Secured Loans
In the process of an acquisition, the acquiring firm is often allowed to see the
target firms internal books. The acquiring firm does an internal audit. Offers are
often made contingent upon the resolution of the due dilengence process.
Dumping
Used in the context of general equities. Offering large amounts of stock with little
or no concern for price or market effect.
Duplicative portfolio
Mainly applies to derivative products. Basket of stocks that imitates the price
movement of another set of securities (e.g., S&P 500 index).
Dupont system of financial control
Highlights the fact that return on assets (R.O.A.) can be expressed in terms of
the profit margin and asset turnover.
Duration
A common gauge of the price sensitivity of a fixed income asset or portfolio to a
change in interest rates.
Dutch auction
Auction in which the lowest price necessary to sell the entire offering becomes
the price at which all securities offered are sold. This technique has been used in
Treasury auctions. Often used in risk arbitrage. Auction system in which the price
of an item (stock) is gradually lowered until it meets a responsive bid
(government T-bills) or offer (corporate repurchase) and is sold. In a corporate
repurchase, a range of prices is set by the company within which shareholders
are invited to tender their shares. The tender offer is open for a specific period of
time (i.e., 20 days), and the quantity of stock to be purchased is stated as well,
subject to proration if more shares are tendered than can be legally purchased
under the stated terms (often an additional amount equal to 20% of outstanding
shares can be purchased). The price paid is that at which the amount stated to
be purchased can be sold. Compare to double auction system.
Dynamic asset allocation
An asset allocation strategy in which the asset mix is quantitatively shifted in
response to -changing market conditions, as in a portfolio insurance strategy, for
example.
