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 # |  |
- U -
- Ultra Vires Activities
- Definition: Unauthorized corporate activities outside the scope of the corporate charter. The underlying motivation for most derivatives trades.
- Uncle Joe
- The American press’s avuncular expression for probably the greatest mass-murderer of all time – Joseph Stalin, Soviet dictator. An early example of the rhetoric of "spin".
undocumented feature
- What the derivatives salesman didn’t tell you about the product you just bought.
- A euphemism for a software bug. (Steven Greenhouse, "Braindump on the Blue Badge: A Guide to Microspeak," New York Times, 8/13/98.)
- unwind
- The financial equivalent of untying a series of tight knots in wet shoelaces or rawhide, a child's slinky, or a spiral telephone cord. "Five minutes after I entered the contract, when I tried to unwind it, the salesman informed me that rates had moved sharply against me. Moreover, the trader who had put me into the contact had taken ill, suddenly."
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- V -
- Value at Risk
- Every penny you have now – plus the present value of your future earnings, unless you seek protection of the bankruptcy law. If you opt for bankruptcy, you might want to establish residency and buy an extremely expensive home in Texas, Florida, or Iowa.
- vapor paper
- Asset backed debt securities issued with non existent collateral. For example, suppose a Brazilian steel company wants financing for a new plant, that will produce steel for sale outside Brazil. The steel company transfers ownership of the steel to a Cayman Islands trust, which seizes the sales receipts and ships dollars to the investors. ???
- VC money
- Seed money that comes from professionals (venture capitalists), rather than "angel capital" (q.v.) from semi-pros or "3F money" (q.v.) from amateurs. (Rich Karlgaard, "Dollars From Heaven," WSJ, 3/16/98.)
- Viagra
- Rhymes with Niagara – perhaps to suggest that user’s vital bodily fluids will soon flow with the power of the famous falls and honeymoon destination. Proof positive – if you needed it – that men will do and pay whatever it takes to have sex – although $10 a "pop" may discourage some candidates. Also known informally as the "Pfizer Riser", and not because it has led to a sharp upswing in Pfizer’s stock price – which has recently doubled. President Clinton’s critics say, "Take the pill and be like Bill." It may eventually replace powdered rhinoceros horn and tiger penis as the most trusted aphrodisiacs.
- A wonder drug that can turn a previously impotent man into a sexual overachiever by increasing blood flow to his genitals. Now, if they could only find a drug that would increase blood flow to his other brain.
- Side effects include: headache, indigestion, seeing blue, and confusing blue and green. Early reports are not clear on who gets the headache – the man taking Viagra, or the object of his affection, as has been the case often in the past.
- Raoul Felder mentions the ultimate side effect: "Some of these old guys will drop dead from it," he said. "They’ll collapse." (Douglas Martin, "The Pill That Revived Sex, Or at Least Talking About It," NYT, 5/3/98.)
- Bob Guccione, publisher of Penthouse magazine, is pleased that the drug will allow men to focus more on the physical side of their relationships with women. Stephanie Miller, of Equal Time, says, "That’s just what we need, something that makes men less emotionally available to their partners."
- Vive la … meme chose
- Will it work for women? " ‘Physiologically ... the clitoris is nothing more than a penis without a urethra,’ he said. The
- urethra carries urine and sperm in men.
- " ‘A lot of women are interested [in Viagra],’ said Dr. Myron Murdoch, a urologist in Greenbelt, Maryland, who is national medical director for the Impotence Institute of America."
- (Maggie Fox, "Miracle" potency pill a hit with US women too," Excite News, http://my.excite.com/news/r/980429/10/odd-viagra.)
- viatical settlement
- A way to make whoopee, as beneficiary – in fact, if
not in law – of one’s own life insurance
policy. A financial interest in a life insurance policy
of a terminally ill person, typically – these days
– someone with AIDS.
A viatical settlement is simply the sale of an existing life insurance policy by a terminally ill person to a third party in return for a percentage of the face value of the policy paid immediately.
