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Modeling |
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Definition of ModelingModelingThe process of creating a depiction of reality, such as a graph, picture, or mathematical
Related Terms:Markowitz modelA model for selecting an optimum investment portfolio, Monte-Carlo simulationA mathematical modeling process. For a model that Arbitrage-free option-pricing modelsYield curve option-pricing models. Asset pricing modelA model for determining the required rate of return on an asset. Asset pricing modelA model, such as the Capital Asset Pricing model (CAPM), that determines the required Binomial modelA method of pricing options or other equity derivatives in Binomial option pricing modelAn option pricing model in which the underlying asset can take on only two Black-Scholes modelThe first complete mathematical model for pricing Black-Scholes option-pricing modelA model for pricing call options based on arbitrage arguments that uses Capital asset pricing model (CAPM)An economic theory that describes the relationship between risk and Capital Asset Pricing Model (CAPM)A model for estimating equilibrium rates of return and values of capital asset pricing model (CAPM)Theory of the relationship between risk and return which states that the expected risk constant-growth dividend discount modelVersion of the dividend discount model in which dividends grow at a constant rate. Constant-growth modelAlso called the Gordon-Shapiro model, an application of the dividend discount Deterministic modelsLiability-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 modelComputation 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 modelA model wherein dividends are assumed to be at a constant rate in perpetuity. economic components modelAbrams’ model for calculating DLOM based on the interaction of discounts from four economic components. Extrapolative statistical modelsmodels that apply a formula to historical data and project results for a Factor modelA way of decomposing the factors that influence a security's rate of return into common and Garmen-Kohlhagen option pricing modelA widely used model for pricing foreign currency options. Gordon modelpresent value of a perpetuity with growth. Index modelA model of stock returns using a market index such as the S&P 500 to represent common or Internet business modela model that involves log size modelAbrams’ model to calculate discount rates as a function of the logarithm of the value of the firm. Market modelThis relationship is sometimes called the single-index model. The market model says that the Markowitz diversificationA strategy that seeks to combine assets a portfolio with returns that are less than Markowitz efficient frontierThe graphical depiction of the markowitz efficient set of portfolios Markowitz efficient portfolioAlso called a mean-variance efficient portfolio, a portfolio that has the highest Markowitz efficient set of portfoliosThe collection of all efficient portfolios, graphically referred to as the percentage of sales modelsPlanning model in which sales forecasts are the driving variables and most other variables are Pie model of capital structureA model of the debt/equity ratio of the firms, graphically depicted in slices of QMDM (quantitative marketability discount model)model for calculating DLOM for minority interests r the discount rate Simple linear trend modelAn extrapolative statistical model that asserts that earnings have a base level and SimulationThe use of a mathematical model to imitate a situation many times in order to estimate the simulation analysisEstimation of the probabilities of different possible outcomes, e.g., from an investment project. Single factor modelA model of security returns that acknowledges only one common factor. Single index modelA model of stock returns that decomposes influences on returns into a systematic factor, Single-index modelRelated: market model Stochastic modelsLiability-matching models that assume that the liability payments and the asset cash flows Two-factor modelBlack's zero-beta version of the capital asset pricing model. Two-state option pricing modelAn option pricing model in which the underlying asset can take on only two Value-at-Risk model (VAR)Procedure for estimating the probability of portfolio losses exceeding some Yield curve option-pricing modelsmodels that can incorporate different volatility assumptions along the
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