Agency costs
The cost of resolving the agency problem. These might include stock options and bonus schemes to managers. |
Similar financial terms
Agency sectorSecurities issued by federally related institutions and government sponsored enterprises such as the Federal Home Loan Mortgage Corporation, Fannie Mae and Freddy Mac Foundation.
Agency problem
The conflict of interest between principal (e.g. shareholders) and agent (e.g. managers) in which agents have an incentive to act in their own self-interest because they bear less than the total costs of their actions.
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.
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 cost view
The 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 pass-throughs
Mortgage pass-through securities whose principal and interest payments are guaranteed by government agencies, such as the Government National Mortgage Association (" Ginnie Mae "), Federal Home Loan Mortgage Corporation (" Freddie Mac") and Federal National Mortgage Association (" Fannie Mae").
Agency theory
The analysis of principal-agent relationships, wherein one person, an agent, acts on behalf of anther person, a principal.
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.
Transactions costs
The transactions costs are the expenses to the execution of a trade. It includes the commissions plus the difference between the price obtained and the midpoint of the bid-offer spread.
Storage costs
The cost of storing commodity.
Direct costs
Costs related directly to sales.
Trading costs
Costs of buying and selling marketable securities and borrowing. Trading costs include commissions, slippage, and the bid/ask spread. See: transaction costs.
Sunk costs
Costs that have been incurred and cannot be reversed.
Search costs
Costs associated with locating a counterparty to a trade, including explicit costs (such as advertising) and implicit costs (such as the value of time).
Round-trip transactions costs
Costs of completing a transaction, including commissions, market impact costs, and taxes.
Opportunity costs
The difference in the performance of an actual investment and a desired investment adjusted for fixed costs and execution costs. The performance differential is a consequence of not being able to implement all desired trades. Most valuable alternative that is given up.
Market timing costs
Costs that arise from price movement of the stock during the time of the transaction which is attributed to other activity in the stock.
Market impact costs
Also called price impact costs, the result of a bid/ask spread and a dealer's price concession.
Carring costs
Costs that increase with increases in the level of investment in current assets.
Fixed costs
Production expenses that are independent of the level of output. Fixed costs could include debt repayments, security costs and marketing and administration costs.
