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what is hubbert s peak theory | hubbert s peak theory is the idea that because oil production is a non renewable resource global crude oil production will eventually peak and then go into terminal decline following a roughly bell shaped curve although this model can be applied to many resources it was developed specifically for oil production understanding hubbert s peak theoryhubbert s peak theory is based on the work of marion king hubbert a geologist who worked for shell in the 1950s it posits that maximum production from individual or global oil reserves will occur towards the middle of the reserve s life cycle according to the hubbert curve which is used by exploration and production e p companies to estimate future production rates 1after that production decline accelerates due to resource depletion and diminishing returns accordingly if new reserves are not brought online faster than extractable reserves are drawn down the world will eventually reach peak oil because there is a finite amount of conventional light sweet crude in the earth s crust 1implications of peak oilan impending peak in fossil fuel production would obviously have serious implications for the world economy increased fuel scarcity and rising energy costs would have a negative impact on virtually every industry and directly increase consumers cost of living spikes in world oil prices are often accompanied by economic recessions a permanent sustained increase in prices due to a long term decline in available oil reserves might lead to corresponding economic malaise it could even raise the specter of stagflation and declining standards of living worldwide 2a technological revolution in oil productionbut hubbert s predictions that u s oil production would peak in the 1970s and that the world would hit peak oil around the year 2000 were proven wrong in actuality a technological revolution in the oil business has increased recoverable reserves and boosted recovery rates from new and old wells 3thanks to hi tech digital oil exploration using 3d seismic imaging which enables scientists to see miles below the seabed floor proven reserves around the world are growing all the time as new oil fields are discovered offshore drilling in the 1950s could reach a depth of 5 000 feet today the most advanced offshore oil rigs have the technology to drill up to 50 000 feet 456the state of texas has led the u s in crude oil production every year but one since 1970 in 1972 the state s annual production rose to slightly more than 1 26 billion barrels thanks to innovations like hydraulic fracturing enhanced oil recovery eor and horizontal drilling in 2019 annual production increased to more than 1 8 billion barrels these innovations have added trillions of cubic feet of gas and billions of barrels of oil to america s recoverable reserves while the u s has become a net exporter of petroleum products such as distillate fuel motor gasoline and jet fuel it remains a net importer of crude oil 78hi tech digital oil exploration using 3d seismic imaging has enabled oil companies to discover new oil fields no more peak oil the oil industry no longer talks about running out of oil thanks to companies like schlumberger for the foreseeable future there are abundant quantities of oil according to the bp statistical review of world energy 2021 the world s total proven oil reserves are estimated to be around 1 73 trillion barrels as of the end of 2020 latest information however this number is likely to rise because most of the world has yet to be explored using the latest technologies 9nor are we anywhere close to peak energy there are more than one trillion tons of proven coal reserves worldwide enough to last around 150 years at current rates of production there are 188 trillion cubic meters of proven natural gas reserves enough to last at least 50 years and there may be three trillion tons of natural gas hydrates which is enough natural gas to fuel the world for a thousand years according to the u s geological survey 101112these known and estimated reserves indicate that the peak in fossil fuel production is apparently a long way off in the future however given the current understanding of the origin of fossil fuels it is virtually inescapable that total reserves are a finite resource peak oil represents a future threat depending on how long it takes us to reach the peak how rapidly production will decline post peak and whether and how fast fossil fuels can be replaced by other energy sources for now though hubbert s peak theory does not appear to present a significant economic challenge in the near term | |
what did hubbert predict would happen to the oil industry | hubbert predicted that crude oil production would peak in the 1970s and decline from that point onwards at the time of his writing hubbert was generally correct as u s oil production did peak at the time however hubbert was not aware of the discovery and production of additional reserves such as from alaska as well as the implementation of new technologies such as fracking which has allowed u s oil production to increase 13who is the largest producer of oil as of 2022 the united states was the largest producer of crude oil producing 11 89 million barrels per day saudi arabia was the second largest producer producing 10 64 million barrels per day 14 | |
which country has the largest oil reserves | venezuela has the largest oil reserves of any country however much of that oil is difficult to refine 15the bottom linethe depletion of fossil fuel resources would have a devastating impact on civilization however current proven reserves show a significant amount of fossil fuels available that can be tapped and used the greater concern is the negative impact of fossil fuel use on the climate because of this there have been great strides made to move away from fossil fuels such as electric vehicles and the implementation of other renewable energy sources which if widely implemented in the future will remove the concern for the depletion of fossil fuels | |
what is hubris | hubris is the characteristic of excessive confidence or arrogance which leads a person to believe that they may do no wrong the overwhelming pride caused by hubris is often considered a flaw in character in the financial world hubris is considered a dangerous quality that emboldens an investment professional to take risks beyond what is appropriate for their situation while such risks may pay off at times any person who shows such behavioral flaws can easily find their gains erased by dramatic losses hubris can cause short sighted irrational or harmful behavior since the person does not stop to examine their behavior or consider the opinions of or effects on others when behaving hubris often causes humiliation to whom it is directed wsfurlan getty images | |
when aiming to be successful most individuals utilize a meaningful process of thought and execution a person affected by hubris will jump into a situation without questioning their methods the lack of adequate processing and planning often ends in eventual failure | hubris may be developed after a person encounters a period of success corporate executives and traders overcome by hubris may become a liability for their firms a manager might start making business decisions without fully thinking through the consequences or a trader may begin taking on excessive risk in many cases people overcome by hubris will bring about their downfall chief executive officers ceos and very successful business people who are overcome with hubris tend to be difficult to work in team settings they lack the ability to consider the opinions of others when they conflict with their own this inconsideration is because they believe they always know best investors and traders can also experience hubris with detrimental effects a lot of investors are overconfident and think they know better than the experts or even the market just being well educated and or clever does not mean you wouldn t benefit from good independent advice also it doesn t mean you can outwit the pros and a complex system of markets either many investors have lost fortunes by being convinced that they were better than the rest hubris may come in the form of overconfidence in 1 the quality of information and 2 the perceived skill or ability to act at the right time for maximum gain indeed studies show that overconfident traders trade more frequently and fail to appropriately diversify their portfolios one study analyzed trades from 10 000 clients at one discount brokerage firm the study wanted to ascertain if frequent trading led to higher returns after backing out tax loss trades and others to meet liquidity needs the study found that the purchased stocks underperformed the sold stocks by 5 over one year and 8 6 over two years in other words the more active the retail investor the less money they make 1this study was repeated numerous times in multiple markets and the results were always the same the authors concluded that traders are basically paying fees to lose money it is essential to differentiate hubris and confidence from one another having a realistic amount of confidence in oneself is crucial to long term success while hubris can be detrimental hubris vs self confidencehubris and self confidence can be confused as to some they appear the same however they are quite different some may say that all those who exhibit hubris are full of self confidence and that is true however not all those who have self confidence exhibit hubris one of the most important differentiating factors between the two is that those who show hubris are arrogant they believe that cannot fail because they are too skilled or lucky for that to happen those with self confidence believe they have the skills or luck but that is backed up by evidence proving so they are not blind to risk or adversity as those with hubris are those who show self confidence usually show an additional trait that those with hubris do not humility humility can be a very useful tool for not only ceos but any type of person as it can not only keep arrogance in check but will provide a much clearer picture of that individual s skills successes and failures when compared to the blinders that are on when someone is full of hubris special considerationsit is crucial to overcome hubris in oneself to avoid damaging professional relationships to overcome hubris seek out knowledge that will assist in doing so such as books and self help guides reforming thought patterns by considering the consequences hubris causes to others is an effective way to initiate positive changes hubris can be quelled by adequately bestowing praise and credit when working in a group setting it is of utmost importance to stay self aware during periods of success be vigilant in remembering that current accomplishments do not mean that future hardships can not occur examples of hubris in literaturehubris exists everywhere but it is often best exemplified through literary works a well known example of hubris occurs in mary shelley s frankenstein the protagonist of the story is victor victor s hubris is demonstrated in his venture to become a scientist who is unrivaled by any other in the end his hubris leads only to catastrophe in the novel pride and prejudice by jane austen the character of mr darcy has an exorbitant amount of pride in his social status and himself his hubris leads him to unfairly judge his eventual love interest elizabeth to the point where he nearly loses her only after a transformation of self is mr darcy able to overcome his hubris and win elizabeth s heart outside of fiction there are and have always been several examples of academics and scholars of finance at the best universities who really are brilliant technically speaking their purported stature in the field and brilliance however can delude them into thinking that the pickings are easy out there in the real world some really do cut it but others are in for a rude awakening beyond the ivory tower odd as it may sound someone with a ph d in finance may in fact lead you in the wrong direction while someone with no more than a high school diploma may have an amazing feel for the market and make a fortune examples of hubris in investingone of the most famous examples of hubris in investing is the saga of nick leeson nick was a head derivatives trader for barings bank and was operating in singapore nick was assigned to make arbitrage trades for the bank and because he was so successful in the past he was given a very powerful position with no oversight making such trades requires placing bets on both sides of the trade in order to hedge against losses however nick thought he understood everything about arbitrage trading in the markets he was involved in so he only placed bets on one side of the trade not both by doing so he left himself wide open to enormous losses eventually these losses occurred and not only was nick arrested but the bank he worked for barings bank was bankrupted as a result on a larger scale enron corp believed they would be able to fool both investors and regulators when they hid the true nature of their financials through sophisticated accounting schemes when the company was finally outed and was forced to report the true financial picture of the company the stock imploded in a spectacular fashion dropping from over 90 to just over 0 25 | |
what is the difference between arrogance and hubris | the two are closely related and are synonyms of the other arrogance tends to be one s excessive pride relating to how they are better than others whereas hubris is extremely self belief in one s abilities and may have nothing to do with others at all | |
what is hubris in a person | hubris is defined as excessive pride or self confidence and is seen most commonly in people who believe they are able to complete a task they are not skilled enough to do there is a lot of crossover between hubris and arrogance but hubris tends to be more related to one s extreme self confidence in their abilities | |
what is an example of hubris | an example of hubris in everyday life can be a ceo thinking that because they invented one great product that they cannot fail a lawyer who thinks they can t lose a case or a doctor who refuses to listen to patients because they believe they know everything and the patient nothing icarus from greek mythology is a classic example of hubris icarus flew too close to the sun and his wings melted and he fell to earth | |
is hubris positive or negative | hubris is a negative trait those exhibiting or imbued with hubris will be seen as extremely arrogant and usually out of touch who was hubris in greek mythology hubris was not the name of the spirit but rather hybris whose name changed over time to what it is now hubris was not a person but hybris the greek goddess personified insolence hubris violence reckless pride and arrogance 2the bottom linehubris is not a useful trait many powerful people believe that due to their past successes they are not able to fail this mindset almost inevitably leads to their downfall and it can be traced back through history touching many different leaders in both business and politics | |
what is a hud 1 form | a hud 1 form also called a hud 1 settlement statement is a standardized mortgage lending document creditors or their closing agents use this form to create an itemized list of all charges and credits to the buyer and to the seller in a consumer credit mortgage transaction a hud 1 form is most commonly used for reverse mortgages and mortgage refinance transactions as of oct 3 2015 the closing disclosure form replaced the hud 1 form for most real estate transactions however if you applied for a mortgage on or before oct 3 2015 you would receive a hud 1 real estate transactions that do not involve a seller such as a refinancing may use a hud 1a form 1now for most kinds of mortgage loans borrowers receive a form called the closing disclosure instead of a hud 1 form either form must be reviewed by the borrower before the closing in order to prevent errors or any unplanned expenses understanding a hud 1 formthe hud 1 lists all costs related to closing the transaction federal law requires the form to be used as a standard real estate settlement form in reverse mortgage and mortgage refinance transactions the law also requires that borrowers be given a copy of the hud 1 at least one day prior to settlement although figures can be added corrected or updated up to the time the parties are seated at the closing table 2most buyers and sellers review the form with a real estate agent attorney or settlement agent on the hud 1 form buyers are referred to as borrowers even if there is no loan involved | |
