Investment Terms

Investment Terms

By Africa Business RadioBusinessInvesting
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Investment Terms episodes

  • Investment Term For The Day - 51% Attack
    A 51% attack refers to an attack on a blockchain—most commonly bitcoins, for which such an attack is still hypothetical—by a group of miners controlling more than 50% of the network's mining hash rate or computing power.
    The attackers would be able to prevent new transactions from gaining confirmations, allowing them to halt payments between some or all users. They would also be able to reverse transactions that were completed while they were in control of the network, meaning they could double-spend coins.
    They would almost certainly not be able to create new coins or alter old blocks. A 51% attack would probably not destroy bitcoin or another blockchain-based currency outright, even if it proved highly damaging.

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    3 min
  • Investment Term for the Day : Zakat
    Zakat is an Islamic finance term referring to the obligation that an individual has to donate a certain proportion of wealth each year to charitable causes.
    Zakat is a mandatory process for Muslims and is regarded as a form of worship. Giving away money to the poor is said to purify yearly earnings that are over and above what is required to provide the essential needs of a person or family.
    Zakat is one of the Five Pillars of Islam, the others being a declaration of faith, prayer, fasting during Ramadan, and the Hajj pilgrimage. It is a compulsory procedure for Muslims earning above a certain threshold and should not be confused with Sadaqah, the act of voluntarily giving charitable gifts out of kindness or generosity.
    Religious texts offer comprehensive descriptions of the minimum amount of zakat that should be distributed to those less fortunate. It generally varies, depending on whether wealth came from the farm produce, cattle, business activities, paper currency, or precious metals, such as gold and silver.
    Zakat is based on income and the value of possessions. The common minimum amount for those who qualify is 2.5% or 1/40 of a Muslim's total savings and wealth.

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    2 min
  • Investment Term for the Day : Zero-Day Attack
    A zero-day attack also referred to as Day Zero is an attack that exploits a potentially serious software security weakness that the vendor or developer may be unaware of.
    The software developer must rush to resolve the weakness as soon as it is discovered in order to limit the threat to software users. The solution is called a software patch. Zero-day attacks can also be used to attack the internet of things.
    A zero-day attack gets its name from the number of days the software developer has known about the problem.
    A zero-day attack can involve malware, adware, spyware, or unauthorized access to user information. Users can protect themselves against zero-day attacks by setting their software—including operating systems, antivirus software, and internet browsers—to update automatically and by promptly installing any recommended updates outside of regularly scheduled updates.
    That being said, having updated antivirus software will not necessarily protect a user from a zero-day attack, because until the software vulnerability is publicly known, the antivirus software may not have a way to detect it.
    Host intrusion prevention systems also help to protect against zero-day attacks by preventing and defending against intrusions and protecting data.

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    2 min
  • Investment Term for the Day : Zero Basis Risk Swap (ZEBRA)
    A zero basis risk swap (ZEBRA) is an interest rate swap agreement between a municipality and a financial intermediary. A swap is an agreement with two counterparties, where one party pays the other party a fixed interest rate and receives a floating rate.
    This particular swap is considered zero-risk because the municipality receives a floating rate that is equal to the floating rate on its debt obligations, meaning that there is no basis risk with the trade. The ZEBRA is also known as a "perfect swap" or "actual rate swap."
    A zero basis risk swap is an interest rate swap entered into between a municipality and a financial intermediary.
    A swap is an over-the-counter derivative where one party pays the other party a fixed interest rate and receives a floating rate.
    A ZEBRA entails the municipality paying a fixed rate of interest on a specified principal amount to the financial intermediary.
    ZEBRAs entail the municipality paying a fixed rate of interest on a specified principal amount to the financial intermediary. In return, they receive a floating rate of interest from the financial intermediary. The floating rate received is equal to the floating rate on the municipality's outstanding debt to the public.
    Basis risk is the financial risk that offsetting investments in a hedging strategy will not experience price changes in opposite directions from each other.
    This imperfect correlation between the two investments creates the potential for excess gains or losses in a hedging strategy, thus adding risk to the position. A ZEBRA is free from such risk.

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    2 min
  • Investment Term for the Day: Zig Zag Indicator
    The Zig Zag indicator lowers the impact of random price fluctuations and is used to help identify price trends and changes in price trends.
    The Zig Zag indicator lowers the impact of random price fluctuations and is used to identify price trends and changes in price trends. The indicator lowers noise levels, highlighting underlying trends higher and lower. The Zig Zag indicator works best in strongly trending markets.
    The Zig Zag indicator plots points on a chart whenever prices reverse by a percentage greater than a pre-chosen variable. Straight lines are then drawn, connecting these points.
    The indicator is used to help identify price trends. It eliminates random price fluctuations and attempts to show trend changes. Zig Zag lines only appear when there is a price movement between a swing high and a swing low that is greater than a specified percentage—often 5%. By filtering minor price movements, the indicator makes trends easier to spot in all time frames.

