CAC 40 index A broad-based index of common stocks composed of 40 of the 100 largest companies listed on the forward segment of the official list of the Paris Bourse.

Cage A section of a brokerage firm used for receiving and disbursing funds.

Calendar List of new issues scheduled to come to market shortly.

Calendar effect Describes the tendency of stocks to perform differently at different times. For example, a number of researchers have documented that historically, returns tend to be higher in January compared to other months (especially February). Others have documented returns patterns across days of the week and within the day. Some of these patterns are found in volume and volatility as well as returns.

Calendar spread Applies to derivative products. A strategy in which there is a simultaneous purchase and sale of options of the same class at the same strike prices, but with different expiration date.

Calendar Straddle or Combination See Calendar Spread.

Call An option that gives the holder the right to buy the underlying asset.

Call date A date before maturity, specified at issuance, when the issuer of a bond may retire part of the bond for a specified call price.

Call feature Part of the indenture agreement between the bond issuer and buyer describing the schedule and price of redemptions prior to maturity.

Call loan A loan repayable on demand. Sometimes used as a synonym for broker loan or broker overnight loan.

Call loan rate See: Call money rate

Call money rate Also called the broker loan rate , the interest rate that banks charge brokers to finance margin loans to investors. The broker charges the investor the call money rate plus a service charge.

Call option An option contract that gives its holder the right (but not the obligation) to purchase a specified number of shares of the underlying stock at the given strike price, on or before the expiration date of the contract.

Call an option To exercise a call option.

Call premium Premium in price above the par value of a bond or share of preferred stock that must be paid to holders to redeem the bond or share of preferred stock before its scheduled maturity date.

Call price The price, specified at issuance, at which the issuer of a bond may retire part of the bond at a specified call date.

Call protection A feature of some callable bonds that establishes an initial period when the bonds may not be called.

Call provision An embedded option granting a bond issuer the right to buy back all or part of an issue prior to maturity.

Call risk The combination of cash flow uncertainty and reinvestment risk introduced by a call provision.

Call swaption A swaption in which the buyer has the right to enter into a swap as a fixed-rate payer. The writer therefore becomes the fixed-rate receiver/floating-rate payer.

Callability Feature of a security that allows the issuer to redeem the security prior to maturity by calling it in, or forcing the holder to sell it back.

Callable Applies mainly to convertible securities. Redeemable by the issuer before the scheduled maturity under specific conditions and at a stated price, which usually begins at a premium to par and declines annually. Bonds are usually called when interest rates fall so significantly that the issuer can save money by issuing new bonds at lower rates.

Called away Convertible: Redeemed before maturity.
Option: Call or put option exercised against the stockholder.
Sale: Delivery required on a short sale.

Cumulative Auction Market Preferred Stocks (CAMPS) Stands for Cumulative Auction Market Preferred Stocks, Oppenheimer & Company's Dutch Auction preferred stock product.

Canadian agencies Agency banks established by Canadian Banks in the U.S.

Canadian Dealing Network (CDN) The organized OTC market of Canada. Formerly known as the Canadian Over-the-Counter Automated Trading System (COATS), the CDN became a subsidiary of the Toronto Stock Exchange in 1991.

"Can get $xxx" Refers to over-the-counter trading. "I have a buyer who will pay $xxx for the stock". Usually a standard markdown from $xxx is applied to this price in bidding the seller for its stock. Antithesis of cost me.

Cancel To void an order to buy or sell from (1) the floor, or (2) the trader/salesperson's scope. In Autex, the indication still remains on record as having once been placed unless it is expunged.

Canceled Certificates Before the issuance of a new certificate, the old certificate is presented to the Transfer Agent and is canceled.

"Cannot compete" In the context of general equities, cannot accommodate customers at that price level (i.e., compete with other market makers), often because there is no natural opposite side of the trade.

"Cannot complete" In the context of general equities, inability to finish an order on a principal or agency basis, given prevailing price instructions and/or market conditions.

Cap An upper limit on the interest rate on a floating-rate note (FRN) or an adjustable-rate mortgage (ARM). Also, an OTC derivatives contract consisting of a series of European interest rate call options; used to protect an issuer of floating-rate debt from interest rate increases. Each individual call option within the cap is called a caplet. Opposite of a floor.

