BARRA's performance analysis (PERFAN) factor model - A method developed by BARRA, a consulting firm in Berkeley, California, which is commonly used by institutional investors applying performance attribution analysis to evaluate their money managers' performances.

Back months - The futures or options on futures months being traded that are furthest from expiration.

Back-end loan fund - A mutual fund that charges investors a fee to sell (redeem) shares, often ranging from 4% to 6%. Some back-end load funds impose a full commission if the shares are redeemed within a designated time period after purchase, such as one year, reducing the commission the longer the investor holds the shares. The formal name for the back-end load is the contingent deferred sales charge, or CDSC.

Backwardation - A market condition in which futures prices are lower in the distant delivery months than in the nearest delivery month.

Balance sheet - Also called the statement of financial condition, a summary of the assets, liabilities, and owners' equity.

Balanced fund - An investment company that invests in both stocks and bonds.

Balloon maturity - Any principal due at maturity for a bond with a sinking fund requirement.

Bank discount basis - A convention used for quoting bids and offers for Treasury bills in terms of annualized yield based on a 360-day year.

Bankers acceptance - A security representing a bank's promise to repay a loan created in a commercial transaction in case the debtor fails to perform. Commonly used in international transactions.

Barbell strategy - A strategy in which the maturities of the securities included in the portfolio are concentrated at two extremes.

Base interest rate - Related: Benchmark interest rate

Base probability of loss - The probability of not achieving a portfolio expected return.

Basis - Regarding a futures contract, the difference between the cash price and the futures price observed in the market.

Basis risk - The uncertainty about the basis at the time a hedge may be lifted. Hedging substitutes basis risk for price risk.

Basket trades - Program trades.

Bear - One who believes prices will move lower. Related: Bull

Bear market - Any market in which prices are in a declining trend.

Before-tax profit margin - The ratio of net income before taxes to net sales.

Bellwether issues - Related: Benchmark issues

Benchmark - The performance of a predetermined set of securities, for comparison purposes. Such sets may be based on published indexes or may be customized to suit an investment strategy.

Benchmark interest rate - Also called the base interest rate, the minimum interest rate that investors will demand for investing in a non-Treasury security. The yield to maturity offered on a comparable-maturity Treasury security that was most recently issued ("on-the-run").

Benchmark issues - Also called on-the-run or current coupon issues or bellwether issues. In the secondary market, the most recently auctioned Treasury issues for each maturity.

Beta - The slope of the market model for the asset, which measures the degree to which the historical returns on the asset change systematically with changes in the market portfolio's return. Hence, beta is referred to as an index of that systematic risk due to general market conditions that cannot be diversified away.

Bid - The price that the market participants are willing to pay.

Black-Scholes option-pricing model - A model for pricing call options based on arbitrage arguments that uses the stock price, the exercise price, the risk-free interest rate, the time to expiration, and the standard deviation of the stock return.

Block trade - A large trading order, defined on the New York Stock Exchange as an order that consists of 10,000 shares of a given stock or that has a total market value of $200,000 or more.

Bond - An instrument in which the issuer (debtor/borrower) promises to repay to the lender/investor the amount borrowed plus interest over some specified period of time.

Bond indenture - The contract that sets forth the promises of a corporate bond issuer and the rights of investors.

Bond indexing - Designing a portfolio so that its performance will match the performance of some bond index.

Bond-equivalent basis - The method uses for computing the bond-equivalent yield.

Bond-equivalent yield - The annualized yield to maturity computed by doubling the semiannual yield.

Book value - The total owners' equity shown in the balance sheet.

Book value per share - The ratio of stockholder's equity to the average number of common shares. Book value per share should not be thought of as an indicator of economic worth, since it reflects accounting valuation (and not necessarily market valuation).

Bootstrapping - A process of creating a theoretical spot rate curve, using one yield projection as the basis for the yield of the next maturity.

Bottom-up equity management style - A management style that de-emphasizes the significance of economic and market cycles and focuses instead on the analysis of individual stocks.

Break - A rapid and sharp price decline.

Break-even time - Related: Premium payback period

Broker - An individual who is paid a commission for executing customer orders. Either a Floor Broker who executes orders on the floor of the Exchange, or an Upstairs Broker who handles retail customers and their orders.

Broker loan rate - Related: Call money rate

Bull - One who expects prices to rise.

Bull market - Any market in which prices are in an upward trend.

Bull spread - A spread strategy in which an investor buys an out-of-the-money put option and finances this purchase by selling an out-of-the-money call option on the same underlying.

Bulldog market - The foreign market in the United Kingdom.

Bullet contract - A guaranteed investment contract purchased with a single (one-shot) premium. Related: Window contract

Bullet strategy - A strategy in which a portfolio is constructed so that the maturities of its securities are highly concentrated at one point on the yield curve.

Butterfly shift - A non-parallel shift in the yield curve involving the humpedness of the curve.

Buy hedge - See long hedge.

Buy in - To cover, offset or close out a short position. Related: Evening up, Liquidation, Offset

Buy limit order - A conditional trading order that indicates that a security may be purchased only at the designated price or lower. Related: Sell limit order

Buy on close - To buy at the end of the trading session at a price within the closing range.

Buy on margin - A transaction in which an investor borrows to buy additional shares using the shares themselves as collateral.

Buy on opening - To buy at the beginning of a trading session at a price within the opening range.

Buy-and-hold strategy - A passive investment strategy with no active buying and selling of stocks once the portfolio is created until the end of the investment horizon.

Buy-side analyst - A financial analyst employed by a non-brokerage firm, typically one of the larger money management firms that purchase securities on their own accounts.

Information provided by FutureSource