Business Glossary: N

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N Fifth letter in a Nasdaq stock symbol specifying that the issue is the company's third class of preferred shares.

NA The two-character ISO 3166 country code for NAMIBIA.

NAD The ISO 4217 currency code for the Namibian Dollar.

NASD See: National Association of Securities Dealers

Nasdaq See: National Association of Securities Dealers Automatic Quotation System

NAV See: Net asset value

NAV Arbitrage See: Net asset value arbitrage

NC The two-character ISO 3166 country code for NEW CALEDONIA.

NE The two-character ISO 3166 country code for NIGER.

NF The two-character ISO 3166 country code for NORFOLK ISLAND.

NFA See: National Futures Association

NG The two-character ISO 3166 country code for NIGERIA.

NGN The ISO 4217 currency code for the Nigerian Naira.

NI The two-character ISO 3166 country code for NICARAGUA.

NIC See: Newly Industrialized Countries

NIF See: Note issuance facility

NIO The ISO 4217 currency code for the Nicaraguan Cordoba Oro.

NL The two-character ISO 3166 country code for NETHERLANDS.

NLG The ISO 4217 currency code for the Dutch Guilder.

NMS See: National Market System

NO The two-character ISO 3166 country code for NORWAY.

NOK The ISO 4217 currency code for the Norwegian Krone.

NOBO (Non-Objecting Beneficial Owner) A beneficial ("street") security holder who has not objected to his or her name being released to the Corporation, if the Corporation so requests.

NPR The ISO 4217 currency code for the Nepalese Rupee.

NOW See: Negotiable Order of Withdrawal

NP The two-character ISO 3166 country code for NEPAL.

NPV See: Net present value

NR The two-character ISO 3166 country code for NAURU.

NTE Short for Not To Exceed.

NU The two-character ISO 3166 country code for NIUE0.

NYSE See: New York Stock Exchange

Naive diversification A strategy whereby an investor simply invests in a number of different assets in the hope that the variance of the expected return on the portfolio is lowered. In contrast, mathematical programming can be used to select the best possible investment weights. Related: Markowitz diversification.

NZ The two-character ISO 3166 country code for NEW ZEALAND.

NZD The ISO 4217 currency code for the New Zealand Dollar.

Nagoya Stock Exchange Established after World War II, one of the three major securities markets in Japan.

Naked option strategies An unhedged strategy making exclusive use of one of the following: Short call strategy (selling or writing call options), and short put strategy (selling or writing put options). By themselves, these positions are called naked strategies because they do not involve an offsetting or risk-reducing position in another option or the underlying security. Related: Covered option strategies. Antithesis of covered option.

Naked strategies Writing an option without owning the underlying asset. Holder is naked because holder may have agreed to sell something not owned.

Naked writer See Uncovered call writing and Uncovered put writing.

Named perils insurance An insurance policy that names specific risks covered by the policy.

NASD form FR-1 A form required by the NASD of foreign dealers to ensure that firms participating in a new distribution of securities make a bona fide public offering.

Narrow-Based Generally referring to an index, it indicates that the index is composed of only a few stocks, generally in a specific industry group. See also broad-based.

Narrow market An inactive market, which displays large fluctuations in prices due to a low volume of trading.

Narrowing the spread Reducing the difference between the bid and ask prices of a security.

Nasdaq small-capitalization companies A group of 2000 companies with relatively small capitalization, which are listed separately and have at least two market makers.

Nasdaq stock market The first electronic stock market listing over 5000 companies. The Nasdaq stock market comprises two separate markets, namely the Nasdaq National Market, which trades large, active securities and the Nasdaq Smallcap Market that trades emerging growth companies.

National Association of Investors Corporation A Michigan-based association that helps groups establish investment clubs.

National Association of Securities Dealers (NASD) Nonprofit organization formed under the joint sponsorship of the investment bankers' conference and the SEC to comply with the Maloney Act, which provides for the regulation of the OTC market.

