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In macroeconomics, the capital account is a record of a country’s international transactions that involves tangible physical assets, such as financial instruments and real estate. The capital account is one of two primary components of a country’s balance of payments, the other being the current account. The balance of payments is a record of a […]

China’s financial markets are of interest to many traders, both foreign and domestic. However, China carries with it its own set of challenges, which we lay out in this article.   1) Real estate bubble and resultant debt problems In China, real estate is 25% of economic activity and 70% of savings. So the effects […]

A business model is an action plan for the successful operation of a business, identifying sources of revenue, the target customer base, products or services to be offered, pricing and costs, and any other necessary operational details. Types of Business Models The following are considered the most popular types of business models: Manufacturer The manufacturing […]

An original equipment manufacturer (OEM) is a company that manufactures products or components used by another company in the production of its finished goods. OEMs typically provide parts and materials for assembly into other products, but they can also design and manufacture complete items to be sold as finished products. OEMs are found in many […]

Liquid assets are those assets that can be easily converted into cash and are used to pay off short-term debts. Examples include cash, accounts receivable, marketable securities (e.g., bonds, stocks), etc. Conversely, private assets represent ownership of physical property or rights that cannot be readily converted into money without a certain process. These include equipment […]

Leading indicators are used to anticipate changes in the economy, labor markets, or financial markets and can be used to inform strategies for mitigating risks. They are often economic measures that change before the overall economy begins to shift. For example, a rise in housing starts is a leading indicator of increased economic activity, whereas […]

The endowment effect is a cognitive bias where one is inclined to value what they already own more than something they do not own. This bias was first identified in a study by Kahneman, Knetsch, and Thaler (1990) titled Experimental Tests of the Endowment Effect and the Coase Theorem. The study found that people placed […]

A bear trap in financial markets is when a security, or a market as a whole, experiences an extremely sharp decline but eventually reverses. Typically, these drops are sudden and steep, resulting in heavy losses for investors holding the affected assets. In some cases, bear traps can be caused by market speculation or news events […]

As interest rates rise, the value of call options increases and the value of put options decreases, holding all else equal. Below we explain why. Positive Rho for Calls; Negative Rho for Puts Call options have positive Rho, which means as interest rates increase, call options tend to increase slightly in price, all else held […]

What Is a Cash and Carry Trade Strategy? A cash and carry trade is a type of price arbitrage strategy in which an investor buys an asset and simultaneously sells a futures or derivatives contract for the same asset, or vice versa. The goal of this strategy is to profit from the difference between the […]