what s included in a hud 1 form | oddly the hud 1 is meant to be reviewed verso or reverse side first the reverse side has two columns the left hand column itemizes the borrower s charges and the right hand column itemizes the seller s charges the borrower s list includes charges related to the mortgage such as a loan origination fee discount points payment for a credit report and fees for the appraisal and flood certification it also may include any prepaid interest charges homeowner s insurance fees property taxes owner s and lender s title insurance and the closing agent s fees the itemized seller list may itemize the real estate commission any contractually agreed upon credit to the buyer and mortgage pay off information the seller s itemized charges typically are lower than the buyer s charges the figures on the hud 1 verso back page are added up and the totals are carried to the form s recto or front side the amount of cash required to be paid by the borrower and the amount to be paid to the seller appear at the bottom of the front page special considerationsthe dodd frank wall street reform and consumer protection act of 2010 requires lenders to provide borrowers of all types of mortgages other than reverse mortgages and mortgage refinances with a closing disclosure form mortgage lending discrimination is illegal if you think you ve been discriminated against based on race religion sex marital status use of public assistance national origin disability or age there are steps you can take one such step is to file a report with the consumer financial protection bureau or with the u s department of housing and urban development hud borrowers must be provided with the disclosure three days before closing this five page form includes finalized figures for all closing fees and costs to the borrower as well as the loan terms the projected monthly mortgage payments and closing costs 3the three days are meant to allow the borrower to ask the lender questions and clear up any discrepancies or misunderstandings regarding costs before closing | |
are hud 1 forms still used | hud 1 forms are still used for reverse mortgages and refinancing the government form used to be used by settlement agents to list all the charges that borrowers and sellers were responsible for in any real estate deal the hud 1 form was replaced by the closing disclosure form in 2015 1 | |
what is a reverse mortgage | a reverse mortgage is a type of loan for individuals aged 62 and older the equity in a home can be used to borrow against in order to receive a lump sum payment a fixed stream of income or a line of credit the amount borrowed becomes due when the homeowner dies relocates or sells the home 4 | |
when do i get a closing disclosure | the law requires that you receive your closing disclosure at least three days prior to closing closing disclosures are not applicable for reverse mortgages or mortgages before oct 3 2015 3the bottom linethe hud 1 form also known as the settlement statement is a standardized form used in real estate transactions in the united states it itemizes all charges and credits involved in the transaction including loan fees settlement charges and escrow payments providing a detailed breakdown of the financial aspects of the deal for both the buyer and the seller | |
what is the hungarian forint huf | the term hungarian forint huf refers to the official and national currency of hungary the forint is issued and managed by magyar nemzeti bank the country s central bank the forint is represented in the international market by the currency code huf and the symbol ft the currency was introduced in hungary in 1946 banknotes are issued in denominations between ft500 and ft20 000 while the bank mints coins ranging in value from ft5 to ft200 understanding the hungarian forint huf the forint is hungary s official national currency it is issued by the country s central bank the hungarian national bank which is commonly known as magyar nemzeti bank established in 1924 the bank is responsible for maintaining the currency s value and controlling its circulation its main objectives are to achieve and maintain price stability while using monetary policy to support the federal government s economic policies the forint is denoted in the foreign exchange market as ft and is commonly referred to by its abbreviation huf it is not pegged to any currency and no currencies are pegged to it either along with the euro the currency s top currency exchange is the u s dollar forint banknotes are issued in denominations of 500 1 000 2 000 5 000 10 000 and 20 000 forints coins are issued in denominations of 5 10 20 50 100 and 200 forints bills are printed by the hungarian banknote printing company while coins are minted by the hungarian mint one forint is divided into 100 fill r these coins were removed from circulation in 1999 due to high inflation the equivalent of one u s dollar as of may 2024 special considerationshungary joined the european union eu in 2004 there was significant support to join the union at the time when the country applied 10 years earlier however hungary still doesn t use the euro and hasn t set a target date to make the switch because the federal government and the central bank are reluctant to adopt the common currency the nation s central bank governor gyorgy matolcsy described the euro as a trap and a strategic error other european countries that don t use the euro include bulgaria the czech republic poland and romania though the european community is seeking more participants through economic integration the 2007 08 financial crisis and the european sovereign debt crisis magnified the dangers of joining the eurozone in which 19 of the 27 eu member countries adopted the single currency by giving up control of their own monetary policy countries such as greece and spain are unable to devalue their currencies to stimulate economic growth although the euro isn t used in hungary some merchants accept it notably large hotels and merchants the exchange rate is generally lower than most exchange offices change is normally given in forints history of the hungarian forint huf the hungarian forint was first used between 1868 and 1892 but it wasn t until 1946 that the modern forint was introduced it was meant to stabilize the national economy following world war ii the name comes from the gold coins of florence called fiorino d oro which were struck beginning in 1252 and used throughout the austro hungarian empire the currency s exchange rate has been stable to some extent but uncertainty in the nation s economy has plagued the value of the forint in the foreign exchange market for instance hungary relies on a skilled labor force to drive its export oriented economy major trading partners include germany slovakia italy romania and austria top industries include car and car parts manufacturing and producing components for radios and televisions according to world bank data hungary reported gross domestic product gdp growth of 4 6 in and 14 6 inflation in 2022 this was primarily due to the economic fallout that resulted from the global covid 19 pandemic | |
does hungary use the euro | although hungary is part of the european union it is not part of the euro area this means it doesn t use the euro as its currency rather it continues to use the forint hungary is reluctant to adopt the euro and has no target date to do so according to the european union the forint is not part of the exchange rate mechanism which ensures that fluctuations in the exchange rate between the forint and euro do not disrupt economic stability within the single market | |
is it better to use the forint or euro in hungary | the forint is the only national currency in hungary which means the euro is not recognized as an official currency there are however some businesses that accept the euro as a transactional currency such as hotels and other merchants especially those in major cities change though is issued in the local currency keep in mind though that the exchange rate through these merchants may be lower than those offered at financial institutions and licensed currency exchanges can travelers use u s dollars in hungary u s dollars are not accepted in hungary for day to day transactions if you re traveling to the country you should consider exchanging your u s currency for the forint which is the country s only national currency the bottom linealthough hungary is part of the european union it is one of a handful of countries that continues to use its own currency rather than the euro the forint which is represented by the abbreviation huf in the international currency market maintaining the forint and controlling the supply in circulation is the responsibility of the country s central bank magyar nemzeti bank | |
what is a hulbert rating | a hulbert rating is a score that tracks the performance of an investment newsletter over time investment newsletters are paid subscriptions that can offer investors a variety of market related information such as trading strategies stock recommendations and economic commentary some newsletters focus on specific industries or types of trading such as options trading investing in utilities precious metals investing or cryptocurrency investing hulbert ratings llc assigns hulbert ratings and encourages investors to judge a newsletter by its long term performance adjusted for risk | |
how a hulbert rating works | the hulbert ratings of investment newsletters are determined by maintaining hypothetical investment portfolios according to the buy and sell advice of each newsletter hulbert ratings llc then tracks the performance of the newsletter by multiple metrics culminating in a sharpe ratio a measure of risk adjusted performance 3financial advisor and contrarian investor mark hulbert began tracking newsletter performance in the hulbert financial digest in 1980 after nearly 36 years and a couple of high profile acquisitions hulbert financial digest was officially laid to rest in jan 2016 hulbert immediately formed hulbert ratings llc which picked up where the digest left off and which continues to track newsletter performance newsletters pay hulbert ratings llc a flat fee to be tracked and audited 2hulbert establishes an impartial evaluation of each newsletter by subscribing under someone else s name to prevent the newsletter from sending their tips early and inflating the performance of the hypothetical portfolio some newsletters are less specific in their calls to action than others are for those hulbert ratings llc must infer buy and sell advice to track returns aside from their value as an impartial review of newsletter performance the very existence of hulbert ratings helps keep newsletters also known as market letters honest about their performance special considerationshulbert ratings appear on the performance scoreboards published on the hulbert ratings llc website the site publishes performance scoreboards that show newsletter ratings for the most recent 12 month period and historical ratings over the trailing 3 5 10 15 20 and 30 years listed newsletter performance ratings go as far back as the inception of the service in 1980 4the hulbert investment newsletter honor roll lists those investment newsletters that have produced above average performance in both up and down markets the list grades each newsletter s performance during up and down periods showing the gain for each newsletter since april 2000 5each newsletter is given a risk number which reflects the volatility of the newsletter s performance as measured by the standard deviation of its monthly returns additionally each newsletter is given a risk adjusted performance number calculated using the sharpe ratio | |
are investment newsletters worth it | after decades of hulbert ratings one thing is clear most newsletters like most actively managed mutual funds underperform the market hulbert himself has come to agree with the conventional but hard to follow wisdom that for all the sophisticated hedging techniques and analytical instruments available an investor s best bet is to dump a sum of money into an index fund and hold it hulbert has even gone so far as to suggest that virtually all changes investors make to their portfolios are mistakes that said hulbert has defended newsletters as useful given the weakness of human psychology specifically hulbert views the average investor as incapable of following the index fund strategy because the average investor will panic in a down market and end up selling low hulbert prefers consistently following a suboptimal strategy namely acting on the buy and sell advice of an investment newsletter compared to inconsistently following the optimal strategy which is to invest in an index fund and hold during downturns not everyone agrees but when deciding on investment strategies investors should remember the truism that most actively managed funds and portfolios underperform the market | |
what is the hull white model | the hull white model is a single factor interest model used to price interest rate derivatives the hull white model assumes that short rates have a normal distribution and that the short rates are subject to mean reversion volatility is thus likely to be low when short rates are near zero which is reflected in a larger mean reversion in the model the hull white model extends the vasicek model and cox ingersoll ross cir model understanding the hull white modelan interest rate derivative is a financial instrument with a value that is linked to the movements of an interest rate or rates interest rate derivatives are often used as hedges by institutional investors banks companies and individuals to protect themselves against changes in market interest rates but they can also be used to increase or refine the holder s risk profile or to speculate on rate moves these may include interest rate caps and floors investments whose values are dependent upon interest rates such as bond options and mortgage backed securities mbs have grown in popularity as financial systems have become more sophisticated determining the value of these investments often entailed using different models with each model having its own set of assumptions this made it difficult to match the volatility parameters of one model with another model and also made it difficult to understand risk across a portfolio of different investments special considerationslike the ho lee model the hull white model treats interest rates as normally distributed this creates a scenario in which interest rates are negative though there is a low probability of this occurring as a model output the hull white model also prices the derivative as a function of the entire yield curve rather than at a single point because the yield curve estimates future interest rates rather than observable market rates analysts will hedge against different scenarios that economic conditions might create unlike the hull white model which uses the instantaneous short rate or the heath jarrow morton hjm model which uses the instantaneous forward rate the brace gatarek musiela model bgm model only uses rates that are observable i e forward libor rates who are hull and white john c hull and alan d white are finance professors at the rotman school of management at the university of toronto together they developed the model in 1990 professor hull is the author of risk management and financial institutions and fundamentals of futures and options markets professor white also recognized internationally as an authority on financial engineering is the associate editor of the journal of financial and quantitative analysis and the journal of derivatives | |
what is human capital | the term human capital refers to the economic value of a worker s experience and skills human capital includes assets like education training intelligence skills health and other things employers value such as loyalty and punctuality as such it is an intangible asset or quality that isn t and can t be listed on a company s balance sheet human capital is perceived to increase productivity and thus profitability the more investment a company makes in its employees the chances of its productivity and success become higher understanding human capitalan organization is often said to only be as good as its people from the top down which is why human capital is so important to a company it is typically managed by an organization s human resources hr department which oversees workforce acquisition management and optimization its other directives include workforce planning and strategy recruitment employee training and development and reporting and analytics the concept of human capital recognizes that not all labor is equal but employers can improve the quality of that capital by investing in employees this can be done through the education experience and abilities of employees all of this has great economic value for employers and for the economy as a whole since human capital is based on the investment of employee skills and knowledge through education these investments in human capital can be easily calculated hr managers can calculate the total profits before and after any investments are made any return on investment roi of human capital can be calculated by dividing the company s total profits by its overall investments in human capital for example if company x invests 2 million into its human capital and has a total profit of 15 million managers can compare the roi of its human capital year over year yoy in order to track how profit is improving and whether it has a relationship to the human capital investments special considerationshuman capital tends to migrate especially in global economies that s why there is often a shift from developing places or rural areas to more developed and urban areas some economists have dubbed this a brain drain or human capital flight this describes the process that keeps certain areas underdeveloped while others become even more developed there is a strong relationship between human capital and economic growth which is why it can help boost the economy that s because people come with a diverse set of skills and knowledge this relationship can be measured by how much investment goes into people s education some governments recognize that this relationship between human capital and the economy exists and so they provide higher education at little or no cost people who participate in the workforce with higher education will often have larger salaries which means they can spend more like anything else human capital is not immune to depreciation this is often measured in wages or the ability to stay in the workforce the most common ways human capital can depreciate are through unemployment injury mental decline or the inability to keep up with innovation consider an employee who has a specialized skill if they go through a long period of unemployment they may be unable to keep these levels of specialization that s because their skills may no longer be in demand when they finally reenter the workforce an individual s human capital may depreciate if they can t or won t adopt new technology or techniques conversely the human capital of someone who does adopt them will history of human capitalthe idea of human capital can be traced back to the 18th century adam smith referred to the concept in his book an inquiry into the nature and causes of the wealth of nations in which he explored the wealth knowledge training talents and experiences of a nation adams suggested that improving human capital through training and education leads to a more profitable enterprise which adds to the collective wealth of society according to smith that makes it a win for everyone 1in more recent times the term was used to describe the labor required to produce manufactured goods but the most modern theory was used by several different economists including gary becker and theodore schultz who invented the term in the 1960s to reflect the value of human capacities 2schultz believed human capital was like any other form of capital to improve the quality and level of production this would require an investment in the education training and enhanced benefits of an organization s employees 3criticism of human capital theoriesthe theory of human capital has received a lot of criticism from many people who work in education and training in the 1960s the theory was attacked primarily because it legitimized bourgeois individualism which was seen as selfish and exploitative the bourgeois class of people included those of the middle class who were believed to exploit those of the working class the theory was also believed to blame people for any defects that happened in the system and for making capitalists out of workers | |
