W - Page 24

WACC: Weighted average cost of capital.

Waiting period: Time during which the SEC studies a firm's registration statement. During this time the firm may distribute a preliminary prospectus.

Wall Street:
Generic term for firms that buy, sell, and underwrite securities.

Wallflower: Stock that has fallen out of favor with investors; tends to have a low P/E (price to earnings ratio).

Wanted for cash: A statement displayed on market tickers indicating that a bidder will pay cash for same day settlement of a block of a specified security.

Warehouse receipt:
Evidence that a firm owns goods stored in a warehouse.

Warehousing: The interim holding period from the time of the closing of a loan to its subsequent marketing to capital market investors.

Warrant: A security entitling the holder to buy a proportionate amount of stock at some specified future date at a specified price, usually one higher than current market. This "warrant" is then traded as a security, the price of which reflects the value of the underlying stock. Warrants are issued by corporations and often used as a "sweetener" bundled with another class of security to enhance the marketability of the latter. Warrants are like call options, but with much longer time spans -- sometimes years. In addition, warrants are offered by corporations whereas exchange-traded call options are not issued by firms.

Wash: Gains equal losses.

Wasting asset: An asset which has a limited life and thus, decreases in value (depreciates) over time. Also applied to consumed assets, such as gas, and termed "depletion."

Watch list: A list of securities selected for special surveillance by a brokerage, exchange or regulatory organization; firms on the list are often takeover targets, companies planning to issue new securities or stocks showing unusual activity.

Weak form efficiency: A form of pricing efficiency where the price of the security reflects the past price and trading history of the security. In such a market, security prices follow a random walk.

Weekend effect:
The common recurrent low or negative average return from Friday to Monday in the stock market.

Weighted average cost of capital:
Expected return on a portfolio of all the firm's securities. Used as a hurdle rate for capital investment.

Weighted average coupon:
The weighted average of the gross interest rate of the mortgages underlying the pool as of the pool issue date, with the balance of each mortgage used as the weighting factor.

Weighted average maturity: The WAM of an MBS is the weighted average of the remaining terms to maturity of the mortgages underlying the collateral pool at the date of issue, using as the weighting factor the balance of each of the mortgages as of the issue date.

Weighted average remaining maturity: The average remaining term of the mortgages underlying an MBS.

Weighted average portfolio yield: The weighted average of the yield all the bonds in a portfolio.

Well diversified portfolio: A portfolio spread out over many securities in such a way that the weight in any security is small. The risk of a well-diversified portfolio closely approximates the systemic risk of the overall market, the unsystematic risk of each security having been diversified out of the portfolio.

White knight: A friendly potential acquirer of a firm sought out by a target firm that is threatened by a less welcome suitor.

Whole life insurance: A contract with both insurance and investment components: (1) It pays off a stated amount upon the death of the insured, and (2) it accumulates a cash value that the policyholder can redeem or borrow against.

Wholesale mortgage banking: The purchasing of loans originated by others, with the servicing rights released to the buyer.

Widely held bank: A bank owned by many shareholders, with no individual owner holding sufficient shares to exercise control over the bank. Under the Bank Act, institutions with over $5 billion in equity and Schedule I banks must be "widely held" by the public, with no single shareholder owning more than 20% of any class of voting shares or 30% of any class of non-voting shares.

Wild card option:
The right of the seller of a Treasury Bond futures contract to give notice of intent to deliver at or before 8:00 p.m. Chicago time after the closing of the exchange (3:15 p.m. Chicago time) when the futures settlement price has been fixed.

Window contract:
A guaranteed investment contract purchased with deposits over some future designated time period (the "window"), usually between 3 and 12 months. All deposits made are guaranteed the same credit rating.

Winners's curse:
Problem faced by uninformed bidders. For example, in an initial public offering uninformed participants are likely to receive larger allotments of issues that informed participants know are overpriced.

Wire house: A firm operating a private wire to its own branch offices or to other firms, commission houses or brokerage houses.

With dividend: Purchase of shares in which the buyer is entitled to the forthcoming dividend.

With rights: Purchase of shares in which the buyer is entitled to the rights to buy shares in the company's rights issue.

Withdrawal plan: The ability to establish automatic periodic mutual fund redemptions and have proceeds mailed directly to the investor.

Withholding tax: A tax levied by a country of source on income paid, usually on dividends remitted to the home country of the firm operating in a foreign country. The tax levied on dividends paid abroad.

Without: If 70 were bid in the market and there was no offer, the quote would be "70 bid without." The expression "without" indicates a one-way market.

Without recourse: Without the lender having any right to seek payment or seize assets in the event of non-payment from anyone other than the party (such as a special-purpose entity) specified in the debt contract.

Woody: Sexual slang for a market moving strongly upward, as in, "This market has a woody."

Working capital: Defined as the difference in current assets and current liabilities (excluding short-term debt). Current assets may or may not include cash and cash equivalents, depending on the company.

Working capital management:
The management of current assets and current liabilities to maximize short-term liquidity.

Working capital ratio: Working capital expressed as a percentage of sales.

Working Control: Theoretically, ownership of 51% of a company's voting stock is necessary to exercise control. In practice, and this is particularly true in the case of a large corporation, effective control sometimes can be exerted through ownership, individually or by a group acting in concert, of less than 50%.

Workout: Informal arrangement between a borrower and creditors.

Workout period: Realignment period of a temporarily misaligned yield relationship that sometimes occurs in fixed income markets.

World Bank:
A multilateral development finance agency created by the 1944 Bretton Woods, New Hampshire negotiations. It makes loans to developing countries for social overhead capital projects, which are guaranteed by the recipient country.

World investible wealth: The part of world wealth that is traded and is, therefore, accessible to investors.

WRAP account: A type of fully discretionary account (in which a client has given specific written authorization to a partner, director or qualified portfolio manager of an investment dealer to select securities and execute trades for him or her). A single annual fee, based on the account's total assets, is charged instead of commissions and service charges being levied separately for each transaction. The account is then managed separately from all other wrap accounts but is kept consistent with a model portfolio suitable to clients with similar objectives. Typically the fees associated with this account exceed 2% to the investor.

Write-down: Decreasing the book value of an asset if its book value is overstated compared to current market values.

Writer:
The seller of an option, usually an individual, bank, or company, that issues the option and consequently has the obligation to sell the asset (if a call) or to buy the asset (if a put) on which the option is written if the option buyer exercises the option.

W-type bottom: A double bottom where the price or indicator chart has the appearance of a W.