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Ladder
A fixed income investment strategy that seeks to reduce interest rate risk by investing in fixed income securities with a wide variety of maturities. Though this strategy assures continuous cash flow, there may be some sacrifice of total return, since shorter-term bonds tend to have lower yields than longer-term bonds.
Ladder strategy
A bond portfolio strategy in which the portfolio is constructed to have approximately equal amounts invested in every maturity within a given range.
Large Cap
Short for large capitalization, which describes companies whose market capitalization (total value) is among the largest in a market.
Last trading day
The final day under an exchange's rules during which trading may take place in a particular futures or options contract. Contracts outstanding at the end of the last trading day must be settled by delivery of underlying physical commodities or financial instruments, or by agreement for monetary settlement depending upon futures contract specifications.
Latin American Fund
A fund that invests primarily in the securities of companies in Latin American countries.
Law of one price
An economic rule stating that a given security must have the same price regardless of the means by which one goes about creating that security. This implies that if the payoff of a security can be synthetically created by a package of other securities, the price of the package and the price of the security whose payoff it replicates must be equal.
LEAPS
Long-term stock or index options which are available with expiration dates up to three years in the future.
Leg
One side of a spread.
Letter of Intent
An agreement calling for an investor to invest a specific amount in a fund over a defined period in order to qualify for reduced sales charges. The reduced sales charge may apply to an individual fund or to all the funds operated by a single investment management firm.
Leveraged buy-out (LBO)
A transaction used for taking a public corporation private, financed through the use of debt funds: bank loans and bonds. Because of the large amount of debt relative to equity in the new corporation, the bonds are typically rated below investment grade, properly referred to as high-yield bonds or junk bonds. Investors can participate in an LBO through either the purchase of the debt (i.e., purchase of the bonds or participation in the bank loan) or the purchase of equity through an LBO fund that specializes in such investments.
Leveraged portfolio
A portfolio that includes risky assets purchased with funds borrowed.
Liability
A financial obligation, or the cash outlay that must be made at a specific time to satisfy the contractual terms of such an obligation.
Liability funding strategies
Investment strategies that select assets so that cash flows will equal or exceed the client's obligations.
Liability swap
An interest rate swap used to alter the cash flow characteristics of an institution's liabilities so as to provide a better match with its assets.
Limit Move
The maximum daily price limit for an exchange traded contract.
Limit Order
An order to buy a stock at or below a specified price or to sell a stock at or above a specified price.
Limit order
An order given to a broker by a customer which has restrictions upon its execution. The customer specifies a price and the order can be executed only if the market reaches or betters that price.
Limit order book
A record of unexecuted limit orders that is maintained by the specialist. These orders are treated equally with other orders in terms of priority of execution.
Limit price
Maximum price inflation.
Limit Up, Limit Down
Commodity exchange restrictions on the maximum upward or downward movements permitted in the price for a commodity during any trading session day.
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