ÖThe Devil's Derivatives DictionaryTM  Last revised: 07/27/00

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z #  

- P -

Definition: An investment vehicle that lets you magically transform a large sum of mere idle cash for a small, priceless, timeless nugget of a "boiler room" operator's wisdom.
Usage: Says the boiler room pro, "I have a six-figure package or a seven-figure package. Which would be better for you?"
Proper Response: "They both sound very interesting. Could you hold for a minute. I need to call the SEC's Office of Investor Education and Assistance. What's your name, again? ... Hello? Hello?"
The lending practice of piling credit fees and insurance products onto a loan, until the drowning borrower can no longer stay afloat. Cf. "flipping" and "packing". To the great credit of Sen. Charles Grassley (R. Iowa), chairman of the Senate Special Committee on Aging, he does not plan legislation to infantilize American borrowers by regulating this process, but is only pointing out the abuses by "a few bad apples" who are "con artists" and "immoral and unethical". (Matt Murray, "Ford's Loan Unit Draws Criticism at a Hearing," WSJ, 3/17/98.)
paint the tape
To put cosmetic prices on the ticker tape to disguise a deteriorating condition and sagging market value, much as a woman might paint her face for the same reason.
payment for order flow
  1. Chump change for those who don't understand that when Wall Street invites you to a free lunch, you are likely to be the main course. The wolf's kickback to the broker who delivers lambs to the slaughter.
  2. A mechanism that allows a broker to offer to do your trade for almost nothing.
penny stock
Wall Street’s equivalent to the Roach Motel (q.v.) – you can get it, easily enough, but you can’t get out!
Low-priced stocks – originally, those trading for under a dollar. Now, after inflation, a share price under five dollars qualifies. Most of them trade over the counter, but some are on the American Stock Exchange, or even on the NYSE.
peer competitor
The politically correct term for what unenlightened people called an enemy, back in the dark ages.
7/28/00 phantom stock
1. A new way for insiders to cash in on phantom profits. 2. Untraded stock, reserved for managers, that tracks the performance of a corporation's subsidiary. Its advocates allege that it gives the managers the incentive to work harder and smarter. 
Comment: While the managers may work harder and smarter, the phantom stock allows them to focus those efforts on the subsidiary, rather than work for the benefit of shareholders. 
Source: Rebecca Smith, "Some See Dark Side in 'Phantom' Stock," WSJ, 11/15/99. 
7/28/00 piggyback offering
Definition: 1. A new way for piggish insiders to back up to the feeding trough. 2. A stock issue that comes shortly after an IPO and includes shares that insiders received at the time of the IPO, thus allowing the insiders to get around the "lockup" agreements that would have frozen their holdings for at least six months. 
Source: Suzanne McGee and Terzah Ewing, "'Piggyback' Deals: Keys to Unlock Insiders' IPO Stakes," WSJ, 2/17/00. 
Pirate of Prague
A nickname for Viktor Kozeny, a controversial Czech entrepreneur and financial buccaneer from the landlocked country, who stands accused of swindling a large group of prominent speculators of hundreds of millions of dollars.
Portfolio Insurance
Definition: Hypothetical downside protection at the certain expense of upside participation.
Example: Its providers used mainly a Dynamic Trading Strategy, namely sell into a falling market and buy into a rising market.
Comment: The effect is to create sitting ducks for predatory traders during violent market swings, as we saw in October 1987.
potential accounting irregularities
The accepted way of referring to suspected fraud in reporting financial and managerial results, without opening oneself up to a major lawsuit. For example, in the wake of "potential accounting irregularities," Cendant Corp. reported that it would cut its 1997 operating income by 13% and 1998 earnings by an unstated amount. The market responded by cutting the price of Cendant stock by 46.5%. (Leslie Scism, Elizabeth MacDonald, and Emily Nelson, "Cendant Is Hammered, And Its Vaunted Plans For Growth Get Dicey," WSJ, 4/17/98.)
Price Keeping Operation (PKO)
The tongue-in-cheek name for the Japanese government’s campaign circa the 1991 Gulf War of buying domestic shares, in hopes of supporting their prices and halting the erosion of the capital base of Japanese banks. The name invites invidious comparison to the contemporaneous, allied Peace Keeping Operation to control Saddam Hussein.
Propeller Head
A Geek (q.v.). One of the Numerati (q.v.). An obvious nickname for the sort of person who would think that wearing a beany with a propeller on top is way cool!
Definition: The only market in which the customer is always wrong.
Pump and Dump
A type of financial fraud in which
  • "[S]tock promoters - often disbarred lawyers or brokers who have lost their licenses - gain control of most of the shares of a marginal or struggling business."
  • They pay little for the shares.
  • If the business is closely held, the promoters arrange for an initial public offering.
  • The promoters hire people - often, a public relations firm and an analyst - to create favorable buzz about the stock and to trade the shares at ever increasing prices.
  • Brokers sell their shares to the suckers.
  • Somehow the suckers can't sell out their shares as prices rise.
  • The promoters exit the scene and the stock price goes where market forces take it - sometimes to zero.

