What is a Foreign Exchange Swap? A foreign exchange swap (also known as an FX swap) is an agreement to simultaneously borrow one currency and lend another at an initial date, then exchanging the amounts at maturity. It is useful for risk-free lending, as the swapped amounts are used as collateral for repayment. Understanding Foreign…
What is the Hamptons Effect? The Hamptons Effect refers to a decline in trading volume right before Labor Day weekend and an increase in volume right after the weekend. The concept was first established because many investors on Wall Street leave on vacation for the Labor Day weekend and cease all trading activity. The Labor…
What is the Healthcare Sector? The healthcare sector is one of 11 S&P sectors or GICS (Global Industry Classification Standard) used by the financial community. It is consistently in the top three most weighted sectors of the S&P 500 Index. The sector encompasses a wide range of businesses that pertain to the creation and provision…
What is Freddie Mac? Freddie Mac is the unofficial title for the Federal Home Loan Mortgage Corporation, a federally-backed government-sponsored enterprise created in 1970 to broaden the secondary mortgage market and deflate interest rate risk for banks. According to its charter, Freddie Mac “establishes secondary market facilities for residential mortgages [and] provides that the operations…
What is a Follow-On Offering? A follow-on offering (FPO) is when a public company issues more shares after their initial public offering (IPO). It happens when the company wants to raise more capital by giving out additional shares to finance projects, pay their debt, or make acquisitions. When a company is issuing a follow-on offering,…
What is Forbearance? Forbearance is a term that refers to the temporary reduction or postponement of payments, such as for loans or mortgages. It happens when the lender grants the borrower momentary relief from paying off their debt due to hardships such as unemployment, injuries, illnesses, or natural disasters. If you are a borrower and…
What is the Heath-Jarrow-Morton Model? The Heath-Jarrow-Morton Model – also known as the HJM Model – is a framework to represent forward interest rates using an existing term structure of interest rates. The model was created based on the work developed by David Heath, Robert A. Jarrow, and Andrew Morton during the late 1980s. Their…
Who is Harry Markowitz? Harry Markowitz is an American economist and creator of the influential Modern Portfolio Theory (MPT) still widely used today. Harry Markowitz Biography Harry Markowitz was born in Chicago, Illinois, on August 24, 1927. After completing his bachelor’s in philosophy at the University of Chicago, Markowitz returned to the university for a…
What is the Hang Seng Index (HSI)? The Hang Seng Index (HSI) is a stock market index in Hong Kong. It records and monitors the daily changes in stock prices of the 50 largest Hong Kong stock market companies. As the companies represent almost 60% of the Hong Kong Stock Exchange, the Hang Seng Index…
What is Hard Call Protection? Hard call protection, also known as absolute call protection, is a requirement in a callable bond where the issuer does not have the ability to exercise the call before the specified date in the agreement. A callable bond is a type of bond where the issuer is allowed to redeem…
