Category: Financial Terms

Over-The-Counter Exchange of India (OTCEI) Key takeaways OTCEI is an electronic stock exchange in Mumbai focused on small- and medium-sized companies. It was created to help companies that cannot meet national exchange listing requirements raise capital. Trading is fully electronic with no single physical trading floor. Listings are restricted by capitalization limits and other rules…

Over-the-Counter Bulletin Board (OTCBB) Key takeaways * The OTCBB was a FINRA-operated electronic quotation service for over-the-counter (OTC) U.S. equity securities, providing real-time quotes, last-sale prices, and volume data. * It was a quotation service only — trades were executed by brokers and market makers, not on the OTCBB itself. * Companies quoted on the…

Over-the-Counter (OTC) Markets: Trading and Securities Over-the-counter (OTC) markets are decentralized venues where participants trade securities directly with one another or through broker-dealers instead of on centralized exchanges. OTC trading covers a wide range of instruments—including stocks, bonds, currencies, derivatives, and cryptocurrencies—and is characterized by greater flexibility and privacy but generally less transparency and regulation…

Over‑Selling: Definition, Risks, and Better Approaches What is over‑selling? Over‑selling happens when a salesperson: * Continues pitching after a customer has already decided to buy, or * Pushes extras or upgrades the customer does not need or want. Both forms can annoy buyers, erode trust, and cause deals to collapse—even if they produce a short‑term…

Key takeaways * An over-line is the amount of insurance coverage that exceeds an insurer’s normal underwriting capacity. * It can arise when a company underwrites more policies than usual or when a reinsurer accepts larger liabilities than typical. * Large or sustained over-lines can draw regulatory scrutiny because they may signal elevated solvency risk….

Over-Limit Fee: What it Is and How It Works Key takeaways * An over-limit fee is a penalty a credit card issuer may charge when your balance exceeds your credit limit. * Federal rules require cardholders to opt in before issuers allow transactions that exceed the limit and to cap the size and frequency of…

Over-Hedging Over-hedging is a risk-management action in which an offsetting position exceeds the size of the original exposure being hedged. The result can be a net position that moves opposite to the original position, potentially turning a protective hedge into a speculative bet. Key takeaways Over-hedging occurs when the hedge is larger than the exposure…

Over and Short: Meaning in Accounting Over and short (often called “cash over short”) refers to a discrepancy between a business’s recorded cash receipts and the actual cash on hand. The term also names a general ledger account used to track these differences. Where it commonly appears Cash-intensive operations such as retail stores, banks, restaurants,…

Over-55 Home Sale Exemption Key takeaways The over-55 home sale exemption allowed homeowners age 55+ to exclude up to $125,000 of capital gains on the sale of a primary residence. The exemption ended in 1997 and was superseded by the Taxpayer Relief Act of 1997, which provides broader, age-neutral exclusions: $250,000 for single filers and…

Outward Direct Investment (ODI) An outward direct investment (ODI) is when a domestic firm invests in and expands operations in another country. It is a common growth strategy companies use to access new markets, resources, or capabilities when domestic opportunities are limited. Common forms of ODI Greenfield investments: building a new subsidiary or facility from…

Outward Arbitrage What is outward arbitrage? Outward arbitrage is a trading strategy that exploits price differences by buying an asset or good in one market (typically domestic) and selling it in another market where the price is higher. Traders move the asset outward from the cheaper market to the more expensive market to capture the…

Outstanding Check: Definition, Risks, and How to Avoid What is an outstanding check? An outstanding check is a check that has been written by the payer but has not yet been cashed or deposited by the payee. Until the payee presents the check and the bank clears it, the check remains a liability on the…

Key Takeaways * Outsourcing is hiring external parties to perform services or produce goods to reduce costs and improve focus on core activities. * Common benefits include lower labor and overhead costs, faster turnaround, access to specialized skills, and increased competitiveness. * Risks include security and confidentiality issues, communication gaps, legal complexity, and potential negative…

Outside Sales: What It Is and How It Works Outside sales (also called field sales) refers to sales activities conducted face-to-face in the customer’s environment rather than from an office. Outside salespeople travel to meet prospects and existing customers, build relationships, present solutions, and close larger or more complex deals that typically require personal interaction….

Bank Guarantees: What They Are, How They Work, and Key Types Key takeaways * A bank guarantee is a promise by a bank to cover a party’s financial obligation if that party defaults under a contract. * Bank guarantees reduce counterparty risk, facilitate trade (especially cross-border), and can improve access to financing and cash flow….

