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Asset pricing model |
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Definition of Asset pricing modelAsset pricing modelA model for determining the required rate of return on an asset. Asset pricing modelA model, such as the Capital asset pricing model (CAPM), that determines the required
Related Terms:Capital asset pricing model (CAPM)An economic theory that describes the relationship between risk and Capital Asset Pricing Model (CAPM)A model for estimating equilibrium rates of return and values of capital asset pricing model (CAPM)Theory of the relationship between risk and return which states that the expected risk Arbitrage Pricing Theory (APT)An alternative model to the capital asset pricing model developed by CAPMSee capital asset pricing model. CARs (cumulative abnormal returns)a measure used in academic finance articles to measure the excess returns an investor would have received over a particular time period if he or she were invested in a particular stock. ![]() Excess returnsAlso called abnormal returns, returns in excess of those required by some asset pricing model. Foreign market betaA measure of foreign market risk that is derived from the capital asset pricing model. Jensen indexAn index that uses the capital asset pricing model to determine whether a money manager Multifactor CAPMA version of the capital asset pricing model derived by Merton that includes extramarket Two-factor modelBlack's zero-beta version of the capital asset pricing model. Acquisition of assetsA merger or consolidation in which an acquirer purchases the selling firm's assets. Administrative pricing rulesIRS rules used to allocate income on export sales to a foreign sales corporation. Arbitrage-free option-pricing modelsYield curve option-pricing models. AssetAny possession that has value in an exchange. AssetA resource, recorded through a transaction, that is expected to yield a benefit to a AssetSomething that is owned; a financial claim or a piece of property that is a store of value. AssetProbable future economic benefit that is obtained or controlled by an entity as a result of assetAnything owned by, or owed to, an individual or business which has commercial or exchange value (e.g., cash, property, etc.). AssetAll things of value owned by an individual or organization. Asset activity ratiosRatios that measure how effectively the firm is managing its assets. Asset allocation decisionThe decision regarding how an institution's funds should be distributed among the Asset-Backed SecuritiesBond or note secured by assets of company. Asset-backed securityA security that is collateralized by loans, leases, receivables, or installment contracts Asset-based financingMethods of financing in which lenders and equity investors look principally to the Asset-Based FinancingLoans granted usually by a financial institution where the asset being financed constitutes the sole security given to the lender. Asset classesCategories of assets, such as stocks, bonds, real estate and foreign securities. Asset CoverageExtent to which a company's net assets cover a particular debt obligation, class of preferred stock, or equity position. Asset-coverage testA bond indenture restriction that permits additional borrowing on if the ratio of assets to Asset/equity ratioThe ratio of total assets to stockholder equity. Asset for asset swapCreditors exchange the debt of one defaulting borrower for the debt of another Asset/liability managementAlso called surplus management, the task of managing funds of a financial asset mixThe weighting of assets in an investment portfolio among different asset classes (e.g. shares, bonds, property, cash, overseas investments. Asset-specific RiskThe amount of total risk that can be eliminated by diversification by Asset substitutionA firm's investing in assets that are riskier than those that the debtholders expected. Asset substitution problemArises when the stockholders substitute riskier assets for the firm's existing Asset swapAn interest rate swap used to alter the cash flow characteristics of an institution's assets so as to Asset turnoverThe ratio of net sales to total assets. asset turnovera ratio measuring asset productivity and showing the number of sales dollars generated by each dollar of assets asset turnover ratioA broad-gauge ratio computed by dividing annual AssetsA firm's productive resources. ASSETSAnything of value that a company owns. AssetsThings that the business owns. AssetsItems owned by the company or expenses that have been paid for but have not been used up. Assets requirementsA common element of a financial plan that describes projected capital spending and the Binomial modelA method of pricing options or other equity derivatives in Binomial option pricing modelAn option pricing model in which the underlying asset can take on only two Black-Scholes modelThe first complete mathematical model for pricing Black-Scholes option-pricing modelA model for pricing call options based on arbitrage arguments that