What is Devaluation? Devaluation is a downward adjustment to a country’s value of money relative to a foreign currency or standard. Many countries that operate using a fixed exchange rate tend to use devaluation as a monetary policy tool to control supply and demand. Why Devaluation Happens (Pros) Devaluation happens due to the following: To…
What is Dirty Price? Dirty price is when a bond price includes interest that has accrued since the latest coupon payment. When investors buy fixed-income securities, such as bonds, they expect to receive coupon payments based on a fixed schedule. However, the price of a bond is dependent on the present value of future coupon…
What is a Demand Shock? A demand shock is a sudden and temporary increase or decrease in the demand for a good or a bundle of goods. Usually, the phrase “demand shock” is used in the context of aggregate demand, which describes the cumulative demand for an entire economy. A Shift in Demand A temporary…
What is Vomma? Vomma is an option Greek that represents the sensitivity of vega to the change of the implied volatility of an option. It is the second derivative of the option value to the volatility. Thus, it is also known as a second-order Greek. Other second-order Greeks include gamma, vanna, veta, and so on. Vomma…
What is Excise Tax? Excise tax refers to a tax on the sale of an individual unit of a good or service. The vast majority of tax revenue in the United States is generated from excise taxes. Excise taxes are generally applied to correct the negative externalities generated by the consumption of a unit of…
What is the Martingale Strategy? The Martingale Strategy involves doubling the trade size every time a loss is faced. A classic scenario for the strategy is to try and trade an outcome with a 50% probability of it occurring. The scenarios are also called zero expectation scenarios. For a situation with an equal probability, such…
What is Externality of Production? Externality of production is a popular term in economics that refers to the cost or benefit that accrues to an unknowing third party from the production of a good or service. Externalities often occur when the price of a good determined by the market forces of demand and supply does…
What was the Microsoft Antitrust Case? The Microsoft antitrust case came to be one of the high-profile cases a few decades ago. In the 1990s. U.S. federal regulators sued Microsoft, which was at that time the world’s leading software company. The Federal Trade Commission launched an investigation as a response to the rising market share…
What is a Negative Return? A negative return represents an economic loss incurred by an investment in a project, a business, a stock, or other financial instruments. As a result of an investment failure, a negative return happens when the total amount of money received over the investment horizon is less than the capital invested,…
What is Voluntary Termination? Voluntary termination occurs when an individual decides to leave the organization where they are currently employed. They may be leaving the job market or may leave to start a new job or career at a different institution. Voluntary termination can occur when an individual is fired from their position. We will…
