Category: Financial Terms

Structural Unemployment What it is Structural unemployment is a long-lasting form of unemployment that occurs when there is a persistent mismatch between the skills, location, or attributes of workers and the requirements of available jobs. Jobs exist, but workers either lack the required skills, live far from where jobs are concentrated, or cannot easily transition…

Understanding Strike Price: Definition, Function, and Impact Key takeaways A strike (or exercise) price is the fixed price at which an option holder can buy (call) or sell (put) the underlying security. The relationship between strike and current market (spot) price—called moneyness—largely determines an option’s intrinsic value and premium. In-the-money (ITM) options have intrinsic value;…

Stress Testing: Techniques, Purpose, and Real-World Examples What is stress testing? Stress testing is a method of evaluating how systems, institutions, or products perform under extreme but plausible adverse conditions. Originally prominent in finance to assess capital and liquidity under economic shocks, stress testing is also widely used in engineering, software, and healthcare to uncover…

SWOT Analysis: What it Is and How to Perform One A SWOT analysis is a strategic planning tool that identifies an organization’s Strengths, Weaknesses, Opportunities, and Threats. It combines internal and external factors to clarify competitive position, evaluate risk and potential, and guide decision-making for companies, teams, products, or projects. How SWOT Works Uses internal…

Stratified Random Sampling Key takeaways Stratified random sampling divides a population into homogeneous subgroups (strata) and draws random samples from each stratum. Proportionate stratification samples each stratum in proportion to its population share; disproportionate (or oversampling) intentionally changes those shares. This method improves precision for estimates of subgroup and overall population characteristics but requires a…

Strategic Management Strategic management is the disciplined process of organizing and directing an organization’s resources to achieve defined goals. It involves assessing the competitive environment and internal capabilities, formulating courses of action, implementing them across the organization, and measuring results to stay competitive and adapt to change. Key takeaways Strategic management aligns resources and actions…

Strategic Financial Management Strategic financial management is the process of managing a company’s financial resources and decisions to achieve long-term objectives and maximize shareholder value. It combines planning, risk management, capital allocation, and ongoing performance control to keep the organization aligned with its strategic goals. Key takeaways Focuses on long-term value creation rather than short-term…

Strategic Alliances: Definition, Types, and How to Build Them Key takeaways * A strategic alliance is a cooperative arrangement between two or more independent companies that pool resources to pursue shared objectives while remaining separate entities. * Alliances help firms enter new markets, access technology or expertise, diversify revenue, and share risk without full mergers…

Strangle (options strategy) What is a strangle? A strangle is an options strategy that profits from a large price move in either direction. You buy (or sell) a call and a put on the same underlying with the same expiration but different strike prices—typically both out of the money for a long strangle. The goal…

Straight-Through Processing (STP) Straight-through processing (STP) automates financial transactions end to end, eliminating manual intervention in payments, securities trades, and other back-office processes. By routing structured transaction data through electronic networks and coded identifiers, STP reduces errors, speeds settlement, and lowers operational costs. Key benefits Faster processing and settlement Fewer manual errors and exceptions Lower…

Winding Up: Definition and Key Points Winding up (also called liquidation) is the legal process of closing a company’s operations by converting its assets to cash, paying creditors, and distributing any remaining assets to owners or shareholders. A business in winding up ceases normal operations and exists only to complete this process. Winding up is…

Windfall Tax A windfall tax is a special levy on businesses or individuals that unexpectedly earn unusually large profits due to external events—such as sudden commodity price spikes, geopolitical shocks, or regulatory changes. Governments use windfall taxes to capture a share of those extraordinary gains for public purposes, such as relief for consumers, social programs,…

Windfall Profits Windfall profits are unusually large, unexpected gains that arise from fortunate or sudden changes in circumstances. They typically exceed historical norms and can affect an entire industry or a single company. Individuals can also experience windfalls from one-time events, such as lottery wins, inheritances, or selling a rare collectible at a premium. How…

Win/Loss Ratio What it is The win/loss ratio compares the number of winning trades to losing trades over a chosen period. It’s a simple measure of how often a trading strategy produces winners versus losers, but it does not measure how much is won or lost per trade. Formula and related metrics Win/Loss ratio =…

Wilshire 5000 Total Market Index (FT Wilshire 5000) Key takeaways The FT Wilshire 5000 (formerly the Wilshire 5000 Total Market Index, TMWX) is a broad, market-capitalization-weighted index intended to represent the investible U.S. equity market. It aims to capture essentially 100% of the investible U.S. market by including a very large number of U.S. equities…

Willie Sutton Rule The Willie Sutton Rule recommends starting with the most obvious, highest‑impact option when solving a problem: go where the rewards or answers are likeliest to be found. It is named after bank robber Willie Sutton, who reportedly replied “Because that’s where the money is” when asked why he robbed banks. Core idea…

Understanding the Williams Act: Shareholder Protections and Tender Offers The Williams Act is a federal law enacted in 1968 to regulate acquisitions and tender offers and to protect shareholders from coercive takeover tactics. Prompted by a wave of hostile, cash tender offers in the 1960s, the Act amended the Securities Exchange Act of 1934 to…

Williams %R Definition Williams %R (Williams percent range) is a momentum oscillator that shows where the current closing price sits relative to the highest high and lowest low over a chosen lookback period (commonly 14 periods). The indicator ranges from 0 to -100 and is used to identify overbought and oversold conditions and potential momentum…

