Glossary

Absolute Advantage

An absolute advantage exists when a nation or economic region is able to produce a good or service more efficiently (using the same amount of resources) than a second nation or region.

Accelerated Tariff Elimination

An increased rate of reduction of import duties at a faster rate than what was originally planned or decided upon.

Accounting Exposure

Changes in a corporation's financial statements as a result of changes in currency values. Also known as translation exposure.

Acquisition of Assets

In an acquisition of assets, one firm acquires the assets of another company. None of the liabilities supporting those asset are transferred to the purchaser.

Acquisition of Stock

In an acquisition of stock, one firm buys the equity interest of another firm.

Acquisition Premium

In a merger or acquisition, the difference between the purchase price and the preacquisition value of the target firm.

Active Fund Management

An investment approach that actively shifts funds either between asset classes (asset allocation) or between individual securities (security selection).

Active Income

In the U.S. tax code, income from an active business as opposed to passive investment income.

Activity Based Costing (ABC)

An accounting method that allocates costs to specific products or services or activities such as production, delivery or maintenance based on breakdowns of cost drivers.

Ad Valorem Tariff

A tariff assessed as a percentage of the value of an import.

Adjusted Present Value

A valuation method that separately identifies the value of an unlevered project from the value of financing side effects.

Advance Payment

Trading method in which the buyer pays for the goods before they are sent out , method is used when buyer is of unknown credit worthiness.

Adventure

It is also called "marine adventure." It is a term of art in the marine insurance business. All insured cargo owners and every shipper on that vessel are part of the adventure.

Advising Bank

Bank, usually in the country of the seller, whose primary function is to authenticate the letter of credit and advise it to the seller.

Advisory Capacity

Used to indicate that a shipper's agent or representative is not empowered to make definitive changes or adjustments without approval of the group or individual represented.

African Developmental Bank Group (ABD Group)

The ABD Group is 1 of 4 major regional developmental banks currently operating in the global economy; it is headquartered in Abidjan, Cote d'Ivoire.

African Union (AU)

The African Union is an organization for regional, social and economic cooperation. It consists of 53 member nations in Africa and was derived from the OAU (Organisation of African Unity). Its goal is to unify Africa and promote peace, security, and stability on the continent through social and economic cooperation.

African, Caribbean, and Pacific Countries (ACP)

The African, Caribbean and Pacific Group of States (ACP) is an organisation created by the Georgetown Agreement in 1975. It is composed of African, Caribbean and Pacific States signatories to the Georgetown Agreement or the Partnership Agreement between the ACP and the European Union, officially called the

Agency Costs

The costs incurred to ensure that agents and managers act in the best interest of the principal. For example, reward to managers as a percentage of profit.

Agent

Someone who represents another. In corporate governance terminology, management is the agent of the principal stakeholders in a principal-agent relationship.

Aggregate Demand

The total demand of all potential buyers of a commodity or service. Includes all individuals and organizations that have the ability, willingness, and authority to purchase such products.

Agreement on Textiles and Clothing (ATC)

The Agreement on Textiles and Clothing (ATC) and all restrictions thereunder terminated on January 1, 2005. The expiry of the ten-year transition period of ATC implementation means that trade in textile and clothing products is no longer subject to quotas under a special regime outside normal WTO/GATT rules but is now governed by the general rules and disciplines embodied in the multilateral trading system.

Air Waybill

A nonnegotiable instrument of domestic and international air transport that functions as a bill of lading.

All-in-cost

The percentage cost of a financing alternative, including any bank fees or placement fees.

Allocation-of-Income Rules

In the U.S. tax code, these rules define how income and deductions are to be allocated between domestic-source and foreign-source income.

Allocational Efficiency

The efficiency with which a market channels capital toward its most productive uses.

Allowance

An amount paid or credited by sellers to the buyers on products due to one or more reasons that did not meet buyers' specifications such as late shipment and faulty packaging.

Alternative Tariff

A tariff that has two or more rates for the same product, trading to and from the same points, with the authority to use one that produces the lowest charge.

American Option

An option that can be exercised anytime until expiration (contrast with European option).

American Shares

Shares of a foreign corporation issued directly to U.S. investors through a transfer agent in accordance with SEC regulations.

