Finance

Electronic Banking (Finance)

Electronic banking is a generic term encompassing the use of increasingly sophisticated, computer-based technologies for delivering, transferring, recording, and developing banking and related financial services. Payments, fund s transfers, and related services are generally regarded as the core elements of electronic banking, but the wider meaning of electronic banking covers back-office functions like bank accounting […]

Eurocredit Markets (Finance)

During the past two decades various international financial markets have grown very rapidly. This growth was accompanied by changes in the process of international financial intermediation (Bloch, 1989; Courtadon, 1985 ; Miller, 1986). Our purpose here is to survey some of the recent developments in the international credit market. Specifically, we will review some of […]

Event Studies (Finance)

The term “event study” describes an empirical research design widely used in finance and accounting. Event studies employ a common general methodology aimed at studying the impact of specified economic or financial events on security market behavior. The occurrence of an event is used as the sampling criterion and the objective of the research is […]

Expectations (Finance)

Expectations arise when the economic agents make decisions in a world involving uncertainty. If we were living in a world of perfect information with unbounded rationality, the notion of expectation would be irrelevant. Unfortunately, the reality of the world is much more complex than captured by theoretical models. The concept of expectations, like love, has […]

Exotic Options (Finance)

Exotic options are possibly defined as all options that are not “vanilla” options, with a predefined (or constant) exercise price and time to expiration, and where there is one underlying asset. Thus exotic options may have uncertain exercise prices, expiration times, and several underlying assets, which may not follow lognormal or normal diffusion processes. Characteristic […]

Experimental Asset Markets (Finance)

Experimental asset markets are multiple-period laboratory double-auction markets utilizing human subjects who trade asset units with fundamental values determined by well-defined (perhaps stochastic) dividend streams. Traders’ monetary payoffs are typically tied to individual performance, e.g. traders attempt to maximize earnings in the form of per share dividend payments and capital gains. The seminal work on […]

Foreign Exchange Management (Finance)

The value of a firm can be thought as the net present value of all expected cash flows. If the firm’s future cash flows are largely affected by changes in exchange rates the firm is said to have large foreign exchange exposure. Traditionally the foreign exchange exposure is divided into three elements (Eiteman et al., […]

Financial Distress (Finance)

A firm is considered in financial distress when its cash flow is not sufficient to cover current obligations. Firms need not be declared bankrupt at the moment this situation occurs. In most European countries and in the United States, creditors can only ask the court to invoke the “bankruptcy” procedure when the firm cannot pay […]

Fat Tails in Finance

Fat tails refer to the excessive probability of “extreme” observations in a distribution. Natural disasters are a fact of life. They tend to have disastrous consequences, but fortunately, occur very rarely. Except for the occasional last-minute warning, they also have the nasty habit of being unpredictable. However, that does not imply that their probability is […]

Futures and Forwards (Finance)

A forward or futures contract is one in which completion (in terms of the payment and matching delivery of goods) is deferred, as opposed to spot or cash transactions where the entire transaction takes place immediately. The principal uses of forward and futures contracts are hedging, speculation, arbitrage and spread trading. Foward and futures contracts […]

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