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F Statistics
The ratio of the variance explained by treatments to the unexpected variance.
Face Value
The amount of principal owed on a debt instrument.
Fade
Selling a rising price or buying a falling price. A trader fading an up opening would be short, for example
Fails
Short for failed deliveries. It is the failure to deliver a security on the settlement date, or the date agreed upon when the trade was done.
Failure
In Elliott wave theory, a 5-wave pattern of movement in which the 5th impulse wave fails to move above the end of the 3rd, or in which the 5th wave does not contain the 5 sub-waves.
Failure Swings
The inability of price to reaffirm a new high in an uptrend or a new low in a downtrend.
Fair Market Value
The value of an asset, under the assumption it is sold to a willing purchaser by a willing seller, under normal conditions.
Fair Price Provision
A form of shark repellent: a strategic move by a takeover target company to make its stock less attractive to potential acquirer. The fair price provision strategy requires a bidder to pay the same price to all shareholders, effectively raising the stakes and discouraging tender offers designed to attract only shareholders eager to replace management.
Fair Values
The theoretical value of what the option should be worth. The theoretical prices generated by an option-pricing model (i.e., the Black-Scholes option pricing model).
Family of Funds
A family of funds is any funds under one name.
Fast Fourier Transform
A method by which to decompose data into a sum of sinusoids of varying cycle length, with each cycle being a fraction of a common fundamental cycle length.
Fast Market
When a stock has so much volume that the order entry systems have difficulty processing all of the orders. This causes problems for brokers who want to give their clients current prices so that they can buy or sell securities. A declaration that market conditions in the futures pit are so disorderly temporarily to the extent that floor brokers are not held responsible for the execution of orders. This usually happens when a company announces important information.
Federal Agency Securities
Issued by U.S. government agencies and sponsored corporations such as Fannie Mae, Freddie Mac and Ginnie Mae, these securities carry direct or implicit government backing, with credit quality second only to Treasury securities.
Federal Open Market Committee (FOMC)
A committee that makes decisions concerning the Fed's operations to control the money supply.
Federal Reserve Board (FRB)
A seven-member group that directs the operations of the Federal Reserve System. Board members are appointed by the president, subject to approval by Congress.
Fee-based Accounts
Client accounts in which the investment dealer does not charge commissions, but charges a fee based on the value of the investor's account instead.
Feedforward Computation
Neural network in which neurons receive information only from the previous layer and send outputs only to the following layer.
Fence
A long (short) underlying position, together with a long (short) OTM put and a short (long) OTM call. All options expire at the same time.
Fibonacci Ratios and Retracements
They can be applied both to price and time, although it is more common to use them on prices. The most common levels used in retracement analysis are 61.8%, 38% and 50%. When a move starts to reverse the 3 price levels are calculated (and drawn using horizontal lines) using a movements low to high. These retracement levels are then interpreted as likely levels where counter moves will stop. It is interesting to note that the Fibonacci ratios were also known to Greek and Egyptian mathematicians. The ratio was known as the Golden Mean and was applied in music and architecture. A Fibonacci spiral is a logarithmic spiral that tracks natural growth patterns.
Fibonacci Sequence
The sequence of numbers (0, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233...), discovered by the Italian mathematician Leonardo de Pisa in the 13th century and the mathematical basis of the Elliott Wave Theory, where the first two terms of the sequence are 0 and 1 and each successive number in the sequence is the sum of the previous two numbers. Technically, it is a sequence and not a series.
Fiduciary
A person legally appointed and authorized to hold assets in trust and manage those assets for the benefit for another person.
Fill
An executed order; sometimes the term refers to the price at which an order is executed.
Fill Order
An order that must be filled immediately (or canceled).
Fill or Kill
When you place an order to buy or sell securities and want that exact number of unit or you don't want any.
Filter
A device or program that separates data, signal or information in accordance with specified criteria.
Filter Point
The time at which a portfolio insurance program makes an adjusting trade.
Final Prospectus
The legal document that states the price of a new issue security, the delivery date, the underwriting spread and other material information. It must be given to every investor who purchases a new issue of registered securities.
Financial Assets
As opposed to real assets, these are paper assets (securities) that entitle the holder to some future payments. Examples include bonds and shares.
Financial Instruments
The term used for debt instruments, which are loans with an agreement to pay back funds with interest, or equity securities, which are shares or stock in a company.
