Category: Financial Terms

Participatory Notes (P-Notes): What They Are and How They Work in India Participatory notes (P-notes or PNs) are offshore derivative instruments that allow foreign investors to gain exposure to Indian securities without registering directly with the Securities and Exchange Board of India (SEBI). Issued by SEBI-registered foreign institutional investors (FIIs) or their brokers, P-notes provide…

Labor Force Participation Rate Overview The labor force participation rate (LFPR) measures the share of the working-age population that is either employed or actively seeking work. It complements the unemployment rate by capturing people who want to work but may have stopped searching. The U.S. Bureau of Labor Statistics (BLS) publishes LFPR figures monthly. Key…

Participating Preferred Stock Participating preferred stock is a class of preferred equity that combines a fixed preferred dividend with the right to share in additional dividends or liquidation proceeds alongside common shareholders. It ranks above common stock but below debt in a company’s capital structure. Key takeaways Holders receive a fixed preferred dividend plus potential…

Participating Policy: Definition and How It Works A participating policy (also called a “with-profits” policy) is a life insurance contract that shares a portion of the insurer’s profits with policyholders through dividends. These dividends are typically declared annually but are not guaranteed — they depend on the insurer’s financial performance, mortality experience, expenses, and investment…

Parsonage Allowance What is a parsonage allowance? A parsonage allowance (also called a housing or rental allowance) is money provided by a religious employer to a minister to offset housing costs. For federal income tax purposes, the allowance may be excluded from the minister’s gross income to the extent it meets IRS rules. Explore More…

Parity Price — Definition and Uses Parity price describes a price level at which two assets or securities are equal in value. The concept appears across markets—convertible bonds, options, commodities, currencies, and interest-rate relationships—and helps investors identify equivalence points, conversion opportunities, or arbitrage. Key Concepts Parity = equality or equivalence in value between two instruments….

Parity Key takeaways Parity denotes equality or equivalence in price or value between two assets. It appears in multiple contexts: convertible bonds, options, commodities, and currencies. Parity concepts help identify conversion opportunities, fair option pricing, and potential arbitrage. What parity means in finance Parity describes a price level at which two assets or securities represent…

Pari-passu Pari-passu is a Latin phrase meaning “equal footing.” In finance and law, it describes situations where two or more assets, securities, creditors, or obligations are treated equally—without preference or priority. Key points Pari-passu denotes equal rank or equal treatment among parties to a claim or contract. It commonly appears in bankruptcy, bond indentures, loan…

Pareto Principle What it is The Pareto Principle (also called the 80/20 Rule) is the observation that a relatively small share of inputs often accounts for a large share of outcomes — commonly phrased as “80% of results come from 20% of causes.” It is an empirical rule of thumb, not a law. Origin Economist…

Pareto Improvement What it is A Pareto improvement is a change in the allocation of resources that makes at least one person better off without making anyone else worse off. Originating from the work of economist Vilfredo Pareto, repeated Pareto improvements can continue until a Pareto optimum (or Pareto efficiency) is reached—an allocation where no…

Pareto Efficiency Key takeaways Pareto efficiency (Pareto optimality) occurs when no reallocation of resources can make someone better off without making someone else worse off. It is a benchmark for allocative efficiency but does not imply fairness or equality. Pure Pareto efficiency is a theoretical ideal; real economies approximate it under certain assumptions (e.g., perfect…

Pareto Analysis Pareto analysis is a decision-making technique based on the 80/20 principle: roughly 80% of effects come from 20% of causes. It helps prioritize efforts by identifying the relatively few causes that produce the majority of problems (or benefits), enabling more efficient use of time and resources. Origins and concept Originated from Vilfredo Pareto’s…

Parent Company: Definition, Types, and Examples What is a parent company? A parent company is a business entity that holds a controlling interest in one or more other companies (subsidiaries). Control typically means owning more than 50% of the subsidiary’s voting stock, which gives the parent influence over strategy, operations, and management appointments. Parent companies…

Paradox of Thrift: How Individual Savings Can Hurt the Economy What is the paradox of thrift? The paradox of thrift—popularized by John Maynard Keynes—holds that while saving is generally prudent for individuals, widespread increases in saving during a recession can reduce aggregate demand, lower production and employment, and deepen the downturn. In short, what is…

Parabolic SAR (Stop and Reverse) Indicator What it is The Parabolic SAR (PSAR), developed by J. Welles Wilder, is a technical indicator used to identify trend direction, signal potential reversals, and provide a trailing stop level. It plots a series of dots on price charts: dots below price during uptrends and above price during downtrends….

