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Definition of Underpricing
Issue of securities below their market value.
Issuing securities at an offering price set below the true value of the security.
an amount or percentage deducted from an equity interest to reflect lack of marketability.
Same as PV, but usually includes a subtraction for an initial cash outlay.
the value in today’s dollars of cash flows that occur in different time periods.
model for calculating DLOM for minority interests r the discount rate
A merger or consolidation in which an acquirer purchases the selling firm's assets.
The net present value analysis of an asset if financed solely by equity
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.
Any possession that has value in an exchange.
The ratio of total assets to stockholder equity.
Also called surplus management, the task of managing funds of a financial
Ratios that measure how effectively the firm is managing its assets.
The decision regarding how an institution's funds should be distributed among the
A security that is collateralized by loans, leases, receivables, or installment contracts
Methods of financing in which lenders and equity investors look principally to the
Categories of assets, such as stocks, bonds, real estate and foreign securities.
A bond indenture restriction that permits additional borrowing on if the ratio of assets to
Asset for asset swap
Creditors exchange the debt of one defaulting borrower for the debt of another
Asset pricing model
A model for determining the required rate of return on an asset.
A firm's investing in assets that are riskier than those that the debtholders expected.
Asset substitution problem
Arises when the stockholders substitute riskier assets for the firm's existing
An interest rate swap used to alter the cash flow characteristics of an institution's assets so as to
The ratio of net sales to total assets.
Asset pricing model
A model, such as the Capital Asset Pricing Model (CAPM), that determines the required
A firm's productive resources.
A common element of a financial plan that describes projected capital spending and the
markets in which the prevailing price is determined through the free interaction of
Bank for International Settlements (BIS)
An international bank headquartered in Basel, Switzerland, which
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.
Any market in which prices are in a declining trend.
Also called on-the-run or current coupon Issues or bellwether Issues. In the secondary
This is the quoted bid, or the highest price an investor is willing to pay to buy a security. Practically
An illegal market.
With respect to convertible bonds, the value the security would have if it were not convertible
A company's book value is its total assets minus intangible assets and liabilities, such as debt. A
Book value per share
The ratio of stockholder equity to the average number of common shares. Book value
The Treasury and federal agencies are moving to a book-entry system in which securities are not represented by engraved pieces of paper but are maintained in computerized records at the
A market where an intermediary offers search services to buyers and sellers.
Any market in which prices are in an upward trend.
The foreign market in the United Kingdom.
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.
Capital asset pricing model (CAPM)
An economic theory that describes the relationship between risk and
The market for trading long-term debt instruments (those that mature in more than one year).
Capital market efficiency
Reflects the relative amount of wealth wasted in making transactions. An efficient
Capital market imperfections view
The view that Issuing debt is generally valuable but that the firm's
Capital market line (CML)
The line defined by every combination of the risk-free asset and the market portfolio.
Also called spot markets, these are markets that involve the immediate delivery of a security
Cash settlement contracts
Futures contracts, such as stock index futures, that settle for cash, not involving
An amount the insurance company will pay if the policyholder ends a whole life
Cheapest to deliver issue
The acceptable Treasury security with the highest implied repo rate; the rate that a
Bond price excluding accrued interest.
An agreement between two or more countries that permits the free movement of capital
Common stock market
The market for trading equities, not including preferred stock.
An offering of securities through competitive bidding.
Complete capital market
A market in which there is a distinct marketable security for each and every
Consumer Price Index (CPI)
The CPI, as it is called, measures the prices of consumer goods and services and is a
Conversion parity price
Related:market conversion price
The contractually specified price per share at which a convertible security can be
Also called parity value, the value of a convertible security if it is converted immediately.
A security that can be converted into common stock at the option of the security holder,
Corner A Market
To purchase enough of the available supply of a commodity or stock in order to
value of cash, accounts receivable, inventories, marketable securities and other assets that
In Treasury securities, the most recently auctioned Issue. Trading is more active in current
Related: Benchmark Issues
A market where traders specializing in particular commodities buy and sell assets for their
The market for trading debt instruments.
IOUs created through loan-type transactions - commercial paper, bank CDs, bills, bonds, and
The price fixed by the Clearing house at which deliveries on futures are in invoiced; also the
markets for derivative instruments.
A financial security, such as an option, or future, whose value is derived in part from the
Devaluation A decrease in the spot price of the currency
Direct search market
Buyers and sellers seek each other directly and transact directly.
Bond price including accrued interest, i.e., the price paid by the bond buyer.
Non-interest-bearing money market instruments that are Issued at a discount and
Dollar price of a bond
Percentage of face value at which a bond is quoted.
Part of a nation's internal market representing the mechanisms for Issuing and trading
Dual syndicate equity offering
An international equity placement where the offering is split into two
Eurobonds that pay coupon interest in one currency but pay the principal in a different
Dynamic asset allocation
An asset allocation strategy in which the asset mix is mechanistically shifted in
Effective call price
The strike price in an optional redemption provision plus the accrued interest to the
Efficient capital market
A market in which new information is very quickly reflected accurately in share
Efficient Market Hypothesis
In general the hypothesis states that all relevant information is fully and
In the interbank Eurodollar deposit market, an either-way market is one in which the bid
The financial markets of developing economies.
Equilibrium market price of risk
The slope of the capital market line (CML). Since the CML represents the
The money market for borrowing and lending currencies that are held in the form of
securities sold in the Euromarket. That is, securities initially sold to investors
Excess return on the market portfolio
The difference between the return on the market portfolio and the
Exchange of assets
Acquisition of another company by purchase of its assets in exchange for cash or stock.
security that grants the security holder the right to exchange the security for the
Instruments exempt from the registration requirements of the securities Act of 1933 or the
The price at which the underlying future or options contract may be bought or sold.
The amount of advantage over a current market transaction provided by an in-the-money
The weighted average of a probability distribution.
Expected value of perfect information
The expected value if the future uncertain outcomes could be known
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