Glossary - E

Earnings per share (EPS)     
The net profit after taxation and preference dividend divided by the number of ordinary shares in issue during the year.

Effective date
The date a corporate action is effective and the resultant new cash and/or stock are distributed.

EGM
See Extraordinary General Meeting

Elasticity
The theoretical increase or decrease in the price of a covered warrant in percentage terms based on a 1% move in the underlying asset.

Entitlement offer
The issue of new shares by a company which may be subscribed for in return for agreeing to pay for the allotment of the new share at a set price. Unlike a rights issue, this entitlement is not tradable.

EPB
See equivalent pension benefits

EPIC
See exchange price input code

Equities
An alternative name for ordinary shares.

Equity fund
A fund investing primarily in equities.

Equivalent bond yield
Comparison of discount yields and yields on bonds with coupons.

Equivalent Pension Benefits (EPB)
Before 1974, some occupational pension schemes provided benefits in place of the State Pension scheme. They are usually very small, and are increasingly rare.

Eurobond
A bond in US dollars or other currency that is sold to investors who are not domiciled in the country whose currency is used.

Eurodollar bonds
A type of Eurobond that pays both interest and principal in euros. They are not regulated by the Securities and Exchange Commission.

European Savings Directive
Introduced to ensure that individuals pay the correct amount of tax to the correct country, reducing any advantage gained by investing elsewhere in the European Union.

European style option / covered warrant
An option or covered warrant that may be exercised only at expiry.

Events of default
Events that the two parties agree constitute a failure of the reference entity to perform its stated requirements on the reference obligation. This could include failure to pay interest or principal, declaration of bankruptcy or restructuring of debt.

Ex
Meaning “without”, indicates that the buyer of a security is not entitled to participate in whatever forthcoming event is specified – for example, ex cap. Opposite of cum.

Ex-distribution
The period, which can be no more than two months, immediately before the distribution of income from a fund (excluding cash funds). If you buy a fund during this period, you are not entitled to the next income payment. However, if you sell during this period, you remain entitled to the next income distribution.

Ex-dividend
A sold share that does not entitle the buyer to receive the recently declared dividend.

Ex-rights
Around the time of a rights issue, the company’s shares are described as cum-rights or ex-rights. Cum-rights means that anyone who buys shares in the company will be entitled to subscribe for the new shares; but on and after the date of the new issue, shares become ex-rights, and the right to subscribe to the new shares stays with the seller.

Exchange
Generally refers to a recognised stock market such as the London Stock Exchange or NASDAQ.

Exchange option
Option in which the holder can only exercise his or her rights at maturity.

Exchange price input code (EPIC)
A three or four character code, unique to a particular stock, that is used as a systems code when accessing price. Also referred to as the stock code.

Execution-only
Where the stockbroker buys and sells at your request with no advice.

Exercise
An action by a `holder taking advantage of a privilege or right offered by a company or other financial institution. This includes warrants, options, and other financial instruments.

Exercise notice
A formal notification that the holder of a call or put option wishes to buy or sell the underlying security at the exercise price.

Exercise of warrants
The relinquishing of a warrant at a set date together with a cash payment in return for the resultant security.

Exercise price
The price at which the holder of an option has the right to buy or sell the underlying asset. Also known as strike price.

Exit charge
Some fund managers levy charges on certain funds if you decide to sell your investment within a specified period. This type of charge, which is becoming increasingly rare, may replace or be in addition to an initial charge.

Expected value
The payoff of an event multiplied by the probability of its occurring summed over all possible events.

Expiry price
See exercise price

Extraordinary General Meeting (EGM)
General meeting of a company at which non-routine proposals are voted on by shareholders.