What are the Articles of Association (AoA)? The Articles of Association (AoA) is the charter document that establishes the legal existence of a company in many jurisdictions worldwide, including the United Kingdom, Europe, and China. This regulatory document defines the purpose of a company and its operation. Regulatory authorities determine the minimum requirement for its…
What is Autocorrelation? Autocorrelation refers to the degree of correlation of the same variables between two successive time intervals. It measures how the lagged version of the value of a variable is related to the original version of it in a time series. Autocorrelation, as a statistical concept, is also known as serial correlation. It…
What are Mergers & Acquisitions (M&A)? Mergers and acquisitions (M&A) refer to transactions between two companies combining in some form. Although mergers and acquisitions (M&A) are used interchangeably, they come with different legal meanings. In a merger, two companies of similar size combine to form a new single entity. On the other hand, an…
What is Negative Convexity? Negative convexity occurs when a bond’s duration increases in conjunction with an increase in yield. The bond price will drop as the yield grows. When interest rates fall, bond prices rise; however, a bond with negative convexity diminishes in value as interest rates decline. In order to fully understand negative convexity,…
What is Net Investment Income (NII)? Net investment income (NII) is the total income before taxes that an investor receives on their portfolio of investment assets. NII is generated from dividends, capital gains, or similar investment-related returns. Below is the formula for net investment income. Net Investment Income – Components 1. Investment returns When calculating…
What is Embezzlement? Embezzlement is the purposeful stealing, retention, or misuse of funds and/or assets entrusted to an employee by an employer or organization. In embezzlement, the embezzler obtains assets legally, but the assets are used for unintended purposes. Understanding Embezzlement Embezzlement occurs when a criminal takes or uses money from a company or an…
What is Noncallable? Noncallable, also called non-redeemable, refers to the type of securities that cannot be called (redeemed) by their issuer(s) before their maturities unless penalties are paid to security holders. Two common examples are noncallable bonds and noncallable preferred stocks. Most Treasury and municipal bonds are noncallable. Issuers of noncallable securities bear more risks…
What is a Roth IRA? A Roth IRA refers to a type of individual retirement account that a holder funds with no tax deduction and makes tax-free withdrawals while being retired. The IRA contains investments in bonds, stocks, certificates of deposit, and other securities. It was first proposed in 1989 by Oregon Senator Robert Packwood…
What is a Pension Fund? A pension fund is a fund that accumulates capital to be paid out as a pension for employees when they retire at the end of their careers. Pension funds typically aggregate large sums of money to be invested into the capital markets, such as stock and bond markets, to generate…
What is Power of Attorney? Power of Attorney, or POA, is a legal document giving an attorney-in-charge or legal agent the authority to act on behalf of the principal. The attorney in charge possesses broad or limited authority to act on behalf of the principal. The agent can make decisions regarding medical care, financial matters,…
