What is the S&P 500?
The S&P 500 (also known as the Standard & Poor's 500) is an index of the 500 largest and most important U.S. companies (selected by a special committee). The S&P 500 is a cap-weighted index, meaning the respective weights of companies in the index depends on market capitalization. For example, since Apple Inc. and Google are the biggest companies in the U.S., they affect movements in the S&P 500 more than a smaller company, like Visa. Continue reading...
What is the Shanghai Composite Index?
The “Shanghai” is an index measuring all shares that are traded on the Shanghai Stock Exchange (China). The Shanghai Index - also referred to as the SSE Composite Index or simply “the Shanghai” - is an index measuring price changes of all A and B shares traded on China’s Shanghai Exchange. Many foreign investors have only limited access to trading shares on China’s main exchange, which makes price discrepancies likely. Continue reading...
If I Retire, Can I Keep the Health Plan My Employer Offered?
Some employers will offer legacy employees continued health care coverage even after retirement, but it is not very common these days. The costs of health care are rising too quickly for most corporations to keep up. Some corporations will continue to pay a percentage of premiums for their retirees, but more often than not it is up to the retiree to obtain their own health care. Following employment, most people are eligible for COBRA, and then later in life you can purchase plans through Medicare and Medicaid. Continue reading...
What is a Mortgage Short Sale?
A mortgage short sale occurs when a borrower and a lender settle for less than is owed on a mortgage because changes to the housing market or financial status has made it impossible to continue the arrangement. Lenders would rather take what they can get, while they still can, in this sort of situation. An example of a short sale would be an older couple reaching retirement age with a house that is bigger than they need in a neighborhood that has seen the property values decrease, and due to pension cuts they will have hard time affording the house in retirement. The lender would settle short to avoid having to go through a foreclosure and all that it implies. Continue reading...
How Does Ethereum Work?
Ethereum uses a blockchain that looks very similar to Bitcoin’s until you get into the details. Ethereum is a platform on which transactions can be made using Ether or other tokens which have been made using the protocol, and smart contracts and decentralized applications (Ðapps) can be executed using the distributed computing power of what’s called the Ethereum Virtual Machine. When viewed from different angles, Ethereum is an open-source coding environment, a market upon which to distribute new blockchain-based applications, and a distributed computing machine that processes functions of the blockchain applications across a broad network. Distributed computing itself is not that new, but distributed computing on a blockchain is. Continue reading...
How Do Ethereum Smart Contracts Work?
Ethereum smart contracts are an essential part of the Ethereum blockchain that can be coded into financial transactions or decentralized applications. Smart contracts were first described in 1998 by Nick Szabo, but they did not really make their debut until being popularized by the Ethereum platform in 2015. Bitcoin even has protocols in its code to facilitate smart contracts, but Ethereum, because it is a platform for the development of decentralized applications, instead of just a medium for currency like Bitcoin, has gotten all the glory. Continue reading...
How to use Andrew's Pitchfork in trading
Alan Andrews designed Andrew’s Pitchfork to define a trend with support and resistance lines around a median line, all three of which are derived from three points at peaks and troughs around the onset of a current trend. The overlay takes the shape of a trident or pitchfork, with Andrews calling the lines “tines,” after a pitchfork’s prongs. The origin point is placed at the location of a major trend reversal or a definitive support/resistance level, forming beginning of the pitchfork’s “handle.” Once the incline of the pitchfork is suitable, traders can attempt to use it for indications of overbought/oversold conditions, or to indicate a transition to a new trend. Continue reading...
What is Accrual Rate?
This term might apply to bonds or pensions and other financial instruments which build up interest value which is paid out at a later time. Accrual Rate is the rate at which a nominal interest rate is credited to an account that will be paid out at a later time. A bond sold in the secondary market, for instance, will take the accrual rate into account if the sale takes place in between coupon payments. Continue reading...
What is Duration?
Duration refers to the amount of time before a fixed income product will return the investment (principal and interest) to the investor. The bigger the duration number, the greater the interest-rate risk or reward for bond prices. For example, an investor should generally expect to receive better interest from a 30-year duration bond versus a 10-year, since the investor has to hold the note for longer to receive all interest payments and principal. Continue reading...
What is a currency swap?
In a currency swap, institutions will enter into an arrangement lasting anywhere from 1 to 30 years, in which they loan each other an equal principal amount at the current exchange rate, lending out their currency and taking a loan in a foreign currency, and paying an interest rate in foreign currency to their lending counter-party. Institutions that engage in a currency swap (also called a cross-currency swap) seek to increase their exposure or liquidity in a foreign currency, and in some cases seek to take advantage of favorable interest rates in the arrangement. In fact, a currency swap can be considered a variation on an interest rate swap, except that in this case, a notional principal is exchanged at the onset. Continue reading...