An investment technique used to eliminate the risk of a single asset. In most cases, this means taking an offsetting position in that single asset. If this asset is part of a larger portfolio, the hedge will eliminate the risk of the one asset but will have less of an effect on the risk associated with the portfolio. Taobiz explains Micro-Hedge Say you are holding the stock of a company and want to eliminate the price risks associated with that stock. To offset your position in the company, you could take a short position in the futures market, thereby securing the stock price for the period of the futures contract. This strategy is used when an investor feels very uncertain about the future movement of a single asset.
Companies with market capitalizations between $50 million and $300 million. Taobiz explains Micro Cap A micro-cap stock isn't the smallest classification - nano cap is even smaller. Keep in mind that classifications such as "large cap" or "small cap" are only approximations that change over time. Also, the exact definition of these terms can vary between brokerage houses.
An investment strategy, used mainly for bonds, where holdings are heavily concentrated in both very short and long term maturities. |||This is also known as a barbell, charting on a timeline gives the appearance of a barbell or dumbbell.
A bond that pays interest in one currency but pays the principal in a different currency. The amount of the principal repayment is set at initiation and paid at maturity. This principal amount usually allows for some appreciation in the exchange rate of the stronger currency. These issues are common in the Eurobond market and are a useful source of capital for multinational companies. |||There are three methods used in applying the exchange rate to principal and interest payments from dual currency bonds: 1. The use of the prevailing exchange rate when the bond is issued 2. The use of the existing exchange rate (spot rate) at the time cash flow payments are made 3. The use of the currency that is chosen from the two currencies by the investors or issuers of these bonds - also known as an "option currency bond"
A perspective that defines the act of stealing confidential information from an employer and then trading securities based on the misappropriated insider knowledge. In the United States, a person guilty according to the misappropriation theory will likely be convicted of insider trading. Taobiz explains Misappropriation Theory The misappropriation theory gained prominence in the Supreme Court's conviction of James H. O'Hagan. O'Hagan was an attorney who acted on insider information regarding a takeover bid for Pillsbury. The United States versus O'Hagan was a watershed case for the theory, defining its validity. This take on insider trading expands the traditional view of what constitutes guilt. Instead of looking only at people who trade their own companies' shares based on stolen information, the theory extends to those who use the knowledge to profit in any corporation.
When a market fails or falls into crisis after an extended period of market speculation or unsustainable growth. A Minsky moment is based on the idea that periods of speculation, if they last long enough, will eventually lead to crises; the longer speculation occurs the worse the crisis will be. This crisis is named after Hyman Minsky, an economist and professor famous for arguing the inherent instability of markets, especially bull markets. He felt that long bull markets only ended in large collapses. Taobiz explains Minsky Moment The phrase "Minsky moment" was coined by Paul McCulley in 1998 while referring to the Asian Debt Crisis of 1997, in which speculators put increasing pressure on dollar-pegged Asian currencies until they eventually collapsed. These types of crises occur because investors take on additional risk during prosperous times or bull markets. The longer a bull market lasts, the more risk is taken in the market. Eventually, so much risk is taken that instability ensues. For example an investor might borrow funds to invest while the market is in an upswing. If the market drops slightly, leveraged assets might not cover the debts taken to acquire them. Soon after, lenders start calling in their loans. Speculative assets are hard to sell, so investors start selling less speculative ones to take care of the loans being called in. The sale of these investments causes an overall decline in the market. At this point, the market is in a Minsky moment. The demand for liquidity might even force the country's central bank to intervene.
The difference in price between the front month and back month in a mortgage-backed security (MBS) dollar roll trade. A dollar roll is a popular type of trade in the MBS pass-through TBA market. According to forward securities pricing theory, the front month price should be higher than the back month price. The drop is a function of current short-term interest rates, prepayment estimates, and the supply and demand for pass-throughs in the current delivery or front month. |||A pass-through Tbasecurity is said to be trading through fail when the drop is larger than what it would cost a mortgage originator, investor or securities dealer to fail to deliver into a TBA contract for an entire month. When there is a shortage of supply or extreme demand for a Tbasecurity in the current delivery month, the drop can increase to fail or larger, reflecting the fact that securities dealers would rather roll a trade out an additional month at a large drop or fail to deliver that security for an entire month than make delivery in the current month.
An initial public offering in which a parent company spins off one of its subsidiaries or divisions, but retains a majority stake in the company after issuance. This means that after the public offering, the parent company will still have a controlling stake of the new public company. Watch: Initial Public Offering (IPO) Taobiz explains Minority IPO The parent company may retain this majority stake forever or may slowly dissolve their ownership over time. This type of IPO allows the company to raise funds, accessing the value of the subsidiary, to fund its own operation or return value to shareholders.
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