Asset approachA theory of determination of the exchange rate that focuses on its role as the price of an asset. With high capital mobility, equilibrium requires that expected returns on comparable domestic and foreign assets be the same.
Elasticities approachElasticities approach
1. The method of analyzing the determination of the balance of trade, especially due to a devaluation, that focuses on the price elasticities of exports and imports. According to this approach, the effect depends criticalliy on the Marshall-Lerner Condition. 2. The explanation of exchange rates using supply and demand curves.
Risk premium approachRisk premium approach
A common approach for tactical asset allocation to determine the relative valuation of asset classes based on expected returns.
Top down approachTop down approach
A method of security selection that starts with asset allocation and works systematically through sector and industry allocation to individual security selection.
Signaling approachSignaling approach
Notion that insiders in a firm have information that the market does not have, and that the choice of capital structure by insiders can signal information to outsiders and change the value of the firm. This theory is also called the asymmetric information approach.
Debt service parity approachDebt service parity approach
Payment alternatives that provide the firm with the exact same schedule of after-tax debt payments (including both interest and principal).
Further SuggestionsCross sectional approach
Variance minimization approach to tracking
Residual dividend approach
Market Value Approach
Optimization approach to indexing
Stratified sampling approach to indexing