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Surplus Lines Insurance Surplus lines insurance (also called excess and surplus or E&S) covers risks that standard, state‑admitted insurers are unwilling or unable to insure. It’s most common for unusual, high‑limit, or newly emerging risks that lack historical data for conventional pricing. How it works Surplus lines policies are typically property and casualty products for…

Surplus: Definition, Types, and Economic Effects What is a surplus? A surplus is any amount of an asset or resource that exceeds current need or demand. It can apply to goods, income, profits, capital, or government budgets. Surpluses often arise from mismatches between supply and demand — for example, unsold inventory on store shelves or…

What Is a Surety? A surety is a party that guarantees another party’s financial or performance obligations. When a debtor (the principal) fails to meet agreed obligations to a creditor or obligee, the surety steps in to ensure the obligee is compensated or the obligation is fulfilled. Unlike insurance, a surety does not absorb loss…

Surcharge: What it is, how it works, types, examples, and how to avoid What is a surcharge? A surcharge is an additional charge, fee, or tax added on top of the stated price of a good or service. It can be a fixed amount (for example, $5 per transaction) or a percentage of the purchase…

Supranational: Definition, Function, and Debate What is supranational? A supranational organization is a multinational body in which member states agree to cede some decision-making authority to the group. Decisions made by the organization can be binding on member countries in the areas where they have transferred authority. This arrangement lets states pool sovereignty to achieve…

Understanding Support (Support Level) Key takeaways * A support level is a price area where buying interest tends to prevent a security from falling further. * Traders use support to plan entries, exits, stops, and to spot potential trend reversals. * Support can be drawn as horizontal lines, trendlines, or represented by dynamic indicators such…

Supply Shock A supply shock is an unexpected event that suddenly changes the supply of a good or commodity and causes an abrupt price movement. If supply falls (a negative or adverse supply shock) and demand remains unchanged, prices rise. If supply increases (a positive supply shock), prices typically fall. How supply shocks work A…

Supply Curve A supply curve shows the relationship between the price of a good or service and the quantity sellers are willing to provide. Plotted with price on the vertical axis and quantity on the horizontal axis, it is typically upward-sloping: higher prices generally encourage producers to supply more. How it works The law of…

Supply Chain Management (SCM) Supply Chain Management (SCM) coordinates the flow of goods, information, and finances from raw materials to the finished product delivered to the customer. Effective SCM reduces costs, shortens lead times, improves product quality, and enhances customer satisfaction by aligning suppliers, manufacturers, logistics, and retailers around shared objectives. Key takeaways SCM optimizes…

Supply Chain Finance Supply chain finance (SCF) refers to technology-enabled financing solutions that lower financing costs and improve efficiency for buyers and suppliers in a commercial transaction. SCF automates invoice approval and settlement workflows and uses short-term credit provided by banks or nonbank financiers to optimize working capital and liquidity for both parties. Key takeaways…

Supply Chain: From Raw Materials to Consumers A supply chain is the network of people, processes, and organizations involved in creating and delivering a product or service—from raw-material sourcing through production, distribution, and final sale to the consumer. Effective supply chain management (SCM) coordinates these activities to reduce costs, boost efficiency, and ensure timely delivery….

Supply Supply is the quantity of a good or service that producers are willing and able to offer for sale at various prices. It is a core concept in economics that, together with demand, determines market prices and quantities through market equilibrium. How supply works Producers respond to profit incentives: higher prices generally encourage more…

Supplemental Executive Retirement Plan (SERP) A Supplemental Executive Retirement Plan (SERP) is a non‑qualified deferred compensation arrangement that companies use to reward, retain, and supplement retirement income for select executives. Unlike qualified plans (for example, 401(k)s), SERPs are discretionary, highly customizable, and offered only to selected employees. How SERPs work The employer agrees to pay…

Superannuation: An Overview Key takeaways * Superannuation (super) is Australia’s employer‑based retirement savings system. * Two main types: accumulation funds (investment‑based) and defined‑benefit funds (formula‑based). * Contributions typically come from employers and sometimes employees; contributions in the fund are taxed under specific rules. * Super offers investment choice, generally low fees, portability, and options for…

Sunk Costs and the Sunk Cost Fallacy Definition A sunk cost is any time, money, or effort that has already been spent and cannot be recovered. Because these resources are gone, they should not influence future decisions—but people often let them do so. Key takeaways Sunk costs are irreversible past investments and should not affect…

Summa Cum Laude: Highest Academic Honors Explained Summa cum laude, Latin for “with the highest distinction,” is the top of the three traditional Latin honors awarded at many U.S. colleges and universities. It recognizes graduates whose academic performance and demonstrated mastery of their field place them among the very highest achievers in their class. Criteria…

Sum‑of‑the‑Parts (SOTP) Valuation Sum‑of‑the‑Parts (SOTP) valuation estimates a company’s worth by valuing each business unit independently and aggregating those values. It is most useful for conglomerates or diversified companies where different divisions operate in distinct industries and are likely to be valued using different methods. Core idea Value each operating segment as if it were…

Sum of Squares: Calculation, Types, and Examples The sum of squares (SS) is a basic statistical measure of variability: it quantifies how far data points are spread around their mean or around fitted values in a regression. It’s central to variance, standard deviation, and least-squares regression. Key takeaways Sum of squares equals the sum of…

