Financial Terms related to Price This document is part of the valuable contents available at www.ftpall.com, a free online glossary with more than five thousand financial and business terms. This document can be copied and distributed freely Find thousands of financial terms at www.ftpall.com respecting its original format. It is forbidden its transcription, translation or change on its format without authorization of its author or editor. PRICE 52 week hi/low prices • The highest and lowest prices for the stock in the last 52 weeks. Arm's length price • The price at which a willing buyer and a willing unrelated seller would freely agree to transact. Ask price • A dealer's price to sell a security; also called the offer price. • This is the price dealers are willing to sell securities at. This is typically higher than the price dealers are willing to buy securities (called bid price). The difference between the ask and bid prices is called the bid-ask spread and represents the profit to the dealer for supplying immediate execution services. • See Ask. www.ftpall.com 2|Page Average low price • The average of low prices for the last five years. This represents a possible low price for a cyclical company (e.g. General Motors) whose stock price tends to fluctuate in cycles over approximately a five year period. Average low price earnings • The average low Price-Earnings Ratio (PE) for the past five years. Used to calculate a predicted low price. Find thousands of financial terms at www.ftpall.com Average price • In bond trading, a step in determining a bond's Yield to Maturity. A bond's average price is calculated by adding its face value to the price paid for it, and dividing the result by two. Average price earning ratio • The average of the annual high and low Price-Earning Ratios for a particular time period, typically calculated over the last five years. Bargain purchase price option • Gives the lessee the option to purchase the asset at a price below fair market value when the lease expires. Basis price • Price expressed in terms of yield to maturity or annual rate of return. • Price expressed in terms of yield to maturity or annual rate of return. Bid price • The price a buyer is willing to pay for a security. • This is the quoted bid, or the highest price an investor is willing to pay to buy a security. Practically speaking, this is the available price at which an investor can sell www.ftpall.com 3|Page shares of stock. Related: Ask, offer. 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 price bond • The stated price at which a bond may be repurchased, by use of a call feature, prior to maturity. Find thousands of financial terms at www.ftpall.com Call price preferred • The repurchase price for a preferred share issue. Generally the stated value plus a call premium. Cash price • Price quotation in the cash market (for immediate delivery). Clean price • Bond price excluding accrued interest. Consumer price index • The CPI, as it is called, measures the prices of consumer goods and services and is a measure of the pace of U.S. inflation. The U.S. Department of Labor publishes the CPI very month. • Abbreviated CPI. A measure of price changes in consumer goods and services used to identify periods of inflation or deflation. • Abbreviated CPI. A commonly used measure of the increase (or decrease) in costs of goods and services, published by the U.S. Bureau of Labor Statistics. Conversion parity price • Related: Market conversion price www.ftpall.com 4|Page Conversion price • The per-share price that is effectively paid for common shares as the result of conversion of a convertible security. Convertible price • The contractually specified price per share at which a convertible security can be converted into shares of common stock. Current price / current eps. Find thousands of financial terms at www.ftpall.com • Comparing it to the average PE ratio shows over or under valuation of the company. Divide the current PE by the five-year average PE. If the result is 1 or less, the stock is undervalued. Delivery price • The price fixed by the Clearing house at which deliveries on futures are in invoiced; also the price at which the futures contract is settled when deliveries are made. • Is the invoiced price for a futures contract. Dirty price • Bond price including accrued interest, i.e., the price paid by the bond buyer. Dollar price • Is the price of a bond expressed as a percentage of face, par, or principal. For example, a dollar price of 98 for a $1,000 denominated bond would be $980 for that bond. Dollar price of a bond • Percentage of face value at which a bond is quoted. Effective call price • The strike price in an optional redemption provision plus the accrued interest to the www.ftpall.com 5|Page redemption date. Effective strike price • Is the adjusted level of the option contract exercise price. A key adjustment is for time value either paid or received. Equilibrium market price of risk • The slope of the capital market line (CML). Since the CML represents the return offered to compensate for a perceived level of risk, each point on the line is a Find thousands of financial terms at