Capacity Credit grantors' measurement of a person's ability to repay loans.

Capacity utilization rate The percentage of the economy's total plant and equipment that is currently in production. Usually, a decrease in this percentage signals an economic slowdown, while an increase signals economic expansion.

Capital Money invested in a firm.

Capital account Net result of public and private international investment and lending activities.

Capital allocation decision Allocation of invested funds between risk-free assets and the risky portfolio.

Capital appreciation See: Capital growth

Capital appreciation fund See: Aggressive growth fund

Capital asset A long-term asset, such as land or a building, not purchased or sold in the normal course of business.

Capital asset pricing model (CAPM) An economic theory that describes the relationship between risk and expected return, and serves as a model for the pricing of risky securities. The CAPM asserts that the only risk that is priced by rational investors is systematic risk, because that risk cannot be eliminated by diversification. The CAPM says that the expected return of a security or a portfolio is equal to the rate on a risk-free security plus a risk premium multiplied by the asset's systematic risk. Theory was invented by William Sharpe (1964) and John Lintner (1965). The early work of Jack Treynor is was also instrumental in the development of this model.

Capital budget A firm's planned capital expenditures.

Capital budgeting The process of choosing the firm's long-term assets.

Capital Builder Account (CBA) A Merrill Lynch brokerage account that allows investors to access the loan value of his or her eligible securities to buy or sell securities. Excess cash in a CBA can be invested in a money market fund or an insured money market deposit account without losing access to the money.

Capital expenditures Amount used during a particular period to acquire or improve long-term assets such as property, plant, or equipment.

Capital flight The transfer of capital abroad in response to fears of political risk.

Capital formation Expansion of capital or capital goods through savings, which leads to economic growth.

Capital gain When a stock is sold for a profit, the capital gain is the difference between the net sales price of the securities and their net cost, or original basis. If a stock is sold below cost, the difference is a capital loss.

Capital gains distribution A distribution to the shareholders of a mutual fund out of profits from selling stocks or bonds, that is subject to capital gains taxes for the shareholders.

Capital gains tax The tax levied on profits from the sale of capital assets. A long-term capital gain, which is achieved once an asset is held for at least 12 months, is taxed at a maximum rate of 20% (taxpayers in 28% tax bracket) and 10% (taxpayers in 15% tax bracket). Assets held for less than 12 months are taxed at regular income tax levels, and, since January 1, 2000, assets held for at least five years are taxed at 18% and 8%.

Capital gains yield The price change portion of a stock's return.

Capital goods Goods used by firms to produce other goods, e.g., office buildings, machinery, equipment.

Capital growth The increase in an asset's market price. Also called capital appreciation.

Capital infusion Often refers to the cross-subsidization of divisions within a firm. When one division is not doing well, it might benefit from an infusion of new funds from the more successful divisions. In the context of venture capital, it can also refer to funds received from a venture capitalist to either get the firm started or to save it from failing due to lack of cash.

Capital-intensive Used to describe industries that require large investments in capital assets to produce their goods, such as the automobile industry. These firms require large profit margins and/or low costs of borrowing to survive.

Capital International Indexes Market indexes maintained by Morgan Stanley that track major stock markets worldwide.

Capital investment See: Capital expenditure.

Capital lease A lease obligation that has to be capitalized on the balance sheet.

Capital loss The difference between the net cost of a security and the sales price, if the security is sold at a loss. Also used in a more general context to refer to the market for stocks, bonds, derivatives and other investments.

Capital market The market for trading long-term debt instruments (those that mature in more than one year). Also used in a more general context to refer to the market for stocks, bonds, derivatives and other investments.

Capital market efficiency The degree to which the present asset price accurately reflects current information in the market place. See: Efficient market hypothesis.

Capital market imperfections view The view that issuing debt is generally valuable, but that the firm's optimal choice of capital structure involves various other views of capital structure ( net corporate/personal tax, agency cost, bankruptcy cost, and pecking order), that result from considerations of asymmetric information, asymmetric taxes, and transaction costs.

Capital market line (CML) The line defined by every combination of the risk-free asset and the market portfolio. The line represents the risk pr