Safety stock		A level of inventory beyond anticipated needs that provides a cushion in the event that it takes longer to replenish inventory than expected or in the case of greater than expected demand.
Safety-first rules		Rules for portfolio selection that focus on the risk that portfolio value will fall below some minimum acceptable level over some time horizon.
Sales		Generally, a synonym for revenue; "sales" is generally understood to refer to the sale of goods, whereas "revenue" is understood to include the sale of goods or services.
Sales returns and allowances		An offset to revenue reflecting any cash refunds, credits on account, and discounts from sales prices given to customers who purchased defective or unsatisfactory items.
Sales risk		Uncertainty with respect to the quantity of goods and services that a company is able to sell and the price it is able to achieve; the risk related to the uncertainty of revenues.
Salvage value		The amount the company estimates that it can sell the asset for at the end of its useful life. Also called residual value.
Sample		A subset of a population.
Sample excess kurtosis		A sample measure of the degree of a distribution's peakedness in excess of the normal distribution's peakedness.
Sample kurtosis		A sample measure of the degree of a distribution's peakedness.
Sample mean		The sum of the sample observations, divided by the sample size.
Sample selection bias		Bias introduced by systematically excluding some members of the population according to a particular attribute—for example, the bias introduced when data availability leads to certain observations being excluded from the analysis.
Sample skewness		A sample measure of degree of asymmetry of a distribution.
Sample standard deviation		The positive square root of the sample variance.
Sample statistic		A quantity computed from or used to describe a sample.
Sample variance		A sample measure of the degree of dispersion of a distribution, calculated by dividing the sum of the squared deviations from the sample mean by the sample size minus 1.
Sampling		The process of obtaining a sample.
Sampling distribution		The distribution of all distinct possible values that a statistic can assume when computed from samples of the same size randomly drawn from the same population.
Sampling error		The difference between the observed value of a statistic and the quantity it is intended to estimate.
Sampling plan		The set of rules used to select a sample.
Saving		In economics, income not spent.
Say's law		Named for French economist J.B. Say: All that is produced will be sold because supply creates its own demand.
Scalper		A trader who offers to buy or sell futures contracts, holding the position for only a brief period of time. Scalpers attempt to profit by buying at the bid price and selling at the higher ask price.
Scenario analysis		Analysis that shows the changes in key financial quantities that result from given (economic) events, such as the loss of customers, the loss of a supply source, or a catastrophic event; a risk management technique involving examination of the performance of a portfolio under specified situations. Closely related to stress testing.
Screening		The application of a set of criteria to reduce a set of potential investments to a smaller set having certain desired characteristics.
Scrip dividend schemes		Dividend reinvestment plan in which the company meets the need for additional shares by issuing them instead of purchasing them.
Sealed bid auction		An auction in which bids are elicited from potential buyers, but there is no ability to observe bids by other buyers until the auction has ended.
Search costs		Costs incurred in searching; the costs of matching buyers with sellers.
Seasoned offering		An offering in which an issuer sells addi­tional units of a previously issued security.
Seats		Memberships in a derivatives exchange.
Second lien		A secured interest in the pledged assets that ranks below first lien debt in both collateral protection and priority of payment.
Second price sealed bid		An auction (also known as a Vickery auction) in which bids are submitted in sealed envelopes and opened simultaneously. The winning buyer is the one who submitted the highest bid, but the price paid is equal to the second highest bid.
Second-degree price discrimination		When the monopolist charges different per-unit prices using the quantity pur­chased as an indicator of how highly the customer values the product.
Secondary bond markets		Markets in which existing bonds are traded among investors.
Secondary market		The market where securities are traded among investors.
Secondary precedence rules		Rules that determine how to rank orders placed at the same time.
Sector		A group of related industries.
Sector indices		Indices that represent and track different economic sectors—such as consumer goods, energy, finance, health care, and technology—on either a national, regional, or global basis.
Secured bonds		Bonds secured by assets or financial guarantees pledged to ensure debt repayment in case of default.
Secured debt		Debt in which the debtholder has a direct claim—a pledge from the issuer—on certain assets and their associated cash flows.
Securitized bonds		Bonds created from a process that involves moving assets into a special legal entity, which then uses the assets as guarantees to secure a bond issue.
Security characteristic line		A plot of the excess return of a security on the excess return of the market.
Security market index		A portfolio of securities representing a given security market, market segment, or asset class.
Security market line (SML)		The graph of the capital asset pricing model.
