A bear note is a special type of investment that some people buy because they think it will make them more money. The value of the bear note goes up when the price or value of something else goes down. That “something else” is called the reference asset. The reference asset for a bear note…
A bear hug happens when one company really wants to take over another company. The company that wants to take over is called the “bidder”. The company they want to buy is called the “target”. How a Bear Hug Works The bidder offers a super high price to buy the target company. This price is…
A bazaar is an unregulated, open-air marketplace. It is a place where many different sellers have stands or stores. They sell their products to shoppers walking by. In a bazaar, the prices are not always fixed like in a normal store. Shoppers can try to negotiate a lower price with the sellers. This is called…
A basket option is a kind of fancy financial thing called an over-the-counter complex option. When you buy one of these options, it lets you make money based on how the price of a group of things changes compared to a set price. This group of things the price is based on is called a…
A basket credit swap is a special type of deal between two groups of people. It’s a bit like insurance. One group agrees to make regular payments to the other group. In return, the other group promises to pay money if certain bad things happen to companies or countries the first group has lent money…
A basket aggregate is a special kind of insurance policy. It puts a total limit on how much money the insurance company will pay out for different types of losses and risks. Multiple lines of coverage See, a normal insurance policy usually just covers one specific thing. Like maybe it only covers damage from fires….
Basis trading is a way to make money by buying and selling things. A basis trade uses two different things that are related to each other. One thing is bought with cash. The other thing is a futures contract. Cash Instrument The thing bought with cash is called the “cash instrument”. A cash instrument can…
A basis swap is a special type of interest rate swap. In an interest rate swap, two parties agree to exchange interest rate payments. Usually one party pays a fixed interest rate and the other party pays a floating rate that can change over time. In a basis swap, both parties pay floating interest rates…
Basis risk is a type of risk in finance. It can happen when you use one thing to protect yourself against losing money on something else, but the two things don’t match up perfectly. What causes basis risk Trying to reduce other risks Many times, basis risk happens because people are trying to get rid…
Basis price is the price used to figure out if you made or lost money on an investment. It is calculated by taking the price you paid for the investment and subtracting the price you sold it for. You also have to add in any fees or commissions you paid. An example of basis price…
