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Mathematical programming |
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Definition of Mathematical programmingMathematical programmingAn operations research technique that solves problems in which an optimal mathematical programminga variety of techniques used
Related Terms:integer programminga mathematical programming technique in which all solutions for variables must be restricted to whole numbers linear programminga method of mathematical programming used to solve a problem that involves an objective function and multiple limiting factors or constraints long-term variable cost a cost that was traditionally viewed as a fixed cost Integer programmingVariant of linear programming whereby the solution values must be integers. Linear programmingTechnique for finding the maximum value of some equation subject to stated linear constraints. Zero-one integer programmingAn analytical method that can be used to determine the solution to a capital Planning, programming and budgeting system (PPBS)A method of budgeting in which budgets are allocated to projects or programmes rather than to responsibility centres. objective functionthe linear mathematical equation that Zero-one integer programmingAn analytical method that can be used to determine the solution to a capital Discrete random variableA random variable that can take only a certain specified set of discrete possible Point and figure chartA price-only chart that takes into account only whole integer changes in price, i.e., a NPV (net present value of cash flows)Same as PV, but usually includes a subtraction for an initial cash outlay. PV (present value of cash flows)the value in today’s dollars of cash flows that occur in different time periods. Adjusted present value (APV)The net present value analysis of an asset if financed solely by equity All equity rateThe discount rate that reflects only the business risks of a project and abstracts from the All or noneRequirement that none of an order be executed unless all of it can be executed at the specified price. All-in costTotal costs, explicit and implicit. All-or-none underwritingAn arrangement whereby a security issue is canceled if the underwriter is unable Arbitrage-free option-pricing modelsYield curve option-pricing models. Asset allocation decisionThe decision regarding how an institution's funds should be distributed among the Balloon maturityAny large principal payment due at maturity for a bond or loan with or without a a sinking Bond valueWith respect to convertible bonds, the value the security would have if it were not convertible Book valueA company's book value is its total assets minus intangible assets and liabilities, such as debt. A Book value per shareThe ratio of stockholder equity to the average number of common shares. Book value Borrower falloutIn the mortgage pipeline, the risk that prospective borrowers of loans committed to be CallAn option that gives the right to buy the underlying futures contract. Call an optionTo exercise a call option. Call dateA date before maturity, specified at issuance, when the issuer of a bond may retire part of the bond Call money rateAlso called the broker loan rate , the interest rate that banks charge brokers to finance Call optionAn option contract that gives its holder the right (but not the obligation) to purchase a specified Call priceThe price, specified at issuance, at which the issuer of a bond may retire part of the bond at a Call priceThe price for which a bond can be repaid before maturity under a call provision. Call protectionA feature of some callable bonds that establishes an initial period when the bonds may not be Call provisionAn embedded option granting a bond issuer the right to buy back all or part of the issue prior Call riskThe combination of cash flow uncertainty and reinvestment risk introduced by a call provision. Call swaptionA swaption in which the buyer has the right to enter into a swap as a fixed-rate payer. The CallableA financial security such as a bond with a call option attached to it, i.e., the issuer has the right to Capital allocationdecision allocation of invested funds between risk-free assets versus the risky portfolio. Carrying valueBook value. Cash flow from operationsA firm's net cash inflow resulting directly from its regular operations Cash-surrender valueAn amount the insurance company will pay if the policyholder ends a whole life Chinese wallCommunication barrier between financiers (investment bankers) and traders. This barrier is Company-specific riskRelated: Unsystematic risk Conversion valueAlso called parity value, the value of a convertible security if it is converted immediately. Cost of limited partner capitalThe discount rate that equates the after-tax inflows with outflows for capital Covered callA short call option position in which the writer owns the number of shares of the underlying Covered call writing strategyA strategy that involves writing a call option on securities that the investor Deferred callA provision that prohibits the company from calling the bond before a certain date. During this Deterministic modelsLiability-matching models that assume that the liability payments and the asset cash Dynamic asset allocationAn asset allocation strategy in which the asset mix is mechanistically shifted in Dynamic hedgingA strategy that involves rebalancing hedge positions as market conditions change; a Effective