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what is hyperledger fabric | hyperledger fabric is a modular blockchain framework that acts as a foundation for developing blockchain based products solutions and applications using plug and play components that are aimed for use within private enterprises hyperledger fabric was initiated by digital asset and ibm and has now emerged as a collaborative cross industry venture which is currently being hosted by the linux foundation among the several hyperledger projects fabric was the first one to exit the greenhouse and was released in july 2017 3 | |
how hyperledger fabric works | traditional blockchain networks can t support private transactions and confidential contracts that are of utmost importance for businesses hyperledger fabric was designed in response to this as a modular scalable and secure foundation for offering industrial blockchain solutions hyperledger fabric is the open source engine for blockchain and takes care of the most important features for evaluating and using blockchain for business use cases within private industrial networks the verifiable identity of a participant is a primary requirement hyperledger fabric supports memberships based on permission all network participants must have known identities many business sectors such as healthcare and finance are bound by data protection regulations that mandate maintaining data about the various participants and their respective access to various data points fabric supports such permission based membership 4the modular architecture of hyperledger fabric separates the transaction processing workflow into three different stages smart contracts called chaincode that comprise the distributed logic processing and agreement of the system transaction ordering and transaction validation and commitment 5 this segregation offers multiple benefits additionally hyperledger fabric s support for plug and play of various components allows for easy reuse of existing features and ready made integration of various modules for instance if a function already exists that verifies the participant s identity an enterprise level network simply needs to plug and reuse this existing module instead of building the same function from scratch the participants on the network have three distinct roles in a nutshell the transaction proposal is submitted to the endorser peer according to the predefined endorsement policy about the number of endorsers required after sufficient endorsements by the endorser s a batch or block of transactions is delivered to the committer s committers validate that the endorsement policy was followed and that there are no conflicting transactions once both the checks are made the transactions are committed to the ledger 7image source ibmsince only confirming instructions such as signatures and read write set are sent across the network the scalability and performance of the network is enhanced only endorsers and committers have access to the transaction and security is improved with a fewer number of participants having access to key data points 5example of hyperledger fabricsuppose there s a manufacturer that wants to ship chocolates to a specific retailer or market of retailers i e all us retailers at a specific price but does not want to reveal that price in other markets i e chinese retailers since the movement of the product may involve other parties like customs a shipping company and a financing bank the private price may be revealed to all involved parties if a basic version of blockchain technology is used to support this transaction hyperledger fabric addresses this issue by keeping private transactions private on the network only participants who need to know are aware of the necessary details data partitioning on the blockchain allows specific data points to be accessible only to the parties who need to know 6criticism of hyperledger fabricthe high water mark of crypto enthusiasm broke in 2018 after the collapse of the price of bitcoin which hit its peak on dec 17 2017 89 overoptimistic claims about the value of the new technology were replaced with skepticism and related technologies including hyperledger also suffered from this skepticism hyperledger fabric competes with other hyperledger projects like iroha indy and sawtooth 10 it also competes with r3 s corda which is also a private permission based dlt blockchain service firm chainstack published a paper in january 2020 that shows development in corda has been historically higher than development in fabric though fabric development passed corda s in q3 2019 when fabric switched to github 11the chainstack report shows that while there are three times as many developers working on fabric corda developers made more than two times as many code contributions and fabric developers push far less code per developer than corda s developers 12several critiques of hyperledger fabric point out that a permission based private blockchain with hyperledger fabric s features is not a blockchain and current non blockchain technologies are far less expensive and deliver the same amount of security cointelegraph s stuart popejoy put the case like this hyperledger fabric has also been critiqued for lacking resiliency a team of researchers from the sorbonne in paris and csiro data61 australia s national science agency found that significant network delays reduced the reliability of fabric b y delaying block propagation we demonstrated that hyperledger fabric does not provide sufficient consistency guarantees to be deployed in critical environments 14hyperledger fabric 2 0 released in january 2020in january of 2020 hyperledger fabric 2 0 was released to address some of the existing criticisms 3 according to ron miller at techcrunch the biggest updates involve forcing agreement among the parties before any new data can be added to the ledger known as decentralized governance of the smart contracts 15although the update isn t a sea change in the simplicity or applicability of fabric it does demonstrate that progress continues to be made in the cryptocurrency industry beyond the crypto mania that occurred in 2018 over the next five to ten years it s expected that enterprise blockchain will undoubtedly find its proper use 16 | |
what is hyperledger iroha | hyperledger iroha is a blockchain platform designed to be easily integrable in various business uses that require distributed ledger technology for example the platform can be used to help companies and governments with identity management such as national ids and the financial services sector with bank to bank transfers according to the company s website hyperledger aims to create distributed ledger technology that enables organizations to build and run robust industry specific applications platforms and hardware systems to support their individual business transactions 1launched in may 2019 hyperledger iroha is one of the projects under the hyperledger umbrella and is hosted by the linux foundation 2 the japanese fintech company soramitsu co ltd has open sourced the code for iroha it was originally contributed by soramitsu hitachi ntt data and colu 3understanding hyperledger irohahyperledger iroha is a business blockchain framework designed to be incorporated into infrastructure projects that need distributed ledger technology the distributed ledger feature of a blockchain works similar to a shared database which can allow data to be shared publicly however many businesses can use a private blockchain network as a framework to build software applications called apps for their use internally or to offer technology based products to their customers 45hyperledger iroha s platform enables users to build applications specific to their business needs particularly for mobile applications it features a domain driven c design which is a programming language used by software engineers iroha also features a consensus algorithm called yac for yet another consensus algorithm an algorithm is a step by step procedure that s written in code which is designed to solve the problems and carry out a sequence of instructions features of hyperledger iroha include iroha allows easy deployment and maintenance a vast range of code libraries for developers to enable hassle free application development secure control and permissions over user roles and activities easy asset management and participant identity and modular design architecture to facilitate the blockchain ecosystem 2for example the national bank of cambodia uses hyperledger iroha to reach the unbanked population especially in rural areas promote the use of the national currency instead of u s dollars reduce the compliance burdens on some payment service providers and modernize retail payments to deliver better services at lower cost a pilot project went live in july 2019 and ran successfully with more than 10 000 users and a network of 16 banks reaching a retail throughput of up to 2 000 transactions per second 6permission based vs public blockchainsiroha differs from other popular blockchain networks like bitcoin and ethereum as the latter operate as permissionless ledgers which allow anyone to join and grant access to everything on the network iroha s operations are permissioned that is only participants with suitable access are allowed to join interact and contribute to the blockchain system in a permissioned network the participants might be known to one another which means they could have shared interests leading to collaboration and consensus a permissioned network allows participants to share data within a secure blockchain conversely in a public blockchain the data is made public also transactions on a public blockchain need to be verified as accurate and not fraudulent which is part of the proof of work process as a result public blockchains often face latency or slowness since the system gets bogged down as the volume of transactions increases 7in a permissioned network similar to hyperledger iroha problems can be resolved more quickly than on a public blockchain since the network isn t held up by the proof of work mechanisms 8 however data querying can be restricted on iroha as not everyone is allowed to read and verify the data on the blockchain unlike bitcoin or ethereum iroha does not have a native cryptocurrency but it can be created by an eligible participant as required for their own enterprise use applications of hyperledger irohausing iroha a business can create and manage simple digital assets like any standard cryptocurrency or complex ones like indivisible rights certificate authenticity and patents iroha allows building certifying identities which enables granting as well as verification of various certificates issued to individuals by educational and healthcare institutes a candidate s university degree can be stored on the blockchain and any qualifying hiring agency or employer can be given verification rights to authenticate the candidate s information during the hiring process 9iroha can also be used to create digital avatars of real world assets that can be transacted with zero or low transaction fees for instance the current owner of a vintage car can create a digital asset that represents the vintage car on the blockchain and then link its ownership to themself to transfer ownership they can then create an offer using a multi signature transaction which includes the cost of transfer in a particular currency the interested counterparty can accept the offer on the blockchain and complete the transaction by transferring the currency to the present owner and receive the ownership of the car in return 9hyperledger iroha can also be used in the identity management process needed for know your customer kyc requirements 10 kyc is a standard requirement in the financial services industry that establishes guidelines for banks and investment firms to know their client for example kyc helps to establish an understanding of a client s risk tolerance for investment purposes kyc also involves accepting the proper identification and corporate resolutions during the account opening process as well as understanding the type of industry and how a business earns its income kyc is critical to financial firms in that it helps them ensure their customers are treated properly but also is designed to prevent fraud and money laundering 11as a result there is a significant amount of documentation involved in the kyc process instead of a user submitting kyc documents to each institute separately they can create the necessary identity on the blockchain which can be accessed by the various qualifying institutes as needed for kyc compliance 10iroha offers smart contracts which are self executing contracts that contain terms of an agreement between two parties that is written in code if one party satisfies their end of the agreement through the blockchain network the smart contract automatically executes the other end of the agreement 1213in this way iroha can offer an alternative to ethereum s smart contracts which may require writing cumbersome code the same can be achieved quickly and simply by using the built in commands in iroha to complete common tasks more quickly and with lower complexity and lower risk example of hyperledger irohabakong is cambodia s mobile payment and banking software application app and is the first retail payments system that uses blockchain technology bakong is sponsored by the national bank of cambodia which is the country s central bank and is built on hyperledger iroha s network bakong allows businesses and individuals the ability to transfer money and buy from merchants using a smartphone app merchants can also make cashless and secure payments while banks can make interbank transfers at a lower cost than typical wire transfers bakong launched in 2019 was developed by soramitsu which is a global technology company that develops blockchain based solutions including domestic and cross border payment systems 14 bakong has since partnered with more than 40 financial institutions 15using hyperledger s iroha network the project is designed to reach cambodia s unbanked citizens by allowing any citizen to open an account regardless of whether they have a traditional bank account or not reaching those who are unbanked is a major issue for cambodia since 78 of its citizens do not have a bank account however more than 50 of its people own a smartphone the benefits of financial inclusion from the blockchain project also allow those citizens to do business with more than 500 merchants through the app 14 | |
how many types of hyperledger are there | there are five types of hyperledger blockchain technologies | |
what is hyperledger sawtooth | hyperledger sawtooth is an open source project under the hyperledger umbrella and works as an enterprise level blockchain system used for creating and operating distributed ledger applications and networks particularly for use by enterprises understanding hyperledger sawtoothdeveloped by the linux foundation in collaboration with ibm intel and sap the underlying design concept of hyperledger sawtooth aims to keep the ledgers truly distributed and make smart contracts much secure and thus suitable for businesses it is an implementation of blockchain as a service baas in most standard blockchain based systems core and applications are hosted and executed on the same platform which may lead to performance issues as well as security concerns hyperledger sawtooth segregates the core ledger system from the application specific environment thereby simplifying the application development yet keeping the system safe and secure using this architecture a developer can build applications in their programming language of choice that can be hosted operated and run on the system periphery without interfering with the core blockchain system supported languages include c go java javascript python and rust a sawtooth application can be based on a core business logic required for a business need or it can be developed and run as a smart contract virtual machine that has a self governing mechanism for creating notifying and executing the contracts between various participants on the blockchain 1 the core system allows applications to co exist on the same blockchain selects transaction rules selects the necessary permissioning mechanism and defines the consensus algorithms that are used to finalize the working of the digital ledger in a way that best supports the needs of an enterprise | |
how hyperledger sawtooth works | sawtooth enables selective permissions that is one can easily deploy certain select clusters of sawtooth nodes with different permissions on the same blockchain the ledger stores the necessary details about the permissions nodes and identities the operating performance of the sawtooth network is boosted by the mechanism of parallel transaction execution which has an upper hand over the serial execution mechanism that often is a bottleneck when dealing with high volumes of transactions on many popular cryptocurrency networks sawtooth supports proof of elapsed time poet consensus mechanism that offers benefits of low resource utilization and low energy consumption and is commonly used on the permissioned blockchain networks to decide the mining rights or the block winners on the network for more see proof of elapsed time 2 some real world examples using sawtooth based applications include sawtooth supply chain which helps an enterprise keep track of contextual and logistics related information of an asset represented on the blockchain sawtooth marketplace which helps participants trade in specified quantities of digital assets on the blockchain and sawtooth private utxo which facilitates digital asset creation and trading including off ledger and privately held transactions | |
