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Glossary

W

Warehouse receipt arrangement
The use of inventory as collateral for a loan; similar to a trust receipt arrangement except there is a third party (i.e., a warehouse company) that supervises the inventory.
Wealth relative
The ending value of one unit of money invested at specified rates of return.
Weather derivative
A derivative contract with a payment based on a weather-related measurement, such as heating or cooling degree days.
Weighted average cost method
An inventory accounting method that averages the total cost of available inventory items over the total units available for sale.
Weighted mean
An average in which each observation is weighted by an index of its relative importance.
Weighted-average cost of capital
A weighted average of the after-tax required rates of return on a company’s common stock, preferred stock, and long-term debt, where the weights are the fraction of each source of financing in the company’s target capital structure.
White knight
A third party that is sought out by the target company’s board to purchase the target in lieu of a hostile bidder.
White squire
A third party that is sought out by the target company’s board to purchase a substantial minority stake in the target—enough to block a hostile takeover without selling the entire company.
White-corrected standard errors
A synonym for robust standard errors.
Wild card option 
A provision allowing a short futures contract holder to delay delivery of the underlying.
Winner’s curse
The tendency for the winner in certain competitive bidding situations to overpay—whether because of overestimation of intrinsic value, emotion, or information asymmetries.
Winsorized mean
A mean computed after assigning a stated percent of the lowest values equal to one specified low value and a stated percent of the highest values equal to one specified high value.
Within-sector selection return
In attribution analysis, a measure of the impact of a manager’s security selection decisions relative to the holdings of the sector benchmark.
Working capital
The difference between current assets and current liabilities.
Working capital management
The management of a company’s short-term assets (such as inventory) and short-term liabilities (such as money owed to suppliers).
Working capital turnover
A comparison of revenues with working capital to produce a measure that shows how efficiently working capital is employed.
Worst-case scenario analysis
A stress test in which we examine the worst case that we actually expect to occur.
Write-down
A reduction in the value of an asset as stated in the balance sheet.
Weighted average coupon (WAC)
The weighted average interest rate of the underlying mortgage loans or pools that serve as collateral for a security, weighted by the size of the principal loan balances.
Weighted average loan age (WALA)
The weighted average number of months since the date of the loan origination of the mortgages (i.e., the age of the loans) that collateralize a security, weighted by the size of the principal loan balances.
Weighted average maturity (WAM)
The weighted average number of months to the final payment of each loan backing a mortgage security weighted by the size of the principal loan balances. Also known as weighted average remaining maturity (WARM) and weighted average remaining term (WART).
Window
In a CMO security, the period of time between the expected first payment of principal and the expected last payment of principal.
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