What is an Underlying Security? Underlying security is a term in investing that denotes the negotiable financial instrument upon which a financial derivative, such as an option on a stock – is based. Therefore, the value of the underlying security also determines the value of its financial derivative. A financial derivative is defined as a…
What is Underlying Debt? Underlying debt is a term used to denote the debt obligation(s) of a smaller government entity that is guaranteed by a larger government entity in its jurisdiction. In such an instance, the larger entity considers the debt obligation issued by the smaller entity to be its underlying debt. The concept of…
What is an Underlying Asset? Underlying asset is an investment term that refers to the real financial asset or security that a financial derivative is based on. Thus, the value of the underlying asset drives the value of the financial derivative. (A derivative is simply a financial security or instrument that is derived from another…
What is Force Majeure? Force majeure is a concept in contract law that describes a clause, included in many contracts, that frees the parties to the contract from their contractual obligations in the event of highly unusual and unforeseen circumstances. The force majeure clause is triggered into effect by an extraordinary event or the occurrence…
What is the Fractal Indicator? The fractal indicator is a trading indicator used in technical analysis that is used to identify potential trend reversal points in a market. It was developed by a renowned trader, Bill Williams, and therefore is also referred to as the Williams Fractal Indicator. Williams presented the fractal indicator in his…
What is a Fixed Annuity? A fixed annuity is an investment product sold by insurance companies that provides guaranteed periodic (typically monthly) income payments to the annuity purchaser. It is essentially an investment intended to provide regular income to an individual following their retirement from the workforce. Understanding Fixed Annuities A fixed annuity refers to…
What is the European Monetary System (EMS)? The European Monetary System (EMS) refers to an arrangement established in 1979, whereby members of the European Economic Community (now the European Union) agreed to link their currencies to encourage monetary stability in Europe. The EMS aimed to create a stable exchange rate for easier trade and cooperation…
What is the European Sovereign Debt Crisis? The European Sovereign Debt Crisis refers to the financial crisis that occurred in several European countries due to high government debt and institutional failures. The crisis began in 2009 when Greece’s sovereign debt reportedly reached 113% of GDP – almost twice the limit of 60% set by the…
What is the European Banking Authority (EBA)? The European Banking Authority (EBA) is an agency that aims to supervise financial integrity and ensure financial stability across the European Union (EU). The EBA is a part of the European System of Financial Supervision (ESFS), which works to ensure that the European single market functions efficiently through…