what is a hypermarket | a hypermarket is a retail store that combines a department store and a grocery supermarket often a very large establishment hypermarkets offer a wide variety of products such as appliances clothing and groceries hypermarkets offer shoppers a one stop shopping experience the idea behind this big box store is to provide consumers with all the goods they require under one roof some of the most well known hypermarkets include the walmart supercenter fred meyer meijer and super kmart fred meyer based in portland oregon is often credited with founding the first u s hypermarket in 1931 when it opened its store in portland s hollywood district the store combined the existing supermarket model with a pharmacy and clothing retailer hypermarkets can include warehouse like stores that might also offer merchandise found in discount stores or specialty stores at one location understanding hypermarketsbig box retailers have the advantage of selling high volumes of merchandise which in most cases affords them greater buying power compared with retailers who sell goods in smaller quantities this lets companies such as walmart cosco and tesco apply pricing pressure on vendors potentially securing discounts on goods that their rivals cannot get from the vendors this practice allows hypermarket companies to sell merchandise at lower rates than their competitors the combination of a full supermarket with the wide variety of merchandise offerings found in department stores and other types of retailers can pose a highly competitive existential threat to local supermarkets and other retailers alike local market pressurea company such as walmart poses a particular threat with its hypermarket locations because of its efforts to keep its employees from unionizing in many american supermarkets employees are members of labor unions that negotiate for collective benefits such as regular salary increases and health insurance historically walmart has kept unions from taking root in its stores which has arguably allowed the company to control its costs in ways that traditional supermarkets cannot the presence of a hypermarket from a company such as walmart can mean discount prices with profit margins that local competitors might not be able to sustain this can force rival supermarkets to attempt to renegotiate terms with their workers or make cost cutting measures in order to remain viable in extreme cases the long term effects of these practices can drive competition out of business given the range of products available through hypermarkets such a retailer may also pose a competitive threat to shopping centers that traditionally served as focal points for different retailers to operate from such shopping centers might include a supermarket department stores and other specialty stores that sell comparable merchandise that a hypermarket may sell the difference is that the operator and owner of a hypermarket would see combined sales from all of these channels hypermarkets can be found across international markets such as europe asia the middle east north africa and the americas | |
what is hypertext markup language html | hypertext markup language html is the set of markup symbols or codes inserted into a file intended for display on the internet the markup tells web browsers how to display a webpage s words and images each individual piece markup code which would fall between and characters is referred to as an element though many people also refer to it as a tag some elements come in pairs that indicate when some display effect is to begin and when it is to end understanding htmlhypertext markup language is the computer language that facilitates website creation the language which has code words and syntax just like any other language is relatively easy to comprehend and as time goes on is increasingly powerful in what it allows someone to create html continues to evolve to meet the demands and requirements of the internet under the guise of the world wide web consortium the organization that designs and maintains the language for instance with the transition to web 2 0 hypertext is the method by which internet users navigate the web by clicking on special text called hyperlinks users are brought to new pages the use of hyper means it is not linear so users can go anywhere on the internet simply by clicking on the available links markup is what html tags do to the text inside of them they mark it as a specific type of text for example markup text could come in the form of boldface or italicized type to draw specific attention to a word or phrase html basicsat its core html is a series of short codes typed into a text file these are the tags that power html s capabilities the text is saved as an html file and viewed through a web browser the browser reads the file and translates the text into a visible form as directed by the codes that the author used to write what becomes the visible rendering writing html requires tags to be used correctly to create the author s vision the tags are what separate normal text from html code tags are the words between what are known as angle brackets which allow graphics images and tables to appear on the webpage different tags perform different functions the most basic tags apply formatting to text as web interfaces need to become more dynamic cascading style sheets css and javascript applications may be used css makes webpages more accessible and javascript adds power to basic html html vs xmlunlike html extensible markup language or xml allows users to define their own markup for instance using xml one user could choose to denote a footnote with a tag while another user could opt for something different using html only one predetermined tag can be used to denote a specific type of information xml documents are meant to be easy to read since they contain user defined tags and since the documents only consist of markup and content | |
what does html stand for | html stands for hypertext markup language who invented html in 1980 british scientist tim berners lee proposed and made a prototype of a system for researchers at cern where he worked to use and share documents in 1989 berners lee authored a memo that proposed an internet based hypertext system he specified html and wrote the browser and server software in late 1990 1 | |
how can html be used | uses for html include | |
what does the future hold for html | the fifth and final major version of hypertext markup language is html5 released in 2008 the current specification is known as the html living standard future developments for html5 the html living standard are thought to include the bottom linehypertext markup language or html is a set of markup symbols or codes inserted into a file intended for display on the internet the markup tells web browsers how words and images should be displayed on a webpage | |
what is hypothecation | hypothecation occurs when an asset is pledged as collateral to secure a loan the owner of the asset does not give up title possession or ownership rights such as income generated by the asset however the lender can seize the asset if the terms of the agreement are not met hypothecation is different from a mortgage lien or assignment 1investopedia yurle villegashypothecation in mortgageshypothecation occurs most commonly in mortgage lending a mortgage is a type of loan that s secured by an underlying property the borrower technically owns the house but because the house is pledged as collateral the mortgage lender has the right to seize the house if the borrower cannot meet the repayment terms of the loan agreement which occurred during the foreclosure crisis 2auto loans are similarly secured by the underlying vehicle unsecured loans on the other hand do not work with hypothecation because there is no collateral to claim in the event of default as hypothecation provides security to the lender because of the collateral pledged by the borrower it is easier to secure a loan and the lender may offer a lower interest rate than on an unsecured loan though lenders cannot claim collateral for unsecured loans in default they can pursue other debt collection actions including a creditor lawsuit hypothecation in investingmargin lending in brokerage accounts is another common form of hypothecation when an investor trades on margin they re borrowing money from the brokerage to do so this can allow them to leverage their existing account balances to make larger investments and potentially net larger profits on the sale of securities this type of hypothecation can be risky however when an investor chooses to buy on margin or sell short they are agreeing that those securities can be sold if necessary if there is a margin call the investor owns the securities in their account but the broker can sell them if they issue a margin call that the investor cannot meet to cover the investor s losses 3this can be costly for the investor because it can amplify losses well beyond the initial investment made for that reason it s important to understand how margin trading works and what hypothecation could mean for you on a personal level examples of hypothecation agreementhypothecation in real estate is most often associated with mortgage loans a rental property for example may undergo hypothecation as collateral against a mortgage issued by a bank while the property remains collateral the bank has no claim on rental income that comes in however if the landlord defaults on the loan the bank may seize the property by initiating a foreclosure proceeding the use of hypothecation in real estate agreements can offer some reassurance to lenders who may want to mitigate risk when loaning money if the borrower doesn t pay for any reason the bank can potentially recoup some of its losses if it s able to foreclose and then resell the property later in that sense hypothecation aids in stabilizing the mortgage lending industry hypothecation can also work in favor of borrowers by entering into this type of agreement borrowers may find it easier to obtain mortgage loans with a smaller down payment or lower credit score requirements they may also be able to qualify for more favorable interest rates because the lender is assuming less risk foreclosure can be exceptionally damaging to your credit scores so if you re struggling with mortgage payments it may be helpful to reach out to your lender to discuss possible solutions hypothecation in commercial real estatehypothecation in commercial real estate is the same as it is in residential real estate lending the borrower posts collateral in order to secure a loan so again an investor who s borrowing to purchase a rental property such as an apartment building or duplex would use the property itself as collateral for the loan construction loans in commercial real estate work a little differently because the property that would otherwise serve as collateral has yet to be built the borrower would need to provide other property as substitute collateral the same rule however would apply with regard to default if the borrower fails to pay the loan the lender could claim ownership of the collateral | |
when banks and brokers use hypothecated collateral as collateral to back their own transactions and trades with their client s agreement in order to secure a lower cost of borrowing or a rebate on fees this is called rehypothecation for example the lender may use an apartment building offered as collateral for a commercial real estate loan as collateral for a new loan this newly created debt is now a derivative | rehypothecation is regulated by the securities and exchange commission banks and lenders must have permission from the owner of the property or assets to do this rehypothecation by banks and financial institutions is a less common practice today due to the adverse impact this practice had during the financial crisis of 2008 | |
how do hypothecation and a mortgage differ | hypothecation is the pledging of an asset as collateral for a loan without transferring the property s title to the lender in a mortgage the property purchased is used to secure the loan but the lender holds the title | |
is assignment the same as hypothecation | assignment is an arrangement involving contracts in which one party assigns rights and responsibilities outlined in a contract to another party hypothecation allows a borrower to hold onto a property while using it as security for a loan | |
what is hypothecation vs a lien | with hypothecation the borrower is allowed to hold the property used as collateral for the loan the borrower agrees to repay the loan on the condition that if they don t the lender can claim the property a lien however requires a property owner to satisfy outstanding debts before an underlying property can be refinanced or sold | |
what is an example of hypothecation | an example of hypothecation would be an investor who takes out a mortgage loan to purchase an investment property the property serves as collateral for the loan meanwhile the investor collects the rental income derived from it but if the investor defaults the lender can initiate a foreclosure proceeding to take ownership of the property the bottom linehypothecation often applies in real estate lending transactions in which a property is used to secure a loan but it can also be used in other types of loan situations as well as investing if you re entering into a loan agreement that includes hypothecation it s important to understand the potential consequences if you fail to uphold your financial obligation to the lender | |
what is hypothesis testing | hypothesis testing sometimes called significance testing is an act in statistics whereby an analyst tests an assumption regarding a population parameter the methodology employed by the analyst depends on the nature of the data used and the reason for the analysis hypothesis testing is used to assess the plausibility of a hypothesis by using sample data such data may come from a larger population or a data generating process the word population will be used for both of these cases in the following descriptions | |
how hypothesis testing works | in hypothesis testing an analyst tests a statistical sample intending to provide evidence on the plausibility of the null hypothesis statistical analysts measure and examine a random sample of the population being analyzed all analysts use a random population sample to test two different hypotheses the null hypothesis and the alternative hypothesis the null hypothesis is usually a hypothesis of equality between population parameters e g a null hypothesis may state that the population mean return is equal to zero the alternative hypothesis is effectively the opposite of a null hypothesis thus they are mutually exclusive and only one can be true however one of the two hypotheses will always be true the null hypothesis is a statement about a population parameter such as the population mean that is assumed to be true 14 step processexample of hypothesis testingif an individual wants to test that a penny has exactly a 50 chance of landing on heads the null hypothesis would be that 50 is correct and the alternative hypothesis would be that 50 is not correct mathematically the null hypothesis is represented as ho p 0 5 the alternative hypothesis is shown as ha and is identical to the null hypothesis except with the equal sign struck through meaning that it does not equal 50 a random sample of 100 coin flips is taken and the null hypothesis is tested if it is found that the 100 coin flips were distributed as 40 heads and 60 tails the analyst would assume that a penny does not have a 50 chance of landing on heads and would reject the null hypothesis and accept the alternative hypothesis if there were 48 heads and 52 tails then it is plausible that the coin could be fair and still produce such a result in cases such as this where the null hypothesis is accepted the analyst states that the difference between the expected results 50 heads and 50 tails and the observed results 48 heads and 52 tails is explainable by chance alone | |
when did hypothesis testing begin | some statisticians attribute the first hypothesis tests to satirical writer john arbuthnot in 1710 who studied male and female births in england after observing that in nearly every year male births exceeded female births by a slight proportion arbuthnot calculated that the probability of this happening by chance was small and therefore it was due to divine providence 2 | |
what are the benefits of hypothesis testing | hypothesis testing helps assess the accuracy of new ideas or theories by testing them against data this allows researchers to determine whether the evidence supports their hypothesis helping to avoid false claims and conclusions hypothesis testing also provides a framework for decision making based on data rather than personal opinions or biases by relying on statistical analysis hypothesis testing helps to reduce the effects of chance and confounding variables providing a robust framework for making informed conclusions 3 | |
what are the limitations of hypothesis testing | hypothesis testing relies exclusively on data and doesn t provide a comprehensive understanding of the subject being studied additionally the accuracy of the results depends on the quality of the available data and the statistical methods used inaccurate data or inappropriate hypothesis formulation may lead to incorrect conclusions or failed tests hypothesis testing can also lead to errors such as analysts either accepting or rejecting a null hypothesis when they shouldn t have these errors may result in false conclusions or missed opportunities to identify significant patterns or relationships in the data 3the bottom linehypothesis testing refers to a statistical process that helps researchers determine the reliability of a study by using a well formulated hypothesis and set of statistical tests individuals or businesses can make inferences about the population that they are studying and draw conclusions based on the data presented all hypothesis testing methods have the same four step process which includes stating the hypotheses formulating an analysis plan analyzing the sample data and analyzing the result | |
what is hysteresis | hysteresis in the field of economics refers to an event in the economy that persists even after the factors that led to that event have been removed or otherwise run their course hysteresis often occurs following extreme or prolonged economic events such as an economic crash or recession after a recession for example the unemployment rate may continue to increase despite growth in the economy and the technical end of the recession understanding hysteresisthe term hysteresis was coined by sir james alfred ewing a scottish physicist and engineer to refer to systems organisms and fields that have memory in other words the consequences of some input are experienced with a certain time lag or delay one example is seen with iron iron maintains some magnetization after it has been exposed to and removed from a magnetic field 1 hysteresis is derived from the greek word meaning a coming short or a deficiency hysteresis in economics arises when a single disturbance affects the course of the economy the specific reasons for hysteresis vary depending on the precipitating event that said the persistence of a market malaise after the event has technically passed is most commonly attributed to changes in the attitudes of market participants due to the event after a market crash for example many investors are reluctant to reinvest what cash they have on hand due to their recent losses this reluctance translates to a longer period of depressed stock prices due to the attitude of investors rather than the market fundamentals types of hysteresis in economicsa common example of hysteresis is the delayed effects of unemployment where the unemployment rate can continue to rise even after the economy has begun recovering the current unemployment rate is a percentage of the number of people in an economy who are looking for work but can t find any | |
