What is Mean Reversion? Mean reversion is a theory implying that asset prices and historical returns gradually move towards the long-term mean, which can be based on the economy, industry, or average return within a set of data. The greater the deviation from their mean, the higher probability that the next movement of asset prices…
What is a Nonconforming Mortgage? A nonconforming mortgage is a loan for a home that does not follow government-sponsored enterprise (GSE) guidelines. GSE guidelines tend to include maximum loan amounts, downpayment requirements, credit requirements, and more. As the loans do not follow the above requirements and are more difficult to sell, they tend to be…
What is a Voting Trust Certificate? A voting trust certificate is a document used to give temporary voting control over a corporation to one or several individuals. It is issued to a shareholder and represents the normal rights of any other stockholder, such as receiving quarterly dividends in exchange for their common shares. The only…
What is an Earnings Report? An earnings report is an official financial document issued by a public company that shows expenses, earnings, and overall profit of the company for a certain period. The earnings report can also be called the income statement or profit and loss (P&L) statement. Investors can analyze the earnings report of…
What is Real Estate Owned (REO)? Real estate owned (REO) is a bank-owned property that failed to sell at a foreclosure auction. When homeowners fail to pay their mortgages, they can either sell their property immediately and offer the sale proceeds to the bank or give it up to the bank for foreclosure. Foreclosure refers…
What is Bull vs. Bear? The term “bull vs. bear” denotes the ensuing trends in stock markets – whether they are appreciating or depreciating in value – and what is the investors’ outlook about the market in general. A bull market indicates a sustained increase in price, whereas a bear market denotes sustained periods of…
What is Power Query? Power Query is a tool used to manipulate data and is commonly used to transform data for business intelligence projects. High quality analysis relies on well-organized data that is free from errors and that draws data from a single source of truth. While many analysts spend hours of time manipulating data,…
What is Extrinsic Value? Extrinsic value of an option is calculated by taking the difference between the market price of an option (also called the premium) and its intrinsic price – the value of an options contract in relation to the underlying at expiration or if exercised. In other words, it is determined by factors…
What is Sharia Law? Sharia law is a religious law that lays down governing principles for spiritual, mental, and physical behavior that must be followed by Muslims. Regarded as God’s command for Muslims, Sharia law is essentially Islam’s legal system. The four primary sources of Sharia Law are: The Quran – The Holy Book conveys…
What is Translation Exposure? Translation exposure is a kind of accounting risk that arises due to fluctuations in currency exchange rates. Understanding Translation Exposure The assets, liabilities, equities, and earnings of a subsidiary of a multinational company are usually denominated in the currency of the country it is situated in. If the parent company is…