(Source: Eaton, Leslie. "Investment Fraud Is Soaring Along With the Stock Market," New York Times, 11/30/97.)

A $25,000 chip at the MGM Grand in Las Vegas. (Alex Berenson, "No Dice: A Gonzo Gambling Tour: The Little (Rich) World of the Whales,", 12/12/97.)
Pyramid Scheme
Definition: A modern monument to the triumph of wishful thinking over common sense, found in a moral and ethical desert, named after an ancient monument celebrating a similar triumph, found in the Egyptian desert. An unsustainable scheme that pays each early joiner with the proceeds from multiple later joiners.
Example: The past and present Social Security system in the U.S.
Comment on breaking news: So, the SEC has charged International Heritage Inc. and three founders on 3/16/98 with luring 155,000 investors into a giant pyramid scheme that raised $150 million. (Bloomberg News, Washington, 3/17/98) We eagerly await the SEC's similar action against the Democrat and Republican political heirs of FDR, who have participated in luring more than 1000 times as many suckers into a gigantic pyramid scheme that has raised much more than 1000 times as much money.
Back to Top

- Q -

A mathematician who observes the price of a Derivative Products in practice and tries to figure out what it is in theory.
Back to Top

- R -

Red Chip Stocks
Capitalism's ultimate weapon against the Red Chinese "Yellow Peril".
Red Herring
A legal document that grants the issuer in an IPO the right to pick the pockets of the unwary [redundant – Ed.] investor. A preliminary prospectus in an IPO, designed to overwhelm and confuse investors, and required by securities regulators.
red meat
The lurid stuff that the Democrat and Republican parties and their candidates provide their base (q.v.) to entice them out to vote during midterm elections. Democrats hold up the scary image of that demon, Newt Gingrich, or a Republican plan to take away Social Security and Medicare benefits. Republicans advertise Bill Clinton’s most egregious encounters with extra marital sex, campaign finance violations, perjury, obstruction of justice, subornation of perjury, trumped up charges against White House Travel Office employees, illegally gotten files on political enemies, Chinese economic spies, etc.
Red Thursday
The day that Tomiichi Akiyama, chairman of Sumitomo, announced that Yasuo Hamanaka, the company's former chief copper trader, had lost a huge sum of money – in the vicinity $2 billion – trading copper. Circa 6/11/96.

The date of a major crash in the Hong Kong stock market.
Reinheitsgebot law
Proof that Germany takes beer drinking a lot more seriously than it takes investing, since the Reinheitsgebot law is both older and stronger than German securities law.

A German law since 1516 that requires brewers to make beer from malt, hops, yeast, and water. If you flavor it with chocolate, cinnamon, tequila, or marijuana, it isn’t beer. (Greg Steinmetz, "As It Turns out, The Bud in This Beer Is a Bit of Marijuana," WSJ, 5/27/98.)

