed in dollars. In the case of cash equivalents, it is the annualized yield.
Dividend Yield	The percentage obtained by dividing the dividend by the market price of a stock.
DJIA	Dow Jones Industrial Average
DK (Don't Know)	Also known as bounce. A term used by a receiving party when they do not recognize or agree with the details of securities that are being delivered.
Dollar Value of a Basis Point (DV01)	The change in a security's dollar market value given a 1 basis point change in yield. Similar to duration, but for a very small change in yield.
Domestic Settlement	Settlement according to the accepted market convention.
DTC	Depository Trust Company
Dual Index Floater	Floating rate security whose coupon adjusts with the spread between two indices. For example, a coupon formula of 10 year CMT - 3 month LIBOR would result in a rising coupon when the spread between 10 year CMT and 3 month LIBOR widens, and a falling coupon when the spread narrows.
Dumbbell	Refers to a fixed income portfolio strategy in which assets are concentrated only in the very short or very long maturity issues.
Duration	A measure of average maturity that incorporates a bond's yield, coupon, final maturity and call features into one measurement. Duration measures the sensitivity of a bond's, or portfolio's, price to changes in interest rates.
Dutch Auction	A competitive bidding technique in which the lowest price necessary to sell the entire amount of securities offered becomes the price at which all securities are sold.
Dwarf	A FNMA pass-through security backed by 15-year mortgages which have the same guarantees as regular FNMAs.

The information contained herein has been obtained from sources deemed to be reliable: however Southeast Corporate does not guarantee its accuracy or completeness.

Earnings Yield	The percentage found by dividing the earnings per share by the market price of a stock.
EBY	Equivalent Bond Yield
Economic and Monetary Union (EMU)	The union of 12 member countries / currencies to institute an irreversible fixed exchange rate for participating countries and their replacement by a single European currency unit, the euro.
Economic Indicators	Statistics which suggest the direction of interest rates and the general economy. Examples are the unemployment rate, inflation rate, capacity utilization rate, and balance of trade.
Effective Duration	The standard measurement that estimates the price change in a security or a portfolio when the interest rates movements are fairly small.
Effective Rate	Calculated yield on a debt instrument which uses the purchase price of the security. The effective rate is determined by the price, the coupon rate, the time between interest payments, and the time until maturity.
Effective Yield	The rate of return realized by an investor who buys a security and subsequently sells it. It reflects coupon, interest on interest, principal payments and capital gains or losses in comparison to the original purchase price.
Equity	Ownership or proprietary rights and interests in a company. Synonymous with common stock. Investments: ownership interest possessed by shareholders in a corporation - stock as opposed to bonds.
Equivalent Bond Yield (EBY)	A measurement of the rate of return on a security sold on a discount basis that assumes actual days to maturity and a 365-day year.
Eurobond	A bond denominated in a currency of a European country.
Eurodollar Certificate of Deposit	Certificate of deposit issued by a bank outside the United States, primarily Europe, with interest and principal paid in U.S. dollars.
Eurodollar Issues	Dollar denomination securities of U.S. issuers traded in foreign markets.
Even Par Swap	The sale of one block of bonds and the simultaneous purchase of the same principal amount of another block of bonds.
Exchange Rate	The relative value of one currency in terms of another.
Ex-Dividend Date	The ex-dividend date determines who, from a trading perspective, receives the next dividend payment.
Exempt	Instruments exempt from registration requirements of the Securities Act of 1933 and the margin requirements of the Securities and Exchange Act of 1934. Exempt securities include debt of the U.S. Treasury, U.S. Government agencies and municipalities, private placements, commercial paper, Title XI, and equipment trust certificates.
Expansion	A period of increase in the rate of economic growth, normally measured by Gross Domestic Product (GDP).

The information contained herein has been obtained from sources deemed to be reliable: however Southeast Corporate does not guarantee its accuracy or completeness.

