|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
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.
The amount of total risk that can be eliminated by diversification by
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.
A market in which stock or bond prices are generally
A prolonged period of falling stock market prices.
risk of a firm measured from the standpoint of an investor who holds a highly diversified portfolio.
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.
A market in which stock or bond prices are generally rising.
A prolonged period of rising stock market prices.
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).
The market in which investors buy and sell shares of companies, normally associated with a Stock Exchange.
A market that specializes in trading long-term, relatively high risk
The market in which savings are made available to those needing funds to undertake investment projects. A financial market in which longer-term (maturity greater than one year) bonds and stocks are traded.
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.
markets for long-term financing.
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
See asset-specific 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
Consumer Price Index (CPI)
An index calculated by tracking the cost of a typical bundle of consumer goods and services over time. It is commonly used to measure inflation.
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
Financial and moral risk that an obligation will not be paid and a loss will result.
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.
The absence of equilibrium. Disequilibrium implies excess demand or excess supply and pressure for change.
Related: unsystematic risk.
DLOM (discount for lack of marketability)
an amount or percentage deducted from an equity interest to reflect lack of marketability.
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 capital markets
Financial markets in which security prices rapidly reflect all relevant information about asset values.
Efficient Market Hypothesis
In general the hypothesis states that all relevant information is fully and
Efficient Markets Hypothesis
The hypothesis that securities are typically in equilibrium--that they are fairly priced in the sense that the price reflects all publicly available information on the security.
In the interbank Eurodollar deposit market, an either-way market is one in which the bid
The financial markets of developing economies.
A position in which there is no pressure for change, where demand and supply are equal.
Equilibrium rate of interest
The interest rate that clears the market. Also called the market-clearing interest
Escalating Price Option
A nonqualified stock option that uses a sliding scale for
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.
The price set for buying an asset (call) or selling an asset (put).
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
Fair market value
The price that an asset or service will fetch on the open market.
Fair Market Value
The highest price available, expressed in terms of cash, in an open and unrestricted market between informed, prudent parties acting at arm's length and under no compulsion to transact.
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
Farm Improvement and Marketing Cooperatives Loans Act
Federal funds market
The market where banks can borrow or lend reserves, allowing banks temporarily
Federal Open Market Committee (FOMC)
Fed committee that makes decisions about open-market operations.
An organized institutional structure or mechanism for creating and exchanging financial assets.
markets in which financial assets are traded.
The risk that the cash flow of an issuer will not be adequate to meet its financial obligations.
risk to shareholders resulting from the use of debt.
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