Super Finance Glossary
Over 10,000 financial glossary terms...
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Default Risk
Definition: The risk that an issuer of a bond may be unable to make timely principal and interest payments. Also referred to as credit risk (as gauged by commercial rating companies).
Definition: The risk that an issuer of a bond may be unable to make timely principal and interest payments. Also referred to as credit risk (as gauged by commercial rating companies).
Defeasance
Definition: The setting aside by a borrower of cash or bonds sufficient to service the borrower's debt. Both the borrower's debt and the offsetting cash or bonds are removed from the balance sheet. In securities trading, where a clearing house becomes counterparty to each side of a trade, after the trade has been agreed. This is necessary to facilitate netting, and reduce counterparty risk exposure. The term has become popular recently, because of the growth of central counterparty clearing services in European cash equities markets.
Definition: The setting aside by a borrower of cash or bonds sufficient to service the borrower's debt. Both the borrower's debt and the offsetting cash or bonds are removed from the balance sheet. In securities trading, where a clearing house becomes counterparty to each side of a trade, after the trade has been agreed. This is necessary to facilitate netting, and reduce counterparty risk exposure. The term has become popular recently, because of the growth of central counterparty clearing services in European cash equities markets.
Defensive Securities
Definition: Low-risk stocks or bonds that will provide a predictable and safe return on an investor's money.
Definition: Low-risk stocks or bonds that will provide a predictable and safe return on an investor's money.
Deferred Account
Definition: A type of account that delays taxes on that account until some later date. An example is an IRA account.
Definition: A type of account that delays taxes on that account until some later date. An example is an IRA account.
Deferred Annuities
Definition: Tax-advantaged life insurance products. Deferred annuities offer deferral of taxes with the option of withdrawing one's funds in the form of a life annuity.
Definition: Tax-advantaged life insurance products. Deferred annuities offer deferral of taxes with the option of withdrawing one's funds in the form of a life annuity.
Deferred Call
Definition: A provision that prohibits the company from calling the bond before a certain date. During this period the bond is said to be call protected.
Definition: A provision that prohibits the company from calling the bond before a certain date. During this period the bond is said to be call protected.
Deferred Charge
Definition: An expenditure treated as an asset that carries forward until it becomes pertinent to the business at hand, e.g., the underwriting fees on a corporate bond issue, which the corporation capitalizes as a deferred charge and then amortizes over the life of the bond issue.
Definition: An expenditure treated as an asset that carries forward until it becomes pertinent to the business at hand, e.g., the underwriting fees on a corporate bond issue, which the corporation capitalizes as a deferred charge and then amortizes over the life of the bond issue.
Deferred Compensation
Definition: An amount that has been earned but is not actually paid until a later date, typically through a payment plan, pension, or stock option plan.
Definition: An amount that has been earned but is not actually paid until a later date, typically through a payment plan, pension, or stock option plan.
Deferred Equity
Definition: A common term for convertible bonds, which recognizes their equity component and the expectation that the bond will ultimately be converted into shares of common stock.
Definition: A common term for convertible bonds, which recognizes their equity component and the expectation that the bond will ultimately be converted into shares of common stock.
Deferred Interest Bond
Definition: A bond that pays interest at a later date, usually in one lump sum, effectively reinvesting interest earned over the life of the bond. See: Zero coupon bond.
Definition: A bond that pays interest at a later date, usually in one lump sum, effectively reinvesting interest earned over the life of the bond. See: Zero coupon bond.
Deferred Nominal Life Annuity
Definition: A monthly fixed-dollar payment beginning at retirement age. It is nominal because the payment is fixed in a dollar amount at any particular time, up to and including retirement.
Definition: A monthly fixed-dollar payment beginning at retirement age. It is nominal because the payment is fixed in a dollar amount at any particular time, up to and including retirement.
Deferred Payment Annuity
Definition: An annuity that stipulates payments be made to the annuitant at a later date, such as when the annuitant reaches a certain age.
Definition: An annuity that stipulates payments be made to the annuitant at a later date, such as when the annuitant reaches a certain age.
Deferred Payments
Definition: Payments to be made at some future date. See "graduated payment mortgage."
Definition: Payments to be made at some future date. See "graduated payment mortgage."
Deferred Tax Expense
Definition: A non-cash expense that provides a source of free cash flow. Amount allocated during the period to cover tax liabilities that have not yet been paid.
Definition: A non-cash expense that provides a source of free cash flow. Amount allocated during the period to cover tax liabilities that have not yet been paid.
Deficiency
Definition: The amount by which a project's cash flow is not adequate to meet debt service.
Definition: The amount by which a project's cash flow is not adequate to meet debt service.
Deficiency Agreement
Definition: An agreement that calls on the sponsor or another party to provide the shortfall when cash flow, working capital, or revenues are below agreed levels or are insufficient to meet debt service.
Definition: An agreement that calls on the sponsor or another party to provide the shortfall when cash flow, working capital, or revenues are below agreed levels or are insufficient to meet debt service.
Deficiency Letter
Definition: Notification from the SEC to a prospective issuer of securities that revisions or additions need to be made to the preliminary prospectus.
Definition: Notification from the SEC to a prospective issuer of securities that revisions or additions need to be made to the preliminary prospectus.
Deficit
Definition: An excess of liabilities over assets, of losses over profits, or of expenditure over income.
Definition: An excess of liabilities over assets, of losses over profits, or of expenditure over income.
Deficit Spending
Definition: When government spending overwhelms government revenue resulting in government borrowing.
Definition: When government spending overwhelms government revenue resulting in government borrowing.
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