Face Value (Amount)	The par value of a bond that appears on the face. This is the amount that the issuer promises to pay at maturity as well as the amount on which interest is computed.
Factor	The proportion of an amortizing security's outstanding principal balance to its original principal balance expressed in decimal form.
Fail	A trade is said to fail if on the settlement date the seller fails to deliver securities to the buyer or the buyer fails to deliver proper funds to the seller. The buyer is said to have a "fail to receive" and the seller is said to have a "fail to deliver."
Fast-Pay	Refers to a pass-through security with a relatively high rate of prepayment.
Fed Funds Target Rate	The target rate for federal funds established by the Federal Open Market Committee (FOMC)
Federal Agency Securities	Also known as agencies, these securities are issued by government agencies such as the Government National Mortgage Association (GNMA) or government sponsored enterprises (GSE) such as the Federal Home Loan Bank System.
Federal Farm Credit Bank (FFCB)	Government-sponsored institution which specializes in the consolidation of the financing activities of the Federal Land Banks, the Federal Intermediate Credit Banks, and Banks for Cooperatives. The FFCB issues bonds and notes on a regular basis to provide funds to members of the Federal Farm Credit System.
Federal Financing Bank (FFB)	A government institution established in 1973 to lend small government agencies reasonably priced funds. The fact that these small agencies were relatively unknown and were forced to compete with the issuances of the Treasury and larger agencies gave rise to the Federal Financing Bank.
Federal Funds	Deposit balances at the Federal Reserve, most of which represent legal reserves. Transactions that involve the sale of immediately available funds for one business day are "Federal Funds" transactions.
Federal Funds Rate	The interest rate at which federal funds are traded. It is monitored by the Fed in the process of regulating the growth of bank reserves and money supply in the execution of its monetary policy. As such, it is closely watched by market participants.
Federal Home Loan Bank System (FHLB)	The FHLB, created in 1932, was composed of 12 regional banks and a central board in Washington, D.C. The 12 Federal Home Loan Banks issue consolidated debt securities to provide liquidity to member financial institutions. The 1989 Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) changed the structure of this system by changing the requirements for FHLB membership. No longer responsible for regulating or examining its members, the FHLB is now under the supervision of the Federal Housing Finance Board (FHFB).
Federal Home Loan Mortgage Corporation (Freddie Mac, FHLMC, FRMC)	A government organization that purchases mortgages from thrift institutions to increase the supply of housing funds.
Federal Housing Administration (FHA)	The FHA is a federally sponsored agency created in 1934 under the National Housing Act to insure lenders against loss on residential mortgages.
Federal Housing Finance Board (Finance Board or FHFB)	The Finance Board oversees the 12 Federal Home Loan Banks and the Office of Finance. It ensures the safety and soundness of the bank system, establishes policy for the Community Investment Cash Advances program, and the Community Support Program. It also oversees the FHLB's financial performance and operations, and evaluates banks' achievements of public policy.
Federal Intermediate Credit Bank	One of 12 district banks which provides short-term financing for the seasonal production and marketing of crops and livestock and for other farm-related credit purposes. These banks do not lend directly to farmers. Instead, they lend to various financial institutions which make loans to farmers.
Federal Land Bank	One of 12 district banks which extends first mortgage loans on farm properties and makes other loans through local Federal Land Bank associations.
Federal National Mortgage Association (FNMA)	The FNMA, also known as Fannie Mae, was established in 1938 by Congress to create a secondary market in mortgages issued by the Federal Housing Administration (FHA). Currently, FNMA is a privately owned corporation whose function is to buy and sell government insured or guaranteed mortgages to stabilize the supply and demand of mortgage money. Fannie Mae issues debentures and short-term discount notes to finance its mortgage purchases. FNMA guarantees timely payment of principal and interest on MBS it issues.
Federal Open Market Committee (FOMC)	A committee consisting of the 7 members of the Federal Reserve Board of Governors plus 5 of the 12 presidents of the Federal Reserve Banks. The FOMC meets once every 7 weeks to establish the prevailing discount and Fed Funds target rates. The FOMC also conducts open market operations, whereby government securities are bought and sold in the open market to implement monetary policy.
Federal Reserve Bank	One of the 12 banks that, with their branches, make up the Federal Reserve System. The role of each Federal Reserve Bank is to monitor the commercial and savings banks in its region, to ensure that they follow Federal Reserve Board regulations, and provide access to funds through the discount window.
Federal Reserve Open Market Committee (FOMC)	The Fed's arm for establishing and executing monetary policy. This committee is composed of the seven Governors of the Federal Reserve Board, the president of the Federal Reserve Bank of New York and four of the presidents of regional Federal Reserve Banks. It normally meets on the third Tuesday of each month to issue guidelines to its trading desk at the Federal Reserve Bank of New York. A summary report of each meeting is released the Friday after the subsequent meeting.
Federal Reserve Open Market Operations	All of the Fed's activities in the marketplace. When the Fed is a buyer of securities, the quantity of bank reserves is increased. When the Fed sells securities, banks lose reserves. The purpose of most open market operations is merely to offset changes in the quantity of bank reserves arising from other factors, most notably changes in the Treasury's balance at the Federal Reserve.
Federal Reserve System	Established in 1913, it is the central banking system of the U.S. There are 12 regional Federal Reserve Banks but virtually all the policy-making powers are lodged in the Board of Governors of the Federal Reserve System in Washington. This has seven members appointed by the President of the U.S. for 14-year terms. The president chooses one of these to be chairman for a 4-year term. All depository institutions must hold reserves at the Fed or in vault cash.
FHA	Federal Housing Authority
FHLB	Stands for Federal Home Loan Bank. One of the federal agencies that guarantees mortgages for home loans.
FHLMC	Stands for Federal Home Loan Mortgage Corporation, another federal agency guaranteeing home mortgages. Freddie Mac.
FHLMC Gold	A program of FHLMC mortgage-backed securities (MBS) issuance. Under the "Gold" program, FHLMC guarantees timely payment of principal and interest. The payment delay on FHLMC "Golds" is 45 days. All FHLMC MBS issued since 1991 are issued under the "Gold" program.
FHLMC Green	A program of FHLMC mortgage-backed securities (MBS) issuance. Under the "Green" program, FHLMC guarantees timely payment of principal and eventual payment of interest in the event of delinquency or default on the underlying mortgages. The payment delay on FHLMC "Greens" is 75 days.
Fiduciary	An individual, corporation, or association, to whom certain property is given to hold in trust, according to the trust agreement under which the property is held.
First coupon date	The first date after settlement on which a coupon is paid to the buyer.
Fiscal Policy	Federal Government policies affecting government spending, taxation, and deficits (or surpluses).
Five Percent Policy	The NASD guide in establishment of mark-ups and commissions. As a practice, dealer mark-ups and commissions on a security should not exceed 5% of the price of such security.
Fixed Income	Securities/Investments in which the income during ownership is fixed or constant. Generally refers to any type of bond investment.
Fixed Rate Bond or Note	A debt instrument that carries a fixed coupon.
Fixed Rate Mortgage	A mortgage which features a fixed rate of interest and a level monthly payment that remains constant over the life of the mortgage.
Flat	A security trades flat when it is traded with no accrued interest. For example, if a security transaction has a settlement date equal to the security's interest payment date, the buyer will not pay the seller accrued interest.
Flip	To sell securities shortly after purchase for a trading profit.
Floating Rate Note (FRN)	A fixed income security which has variable coupon rates, periodically changed according to the rise and fall of a certain interest rate index or a specific fixed income security which is used as a benchmark. Also known as a "floater".
Floor	A feature of a floating rate security that stipulates a minimum coupon (the floor) below which the coupon cannot adjust.
FNMA	Stands for Federal National Mortgage Association or "Fannie Mae". This publicly owned government sponsored corporation backs mortgage loans, which are packaged together and sold to investors as "FNMAs".
FOMC	Federal Reserve Open Market Committee (or FOMC)
Foreign Account	An account at a financial institution which is held in currency other than U.S. dollars.
Foreign exchange market	Market where currencies are traded internationally. The foreign exchange market represents transactions equaling approximately a trillion dollars globally every day, which is greater than all bond markets combined.
Forward	A forward trade is a principal-to-principal non-transferable agreement which stipulates that delivery and payment for securities will take place on a date in the future at a price agreed to at the time of the transaction.
Free Delivery	Delivery of securities with no required payment by the receiving party. Free delivery is not permitted for federal credit unions.
Frequency	Number of coupon installments paid annually. Zero-coupon bonds, which pay no coupons, have frequencies of zero. Corporate bonds typically pay interest twice a year (semi-annually). CMOs pay interest either monthly or quarterly, while mortgage pools pay once a month. Eurobonds often pay annually.
Fully Modified Pass-Through	The security holder receives principal and interest due, whether or not they have been collected.
Future	A contract to buy or sell a specific amount of securities or commodities for a specific amount of securities or commodities for a specific price or yield on a specified future date.
Future Value	The assumed amount of cash at a future point in time. a present value becomes a future value through the process of reinvestment.
Futures Contract	Agreement to buy or sell a specific amount of a commodity or financial instrument at a particular price and a stipulated future date. (exchange traded)
Futures Delivery	The process of meeting an obligation to deliver or receive securities or commodities on a date, in a location as specified by the terms of the contract.
Futures Long/Futures Short	Refers to aggregate market value positions in financial futures contracts either held for future delivery into account (Futures Long) or the future delivery of financial instruments from account (Futures Short).

The information contained herein has been obtained from sources deemed to be reliable: however Southeast Corporate does not guarantee its accuracy or completeness.

Glossary of Terms

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Gap	The difference in maturity between an institution's sources and uses of funds.
Gap Management	Process of managing the difference between the sources and uses of funds and the effect of interest-rate sensitivity and liquidity on that difference.
General Obligation Bond (GO)	A federal tax-exempt bond backed by the "full faith, credit and taxing power" of the issuing municipality.
Give-up	Give up of yield results from the sale of bonds at one yield and the purchase of an equivalent amount of bonds at a lower yield.
GNMA	Stands for Government National Mortgage Association or "Ginnie Mae". This is a federal agency which backs home loan mortgages. A wholly-owned U.S. Government cooperation within the Department of Housing and Urban Development, established in 1968 as a spin-off from the Federal National Mortgage Association (FNMA). GNMA took over the assets and liabilities and operations of the Special Assistance Functions and the Management and Liquidating functions of FNMA. GNMA can raise funds by issuing securities backed by pools of mortgages. Primary functions of GNMA are the purchase and sale of certain FHA and VA mortgages pursuant to various programs for support of the housing market, and the guaranteeing of mortgage-backed securities issued against pools of FHA and VA mortgages.
Good Delivery	The completion of a security transaction that meets the specifications of the confirmation. The security must be delivered within the agreed upon time period and must be properly endorsed if necessary.
Good Faith Deposit	A cash deposit required on a competitive bid. Deposits usually range from one to five percent of the value of an issue, and are due at the time of the bid.
Good Till Canceled (GTC)	An open order to buy or sell securities which remains in effect until the order is executed or canceled.
Government	A security issued by the U.S federal government and its agencies (all are U.S. Treasury obligations).
Government Agencies	Obligations of the federal government other than direct obligations such as Treasury Notes, Bonds, or Bills. Examples of these are GNMAs, FHLMCs, etc.
Government Bonds	Bonds backed by the federal government, whether issued by the Treasury or one of the government agencies.
Graduated Payment Mortgages (GPMs)	A mortgage which calls for monthly payments that are initially relatively small and which rise by a fixed percentage each year for some specified period of time.
Gross Domestic Product (GDP)	The standard measure of growth in economic activity. GDP measures the gross domestic output of an economy. Two consecutive quarters of decline in the growth rate of real GDP is considered a recession.
Gross National Product (GNP)	The total dollar value of final goods and services produced by the economy. When the proper accounting adjustments are made, this is equivalent to adding up total income and taxes in the economy; or total final sales plus the change in inventory stock; or the total value of each industry's output. Real GNP is the figure derived by deflating each component of GNP for the increase in prices since an arbitrary base period (currently 1972) and adding up the results. The relationship between this total and the actual dollar GNP yields the implicit GNP price deflator that is commonly cited as a measure of general price change.
Gross Spread	The dollar difference between the price which the issuing company receives for its securities and the price which the public pays for those securities. The sum of the selling concession, management fee and the underwriting fee equals the gross spread.
Guaranteed Coupon	In the GNMA forward market, a trade in which the seller guarantees the buyer delivery of a specific-coupon GNMA at the agreed price, thereby avoiding the yield maintenance and par cap procedures associated with delivery of different coupons.
Guaranteed Mortgage Certificate (GMC)	A bond issued by FHLMC backed by a pool of conventional mortgages and similar to a pass-through except that FHLMC guarantees that some minimum principal amount will be paid each year. Unlike pass-throughs GMC's pay interest semi-annually and principal annually. The investor also has the option to put his remaining principal balance to FHLMC at par some time prior to maturity.

