What is Margin Trading? Margin trading is the act of borrowing funds from a broker with the aim of investing in financial securities. The purchased stock serves as collateral for the loan. The primary reason behind borrowing money is to utilize more capital to invest and, by extension, the potential for more profits. …
What is the New York Stock Exchange (NYSE)? The New York Stock Exchange (NYSE) is the largest securities exchange in the world, hosting 82% of the S&P 500, as well as 70 of the biggest corporations in the world. It is a publicly-traded company that provides a platform for buying and selling over nine million…
What is the Price-Weighted Index? A price-weighted index is a type of stock market index in which each component of the index is weighted according to its current share price. In price-weighted indices, companies with a high share price have a greater weight than those with a low share price. Therefore, the price movements of…
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…
