Glossary

R-square

The percent of the variation in a dependent variable (a y-variable) that is “explained by” variation in an independent variable (an x-variable). Also known as the coefficient of determination.

Random Walk

A process in which instantaneous changes in exchange rates are normally distributed with a zero mean and constant variance.

Re-invoicing Centers

An offshore financial affiliate that is used to channel funds to and from the multinational’s foreign operations.

Real Appreciation/Depreciation

A change in the purchasing power of a currency.

Real Cash Flow

A cash flow is expressed in real terms if the current, or date 0, purchasing power of the cash flow is given.

Real Exchange Rate

A measure of the nominal exchange rate that has been adjusted for inflation differentials since an arbitrarily defined base period.

Real Interest Rate

Interest rate expressed in terms of real goods; that is, the nominal interest rate minus the expected inflation rate.

Real Options

An option or option-like feature embedded in a real investment opportunity.

Realignment

The coordinated revaluation and devaluation of the currencies of several countries.

Reciprocal Marketing Agreement

A strategic alliance in which two companies agree to comarket each other’s products in their home market. Production rights may or may not be transferred.

Reconsignment

In shipping, it is the change in either the name of the consignee, the place of delivery, or relinquishment of the shipment by the carrier at the point of origin.

Recourse

The right to demand return of money paid. In negotiation of a letter of credit, payment by the negotiating bank will normally be with recourse.

Red Clause

A banking term which refers to a special clause in a letter of credit allowing the seller of goods to obtain an unsecured advance from the issuing bank to finance the manufacture or purchase of the goods.

Regional Development Banks (RDBs)

Banks that are owned and operated by member nations; they are designed to extend development loans and provide other assistance to member nations. The world's four regional development banks are the African Development Bank Group, the Asian Development Bank, the European Bank for Reconstruction and Development, and the Inter-American Development Bank.

Registered Bonds

Bonds for which each issuer maintains a record of the owners of its bonds. Countries requiring that bonds be issued in registered form include the United States and Japan (contrast with bearer bonds).

Registration Statement

In the United States, a statement filed with the Securities and Exchange Commission on securities issues that discloses relevant information to the public.

Remittance

The forwarding of funds from one party to another as payment for goods or services.

Repatriation

The act of remitting cash flows from a foreign affiliate to the parent firm.

Replevin

A legal action which entitles the rightful owner of property that has been wrongfully kept from him or her to recover it.

Rescind

To void or cancel a contract.

Reservation Price

The price below (above) which a seller (purchaser) is unwilling to go.

Residual Value

The value of an asset at the conclusion of a lease.

Restitution

In the case of a breach of contract, restitution is the restoration of the involved parties to their original positions prior to the contract.

Restrictive Endorsement

Endorsement transferring title or right to a named party.

Retention Ratio

Retained earnings divided by net income.

Return on Equity (ROE)

Net income after interest and taxes divided by average common stockholder's equity.

Revaluation

An increase in a currency value relative to other currencies in a fixed exchange rate system.

Right of Priority

In patent, industrial design and trademark laws, a priority right or right of priority is a time-limited right, triggered by the first filing of an application for a patent, an industrial design or a trademark respectively. The priority right belongs to the applicant or his successor in title and allows him to file a subsequent application for the same invention, design or trademark and benefit, for this subsequent application, from the date of filing of the first application for the examination of certain requirements.

Rights of Set-off

An agreement defining each party’s rights should one party default on its obligation. Rights of set-off were common in parallel loan arrangements.

Risk Averse

Seeking stability rather than risk.

Risk Premium

The excess return on the risky asset that is the difference between expected return on risky assets and the return of risk-free assets.

Risk Profile

A graph with the value of an underlying asset on the x-axis and the value of a position exposed to risk in the underlying asset on the y-axis. Also used with changes in value (contrast with payoff profile).

Roll’s Critique

The CAPM holds by construction when performance is measured against a mean-variance efficient index. Otherwise, it holds not at all.

Royalty

Payment made for the use of a person or business’s property based on an agreed percentage of the income arising from its use.

Rule #1

Always keep track of your currency units.

Rule #2

Always think of buying and selling the currency in the denominator of a foreign exchange quote.

Rules of Origin

Rules used to determine in what country a good will be considered as actually made for tariff and other trade purposes.