what are examples of human capital | examples of human capital include communication skills education technical skills creativity experience problem solving skills mental health and personal resilience | |
what is the relationship between human capital and the economy | human capital allows an economy to grow when human capital increases in areas such as science education and management it leads to increases in innovation social well being equality increased productivity and improved rates of participation all of which contribute to economic growth increases in economic growth tend to improve the quality of life for a population | |
how can i increase my human capital | ways to increase your own human capital include more education automating finances to improve efficiency expanding your horizons outside of your social and workplaces obtaining more experience increasing participation in a multitude of activities or organizations improving your communication skills improving your health and expanding your network | |
what is human capital risk | human capital risk refers to the gap between the human capital requirements of a company or organization and the existing human capital of its workforce this gap can lead a company towards inefficiencies inability to achieve its goals a poor reputation fraud financial loss and eventual closure to reduce and eliminate human capital risk an organization should train foster and support its workforce the bottom linehuman capital refers to the economic value of a worker s abilities and skills companies can enhance their human capital through recruitment or training as well as by implementing management techniques that optimize the productivity of their existing workers maintaining and improving the value of human capital is usually the role of a company s hr department | |
what is the human development index hdi | the human development index hdi is a statistic developed and compiled by the united nations since 1990 to measure various countries levels of social and economic development it is composed of four principal areas of interest mean years of schooling expected years of schooling life expectancy at birth and gross national income gni per capita this index is a tool used to follow changes in development levels over time and compare the development levels of different countries investopedia jake shiunderstanding the human development index hdi the hdi was established to place emphasis on individuals or more precisely on their opportunities to realize satisfying work and lives evaluating a country s potential for individual human development provides a supplementary metric for evaluating a country s level of development besides considering standard economic growth statistics such as gross domestic product gdp this index can also be used to examine the various policy choices of nations if for example two countries have approximately the same gni per capita then the hdi can help to evaluate why they produce widely disparate human development outcomes proponents of the hdi hope it can be used to stimulate such productive public policy debate 1 | |
how is the hdi measured | the hdi is a summary measurement of basic achievement levels in human development the computed hdi of a country is an average of indexes of each of the life aspects that are examined knowledge and understanding a long and healthy life and an acceptable standard of living each of the components is normalized to a scale between zero and one and then the geometric mean of the three components is calculated 2the final hdi score for each country is calculated as a geometric mean of the three components by taking the cube root of the product of the normalized component scores 2switzerland scores the highest among 193 countries in the 2023 2024 hdi rankings from the u n 4hdi rankingstop hdi scores go heavily to northern european countries while the lowest scoring nations are largely found on the african continent the top 25 countries in the 2023 2024 hdi rankings are in the table below 4the bottom five countries are in the table below 4limitations of the hdithere are criticisms of the hdi it is a simplification and an admittedly limited evaluation of human development the hdi does not specifically reflect quality of life factors such as empowerment movements or overall feelings of security in recognition of these facts the u n human development report office hdro provides additional composite indices to evaluate other life aspects including inequality issues such as gender disparity or racial inequality examination and evaluation of a country s hdi are best done in concert with examining these and other factors such as the country s rate of economic growth expansion of employment opportunities and the success of initiatives undertaken to improve the overall quality of life within a country several economists say the hdi is essentially redundant as a result of the high correlations among the hdi its components and simpler measures of income per capita gni per capita or even gdp per capita correlates very highly with both the overall hdi and the other two components in both values and rankings 5given these strong and consistent correlations they say it would be simpler and clearer just to compare per capita gni across countries than to spend time and resources collecting data for the additional components that provide little or no additional information for the overall index 5indeed a fundamental principle of the composite index design is to not include multiple additional components that are strongly correlated in a way that suggests that they might reflect the same underlying phenomenon this is to prevent inefficient double counting and avoid introducing additional sources of potential errors in the data in the case of the hdi the inclusion of the components is problematic because it is easily plausible that higher average incomes directly lead to both more investment in formal education and better health and longevity moreover definitions and measurements of years of schooling and life expectancy can vary widely from country to country | |
what are the indicators used in the human development index hdi | the human development index hdi measures each country s social and economic development by focusing on the following four factors mean years of schooling expected years of schooling life expectancy at birth and gross national income gni per capita 1 | |
is a high hdi good or bad | the higher the hdi the better a high hdi essentially means that the country in question offers a generally high standard of living with decent healthcare education and opportunities to earn money | |
which countries have the highest hdi | from the 2023 2024 human development report switzerland finished first with an hdi value of 0 967 norway iceland hong kong and denmark rounded out the top five meanwhile the united states was ranked 20 with an hdi value of 0 927 4the bottom linethe united nations human development index hdi seeks to quantify a country s level of prosperity based on both economic and non economic factors non economic factors include life expectancy and educational attainment economic factors are measured by gross national income gni per capita while the u n argues that the hdi improves our understanding of relative well being around the world economists have criticized the index as overly simplistic and flawed in its methodology | |
what is the human life approach | the human life approach is a method of calculating the amount of life insurance a family would need based on the financial loss they would incur if the insured person in the family were to pass away today understanding the human life approachthe human life approach is usually calculated by taking into account a number of factors including but not limited to the insured individual s age gender planned retirement age occupation annual wage employment benefits as well as the personal and financial information of the spouse and or dependent children since the value of a human life has economic value only in its relation to other lives such as a spouse or dependent children this method is typically only used for families with working family members the human life approach contrasts with the needs approach | |
when using the human life approach it s necessary to replace all of the income that s lost when an employed family member dies this figure includes after tax pay and makes adjustments for expenses like a second car incurred while earning that income it also considers the value of health insurance or other employee benefits | the human life approach calculation | |
when determining the life insurance amount needed for a family there are many important factors to consider it is imperative to spend the appropriate time assessing the many variables involved so that a family can ensure that it will be taken care of and will not be in any sort of financial distress if a family member passes away the following are five key steps in calculating life insurance needs for the human life approach | step one estimate the insured s remaining lifetime earnings taking into consideration both the average annual salary and potential future increases which will have a significant impact on life insurance requirements step two subtract a reasonable estimate of annual income taxes and living expenses spent on the insured this provides the actual salary needed to provide for family needs minus the presence of the insured as a rule of thumb this figure should be close to about 70 of the pre death income although this number may vary from family to family depending on individual budgets step three determine the length of time for which earnings will need to be replaced this time period could be until the insured s dependents are fully grown and no longer require financial support or until the insured s assumed retirement age step four select a discount rate for future earnings a conservative figure for this estimate would be the assumed rate of return on u s treasury bills or notes this is needed because a life insurance company will leave a death benefit in an interest bearing account step five multiply the net salary needed by the length of time needed to determine the future earnings then using the assumed rate of return figure out the present value of future earnings example of the human life approachconsider a 40 year old that makes 65 000 per year after following the above steps it is determined that the family needs 48 500 per year to support itself if the 40 year old individual passes away and must do so until what the retirement age of the individual would have been in this case 25 years away till 65 assuming a 5 discount rate the present value of this 40 year old s future net salary over 25 years would be 683 556 | |
what is human resource planning hrp | human resource planning hrp is the continuous process of systematic planning to achieve optimum use of an organization s most valuable asset quality employees hr planning ensures the best fit between employees and jobs while avoiding manpower shortages or surpluses there are four key steps to the hrp process they include analyzing present labor supply forecasting labor demand balancing projected labor demand with supply and supporting organizational goals hrp is an important investment for any business as it allows companies to remain both productive and profitable michela buttignol | |
what is human resource planning hrp used for | employees are a key part of any business without a strong workforce income will likely dry up and the company will go out of business hrp is designed to prevent this from happening its mission is to identify current and future hiring and training needs hrp allows companies to plan ahead so they can maintain a steady supply of skilled employees the process is used to help companies evaluate their needs and to plan ahead to meet those needs hrp needs to be flexible enough to meet short term staffing challenges while adapting to changing conditions in the business environment over the longer term to help prevent future roadblocks and satisfy their objectives hr managers have to make plans to do the following identifying a company s skill set and targeting the skills a company needs enables it to strategically reach business goals and be equipped for future challenges | |
what is the goal of human resource planning hrp | the goal of hr planning is to have the optimal number of staff to make the most money for the company staying on top of this and achieving effective hrp can ensure that the company challenges of human resource planning hrp hrp offers many advantages but it isn t without challenges the future isn t easy to predict a technology breakthrough can change everything as can a black swan event issues such as employees getting sick and wealthier or more prestigious competitors poaching staff can also cause serious problems additionally as globalization increases hr departments will face the need to implement new practices to accommodate government labor regulations that vary from country to country the increased use of remote workers by many corporations will also impact hrp and will require hr departments to use new methods and tools to recruit train and retain workers companies can set themselves up to better deal with these types of challenges if they are adaptable and continuously keep tabs on the world around them the more prepared a company is for an event that impacts its human resources the better it can handle and potentially take advantage of it hrp strategies must frequently be revised to match not only the company s changing needs but also external changes there s also the challenge of hrp being time consuming and potentially costly hrp offers benefits but it can take a while to reap them a high level of employee engagement can be essential for a company s success if a company has the best employees and the best practices in place it can mean the difference between sluggishness and productivity helping to lead a company to profitability however like most important investments it can take a while for these efforts to pay off in the beginning hrp will be a drag on profits | |
what are the four steps to human resource planning hrp | there are four general broad steps involved in the hrp process each step needs to be taken in sequence in order to arrive at the end goal which is to develop a strategy that enables the company to successfully find and retain enough qualified employees to meet its needs the first step of hrp is to identify the company s current human resources supply in this step the hr department studies the strength of the organization based on the number of employees their skills qualifications positions benefits and performance levels the second step requires the company to outline the future of its workforce here the hr department can consider anything that factors into the future needs of the company including promotions retirements layoffs and transfers the hr department can also look at external conditions impacting labor demand such as new technology that might increase or decrease the need for workers the third step in the hrp process is forecasting the employment demand hr creates a gap analysis that lays out specific needs to narrow the supply of the company s labor versus future demand this analysis will often generate a series of questions such as the answers to questions from the gap analysis help hr determine how to proceed which is the final phase of the hrp process hr must now take practical steps to integrate its plan with the rest of the company the department needs a budget the ability to implement the plan and a collaborative effort with all departments to execute that plan common hr policies put in place after this fourth step may include policies regarding vacation holidays sick days overtime compensation and termination | |
