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.
Monetary approachMonetary approach
A framework for analyzing exchange rates and the balance of payments that focuses on supply and demand for money in different countries. A floating exchange rate is assumed to equate supply and demand and thus to reflect relative growth rates of money supplies and determinants of demand. Under a pegged exchange rate, the balance of payments surplus or deficit equals the excess demand or supply, respectively, for a country's money.
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.
Variance minimization approach to trackingVariance minimization approach to tracking
An approach to bond indexing that uses historical data to estimate the variance of the tracking error.
Risk premium approachRisk premium approach
A common approach for tactical asset allocation to determine the relative valuation of asset classes based on expected returns.
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.
Further SuggestionsMarket Value Approach
Residual dividend approach
Optimization approach to indexing
Top down approach
Debt service parity approach
Stratified sampling approach to indexing
Cross sectional approach