What Is Perfect Competition? The term perfect competition refers to a theoretical market structure. Although perfect competition rarely occurs in real-world markets, it provides a useful model for explaining how supply and demand affect prices and behavior in a market economy. Under perfect competition, there are many buyers and sellers, and prices reflect supply and demand.
What Is a Perfected Lien? A perfected lien is a lien that has been filed with the appropriate filing agent in order to make the securing interest in an asset binding. A lien is used in secured loans and integrated into the lending contract. Liens can also be involved in other special situations. A perfected lien provides legal documentation
What Is a Perfect Hedge? A perfect hedge is a position by an investor that eliminates the risk of an existing position, or a position that eliminates all market risk from a portfolio. Rarely achieved, a perfect hedge position needs to have a 100% inverse correlation to the initial position. Understanding a Perfect Hedge A perfect
What Is a Performance Audit? A performance audit is an independent assessment of an entity’s operations to determine if specific programs or functions are working as intended to achieve stated goals. Performance audits are typically associated with government agencies at all levels as most government bodies receive federal funding. Key Takeaways A performance audit is
A performance-based index is a stock index that adds the amount of all dividend payments, capital gains and other cash disbursements to the net stock price. When measuring the performance over a given time period, the performance-based index will add these transactions to the net share price before calculating the index return. In contrast, a non-performance index calculates returns
What Is a Performance Bond? A performance bond is a financial guarantee to one party in a contract against the failure of the other party to meet its obligations. It is also referred to as a contract bond. A performance bond is usually provided by a bank or an insurance company to make sure a
What Are Performance Bonuses? A performance bonus is a form of additional compensation paid to an employee or department as a reward for achieving specific goals or hitting predetermined targets. A performance bonus is compensation beyond normal wages and is typically awarded after a performance appraisal and analysis of projects completed by the employee over
What Is Peak Pricing? Peak pricing is a form of congestion pricing where customers pay an additional fee during periods of high demand. Peak pricing is most frequently implemented by utility companies, which charge higher rates during times of the year when demand is the highest. The purpose of peak pricing is to regulate demand
What Is a Peak-To-Valley Drawdown? A peak-to-valley drawdown is a fund’s or money manager’s largest cumulative percentage decline in portfolio value. It is defined as the percentage decline from the fund’s highest value (peak) to the lowest value (trough) after the peak. Funds that have been in existence for long periods of time may have
What Is the Pearson Coefficient? The Pearson coefficient is a type of correlation coefficient that represents the relationship between two variables that are measured on the same interval or ratio scale. The Pearson coefficient is a measure of the strength of the association between two continuous variables. Understanding the Pearson Coefficient To find the Pearson
