Glossary

Laissez-faire

A term associated with the free enterprise economic system which calls for minimal government intervention or regulation, except in maintenance of this economic freedom.

Landed Cost

The quoted or invoiced cost of a commodity, plus any inbound transportation charges.

Law of One Price

The principle that equivalent assets sell for the same price. The law of one price is enforced in the currency markets by financial market arbitrage. Also known as purchasing price parity (PPP).

LDCs

Least Developed Countries
The poorest of the developing countries. They are characterized by a low gross national product per capita, a reliance on subsistence agriculture, rapid population growth, inadequate infrastructure, a weak safety net of social programs, and a low quality of life.
Note: Many sources prefer LLDC to denote Least Developed Countries and LDC for Less Developed Countries.

Lesser Developed Countries
This is a form of categorization in economic growth for the countries that are just beginning to industrialize.

Lead Manager

The lead investment bank in a syndicate selling a public securities offering.

Leading and Lagging

Reduction of transaction exposure through timing of cash flows within the corporation.

Lease

A contract in which one party conveys the use of an asset to another party for a specific period of time at a predetermined rate.

Lease Rate

The periodic rental payment to a lessor for the use of assets. Others may define lease rate as the implicit interest rate in minimum lease payments.

Less than Truckload (LTL)

Refers to shipments of relatively small amounts of freight, typically between 100 and 10,000 pounds. It usually involves slower freight times than full truckload shipping.

Letter of Credit (L/C)

A letter issued by an importer’s bank guaranteeing payment upon presentation of specified trade documents (invoice, bill of lading, inspection and insurance certificates, etc.).

Letter of Intent

A document describing the preliminary understanding between parties intending to join together in some sort of action or engage in a contract.

Leveraged Lease

The lessor provides an equity portion (usually 20 to 40 percent) of the equipment cost and lenders provide the balance on a nonrecourse debt basis.

Liberalization

The process by which certain business activities become more market driven.

License Agreement

A sales agreement in which a domestic company (the licensor) allows a foreign company (the licensee) to market its products in a foreign country in return for royalties, fees, or other forms of compensation.

Licensing

One firm gives another firm a permission, which allows the latter to engage in an activity otherwise legally forbidden to it. Such activities usually involve the transfer of intellectual and proprietary knowledge in return for royalty as revenue.

Limited Flexibility Exchange Rate System

The International Monetary Fund’s name for an exchange rate system with a managed float.

Liquid Market

A market in which traders can buy or sell large quantities of an asset when they want and with low transactions costs.

Liquidity

The ease with which an asset can be exchanged for another asset of equal value.

Loanable funds

The pool of funds from which borrowers can attract capital; typically categorized by currency and maturity.

Location-specific advantages

Advantages (natural and created) that are available only or primarily in a single location.

Lombard Rate

The rate of interest changed by the Bundesbank, Germany’s central bank, to loans backed by moveable, easily-sold assets.

London Interbank Bid Rate (LIBID)

The bid rate that a Euromarket bank is willing to pay to attract a deposit from another Euromarket bank in London.

London Interbank Offer Rate (LIBOR)

The offer rate that a Euromarket bank demands in order to place a deposit at or make a loan to another Euromarket bank in London.

Long Position

A position in which a particular asset (such as a spot or forward currency) has been purchased.

Lump of Labor Fallacy

The fallacious argument which, working on the assumption that there is only a fixed amount of work in the world, says that an increasing population will inevitably lead to increasing unemployment. This argument is often used by governments as reasoning behind reducing the workweek to reduce unemployment.