What Is Portfolio Variance? Portfolio variance is a measurement of risk, of how the aggregate actual returns of a set of securities making up a portfolio fluctuate over time. This portfolio variance statistic is calculated using the standard deviations of each security in the portfolio as well as the correlations of each security pair in
What Is Portfolio Weight? Portfolio weight is the percentage of an investment portfolio that a particular holding or type of holding comprises. The most basic way to determine the weight of an asset is by dividing the dollar value of a security by the total dollar value of the portfolio. Of course, if the portfolio
What Is Position Sizing? Position sizing refers to the number of units invested in a particular security by an investor or trader. An investor’s account size and risk tolerance should be taken into account when determining appropriate position sizing. Understanding Position Sizing Position sizing refers to the size of a position within a particular portfolio
What Is a Positive Butterfly? A positive butterfly is a non-parallel yield curve shift that occurs when short- and long-term interest rates shift upward by a greater magnitude than medium-term rates. This shift effectively decreases the overall curvature of the yield curve. A positive butterfly may be contrasted with a negative butterfly, and should not
What Is Positive Carry? The term positive carry refers to a strategy that involves two different positions where the inputs end up being greater than the outputs. Investors often use a positive carry strategy by investing borrowed capital and making a profit on the difference between interest earned and interest paid. This strategy is commonly
What Is a Poisson Distribution? In statistics, a Poisson distribution is a probability distribution that is used to show how many times an event is likely to occur over a specified period. In other words, it is a count distribution. Poisson distributions are often used to understand independent events that occur at a constant rate
What Is a Policyholder Surplus? A policyholder surplus is the assets of a policyholder-owned insurance company (also called a mutual insurance company) minus its liabilities. Policyholder surplus is one indicator of an insurance company’s financial health. It gives an insurance company another source of funds, in addition to its reserves and reinsurance, in the event the company
A policy or sales illustration is an educational tool that shows a prospective or new insurance policyholder how a life or disability insurance policy works. A policy or sales illustration factors in all of a policy’s key details, including the applicant or insured’s age, gender, and underwriting class (the risk level used to determine premiums). Breaking
What Is a Political Action Committee (PAC)? In the U.S., a political action committee (PAC) is a political committee that pools campaign contributions from members and donates those funds to campaigns for or against candidates, ballot initiatives, or legislation. PACs are typically formed to represent business, labor, or ideological interests by individuals who wish to
What Is Political Economy? Political economy is an interdisciplinary branch of the social sciences. It focuses on the interrelationships among individuals, governments, and public policy. Political economists study how economic theories such as capitalism, socialism, and communism work in the real world. Any economic theory is a means of directing the distribution of a finite
