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Chapter 2: The Financial System
Terms
- over-the-counter markets
- flow of funds'moral hazard
- adverse selection
- principal-agent problem
- collateralization
- fixed-income securities
- money market
- capital market
- liquidity
- residual claim
- limited liability
- derivatives
- call option
- put option
- forward contracts
- mortgage rate
- commercial loan rate
- unit of account
- maturity
- default risk
- exchange rate
- yield curve
- yield spread
- capital gain
- capital loss
- nominal prices
- real pirces
- nominal interest rate
- index-linked bonds
- interest-rate arbitrage
- productivity of capital goods
- rate of return on capital
- commercial banks
- defined-contribution pension plan
- defined-benefit pension plan
- mutual funds
- investment banks
- market-weighted stock indexes
Concepts
- Functions of the Financial System
- Transferring Resources Across Time and Space
- Managing Risk
Chapter 4: The Basics of Risk
Concepts
- Measuring Risk
- Diversifiable and Non-diversifiable Risk
- Capital Asset Pricing Model
- Arbitrage Pricing Model
- Default Risk
Chapter 7: Riskless Rates and Risk Premiums
Concepts
- Risk-free Rate
- Equity Risk Premium
- Country Risk Premiums
- Implied Equity Risk Premium
- Bond Default Spreads
- What is the right discount rate to use in valuing an asset?
Chapter 8: Estimating Risk Parameters and Costs of Financing
Concepts
- Estimating Historical beta (regression)
- Bottom up beta
- Fundamental Beta
- Cost of debt
- Estimating Default Spreads for the debt
- Estimating Tax Rates
- Capitalizing Operating Leases
- Computing Equity and Debt weights
Chapter 9: Measuring Earnings
Concepts
Chapter 10: Principles of Risk Management
Terms
- hedging
- insuring
- diversifying
- uncertainty
- risk
- risk aversion
- risk management
- risk exposure
- speculators
- hedgers
Concepts
- The appropriateness of a risk-management decision should be judged
in the light of the information available at the time the decision is
made.
For example, if you bought theft insurance for your car and your car
didn't get stolen during the policy period, that doesn't make the insurance
purchase a bad decision.
Similarly, if you bought a lottery ticket, and your ticket won, that
doesn't make the lottery ticket purchase a good one.
- The riskiness of an asset or a transaction cannot be assessed in isolation,
without a context.
Chapter 11: Estimating Growth
Concepts
Chapter 12: Closure in Valuation: Estimating Terminal Value
Concepts
Chapter 14: Free Cash Flow to Eauity Discount Models
Concepts
Chapter 18: Earnings Multiples
Concepts
Chapter 19: Book Value Multiples
Concepts
- cash dividend
- ex-dividend date
- stock dividend
Chapter 20: Revenue Multiples and Ssector-Specific Multiples
Concepts
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