The latest jewel in the crown of the SEC’s regulatory Reich. In November 1997 a federal judge in Washington dismissed SEC claims that a Waco, Texas, company that sold viatical settlements was really selling unregistered securities. However, in 6/98 two Florida brothers agreed to pay $950,000 to settle SEC charges of fraud and failure to register public securities, which were related to selling some $100 million of viatical settlements. (Paul Beckett, "SEC Case Involving Viatical Settlements Is Settled With $950,000 in Payments," WSJ, 5/4/98.)
- Volga boat ride
- A funny name for the unfunny experience of investing in Russian securities and real assets.
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- W -
- Wall Street walk
- (Before 1990) The distinctly downtrodden gait of the
disgruntled institutional investor, as he shuffled out the door, because
management was the puppet master and the board were the puppets.
(Post 1990) The confident stride of the institutional investors into the board room, demanding revolution. Today, commonly, the board tells underachieving management to take a hike, the better to avoid personal liability in a shareholder lawsuit. - WESON
- Weird shit Out of Nowhere. Intermittent, irreproducible glitches in software, market activity, or other social relationships.
- whale
- A major gambler who qualifies for a credit line of at least $1 million. A whale who feels lucky may want to bet a quarter of a million dollars on a single hand, but the risk managers at cautious casinos these days probably won't won't let him bet more than $150,000. (Alex Berenson, "No Dice: A Gonzo Gambling Tour: The Little (Rich) World of the Whales," TheStreet.com, 12/12/97.)
- When Issued Market
- A security's pre-debut party.
- whisper numbers
- Evil rumors about forthcoming corporate earnings
announcements, which spread like a virus from greedy
trader to greedy trader. Some cynics believe that the
people who initiate these rumors are trying to manipulate
the market. "Whisper numbers are usually generated
by short sellers who inflate the whisper number so high
that it can't possibly be met." (Rob L., Letter to
sam ding, 10/16/97. http://www4.techstocks.com/~wsapi/investor/s-13512/reply-229)
Whisper numbers contrast with and compete with the unbiased estimates of earnings by those incorruptible Wall Street analysts, who remain totally unbiased in their forecasts, even though they work for and receive millions in compensation from investment banks that want future underwriting business from the firms the analysts cover - wiggle room
- A large room in the White House, between the Oval Office and the press briefing room. An incompleteness of facts that allows the Clinton administration to spin a yarn that affords them the greatest political advantage. Cf. spin.
- Wimbledon Effect
- Definition: Having a playing ground that is world class, but with all the best players being foreign.
- Source: "Tokyo reborn as Asia's top trading venue," the on-line Australian Financial Review, 5/28/97.)
- Worthless Collar
- The only truly Costless Collar – you get what you pay for. The "Costless Collar" that you can obtain in the marketplace costs approximately the bid-ask spread on one of its component options, because the Tooth Fairy and Santa Claus have so far steered clear of the Derivatives market. While the term, "Worthless Collar", may be misleading, it does have the practical advantage that no one would for one minute believe it to be literally true, whereas many a customer has struggled mightily - and an unfortunate few have struggled in vain – to grasp how he really pays for a "Costless Collar".
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- X -
- X-Rated Option
- Any option with particularly obscene provisions, making it highly likely that the customer will wake up the morning after with either clear evidence or a strong supposition that he has been raped or at least had intercourse while intoxicated with dreams of wealth.
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- Y -
- Yakuza
- Japanese organized criminals, many of whom sacrifice a finger or two to prove their courage, and some of whom make a good living shaking down Japanese financial firms and other corporations, a practice called Sokaiya (q.v.).
- Yield Burning
- Definition: Violating man's law relating to municipal bond advanced refunding, while enforcing Nature's law about separating a fool from his money. The IRS's name for the investment banker's act of buying ordinary Treasury securities in ordinary markets and selling them at inflated prices and depressed yields to sleepy state and local governments and authorities, allowing the governments to defease an old, high-yielding muni bond issue, which allows the government to issue new munis with lower yields.