when the economy re enters an expansionary phase it is expected that businesses would start re hiring the unemployed and that the economy s unemployment rate would start declining towards its normal or natural unemployment rate until cyclical unemployment becomes zero this is the ideal scenario of course however hysteresis tells a different story | hysteresis states that as unemployment increases more people adjust to a lower standard of living as they become accustomed to the lower standard of living people may not be as motivated to achieve the previously desired higher living standard also as more people become unemployed it becomes more socially acceptable to be or remain unemployed after the labor market returns to normal some unemployed people may be disinterested in returning to the workforce last and most significantly employers themselves have undergone significant pain during a downturn and will be more likely to demand more of remaining workers before taking on the larger costs of adding to their workforce output hysteresis can happen in the aftermath of economic downturns it s the decline in investment and productivity when businesses curtail their investment activities during recessions it often results in a reduction in the overall productivity of the economy the consequences of this diminished productivity can extend beyond the recessionary period in practical terms this implies that even when the economy begins to recover it may struggle to regain the growth trajectory it maintained prior to the downturn for instance companies may be hesitant on committing long term capital or being the first to introduce a new product to markets in the aftermath of economic downturns governments and central banks must not only focus on short term stimulus measures to address immediate economic challenges but also consider strategies to revive and sustain long term growth mitigating output hysteresis may involve targeted policies aimed at encouraging investment fostering innovation and enhancing productivity in order to counteract the lasting impacts of economic contractions following a financial downturn the initial response of banks is often to tighten credit as they deal with increased risks and uncertainties however what distinguishes credit market hysteresis is the prolonged nature of these tightened conditions even after the crisis has abated banks potentially hesitant by the experiences of the crisis may remain risk averse they may be cautious with their lending practices and perpetuating a persistent credit crunch even though that may not necessarily be required this sustained restriction in credit availability has far reaching implications for economic actors businesses find it challenging to secure the necessary financing for investments expansion and daily operations individuals face difficulties accessing credit for essential purposes like home purchases and education the consequences of credit market hysteresis extend beyond the immediate post crisis period acting as a drag on the overall economic recovery inflation hysteresis emerges when extended periods of either high or low inflation shape expectations for the future when inflation remains persistently low for example it can instill the belief that this trend will continue this can lead to expectations of ongoing low inflation and can make it hard for central banks striving to maintain price stability central banks may rely on the public s expectations of future inflation to guide their policy decisions in cases of inflation hysteresis where expectations become entrenched it becomes more challenging for central banks to implement effective monetary policies central banks may enact policies they think are best however the general public may latch onto inflation beliefs that perpetuate beyond what is actually happening hysteresis in unemployment can also be observed when businesses switch to automation during a market downturn workers without the skills required to operate this machinery or newly installed technology will find themselves unemployable when the economy starts recovering in addition to hiring only tech savvy workers these companies will ultimately hire fewer employees than before the recessionary phase in effect the loss of job skills will cause a movement of workers from the cyclical unemployment stage to the structural unemployment group a rise in structural unemployment will lead to a rise in the natural unemployment rate hysteresis can indicate a permanent change in the workforce from the loss of job skills making workers less employable even after a recession has ended example of hysteresisa tremendous example of hysteresis in the modern economy is the covid 19 pandemic on may 11 2023 the biden administration ended the public health emergency status of the crisis 2 however many of the economic responses taken during the pandemic are still being felt into 2024 the pandemic caused widespread job losses particularly in sectors like hospitality and travel that were hit hard by lockdowns the bureau of labor statistics projects the leisure and hospitality industry will employ just over 16 million individuals by the year 2031 this would eventually compare closely to the 16 6 million individuals employed in 2019 though the point is the lag in market response 3the pandemic has also led to inflationary pressures for example supply chain disruptions have increased the cost of goods and these cost increases have often been passed on to consumers in the form of higher prices note that despite easing rate hikes and monetary policy the average monthly inflation rate of 4 1 in 2023 was still the third highest average of the millennium behind only 2022 and 2021 respectively 4the last example related to the pandemic relates to consumer preference there were many barriers presented to in person shopping or consumption due to health restrictions as a result most americans turned to online shopping 5 with those barriers largely removed post pandemic there s a lot of evidence that shows post pandemic consumer behavior has changed this can loosely be defined as hysteresis as with the barriers removed and market conditions largely where they were pre pandemic consumers have not yet returned and may not return to what the trend was before | |
how to prevent hysteresis | economies that are experiencing a recession and hysteresis in which the natural rate of unemployment is rising usually employ economic stimulus to combat the resulting cyclical unemployment expansionary monetary policies by central banks such as the federal reserve can include lowering interest rates so as to make loans cheaper and help stimulate the economy an expansionary fiscal policy might also include increases in government spending in regions or industries that are most affected by unemployment however hysteresis is more than cyclical unemployment and can persist long after the economy has recovered for long term issues such as a lack of skills due to workers displaced by technological advances job training programs might be helpful to combat hysteresis | |
what are the types of hysteresis relevant to financial markets | hysteresis in financial markets takes various forms including credit market hysteresis investor sentiment towards inflation or manufacturing output can hysteresis be mitigated through structural reforms preemptive structural reforms involve anticipating potential sources of hysteresis and implementing changes to enhance the flexibility and resilience of the economy labor market reforms regulatory adjustments and initiatives promoting innovation can mitigate the impact of economic shocks though there s usually greater risk in longer term policies compared to short term strategies | |
what are the long term consequences of banking sector hysteresis | the banking sector s hysteresis arising from financial crises can lead to persistent cautious lending practices even after the crisis abates this ongoing prudence in lending may contribute to a prolonged credit squeeze making it tough for consumers and businesses to get loans | |
what role does public debt hysteresis play in fiscal sustainability | public debt hysteresis occurs when high levels of public debt limit a government s fiscal flexibility the need to service debt may lead to prolonged periods of hysteresis as the government may not have the ability to spend in other critical areas in the future the bottom linehysteresis in the context of finance refers to the lasting impact of past economic events on the current state of financial markets it highlights how shocks and disruptions such as financial crises can lead to persistent effects influencing market behavior credit conditions and overall economic performance over an extended period | |
what is an iceberg order | iceberg orders are large single orders that have been divided into smaller limit orders usually through the use of an automated program for the purpose of hiding the actual order quantity the term iceberg comes from the fact that the visible lots are just the tip of the iceberg given the greater number of limit orders ready to be placed they are also sometimes referred to as reserve orders basics of iceberg ordericeberg orders are mainly used by institutional investors to buy and sell large amounts of securities for their portfolios without tipping off the market only a small portion of their entire order is visible on level 2 order books at any given time by masking large order sizes an iceberg order reduces the price movements caused by substantial changes in a stock s supply and demand for example a large institutional investor may want to avoid placing a large sell order that could cause panic a series of smaller limit sell orders may be more palatable and disguise the extant selling pressure on the other hand an institutional investor looking to buy shares at the lowest possible price may want to avoid placing a large buy order that day traders could see and bid up the stock previous research has indicated that traders tend to place order types similar to the amount and pattern of iceberg orders thereby increasing liquidity and minimizing impact of the iceberg order on overall trading identifying iceberg orderstraders can identify iceberg orders by looking for a series of limit orders coming from a single market maker that constantly seems to reappear for example an institutional investor might break an order to buy one million shares into ten different orders for 100 000 shares each traders have to watch closely to pick up on the pattern and recognize that these orders are being filled in real time traders looking to capitalize on these dynamics might step in and buy shares just above these levels knowing that there s strong support from the iceberg order creating an opportunity for scalping profits in other words the iceberg order s may serve as reliable areas of support and resistance that can be considered in the context of other technical indicators for example a day trader may notice high levels of selling volume at a certain price they may then look at the level 2 order book and see that most of this volume is coming from a series of similarly sized sell orders from the same market maker since this could be the sign of an iceberg order the day trader may decide to short sell the stock due to the strong selling pressure from the constant stream of limit sell orders exchanges typically prioritize orders based on the sequence in which they are received in the case of an iceberg order the visible portion of an order is executed first the hidden portion of an order is executed only after it becomes visible in the order book if traders have already placed orders similar to the iceberg order then they are executed after the visible portion of an iceberg order example of an iceberg ordersuppose a large pension investment fund wants to make an investment of 5 million into stock abc news of the fund s investment could cause a massive spike in abc s price within a short period of time to avoid such a disruption the fund devises an iceberg order that splits its original order into smaller lots of 500 000 each | |
what is the ichimoku cloud | the ichimoku cloud is a collection of technical indicators that show support and resistance levels as well as momentum and trend direction it does this by taking multiple averages and plotting them on a chart it also uses these figures to compute a cloud that attempts to forecast where the price may find support or resistance in the future the ichimoku cloud was developed by goichi hosoda a japanese journalist and published in the late 1960s it provides more data points than the standard candlestick chart while it seems complicated at first glance those familiar with how to read the charts often find it easy to understand with well defined trading signals the formulas for the ichimoku cloudthe following are the five formulas for the lines that comprise the ichimoku cloud indicator conversion line tenkan sen 9 ph 9 pl 2 base line kijun sen 26 ph 26 pl 2 leading span a senkou span a cl base line 2 leading span b senkou span b 52 ph 52 pl 2 lagging span chikou span close plotted 26 periods lagging span chikou span in the past where ph period high pl period low cl conversion line begin aligned text conversion line tenkan sen frac text 9 ph text 9 pl 2 text base line kijun sen frac text 26 ph 26 pl 2 text leading span a senkou span a frac text cl base line 2 text leading span b senkou span b frac text 52 ph 52 pl 2 text lagging span chikou span text close plotted 26 periods phantom text lagging span chikou span text in the past textbf where text ph text period high text pl text period low text cl text conversion line end aligned conversion line tenkan sen 29 ph 9 pl base line kijun sen 226 ph 26 pl leading span a senkou span a 2cl base line leading span b senkou span b 252 ph 52 pl lagging span chikou span close plotted 26 periodslagging span chikou span in the pastwhere ph period highpl period lowcl conversion line | |
how to calculate the ichimoku cloud | the highs and lows are the highest and lowest prices seen during the period for example the highest and lowest prices seen over the last nine days in the case of the conversion line adding the ichimoku cloud indicator to your chart will do the calculations for you but if you want to calculate it by hand here are the steps | |
what does the ichimoku cloud tell you | the technical indicator shows relevant information at a glance by using averages the overall trend is up when the price is above the cloud down when the price is below the cloud and trendless or transitioning when the price is in the cloud | |
when leading span a is rising and above leading span b this helps to confirm the uptrend and the space between the lines is typically colored green when leading span a is falling and below leading span b this helps confirm the downtrend the space between the lines is typically colored red in this case | traders will often use the ichimoku cloud as an area of support and resistance depending on the relative location of the price the cloud provides support resistance levels that can be projected into the future this sets the ichimoku cloud apart from many other technical indicators that only provide support and resistance levels for the current date and time traders should use the ichimoku cloud in conjunction with other technical indicators to maximize their risk adjusted returns for example the indicator is often paired with the relative strength index rsi which can be used to confirm momentum in a certain direction it s also important to look at the bigger trends to see how the smaller trends fit within them for example during a very strong downtrend the price may push into the cloud or slightly above it temporarily before falling again only focusing on the indicator would mean missing the bigger picture that the price was under strong longer term selling pressure crossovers are another way that the indicator can be used watch for the conversion line to move above the base line especially when the price is above the cloud this can be a powerful buy signal one option is to hold the trade until the conversion line drops back below the base line any of the other lines could be used as exit points as well the difference between the ichimoku cloud and moving averageswhile the ichimoku cloud uses averages they are different than a typical moving average simple moving averages take closing prices add them up and divide that total by how many closing prices there are in a 10 period moving average the closing prices for the last 10 periods are added then divided by 10 to get the average notice how the calculations for the ichimoku cloud are different they are based on highs and lows over a period and then divided by two therefore ichimoku averages will be different than traditional moving averages even if the same number of periods are used one indicator is not better than another they just provide information in different ways limitations of using the ichimoku cloudthe indicator can make a chart look busy with all the lines to remedy this most charting software allows certain lines to be hidden for example all of the lines can be hidden except for leading span a and leading span b which create the cloud each trader needs to focus on which lines provide the most information then consider hiding the rest if all of the lines are distracting another limitation of the ichimoku cloud is that it is based on historical data while two of these data points are plotted in the future there is nothing in the formula that is inherently predictive averages are simply being plotted in the future the cloud can also become irrelevant for long periods of time as the price remains way above or way below it at times like these the conversion line the base line and their crossovers become more important as they generally stick closer to the price | |
what does ichimoku mean in english | in japanese ichimoku translates to one look referring to the fact that support and resistance levels can be gauged in just a glance | |
what are the tenkan sen and kijun sen | the japanese terminology for the moving average lines used in the ichimoku cloud are called the tenkan and kijun sen | |
what are the senkou spans used in ichimoku clouds | the senkou spans form the cloud of the ichimoku cloud | |
