This document defines various financial terms from A to Z. Some key terms defined include: - Value-added tax (VAT): A method of indirect taxation where a tax is levied at each stage of production on the value added at that specific stage. - Value-at-Risk (VAR) model: A procedure for estimating the probability of portfolio losses exceeding a specified level based on historical market trends, correlations, and volatilities. - Variable annuities: Annuity contracts where the issuer pays periodic amounts linked to the investment performance of an underlying portfolio. - Venture capital: An investment in a start-up business perceived to have excellent growth prospects but no access to capital

1. Glossary of Financial Terms
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
Value-added tax
V Method of indirect taxation whereby a tax is levied at
each stage of production on the value added at that
specific stage.
Value-at-Risk model (VAR)
Procedure for estimating the probability of portfolio
losses exceeding some specified proportion based on a
statistical analysis of historical market price trends,
correlations, and volatilities.
Value additivity principal
Prevails when the value of a whole group of assets
exactly equals the sum of the values of the individual
assets that make up the group of assets. Stated
differently, the principle that the net present value of a
set of independent projects is just the sum of the net
present values of the individual projects.
Value date
In the market for Eurodollar deposits and foreign
exchange, value date refers to the delivery date of
funds traded. Normally it is on spot transactions two
days after a transaction is agreed upon and the future
date in the case of a forward foreign exchange trade.
Value dating
Refers to when value or credit is given for funds
transferred between banks.
Value manager
A manager who seeks to buy stocks that are at a
discount to their "fair value" and sell them at or in
excess of that value. Often a value stock is one with a
low price to book value ratio.
Vanilla issue
A security issue that has no unusual features.
Variable
A value determined within the context of a model.
Also called endogenous variable.
Variable annuities
Annuity contracts in which the issuer pays a periodic
amount linked to the investment performance of an
underlying portfolio.
Variable cost
A cost that is directly proportional to the volume of
output produced. When production is zero, the
variable cost is equal to zero.

2. Variable life insurance policy
A whole life insurance policy that provides a death
benefit dependent on the insured's portfolio market
value at the time of death. Typically the company
invests premiums in common stocks, and hence
variable life policies are referred to as equity-linked
policies.
Variable price security
A security, such as stocks or bonds, that sells at a
fluctuating, market-determined price.
Variable rate CDs
Short-term certificate of deposits that pay interest
periodically on roll dates. On each roll date, the
coupon on the CD is adjusted to reflect current market
rates.
Variable rated demand bond (VRDB)
Floating rate bond that can be sold back periodically
to the issuer.
Variable rate loan
Loan made at an interest rate that fluctuates based on a
base interest rate such as the Prime Rate or LIBOR.
Variance
A measure of dispersion of a set of data points around
their mean value. The mathematical expectation of the
squared deviations from the mean. The square root of
the variance is the standard deviation.
Variance minimization approach to tracking
An approach to bond indexing that uses historical data
to estimate the variance of the tracking error.
Variance rule
Specifies the permitted minimum or maximum
quantity of securities that can be delivered to satisfy a
TBA trade. For Ginnie Mae, Fannie Mae, and Feddie
Mac pass-through securities, the accepted variance is
plus or minus 2.499999 percent per million of the par
value of the TBA quantity.
Variation margin
An additional required deposit to bring an investor's
equity account up to the initial margin level when the
balance falls below the maintenance margin
requirement.
Venture capital
An investment in a start-up business that is perceived
to have excellent growth prospects but does not have
access to capital markets. Type of financing sought by
early-stage companies seeking to grow rapidly.

3. Vertical acquisition
Acquisition in which the acquired firm and the
acquiring firm are at different steps in the production
process.
Vertical analysis
The process of dividing each expense item in the
income statement of a given year by net sales to
identify expense items that rise faster or slower than a
change in sales.
Vertical merger
A merger in which one firm acquires another firm that
is in the same industry but at another stage in the
production cycle. For example, the firm being
acquired serves as a supplier to the firm doing the
acquiring.
Vertical spread
Simultaneous purchase and sale of two options that
differ only in their exercise price. See: horizontal
spread.
Virtual currency option
A new option contract introduced by the PHLX in
1994 that is settled in US$ rather than in the
underlying currency. These options are also called 3-
Ds (dollar denominated delivery).
Visible supply
New muni bond issues scheduled to come to market
within the next 30 days.
Volatility
A measure of risk based on the standard deviation of
investment fund performance over 3 years. Scale is 1-
9; higher rating indicates higher risk. Also, the
standard deviation of changes in the logarithm of an
asset price, expressed as a yearly rate. Also, volatility
is a variable that appears in option pricing formulas. In
the option pricing formula, it denotes the volatility of
the underlying asset return from now to the expiration
of the option.
Std
Rating Std Deviation Rating
Deviation
up to 7. 99 1 20. 00-22. 99 6
8. 00-10. 99 2 23. 00-25. 99 7
11. 00-13. 99 3 26. 00-28. 99 8

4. 14. 00-16. 99 4 29. 00 and up 9
17. 00-19. 99 5
Volatility risk
The risk in the value of options portfolios due to the
unpredictable changes in the volatility of the
underlying asset.
Volume
This is the daily number of shares of a security that
change hands between a buyer and a seller.
Voting rights
The right to vote on matters that are put to a vote of
security holders. For example the right to vote for
directors.