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    3 min
  • Investment Term for the Day: Zig Zag Indicator
    The Zig Zag indicator lowers the impact of random price fluctuations and is used to help identify price trends and changes in price trends.The Zig Zag indicator lowers the impact of random price fluctuations and is used to identify price trends and changes in price trends. The indicator lowers noise levels, highlighting underlying trends higher and lower. The Zig Zag indicator works best in strongly trending markets.The Zig Zag indicator plots points on a chart whenever prices reverse by a percentage greater than a pre-chosen variable. Straight lines are then drawn, connecting these points.The indicator is used to help identify price trends. It eliminates random price fluctuations and attempts to show trend changes. Zig Zag lines only appear when there is a price movement between a swing high and a swing low that is greater than a specified percentage—often 5%. By filtering minor price movements, the indicator makes trends easier to spot in all time frames.

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    5 min
  • Investment Term for the Day: Godfather Offer
    A Godfather offer is an irrefutable takeover bid made to a target company by an acquirer. Typically, the offer is priced at an extremely generous premium compared with the target's prevailing share price, making it difficult for management to reject the bid without angering shareholders and being accused of breaching their fiduciary duty.
    A Godfather offer is named after the Francis Ford Coppola movie of the same title. More specifically, the name refers to the film's famous line, "I'm gonna make him an offer he can't refuse." This line has gone on to become one of the most celebrated quotations in cinema.
    In essence, the idea of a Godfather offer isn't so much an offer as a sly, yet heavy-handed demand: do as I say, or else.
    Of course, the acquiring company isn't insinuating it will kill somebody if it doesn't get its way, like Marlon Brando's character Don Corleone did in the movie. However, it is being aggressive and putting a targeted company that doesn't want to be purchased in an awkward, vulnerable position.
    When a tender offer is made publicly inviting shareholders to sell their shares at a very favorable price, the target's board of directors might have trouble voicing its resistance. Put it this way: If management doesn't want to sell and snubs the bid, shareholders may initiate lawsuits or other forms of revolt against the target company for not performing its fiduciary duty of looking out for shareholders' interests.

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    5 min
  • Investment Term for the Day: Godfather Offer
    A Godfather offer is an irrefutable takeover bid made to a target company by an acquirer. Typically, the offer is priced at an extremely generous premium compared with the target's prevailing share price, making it difficult for management to reject the bid without angering shareholders and being accused of breaching their fiduciary duty.A Godfather offer is named after the Francis Ford Coppola movie of the same title. More specifically, the name refers to the film's famous line, "I'm gonna make him an offer he can't refuse." This line has gone on to become one of the most celebrated quotations in cinema. In essence, the idea of a Godfather offer isn't so much an offer as a sly, yet heavy-handed demand: do as I say, or else.Of course, the acquiring company isn't insinuating it will kill somebody if it doesn't get its way, like Marlon Brando's character Don Corleone did in the movie. However, it is being aggressive and putting a targeted company that doesn't want to be purchased in an awkward, vulnerable position.When a tender offer is made publicly inviting shareholders to sell their shares at a very favorable price, the target's board of directors might have trouble voicing its resistance. Put it this way: If management doesn't want to sell and snubs the bid, shareholders may initiate lawsuits or other forms of revolt against the target company for not performing its fiduciary duty of looking out for shareholders' interests.

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    7 min
  • Investment Term for the Day: Bear Hug
    In business, a bear hug is an offer made by one company to buy the shares of another for a much higher per-share price than what that company is worth in the market. It's an acquisition strategy that companies sometimes use when there's doubt that the target company's management or shareholders are willing to sell.
    The bear hug offer, though usually financially favorable, is generally unsolicited by the target company.
    The name bear hug reflects the persuasiveness of the offering company's overly generous offer to the target company. By offering a price far in excess of the target company's current value, the offering party can usually obtain an acquisition agreement. The target company's management is essentially forced to accept such a generous offer because it's legally obligated to look out for the best interests of its shareholders.
    To qualify as a bear hug, the acquiring company must make an offer well above market value for a large number of a company’s shares.
    A business may attempt a bear hug in an effort to avoid a more confrontational form of takeover attempt or one that would require significantly more time to complete.
    The acquiring company may use a bear hug to limit competition or acquire goods or services that complement its current offerings.

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    4 min
  • Investment Term for the Day: Bear Hug
    In business, a bear hug is an offer made by one company to buy the shares of another for a much higher per-share price than what that company is worth in the market. It's an acquisition strategy that companies sometimes use when there's doubt that the target company's management or shareholders are willing to sell.The bear hug offer, though usually financially favorable, is generally unsolicited by the target company.The name bear hug reflects the persuasiveness of the offering company's overly generous offer to the target company. By offering a price far in excess of the target company's current value, the offering party can usually obtain an acquisition agreement. The target company's management is essentially forced to accept such a generous offer because it's legally obligated to look out for the best interests of its shareholders.To qualify as a bear hug, the acquiring company must make an offer well above market value for a large number of a company’s shares.A business may attempt a bear hug in an effort to avoid a more confrontational form of takeover attempt or one that would require significantly more time to complete. The acquiring company may use a bear hug to limit competition or acquire goods or services that complement its current offerings.

    Become a supporter of this podcast: https://www.spreaker.com/podcast/investment-terms--4432332/support.
    5 min

About Investment Terms

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An audio glossary of investment terms for young people and intending investors.

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