American Terms

A foreign exchange quotation that states the U.S. dollar price per foreign currency unit (contrast with European terms).

Andean Community (CAN)

The Andean Community or Comunidad Andina de Naciones in Spanish (CAN) is made up of Bolivia, Colombia, Ecuador, Peru and Venezuela. It is a series of bodies and institutions that work to bring Andean subregional integration, promote external projection, and reinforce the actions connected with the process.

Andean Pact

A regional trade pact that includes Venezuela, Colombia, Ecuador, Peru, and Bolivia.

Annuity

A level stream of equal dollar payments that lasts for a fixed time. An example of an annuity is the coupon part of a bond with level annual payments.

Annuity Factor

The term used to calculate the present value of the stream of level payments for a fixed period.

Anti-dumping Laws

Laws that are enacted to prevent dumping - offering prices in the overseas market that is lower than that at which a product is sold in its home domestic market.

Appellate Body (AB)

The Appellate Body is a World Trade Organization (WTO) entity, which was established in 1995 under Article 7 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU). Its purpose is to hear appeals and reports issued by panels in disputes between WTO members. It is composed of a standing body of 7 people and has the power to uphold, modify, or reverse the legal findings and conclusions of a panel. These rulings must be accepted by the parties of the dispute. The Appellate Body has its seat in Geneva, Switzerland.

Appreciation

An increase in a currency value relative to another currency in a floating exchange rate system.

Arab Maghreb Union (AMU)

A regional alliance seeking economic and political unity in Northern Africa. Members are Algeria, Libya, Mauritania, Morocco, and Tunisia.

Arbitrage

The process of purchasing and selling the identical products, such as foreign exchange, stocks, bonds and other commodities, in several markets intending to make profit from the difference in price. Arbitrage is generally seen as a "risk-less" transaction.

Arbitrage Pricing Theory (APT)

APT is a theory used in finance to find the prices of assets and is typically used in stock pricing.

Arbitrage Pricing Theory (APT)

An asset pricing model that assumes a linear relation between required return and systematic risk as measured by one or more factors according to Rj = mj + b1jF1 + ... + bKjFK + ej.

Asia-Pacific Economic Cooperation (APEC)

A forum designed to promote economic growth, cooperation, and integration among member nations. APEC has also worked to reduce tariffs and other trade barriers across the Asia-Pacific region. Its vision is based on the "Bogor Goals" adopted in the 1994 meeting in Bogor, Indonesia. There are 21 member economies including: Australia; Brunei Darussalam; Canada; Chile; People's Republic of China; Hong Kong, China; Indonesia; Japan; Republic of Korea; Malaysia; Mexico; New Zealand; Papua New Guinea; Peru; The Republic of the Philippines; The Russian Federation; Singapore; Chinese Taipei; Thailand; United States of America; Viet Nam.

Asian Development Bank (ADB)

The Asian Development Bank (ADB) is a multilateral development financial institution owned by 67 members (48 from the region and 19 from other parts of the globe). Its goal is to improve the welfare of the people in Asia and the Pacific. ADB is headquartered in Manila, Philippines. It is one of four major development banks around the world.

Ask Rates

The rate at which a market maker is willing to sell the quoted asset. Also known as offer rates.

Asset Allocation Policy

The target weights given to various asset classes in an investment portfolio.

Assets In Place

Those assets in which the firm has already invested (Compare to growth options).

Association of Southeast Asian Nations (ASEAN)

An economic and geopolitical affiliation formed in 1967 that includes Singapore, Brunei Darussalam, Malaysia, Thailand, the Philippines, Indonesia, Myanmar (Burma), Laos, Cambodia, and Vietnam.

At-the-money Option

An option with an exercise price that is equal to the current value of the underlying asset.

Attachment

Legal seizure of a property or a person before the judgment is made, in order to secure compensation if awarded. The prosecutor can request the court to issue an order to seize a property.

Autarky

In models of international trade, a situation in which there is no cross-border trade.

Aval

A guarantee of the buyer's credit provided by the guarantor, unless the buyer is of unquestioned financial standing. The aval is an endorsement note as opposed to a guarantee agreement.

Avalisation

Payment undertaking given by a bank in respect of a bill of exchange drawn.

Average Accounting Return (AAR)

The average project earnings after taxes and depreciation divided by the average book value of the investment during its life.