Security selection		The process of selecting individual secu­rities; typically, security selection has the objective of generating superior risk-adjusted returns relative to a portfolio's benchmark.
Self-investment limits		With respect to investment limitations applying to pension plans, restrictions on the percentage of assets that can be invested in securities issued by the pension plan sponsor.
Sell-side firm		A broker or dealer that sells securities to and provides independent investment research and recommendations to investment management companies.
Semi-strong-form efficient market		A market in which security prices reflect all publicly known and available information.
Semiannual bond basis yield		An annual rate having a periodicity of two; also known as a semiannual bond equivalent yield.
Semiannual bond equivalent yield		See semiannual bond basis yield.
Semideviation		The positive square root of semivariance (some­times called semistandard deviation).
Semilogarithmic		Describes a scale constructed so that equal intervals on the vertical scale represent equal rates of change, and equal intervals on the horizontal scale rep­resent equal amounts of change.
Semivariance		The average squared deviation below the mean.
Seniority ranking		Priority of payment of various debt obligations.
Sensitivity analysis		Analysis that shows the range of possible outcomes as specific assumptions are changed.
Separately managed account (SMA)		An investment port­folio managed exclusively for the benefit of an individual or institution.
Serial maturity structure		Structure for a bond issue in which the maturity dates are spread out during the bond's life; a stated number of bonds mature and are paid off each year before final maturity.
Settlement		The process that occurs after a trade is completed, the securities are passed to the buyer, and payment is received by the seller.
Settlement date		Date when the buyer makes cash payment and the seller delivers the security.
Settlement period		The time between settlement dates.
Settlement price		The official price, designated by the clearing-house, from which daily gains and losses will be determined and marked to market.
Shareholder wealth maximization		To maximize the market value of shareholders' equity.
Shareholder-of-record date		The date that a shareholder listed on the corporation's books will be deemed to have ownership of the shares for purposes of receiving an upcoming dividend; two business days after the ex-dividend date.
Shareholders' equity		Assets less liabilities; the residual interest in the assets after subtracting the liabilities.
Sharpe ratio		The average return in excess of the risk-free rate divided by the standard deviation of return; a measure of the average excess return earned per unit of standard deviation of return.
Shelf registration		Type of public offering that allows the issuer to file a single, all-encompassing offering circular that covers a series of bond issues.
Short		The seller of an asset or derivative contract.
Short position		A position in an asset or contract in which one has sold an asset one does not own, or in which a right under a contract can be exercised against oneself.
Short selling		A transaction in which borrowed securities are sold with the intention to repurchase them at a lower price at a later date and return them to the lender.
Short-run average total cost curve		The curve describing average total costs when some costs are considered fixed.
Short-run supply curve		The section of the marginal cost curve that lies above the minimum point on the average variable cost curve.
Shortfall risk		The risk that portfolio value will fall below some minimum acceptable level over some time horizon.
Shutdown point		The point at which average revenue is less than average variable cost.
Simple interest		The interest earned each period on the original investment; interest calculated on the principal only.
Simple random sample		A subset of a larger population created in such a way that each element of the population has an equal probability of being selected to the subset.
Simple random sampling		The procedure of drawing a sample to satisfy the definition of a simple random sample.
Simple yield		The sum of the coupon payments plus the straight-line amortized share of the gain or loss, divided by the flat price.
Simulation		Computer-generated sensitivity or scenario analysis that is based on probability models for the factors that drive outcomes.
Simulation trial		A complete pass through the steps of a simulation.
Single price auction		A Dutch auction variation, also involving a single price, is used in selling U.S. Treasury securities.
Single-step format		With respect to the format of the income statement, a format that does not subtotal for gross profit (revenue minus cost of goods sold).
Sinking fund arrangement		Provision that reduces the credit risk of a bond issue by requiring the issuer to retire a portion of the bond's principal outstanding each year.
Skewed		Not symmetrical.
Skewness		A quantitative measure of skew (lack of symmetry); a synonym of skew.
Small country		A country that is a price taker in the world market for a product and cannot influence the world market price.
Solvency		With respect to financial statement analysis, the ability of a company to fulfill its long-term obligations.
Solvency ratios		Ratios that measure a company's ability to meet its long-term obligations.
Sovereign bonds		A bond issued by a national government.
Sovereign yield spread		An estimate of the country spread (country equity premium) for a developing nation that is based on a comparison of bonds yields in country being analyzed and a developed country. The sovereign yield spread is the difference between a government bond yield in the country being analyzed, denominated in the currency of the developed country, and the Treasury bond yield on a similar maturity bond in the developed country.
