What is an Annualized Total Return? An annualized total return is the return earned on an investment each year. It is computed as a geometric average of the returns of each year earned over a period. It is also known as the Compounded Annual Growth Rate (CAGR). However, while it gives investors a performance preview of…
What is Naked Shorting? Naked shorting is the practice of selling short a stock or other tradeable security without first borrowing the shares to sell or arranging to borrow them. Naked shorting is not illegal in every jurisdiction, but it is prohibited in the United States. Naked Shorting vs. Ordinary Short Selling In ordinary short…
What is a Naked Put? A naked put refers to a situation where an investor sells a put option without already having an equivalent short position in the option’s underlying security. It is one of the ways that an investor can profit from changes in the price of a security without directly investing in the…
What is a Naked Option? A naked option is an investing term that refers to an investor selling an option without holding a corresponding position in the option’s underlying security. Selling naked options is considered a high-risk trading practice, as it exposes the investor to high potential loss, while only providing a limited profit. Nonetheless,…
What is Data-Mining Bias? Data-mining bias refers to an assumption of importance a trader assigns to an occurrence in the market that actually was a result of chance or unforeseen events. The data-mining bias, for many analysts, is considered an “insidious threat” because it can sneak up on traders and analysts alike during the research…
Examples of Black Swan Events in Everyday Life While black swan events are most commonly associated with the financial world, there are plenty of examples of black swan events in everyday life. A common misconception about black swan events is that they are always negative events, but that is not always the case. The primary…
What is a Data Mining? Data mining is the process of uncovering patterns and finding anomalies and relationships in large datasets that can be used to make predictions about future trends. The main purpose of data mining is to extract valuable information from available data. Data mining is considered an interdisciplinary field that joins the…
What is the Negative Directional Indicator (-DI)? A negative directional indicator (-DI) represents the downward behavior of the financial market. An upward sloping negative directional indicator indicates that the downtrend is strengthening. Theoretically, a (-DI) occurs when the difference in the low price of a security for two consecutive periods exceeds the difference in the…
What is an Annuity Table? An annuity table is a method that helps in understanding the worth of an annuity. It calculates the present value and future value of the annuity, considering the value and the time period of the investment. The table helps an investor in making informed decisions while planning for investments. …
What is Financial Mathematics? Financial mathematics describes the application of mathematics and mathematical modeling to solve financial problems. it is sometimes referred to as quantitative finance, financial engineering, and computational finance. The discipline combines tools from statistics, probability, and stochastic processes and combines it with economic theory. Mathematics and Statistics Explained Mathematics is the discipline…
