Simple moving average (SMA)

Simple moving average (SMA)

Simple moving average (SMA)

Moving Average (MA) is a commonly used technical analysis and is a stock indicator. The reason for calculating the moving average of a stock is to help smooth out the price data over a specified period of time by creating a constantly updated average price. There are two types of moving averages. They are simple moving average (SMA) and exponential moving average (EMA). The longer the time period of the moving average the greater is the lag. A 100-day moving average would have a greater lag than a 10 day moving average. (more…)
Modern portfolio theory

Modern portfolio theory

Modern Portfolio Theory

Modern portfolio theory is an investment theory. It allows the investor to assemble an asset portfolio that will maximize the return for a particular level of risk. The theory assumes investors will prefer less risky portfolios. Modern portfolio theory (MPT) can also be used to construct a portfolio that will minimize ↓ risk for a given level of expected return. Due to the abundance of market data, market risk has attracted significant interest since the 1950s. (more…)
Equity vs Fixed Income

Equity vs Fixed Income

Equity vs Fixed Income

If a person wants to generate income or appreciation in the future he acquires an asset known as investment. An investment is always purchased to generate more in the future than you invest today. But there is always a risk associated with the investment. Investments instead of profits can also generate losses as they can lose value in the future. For example, you invest in a company and that company goes bankrupt. One can invest in these different types of investments such as bonds, stocks, mutual funds, exchange-traded funds, index funds, and options. This article aims to provide an overview of Equity vs Fixed Income. (more…)
Stop – Loss Order

Stop – Loss Order

Stop – Loss Order

There are three common types of orders. A market order, limit order, and stop-loss order. Market order – Market order is an order to buy or sell a security immediately. This order will not guarantee the execution price but will definitely guarantee the time of execution. It will generally execute at or near the ask or bid price. Limit order – Buying or selling a security at a specific price or better is known as a limit order. Buy limit order and sell limit orders will only be executed at the limit price or higher and limit price or lower respectively. Stop-loss order – It means an order to buy or sell a stock once the price of the stock reaches the specified price, known as the stop price. A stop order becomes a market order when the stop price is reached. (more…)
Asset-Backed Securities (ABS)

Asset-Backed Securities (ABS)

Asset-Backed Securities (ABS)

A security whose income payments and hence values are derived from and backed by a specified pool of underlying assets are known as Asset-Backed Securities (ABS). An ABS is an investment security consisting of a bond or note that is collateralized by a pool of assets, such as loans, leases, credit card debt, royalties, or receivables. ABS is a pool of loans that are packed and sold to investors as securities through a process known as securitization. This pool is a group of illiquid and small assets that cannot be sold individually. (more…)
Bond Tranches

Bond Tranches

Bond Tranches

Tranche is a French word meaning slice or portion. They are found in mortgage-backed securities (MBS) or asset-backed securities (ABS). Tranches are segments created from a pool of securities—usually debt instruments such as bonds or mortgages—that are divided up by risk, time to maturity, or other characteristics in order to be marketable to different investors. (more…)
EQUITY DERIVATIVE

Equity Derivatives

EQUITY DERIVATIVE

An equity derivative is a type of financial instrument. The value of an equity derivative is derived from the price movement of an underlying asset. Investors use equity derivatives to speculate or hedge against the downside of their investment. The hedge to mitigate the risk associated with taking a long position or short position. Equity option and equity index futures are two forms of equity derivatives. A stock option is a good example of an equity derivative because the value of the stock option is based on the price movements of the underlying stock. (more…)
Structured Investment Vehicle

Structured Investment Vehicle

Structured Investment Vehicle

A structured investment vehicle (SIV) is a type of special-purpose vehicle that purchases long-term bonds and other fixed-income securities and pays for them with short- to medium-term instruments like commercial paper. Citibank founded the first SIV, Alpha Finance Corporation, in 1988, and since then, numerous SIVs have been set up by specialist fund managers and banks.

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Falling Knife

Falling Knife

Falling Knife

Sharp drops in stocks seen during a week’s time are referred to as a ‘Falling knife”. It is a term used to describe a quick drop in the price of a security, such as a stock. It does not have a specific magnitude or duration to drop before a falling knife constitutes. (more…)
Efficient Frontier

Efficient Frontier

Efficient Frontier

Efficient frontier or Portfolio frontier, a part of modern portfolio theory comprises efficient parts of the risk-return spectrum. It occupies investment portfolios that offer the highest expected return for a specific risk level. It is a set of optimal portfolios that are expected to give higher returns for a minimum level of return. (more…)