Lagging indicators
Market indicators showing the general direction of the economy and confirming or denying the trend implied by the leading indicators. Also referred to as concurrent indicators.
Last trading day
According to the Chicago Board of Trade rules, the final day when trading may occur in a given futures or option contract month. Futures contracts outstanding at the end of the last trading day must be settled by delivery of the underlying commodity or securities or by agreement for monetary settlement (in some cases by EFPs).
Leading indicators
Market indicators that signal the state of the economy for the coming months. Some leading indicators are: average manufacturing workweek, initial claims for unemployment insurance, orders for consumer goods and material, percentage of companies reporting slower deliveries, change in manufacturers' unfilled orders for durable goods, plant and equipment orders, new building permits, index of consumer expectations, change in material prices, prices of stocks, and change in money supply.
Legal opinion
An opinion concerning the validity of a securities issue with respect to statutory authority, constitutionality, procedural conformity and usually the exemption of interest from federal income taxes. Legal opinion is usually rendered by a law firm recognized as specializing in public borrowings, often referred to as "bond counsel."
Lender option commitments
An agreement giving a lender the option to deliver loans or securities by a certain date at agreed-upon terms.
Letter of credit
An arrangement in which a lender agrees to substitute its credit for a borrower's under specified conditions.
Leverage
The ability to control large dollar amounts of a commodity with a comparatively small amount of capital. The use of borrowed money to increase investing power.
Limit order
An order in which the customer sets a limit on the price and/or time of execution. Limits the maximum number of speculative futures contracts one can hold as determined by the Commodity Futures Trading Commission and/or the exchange upon which the contract is traded. Also referred to as trading limit.The maximum advance or decline from the previous day's settlement-permitted for a contract in one trading session by the rules of the exchange. According to the Chicago Board of Trade rules, it's an expanded allowable price range set during volatile markets. Orders where the customer has changed price, settlement, or asked for a quantity greater than available. Dealer will treat this as a subject order. Dealer may reject the order if changes are unacceptable.
Limited-liability company
A special purpose company incorporated under special limited-liability company legislation enacted in many states and foreign countries. This type of entity is structured as a "pass-through" and treated like a partnership for tax purposes.
Limited partnership
An entity formed under state legislation that enables large number of investors to become limited partners of a partnership, owning an economic interest in the entity's assets, but sharing in its liabilities only to the extent of their initial investment.
Limited tax bond
A bond secured by a pledge of a tax or category of taxes limited to a rate or amount.
Linkage
The ability to buy (sell) contracts on one exchange (such as the Chicago Mercantile Exchange) and later sell (buy) them on another exchange (such as the Singapore International Monetary Exchange.)
Liquid
A characteristic of a security or commodity market with enough units outstanding to allow large transactions without a substantial change in price. Institutional investors are inclined to seek liquid investments so that their trading activity will not influence market price.
Liquidate
To sell (or purchase) futures contracts of the same delivery month purchased (or sold) during an earlier transaction or to make (or take) delivery of the cash commodity represented by the futures contract. To take a second futures or options position opposite to the initial or opening position.
Liquidation value
The amount a securities holder may receive in case of a liquidation of the issuer.
Liquidity
Capacity of a market to absorb a reasonable level of seeing without significant losses. Refers to the ability to readily convert an asset or investment to cash by sale at a fair price.
Liquidity Data Bank (r)
A computerized profile of CBOT market activity, used by technical traders to analyze price trends and develop trading strategies. There is a specialized display of daily volume data and time distribution of prices for every commodity traded on the Chicago Board of Trade.
Liquidity risk
The possibility that an investor may not be able to find a buyer within a reasonable time at a price that reasonably reflects the theoretical value of the security's discounted cash flows.
Listed
Bonds that are listed and traded over the major exchanges -- NYSE, AMEX and NASDAQ.
Loan-to-Value (LTV)
The relationship between the dollar amount of a loan and the value of the property. It is a key indicator of leverage and is computed as the loan amount divided by the value of the property.
Loan program
A federal program in which the government lends money at pre-announced rates to farmers and allows them to use the crops they plant for the upcoming crop year as collateral. Default on these loans is the primary method by which the government acquires stock of agricultural commodities.
Loan rate
The amount lent per unit of a commodity to farmers.
Loan servicing
The tasks a lender performs to protect a mortgage investment, including collecting monthly payments from borrowers and dealing with delinquencies.
Locked-box structure
A structure whereby rental payments are sent directly from the tenants to the trustee.
Lockout period
A prescribed period of time before principal repayments begin on a security that has amortizing principal repayments. On some floating rate securities, the term "lock-out" period also applies to the interval between the day the rate for the current interest period is set and the actual payment date, which may be several days apart. The period of time before a REMIC investor will begin receiving principal payments. The period ranging from a few months to several years during which a callable debt security cannot be redeemed. This interim period is also referred to as the non-call period.
London Interbank Offered Rate (LIBOR)
An interest rate charged among banks in London for short-term loans denominated in a specified currency, usually U.S. dollars. LIBOR is frequently used as the base for resetting rates on floating-rate securities and a common index for debt securities
Long
One who has bought futures contracts or owns a cash commodity.
Long hedge
Buyer of futures contracts to protect against a possible price increase of cash commodities that will be purchased in the future. At the time the cash commodities are bought, the open futures position is closed by selling an equal number and type of futures contracts as those that were initially purchased. Also referred to as a buying hedge.
Loss mitigation
Activities designed to reduce either the likelihood of a corporation suffering financial losses on a loan or the final dollar value of those losses in the event of a borrower default.
Loss severity
The percentage of principal lost when a loan is foreclosed.
Low
The lowest price of the day for a particular futures contract.