what is the chikou span in ichimoku clouds | the chikou span is meant to measure market sentiment using the most recent closing price and plotted 26 periods behind the price action the bottom linein order to create a cloud to show where prices may find future resistance or support the ichimoku cloud plots multiple averages on a chart this shows not only support and resistance but also trend direction and momentum all of which appear as a group of technical indicators while there are some limitations to the ichimoku cloud it is neither better nor worse than existing technical indicators such as moving averages it simply represents information in a different way | |
what is the ichimoku kinko hyo | the ichimoku kinko hyo or ichimoku for short is a technical indicator that is used to gauge momentum along with future areas of support and resistance the all in one technical indicator is comprised of five lines called the tenkan sen kijun sen senkou span a senkou span b and chikou span understanding ichimoku kinko hyothe ichimoku kinko hyo indicator was originally developed by a japanese newspaper writer to combine various technical strategies into a single indicator that could be easily implemented and interpreted in japanese ichimoku translates to one look meaning traders only have to take one look at the chart to determine momentum support and resistance ichimoku may look very complicated to novice traders that haven t seen it before but the complexity quickly disappears with an understanding of what the various lines mean and why they are used the ichimoku indicator is best used in conjunction with other forms of technical analysis despite its goal of being an all in one indicator ichimoku kinko hyo interpretationthere are five key components to the ichimoku indicator example of an ichimoku kinko hyo chartthe following is an example of an ichimoku indicator plotted on a chart in this example the ichimoku cloud is the area that s shaded in orange which represents a key area of support and resistance the chart shows that the spdr s p 500 etf remains in a bullish uptrend since the current price is trading above the cloud if the price were to enter the cloud traders would watch for a potential reversal of the trend | |
what is icon icx | icon is a platform that is intended to facilitate the interactions of independent blockchains also referred to as communities within the icon platform a community is defined as a network of nodes that follow a single governance system a node is a computer that connects to a cryptocurrency network cryptocurrency networks such as bitcoin and ethereum are considered communities but banks businesses hospitals schools and governments could also participate as communities within this ecosystem icon is supported through a cryptocurrency token icx the icon project was founded in 2017 by the icon foundation an organization based in south korea 1the goal of the icon project is to facilitate a platform where entities from a diverse range of industries financial security insurance healthcare educational and commerce can interact and transact on a single network understanding icon icx an initial coin offering ico in september 2017 for icon s cryptocurrency icx raised roughly 43 million this sale included 50 of icon s token supply the project officially launched its blockchain in january 2018 and participants in the ico received their icx cryptocurrency in june 2018 in 2019 icon released its own token standard irc16 which allows users to use the icon software as infrastructure to create their own tokenized assets and securities 2 these tokenized assets and securities are digital tokens or coins that represent equity ownership units with tokenized equity a business can raise capital by issuing its shares in the form of digital assets this is how icon describes its goal to establish a digital nation wherein different economic actors can issue and control their own forms of value under rule systems they select according to its website the aim of project icon is to hyperconnect the world by building one of the largest decentralized networks in the world 3 the icon project took inspiration for their project from the way that real world economies are structured businesses nonprofit organizations and government institutions all leverage a common medium of exchange a national currency while still remaining distinct but interoperable economic actors 2 the blockchain technology and accompanying cryptocurrency token called icx allow participants in a decentralized system to converge at a central point creating an interconnected blockchain network a blockchain is a type of database it differs from a typical database in the way that it stores data data is stored in blocks in chronological order as new data comes in it is entered into a new block once the block is filled with data that block is chained onto the previous block while blockchains are most commonly associated with cryptocurrencies there are additional areas where this technology can be applied because different types of information can be stored on a blockchain while the most common use so far has been as a ledger for transactions any exchange of information can be added to a blockchain transactions involving securities currencies business contracts deeds loans intellectual property and personal identification could be tokenized every blockchain is managed by a specific network for this reason in the past connecting different blockchains was not considered a possibility the icon project is an attempt at such a connection unlike other centralized payment systems which require businesses to adhere to their own policies and guidelines icon allows individual communities to retain control of their own policies in this way icon seeks to reduce potential barriers to adoption goals of iconicon aims to create a greater network composed of individuals networks that is powered by cryptocurrencies blockchains that participate in the icon project can exchange currencies using the platform s decentralized exchange dex the dex sets currency reserves for each blockchain community so that the communities can exchange value in real time exchange rates are set for these transactions using an a i analysis model and the native icx coin is used as an intermediary currency for the exchange the icon project consists of five major components the icon republic icon communities community representatives c rep community nodes c nodes and citizen nodes icon communities are a network of nodes within a single governance system they can operate with their own governance structures numbers of nodes and characteristics communities can also vary in their approaches to decision making for example while bitcoin takes a consensus driven approach other communities such as financial institutions may follow a hierarchical approach community nodes are the infrastructure for each community they maintain a community s blockchain community representatives are nodes that are elected from within each community and are trusted to interact with the icon republic through the community representative each community s blockchain is linked to the icon republic community representatives receive icx for their work the icon republic is the governing structure of the network it is also the decision committee for the blockchain s operations icon republic governance is determined by the votes of community representatives a helpful analogy is to imagine the icon republic as the united states and to imagine each icon community as a separate state the actions of the icon republic do not determine the governance of the separate communities themselves however the icon republic does govern the process by which new icx cryptocurrency is minted citizen nodes are participants in the blockchain that do not have voting rights but can make transactions within a community with other communities and with the icon republic the icon republic s blockchain is referred to as the nexus the technology that powers the nexus is an algorithm called a loopchain the loopchain connects communities that are part of the icon republic these communities when grouped together they are referred to as a consortium determine a common set of rules that allow the different blockchains to effectively work together the set of rules governing how the independent blockchains interact with the icon republic s blockchain the nexus is called the blockchain transmission protocol btp finally as with ethereum anyone can use icon to build decentralized applications called dapps through the blockchain s public channel additionally after these applications are listed on icon s dapp store anyone with a citizen node can download and use them criticisms of iconwhile icon has ambitious plans for connecting different communities it faces many challenges in accomplishing this goal first many investors are used to traditional centralized cryptocurrency exchanges while it is true that these traditional centralized exchanges do not fit with the decentralized ideology of cryptocurrencies in 2021 these exchanges are still an integral part of the cryptocurrency market many investors only purchase cryptocurrencies that they can buy through their favorite exchanges this could create problems for icx given the goals of icon many exchanges might not want to offer icx to their customers high levels of competition increase the risk that a particular cryptocurrency will fail to catch on like other cryptocurrencies icon faces stiff competition from other cryptocurrencies | |
what is ideation | ideation refers to the process of developing and conveying prescriptive ideas to others typically in a business setting it describes the sequence of thoughts from the original concept to implementation ideations can spring forth from past or present knowledge external influences opinions convictions or principles ideation can be expressed in graphical written or verbal terms | |
how ideation works | simply put ideation is the literal action of forming ideas from their conception to real world application and implementation ideas and the act of ideating can come from anyone tangentially or directly associated with a business or organization including low level employees managers customers partners and stakeholders actual ideations can be the result of brainstorming sessions online forums seminars team building exercises surveys and social media platforms ideation is a key component of any successful business for example in its early days google encouraged employees to spend as much as 20 of their work hours meditating on new ideas that personally intrigue them and potentially solve real problems as the company has grown this is apparently not utilized as much as before 1 this focus on ideation allows companies to become innovative or remain competitive by increasing the likelihood of new product rollouts increased customer acquisition and superior financial performance the point is that if employees are spending 100 of their time focused on the requirements of their job then there is no time to think about new strategies or products in which to grow or improve the ideation processalthough the ideation process does not necessarily have to conform to one universal model there are general guidelines that people can follow to help them maximize the effectiveness of ideation and the solutions it generates first and foremost ideation does not necessarily start with a randomly generated thought instead ideas are reverse engineered to fit emergent problems it is thus critically important to first clearly define the problem and understand its key underlying factors such as industry trends business environments customer needs budget constraints and any other causes behind the vexing issue at hand once key pain points are identified as well as their root causes brainstorming sessions and other collaborative pow wows can be initiated in an effort to crowdsource potential ideas and generate possible solutions to the problems being posed ideally these collaborations should blend the right brain and left brain thought processes because many problems require both creative and pragmatic approaches to cultivating viable solutions barriers to ideation can include a hostile environment vague goals closed minded individuals groupthink people pleasers ego inexperienced teams inability to think out of the box and pessimism these forums should invite open unrestricted and unencumbered dialogue where participants feel safe to float ideas without fear of ridicule all ideas from the deeply academic to the wildly fanciful should be enthusiastically embraced and should be treated with equal fairness and open mindedness the plethora of ideas generated during collaboration stages is then pared down to one prevailing idea that can best drive the future actions of the group this marquis idea is tested against the problem and adjusted as needed it is then tirelessly reworked retested and finessed until a potential solution is perfected the idea is then implemented in the real world and if it s deemed successful the ideation process concludes styles of ideation include the following | |
what is an identifiable asset | an identifiable asset is an asset whose commercial or fair value can be measured at a given point in time and which is expected to provide a future benefit to the company these assets are an important consideration in the context of mergers and acquisitions because not all assets on a company s balance sheet are able to be quickly and accurately valued at a point in time only those which are may be classified as identifiable examples include cash short term liquid investments property inventories and equipment among others identifiable assets may be contrasted with goodwill understanding identifiable assets | |
when one company seeks to take over another the acquiring company can assign a fair value to the identifiable assets that can be reasonably expected to provide a benefit to the purchasing company in the future identifiable assets can be both tangible and intangible assets identifiable assets are quite important in valuing a business accurately | if an asset is deemed to be identifiable the purchasing company records it as part of its assets on its balance sheet identifiable assets consist of anything that can be separated from the business and disposed of such as machinery vehicles buildings or other equipment if an asset is not deemed to be an identifiable asset then its value is considered part of the goodwill amount arising from the acquisition transaction | |
how identifiable assets are used | for example suppose a conglomerate company purchases both a smaller manufacturing firm and a smaller start up internet marketing company the manufacturing company would likely have most of its value tied up in property equipment inventory and other physical assets so virtually all of its assets would be identifiable the internet marketing company on the other hand would likely have very few identifiable assets and its value as a company would be based on its future earnings potential as such the purchase of the marketing company would generate a lot more goodwill on the company s books as it s total value cannot be readily measured even though there might be a few tangible assets example of identifiable assets vs goodwillif the fair value of company abc s identifiable assets are 22 million and its liabilities are 10 million it has an identifiable value company xyz agrees to purchase company abc for 15 billion the premium value following the acquisition is 3 billion this 3 billion will be included on the acquirer s balance sheet as goodwill since it exceeds the identifiable assets as a real life example consider the t mobile and sprint merger announced in early 2018 1 the deal was valued at 35 85 billion as of march 31 2018 per an s 4 filing the fair value of the assets was 78 34 billion and the fair value of the liabilities was 45 56 billion 2 the difference between the assets and liabilities is 32 78 billion thus goodwill for the deal would be recognized as 3 07 billion 35 85 32 78 the amount over the difference between the fair value of the identifiable assets and liabilities | |
what is identity theft | identity theft is the crime of using the personal or financial information of another person to commit fraud such as making unauthorized transactions or purchases identity theft is committed in many different ways and its victims are typically left with damage to their credit finances and reputation understanding identity theftidentity theft occurs when someone steals your personal information such as your social security number bank account number and credit card information thieves can attempt to obtain your personal information in various ways for instance some sift through trash bins looking for bank account and credit card statements identity thieves increasingly use computer technology to obtain other people s personal information for identity fraud to find such information they may search the hard drives of stolen or discarded computers hack into computers or computer networks of organizations and corporations access computer based public records use information gathering malware to infect computers browse social networking sites or use deceptive emails or text messages 1once identity thieves have the information they are looking for they can ruin a person s credit rating and the standing of other personal information 1victims of identity theft often do not know their identity has been stolen until they begin receiving calls from creditors or are turned down for a loan because of a bad credit score types of identity theftthere are several types of identity theft including financial identity theft occurs when someone uses another person s identity or information to obtain credit goods services or benefits this is the most common form of identity theft 2if identity thieves obtain your social security number they can use it to apply for credit cards and loans and then not pay outstanding balances fraudsters can also use your number to receive medical disability and other benefits 3in medical identity theft someone poses as another person to obtain free medical care 1 synthetic identity theft is a type of fraud in which a criminal combines real usually stolen and fake information to create a new identity this new identity is used to open fraudulent accounts and make fraudulent purchases synthetic identity theft allows the criminal to steal money from credit card companies and lenders who extend them credit based on the fake identity 1child and teen identity theft involves using a child s identity for various forms of personal gain this is common as children typically do not have the capability to take steps to create obstacles for the perpetrator the fraudster may use the child s name and social security number to obtain a residence find employment obtain loans or avoid arrest on outstanding warrants often the victim is a family member the child of a friend or someone else close to the perpetrator some people even steal the personal information of deceased loved ones 1tax identity theft occurs when someone uses your personal information including your social security number to file a bogus state or federal tax return in your name and collect a refund 1in criminal identity theft a criminal poses as another person during an arrest to try to avoid a summons prevent the discovery of a warrant issued in their real name or avoid an arrest or conviction record 2examples of identity theftit can be difficult to know if you ve been a victim of identity theft especially if you don t check your financial statements regularly some clear indicators of identity theft include potential victims of identity theftanyone can be a victim of identity theft however children and aging adults are particularly vulnerable they may not understand specific situations or paperwork such as bills in addition their care and finances often are handled by others who normally may not inform them of details or regularly check their accounts children who are victims of identity theft may not become aware of it until they are adults adults who need medical care often have to provide a lot of personal information repeatedly to hospitals clinics caregiving agencies and doctor s officers as a result this information can be sought and obtained nefariously from a variety of locations if you believe you are a victim of identity theft immediately visit identitytheft gov a website administered by the federal trade commission ftc it provides directions to help you recover your identity and repair damage you may have experienced identity theft protectionmany types of identity theft can be prevented or limited one way to protect yourself is to continually check the accuracy of personal documents and promptly deal with any discrepancies 4there are several identity theft protection services that help people avoid or mitigate the effects of identity theft typically such services help in addition some government agencies and nonprofit organizations provide similar assistance typically through websites that offer information and tools to help people avoid remedy and report incidents of identity theft 4many of the best credit monitoring services also provide identity protection tools and services 4recovering from identity theftmanaging identity theft can be a long painstaking process after you have filed and retained a copy of your report with the ftc there are other steps that you need to take | |