This is in contrast to German securities law that does not require issuers of securities to make financial statements from generally accepted accounting principals or accurate and current data.
Definition: A sucker with a track record of naivety, ignorance, or just plain stupidity, hence a scam artist's preferred customer.
Comment: A sucker who has proven his vulnerability is more likely to fall for a subsequent, properly constructed scam than the average person in the telephone directory. For example, a classic follow up fraud is to approach someone who has been defrauded and sell him services to "recover" previous losses.The smartest investors and traders learn from someone else's mistakes, which is good, because nobody lives long enough to make all the mistakes himself. Many people seem to learn only from their own mistakes. Some poor, lost souls don't even learn the hard way. They become "reloaders", two-time losers, or even serial victims.
Source: "Better Business Bureau Tips for Businesses."
Republican Party
Formerly, the Episcopal Church, voting. Currently, the Christian Coalition, fighting a cultural war. (William McGurn, "Rum, Romanism And Republicans", The Wall Street Journal, 1/29/99.)
Richard Petty syndrome
The overuse of buttons and banners from sponsors and partners on a Web site. Refers to the logo-festooned jumpsuits of auto racers. (Source: Gareth Bronwyn, "Jargon Watch", Wired, 6/99.)
rip ups
The option market's counterpart of the torn up, worthless betting receipts that litter the floors of the viewing stands at race tracks. Option trade tickets that expire worthless on the same day that their unfortunate buyers purchase them. (Source: James Cramer, "Wrong! Cramer Dodges Expiration Fridays," (2/24/97).
roach motel
An investment that you can get into, but can’t get out of.
The prime example is a thinly traded penny stock whose price promoters are manipulating. Its price keeps rising on small volume. You get in at three and watch the price go up to seventeen. You try to get out and find that the only bid is two.
An IPO can fit this description, too. You had to beg your registered rep to let you in on the deal. Now, you tell him you want to "flip" your shares (sell them after holding them only briefly) and you meet resistance: "Do you really want to sell, now? You'll be leaving a lot of upside on the table." Turns out, if you sell, his boss makes him pay a severe penalty for not handling you properly. Of course, "the customer's interest is primary", but the underwriters dumped their stock as soon as possible.

A third example is Globix warrants. You can trade them in any state, but can’t exercise them in 33 states – including California, Illinois, and Michigan – where the company didn’t register the stock. If you sell them to someone who later finds he can’t legally buy them, because of nonregistration, the broker must break the trade. It’s not clear who would eat the cost. (Suzanne Galante, "Silicon Valley: Globix Warrants: A Net Company Makes Like a Roach Motel,", 6/26/98,
"rocket" docket
The only U.S. federal court that doesn’t deny justice – if justice delayed is justice denied. One place, at least, where the wheels of justice don’t have to grind slowly.

In the Eastern District of Virginia, a criminal complaint leads, typically, to a decision within five months. A multimillion-dollar civil suit may take up to nine months. The district judges keep the assembly line moving by sharing responsibility for cases. Each Friday, at least one judge and one magistrate are available to hear and rule on timely, pending motions. The 4th Circuit Court can confirm a verdict in 30 days. "Hell, they can electrocute you in 90 days!"

Rocket Scientist
Definition: A jocular term for a Derivatives Quant.
Usage: You don't have to be a Rocket Scientist to know you can't hedge volatility by trading the underlying.
Definition: 1. A firm that tries to make a huge, silk purse out of a large number of tiny sows ears.
2. A firm that creates “growth through a constant acquisition binge” of small firms within a single industry. 
U.S. Office Products Co. and Waste Management Inc., circa 1998.
Applications: Wayne Huizenga consolidated garbage companies into Waste Management and video stores into Blockbuster. Others have consolidated smaller firms in the funeral home, internet service provider, and plumbing sectors.
Theories behind the “roll-up business”:
1. “[R]oll-ups … bring economies of scale, management discipline and access to capital into industries dominated by inefficient, undercapitalized mom-and-pop shops.”
2. The acquisitions provide a way to create spurious earnings growth.
3. They borrow and buy, borrow and buy. So when the stock market and bond market are up, roll-ups prosper. When either the stock market or bond market tanks, roll-ups suffer. When both markets tank, roll-ups die.
Source: Paul M. Sherer, “Roll-Ups: Ironing out the Bumps,” NYT, 9/3/1999.
rounding error
The significance of Salomon Brothers in CitiGroup. "Now it’s really just a pimple on the butt of this huge elephant." (Alan Deutschman, "Nightmare on Wall Street," New York, 4/27/98.)
Russian flu
Lackluster performance in the Russian financial markets in late 1997, largely because foreigners (largely, Asians, particularly Koreans, who were feeling the effects of "Asian flu" withdrew some $7 billion of investment during that period. (Laure Edwards, "Russian Flu Symptoms," Financial Trader, 2/98.)
Back to Top