The information contained herein has been obtained from sources deemed to be reliable: however Southeast Corporate does not guarantee its accuracy or completeness.

Haircut	The difference between the actual market value of a security and its loan value. A haircut is taken by the purchasing party in a reverse repurchase or repurchase transaction to protect the buyer from becoming under-collateralized should market prices decline. Also called margin or over-collateralization.
Half-life	The amount of time that must elapse until half the principal amount of a block of bonds has been retired ( via a sinking fund or other Process).
Handle	The whole-dollar price of a security. For example, if a security is quoted at 101-10/32, 101 is the handle.
Held to Maturity (HTM)	Accounting classification under Statement of Financial Accounting Standards (SFAS) 115, Accounting for Certain Investments in Debt and Equity Securities. HTM securities are those which management has the positive intent and ability to hold to maturity. Securities classified HTM must be recorded at amortized cost. HTM securities may not be sold except under certain circumstances. Changes in market interest rates, generating liquidity, or rebalancing the investment portfolio are not acceptable reasons for the sale of HTM securities.
Holder of Record	Owner of a security as recorded on the books of the issuing company or its transfer agent as of the record date.

The information contained herein has been obtained from sources deemed to be reliable: however Southeast Corporate does not guarantee its accuracy or completeness.

Immunization	A process for designing fixed income portfolios to obtain a target rate of return over a specified time period, within a narrow range, despite market conditions.
Implied Forward Rate	A forecasted rate derived from present yields and based on the theory that the yield curve on one day is an excellent prediction of rates in the future.
Income	Money earned on a security from interest or dividends.
Indenture	For debt securities, the contract that specifies all legal obligations of the issuer with respect to the securities and any qualifications or restrictions that may exist. The indenture names a trustee which holds the indenture, supervises payments of principal and interest to the security holders, and acts on behalf of the holders in the event of a default or other violation of the indenture's provisions.
Index	1. A short-term money market rate used as the coupon basis for a floating rate security. Examples, which are generally published in financial media, include the Prime rate and LIBOR. 2. A statistical yardstick composed of a basket of securities with a set of characteristics. An example of this would include the S&P 500 which is an index of 500 stocks or the Lehman Aggregate for bonds.
Index Fund	An account comprised of securities; the characteristics of which will produce a return which will replicate a designated securities index. (i.e., Stocksplus and S&P 500)
Index-Linked Bond	A bond whose coupon payments are a function of some index.
Indicative quote	A quote that is indicative of the market at a particular time of the day. Foreign exchange rates are subject to change, and the indicative quote will give the member a good estimate of the real-time exchange rate that your corporate will receive.
Industrial Production	An index of economic growth based on the production activity of manufacturing firms.
Inflation	A general rise in prices, usually measured by changes in prices of major indices, such as the Consumer Price Index. An increase in a particular price may or may not be inflationary, depending on how it affects other prices and on how promptly it brings to market additional supplies of a product. As of December 2001, the year-over-year percentage change in the CPI was 1.9%, which in historical terms is a modest rate of inflation.
Inflation Index Bond	Fixed income securities whose principal value is periodically adjusted according to the rate of inflation. The interest rate on these bonds is fixed at issuance, but over the life of the bond this interest is paid on an increasing principal value, which has been adjusted for inflation.
Initial Margin	The amount of margin required in order to establish a position in a futures contract.
Inside Market	The market defined by the highest actual bid and the lowest actual offering. An inside market may be tighter than a particular trader's market.
Interbank rates	The bid and offer rates at which international banks place deposits with each other. These are rates based on transactions of $1 million to $5 million or more transferred electronically.
Interest Only (IO)	The interest portion of a stripped mortgage-backed security or an interest-only tranche of a CMO. All interest payments on the underlying mortgages are due to registered holders of the IO security. If the mortgages prepay faster than expected, the buyer may receive less in cash flows than the amount paid.
Interest Rate of Return	The percentage increase in the value of a bond over the holding period that results from interest income, including: All coupon payments; All income earned by reinvesting coupon payments and proceeds, if any, from selling or redeeming the bond; Any change in accrued interest between the settlement date and the horizon date.
Interest Rates	The percentage paid as a fee for the use of money, expressed as an annual percentage of the principal amount. Influenced by a variety of factors including economic growth, inflation, supply/demand and international factors.
Interest Receivable	Interest income impacts the portfolio as soon as it is earned. Income is posted to cash automatically on payment date except in the case of mortgage a pass-through, where we post based on actual bank receipts.
Interest Yield Equivalent (IYE)	A measurement of the rate of return on a security sold on a discount basis that assumes actual days to maturity and a 360-day year.
Interest-Rate Risk	When interest rates rise, the market value of fixed-income securities (such as bonds) declines. Similarly, when interest rates decline, the market value of fixed-income securities increases.
Intermarket Spread Swaps	Swaps done in anticipation of a (favorable) change in the price or yield spread between the two issues from two different sectors of the market.
International Settlement	The settlement of securities is affected through an international clearing agency such as Euroclear or Cedel. International settlement usually assumes no local or generally recognized holidays
Inverse Floater	A floating rate security whose coupon rises (falls) as the index to which it is tied falls (rises).
Investment Act of 1940	Legislation passed by Congress to insure that those investing in investment companies are fully informed and fairly treated. It requires that all publicly held companies register with the SEC.
Investment Banker	An individual or firm engaged in the financing of capital. The investment banker is the middleman between the issuer of new securities and the investor. He/she facilitates the conversion of savings into investment.
Investment Grade	Bonds rated in the top four rating categories (AAA, AA, A, BBB) are commonly known as investment grade securities and are considered eligible for bank investment under present commercial bank regulations issued by Comptroller of the Currency.
ISMA Yield	A standard yield to maturity calculation recommended by the ISMA (formerly AIBD). Yield is compounded annually regardless of the coupon frequency.
Issue Bid	A bid to purchase securities at the initial offering price.
Issue Date	The date on which a security is issued and becomes available for settlement.
Issue Price	The dollar value of a security when it first comes to the market. Issue prices are determined in three ways: by auction, as for Treasuries, by consensus, as in a private placement, and by the lead underwriter, who sets the yield.
Issued Amount	Par or face amount of a security issued by a corporation, often stated in millions of dollars.
Issuer	Any entity that has the legal authority to issue and distribute a security. Examples of issuers include corporations, municipalities, foreign and domestic governments and their agencies, and investment trusts.

The information contained herein has been obtained from sources deemed to be reliable: however Southeast Corporate does not guarantee its accuracy or completeness.

Jumbo Certificate of Deposit	Certificate with a minimum face value of $100,000. Jumbo CDS are usually bought and sold by large banks, pension funds, money market funds, and insurance companies. Principal in excess of $100,000 is uninsured.
Jumbo Mortgage	A mortgage in excess of the maximum amount allowed for pooling by FNMA and FHLMC.
Junk Bond	A bond claimed to have high yield, a low investment quality and credit worthiness, usually with a rating of BB or less.

The information contained herein has been obtained from sources deemed to be reliable: however Southeast Corporate does not guarantee its accuracy or completeness.

Laddering	A fixed income portfolio strategy in which assets are distributed evenly over a range of maturities.
Last coupon date	The date on which the last coupon is paid prior to settlement. Although the issuer may pay a final coupon at settlement, that coupon is not considered the last coupon.
Leading Economic Indicators Index (LEI)	An index consisting of 11 component measures of economic activity. The LEI is considered to be a useful measure in forecasting economic peaks and troughs.
Leading Indicators	Those economic statistics that in the past have turned up or down in advance of the general business situation. The Leading Indicator Index is a composite of several such series. There are also Coincidental Indicators (that move with the situation) and Lagging Indicators ( that move after the situation).
Legality	The legal status of a bond generally used to indicate whether it is a legal investment for savings banks in Connecticut, Massachusetts, New Hampshire, New Jersey and/or New York. Also called Legal Status.
Leverage	1.Borrowing funds to invest in securities, thereby increasing the potential return or loss on the funds actually placed at risk, or 2. increasing exposure to an index or other factor by making the security return dependent upon a multiple of the change in the index or other factor.
Limit	The maximum daily price change of a futures contract above or below the previous day's settlement price.
Limit Order	An order to buy or sell at a specific price or better.
Liquidity	The ability to convert assets easily and rapidly into cash. Alternatively, short-term funds (cash and equivalents) held to meet immediate cash demands, such as deposit withdrawals or loan demand.
Liquidity Premium	The extent to which yields are lower on more liquid securities due to the relative ease with which such securities can be bought or sold in the secondary market.
Liquidity Risk	The risk that an issue will be illiquid and force an investor to take a loss if he attempts to sell the issue prior to maturity.
Loan-to-Value Ratio	The relationship between the amount of a mortgage loan and the appraised value of the property, expressed as a percentage of the appraisal value.
London Interbank Offered Rate (LIBOR)	The posted rate at which prime banks offer to make Eurodollar deposits available to other prime banks for a given maturity which can range from overnight to five years.
Long	Signifies an ownership position of a security.
Long Bond	The most recently issued 30-year Treasury bond. Because the yield on the long bond will fluctuate in reaction to economic information, it is used as a benchmark in monitoring long-term interest rates.
Long Coupon	The first interest payment covering a longer period than the remaining payments. A long coupon results when a bond is issued more than 6 months before the first scheduled payment date.

