Jargon Buster

A

Accretion/Dilution

Analysis that determines the change in a company's projected EPS due to a potential M&A or capital markets transaction. Analysis can be completed Bottom-up by adjusting EPS estimates or Top-down by projecting full company statements. A transaction is Accretive when there is a positive change in EPS and Dilutive when there is a negative change.

Accrued interest

The interest earned on a loan or note between two interest payment dates.

Acquisition

The act of one corporation acquiring control of another corporation.

Agent

The bank responsible for administering a project's financing.

American Depository Receipt (ADR)

A certificate of ownership issued by a U.S. bank representing a claim on underlying foreign securities. ADRs may be traded in lieu of trading in the actual underlying shares.

American Stock Exchange (AMEX)

The second-largest stock exchange in the U.S., after the New York Stock Exchange (NYSE). In general, the listing rules are a little more lenient than those of the NYSE, and thus the AMEX has a larger representation of stocks and bonds issued by smaller companies than the NYSE.

Amortization

Writing off an intangible asset investment over the projected life of the assets.

Analyst

Entry level position in a U.S. investment bank. Usually 2-3 years until promotion to Associate.

Arbitrage

Buying securities in one country/market and selling them in another.

Arrangement fee

A fee paid to a mandated bank or group of banks (lead arrangers) for arranging a transaction. It includes fees to be paid to participating banks.

Arranger

A bank or other financial institution responsible for originating and syndicating a loan transaction. The arranger always has a senior role, is often the agent, and usually participates in the transaction at the most senior level. (It holds the largest share of the loan.)

Asset allocation

The relative weightings of regions, sectors and types of investments (i.e. equities, bonds, etc.) within a portfolio, determined by client's risk and return requirements and the market outlook. This is central to financial planning and investment management.

Asset swap

The bond's swapped spread, in basis points. The asset swap spread, or gross spread, is derived by valuing a bond's cash flows via the swap curve's implied zero rates. This gross spread is the basis point amount added to the swap curve, which causes a bond's computed value to equal the market price of the bond.

Audit

Professional examination and verification of a company's accounting data.