What Is the Prospect Theory? Prospect theory assumes that losses and gains are valued differently, and thus individuals make decisions based on perceived gains instead of perceived losses. Also known as the “loss-aversion” theory, the general concept is that if two choices are put before an individual, both equal, with one presented in terms of
What Is a Prospectus? A prospectus is a formal document required by and filed with the Securities and Exchange Commission (SEC) that provides details about an investment offering to the public. A prospectus is filed for offerings of stocks, bonds, and mutual funds. The prospectus can help investors make more informed investment decisions because it contains
What Is Pro Tanto? Pro tanto is a Latin phrase that means “only to that extent,” and is often used to denote partial fulfillment of an actual or potential obligation—often in the form of a partial payment—toward a claim asserted in a lawsuit. Key Takeaways: Pro tanto refers to a partial payment made “only to
What Is a Protected Fund? A protected fund is a type of mutual fund that promises to return at least some portion of the initial investment to an investor. The protected initial investment, plus some capital gain, will be returned as long as the investor holds the original investment until the end of the contractual
What Is Protectionism? Protectionism refers to government policies that restrict international trade to help domestic industries. Protectionist policies are usually implemented with the goal to improve economic activity within a domestic economy but can also be implemented for safety or quality concerns. Key Takeaways Protectionist policies place specific restrictions on international trade for the benefit
What Is a Protective Put? A protective put is a risk-management strategy using options contracts that investors employ to guard against the loss of owning a stock or asset. The hedging strategy involves an investor buying a put option for a fee, called a premium. Puts by themselves are a bearish strategy where the trader
What Is a Contract Provision? A contract provision is a stipulation within a contract, legal document, or a law. A contract provision often requires action by a specific date or within a specified period of time. Contract provisions are intended to protect the interests of one or both parties in a contract. Key Takeaways A contract
What Is Provisional Income? Provisional income is an IRS threshold above which social security income is taxable. The base, from §86 of the Internal Revenue Code (IRC), triggers the taxability of social security benefits, requiring its inclusion in gross income tax payment on excess amounts. Provisional income is calculated using the recipient’s gross income, tax-free
What Is a Provisional Notice of Cancellation (PNOC)? A provisional notice of cancellation is a means by which one participant in a reinsurance treaty can notify the other participants of their intention to withdraw from the treaty. This type of notice is only used in relation to continuous reinsurance contracts, which are those that remain
What Is a Proxy? A proxy is an agent legally authorized to act on behalf of another party or a format that allows an investor to vote without being physically present at the meeting. Shareholders not attending a company’s annual general meeting (AGM) may vote their shares by proxy by allowing someone else to cast