- S -

A human wind tunnel, who blows sunshine up your skirt while sucking money from your wallet.
Sammy Davis, Jr., Theory of Leadership
In the land of the blind, the one-eyed man is king – except in Washington, the land of the short-sighted, where the man who acts as if he is blind or feeble-minded is king.
Santa Claus rally
The stock market's legendary gift to investors after Christmas Day, each year. According to Yale Hirsch (the Hirsch Organization) the total increase for the last five trading days of each year and the first two days of the following January has averaged 1.72% of market value. (Jennifer Westhoven, "Dow ends higher in broad rally, Santa gains seen", New York, 12/22/97, Reuters.) Why is the market so generous? (1) Investors sell some losers at year end, in order to realize losses for tax purposes, depressing prices. (2) The sellers become buyers, as they reinvest their proceeds in shares of different companies, pushing up those prices.
7/28/00 sheeple
"n: a mass of investors comprised of individuals each of whom makes investment decisions based on the observed actions of the other members of the herd : sheep-like as a : one unable to make rational investment decisions based on
personal observations that lead to actions that contradict the actions of the herd b : uncritical of information inputs from those who seek to profit from them, such as financial services companies c : in for a big surprise" 
Source: Eric Janszen,
Shinto gambling
Gambling at one of the riverboat casinos that have sprung up throughout the Midwest, according to University of Nevada-Las Vegas professor William Thompson. The term is a play on the fact that most Shinto temples are near water nearby because of Japanese religion emphazes nature and cleanliness."You wash your hands in the water, and then you go gamble," Thompson says sarcastically. (Alex Berenson, "No Dice: A Gonzo Gambling Tour: Swimming Upstream with the Riverboats,", 12/16/97.)
Legislators crafted Shinto gambling to satisfy simultaneously midwestern laws of demand for both sin and sainthood. Without a doubt the casinos meet much of the demand for sin, whether you measure it in gross amount wagered, the casino's take, or the all-too-human suffering of the losers' dependents. The claim to sainthood is more tenuous, but, clearly, midwestern legislators in the 1990s could teach a thing or two about hypocrisy to the colonial New England Puritan clerics of Nathaniel Hawthorne's The Scarlet Letter.
The casinos must both float and cap each customer's loss per cruise. "Floating" is a term of art that means that each casino is a vast, nearly immobile barge, floating beside a river bank. Each "cruise" lasts an hour, and you can end one cruise and start another by walking off one barge and onto its neighbor. Hence, losing $500 per cruise can mean losing $500 per hour. At current prices that's a few months of diapers and formula.
1. "A peripheral used to produce digitized images of documents and photographs, which can be stored as files and edited on a computer. ("Jargon Watch," Fortune Technology Buyer's Guide, Winter 1998, p. 14.)
2. A human ferret that management employs to roam the trading floors to produce mental audio and visual images of conversations and trade tickets, before they can be stored as files and edited on a computer.
short-term funding agreement
Definition: An innovative financial product that did for General American Life Insurance Co. in 1999 what lending long-term and borrowing short did for S&L’s in the 1980s.
Example: American General borrowed from money market funds and other lenders, with loans callable anytime with only a 7-day delay, and bought assets with maturities much greater than seven days. In 1999, interest rates rose. On 7/30/1999, Moody’s downgraded General American from A2 to A3. Almost immediately, money market funds started withdrawing funds with seven days notice. Soon, General American faced the equivalent of a “run on the bank.” After various attempts to deal with the “run”, General American asked the State of Missouri insurance commission to put it under supervision. Ultimately, MetLife acquired General American.
Source: Deborah Lohse, “How General American Got Fancy in Investing, Lost Its Independence,” WSJ, 9/3/1999.
The name that pessimists have reserved in advance for economic stagnation in Communist China in the 21st century. If China adopts import substitution policies, expanded public ownership, and price controls, we will be fortunate to have a name for the Chinese case of the disease that has afflicted Brazil and Mexico since the 1980s. If China embraces free markets and privatization, and realizes the promise of economic growth, this will be a disease without a country. (Rowan Callick, "Uncertain future for ambitious China," Australian Financial Review, 9/19/97.)
