Basis Point
DefinitionA basis point is one hundredth of a percent or equivalently one ten thousandth. The related concept of a permyriad is literally one part per ten thousand. Figures are commonly quoted in basis points in finance, especially in fixed income markets. Basis Point Understanding what Basis Point is A Basis Point (BPS) is simply, in financial terms, a unit...
Bad Paper
What is 'Bad Paper' Unsecured short-term fixed income instrument that is issued either by a corporation, city, state or country, that has a high probability of defaulting on their promissory notes. Since bad paper is not backed by collateral, it is sold at a discount to the equivalent collateral-backed fixed-income securities. However, in contrast to regular commercial...
Backflip Takeover
What is 'Backflip Takeover' An uncommon type of takeover in which the acquirer becomes a subsidiary of the acquired or targeted company, with business after the takeover conducted in the name of the acquired company. A backflip takeover gets its name from the fact that it runs counter to the norm of a conventional acquisition, where the...
Bag Man
What is 'Bag Man' Any person in charge of organizing, collecting and transporting money, generally in connection with illegal or illicit activities. A bag man is someone who collects and delivers money on behalf of a boss or organization. Nowadays, bag man can be used pejoratively to describe an individual who is in charge of collecting and...
Beta
Beta (beta coefficient or β) is a finance term that represents risk of a financial instrument. In simple terms, it is a numerical value that depicts how volatile are the prices of financial instruments. Beta is the standard deviation or volatility of prices around the mean. Generally, a Beta less than 1 shows that the investment instrument is less...
Balance Of Trade (BOT)
What is 'Balance Of Trade - BOT' The balance of trade (BOT) is the difference between a country's imports and its exports for a given time period. The balance of trade is the largest component of the country's balance of payments (BOP). Economists use the BOT as a statistical tool to help them understand the relative strength...
Back Taxes
DefinitionBack taxes is a term for taxes that were not completely paid when due. Typically, these are taxes that are owed from a prior year. Back Taxes What is 'Back Taxes' Taxes that have been unpaid in the year that they were due. Taxpayers can have unpaid back taxes at the federal, state and/or local levels. Back...
Backtesting
DefinitionBacktesting is a term used in modeling to refer to testing a predictive model on historical data. Backtesting is a type of retrodiction, and a special type of cross-validation applied to previous time period. Backtesting What is 'Backtesting' Backtesting is the process of testing a trading strategy on relevant historical data to ensure its viability before the...
Back-Of-The-Envelope Calculation
What is 'Back-Of-The-Envelope Calculation' An informal mathematical computation, often performed on a scrap of paper such as an envelope. A back-of-the-envelope calculation uses estimated and/or rounded numbers to quickly develop a ballpark figure. The result should be more accurate than a guess, but will be less accurate than a formal calculation performed using precise numbers and a...
Binary Option
DefinitionA binary option is a financial option in which the payoff is either some fixed monetary amount or nothing at all. The two main types of binary options are the cash-or-nothing binary option and the asset-or-nothing binary option. The former pays some fixed amount of cash if the option expires in-the-money while the latter pays the value of the...