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Subjective probabilities

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Definition of Subjective probabilities

Subjective Probabilities Image 1

Subjective probabilities

probabilities that are determined subjectively (for example, on the basis of
judgement rather than using statistical sampling).



Related Terms:

accrual-basis accounting

Well, frankly, accrual is not a good descriptive
term. Perhaps the best way to begin is to mention that accrual-basis
accounting is much more than cash-basis accounting. Recording only the
cash receipts and cash disbursement of a business would be grossly
inadequate. A business has many assets other than cash, as well as
many liabilities, that must be recorded. Measuring profit for a period as
the difference between cash inflows from sales and cash outflows for
expenses would be wrong, and in fact is not allowed for most businesses
by the income tax law. For management, income tax, and financial
reporting purposes, a business needs a comprehensive record-keeping
system—one that recognizes, records, and reports all the assets and liabilities
of a business. This all-inclusive scope of financial record keeping
is referred to as accrual-basis accounting. Accrual-basis accounting
records sales revenue when sales are made (though cash is received
before or after the sales) and records expenses when costs are incurred
(though cash is paid before or after expenses are recorded). Established
financial reporting standards require that profit for a period
must be recorded using accrual-basis accounting methods. Also, these
authoritative standards require that in reporting its financial condition a
business must use accrual-basis accounting.


Agency basis

A means of compensating the broker of a program trade solely on the basis of commission
established through bids submitted by various brokerage firms. agency incentive arrangement. A means of
compensating the broker of a program trade using benchmark prices for issues to be traded in determining
commissions or fees.


Bank discount basis

A convention used for quoting bids and offers for treasury bills in terms of annualized
yield , based on a 360-day year.


Basis

Regarding a futures contract, the difference between the cash price and the futures price observed in the
market. Also, it is the price an investor pays for a security plus any out-of-pocket expenses. It is used to
determine capital gains or losses for tax purposes when the stock is sold.


Basis point

In the bond market, the smallest measure used for quoting yields is a basis point. Each percentage
point of yield in bonds equals 100 basis points. basis points also are used for interest rates. An interest rate of
5% is 50 basis points greater than an interest rate of 4.5%.



Basis Point

One one-hundredth of one percent


Basis point

One hundredth of one percentage point, or 0.0001.


Subjective Probabilities Image 1

Basis Point

One one-hundredth of a percentage point, used to express variations in yields. For example, the difference between 5.36 percent and 5.38 percent is 2 basis points.


Basis price

Price expressed in terms of yield to maturity or annual rate of return.


Basis risk

The uncertainty about the basis at the time a hedge may be lifted. Hedging substitutes basis risk for
price risk.


Bond-equivalent basis

The method used for computing the bond-equivalent yield.


Cost basis

An asset’s purchase price, plus costs associated with the purchase, like installation fees, taxes, etc.


Discounted basis

Selling something on a discounted basis is selling below what its value will be at maturity,
so that the difference makes up all or part of the interest.


Extrapolative statistical models

Models that apply a formula to historical data and project results for a
future period. Such models include the simple linear trend model, the simple exponential model, and the
simple autoregressive model.


Fixed price basis

An offering of securities at a fixed price.


Flow-through basis

An account for the investment credit to show all income statement benefits of the credit
in the year of acquisition, rather than spreading them over the life of the asset acquired.


Subjective Probabilities Image 2

Formula basis

A method of selling a new issue of common stock in which the SEC declares the registration
statement effective on the basis of a price formula rather than on a specific range.


Housing Start

A new house on which construction has just begun.



Manufactured housing securities (MHSs)

Loans on manufactured homes - that is, factory-built or
prefabricated housing, including mobile homes.


predetermined overhead rate

an estimated constant charge per unit of activity used to assign overhead cost to production or services of the period; it is calculated by dividing total budgeted annual overhead at a selected level of volume or activity by that selected measure of volume or activity; it is also the standard overhead application rate


Price value of a basis point (PVBP)

Also called the dollar value of a basis point, a measure of the change in
the price of the bond if the required yield changes by one basis point.


statistical process control (SPC)

the use of control techniques that are based on the theory that a process has natural variations in it over time, but uncommon variations
are typically the points at which the process produces "errors", which can be defective goods or poor service


Stratified sampling approach to indexing

An approach in which the index is divided into cells, each
representing a different characteristic of the index, such as duration or maturity.


Stratified sampling bond indexing

A method of bond indexing that divides the index into cells, each cell
representing a different characteristic, and that buys bonds to match those characteristics.


Warehousing

The interim holding period from the time of the closing of a loan to its subsequent marketing to
capital market investors.



 

 

 

 

 

 

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