
Proxy   • Document intended to provide shareholders with information necessary to vote in an informed manner on matters to be brought up at a stockholders' meeting. Includes information on closely held shares. Shareholders can and often do give management their proxy, representing the right and responsibility to vote their shares as specified in the proxy statement.   • A formal document signed by a shareholder to authorize another shareholder, or commonly the company's management, to vote the holder's shares at the annual meeting. The Proxy Statement discloses important information about issues to be discussed at an annual meeting, as well as information about closelyheld shares.   • Is the written authorization by the shareholder of record to another party to vote the shares as the shareholder designates or to vote the shares as the proxy holder deems fit.    Embedded terms in definition   Closely held shares Held Proxy statement Right Shareholders Shares
   Referenced Terms   Benchmark error: Use of an inappropriate Proxy for the true market portfolio.
  Dear, dear, or dear: Refers to the Daily Earnings at Risk. It is a Proxy for maximum expected losses on a daily basis. It is usually viewed with a 95 percent probability or confidence level. This assumes an underlying normal distribution and independence of returns. At the 95 percent level, it is equivalent to 1.65 standard deviations. Within a Value at Risk (VAR) context, a oneday horizon VAR would be equal to DEAR. Other VAR measurements would depart from DEAR's oneday view.
  Mortgage backed securities hedge funds: Generally focus on being long the actual mortgage backed securities and short some Proxy such as TBAs (To Be Announced), futures, Treasuries or derivatives. These funds typically purchase highly rated agency paper, CMOs, or REMICs and finance the positions in the repo market. This financing can often result in gross asset, principal or market values of $10 billion for an initial cash/equity position of $1 billion dollars. In some respects it is comparable to buying a house with borrowed money. It is the borrowing which magnifies the performance. If the market quickly jumps 10 percent higher, then the buyer doubled his investment. Here, it would be 10 percent of $10 billion or a $1billion profit against an initial capitalization of $1 billion. However, if the market declines by 10 percent, then the original investor is out. If the market went down 25 percent, then the original investor is gone but the lending institution (bank or brokerage firm) is on thehook for $1.5 billion. Effectively, this is what has been recently occurring in the financial industry. The lenders are becoming defacto new investors, holding losing positions, because of defaults.
  Normal distribution: Is one of the most popular and well documented probability distributions. It is frequently depicted as the bellshaped curve. This process underlies much of financial theory and practice. It is often relied upon for modeling efforts because two variables define its location and shape. These two variables are the mean and the standard deviation. It should be noted that normal distributions with larger standard deviations (or variances) are wider or flatter. This is because the greater volatility is dispersed over a wider range. Conversely, smaller standard deviations generate tighter formations which have a pronounced peak appearance. When the mean value of a normal distribution is bounded by one standard deviation (plus or minus) then it is expected that 68.3 percent of the values will occur in that region. When the mean value of a normal distribution is bounded by two standard deviations (plus or minus) then it is expected that 95.5 percent of the values will occur in that wider region. When the mean value of a normal distribution is bounded by three standard deviations (plus of minus) then it is expected that 99.7 percent of the values will occur in that still wider region. When the distribution's mean is bounded by a plus and a minus standard deviation, the design is considered as TwoTailed because both sides of the distribution are being evaluated. These parameterized regions are crucial to the understanding of Value at Risk (VAR) programs and many option pricing models. Also, many linear analysis techniques depend on the assumption and stability of a normal and independent probability functions. Many option pricing models use the annualized standard deviation as the volatility Proxy.
  Proxy battle: The attempt by a nonmanagement group to gain control of the management of a firm by the soliciting a sufficient number of Proxy votes.
   Related Terms   Proxy battle Proxy contest Proxy statement Proxy vote


What to Know Before Declaring Your Financial Independence: Twentysomethings may not realize it, but every time they enter a new phase of their life as young adults  perhaps starting college, a career or a family  they're also venturing into a new world of money management. Here are ways to be prepared. More...

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