Blog Posts

What Is Modern Portfolio Theory? Modern portfolio theory (MPT) is a framework for analyzing and making decisions about investment portfolios. It was first developed by Harry Markowitz in the early 1950s and has since become one of the most important ideas in finance. MPT is built on the idea of diversification, which is the concept […]

Loss aversion is a psychological concept that refers to the tendency for people to strongly prefer avoiding losses to acquiring gains. In other words, people tend to feel the pain of losing something more strongly than the pleasure of gaining something of equal value. This phenomenon has been observed in many studies and is considered […]

In economics, deadweight loss is defined as the loss of economic efficiency that can occur when the market for a good or service is not in equilibrium. The concept of deadweight loss is important for financial professionals to understand as it can help inform decision-making about pricing, output levels, and other factors that impact an […]

The debt-service coverage ratio (DSCR) is a financial metric used to assess a company’s ability to repay its debt obligations. The ratio is calculated by dividing a company’s net operating income (NOI) by its debt service, which includes principal and interest payments on loans and leases. A DSCR of 1.0 or higher indicates that a […]

In this article, we explore the concept of the business cycle and all of its implications on financial markets.   What are business cycles? Business cycles are periods of time during which the economy grows or contracts. The four main phases of a business cycle are expansion, peak, contraction, and trough.   What are the […]

Cash flow return on investment (CFROI) is a valuation method by which it is assumed that the stock market sets prices based on cash flow rather than company performance and earnings reports. For the company, it essentially equates to an internal rate of return (IRR) calculation. Calculating CFROI The CFROI is compared to the total […]

Bond auctions are a fundamental aspect of the global financial system, as governments regularly issue bonds to raise funds and finance their expenditures. Traders and investors are always on the lookout for innovative and effective trading strategies to maximize returns. One such strategy is bond-auction trading, available to large institutional investors. In this article, we […]

What Is a Special Purpose Vehicle (SPV)? A special purpose vehicle (SPV), also known as a special purpose entity (SPE), is a legal entity created to isolate financial risk. Its bankruptcy remote status reduces the chance that creditors of the parent company can go after its assets. Special purpose vehicles can be used for a […]

What Is Probability Theory and Why Is It Important? Probability theory is essential in trading and investing because it allows market participants to understand and quantify the uncertainty and risk associated with financial decisions. Like life itself, trading is about probabilities. There are rarely black-and-white obvious outcomes that are easy to capitalize on. By using […]

What Is the Least Squares Method? The least squares method is a statistical procedure used to estimate the relationships between certain variables. This method is also known as the method of ordinary least squares (OLS) or linear least squares. The least squares method finds the line of best fit for a given set of data […]