Output Gap What is the output gap? The output gap is the difference between an economy’s actual output (actual GDP) and its maximum sustainable output (potential GDP), expressed as a percentage of potential GDP. It measures how far an economy is operating from full capacity. Formula: Output gap (%) = (Actual GDP − Potential GDP)…

Exempt Transaction An exempt transaction is a securities sale or exchange that is not required to be registered with the Securities and Exchange Commission (SEC) because of the nature, size, or parties involved. These exemptions reduce regulatory paperwork for transactions that are considered limited in scope or otherwise do not pose the same public-investor protections…

Exempt‑Interest Dividends: Tax Advantages and Reporting Guide An exempt‑interest dividend is a distribution paid to shareholders of a fund that invests in municipal (tax‑exempt) bonds. These dividends are generally exempt from federal income tax, making them a popular choice for investors seeking tax‑efficient income. However, they still must be reported on tax forms and can…

Exempt Income: Definition, How It Works, Examples, and Key Rules Key takeaways * Exempt income is income that is not subject to income tax at the federal or state level. * The IRS defines federal tax exemptions; states set their own rules and may tax income differently. * Common examples include qualified Roth distributions, interest…

Exempt Employee: Definition, Rules, and Pros & Cons What is an exempt employee? An exempt employee is a worker who is not entitled to the federal Fair Labor Standards Act (FLSA) protections for overtime pay and, in some cases, minimum-wage requirements. Exempt status is determined by job duties, how pay is structured, and a minimum…

What is an executor? An executor is the person appointed to administer a deceased person’s will and carry out its instructions. The executor locates and inventories assets, pays debts and taxes, notifies creditors, and distributes the remaining property to beneficiaries—typically under the oversight of a probate court. Key duties Be legally eligible—typically an adult without…

Executive MBA (EMBA): What It Is and Whether It’s Right for You What is an EMBA? An Executive Master of Business Administration (EMBA) is a graduate-level business degree designed for experienced professionals, senior managers, and executives who want to advance their leadership and management skills while continuing to work. EMBA programs are equivalent in academic…

Execution: Definition, How Orders Are Filled, and Key Considerations What is execution? Execution is the completion—or filling—of a buy or sell order for a security. An order is executed when it is matched and settled in the market, not when the investor places it. After submission, a broker determines the route and method used to…

Exculpatory Clause An exculpatory clause is a contract provision that relieves one party from liability for loss, injury, or damage that may occur during the performance of a contract. Businesses that expose customers’ property or safety to risk—venues, parking facilities, coat checks, recreational providers—commonly use these clauses to limit exposure. Key points Exculpatory clauses aim…

Excise Tax: What It Is and How It Works Key takeaways * Excise taxes are levied on specific goods, services, or activities (e.g., fuel, tobacco, alcohol, airline tickets). They are usually paid by businesses but commonly passed on to consumers through higher prices. Two main types: ad valorem (percentage of value) and specific (fixed amount…

Exchange-Traded Products (ETPs) What is an ETP? An exchange-traded product (ETP) is a market-traded security that provides exposure to an underlying asset, index, or basket of assets. ETPs trade on stock exchanges like individual stocks, so their prices fluctuate intraday. The share price reflects the value and performance of the assets the product tracks. Key…

Exchange-Traded Notes (ETNs) What an ETN Is An exchange-traded note (ETN) is an unsecured debt instrument issued by a bank or financial institution that seeks to replicate the return of a market index. ETNs trade on exchanges like stocks and their prices fluctuate, but they do not pay periodic interest. At maturity the issuer pays…

Exchange-Traded Fund (ETF): A Concise Guide What is an ETF? An exchange-traded fund (ETF) is an investment fund that holds a basket of securities—stocks, bonds, commodities, or other assets—and trades on an exchange like a stock. ETFs let investors gain exposure to a diversified set of holdings through a single security. They can track broad…

Exchange-Traded Derivative An exchange-traded derivative is a standardized financial contract listed and traded on a regulated exchange. Common forms are futures and options. These products provide a liquid, transparent marketplace with centralized clearing that reduces counterparty risk, making them suitable for both hedging and speculation. Key takeaways Standardized contract terms make exchange-traded derivatives easier to…

Exchange Ratio What it is The exchange ratio is the number of acquiring-company shares given for each share of a target company in a stock-based merger or acquisition. It translates ownership in the target into ownership in the combined company, preserving relative value for target shareholders. Why it matters Determines how control and ownership are…

Exchange Rate Mechanism (ERM) An exchange rate mechanism (ERM) is a framework used by a country’s monetary authority to manage its currency’s value relative to other currencies. ERMs aim to reduce exchange-rate volatility, support stable trade conditions, and limit inflationary or deflationary pressures transmitted through currency movements. How an ERM works A central bank or…

Exchange Rates: What They Are and How They Work What is an exchange rate? An exchange rate is the value at which one currency can be exchanged for another. It determines how much of currency B you receive for a unit of currency A and affects trade, tourism, foreign investment, and the price of imported…

Exchange of Futures for Physical (EFP) An Exchange of Futures for Physical (EFP) is a privately negotiated transaction in which two parties swap a futures position for the corresponding physical asset (or vice versa). The deal is agreed bilaterally, then registered with the exchange. The transaction’s volume is reported to the exchange, but the negotiated…

Exchange Controls: What They Are and How Companies Respond What are exchange controls? Exchange controls are government-imposed limits on the purchase, sale, transfer, or possession of foreign—and sometimes domestic—currency. Governments use them to restrict capital flows, stabilize exchange rates, and limit speculation against their currency. International agreements have historically restricted their use; for example, the…

What is an exchange? An exchange is a marketplace—physical or electronic—where securities, commodities, derivatives, and other financial instruments are bought and sold. Its primary functions are to facilitate fair and orderly trading, provide liquidity, and disseminate transparent price information. Exchanges also give companies and governments a platform to raise capital by offering securities to the…