- Comment: "Proper practice" requires that the investment bankers refrain from buying the ordinary Treasuries, and instead buy special, low-yielding Treasuries at inflated prices from the U.S. Treasury. This way, the Treasury captures the profit. Says the Secretary of the Treasury to the investment banker, "Hey! That's our money!"
- Yield Curve
- Definition: A hypothetical set of rates of interest implied by a real set of bonds of different maturities.
- Comment: The mistaken assumption that the forward Yield Curve has any relationship whatsoever to expected future spot rates of interest has gotten many a customer into an ill-advised Derivatives trade.
- yo-yo trade
- A purchase (sale) that quickly reverses a sale (purchase). Ideally, the sale is at a higher price than the purchase, indicating a quick profit. If the sale is at a lower price, then we say the trader got "whipsawed".
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- Z -
- Zero Cost Collar
- Definition: Aka "Costless Collar".
- Usage: "If you don't want to lay out the cash for that Call Option, you might prefer a 'Costless Collar' that gives you the same upside participation."
- Comment: A howlingly funny misnomer. "Hidden-cost Collar" would be more accurate. Think about it. A dealer won't do a transaction for you if it doesn't cost you something, because his revenue is your transaction cost. The purchase of a put option financed by the sale of a call.
- Zero Gain Collar
- Definition: A Costless Collar (q.v.) consisting of a short ATM (q.v.) Call (q.v.) and long ATM Put (q.v.).
- Application: When owned in combination with a long position in the underlying, the Zero Gain Collar gives up all the underlying's upside gain, suffers none of the downside loss, and produces a return equivalent to that of a Treasury Bill, all at a transaction cost many times that of the Treasury market.
- zipless fuck
- Erica Jong’s approving term for sex without
consequences (Fear of Flying): i.e., no pregnancy,
disease, embarrassment at meeting again, sober regrets,
emotional baggage, etc.
An imaginary beast, like the chimera or unicorn, that roams the fields of Erehwon.
- zombie bank
- Economist Edward Kane's term for an economically insolvent bank that doesn't sink into formal bankruptcy because its regulators and central bank connive to keep it afloat. In 1997, many Asian banks come to mind: Japanese banks reported at face value real estate loans worth perhaps 25% of that. Thai banks reported at face value loans until they had been in default for more than one year. In the U.S. in the 1980s, many S&Ls met this definition. Some people suspect that many U.S. commercial banks may be zombie banks, and that is why Fed Chairman Alan Greenspan has opposed the proposal to require U.S. banks to report the "fair value" of their positions in Derivatives. (Martin Mayer, "Why Secrecy Is Bad for Banking," Wall Street Journal, 12/30/97.)
- zombie companies
- Companies that are deeply in debt and long in default, yet open for business with a staff that’s never been bigger. Asia is the graveyard for many zombie companies. The chaebol in Korea have managed to "redeploy" as much as 40% of their employees without layoffs. "The inadequacy of bankruptcy and foreclosure laws explains the state of affairs in Indonesia, where most manufacturing companies, on paper at least, are bankrupt and none is repaying dollar-denominated loans while the rupiah hovers near 8,500 per dollar." (Keith B. Richburg, "Asia Looks for Cash For Its Ailing Banks," Washington Post, 3/30/98, p. A21.)
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- # -
- 3F money
- Seed money that comes from amateurs, "friends, family, and fools", rather than "angel capital" (q.v.) from semi-pros or "VC money" (q.v.) from pros. (Rich Karlgaard, "Dollars From Heaven," WSJ, 3/16/98.)
- 4F Club
- A "dating club" whose members – formerly all male, now of any gender or sexual preference – follow four rules:
- 1. Find 'em.
- 2. Feed 'em.
- 3. F*** 'em.
- 4. Forget 'em.
- 666
- The number of the Beast.
- 88888
- The account number of the Beast – namely, Nick Leeson of Barings.
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