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…
What is the London Stock Exchange (LSE)? The London Stock Exchange (LSE), which is based in London, the United Kingdom, is one of the leading stock markets in the world. Owned by the London Stock Exchange Group, the LSE was established in 1571, making it one of the oldest stock exchanges in the world. The…
What is a Triangular Arbitrage Opportunity? A triangular arbitrage opportunity is a trading strategy that exploits the arbitrage opportunities that exist among three currencies in a foreign currency exchange. The arbitrage is executed through the consecutive exchange of one currency to another when there are discrepancies in the quoted prices for the given currencies. A…
What is the Chief Operating Officer (COO)? The Chief Operating Officer (COO) – a member of the executive management team for the company – is one of the highest positions at a company. COOs are directly and intimately connected to the Chief Executive Officer (CEO). Similar to the Vice President of a country, the COO…
What is the Capitalization-Weighted Index? The Capitalization-Weighted Index (cap-weighted index, CWI) is a type of stock market index in which each component of the index is weighted relative to its total market capitalization. In a capitalization-weighted index, companies with larger market capitalization exert a greater impact on the index value. Companies with a smaller market…
