Glossary C

Section C

Calendar Year

The accounting reporting method using January 1 through December 31 as the fiscal year.


Term of a bond permitting the issuer to redeem it before maturity, on specified dates and at specified prices.

Call Option

A contract that gives the holder the right to buy the underlying stock at a specified price (the strike price) within a fixed period of time.

Call Premium

A dollar amount, usually stated as a percentage of the principal amount called, paid as a "penalty" or a "premium" for the exercise of a call provision.

Capital Appreciation

Increases in the value of an asset.

Capital Gain

Profit earned on the sale of securities, either through dividends or by selling the securities at a higher price than they originally cost.

Capital Gains Distribution

When mutual funds profit by selling some of the stock in their portfolio, they pass along the gains to their shareholders in the form of a capital gains distribution. Such distributions, which often have tax consequences, typically occur annually, and the net asset value of the mutual fund falls by the amount of the distribution.

Capital Guaranty Insurance

A municipal bond insurer which was bought by FSA in December 1995.

Capitalized Interest

The portion of bond proceeds which are set aside to provide for the payment of interest until the project being financed is up and running and able to cover debt service from revenues. Not all bond issues capitalize interest.


CapMAC Holdings, Inc. is a municipal bond insurer which was acquired by MBIA Inc.(NYSE-MBI), effective February 18, 1998. Through a reinsurance arrangement, the full resources of MBIA back the outstanding insurance policies of CapMAC.

Cash & Equivalents

Paper currency and coins, negotiable money orders and checks, and bank balances also, highly liquid securities such as Treasury Bills and money market funds, with a known market value and a maturity of less than 3 months.

Cash Out Refinance

A refinance loan in which the new loan amount is larger than the remaining balance of all current mortgages giving the borrower cash from this transaction. Many homeowners use a cash out refinance to pay for home improvements or to consolidate debt.


Amounts charged for the purchase, sale, or management of securities.

Circuit Breakers

Measures used by stock exchanges during large sell-offs; after market indices have fallen a certain percentage, the exchanges halt trading for a certain amount of time, with a goal of averting panic selling.


The conclusion of a real estate transaction. At closing, you sign documents that transfer legal ownership of the property to you, and pay closing costs. Also called Settlement.

Closing Costs

Expenses you and the seller pay to complete the transfer of ownership. Closing costs might include an origination fee, attorney's fee, initial escrow payments, and charges for obtaining title insurance and a survey. Closing costs vary according to geographic location. Also called Settlement Costs.

Closing Statement

An itemized list of all closing costs to be paid by you and the seller. Also known as the HUD-1 Uniform Settlement Statement.

COFI (Cost of Funds Index)

A bank index reflecting the weighted average interest rate paid by savings institutions on their sources of funds. There are national and regional COFI indexes.


Monetary assets and/or property you legally pledge to a lender as security for your repayment of the debt.


All of the borrowers listed in the mortgage document when more than one person will be responsible for repaying the loan.


A firm which shares in the risk, reward and ownership of distributing new issue bonds. See also Senior Manager.

Commitment Letter

An official notification from a lender stating that your loan application has been approved. The commitment letter also details the terms of the agreement. Also called a Loan Commitment.

Community Property

In some states, property acquired during a marriage is legally considered to be jointly owned.

Companion Tranche

A CMO tranche that absorbs a higher level of the impact of collateral prepayment variability in order to stabilize the principal payment schedule for a PAC or TAC tranche in the same offering.

Comparative Index

The Comparative Index for your account is a blended index comprised of indexes designed to reflect the asset categories in which your account is invested. The Comparative Index may consist of a blend of up to six indexes.

Competitive Sale

The process by which new issue bonds are sold at a sealed bid auction. A sealed bid auction is an auction at which bidders enter their bids in a sealed envelope before the sale time. After the deadline, all the bids are opened and the highest bidder is determined according to the criteria advertised in the Notice of Sale. Unlike an open outcry auction, the losing bidders in a sealed bid auction do not have the opportunity to raise their bids. The highest bidder is the firm or group of firms which offers the lowest interest cost to the issuer for their bonds. Interest cost is computed in one of two ways: NIC (Net Interest Cost) or TIC (True Interest Cost.). See also Negotiated Sale.

Conforming Loan

A mortgage loan that meets all the eligibility requirements for purchase by federal agencies such as Fannie Mae and Freddie Mac. The maximum conforming loan amount is currently $417,000 for a one-unit property.

Contingent Deferred Sales Charge

A sales charge levied by a mutual fund company if a customer sells fund shares within a specified number of years. Instead of charging a traditional front-end load, a brokerage firm may offer the same fund with a contingent deferred sales load. Each year the charge declines by one percentage point until there is no fee for selling the mutual fund shares.

Connie Lee

A municipal bond insurance company chartered by the federal government in 1987 to insure higher education and teaching hospital bonds. The company has been purchased by Ambac Assurance Corporation. See also AMBAC.

Consolidated Account

A consolidated, or composite, account is a grouping of related accounts into a single account.

