MA process Moving-average process.

Maastricht Treaty The treaty that formed the European Union in 1993.

Macaulay duration Weighted average maturity of a set of cash flows.

Magellan Fund A famous—arguably the most famous—open-end mutual fund.

maintenance margin A minimum balance for a margin account that, if breached, results in a margin call.

Maloney Act of 1938 US legislation authorizing oversight of securities firms by self regulating organizations.

managed CDO A CDO whose collateral is actively managed by a portfolio manager.

managed futures Portfolios of forwards or futures managed as an "alternative asset category."

management team In investment management, a team of officers, general partners or employees of a fund who are responsible for investing its portfolio.

managerial capitalism A condition in which stock holdings in corporations become so fragmented and dispersed that owners lose effective control over those corporations.

mandatory redemption A provision requiring that a security be called.

Manhattan Fund A hedge fund that defrauded investors during the 1990s.

Maounis, Nicholas Founder of the hedge fund Amaranth Advisors

mapping procedure The procedure within a VaR measure that characterizes a portfolio's exposures.

margin 1) Collateral. 2) Daily settlement payment on a futures position.

margin account An account holding funds available for making margin payments.

margin call A demand for additional margin.

marginal tax rate The fraction of an incremental dollar of income that would be paid as taxes.

Margrabe option An outperformance option.

Maricopa funds Fraudulent hedge funds run by David M. Mobley during the 1990s.

Mark, Rebecca Enron executive whose ill-advised international acquisitions lost billions of dollars.

mark-to-market The act of assigning a market value to an asset.

mark-to-market exposure credit exposure calculated from instruments' current market values.

mark-to-market mode A mode of analysis for a portfolio credit risk model.

mark-to-model Use of financial models to ascribe a market value to an asset.

market neutral Having balanced long and short positions resulting in no net exposure to broad market moves.

market neutral strategy Speculative trading strategy that seeks to exploit relative mispricings between instruments while avoiding systematic risk.

market portfolio A theoretical portfolio which comprises all risky assets available to investors.

market price Market value.

market risk Exposure to the uncertain market value of a portfolio.

market timing Opportunistically going long or short a market in anticipation of possible market moves.

market value A valuation assigned to an asset based on the price it might fetch in the market.

market value CDO A CDO whose payments to investors are contingent on the adequacy of the market value of its collateral.

Markets in Financial Instruments Directive A 2006 European directive that replaced the 1993 Investment Services Directive.

Markowitz, Harry 1990 Nobel Prize winner who launched the field of portfolio theory.

martingale A type of stochastic process with zero drift.

martingale measure A probability measure under which all asset prices relative to a given numeraire are martingales.

master-feeder arrangement A means of packaging a mutual fund for multiple distribution channels.

matador A foreign bond issued in Spain.

maximum The largest element of a real set.

maximum likely exposure A metric for potential credit exposure.

maximum option A form of rainbow option.

mean Expected value.

mean reversion A tendency for a stochastic process to remain near, or return over time to a long-run average.

mean vector The vector of the expected values of the components of a random vector.

measure An operation for assigning a number to something.

measurement A number obtained from applying a measure.

medium-term note A debt security issued through shelf-registration under US law.

merger arbitrage Speculative trading strategy designed to exploit relative mispricings between the stocks of a firm and another it intends to merge with or acquire.

Merton (1973) option pricing formula A pricing formula for European options on stocks or stock indexes that have a known dividend yield.

Merton model Alternative name for the asset value model of credit risk.

Metallgesellschaft Debacle In 1993, a US subsidiary of Germany’s Metallgesellschaft lost USD 1.3 billion unwinding failed hedges of long-dated oil and fuel contracts.

method of least squares Any of several techniques for fitting a curve to data so as to minimize the sum of squared differences between the curve and data points.

metric An interpretation of the measurements obtained from a measure.

mezzanine finance Catch-all term for various subordinated financing arrangements that include some element of equity.

mid-offer price Average of the bid and ask prices.

MiFID Markets in Financial Instruments Directive

Milken, Michael The "junk bond king" of the 1980s.

min-max option Either a minimum option or a maximum option.

minimum The smallest element of a real set.

minimum option A form of rainbow option.

Mississippi Scheme A French stock bubble that burst spectacularly in 1720.

mixed distribution model Any of a category of option pricing models that can be calibrated to volatility skew.

MM Shorthand notation for millions.

Mobley, David M. Manager of the fraudulent Maricopa hedge funds.

model risk The risk that models are applied to tasks for which they are inappropriate or are otherwise implemented incorrectly.

modern portfolio theory A body of theory relating to how investors optimize portfolio selections.

modified duration A modification of Macaulay duration.

money market deposit A large-denomination time deposit.

Monte Carlo method Any numerical method that employs statistical sampling to solve problems.

Monte Carlo transformation For a VaR measure, a transformation procedure that employs the Monte Carlo method with pseudorandomly generated realizations.

Monte Carlo VaR A category of VaR measures that employ a Monte Carlo transformation.

monthly compounding Compounding based on monthly crediting of interest.

mortality model A type of default model.

mortgage backed security A security interest in mortgage collateral.

mortgage bond A corporate bond collateralized with assets such as a power plant or factory.

mortgage pass-through A securitized pool of mortgages.

moving-average process A type of stochastic process.

MPT modern portfolio theory.

MTN Medium-term note.

multiasset option A multifactor option.

multicollinear A covariance matrix is muticollinear if it is "almost" singular.

multifactor option Any option linked to multiple underliers.

multilateral netting Netting of obligations between three or more parties.

multinormal distribution Joint normal distribution.

multivariate normal distribution Joint normal distribution.

muni Municipal security.

municipal bond A type of municipal security.

municipal note A type of municipal security.

municipal security A debt security issued by a local government or its agencies or authorities in the United States or its territories.

mutual fund A pooled investment vehicle that allows many parties to collectively invest in a professionally managed portfolio of assets.

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