Gamma: The ratio of a change in the option delta to a small change in the price of the asset on which the option is written.
Gap position Monitoring: A component of asset/liability management during which the mismatched positions are reviewed and managed.
Garmen-Kohlhagen option pricing model: A widely used model for pricing foreign currency options.
Gearing: Financial leverage.
GEMs (growing-equity mortgages): Mortgages in which annual increases in monthly payments are used to reduce outstanding principal and to shorten the term of the loan.
General cash offer: A public offering made to investors at large.
General Insurance OmbudService (GIO): The General Insurance OmbudService assists in resolving differences between home, car, and business insurance companies and their customers. When disputes arise, GIO's professional mediators and experienced customer services officers help insurance companies and customers work toward a solution that is in the best interest of all parties in a fair, independent and impartial environment.
General Mortgage Bond: A bond which is secured by a blanket mortgage on the company's property, but which is usually subordinated to one or more other mortgage bonds.
General obligation bonds: Municipal securities secured by the issuer's pledge of its full faith, credit, and taxing power.
General partner: A partner who has unlimited liability for the obligations of the partnership.
General partnership: A partnership in which all partners are general partners.
Generally Accepted Accounting Principles (GAAP): A technical accounting term that encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time.
Generic: Refers to the characteristics and/or experience of the total universe of a coupon of MBS sector type; that is, in contrast to a specific pool or collateral group, as in a specific CMO issue.
Geographic risk: Risk that arises when an issuer has policies concentrated within certain geographic areas, such as the risk of damage from a hurricane or an earthquake.
Geometric mean return: Also called the time-weighted rate of return, a measure of the compounded rate of growth of the initial portfolio market value during the evaluation period, assuming that all cash distributions are reinvested in the portfolio. It is computed by taking the geometric average of the portfolio sub-period returns.
Gestation repo: A reverse repurchase agreement between mortgage firms and securities dealers. Under the agreement, the firm sells federal agency-guaranteed MBS and simultaneously agrees to repurchase them at a future date at a fixed price.
Gilts: British and Irish government securities.
Give up: The loss in yield that occurs when a block of bonds is swapped for another block of lower-coupon bonds. Can also be referred to as "after-tax give up" when the implications of the profit or loss on taxes are considered.
Glass-Steagall Act: A 1933 act in which Congress forbade commercial banks to own, underwrite, or deal in corporate stock and corporate bonds.
Global bonds: Bonds that are designed so as to qualify for immediate trading in any domestic capital market and in the Euromarket.
Global fund: A mutual fund that can invest anywhere in the world, including the U.S.
Globalization: Tendency toward a worldwide investment environment, and the integration of national capital markets.
GMCs (guaranteed mortgage certificates): First issued by Freddie Mac in 1975, GMCs, like PCs, represent the undivided interest in specified conventional whole loans and participations previously purchased by Freddie Mac.
GNMA-I: Mortgage-backed securities (MBS) on which registered holders receive separate principal and interest payments on each of their certificates, usually directly from the servicer of the MBS pool. GNMA-I mortgage-backed securities are single-issuer pools.
GNMA-II: Mortgage-backed securities (MBS) on which registered holders receive an aggregate principal and interest payment from a central paying agent on all of their certificates. Principal and interest payments are disbursed on the 20th day of the month. GNMA-II MBS are backed by multiple-issuer pools or custom pools (one issuer but different interest rates that may vary within one percentage point). Multiple-issuer pools are known as "Jumbos." Jumbo pools are generally longer and offer certain mortgages that are more geographically diverse than single-issuer pools. Jumbo pool mortgage interest rates may vary within one percentage point.
GNMA Midget: A GNMA pass-through certificate backed by fixed rate mortgages with a 15-year maturity. GNMA Midget is a dealer term and is not used by GNMA in the formal description of its programs.
Gnomes: Freddie Mac's 15-year, fixed-rate pass-through securities issued under its cash program.
Go-around: When the Fed offers to buy securities, to sell securities, to do repo, or to do reverses, it solicits competitive bids or offers from all primary dealers.
Going-private transactions: Publicly owned stock in a firm is replaced with complete equity ownership by a private group. The shares are delisted from stock exchanges and can no longer be purchased in the open markets.
Gold exchange standard: A system of fixing exchange rates adopted in the Bretton Woods agreement. It involved the U.S. pegging the dollar to gold and other countries pegging their currencies to the dollar.
Gold standard: An international monetary system in which currencies are defined in terms of their gold content and payment imbalances between countries are settled in gold. It was in effect from about 1870-1914.
Golden parachute: Compensation paid to top-level management by a target firm if a takeover occurs.
Good delivery: A delivery in which everything - endorsement, any necessary attached legal papers, etc. - is in order.
Good delivery and settlement procedures: Refers to PSA Uniform Practices such as cut-off times on delivery of securities and notification, allocation, and proper endorsement.
