Pricing efficiency
Also called external efficiency, a market characteristic where prices at all times fully reflect all available information that is relevant to the valuation of securities. |
Similar financial terms
Yield curve option-pricing modelsModels that can incorporate different volatility assumptions along the yield curve, such as the Black-Derman-Toy model. Also called arbitrage-free option-pricing models.
Administrative pricing rules
IRS rules used to allocate income on export sales to a foreign sales corporation.
Underpricing
Issue of securities at a discount to their market value.
Two-state option pricing model
An option pricing model in which the underlying asset can take on only two possible (discrete) values in the next time period for each value it can take on in the preceding time period. Also called the binomial option pricing model.
Regulatory pricing risk
Risk that arises when regulators restrict the premium rates that insurance companies can charge.
Binomial option pricing model
An option pricing model in which the underlying asset can take on only two possible, discrete values in the next time period for each value that it can take on in the preceding time period.
Weak form efficiency
According to the Efficient Markets Hypothesis (EMH) the weak form is a form of pricing efficiency where the price of the security reflects the past price and trading history of the security. In such a market, security prices follow a random walk.
Strong-form efficiency
Pricing efficiency, where the price of a, security reflects all information, whether or not it is publicly available.
Semi-strong form efficiency
A form of pricing efficiency where the price of the security fully reflects all public information (including, but not limited to, historical price and trading patterns). Compare weak form efficiency and strong form efficiency.
Marketplace price efficiency
The degree to which the prices of assets reflect the available marketplace information. Marketplace price efficiency is sometimes estimated as the difficulty faced by active management of earning a greater return than passive management would, after adjusting for the risk associated with a strategy and the transactions costs associated with implementing a strategy.
Capital market efficiency
Reflects the relative amount of wealth wasted in making transactions. An efficient capital market allows the transfer of assets with little wealth loss.
