Campbell R. Harvey's Hypertextual Finance Glossary

Copyright © 2008. All Worldwide Rights Reserved. Do not reproduce without explicit permission.

V

Fifth letter of a Nasdaq stock symbol indicate that it is when-issued or when-distributed.

VAMI

A way of reporting fund performance whereby each reporting period is indexed at 100 or 1000. Hence, for a fund with a total return of 39% over the year, the VAMI indexed at 100 is 139.

VA

The two-character ISO 3166 country code for HOLY SEE (VATICAN CITY STATE).

VaR

See: Value-at-risk model

VAT

See: Value-added tax

VC

The two-character ISO 3166 country code for SAINT VINCENT AND THE GRENADINES.

VE

The two-character ISO 3166 country code for VENEZUELA.

VEB

The ISO 4217 currency code for the Venezuelan Bolivar.

VG

The two-character ISO 3166 country code for VIRGIN ISLANDS, BRITISH.

VI

The two-character ISO 3166 country code for VIRGIN ISLANDS, U.S..

VN

The two-character ISO 3166 country code for VIET NAM.

VND

The ISO 4217 currency code for the Vietnamese Dong.

VRDB

See: Variable-rated demand bond

VU

The two-character ISO 3166 country code for VANUATU.

VUV

The ISO 4217 currency code for the Vanuatu Vatu.

VWAP

The volume-weighted average price.

Validated Export License

Document issued by the U.S. government (BXA), authorizing the export of specific commoditites to a specified foreign country within a specified time period.

Valuation

Determination of the value of a company's stock based on earnings and the market value of assets.

Valuation Clause

Stipulates a fixed sum for insured property in the event of loss when included in a marine cargo insurance policy.

Valuation Opportunity Cost

The potential increase in firm value associated with investments that are for gone due to capital rationing.

Valuation reserve

An allowance to provide for changes in the value of a company's assets, such as depreciation.

Value Added

Value added is the risk adjusted return generated by an investment strategy: the return of the investment strategy minus the return of the benchmark.

Value-added tax

Tax added onto a product during each step of production, from raw material to finished good.

Value additivity principal

When the value of a whole group of assets exactly equals the sum of the values of the individual assets that make up the group of assets. Or, the principle that the net present value of a set of independent projects is just the sum of the net present values of the individual projects.

Value broker

A discount broker whose rates are a percentage of the dollar value of each transaction.

Value date

In the market for Eurodollar deposits and foreign exchange, the delivery date of funds traded. For spot transactions, it is normally on spot transactions two days after a transaction is agreed upon. In the case of a forward foreign exchange trade, it is the future date.

Value dating

When value or credit is given for funds transferred between banks.

Value investing

In the context of asset management, mutual funds, and hedge funds, the a style of investment that focuses on securities with low price to earnings ratios or low price to book ratios. Some of these securities are deemed cheap and are viewed by manager as having a lot of profit potential.

Value Line investment survey

A proprietary service that ranks stocks for timeliness and safety.

Value manager

A manager who seeks to buy stocks that are at a discount to their "fair value" and to sell them at or in excess of that value. Often a value stock is one with a low price-to-book value ratio. Opposite of to growth stock.

Value Maximization

Increases in owners' wealth achieved by maximizing of the value of a firm's common stock.

Value-at-risk model (VaR)

Procedure for estimating the probability of portfolio losses exceeding some specified proportion based on a statistical analysis of historical market price trends, correlations, and volatilities.

Value stocks

Stocks with low price/book ratios or price/earnings ratios. Historically, value stocks have enjoyed higher average returns than growth stocks (stocks with high price/book or P/E ratios) in a variety of countries.

Value stock fund

A mutual fund that emphasizes stocks of companies whose growth opportunities are generally regarded as subpar by the market. A value stock company often pays regular dividend income to shareholders and sells at relatively low prices in relation to its earnings or book value.

Vancouver Stock Exchange (VSE)

A securities and options exchange in Vancouver, British Columbia, (Canada), specializing in venture capital companies.

Vanilla issue

A security issue that has no unusual features.

Variable

An element in a model. For example, in the model RS&P_t+1 = a + b Tbill _t + e_t, where RS&P_t+1 is the return on the S&P in month _t+1 and Tbill is the Tbill return at month _t, both RS&P and Tbill are "variables" because they change through time; i.e., they are not constant.

Variable annuities

Investment contracts whose issuer pays a periodic amount linked to the investment performance of an underlying portfolio.

