Glossary

Dealing Desk

The desk at an international bank that trades spot and forward foreign exchange. Also known as trading desk.

Debt Capacity

The amount of debt that a firm chooses to borrow to support a project.

Debt-for-equity Swap

A swap agreement to exchange equity (debt) returns for debt (equity) returns over a prearranged length of time.

Debtor Nation

A nation that is owed less in foreign currency than it owes other nations.

Decision Trees

A graphical analysis of sequential decisions and the likely outcomes of those decisions.

Deferred Payment Credit

A type of letter of credit which provides for payment some time after presentation of the shipping documents by the exporter.

Del Credere Risk

Situation created when a sales agent sells on credit and there is a chance that the buyer either does not want to or does not have the money to pay.

Deliverable Instrument

The asset underlying a derivative security. For a currency option, the deliverable instrument is determined by the options exchange and is either spot currency or an equivalent value in futures contracts.

Delta-cross-hedge

A futures hedge that has both currency and maturity mismatches with the underlying exposure.

Delta-hedge

A futures hedge using a currency that matches the underlying exposure and a maturity date that is different from, but preferably close to, the maturity of the underlying exposure.

Demand Management

A business process with the intention to coordinate and influence all sources of demand for a firm’s products.

Department for International Development (DFID)

Department for International Development (UK)

Department of Commerce (DOC)

Department of Commerce (USA)

Depository Receipt

A derivative security issued by a foreign borrower through a domestic trustee representing ownership in the deposit of foreign shares held by the trustee.

Depreciation

1) The expense against earnings to write-off purchase price of an asset over its useful life. 2) A decrease in a currency value relative to another currency in a floating exchange rate system.

Derivative Security

A financial security whose price is derived from the price of another asset. The value of a derivative is determined by the fluctuations in the asset.

Devaluation

A decrease in a currency value relative to another currency in a fixed exchange rate system. The purpose of devaluation typically is to increase export and decrease import in order to correct a balance of payment deficit.

Developed Countries

The richer more industrialized countries in the world.

Developing Country

A country that is in the process of becoming industrialized. Average national income must be below $9,265 for a country to be classified as a developing country. A developing country typically lacks industrialization, infrastructure, high literacy rate and advanced living standards.

Difference Check

The difference in interest payments that is exchanged between two swap counterparties.

Digital Divide

The digital divide refers to the widening technological gap between the richer and the poorer countries of the world.

Direct Costs of Financial Distress

Costs of financial distress that are directly incurred during bankruptcy or liquidation proceedings.

Direct Exporting

Marketer takes direct responsibility for its products abroad by selling them directly to foreign customers or through local representatives in foreign markets.

Direct Financing Lease

A non-leveraged lease by a lessor in which the lease meets any of the definitional criteria of a capital lease, plus certain additional criteria.

Direct Product Profitability

Measuring the direct costs associated with handling a product from the warehouse until a customer buys from the retail store.

Direct Terms

The price of a unit of foreign currency in domestic currency terms, such as $.6548/DM for a U.S. resident (contrast with indirect quote).

Discount

If a bond is selling below its face value, it is said to sell at a discount.

Discounted Cash Flow

A valuation methodology that discounts expected future cash flows at a discount rate appropriate for the risk, currency, and maturity of the cash flows.

Discounted Payback

The length of time needed to recoup the present value of an investment; sometimes used when investing in locations with high country risk.

Discounted Payback Period Rule

An investment decision rule in which the cash flows are discounted at an interest rate and the payback rule is applied on these discounted cash flows.

Discounting

Calculating the present value of a future amount. The process is the opposite of compounding.

Discretionary Reserves

Balance sheet accounts that are used in some countries to temporarily store earnings from the current year or the recent past.

Discriminatory Pricing

The practice that selling a product or service at different prices that do not reflect a proportional difference in costs.

Dispatch

An amount paid by a vessel's operator to a charter if loading or unloading is completed in less time than stipulated in the charter party.

Dispute Settlement Body (DSB)

Dispute Settlement Body is a part of the World Trade Organization (WTO) that settles trade disputes between governments.

Dispute Settlement Panel (DSP)

The WTO's Dispute Selttement Body forms different Dispute Settlement Panels to resolve conflicting issues among its members.

Dispute Settlement Understanding (DSU)

The Dispute Settlement Understanding (DSU) of the World Trade Organization (WTO) was one of the key outcomes of the Uruguay Round of multilateral trade negotiations.

Distributor

A foreign agent who sells for a supplier directly and maintains an inventory of the supplier’s product.

Diversifiable Risk

A risk that specifically affects a single asset or a small group of assets. Also called unique or unsystematic risk.

Diversionary Dumping

The sale of foreign products at less than fair value to a 3rd country where the products are further processed and sold to another country.

Dock Receipt

A receipt issued by an ocean carrier to acknowledge receipt of a shipment at the carrier's dock or warehouse.

Dock Statement

A receipt issued by an ocean carrier to acknowledge the receipt of a shipment at the carrier's dock or warehouse facilities.

Domestic Bonds

Bonds issued and traded within the internal market of a single country and denominated in the currency of that country.

Domestic International Sales Corporation

In the U.S. tax code, a specialized sales corporation whose income is lumped into the same income basket as a foreign sales corporation.

Domestic Liquidity

The aggregate of money supply, quasi-money or savings and time deposits, and deposit substitutes.

Downstream Dumping

A type of dumping in which the primary producer first sells its product to another domestic producer at below fair value or cost. The second producer then furthur processes the product and exports it to another country at a lower than normal cost.

Draft

A means of payment whereby a drawer (the importer) instructs a drawee (either the importer or its commercial bank) to pay the payee (the exporter). Also known as trade bill or bill of exchange.

Dual Pricing

The practice of selling identical products in different markets for different prices.

Dumping

Selling merchandise in another country at a price below the price at which the same merchandise is sold in the home market or selling such merchandise below the costs incurred in production and shipment, that is, selling the product at less than fair value. Dumping is an illegal trade practice.

Dumping Margin

The difference between the fair value of a product and the amount for which it is available in the case of dumping.

Duty

A tax imposed on imports by the customs authority of a country.