National Association of Securities Dealers Automatic Quotation System (Nasdaq) An electronic quotation system that provides price quotations to market participants about the more actively traded common stock issues in the OTC market. About 4000 common stock issues are included in the Nasdaq system.

National bank A commercial bank approved by the U.S. Comptroller of the Currency, which is required to be a member of and purchase stocks in the Federal Reserve System.

National Credit Union Administration Federal agency that oversees and insures the federal credit union system, and is funded by its members.

National debt Treasury bills, notes, bonds, and other debt obligations that constitute the debt owed by the federal government.

National Foundation for Consumer Credit A nonprofit organization that seeks to help consumers who have taken on too much debt by helping them work out payment plans and supplying credit counseling.

National Futures Association (NFA) The futures industry self-regulatory organization established in 1982.

National market Related: Internal market

National Market Advisory Board Group that advises the SEC on establishing a national exchange market system, which is a highly automated, continuous national exchange, but that preserves the regional exchanges.

National Market System (NMS) Refers to over-the-counter trading. System of trading OTC stocks under the sponsorship of the NASD. Must meet certain criteria for size, profitability and trading activity. More comprehensive information is available for NMS stocks than for non-NMS stocks traded OTC (high, low, and last-sale prices, cumulative volume figures, and bid and ask quotations throughout the day). This is due to the fact that market makers must report the actual price and number of shares in each transaction within 90 seconds verses nonreal-time reporting for non-NMS stocks (thus, last sales prices and minute-to-minute volume updates are not possible).

National Quotation Bureau A service that publishes bid and offer quotes from market makers in OTC transactions.

National Securities Clearing Corporation (NSCC) A clearing corporation that facilitates the settlement of accounts among brokerage firms, exchanges, and other clearing corporations.

National Stock Exchange (NSE) Second-largest stock exchange based in India.

National tax policy The way a country chooses to allocate tax burdens.

Nationalization A government takeover of a private company.

Natural Used in the context of general equities. Customer buyer or seller, versus a principal or profile interest. Legitimate, real.

Natural logarithm Logarithm to the base e (approximately 2.7183).

Near money Assets that are easily convertible into cash, such as money market accounts and bank deposits.

Nearby The nearest active trading month of a financial or commodity futures market. Related: Deferred futures.

Nearby futures contract When several futures contracts are considered, the contract with the closest settlement date is called the nearby futures contract. The next (or the "next out") futures contract is the one that settles just after the nearby futures contract. The contract farthest away in time from settlement is called the most distant futures contract.

Nearest month The expiration date of an option or future that is closest to the present.

"Need the tick" Used for listed equity securities. A stock must trade up/down at least one tick (1/8) in order to comply with regulations governing short sales/corporate repurchases.

Negative amortization A loan repayment schedule in which the outstanding principal balance of the loan increases, rather than amortizing, because the scheduled monthly payments do not cover the full amount required to amortize the loan. The unpaid interest is added to the outstanding principal, to be repaid later.

Negative NPV tie-in project A negative-NPV infrastructure development project that a local government requires of a company engaged in a positive NPV investment project elsewhere in the country.

Negative carry Related: Net financing cost

Negative cash flow Occurs when spending in a business is greater than earnings.

Negative convexity A bond characteristic such that the price appreciation will be less than the price depreciation for a large change in yield of a given number of basis points. For example, a fixed-rate mortgage may lose value as rates go down because of prepayments.

Negative covenant A bond covenant that limits or prohibits certain actions unless the bondholders agree.

Negative duration Occurs when the price of an MBS moves in the same direction as interest rates.

Negative income tax A proposal to assist taxpayer with below-subsistence-level incomes. After filing a tax return, such persons would receive a subsidy to bring them up above the poverty level.

Negative obligation A New York Stock Exchange rule that governs the behavior of specialists. Negative obligation is the mandate of the specialists not trade for the specialist's firm's own account when enough public investor orders exist to match up naturally -- without intervention. An example of violating negative obligation is Trading Ahead. Also see positive obligation.

