Term Structure Of Interest Rates

The Term Structure of Interest Rates, also known as the yield curve, illustrates the interest rates for similar-quality bonds with varying maturities. It reveals the market's expectations for future interest rate movements and the risk premiums associated with debts of different terms.The shape of the term structure of interest rates, such as rising, horizontal, or inverted, can provide important signals of economic conditions and market sentiment. Investors and economists analyze the yield curve to make investment decisions and predict macroeconomic trends.

Interest Rate Call Option

An interest rate call option is a derivative in which the holder has the right to receive an interest payment based on a variable interest rate, and then subsequently pays an interest payment based on a fixed interest rate. If the option is exercised, the investor who sells the interest rate call option will make a net payment to the option holder.

Rational Expectations Theory

The rational expectations theory is a concept and modeling technique that is used widely in macroeconomics. The theory posits that individuals base their decisions on three primary factors: their human rationality, the information available to them, and their past experiences.The theory suggests that people’s current expectations of the economy are, themselves, able to influence what the future state of the economy will become. This precept contrasts with the idea that government policy influences financial and economic decisions.

Rational Choice Theory

Rational Choice Theory is an analytical model that assumes individuals will make decisions that best serve their goals and interests within the constraints of the information and resources they have. The theory posits that individuals will weigh the costs and benefits of various options and choose the one that is expected to yield the greatest personal benefit.

Goldilocks Economy

A Goldilocks economy is not too hot or too cold but just right—to steal a line from the popular children's story . The term describes an ideal state for an economic system. In this perfect state, there is full employment, economic stability, and stable growth. The economy is not expanding or contracting by a large margin.A Goldilocks economy is thus warm enough with steady economic growth to prevent a recession; however, growth is not so hot as to push it into an inflationary status.

Brownfield Investment

A brownfield (also known as "brown-field") investment is when a company or government entity purchases or leases existing production facilities to launch a new production activity. This is one strategy used in foreign direct investment.The alternative to this is a greenfield investment, in which a new plant is constructed. The clear advantage of a brownfield investment strategy is that the buildings are already constructed. The costs and time of starting up may thus be greatly reduced and the buildings already up to code.Brownfield land, however, may have been abandoned or left unused for good cause, such as pollution, soil contamination, or the presence of hazardous materials.

Working-Age Population

The Working-Age Population refers to the total number of people within a specific age range who are considered capable and likely to participate in the labor force. This metric is commonly used to assess the size of a country's or region's labor market and the level of potential economic activity.The working-age population generally excludes children, students, retirees, and people who are unable to work due to health or other reasons. Understanding changes in the working-age population is critical to developing education, employment, retirement policies, and economic development planning.

Expanded Accounting Equation

The expanded accounting equation is derived from the common accounting equation and illustrates in greater detail the different components of stockholders' equity in a company.By decomposing equity into component parts, analysts can get a better idea of how profits are being used—as dividends, reinvested into the company, or retained as cash.

Quick Liquidity Ratio

The quick liquidity ratio is the total amount of a company’s quick assets divided by the sum of its netliabilities, and for insurance companies includes reinsurance liabilities. In other words, it shows how much easily-convertible-to-money assets, such as cash, short-term investments, equities, and corporate and government bonds nearing maturity, an insurance company can tap into on short notice to meet its financial obligations.The quick liquidity ratio is also commonly referred to as the acid-test ratio or the quick ratio.

Fear And Greed Index

The Fear & Greed Index is an index developed by CNN Business to measure investor sentiment. It indicates how emotions influence the way investors pay for stocks. The index provides a window into whether stocks are fairly priced at any given point in time. The Fear & Greed index is calculated daily, weekly, monthly, and yearly and is based on the logic that excessive fear will drive share prices down, and too much greed will drive prices up.

Bear Call Spread

A Bear Call Spread is an options trading strategy used when expecting a decline in the price of the underlying asset. This strategy involves selling a call option with a lower strike price while simultaneously buying a call option with a higher strike price but the same expiration date. The maximum profit from this strategy is capped at the net credit received at the trade's initiation, making it a strategy with limited risk and limited profit potential.

