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Definition of Agency theory
The analysis of principal-agent relationships, wherein one person, an agent, acts on behalf of
A form of organization commonly used by foreign banks to enter the U.S. market. An agency
A means of compensating the broker of a program trade solely on the basis of commission
Agency cost view
The argument that specifies that the various agency costs create a complex environment in
The incremental costs of having an agent make decisions for a principal.
Mortgage pass-through securities whose principal and interest payments are
Conflicts of interest among stockholders, bondholders, and managers.
Arbitrage Pricing Theory (APT)
An alternative model to the capital asset pricing model developed by
Security prices sometimes move wildly above their true values.
Federal agency securities
Securities issued by corporations and agencies created by the U.S. government,
Fiscal agency agreement
An alternative to a bond trust deed. Unlike the trustee, the fiscal agent acts as an
Liquidity theory of the term structure
A biased expectations theory that asserts that the implied forward
Local expectations theory
A form of the pure expectations theory which suggests that the returns on bonds
Market segmentation theory or preferred habitat theory
A biased expectations theory that asserts that the
Modern portfolio theory
Principles underlying the analysis and evaluation of rational portfolio choices
Normal backwardation theory
Holds that the futures price will be bid down to a level below the expected
Preferred habitat theory
A biased expectations theory that believes the term structure reflects the
Pure expectations theory
A theory that asserts that the forward rates exclusively represent the expected
Static theory of capital structure
theory that the firm's capital structure is determined by a trade-off of the
theory of constraints (TOC)
a method of analyzing the bottlenecks
Conflicts of interest between the firm’s owners and managers.
expectations theory of exchange rates
theory that expected spot exchange rate equals the forward rate.
pecking order theory
Firms prefer to issue debt rather than equity if internal finance is insufficient.
random walk theory
Security prices change randomly, with no predictable trends or patterns.
Debt levels are chosen to balance interest tax shields against the costs of financial distress.
Quantity Theory of Money
theory that velocity is constant, and so a change in money supply will change nominal income by the same percentage. Formalized by the equation Mv = PQ.
Real Business Cycle Theory
Belief that business cycles arise from real shocks to the economy, such as technology advances and natural resource discoveries, and have little to do with monetary policy.
A grouping of sales producers according to region. Compare with Branch.
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