Sovereigns		A bond issued by a national government.
Spearman rank correlation coefficient		A measure of correlation applied to ranked data.
Special dividend		A dividend paid by a company that does not pay dividends on a regular schedule, or a dividend that supplements regular cash dividends with an extra payment.
Special purpose entity		A non-operating entity created to carry out a specified purpose, such as leasing assets or securitizing receivables; can be a corporation, partnership, trust, limited liability, or partnership formed to facilitate a specific type of business activity.
Special purpose vehicle		See special purpose entity.
Specific identification method		An inventory accounting method that identifies which specific inventory items were sold and which remained in inventory to be carried over to later periods.
Speculative demand for money		The demand to hold speculative money balances based on the potential opportunities or risks that are inherent in other financial instruments. Also called portfolio demand for money.
Speculative money balances		Monies held in anticipation that other assets will decline in value.
Speculative value		The difference between the market price of the option and its intrinsic value, determined by the uncertainty of the underlying over the remaining life of the option.
Split coupon bond		See deferred coupon bond.
Sponsored		A type of depository receipt in which the foreign company whose shares are held by the depository has a direct involvement in the issuance of the receipts.
Spot curve		A sequence of yields-to-maturity on zero-coupon bonds.
Spot markets		Markets in which assets are traded for immediate delivery.
Spot prices		The price of an asset for immediately delivery.
Spot rates		A sequence of market discount rates that correspond to the cash flow dates; yields-to-maturity on zero-coupon bonds maturing at the date of each cash flow.
Spread		In general, the difference in yield between different fixed income securities, often used to refer to the differ­ence between the yield-to-maturity and the benchmark.
Spread over the benchmark		See required yield spread.
Spread risk		Bond price risk arising from changes in the yield spread on credit-risky bonds; reflects changes in the market's assessment and/or pricing of credit migration (or downgrade) risk and market liquidity risk.
Stable		With reference to an equilibrium, one in which price, when disturbed away from the equilibrium, tends to converge back to it.
Stackelberg model		A prominent model of strategic decision-making in which firms are assumed to make their decisions sequentially.
Stagflation		When a high inflation rate is combined with a high level of unemployment and a slowdown of the economy.
Standard cost		With respect to inventory accounting, the planned or target unit cost of inventory items or services.
Standard deviation		The positive square root of the variance; a measure of dispersion in the same units as the original data.
Standard normal distribution		The normal density with mean (u) equal to 0 and standard deviation (a) equal to 1.
Standardizing		A transformation that involves subtracting the mean and dividing the result by the standard deviation.
Standing limit orders		A limit order at a price below market and which therefore is waiting to trade.
Stated annual interest rate		A quoted interest rate that does not account for compounding within the year. Also called quoted interest rate.
Statement of cash flows		A financial statement that reconciles beginning-of-period and end-of-period balance sheet val­ues of cash; provides information about an entity's cash inflows and cash outflows as they pertain to operating, investing, and financing activities. Also called cash flow statement.
Statement of changes in equity		(statement of owners' equity) A financial statement that reconciles the beginning-of-period and end-of-period balance sheet values of shareholders' equity; provides information about all factors affecting shareholders' equity. Also called statement of owners' equity.
Statement of financial condition		The financial statement that presents an entity's current financial position by disclosing resources the entity controls (its assets) and the claims on those resources (its liabilities and equity claims), as of a particular point in time (the date of the balance sheet).
Statement of financial position		The financial statement that presents an entity's current financial position by disclosing resources the entity controls (its assets) and the claims on those resources (its liabilities and equity claims), as of a particular point in time (the date of the balance sheet).
Statement of operations		A financial statement that provides information about a company's profitability over a stated period of time.
Statement of owners' equity		A financial statement that reconciles the beginning of-period and end-of-period balance sheet values of shareholders' equity; provides information about all factors affecting shareholders' equity. Also called statement of changes in shareholders' equity.
Statement of retained earnings		A financial statement that reconciles beginning-of-period and end-of-period balance sheet values of retained income; shows the linkage between the balance sheet and income statement.
Statistic		A quantity computed from or used to describe a sample of data.
Statistical inference		Making forecasts, estimates, or judgments about a larger group from a smaller group actually observed; using a sample statistic to infer the value of an unknown population parameter.