what do you do if someone has stolen your identity | the first step to take is to report the theft to the federal trade commission ftc at identitytheft gov you can also call them at 1 877 438 4338 then you can freeze your credit reports file a police report and change your login and password information for all sensitive accounts it would also be wise to close your current credit and debit cards and receive new ones check your credit reports for false accounts and dispute any with the credit agencies | |
what are the first signs of identity theft | some early signs of identity theft are unfamiliar charges on your credit card or debit card statements new cards that you did not apply for incorrect items on your credit report medical bills for doctor s visits that you did not have and collection notices for purchases that you did not make | |
what are three types of identity theft | three common types of identity theft are medical identity theft financial identity theft and child identity theft the bottom lineidentity theft is a traumatic and difficult experience and can severely damage your creditworthiness it can leave you with bills that you did not incur and cannot pay it s important to monitor your bank and credit card statements regularly review your credit report periodically for any signs of fraud if you suspect that you are a victim of fraud there are ways to dispute the charges fix the theft and stop your private information from being made available to thieves in addition the government provides various resources to help you repair your credit standing | |
what is idiosyncratic risk | idiosyncratic risk is a type of investment risk that is endemic to an individual asset like a particular company s stock a group of assets like a particular sector or in some cases a very specific asset class like collateralized mortgage obligations idiosyncratic risk is also referred to as a specific risk or unsystematic risk therefore the opposite of idiosyncratic risk is a systematic risk which is the overall risk that affects all assets such as fluctuations in the stock market interest rates or the entire financial system investopedia zoe hansenunderstanding idiosyncratic riskresearch suggests that idiosyncratic risk accounts for most of the variation in the uncertainty surrounding an individual stock over time rather than market risk idiosyncratic risk can be thought of as the factors that affect an asset such as the stock and its underlying company at the microeconomic level it has little or no correlation with risks that reflect larger macroeconomic forces such as market risk microeconomic factors are those that affect a limited or small portion of the entire economy and macro forces are those impacting larger segments or the entire economy company management s decisions on financial policy investment strategy and operations are all idiosyncratic risks specific to a particular company and stock other examples can include the geographical location of operations and corporate culture in terms of industry or sector an example of idiosyncratic risk for mining companies would be the exhaustion or the inaccessibility of a vein or a seam of metal likewise the possibility of a pilots or a mechanics strike would be an idiosyncratic risk for airline companies | |
what is idle time | idle time is paid time that an employee or machine is unproductive due to factors that can either be controlled or uncontrolled by management it normally applies to full time workers rather than consultants who typically have to bill for every hour of their time understanding idle timeidle time is a period of time associated with employees waiting that may be because a piece of machinery they need to use isn t working they are waiting for an important shipment or the company is overstaffed and not everyone paid to be there has a task to do | |
when employees are not engaged in productive activities it can have serious implications for employers according to a 2018 study from the harvard business school 78 1 of workers find themselves on a weekly basis with involuntary idle time which costs employers an estimated 100 billion per year 1 | types of idle timeidle time can be classified either as normal or abnormal normal idle time is categorized as downtime for regular maintenance and repair regularly scheduled downtime for manufacturing assets is a normal business practice and cannot be controlled by management abnormal idle time such as a worker strike is out of the ordinary and can in many cases be controlled by management time management is extremely important in any business particularly when there are high fixed costs idle machinery or equipment generates depreciation expenses and also reduces output productivity idle workers who are on fixed salaries are a detriment to company profitability and a drag on overall productivity examples of idle timecompany managers who do not efficiently schedule work shifts or operations flow may cause idle time employees themselves too may be responsible for causing idle time for instance if a car factory assembly team makes 100 cars in an eight hour shift and the quality inspection and testing group processes only 50 cars during that shift the assembly line would have to idle for a period of time until the quality control group caught up to pace a natural disaster could also be the reason for idle time floods for example frequently result in stoppages of loading and unloading of containers at shipping ports or railway terminals which would have a ripple effect on factories that rely on these transportation networks with a surplus of finished inventory factories would be forced to idle both workers and manufacturing facilities until goods started moving again the bottom lineno business runs at 100 efficiency over long periods of time and idle time is inevitable however the goal is to minimize this cost to the company through careful scheduling and coordination with connected groups in addition it is advisable for managers to draw up contingency plans to keep operations running when an unexpected event arises | |
what is illiquid | illiquid refers to the state of a stock bond or other assets that cannot easily and readily be sold or exchanged for cash without a substantial loss in value illiquid assets may be hard to sell quickly because there is low trading activity or interest in the issue indicated by a lack of ready and willing investors or speculators to purchase or sell the asset as a result illiquid assets tend to have lower trading volume wider bid ask spreads and greater price volatility illiquidity is the opposite of liquidity illiquidity explainedregarding illiquid assets the lack of ready buyers also leads to larger discrepancies between the asking price set by the seller and the bid price submitted by the buyer this difference leads to much larger bid ask spreads than would be found in an orderly market with daily trading activity the lack of depth of the market dom or ready buyers can cause holders of illiquid assets to experience losses especially when the investor is looking to sell quickly illiquidity in the context of a business refers to a company that does not have the cash flows necessary to make its required debt payments although it does not mean the company is without assets capital assets including real estate and production equipment often have value but are not easily sold when cash is required the sale of illiquid assets is not a company s core business they generally include any property owned by the company that is outside of the products produced for sale in times of crisis a company may need to liquidate these assets to avoid bankruptcy and if this happens quickly it can dispose of assets at prices far below an orderly fair market price sometimes known as a fire sale additionally a company may become illiquid if it is unable to obtain the cash necessary to meet debt obligations examples of illiquid and liquid assetssome examples of inherently illiquid assets include houses and other real estate cars antiques private company interests and some types of debt instruments certain collectibles and art pieces are often illiquid assets as well stocks that trade on over the counter otc markets are also often less liquid than those listed on robust exchanges though these assets may have inherent value the marketplace in which they are sold often has few buyers in comparison to those interested in the purchase of more liquid assets on the other end of the spectrum most listed securities traded at major exchanges such as stocks etfs mutual funds bonds and listed commodities are very liquid and can be sold almost instantaneously during regular market hours at fair market price additionally precious metals such as gold and silver are often fairly liquid trading after normal business hours can also result in illiquidity because many market participants are not active in the market at those times an asset s liquidity may change over time depending on outside market influences this change in price is especially true for collectibles as an item s popularity in the consumer market may fluctuate dramatically leading to highly volatile pricing illiquidity and increased riskilliquid securities carry higher risks than liquid ones known as liquidity risk which becomes especially true during times of market turmoil when the ratio of buyers to sellers is thrown out of balance during these times holders of illiquid securities may find themselves unable to unload them at all or unable to do so without losing money illiquid securities also may demand a liquidity premium added to their price to compensate for the fact that they may difficult to dispose of later on during times of financial panic markets and credit facilities may seize up causing a liquidity crisis when sellers of even marketable securities find it challenging to find eager buyers at fair prices real world exampleilliquidity can leave both companies and individuals unable to generate enough cash to pay their debts for example the economic times reported that jet airways had delayed repayment of overseas debt for the fourth time in recent months due to a corporate illiquidity crisis that left the company struggling to access liquid funds as a result jet airways not only had to ground more than 80 planes but it also put together a resolution plan that called for the resignation of its chair naresh goyal and the board voting to allow lenders to take control of the airline 1 | |
what is immediate family | the term immediate family commonly applies to an individual s closest family members however the term has legal meanings for government or company policies how the term is defined can affect whether a person can use paid or unpaid leave to care for a sick family member attend a funeral or access financial resources criteria for immediate familyin general a person s immediate family is their smallest family unit however companies organizations and policy makers may define the term to meet their criteria parents spouses and minor children are almost always considered immediate family while siblings may or may not count adoptive parents or children are also considered immediate family although there is no blood relation half siblings step siblings and other near relatives may be legally ambiguous in some cases a long term relationship might qualify someone as a member of the immediate family if there are no blood or legal ties one example of this type of relationship is common law marriage legal aspectsif there is no identifiable next of kin a deceased family member s assets are passed on to the state close friends unmarried partners and unrecognized children may not be able to inherit even if they believe that the deceased would have wanted it protecting immediate family | |
how does immediate family differ from extended family | in contrast to the immediate family the extended family is a network of individuals with blood or legal ties this can include aunts uncles cousins grandparents grandchildren and married spouses in some cases extended family may exercise some rights if the immediate family cannot if a child loses one parent the grandparents may be able to exercise some custody rights such as legal visitation extended family members may also be eligible to adopt the children of parents who are deceased or otherwise unable to provide care who counts as immediate family for a green card a u s citizen can petition for members of their immediate family to receive permanent resident green card status for these purposes the immediate family is defined as one s spouse a child who is unmarried and less than 21 years old or a parent if the applying citizen is over 21 years old older children married children siblings half siblings and adoptive siblings are also eligible although they may face longer wait times | |
what counts as immediate family for asylum claims | people with asylum or refugee status may petition for members of their immediate family to be given green card status under u s law immediate family only includes the spouse parent or child of the person making the application a child is considered younger than age 21 and unmarried the bottom lineimmediate family is a term for members of a person s family unit including spouse and children parents and siblings however the exact definitions of one s immediate family may vary depending on the context companies often define immediate family for benefits and leave | |
what is an ioc | an immediate or cancel order ioc is an order to buy or sell a security that will execute all or part immediately and then cancel any unfilled portion of the order an ioc order is one of several duration or time in force orders that investors can use to specify how long the order remains active in the market and under what conditions the order is canceled other commonly used duration order types include fill or kill fok all or none aon and good till canceled gtc most online trading platforms allow ioc orders to be placed manually or programmed into automated trading strategies | |
how ioc works | investors can submit either a limit or market immediate or cancel order ioc depending on their specific execution requirements an ioc limit order is entered at a particular price whereas an ioc market order has no price attached and transacts with the best offer price for a buy and the best bid price for a sell ioc orders differ from other duration orders in that they only require a partial fill whereas both fok and aon orders must be filled in their entirety or canceled gtc orders remain active until executed in the market or canceled by the client although most brokers cancel them between 30 and 90 days | |
when to use an ioc order | investors typically use ioc orders when submitting a large order to avoid having it filled at varying prices an ioc order automatically cancels any part of the order that doesn t fill immediately assume a trader places an ioc order to purchase 5 000 shares of international business machines corporation ibm any portion of the 5 000 shares not purchased immediately is automatically canceled those who trade several stocks throughout the day may use an ioc order to minimize the risk of forgetting to cancel an order at the close ioc orders help investors to limit risk speed execution and provide price improvement by providing greater flexibility examplesuppose an investor places an ioc market order to buy 1 000 shares of apple inc aapl the order book shows 2 000 shares bid at 170 95 and 500 shares offered at 171 00 the order would immediately fill 500 shares at the offer price 171 and cancel the unfilled portion of 500 shares let s assume another investor places an ioc limit order to buy 1 000 shares of apple at 169 around the market open when the stock is currently offered at 170 the s p 500 drops slightly in the afternoon and a seller offers 700 shares of aapl at 169 the ioc order however would not be filled because it was canceled immediately after not being filled earlier in the day | |
what are the benefits of using ioc | ioc limit orders protect against getting a bad fill in a fast moving or illiquid market on the other hand ioc market orders ensure a complete or partial execution in a strongly trending stock with heavy buying demand | |
