Capital Adequacy Ratio

The capital adequacy ratio (CAR) is an indicator of how well a bank can meet its obligations. Also known as the capital-to-risk weighted assets ratio (CRAR), the ratio compares capital to risk-weighted assets and is watched by regulators to determine a bank's risk of failure. It's used to protect depositors and promote the stability and efficiency of financial systems around the world.Two types of capital are measured:Tier-1 capital, core funds on hand to manage losses so that a bank can continue operating and,Tier-2 capital, a secondary supply of funds available from the sale of assets once a bank closes down.

Margin Call

A margin call occurs when the percentage of an investor’s equity in a margin account falls below the broker’s required amount. An investor’s margin account contains securities bought with a combination of the investor’s own money and money borrowed from the investor’s broker.A margin call refers specifically to a broker’s demand that an investor deposit additional money or securities into the account so that the value of the investor's equity (and the account value) rises to a minimum value indicated by the maintenance requirement.A margin call is usually an indicator that securities held in the margin account have decreased in value. When a margin call occurs, the investor must choose to either deposit additional funds or marginable securities in the account or sell some of the assets held in their account.

Weekly Premium Insurance

Weekly premium insurance is a type of financial protection where the payments that the insured makes in return for coverage are paid weekly.This type of insurance was introduced by Prudential in 1875 and was common in the late 1800s and early 1900s. At that time, insurers were unable to get insurance with monthly premium payments to catch on with consumers. The small weekly premium payments were designed to match up with workers' pay schedules and modest incomes. Weekly premium insurance is also known as industrial life insurance.

Cyclical Industry

A cyclical industry is a type of industry that is sensitive to the business cycle, such that revenues generally are higher in periods of economic prosperity and expansion and are lower in periods of economic downturn and contraction. Companies in cyclical industries can deal with this type of volatility by implementing employee layoffs and cuts to compensate during bad times and paying bonuses and hiring en masse in good times.

Cyclical Unemployment

Cyclical unemployment is the component of overall unemployment that results directly from cycles of economic upturn and downturn. Unemployment typically rises during recessions and declines during economic expansions. Moderating cyclical unemployment during recessions is a major motivation behind the study of economics and the goal of the various policy tools that governments employ to stimulate the economy.

Cyclical Stocks

A cyclical stock is a stock that's price is affected by macroeconomic or systematic changes in the overall economy. Cyclical stocks are known for following the cycles of an economy through expansion, peak, recession, and recovery. Most cyclical stocks involve companies that sell consumer discretionary items that consumers buy more during a booming economy but spend less on during a recession.

Viager

A "viager" is a real estate transaction, popular in France, where the buyer makes a down payment and then a series of payments for as long as the seller is alive.

Medium Term Note

A medium-term note (MTN) is a note that usually matures in five to 10 years. A corporate MTN can be continuously offered by a company to investors through a dealer with investors being able to choose from differing maturities, ranging from nine months to 30 years, though most MTNs range in maturity from one to 10 years.

Quality Control Charts

A quality control chart is a graphic that depicts whether sampled products or processes are meeting their intended specifications. If not, the chart will show the degree by which they vary from specifications. A quality control chart that analyzes a specific attribute of a product is called a univariate chart, while a chart measuring variances in several product attributes is called a multivariate chart. Randomly selected products are tested for the given attribute(s) the chart is tracking.

Spiders

Spider (SPDR) is a short form name for a Standard & Poor's depository receipt, an exchange-traded fund (ETF) managed by State Street Global Advisors that tracks the Standard & Poor's 500 index (S&P 500). Each share of an SPDR contains a 10th of the S&P 500 index and trades at roughly a 10th of the dollar-value level of the S&P 500. SPDRs can also refer to the general group of ETFs to which the Standard & Poor's depositary receipt belongs.

Straight-Through Processing

Straight-through processing is an automated process done purely through electronic transfers with no manual intervention involved. Its popular uses are in payment processing as well as the processing of securities trades. Any company involved with straight-through processing will need to have the necessary systems and technical networking in place to facilitate STP efficiency.

Helicopter Drop

A helicopter drop refers to a term first coined by Milton Friedman as a rhetorical device intended to abstract away the effects of any monetary policy transmission mechanisms in a thought experiment regarding the addition of cash to the bank accounts of all citizens—as if dropped from a helicopter overnight.

Gibraltar Pound

The Gibraltar pound (abbreviated as GIP) is the official currency for the country of Gibraltar. The Gibraltar pound is pegged at par value to the British pound sterling, at a fixed exchange rate.

Security Market Line

The security market line (SML) is a line drawn on a chart that serves as a graphical representation of the capital asset pricing model (CAPM)—which shows different levels of systematic, or market risk, of various marketable securities, plotted against the expected return of the entire market at any given time.Also known as the "characteristic line," the SML is a visualization of the CAPM, where the x-axis of the chart represents risk (in terms of beta), and the y-axis of the chart represents expected return. The market risk premium of a given security is determined by where it is plotted on the chart relative to the SML.

Positive Economics

The term positive economics refers to the objective analysis in the study of economics. Most economists look at what has happened and what is currently happening in a given economy to form their basis of predictions for the future. This investigative process is positive economics. Conversely, a normative economic study bases future predictions on value judgments.

Discounted Payback Periods

The discounted payback period is a capital budgeting procedure used to determine the profitability of a project. A discounted payback period gives the number of years it takes to break even from undertaking the initial expenditure, by discounting future cash flows and recognizing the time value of money. The metric is used to evaluate the feasibility and profitability of a given project.The more simplified payback period formula, which simply divides the total cash outlay for the project by the average annual cash flows, doesn't provide as accurate of an answer to the question of whether or not to take on a project because it assumes only one, upfront investment, and does not factor in the time value of money.

Discount Yield

The discount yield is a way of calculating a bond's return when it is sold at a discount to its face value, expressed as a percentage. Discount yield is commonly used to calculate the yield on municipal notes, commercial paper and treasury bills sold at a discount.

Prospectus

A prospectus is a formal document required by and filed with the Securities and Exchange Commission (SEC) that provides details about an investment offering to the public. A prospectus is filed for offerings of stocks, bonds, and mutual funds.The prospectus can help investors make more informed investment decisions because it contains a host of relevant information about the investment or security. In areas other than investing, a prospectus is a printed document that advertises or describes an offering such as a school, commercial enterprise, forthcoming book, etc. All forms of prospectus exist to attract or inform clients, members, buyers, or investors.

Book-To-Market Ratio

The book-to-market ratio is one indicator of a company's value. The ratio compares a firm's book value to its market value. A company's book value is calculated by looking at the company's historical cost, or accounting value. A firm's market value is determined by its share price in the stock market and the number of shares it has outstanding, which is its market capitalization.

Long-Legged Doji

The long-legged doji is a candlestick that consists of long upper and lower shadows and has approximately the same opening and closing price, resulting in a small real body.

Bond Yield

A bond yield is the return an investor realizes on a bond. Put simply, a bond yield is the return on the capital invested by an investor. Bond yields are different from bond prices—both of which share an inverse relationship. The yield matches the bond's coupon rate when the bond is issued. Bond yields can be derived in different ways, including the coupon yield and current yield. Additional calculations of a bond's yield include yield to maturity (YTM) among others.