why is human resource planning important | human resource planning hrp allows a business to better maintain and target the right kind of talent to employ having the right technical and soft skills to optimize their function within the company it also allows managers to better train the workforce and help them develop the required skills | |
what is hard vs soft human resource planning | hard hrp evaluates various quantitative metrics to ensure that the right number of the right sort of people are available when needed by the company soft hrp focuses more on finding employees with the right corporate culture motivation and attitude often these are used in tandem | |
what are the basic steps in hrp | hrp begins with an analysis of the available labor pool from which a company can draw it then evaluates the firm s present and future demand for various types of labor and attempts to match that demand with the supply of job applicants the bottom linequality employees are a company s most valuable asset hrp involves the development of strategies to ensure that a business has an adequate supply of employees to meet its needs and can avoid either a surplus or a lack of workers there are four general steps in developing such a strategy first analyzing the company s current labor supply second determining the company s future labor needs third balancing the company s labor needs with its supply of employees and fourth developing and implementing the hr plan throughout the organization a solid hrp strategy can help a company be both productive and profitable | |
what is human resources hr | human resources hr is the division of a business that is charged with finding recruiting screening and training job applicants it also administers employee benefit programs hr plays a key role in helping companies deal with a fast changing business environment and a greater demand for quality employees in the 21st century understanding human resources hr john r commons an american institutional economist first coined the term human resource in his book the distribution of wealth published in 1893 however it was not until the 20th century that hr departments were formally developed and tasked with addressing misunderstandings between employees and their employers 1an hr department is an essential component of any business regardless of an organization s size it is tasked with maximizing employee productivity and protecting the company from any issues that may arise within the workforce hr responsibilities include compensation and benefits recruitment retention firing and keeping up to date with any laws that may affect the company and its employees key hr activitiesthe following are the six key people related activities that hr must effectively do to add value to a company hr management strategiesbeginning in the 1980s there was a push for strategic initiatives within hr departments this movement was based on research related to the impact of employee related issues on a firm s long term business success collectively these strategies are sometimes referred to as human resource management hrm strategies hrm is a comprehensive approach to managing employees and an organization s culture and environment it focuses on the recruitment management and general direction of the people who work in an organization an hr department that adopts hrm strategies typically plays a more active role in improving an organization s workforce it may recommend processes approaches and business solutions to management google is one example of an organization that has adopted a more active approach to employee relations through its hr department the company offers many employee perks including on site wellness centers on site meals and snacks fitness centers massage programs and ergonomic support for google happy employees are equivalent to productive employees 23in 1901 national cash register co known today as ncr corp established what is thought to have been the first personnel department the hr predecessor to manage wages workplace safety and employee concerns 4hr outsourcingsince the mid 20th century some companies have outsourced some of the more traditional administrative transactional hr functions in an effort to free the department to recommend and implement more meaningful value adding programs that impact the business in positive ways 5functions that may be outsourced in this process include the use of modern tools such as recruitment software can help to improve the efficiency of hr departments in turn that can give them more leeway to focus on adding ever greater value | |
what is the role of human resources | a human resources department is focused on the recruitment and retention of employees within a company hr typically finds hires and fires and trains employees it oversees employee relations and manages benefit programs it s the place where an employee goes with questions about their position at the company to address concerns and to air grievances | |
what is human resource management hrm | human resource management hrm is a strategic approach to managing company employees the work culture and the work environment so that people can function as effectively and productively as possible typically it involves using metrics to measure workforce success | |
what are the 5 types of human resources | there are numerous important human resources functions carried out by an hr department five well known types of responsibilities are the bottom linea company s human resources hr department manages the life cycle of each employee from recruitment and onboarding to training and termination or retirement hr departments also must monitor industry trends and rules to stay on top of compliance and legal issues increasingly hr departments focus on human resource management using strategic investments and initiatives to improve an organization s workforce the long term goal of hrm is to create a more positive loyal and productive workforce which ultimately benefits the company | |
what is a humped yield curve | a humped yield curve is a relatively rare type of yield curve that results when the interest rates on medium term fixed income securities are higher than the rates of both long and short term instruments also if short term interest rates are expected to rise and then fall then a humped yield curve will ensue humped yield curves are also known as bell shaped curves humped yield curves explainedthe yield curve also known as the term structure of interest rates is a graph that plots the yields of similar quality bonds against their time to maturity ranging from 3 months to 30 years the yield curve thus enables investors to have a quick glance at the yields offered by short term medium term and long term bonds the short end of the yield curve based on short term interest rates is determined by expectations for the federal reserve policy it rises when the fed is expected to raise rates and falls when interest rates are expected to be cut the long end of the yield curve is influenced by factors such as the outlook on inflation investor demand and supply economic growth institutional investors trading large blocks of fixed income securities etc the shape of the curve provides the analyst investor with insights into the future expectations for interest rates as well as a possible increase or decrease in macroeconomic activity the shape of the yield curve can take on various forms one of which is a humped curve | |
when the yield on intermediate term bonds is higher than the yield on both short term and long term bonds the shape of the curve becomes humped a humped yield curve at shorter maturities has a positive slope and then a negative slope as maturities lengthen resulting in a bell shaped curve in effect a market with a humped yield curve could see rates of bonds with maturities of one to 10 years trumping those with maturities of less than one year or more than 10 years | humped vs regular yield curvesas opposed to a regularly shaped yield curve in which investors receive a higher yield for purchasing longer term bonds a humped yield curve does not compensate investors for the risks of holding longer term debt securities for example if the yield on a 7 year treasury note was higher than the yield on a 1 year treasury bill and that of a 20 year treasury bond investors would flock to the mid term notes eventually driving up the price and driving down the rate since the long term bond has a rate that is not as competitive as the intermediate term bond investors will shy away from a long term investment this will eventually lead to a decrease in the value of the 20 year bond and an increase in its yield types of humpsthe humped yield curve does not happen very often but it is an indication that some period of uncertainty or volatility may be expected in the economy when the curve is bell shaped it reflects investor uncertainty about specific economic policies or conditions or it may reflect a transition of the yield curve from a normal to inverted curve or from an inverted to normal curve although a humped yield curve is often an indicator of slowing economic growth it should not be confused with an inverted yield curve an inverted yield curve occurs when short term rates are higher than long term rates or to put it another way when long term rates fall below short term rates an inverted yield curve indicates that investors expect the economy to slow or decline in the future and this slower growth may lead to lower inflation and lower interest rates for all maturities | |
a hundredweight cwt is a unit of measurement used to define the quantities of certain commodities being bought and sold it is used in some commodities trading contracts pricing by hundredweight also is a standard option for shipping packages that take up less than an entire truckload usage of hundredweight more generally has declined in favor of contract specifications in pounds or kilograms | the value of a hundredweight differs in its american and british usages in the united states a hundredweight is a unit of mass equal to 100 pounds in the united kingdom a hundredweight is a unit of mass equal to 112 pounds the two values are sometimes distinguished by referring to the american hundredweight as a short hundredweight and the british hundredweight as a long hundredweight 1 the short hundredweight is also sometimes called a cental understanding hundredweight cwt the abbreviation cwt refers to centum or cental weight meaning hundredweight the hundredweight has been used as a measurement of mass in europe since the late medieval era traders bought and sold goods like wax sugar and pepper in hundredweights although the precise amount that was meant at the time could be 100 pounds or 108 pounds since 1340 when king edward iii changed the official definition of one stone to 14 pounds one hundredweight has equaled eight stones or 112 pounds 2this was set in law in 1878 when the weights and measures act established one hundredweight as 112 pounds 3 in the u s and canada one hundredweight then and now is 100 pounds 14in the united states and canada 1 hundredweight count cwt is equal to 100 lbs or 45 4 kilograms in great britain 1 hundredweight count cwt is equal to 112 lbs or 50 8 kilograms 1in 1824 it became illegal for british merchants to use the term hundredweight to refer to a unit of 100 pounds and merchants could be sued for fraudulent activity for doing so in 1879 it became legal again to use of measurement of 100 pounds in britain but only when it was labeled a cental 5the term hundredweight is derived from the french avoirdupois weight system which was established in england in the late medieval period it provided a standard for measurement simplifying the trading of certain goods among countries 6this was especially helpful when dealing with commodities that were traded in large quantities it was accepted that 20 hundredweights were one ton 7 a short ton weighed 2 000 pounds and a long ton weighed 2 240 pounds 1the abbreviation cwt stands for centum or cental weight meaning one hundredweight examples of hundredweight cwt the hundredweight is most often used as a unit of measure for trading large quantities of commodities it also is used when referring to products that are exceptionally heavy such as steel many food items such as cattle oil seeds and grains are measured using the hundredweight along with products sold in bulk including paper and some chemicals or additives one problem with using the hundredweight for global trade is that it has two standard definitions it s 100 pounds in the u s and canada and 112 pounds in the u k in the futures markets prices for cattle and other livestock are quoted in hundredweights while prices for foods like coffee and sugar are priced by cents per pound prices of futures including livestock and rice may be measured and traded in hundredweights 8anvils were commonly measured in hundredweights using a decimal designation to state the number of hundredweights quarter hundredweights and pounds the anvil weighed the formula can still be used to indicate anvil weight 9shipping by hundredweight is the preferred option for many businesses that frequently ship small packages that add up to less than a full truckload rise of the metric systemwith the increased use of the metric system across europe the hundredweight generally fell out of favor as the metric system created a more universally accepted standard dealing in hundredweights became less common the potential for confusion between the british and north american definitions helped make it unpopular for international trade even though it is not as commonly used as it once was it is still an accepted unit of measurement the hundredweight is used within certain u s sectors especially those related to agriculture even though most trade is conducted in pounds or kilograms cwt shipping vs ltl shippingoften used by small shippers that need to send packages to several destinationspreferred by many businesses shipping small packages that add up to less than a full truckloadconsistent standardized system of pricingmore affordable when shipping lighter items across short distancesused to ship larger items requiring one pallet or moreoften used to ship items that are large very heavy or oddly shapedoften used when goods are being shipped to the same destination such as a warehousemore affordable when shipping heavier items across a greater distanceshipping companies that handle smaller loads of goods can often choose between two pricing options for transporting their packages hundredweight cwt or less than truckload ltl pricing generally a shipping company that specializes in carrying small loads from many clients relies on hundredweight pricing ups and fedex for example both offer hundredweight options for shipping packages 1011hundredweight pricing is often used by small shippers that need to send packages to several destinations it s the more affordable way to ship lighter items across short distances ltl pricing on the other hand is often used to ship large very heavy items that fit on one pallet or more it s the more affordable way to ship heavier items across a greater distance 12according to freightsnap a firm that specializes in supply chain management services both options have advantages and disadvantages the better shipping choice depends on many factors including the size shape and weight of the products being shipped and the distance being covered 12 | |
how do you calculate cwt in cattle | in the u s cattle and all other commodities are weighed in pounds a hundredweight equals 100 pounds in north america so the total weight of the cattle divided by 100 equals the number of hundredweight of cattle | |
how are freight prices calculated with cwt | the shipping charge will be quoted as a price per cwt for example the quoted price might be 30 per cwt a 500 pound shipment is five hundredweight the total price is 30 x 5 or 150 | |
how many kilograms are there in a hundredweight cwt | one pound equals 0 453592 kilograms a hundredweight in the u s measurement of 100 pounds would equal 45 3592 kilograms a hundredweight in the british measurement of 112 pounds is 50 8023 kilograms 1 | |
how do you calculate hundredweight cwt | in north america you simply divide the weight in pounds by 100 so something that is one ton 2 000 pounds would be 20 cwt the hundredweight survives as a standard unit of measurement in the 21st century but only in a number of specific uses it is used to indicate the quantity of some commodities being bought and sold in the marketplace and of some commodity futures being traded in the financial markets it also is used to indicate the quantity of goods being shipped by freight | |
what are hung convertibles | hung convertibles are convertible securities where the share price of the underlying security is well below the conversion price making it unlikely that the securities will be converted into common stock since unconverted securities must be repaid at face value most issuers wish to prevent their convertibles from being hung understanding hung convertiblesconvertible securities are a type of bond note or preferred stock that can be converted into the common shares of the issuing company at a fixed price and date in the future many companies with low credit choose to issue convertible securities as an inexpensive way to raise money | |