uses capital assetan asset used to generate revenues or cost savings Capital assetA fixed asset, something that is expected to have long-term usage within Capitalized Cost An expenditure or accrual that is reported as an asset to be amortized againstfuture-period revenue. constant-growth dividend discount modelVersion of the dividend discount model in which dividends grow at a constant rate. Constant-growth modelAlso called the Gordon-Shapiro model, an application of the dividend discount Contra-asset accountAn offset to an asset account that reduces the balance of the asset account. Cost-plus pricingA method of pricing in which a mark-up is added to the total product/service cost. Current assetTypically the cash, accounts receivable, and inventory accounts on the Current assetsValue of cash, accounts receivable, inventories, marketable securities and other assets that Current assetsCash, things that will be converted into cash within a year (such as accounts receivable), and inventory. Current assetsAmounts receivable by the business within a period of 12 months, including bank, debtors, inventory and prepayments. current assetsCurrent refers to cash and those assets that will be turned Current AssetsCash and other company assets that can be readily turned into cash within one year. Deferred Tax AssetFuture tax benefit that results from (1) the origination of a temporary difference Deterministic modelsLiability-matching models that assume that the liability payments and the asset cash Discounted dividend model (DDM)A formula to estimate the intrinsic value of a firm by figuring the dividend discount modelComputation of today’s stock price which states that share value equals the present value of all expected future dividends. Dividend discount model (DDM)A model for valuing the common stock of a company, based on the Dividend growth modelA model wherein dividends are assumed to be at a constant rate in perpetuity. dual pricing arrangementa transfer pricing system that allows Dynamic asset allocationAn asset allocation strategy in which the asset mix is mechanistically shifted in economic components modelAbrams’ model for calculating DLOM based on the interaction of discounts from four economic components. Exchange of assetsAcquisition of another company by purchase of its assets in exchange for cash or stock. Extrapolative statistical modelsmodels that apply a formula to historical data and project results for a Factor modelA way of decomposing the factors that influence a security's rate of return into common and Financial assetsClaims on real assets. financial assetsClaims to the income generated by real assets. Also called securities. Fixed assetLong-lived property owned by a firm that is used by a firm in the production of its income. Fixed assetAn item with a longevity greater than one year, and which exceeds a company’s Fixed asset turnover ratioThe ratio of sales to fixed assets. Fixed assetsThings that the business owns and are part of the business infrastructure – fixed assets may be fixed assetsAn informal term that refers to the variety of long-term operating Fixed AssetsLand, buildings, plant, equipment, and other assets acquired for carrying on the business of a company with a life exceeding one year. Normally expressed in financial accounts at cost, less accumulated depreciation. Fixed Assets Turnover RatioA measure of the utilization of a company's fixed assets to Garmen-Kohlhagen option pricing modelA widely used model for pricing foreign currency options. Gordon modelpresent value of a perpetuity with growth. Index modelA model of stock returns using a market index such as the S&P 500 to represent common or Intangible assetA legal claim to some future benefit, typically a claim to future cash. Goodwill, intellectual Intangible assetA nonphysical asset with a life greater than one year. Examples are Intangible assetsassets owned by the company that do not possess physical substance; they usually take the form of rights and privileges such as patents, copyrights, and franchises. Intangible fixed assetsNon-physical assets, e.g. customer goodwill or intellectual property (patents and trademarks). Internet business modela model that involves Limitation on asset dispositionsA bond covenant that restricts in some way a firm's ability to sell major assets. Liquid assetasset that is easily and cheaply turned into cash - notably cash itself and short-term securities. log size modelAbrams’ model to calculate discount rates as a function of the logarithm of the value of the firm. Long-term assetsValue of property, equipment and other capital assets minus the depreciation. This is an Longer-Term Fixed Assetsassets having a useful life greater than one year but the duration of the 'long term' will vary with the context in which the term is applied. Market modelThis relationship is sometimes called the single-index model. The market model says that the Markowitz modelA model for selecting an optimum investment portfolio, Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit. |