Business Glossary: L
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L
Fifth letter of a Nasdaq stock symbol specifying that the issue is a class of stock such as third preferred class of warrants, foreign preferred, sixth class of preferred stock, or preferred when issued stock.
LA The two-character ISO 3166 country code for LAO PEOPLE'S DEMOCRATIC REPUBLIC.
LAK The ISO 4217 currency code for Laos New Kip.
LB The two-character ISO 3166 country code for LEBANON.
LBO See: Leveraged buyout
LBP The ISO 4217 currency code for Lebanese Pound.
LC The two-character ISO 3166 country code for SAINT LUCIA.
LCL See: Less Than Container Load
LDC See: Less developed countries
LEAPS See: Long-Term Anticipation Securities
LI The two-character ISO 3166 country code for LIECHTENSTEIN.
LIBOR See: London Interbank Offered Rate
LIFFE See: London International Financial Futures and Options Exchange
LIFO See: Last in, first out
LK The two-character ISO 3166 country code for SRI LANKA.
LKR The ISO 4217 currency code for Sri Lankan Rupee.
LDs See: Liquidated damages
LOC See: Letter of credit
LP See: Limited partner
LR The two-character ISO 3166 country code for LIBERIA.
LRD The ISO 4217 currency code for the Liberian Dollar.
LS The two-character ISO 3166 country code for LESOTHO.
LSL The ISO 4217 currency code for the Lesotho Loti.
LT The two-character ISO 3166 country code for LITHUANIA.
LTL The ISO 4217 currency code for the Lithuanian Litas.
LTV See: Loan-to-value ratio
LU The two-character ISO 3166 country code for LUXEMBOURG.
LUF The ISO 4217 currency code for the Luxembourg Franc.
LV The two-character ISO 3166 country code for LATVIA.
LVL The ISO 4217 currency code for the Latvian Lats.
LY The two-character ISO 3166 country code for LIBYAN ARAB JAMAHIRIYA.
LYD The ISO 4217 currency code for the Libyan Dinar.
LYON See: Liquid yield option note
Ladder strategy A bond portfolio construction strategy that invests approximately equal amounts in every maturity within a given range.
Lady Macbeth Strategy Strategy in which a third party poses as a white knight in a takeover bid, and then joins forces with an unfriendly bidder.
Laffer curve A curve conjecturing that economic output will increase if marginal tax rates are cut. Named after economist Arthur Laffer.
Lag Payment of a financial obligation later than is expected or required, as in lead and lag. Also, the number of periods that an dependent variable in a regression model is "held back" in order to predict the dependent variable.
Lag response of prepayments A delay of typically about three months between the time the weighted-average coupon of an MBS pool crosses the threshold for refinancing and observation of an acceleration in prepayment speed is observed.
Lagging Strategy used by a firm to stall payments, normally in response to exchange rate projections.
Lagging indicators Economic indicators that follow rather than precede the country's overall pace of economic activity. See also: Leading indicators and coincident indicators.
Laisse-faire Doctrine that a government should not interfere with business and economic affairs.
Lambda The ratio of a change in the option price to a small change in the option volatility. It is the partial derivative of the option price with respect to the option volatility.
Land contract A method of real estate financing; a mortgage-holding seller finances a buyer by taking a down payment and subsequent payments in installments, but holds the title until the mortgage is fully repaid.
Landlord A property owner who rents property to a tenant.
Lapsed option An option that no longer has any value because it has reached its expiration date without being exercised.
Large-cap A stock with a high level of capitalization, usually at least $5 billion market value.
Lagging indicators Economic indicators that follow rather than precede the country's overall pace of economic activity. See also: Leading indicators and coincident indicators.
Last in, first out (LIFO) An accounting method that fixes the cost of goods sold to the most recent purchases. Hence, if prices are generally rising, LIFO will lead to lower accounting profitability.
Last sale The most recent trade performed in a security.
Last split After a stock split, the number of shares distributed for each share held and the date of the distribution.
Last trading day The final day under an exchange's rules during which trading may take place in a particular futures or options contract. Contracts outstanding at the end of the last trading day must be settled by delivery ofunderlying physical commodities or financial instruments, or by agreement for monetary settlement, depending futures contract specifications.
Late charge A fee a credit grantor charges a borrower for a late payment.
Late tape A delay in the display of price changes on the tape of an exchange because of heavy trading. In severe instances the first digit of each price is intentionally deleted.
Late trading Late trading of mutual fund shares occurs when investors placing trades after 4 PM receive the 4 PM price. These late traders can use the information revealed after 4 PM to guide their trades: buying funds when their current value is greater than their 4 PM value and selling the funds when the reverse is true. Doing so allows them to earn expected abnormal returns at the expense of the fund's long-term shareholders.
Latent default A potential default that may have always been present but unidentified.
Launder To move illegally acquired cash through financial systems so that it appears to be legally acquired.
Law of large numbers The mean of a random sample approaches the mean (expected value) of the population as sample size increases.
Law of one price An economic rule stating that a given security must have the same price no matter how the security is created. If the payoff of a security can be synthetically created by a package of other securities, the implication is that the price of the package and the price of the security whose payoff it replicates must be equal. If it is unequal, an arbitrage opportunity would present itself.
Lay off In the context of general equities, this eliminates all or part of a position by finding customers or other dealers to take the position.
Layup Used in the context of general equities. Easily executed trade or order. See: Lead pipe.
Lead Payment of a financial obligation earlier than is expected or required.
Lead arranger The senior tier of arranger
Lead bank A senior bank involved in the negotiations for a project financing.
Lead Manager Subordinate to an arranger.
Lead pipe Used in the context of general equities. Virtually certain that trade will take place; lead pipe cinch. See: Layup.
