Leverage, or financial leverage, is the use of borrowed funds (money) to buy assets or securities in the expectation that the income from the asset will exceed the borrowing cost. Table of Contents What is Financial Leverage? Leverage, also known as financial leverage, is a type of investment in which borrowed money or debt is […]
Default happens when a borrower cannot pay back their interest or principal amount as agreed in the terms of a loan or contract. Table of Contents What Is a Default? In the world of finance, the term “default” might sound intimidating, but it’s an essential concept to understand. A default happens when someone fails to fulfill
Junk Bonds are the fixed-income securities that carries high level of risk as the probability of default is higher. Table of Contents What Is Junk Bond? A junk bond is a high-risk, high-yield bond issued by companies or entities with lower credit ratings. These bonds offer higher interest rates to compensate investors for the increased
A zero-coupon bond is a type of bond that doesn’t pay periodic interest (coupons). Instead, it is sold at a deep discount to its face value Table of Contents What is a Zero-Coupon Bond?  Zero coupon bonds are bonds that do not pay interest during the life of the bonds. Instead, investors buy zero coupon
Held-to-maturity (HTM) securities are investments that investor or institution intends to hold until they reach maturity. Table of Contents Held-to-maturity (HTM) securities are a category of investments in debt instruments, such as bonds or treasury notes, that an investor or institution intends to hold until they reach maturity. These securities are reported at their amortized
Market Capitalization (Market Cap) is the most recent market value of a company’s outstanding shares. The Market Cap is equal to the current share price multiplied by the number of shares outstanding. Table of Contents What Is Market Capitalization? Market cap, short for market capitalization, is the total value of a company’s shares of stock.
In finance, risk refers to the degree of uncertainty and/or potential financial loss inherent in an investment decision. Risk is also defined as the volatility of returns Table of Contents What Is Risk? In finance, risk is the probability that actual results will differ from expected results. Risk includes the possibility of losing some or
Derivatives are financial instruments whose value is derived from the value of an underlying asset. They are used for various purposes, including speculation, hedging or to shift risk. Table of Contents What Is a Derivative? The term “derivative” refers to a financial contract whose value is determined by on an underlying asset, a group of
An Initial Public Offering (IPO) is the process by which a private company offers its shares to the public for the first time to raise capital by selling equity. Table of Contents What is an IPO? An IPO, or initial public offering, is the term for the first time that a private company sells shares
The Sharpe Ratio is a widely used financial metric that measures the risk-adjusted return of an investment. It helps investors understand how much excess return they are receiving for the additional risk taken compared to a risk-free asset. Table of Contents The Sharpe ratio compares the return of an investment with its risk. It’s a
