Glossary - D

Daily Official List (DOL)
London Stock Exchange publication that details the previous day’s trading activity of every share in the Exchange.

DAX
See Deutsche Aktienindex

Day trading
Where investors, known as day traders, try to make money from buying and selling shares throughout the day and netting off the transactions by the end of the day.

Deal
A sale or purchase of securities. Also known as a bargain, transaction or trade.

Debenture
A loan raised by a company that pays a fixed rate of interest and is secured on the company’s assets.

Debt security
A contract, such as a bond or note, representing money borrowed by an issuer that must be repaid at a future date with specified interest.

Default
Failure of an issuer to make timely payments of both interest and principal when due.

Defensive
Weighted towards lower-risk (less volatile) investments.

Defensive stock
Securities in companies with continuous dividend payments and relatively stable earning despite poor economic conditions. These stocks are considered to be more stable in price at times in a market where prices are falling.

Delist
The removal of a security’s listing on a stock exchange. This is done when the security no longer exists, the company is bankrupt, the public distribution of the security has dropped to an unacceptably low level or the company has failed to comply with the terms of its listing.

Delta
The rate of change of an option price with respect to changes in the underlying asset value. It is the slope of the curve that relates the option price to the underlying asset price. Delta has a magnitude of between zero and one.

Delta-gamma hedge
A risk-offsetting position consisting of short-term option contracts that neutralise the market risk of an underlying position in an instrument with optionality. The hedge offsets the current delta within a narrow range and attempts to match the change in delta (gamma) of the underlying position over a wider range of possible prices. In contrast to dynamic hedging or delta hedging, which rely on a series of transactions in the underlying, forwards, or futures to match changing deltas, a delta-gamma hedge has an option payoff pattern built in.

Delta negative
When the value of a put option decreases in value by delta for every one unit rise in the price of the underlying. This relationship can be upset in barrier options. Opposite to delta positive.

Delta neutral
An option portfolio that has been delta hedged so that it has no exposure to small moves in the price of the underlying. In practice, since delta is altered by all but the very smallest changes in the price of the underlying, the ratio of options to underlying must be constantly rebalanced to maintain delta neutrality.

Delta positive
When the value of a call option increases by the value of delta for a one unit rise in the price of the underlying. This relationship can be upset in barrier options. Opposite to delta negative.

Dematerialised
Where securities are held in a book entry transfer system with no certificates, as these are held in electronic accounts within CREST.

Demutualisation
Conversion process by which mutually held organisations become publicly listed companies. Examples include building societies converting to banks.

Department of Trade and Industry (DTI)
UK Government department responsible for some commercial matters, including monopolies and prosecution of insider dealing.

Derivative
Instruments that derive their value from an underlying security, such as a share, index or currency.  CFDs, spread bets, covered warrants and futures options are all types of derivatives.

Deutsche Aktienindex (DAX)
The German stock index on the Frankfurt Stock Exchange.

Differential swap
Where a counterparty swaps floating payments referenced to an interest rate of one currency into floating payments referenced to an interest rate of another currency. The principal for both payments, however, is in one currency. This swap is therefore a strip of forward rate agreements and the pricing characteristics are similar to a fixed-fixed cross currency swap, with a premium being payable either up front or as a spread on the floating.

Digital option
See binary option

Dilution levy
A charge that fund managers can choose to apply to cover any dealing or other costs they may incur when buying or selling units in their fund. The fund manager can choose to charge the levy to the fund itself or to the actual buyers and sellers of the fund. If a fund manager does choose to charge the levy, it will appear as a separate, explicit charge on the contract note.

Directors dealings
The share transactions undertaken by Directors in the company in which they are employed.

Discount
When the market price of a newly issued stock is lower than the issue price.

Discretionary investment management
The engagement of an investment adviser who has complete discretion (often within prescribed limits) to manage and invest your capital without reference to you other than at agreed reporting dates. Also called discretionary management.

Distribution(s)
Income generated by a unit trust or OEIC, which can be either paid out to the investor or reinvested within the fund. Frequency of distributions may vary from fund to fund. See also income units or accumulation units.

Dividend(s)
Payment of a company's post-tax profits distributed to its shareholders, usually expressed as pence per share.

Dividend cover
The indicator as to the rate that the company may be paying its dividends out of its earnings, and its ability to continue to pay dividends at that rate.

Dividend pay date
The date on which the dividend is paid.

Dividend yield
Measures the rate of return that an investor gets by comparing the cost of the shares with the dividend paid. It is calculated as dividend per share divided by market price per share, multiplied by 100.

DOL
See Daily Official List

Double barrier option
A general term for any barrier option incorporating two knock out or knock in levels, one either side of spot. These are most common in the foreign exchange (FX) and equity markets, where participants may have strong views on both a support and a resistance level.

Dow Jones Industrial Index
The major benchmark measure of the performance of the New York Stock Exchange.

DTI
See Department of Trade and Industry.

Dual currency service
Foreign exchange (FX) instruments that let investors place funds into a product that speculates on the movement of the exchange rate between two major currencies. Requires investors to take a directional view on two currencies, such as that the dollar is likely to fall against the pound. Can offer potentially enhanced returns and allow you to hedge against future exchange risk.

Dual currency swap
A swap used to hedge dual currency bonds in which the issuer has the option to repay principal and coupon in either the base currency or an alternative currency at a pre-agreed exchange rate. Dual currency swaps are currency swaps that incorporate foreign exchange (FX) options necessary to hedge the interest rate payments back into the principal currency.

Dual pricing
Two prices quoted by a unit trust manager. The lower price is the one at which investors can sell and the higher price the one at which they can buy.

Due diligence
The process that companies, or more particularly their lawyers and accountants, carry out when one is about to acquire another. Involves meeting between the lead manager and their lawyers with representatives of an issuer to verify information to be included in the offering circular, including the issuer’s financial condition, management and use of proceeds.

Duration
Measures price sensitivity to interest rate changes. The longer its duration, the more sensitive an instrument is to interest rates. Instruments whose price rises as rates rise are said to exhibit negative duration.

Modified duration is the percentage change in the price of a fixed income instrument per basis point change in yield. For a 1% change in yield, an instrument with a modified duration of 1.5 will change 1.5% in price in the opposite direction.

Macaulay duration is the present value weighted-average term to maturity of a fixed income instrument expressed in years. It is calculated as the average life of the present values of all future cash flows of an instrument with the time delay until receipt of each cash flow weighted by the contribution of that cash flow to the total present value of the instrument.