What is the Monetary Base? The monetary base refers to the amount of cash circulating in the economy. It is composed of two parts: currency in circulation and bank reserves. Currency in circulation refers to banknotes and coins held by the public – money we use in our everyday lives. Bank reserves are cash deposits…
What is Straight Voting? Straight voting, commonly known as statutory voting, is a corporate voting system that may be used to elect directors or to vote on important matters (e.g., voting on auditors, mergers and acquisitions opportunities, etc.). In the context of electing a director, each share is usually entitled to one vote per director…
What is Mercantilism? Mercantilism is an economic theory that emphasizes self-sufficiency through a favorable balance of trade. Mercantilist policies focus on the accumulation of wealth and resources while maintaining a positive trade balance with other countries. By maximizing exports and minimizing imports, mercantilism is also viewed as a form of economic protectionism. Originating in 16th-century…
What is Ethical Decision-Making? Ethical decision-making in finance is a decision-making ideology that is based on an underlying moral philosophy of right and wrong. Ethical decision-making is normative in nature, and ethical decisions are not solely driven by the goal of profit maximization. An ethical decision is one that stems from some underlying system of…
What is Microeconomics? Microeconomics is the study of how individuals and companies make choices regarding the allocation and utilization of resources. It also studies how individuals and businesses coordinate and cooperate, and the subsequent effect on the price, demand, and supply. Microeconomics refers to the goods and services market and addresses economic and consumer concerns….
What is Level of Measurement? In statistics, level of measurement is a classification that relates the values that are assigned to variables with each other. In other words, level of measurement is used to describe information within the values. Psychologist Stanley Smith is known for developing four levels of measurement: nominal, ordinal, interval, and ratio….
What are Arbitrage Free Term Structure Models? Arbitrage Free Term Structure Models (also known as No-Arbitrage Models) are used to generate the true stochastic interest rate generating process by using real market data. Unlike equilibrium term structure models, which make certain assumptions about the true interest rate generating process to determine the correct theoretical term…
What are Equilibrium Term Structure Models? Equilibrium Term Structure Models (also known as Affine Term Structure Models) are stochastic interest rate models used to estimate the correct theoretical term structure. Equilibrium term structure models estimate the stochastic process that describes the dynamics of the yield curve (term structure). The models identify mis-pricing in the bond…
What is Utilitarianism? Utilitarianism is a normative theory of ethics that states that the ethical and moral justness of an action depends only on the consequences of that action. An action that increases everyone’s utility is morally and ethically just, whereas an action which decreases everyone’s utility is morally and ethically unjust. Utility is a…
What is Customer Satisfaction? Customer satisfaction is the degree to which products or services provided by a company meet a customer’s expectations. In other words, customer satisfaction is how satisfied a customer is after doing business with a company. Customer satisfaction not only measures how happy a customer is with their transactions with the business,…