when convertible securities are unlikely to be converted to stock they are referred to as hung convertibles this is most common when the cost of conversion is greater than the price of the underlying stock | due to their limited prospects for conversion hung convertibles also known as busted convertibles trade more like debt instruments than quasi equity securities hung convertibles can also refer to two other instances where the likelihood of conversion is low hung convertibles tend to trade like other debt instruments due to the low probability of conversion when the price of the underlying security is high enough to justify conversion they tend to behave more like equities example of a hung convertiblehung convertibles can take the form of bonds which are backed by collateral or debentures which are dependent on the promise of the issuer to pay its obligations for example consider a convertible debenture with a face value of 1 000 that can be converted into 100 shares for a conversion price of 10 if the price of the underlying stock is 4 this debenture would be considered a hung convertible especially if it matures in a relatively short period such a debenture would therefore be priced as a debt instrument with its pricing determined by several factors including its coupon rate maturity current market interest rates and yields and the issuer s credit rating to solve the problem of a hung convertible a company therefore would need to improve its fundamentals such as revenue growth operating margins or return on invested capital to spur the common stock high enough to reach the conversion price convertible securities share many of the advantages of both bonds and stocks however they typically pay lower coupon rates than regular bonds benefits and limitations of hung convertiblessome investors view hung convertible securities as the best of both worlds they have the income producing and stable price qualities of a bond plus the conversion feature that can provide the potential to gain shares of common stock which have historically provided greater capital appreciation and been less sensitive to interest rates than bonds in other words an investor gets paid to wait by earning coupon payments up until maturity or conversion into common equity for an equity investor convertibles can offer a degree of participation in up markets and more downside protection in turbulent markets than owning the common stock outright hung convertibles come with drawbacks as well due to the conversion feature convertibles pay lower coupon rates than bonds of the same maturity and credit quality convertibles investment manager calamos investments pegs this difference at 300 to 400 basis points quite a spread in today s low interest rate environment and if the stock of the issuer performs poorly the investor will be left with a lower paying bond 1special considerationsvaluing convertibles is a complex exercise since factors that impact bonds such as interest rates and factors that impact stocks such as earnings growth must be analyzed in tandem when a convertible bond is trading close to its investment value or the value of an equivalent non convertible bond its price behavior will be more influenced by interest rates than one trading closer to its conversion value in general however a change in the fundamentals of the issuing company will have the greatest impact on a convertible s price | |
what is a hurdle rate | a hurdle rate is the lowest rate of return a project or investment must achieve before a manager or investor deems it acceptable it s important when companies or investors make important decisions like pursuing a specific project riskier projects generally have higher hurdle rates than those with less risk the term is also often used in private equity investing and hedge fund management for example in a private equity investment fund the general partner gp can only charge performance fees known as carried interest if the limited partner s rate of return crosses the prearranged hurdle rate investopedia sydney burnshurdle rate factorsthe hurdle rate balances the need for profit with the risks and costs involved this concept is crucial in guiding individual and corporate investment strategy decisions | |
what does the hurdle rate tell you | hurdle rates are important especially when calculating the potential success of future endeavors and projects companies determine whether they will take on a capital project based on its risk level if an expected rate of return is above the hurdle rate the investment is considered sound if the rate of return falls below the hurdle rate management may choose not to move forward a hurdle rate is also called the break even yield | |
how to use hurdle rate | investors and businesses use hurdle rates to evaluate an investment or project s potential investors look at the risk premium for a potential investment since it captures the anticipated amount of risk involved the higher the risk the higher the risk premium should be risk premiums are typically added to the wacc for a more realistic hurdle rate using a hurdle rate to determine an investment s potential helps to take our feelings or preferences for it out of the equation by assigning a realistic risk factor an investor can use the hurdle rate to assess whether the project has financial merit despite its intrinsic value | |
when businesses assess future projects they often begin with the wacc which conveys the average rate a company is expected to pay to finance its assets accounting for its equity and debt 1 the wacc is calculated by weighing the cost of each capital component equity preferred stock and debt according to its proportion in the overall capital structure in practical terms wacc is a benchmark that presents the minimum return a company must generate on its projects to satisfy its shareholders and debt holders when a company evaluates new projects using wacc plus the risk premium ensures that these initiatives are expected to yield returns at least equal to the company s current cost of capital plus the risk premium this aligns management decisions with the expectations of investors | companies can use the net present value npv approach as part of their assessment npv involves calculating the difference between the present value of cash inflows and outflows over the project s life span future cash flows are estimated and then discounted to their present value using a discount rate typically the hurdle rate which is often the wacc the npv is the sum of these discounted cash flows minus the costs for the initial investment cost if the npv is positive the projected earnings discounted to present value are higher than the expected costs suggesting the project is likely profitable there is also a method that uses the internal rate of return irr the discount rate that makes the npv of all cash flows from a project equal to zero 2 essentially it represents the break even rate of return expected from the project thus a project is generally considered viable if its irr is greater than the hurdle rate which is often set as the wacc the irr method is handy for comparing the profitability of different investment opportunities providing a rate of return perspective that complements the absolute value approach of npv formula and calculating hurdle ratessince the hurdle rate is the lowest return a company expects from an investment to justify the risk we can use the wacc to help calculate this rate the wacc reflects the average rate of return a company must earn on its investments to satisfy its shareholders and debt holders let s say you manage a company evaluating investing in sophisticated manufacturing equipment your engineers estimate the new equipment could result in a 20 increase in production efficiency that is an roi of 20 here is the standard formula for the hurdle rate for companies weighing an investment a simplified wacc calculation makes this quicker and easier you just need the following to calculate it suppose this is the financial data for your firm to arrive at the table below we determine the proportional weight of the firm s capital components common stock preferred stock and debt first we calculate the weighted cost of each then we multiply each component s cost or return rate by its proportional weight in the total capital structure finally we total up these weighted percentages we now need the other element in the equation for the hurdle rate namely the risk premium in finance a risk premium is the extra return above the risk free rate that investors demand for taking on extra risk virtually all investments carry more risk than u s treasurys so we can use the yield on the 10 year u s treasury as the benchmark for the risk free rate incorporating the 10 year treasury yield as a risk premium into the hurdle rate helps ensure that it makes up for the market risk represented by the wacc and the opportunity cost of investing in the new manufacturing equipment in this example we assume the 10 year treasury yields 4 5 since the estimated return on investment of 20 is greater than the hurdle rate of 13 26 purchasing the new machine would be prudent the investment is expected to yield returns that exceed the minimum rate required to justify the risk and cost of capital if however it were only expected to yield 10 it should probably be passed over like other investment decision making tools the hurdle rate is only an estimate there is no guarantee that returns will match the results of the calculation in private equity the hurdle rate has a slightly different meaning referring to the minimum rate of return a fund has to achieve before the general partners gps or managers start receiving a share of the profits known as carried interest it acts as a performance threshold that ensures limited partners lps get a certain return on their investment before the general partners receive theirs hurdle rates in private equity typically range from 7 to 8 but can vary based on the fund s strategy and the agreement between lps and gps only after reaching the hurdle rate do gps start receiving their share of the profits often about 20 of the fund s returns above the hurdle rate suppose a private equity fund has the following details if the fund s return is below 8 all returns are distributed to the lps and the gps do not receive carried interest any returns above the 8 hurdle rate are shared between the lps and the gps who receive about 20 in this example this arrangement aligns the interests of the fund managers with those of the investors giving an incentive to the gps to exceed the hurdle rate to achieve their share of the profits there are variations in hurdle rate structures some private equity funds employ a fixed hurdle rate while others might link it to a benchmark making it variable there can be tiered hurdle rates in more complex arrangements with different levels of carried interest rates applying up a ladder of performance thresholds limitations of the hurdle ratehurdle rates typically favor projects or investments with high rates of return on a percentage basis even if the dollar value is smaller suppose project a has a return of 20 and a dollar profit value of 10 and project b has a return of 10 and a dollar profit value of 20 project a would be more likely chosen because it has a higher rate of return even though it returns less in terms of overall dollar value in addition choosing a risk premium is difficult since it s not guaranteed a project or investment may return more or less than expected if the rate is chosen incorrectly it can result in a flawed use of funds or missed opportunities hurdle rate vs internal rate of return irr the hurdle rate and irr are both key financial metrics used in investment and capital budgeting but they serve different purposes and are used in different ways the hurdle rate is essentially the minimum acceptable return on an investment it is often set at the company s wacc added to the risk free rate although it can be adjusted higher for riskier projects it is used as a benchmark to determine whether an investment is worth pursuing if the expected return on a project is higher than the hurdle rate the project is typically considered viable the hurdle rate is therefore formulated before the assessment of an investment the irr however is the rate at which the net present value npv of all the cash flows both positive and negative from a project or investment equals zero it is used to estimate the profitability of potential investments a higher irr indicates a more profitable investment unlike the hurdle rate the irr is calculated based on the expected cash flows from the project | |
how is the hurdle rate used in mergers and acquisitions | in mergers and acquisitions the hurdle rate plays a crucial role in evaluating the potential value of the acquisition it s used as a benchmark to assess if the anticipated efficiencies and the growth prospects from the merger or acquisition justify the investment a deal is generally pursued only if the expected return is greater than the hurdle rate so that it aligns with the acquiring company s risk tolerance and return expectations can the hurdle rate vary within a company yes the hurdle rate can vary within a company based on the risk profile and the nature of different departments or projects high risk projects such as those involving new product development or expanding into new markets might have a higher hurdle rate than lower risk endeavors like routine capital maintenance varying the hurdle rate helps ensure that the rate of return keeps up with changes in the level of risk associated with each project | |
do macroeconomic factors influence the hurdle rate | external economic factors such as interest rates inflation and market volatility can significantly influence a company s hurdle rate for instance an increase in interest rates would lead to a higher cost of debt which would raise the company s wacc and thus the hurdle rate similarly higher inflation can increase the hurdle rate since the reduced buying power of future cash flows needs to be considered therefore hurdle rates are not static even for the same project companies must regularly reassess and adjust their hurdle rate to reflect changes in the wider economy the bottom linea hurdle rate is the minimum rate of return required for a company or investor to go ahead with a project most companies factor in a risk premium when determining their hurdle rate assigning a higher rate to riskier projects and a lower rate to projects with more moderate risks also known as break even yield the hurdle rate is very often a key factor in guiding investment decisions | |
what is hurricane insurance | actually hurricane insurance doesn t exist as a specific separate type of policy the term often refers to what is strictly speaking a hurricane deductible on a homeowners insurance policy an extra amount a homeowner must pay before the insurer will cover the damage or destruction caused by a hurricane a percentage of the property s worth this deductible is common in 19 hurricane prone states and the district of columbia 1hurricane insurance can also refer to special types of catastrophe insurance that specifically cover flooding or extreme winds which actually do the damage to the property these policies are also typical and sometimes required in high risk hurricane states such as florida and texas understanding hurricane insurancehurricane deductibles are separate from regular homeowners insurance deductibles and are based on a percentage of the home s value while a regular homeowners insurance policy deductible is a fixed dollar amount say 500 or 2 000 a hurricane deductible might be 2 to 5 of a home s insured value or 2 000 to 5 000 for every 100 000 in home coverage hurricane deductibles first developed in 1992 after hurricane andrew s massive damage to south florida inflicted major losses on homeowners insurance companies but they became more widespread in 2005 in the wake of hurricane katrina insurance companies turn to reinsurers when they re having trouble paying large amounts of claims all at once but even reinsurance companies were struggling under such enormous losses as a result insurance companies began requiring hurricane deductibles in 19 states and washington d c homes in these states which are all on the gulf of mexico or atlantic coasts are susceptible to hurricane damage 1for a homeowner to be required to pay a hurricane deductible there usually must be a named hurricane in the area sometimes a severe tropical storm will trigger the deductible the hurricane deductible will be in effect for any damage that occurs until the storm is downgraded rules vary by state even when a hurricane deductible doesn t apply a windstorm deductible might a windstorm deductible applies to damage from any kind of high wind it can run a little lower than a hurricane deductible sometimes as low as 1 of the property s insured worth 1states where hurricane deductibles applythe states regions where hurricane deductibles apply are policies offering hurricane coveragehomeowners should also be aware that even if they pay a hurricane deductible gaps in their coverage might exist most homeowners policies exempt flooding from an outside natural event like a hurricane so property owners need a separate flood insurance policy to cover such water related destruction or damage 2most standard homeowners policies will cover some damage caused by hurricanes mostly that related to the heavy wind that say rips shingles off a roof or causes a tree branch to snap and crash into a window also homeowners insurance policies in some hurricane prone states won t pay for wind related damage so if you want to protect your property you must purchase separate windstorm insurance in this case all wind damage or destruction would fall under this policy instead of the traditional homeowners policy on top of hurricane coverage windstorm insurance applies to problems stemming from tornadoes cyclones and other types of high speed winds 2 | |
