Contagion is when some bad stuff happening in one place spreads and causes problems in other areas. In the world of money and business, it’s when a crisis or instability in one financial system or country infects others, making their problems worse. How Contagion Happens Contagion can spread in a few key ways: People start…
The Consumer Price Index, or CPI for short, is a way to measure how much prices are going up in a country. It looks at the prices of things that most people buy often, like food, gas, clothes, and housing. Governments use the CPI to see if prices are rising too fast. This is called…
Constructive total loss happens when something gets messed up really bad. Like, it’s totally trashed. We’re talking about stuff like houses, cars, or things you own that have value. When they get damaged so much that fixing them costs more than what they’re worth, the insurance people call it a “constructive total loss”. It’s their…
Constant Proportion Portfolio Insurance, or CPPI for short, is a type of investment. People use it to try to make more money while limiting how much they can lose. It’s a little complicated, but we’ll explain it. Special Purpose Entity With CPPI, the first thing that happens is a company is created, called a special…
Constant Proportion Debt Obligations, or CPDOs for short, are a type of investment that some companies set up to make money. The way it works is pretty tricky. Creating a CPDO To start a CPDO, a company will create what’s called a “special purpose entity”. This is basically a separate mini-company that exists just for…
A Constant Maturity Treasury, or CMT for short, is a special interest rate that the Federal Reserve calculates and shares with everyone. The Federal Reserve is like the central bank of the United States. It’s their job to monitor interest rates and the economy. How the CMT works The CMT tells us what the interest…
A constant maturity swap represents a specialized interest rate agreement between two parties. One party agrees to pay a fixed interest rate to another party in exchange for receiving a floating rate based on a constant maturity Treasury (CMT) yield. This financial instrument differs from standard interest rate swaps because it uses Treasury yields rather…
Insurance works differently at Lloyd’s of London than regular insurance companies. Inside Lloyd’s, groups of insurance experts called syndicates team up to handle significant, complex risks together. This teamwork approach is called consortium underwriting, and it’s been around for hundreds of years. When syndicates join forces in a consortium, they’re saying, “We’ll share the work…
Consolidation has two primary meanings in the world of business and finance. Consolidation as a type of merger One meaning of consolidation is when two companies join to create a new company. This is a special kind of merger. In an expected merger, one company buys another company. The bought company stops existing as its…
Consolidated financial statements show a group of companies’ overall financial position and results. They combine the financials of a parent company and all the subsidiaries it controls. What are Consolidated Financial Statements? When a company owns other companies, called subsidiaries, consolidated financial statements combine all their separate financials into one set of statements. This gives…
