Stock
What is a Stock? When a person owns stock in a company, the individual is called a shareholder and is eligible to claim part of the company’s residual assets and earnings (should the company ever have to dissolve). A shareholder may also be referred to as a stockholder. The terms “stock,” “shares,” and “equity” are...
Sharpe Ratio
What is the Sharpe Ratio? Named after American economist William Sharpe, the Sharpe Ratio (also called the Sharpe Index or the Modified Sharpe Ratio) is commonly used to gauge the performance of an investment by adjusting for its risk. The higher the ratio, the greater the investment return relative to the amount of risk taken,...
Risk Averse Definition
What is Risk Averse? Someone who is risk averse has the characteristic or trait of preferring avoiding loss over making a gain. This characteristic is usually attached to investors or market participants who prefer investments with lower returns and relatively known risks over investments with potentially higher returns but also with higher uncertainty and more...
Types of Security
What are the Types of Security? There are four main types of security: debt securities, equity securities, derivative securities, and hybrid securities, which are a combination of debt and equity. Let’s first define security. Security relates to a financial instrument or financial asset that can be traded in the open market, e.g., a stock, bond,...
Chinese Wall
What is a Chinese Wall? In finance, a Chinese Wall (or a Wall of China) is a virtual information barrier erected between those who have material, non-public information, and those who don’t, to prevent conflicts of interest. Below is an example of how a bank uses a Chinese Wall policy to comply with securities regulations....
