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Random walk with drift
| Глоссарий экономических терминов |
For a random walk with drift, the best forecast of tomorrow`s price is today`s price plus a drift term. one could think of the drift as measuring a trend in the price (perhaps reflecting long-term inflation). given the drift is usually assumed to be constant. related: mean reversion.
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Reflecting, английский
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Strike index, английский
For a stock index option, the index value at which the buyer of the option can buy or sell the underlying stock index. the strike index is converted to a dollar value by multiplying by the option`s contract multiple. related: strike price.
Net asset value arbitrage, английский
For a number of assets, the most recent transaction price at 4pm et does not fully reflect all available market information. one example is international equities that trade on exchanges that are located in different time zones and close 2-15 hours before u.s. markets. in addition, domestic small-capitization equities and high-yield and convertible bonds often trade infrequently and have wide bid-ask spreads. this can cause the most recent transaction price to be much different from the price that one would see in a liquid market at 4 pm, even for assets that trade on exchanges that are open at that time. investors can take advantage of mutual funds that calculate their navs using stale closing prices by trading based on recent market movements. for example, if the u.s. market has risen since the close of overseas equity markets, investors can expect that overseas markets will open higher the following morning. investors can buy a fund with a stale-price nav for less than its current value, and they can likewise sell a fund for more than its current value on a day that the u.s. market has fallen. similar opportunities exist when the values of infrequently or illiquidly-traded domestic assets have recently changed. also known as stale price arbitrage.
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