Par Yield Curve: Definition, Meaning, and How to Derive It What is the par yield curve? The par yield curve plots the coupon rates (yields to maturity) of hypothetical coupon‑paying Treasury securities that would be priced at par (price = 100). For each maturity on the x‑axis, the par yield is the annual coupon rate…

Par Value Par value is the stated—or face—value of a financial instrument when it is issued. It applies primarily to bonds and stocks and serves different legal, contractual, and accounting purposes than market value, which fluctuates with supply and demand. Key points For bonds, par value is the amount the issuer promises to repay at…

Par Value: What It Means for Stocks and Bonds Key takeaways * Par value (also called face or nominal value) is the stated value of a bond or stock when issued. * For bonds, par value defines the amount repaid at maturity and is used to calculate coupon payments. * For stocks, par value is…

Paper Trading Key takeaways Paper trading is simulated investing using fake money to practice strategies and order execution without financial risk. Modern simulators mimic real trading platforms and allow testing of orders, charts, and news feeds. To be useful, paper trading should replicate the capital, time horizon, fees, and risk parameters you’ll use in a…

Paper Money Key Takeaways * Paper money is a country’s official currency issued and regulated by its central bank or treasury. * It typically functions as fiat money—value derives from legal acceptance rather than intrinsic worth. * Paper money originated in 7th-century China as a practical alternative to heavy metal coinage. * Major modern examples…

Painting the Tape Painting the tape is a form of market manipulation in which traders buy and sell a security among themselves to create the appearance of substantial trading activity. The goal is to manufacture interest and drive the price higher so manipulators can sell their holdings to unsuspecting investors at inflated prices. Key takeaways…

Paid-Up Capital: Definition and Key Points What is paid-up capital? Paid-up capital (also called paid-in or contributed capital) is the equity a company receives from shareholders in exchange for issued shares. It represents funds actually paid to the company on the primary market (for example, through an initial public offering). Transfers of shares on secondary…

Paid-Up Additional Insurance: How It Works and Key Considerations Definition Paid-up additional insurance (PUA) is a feature of participating whole life policies that lets policyholders use dividends (or extra premiums via a rider) to buy small, fully paid life insurance increments. Each paid-up addition has its own death benefit and cash value, and it continues…

Paid-In Capital: Definition, Calculation, and Key Points Definition Paid-in capital (also called contributed capital) is the total cash or other assets a company receives from investors in exchange for its common or preferred stock. On the balance sheet it appears in shareholders’ equity and typically comprises: – The par (or stated) value of the issued…

What is Paga? Paga is a mobile payments and mobile wallet platform founded in Nigeria by Tayo Oviosu. Launched publicly in 2011, it enables users to send and receive money, pay bills, buy airtime, and access basic banking services via a mobile app, website, or through a nationwide network of agent outlets. How Paga works…

Pac-Man Defense What it is The Pac-Man defense is a takeover-defense tactic used by a target company when faced with a hostile acquisition attempt. Instead of surrendering, the target turns the tables by attempting to acquire the hostile bidder. The goal is to deter or disrupt the acquirer’s plans by creating a counter-threat that makes…

P-Value: Definition, Calculation, Interpretation, and Examples Key takeaways * A p-value measures how likely the observed data (or more extreme) would be if the null hypothesis were true. * Smaller p-values indicate stronger evidence against the null hypothesis and in favor of the alternative. * A common threshold for “statistical significance” is 0.05, but thresholds…

P-Value: Definition, Calculation, Interpretation, and Examples Key takeaways * A p-value measures the probability of obtaining data at least as extreme as observed, assuming the null hypothesis is true. * Lower p-values provide stronger evidence against the null hypothesis; a common threshold for “statistical significance” is 0.05, but this is arbitrary. * P-values do not…

Oxford Saïd Business School (SBS) Oxford Saïd Business School is the business faculty of the University of Oxford. It offers a range of degree and executive education programs—most notably the full-time MBA, executive and part-time MBA formats, specialized master’s programs, doctoral study, and short courses—anchored in Oxford’s collegiate environment. The school emphasizes global perspective, entrepreneurship,…

Owners’ Equivalent Rent (OER) Owners’ equivalent rent (OER) is an estimate of how much rent a homeowner would have to pay to live in their own home if they were renting it. It represents the “implicit rent” of owner-occupied housing and is used to approximate the shelter cost faced by homeowners without relying on actual…

Owner-Occupant An owner-occupant is a person who owns and lives in the same property. Lenders and housing programs treat owner-occupants differently from absentee owners or investor-owners, and certain loans and government incentives are available only to owner-occupants. How the designation works for mortgages Mortgage applications typically require you to state whether you intend to occupy…

Owner Financing Owner financing (also called seller or creative financing) is a real estate arrangement in which the property seller finances all or part of the purchase for the buyer. Instead of getting a mortgage from a bank, the buyer makes regular payments to the seller according to terms the parties negotiate. How it works…

Owner Earnings Run Rate Owner earnings run rate is an estimate of the cash a business is likely to generate for its owners over a defined period—typically a year—based on recent financial performance. It combines the concept of a run rate (extrapolating current results forward) with owner earnings (a cash‑based measure of distributable earnings). What…

Own-Occupation Policy What it is An own-occupation disability insurance policy pays benefits when a policyholder is unable to perform the material and substantial duties of the occupation for which they are trained. Coverage is typically triggered by inability to perform one’s own occupation—even if the person can work in another job or profession. Doctors and…

Overwriting: Definition, How It Works, and an Example What is overwriting? Overwriting is an options strategy in which an investor who owns a stock sells (writes) call options against that stock to collect option premiums. The seller generally believes the options are overpriced or unlikely to be exercised before expiration and uses the premiums to…