how hurricane deductibles are calculated | to some degree depending on the state insurance companies dictate the level of the hurricane deductible and where it should apply however insurers hurricane deductible plans are subject to state insurance departments and may be subject to various regulations and laws rhode island for example sets a cap of 5 on hurricane and windstorm deductibles 3in florida located in a particularly hurricane prone region state law sets some requirements homeowners have to have the option of a 500 flat rate hurricane deductible premiums may of course be higher than if you choose one of the other mandated options 2 5 or 10 of the insured value of the residence 1in some states homeowners may pay lower insurance premiums if they make improvements to their home to minimize damage from a hurricane such as installing storm shutters or hurricane resistant laminated glass windows and doors | |
are wind and hurricane insurance the same | a windstorm insurance policy may be different than a hurricane insurance policy with a windstorm insurance coverage is for damage caused by wind only while there is no specific hurricane insurance this insurance may refer a a combination of a windstorm policy flood insurance and homeowners insurance | |
is hurricane insurance the same as flood insurance | hurricane insurance and flood insurance may sometimes be considered the same flood insurance covers damage from flooding which may include flooding as a result of hurricanes but could also cover damage from other causes like a leaked pipe hurricane insurance is typically a combination of flood and windstorm insurance which covers damages caused by wind such as from hurricanes | |
are hurricanes usually part of homeowners insurance | you may have to get separate flood insurance and windstorm insurance to cover hurricane damage these policies may not be part of homeowners insurance however some policies may include windstorm insurance most standard homeowners insurance won t cover flood damage the bottom linehurricane insurance can be a valuable tool to protect your from financial hardship in the event your home suffers from damage from a hurricane whether hurricane insurance is right for you will depend on a number of factors including the risk that a hurricane will damage your home and your own financial situation consider consulting a financial advisor for guidance with your specific needs | |
what is a hybrid annuity | a hybrid annuity is a retirement income investment that allows investors to split their funds between fixed rate and variable rate components investors can divide their savings between conservative assets that offer a low but guaranteed rate of return and riskier assets that offer the potential for higher returns as in any annuity the goal is to create a steady stream of income during retirement | |
how a hybrid annuity works | a hybrid annuity is a combination of two or more annuities a fixed annuity contract and a variable annuity contract that are both placed in the same annuity product its design allows a portion of an investor s money to be placed in a mutual fund sub account which is the variable component the remainder is kept separate in order to guarantee payment of a set amount after retirement which is the fixed component a hybrid annuity gives investors more options for investing than a standard annuity such as pairing a fixed annuity with an indexed product in an effort to better protect the principal in both segments effectively they allow the backing of a fixed rate annuity and a variable rate annuity in a single product hybrid annuities can be used by anyone but they are best suited for those saving for retirement that are seeking both growth and stability via income payments or as a hedge against inflation special considerationshybrid annuities might not be a one size fits all investment which is what they are sometimes marketed as they can be useful for those who have longer time horizons but who aren t well into retirement younger investors could also opt to merely invest in equities and likely generate a better return over the long term most professionals agree that younger investors should opt for the latter strategy rather than investing in annuities in general annuities are appropriate for investors seeking stable guaranteed retirement income annuity holders cannot outlive the income stream which removes longevity risk notably the lump sum deposited into the annuity is not liquid it is subject to withdrawal penalties annuities are not recommended for investors who may need access to their cash some investors also may look to cash out an annuity at a profit although that is contrary to the investment strategy behind these products as with any investment an investor s risk tolerance should be considered before making an annuity purchase as well as an assessment of their liquid cash needs advantages and disadvantage of hybrid annuitiesas with any annuity hybrids can begin paying out immediately or be deferred with fixed or flexible premiums among other positives hybrid annuities offer the possibility of increasing the investor s income and hedging the assets against inflation the mix of fixed and variable components lowers the downside risk as for negatives the dual framework adds complexity to these products which is a deterrent for many investors hybrid products also may have higher fees including high charges on the back end when the holder goes to surrender or cash in the annuity these fees are also not prominently displayed i e sometimes hidden the key argument against hybrids is that they are over complicated expensive and over designed in fact most annuities provide some sort of growth and income components that is nearly all variable and indexed annuity products today come with guaranteed income riders that somewhat negates a major selling point of hybrids | |
what is a hybrid arm | a hybrid adjustable rate mortgage or hybrid arm also known as a fixed period arm blends characteristics of a fixed rate mortgage with an adjustable rate mortgage a hybrid arm will have an initial fixed interest rate period followed by an adjustable rate period after the fixed rate expires the rate adjusts based on an index plus a margin the date at which the mortgage changes from the fixed rate to the adjustable rate is referred to as the reset date the most common configuration of hybrid arm is the 5 1 which has an initial fixed term of 5 years followed by adjustable rates that reset every 12 months 1understanding hybrid armsa typical fixed rate mortgage loan has a fixed rate for the life of the loan which might be 15 or 30 years conversely an adjustable rate mortgage arm has an interest rate that is not fixed and resets periodically which means the reset rate can be higher than the initial rate a hybrid arm is a blend of the fixed and adjustable rate mortgages offering a fixed rate for a set period and adjusting annually afterwards the length of the initial fixed rate period can vary such as three five or seven years after the fixed rate period ends the loan essentially converts to an adjustable rate mortgage in which the rate resets periodically based on an index or benchmark the 5 1 hybrid arm may be the most popular type of adjustable rate mortgage the five in a 5 1 arm means the fixed rate period is for five years the one means the rate will reset once per year following the end of the fixed rate period there are many types of arms including 3 1 7 1 and 10 1 arms however they each have the same structure in which the first number represents the fixed rate period while the second number is how often the rate resets afterward in other words the 3 1 7 1 and 10 1 arms offer an introductory fixed rate for three seven or 10 years respectively after which they adjust annually 2other arm structures exist such as the 5 5 and 5 6 arms which also feature a five year introductory period followed by a rate adjustment every five years or every six months respectively notably 15 15 arms adjust once after 15 years less common are 2 28 and 3 27 arms 3 with the former the fixed interest rate applies for only the first two years followed by 28 years of adjustable rates with the latter the fixed rate is for three years with adjustments in each of the following 27 years some of these loans adjust every six months rather than annually a borrower should carefully consider his or her time horizon when choosing a hybrid arm and recognize the risks associated with the reset date or the expiration of the fixed interest rate period if there has been a large change in interest rates this reset could create substantially large payments however the amount by which the interest rate can adjust is typically subject to an interest rate cap when considering a hybrid arm be sure to research to find a mortgage lender who has a lot of experience with adjustable rate mortgages 4hybrid arms come with significant risks to borrowers who plan to refinance the mortgage or sell the property after the reset if the borrower becomes unemployed or there s a market downturn the borrower may not be able to repay the loan at the higher rate and or sell the property for a higher price as a result the borrower may go into foreclosure 5 | |
how hybrid arms are structured | hybrid adjustable rate mortgages may be set with fixed rate intervals of three five seven or 10 years with the adjustable rate triggered on the reset date after the reset date has been reached the interest rate on the mortgage is typically assessed and recalculated on an annual basis long term fixed rate mortgages especially those with a 30 year period can see low interest rates that are competitive hybrid arms offer homebuyers options that may be more suitable for their needs for instance some homeowners do not remain in their residences for 30 years making it more attractive to pursue a mortgage that offers interest rates that better suit the time frame they expect to hold the property with a hybrid arm a margin is added to a benchmark interest rate to determine the new reset there are a variety of benchmarks for the adjustable rate period of the mortgage a floor will be set to determine the absolute lowest rate at which the loan s interest rate can be adjusted for instance the lender might stipulate that the interest rate cannot fall below its stated margin the calculation of the new adjustable rate can include a lookback period where the lender at the reset date refers to the index within the lookback period the length of this period can vary by lender and could be set around 45 days | |
what is the difference between an arm and a hybrid arm | an arm is an adjustable rate mortgage whereby the rate resets periodically a hybrid arm has a fixed rate for the initial period and typically adjusts annually afterward the initial period can vary and be three five or seven years | |
what is a 5 1 arm loan | the 5 1 adjustable rate mortgage has a five year period with a fixed interest rate that resets or adjusts annually thereafter the five represents the fixed rate period while the one represents how often the rate will reset each year following the end of the fixed rate period once per year | |
what are the risks to a hybrid arm | if the borrower can t afford the new rate following the reset they may default on the payments also if the borrower plans to sell the home following the reset and the property value has decreased the borrower may take a loss on the sale if the home s value is less than the amount owed on the loan the bottom linehybrid adjustable rate mortgages arms offer a fixed rate during the initial introductory period which is usually a set number of years following the initial period the interest rate on the loan adjusts annually based on the market or a benchmark as a result the adjusted rate can be significantly higher than the initial fixed rate the benefits to the borrower include a low monthly mortgage payment during the introductory period however the drawback of a hybrid arm is the reset feature can lead to an interest rate that s much higher than the initial rate for this reason borrowers may often try to refinance the mortgage to avoid a higher rate following the reset | |
what is a hybrid fund | a hybrid fund is an investment fund that is characterized by diversification among two or more asset classes these funds typically invest in a mix of stocks and bonds they may also be known as asset allocation funds understanding hybrid fundshybrid funds offer investors a diversified portfolio the term hybrid indicates that the fund strategy includes investment in multiple asset classes in general it can also mean that the fund uses an alternative mixed management approach hybrid funds are commonly known as asset allocation funds in the investment market asset allocation funds can be used for many purposes these funds offer investors an option for investing in multiple asset classes through a single fund hybrid funds evolved from the implementation of modern portfolio theory in fund management these funds can offer varying levels of risk tolerance ranging from conservative to moderate and aggressive in all cases hybrid funds will include some mix of two or more asset classes in risk targeted and balanced funds allocations will typically remain at a fixed proportion in funds targeting a specified utilization date the proportion of asset mix will vary over time in all of the funds the investment manager may actively manage the individual holdings within each asset category to respond to changing market conditions and potential capital appreciation opportunitiesexamples of hybrid fundsinvestment managers offer a wide range of options for hybrid funds below are two examples this fund has a 60 40 balance among stocks and bonds the stock portion of the portfolio seeks to replicate the crsp u s total market index the bond portion of the portfolio seeks to replicate the bloomberg u s aggregate float adjusted index the fund has an expense ratio of 0 06 as of q2 2021 1the t rowe price retirement 2060 fund is a hybrid target date fund as of may 2021 it had more than 90 of the portfolio in stocks and approximately 8 in bonds and other fixed income securities the fund uses a fund of funds approach with 19 of the portfolio in a growth stock fund the fund has an expense ratio of 0 71 as of q2 2021 2 | |
what is a hybrid security | a hybrid security is a single financial security that combines two or more different financial instruments hybrid securities often referred to as hybrids generally combine both debt and equity characteristics the most common type of hybrid security is a convertible bond that has features of an ordinary bond but is heavily influenced by the price movements of the stock into which it is convertible understanding hybrid securitieshybrid securities are bought and sold on an exchange or through a brokerage hybrids may give investors a fixed or floating rate of return and may pay returns as interest or as dividends some hybrids return their face value to the holder when they mature and some have tax advantages hybrid securities can be viewed as a form of esoteric debt and may be difficult to sell due to their complexity types of hybrid securitiesin addition to convertible bonds another popular type of hybrid security is convertible preference shares which pay dividends at a fixed or floating rate before common stock dividends are paid and can be exchanged for shares of the underlying company s stock pay in kind toggle notes are another type of hybrid security where the issuing company can toggle the payment from interest rates to the additional debt owing to the investor meaning the company owes the investor more debt but doesn t actually pay interest on it immediately this interest deferral allows the company to keep cash flowing but the larger principal payment may never come if the cash flow situation isn t resolved each type of hybrid security has a unique risk and reward characteristics convertible bonds offer greater potential for appreciation than regular bonds but pay less interest than conventional bonds while still facing the risk that the underlying company could perform poorly they can also fail to make coupon payments and not be able to repay the bond s face value at maturity convertible securities offer greater income potential than regular securities but can still lose value if the underlying company underperforms other risks of hybrid securities include deferred interest payments insolvency market price volatility early repayment and illiquidity special considerationsother new types of hybrid securities are being introduced all the time in an attempt to meet the needs of sophisticated investors some of these securities are so complicated that it is difficult to define them as either debt or equity in addition to being difficult to understand another criticism of some hybrid securities is that they require the investor to take more risk than the potential return warrants hybrid securities are not marketed toward retail investors but even institutional investors sometimes fail to fully understand the terms of the deal they are entering when buying a hybrid security | |