The information contained herein has been obtained from sources deemed to be reliable: however Southeast Corporate does not guarantee its accuracy or completeness.

Margin	The difference between the market value of collateral pledged to secure a loan and the face value of the loan itself.
Margin Call	A call for cash in a margin position.
Market Day	A day when the domestic bond market is open.
Market Order	An order given to buy or sell a particular security at the best immediately obtainable price.
Market Price	The most current price of a security.
Market Risk	The risk that current interest rates may change and thus adversely affect current market prices.
Market Value	Market price times quantity.
Marketable Securities	Securities that may be sold easily due to an active secondary market; e.g., government securities, bankers' acceptances, and commercial paper.
Mark-to-Market	The process of adjusting a security's price to fair market value each period. Marking-to-market results in unrealized gains when the market price increases above historical cost, or unrealized losses when the market price falls below historical cost.
Matched Book	If the distribution of the maturities of a financial institution's deposits equals that of its investments, it is said to have a matched book. Also known as an immunized portfolio or a dedicated portfolio.
Maturity	The date on which a loan, bond, mortgage or other debt security becomes due and is to be paid off.
MBS Depository	A book-entry depository for GNMA securities initially operated by Mortgage-Backed Securities Clearing Corporation (MBSCC). On March 31, 1989, the Participants Trust Company (PTC) completed its purchase of the depository from the MBSCC.
Modern Portfolio Theory	The theoretical framework for designing investment portfolios based upon the risk and reward characteristics of the entire portfolio, which is held not to be equivalent to the aggregation of the individual securities of the portfolio due to the covariance of returns of the individual assets. The major tenet of the theory holds that reward is directly related to risk, which can be divided into two basic parts: 1) systematic risk (portfolios' behavior as a function of the market's behavior), and 2) unsystematic risk (portfolios' behavior attributable to selection of individual securities). Because un-systematic risk can be largely eliminated through diversification, the portfolio will be subject principally to systematic risk.
Modified Pass-Through	The security holder receives interest due, whether or not it has been collected, and principal as collected.
Money Market	Market in which short-term debt instruments are traded. These instruments primarily include certificates of deposit, Eurodollar certificates of deposit, commercial paper, bankers' acceptances, Treasury bills, and discount notes of government-sponsored enterprises. Federal Funds borrowing, bank borrowing from the Federal Reserve, and various forms of repurchase agreements are also elements of the money market.
Money market account (MMA)	Insured deposit accounts of very short maturity with rates determined by the market and accessible by withdrawal instrument. MMAs are limited to three share draft or check withdrawals per month, and a total of six remote withdrawals per month to avoid posting reserves.
Money Market Mutual Fund (MMF or MMMF)	A taxable, uninsured investment account with no set maturity date, but invested in securities of very short maturity with rates determined by the market and accessible by withdrawal instrument. Subject to 2(a)7 of the Securities and Exchange Act of 1934.
Mortgage	A conveyance of an interest in real property given as security for the payment of a debt.
Mortgage Bond	A bond backed by a lien against real property.
Mortgage Derivative	A security whose cash flows are derived from underlying mortgages. I/Os and P/Os are examples of mortgage derivatives.
Mortgage Insurance	A type of term life insurance often bought by mortgagors. The amount of coverage decreases as the mortgage balance declines. In the event that the borrower dies while the policy is in force, the debt is automatically repaid by insurance proceeds.
Mortgage pass-through security	A mortgage-backed security, backed by residential mortgages, in which each resident's monthly mortgage payments, plus any optional prepayments, are passed through to the investors. A service fee is deducted from each pass-through payment.
Mortgage Pool	Mortgages sharing similar characteristics in terms of class of property, interest rate, and maturity which have been grouped together for the purpose of issuing new securities.
Mortgage Real Estate Investment Trust (REIT)	Entity which lends stockholder capital to real estate builders and buyers. Funds are often borrowed from banks and then lent at higher interest rates to companies dealing in real estate. REITS typically invest in real estate properties and/or mortgage-backed securities.
Mortgage-Backed Bond	A general obligation of the issuer, secured by mortgage collateral, where the issuer retains ownership of the mortgages. Unlike pass-through securities, the cash flow on a mortgage-backed bond is not directly related to the cash flow of the underlying mortgage collateral. Interest on the bond is paid semi-annually at a fixed rate and principal is paid at maturity.
Mortgage-Backed Security (MBS)	Security backed by mortgages issued by private issuers, the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, or the Government National Mortgage Association. Investors' cash flow are based on the interest and principal payments made on the underlying mortgages.
Multi-Step	Structured note whose initial coupon steps up to subsequently higher pre-determined coupons if the note is not called.
Municipal Bond	A debenture issued by a municipality. Interest on municipal bonds (munis) is exempt from federal and may be exempt from state and local, income tax.
Mutual Fund	An investment company whose capitalization is not fixed at a given number of shares but that issues shares in accordance with customer demand. Mutual funds sell their own new shares to investors, stand ready to buy back their old shares, and are not listed on organized exchanges. Mutual funds are often classified on the basis of the kinds of investment they specialize in, such as bond funds, ARM funds, or money market funds. The price for a share of a mutual fund is determined by the trust?s net asset value (NAV) per share.

The information contained herein has been obtained from sources deemed to be reliable: however Southeast Corporate does not guarantee its accuracy or completeness.

NASD (National Association of Securities Dealers)	Formed in 1939 under the auspices of the Maloney Act, it is a self-regulating body of the securities industry designated to establish rules of fair practice for the protection of the investing public.
National Association of Securities Dealers Automated Quotations System (NASDAQ)	Owned and operated by the National Association of Securities Dealers, NASDAQ is a computerized system that provides brokers and dealers with price quotations for over-the-counter and listed securities.
Negative Amortization	The process which occurs when payments on a graduated payment mortgage or an adjustable-rate mortgage are insufficient to pay the interest due on the loan balance. The unpaid interest is added to the principal increasing the balance owed by the borrower. Adjustable rate mortgages with payment caps (as opposed to interest rate caps) may feature negative amortization.
Negotiable Instruments	Claims or rights to payment that are readily transferable from one party to another, i.e., capable of being bought and sold.
Net Asset Value	The price for a share of a mutual fund. The net asset value (NAV) is the total market value of all the fund's securities, minus liabilities, divided by the number of shares outstanding.
Net Coupon	The homeowners' gross interest payments minus servicing, management, and guarantee fees. Investors receive the net coupon cash-flows. For ARM pools, the net coupon is the net margin plus the floating-rate index rate as of the last reset date.
Net economic value (NEV)	A calculation to determine the risk that changing interest rates will place on a corporate's capital. NEV is intended to show how the economic values of both sides of the balance sheet will change in relation to one another as interest rates change.
New Issue	A stock or bond sold by a corporation for the first time. Proceeds may be said to retire outstanding debt, for new plants or equipment, or for additional working capital.
Nominal Day	Any calendar day without regard to whether the bond market is open or not.
Nominal Payment Dates	The dates on which coupons are scheduled to be paid. This day is used to calculate the accrued interest due to the holder. If the nominal payment date falls on a non-market day, the actual coupon payment is usually on the next market day. Also referred to as coupon date or coupon due date.
Nominal Yield	Annual dollar amount of income received from a fixed-income security divided by the par value of the security and stated as a percentage. A security's nominal yield is equal to its coupon rate.
Nominee Name	Securities are registered in nominee name for reasons of safety or to facilitate transactions. Nominees pass through principal and interest payments to the beneficial owner who retains the right to the security and its benefits. Also referred to as street name.
Notional Principal	A basis for exchange of cash flows used in derivatives markets. The dollar amount of cash flows to be exchanged is calculated by multiplying an index or price factor by a notional principal balance, but the principal is not exchanged.
NYSE	New York Stock Exchange

The information contained herein has been obtained from sources deemed to be reliable: however Southeast Corporate does not guarantee its accuracy or completeness.

