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Level 2 (NASDAQ Level 2 Quotes) Level 2 is a real-time view of a stock’s order book that shows bid and ask prices and sizes posted by market makers and electronic communication networks (ECNs). It exposes market depth beyond the best bid and offer, helping active traders visualize supply and demand and make more informed…

Level 1: Definition, How It Works, and Accessibility Level 1 is a basic market data feed that shows the national best bid and offer (NBBO) for a security in real time. It displays the best available bid and ask prices and the size (volume) at those prices. Level 1 provides the essential price information most…

Letter of Intent (LOI) A letter of intent (LOI) is a short document that sets out the preliminary understanding between parties who intend to negotiate and complete a transaction. It outlines the major terms and conditions of a proposed deal so both sides agree on the broad framework before investing time and resources to finalize…

Letter of Indemnity (LOI) A Letter of Indemnity (LOI) is a written promise to compensate a party for specified losses or liabilities that may arise if another party fails to meet contractual obligations. LOIs are commonly used to reduce risk and enable transactions to proceed when there is uncertainty or a temporary gap in documentation….

Letter of Guarantee A letter of guarantee is a bank-issued commitment that a supplier or creditor will be paid if the bank’s client (the buyer or debtor) defaults. It acts as a form of insurance for the recipient, giving confidence to proceed with transactions when one party’s ability to pay is uncertain. How it works…

Letter of Credit — Definition, Types, and Uses A letter of credit (LC) is a bank-issued guarantee that a seller will receive payment from a buyer on time and for the agreed amount. It shifts payment risk from the seller to the issuing bank, which pays the seller when the LC’s conditions are met. Letters…

Letter of Comfort: Definition, Uses, and How It Differs from a Guarantee What is a letter of comfort? A letter of comfort (also called a letter of intent or solvency opinion, and sometimes a keepwell agreement when issued by a parent company) is a written statement that provides assurance—often limited—that an obligation will be met….

Lessor: Definition, Types, vs. Landlord and Lessee Definition A lessor is an individual or legal entity that owns an asset and grants another party—the lessee—the right to use that asset under a lease agreement in exchange for periodic payments. The lease is a binding contract that sets the rights and obligations of both parties. Key…

Lessee: The Person That Rents a Property Definition A lessee is a person or entity that rents property from a lessor under the terms of a lease agreement. The lease is a legally binding contract that defines each party’s rights and responsibilities for use of the property. Explore More Resources › Read more Government Exam…

Least-Developed Countries (LDC): Meaning, Criteria, and Notes What is an LDC? Least-developed countries (LDCs) are low-income nations that face severe structural impediments to sustainable development. They are highly vulnerable to economic and environmental shocks and generally have lower levels of human assets (health, education, and related indicators) than other countries. Because of these constraints, LDCs…

Leptokurtic Distributions A leptokurtic distribution is a probability distribution with heavier tails and a sharper center than the normal distribution. In statistical terms, its kurtosis (the standardized fourth central moment) is greater than 3. This implies a higher probability of extreme outcomes — both large gains and large losses — compared with a mesokurtic (normal)…

Lender of Last Resort What it is A lender of last resort (LoR) is an institution—typically a country’s central bank—that provides emergency credit to banks or other eligible financial institutions when they cannot obtain funding elsewhere. The goal is to prevent a liquidity shortage at one institution from triggering wider financial instability. Key takeaways LoRs…

Understanding Lenders: Types, Decisions, and Loan Qualifications Lenders—ranging from banks and credit unions to private investors and online platforms—provide funds to individuals and businesses with the expectation of repayment, typically with interest. They evaluate risk using financial records, credit history, collateral and other factors to decide whether to approve a loan and on what terms….

The Lemon Problem Key takeaways * The “lemon problem” describes how asymmetric information between buyers and sellers can drive high-quality goods out of a market, leaving only low-quality items (“lemons”). * George A. Akerlof introduced the idea in his 1970 paper “The Market for ‘Lemons’.” The concept applies beyond used cars to finance, credit markets,…

Lehman Formula The Lehman Formula is a tiered commission method developed in the 1960s by Lehman Brothers to calculate investment-banking fees on transactional deals. It applies different percentage rates to portions of a deal’s value, making fees transparent and scalable for transactions ranging from small private placements to large M&A or IPO deals. How it…

Lehman Brothers: Rise, Collapse, and Legacy Key takeaways * Lehman Brothers, once the fourth-largest U.S. investment bank, filed the largest bankruptcy in U.S. history on September 15, 2008. * The collapse was driven by heavy exposure to subprime and low-rated mortgage assets, extreme leverage (peaking around 30:1), and a sudden loss of liquidity and counterparty…

Bloomberg Aggregate Bond Index (the “Agg”) What it is The Bloomberg Aggregate Bond Index is the standard benchmark for the U.S. investment‑grade fixed‑income market. It tracks a broad set of dollar‑denominated, investment‑grade bonds—such as U.S. Treasuries, agency debt, corporate bonds, mortgage‑backed securities (MBS), and asset‑backed securities—and is used by traders and fund managers to measure…