what is hydraulic fracturing | hydraulic fracturing commonly known as fracking is a process that injects high pressure liquid into an oil or gas bearing rock formation to create fractures this pressure typically yields improved flows making it useful for oil and gas firms seeking more economical production in areas that would otherwise produce low flow wells | |
what is a hydrocarbon | the term hydrocarbon refers to an organic chemical compound that is composed exclusively of hydrogen and carbon atoms hydrocarbons are naturally occurring and form the basis of crude oil natural gas coal and other important energy sources they are highly combustible and produce carbon dioxide water and heat when they are burned as such hydrocarbons are highly effective as a source of fuel understanding hydrocarbonshydrocarbons occur naturally they originate from plant and animal fossils that were formed by the forces of temperature and weight over millennia they are mostly found deep underground in porous rock formations such as sandstone limestone and shale porous rock formations are often found in large bodies of water so there is an immense quantity of hydrocarbons trapped deep beneath the oceans oil and natural gas exploration companies use advanced engineering techniques to identify these potential reservoirs and pull their resources to the surface for human use examples of such technologies include offshore oil platforms directional drilling and enhanced oil recovery eor techniques hydrocarbons are very important for the modern economy they are responsible for more than 80 of global energy consumption 1 this figure may actually understate the role of hydrocarbons in the economy by a significant margin because they are used in a wide range of applications aside from their use as a source of energy for example refined petroleum has been used to produce many derivative materials that play critical roles in the global economy such as plastics solvents and lubricants different techniques are used to extract hydrocarbons depending on the type and location of the reserve for example hydraulic fracturing better known as fracking is used to extract natural gas from shale rock by using pressurized fracking fluid to create fissures through which the gas can escape to the surface mining is used to access oil sands which are unconventional deposits of crude oil that are heavily intermixed with sand and sandstone hydrocarbon companiesbecause hydrocarbons are the largest energy source in the globe some of the largest companies in the world are hydrocarbon companies these primarily include oil and gas companies that mine hydrocarbons and convert them into the energy sources that the world uses to power almost everything out of the top 10 companies in the world six of them are state owned saudi aramco is the world s largest oil and gas company while exxon mobil xom which is based in the united states is the world s largest public company other names in this space include the success of these companies and their ability to provide energy sources efficiently and cheaply greatly impact the world s financial markets and economies the fluctuations in the price of oil have a great impact on the cost of gasoline for cars jet fuel for airlines and gas for heating homes these costs affect how consumers spend their money decisions that reverberate throughout the global economy impact of hydrocarbonsthere is a serious environmental cost to using hydrocarbons as a primary source of energy fossil fuel sources like crude oil natural gas and coal contain hydrogen and carbon when they re burned they release greenhouse gasses into the air mainly carbon dioxide releasing them into the air contributes to climate change but it isn t just consumption that contributes to the deterioration of the environment the process of oil and gas extraction also does considerable damage to the surface environment and surrounding groundwater of the extraction site by releasing pollutants there is also a major threat of unexpected spills which also has a negative impact on marine and aquatic life not only does the use of hydrocarbons have an environmental impact but it also has economic implications proponents say that this sector is a major economic driver because of how vital it is in terms of the number of jobs it creates and let s not forget how useful hydrocarbons are to society after all consumers need energy sources to fuel their cars heat their homes and light up their rooms but there s a clear downside many economists argue that hydrocarbon energy production involves substantial negative externalities that are not sufficiently represented in the market price of oil and gas in fact considering the mounting cost of climate change related phenomena many argue that these externalities significantly outweigh any cost savings associated with hydrocarbons alternatives to hydrocarbonsto address the negative impact of hydrocarbon energy there is a growing movement toward the use of renewable energy sources such as solar wind and geothermal power along with innovations in battery technology and smart grid infrastructure these new energy alternatives may play a significantly larger role in global energy production in the years and decades ahead solar power comes from the sun the process transforms solar energy into thermal or electrical energy that is used in powering homes heating water for commercial and industrial use and providing electricity solar energy is considered to be the most abundant and cleanest energy source in the world solar power has gained prominence in the use of homes and office buildings it functions via solar panels that are placed on these structures that convert solar energy into electricity and other uses solar panel companies are more common and a new part of the energy industry the top five solar power producing countries are china the united states japan germany and india 2wind energy utilizes the wind to create power or electricity wind turbines are created to convert the energy in wind to mechanical power which is then used for a variety of industrial tasks as well as in creating electricity through the use of a generator wind turbines can be found on both land and water geothermal energy taps into the heat that exists under the surface of the earth the sources of heat are trapped inside rocks and liquids under the surface as well as far down towards the earth s core geothermal energy is created by digging wells into the earth s surface to access the steam and hot water which are used to power generators that create electricity | |
what is a hydrocarbon and its uses | a hydrocarbon is an organic compound consisting of hydrogen and carbon found in crude oil natural gas and coal hydrocarbons are highly combustible and the main energy source of the world its uses consist of gasoline jet fuel propane kerosene and diesel to name just a few | |
what are the types of hydrocarbons | there are two types of hydrocarbons aliphatic and aromatic the three types of aliphatic hydrocarbons are alkanes alkenes and alkynes aromatic hydrocarbons include benzene overall examples of hydrocarbons are methane ethane propane and butane | |
what is hydrocarbon fuel | hydrocarbon fuel is fuel that is derived from a hydrocarbon which includes gasoline and jet fuel both of which have significant uses in the modern world from powering cars to planes to lawnmowers | |
how do you identify a hydrocarbon | hydrocarbons are identified by studying their molecular structure hydrocarbons only consist of carbon and hydrogen in many different formats but that is their identifying feature | |
are hydrocarbons harmful to humans | yes hydrocarbons are dangerous to humans gases emitted from hydrocarbons have shown to damage respiratory systems and harm the environment through climate change and the greenhouse effect oil spills damage ecosystems while hydrocarbons are natural occurrences it is their manipulation into energy sources that are harmful to humans the bottom linehydrocarbons are naturally occurring chemical compounds that consist of hydrogen and carbon found in crude oil natural gas and coal they have been manipulated by humans to be used as an energy source such as gasoline and jet fuel the use of hydrocarbons particularly their burning such as in coal has had a devastating impact on the environment as a result many alternative energy sources that are safer and cleaner have been developed such as solar and wind | |
what is hyperdeflation | hyperdeflation is an extremely large and relatively quick level of deflation in an economy understanding hyperdeflationhyperdeflation occurs when the purchasing power of currency rises drastically in a relatively short period of time this increase results in debts being more pronounced as the real value of goods and services increases and the value of the currency falls if hyperdeflation were to occur it would have severe economic consequences as people would forgo making a purchase today when they know it will be much cheaper to buy it tomorrow or the day after or the day after and so spending and investment will grind to a halt hyperdeflation is quite rare and can be contrasted with the still rare but more common periods of hyperinflation where prices rise rapidly as the purchasing power of currency falls steeply hyperdeflation is more or less a theoretical term and there is no exact measure of the difference between it and deflation however hyperdeflation like deflation can lead to a deflationary spiral in which a deflationary environment leads to lower production lower wages and lower demand and thus lower price levels this scenario creates a feedback loop that continues until an outside force the government for example steps in the united states has experienced severe periods of deflation following the civil war and world war i 1 some economists believe that the financial crisis of 2007 2009 brought on a period of deflation in the united states 2 japan entered a severe period of deflation that has been ongoing since the 1990s 3deflationary spiralwhile hyperdeflation is rare deflation by itself can lead to pernicious negative feedback loops a deflationary spiral is a downward price reaction to an economic crisis leading to lower production lower wages decreased demand and still lower prices these events often occur during a period of severe economic crisis such as the great depression deflation occurs when general price levels decline as opposed to inflation which is when general price levels rise when deflation occurs central banks and monetary authorities can enact expansionary monetary policies to spur demand and economic growth if monetary policy efforts fail however due to greater than anticipated weakness in the economy or because target interest rates are already zero or close to zero a deflationary spiral may occur even with an expansionary monetary policy in place such a spiral amounts to a vicious circle where a chain of events reinforces an initial problem example of hyperdeflationunlike hyperinflation there are scant few documented real world examples of hyperdeflation in history recently however the world has seen the emergence of cryptocurrency a decentralized digital currency that works through a blockchain or public transaction ledger bitcoin created in 2009 was the first digital currency and remains the most well known many observers have labeled its recent volatility as an unprecedented example of hyperdeflation some cryptocurrency experts and economists label its rising prices as a bubble noting that the currency has long term prospects however they also point out the possibility that deflation will occur by design the number of new coins decreases each year but demand for bitcoin is growing this dynamic may lead to the digital economy entering a deflationary period since no centralized banking system or federal reserve equivalent oversees the currency no intervention policies will be set into motion furthermore bitcoin cannot be dropped and picked up by a fortunate passerby if one loses their personal key they lose the money and the money is effectively pulled out of circulation additionally there is a high level of wealth concentration among bitcoin holders meaning there is a relatively small number of users who can sell or more importantly to this scenario not sell with rising value comes more incentive to buy and hoard bitcoin which only increases the price and further decreases supply this situation could hypothetically lead to a real world occurrence of hyperdeflation | |
what is hyperinflation | hyperinflation is a term to describe rapid excessive and out of control general price increases in an economy while inflation measures the pace of rising prices for goods and services hyperinflation is rapidly rising inflation typically measuring more than 50 per month although hyperinflation is a rare event for developed economies it has occurred many times throughout history in countries such as china germany russia hungary and georgia investopedia matthew collinsunderstanding hyperinflationinflation is measured by the bureau of labor statistics using the consumer price index cpi to measure the dollar s purchasing power the cpi is an index of the prices for about 94 000 commodities and services around 8 000 rental housing unit quotes and prices for airline fares apparel household goods prescription drugs used automobiles and postage generally speaking the federal reserve strives to maintain what it calls a healthy inflation rate of around 2 over the long term hyperinflation is an extreme case of inflation not just a high case inflation higher than 5 is considered high inflation inflation of 50 or more per month is considered hyperinflation for comparative purposes the u s inflation rate measured by the cpi averaged about 2 5 per year from 2013 through 2022 the average for june through april of 2023 was 5 55 in an environment of hyperinflation prices may increase daily or weekly which can have a dramatic impact on what consumers pay for basic necessities for instance imagine you always buy the same items at the grocery store if the economy were experiencing a rising inflation rate of 5 per day your grocery bill might rise from 500 one week to 675 the next week then as high 911 the week after that causes of hyperinflationalthough several circumstances can trigger hyperinflation here are the most common causes of hyperinflation central banks generally control the circulating supply of money in circumstances that historically warrant an increase in the money supply like a recession or depression central banks can increase the amount of money circulating the intent behind this action is to encourage banks to lend and consumers and businesses to borrow and spend however if the increase in money supply is not supported by economic growth as measured by gross domestic product gdp hyperinflation can result if gdp the measure of an economy s production isn t growing businesses raise prices to boost profits and stay afloat because consumers have more money they pay higher prices and feed inflation if economic output continues to stagnate or shrink and inflation keeps rising companies charge more consumers pay more and the central bank prints more money a cycle of increasing inflation rates occurs leading to hyperinflation demand pull inflation is a scenario in which aggregate demand becomes too high for aggregate supply this increases prices rapidly because there are not enough goods and services available to meet the increase in overall demand from consumers and businesses hyperinflation is the product of many circumstances and poor monetary decision making coming together effects of hyperinflationhyperinflation can cause several adverse consequences people may begin hoarding goods such as food in turn there can be food supply shortages | |
when prices rise excessively money decreases in value because inflation causes it to have less purchasing power less purchasing power means consumers spend more to buy less as a result they have less money to pay bills and fewer dollars to use on essential items | also people might not deposit their money in financial institutions leading banks and lenders to go out of business tax revenues may also fall if consumers and businesses can t pay resulting in governments failing to provide essential services | |