Odd-Lot	Refers to a trading unit of a bond that is some fraction of a round-lot. A premium is usually charged for odd-lot transactions.
Offer	Price at which the owner of a security will sell; also known as the ask, asked, or asking price.
Offering	A set of securities that a trader or portfolio manager wants to buy or sell.
Offering Circular (OC)	A legal document explaining the terms of a security exempt from registration (e.g., agency securities). An OC is delivered to investors within 30-90 days of delivery of a new issue of the security.
On-the-run	The most recently auctioned Treasury security of a given maturity.
Open Order	An order to buy or sell entered at a certain price and designated good until canceled.
Open Repo	Repurchase agreement in which the repurchase date is unspecified and the agreement can be terminated by either party at any time. The agreement continues on a day-to-day basis with interest rate adjustments made as market rates change.
Option Contract	A contract between two counterparties whereby the seller grants an option to buy or sell the underlying commodity or security at a given price on or prior to the contract's expiration date.
Organized Exchange	Centralized institutions on which listed securities are traded. Prices are determined by forces of supply and demand. The New York Stock exchange and the American Stock Exchange are organized exchanges.
Original Face	The face value of a security on the issue date.
Original Issue Discount	The discount from par at which a new issue comes to the market. The IRS treats the accretion of this discount over the life of the security as being current income to the holder.
Original Principal	The principal amount of a pass-through pool originally issued (also called original face).
Originator	A person who solicits builders, brokers, and others to obtain applications for mortgage loans. Origination is the process by which the mortgage banker brings into being a mortgage secured by real property.
Overbought	A market that is susceptible to a downward correction in price levels. Implies that prices have risen more than fundamentals would dictate.
Oversold	A market that is susceptible to an upward correction in price levels. Implies that prices have fallen more than fundamentals would dictate.
Over-the-Counter Market (OTC)	Not an organized securities exchange, but rather a means of trading securities which are not listed on an organized exchange. Prices of securities traded OTC are determined by both competitive bids and negotiations. A mass telecommunication network communicates bids and offers to bring buyers and sellers together.

The information contained herein has been obtained from sources deemed to be reliable: however Southeast Corporate does not guarantee its accuracy or completeness.

Par	Face value of the bond. The value of the security as it appears on the certificate or instrument.
Par Amount	Face value of the bond multiplied by the number of bonds held, in dollars. For example, if you purchase two bonds with face values of $1,000, the par amount is $2,000. Par amount is not the same as market value.
Par Bond	A bond selling at par, in line with prevailing new issue or estimated going yield rates.
Par Value	The face value of a security. A bond selling at par is worth the same dollar amount for which it will be redeemed at maturity.
Partial Delivery	Term used when the seller does not deliver the full amount of a security. If the buyer does not object, the seller may deliver a portion of the security. The remaining portion is deemed a fail.
Partial Duration	The sensitivity of a bond's or bond portfolio's price to a change in one particular portion of the yield curve while holding the rest of the curve constant.
Participants Trust Company (PTC)	Depository institution which accepts deposits of physical GNMA securities and converts them to book-entry form.
Participation Certificate	Certificate representing an interest in a pool of debt instruments such as a mortgage pool.
Pass-Through Mortgage-Backed Security	A security which represents ownership interest in an underlying pool of mortgages. The cash flow from the underlying mortgages is passed through to the security holder, through the servicing agent (who usually keeps a portion as a fee), as scheduled monthly payments of principal, interest and prepayments of principal.
Pay Down	That portion of a mortgage which is applied toward reduction of the par amount, as opposed to the interest due. Includes all pass-through principal payments.
Pay Up	Included are regular additions to GNMA Graduated-Payment Mortgages principal balances, as well as some CMO's. Treated as the opposite of a pay down where payments are being added to the par. (see negative amortization)
Paydown Schedule	The timetable of principal redemptions for an amortizing security.
Paying Agent	The agency, usually a commercial bank, responsible for making principal and interest payments on a security.
Payment Date	Also known as payable date. The date that principal and interest payments are to be made to the registered holder of a security or are available to holders of bearer bonds.
Payment Delay	The amount of time that elapses between the time that a pass-through issuer receives payments of principal and interest from the mortgagors and the time that the security holder receives them.
Perfect Hedge	Equal price changes on both sides of a hedged position during a hedge period.
Periodic Payment	In reference to the calculation of average life for a sinking fund issue, a group of consecutive equal sinking fund payments.
Perpetual	A fixed income security with no maturity date.
Pledging	Transferring the rights to securities to a lender or creditor as collateral for an obligation. Also referred to as hypothecation.
Point	One percent of the face amount of a bond; $10 for each $1000 face amount. Bond prices are quoted in points and fractions of points.
Pool	A collection of mortgages assembled by an originator or master servicer as the basis for a security. Pools are identified by a number.
Pool Factor	The ratio of the outstanding principal amount of a pass-through pool to its original principal amount.
Pool Insurance	Insurance carried to guarantee the payments of principal and interest on the mortgages comprising a mortgage pool.
Portfolio	The securities owned by an investor.
Position	To buy or sell a security and thereby become long or short in such security.
Premium	The amount by which the price exceeds the par amount or maturity value of a bond.
Premium Bond	A bond selling above par; opposite of a discount bond. The excess over par is called the premium.
Prepayment	The unscheduled partial or complete payment of the principal amount outstanding on a debt obligation before it is due.
Prepayment Penalty	Fee a borrower must pay when a loan that does not have a prepayment clause is repaid before its scheduled maturity.
Prepayment Risk	The risk that a pass-through issue will have an adverse pattern of prepayments (i.e., low prepayments for discount issues, high prepayments for premium issues).
Present Value	The discounted value of a cash flow or series of cash flows.
Price	The dollar amount to be paid for a security, expressed as a percentage of its current face value.
Primary Dealer	Banks and investment dealers which have met qualification standards set by the Federal Reserve in terms of reputation, capacity, facilities, and staff. Primary dealers are authorized to buy and sell government securities to assist in the execution of federal open market operations.
Primary Market	The market in which newly issued securities are sold. The proceeds of sales in the primary market go to the issuer of the securities.
Prime Rate	Interest rate banks use as a benchmark. When a major bank changes its prime rate, others tend to follow which causes the prime rate to remain relatively consistent throughout the banking industry. Often used as a floating index.
Principal	The amount lent at the start of a loan. In the case of fixed income instruments, the principal is the current par value of a security, exclusive of accrued interest.
Principal amount	Face amount of a security. The amount that the issuer must pay the holder at maturity.
Principal Balance	The outstanding balance of a mortgage, sinking fund bond or other debt, exclusive of interest and any other charges.
Principal Only (PO)	The principal portion of a stripped mortgage-backed security or a principal only tranche of a CMO.
Principal paydown	The amount of principal returned to the holder over the horizon period expressed as a percentage of par.
Principal Transaction	A securities transactions in which one or both of the parties act as principals dealing for their own account.
Private Mortgage Insurance	Insurance written by a private company protecting a mortgage lender against loss occasioned by a mortgage default.
Producer Price Index (PPI)	A measure of inflation. The PPI consists of the market-weighted prices for a fixed basket of raw materials and finished products normally purchased by manufacturers.
Project Loan	A mortgage on a commercial property or multi-family dwelling, with a maturity of up to forty years. Also used to refer to pass-through pools containing project loans.
Project Notes	A short-term federal tax-exempt note issued by local authorities to build low-cost housing which is backed by the U.S. Government.
Prospectus	A detailed statement prepared by an issuer and filed with the Securities and Exchange Commission prior to the sale of a new issue. The prospectus gives detailed information on the issuer's financial condition and the structure of the new issue.
Public Securities Association Prepayment Index (PSA)	A prepayment measure that attempts to account for "seasoning" of mortgage-backed securities (MBS). During the first month the MBS is outstanding, 100% PSA is equal to .2% CPR. Each subsequent month, 100% PSA is equal to .2% CPR times the number of months outstanding, until month 30, when the MBS is considered "seasoned." From this point until maturity, 100% PSA is equal to 6% CPR.
Purchasing Power	Measurement of money value, based on the quantity of goods and services it can buy. Purchasing power of money changes over time and is affected by the rate of inflation. As inflation rises and the costs of goods and services increases, the purchasing power of the dollar declines. If purchasing power is maintained, an investor can keep a constant standard of living.
Put Option	The right, but not the obligation, to sell a security at a predetermined price on or before a specified future date.
Puttable Bonds	Corporate issues in which the investor has the option to "put" (sell) the bond back to the issue at a stated price.

