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…
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 the investments won’t lose value. Rather,…
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…
