- Earnings per share
- Earnings calculated by dividing the earnings available to
common stock holders by the weighted average number of common shares
outstanding over the year for which the calculation takes place.
- Earnings surprises
- Positive or negative differences from the consensus forecast.
- Economic surplus
- For any entity, the difference between the market value of all its
assets and the market value of its liabilities.
- Effective convexity
- The convexity of a bond calculated with cash flows that change
- Effective date
- In an interest rate swap, the date the swap begins accruing interest.
- Effective duration
- The duration calculated using the approximate duration formula for
a bond with an embedded option, reflecting the expected change in the cash flow
caused by the option.
- Efficient portfolio
- A portfolio that provides the greatest expected return for a given
level of risk, or equivalently, the lowest risk for a given expected return.
- Embedded option
- An option that is part of the structure of a bond, as opposed to a
bare option, which trades separately from any underlying security.
- Emerging markets
- The financial markets of developing economies.
- Endowment funds
- Investment funds established for the support of institutions such
as colleges, private schools, museums, hospitals, and foundations. The investment
income may be used for the operation of the institution and for capital expenditures.
- Enhanced indexing
- Also called indexing plus, an indexing strategy whose objective
is to exceed the total return performance of the index.
- Equilibrium market price of risk
- The slope of the capital market line (CML). Since
the CML represents the return offered to compensate for a perceived level of risk,
each point on the line is a balanced market condition, or equilibrium. The slope of the
line determines the additional return needed to compensate for a unit change in risk.
- The residual dollar value of a futures trading account, assuming its liquidation
at the going market price.
- Equity cap
- An agreement in which one party, for an upfront premium, agrees to
compensate the other at specific time periods if a designated stock market benchmark
is greater than a predetermined level.
- Equity claim
- Also called a residual claim, a claim to a share of earnings after debt
obligation, have been satisfied.
- Equity collar
- The simultaneous purchase of an equity floor and sale of an equity
- Equity floor
- An agreement in which one party agrees to pay the other at specific
time periods if a specific stock market benchmark is less than a predetermined level.
- Equity-linked policies
- Related: Variable life
- Equity market
- Related: Stock market
- Equity options
- Options in which the underlying is either a stock or a stock index.
- Equity swap
- A swap in which the cash flows that are exchanged are based on the
total return on some stock market index and an interest rate (either a fixed rate or a
floating rate). Related: Interest rate swap.
- Equivalent taxable yield
- The yield that must be offered on a taxable bond issue to
give the same after-tax yield as a tax-exempt issue.
- Euro straight
- A fixed-rate coupon Eurobond
- A bond that is (1) underwritten by an international syndicate, (2) offered at
issuance simultaneously to investors in a number of countries, and (3) issued outside
the jurisdiction of any single country.
- Eurodollar bonds
- Eurobonds denominated in U.S. dollars.
- Euroequity issues
- Securities sold in the Euromarket. That is, securities initially sold
to investors simultaneously in several national markets by an international syndicate.
Euromarket. Related: External market
- European option
- Option that may be exercised only at the expiration date. Related: American
- Euroyen bonds
- Eurobonds denominated in Japanese yen.
- Evaluation period
- The time interval over which a money manager's performance is
- Evening up
- Buying or selling to offset an existing market position. Related: Buy in,
- Event risk
- The risk that the ability of an issuer to make interest and principal
payments will change because of (1) a natural or industrial accident or some
regulatory change or (2) a takeover or corporate restructuring.
- Exante return
- The expected return of a portfolio based on the expected returns of its
component assets and their weights.
- Ex post return
- Related: Holding period return
- Except for opinion
- An auditor's opinion reflecting the fact that the auditor was unable
to audit certain areas of the company's operations because of restrictions imposed by
management or other conditions beyond the auditor's control.
- Excess reserves
- Any excess of actual reserves above required reserves.
- Excess returns
- Also called abnormal returns, returns In excess of those required by
some asset pricing model.
- Exchange rate risk
- Also called currency risk, the risk of an investment's value
changing because of currency exchange rates.
- Exchangeable security
- A security that grants the securityholder the right to
exchange the security for the common stock of a firm other than the issuer of the
- Execution costs
- The difference between the execution price of a security and the
price that would have existed in the absence of a trade, which can be further divided
into market impact costs and market timing costs.
- The conversion of the option by the holder into the appropriate long or
short underlying futures contract.
- Exercise price
- The price at which the underlying future or options contract may be
bought or sold.
- Expectations theories
- Theories including the pure expectations theory, the liquidity
theory of the term structure, and the preferred habitat theory, which share a
hypothesis about the behavior of short-term forward rates and also assume that the
forward rates in current long-term contracts are closely related to the market's
expectations about future short-term rates. These three theories differ, however, on
whether other factors also affect forward rates, and how.
- Expected return
- The return expected on a risky asset based on a probability
distribution for the possible rates of return.
- Expected value
- The weighted average of a probability distribution.
- Charged to an expense account, fully reducing reported profit of that
year, as is appropriate for expenditures for items with useful lives under one year.
- Expiration date
- The last day upon which an option can be exercised.
- Expiration date The date when an option contract ends.
- External efficiency
- Related: Pricing efficiency.
- External market
- Also referred to as the international market, the offshore market, or,
more popularly, the Euromarket, the mechanism for trading securities that (1) at
issuance are offered simultaneously to investors in a number of countries and (2) are
issued outside the jurisdiction of any single country. Related: Internal market
- 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.
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