Natural Hedge
What is a Natural Hedge? A natural hedge refers to a strategy that reduces financial risks in the normal operation of an institution. It is typically done by investing in different assets and financial instruments with negative correlations among them. The conventional financial hedging strategy usually contains derivatives and forwards. The natural hedging strategy does...
National Association of Real Estate Investment Trusts (NAREIT)
What is the National Association of Real Estate Investment Trusts (NAREIT)? The National Association of Real Estate Investment Trusts – more commonly known as NAREIT – acts as the voice for equity and mortgage REITs, REITs traded on all major stock exchanges, as well as non-listed and private REITs. NAREIT’s primary focus is to act...
The Economic Crash of 2020
What is the Economic Crash of 2020? The economic crash of 2020 was precipitated by the COVID-19 pandemic. The sudden appearance of the virus, its rapid spread, and uncertainty about how communicable and how lethal it might be sent financial markets and economies spiraling down worldwide. The Market Crash At the beginning of February, the...
Prospect Theory
Prospect Theory, introduced by psychologists Daniel Kahneman and Amos Tversky in 1979, explores decision-making under risk and uncertainty. It is a psychology theory that suggests that individuals prioritize avoiding losses over seeking gains, exhibiting characteristics like certainty preference, discounting small probabilities, relative positioning, and loss aversion. The theory involves two phases: editing (framing effects) and...
Screening
What is Screening? Screening refers to a strategy that is used to combat adverse selection by filtering out false information and retaining only the true information. Screening is used in contemporary markets where the products being released into the market are getting increasingly complex for an ordinary consumer to comprehend. For example, in the auto...