how does ioc affect market or limit orders | a market order is an order to buy or sell a stock at the best available price and will be executed immediately a limit order is an order to buy or sell a stock at a certain price or better market and limit orders may include timing restrictions and other trading instructions like ioc | |
what does time in force mean for market traders | traders use time in force instructions when placing a trade to indicate how long an order will remain active before it is executed or expires the bottom linean immediate or cancel order ioc is an order to buy or sell a security that will execute all or part immediately and then cancel any unfilled portion of the order using time in force instructions ioc limit orders protect investors during a fast moving market ioc market orders ensure a complete or partial execution in a strong market with high demand | |
what is an immediate payment annuity | an immediate payment annuity is a contract between an individual and an insurance company that pays the owner or annuitant a guaranteed income starting almost immediately it differs from a deferred annuity which begins payments at a future date chosen by the annuity owner an immediate payment annuity is also known as a single premium immediate annuity spia an income annuity or simply an immediate annuity | |
how an immediate payment annuity works | individuals typically buy immediate payment annuities by paying an insurance company a lump sum of money the insurance company in turn promises to pay the annuitant a regular income according to the terms of the contract the amount of those payments is calculated by the insurer based on such factors as the annuitant s age prevailing interest rates and how long the payments are to continue payments typically begin within a month of purchase annuitants can also decide how often they want to be paid known as a mode a monthly mode is most common but quarterly or annual payments are also an option people often buy immediate payment annuities to supplement their other retirement income such as social security for the rest of their lives it is also possible to buy an immediate payment annuity that will provide income for a limited period of time such as 5 or 10 years the payments on immediate payment annuities are generally fixed for the period of the contract however some insurers also offer immediate variable annuities that fluctuate based on the performance of an underlying portfolio of securities much like deferred variable annuities still another variation is the inflation protected annuity or inflation indexed annuity which promises to increase payments in line with future inflation immediate payment annuities represent a bit of a gamble annuitants who die too soon may not get their money s worth while those who live a long time can come out ahead special considerationsone potential drawback of an immediate payment annuity is that payments typically end upon the death of the annuitant and the insurance company keeps the remaining balance so an annuitant who dies earlier than expected may not get their money s worth out of the deal on the other hand an annuitant who lives longer may come out ahead there are some ways to get around this problem one is by adding a second person to the annuity contract referred to as a joint and survivor annuity it is also possible to buy an annuity that guarantees payments to the annuitant s beneficiaries for a certain period or that will refund the annuitant s principal if the annuitant dies early known as a cash refund annuity such provisions cost extra however once purchased an immediate payment annuity cannot be canceled for a refund this may pose a problem should the annuitant need the money in a financial emergency for this reason it s smart to have an emergency fund set aside for unforeseen needs before deciding how much money will be placed in the annuity | |
what is immunization | immunization also known as multi period immunization is a risk mitigation strategy that matches the duration of assets and liabilities in order to minimize the impact of interest rates on net worth over time understanding immunizationimmunization helps large firms and institutions protect their portfolios from exposure to interest rate fluctuations using a perfect immunization strategy firms can nearly guarantee that movements in interest rates will have virtually no impact on the value of their portfolios for example large banks must protect their current net worth whereas pension funds have the obligation of payments after a number of years these institutions are both concerned about protecting the future value of their portfolios and must deal with uncertain future interest rates immunization is considered a quasi active risk mitigation strategy because it has the characteristics of both active and passive strategies by definition pure immunization implies that a portfolio is invested for a defined return for a specific period of time regardless of any outside influences such as changes in interest rates the opportunity cost of using the immunization strategy is potentially giving up the upside potential of an active strategy for the assurance that the portfolio will achieve the intended desired return as in the buy and hold strategy by design the instruments best suited for this strategy are high grade bonds with remote possibilities of default in fact the purest form of immunization would be to invest in a zero coupon bond and match the maturity of the bond to the date on which the cash flow is expected to be needed this eliminates any variability of return positive or negative associated with the reinvestment of cash flows just like a vaccine immunizes a body against infection immunization leaves a portfolio safeguarded against interest rate fluctuations duration or the average life of a bond which is also its price sensitivity to changes in interest rates is commonly used in immunization it is a much more accurate predictive measure of a bond s volatility than a bond s term to maturity this strategy is commonly used in the institutional investment environment by insurance companies pension funds and banks to match the time horizon of their future liabilities with structured cash flows it is one of the most sound strategies and can also be used successfully by individuals for example just like a pension fund would use an immunization to plan for cash flows upon an individual s retirement that same individual could build a dedicated portfolio for their own retirement plan immunization can be accomplished by cash flow matching duration matching convexity matching and trading forwards futures and options on bonds similar strategies can be used to immunize other financial risks such as exchange rate risk often investors and portfolio managers use hedging techniques to reduce specific risks hedging strategies are usually imperfect but if a perfect hedging strategy is in place it is technically an immunization strategy immunization examplesassume an investor needs to pay a 10 000 obligation in five years to immunize against this definite cash outflow the investor can purchase a security that guarantees a 10 000 inflow in five years a five year zero coupon bond with a redemption value of 10 000 would be suitable by purchasing this bond the investor matches the expected inflow and outflow of cash and any change in interest rates would not affect their ability to pay the obligation in five years to immunize a bond portfolio using the duration method an investor must match the portfolio s duration to the investment time horizon in question if an investor has a 10 000 obligation in five years there are a few ways in which they can use duration matching it is possible to make a profit using duration matching all that needs to be done is to construct a bond portfolio in a way that the portfolio s convexity is higher than the convexity of the liabilities increasingly long term personal investments such as retirement accounts are immunized for example future liabilities are matched by fixed income portfolio duration choosing an immunization strategyportfolio immunization using duration and cash flow matching are two types of dedication strategies to safeguard the funding of liabilities when due immunization via duration matching aims to balance the opposing effects interest rates have on the price return and reinvestment return of a coupon bond a multiple liability immunization strategy pays off better when the interest rate shifts are not too arbitrary it requires a lower investment than cash flow matching but does carry reinvestment risk in the case of non parallel rate shifts cash flow matching on the other hand relies on the availability of securities with specific principals coupons and maturities to work efficiently this is far fetched in most practical cases and so this strategy requires more cash investment it also runs the risk of excess cash balances accumulating and being reinvested at very low rates in between liabilities due to these factors multiple liability immunization is generally superior to cash flow matching linear programming and optimization techniques are used to extend and even combine the two strategies in order to achieve even better results | |
what is impact investing | impact investing is making investments to help create beneficial social or environmental effects while also generating financial gains this investment strategy can involve different types of asset classes such as stocks bonds mutual funds or microloans the point of impact investing is to use money and investment capital for positive social results understanding impact investingthe term impact investing was first coined in 2007 but the practice was developed years earlier 1 a basic goal of impact investing is to help reduce the negative effects of business activity on the social or physical environment that s why impact investing may sometimes be considered an extension of philanthropy investors who use impact investing as a strategy consider a company s commitment to corporate social responsibility csr or the sense of duty to positively serve society as a whole before they become involved with that company the type of impact this creates varies based on the industry and the specific company within that industry some common examples include giving back to the community by helping the less fortunate or investing in sustainable energy practices to help save our planet impact investing actively seeks to create positive social and environmental outcomes through investing for example in nonprofits that benefit the community or in clean technology enterprises that benefit the environment the bulk of impact investing is done by institutional investors including hedge funds private foundations banks pension funds and other fund managers however a range of socially conscious financial service companies web based investment platforms and investor networks now offer individuals an opportunity to participate too one major venue is microfinance loans which provide small business owners in emerging nations with startup or expansion capital women are often the beneficiaries of such loans types of impact investmentsimpact investments come in many different forms of capital and investment vehicles like any other type of investment class impact investments provide investors with a range of possibilities when it comes to returns but the most important thing is that these investments offer both a financial return and are in line with the investor s conscience according to a 2020 survey by the global impact investing network giin the majority of investors who choose impact investing look for market rate returns 2the opportunity for impact investments varies and investors may choose to put their money into emerging markets em or developed economies impact investments span several industries including environmental social and governance esg refers to the practices of the company being invested in esg investors look for companies that have ethical governance prioritize the well being of workers in their supply chain or work towards positive environmental outcomes and sustainable business practices the integration of esg factors is used to enhance traditional financial analysis by identifying potential risks and opportunities beyond technical valuations while there is an overlay of social consciousness the main objective of esg valuation remains financial performance socially responsible investing sri goes a step further than esg by actively eliminating or selecting investments according to specific ethical guidelines for example sri investors may avoid investing in companies that are involved in producing or selling alcohol tobacco or firearms the underlying motive could be religion personal values or political beliefs unlike esg analysis which shapes valuations sri uses esg factors to apply negative or positive screens on the investment universe sri is often considered a type of impact investing however sri may focus more on avoidance of harm while impact investing also suggests a positive impact via its investments | |
when focused on environmental causes sri may be known as green investing | many asset management companies banks and other investment houses now offer funds specifically tailored to socially responsible investors special considerationssocially and environmentally responsible practices tend to attract impact investors meaning companies can benefit financially from committing to socially responsible practices impact investing appeals largely to younger generations such as millennials and gen z who want to give back to society so this trend is likely to expand as these investors gain more influence in the market investors also tend to profit a 2020 survey by the global impact investing network found that more than 88 of impact investors reported that their investments were meeting or surpassing their financial expectations 3by engaging in impact investing individuals or entities essentially state that they support the message and the mission of the company in which they re investing a long term goal of impact investing is that as more people realize the social and financial benefits of impact investing more companies will engage in socially responsible business practices while money isn t everything in a 2020 survey of impact investors more than 88 of respondents said that their investments were meeting or exceeding financial expectations 3examples of impact investingone of the most well known impact investment funds is the bill melinda gates foundation launched by the celebrated windows pioneer with a total endowment of over 67 million 4 while most of the gates foundation is engaged in philanthropy it also has a strategic investment fund the fund has over 2 5 billion under management which is invested in ventures that align with the foundation s goals of improving health education and gender equality 5 as explained on the fund s website the strategic investment fund supports organizations or projects that benefit the world s poorest and are often overlooked by traditional investors 67the soros economic development fund is part of the open society foundations launched by billionaire philanthropist george soros as of december 2022 the fund had 130 million actively invested in impact ventures as the name implies the foundation seeks to support open societies by promoting democracy legal reforms higher education and journalism as well as other fields 8the ford foundation was launched in 1936 by edsel and henry ford with an initial endowment of 25 000 9 today the ford foundation has one of the world s largest private endowments with more than 16 billion under management 10 most of that money is given as grants to support causes aligned with the values of the foundation however in 2017 the ford foundation announced plans to invest 1 billion in business ventures aligned with their mission 11 | |
what is impact focused investing | impact focused investing or simply impact investing is an investment strategy that seeks to achieve social or environmental goals as well as generate profit unlike philanthropic endeavors impact investors typically expect a return on their investment although this may be a secondary consideration | |
does impact investing work | most impact investors seek returns that are comparable to market rates and some impact funds can even outperform the market generally speaking the returns from impact investing tend to be slightly lower than the market average in a 2021 study by the university of california the median impact fund had a median internal rate of return of 6 4 compared to 7 4 from non impact seeking funds 12 | |
what is the difference between esg and impact investing | environmental social and governance practices refer to business decisions that could affect the returns of that company for example a company that knowingly employs child labor or engages in discrimination could be at a competitive disadvantage particularly when marketing to socially conscious consumers impact investing on the other hand is the practice of seeking investments that specifically optimize a goal other than profits this might include investments in clean energy education or microfinance | |
what is an impact investing firm | an impact investing firm is an investment fund that specifically seeks to support beneficial social or environmental outcomes in addition to generating financial returns some impact funds invest in causes that they believe will generate strong returns others consider profits to be a secondary consideration | |
what is an impact investing strategy | an impact investing strategy is an investment strategy that targets companies or industries that produce social or environmental benefits for example some impact investors seek to support renewable energy electric cars microfinance sustainable agriculture or other causes that they believe to be worthwhile the bottom lineimpact investing is part of a growing trend of socially responsible practices that seek to reduce some of the negative consequences of traditional business activities by supporting companies and industries in worthwhile causes impact investing can produce social or environmental benefits while also earning a profit | |
what is an impaired asset | an impaired asset is an asset that has a market value less than the value listed on the company s balance sheet when an asset is deemed to be impaired it will need to be written down on the company s balance sheet to its current market value jake shi investopedia | |
