Industry WIKI

Bond valuation is the process of estimating the fair value of a bond. In the prevalent present-value approach, the value equals the sum of expected cash flows discounted at appropriate rates.

In finance, the capital asset pricing model (CAPM) is a model used to determine a theoretically appropriate required rate of return of an asset, to make decisions about adding assets to a well-diversified portfolio. The model takes into account the asset's sensitivity to non-diversifiable risk (also known as systematic risk or market risk), often represented by the quantity beta (β) in t

Credit risk is the chance that a borrower does not repay a loan or fulfill a loan obligation. For lenders the risk includes late or lost interest and principal payment, leading to disrupted cash flows and increased collection costs. The loss may be complete or partial. In an efficient market, higher levels of credit risk will be associated with higher borrowing costs. Because of this, me

An equity swap is a financial derivative contract (a swap) where a set of future cash flows are agreed to be exchanged between two counterparties at set dates in the future. The two cash flows are usually referred to as "legs" of the swap; one of these "legs" is usually pegged to a floating rate such as LIBOR. This leg is also commonly referred to as the "floating leg". The other leg of

A perpetual bond, also known colloquially as a perpetual or perp, is a bond with no maturity date, therefore allowing it to be treated as equity, not as debt. Issuers pay coupons on perpetual bonds forever, and they do not have to redeem the principal. Perpetual bond cash flows are, therefore, those of a perpetuity.

The public market equivalent (PME) is a collection of performance measures developed to assess private equity funds and to overcome the limitations of the internal rate of return and multiple on invested capital measurements. While the calculations differ, they all attempt to measure the return from deploying a private equity fund's cash flows into a stock market index.

Quality investing is an investment strategy based on a set of clearly defined fundamental criteria that seeks to identify companies with outstanding quality characteristics. The quality assessment is made based on soft (e.g. management credibility) and hard criteria (e.g. balance sheet stability). Quality investing supports best overall rather than best-in-class approach.

In finance, return is a profit on an investment. It comprises any change in value of the investment, and/or cash flows (or securities, or other investments) which the investor receives from that investment over a specified time period, such as interest payments, coupons, cash dividends and stock dividends. It may be measured either in absolute terms (e.g., dollars) or as a percentage of

In mathematical finance, a replicating portfolio for a given asset or series of cash flows is a portfolio of assets with the same properties (especially cash flows). This is meant in two distinct senses: static replication, where the portfolio has the same cash flows as the reference asset (and no changes need to be made to maintain this), and dynamic replication, where the portfolio doe

Securitization is the financial practice of pooling contractual debt obligations (such as residential mortgages, commercial mortgages, auto loans, or credit card debt) and selling their associated cash flows to investors. The financial instruments sold in such transactions are known as securities, types of which include bonds, pass-through securities, and collateralized debt obligations

In finance, a swap is a derivative in which two parties agree to exchange one stream of cash flows for another, based on some agreed formula. An example is a floating-for-fixed interest rate swap, which calls for (a) payments by one party based on the product of a floating interest rate and a fixed amount, called the notional, in exchange for (b) payments by the counterparty based on the

In finance, the terminal value (also known as “continuing value” or “horizon value” or "TV") of a security is the present value at a future point in time of all future cash flows when we expect stable growth rate forever. It is most often used in multi-stage discounted cash flow analysis, and allows for the limitation of cash flow projections to a several-year period; see Forecast period