The information contained herein has been obtained from sources deemed to be reliable: however Southeast Corporate does not guarantee its accuracy or completeness.

Quotation (Quote)	A price ( bid and /or asked) in a subject market; not necessarily the price at which a security can be bought or sold, but an indication of market levels.

The information contained herein has been obtained from sources deemed to be reliable: however Southeast Corporate does not guarantee its accuracy or completeness.

Rally	An expression used in market parlance and literature to indicate a rise in prices following a flat or declining trend.
Rate Anticipation Swaps	Swaps done in anticipation of a (favorable) change in the overall level of interest rates. Rate anticipation swaps generally consist of lengthening maturity and/or lowering coupon when bullish and shortening maturity and/or increasing coupon when bearish.
Rate of Purchase	The yield obtainable on a security based on its purchase price or its current market price. This may be an amortized yield to maturity on a bond or the current income return.
Rate of Return	The annualized return on a fixed income investment is a combination of the percentage change in the price of the security and the coupon interest earned over the same period. If a security is held to maturity its rate of return will equal the yield to maturity. This may be amortized yield to maturity on a bond or the current income return.
Rating	An evaluation given by Moody's, Standard & Poor's, or other rating services of a security issuer's creditworthiness.
Rating Agency	A private corporation that conducts credit analysis of corporate debt issues and issues ratings based on the creditworthiness of the issuer.
Real Estate Investment Trust (REIT)	Company, usually traded publicly, that manages a portfolio of real estate to earn profits for shareholders. REITs maintain a diverse portfolio of real estate from shopping centers and office buildings to apartment complexes and hotels.
Real Estate Mortgage Investment Conduit (REMIC)	A REMIC is a vehicle created under the Tax Reform Act of 1986 for issuing mortgage-backed securities. REMICs may be structured as corporations, partnerships, trusts, or as a segregated pool of assets and will not be subject to taxation at the issuer level in compliance with the requirements of the act.
Real Return Bond	A security that adjusts either, or both, its principal and interest payments to compensate for rising inflation, thereby protecting an investor's purchasing power.
Real Yield	Describes the yield on a security adjusted for inflation.
Recession	A period of decline in the rate of economic growth. Generally considered a period of two consecutive quarters of negative real GDP growth. Commonly designated by the National Bureau of Economic Research.
Reclamation	A claim for the right to return or the right to demand the return of a security that has been previously accepted as a result of bad delivery or other irregularities in the settlement process.
Record Date	The record date determines, from a custodial perspective, who actually receives the next coupon payment. This is usually the market day preceding the coupon due date ( or ex-dividend date). Ownership of the next coupon payment is determined by who holds the securities after close of business on the Record Date.
Red Herring	A preliminary prospectus giving the advance details of an expected offering of corporate securities, subject to amendment, with the sale contingent upon clearance by the SEC. So called because it contains a disclaimer printed in red.
Redemption	Repayment of a debt security on its maturity date or before its maturity date if the security has been called.
Redemption date	The date when the cancellation or partial repayment of an outstanding debt occurs.
Redemption Price	The price at which a bond may be redeemed (at the option of the company) prior to its maturity day. Redemption prices are determined when the bond is issued and are usually based on the original coupon and offering price.
Refinance	The prepayment of a mortgage by the homeowner with a new mortgage on the same property. Refinancing usually occurs when the homeowner can borrow funds under a new mortgage at an interest rate lower than that of the existing mortgage
Refinancing	The retirement of existing securities and issuing of new securities to save interest costs, consolidate debt, lengthen maturity, or otherwise alter the capitalization of a company.
Refunding	A redemption with funds raised through the sale of a new issue. Most corporate bonds are protected for some stated period against refunding through sale of an issue with an interest cost lower than that on the outstanding bond.
Registered Security	A security that is recorded in the name of the holder on the books of the issuer's registrar. Endorsement is required by the registered owner before ownership of the security may be transferred.
Regular Dividend	An established dividend rate fixed by a corporation upon its stock and usually paid quarterly or semi-annually.
Regular Way Settlement	The customary process by which purchases and sales of securities are determined and the balance paid. Regular Way Settlement of a corporate security is on the third full business day after the transaction date (also referred to as corporate settlement); on a government security, it is the first full business day after the trade date.
Reinvestment Risk	The risk that an investor will be forced to reinvest cash flow from an issue at substantially lower rates that the yield of the original investment.
Repurchase Agreement (Repo)	Agreement between a seller and a buyer whereby the seller agrees to repurchase the securities at a predetermined price on demand or at a specified later date. Repos, also called Rps or buybacks, are widely used both as a money market investment vehicle and as an instrument of Federal Reserve monetary policy. Terms and conditions are generally dictated by the Bond Markets Association Master Repurchase Agreement.
Re-REMIC	A REMIC collateralized by one or more tranches of another REMIC, rather than by MBS.
Reserve Requirement	Requirement set by the Federal Reserve System's Board of Governors which dictates the amount of cash and other liquid assets members must hold in their own vaults or on deposit with a Federal Reserve Bank. The reserve requirement is stated as a percentage of time and demand deposits and is a key tool in controlling the money supply and growth of the economy. Exemptions are provided to Bankers' banks.
Return	The amount of money received annually from an investment, usually expressed as a percentage.
Return Correlation	The relationship between the returns on investments. A negative return correlation between two investments means that most of the time when investment A has a positive return, investment B will have a negative return.
Reversal	A bond swap that is the "reverse" of a prior bond swap. If the initial bond swap consisted of selling bond A and buying bond B, the reversal is the sale of B and the purchase of A.
Reverse Repurchase Agreement	Agreement between a buyer and seller in which the buyer agrees to resell the securities to the seller at a predetermined price, on demand or at a specified date. Also referred to as reverse repo or RR. Terms and conditions are generally dictated by the Bond Markets Association Master Repurchase Agreement.
Rich	Expensive; having a price which is perceived to be overvalued.
Risk	A measure of the volatility of returns. Generally captured by the variance or standard deviation of the expected return.
Risk-vs-Return	Risk measures the probability of financial loss. Investors often compare risk, as measured by standard deviation of returns, to historical or expected return when making investment decisions. Typically, investors demand higher returns for investments they consider more risky.
Roll Over	Reinvestment of funds received from a maturity security in a new issue of the same or like security.

The information contained herein has been obtained from sources deemed to be reliable: however Southeast Corporate does not guarantee its accuracy or completeness.

