Category: Financial Terms

Black–Scholes Model The Black–Scholes model (also called Black–Scholes–Merton or BSM) is a foundational mathematical framework for estimating the theoretical price of European-style options. Introduced in 1973, it expresses an option’s fair value in terms of the underlying asset price, strike, time to expiration, volatility, and the risk-free interest rate. History (brief) Fischer Black, Myron Scholes…

Black Monday Black Monday refers most famously to Oct. 19, 1987, when global equity markets plunged: the Dow Jones Industrial Average fell about 22.6% in a single trading session (a drop of 508 points), and other major indices plunged similarly. It remains the largest one-day percentage decline in modern U.S. market history and triggered a…

Black Market — Definition and Overview A black market is any exchange of goods or services conducted outside government-sanctioned channels to evade laws, price controls, or taxes. Transactions may involve illegal goods (drugs, weapons, trafficked persons) or legal goods sold illicitly (untaxed alcohol, counterfeit products). Black markets are also called underground, shadow, or illegal markets….

Black Friday Black Friday is the day after the U.S. Thanksgiving holiday and is widely considered the start of the holiday shopping season. Retailers promote deep discounts on electronics, toys, clothing, and other gift items; consumers flock to stores and websites for limited-time offers. Sales activity around Black Friday is often used as a short-term…

Black Box Model A black box model is any system or algorithm that produces outputs from inputs while concealing—or making unintelligible—the internal logic that connects the two. Widely used across finance, computing, engineering, and behavioral science, these models can deliver powerful predictions and automation but pose transparency, governance, and risk-management challenges. Key takeaways Processes inputs…

Black Money: Definition, How It Works, and Its Effects Key takeaways * Black money is income obtained illegally or income from legal activity that is not reported for tax purposes. * It is often transacted in cash, kept out of the banking system, and concealed through various laundering methods. * Black money reduces government revenue,…

Bitcoin Wallet A cryptocurrency (Bitcoin) wallet is software or hardware that stores the cryptographic keys used to access and sign transactions on a blockchain. Wallets do not hold coins themselves—coins exist on the blockchain—rather they store the private keys that grant control of the funds associated with a public address. Key takeaways A wallet stores…

Bitcoin Misery Index (BMI) The Bitcoin Misery Index (BMI) is a contrarian measure of Bitcoin price sentiment that ranges from 0 to 100. Created by Tom Lee of Fundstrat in 2018, the BMI combines win-rate metrics and volatility to gauge how satisfied traders are with recent Bitcoin performance. How the BMI is calculated Scale: 0–100,…

Bitcoin Mining Bitcoin mining is the decentralized process that secures the Bitcoin network, validates transactions, and creates new bitcoins. Miners run specialized software and hardware to compete in solving a cryptographic puzzle; the first to find a valid solution adds a new block to the blockchain and receives a bitcoin reward plus transaction fees. How…

Bitcoin Cash (BCH): A concise guide What is Bitcoin Cash? Bitcoin Cash (BCH) is a cryptocurrency that split from Bitcoin in 2017 via a hard fork. It was created to address Bitcoin’s scalability limits by increasing the maximum block size, allowing more transactions per block and aiming for lower fees and faster confirmations. BCH is…

Bitcoin Bitcoin is a decentralized digital currency that enables peer-to-peer transactions without a central authority. It runs on a distributed ledger called a blockchain and was first described in a 2008 white paper attributed to the pseudonymous Satoshi Nakamoto. Since its launch in 2009, Bitcoin has become the most widely known cryptocurrency and a focal…

Bird-in-Hand: Definition and Investment Strategy The bird-in-hand theory holds that investors prefer the certainty of dividends over the uncertain prospect of future capital gains. Derived from the proverb “a bird in the hand is worth two in the bush,” the idea is that a known cash return today is more valuable to many investors than…

Bioremediation: Using Living Organisms to Clean Contaminated Environments What is bioremediation? Bioremediation is a branch of biotechnology that uses living organisms—mainly microbes and bacteria, and sometimes fungi—to remove or neutralize pollutants in soil, groundwater, and other environments. It harnesses natural metabolic processes to break down contaminants such as oil, solvents, and pesticides into harmless end…

Binomial Option Pricing Model The binomial option pricing model values options by modeling the underlying asset’s possible price paths as a discrete-time “binomial tree.” At each step the asset either moves up or down by a specified factor. The model is widely used because it is intuitive, flexible, and well suited to valuing American-style options…

Binomial distribution Definition A binomial distribution models the probability of obtaining a given number of successes in a fixed number of independent trials, where each trial has exactly two possible outcomes (commonly called “success” and “failure”) and the probability of success p is constant across trials. When to use it Use the binomial distribution when:…

Binary Option: Definition, How It Trades, and Example Key takeaways A binary option is an all-or-nothing financial contract: it pays a fixed amount if a specific yes/no outcome occurs at expiration, and nothing if it does not. Payout and loss are predetermined; risk is limited to the amount invested in the option. Most binary options…