Variable cost

A cost that is directly proportional to the volume of output produced. When production is zero, the variable cost is equal to zero.

Variable interest rate

See: Adjustable rate

Variable life insurance policy

A whole life insurance policy that provides a death benefit dependent on the insured's portfolio market value at the time of death. Typically the company invests premiums in common stocks, so variable life policies are referred to as equity-linked policies.

Variable Plan

A plan in which either the number of shares and/or the price at which they will be issued is not known on the grant date.

Variable-price security

A security that sells at a fluctuating market-determined price stocks and bonds are example.

Variable-rate

A varible-rate agreement, as distinguished from a fixed-rate agreement, calls for an interest rate that may fluctuate over the life of the loan. The rate is often tied to an index that reflects changes in market rates of interest. A fluctuation in the rate causes changes in either the payments or the length of the loan term. Limits are often placed on the degree to which the interest rate or the payments can vary.

Variable-rate CDs

Short-term certificate of deposits that pay interest periodically on roll dates. On each roll date, the coupon on the CD is adjusted to reflect current market rates.

Variable-rate demand note

A note that is payable on demand and bears interest tied to a money market rate.

Variable-rate loan

Loan made at an interest rate that fluctuates depending on a base interest rate, such as the prime rate or LIBOR.

Variable rated demand bond (VRDB)

Floating-rate bond that periodically can be sold back to the issuer.

Variable Ratio Write

An option strategy in which the investor owns 100 shares of the underlying security and writes two call options against it, each option having a different striking price.

Variance

A measure of dispersion of a set of data points around their mean value. The mathematical expectation of the average squared deviations from the mean. The square root of the variance is the standard deviation.

Variance-minimization approach to tracking

An approach to bond indexing that uses historical data to estimate the variance of the tracking error.

Variance rule

Specifies the permitted minimum or maximum quantity of securities that can be delivered to satisfy a TBA trade. For Ginnie Mae, Fannie Mae, and Freddie Mac pass-through securities, the accepted variance is plus or minus 2.499999 % per million of the par value of the TBA quantity.

Variation margin

An additional required deposit to bring an investor's equity account up to the margin level when the balance falls below the maintenance margin requirement.

Vault cash

Cash kept on hand in a depository institution's vault to meet day-to-day business needs, such as cashing checks for customers; can be counted as a portion of the institution's required reserves.

Vega

A term that describes the sensitivity of the option price to a one-percent change in volatility.

Velda Sue

Stands for Venture Enhancement and Loan Development Administration for Smaller Undercapitalized Enterprises. A federal agency that buys and pools small business loans made by banks, and then issues securities that are bought by large institutional investors.

Velocity

The number of times a dollar is spent, or turns over, in a specific period of time. Velocity affects the amount of economic activity generated by a given money supply.

Vendor

Seller or supplier.

Venture capital

An investment in a start-up business that is perceived to have excellent growth prospects but does not have access to capital markets. Type of financing sought by early-stage companies seeking to grow rapidly.

Venture capital limited partnership

A partnership between a startup company and a brokerage firm or entrepreneurial company that provides capital for the new business in return for stock in the company and a share of the profits.

Vertical acquisition

Buying or taking over a firm in the same industry in which the acquired firm and the acquiring firm represent different steps in the production process.

Vertical analysis

Dividing each expense item in the income statement of a given year by net sales to identify expense items that rise more quickly or more slowly than a change in sales.

Vertical line charting

A form of technical charting that shows the high, low, and closing prices of a stock or a market on each day on one vertical line with the closing price indicated by a short horizontal mark.

Vertical merger

When one firm acquires another firm that is in the same industry but at another stage in the production cycle. For example, the firm being acquired serves as a supplier to the firm doing the acquiring.

Vertical spread

Simultaneous purchase and sale of two options that differ only in their exercise price. See: Horizontal spread.

Vessel

A conveyance for the transport of goods by water.

Vest

Become applicable or exercisable. A term mainly used on the context of employee stock ownership or option programs. Employees might be given equity in a firm but they must stay with the firm for a number of years before they are entitled to the full equity. This is a vesting provision. It provides incentive for the employee to perform.

Vesting

Nonforfeitable ownership (or partial ownership) by an employee of the retirement account balances or benefits contributed on the employees behalf by an employer. The Tax Reform Act of 1986 established minimum vesting rights for employees based on their years of service—full vesting in five years or 20% vesting per year starting by the end of the third year.