Safekeeping	The safe storage of securities. Security owners rely on a safekeeping agent to hold their securities, collect coupon payments, monitor security activity, and provide periodic statements of holdings.
SBA Pool	A pool of small business loans guaranteed by the Small Business Administration. The coupon adjusts monthly or quarterly with changes in the Prime lending rate. Terms vary with the purpose of the loan, from working capital loans with maturities less than 5 years to loans secured by real estate with maturities not exceeding 20 years. SBA pools are backed by the full faith and credit of the U.S. Government.
Seasoned	Refers to a security which has been outstanding in the secondary market for over 90 days
Secondary Date	The first day that the bond is available for trading in the secondary market.
Secondary Market	The market in which securities are bought and sold subsequent to original issuance. Proceeds of secondary market sales go to the selling dealers and investors, as opposed to the issuers who received the proceeds when the securities were sold in the primary market.
Sector	A group of securities with similarities (for example, industry type, coupon rate, maturity date and/or rating).
Securities	Stocks, bonds and notes which give evidence to and assure the fulfillment of an obligation.
Securities Act of 1933	A law designed to ensure that new securities offered to the public are clearly and completely described in the registration statement and prospectus. The SEC does not guarantee that the statements are accurate, but attempts to make certain that all relevant information is fully disclosed
Securities and Exchange Commission (SEC)	Federal agency created by the Securities Exchange Act of 1934. The SEC is made up of five commissioners appointed by the President of the United States on a rotating basis for 5-year terms. The statutes administered by the SEC are designed to promote full, public disclosure and to protect the investing public against malpractice in the securities markets.
Security	Instrument that signifies an ownership position in a corporation (a stock), a creditor relationship with a corporation or governmental body (a bond), or rights to ownership such as those represented by an option, subscription right, or subscription warrant.
Sell Off	A sudden sharp decline in prices accompanied by increased volume of trading and a general rise in interest rates.
Semi-Annual Bond Equivalent Yield	SABE; a method of converting yields and other measures of value in order to place them on a comparable basis. This method assumes interest is reinvested semi-annually. SABE is often applied to discount securities in order to compare their rate of return to the yield to maturity on coupon bonds.
Senior Securities	The class of securities that occupies the highest priority in a claim for principal, interest or dividends.
Serial Bond	An issue that is segmented into a series of maturities which matures in relatively small amounts at stated periodic intervals.
Servicing	The policing and record-keeping functions performed by mortgage lenders. The servicer of a loan sends payments notices, keeps track of the principal balance, ensures that property taxes and mortgage insurance are paid, remits payments to mortgage investors, etc. For these considerations, the servicer is paid a servicing fee.
Servicing Fee	The fee paid to the servicer of a mortgage loan. It is usually a fixed percentage of the outstanding principal balance of the loan, and is taken from the interest portion of the payment.
Settle	To complete a securities transaction. A trade is settled when the buyer has paid for the securities delivered by the seller.
Settlement	A transfer of funds between two parties in cash, or on the books of a mutual depository institution, to complete one or more prior transactions, made subject to final accounting. Also involves the process which allows a buyer of a security to take ownership and seller to receive funds.
Settlement Date	The date on which the final consummation of a securities transaction takes place and payment is made.
Settlement price	Expected valuation for the selected security on the settlement date.
Share/Par	Refers to par value in the case bonds, and number of shares in the case of stocks.
Short	The position held by an investor who has sold short a security, i.e., has sold a security the investor does not own. This is known as selling short.
Short Coupon	Interest payment covering less than the usual 6-month period. A short coupon payment occurs when the original issue date is less than 6 months from the first scheduled interest payment date.
Short Covering	The action taken by a trader or investor to buy securities previously sold short in order to deliver them and thereby close out a short position.
Short Position	Situation that arises when securities that are not owned are sold.
Short Sale	The practice of selling first and buying later. The seller sells a security not owned on the expectation that the market price will fall and the seller will be able to buy the security at a price lower than that at which it was sold.
Short-Term	A type of obligation with a maturity of less than one year.
Simple Interest	Interest calculation based only on the original principal amount. Simple interest does not take into consideration accumulated interest as does the calculation for compound interest.
Simple Yield	A modified version of the current yield that accounts for a deviation in a bond's clean price from par. Any capital gain or loss is assumed to occur uniformly over the life of the bond.
Sinking Fund	A separate account into which regular payments are made and accumulate for later use in retiring a bond issue. Debt issues with indentures requiring a sinking fund are considered to be safer than those that don't require the issuer to set aside funds to be used in retiring the issue.
Skip Day Settlement	Settlement on the day after the next market trade day.
Small Business Administration (SBA)	Federal agency which provides financial and managerial assistance to businesses that lack the access to capital markets enjoyed by larger corporations. The SBA finances its activities through direct grants approved by Congress.
Spot Curve	The yield curve associated with zero coupon Treasury securities. Due to the relative illiquidity of these securities, the strip curve is calculated from on-the-run coupon Treasury securities using a method known as bootstrapping.
Spot Price	The price of a security or commodity in the cash market. Used in reference to the futures markets for securities or commodities which underlay various futures contracts.
Spot Rate	The observed or implied yield on a zero-coupon Treasury security of a given maturity.
Spread	1. The yield or price differential between two different securities. 2. The difference between the bid and the asked price or yield in the quotation of the security.
Spread Duration	A measurement that estimates the price sensitivity of a specific sector or asset class to a 100 basis-point movement (either widening or narrowing) in its spread relative to Treasuries or some other benchmark.
Spread to Call	The difference between the yield to call of a security and the nearest benchmark treasury yield at the call date of the security.
Spread to Put	The difference between the yield to put of a security and the yield of the benchmark U.S. treasury bond maturing closest to the security's put date; expressed in basis points.
Standard Deviation	Statistical measure of the degree to which an individual value in a probability distribution tends to vary from the mean of the distribution. In portfolio theory, the past performance of securities is used to determine the range of possible future performances and a probability is attached to each performance. The standard deviation of performance can then be calculated for each security and for the portfolio as a whole. The greater the degree of dispersion, the greater the risk.
Standby Commitment	An unsecured agreement to purchase a security at a pre-specified price. Standby commitments are prohibited for credit unions.
Step Up	Structured note whose initial coupon steps up to a higher pre-determined coupon if the security is not called.
Straddle	An option position that is a combination of a put and a call on the same security at different strike prices for the same expiration date.
Straight Bond	A bond with unquestioned right to repayment of principal at a specified future date, unquestioned right to fixed interest payments on stated dates and no right to any additional interest, principal or conversion privilege
Straight Pass-Through	The security holder receives principal and interest actually collected by the servicing agent.
Street Name	Phrase describing the registration of securities held in the name of a broker or another nominee instead of a customer. Since the security is in the broker's custody, transfer at the time of sale is easier than if the security was registered in the customer's name and required endorsement prior to transfer. (See Nominee Name)
Stress Test	The process of evaluating a security's price, yield, spread, WAL, and duration assuming instantaneous and sustained parallel positive and negative shifts in the Treasury yield curve.
Strike Price	The price at which an option may be exercised for the underlying security
Strip	The practice of separating a security into its corpus (principal) and its coupons which are then sold as separate securities.
STRIP	(Separate trading of Registered Interest and Principal of Securities) Process by which a bond is separated into its corpus and coupons which are then sold separately as zero coupon securities.
Stripped mortgage-backed security	A mortgage-backed security in which interest cash-flows are separated from principal cash-flows. Investors can buy interest-only (IO) bonds, principal-only (PO) bonds, or combinations that are mostly interest or mostly principal.
Structured Note	A debenture whose cash flows are determined by an underlying swap.
Student Loan Marketing Association (SLMA)	Known as Sallie Mae, it purchases student loans from originating financial institutions, provides funding to state student loan agencies, and guarantees student loans traded in the secondary market. SLMA issues debt to finance operations.
Subject	Refers to a quote or indication of price that is not firm and cannot be relied upon as the basis for a transaction. Also refers to an order for a new issue which may not be completely filled because of strong demand.
Subordinated	Refers to a promise to pay or a security with a promise to pay which cannot legally be fulfilled until payments on certain other obligations have been made and any other conditions (defined in the indenture) have been met. These other obligations are said to be senior to the subordinated obligation.
Subordinated Debenture	Security with a claim on income which is secondary to other debenture bonds.
Subscription Date	The period during which investors place their bids for a new issue with a syndicate.
Substitution Swaps	swaps done in order to improve upon one or more characteristics of the original bonds. Swaps done for yield pickup, quality improvement or change in call protection are in this category.
Surplus	The amount by which revenues exceed expenditures.
Swap	(1) Exchange of one security for another. A swap may be executed to change the maturity, quality, or interest rate structure of an investment portfolio, or because investment objectives have changed. (2)A contractual agreement between two counterparties whereby cash flows are exchanged on the basis of changes in interest rates, currency exchange rates, returns on a bond or stock index, or some other measure. Swap agreements are conducted off-balance sheet, and are not permissible investments for credit unions.
Syndicate	A limited partnership agreement among underwriters.

The information contained herein has been obtained from sources deemed to be reliable: however Southeast Corporate does not guarantee its accuracy or completeness.