Negative Pledge An agreement in which the borrower agrees not to pledge any of its assets as security and/or not to incur further indebtedness.

Negative pledge clause A bond covenant that requires the borrower to grant lenders a lien equivalent to any liens that may be granted in the future to any other currently unsecured lenders.

Negative working capital Occurs when current liabilities exceed current assets, which can lead to bankruptcy.

Negative yield curve When the yield on a short-term security is higher than the yield on a long-term security, partially because high interest rates are creating a greater demand for short-term borrowing.

Neglected firm effect The tendency of firms that are neglected by security analysts to outperform firms that are the subject of considerable attention.

Negotiable A security whose title is transferable by delivery . See also: Negotiable instrument.

Negotiable bill of lading Contract that grants title of merchandise to the holder, which allows banks to use the merchandise as collateral.

Negotiable certificates of deposit Large-denomination bank certificates of deposit that can be traded.

Negotiable instrument An unconditional order or promise to pay some amount of money, easily transferable from one party to another.

Negotiable order of withdrawal (NOW) Demand deposits that pay interest.

Negotiable Order of Withdrawal Account (NOW) An interest-earning account on which chechs may be drawn. Withdrawals from NOW accounts may be offered by commerical banks, mutual savings banks, and savings and loan associations and may be owned only by individuals and certain nonprofit organizations and govermental units.

Negotiated certificate of deposit A large-denomination CD, generally $1MM or more, that can be sold but cannot be cashed in before maturity.

Negotiated commission An unfixed broker's commission that is determined through negotiation, depending on the specifics of the trades performed.

Negotiated markets Markets in which each transaction is separately negotiated between buyer and seller (i.e., an investor and a dealer).

Negotiated offering An offering of securities for which the terms, including underwriters' compensation, have been negotiated between the issuer and the underwriters.

Negotiated sale Determining the terms of an offering by negotiation between the issuer and the underwriter rather than through competitive bidding by underwriting groups.

Negotiated underwriting A securities offering process in which the purchase price paid to the issuer and the public offering price are determined by negotiation rather than through competitive bidding.

NEO Abbreviation for nonequity options, which are options contracts on foreign currencies, debt issues, commodities, and stock indexes.

Net The gain or loss on a security sale as measured by the selling price of a security less the adjusted cost of acquisition.

Net adjusted present value The adjusted present value minus the initial cost of an investment.

Net advantage to leasing The net present value of entering into a lease financing arrangement rather than borrowing the necessary funds and buying the asset.

Net advantage to merging The difference in total post- and pre-merger market value minus the cost of the merger.

Net advantage of refunding The net present value of the savings from a refunding.

Net after-tax gain Capital gain after income taxes have been paid.

Net asset value (NAV) The value of a fund's investments. For a mutual fund, the net asset value per share usually represents the fund's market price, subject to a possible sales or redemption charge. For a closed-end fund, the market price may vary significantly from the net asset value.

Net asset value arbitrage For a number of assets, the most recent transaction price at 4PM ET does not fully reflect all available market information. One example is international equities that trade on exchanges that are located in different time zones and close 2-15 hours before U.S. markets. In addition, domestic small-capitization equities and high-yield and convertible bonds often trade infrequently and have wide bid-ask spreads. This can cause the most recent transaction price to be much different from the price that one would see in a liquid market at 4 PM, even for assets that trade on exchanges that are open at that time. Investors can take advantage of mutual funds that calculate their NAVs using stale closing prices by trading based on recent market movements. For example, if the U.S. market has risen since the close of overseas equity markets, investors can expect that overseas markets will open higher the following morning. Investors can buy a fund with a stale-price NAV for less than its current value, and they can likewise sell a fund for more than its current value on a day that the U.S. market has fallen. Similar opportunities exist when the values of infrequently or illiquidly-traded domestic assets have recently changed. Also known as Stale Price Arbitrage.