A limited purpose company created to work in tandem with insurance companies. Reinsurance sidecars will purchase a portion or all of an insurance policy from an insurance company to share in the profits and risks. If the underwritten policies have low claim rates while in possession of the sidecar, the investors will make higher returns. Sidecars are used as a way to increase the original underwriter's business while reducing liabilities. The reinsuring company sometimes sets up a type of insurance investment vehicle, called sidecars, for investors who lack underwriting experience. The investors' funds are used by the reinsuring company to underwrite a portion or all of an existing policy from a separate company for a percentage of the premiums.
A broad definition for three types of arbitrage that contain an element of risk: 1) Merger and acquisition arbitrage - The simultaneous purchase of stock in a company being acquired and the sale (or short sale) of stock in the acquiring company. 2) Liquidation arbitrage - The exploitation of a difference between a company's current value and its estimated liquidation value. 3) Pairs trading - The exploitation of a difference between two very similar companies in the same industry that have historically been highly correlated. When the two company's values diverge to a historically high level you can take an offsetting position in each (e.g. go long in one and short the other) because, as history has shown, they will inevitable come to be similarly valued. In theory true arbitrage is riskless, however, the world in which we operate offers very few of these opportunities. Despite these forms of arbitrage being somewhat risky, they are still relatively low-risk trading strategies which money managers (mainly hedge fund managers) and retail investors alike can employ.
A mental price or percentage set by traders where they will place a buy or sell order. A soft stop order is a position set by traders where they should buy or sell a security, however it is "soft" because it can be manipulated or changed depending on market conditions and special circumstances. While a regular stop order is an order which has already been placed to buy or sell a security at a certain point, soft stop orders are used as more of a guide for traders to consider buying or selling at a certain point, taking other factors such as market sentiment and momentum into consideration.
A form of authentication issued by a bank or other financial institution that verifies the legitimacy of a signature and the signatory's overall request. This type of guarantee is often used in situations where financial instruments are being transferred. In most cases, the guarantor accepts all consequences in the event that the signature is fraudulent. With the number of crimes related to identity theft rising each year, using a signature guarantee service is a great way to prevent others from capitalizing on your identity in order to commit fraudulent acts. In order to provide some sort of signature guarantee, a financial institution must be a member of a recognized securities guarantee program, such as Medallion.
An investment strategy in which one investor allows a second investor to control where and how to invest the capital. The sidecar investment will usually be used when one of the parties lacks the ability or confidence to invest for themselves. The strategy will place trust in someone else's ability to gain profits. The word "sidecar" refers to a motorcycle sidecar; the person riding in the sidecar must place his or her trust in the driver's skills. This differs from coattail investing, where one investor mimics the moves of another. For example, suppose there are two individuals - Fred, who is experienced in trading stock, and Barney, who has a background in real estate. They decide to work together in a sidecar investing strategy. In this case, Fred would give Barney money to invest in real estate on his behalf and Barney would give Fred money to invest in stocks. This setup allows both Fred and Barney to diversify their portfolios and benefit from one another's expertise.
An investment strategy that is focused on mitigating a risk that has already been taken. The "short" portion of the term refers to the act of shorting a security, usually a derivatives contract, that hedges against potential losses in an investment that is held long.If a short hedge is executed well, gains from the long position will be offset by losses in the derivatives position, and vice versa. A common risk in short hedging is basis risk, or the risk that price levels will not change much over the period the hedge is in place; in this scenario, the asset held in the long position would not gain any value, and the short hedge would lose value.Short hedging is often seen in the agriculture business, as producers are often willing to pay a small premium to lock in a preferred rate of sale in the future. Also, short hedges involving interest rates are common among institutional money managers that hold large amounts of fixed income securities and are concerned about reinvestment risk in the future.
One of three stock exchanges in the People's Republic of China, located in Shenzhen. The SHZ lists more than 1500 companies, most of which are controlled by the Chinese government. It lists the Shenzhen Stock Exchange 100 Index, which is composed of various Chinese benchmark banks and companies. The SHZ is the 9th largest stock exchange in all of Asia in terms of market capitalization. It runs from 9:00 AM to 3:00 PM weekdays except for holidays. In 2009 the SHZ opened a new exchange similar to Nasdaq for small cap technology companies.
The session price is the price of a stock over the trading session. However, it is sometimes referred to as the final price at the session’s close. Daily price data for a trading instrument usually includes the open, high, low and close prices. Because the session is not a singular point in time, the term is usually qualified: for example, "the opening session price", "the range of the session price" or "the session price was very volatile." The session price can be useful in establishing areas of support and resistance, and in identifying overall trends in a market.
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