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Definition of Price risk
The risk that the value of a security (or a portfolio) will decline in the future. Or, a type of
Taking a position either long or short that does not involve spreading.
A type of mortgage-pipeline risk that occurs when a lender commits to sell loans to an
The slope of the capital market line (CML). Since the CML represents the
A measure of the extra return, or risk premium, that investors demand to bear risk. The
The uncertainty about the basis at the time a hedge may be lifted. Hedging substitutes basis risk for
A method for hedging price risk which involves an agreement between a lender and an investor
Investing in a variety of maturities to reduce the price risk to which holding long
A method for hedging price risk that utilizes debt-market instruments, such as interest 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.
The amount of total risk that can be eliminated by diversification by
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.
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
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.
Bond price excluding accrued interest.
The risk that a foreign debtor will be unable to pay its debts because of business events,
Related: Unsystematic risk
See asset-specific risk
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
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
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
Devaluation A decrease in the spot price of the currency
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.
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
Escalating Price Option
A nonqualified stock option that uses a sliding scale for
The risk that the ability of an issuer to make interest and principal payments will change because
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).
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
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.
See:diversifiable risk or unsystematic risk.
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 (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 exchange risk
The risk that a long or short position in a foreign currency might have to be closed out
Also called dirty price, the price of a bond including accrued interest. Related: flat price.
Related: interest rate risk
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,
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.
High-Risk Small Business
Firm viewed as being particularly subject to risk from an investors perspective.
Unsystematic risk or risk that is uncorrelated to the overall market risk. In other words,
Also called purchasing-power risk, the risk that changes in the real return the investor will
The risk that a firm will be unable to satisfy its debts. Also known as bankruptcy risk.
Interest rate risk
The risk that a security's value changes due to a change in interest rates. For example, a
Interest Rate Risk
Possibility that interest rates will rise during the term of a loan thereby increasing the annual cost of borrowing.
The price that the buyer of a futures contract must pay the seller when a Treasury Bond is delivered.
judgmental method (of risk adjustment)
an informal method of adjusting for risk that allows the decision maker
Law of one price
An economic rule stating that a given security must have the same price regardless of the
law of one price
Theory that prices of goods in all countries should be equal when translated to a common currency.
Maximum price fluctuation
Maximum price fluctuation
The risk that arises from the difficulty of selling an asset. It can be thought of as the difference
This is the day's lowest price of a security that has changed hands between a buyer and a seller.
Low price-earnings ratio effect
The tendency of portfolios of stocks with a low price-earnings ratio to
Market conversion price
Also called conversion parity price, the price that an investor effectively pays for
The amount of money that a willing buyer pays to acquire something from a willing seller,
risk that cannot be diversified away. Related: systematic risk
The amount of total risk that cannot be eliminated by portfolio
Economywide (macroeconomic) sources of risk that affect the overall stock market. Also called systematic risk.
The part of security's risk that cannot be eliminated by diversification. It is measured by the beta coefficient.
market risk premium
risk premium of market portfolio. Difference between market return and return on risk-free Treasury bills.
Marketplace price efficiency
The degree to which the prices of assets reflect the available marketplace
material price variance
total actual cost of material purchased
Materials price variance
The difference between the actual and budgeted cost to
Maximum price fluctuation
The maximum amount the contract price can change, up or down, during one
Minimum price fluctuation
Smallest increment of price movement possible in trading a given contract. Also
The risk associated with taking applications from prospective mortgage borrowers
negotiated transfer price
an intracompany charge for goods
price quotations on futures for a period in which no actual trading took place.
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