Statistically significant		A result indicating that the null hypothesis can be rejected; with reference to an estimated regression coefficient, frequently understood to mean a result indicating that the corresponding population regression coefficient is different from 0.
Statutory voting		A common method of voting where each share represents one vote.
Step-up coupon bond		Bond for which the coupon, which may be fixed or floating, increases by specified margins at specified dates.
Stock dividend		A type of dividend in which a company distrib­utes additional shares of its common stock to shareholders instead of cash.
Stock-out losses		Profits lost from not having sufficient inventory on hand to satisfy demand.
Stop order		An order in which a trader has specified a stop price condition. Also called stop-loss order.
Stop-loss order		See stop order.
Store of value		The quality of tending to preserve value.
Store of wealth		Goods that depend on the fact that they do not perish physically over time, and on the belief that others would always value the good.
Straight-line method		A depreciation method that allocates evenly the cost of a long-lived asset less its estimated residual value over the estimated useful life of the asset.
Strategic analysis		Analysis of the competitive environment with an emphasis on the implications of the environment for corporate strategy.
Strategic asset allocation		The set of exposures to IPS-permissible asset classes that is expected to achieve the client's long-term objectives given the client's investment constraints.
Strategic groups		Groups sharing distinct business models or catering to specific market segments in an industry.
Street convention		Yield measure that neglects weekends and holidays; the internal rate of return on cash flows assuming payments are made on the scheduled dates, even when the scheduled date falls on a weekend or holiday.
Stress testing		A set of techniques for estimating losses in extremely unfavorable combinations of events or scenarios.
Strike		The fixed price at which an option holder can buy or sell the underlying.
Strike price		The fixed price at which an option holder can buy or sell the underlying.
Strike rate		The fixed rate at which the holder of an interest rate option can buy or sell the underlying.
Striking price		The fixed price at which an option holder can buy or sell the underlying.
Strong-form efficient market		A market in which security prices reflect all public and private information.
Structural (or cyclically adjusted) budget deficit		The deficit that would exist if the economy was at full employment (or full potential output).
Structural subordination		Arises in a holding company structure when the debt of operating subsidiaries is serviced by the cash flow and assets of the subsidiaries before funds can be passed to the holding company to service debt at the parent level.
Subjective probability		A probability drawing on personal or subjective judgment.
Subordinated debt		A class of unsecured debt that ranks below a firm's senior unsecured obligations.
Substitutes		Said of two goods or services such that if the price of one increases the demand for the other tends to increase, holding all other things equal (e.g., butter and margarine).
Sunk cost		A cost that has already been incurred.
Supernormal profit		Equal to accounting profit less the implicit opportunity costs not included in total accounting costs; the difference between total revenue (TR) and total cost (TC).
Supply		The willingness of sellers to offer a given quantity of a good or service for a given price.
Supply curve		The graph of the inverse supply function. Supply function: The quantity supplied as a function of price and possibly other variables.
Supply shock		A typically unexpected disturbance to supply.
Support		In technical analysis, a price range in which buying activity is sufficient to stop the decline in the price of a security.
Supranational bonds		A bond issued by a supranational agency such as the World Bank.
Surety bond		Form of external credit enhancement whereby a rated and regulated insurance company guarantees to reimburse bondholders for any losses incurred up to a maximum amount if the issuer defaults.
Survey approach		An estimate of the equity risk premium that is based upon estimates provided by a panel of finance experts.
Survivorship bias		The bias resulting from a test design that fails to account for companies that have gone bankrupt, merged, or are otherwise no longer reported in a database.
Sustainable growth rate		The rate of dividend (and earnings) growth that can be sustained over time for a given level of return on equity, keeping the capital structure constant and without issuing additional common stock.
Sustainable rate of economic growth		The rate of increase in the economy's productive capacity or potential GDP.
Swap contract		An agreement between two parties to exchange a series of future cash flows.
Swaption		An option to enter into a swap.
Syndicated loans		Loans from a group of lenders to a single borrower.
Syndicated offering		A bond issue that is underwritten by a group of investment banks.
Synthetic call		The combination of puts, the underlying, and risk-free bonds that replicates a call option.
Synthetic put		The combination of calls, the underlying, and risk-free bonds that replicates a put option.
Systematic risk		Risk that affects the entire market or economy; it cannot be avoided and is inherent in the overall market. Systematic risk is also known as non diversifiable or market risk.
Systematic sampling		A procedure of selecting every kth member until reaching a sample of the desired size. The sample that results from this procedure should be approximately random.