What is Volatility Ratio? Volatility ratio refers to a technical measure of the changes in the prices of a given security. It enables investors and traders to identify price patterns. It is used in technical analysis to understand the current direction of the price movement of a security relative to the previous day, or any…
What is a Volatility Skew? Volatility skew refers to a technical tool that informs investors about the preference of fund managers, whether they prefer to write call options or not. Factors that impact a volatility skew include investor sentiment about the market and the relationship between the supply and demand of given options in the…
What is a Volatility Swap? Volatility swap refers to a financial derivative, the payoff of which is based upon the volatility of the underlying asset of that security, which is a forward contract. Volatility swaps enable investors to trade the volatility of an asset without explicitly trading the underlying asset. The payoff, which is the…
What is a Volatility Smile? A volatility smile refers to a U-shaped graphical representation of the pattern created by the implied volatilities of multiple options contracts that share the same date of expiration. The geographical pattern obtained when the values of different implied volatilities are plotted against the strike prices of their corresponding options; a…
What is a Market? A market refers to a space that facilitates an economic transaction between parties: the buyers and the sellers. An economic transaction may involve an exchange of goods, information, services, currency, etc., and does not necessarily involve legal tender. A market is not necessarily a physical space, such as a retail outlet….
What is Microcap? The term “microcap,” also known as micro-cap, is generally used for companies with a low market capitalization, usually ranging between $50 million and $300 million. Market capitalization is the product of a company’s share price and its outstanding shares, and it changes daily. Microcap stocks can either be newly listed companies with…
What is Market Index? Market index refers to a portfolio of securities that represent a particular section of the stock market. The securities that are part of a particular index often come with certain characteristics. What is Index Methodology? Index methodology is a hypothetical portfolio that derives its value from the values of its underlying…
What are Market Dynamics? Market dynamics refer to the forces that impact prices, supply and demand, and the behavior of consumers and businesses. These forces create pricing signals, influencing how companies set prices, allocate resources, and adjust to shifts in consumer preferences, competition, and economic conditions. Changes in market behavior stem from various factors, including…
What is Market Exposure? Market exposure refers to the absolute amount of funds or the percentage of a portfolio that is invested in a given security, or a bundle of securities that are part of the same industry or market sector. It is usually expressed in the form of a percentage of the total securities…
What is the Stock Market Capitalization-to-GDP Ratio? The stock market capitalization-to-GDP ratio refers to a metric that is used to evaluate whether or not a given market is valued accurately in accordance with its historical average. The ratio can be calculated for a specific market, such as the London Stock Exchange (LSE), or can even…