Sukuk Sukuk are Sharia-compliant financial certificates that provide investors with ownership interests in tangible assets or projects instead of creating a conventional interest-bearing debt obligation. They deliver returns tied to the performance or profits of the underlying asset, enabling debt-like financing without riba (interest), which is prohibited under Islamic law. Key takeaways Sukuk give investors…

Substitution Effect The substitution effect describes how consumers replace a relatively more expensive good with a cheaper alternative when the price of the former rises while their income remains the same. It explains reductions in demand that occur purely because a lower-cost substitute is available. How it works When the price of a product increases,…

Substitute A substitute is a product or service that consumers can use in place of another. When two goods serve the same purpose, a change in the price or availability of one affects demand for the other. Substitutes expand consumer choice and shape market competition. Key takeaways Two goods are substitutes if demand for one…

Substantially Equal Periodic Payment (SEPP) A Substantially Equal Periodic Payment (SEPP) plan lets you take penalty-free withdrawals from qualified retirement accounts before age 59½ under IRS Rule 72(t). SEPPs provide a steady income stream but require a firm, multi-year commitment and adherence to IRS calculation rules. Key takeaways SEPPs allow early, penalty-free withdrawals from IRAs…

Subsidies: Types, Benefits, and Drawbacks Subsidies are financial supports—direct or indirect—provided to individuals, businesses, or industries to reduce costs, encourage specific activities, or achieve social and economic objectives. Governments use subsidies to address market failures, support emerging sectors, protect vulnerable populations, or pursue political goals. While subsidies can produce public benefits, they also carry economic…

Subsidiary Company: Definition, How It Works, Pros and Cons Key takeaways A subsidiary is a company that is majority-owned or controlled by another company (the parent or holding company). Subsidiaries are separate legal entities, but parents usually exercise significant influence. A parent typically consolidates a majority-owned subsidiary’s financials into its own statements. Advantages include risk…

What is a subscription agreement? A subscription agreement is a contract by which an investor agrees to buy securities (often shares or a partnership interest) from an issuer at a specified price. In the context of limited partnerships (LPs) and private placements, it serves as the investor’s application and the issuer’s offer, documenting the terms…

Understanding Subrogation in Insurance Definition Subrogation is the insurer’s legal right to pursue reimbursement from a third party (or that party’s insurer) who caused a loss after the insurer has paid a covered claim. In effect, the insurer “steps into the policyholder’s shoes” to recover the amount it paid. How Subrogation Works An insured suffers…

Subprime Mortgage A subprime mortgage is a home loan made to a borrower with a below‑average credit history who would not qualify for a prime, or conventional, mortgage. Lenders charge higher interest rates on subprime loans to compensate for increased default risk. These loans are often adjustable‑rate mortgages (ARMs), which can increase borrowers’ monthly payments…

Subprime Loan What is a subprime loan? A subprime loan is a loan offered at interest rates above the prime rate to borrowers who do not qualify for prime-rate credit. Subprime borrowers typically have low credit scores, limited credit history, past delinquencies, or other factors that increase the lender’s perception of default risk. Because of…

Subordination Agreement Definition A subordination agreement is a legal document that establishes the priority of competing claims on a debtor’s assets. It designates one debt as senior (higher priority) and another as junior or subordinated (lower priority). Priority matters most when a borrower defaults, goes into foreclosure, or declares bankruptcy—senior creditors are paid before subordinated…

Subordinated Debt Subordinated debt (or subordinated debentures) is debt that ranks below other obligations in priority of claim on a borrower’s assets and earnings. In a default or liquidation, subordinated creditors are paid only after senior (unsubordinated) creditors have been fully satisfied. Because of this lower claim priority, subordinated debt typically carries higher interest rates…

Sublease: What It Is and How It Works Key takeaways * A sublease is when an existing tenant (sublessor) rents all or part of their leased property to a third party (subtenant) for a defined period. * The original tenant typically remains legally responsible to the landlord for rent and lease obligations. * Many leases…

Subjective Probability Subjective probability is the assessment of how likely an event is to occur based on an individual’s personal judgment, experience, beliefs, or “gut feeling,” rather than on formal calculation or long-run frequency data. How it works It expresses a personal degree of belief in an outcome (e.g., “I think there’s a 30% chance…

Student Loan Forgiveness Student loan forgiveness relieves borrowers of part or all of their federal student loan debt. Eligibility is generally limited to federal Direct Loans; private student loans are not eligible. Forgiveness programs and rules can change due to legislation and court rulings, so borrowers should verify current requirements with their loan servicer or…

Key takeaways * A structured note is a debt security with an embedded derivative that modifies its risk-return profile. * Returns are linked to an underlying asset, index, or group of assets (equities, rates, commodities, FX, etc.). * Structured notes can offer customized payoffs (principal protection, income, leveraged upside) but are complex, often illiquid, and…

Structured Finance Explained Structured finance is a set of techniques that repackages and redistributes cash flows from assets to meet complex financing needs that standard loans or securities cannot satisfy. It is widely used by large corporations, financial institutions, and governments to raise capital, manage risk, and improve liquidity through securitization and other customized instruments….