What is Volume? The term “volume” in trading refers to the total number of shares that are traded during a given period of time. The volume of trade is measured on all types of financial commodities, including stocks, options contracts, bonds, futures contracts, etc. In trading terminology, when a security is traded for another, it…
What is the Sherman Antitrust Act? The Sherman Antitrust Act is the first antitrust legislation to be passed by the United States Congress. It was introduced during the term of US President Benjamin Harrison. The law was named after Ohio politician, John Sherman, who was an expert in trade and commerce regulation. Sherman crafted the…
What are the Major Risks for Banks? Major risks for banks include credit, operational, market, and liquidity risk. Since banks are exposed to a variety of risks, they have well-constructed risk management infrastructures and are required to follow government regulations. Government agencies, such as the Office of Superintendent of Financial Institutions (OSFI) in Canada, set the…
What is Invested Capital? Invested capital is the investment made by both shareholders and debtholders in a company. When a company needs capital to expand, it can obtain it either by selling stock shares or by issuing bonds. Shareholders are people who have purchased stock in a company and debtholders are those who have purchased…
What are the S&P Sectors? The S&P sectors constitute a method of sorting publicly traded companies into 11 sectors and 24 industry groups. Created by Standard & Poor’s (S&P) and Morgan Stanely Capital International (MSCI), they are also known as the Global Industry Classification Standard (GICS). S&P sorts companies into sectors based on their primary…
What is Put-Call Parity? Put-call parity is an important concept in options pricing which shows how the prices of puts, calls, and the underlying asset must be consistent with one another. This equation establishes a relationship between the price of a call and put option which have the same underlying asset. For this relationship to…
What is Output/Input Budgeting? An output/input budget is also known as a performance budget. It is a type of budget that reflects both the funding levels (input) and the expected output from each unit of the organization. The output/input budgeting method is often used by governments to show the relationship between taxpayer funds (input) and…
What is the Interest Rate Parity (IRP)? The interest rate parity (IRP) is a theory regarding the relationship between the spot exchange rate and the expected spot rate or forward exchange rate of two currencies, based on interest rates. The theory holds that the forward exchange rate should be equal to the spot currency exchange…
What are Bank-Specific Ratios? Bank-specific ratios, such as net interest margin (NIM), provision for credit losses (PCL), and efficiency ratio are unique to the banking industry. Similar to companies in other sectors, banks have specific ratios to measure profitability and efficiency that are designed to suit their unique business operations. Also, since financial strength is…
