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Financial Terms | |
Price risk |
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Definition of Price riskPrice riskThe risk that the value of a security (or a portfolio) will decline in the future. Or, a type of
Related Terms:Flat price riskTaking a position either long or short that does not involve spreading. Reverse price riskA type of mortgage-pipeline risk that occurs when a lender commits to sell loans to an Equilibrium market price of riskThe slope of the capital market line (CML). Since the CML represents the Market price of riskA measure of the extra return, or risk premium, that investors demand to bear risk. The Basis riskThe uncertainty about the basis at the time a hedge may be lifted. Hedging substitutes basis risk for Forward saleA method for hedging price risk which involves an agreement between a lender and an investor Liquidity diversificationInvesting in a variety of maturities to reduce the price risk to which holding long ![]() Substitute saleA method for hedging price risk that utilizes debt-market instruments, such as interest rate Arm's length priceThe price at which a willing buyer and a willing unrelated seller would freely agree to Ask priceA dealer's price to sell a security; also called the offer price. Asset-specific RiskThe amount of total risk that can be eliminated by diversification by Bankruptcy riskThe risk that a firm will be unable to meet its debt obligations. Also referred to as default or insolvency risk. Bargain-purchase-price optionGives the lessee the option to purchase the asset at a price below fair market Basis priceprice expressed in terms of yield to maturity or annual rate of return. Beta riskrisk of a firm measured from the standpoint of an investor who holds a highly diversified portfolio. Bid priceThis is the quoted bid, or the highest price an investor is willing to pay to buy a security. Practically ![]() Business riskThe risk that the cash flow of an issuer will be impaired because of adverse economic 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 riskThe combination of cash flow uncertainty and reinvestment risk introduced by a call provision. Clean priceBond price excluding accrued interest. Commercial riskThe risk that a foreign debtor will be unable to pay its debts because of business events, Company-specific riskRelated: Unsystematic risk Companyspecific RiskSee asset-specific risk Completion riskThe 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 priceRelated:Market conversion price Convertible priceThe contractually specified price per share at which a convertible security can be Counterparty riskThe risk that the other party to an agreement will default. In an options contract, the risk Country financial riskThe ability of the national economy to generate enough foreign exchange to meet Country risk GeneralLevel of political and economic uncertainty in a country affecting the value of loans or Credit riskThe risk that an issuer of debt securities or a borrower may default on his obligations, or that the Credit RiskFinancial and moral risk that an obligation will not be paid and a loss will result. Cross-border riskRefers to the volatility of returns on international investments caused by events associated Currency riskRelated: Exchange rate risk Currency risk sharingAn agreement by the parties to a transaction to share the currency risk associated with Default riskAlso referred to as credit risk (as gauged by commercial rating companies), the risk that an Delivery priceThe 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
Dirty priceBond price including accrued interest, i.e., the price paid by the bond buyer. Diversifiable riskRelated: unsystematic risk. Dollar price of a bondPercentage of face value at which a bond is quoted. Economic riskIn project financing, the risk that the project's output will not be salable at a price that will Effective call priceThe strike price in an optional redemption provision plus the accrued interest to the Escalating Price OptionA nonqualified stock option that uses a sliding scale for Event riskThe risk that the ability of an issuer to make interest and principal payments will change because Exchange rate riskAlso called currency risk, the risk of an investment's value changing because of currency Exchange riskThe variability of a firm's value that results from unexpected exchange rate changes or the Exercise priceThe price at which the underlying future or options contract may be bought or sold. Exercise priceThe price set for buying an asset (call) or selling an asset (put). Fair market priceAmount at which an asset would change hands between two parties, both having Fair priceThe equilibrium price for futures contracts. Also called the theoretical futures price, which equals Fair price provisionSee:appraisal rights. Fallout riskA type of mortgage pipeline risk that is generally created when the terms of the loan to be Financial riskThe risk that the cash flow of an issuer will not be adequate to meet its financial obligations. financial riskrisk to shareholders resulting from the use of debt. Firm-specific riskSee:diversifiable risk or unsystematic risk. Fixed price basisAn offering of securities at a fixed price. Fixed-price tender offerA 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 riskThe risk that there will be an interruption of operations for a prolonged period after a Foreign exchange riskThe risk that a long or short position in a foreign currency might have to be closed out Full priceAlso called dirty price, the price of a bond including accrued interest. Related: flat price. Funding riskRelated: interest rate risk Futures priceThe price at which the parties to a futures contract agree to transact on the settlement date. Geographic riskrisk that arises when an issuer has policies concentrated within certain geographic areas, Herstatt riskThe 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. High priceThe highest (intraday) price of a stock over the past 52 weeks, adjusted for any stock splits. High-Risk Small BusinessFirm viewed as being particularly subject to risk from an investors perspective. Idiosyncratic RiskUnsystematic risk or risk that is uncorrelated to the overall market risk. In other words, Inflation riskAlso called purchasing-power risk, the risk that changes in the real return the investor will Insolvency riskThe risk that a firm will be unable to satisfy its debts. Also known as bankruptcy risk. Interest rate riskThe risk that a security's value changes due to a change in interest rates. For example, a Interest Rate RiskPossibility that interest rates will rise during the term of a loan thereby increasing the annual cost of borrowing. Invoice priceThe 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 priceAn economic rule stating that a given security must have the same price regardless of the law of one priceTheory that prices of goods in all countries should be equal when translated to a common currency. Limit priceMaximum price fluctuation Limit priceMaximum price fluctuation Liquidity riskThe risk that arises from the difficulty of selling an asset. It can be thought of as the difference Low priceThis is the day's lowest price of a security that has changed hands between a buyer and a seller. Low price-earnings ratio effectThe tendency of portfolios of stocks with a low price-earnings ratio to Market conversion priceAlso called conversion parity price, the price that an investor effectively pays for Market pricesThe amount of money that a willing buyer pays to acquire something from a willing seller, Market riskrisk that cannot be diversified away. Related: systematic risk Market RiskThe amount of total risk that cannot be eliminated by portfolio market riskEconomywide (macroeconomic) sources of risk that affect the overall stock market. Also called systematic risk. Market RiskThe part of security's risk that cannot be eliminated by diversification. It is measured by the beta coefficient. market risk premiumrisk premium of market portfolio. Difference between market return and return on risk-free Treasury bills. Marketplace price efficiencyThe degree to which the prices of assets reflect the available marketplace material price variancetotal actual cost of material purchased Materials price varianceThe difference between the actual and budgeted cost to Maximum price fluctuationThe maximum amount the contract price can change, up or down, during one Minimum price fluctuationSmallest increment of price movement possible in trading a given contract. Also Mortgage-pipeline riskThe risk associated with taking applications from prospective mortgage borrowers negotiated transfer pricean intracompany charge for goods Nominal priceprice quotations on futures for a period in which no actual trading took place. Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit. |