What is a Covered Call? A covered call is a risk management and an options strategy that involves holding a long position in the underlying asset (e.g., stock) and selling (writing) a call option on the underlying asset. The strategy is usually employed by investors who believe that the underlying asset will experience only minor…
What is a Rally? A rally refers to a period of continuous increase in the prices of stocks, indexes or bonds. The word, rally, is typically used as a buzzword by business media outlets such as Bloomberg to describe a period of increasing prices. Learn more about bond trading with CFI’s Fixed Income Fundamentals Course. A…
What is Probability of Default? The probability of default (PD) is the probability of a borrower or debtor defaulting on loan repayments. Within financial markets, an asset’s probability of default is the probability that the asset yields no return to its holder over its lifetime and the asset price goes to zero. Investors use the…
What is the Double Declining Balance Depreciation Method? The double declining balance depreciation method is a form of accelerated depreciation that doubles the regular depreciation approach. It is frequently used to depreciate fixed assets more heavily in the early years, which allows the company to defer income taxes to later years. This guide will explain…
What is Hedging? Hedging is a financial strategy that should be understood and used by investors because of the advantages it offers. As an investment, it protects an individual’s finances from being exposed to a risky situation that may lead to loss of value. However, hedging doesn’t necessarily mean that the investments won’t lose value…
What are Stock Promoters? Stock promoters are individuals or institutions that help companies to raise capital. They raise funds for companies by capturing the attention of potential investors. Stock Promoting Activities Stock promoters are notorious for their operations with penny stocks. The promotion of penny stocks frequently involves illegal and fraudulent activities, such as pump and…
What is the Credit Curve? The credit curve is the graphical representation of the relationship between the return offered by a security (credit-generating instrument) and the time to maturity of the security. It measures the investors’ sentiments about risk and can affect the return on investments. The difference between the first maturity on the curve…