how to prepare for hyperinflation | it s critical to remember that hyperinflation doesn t happen very often especially in developed countries where a central bank focuses on reigning in and controlling inflationary periods however there are some actions you can take to reduce the effects normal or high inflation have on your portfolio a balanced and diversified portfolio can help you reduce losses through inflationary periods commodities and real estate can reduce the adverse effects of inflation because they tend to increase in value during these times treasury inflation protected securities tips can hedge against rising inflation because the principal you have invested in a tips adjusts with inflation mutual funds and exchange traded funds that practice inflation swaps can also be used to combat the effects of inflation on your portfolio real world examples of hyperinflationone of the more devastating and prolonged episodes of hyperinflation occurred in the former yugoslavia in the 1990s on the verge of national dissolution the country had already been experiencing inflation at rates that exceeded 76 annually in 1991 it was discovered that the leader of the then serbian province slobodan milosevic had plundered the national treasury by having the serbian central bank issue 1 4 billion of loans to his cronies the theft forced the government s central bank to print excessive amounts of money to take care of its financial obligations as a result hyperinflation quickly enveloped the economy erasing what was left of the country s wealth and forcing its people into bartering for goods the inflation rate nearly doubled each day until it reached an unfathomable rate of 313 000 000 per month the government quickly took control of production and wages which led to food shortages as a result incomes dropped by more than 50 and production crawled to a stop eventually the government replaced its currency with the german mark which helped to stabilize the economy hungary experienced hyperinflation after world war ii at the peak of hungary s inflation prices were rising 207 per day in march 2007 zimbabwe entered a period of hyperinflation that equaled a daily rate of inflation of 98 until early 2009 the country s hyperinflationary period began in 1999 after the country experienced several periods of drought and a following reduction in gdp as a result the country was forced to borrow more than it produced and the government began spending more it increased taxes to pay bonuses to independence war veterans became involved in a war in the congo and borrowed from the international monetary fund to improve development and living standards for citizens the government began printing money to pay for the expenses causing an inflationary rise and residents began to move to other countries to escape the economy by 2010 millions of people had left the country and the economy was in shambles | |
what will happen if there is hyperinflation | hyperinflation doesn t occur without any indication in the united states if economists see signs of hyperinflation the federal reserve will implement any monetary policy tools allowed to ensure it doesn t happen this happens long before inflation can reach the 50 rate in the past federal reserve chair paul volcker raised rates to more than 21 to combat a rate of more than 14 leading to two recessions before inflation came under control will the u s go into hyperinflation it is doubtful that the u s will experience hyperinflation unless economic circumstances become very dire the federal reserve and government have many tools at their disposal that can prevent hyperinflation from occurring | |
what was the worst hyperinflation in history | hungary experienced hyperinflation from august 1945 to jul 1946 with a daily inflation rate of 207 the bottom linehyperinflation is a scenario in which a county s inflation rate rises 50 or more in one month it is different than a country simply experiencing high inflation 5 is considered high inflation hyperinflation raises consumer prices and can make it difficult or impossible for a country to meet its financial obligations or produce goods and services it causes the prices of everyday necessities to rise rapidly making them hard for consumers to afford however hyperinflation does not occur often and usually has a cause such as war natural disasters or political corruption | |
what is hyperledger | hyperledger is a global enterprise blockchain project that offers the necessary framework standards guidelines and tools to build open source blockchains and related applications for use across various industries hyperledger s projects include a variety of enterprise ready permissioned blockchain platforms and plug and play options using the available components under the hyperledger umbrella a business can apply various modular blockchain solutions and services to significantly improve the performance of their operations and the efficiency of their business processes hyperledger historyhyperledger is a global collaboration that includes leading businesses from the fields of finance banking internet of things iot supply chain management manufacturing and production and technology 1 they include big names like bosch ibm microsoft oracle deloitte hitachi american express jp morgan and visa in addition to a host of blockchain based startups like consensys 2the hyperledger project was created in december 2015 by the linux foundation which is based in san francisco california it started with 30 member firms and has grown to about 140 member companies today 32hyperledger was set up with the aim of accelerating industry wide collaboration to develop high performance and reliable blockchain and distributed ledger based technology frameworks it can be used across various industry sectors to enhance efficiency performance and transactions across multiple business processes | |
how hyperledger works | consider hyperledger to be an operating system that runs on a computer laptop other device or a network like open source linux linux is the underlying programming used to create many operating systems in fact it is used much more than other proprietary systems for enterprise purposes these operating systems can have different designs and user interfaces and be fully customized once a linux operating system is installed or maybe your device came with it you can choose what programs you want maybe you prefer a different internet browser and office suite over the default options hyperledger is similar it is a system that lets the users decide what they want based on their needs so a system can be built using one of the existing hyperledger projects consider these to be operating systems designed for specific purposes with different modules for various needs hyperledger projectssome hyperledger projects include but are not limited to the following all projects under the hyperledger umbrella follow the design methodology that supports a modular and extensible approach interoperability and security features the projects remain agnostic to designing tokens or cryptocurrencies though users can create one as required | |
what is a hyperledger in blockchain | hypledger is the name of an open source project sponsored by the hyperledger foundation it provides a platform for developers to create distributed ledger and blockchain related projects of their own using preprogrammed modules | |
is hyperledger better than ethereum | comparing one to the other is like comparing apples and oranges ethereum is a public blockchain designed for transferring value and for developers to build applications on hyperledger is a platform that gives developers modularized options for building blockchains or distributed ledgers that fit their needs | |
is hyperledger owned by ibm | ibm uses hyperledger fabric in its proprietary blockchain platform but it does not own hyperledger 8the bottom linethe linux foundation is home to the hyperledger open source collaborative project which aims to provide business grade blockchain frameworks and technologies businesses may build private permissioned blockchain networks for a variety of use cases hyperledger uses include supply chain management and smart contracts and hyperledger is known for its modular and adaptable solutions correction june 5 2024 this article has been corrected to explain hyperledger as the foundation for hyperledger projects | |
what was hyperledger burrow | hyperledger burrow was a framework for executing smart contracts in permissioned blockchains it was originally incubated as part of hyperledger a community of open source projects and tools for commercial implementations of blockchain technology hyperledger burrow was designed to facilitate cross industry applications for smart contracts understanding hyperledger burrowfollowing the success of bitcoin many blockchain advocates recognized the potential of using distributed ledgers to record smart contracts self executing programs that can operate without human management however existing networks such as bitcoin or ethereum were too limited for business applications due to the high cost and latency of open blockchains in order to facilitate more scalable blockchains the linux foundation launched the hyperledger community in 2015 many industry leaders joined the initiative in order to develop enterprise grade blockchain tools including ibm intel and microsoft burrow was one of the projects under the hyperledger umbrella along with other enterprise oriented platforms such as hyperledger fabric hyperledger sawtooth and hyperledger iroha originally called erisdb the project was designed by monax to build ship and run blockchain based applications for business ecosystems | |
how hyperledger burrow worked | hyperledger burrow was a software that was intended to be used to run nodes in a permissioned blockchain network because the participants in permissioned blockchains are known and trusted by the rest of the network it is possible to achieve higher speeds and throughput than permissionless chains while it was similar to many other hyperledger blockchain tools the focus for hyperledger burrow was to provide a clean and simple developer experience 1 the key component of hyperledger burrow was a permissioned implementation of the ethereum virtual machine which allowed it to interact with smart contracts on other ethereum based networks hyperledger burrow abandonedhyperledger burrow was reportedly also able to interact with the ethereum public chain since they share the same smart contract language burrow s developers planned to introduce a two way peg system with the ethereum mainnet allowing data and tokens to move seamlessly between chains this would theoretically have allowed hyperledger burrow to operate as a high speed sidechain to the public network there were also plans to integrate public staking when ethereum transitioned to a proof of stake model but by the time that happened in 2022 the project had been abandoned | |
is burrow a hyperledger project | hyperledger burrow was one of the projects associated with hyperledger but it shutdown in may 2022 | |
is hyperledger really a blockchain | yes but it is different that the blockchains that get more media attention like bitcoin and ethereum it is designed for enterprise uses and encorporates modules that let developers load what they need for specific business purposes | |
why is hyperledger better than ethereum | ethereum is designed to be a global public virtual machine that anyone can create applications for hyperledger is designed as a permissioned private blockchain for business and enterprise uses so which is better depends on who is using it and the purpose they have for doing so the bottom linehyperledger burrow was a project that tried to create a blockchain that would execute smart transactions for other blockchains it appeared to be somewhat influential in other hyperledger projects in that they may have shared ideas but ultimately the project didn t generate enough interest to continue progressing and shut down in 2022 2 | |
what is hyperledger composer | hyperledger composer is a set of open source tools that allows business owners operators and developers a way to create blockchain applications and smart contracts aimed at solving business problems and or improving operational efficiencies it is an example of a commercial application of blockchain as a service baas hyperledger composer is one of the several hyperledger projects hosted by the linux foundation in collaboration with corporate members 1 as of august 2019 the hyperledger composer project is in deprecated status meaning that while it is still in use none of the maintainers are actively developing new features or provide support composer has been combined into hyperledger fabric v1 4 2 understanding hyperledger composerhyperledger composer is built in javascript a platform independent programming language that also supports the use of built in libraries and uses available functions and scripts to make the utilities more scalable and reusable composer is an application development framework which simplifies and expedites the creation of hyperledger fabric blockchain applications using hyperledger composer a business person with no technical knowledge can easily collaborate with a developer to build specific features they include defining the business rules based on which blockchain transactions will be processed defining the assets that are exchanged in blockchain based use cases and define controls for participants their identities roles and access levels for performing the various kinds of transactions similarly a developer using hyperledger composer can easily build and configure core components of the blockchain which include the network s digital assets transaction logic participants and access controls composer supports sharing reusability and scalability of components across various organizations one can easily generate the required scripts and apis necessary for business implementation using hyperledger composer it also supports use cases and real time testing which can even be performed through the web based composer playground without the need for local installations using hyperledger composer it is possible for an individual to create and run a sample blockchain and grant restricted permission to various participants for instance one can easily build a perishable goods network that facilitates trading of items like fruits and vegetables include participants like farmers shippers and importers define individual roles for each participant define and execute terms of agreement between the participants track shipments acknowledge monitor and report status of goods at various stage in the supply chain and payments management special considerationshyperledger composer offers a lot of advantages which include the faster creation of blockchain applications in easy steps smooth and low cost modeling and testing allowing the user to build test and deploy various options and then implement the one that offers the best fit and reusability of existing apps and apis that reduce both effort and costs business network archive is central to hyperledger composer s architecture and it maintains the core data and functionality of the business network that includes the business model transaction logic and access controls composer playground is the web based interface that enables modeling the business requirements and functions functional testing as well as deployment testing on a live blockchain a loopback connector that supports various apis and integration capabilities allows a variety of client applications as well as non blockchain applications an easy medium to interface with the hyperledger composer | |
what is hyperledger explorer | hyperledger explorer is an open source blockchain utility module that allows users to create a user friendly web based application with which a user can view initiate organize or query various artifacts and developments that form an integral part of the blockchain network it is to be used specifically on deployments of blockchains created using the hyperledger umbrella 1understanding hyperledger explorerhyperledger explorer came into existence as the hyperledger project has been consistently growing since its inception in 2016 and is now being used and contributed to by more than 130 organizations across the globe under the auspice of the open source linux foundation with such wide level adaptability there emerged a need for an easy to use human interpretable utility that offers a dashboard view of blockchain happenings thus emerged hyperledger explorer which was initially contributed to by technology stalwarts like ibm and intel and by the leading financial sector clearing and settlement company dtcc each of them initially developed their own versions of explorer and later merged their efforts to achieve the common goal under the hyperledger project 23like the standard utilities of windows explorer and task manager hyperledger explorer can be regarded as an easy way to use an interface that allows users to view the necessary network information of the blockchain it includes details like name state and list of network nodes details of blocks transactions and related data transaction families chain codes and any other relevant details that may be stored on the blockchain since all such raw blockchain data is usually in a format that is difficult to read for humans hyperledger explorer attempts to provide an easy visualization by using graphs charts pictures and templates in addition to the usual search and monitoring facility | |
how hyperledger explorer works | its architecture includes a web server that runs in the backend and is responsible for interacting with all other components and maintaining the necessary query server response the web sockets are used to communicate between the server and the various client components of hyperledger explorer a rethinkdb database is used to store the necessary details about blockchain components like information about blocks transactions and smart contracts and this can be queried for any necessary information a security repository takes care of ensuring only secure and authorized access is maintained for accessing the hyperledger explorer hyperledger explorer allows for a unified enterprise level visualization which may be needed in real time by a blockchain developer developing a particular feature or component on the blockchain or by a researcher seeking to study historical developments or by blockchain operators who are responsible for managing the blockchain or by top management the following animated image presents multiple facets of how hyperledger explorer is configured and what it provides |
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