how impaired assets work | an asset is impaired if its projected future cash flows are less than its current carrying value an asset may become impaired as a result of materially adverse changes in legal factors that have changed the asset s value significant changes in the asset s market price due to a change in consumer demand or damage to its physical condition another indicator of potential impairment occurs when an asset is more likely than not to be disposed prior to its original estimated disposal date asset accounts that are likely to become impaired are the company s accounts receivable goodwill and fixed assets long term assets such as intangibles and fixed assets are particularly at risk of impairment because the carrying value has a longer time span to become impaired assets are tested for impairment periodically to ensure the company s total asset value is not overstated on the balance sheet according to generally accepted accounting principles gaap certain assets such as goodwill should be tested on an annual basis 1 gaap also recommends that companies take into consideration events and economic circumstances that occur between annual impairment tests in order to determine if it is more likely than not that the market value of an asset has dropped below its carrying value 2an impairment loss should only be recorded if the anticipated future cash flows are unrecoverable when an impaired asset s carrying value is written down to market value the loss is recognized on the company s income statement in the same accounting period accounting for impaired assetsunder gaap rules the total dollar value of an impairment is the difference between the asset s carrying value and its fair market value under international financial reporting standards ifrs the total dollar value of an impairment is the difference between the asset s carrying value and the recoverable value of the item the recoverable value can be either its fair market value if you were to sell it today or its value in use the value in use is determined based on the potential value that the asset can bring in for the remainder of its useful life 3the journal entry to record an impairment is a debit to a loss or expense account and a credit to the related asset a contra asset impairment account which holds a balance opposite to the associated asset account may be used for the credit in order to maintain the historical cost of the asset on a separate line item in this situation the net of the asset its accumulated depreciation and the contra asset impairment account reflect the new carrying value upon recording the impairment the asset has a reduced carrying value in future periods the asset will be reported at its lower carrying value even if the impaired asset s market value returns to the original level gaap states that the impaired asset must remain recorded at the lower adjusted dollar amount this is in compliance with conservative accounting principles any increase in value is recognized upon the sale of the asset under ifrs impairment losses can be reversed in specific instances 45standard gaap practice is to test fixed assets for impairment at the lowest level where there are identifiable cash flows separate from other groups of assets and liabilities for example an auto manufacturer should test for impairment for each of the machines in a manufacturing plant rather than for the high level manufacturing plant itself however if there are no separately identifiable cash flows at this low level it s allowable to test for impairment at the asset group or entity level if an asset group experiences impairment the adjustment is allocated among all assets within the group this proration is based on the current carrying value of the assets ifrs prefers fixed asset impairment at the individual asset level if that is not possible then it can be impaired at the cash generating unit cgu level the cgu level is the smallest identifiable level at which there are identifiable cash flows largely independent of cash flows from other assets or groups of assets 3asset depreciation vs asset impairmenta capital asset is depreciated on a regular basis in order to account for typical wear and tear on the item over time the amount of depreciation taken each accounting period is based on a predetermined schedule using either straight line or one of multiple accelerated depreciation methods depreciation differs from impairment which is recorded as the result of a one time or unusual drop in the market value of an asset | |
when a capital asset is impaired the periodic amount of depreciation is adjusted moving forward retroactive changes are not required for adjusting the previous depreciation already taken however depreciation charges are recalculated for the remainder of the asset s useful life based on the impaired asset s new carrying value as of the date of the impairment | in 2015 microsoft recognized impairment losses on goodwill and other intangible assets related to its 2013 purchase of nokia initially microsoft recognized goodwill related to the acquisition of nokia in the amount of 5 5 billion plus another 4 5 billion in other intangible assets the book value of goodwill from the nokia purchase and therefore assets as a whole reported on microsoft s balance sheet were deemed to be overstated when compared with the true market value because microsoft had not been able to capitalize on the potential benefits in the cellphone business the company recognized an impairment loss in the amount of 7 6 billion including the entirety of the 5 5 billion in goodwill 6 | |
how do you calculate the impairment of an asset under gaap | to calculate the impairment of an asset take the carrying value of the asset its historical cost minus accumulated depreciation and subtract its fair market value if its fair market value is less than the carrying value you will need to record an impairment loss for the difference | |
where does impairment show up on my company s financial statements | an impairment loss shows up as a negative value on the income statement if you keep a contra asset account for the value of the impairment to preserve the historical cost of the asset it would be reported directly below the asset on your balance sheet a contra asset account has a natural balance that is opposite that of a standard asset account a credit | |
when should an asset be impaired | an asset should be impaired when its fair market value is less than its carrying value historical cost minus accumulated depreciation this may occur due to physical damage to the asset a change in consumer demand or legal changes surrounding the asset the bottom line | |
when a company has an asset that is now worth less than the value given for it on the company s balance sheet that asset is impaired using an inflationary accounting method the company will write down the asset s value on the company s balance sheet the loss in value is also recorded on its income statement | gaap and ifrs have differing standards for impairment depreciation is not the same thing as impairment and when an asset is impaired depreciation on that asset also needs to be adjusted | |
what is impaired credit | impaired credit typically refers to a deterioration in the perceived creditworthiness of an individual a business or other entity impaired credit is usually reflected for individuals in a lower credit score and for businesses and other entities as a lower credit rating would be borrowers with impaired credit will find it harder to obtain loans and generally have to pay higher interest rates if they do impaired credit can be either a temporary and fixable condition or a warning sign that even greater financial distress may lie ahead | |
how impaired credit works | impaired credit is usually the result of financial stress brought on by a change in circumstances often an unforeseen one in the case of an individual impaired credit may be the result of a job loss a costly illness a steep decline in asset values or a multitude of other crises that can make it difficult for a person to keep up with their bills for a company impaired credit might be due to increased competition a weak economy supply chain issues or bad management decisions among other causes | |
how creditworthiness is assessed for individuals | for individuals credit scores are the most common and simplest measure of creditworthiness credit scores are based on the information in a person s credit report and expressed as a three digit number typically ranging from 300 to 850 credit scores consider a number of factors and weight them in terms of importance in the case of fico scores the most widely used credit scoring system the weighting looks like this 1in general a score below 580 is considered poor while one between 580 and 669 is considered fair good scores begin at 670 very good ones at 740 and exceptional ones at 800 2someone who once had a good or very good credit score but now has a poor score could be considered credit impaired because payment history and amounts owed count for nearly two thirds of a person s credit score it is likely that something has gone wrong in one of those two categories payment history reflects whether they have been making their monthly credit payments on time so perhaps they have for whatever reason started paying late or missing payments altogether the amounts owed category is largely based on the person s credit utilization ratio which is the amount they currently owe as a percentage of all the revolving credit they have available to them for example if they have two credit cards with a combined credit limit of 20 000 and they owe 10 000 on those cards their credit utilization ratio is 50 credit scores reward lower utilization ratios and punish higher ones so it s possible that the person has run up much bigger balances than they carried in past again there may be a logical reason for that but their credit score will still take a hit if the individual can keep up with their bills and pay off a large chunk of their outstanding debt they should be able to restore their credit score over time and no longer be labeled as credit impaired in addition to credit ratings some companies have business credit scores also known as commercial credit scores they are computed by dun bradstreet equifax and experian | |
how creditworthiness is assessed for businesses and governments | credit ratings agencies assess the creditworthiness of businesses governments and other entities assigning them letter grades rather than numbers they also rate the credit quality of the debt such as bonds that these entities may issue the major credit rating agencies are fitch ratings moody s investors service and s p global another large ratings agency am best focuses on the insurance industry all of these agencies are private companies and typically paid by the entities they rate while their ratings systems differ all assign letter grades from aaa best down to c or d worst based on their assessment of that particular entity s creditworthiness the higher the grade the more likely it will be to repay its debts in the ratings agency s opinion an entity that has dropped a number of letter grades could be considered to be credit impaired credit ratings take a variety of factors into account which will vary based on the type of entity that s being rated as s p global explains the credit analysis of a corporate issuer typically considers many financial and non financial factors including key performance indicators economic regulatory and geopolitical influences management and corporate governance attributes and competitive position 3in rating a government entity on the other hand the analysis may concentrate on fiscal and economic performance monetary stability and the effectiveness of the government s institutions s p global notes 3 | |
what is credit repair | credit repair usually refers to the steps a person or third party working on their behalf can take to remove information from their credit report that is damaging to their credit score however it s worth noting that only inaccurate information can be removed from a credit report accurate information will remain on the report until it drops off due to age usually after seven years | |
how can you obtain your credit report | you can obtain your credit reports from all three major credit bureaus at the official website annualcreditreport com by law you are entitled to a free report from each of the three bureaus at least once every 12 months if you find errors especially ones that might be hurting your credit score you have a right to challenge them and the bureau is required to investigate | |
how can you obtain your credit score | you may be able to obtain your credit score free of charge from your bank or credit card companies there are also some reliable websites that offer free credit scores bear in mind that there are multiple credit scoring models so chances are you have several credit scores and the one you get for free may not be identical to all the others the bottom linehaving impaired credit is not a good situation for a person business government or any other entity to be in fortunately they may be able to improve their standing by addressing the issues that caused their credit scores or credit ratings to call in the first place | |
what is impairment | in accounting impairment is a permanent reduction in the value of a company asset it may be a fixed asset or an intangible asset | |
when testing an asset for impairment the total profit cash flow or other benefits that can be generated by the asset is periodically compared with its current book value if the book value of the asset exceeds the future cash flow or other benefits of the asset the difference between the two is written off and the value of the asset declines on the company s balance sheet 1 | investopedia xiaojie liuunderstanding impairmentimpairment is most commonly used to describe a drastic reduction in the recoverable value of a fixed asset the impairment may be caused by a change in the company s legal or economic circumstances or by a casualty loss from an unforeseeable disaster for example a construction company may face extensive damage to its outdoor machinery and equipment due to a natural disaster this will appear on its books as a sudden and large decline in the fair value of these assets to below their carrying value an asset s carrying value also known as its book value is the value of the asset net of accumulated depreciation that is recorded on a company s balance sheet 2an accountant tests assets for potential impairment periodically if any impairment exists the accountant writes off the difference between the fair value and the carrying value fair value is normally derived as the sum of an asset s undiscounted expected future cash flows and its expected salvage value which is what the company expects to receive from selling or disposing of the asset at the end of its life 3other accounts that may be impaired and thus need to be reviewed and written down are the company s goodwill and its accounts receivable a company s capital can also become impaired an impaired capital event occurs when a company s total capital becomes less than the par value of the company s capital stock unlike impairment of an asset impaired capital can naturally reverse when the company s total capital increases back above the par value of its capital stock 4impairment vs depreciationimpairment is unexpected damage depreciation is expected wear and tear the value of fixed assets such as machinery and equipment depreciates over time the amount of depreciation taken in each accounting period is based on a predetermined schedule using either a straight line method or one of a number of accelerated depreciation methods depreciation schedules allow for a set distribution of the reduction of an asset s value over its lifetime unlike impairment which accounts for an unusual and drastic drop in the fair value of an asset for instance gaap requirements for impairmentunder generally accepted accounting principles gaap assets are considered to be impaired when their fair value falls below their book value 6any write off due to an impairment loss can have adverse effects on a company s balance sheet and its resulting financial ratios it is therefore important for a company to test its assets for impairment periodically certain assets such as intangible goodwill must be tested for impairment on an annual basis in order to ensure that the value of assets is not inflated on the balance sheet gaap also recommends that companies take into consideration events and economic circumstances that occur between annual impairment tests in order to determine if it is more likely than not that the fair value of an asset has dropped below its carrying value 7causes of impairmentspecific situations in which an asset might become impaired and unrecoverable include when a significant change occurs to an asset s intended use when there is a decrease in consumer demand for the asset damage to the asset or adverse changes to legal factors that affect the asset if these types of situations arise mid year it s important to test for impairment immediately standard gaap practice is to test fixed assets for impairment at the lowest level where there are identifiable cash flows for example an auto manufacturer should test for impairment for each of the machines in a manufacturing plant rather than for the high level manufacturing plant itself if there are no identifiable cash flows at this low level it s allowable to test for impairment at the asset group or entity level 8example of impairmentabc company based in florida purchased a building many years ago at a historical cost of 250 000 it has taken a total of 100 000 in depreciation on the building and therefore has 100 000 in accumulated depreciation the building s carrying value or book value is 150 000 on the company s balance sheet a category 5 hurricane damages the structure significantly the company determines that the situation qualifies for impairment testing after assessing the damages abc company determines the building is now only worth 100 000 the building is therefore impaired and the asset value must be written down to prevent overstatement on the balance sheet a debit entry is made to loss from impairment which will appear on the income statement as a reduction of net income in the amount of 50 000 150 000 book value 100 000 calculated fair value as part of the same entry a 50 000 credit is also made to the building s asset account to reduce the asset s balance or to another balance sheet account called the provision for impairment losses | |
how is impairment determined | the generally accepted accounting principles gaap define an asset as impaired when its fair value is lower than its book value to check an asset for impairment the total profit cash flow or other benefit expected to be generated by the asset is compared with its current book value if it is determined that the book value of the asset is greater than the future cash flow or benefit of the asset an impairment is recorded 9 | |
