|Asset pricing model|
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Definition of Asset pricing model
Asset pricing model
A model for determining the required rate of return on an asset.
Asset pricing model
A model, such as the Capital asset pricing model (CAPM), that determines the required
An economic theory that describes the relationship between risk and
A model for estimating equilibrium rates of return and values of
Theory of the relationship between risk and return which states that the expected risk
An alternative model to the capital asset pricing model developed by
See capital asset pricing model.
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.
Also called abnormal returns, returns in excess of those required by some asset pricing model.
A measure of foreign market risk that is derived from the capital asset pricing model.
An index that uses the capital asset pricing model to determine whether a money manager
A version of the capital asset pricing model derived by Merton that includes extramarket
Black's zero-beta version of the capital asset pricing model.
A merger or consolidation in which an acquirer purchases the selling firm's assets.
IRS rules used to allocate income on export sales to a foreign sales corporation.
Yield curve option-pricing models.
Any possession that has value in an exchange.
A resource, recorded through a transaction, that is expected to yield a benefit to a
Something that is owned; a financial claim or a piece of property that is a store of value.
Probable future economic benefit that is obtained or controlled by an entity as a result of
Anything owned by, or owed to, an individual or business which has commercial or exchange value (e.g., cash, property, etc.).
All things of value owned by an individual or organization.
Asset activity ratios
Ratios that measure how effectively the firm is managing its assets.
Asset allocation decision
The decision regarding how an institution's funds should be distributed among the
Bond or note secured by assets of company.
A security that is collateralized by loans, leases, receivables, or installment contracts
Methods of financing in which lenders and equity investors look principally to the
Loans granted usually by a financial institution where the asset being financed constitutes the sole security given to the lender.
Categories of assets, such as stocks, bonds, real estate and foreign securities.
Extent to which a company's net assets cover a particular debt obligation, class of preferred stock, or equity position.
A bond indenture restriction that permits additional borrowing on if the ratio of assets to
The ratio of total assets to stockholder equity.
Asset for asset swap
Creditors exchange the debt of one defaulting borrower for the debt of another
Also called surplus management, the task of managing funds of a financial
The weighting of assets in an investment portfolio among different asset classes (e.g. shares, bonds, property, cash, overseas investments.
The amount of total risk that can be eliminated by diversification by
A firm's investing in assets that are riskier than those that the debtholders expected.
Asset substitution problem
Arises when the stockholders substitute riskier assets for the firm's existing
An interest rate swap used to alter the cash flow characteristics of an institution's assets so as to
The ratio of net sales to total assets.
a ratio measuring asset productivity and showing the number of sales dollars generated by each dollar of assets
asset turnover ratio
A broad-gauge ratio computed by dividing annual
A firm's productive resources.
Anything of value that a company owns.
Things that the business owns.
Items owned by the company or expenses that have been paid for but have not been used up.
A common element of a financial plan that describes projected capital spending and the
A method of pricing options or other equity derivatives in
Binomial option pricing model
An option pricing model in which the underlying asset can take on only two
The first complete mathematical model for pricing
Black-Scholes option-pricing model
A model for pricing call options based on arbitrage arguments that uses
an asset used to generate revenues or cost savings
A 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 against
constant-growth dividend discount model
Version of the dividend discount model in which dividends grow at a constant rate.
Also called the Gordon-Shapiro model, an application of the dividend discount
An offset to an asset account that reduces the balance of the asset account.
A method of pricing in which a mark-up is added to the total product/service cost.
Typically the cash, accounts receivable, and inventory accounts on the
Value of cash, accounts receivable, inventories, marketable securities and other assets that
Cash, things that will be converted into cash within a year (such as accounts receivable), and inventory.
Amounts receivable by the business within a period of 12 months, including bank, debtors, inventory and prepayments.
Current refers to cash and those assets that will be turned
Cash and other company assets that can be readily turned into cash within one year.
Deferred Tax Asset
Future tax benefit that results from (1) the origination of a temporary difference
Liability-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 model
Computation 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 model
A model wherein dividends are assumed to be at a constant rate in perpetuity.
dual pricing arrangement
a transfer pricing system that allows
Dynamic asset allocation
An asset allocation strategy in which the asset mix is mechanistically shifted in
economic components model
Abrams’ model for calculating DLOM based on the interaction of discounts from four economic components.
Exchange of assets
Acquisition of another company by purchase of its assets in exchange for cash or stock.
Extrapolative statistical models
models that apply a formula to historical data and project results for a
A way of decomposing the factors that influence a security's rate of return into common and
Claims on real assets.
Claims to the income generated by real assets. Also called securities.
Long-lived property owned by a firm that is used by a firm in the production of its income.
An item with a longevity greater than one year, and which exceeds a company’s
Fixed asset turnover ratio
The ratio of sales to fixed assets.
Things that the business owns and are part of the business infrastructure – fixed assets may be
An informal term that refers to the variety of long-term operating
Land, 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 Ratio
A measure of the utilization of a company's fixed assets to
Garmen-Kohlhagen option pricing model
A widely used model for pricing foreign currency options.
present value of a perpetuity with growth.
A model of stock returns using a market index such as the S&P 500 to represent common or
A legal claim to some future benefit, typically a claim to future cash. Goodwill, intellectual
A nonphysical asset with a life greater than one year. Examples are
assets 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 assets
Non-physical assets, e.g. customer goodwill or intellectual property (patents and trademarks).
Internet business model
a model that involves
Limitation on asset dispositions
A bond covenant that restricts in some way a firm's ability to sell major assets.
asset that is easily and cheaply turned into cash - notably cash itself and short-term securities.
log size model
Abrams’ model to calculate discount rates as a function of the logarithm of the value of the firm.
Value of property, equipment and other capital assets minus the depreciation. This is an
Longer-Term Fixed Assets
assets 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.
This relationship is sometimes called the single-index model. The market model says that the
A model for selecting an optimum investment portfolio,
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