Binance Coin (BNB): Overview Binance Coin (BNB) is the native cryptocurrency of the Binance ecosystem. It began as a utility token for reduced trading fees on Binance and has since expanded into broader on-chain and off-chain use cases. BNB ranks among the largest cryptocurrencies by market capitalization. History and tokenomics Launched in 2017 via an…

Bill of Lading: Meaning, Types, Uses, and Management What is a bill of lading? A bill of lading (B/L) is a legal shipping document that serves three roles simultaneously: * A receipt confirming the carrier has received the goods in the described condition. * Evidence of the contract of carriage between shipper and carrier. *…

What is a bill of exchange? A bill of exchange is a written, negotiable order binding one party to pay a fixed sum to another party either on demand or at a specified future date. Commonly used in international trade, it functions as a payment instrument that can be transferred by endorsement and helps parties…

Billing Cycle Explained: Definition, How It Works, and Examples A billing cycle is the period between the end of one billing statement and the end of the next for a recurring good or service. It determines when charges are calculated, statements are issued, and payments are due. While monthly cycles are common (credit cards, utilities,…

Bill of Materials (BOM): A Comprehensive Guide What is a Bill of Materials (BOM)? A bill of materials (BOM) is a structured list that details all components, raw materials, subassemblies, parts, and instructions required to build, manufacture, or repair a finished product. It serves as a centralized blueprint used across engineering, production, purchasing, and inventory…

Bill Auction: Definition, How It Works, and How to Participate What is a bill auction? A bill auction is the U.S. Treasury’s public sale of Treasury bills (T-bills), its short-term debt securities with maturities from a few weeks up to one year. The Treasury issues most short-term bills through weekly electronic auctions. These auctions are…

Bilateral Trade: Key Benefits and Challenges Explained What is bilateral trade? Bilateral trade is the exchange of goods and services between two countries, often governed by bilateral trade agreements that reduce or eliminate tariffs, quotas, and other trade barriers. These agreements aim to boost trade and investment, standardize regulations, and improve market access for businesses…

Bilateral Contract: Definition, How It Works, and Examples Definition A bilateral contract is a legally binding agreement between two parties in which each party makes a promise or assumes an obligation to the other. Both sides exchange consideration (something of value), creating reciprocal duties that are enforceable by law. Explore More Resources › Read more…

Big Data — an overview Big data refers to extremely large and complex datasets that require specialized tools and techniques for storage, processing, and analysis. These datasets power insights, forecasts, and automated decisions across business, science, and government. What is big data? Big data is defined not just by size but by how quickly it…

Bid Size The bid size is the quantity of a security that buyers are willing to purchase at a specified bid price. It indicates how many shares (or contracts) are available to be bought at the current best bid and is a key indicator of demand and liquidity in the market. Key takeaways Bid size…

Bid Price: Definition and Overview A bid price is the highest amount a buyer is willing to pay for a security, asset, commodity, or service. It is typically lower than the ask (or offer) price—the minimum amount a seller will accept. The difference between them is called the bid-ask spread, an important indicator of market…

Bid Bond: Definition, How It Works, and Key Differences from Performance Bonds What is a bid bond? A bid bond is a financial guarantee provided by a bidder (usually a contractor) to a project owner that the bidder will enter into the contract and provide required performance/payment bonds if awarded the job. It protects the…

Bid-Ask Spread What it is The bid-ask spread is the difference between the highest price a buyer is willing to pay (the bid) and the lowest price a seller is willing to accept (the ask) for a security. It represents the primary transaction cost of trading and is collected by market makers or liquidity providers…

Bid and Ask What they are The bid and ask make up a two-sided price quote for a security: * Bid: the highest price a buyer is currently willing to pay. * Ask (or offer): the lowest price a seller is currently willing to accept. The difference between them is the bid-ask spread. How it…

Bid: Meaning, How It Works, Types, and Examples Key takeaways * A bid is an offer to purchase an asset at a specified price and quantity. * The bid-ask spread (ask minus bid) reflects supply and demand and the market’s liquidity. * Market makers quote both bid and ask prices to facilitate trading and earn…

Bicameral System: What It Is, How It Works, and Its History in the U.S. What is a bicameral legislature? Bicameral means “two chambers.” A bicameral legislature divides the legislative branch into two separate houses that deliberate and vote independently. The most familiar example is the U.S. Congress, composed of the House of Representatives and the…

Beta Beta (β) measures a security’s price volatility relative to a benchmark market (commonly the S&P 500). It indicates how much systematic risk a stock or portfolio contributes compared with the broader market. Key takeaways A market index has β = 1.0. β > 1: security is more volatile than the market. β < 1:…

Key Takeaways * Best practices are proven guidelines or standards that represent the most efficient, ethical, or effective way to handle a business situation. * They can be set by regulators, industry bodies, or internally by an organization and serve as a roadmap for consistent decision-making and process execution. * Effective best practices are measurable,…

Best Endeavors: Meaning, Overview, and Limits Key takeaways * “Best endeavors” (or “best efforts”) is a contractual standard requiring a party to take all reasonable steps within its power to achieve the contract objective. * It is generally a stricter obligation than “reasonable endeavors,” though lines between standards can blur and lead to litigation. *…