Financial Intermediary
Institutions that provide indirect financing by attracting funds from economic units with a surplus and making them available to deficit-spending entities. Examples include banks, insurance companies, and pension funds.
Financial Leverage
Arises from the partial use of debt or other fixed-income securities to finance investments. Fixed-financing charges have the effect of magnifying the potential variations of returns on the equity portion of the investment. The degree of financial leverage is sometimes defined as the percentage change in earnings per share (EPS) caused by a given percentage change in earnings before interest and taxes (EBIT).
Financial Risk
The risk introduced through financing that increases with the proportion of debt in a firm's capital structure.
Fire (verb)
In expert system programming, ordinarily used to describe the "triggering" or "activation" of a rule. A rule is "fired," "triggered" or "activated" when its conditions have been met, and its "consequence" (resultant facts) is added to the knowledge base.
Firm Bid
An undertaking to buy a specified amount of securities at a specified price for a specified period of time, unless released from this obligation by the seller.
Firm Offer
An undertaking to sell a specified amount of securities at a specified price for a specified period of time, unless released from this obligation by the buyer.
Fiscal Drag
A term used to describe a situation where there is little government spending to encourage growth in an economy. This usually occurs as a result of high deficits that require a reduction in government spending.
Fiscal Policy
The federal tax and spending policies set by Congress or the President. These policies affect tax rates, interest rates and government spending in an effort to control the economy. (See also: monetary policy)
Fiscal Year
A company's accounting year. Due to the nature of particular businesses, some companies do not use the calendar year for their bookkeeping. A typical example is the department store which finds December 31st too early a date to close its books after the holiday rush and has a January 31st fiscal year-end instead.
Fit Criterion
A quantitative comparable measure used to minimize model errors.
5% Confidence
Before conducting statistical tests, an analyst must select a confidence level that will be used to determine when to accept the null hypothesis. A 5% confidence level indicates that one is not willing to accept the null hypothesis when the average net return calculated from the sample could have occurred in only 5 of 100 samples if the null hypothesis were true.
Fixed Asset
A tangible long-term asset such as land, buildings or machinery, held for use rather than for processing or resale. Fixed assets are found on a company's balance sheet.
Fixed Delta
A delta figure that does not change with the change in the underlying. A futures contract has a fixed delta of plus or minus 100.
Fixed Income Security
A preferred stock or debt instrument that has a stipulated interest or dividend rate, e.g., a bond or GIC. This term is often used in reference to an overall investment policy, e.g., fixed income portion of a portfolio.
Fixed-return Instruments
Instruments that pay a fixed rate of interest for an agreed-upon length of time such as term deposits, Treasury bills and Guaranteed Investment Certificates.
Flaglike
Sideways market price action that has a slight drift in price counter to the direction of the main trend; a consolidation phase.
Flat
When the quoted market price of a bond or debenture is only the total cost of the bond or debenture, instead of the cost of the debt instrument plus accrued interest. Bonds and debentures in default of interest trade flat.
Flat Yield Curve
A chart showing the yields of bonds with short maturities as equal to the yields of bonds with long maturities.
Float
The interest rate received on short-term investments. Also, the number of securities that are in the public's possession. If NIMBY Incineration Inc. has 10,000,000 shares issued and 25% are in the hands of employees it is said that this float is 7,500,000 shares. You can deduct shares that are held by pensions, mutual funds and other large investors to arrive at a float.
Floating Exchange Rates
Exchange rates between currencies that are allowed to appreciate or depreciate freely vis-à-vis other currencies in reaction to market forces.
Floor Broker
An exchange member who is paid a fee for executing orders for Clearing Members or their customers. A Floor Broker executing orders must be licensed by the CFTC.
Floor Trader
An exchange member or "local" who executes transactions from the floor of the exchange only for his own account.
Flow-through Shares
Tax deductions and credits, normally available only to a corporation, are given to the owners of the corporation's flow-through shares.
Fluctuation
A variation in the market price of a security.
Flyers
Speculative or high-risk trades.
Forced Conversion
When you own bonds or preferred shares there are sometimes provisions in place to allow the issuing company to make you give them back the security. Realize that they don't get them back for nothing; it is known ahead of time what the conversion value is.
Forecast Origin
The most recent historical period for which data is used to build a forecasting model. The next time period is the first forecast period.
Form 10K
An annual audited report that covers essentially all the information contained in an issuing company's original registration statement. A Form 10K is due within 90 days of year-end.
