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Glossary

V

Valuation
The process of determining the value of an asset or service.
Valuation allowance
A reserve created against deferred tax assets based on the likelihood of realizing the deferred tax assets in future accounting periods.
Valuation ratios
Ratios that measure the quantity of an asset or flow (e.g., earnings) in relation to the price associated with a specified claim (e.g., a share or ownership of the enterprise).
Valuation reserve
With respect to insurance companies, an allowance—created by a charge against earnings—to provide for losses in the value of the assets.
Value
The amount for which one can sell something, or the amount one must pay to acquire something.
Value at risk VAR
A money measure of the minimum value of losses expected during a specified time period at a given level of probability.
Value investment style 
With reference to equity investing, an investment style focused on paying a relatively low share price in relation to earnings or assets per share.
Value investors
With reference to equity investors, investors who are focused on paying a relatively low share price in relation to earnings or assets per share.
Value weighted
With respect to index construction, an index in which each security in the index is weighted according to its market capitalization. Synonyms: market-capitalization weighted
Value-motivated traders
Traders that act on value judgments based on careful, sometimes painstaking research. They trade only when the price moves into their value range.
Variable annuity
A life annuity in which the periodic payment varies depending on stock prices.
Variable costs
Costs that fluctuate with the level of production and sales.
Variable life insurance
A type of ordinary life insurance in which death benefits and cash values are linked to the investment performance of a policyholder-selected pool of investments held in a so-called separate account. Synonyms: unit-linked life insurance
Variable prepaid forward 
A monetization strategy that involves the combination of a collar with a loan against the value of the underlying shares. When the loan comes due, shares are sold to pay off the loan and part of any appreciation is shared with the lender.
Variable rate bond
A long-term bond the interest rate of which is adjusted periodically, typically based upon specific market indicators.
Variable-rate demand obligation (VRDO)
A bond which bears interest at a variable, or floating, rate established at specified intervals (e.g., flexible, daily, weekly, monthly or annually). It contains a put option permitting the bondholder to tender the bond for purchase when a new interest rate is established. VRDOs are also referred to as VRDNs (N=Notes), VRDBs (B=Bonds) or low floaters.
Variable universal life
A type of life insurance policy that combines the flexibility of universal life with the investment choice flexibility of variable life. Synonyms: flexible-premium variable life
Variance
The expected value (the probability-weighted average) of squared deviations from a random variable’s expected value.
Variation margin
Additional margin that must be deposited in an amount sufficient to bring the balance up to the initial margin requirement.
Vega
The relationship between option price and volatility.
Venture capital 
The equity financing of new or growing private companies.
Venture capital firms 
Firms representing dedicated pools of capital for providing equity or equity-linked financing to privately held companies.
Venture capital fund 
A pooled investment vehicle for venture capital investing.
Venture capital trusts 
An exchange-traded, closed-end vehicle for venture capital investing.
Venture capitalists 
Specialists who seek to identify companies that have good business opportunities but need financial, managerial, and strategic support.
Venturers
The owners of a joint venture. Each is active in the management and shares control of the joint venture.
Vertical analysis
Common-size analysis using only one reporting period or one base financial statement; for example, an income statement in which all items are stated as percentages of sales.
Vertical common-size analysis
The most common type of common-size analysis in which the accounts in a given period are compared to a benchmark item in that same year.
Vertical merger
A merger involving companies at different positions of the same production chain; for example, a supplier or a distributor.
Vested
With respect to pension benefits or assets, said of an unconditional ownership interest.
Vested benefit obligation
Under U.S. GAAP, a measure used in estimating a defined-benefit pension plan’s liabilities, defined as the “actuarial present value of vested benefits.”
Vested benefits
Future benefits promised to the employee regardless of continuing service. Benefits typically vest after a specified period of service or a specified period of service combined with age.
Vesting date
The date that employees can first exercise stock options; vesting can be immediate or over a future period.
Vintage year
With reference to a private equity fund, the year it closed.
Vintage year effects 
The effects on returns shared by private equity funds closed in the same year.
Volatility
As used in option pricing, the standard deviation of the continuously compounded returns on the underlying asset.
Volatility clustering 
The tendency for large (small) swings in prices to be followed by large (small) swings of random direction.
Volume-weighted average price
The average price at which a security traded during the day, where each trade price is weighted by the fraction of the day’s volume associated with the trade.Synonyms: VWAP
Volume-weighted average price strategy
A logical participation strategy that involves breaking up an order over time according to a prespecified volume profile.
Volatility
The propensity of a security's price to rise or fall sharply.
Volume cap
Dollar limitation of private-activity bonds that are allowed to be issued, by state, each year. Legislation enacted by Congress sets the volume cap.
Voting Instruction Form (VIF)
A hard-copy proxy card provided in proxy materials to shareholders who are considered beneficial owners. You are a beneficial owner if your shares are held in a stock brokerage account or by a bank. A shareholder casts their proxy vote by submitting the VIF in advance of an annual or special meeting. Registered owners receive a similar proxy card. You are a registered owner if your shares are registered in your name with the company.
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