Category: Financial Terms

Best Alternative to a Negotiated Agreement (BATNA) What is a BATNA? The Best Alternative to a Negotiated Agreement (BATNA) is the course of action a party will take if negotiations fail and no deal is reached. The concept, popularized by Roger Fisher and William Ury in Getting to Yes, helps negotiators decide whether to accept…

Bespoke CDO A bespoke CDO is a customized collateralized debt obligation created by a dealer for a specific group of investors. Typically the investor group buys a single tranche tailored to its risk-return or hedging needs, while the dealer retains and hedges the remaining tranches. These instruments are often structured as synthetic CDOs that reference…

Bernie Madoff: Who He Was and How His Ponzi Scheme Worked Key takeaways * Bernard L. “Bernie” Madoff ran the largest Ponzi scheme in history, taking in roughly $65 billion in client account statements while paying redemptions with new investors’ money. * The fraud surfaced in 2008 when widespread redemption requests during the financial crisis…

Bermuda Option A Bermuda option is an exotic options contract that can be exercised only on predetermined dates before expiration (commonly one specified day each month) as well as on the expiration date. It sits between American options (exercisable any time before expiration) and European options (exercisable only at expiration), combining limited early-exercise flexibility with…

Berkshire Hathaway Overview Berkshire Hathaway is a multinational holding company led for decades by Warren Buffett. It owns a wide range of operating businesses and holds large equity stakes in public companies. By 2025 Berkshire’s market capitalization exceeded $1 trillion, making it one of the largest publicly traded companies in the world. Key facts Founded…

BHD (Berhad): Definition, What It Indicates and Example Companies Definition Berhad (abbreviated Bhd or BHD) is the suffix used in Malaysia to designate a public limited company. It indicates a company that issues shares and is subject to public financial reporting requirements. The suffix Sendirian Berhad (Sdn Bhd or SDN BHD) denotes a private limited…

Benjamin Graham: The Father of Value Investing and His Legacy Key takeaways * Benjamin Graham is widely regarded as the father of value investing and authored the seminal works “Security Analysis” and “The Intelligent Investor.” * His approach centers on determining a stock’s intrinsic value, buying when the market price is significantly below that value,…

Benefit-Cost Ratio (BCR) The Benefit-Cost Ratio (BCR) is a simple metric used in cost–benefit analysis to compare the present value of a project’s expected benefits to the present value of its costs. It helps evaluate whether a project is likely to create net economic value. Key points Formula: BCR = NPV(benefits) / NPV(costs) BCR >…

Beneficiary — Role, Types, and Examples Key takeaways * A beneficiary is a person or organization named to receive assets (money, insurance proceeds, account balances) after someone dies. * Designating beneficiaries on account paperwork usually overrides instructions in a will and can avoid probate. * Different assets have different distribution rules and tax consequences—retirement accounts…

What is a beneficial owner? A beneficial owner is the person who enjoys the economic benefits and exercises the real control over an asset, even when legal title is held by another party (for example, a broker, trustee, or nominee). Beneficial ownership is distinct from legal ownership: the legal owner appears on formal records, while…

Investment Benchmarks: Definition, Types, and Uses What is a benchmark? A benchmark is a standard index used to measure the performance of securities, funds, or portfolios over time. Benchmarks provide a reference point for comparing returns, risk, and overall effectiveness of investment strategies relative to a relevant market or market segment. Why benchmarks matter Help…

Ben Bernanke Ben S. Bernanke is an American economist best known for serving two terms as chair of the U.S. Federal Reserve (2006–2014). He led the Fed through the 2008 financial crisis and the Great Recession, introducing unconventional measures—most notably quantitative easing—to stabilize the financial system and support recovery. His actions remain influential and controversial…

Below-the-Line Advertising Definition Below-the-line (BTL) advertising uses targeted, non-mainstream channels to reach specific audiences directly. Typical BTL tactics include direct mail, targeted online ads, social media campaigns, trade shows, catalogs, and search-engine marketing. Compared with above-the-line (ATL) advertising (TV, radio, billboards, mass print), BTL is usually more focused, measurable, and cost-effective. Key takeaways BTL targets…

Bell Curve Key takeaways A bell curve (normal distribution) is a symmetric, bell-shaped graph showing how values cluster around a central mean. The peak corresponds to the mean, median, and mode; spread is measured by the standard deviation. Empirical rule: ~68% within 1 SD, ~95% within 2 SD, ~99.7% within 3 SD. Widely used in…

Behavioral Finance: Biases, Emotions, and Financial Behavior Behavioral finance studies how psychological factors—biases, emotions, and cognitive limitations—shape financial decisions by investors and other market participants. It challenges the assumption of perfectly rational actors in traditional finance and helps explain market anomalies such as bubbles, crashes, and persistent mispricings. Key takeaways Psychological biases and emotions systematically…

Understanding Behavioral Economics: Theories, Principles, and Applications Behavioral economics blends insights from psychology and economics to explain how people actually make economic decisions—often irrationally—rather than how they would behave under traditional rational-choice models. It examines cognitive biases, emotional influences, social pressures, and contextual factors that systematically shape choices in markets, policy, and everyday life. Key…

Bearish Engulfing Pattern What it is The bearish engulfing pattern is a two-candle candlestick formation that often signals a potential reversal from an uptrend to a downtrend. It consists of: – A smaller bullish (up) candle followed by – A larger bearish (down) candle whose body completely engulfs the body of the prior bullish candle…