Tennessee Valley Authority (TVA)	Federal agency established to assist in the development of the Tennessee River and adjacent areas. TVA bonds and notes are secured by a first charge on the agency's net income before interest and depreciation. Principal and interest payments rank ahead of the TVA?s annual payments to the Treasury.
Term Fed Funds	Fed funds sold for a period of time longer than overnight.
Term Repo	A repurchase agreement usually longer than overnight.
Term Structure	The relationship among yields on securities of varying maturities, holding all other factors constant.
Thin	As applied to a market, means that bids and offerings are scarce and the market is subject to wide fluctuations due to poor liquidity.
Thrift Institution	An institution that accepts and maintains accounts for small depositors but is legally barred from offering demand deposit accounts. Institutions offering demand deposit facsimile accounts are considered thrift institutions and not commercial banks.
Through the market	When a new bond offering has come to market and the yield to maturity is lower than comparable bonds outstanding, the new bond is said to be offered " through the market".
Tick	A market term meaning 1/32 of 1% of a security's face value.
Tight	Highly competitive. A tight market is characterized by a small spread between the bid and offer levels for a given security
Time Deposit	A deposit with a maturity fixed by law of at least 30 days. Savings accounts at commercial banks also are regarded as time deposits
TIPS	Inflation-indexed securities issued by the U.S. Treasury Department (commonly known as Treasury Inflation-Protection Securities). TIPS have been issued in the U.S. since January 1997. These securities adjust both their principal and coupon payments upward with any rise in inflation. Like all Treasuries, they enjoy the full guarantee of the U.S. government.
Total rate of return	For a particular horizon period, the sum of coupon income, retired principal, reinvestment income, and the change in the market value of a bond, divided by the initial price and expressed as a percentage. Also called "total return" and "horizon return."
Trade Date	The date on which parties enter into agreement for the purchase or sale of securities.
Trader	1. A person whose intention is to profit from buying and selling, rather than the holding of securities. 2. An entity that buys and sells securities in order to facilitate transactions between buyers and sellers.
Trading Account	Accounting classification under Statement of Financial Accounting Standards (SFAS) 115, Accounting for Certain Investments in Debt and Equity Securities. Trading securities are those which management intends to actively trade in order to profit from short-term price fluctuations. Trading securities are identified with frequent purchases and sales and short-term holding periods. Trading securities must be recorded at fair market value, with unrealized gains and losses being recognized on the income statement and passed through to undivided earnings.
Traditional Mortgage	A mortgage with a fixed interest rate and term to maturity, requiring level payments of principal and interest.
Tranche	A part of a single market operation which may have shared documentation, but different terms; e.g., a $200 million issue, one tranche of $100 million having a maturity of 5 years and the second tranche of $100 million having a 10 year maturity. Generally used for CMOs and ABS. French word for "slice."
Transfer Agent	An individual responsible for keeping records of the holders of a bond issue, with names, addresses, and number of bonds owned.
Transfer Payment	A government or other payment for which the recipient renders no current services. Social security, unemployment compensation and welfare benefits are the largest types of transfer payments.
Treasury Bill	A non-interest bearing obligation, fully guaranteed by the U.S. Government, payable to the bearer. Bills are sold on a discount basis so that the income is the difference between the purchase price and the face value. Offered in maturities of one, three and six months.
Treasury bond	Long-term U.S. Treasury securities having maturities of more than 10 years and minimum denominations of $1,000. Interest is calculated on an actual/365 day-count basis and quoted as a percentage of par to the nearest 1/32.
Treasury Note	Intermediate-term U.S. Treasury securities with maturities of one to 10 years and minimum denominations of $1,000. Interest is calculated on an actual/365 day-count basis and quoted as a percentage of par to the nearest 1/32.
Treasury Securities	Debt obligations of the U.S. Government, secured by its full faith and credit, and issued at various schedules and maturities. The income from Treasury securities is exempt from state and local, but not federal taxes.
Treasury Strips (Zero Coupons)	Broker/Dealers repackage Treasury cash flows to create "Strip" securities. "Strips" have varying maturities, trade on discount basis, pay no coupon and mature at par.
Treasury Yield Curve	A graphical representation of the yields associated with the various maturities of on-the-run Treasury securities.
Treasurys	Negotiable debt obligations of the U.S. government, secured by its full faith and credit and issued at various schedules and maturities. Examples are T-Bills with maturities ranging from 3 months to 30 years at the time of the issue. These are generally non-callable.
Trustee	A bank designated as the custodian of funds and official representative of bondholders to enforce their contract with the issuer.

The information contained herein has been obtained from sources deemed to be reliable: however Southeast Corporate does not guarantee its accuracy or completeness.

Unemployment Rate	The percentage obtained by dividing the number of persons looking for work by the total labor force.
Unit Investment Trust (UIT)	Investment vehicle that consists of a fixed portfolio of income-producing securities such as corporate bonds, municipal or government bonds, mortgage-backed securities, or preferred stock. Unit holders receive an undivided interest in the portfolio's earnings in proportion to the amount of capital they invest. The portfolio of securities remains fixed until all the securities mature and unit holders have recovered their principal.
Unsecured Bonds	A bond which is not backed by any pledge of assets that the debt will be paid; the debtor merely pledges the credit standing.
Unwind	To gradually reduce a position in a security over a period of time.
Upgrade	The changing of a rating by a rating agency to a higher (more credit worthy) rating.

The information contained herein has been obtained from sources deemed to be reliable: however Southeast Corporate does not guarantee its accuracy or completeness.

Variable Rate Mortgage (VRM)	An adjustable rare mortgage whose rate is tied to an index or lender's cost of money, calculated periodically.
Velocity	In the most common usage, the number obtained when GNP is divided by money supply. As such, it represents the number of times per year that each dollar in the money supply is spent on goods and services.
Veterans Administration (VA)	U.S. Government agency that guarantees home loan mortgages issued to qualified veterans of the U.S. Armed Forces or their surviving spouse.
Volatility	Measures the variation of asset values over a set time period.

The information contained herein has been obtained from sources deemed to be reliable: however Southeast Corporate does not guarantee its accuracy or completeness.

WAM Pool (or WAM Bond)	A 15- or 30-year mortgage-backed security (MBS) that has been outstanding for a period of time such that its WAM is now much shorter than the original WAM, typically under 5 years.
Weighted Average	An average calculated by using two data items, 1) the percentage each item represents of the total amount and 2) the data item in which you are trying to get a weighted average.
Weighted Average Coupon (WAC)	The average gross coupon rate of the underlying mortgages that collateralize a security.
Weighted Average Maturity (WAM)	The average remaining term to maturity of the underlying mortgages that collateralize a security. May be expressed in terms of weighted average maturity year.
When Issued	Short for when, as, and if issued which refers to a conditional transaction made prior to the security's issue date.
Whole Loan CMO	A CMO collateralized by non-agency mortgages. The investor is subject to both the credit risk of the borrowers and that of the issuer.

The information contained herein has been obtained from sources deemed to be reliable: however Southeast Corporate does not guarantee its accuracy or completeness.

Yankee Bond Market	Dollar denominated bonds issued in the United State by foreign banks and corporations. Yankee Certificates of Deposit are negotiable CDs issued in the U.S. by branches and agencies of foreign banks.
Yankee Securities	Dollar denominated bonds issued in the U.S. by foreign banks and corporations for trade in U.S. markets.
Years to Maturity	The remaining term of a security, excluding any options or prepayment features.
Yield	The rate of annual income return on an investment expressed as a percentage. Income yield is obtained by dividing the current dollar income by the current market price of the security.
Yield Curve	A graphic depiction of the term structure of interest rates.
Yield Curve Risk	Price exposure that a security or portfolio has in the event of nonparallel shifts in the yield curve.
Yield Maintenance	For a GNMA or other mortgage security bought under a futures contract or standby commitment, the adjustment of the price upon delivery necessary to provide the same yield to the buyer that was specified in the original agreement. Yield maintenance becomes necessary when the coupon on the GNMA that is delivered is different from the coupon that had been expected at the time the agreement was made.
Yield to Average Life	The yield derived when the average life date (average maturity) is substituted for the maturity date of the issue.
Yield to call	The yield computed assuming cash flow is the coupon stream to the call date, when the issue is redeemed at its call date, when the issue is redeemed at its call price.
Yield to Maturity (YTM)	Return an investor will receive if an interest-bearing investment is held to its maturity date and all interest payments are reinvested at the security's YTM. It takes into account purchase price, redemption value, time remaining until maturity, coupon yield, and the time between interest payments.
Yield To Put	The return a bond earns assuming that it is held until a certain date and put (sold) to the issuing company at a specific price (the put price).
Yield to Worst	The yield resulting from the most adverse set of circumstances from the investor's point of view; the lowest of all possible yields.

The information contained herein has been obtained from sources deemed to be reliable: however Southeast Corporate does not guarantee its accuracy or completeness.

Zero-coupon bond	A bond that is issued without a coupon but at a deep discount. At maturity, it is redeemed at its face amount.
Zero-Coupon Convertible Security	Zero-coupon bond, usually a municipal bond, convertible into a coupon bond at some time before maturity.

The information contained herein has been obtained from sources deemed to be reliable: however Southeast Corporate does not guarantee its accuracy or completeness.