where are impairment losses shown | impairment losses are shown both on the income statement and the balance sheet an impairment loss is simultaneously recorded as an expense on the income statement and reduces the value of the impaired asset on the balance sheet 10 | |
how is impairment accounted for | an accountant will write off the difference between the fair and carrying values if an impairment is present and the value of the asset decreases on the company s balance sheet fair value is typically the sum of an asset s undiscounted expected future cash flows and its expected salvage value which is what the company would expect to receive from selling or disposing of the asset at the end of its useful life 3 | |
what is the purpose of asset impairment | the overall goal of asset impairment is to periodically evaluate a company s assets to make sure the total value of the assets is not being overstated an impaired asset is one that has a market value less than what is listed on the company s balance sheet there are various factors that can affect an asset s value so periodically checking its value is prudent business management 9 | |
is an impaired asset considered a loss | under gaap an impaired asset must be recorded as a loss on the income statement it is important to compare the value of the asset to the fair market value to help determine the loss 9the bottom lineimpairment refers to the reduction in the value of a company asset either a fixed asset or an intangible asset the entire value of the asset is not typically recorded as a loss but most often the difference between the predicted cash flow of the asset and the book value if the book value is higher is the amount recorded as a loss periodically evaluating the value of assets helps a company accurately record its asset value rather than overstating its asset value which could lead to financial problems later on 9 | |
what is impeachment | impeachment as authorized by article ii section 4 of the u s constitution is the formal process that allows congress to bring charges of treason bribery or other high crimes and misdemeanors against high ranking civil officers such as the president 1the power to impeach serves as the first step in an important check on the executive and judicial branches of government regarding violations of law and abuses of power when impeached by the house of representatives the official goes on trial and if convicted by the senate is removed from office 2 | |
how impeachment works | article ii section 4 of the u s constitution says importantly impeachment is not the same as removal or conviction though many people think that is the case impeachment is a charging process similar to an indictment in a criminal proceeding impeachment at the federal level is rare removal even more so impeachment proceedings have been initiated by the house of representatives more than 60 times since the adoption of the u s constitution just 20 of those proceedings have actually ended with impeachment there have been just eight convictions by the senate all of them of federal judges 5only three u s presidents andrew johnson bill clinton and donald trump have been impeached by the u s house of representatives all three were acquitted by the senate 4officials subject to impeachmentthe constitution names the president and vice president as subject to impeachment the question of exactly who all civil officers of the united states are has been the subject of much discussion the federalist papers 85 essays by alexander hamilton john jay and james madison that comprise a foundational document of american history make clear that impeachment serves as a check on the executive and judicial branches of government the essays do not however specify who within those branches would be considered civil officers 67the term civil officers is broad enough to include any officer appointed by the federal government based on historic precedent federal judges including supreme court justices are subject to impeachment as are members of the president s cabinet military officers who face discipline under the military code are not subject to impeachment nor are members of congress a precedent established in 1799 8impeachable offensesthere was considerable debate at the 1787 constitutional convention in philadelphia over the definition of impeachable crimes initially the founders said the president and others could be removed by impeachment and conviction for corrupt conduct or malpractice or neglect of duty later the wording was changed to treason bribery or corruption then to just treason or bribery before finally settling on treason bribery or other high crimes and misdemeanors the debate did not stop there because the phrase high crimes and misdemeanors left the matter of impeachable offenses open to interpretation since the ratification of the constitution in 1789 the definition of high crimes and misdemeanors has plagued members of congress lawyers and legal scholars alike the framers borrowed the term high crimes and misdemeanors from british law wherein it referred to crimes by public officials against the government in practical terms as representative gerald ford said in 1970 an impeachable offense is whatever a majority of the house of representatives considers it to be at a given moment in history 9duties of the house and senatearticle i section 2 of the constitution states that the house of representatives has the sole power to impeach 10 the house however does not have the power to remove an impeached individual that duty goes to the senate which holds a trial and decides whether to convict and remove or acquit 11impeachment begins when the house adopts a resolution calling for an investigation by a house committee into charges against the official in question the committee may recommend impeachment or dismissal the house then votes by simple majority to approve or dismiss articles of impeachment following approval the house appoints managers to conduct the impeachment trial in the senate the house then passes a resolution informing the senate about the articles of impeachment and the names of the house managers who will bring the case before the senate | |
when the senate receives the resolution that body advises the house when it will receive the managers and begin the impeachment trial the senate becomes the court with the president of the senate presiding except when the person impeached is the president in which case the presiding officer is the chief justice of the supreme court to convict and remove an impeached individual from office requires a two thirds majority in the senate | penalties of impeachment and convictionthe penalty for impeachment is a trial in the senate because impeachment is the same as an indictment there is no other penalty except perhaps to one s reputation impeachment as discussed above only requires a simple affirmative majority in the house of representatives the constitution requires a two thirds affirmative vote in the senate to convict an impeached person the penalty for conviction is removal from office the senate also has the option by simple majority vote to disqualify the official from holding public office in the future there is no appeal to impeachment or conviction because it involves a political rather than criminal question 12history of federal impeachment proceedingsof the 20 federal impeachment proceedings since 1799 10 have occurred in the past 100 years impeached officials included 15 federal judges three presidents one senator and a cabinet secretary the secretary of war these impeachments resulted in seven acquittals eight convictions all judges and they were removed from office three dismissals and one resignation with no further action 13as discussed earlier only three u s presidents have been impeached by the house andrew johnson bill clinton and donald trump and all were acquitted by the senate 13 president richard nixon was never impeached although he was threatened with impeachment over the watergate scandal of 1974 14 nixon stepped down before congress could vote on whether to proceed with impeachment becoming the only u s president to have resigned from office 15real life example of impeachmenta recent impeachment and senate trial occurred when former president trump was impeached by the house of representatives on dec 18 2019 the resolution contained two impeachment articles 16this example of high crimes and misdemeanors accused trump of corruptly attempting to solicit ukraine to conduct investigations to discredit his democratic political rivals the article passed 230 197 with republican members of the house united in their opposition and two democrats also voting against the article 17the obstruction of congress charge which also fell under high crimes and misdemeanors arose from accusations that when congress tried to investigate the ukraine situation trump ordered his administration to defy each attempt at obtaining information and testimony this article passed 229 198 with one additional democrat joining republicans in opposition to the charge 18the articles of impeachment were submitted to the senate on jan 16 2020 and the trial began due to objections by republican senators no witnesses or documents were subpoenaed on feb 5 2020 the president was acquitted on both counts the vote on article i abuse of power was 48 for conviction 52 for acquittal on article ii obstruction of congress the vote was 47 for conviction 53 for acquittal 18from start to finish not counting the accumulation of evidence these impeachment proceedings took a little less than two months that said there is no set amount of time for impeachments and very few specifics about it in the constitution for that reason every impeachment is unique | |
what is imperfect competition | imperfect competition exists whenever a market violates the abstract tenets of neoclassical perfect competition this can happen in both real and hypothetical markets in an imperfectly competitive environment companies sell different products and services set their own individual prices fight for market share and are often protected by barriers to entry and exit understanding imperfect competitionperfect competition is a set of assumptions in microeconomics used to make the theories of consumer and producer behavior supply and demand and market price determination mathematically tractable so that they can be precisely defined and described in welfare economics and applied economics for public policy perfect competition is also sometimes utilized as a standard to measure the effectiveness and efficiency of real world markets in a perfectly competitive environment the following criteria must be met it is immediately apparent that very few businesses in the real world operate this way bar perhaps a few exceptions such as vendors at a flea market or farmer s market if and when the forces listed above are not met competition is said to be imperfect it is labeled as such because differentiation results in certain companies gaining an advantage over others enabling them to generate higher profit than peers sometimes at the expense of customers imperfect competition creates opportunities to generate more profit unlike in a perfect competition environment where businesses earn just enough to stay afloat in an imperfectly competitive environment companies sell different products and services set their own individual prices fight for market share and are often protected by barriers to entry and exit making it harder for new companies to challenge them imperfectly competitive markets are widespread and can be found in the following types of market structures monopolies oligopolies monopolistic competition monopsonies and oligopsonies history of imperfect competitionthe treatment of perfect competition models in economics along with modern conceptions of monopoly were founded by the french mathematician augustin cournot in his 1838 book researches into the mathematical principles of the theory of wealth his ideas were adopted and popularized by the swiss economist leon walras considered by many to be the founder of modern mathematical economics prior to walras and cournot mathematicians had a difficult time modeling economic relationships or creating reliable equations the new perfect competition model simplified economic competition to a purely predictive and static state this avoided many problems that exist in real markets such as imperfect human knowledge barriers to entry and monopolies the mathematical approach gained widespread academic acceptance particularly in england any deviation from the new model of perfect competition was considered a troublesome violation of the new economic understanding neoclassical microeconomists in the 19th and 20th centuries claimed to be able to demonstrate mathematically that perfectly competitive markets could maximize economic efficiency and socialwelfare one englishman in particular william stanley jevons took the ideas of perfect competition and argued that competition was most useful not only when free of price discrimination but also when there is a small number of buyers or a large number of sellers in a given industry thanks to the influences of jevons the cambridge tradition of economics adopted a whole new language for potential distortions in economic markets some real and some only theoretical among these problems were oligopoly monopolistic competition monopsony and oligopsony limitations of imperfect competitionthe cambridge school s wholesale devotion to creating a static and mathematically calculable economic science had its drawbacks ironically a perfectly competitive market would require the absence of active competition all sellers in a perfect market must sell exactly similar goods at identical prices to the exact same consumers all of whom possess the same perfect knowledge there is no room for advertising product differentiation innovation or brand identification in perfect competition no real market can or could attain the characteristics of a perfectly competitive market the pure competition model ignores many factors including the limited deployment of physical capital and capital investment entrepreneurial activity and changes in the availability of scarce resources other economists have adopted more flexible and less mathematically rigid theoretical constructs such as mises evenly rotating economy however the language created by the cambridge tradition still predominates the discipline even today the basic graphs and equations shown in most economics 101 textbooks hail from these mathematical derivations | |
what is an example of a business in imperfect competition | there are a multitude of examples of businesses and markets that exhibit characteristics of imperfect competition for instance consider the airline industry in this sector there are limited firms operating and high regulatory and financial barriers to entry airline ticket sellers also typically have a high degree of control over price setting with consumers primarily acting as price takers in addition buyers in particular may not have free and perfect information about past present and future conditions preferences and technologies because of these factors and more the airline industry exemplifies imperfect competition | |
what is an example of a perfectly competitive market | the farmer s market was mentioned above as a potential example of a perfectly competitive market this would be the case if a few conditions were met the many stalls at the farmer s market sold identical or nearly identical products such as fresh produce shoppers could set the prices they were willing to pay all transactions could be made without additional fees all parties had full information about prices and the utility of products sold and new vendors could enter the market without any obstacle in reality most farmer s markets don t meet these conditions a market may limit the number of participating vendors for instance or vendors may vary what products they offer however such markets can closely approximate perfect competition under specific circumstances | |
is a monopoly imperfect competition | a monopoly is a clear example of imperfect competition defined as a market dominated by one seller monopolies allow firms to set any price they wish and yield high levels of profit in monopolistic industries buyers rarely have full information about market conditions when transacting they may be subject to a range of fees and costs in addition monopolies often feature high barriers to entry for prospective competitors the bottom lineimperfect competition refers to any market that is less than perfectly competitive under the hypothetical ideal of perfect competition all producers and consumers have full information market share does not influence price firms sell identical products and companies are able to enter or exit markets without barriers thus in contrast imperfectly competitive markets may exhibit characteristics such as asymmetrical access to information the presence of price makers monopolies and barriers to market entry | |
what is an imperfect market | an imperfect market refers to any economic market that does not meet the rigorous standards of the hypothetical perfectly or purely competitive market pure or perfect competition is an abstract theoretical market structure in which a series of criteria are met since all real markets exist outside of the spectrum of the perfect competition model all real markets can be classified as imperfect markets in an imperfect market individual buyers and sellers can influence prices and production there is no full disclosure of information about products and prices and there are high barriers to entry or exit in the market a perfect market is characterized by perfect competition market equilibrium and an unlimited number of buyers and sellers understanding imperfect marketsall real world markets are imperfect thus the study of real markets is always influenced by competition for market share high barriers to entry and exit different products and services prices set by price makers rather than by supply and demand imperfect or incomplete information about products and prices and a small number of buyers and sellers for example traders in the financial market do not possess perfect or even identical knowledge about financial products the traders and assets in a financial market are not perfectly homogeneous new information is not instantaneously transmitted and there is a limited velocity of reactions |
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