Academy

Direct Cost

A direct cost is a price that can be directly tied to the production of specific goods or services. A direct cost can be traced to the cost object, which can be a service, product, or department. Direct and indirect costs are the two major types of expenses or costs that companies can incur. Direct costs are often variable costs, meaning they fluctuate with production levels such as inventory. However, some costs, such as indirect costs are more difficult to assign to a specific product. Examples of indirect costs include depreciation and administrative expenses.

Pledged Asset

A pledged asset is an asset that is used by a lender to secure a debt or loan and can include cash, stocks, bonds, and other equity or securities. A pledged asset is collateral held by a lender in return for lending funds. Pledged assets can reduce the down payment that is typically required for a loan as well as reduces the interest rate charged.

Index Option

An index option is a financial derivative that gives the holder the right (but not the obligation) to buy or sell the value of an underlying index, such as the S&P 500 index, at the stated exercise price. No actual stocks are bought or sold. Often, an index option will utilize an index futures contract as its underlying asset.Index options are always cash-settled and are typically European-style options, meaning they settle only on the date of maturity and have no provision for early exercise.

Political Risk

Political risk is the risk an investment's returns could suffer as a result of political changes or instability in a country. Instability affecting investment returns could stem from a change in government, legislative bodies, other foreign policymakers or military control. Political risk is also known as "geopolitical risk".

Bond Quote

A bond quote is the last price at which a bond traded, expressed as a percentage of par value and converted to a point scale. Par value is generally set at 100, representing 100% of a bond's face value of $1,000. For example, if a corporate bond is quoted at 99, that means it is trading at 99% of face value. In this case, the cost to buy each bond is $990.

Index Futures

Index futures are futures contracts based on stock market indices (such as the S&P 500 Index, Nasdaq 100 Index, Hang Seng Index, etc.) as the underlying assets. Investors buy and sell these contracts to predict the price of the index at a specific point in the future.

Recapitalization

Recapitalization is a type of a corporate restructuring that aims to change a company’s capital structure. Usually, companies perform recapitalization to make their capital structure more stable or optimal. Recapitalization essentially involves exchanging one type of financing for another – debt for equity, or equity for debt.

Indexed Annuity

An indexed annuity is a type of annuity contract that pays an interest rate based on the performance of a specified market index, such as the S&P 500. It differs from fixed annuities, which pay a fixed rate of interest, and variable annuities, which base their interest rate on a portfolio of securities chosen by the annuity owner. Indexed annuities are sometimes referred to as equity-indexed or fixed-indexed annuities.

Index Fund

An index fund is a passively managed investment fund that aims to replicate the performance of a specific stock market index (such as the S&P 500 Index, Nasdaq 100 Index, Hang Seng Index, etc.). The fund achieves returns similar to the index by holding the same stocks that make up the index.

Paper Trade

Paper trading is a simulated trading activity where investors execute buy and sell operations without using real money. It is typically used to test trading strategies, learn market operations, and improve trading skills. The goal of paper trading is to allow investors to practice in a real market environment without bearing actual financial risk.

Take-Profit Order

A take-profit order (T/P) is a type of limit order that specifies the exact price at which to close out an open position for a profit. If the price of the security does not reach the limit price, the take-profit order does not get filled.

Stop Order

A Stop Order is a type of trading order used to automatically execute a buy or sell operation when the market price reaches a preset level. There are two types of stop orders:Stop Buy Order: This order is executed automatically when the market price rises to the preset trigger price. It is commonly used to buy when the price breaks through a certain level, preventing missing out on further upward movement.Stop Sell Order: This order is executed automatically when the market price falls to the preset trigger price. It is typically used to limit losses or protect existing profits.