Lead regulator A leading self-regulatory organization that over sees compliance with a particular section of the law, such as the NYSE, ASE, or NASDAQ.
Lead underwriter The head of a syndicate of financial firms that are sponsoring an initial public offering of securities or a secondary offering of securities. Could also apply to bond issues.
Leader A stock or group of stocks that is the first to move in a market upsurge or downturn.
Leading Strategy used by a firm to accelerate payments, normally in response to exchange rate expectations.
Leading economic indicators Economic series that tend to rise or fall in advance of the rest of the economy.
Leading indicator A change in a measurable economic factor that is evident before the economy starts to follow a specific trend.
Leading and lagging Refers to timing of cash flows within a corporation.
Leading the market In the context of general equities, this is a stock or group of stocks moving with the market as a whole, but moving in advance of the general market.
League tables A ranking of lenders and advisors according to the underwriting, final take, or number of project finance loans or advisory mandates.
Leakage Release of information selectively or not before official public announcement.
Lease A long-term rental agreement, and a form of secured long-term debt.
Lease acquisition cost The legal fees and other expenses incurred when acquiring a lease.
Leasehold An asset providing the right to use property under a lease agreement.
Leasehold improvement An improvement made to leased property.
Lease-purchase agreement An agreement that allows for portions of lease payments to be used to purchase the leased property.
Lease rate The payment per period stated in a lease contract.
Lease term The life of a lease, including any renewal options.
Leaseback A transaction that involves the sales of some property, and an agreement by the seller to lease the property back from the buyer after the sale.
Leaves Used in the context of general equities. Remains to buy or sell of a previously entered order after a report of partial execution has been given. If the floor broker to buy 20M IBM at $115, and he then buys 6M at this price, his report would be, "You bought 6M IBM at $115; leaves 14."
Ledger cash A firm's cash balance as reported in its financial statements. Also called book cash.
Leg A prolonged trend in stock market prices, such as a multiple-period bull market; or, an option that is one side of a spread transaction. See: Lifting a leg.
Leg up Used in the context of general equities. (1)Have a portion of the offsetting side of a trade in your pocket (spoken for) so your capital risk in the transaction is reduced. (Purchase of 10,000 of a 50,000 buy order leaves the trader a "leg up".) (2) Complete one side of a two-sided transaction, as in a swap or contingency order.
LEGAL A computerized database maintained by the NYSE to keep track of enforcement actions, audits, and complaints against member firms. This term is not an acronym but is referred to in capitals.
Legal capital Value at which a company's shares are recorded in its books.
Legal bankruptcy A legal proceeding for liquidating or reorganizating a business.
Legal defeasance The deposit of cash and permitted securities, as specified in the bond indenture, into an irrevocable trust sufficient to enable the issuer to fully discharge its obligations under the bond indenture.
Legal entity A person or organization that can legally enter into a contract, and may therefore be sued for failure to comply with the terms of the contract.
Legal investments Investments that a regulated entity is permitted to make under the rules and regulations that govern its conduct.
Legal list A list of high-quality debt and equity securities chosen by a state agency that are acceptable holdings for fiduciary institutions.
Legal monopoly A government-regulated firm that is legally entitled to be the only company offering a particular service in a particular area.
Legal opinion A statement, usually written by a specialized law firm, required for a new municipal bond issue stating that the issue is legally acceptable.
Legal risk The risk associated with the impact of a defect in the documentation on cash flow or debt service.
Legal transfer A stock transaction that requires special documentation in addition to standard stock or bond power to be legally valid.
Legislative risk The risk that new or changed legislation will have a large positive or negative effect on an investment.
Legitimate Used in the context of general equities. Real interest in trading as compared to a profile stance. See: Natural.
Lehman Brothers Adjustable-Rate Mortgage Index A benchmark index that includes all agency-guaranteed securities with coupons that periodically adjust based on a spread over a published index.
Lehman Brothers Aggregate Bond Index A benchmark index made up of the Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed Securities Index, and Asset-Backed Securities Index, including securities that are of investment-grade quality or better, have at least one year to maturity, and have an outstanding par value of at least $100 million.
Lehman Brothers California Municipal Bond Index A benchmark index that includes investment-grade, tax-exempt, and fixed-rate bonds issued in California. All securities have long-term maturities (greater than two years) and are selected from issues larger than $50 million.
Lehman Brothers Corporate Bond Index A benchmark index that includes all publicly issued, fixed-rate, nonconvertible, dollar-denominated, SEC-registered, investment-grade corporate debt.
Lehman Brothers Government Bond Index A benchmark index made up of the Treasury Bond Index and the Agency Bond Index as well as the 1-3 Year Government Index and the 20+ Year Treasury Index.
Lehman Brothers Government/Corporate Bond Index A benchmark index made up of the Lehman Brothers® Government and Corporate Bond indexes, including U.S. government Treasury and agency securities as well as corporate and Yankee bonds.
Lehman Brothers Mortgage-Backed Securities Index A benchmark index that includes 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal Home Loan Mortgage Corporation (FHLMC), and Federal National Mortgage Association (FNMA).
Lehman Brothers Municipal Bond Index A benchmark index that includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than two years) selected from issues larger than $50 million.
Lehman Brothers New York Municipal Bond Index A benchmark index that includes investment-grade, tax-exempt, and fixed-rate bonds issued in the state of New York. All securities have long-term maturities (greater than two years) and are selected from issues larger than $50 million.
Lemon An investment with poor results.
Lemons problem Named after 2001 Nobel Laureate George Akerlof's 1970 paper "The Market for Lemons". His original example had to do with used cars. Why does the seller want to get rid of the car? It might be a lemon. The buyer and seller have asymmetric information. Hence, the buyer will demand a deep discount on the car because of the possibility it is a lemon.