Good 'til canceled: Sometimes simply called "GTC", it means an order to buy or sell stock that is good until you cancel it. Brokerages usually set a limit of 30-60 days, at which the GTC expires if not restated.
Goodwill: Excess of the purchase price over the fair market value of the net assets acquired under purchase accounting.
Government National Mortgage Association (Ginnie Mae): A wholly owned U.S. government corporation within the Department of Housing & Urban Development. Ginnie Mae guarantees the timely payment of principal and interest on securities issued by approved servicers that are collateralized by FHA-issued, VA-guaranteed, or Farmers Home Administration (FmHA)-guaranteed mortgages.
Government sponsored enterprises: Privately owned, publicly chartered entities, such as the Student Loan Marketing Association, created by Congress to reduce the cost of capital for certain borrowing sectors of the economy including farmers, homeowners, and students.
Government securities: Negotiable U.S. Treasury securities.
Graduated-payment mortgages (GPMs): A type of stepped-payment loan in which the borrower's payments are initially lower than those on a comparable level-rate mortgage. The payments are gradually increased over a predetermined period (usually 3,5, or 7 years) and then are fixed at a level-pay schedule which will be higher than the level-pay amortization of a level-pay mortgage originated at the same time. The difference between what the borrower actually pays and the amount required to fully amortize the mortgage is added to the unpaid principal balance.
Graham-Harvey Measure 1: Performance measure invented by John Graham and Campbell Harvey. The idea is to lever a fund's portfolio to exactly match the volatility of the S and P 500. The difference between the fund's levered return and the S&P 500 return is the performance measure.
Graham-Harvey Measure 2: Performance measure invented by John Graham and Campbell Harvey. The idea is to lever the S&P 500 portfolio to exactly match the volatility of the fund. The difference between the fund's return and the levered S&P 500 return is the performance measure.
Grantor trust: A mechanism of issuing MBSs wherein the mortgages' collateral is deposited with a trustee under a custodial or trust agreement.
Gray market: Purchases and sales of Eurobonds that occur before the issue price is finally set.
Greenmail: Situation in which a large block of stock is held by an unfriendly company, forcing the target company to repurchase the stock at a substantial premium to prevent a takeover.
Greenshoe option: Option that allows the underwriter for a new issue to buy and resell additional shares.
Gross domestic product (GDP): The market value of goods and services produced over time including the income of foreign corporations and foreign residents working in the U.S., but excluding the income of U.S. residents and corporations overseas.
Gross interest: Interest earned before taxes are deducted.
Gross national product (GNP): Measures and economy's total income. It is equal to GDP plus the income abroad accruing to domestic residents minus income generated in domestic market accruing to non-residents.
Gross profit margin: Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold.
Gross spread: The fraction of the gross proceeds of an underwritten securities offering that is paid as compensation to the underwriters of the offering.
Gross-up and Credit System: A procedure to encourage Canadians to invest in preferred and common shares of taxable, dividend-paying Canadian corporations by giving a tax break to such investors. The taxpayer pays tax based on grossing-up i.e. adding 25% to the a number of dividends actually received and then obtaining a credit against federal and provincial tax based on the grossed-up amount. This system is not available on interest from bonds.
Group of five (G-5): The five leading countries (France, Germany, Japan, United Kingdom, and the U.S.) that meet periodically to achieve some cooperative effort on international economic issues. When currency issues are discussed, the monetary authorities of these nations hold the meeting.
Group of seven (G-7): The G-5 countries plus Canada and Italy.
Group rotation manager: A top-down manager who infers the phases of the business cycle and allocates assets accordingly.
Growing perpetuity: A constant stream of cash flows without end that is expected to rise indefinitely.
Growth manager: A money manager who seeks to buy stocks that are typically selling at relatively high P/E ratios due to high earnings growth, with the expectation of continued high or higher earnings growth.
Growth opportunity: Opportunity to invest in profitable projects.
Growth phase: A phase of development in which a company experiences rapid earnings growth as it produces new products and expands market share.
Growth rates: Compound annual growth rate for the number of full fiscal years shown. If there is a negative or zero value for the first or last year, the growth is NM (not meaningful).
Growth stock: Common stock of a company that has an opportunity to invest money and earns more than the opportunity cost of capital.
GTC Order: This stands for a "good till canceled" order. This is an order to buy or sell a security at a specified price, which is valid until executed or canceled. This is the same as an open order.
Guaranteed insurance contract: A contract promising a stated nominal interest rate over some specific time period, usually several years.
Guaranteed Investment Certificate (GIC): Guaranteed deposits issued by banks and trust companies. They are a very popular investment, although their relative lack of liquidity is sometimes a weakness.
Guaranteed investment contract (GIC): A pure investment product in which a life company agrees, for a single premium, to pay the principal amount of a predetermined annual crediting (interest) rate over the life of the investment, all of which is paid at the maturity date.
Guarantor program: Under the Freddie Mac program, the aggregation by a single issuer (usually an S&L) for the purpose of forming a qualifying pool to be issued as PCs under the Freddie Mac guarantee.