What Is Pure Risk? Pure risk is a category of risk that cannot be controlled and has two outcomes: complete loss or no loss at all. There are no opportunities for gain or profit when pure risk is involved. Pure risk is generally prevalent in situations such as natural disasters, fires, or death. These situations
What Is a Pure Yield Pickup Swap? A pure yield pickup swap is the practice of exchanging one set of bonds for another, intending to increase the yield received on those bonds. Importantly, the term assumes that the increase in yield will not be achieved at the expense of increasing the riskiness of the bonds.
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
