Blog Posts

Basis risk pertains to the risk that the basis, or the difference in price between two similar financial instruments, will change unexpectedly. This type of risk is often present when an investor is holding a position in one security while simultaneously trying to hedge against moves in another related security.   Conceptual Diagram of Basis […]

Interest rates play an important role in how a bank makes money. Interest rates influence a bank’s business both directly – i.e., driving loan, securities and deposit pricing and borrowing costs – and indirectly – i.e., impacting loan demand, default rates, and capital markets activity. Over the past more than four decades, interest rates have […]

Relative value is a concept that refers to the value of an asset in relation to the value of other assets. It is often used to compare the value of investments or to determine the fair value of an asset. In trading, relative value is used to identify opportunities to buy or sell assets based […]

Directional investment strategies are ways of trading or investing that involve taking a position in the market with the expectation that the price of an asset will move in a specific direction. There are two main types of directional investment strategies: bullish and bearish. Bullish investment strategies involve taking a long position in the market, […]

An index fund and ETF are often assumed to be the same thing. In some cases they are, but an index fund covers a wider array of investment products. Here we’ll look at their similarities and differences.   Key Takeaways – Index Fund vs. ETF Structure and Management: Index funds are generally used interchangably with […]

Terms of trade are a critical concept in international trade and currency trading.  The term refers to the ratio between a country’s export prices and its import prices, and it measures the relative performance of a country’s trade balance.  In other words, it shows the value a country receives for its exports compared to the […]

Global macro is an investment strategy that seeks to profit from changes in the global economy by taking positions in a wide range of financial instruments, including currencies, bonds, commodities, and equities. This approach is based on the study of national economies, fiscal and monetary policies, financial and economic history, geopolitics, and international relations, and […]

What Is Operating Margin? Operating margin is a company’s operating income divided by its revenue. The operating margin is a measure of a company’s pricing strategy and overall efficiency. A higher operating margin indicates that a company is able to effectively generate more profit from its operations. Operating margin is associated with operating income, which […]

Interest rate caps, floors, and collars are commonly used financial instruments to manage interest rate risk. Interest rate caps provide protection against rising interest rates by setting a maximum interest rate that a borrower will have to pay. Interest rate floors, on the other hand, provide protection against falling interest rates by setting a minimum […]

Real estate is usually the largest single asset that most people will purchase during their lifetimes. It’s also a huge asset class. In the US alone, residential real estate is nearly a $40 trillion asset class (about $120,000 per person). So there’s a lot of interest in being able to develop a view of how […]