CMT (Constant Maturity Treasury)

A series of indexes of various maturities (one, three, five, seven, or ten years) published by the Federal Reserve Board and based on the average yield of a range of Treasury securities adjusted to a constant maturity corresponding to that of the index.


An investor whose style often opposes the prevailing sentiment.

Conventional Mortgage Market

Residential mortgage loan with a fixed rate and term, secured by real property; does not include FHA or VA loans.

Conversion Option

A provision in some adjustable rate mortgages (ARMs) that allows you to change the ARM to a fixed rate mortgage. Also known as Conversion Clause.

Convertible ARM

An adjustable rate mortgage that can be converted to a fixed rate mortgage under specified conditions, usually by refinancing or exercising a conversion option.

Convertible Securities

Corporate securities (convertible bonds or preferred stock). These give the holder the right to exchange them for a specified number of another security type (typically, the common stock of the company) at a predetermined price.

Convertible Securities Funds

Mutual Fund that invests at least 65% in convertible securities. See also Convertible securities.


Investment style in which a portfolio is representative of a broad market index such as the S&P 500, Russell 1000, etc.

Corporate Investment Grade Fund

Corporate Investment Grade Mutual Funds seek current income by investing a minimum of 65% in investment grade corporate debt issues. Investment grade securities must be BBB or higher, as rated by Standard & Poor's.

Corporate High Yield Fund

A mutual fund that seeks high current income by investing a minimum of 65% of its assets in generally low-quality corporate debt issues.


The principal amount of a bond


A price reaction, usually downward, leading to an adjustment of more than 10%.


The field on the Online Services Transaction Detail page that identifies funds due for a purchase or proceeds of a sale, and is calculated by multiplying the number of shares executed by the average execution price.

Cost Basis

Original price of an asset.

Coupon Equivalent Yield (CEY)

A yield measure that adjusts for monthly payments of interest rather than semi-annual payments. This adjustment gives a basis for comparison versus semi-annual pay instruments like Treasury bonds.

Coupon Frequency

The period of time between coupon payments on a bond. Most U.S. bonds pay interest on a semi-annual basis. Some exceptions include bonds that pay coupons monthly, quarterly or at maturity.

Covered Call

(1) A call whose seller owns the security, or a security convertible. (2) A call whose holder sold the underlying security short. Often used to reduce risk. If the security falls (rises) in value, the call option will rise (fall).

Covered Tax Lots

A covered tax lot refers to any equity tax lot purchased or acquired on or after January 1, 2011. These tax lots must be accurately recorded by UBS and reported to both clients and the IRS beginning with 2011 annual tax reporting.

CPI (Consumer Price Index)

Published by the U.S. Department of Labor, the Consumer Price Index (CPI) measures changes in the cost of consumer goods and services purchased by a typical (usually urban) household over a specified period of time. Usually expressed as a percentage, positive CPI statistics indicate the percentage of general price increases. For example, if the cost of an item doubles over the ten year period 1990 to 2000, it would be assigned an index number of 200% relative to its initial assessment in 1990. Uses for the CPI include identifying trends in the prices of consumer goods and services, initiating increases in wages and Social Security benefits, as well as tracking changes in the rate of inflation and the cost of living.

CPR (Constant Prepayment Rate)

The percentage of outstanding mortgage loan principal that prepays in one year, based on the annualization of the Single Monthly Mortality (SMM), which reflects the outstanding mortgage loan principal that prepays in one month.


Your purchase of the present use of money with the promise to pay it back in an agreed-upon time period, and at a cost usually defined by an interest rate.

Credit Bureau

A company that provides information to a lender about your creditworthiness, based on your credit history. The three major national credit bureaus are Equifax, Experian, and Trans Union. Also called Consumer Credit Reporting Agency or Credit Repository.

Credit History

Your debt and repayment history on loans and credit cards.

Credit Report

A credit bureau's detailed report of your credit history.

Credit Score

A number, based on the analysis of your credit report, used by the lender to determine your ability to qualify for a mortgage loan. Credit scores usually range from 300 to 900 - the higher the number, the better to qualify for a loan. Also known as a FICO score.

Crossover Refunding

In a crossover refunding the revenue stream originally pledged to secure the securities being refunded continues to be used to pay debt service on the refunded securities until they mature or are called. At that time the pledged revenues "cross over" to pay debt service on the refunding securities. During the period when both the refunded and the refunding securities are outstanding, interest expense on the refunding securities is paid from interest earnings on the invested proceeds of the refunding issue.

Current Coupon
A bond that has a coupon within half a percentage point of the current market rates.

Current Face
The current remaining monthly principal on a mortgage security. Current face is computed by multiplying the original face value of the security by the current principal balance factor.

Cushion Bond
A bond whose coupon is above current market rates. Some investors believe that cushion bonds may decrease proportionately less than current coupon bonds in an increasing interest rate environment.

Custom Index
An optional index, selected by you, which may consist of a blend of up to six indexes and an option of adding or subtracting an annualized return value.

Cyclical Stocks
Securities of companies whose operations are tied to business cycles, doing well during economic recoveries and sliding during recessions.