What are Vulture Funds? Vulture funds are a subset of hedge funds that invest in distressed securities that have a high chance of default. The fund buys risky debt instruments at highly discounted prices in the secondary market and benefits by taking legal action against the issuers for debt recovery. Vulture fund portfolio managers seek…
What is a Reverse Convertible Note (RCN)? A Reverse Convertible Note (RCN) is a short-term investment option that can be very helpful to investors suffering from some cash flow problems. RCNs are securities that offer a consistent and predictable income, rivaling and surpassing traditional returns, including returns investors generally only see from high-yield bonds. The…
What is Value at Risk (VaR)? Value at Risk (VaR) is a financial metric that estimates the risk of an investment. More specifically, VaR is a statistical technique used to measure the amount of potential loss that could happen in an investment portfolio over a specified period of time. Value at Risk gives the probability…
What is a Convertible Bond? A convertible bond is a type of debt security that provides an investor with a right or an obligation to exchange the bond for a predetermined number of shares in the issuing company at certain times of a bond’s lifetime. It is a hybrid security that possesses features of both…
What are Options: Calls and Puts? An option is a derivative, a contract that gives the buyer the right, but not the obligation, to buy or sell the underlying asset by a certain date (expiration date) at a specified price (strike price). There are two types of options: calls and puts. American-style options can be…
What is a Golden Cross? A Golden Cross is a basic technical indicator that occurs in the market when a short-term moving average (50-day) of an asset rises above a long-term moving average (200-day). When traders see a Golden Cross occur, they view this chart pattern as indicative of a strong bull market. Chart Source…
What is Sukuk? Sukuk (Islamic bond or “Sharia-compliant” bond) is an Islamic financial certificate that represents a portion of ownership in a portfolio of eligible existing or future assets. They can be considered as an Islamic version of conventional bonds. Sharia (Islamic law) prohibits lending with interest payments (riba), which is considered usurious and exploitative…
What is Pegging? In finance, pegging refers to two different actions. 1) A peg is the act of linking the exchange rate of one currency to another. For most countries, the general practice is to peg the exchange rate of their currency to that of the U.S. dollar. However, some countries peg to currency baskets….
What is High-Frequency Trading (HFT)? High-frequency trading (HFT) is algorithmic trading characterized by high-speed trade execution, an extremely large number of transactions, and a very short-term investment horizon. HFT leverages special computers to achieve the highest speed of trade execution possible. It is very complex and, therefore, primarily a tool employed by large institutional investors…