Bearer Share: Definition and Overview A bearer share is a type of equity security owned by whoever physically holds the stock certificate. Ownership is not registered with the issuing company or any authority; control transfers simply by handing over the certificate. Dividends are typically claimed by presenting a physical coupon attached to the certificate. Bearer…

Bearer Bonds Bearer bonds are physical fixed-income certificates owned by whoever holds them, rather than by a named, registered owner. They pay interest via detachable coupons that the holder redeems for payment. Because ownership is evidenced solely by possession, bearer bonds behave much like cash: whoever has the certificate can collect interest and principal. Key…

Understanding Bear Traps in Trading A bear trap is a deceptive market move where a security appears to break down into a sustained decline, luring traders into short positions, then quickly reverses upward. Traders caught short must cover at higher prices, incurring losses. Bear traps can occur across markets—stocks, futures, bonds, and currencies—and often stem…

Bear Stearns: Rise, Collapse, and Legacy Key takeaways * Bear Stearns was a major New York investment bank founded in 1923 that collapsed at the outset of the 2008 financial crisis. * Heavy exposure to mortgage‑backed securities and high leverage—especially in hedge funds—left the firm vulnerable when the housing market turned. * Liquidity evaporated in…

Bear Spread A bear spread is an options strategy used when an investor expects a moderate decline in the price of an underlying asset. It combines the simultaneous purchase and sale of two options on the same underlying with the same expiration but different strike prices. Bear spreads are vertical spreads that limit both potential…

Bear Put Spread A bear put spread (also called a debit put spread or long put spread) is an options strategy used when you expect a moderate decline in an underlying asset. It reduces the cost and risk of buying a single put by simultaneously selling a lower-strike put with the same expiration. How it…

Bear Market A bear market is a sustained decline in financial markets, commonly defined as a drop of 20% or more from recent highs. It reflects widespread investor pessimism and often coincides with weakening economic conditions. Bear markets can be short-lived or extend for months or years, and they create both risks and opportunities for…

Bear Hug: Definition and Overview A bear hug is an unsolicited acquisition tactic where a buyer makes a public offer to purchase a target company at a significant premium to its current market price. The offer is directed at the target’s shareholders rather than—or in addition to—its board, applying pressure on management to accept or…

Bear Call Spread A bear call spread (also called a bear call credit spread or short call spread) is an options strategy used when you expect a modest decline or neutral movement in an underlying asset. It involves selling a call at a lower strike and buying a call at a higher strike, both with…

What is the Beacon Score? The Beacon score was an early credit-scoring model created by FICO and commonly associated with Equifax. Over time it was rebranded and integrated into the family of FICO scores. For example, Beacon 5.0 is now referred to as FICO Score 5. The Beacon name is largely historical, but the scoring…

BCG Growth-Share Matrix The BCG Growth-Share Matrix is a strategic planning tool that helps companies evaluate and prioritize product lines or business units by comparing market growth rate (vertical axis) with relative market share (horizontal axis). Developed by Bruce Henderson of the Boston Consulting Group in 1970, it organizes offerings into four quadrants—Stars, Cash Cows,…

Bayes’ Theorem Definition Bayes’ Theorem is a formula for updating the probability of a hypothesis (event A) given new evidence (event B). It converts a prior probability into a posterior probability by incorporating the likelihood of the observed evidence. Why it matters Bayes’ Theorem lets you revise beliefs rationally when new information arrives. It’s widely…

Batch Processing Key takeaways Batch processing automates the execution of multiple transactions or tasks as a single group with little or no human intervention. It is commonly used for payroll, end-of-day bank reconciliation, billing cycles, and overnight trade settlement. Batch systems reduce ongoing labor costs and improve throughput but can require significant upfront investment and…

BAT Stocks: Baidu, Alibaba, Tencent What are BAT stocks? BAT is an acronym for three of China’s largest technology companies: Baidu, Alibaba, and Tencent. Together they represent major pillars of China’s internet economy—search, e‑commerce and cloud services, and social/gaming/payments—often compared to large U.S. tech groups such as FAANG. Explore More Resources › Read more Government…

Basket Trade Definition A basket trade is an order to buy or sell a group of securities simultaneously. Typically used by institutional investors and investment firms, basket trades often include 15 or more securities and can encompass stocks, options, currencies, or commodities. They enable managers to execute a portfolio-level change in a single, coordinated transaction….

Key Takeaways * A basket of goods is a representative collection of consumer items and services used to track price changes and measure inflation. * The U.S. Bureau of Labor Statistics (BLS) samples roughly 80,000 prices monthly across more than 200 categories to produce the Consumer Price Index (CPI). * CPI calculations adjust for product…

Basis Risk Basis risk is the risk that a hedge will not perfectly offset the price movements of the underlying exposure because the two instruments are not perfectly correlated. When the asset being hedged and the hedging instrument move differently, the hedge can leave residual gains or losses. How basis risk affects hedges Hedging typically…

Basis Point (BPS) Definition A basis point (bp or bps) is a unit for measuring changes in interest rates, yields, fees, or spreads. – 1 basis point = 0.01% = 0.0001 in decimal form. – It removes ambiguity when discussing small percentage moves. Key takeaways Common financial unit for interest rates, bond yields, credit spreads,…