BANKING AND FINANCIAL TERMS

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Agency cost viewThe argument that specifies that the various agency costs create a complex environment in which
total agency costs are at a minimum with some, but less than 100%, debt financing.
Agency  basis  A  means  of  compensating  the  broker  of  a  program  trade  solely  on  the  basis  of  commission
established  through  bids  submitted  by  various  brokerage  firms.  agency  incentive  arrangement.  A  means  of
compensating  the  broker  of  a  program  trade  using  benchmark  prices  for  issues  to  be  traded  in  determining
commissions or fees.
Agency bank A form of organization commonly used by foreign banks to enter the U.S. market. An agency bank
cannot accept deposits or extend loans in its own name; it acts as agent for the parent bank.
Agencies Federal agency securities.
After-tax real rate of return Money after-tax rate of return minus the inflation rate.
After-tax profit margin The ratio of net income to net sales.
Affirmative covenant A bond covenant that specifies certain actions the firm must take.
Adverse selection A situation in which market participation is a negative signal.
Advance commitment A promise to sell an asset before the  seller has lined up purchase of the asset. This seller
can offset risk by purchasing a futures contract to fix the sales price.
Administrative pricing rules IRS rules used to allocate income on export sales to a foreign sales corporation.
Adjusted  present  value  (APV)  The  net  present  value  analysis  of  an  asset  if  financed  solely  by  equity (present  
value  of  un-levered  cash  flows),  plus  the  present  value  of  any  financing  decisions  (levered  cash flows).  In  other  
words,  the  various  tax  shields  provided  by  the  deductibility  of  interest  and  the  benefits  of other  investment  tax  
credits  are  calculated  separately.  This  analysis  is  often  used  for  highly  leveraged transactions such as a leverage
buy-out.
Adjustable rate preferred stock (ARPS) :Publicly traded issues that may be collateralized by mortgages and
MBSs.
Additional hedge :A protection against borrower fallout risk in the mortgage pipeline.
Actuals :The physical commodity underlying a futures contract. Cash commodity, physical.
Active  portfolio  strategy  :A  strategy  that  uses  available  information  and  forecasting  techniques  to  seek  a better
performance than a portfolio that is simply diversified broadly. Related: passive portfolio strategy
Active :A market in which there is much trading.
Act of state doctrine :This doctrine says that a nation is sovereign within its own borders and its domestic
actions may not be questioned in the courts of another nation.

 

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