What is a Paper Profit (Paper Loss)? A paper profit or loss is an unrealized capital gain (or capital loss) in an investment. For a purchased long investment, it is the difference between the current price and the purchase price. For a sold or short investment, it is the difference between the price when sold
What Is Paper Trade? A paper trade is a simulated trade that allows an investor to practice buying and selling without risking real money. The term dates back to a time when (before the proliferation of online trading platforms) aspiring traders would practice on paper before risking money in live markets. While learning, a paper trader records
What Is a Paradigm Shift? The term paradigm shift refers to a major change in the worldview, concepts, and practices of how something works or is accomplished. A paradigm shift can happen within a wide variety of contexts from scientific research to industry. Paradigm shifts in industry often happen when new technology is introduced that
What Is the Paradox of Thrift? The paradox of thrift, or paradox of savings, is an economic theory that posits that personal savings are a net drag on the economy during a recession. This theory relies on the assumption that prices do not clear or that producers fail to adjust to changing conditions, contrary to the
What Is Paraplanning? Paraplanning refers to the administrative and clerical duties of a financial planner delegated to and carried out by junior members of a financial planning group. Similar in scope to a paralegal at a law firm, the function of a paraplanner was created to allow financial planners to focus on working closely with
What Is a Parent Company? A parent company is a company that has a controlling interest in another company, giving it control of its operations. Parent companies can be either hands-on or hands-off owners of its subsidiaries, depending on the amount of managerial control given to subsidiary managers, but will always maintain a certain level
What Is Pareto Analysis? Pareto analysis is a technique used for business decision-making, but which also has applications in several different fields from welfare economics to quality control. It is based largely on the “80-20 rule.” As a decision-making technique, Pareto analysis statistically separates a limited number of input factors—either desirable or undesirable—which have the
What Is Pareto Efficiency? Pareto efficiency, or Pareto optimality, is an economic state where resources cannot be reallocated to make one individual better off without making at least one individual worse off. Pareto efficiency implies that resources are allocated in the most economically efficient manner, but does not imply equality or fairness. An economy is
What Is the Pareto Principle? The Pareto Principle, named after economist Vilfredo Pareto, specifies that 80% of consequences come from 20% of the causes, asserting an unequal relationship between inputs and outputs. This principle serves as a general reminder that the relationship between inputs and outputs is not balanced. The Pareto Principle is also known
What Is Pari-Passu? Pari-passu is a Latin phrase meaning “equal footing” that describes situations where two or more assets, securities, creditors, or obligations are equally managed without preference. An example of pari-passu occurs during bankruptcy proceedings: When the court reaches a verdict, the court regards all creditors equally, and the trustee will repay them the same fractional