Transferable Letters Of Credit Work

A transferable letter of credit is a letter of credit that allows the first beneficiary to transfer some or all of the credit to another party, creating a secondary beneficiary. The party that initially accepts the transferable letter of credit from the bank is referred to as the first, or primary, beneficiary, while the party that applied for the letter of credit is the applicant. A transferable letter of credit is often used in business deals to ensure payment to a supplier or manufacturer and is an alternative to making an advance payment.

Negotiable Order Of Withdrawal

A Negotiable Order of Withdrawal Account is an interest-earning demand deposit account. A customer with such an account is permitted to write drafts against money held on deposit. A Negotiable Order of Withdrawal Account is also known as a "NOW Account."

Convertible Preferred Stock

Convertible preferred stocks are preferred shares that include an option for the holder to convert the shares into a fixed number of common shares after a predetermined date.Most convertible preferred stock is exchanged at the request of the shareholder, but sometimes there is a provision that allows the company, or issuer, to force the conversion. The value of a convertible preferred stock is ultimately based on the performance of the common stock.

Deliverables

The term "deliverables" is a project management term that's traditionally used to describe the quantifiable goods or services that must be provided upon the completion of a project. Deliverables can be tangible or intangible in nature. For example, in a project focusing on upgrading a firm's technology, a deliverable may refer to the acquisition of a dozen new computers.On the other hand, for a software project, a deliverable might allude to the implementation of a computer program aimed at improving a company's accounts receivable computational efficiency.

Available-For-Sale Security

An available-for-sale security (AFS) is a debt or equity security purchased with the intent of selling before it reaches maturity or holding it for a long period should it not have a maturity date. Accounting standards necessitate that companies classify any investments in debt or equity securities when they are purchased as held-to-maturity, held-for-trading, or available-for-sale. Available-for-sale securities are reported at fair value; changes in value between accounting periods are included in accumulated other comprehensive income in the equity section of the balance sheet.

Distributable Net Income

The term distributable net income (DNI) refers to income allocated from a trust to its beneficiaries. Distributable net income is the maximum amount received by a unitholder or a beneficiary that is taxable. This figure is capped to ensure there is no instance of double taxation. Any amount above the DNI is, therefore, tax-free.

Variable Overhead

Variable overhead is a term used to describe the fluctuating manufacturing costs associated with operating businesses. As production output increases or decreases, variable overhead expenses move in kind. Variable overhead differs from the general overhead expenditures associated with administrative tasks and other functions that have fixed budgetary requirements.Holding a firm grasp on variable overhead is useful in helping businesses correctly set their future product prices, in order to avoid overspending, which can cannibalize profit margins.

Variable Ratio Write

A variable ratio write is a strategy in options investing that requires holding a long position in the underlying asset while simultaneously writing multiple call options at varying strike prices. It is essentially a ratio buy-write strategy.The trader's goal is to capture the premiums paid for the call options. Variable ratio writes have limited profit potential. The strategy is best used on stocks with little expected volatility, particularly in the near term.

Kuwait Investment Authority

The term Kuwait Investment Authority (KIA) refers to a government-owned corporation responsible for managing the sovereign wealth fund of Kuwait. Founded out of the Kuwait Investment Board in 1982, it was established to manage government revenue, derived primarily from the excess proceeds Kuwait earns from its oil reserves. The fund—the world's first and oldest—was created to lessen the country's dependence on oil.

Bearish Engulfing Pattern

A bearish engulfing pattern is a technical chart pattern that signals lower prices to come. The pattern consists of an up (white or green) candlestick followed by a large down (black or red) candlestick that eclipses or "engulfs" the smaller up candle. The pattern can be important because it shows sellers have overtaken the buyers and are pushing the price more aggressively down (down candle) than the buyers were able to push it up (up candle).