|Information Coefficient (IC)
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Definition of Information Coefficient (IC)
Information Coefficient (IC)
The correlation between predicted and actual stock returns, sometimes used to
Abramsâ€™ model for calculating DLOM based on the interaction of discounts from four economic components.
a generalization formula invented by Abrams that is the present value of regular but noncontiguous cash flows that have constant growth to perpetuity.
IRS rules used to allocate income on export sales to a foreign sales corporation.
Certificates issued by a U.S. depositary bank, representing foreign
An option that may be exercised at any time up to and including the expiration date.
Securities certificates issued in the U.S. by a transfer agent acting on behalf of the foreign
The second-largest stock exchange in the United States. It trades
An option contract that can be exercised at any time between the date of purchase and
Arrangements whereby customers who pay before the final date may be entitled to deduct a
An alternative model to the capital asset pricing model developed by
Yield curve option-pricing models.
Arithmetic mean return.
An average of the subperiod returns, calculated by summing the subperiod returns
The price at which a willing buyer and a willing unrelated seller would freely agree to
Legal document establishing a corporation and its structure and purpose.
A dealer's price to sell a security; also called the offer price.
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
information that is known to some people but not to other people.
A situation wherein participants in a transaction have different net tax rates.
The restricting of liability holders from collection efforts of collateral seizure, which is
Brokerage house clerical operations that support, but do not include, the trading of stocks and
BAN (Bank anticipation notes)
Notes issued by states and municipalities to obtain interim financing for
Gives the lessee the option to purchase the asset at a price below fair market
In a balance of payments, the basic balance is the net balance of the combination of the current
Basic business strategies
Key strategies a firm intends to pursue in carrying out its business plan.
Basic IRR rule
Accept the project if IRR is greater than the discount rate; reject the project is lower than the
Price expressed in terms of yield to maturity or annual rate of return.
This is the quoted bid, or the highest price an investor is willing to pay to buy a security. Practically
Binomial option pricing model
An option pricing model in which the underlying asset can take on only two
Black-Scholes option-pricing model
A model for pricing call options based on arbitrage arguments that uses
The amount by which government spending exceeds government revenues.
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.
Capital asset pricing model (CAPM)
An economic theory that describes the relationship between risk and
Capital market efficiency
Reflects the relative amount of wealth wasted in making transactions. An efficient
Cash deficiency agreement
An agreement to invest cash in a project to the extent required to cover any cash
Certificate of deposit (CD)
Also called a time deposit, this is a certificate issued by a bank or thrift that
The market model applied to a single security. The slope of the line is a security's beta.
Chicago Mercantile Exchange (CME)
A not-for-profit corporation owned by its members. Its primary
Bond price excluding accrued interest.
Coefficient of determination
A measure of the goodness of fit of the relationship between the dependent and
Procedures followed by a firm in attempting to collect accounts receivables.
Related: Unsystematic risk
Movement of cash from different lockbox locations into a single concentration
A measure of investors' faith in the economy and the securities market. A low or
Conflict between bondholders and stockholders
These two groups may have interests in a corporation that
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
A standardized statistical measure of the dependence of two random variables,
Interest payment plus repayments of principal to creditors, that is, retirement of debt.
Debt service parity approach
An analysis wherein the alternatives under consideration will provide the firm
Debt-service coverage ratio
Earnings before interest and income taxes plus one-third rental charges, divided
Total par value (number of shares issued, multiplied by the par value of each share). Also
Refers to multi-period cash flow matching.
Dedicating a portfolio
Related: cash flow matching.
An excess of liabilities over assets, of losses over profits, or of expenditure over income.
The written notice given by the seller of his intention to make delivery against an open, short
The price fixed by the Clearing house at which deliveries on futures are in invoiced; also the
Liability-matching models that assume that the liability payments and the asset cash
Devaluation A decrease in the spot price of the currency
Bond price including accrued interest, i.e., the price paid by the bond buyer.
Dividing investment funds among a variety of securities with different risk, reward, and
An established guide for the firm to determine the amount of money it will pay as dividends.
Dollar price of a bond
Percentage of face value at which a bond is quoted.
Domestic International Sales Corporation (DISC)
A U.S. corporation that receives a tax incentive for
Part of a nation's internal market representing the mechanisms for issuing and trading
Dual syndicate equity offering
An international equity placement where the offering is split into two
Dynamic asset allocation
An asset allocation strategy in which the asset mix is mechanistically shifted in
A strategy that involves rebalancing hedge positions as market conditions change; a
Economic environment in which the firm expects to reside over the life of the
See: in-substance defeasance.
Exists when the costs and/or revenues of one project depend on those of another.
The real flow of cash that a firm could pay out forever in the absence of any change in
The extent to which the value of the firm will change because of an exchange rate change.
Cash flow plus change in present value.
Economic order quantity (EOQ)
The order quantity that minimizes total inventory costs.
Profits in excess of the competitive level.
In project financing, the risk that the project's output will not be salable at a price that will
For any entity, the difference between the market value of all its assets and the market
An agreement between two or more countries that allows the free movement of capital,
Effective call price
The strike price in an optional redemption provision plus the accrued interest to the
Reflects the amount of wasted energy.
Efficient capital market
A market in which new information is very quickly reflected accurately in share
The organizing principle of modern portfolio theory, which maintains that any riskaverse
The combinations of securities portfolios that maximize expected return for any level of
Efficient Market Hypothesis
In general the hypothesis states that all relevant information is fully and
A portfolio that provides the greatest expected return for a given level of risk (i.e. standard
Elasticity of an option
Percentage change in the value of an option given a 1% change in the value of the
Electronic data interchange (EDI)
The exchange of information electronically, directly from one firm's
Electronic depository transfers
The transfer of funds between bank accounts through the Automated
Equilibrium market price of risk
The slope of the capital market line (CML). Since the CML represents the
Equipment trust certificates
Certificates issued by a trust that was formed to purchase an asset and lease it
Used to refer to warrants because they are usually issued attached to privately placed bonds.
Related: Variable life
Standards of conduct or moral judgement.
The price at which the underlying future or options contract may be bought or sold.
Expected value of perfect information
The expected value if the future uncertain outcomes could be known
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