What is the Modern Portfolio Theory (MPT)? The Modern Portfolio Theory (MPT) refers to an investment theory that allows investors to assemble an asset portfolio that maximizes expected return for a given level of risk. The theory assumes that investors are risk-averse; for a given level of expected return, investors will always prefer the less…
What is Fintech (Financial Technology)? As financial services companies adapt to rising consumer expectations and shifting technology, a wave of fintech innovation is transforming how people and businesses manage money. From digital banking to disruptive fintech startups, the industry is evolving faster than ever. But what is fintech, and why does it matter to today’s…
What is the Securities Investor Protection Corporation (SIPC)? The Securities Investor Protection Corporation (SIPC) is a non-profit, member-funded organization that works to protect customers from financial loss when a brokerage firm goes bankrupt. The SIPC was created in the United States in 1970 under the Securities Investor Protection Act in order to reduce insecurity among…
What are Robo-Advisors? Robo-advisors are online investment management services that employ mathematical algorithms to provide financial advice with minimal human intervention. They use their algorithms to manage and allocate client assets in the most efficient way possible. Robo-advisors use online questionnaires that obtain information about the clients’ degree of risk-aversion, financial status,…
What is an Acceleration Clause? An acceleration clause is a covenant in loan agreements that requires borrowers to repay the full principal amount upon breach of contract or failure to meet certain requirements set by the lender. Acceleration clauses are most prevalent in the real estate industry, where they protect the lender when the borrower…
What are Futures and Forwards? Future and forward contracts (more commonly referred to as futures and forwards) are contracts that are used by businesses and investors to hedge against risks or speculate. Futures and forwards are examples of derivative assets that derive their values from underlying assets. Both contracts rely on locking in a specific…
What is a Liquidity Premium? A liquidity premium compensates investors for investing in securities with low liquidity. Liquidity refers to how easily an investment can be sold for cash. T-bills and stocks are considered to be highly liquid since they can usually be sold at any time at the prevailing market price. On the other…
What are Preferred Shares? Preferred shares (also known as preferred stock or preference shares) are securities that represent ownership in a corporation, and that have a priority claim over common shares on the company’s assets and earnings. The shares are more senior than common stock but are more junior relative to bonds in terms of…
What is the Exponential Moving Average (EMA)? The Exponential Moving Average (EMA) is a technical indicator used in trading practices that shows how the price of an asset or security changes over a certain period of time. The EMA is different from a simple moving average in that it places more weight on recent data…