Legislative Risk: What It Is and How It Works Legislative risk is the possibility that government action—new laws, regulations, taxes, subsidies, trade policies, or court decisions—will materially change a company’s or industry’s business prospects. Such actions can reduce demand, raise costs, restrict operations, or otherwise make an investment less profitable. How legislative risk appears Legislative…

Legal Tender: Definition, Purpose, and Examples Key takeaways * Legal tender is the money a jurisdiction legally requires creditors to accept for debts and financial obligations. * It is usually the national currency (coins and banknotes) and enables unified exchange, accounting, and monetary policy. * Legal tender laws limit the widespread use of alternative monies…

Legal Separation A legal separation is a court-recognized arrangement that lets married couples live apart while remaining legally married. It defines financial responsibilities, parenting arrangements, and asset control without terminating the marriage. Couples may choose separation for religious, financial, insurance, or family-stability reasons, or as a step before divorce. Key takeaways Legal separation keeps the…

Legal Rate of Interest What it is The legal rate of interest is the maximum interest a lender may lawfully charge on a debt. Limits vary by type of debt and jurisdiction and are intended to prevent excessive, predatory rates. Key points Exceeding the legal rate is considered usury and can trigger penalties such as…

Legal Monopolies A legal monopoly (also called a statutory monopoly) is a market position created or sanctioned by government law or regulation that gives a single firm the exclusive right to provide a particular good or service. The firm may be government-owned and operated, privately owned but tightly regulated, or a hybrid. Prices, service obligations,…

What Is a Legal Lending Limit? A legal lending limit is the maximum amount a bank or thrift may lend to a single borrower (or to a group of related borrowers). It is expressed as a percentage of the institution’s capital and surplus and is intended to prevent excessive credit concentration that could threaten a…

Leg (in trading) What is a leg? A leg is a single component of a multi-part trade, typically in derivatives such as options or futures. Multi-leg strategies combine two or more legs to hedge risk, pursue arbitrage, or express a directed or non-directional view on price movement. Entering or exiting the individual components of such…

Understanding Ledger Wallets: How Hardware Crypto Wallets Operate Key takeaways * Ledger wallets are non-custodial hardware devices that store private keys offline (cold storage) to reduce exposure to online threats. * Ledger devices use a Secure Element chip and a proprietary OS, and they generate a 24‑word recovery phrase for backup. * Ledger supports 5,500+…

Ledger Balance A ledger balance is the official account balance recorded at the close of each business day after a bank posts all completed transactions. It includes cleared deposits, posted withdrawals, processed checks, and any bank adjustments. Unlike the available balance, which updates in real time, the ledger balance remains fixed until the next end-of-day…

Least-Preferred Coworker (LPC) Scale: Definition and Application What it is The Least-Preferred Coworker (LPC) Scale, developed by Fred Fiedler, is a diagnostic tool used to infer an individual’s leadership orientation—whether they are more relationship-oriented or task-oriented. It is a core component of Fiedler’s contingency theory of leadership, which links leader style to situational favorableness. How…

Least Squares Method The least squares method is a regression technique used to find the line (or curve) of best fit for a set of data points. It selects the model that minimizes the sum of the squared differences (residuals) between observed values and the values predicted by the model. Key points Used to estimate…

Least Squares Criterion What it is The least squares criterion is a method for finding the function (most commonly a straight line) that best fits a set of data by minimizing the sum of the squared differences between observed values and the values predicted by the function. These squared differences are called residuals. The resulting…

Leasehold Improvements What they are Leasehold improvements (also called tenant improvements or build-outs) are alterations made to a rental property to customize the space for a specific tenant’s needs. Common examples include painting, new flooring, partitions or cubicles, shelving, countertops, and custom lighting or fixtures. Improvements are typically made to interior spaces and may be…

Leasehold A leasehold is an interest in property granted by a property owner (lessor) to a tenant (lessee) under a lease agreement. The lessee acquires the right to possess and use the property for a specified period in exchange for scheduled payments. Leaseholds are common in both commercial and residential real estate. Key takeaways A…

Leaseback (Sale‑Leaseback) What is a leaseback? A leaseback, or sale‑leaseback, is a financial arrangement where an owner sells an asset and simultaneously leases it back from the buyer. The seller becomes the lessee and retains operational use of the asset while converting its ownership into cash. Typical assets include buildings, land, aircraft, and large equipment….

Lease Rate: What it Is, How It Works, Types Definition A lease rate is the payment a lessee makes to a lessor for the use of an asset for a specified period. It compensates the owner for giving up use of the asset and is commonly expressed as dollars per month or, in commercial real…

Lease Payments: Definition, Contract Terms, Types of Leases What is a lease payment? A lease payment is a regular fee paid under a contract that gives the lessee the right to use an asset (for example, real estate, vehicles, equipment, or software) without transferring ownership to the lessee. The party that grants use is the…

Lease Option: How It Works, Pros and Cons, and Practical Considerations What is a lease option? A lease option (also called lease-to-own or lease with option to purchase) is a rental agreement that gives the tenant the exclusive right—but not the obligation—to buy the leased property during the lease term or at its end. In…