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P&S
Purchase and sale statement. A statement provided by the broker
showing change in the customer's net ledger balance after the offset
of a previously established position(s).
P/E
A stock has a price-to-earnings ratio: the share price divided by earnings per share
for the company's most recent four quarters. A projected P/E divides the share price by estimated earnings per share for the coming four quarters.
P/E ratio equation
Assume XYZ Co. sells for $25. 50 per share and has earned $2. 55 per share this year
$25. 50 = 10 times $2. 55
XYZ stock sells for 10 times earnings
.
Par value
Also called the maturity value
or face value, the amount that the issuer
agrees to pay at the maturity date
.
Parallel shift in the yield curve
A shift in the yield curve
in which the change in the yield
on all maturities is the same number of basis
points. Related:
Non-parallel shift in the yield curve
Parity value
Related:
conversion value
Participating GIC
A guaranteed investment contract
where the policyholder is not guaranteed a crediting rate, but instead receives a return
based on the actual experience of the portfolio
managed by the life company.
Passive portfolio strategy
A strategy that involves minimal expectational input, and instead relies on diversification to match the performance of some market index. A passive strategy assumes that the marketplace will reflect all available information in the price paid for securities. Related:
active portfolio
strategy
Pass-through
Related:
mortgage pass-through security
Pass-through coupon rate
The interest
rate paid on a securitized pool of assets, which is less than the rate paid on the underlying loans by an amount equal to the servicing and guaranteeing fees.
Payment date
Date on which a declared stock dividend
or a bond
interest
payment is scheduled to be made.
Payment-In-Kind (PIK) bond
A bond
that gives the issuer
an option
(during an initial period) either to make coupon
payments in cash or to give the bondholder a similar bond.
Pension benefit guaranty corporation
A federal agency that insures the vested benefits of pension plan
participants (established -in 1974 by the ERISA legislation).
Pension plan
A fund that is established for the payment of retirement benefits.
Pension sponsors
Organizations that have established a pension plan
.
Perfect hedge
A hedge in which the profit and loss are equal.
Performance attribution analysis
The decomposition of a money manager's performance results to explain the reasons why those results were achieved. This analysis seeks to answer the following questions: (1) What were the major sources of added value? (2) Was short-term factor timing statistically significant? (3) Was market timing statistically significant? And (4) was security
selection statistically significant?
Performance evaluation
The evaluation of a manager's performance which involves, first, determining whether the money manager
added value by outperforming the established benchmark
(performance measurement) and, second, determining how the money manager achieved the calculated return
(performance attribution analysis).
Performance measurement
The calculation of the return
realized by a money manager
over some time interval.
Perpetual warrants
Warrants that have no expiration date
.
Phone switching
In mutual funds, the ability to transfer shares
between funds in the same family by telephone request. There may be a charge associated with these transfers. Phone switching
is also possible among different fund families if the funds are held in street name by a participating broker/dealer.
Pit
A specific area of the trading floor that is designed for the trading of an individual futures
or options contract
.
Pit committee
A committee of the exchange that determines the daily settlement price
of futures
contracts.
Pivot
Price level established as being significant by market's failure to penetrate or as being significant when a sudden increase in volume
accompanies the move through the price level.
Plan sponsors
The entities that establish pension plans, including private business entities acting for their employees; state and local entities operating on behalf of their employees; unions acting on behalf of their members; and -individuals representing themselves.
Plowback rate
Related:
retention rate
.
Point
Related:
minimum price fluctuation
.
Point and figure chart
A price-only chart that takes into account only whole integer changes in price, i.e., a 2-point change. Point
and figure charting disregards the element of time and is solely used to record changes in price.
Policy asset allocation
A long-term asset
allocation method, in which the investor
seeks to assess an appropriate long-term "normal" asset mix that represents an ideal blend of controlled risk and enhanced return
.
Portfolio
A collection of investments.
Portfolio insurance
A strategy using a leveraged portfolio
in the underlying stock to create a synthetic put option
.
Portfolio internal rate of return
The rate of return
computed by first determining the cash flows for all the bonds in the portfolio
and then finding the interest
rate that will make the present value of the cash flows equal to the market value of the portfolio.
Portfolio management
Investment management
Portfolio manager
Investment manager
Portfolio turnover rate
For an investment company, an annualized rate found by dividing the lesser of purchases and sales by the average
of portfolio
assets.
Position
A market commitment; the number of contracts bought or sold for which no offsetting transaction has been entered into. The buyer of a commodity
is said to have a long position
and the seller of a commodity is said to have a short position
. Related:
open contracts
Positive carry
Related:
net financing cost
Positive convexity
A property of option-free bonds whereby the price appreciation for a large change in interest
rates will be greater (in absolute terms) than the price depreciation
for the same change in interest rates.
Posttrade benchmarks
Prices
after the decision to trade
.
Preferred habitat theory
A biased expectations theory which rejects the assertion that the risk premium
must rise uniformly with maturity. Instead, the extent that the demand for and supply of funds i-,l a given maturity range
do not match will induce some participants to shift to maturities showing the opposite imbalances. However, such investors will need to be compensated by an appropriate risk premium whose magnitude will reflect the extent of aversion to either price or reinvestment risk
.
Preferred shares
Preferred shares give investors a fixed dividend
from the company's earnings
. And more importantly: preferred shareholders get paid before common shareholders.