Sleep Tax
The reasons that eternal vigilence is the price of more than liberty. New York City police coined the expression during "Operation Awake", because much of the theft on subways occurred as pickpockets "made 'withdrawals' from sleeping passengers." Similarly, scam artists can impose a sleep tax on investors who aren't alert to pitfalls in franchise and other business offerings. (Source: Bob Rosner, "Scam Detection,", 10/21/97.)
State and Local Government Series (q.v.) of Treasury securities. More appropriately termed DOGS (q.v.).
  • Short for "the snake in the tunnel" the exchange rate scheme that allowed exchange rates to fluctuate within bounds. A graph of the exchange rate versus time would show the snake (the fluctuations) and the tunnel (the bounds). During the 1970s the U.K. participated this scheme and got the worst of fixed and flexible exchange rates. Ultimately, it lost billions of dollars before pulling the plug on this Frankenstein monster. (David DeRosa, "1998 -- The Year of the EMU",, 12/31/97.)
  • The nickname for a certain player on Wall Street. "I live by three rules: (1) Never eat at a restaurant named 'Mom's'. (2) Never play poker with a man named 'Doc'. (3) Never take a job for a boss they call, 'Snake'."
Small Order Execution System (q.v.). NASDAQ's mechanism by which traders taking NoDozTM can pick the pockets of market makers using SominexTM. Cf. SOES Bandits.
" 'SOES turns smart people into rich people,' says Friedfertig. 'I've seen people who used to steal car batteries for a living come in here and make $7,000 a week.' " (Mark Friedfertig, quoted in Cory Johnson, "Easy Money: SOES Bandits Rain on Nasdaq Parade," (2/27/97).
SOES Bandits
NoDozTM-guzzling OTC stock traders who try to pick the pockets of NASDAQ market makers, the same way program traders pick the pockets of SominexTM-ingesting investors who have placed limit orders with exchange specialists. Big Wall Street trading operations - often including both market makers and program traders – gnash their teeth and wail bitterly about the goniffs who get away with the first crime, while explaining piously that the second virtuous act is how they make markets efficient.
Racketeers – apparently, yakuza (q.v.) – who threaten to disrupt the shareholders' meeting or otherwise embarrass corporate management, unless management makes massive payoffs. Mr. Ryuichi Koike has managed to shake down the Japanese big four securities firms and Dai-Ichi Kangyo Bank for millions of dollars. Satoshi Yamamoto claims to be a "shareholder activist", but some claim he is another extortionist. ("Blackmail in Japan Inc.", Australian Financial Review, 7/15/97.) In the past, Japanese corporations used the sokaiya as "muscle" to keep investors from loudly demanding higher dividends at the shareholder meetings.
Definition: Punishments.
Origin: Military. "Soldiers who suspect generals are punished more discreetly than sergeants coin a descriptive phrase: 'Different spanks for different ranks' ." (Ronald G. Shafer, "Minor Memos", WSJ, 1997.)
Derivatives Application: A back-office clerk who "borrows" $2 in change from the coffee money or gets daily free coffee from the trading floor finds himself without a job. An option trader who creates $20 million in bogus P&L finds himself reassigned to trader supervision. A manager who creates a Derivatives business that records $200 million in bogus P&L retires to the life of a country squire.
Political Application: Peter Collins ran a newsletter about ballroom dancing on government time, when he worked for the Defense Intelligence Agency. The Justice Department won a conviction for his crime of using the government copier to copy his newsletter and calendars. Bill Clinton auctioned off the Lincoln Bedroom, seats on Air Force One, ambassadorships, a plot in Arlington Cemetery, gambling rights on Indian reservations, and anything else not tied down. The Justice Department finds no evidence of any criminal activity. (Mark Levin, "Dancing Around the Law," WSJ, 1/8/98.)
To spin a golden yarn out of a factual hay maker. To break down a dangerous concentration of toxic facts into a harmless and diffuse cloud of confusing issues, questions, and counter charges. A term that Time magazine coined in 1988. (Robert L. Dilenschneider, " ‘Spin Doctors’ Practice Public Relations Quackery," Wall Street Journal, 6/1/98.)
