Glossary of Terms

Same as Z statistic.

A commonly used transformation of a standard normal distribution.
The resulting distribution has a mean of 0 and a standard deviation of 1. Used extensively in hypothesis testing.

Also known as the Z score.

So for example if a data point has a Z score (or Z statistic) of -1.64, then it lies 1.64 standard deviations below the mean.

The Z score is calculated as the difference between the data point (X) and the mean E[x], all divided by the standard deviation of the population (SD).
For example if:
the mean (E[x]) of a population = 100;
the standard deviation (SD) = 10; and
a given observation (or data point) = 83.6;

then the Z score (Z) is calculated as:
Z = (X - E[x])/SD
= (83.6 - 100 = -16.4)/10
= - 1.64 standard deviations.

In this case the Z score is negative, indicating that the data point (83.6) lies below the mean (of 100).

Zero Balance Account.

Zero Based Budgeting.

Zero Coupon Bond.

Zero Coupon Rate.

1. None or nil. Conventionally denoted as '0'.

2. Zero coupon bond.

3. Zero coupon yield.

(ZBA). A disbursement bank account on which cheques are written even though the balances in the accounts are maintained at zero.
Debits are covered by a transfer of funds from a master account at the same bank.

A method of cash concentration whereby funds are moved between a group of accounts leaving all but one (the main account) with a zero balance.

An approach to planning as if each planning period were the first in operation.
All structures and activities should be justified as if they were new proposals.

(ZBB). This requires department managers to present their budgets as if each year were the first in operation – all aspects of the budget should be justified afresh.

1. A zero cost collar is an options hedging structure which has a zero net premium payable by the hedging entity. The profit for the provider - and the true cost for the hedger - is built in to the related strike prices of the options, from which the collar is constructed.

2. Any structure which has no cost, or which may appear to have no cost.

Zero coupon instruments pay only a single amount at their final maturity. They do not pay any intermediate interest.
Investors in zero coupon instruments are not exposed to reinvestment risk, because the whole of their return is enjoyed via the capital gain up to maturity, which is fixed from the investment date. (So long as they hold their investment for its full life up to final maturity.)

(ZCB). Securities which pay no intermediate coupons, but only a redemption amount, so that the whole of the return to investors is represented by their capital gain from their investment date to the redemption of the bond at its final maturity.
This may be beneficial for some taxpayers, especially high-income individuals.

(ZCR). Near enough the same as Zero coupon yield.

The rate of return on an investment today, for a single cashflow at maturity of the instrument. Equal to the current market rate of return on zero coupon bonds of the same maturity.

Also known as the Zero coupon rate, spot rate, or spot yield.

UK VAT.
Chargeable to VAT at a rate of 0%.

A swap in which a fixed rate payer makes a single payment, on the maturity date, and the other party makes payments periodically.