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Finance GlossaryHard Underwriting
Hard Underwriting
Definition of Hard Underwriting
A hard underwriting occurs when the underwriter agrees to buy their share of stock before the IPO opens. This is known as hard underwriting because in a regular underwriting process, the underwriter is liable to buy all unsold shares after the issue opens.
Related Terms
Face Value
The term face value refers to the actual price of a stock that’s obtained by dividing a company’s net value by its total shares outstanding. In India, the face value of shares can range from Rs. 1 to Rs. 100.
However, the market value of the share may vary. At times, the difference can be drastic. For example, the face value of an MRF share is Rs. 10 but the market value (LTP) of the same share is Rs. 86,313.45.
Face value is also known as nominal value or par value. The latter is used frequently in the case of bonds.
The face value of a bond is the amount that an investor receives from the issuer on maturity. Similar to stocks, bonds and other fixed income instruments may have a different face value and market value.
However, the market value of the share may vary. At times, the difference can be drastic. For example, the face value of an MRF share is Rs. 10 but the market value (LTP) of the same share is Rs. 86,313.45.
Face value is also known as nominal value or par value. The latter is used frequently in the case of bonds.
The face value of a bond is the amount that an investor receives from the issuer on maturity. Similar to stocks, bonds and other fixed income instruments may have a different face value and market value.
EBITDA
EBITDA is short for Earnings Before Interest, Taxes, Depreciation, and Amortization. EBITDA allows investors to understand cash flow from all operations while excluding certain non-cash expenses related to interest, depreciation, amortization, and taxes.
That’s why investors use EBITDA as a valuation technique to determine the profitability of a company. Interestingly, EBITDA is a variation of operating income which is known as EBIT.
While there are many ways to calculate EBITDA, the most common methods include:
1) EBITDA = Net Income + Taxes + Interest + Depreciation + Amortization 2) EBITDA = Operating Income + Depreciation & Amortization
That’s why investors use EBITDA as a valuation technique to determine the profitability of a company. Interestingly, EBITDA is a variation of operating income which is known as EBIT.
While there are many ways to calculate EBITDA, the most common methods include:
1) EBITDA = Net Income + Taxes + Interest + Depreciation + Amortization 2) EBITDA = Operating Income + Depreciation & Amortization
Forex Futures Trading
Forex futures trading is the buying and selling of exchange-traded futures contracts for currency pairs . A forex futures contract gives the holder the right and the obligation to buy or sell a pair of currencies at a predetermined price and date. The important components of forex futures trading include:
- Forex pair: the currency you will buy in exchange of the other at the end of the futures contract
- Lot size: the value of the currency included in the contract
- Contract price: the price at which the futures contract is trading
- Spot price: the latest forex rate for the currency pair, different from the contract price
- Margin: the amount of money you’re required to deposit with your currency trading platform
- Tick size: the minimum amount by which a forex futures contract can move, which is Rs. 0.0025 in India
- Expiration date: the preagreed day on which the contract must be excercised or squared off
Forex futures trading in India is possible through three exchanges: NSE, BSE, and MSE. The forex futures contracts are standardized derivatives that can be traded between 9.00 AM to 7.30 PM. Forex futures in India are cash settled, meaning profits or losses are settled in INR while the base currency is not delivered.
Beta Stocks
Beta of stocks measures the risk that the shares carry compared to the broader market. Theoretically, the market is said to have a default Beta of 1. As a result, Beta stocks can be of four types:
- High Beta Stocks : typically having a Beta value of more than 1, these stocks are known to be high-risk, high-reward investments
- Low Beta Stocks : typically having a Beta value of less than 1, these stocks are known to be low-risk, low-reward investments
- Negative Beta Stocks : typically having a Beta value of less than zero, these stocks are known to have an inverse correlation with the market
- Same as the market : typically having a Beta that’s equal to 1, these stocks are known to share characteristics with the market
Bracket Order
A bracket order is used in intraday trading to limit downside and lock upside by placing three types of orders together:
- Buy or sell order at market price
- Target order to square off & book profits
- Stop-loss order to limit loss
Long-Term Capital Gain Tax
Long-term capital gain tax is the tax imposed on profits from selling shares or financial securities held for a period of at least three years. The tax rate applied is typically lower than the short-term capital gains tax, which are profits from the sale of shares held for a shorter duration.
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