"In my book ‘Hardball,’ I explained the art of spin as ‘a traditional two-step: first, you admit you have a problem, thereby establishing credibility, then use the enhanced credibility to define the problem in a way that keeps the political damage to a minimum. In Friday’s press conference, Mr. Clinton managed to disguise an obvious untruth – that he was eager to testify – by prefacing it with an obvious truth – that he wanted to scandal behind him." (Christopher Matthews, "Doesn’t He Ever Get Dizzy?" Wall Street Journal, 8/5/98.
spin doctors
"[P]urveyors of deception, manipulation and misinformation. … Spin doctors try to alter the facts through a deliberate and reckless disregard for the truth. Spin is to public relations what pornography is to art." … [S]pin doctors … do whatever it takes to get their message out—confuse the issue, change the subject, attack the president’s critics. Forget taste, appropriateness and common sense – and pay no heed to long-term consequences." Example: "Drag $100 through a trailer park, and there’s no telling what you will find." (Robert L. Dilenschneider, " ‘Spin Doctors’ Practice Public Relations Quackery," WSJ, 6/1/98.)
The statutory gang rape of shareholders by investment bankers and corporate decision makers. A heretofore unprosecuted form of corporate bribery, akin to the political concept of "legal graft".
The investment bankers identify the corporate decision makers and gain approval to bring out an issue of shares. In return for each decision maker’s approval, the bankers put newly offered shares of the corporation in an account for him. Then, when the shares go public, he can sell them for a quick, riskless profit.
The investment banking practice of allocating shares of "hot" initial public offerings to certain brokerage accounts, then promptly selling the shares for a profit. Venture capitalists and corporate executives who are in a position to throw more business to the bankers are the most frequent beneficiaries of this generosity. Surprise!
While this practice makes eminent business sense to the bankers and players who want to influence key decision makers, the NASD and SEC look at it with a jaundiced eye. The NASD warned the bankers that it might hold them liable for spinning. (Michael Siconolfi, "NASD Warns On 'Spinning' IPO Shares," Wall Street Journal, 11/24/97) If a retail customer were to unload shares he bought in an IPO, in the standard way that a decision maker does, then his broker would never let him get close to another IPO.
A person who is good with numbers, but lacks the personality to be an accountant.
What gets an honest NYSE specialist out of bed every morning. One sixteenth of a dollar or a percent six and a quarter cents on the dollar. A common profit margin on a trade in a liquid stock, such as IBM. (Source: Desmond Macrae, "How Specialists Make a Living," Financial Trader 4(10).)
stock promoter
The professional blowhard who puts the hot air into a stock bubble.
The fine art of lending a borrowing homeowner more than he can repay, unless he sells the home that prompted the loan in the first place. Cf. "flipping" and "packing". To the great credit of Sen. Charles Grassley (R. Iowa), chairman of the Senate Special Committee on Aging, he does not plan legislation to infantilize American borrowers by regulating this process, but is only pointing out the abuses by "a few bad apples" who are "con artists" and "immoral and unethical". (Matt Murray, "Ford's Loan Unit Draws Criticism at a Hearing," WSJ, 3/17/98.)
style drift
The investment manager's equivalent of a basketball betting junky's switch to football bets after losing ten basketball bets in a row. Desperation plays by hedge funds and mutual funds. For example, switching, after ten years of experience, from fixed income "arbitrage" to equity "arbitrage".
submerging markets
Former emerging markets (q.v.), as they head back into the primeval slime, whence they came.
In Japan, a popular financial planning tool, and a pleasant alternative to facing creditors (cf. dogeza), in-laws, or yakuza. Japanese life insurance companies pay the full benefit for suicide, as long as the policy has been in effect for more than a year – in contrast to the typical three years in the U.S. The suicide rate in Japan for the life insured is double the rate for the uninsured. Japanese lenders often require guarantors for loans, and in-laws are frequently guarantors. Yakuza sometimes buy up the debt of companies in distress, then use the position of creditor to extort cash or anything they can turn into cash. (Edward W. Desmond, "When Suicide Makes Sense," Fortune, 5/25/98, p. 32.)
SWAG Pricing
Definition: Approximate pricing based on a questionable methodology. An acronym for Scientific Wild Ass Guess.
Usage: We don't have time to turn this over to a Rocket Scientist (q.v.). What's your SWAG price?
Back to Top

