What Does Annualize Mean? To annualize is to convert a short-term or partial period result into an annual basis. Annualization is helpful when comparing the returns of two or more investments or if a borrower wants to know how much interest they would need to pay for taking a loan. A return of a short-term…
What are Equity Derivatives? Equity derivatives are financial contracts whose value is derived from the value of an underlying stock assets in the secondary market. Equity derivative contracts are complex financial instruments that are used for speculation, hedging and getting access to stocks or markets that would otherwise not be accessible. These contracts are agreements…
What is a Eurodollar? A Eurodollar refers to funds that are denominated in U.S. dollars and held in foreign banks, or overseas branches of American banks. These funds can in the form of cash deposits or term deposits. These deposits were originally held in Europe, hence the name “Eurodollar” (i.e., U.S. dollars held in Europe)….
What is Margin Debt? Margin debt represents the amount that an investor owes a broker in their margin account. When a broker approves a margin account for an investor, the margin account is granted a line of credit that can be used to purchase securities. The brokerage charges an interest rate on the margin debt,…
What is Margin Loan Availability? Margin loan availability refers to the funds currently available in a margin account that can be used to purchase additional securities. An investor can also withdraw the funds for personal use. A margin account allows investors to purchase more securities than they would’ve purchased using their actual deposits. When investors…
What is the Margin of Safety? The margin of safety is an investment principle where the investor buys stocks when the market price is below their actual value. It is evaluated as the change between the price of a financial instrument and its basic value. The margin of safety acts as a built-in cushion that allows…
What is Marginal Analysis? Marginal analysis compares the additional benefits derived from an activity and the extra cost incurred by the same activity. It serves as a decision-making tool in projecting the maximum potential profits for the company by comparing the costs and benefits of the activity. The term “marginal” is used by economists to…