call priceThe strike price in an optional redemption provision plus the accrued interest to the Exercise valueThe amount of advantage over a current market transaction provided by an in-the-money Expected valueThe weighted average of a probability distribution. Expected value of perfect informationThe expected value if the future uncertain outcomes could be known Extraordinary positive valueA positive net present value. Extrapolative statistical modelsmodels that apply a formula to historical data and project results for a Face valueSee: Par value. Fallout riskA type of mortgage pipeline risk that is generally created when the terms of the loan to be Federally related institutionsArms of the federal government that are exempt from SEC registration and Financial objectivesobjectives of a financial nature that the firm will strive to accomplish during the period Firm's net value of debtTotal firm value minus total firm debt. Firm-specific riskSee:diversifiable risk or unsystematic risk. First-callWith CMOs, the start of the cash flow cycle for the cash flow window. Funds From Operations (FFO)used by real estate and other investment trusts to define the cash flow from Future valueThe amount of cash at a specified date in the future that is equivalent in value to a specified Generally Accepted Accounting Principals (GAAP)A technical accounting term that encompasses the Glass-Steagall ActA 1933 act in which Congress forbade commercial banks to own, underwrite, or deal in Implied callThe right of the homeowner to prepay, or call, the mortgage at any time. Income statement (statement of operations)A statement showing the revenues, expenses, and income (the Installment saleThe sale of an asset in exchange for a specified series of payments (the installments). Internally efficient marketOperationally efficient market. Intrinsic value of an optionThe amount by which an option is in-the-money. An option which is not in-themoney Intrinsic value of a firmThe present value of a firm's expected future net cash flows discounted by the Investment valueRelated:straight value. Investor falloutIn the mortgage pipeline, risk that occurs when the originator commits loan terms to the Irrational call optionThe implied call imbedded in the MBS. Identified as irrational because the call is Law of large numbersThe mean of a random sample approaches the mean (expected value) of the Limited liabilityLimitation of possible loss to what has already been invested. Limited partnerA partner who has limited legal liability for the obligations of the partnership. Limited partnershipA partnership that includes one or more partners who have limited liability. Limited-liability instrumentA security, such as a call option, in which the owner can only lose his initial Limited-tax general obligation bondA general obligation bond that is limited as to revenue sources. Linear programmingtechnique for finding the maximum value of some equation subject to stated linear constraints. Linear regressionA statistical technique for fitting a straight line to a set of data points. Liquidation valueNet amount that could be realized by selling the assets of a firm after paying the debt. Loan valueThe amount a policyholder may borrow against a whole life insurance policy at the interest rate Log-linear least-squares methodA statistical technique for fitting a curve to a set of data points. One of the Limited partnershipA partnership that includes one or more partners who have limited liability. Limited-liability instrumentA security, such as a call option, in which the owner can only lose his initial investment. Margin callA demand for additional funds because of adverse price movement. Maintenance margin Market value1) The price at which a security is trading and could presumably be purchased or sold. Market value ratiosRatios that relate the market price of the firm's common stock to selected financial Market value-weighted indexAn index of a group of securities computed by calculating a weighted average Master limited partnership (MLP)A publicly traded limited partnership. Maturity valueRelated: par value. Mutually exclusive investment decisionsInvestment decisions in which the acceptance of a project Net adjusted present valueThe adjusted present value minus the initial cost of an investment. Net asset value (NAV)The value of a fund's investments. For a mutual fund, the net asset value per share Net book valueThe current book value of an asset or liability; that is, its original book value net of any Net present value (NPV)The present value of the expected future cash flows minus the cost. Net present value of growth opportunitiesA model valuing a firm in which net present value of new Net present value of future investmentsThe present value of the total sum of NPVs expected to result from Net present value ruleAn investment is worth making if it has a positive NPV. Projects with negative NPVs Net salvage valueThe after-tax net cash flow for terminating the project. Non-parallel shift in the yield curveA shift in the yield curve in which yields do not change by the same Objective (mutual fund)The fund's investment strategy category as stated in the prospectus. There are Operationally efficient marketAlso called an internally efficient market, one in which investors can obtain Optimal contractThe contract that balances the three types of agency costs (contracting, monitoring, and
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