Preferred stock
A security
that shows ownership in a corporation and gives the holder a claim, prior to the claim of common stockholders, on earnings
and also generally on assets in the event of liquidation
. Most preferred stock
pays a fixed dividend, stated in a dollar amount or as a percentage of par value
. This stock does not usually carry
voting rights. The stock shares
characteristics of both common stock and debt.
Premium
The price of an options contract; also, in futures
trading, the amount the futures price exceeds the price of the spot commodity
. Related:
inverted market
premium payback period Also called break-even time, the time it takes to recover the premium per share of a convertible security
.
Prepayment speed
Also called speed, the estimated rate at which mortgagors pay off their loans ahead of schedule, critical in assessing the value of mortgage
pass-through securities.
Prepayments
Payments made in excess of scheduled mortgage
principal repayments.
Prerefunded bond
Refunded bond
.
Pre-trade benchmarks
Prices
occurring before or at the decision to trade
.
Price/book ratio
Compares a stock's market value to the value of total assets less total liabilities (book). Determined by dividing current price by common stockholder equity
per share (book value), adjusted for stock splits. Also called Market-to-Book.
Price/earnings ratio
Shows the "multiple" of earnings
at which a stock sells. Determined by dividing current price by current earnings per share
(adjusted for stock splits). Earnings per share for the P/E
ratio is determined by dividing earnings for past 12 months by the number of common shares
outstanding. Higher "multiple" means investors have higher expectations for future growth, and have bid
up the stock's price.
Price/sales ratio
Determined by dividing stock's current price by revenue per share (adjusted for stock splits). Revenue per share for the P/S ratio is determined by dividing revenue for past 12 months by number of shares
outstanding.
Price compression
The limitation of the price appreciation potential for a callable bond
in a declining interest
rate environment, based on the expectation that the bond will be redeemed at the call price
.
Price discovery process
The process of determining the prices
of the assets in the marketplace through the interactions of buyers and sellers.
Price impact costs
Related:
market impact costs
Price momentum
Related:
Relative strength
Price persistence
Related:
Relative strength
Price risk
The risk that the value of a security
(or a portfolio) will decline -in the future.
Price Value of a Basis point (PVBP)
Also called the dollar value of an 01, a measure of the change in the price of the bond
if -the required yield
changes by one basis point
.
Price-Earnings (P/E) ratio
The current market price of the stock divided by some measure of earnings per share
.
Prices
Price of a share of common stock on the date shown. Highs and lows are based on the highest and lowest intraday trading price.
Price-volume relationship
A relationship espoused by some technical analysts
that signals continuing rises and falls in security
prices
based on accompanying changes in volume
traded.
Pricing efficiency
Also called external efficiency, a market characteristic where prices
at all times fully reflect all available information that is relevant to the valuation of securities.
Primary market
The first buyer of a newly issued security
buys that security in the primary market. All subsequent trading of those securities is done in the secondary market
.
Private-label pass-throughs
Related:
Conventional passthroughs
Probability distribution
Also called a probability function, a function that describes all the values that the random variable can take and the probability associated with each.
Probability function
Related:
probability distribution
Profit margin
Indicator of profitability. The ratio of earnings
available to stockholders to net sales. Determined by dividing net income
by revenue for the same 12-month period. Result is shown as a percentage.
Program trades
Also called basket trades, orders requiring the execution
of trades in a large number of different stocks at as near the same time as possible. Related:
block trade
Program trading
Trades based on signals from computer programs, usually entered directly from the trader's computer to the market's computer system and executed automatically.
Projected Benefit Obligation (PBO)
A measure of a pension plan's liability
at the calculation date assuming that the plan is ongoing and will not terminate in the foreseeable future. Related:
accumulated benefit obligation
Prospectus
Formal written document to sell securities that describes the plan for a proposed business enterprise, or the facts concerning an existing one, that an investor
needs to make an informed decision. Prospectuses are used by Mutual Funds to describe the fund objectives, risks and other essential information.
Protective put buying strategy
A strategy that involves buying a put option
on the underlying security
that is held in a portfolio
. Related:
Hedge option
strategies
Provisional call feature
A feature in a convertible issue
that allows the issuer
to call
the issue during the non-call period if the price of the stock reaches a certain price.
Proxy
Document intended to provide shareholders with information necessary to vote in an informed manner on matters to be brought up at a stockholders' meeting. Includes information on closely held shares
. Shareholders can and often do give management their proxy, representing the right and responsibility to vote their shares
as specified in the proxy statement.
Purchasing-power risk
Related:
inflation risk
Pure expectations theory
A theory that asserts that the forward rates exclusively represent the expected future rates. Related:
biased expectations theories
Pure index fund
A portfolio
that is managed so as to perfectly replicate the performance of the market portfolio
.
Put
An option
granting the right to sell the underlying futures contract
. Opposite of a call
.
Put option
This security
gives investors the right to sell (or put) fixed number of shares
at a fixed price within a given time frame. An investor, for example, might wish to have the right to sell shares
of a stock at a certain price by a certain time in order to protect, or hedge, an existing investment.
Put swaption
A swaption in which the buyer has the right to enter into a swap as a floating-rate payer
. The writer
of the swaption therefore becomes the floating-rate receiver/fixed-rate payer.
Put-call parity relationship
The relationship between the price of a put
and the price of a call
on the same underlying with the same expiration date, which prevents arbitrage
opportunities.
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