William J. O’Neil William J. O’Neil was an investor, stockbroker, entrepreneur, and author who pioneered data-driven stock research and popularized a systematic growth-investing approach. He founded William O’Neil & Co., created the CAN SLIM investment strategy, launched the market research products Daily Graphs and MarketSmith, and established the financial newspaper Investor’s Business Daily (IBD). He…

William H. Gross Key takeaways * William H. “Bill” Gross co-founded Pacific Investment Management Company (PIMCO) and became known as the “Bond King.” * He helped create broad, investable access to fixed‑income markets and popularized active bond management. * Gross is also a prominent philatelist and philanthropist, donating parts of his collections and supporting the…

William F. Sharpe: CAPM, the Sharpe Ratio, and His Contributions to Finance Key takeaways * William F. Sharpe is a Nobel Prize–winning economist best known for developing the capital asset pricing model (CAPM) and the Sharpe ratio. * CAPM links an asset’s expected return to its systematic risk (beta) and the market risk premium. *…

William T. Dillard II Key facts * Born March 4, 1945, in Nashville, Arkansas. * Education: B.S. in accounting, Sam M. Walton College of Business (University of Arkansas), 1966; MBA, Harvard University. * Joined Dillard’s in 1967; became CEO in 1998. * Owns roughly 10% of Dillard’s. * Known for early adoption of computerized inventory…

Will: What It Means, How It Works, and Requirements Key takeaways * A will (last will and testament) is a legal declaration of how you want your property distributed after death. * A will can name an executor, recommend a guardian for minor children, and state funeral or burial preferences. * Beneficiary designations on insurance…

Wilder’s DMI (ADX): Definition, Calculation, and Trading Use What it is Wilder’s Directional Movement Index (DMI) is a set of three lines that measure trend direction and strength: – +DI (Plus Directional Indicator) — measures upward movement. – −DI (Minus Directional Indicator) — measures downward movement. – ADX (Average Directional Index) — measures the strength…

Wildcat Drilling Key takeaways Wildcat drilling (wildcatting) is exploratory drilling in unproven or previously exhausted areas to find oil or natural gas. It carries high risk and high potential reward, and is often undertaken by smaller, agile firms. Wildcatters also rework older fields or marginal wells that larger companies deem uneconomic. Although a small portion…

Wildcat Drilling: What It Means and How It Works Key takeaways Wildcat drilling is high-risk exploratory drilling in unproven or previously exhausted areas for oil or natural gas. It’s often undertaken by smaller, agile companies that can operate profitably where larger firms cannot. Successes can deliver large rewards; repeated failures can bankrupt small producers. What…

Wildcat Banking: Meaning and History Key takeaways * Wildcat banking refers to a period (roughly 1837–1865) in which state-chartered banks in the U.S. operated with little or no federal oversight, often from remote locations. * These banks issued their own banknotes, which varied widely in value and redeemability; some were backed by specie or bonds,…

Wild Card Option: What it Is and How It Works A wild card option is an embedded right in certain U.S. Treasury futures contracts that allows the seller (the short) to delay delivery of the underlying Treasury securities beyond the regular trading session. By postponing settlement into after-hours trading, the seller can see whether prices…

Wild Card Option: Definition, How It Works, and an Example What is a wild card option? A wild card option is a contractual right embedded in certain U.S. Treasury futures contracts that allows the seller (the short) to postpone delivery of the underlying Treasury bonds until after regular trading hours. This gives the seller additional…

Wilcoxon Test What it is The Wilcoxon test is a family of nonparametric hypothesis tests used to compare two groups when data do not meet the assumptions required for parametric tests (for example, normality). There are two commonly used versions: – Wilcoxon signed-rank test — for comparing two related (paired) samples. – Wilcoxon rank-sum test…

Widow(er)’s Exemption What it is A widow(er)’s exemption provides tax relief to a surviving spouse after a partner’s death. Relief can come from federal rules (income, capital gains, estate tax treatment) and from state laws (commonly reduced property-tax assessments). To qualify for federal benefits, spouses must have been legally married; domestic partnerships and civil unions…

Widow’s Allowance A widow’s allowance (also called a widower’s or spousal allowance) is a short-term cash or property payment provided to a surviving spouse — and sometimes to minor or dependent children — from the decedent’s estate. It’s intended to meet immediate living expenses while the estate is being settled and is typically set by…

Widow Maker A “widow maker” is a trade or investment that can produce sudden, catastrophic losses. In finance the phrase describes positions that either entail extreme risk or repeatedly confound consensus expectations so that nearly everyone taking the trade loses. The term originates from nonfinancial uses — a loose tree limb that can fall in…

Widow-and-Orphan Stock: Definition, Characteristics, Pros and Cons What is a widow-and-orphan stock? A widow-and-orphan stock is a traditional term for an equity that combines low price volatility with a reliable dividend. These are typically large, mature companies in non-cyclical industries (for example, utilities and consumer staples) that provide steady income and are perceived as lower…

Widely Held Fixed Investment Trust (WHFIT) A widely held fixed investment trust (WHFIT) is a type of unit investment trust (UIT) that includes at least one third‑party interest holder (a middleman). Like other UITs, a WHFIT holds a fixed portfolio of assets—such as stocks, bonds, or mortgages—and distributes income (interest or dividends) to investors proportionate…