What is the Endowment Effect? The endowment effect is a principle in behavioral psychology that describes the tendency of people to value an object that they own higher than they would value if they didn’t own it. Their valuation of an owned object will often be higher than its true fair market value. The endowment…
What is the Equity-Efficiency Tradeoff? The equity-efficiency tradeoff occurs when maximizing the productive efficiency of the market leads to less equitable wealth distribution. In welfare economics, there is said to be a tradeoff between market efficiency and market equity. An efficient market implying Pareto efficiency refers to the outcome of a set of exchanges between decision-making…
What is Social Justice? Social justice refers to a political and philosophical theory that focuses on the concept of fairness in relations between individuals in society and equal access to wealth, opportunities, and social privileges. History and Evolution of Social Justice The concept of social justice first arose in the 19th century during the Industrial…
What is Expiration Time (in Options)? Expiration time in options trading occurs on the third Saturday of the expiration month at 11:59 a.m. EST. The expiration time is not to be confused with the last day to trade options, which is the third Friday of the expiration month. The expiration time is the moment when…
What is an Export Credit Agency (ECA)? An export credit agency (ECA) is an institution that works to support companies with their international trade. Export credit agencies can be private, quasi-governmental, or entirely run by the government. They offer financing solutions and risk insurance (guarantees) for companies trying to export and import products. An ECA’s…
What is Volatility Quote Trading? Volatility quote trading is a form of investment that focuses on the volatility that a security is estimated to experience in the future. Unlike a regular investment, volatility quote trading does not consider the price or intrinsic value of the investment; instead, it looks at the likelihood of volatility. In…
What is the Hedonic Treadmill? The hedonic treadmill is a theory based on the observation that there is a tendency for people to quickly return to a relatively stationary level of happiness or “set point” despite experiencing major positive or negative events or life changes. The hedonic treadmill is also known as hedonic adaptation. Adaptation…
What is Quote Stuffing? Quote stuffing is the practice of entering, and then immediately canceling, a massive number of orders to buy or sell stocks. It is a tactic employed by high-frequency traders (HFT) in an attempt to profit by manipulating the market price of a stock or stock index. Basically, a trader is “stuffing”…
What is the Queuing Theory? The Queuing Theory is concerned with studying all the various dynamics of lines – or “queues” – and how they may be made to operate more efficiently. It is essentially the study of “waiting in line,” including how people behave when they have to queue up to make a purchase…
What is a Debit Note? A debit note is a commercial document, common in business to business (B2B) transactions, that either buyers or sellers may use regarding the amount due for a sale of goods or services. It is essentially an additional note related to an invoice, usually indicating the need to adjust the invoiced…
