What is the Information Ratio? The information ratio measures the risk-adjusted returns of a financial asset or portfolio relative to a certain benchmark. This ratio aims to show excess returns relative to the benchmark, as well as the consistency in generating the excess returns. The consistency of generating excess returns is measured by the tracking…
What is the Forward Rate? The forward rate, in simple terms, is the calculated expectation of the yield on a bond that, theoretically, will occur in the immediate future, usually a few months (or even a few years) from the time of calculation. The consideration of the forward rate is almost exclusively used when talking…
What is Asset Valuation? Asset valuation simply pertains to the process to determine the value of a specific property, including stocks, options, bonds, buildings, machinery, or land, that is conducted usually when a company or asset is to be sold, insured, or taken over. The assets may be categorized into tangible and intangible assets. Valuations…
What is a Credit Union? A credit union is a type of financial organization that is owned and governed by its members. Credit unions provide members with a variety of financial services, including checking and savings accounts and loans. They are non-profit organizations that are intended to provide high-quality services to its members, not to maximize profits. In…
What is a Liquidity Event? A liquidity event is a process by which an investor liquidates their investment position in a private company and exchanges it for cash. The main purpose of a liquidity event is the transfer of an illiquid asset (an investment in a private company) into the most liquid asset – cash….
What Does Negotiable Mean? The term “negotiable” is commonly referred to as the price of a good or security, or any other term or provision in a contract or an agreement, that is not firmly settled between the parties and that can be adjusted. The negotiable price of a good or the negotiable term of…
What is a Venture Capital Fund? A venture capital fund is a type of investment fund that invests in early-stage startup companies that offer a high return potential but also come with a high degree of risk. The fund is managed by a venture capital firm, and the investors are usually institutions or high net…
What is an Earnings Guidance? An earnings guidance is the information provided by the management of a publicly traded company regarding its expected future results, including estimates of revenues, expenses, margins, and earnings. In addition, the company’s management sets up its future direction by defining its short-term and long-term goals. The earnings guidance is important…
What is Quantitative Analysis? Quantitative analysis is the process of collecting and evaluating measurable and verifiable data such as revenues, market share, and wages in order to understand the behavior and performance of a business. In the past, business owners and company directors relied heavily on their experience and instinct when making decisions. However, with…
What is Negative Carry? Negative carry is a carry trade with a negative yield, meaning the cost of holding (carrying) the investment exceeds the yield. How It Works In some rare circumstances, it is prudent to purchase a low-yielding asset by using (borrowing) a high-yielding asset. Before we proceed, let us try to understand the primary…