Vesting Schedule

Schedule setting forth when, and to what extent, options become exercisable or restricted stock or stock units are no longer subject to forfeiture (for example, 20% per year over five years).

Veterans Administration (VA) mortgage

A home mortgage loan granted by a lending institution to U.S. veterans and guaranteed by the Veterans Administration.

V formation

A technical chart pattern that follows a letter V form, indicating that the security price has bottomed out, and is now in a bullish trend.

Vienna Convention

Common name for the United Nations Convention on Contracts for the International Sale of Goods. They are a body of law governing the international sale of goods between parties domiciled in member countries.

Vienna Stock Exchange (VSX)

One of the world's oldest exchanges, which accounts for approximately 50% of Austrian stock transactions; the balance are traded OTC.

Vignette

A symbol or pictorial representation of the corporation on a stock certificate. Usually a complicated and artistic design, it is meant to make the counterfeiting of stock certificates as difficult as possible.

Virtual currency option

A new option contract introduced by the PHLX in 1994 that is settled in US dollars rather than in the underlying currency. These options are also called 3-Ds (dollar-denominated delivery).

Visible supply

New muni bond issues scheduled to come to market within the next 30 days.

VIX

The implied volatility on the S&P 100 (OEX) option. This volatility is meant to be a forward looking volatility. It is calculated from both calls and puts that are near the money. The VIX is a popular measure of market risk.

Volatility

A measure of risk based on the standard deviation of the asset return. Volatility is a variable that appears in option pricing formulas, where it denotes the volatility of the underlying asset return from now to the expiration of the option. There are volatility indexes. Such as a scale of 1-9; a higher rating means higher risk.

Volume counting

The SEC dictates how volume is counted. Thus, volume is counted in the same manner on all markets based on the above reporting structure. Any time money changes hands (or any time capital is risked), it must be counted as a trade. Examples: 1) One registered market participant on Nasdaq buys 100 shares into inventory from another registered market participant or from one of its clients. In either case, it is counted as 100 shares. 2) One member firm on the NYSE or Amex buys 100 shares from another member firm. The Specialist matches the order between the two firms and it is counted as 100 shares. 3)The Specialist sells 100 shares from his inventory to a member firm on the NYSE. It is counted as 100 shares. 4) A Market Maker receives an order to buy 100 shares from it's client. It does not have 100 shares in its inventory. It must go buy 100 shares from someone else. It then sells these 100 shares to the client. Thus, there are two trades in this example for a total of 200 shares.

Volume deleted

A note appearing on the consolidated tape when the tape is running behind under heavy trading, meaning that only the stock symbol and price will be shown for trades under 5000 shares.

Volume discount

A reduction in price based on the purchase of a large quantity.

Voluntary accumulation plan

Arrangement allowing shareholders of a mutual fund to purchase shares over a period of time on a regular basis, and in so doing take advantage of dollar cost averaging.

Voluntary bankruptcy

The legal proceeding that follows a petition of bankruptcy.

Voluntary liquidation

Liquidation proceedings that are supported by a company's shareholders.

Voluntary plan

A pension plan supported partially by the employee by pension contributions deducted from each paycheck.

Volatility risk

The risk in the value of options portfolios due to the unpredictable changes in the volatility of the underlying asset.

Voting Instruction Card

The voting card sent to participants in an employee plan giving the trustee of the plan the authority to vote the shares as indicated on a proxy card.

Volume

This is the daily number of shares of a security that change hands between a buyer and a seller. Also known as volume traded. Also see Up volume and Down volume.

Up volume

When a stock closes increases in value on a particular day, the volume in that stock is considered up volume. Related: Down volume.

Voting certificate

Certificates issued by a voting trust to stockholders in exchange for their common stock, which represent all the rights of common stock except voting rights.

Voting rights

The right to vote on matters that are put to a vote of security holders. For example the right to vote for directors.

Voting stock

The shares in a corporation that entitle the shareholder to vote.

Voting trust certificate

A trust in which control of a corporation is given to a few individuals, usually to support reorganization of a corporation without interference.

VXN

The implied volatility on the Nasdaq 100 (NPX) option. This volatility is meant to be a forward looking volatility. It is calculated from both calls and puts that are near the money.

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Copyright © 2007, Campbell R. Harvey. All Worldwide Rights Reserved. Do not reproduce without explicit permission.

[Version March 17, 2008.]

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