Business / Finance Glossary

Expectations Hypothesis Theories: Refers to options that are more complex than simple puts or call options. For example, a Caput is a call option on a put option.

Expectations Theory Of Forward Exchange Rates: Theories of the term structure of interest rates, which include the pure expectations theory; the liquidity theory of the term structure, and the preferred habitat theory. These theories hol . . . View Full Definition

Expected Dividend Yield: A theory of foreign exchange rates that states that the expected future spot foreign exchange rate t periods from now equals the current t-period forward exchange rate.

Expected Future Cash Flows: Total amount of dividends received during the life of a futures contract or total dividends received for holding a particular stock one year. See: Current yield.

Expected Future Return: Projected future cash flows associated with an asset.

Expected Return: The return that is expected to be earned on an asset in the future. Also called the expected return.

Expected Return On Investment: The expected return on a risky asset, given a probability distribution for the possible rates of return. Expected return equals some risk-free rate (generally the prevailing U.S. Treasury no . . . View Full Definition

Expected Return-Beta Relationship: The return one can expect to earn on an investment. See: Capital asset pricing model.

Expected Value: Implication of the CAPM that security risk premiums will be proportional to beta.

Expected Value Of Perfect Information: The weighted average of a probability distribution. Also known as the mean value.

Expenditures: The expected value if the future uncertain outcomes could be known minus the expected value with no additional information.

Expense Ratio: All purchases made by a business, whether in cash or on credit; not equivalent to expenses. Also known as costs.

Expensed: The percentage of the assets that are spent to run a mutual fund (as of the last annual statement). This includes expenses such as management and advisory fees, overhead costs, and 12b-1 (di . . . View Full Definition

Expenses: Charged to an expense account, fully reducing reported profit of that year, as is appropriate for expenditures for items with useful lives under one year.

Experience Rating: Resources used to support the ongoing operations of a business for a specified time period; not equivalent to expenditures or costs.

Expiration: A technique insurance companies use to determine the correct price of a policy premium.

Expiration Cycle: The time an option contract lapses.

Expiration Date: Dates on which options on a particular security expire. A given option will be placed in one of three cycles; the January cycle, the February cycle, or the March cycle. At any time, an optio . . . View Full Definition

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