Anchoring and Adjustment
What is Anchoring and Adjustment? Anchoring and adjustment refers to a cognitive heuristic that influences how people assess probabilities in an intuitive manner. According to the anchoring and adjustment heuristic, people employ a certain starting point (“the anchor”) and make adjustments until they reach an acceptable value over time. The heuristic was first hypothesized by...
American Stock Exchange (AMEX)
What is the American Stock Exchange (AMEX)? The American Stock Exchange (AMEX) started operations in 1908 as the New York Curb Market Agency. The AMEX was originally composed of traders and brokers that would get together to buy and sell stocks at an open location in New York City. It was a self-regulated and very...
Mergers & Acquisitions (M&A)
What are Mergers & Acquisitions (M&A)? Mergers and acquisitions (M&A) refer to transactions between two companies combining in some form. Although mergers and acquisitions (M&A) are used interchangeably, they come with different legal meanings. In a merger, two companies of similar size combine to form a new single entity. On the other hand, an...
Negative Convexity
What is Negative Convexity? Negative convexity occurs when a bond’s duration increases in conjunction with an increase in yield. The bond price will drop as the yield grows. When interest rates fall, bond prices rise; however, a bond with negative convexity diminishes in value as interest rates decline. In order to fully understand negative convexity,...
Net Investment Income (NII)
What is Net Investment Income (NII)? Net investment income (NII) is the total income before taxes that an investor receives on their portfolio of investment assets. NII is generated from dividends, capital gains, or similar investment-related returns. Below is the formula for net investment income. Net Investment Income – Components 1. Investment returns When calculating...
