What is the Autoregressive Integrated Moving Average (ARIMA)? The Autoregressive Integrated Moving Average (ARIMA) model uses time-series data and statistical analysis to interpret the data and make future predictions. The ARIMA model aims to explain data by using time series data on its past values and uses linear regression to make predictions. Understanding the ARIMA…
What is Adjusted Beta? Adjusted beta tends to estimate a security’s future beta. It is a historical beta adjusted to reflect the tendency of beta to be mean-reverting – the CAPM’s beta value will move towards the market average, of 1, over time. The beta estimate based purely on historical data – known as the unadjusted…
What is the Net Debt-to-EBITDA Ratio? The net debt-to-EBITDA ratio measures a company’s ability to pay off its liabilities. It shows how much time the company needs to operate at the current debt and EBITDA levels to pay all of its debt. The net debt-to-EBITDA ratio is similar to the debt-to-EBITDA ratio in that it…
What is the Vasicek Interest Rate Model? The Vasicek Interest Rate Model is a mathematical model that tracks and models the evolution of interest rates. It is a one-factor short-rate model and assumes that the movement of interest rates can be modeled based on a single stochastic (or random) factor – the market risk factor….
What is a Non-Qualified Stock Option (NSO)? A non-qualified stock option (NSO) is a type of stock option used by employers to compensate and incentivize employees. It is also a type of stock-based compensation. Unlike incentive stock options (ISOs), which come with special tax benefits, holders of non-qualified stock options are required to pay taxes…
What is Non-Competitive Tender? Non-competitive tenders are a way of purchasing U.S. Treasury securities through non-competitive bids that do not state a particular price or yield for the security. Instead, investors rely on competitive bidders to set an average “market” price and offer to purchase a specific amount of Treasury securities at that price. The…
What is a Nonaccrual Loan? A nonaccrual loan, or non-performing loan – sometimes referred to colloquially as a doubtful, sour, or troubled loan – is a loan that is overdue on payments. The reason for the more colloquial “doubtful” and “troubled” terminology is that the lending institution is doubtful about whether the loan will be…
What is Asset Allocation? Asset allocation refers to an investment strategy in which individuals divide their investment portfolios between different diverse asset classes to minimize investment risks. The asset classes fall into three broad categories: equities, fixed-income, and cash and equivalents. Anything outside these three categories (e.g., real estate, commodities, art) is often referred to…
What is Monopsony? Monopsony consists of a market condition that is heavily influenced by a single buyer. It is the opposite of a monopoly – a market condition with only one seller. In monopsonies, the buyer exerts a majority of control over the purchase of a good or a service, which gives them higher power…
What is Visible Supply? Visible supply refers to the number of goods available to be bought or sold. In the context of finance, visible supply typically refers to the number of commodities available for trading. It can include commodities that are held in storage, loading docks, or transit. For example, when corn is harvested and…
