What is Excess of Loss Reinsurance? Excess of loss reinsurance is a specific type of reinsurance where the ceding company is compensated for losses that exceed a specified limit. The purpose of an excess of loss reinsurance is to assist insurance companies with managing risk. It is a form of non-proportional reinsurance that is centrally…
What is the Hedonic Regression Method? The hedonic regression method is a regression technique used to determine the value of a good, service, or asset by fractionating the product into constituent parts or characteristics. It is done to determine the contributory value of each characteristic separately through regression analysis. The regression model should be able…
What is the Flat Yield Curve? A flat yield curve is a type of yield curve that occurs when anticipated interest rates are steady, or short-term volatility outweighs long term volatility. It signifies that the difference between yields on short-term and long-term bonds minimize, in effect giving no incentives for investors and lenders to lend…
Who is Joseph Schumpeter? Political economist Joseph Schumpeter was born on February 8, 1883 in Moravia, the Czech Republic. Schumpeter was one of the most influential and renowned 20th-century economists and promoted the phrase “creative destruction,” an economic concept. Joseph Schumpeter’s Early Life Joseph Schumpeter was born in Triesch, Czech Republic. His parents were German…
Who is Joseph Stiglitz? Joseph Eugene Stiglitz is a renowned American economist. In 2001, Stiglitz was awarded the Nobel Prize for Economics for his foundational theory of markets with asymmetric information. He received the award together with fellow American economists Michael Spence and George Akerlof. Joseph Stiglitz’s Life and Career Joseph Stiglitz was born in…
What is the Joseph Effect? The Joseph Effect, which derives its name from a Biblical reference, is a phrase created by Benoit Mandelbrot, a Polish-born French-American mathematician. The phrase asserts that variations over time are normal and often part of wider trends and patterns, instead of being random. In essence, the Joseph Effect indicates whether…
What is a Fiscal Deficit? A fiscal deficit occurs when a government spends more money than it takes in. Government expenditures are usually measured on an annualized basis. A deficit is said to be occurring if, within that one-year period, the government does not take in more revenue than it spends. The simplified formula to…
What is a Hedging Transaction? In finance, a hedging transaction is a strategic action that investors use to reduce the risk of losing money while executing their investing strategy. There are many types of hedging transactions, but they generally involve derivatives, such as options or futures contracts. They are frequently used for businesses looking to lower…
What is the Keltner Channel? Keltner Channel refers to a technical analysis indicator composed of three separate lines. It includes a central moving average line along with channel lines located above and below the central one. History of the Keltner Channel The Keltner Channel is named after American grain trader Chester W. Keltner, who described…
What is the Kelly Criterion? The Kelly Criterion is a mathematical formula for bet sizing, which is frequently used by investors to decide how much money they should allocate to each investment or bet through a predetermined fraction of assets. It is popular because it typically leads to higher wealth in the long run compared…