- T -

talking points
1. A list of points to make in an affadavit, interview, conversation, or public presentation.
2. A blueprint for perjury.
For example, imagine that you have said that you saw a young married woman or widow, looking disheveled, leave the President's Oval Office, and that you heard her say that the President had made a pass at her. A young friend might hand you an unsigned memo with talking points, such as
1. "[Y]ou now do not believe that what she claimed happened really happened."
2. "You now find it completely plausible that she herself smeared her lipstick, untucked her blouse, etc."
(" 'Talking Points' for Tripp Affidavit," New York Times 1/26/98.)
If those points summarize your thinking, you may be grateful for assistance in dealing with an scary encounter with potentially hostile attorneys. If they don't bear any resemblence to opinions you have ever expressed, then you may conclude that this looks like a blueprint for perjury.
Tauber, Laszlo
Not now and never will he be a patron saint of derivatives dealers. A wealthy surgeon and real estate tycoon who immigrated to the U.S. from Hungary after World War II, he made tens of millions of dollars in Washington, DC, real estate, and lost tens of millions in FX derivatives deals with Salomon Brothers and others. He then sued to nullify the contracts on the grounds that they were illegal futures contracts. ("Your Honor, I killed my parents, but have mercy on me, for I am but a poor orphan.") Fortunately for the rule of law and the survival of the OTC derivatives industry, he lost.
Proof that "size matters" in finance. Since the 18th century, the minimum tick size in U.S. stock markets had been 1/8 of a dollar. Then, in 1997 the American Stock Exchange reduced tick size to 1/16.
term insurance
The magic words that can make a pesky life insurance salesman disappear. An insurance contract that ends in a specified number of years, and which includes only a small sales commission.
The Japanese term for the common Japanese securities firm's practice of covering the trading losses of "favorite" customers. One presumes that the pros have skinned these customers so thoroughly and frequently that tossing them a few chips after a bad roll of the dice is not a serious hardship. Nevertheless, the revelation that Yamaichi had hidden some $1.6 billion of tobashi payments off its balance sheet may have enraged Japanese regulators and sealed Yamaichi's fate (RIP, 11/14/97).
Top Cat
"An Asian Tiger who lost his claws and several billion U.S. dollars of Malaysia’s treasure to George Soros and other currency traders in a tussle over the British pound in 1992, then more in 1993. At the time, Nor Mohamed Yackop ("Top Cat") was a top official at Bank Negara – Malaysia’s central bank. (
The unprofessional, total absence of the normal and prudential practice of hiding all inconvenient details from one's intended victim.
Back to Top
Click here to email Dr. Risk or the William Margrabe Group

Risk Management, 
Derivatives, and 
Financial Engineering

Our other web sites: 


Free option pricing calculators from here and around the world.


of the best articles 
from the best publications 
in the risk management trade press.

of the best articles from the best publications 
  in  the derivatives trade press. 


Answers to your questions about Investment, 
Risk Management, 
Derivatives, and 
Financial Engineering

Copyright © 1996–2002 by The William Margrabe Group, Inc. All rights reserved.
All trademarks or product names mentioned herein are the property of their respective owners.