asset

Examples of asset in the following topics:

• The Capital Account

  • The capital account acts as a sort of miscellaneous account, measuring non-produced and non-financial assets, as well as capital transfers.
  • The first is a broad interpretation that reflects the net change in ownership of national assets.
  • The capital account can be split into two categories: non-produced and non-financial assets, and capital transfers.
  • Non-produced and non-financial assets include things like drilling rights, patents, and trademarks.
  • Capital transfers include debt forgiveness, the transfer of goods and financial assets by migrants leaving or entering a country, the transfer of ownership on fixed assets, the transfer of funds received to the sale or acquisition of fixed assets, gift and inheritance taxes, death levies, and uninsured damage to fixed asset.

• The Relationship Between Risk and Return and the Security Market Line

  • In finance, the capital asset pricing model (CAPM) is used to determine the required rate of return of an asset, taking into account an asset's sensitivity to non-diversifiable or systematic risk.
  • Non-diversifiable risk is noted by the variable beta (β), where beta is greater than one if the asset's price sensitivity is greater than the market; equal to one when the asset's sensitivity is equal to the market; and less than one if the asset exhibits less pricing volatility than the market.
  • The expected return of an asset is equal to the risk free rate plus the excess return of the market above the risk-free rate, adjusted for the asset's overall sensitivity to market fluctuations or its beta.
  • Mathematically, the capital asset pricing model can be written as: E(Ri) = Rf + β(E(Rm) - Rf), where R is the return, E(R) is the expected return, i denotes any asset, f is the risk-free asset, and m is the market.
  • The SML essentially graphs the results from the capital asset pricing model formula.

• The Value of Diversification

  • The compensation adjustment for holding an asset of a given risk profile can be further enhanced through asset diversification.
  • The risks that are inherent to a specific investment can be compensated for by a market-assessed risk premium, whereby market participants adjust the price of an asset, impacting its overall return, based on the risk characteristics of the asset.
  • However, the compensation adjustment for holding an asset of a given risk profile can be further enhanced through asset diversification.
  • Through diversification, an investor's entire portfolio can perform better than its worst-performing asset.
  • In general, most asset managers would advocate holdings that are diversified across sectors and asset classes to further the benefit of growth and reduce the risk of performance volatility that may be attributable to a company, sector, or asset class .

• Finding an Equilibrium Exchange Rate

  • The increase in capital flows has given rise to the asset market model.
  • Asset prices are influenced mostly by people's willingness to hold the existing quantities of assets, which in turn depends on their expectations on the future worth of the assets.
  • The asset market model of exchange rate determination states that the exchange rate between two currencies represents the price that just balances the relative supplies of, and demand for, assets denominated in those currencies.
  • These assets are not limited to consumables, such as groceries or cars.
  • The key difference between the balance of payments and asset market models is that the former includes financial assets, such as stock, in its calculation.

• Measuring and Managing Risk

  • Risk is pervasive in the economy and is an essential component in the derivation of an asset's investment return.
  • Assets can have varying maturity dates and potential for default, the attribution of time to maturity and timely payments involve an assessment of risk.
  • Risk is pervasive in the economy and is an essential component in the derivation of an asset's investment return.
  • This same phenomenon is true of financial assets.
  • For example, if asset A and asset B both pay a 5% coupon on an annual basis, but asset B matures in 5 years and asset A matures in 1 year, all else equal (asset quality and issuer solvency), we would expect asset A to trade at a higher price than asset B.

• The Financial Account

  • The financial account measures the net change in ownership of national assets.
  • A financial account surplus means that the net ownership of a country's assets is flowing out of a country - that is, foreign buyers are purchasing more domestic assets than domestic buyers are purchasing of assets from the rest of the world.
  • This occurs when domestic buyers are purchasing more foreign assets than foreign buyers are purchasing of domestic assets.
  • As with FDI, the income derived from these assets is recorded in the current account; the financial account entry will just be for any buying or selling of the portfolio assets in the international financial markets.
  • Likewise, a fall in the domestic interest rate will cause domestic investors to purchase foreign assets in place of domestic assets, and will cause a financial account deficit.

• Reason for a Zero Balance

  • Italian euros are also supplied when Italian purchasers acquire assets from other countries.
  • Exports + (foreign purchases of domestic assets) = imports + (domestic purchases of foreign assets)
  • Exports - imports = (domestic purchases of foreign assets) - (foreign purchases of domestic assets)
  • The right-hand term is the difference between the foreign assets that people within the country purchase and the domestic assets that are purchased by foreigners.
  • When a country buys more foreign assets that other countries buy of its assets, this balance is positive and there is a financial account surplus.

• Defining Capital

  • In economics, capital references non-financial assets used in the production of goods and services.
  • In economics, capital (also referred to as capital goods, real capital, or capital assets) references non-financial assets used in the production of goods and services.
  • Interest is a fee that is paid by a borrower of assets.
  • It is a form of compensation for the use of the assets.
  • It is a form of capital assets that is traded in financial markets.

• The Balance of Payments

  • This includes payments for the country's exports and imports, the sale and purchase of assets, and financial transfers.
  • Sources of funds include exports, the receipt of loans or investment, and income from foreign assets.
  • Whenever a country has an outflow of funds, such as when the country imports goods and services or when it invests in foreign assets, it is recorded as a debit on the balance of payments.
  • The financial account records the flow of assets from one country to another.
  • Debt forgiveness would affect the capital account, as would the purchase of non-financial and non-produced assets such as the rights to natural resources or patents.

• The Demand for Money

  • In economics, the demand for money is the desired holding of financial assets in the form of money (cash or bank deposits).
  • However inherent to the holding of money is the trade-off between the liquidity advantage of holding money and the interest advantage of holding other assets.
  • While the demand of money involves the desired holding of financial assets, the money supply is the total amount of monetary assets available in an economy at a specific time.