|Equilibrium market price of risk|
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Definition of Equilibrium market price of risk
Equilibrium market price of risk
The slope of the capital market line (CML). Since the CML represents the
an amount or percentage deducted from an equity interest to reflect lack of marketability.
model for calculating DLOM for minority interests r the discount rate
The price at which a willing buyer and a willing unrelated seller would freely agree to
A dealer's price to sell a security; also called the offer price.
markets in which the prevailing price is determined through the free interaction of
The risk that a firm will be unable to meet its debt obligations. Also referred to as default or insolvency risk.
Gives the lessee the option to purchase the asset at a price below fair market
price expressed in terms of yield to maturity or annual rate of return.
The uncertainty about the basis at the time a hedge may be lifted. Hedging substitutes basis risk for
Any market in which prices are in a declining trend.
This is the quoted bid, or the highest price an investor is willing to pay to buy a security. Practically
An illegal market.
A market where an intermediary offers search services to buyers and sellers.
Any market in which prices are in an upward trend.
The foreign market in the United Kingdom.
The risk that the cash flow of an issuer will be impaired because of adverse economic
The price, specified at issuance, at which the issuer of a bond may retire part of the bond at a
The price for which a bond can be repaid before maturity under a call provision.
The combination of cash flow uncertainty and reinvestment risk introduced by a call provision.
The market for trading long-term debt instruments (those that mature in more than one year).
Capital market efficiency
Reflects the relative amount of wealth wasted in making transactions. An efficient
Capital market imperfections view
The view that issuing debt is generally valuable but that the firm's
Capital market line (CML)
The line defined by every combination of the risk-free asset and the market portfolio.
Also called spot markets, these are markets that involve the immediate delivery of a security
Bond price excluding accrued interest.
The risk that a foreign debtor will be unable to pay its debts because of business events,
An agreement between two or more countries that permits the free movement of capital
Common stock market
The market for trading equities, not including preferred stock.
Related: Unsystematic risk
Complete capital market
A market in which there is a distinct marketable security for each and every
The risk that a project will not be brought into operation successfully.
Consumer Price Index (CPI)
The CPI, as it is called, measures the prices of consumer goods and services and is a
Conversion parity price
Related:market conversion price
The contractually specified price per share at which a convertible security can be
Corner A Market
To purchase enough of the available supply of a commodity or stock in order to
The risk that the other party to an agreement will default. In an options contract, the risk
Country financial risk
The ability of the national economy to generate enough foreign exchange to meet
Country risk General
Level of political and economic uncertainty in a country affecting the value of loans or
The risk that an issuer of debt securities or a borrower may default on his obligations, or that the
Refers to the volatility of returns on international investments caused by events associated
Related: Exchange rate risk
Currency risk sharing
An agreement by the parties to a transaction to share the currency risk associated with
A market where traders specializing in particular commodities buy and sell assets for their
The market for trading debt instruments.
Also referred to as credit risk (as gauged by commercial rating companies), the risk that an
The price fixed by the Clearing house at which deliveries on futures are in invoiced; also the
markets for derivative instruments.
Devaluation A decrease in the spot price of the currency
Direct search market
Buyers and sellers seek each other directly and transact directly.
Bond price including accrued interest, i.e., the price paid by the bond buyer.
Related: unsystematic risk.
Dollar price of a bond
Percentage of face value at which a bond is quoted.
Part of a nation's internal market representing the mechanisms for issuing and trading
In project financing, the risk that the project's output will not be salable at a price that will
Effective call price
The strike price in an optional redemption provision plus the accrued interest to the
Efficient capital market
A market in which new information is very quickly reflected accurately in share
Efficient Market Hypothesis
In general the hypothesis states that all relevant information is fully and
In the interbank Eurodollar deposit market, an either-way market is one in which the bid
The financial markets of developing economies.
Equilibrium rate of interest
The interest rate that clears the market. Also called the market-clearing interest
The money market for borrowing and lending currencies that are held in the form of
The risk that the ability of an issuer to make interest and principal payments will change because
Excess return on the market portfolio
The difference between the return on the market portfolio and the
Exchange rate risk
Also called currency risk, the risk of an investment's value changing because of currency
The variability of a firm's value that results from unexpected exchange rate changes or the
The price at which the underlying future or options contract may be bought or sold.
Also referred to as the international market, the offshore market, or, more popularly, the
Fair market price
Amount at which an asset would change hands between two parties, both having
The equilibrium price for futures contracts. Also called the theoretical futures price, which equals
Fair price provision
A type of mortgage pipeline risk that is generally created when the terms of the loan to be
Federal funds market
The market where banks can borrow or lend reserves, allowing banks temporarily
An organized institutional structure or mechanism for creating and exchanging financial assets.
The risk that the cash flow of an issuer will not be adequate to meet its financial obligations.
See:diversifiable risk or unsystematic risk.
The market for trading bonds and preferred stock.
Fixed price basis
An offering of securities at a fixed price.
Fixed-price tender offer
A one-time offer to purchase a stated number of shares at a stated fixed price,
Flat price risk
Taking a position either long or short that does not involve spreading.
Flat price (also clean price)
The quoted newspaper price of a bond that does not include accrued interest.
Force majeure risk
The risk that there will be an interruption of operations for a prolonged period after a
Foreign banking market
That portion of domestic bank loans supplied to foreigners for use abroad.
Foreign bond market
That portion of the domestic bond market that represents issues floated by foreign
Foreign equity market
That portion of the domestic equity market that represents issues floated by foreign companies.
Foreign exchange risk
The risk that a long or short position in a foreign currency might have to be closed out
Part of a nation's internal market, representing the mechanisms for issuing and trading
Foreign market beta
A measure of foreign market risk that is derived from the capital asset pricing model.
A market in which participants agree to trade some commodity, security, or foreign
Direct trading in exchange-listed securities between investors without the use of a broker.
Also called dirty price, the price of a bond including accrued interest. Related: flat price.
Related: interest rate risk
A market in which contracts for future delivery of a commodity or a security are bought or sold.
The price at which the parties to a futures contract agree to transact on the settlement date.
risk that arises when an issuer has policies concentrated within certain geographic areas,
Purchases and sales of eurobonds that occur before the issue price is finally set.
The risk of loss in foreign exchange trading that one party will deliver foreign exchange but the counterparty financial institution will fail to deliver its end of the contract. It is also referred to as settlement risk.
The highest (intraday) price of a stock over the past 52 weeks, adjusted for any stock splits.
Unsystematic risk or risk that is uncorrelated to the overall market risk. In other words,
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