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Back End Load
One of three possible sales charge schedules imposed by funds that charge fees. A back end load, or "deferred sales charge," is a fee charged when fund's shares are sold. The amount of the fee usually varies depending on how long the investment is held--generally the longer the time period, the smaller the fee. Funds sold under several sales charge options usually refer to the shares sold with a back end load as class B shares.
Back End Loan Fund
A mutual fund that charges investors a fee to sell (redeem) shares, often ranging from 4% to 6%. Some back-end load funds impose a full commission if the shares are redeemed within a designated time period after purchase, such as one year, reducing the commission the longer the investor holds the shares. The formal name for the back-end load is the contingent deferred sales charge, or CDSC.
Back Months
The futures or options on futures months being traded that are furthest from expiration.
Back-Testing
The testing of a strategy based on historical data to see if the results are consistent.
Backdating
Backdating is used in relation to funds that offer declining proportional sales charges of larger purchases. This permits investors to count previous purchases of the fund's shares in qualifying for reduced loads or sales charges on subsequent purchases.
Backspread
A spread in which more options are purchased than sold and where all options have the same underlying and expiration date.Backspreads are usually delta neutral.
Backwardation
A market condition in which futures prices are lower in the distant delivery months than in the nearest delivery month.
Balance Sheet
Also called the statement of financial condition, a summary of the assets, liabilities, and owners' equity.
Balanced Fund
A fund with an investment objective of both long-term growth and income, through investment in both stocks and bonds. Typically, the stock/bond ratio ranges around 60%/40%. This broader diversification across asset classes tends to further reduce risk.
Balanced Target Maturity Funds
A fund with an investment objective of both long-term growth and income, through investment in both stocks and bonds. Typically, the stock/bond ratio ranges around 60%/40%. This broader diversification across asset classes tends to further reduce risk.
Balloon Maturity
Any principal due at maturity for a bond with a sinking fund requirement.
Bank Discount Basis
A convention used for quoting bids and offers for Treasury bills in terms of annualized yield based on a 360-day year.
Bankers Acceptance
A security representing a bank's promise to repay a loan created in a commercial transaction in case the debtor fails to perform. Commonly used in international transactions.
Barbell Strategy
A strategy in which the maturities of the securities included in the portfolio are concentrated at two extremes.
BARRA's Performance Analysis (PERFAN) Factor Model
A method developed by BARRA, a consulting firm in Berkeley, California, which is commonly used by institutional investors applying performance attribution analysis to evaluate their money managers' performances.
Base Interest Rate
Related: Benchmark interest rate
Base Probability of Loss
The probability of not achieving a portfolio expected return.
Basis
Regarding a futures contract, the difference between the cash price and the futures price observed in the market.
Basis Point
Measurement used to quote bonds. One basis point is equal to 0.01%, or one one-hundredth of one percent. 100 basis points is equal to 1%, whereas 50 basis points would equal one half percent, or 0.50%.
Basis Risk
The uncertainty about the basis at the time a hedge may be lifted. Hedging substitutes basis risk for price risk.
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