Form 10Q
A quarterly report containing a corporation's unaudited financial data. Certain non-recurring events that arise during the quarterly period, such as significant litigation, must be reported. A Form 10Q is due 45 days after the end of each of the first three fiscal quarters.
Formula Investing
These are investment strategies. One formula involves shifting funds from common shares to preferred shares or bonds as the stock market rises above a predetermined point-and returning funds to common shares as the stock market declines.
Forward Contract
An individually negotiated contract, with prearranged terms, covering a transaction that is set to take place at a specified future date.
Forward-Rate Agreements (FRAs)
Cash payments are made daily as the spot rate varies above or below an agreed-upon forward rate and can be hedged with Eurodollar futures.
401K Plan
A tax-deferred defined contribution retirement plan offered by an employer.
403B Plan
A tax-deferred annuity retirement plan available to employees of public schools and certain non-profit organizations.
Four Pillars
A term used to describe the main types of financial institutions: banking, trust, insurance and securities.
Fractal Dimension
From fractal geometry, used to describe the irregular nature of lines, curves, planes or volumes.
Fractals
Depiction of mathematical models that may be applied to identify data patterns.
Free Floating Currency
Not fixed or tied to any other currency. It is valued in open markets based on that country's economic and political outlook.
Frequency
The number of complete cycles observed per time period (i.e., cycles per year).
Frequency Component
That part of a time series that may be represented as a cycle.
Frequency Distribution
A chart showing the number of times (or "frequency") an event occurs for each possible value of the event. The vertical or y-axis of the chart is the frequency axis and the horizontal or x-axis shows the different values the variable being measured can take.
Frequency Domain
Variation in a time series is accounted for by cyclical components at different frequencies.
Frequency Response
The transfer of the frequency of the underlying data, usually prices, to the frequency of its moving average.
Front-end Load
1. A mutual fund commission or sales fee that is charged at the time-shares are purchased. The load is added to the net asset value of the shares when calculating the public offering price.
2. A system of sales charge for contractual plans that permits up to 50% of the first year's payments to be deducted as a sales charge. Investors have a right to withdraw from the plan, but there are some restrictions if this occurs.
Front-Loaded
Commission and fees taken out of investment capital before the money is put to work.
Front Month
The first expiration month in a series of months.
Front Month (Option)
Usually the option with the shortest time to expiration or the future with the nearest time to delivery.
Full Service Broker
A type of stockbroker that provides more than stock quotes, but generally (and not limited to) Portfolio Planning and Management, Investment Ideas, Researching specific investments. Since these brokers provide more than order taking and stock quotes, their commissions are higher.
Fully Diluted Earnings Per Share
Earnings per common share calculated on the assumption that all convertible securities are converted into common shares, such as convertible preferred shares, convertible debentures, stock options (under employee stock-option plans) and warrants.
Fundamentals
The theory that holds that stock market activity may be predicted by looking at the relative data and statistics of a stock as well as the management of the company in question and its earnings.
Fund Family
The management company that runs and/or sells shares of the fund. Fund families often offer several funds with different investment objectives.
Funds From Operations (FFO)
Used by real estate and other investment trusts to define the cash flow from trust operations. It is earnings with depreciation and amortization added back. A similar term increasingly used is "Funds Available" for Distribution (FAD), which is FFO less capital investments in trust property and the amortization of mortgages.
Futures
A term used to designate all contracts covering the purchase and sale of financial instruments or physical commodities for future delivery on a commodity futures exchange.
Futures Commission Merchant
A firm or person engaged in soliciting or accepting and handling orders for the purchase or sale of futures contracts, subject to the rules of a futures exchange and, who, in connection with solicitation or acceptance of orders, accepts any money or securities to margin any resulting trades or contracts.
Futures Contract
Agreement to buy or sell a set number of shares of a specific stock in a designated future month at a price agreed upon by the buyer and seller. The contracts themselves are often traded on the futures market. A futures contract differs from an option because an option is the right to buy or sell, whereas a futures contract is the promise to actually make a transaction.
Futures Market
A continuous auction market in which participants buy and sell commodities contracts for delivery on a specified future date. Trading is carried on through open outcry and hand signals in a trading pit or ring.
Future Volatility
A prediction of what volatility may be like in the future.
Fuzzy Systems
A problem-solving method that can be applied to neural networks, expert systems and other computing methods. Fuzzy systems process inexact information inexactly and describe ambiguity rather than the uncertainty of an occurrence and are useful in performing control and decision-making tasks.
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