www.ftpall.com balanced market condition, or equilibrium. The slope of the line determines the additional return needed to compensate for a unit change in risk. Exercise or option price • The price at which holders of warrants can purchase a specified number of shares of common shares. Exercise price • The price at which the underlying future or options contract may be bought or sold. • The price at which an option holder may buy or sell the underlying security. Also called the strike price. • Is the predetermined level at which an option s underlying instrument is priced upon its exercise. The exercise price is also called the strike price. Fair market price • Amount at which an asset would change hands between two parties, both having knowledge of the relevant facts. Also referred to as market price. Fair price • The equilibrium price for futures contracts. Also called the theoretical futures price, which equals the spot price continuously compounded at the cost of carry rate for some time interval. www.ftpall.com 6|Page Fair price provision • See: appraisal rights. Fixed price basis • An offering of securities at a fixed price. Fixed price tender bid • An offer by a company to purchase a certain percentage of its own shares at a stated price that is well above the current market price within a specified period of Find thousands of financial terms at www.ftpall.com time; termed a substantial issuer bid. Fixed price tender offer • A one-time offer to purchase a stated number of shares at a stated fixed price, usually a premium to the current market price. Flat price also clean price • The quoted newspaper price of a bond that does not include accrued interest. The price paid by purchaser is the full price. Flat price risk • Taking a position either long or short that does not involve spreading. Full price • Also called dirty price, the price of a bond including accrued interest. Related: flat price. Futures price • The price at which the parties to a futures contract agree to transact on the settlement date. High price • The highest (intraday) price of a stock over the past 52 weeks, adjusted for any www.ftpall.com 7|Page stock splits. Implied price • Is the price computed by a model which considers a comparable benchmark, volatility, and spread adjustment. It is used in the absence of a current market price. Implied price of a warrant • The price effectively paid for each warrant attached to a bond. Invoice price Find thousands of financial terms at www.ftpall.com • The price that the buyer of a futures contract must pay the seller when a Treasury Bond is delivered. Law of one price • An economic rule stating that a given security must have the same price regardless of the means by which one goes about creating that security. This implies that if the payoff of a security can be synthetically created by a package of other securities, the price of the package and the price of the security whose payoff it replicates must be equal. Limit price • Maximum price fluctuation Low price • This is the day's lowest price of a security that has changed hands between a buyer and a seller. Low price earnings ratio effect • The tendency of portfolios of stocks with a low price-earnings ratio to outperform portfolios consisting of stocks with a high price-earnings ratio. Market conversion price www.ftpall.com 8|Page • Also called conversion parity price, the price that an investor effectively pays for common stock by purchasing a convertible security and then exercising the conversion option. This price is equal to the market price of the convertible security divided by the conversion ratio. Market price of risk • A measure of the extra return, or risk premium, that investors demand to bear risk. The reward-to-risk ratio of the market portfolio. Market prices Find thousands of financial terms at www.ftpall.com • The amount of money that a willing buyer pays to acquire something from a willing seller, when a buyer and seller are independent and when such an exchange is motivated by only commercial consideration. Marketplace price efficiency • The degree to which the prices of assets reflect the available marketplace information. Marketplace price efficiency is sometimes estimated as the difficulty faced by active management of earning a greater return than passive management would, after adjusting for the risk associated with a strategy and the transactions costs associated with implementing a strategy. Maximum price fluctuation • The maximum amount the contract price can change, up or down, during one trading session, as fixed by exchange rules in the contract specification. Related: limit price. Minimum price fluctuation • Smallest increment of price movement possible in trading a given contract. Also called point or tick. The zero-beta portfolio with the least risk. Nominal price www.ftpall.com 9|Page • Price quotations on futures for a period in which no actual trading took place. Offer price • See: offer. • See Ask. Opening price • The range of prices at which the first bids and offers were made or first transactions were completed. Find thousands of financial terms at www.ftpall.com Option price • Also