Tier 1 Capital Ratio
What is Tier 1 Capital Ratio Tier 1 capital is the core measure of a bank's financial strength from a regulator's perspective. It consists primarily of equity capital and disclosure reserves, and it is a key measure of a bank's ability to absorb losses. It is the ratio of a bank's Tier 1 capital to its total risk-weighted assets. This...
Reinvestment Rate
What is reinvestment rate and why is it important The reinvestment rate is the percentage of cash flow that a company reinvests into its business, and it is a key determinant of growth. A high reinvestment rate indicates that a company is plowing its profits back into the business, which can be used to finance new products, expand into new...
Roll Yield
What is Roll Yield Roll yield is the theoretical return an investor would receive if they were to roll their position in a futures contract forward to the next delivery date. The roll yield is calculated by taking the difference between the current price of the futures contract and the price of the contract at the next delivery date, and...
Issued Shares
What are issued shares and why are they important When a company goes public, it sells shares of stock to raise capital. Investors who buy these shares become partial owners of the company and are entitled to a share of the profits (or losses) generated by the business. The total number of shares that a company offers for sale is...
Voluntary Compliance
Best Practices for Voluntary Compliance One of the ways a company can practice its corporate social responsibility is through voluntary compliance. This type of program ensures that employees have access to company policies and procedures. However, it can also lead to litigation. The company that engages in voluntary compliance must be sure to implement best practices for voluntary compliance. Here...
Heston Model
What is the Heston Model and how can it be used in business The Heston model is a mathematical model used to describe the evolution of a stochastic process. It was first proposed by Steven Heston in 1993 and has been used extensively in financial applications. The model can be used to price options, calculate risk-neutral densities, and simulate asset...
Dividend Policy
What is Dividend Policy A company's dividend policy is the strategy the company uses to determine how much it will pay out to shareholders in dividends. This includes how often the company will make dividend payments, as well as the size of the dividend payments. The dividend policy is typically set by the board of directors and can be changed...
Weighted Alpha
What is weighted alpha and what does it measure Weighted alpha is a measure of how much a stock has risen or fallen over a one-year period. It takes into account the stock's price changes as well as any dividends that have been paid out. Weighted alpha is often used by investors to get a sense of how volatile a...
Leveraged Loan
What is a Leveraged Loan A leveraged loan is a type of financing that is secured by collateral, typically a company’s assets. The collateral provides protection for the lenders in the event that the borrower defaults on the loan. Leveraged loans are often used by companies that are highly leveraged, meaning they have a large amount of debt relative to...
Forfaiting
What is forfaiting and how does it work Forfaiting is a way of financing international trade by reducing the risk to the buyer. In forfaiting, the seller agrees to accept a discounted payment in exchange for an upfront payment. This discount is typically between 2% and 5%. The buyer then pays the full value of the invoice to the forfaiter,...