Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
17 Cards in this Set
- Front
- Back
|
Annual percentage rate (APR)
|
Interest rate is annualized using simple rather than compound interest.
|
|
|
Conditional tail expectation
|
Expectation of a random variable conditional on it falling below some threshold value. Often used as a measure of down-side risk.
|
|
|
Dividend yield
|
The percent rate of return provided by a stock's dividend payments.
|
|
|
Effective annual rate (EAR)
|
Interest rate is annualized using compound rather than simple interest.
|
|
|
Event tree
|
Depicts all possible sequences of events.
|
|
|
Excess return
|
Rate of return in excess of the risk-free rate.
|
|
|
Kurtosis
|
Measure of the fatness of the tails of a probability distribution. Indicates probability of observing extreme high or low values.
|
|
|
Lognormal distribution
|
The log of the variable has a normal (bell-shaped) distribution.
|
|
|
Lower partial standard deviation
|
Standard deviation computed using only the portion of the probability distribution below the mean of the variable.
|
|
|
Nominal interest rate
|
The interest rate in terms of nominal (not adjusted for purchasing power) dollars.
|
|
|
Normal distribution
|
Bell-shaped probability distribution that characterizes many natural phenomena.
|
|
|
Real interest rate
|
The excess of the interest rate over the inflation rate. The growth rate of purchasing power derived from an investment.
|
|
|
Risk-averse, risk-neutral, risk lover
|
A risk-averse investor will consider risky portfolios only if they provide compensation for risk via a risk premium. A risk-neutral investor finds the level of risk irrelevant and considers only the expected return of risk prospects. A risk lover is willing to accept lower expected returns on prospects with higher amounts of risk.
|
|
|
Risk premium
|
An expected return in excess of that on riskfree securities. The premium provides compensation for the risk of an investment.
|
|
|
Risk-free rate
|
The interest rate that can be earned with certainty.
|
|
|
Skew
|
Measure of the asymmetry of a probability distribution.
|
|
|
Value at risk
|
Measure of down-side risk. The loss that will be incurred in the event of an extreme adverse price change with some given, typically low, probability.
|