called the option premium, the price paid by the buyer of the options contract for the right to buy or sell a security at a specified price in the future. Price appreciation • Growth from the current price to the forecast high price. Price buy zone ratio • A ratio that indicates whether the current price meets the target buy zone set in your analysis. If the Price-Buy Zone Ratio is above 1, the stock is more costly than your target price. Price compression • The limitation of the price appreciation potential for a callable bond in a declining interest rate environment, based on the expectation that the bond will be redeemed at the call price. Price discovery • Is the process which reflects the interaction of buyers and sellers, supply and demand, and creates a record of transactions. The financial markets are classic examples of this behavior. Securities and commodities quickly reflect the relative www.ftpall.com 10 | P a g e desirability of ownership. Price discovery process • The process of determining the prices of the assets in the marketplace through the interactions of buyers and sellers. Price dividend will support • A company with a large dividend yield will have substantial price support. A large dividend yield is anything larger than the bank interest rate. Find thousands of financial terms at www.ftpall.com Price earnings ratio • Abbreviated PE Ratio. Also known as the Stock's Multiple. Calculated by dividing price by EPS. PE represents the amount that investors are willing to pay for each dollar of earnings. The PE value will fluctuate. The higher the PE ratio, the riskier and more volatile the stock. Investors are willing to pay a higher PE for faster growth and potential return. There are various EPS formulas for PE. A Trailing PE uses reported earnings from the last fiscal year. A Current PE uses earnings from the current quarter back four quarters. A Projected or Leading PE uses earnings forecasted up to a year ahead. Price elasticities • The percentage change in the quantity divided by the percentage change in the price. Price impact costs • Related: market impact costs Price momentum • Related: Relative strength Price persistence www.ftpall.com 11 | P a g e • Related: Relative strength Price risk • The risk that the value of a security (or a portfolio) will decline in the future. Or, a type of mortgage-pipeline risk created in the production segment when loan terms are set for the borrower in advance of terms being set for secondary market sale. If the general level of rates rises during the production cycle, the lender may have to sell his originated loans at a discount. • The risk that a debt security's price may change due to a rise or fall in the going Find thousands of financial terms at www.ftpall.com level of interest rates. Price specie flow mechanism • Adjustment mechanism under the classical gold standard whereby disturbances in the price level in one country would be wholly or partly offset by a countervailing flow of specie (gold coins) that would act to equalize prices across countries and automatically bring international payments back in balance. Price takers • Individuals who respond to rates and prices by acting as though they have no influence on them. Price to book ratio • Also known as Market-to-Book Ratio. Compares a stock's market value to its book value, calculated by dividing the current price by Common Stockholders' Equity Per Share (book value). A lower Price-To-Book Ratio might imply a stock is undervalued. • Is computed by dividing the current share price by the book value per share. Book value per share is determined by dividing assets less the liabilities (the book value) by the number of shares outstanding. Price to cash flow ratio www.ftpall.com 12 | P a g e • Price per share divided by Cash Flow Per Share. A measure of the market's expectations regarding a firm's future financial health. Provides an indication of relative value, similar to the Price-Earnings Ratio. Price to earnings ratio • Is the relationship between the current price of an equity and its earnings stream. Price to sales ratio • Calculated by dividing a stock's current price by its revenues per share. This Find thousands of financial terms at www.ftpall.com equation is another technique for finding a stock's valuation relative to its own past performance, other companies, or the market itself. Price value of a basis point • Abbreviated PVBP. Also called the dollar value of a basis point, a measure of the change in the price of the bond if the required yield changes by one basis point. Price volume relationship • A relationship espoused by some technical analysts that signals continuing rises and falls in security prices based on accompanying changes in volume traded. Price/book ratio • Compares a stock's market value to the value of total assets less total liabilities (book value). Determined by dividing current stock price by common stockholder equity per share (book value), adjusted for stock splits. Also called Market-to-Book. Price/earnings multiple approach • A technique to estimate the firm's share value; calculated by multiplying the firm's expected earnings per share (EPS) by the average price/earnings (P/E) ratio. Price/earnings p/e ratio • Shows the multiple of earnings at which a stock sells. Determined by dividing current stock price by current earnings per share (adjusted for stock splits). Earnings www.ftpall.com 13 | P a g e per share for the P/E ratio are determined by dividing earnings for past 12 months by the number of common shares outstanding. Higher multiple means investors have higher expectations for future growth, and have bid up the stock's price. • Measures the amount investors are willing to pay for each dollar of the firm's earnings; the higher the P/E ratio, the greater the investor confidence in the firm. Price/sales ratio • Determined by dividing current stock price by revenue per share (adjusted for stock splits). Revenue per share for the P/S ratio is determined by dividing revenue for Find thousands of financial terms at www.ftpall.com past 12 months by number of shares outstanding. Priced out • The market has already incorporated information, such as a low dividend, into the price of a stock. Prices • Price of a share of common stock on the date shown. Highs and lows are based on the highest and lowest intraday trading price. Put price • The price at which the asset will be sold if a put option is exercised. Also called the strike or exercise price of a put option. Ratio of exchange in market price • The ratio of the market price per share of the acquiring firm paid to each dollar of market price per share of the target firm. Reset options or reprice options • Are options which have the terms such as price reset to different levels. Often this technique has been used to grant new and more favorable terms to the holder. For example, in a declining market for a company's stock, some executives or www.ftpall.com 14 | P a g e employees may have their options effectively repriced to lower strikes. Critics claim that this defeats the purpose of performance based options. Reverse price risk • A type of mortgage-pipeline risk that occurs when a lender commits to sell loans to an investor at rates prevailing at application but sets the note rates when the borrowers close. The lender is thus exposed to the risk of falling rates. Settlement price Find thousands of financial terms at www.ftpall.com • A figure determined by the closing range which is used to calculate gains and losses in futures market accounts. Settlement prices are used to determine gains, losses, margin calls, and invoice prices for deliveries. Related: closing range. Spot price • The actual price at which a particular commodity can be bought or sold at a specified time and place. • The current market price of the actual physical commodity. Also called cash price. Stated conversion price • At the time of issuance of a convertible security, the price the issuer effectively grants the security holder to purchase the common stock, equal to the par value of the convertible security divided by the conversion ratio. Stop out price • The lowest price (highest yield) accepted by the Treasury in an auction of a new issue. Strike price • The stated price per share for which underlying stock may be purchased (in the case of a call) or sold (in the case of a put) by the option holder upon exercise of the option contract. www.ftpall.com 15 | P a g e • Is the stipulated price of an option at which level the underlying security, futures, or commodity will be priced or valued upon exercise. Striking price • The price at which the holder of a call option can buy (or the holder of a put option can sell) common shares at any time prior to the option's expiration date. • See exercise price. Subscription price Find thousands of financial terms at www.ftpall.com • The price at which stock rights are exercisable for a specified period of time; is set below the prevailing market price. • Price that the existing shareholders are allowed to pay for a share of stock in a rights offering. Support for prices • Is a price level where stocks, bonds, currencies, and commodities are expected to receive buy orders. At its simplest application it is the bid side of a quote. On a more complex level it refers to the lower boundary of some described trading range. Theoretical futures price • Also called the fair price, the equilibrium futures price. Transfer price • Prices that subsidiaries charge each other for the goods and services traded between them. • The price at which one unit of a firm sells goods or services to another unit of the same firm. Under priced • Stock sold at a price below its current market price. www.ftpall.com 16 | P a g e Underlying market price • Is the price of the designated or benchmark security or index. For example, if a security had a call strike price of 110 and was trading at 107, then the underying market price would be 107 and that call would be $3 out-of-the-money. Variable price security • A security, such as stocks and bonds, that sells at a fluctuating, market-determined price. Find thousands of financial terms at www.ftpall.com • A security, such as stocks or bonds, that sells at a fluctuating, market-determined price.
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