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when there is a direct conflict between multiple parties striving for the same outcome it is often called a zero sum game this means that for every winner there is a loser alternatively it means that the collective net benefit received is equal to the collective net benefit lost lots of sporting events are a zero sum game as one team wins and another team loses | a non zero sum game is one in which all participants can win or lose at the same time consider business partnerships that are mutually beneficial and foster value for both entities instead of competing and attempting to win at the expense of the other both parties benefit investing and trading stocks is sometimes considered a zero sum game after all one market participant buys a stock and another participant sells that same stock for the same price however because different investors have different risk appetites and investing goals it may be mutually beneficial for both parties to transact simultaneous move situations which occur frequently in life mean each participant must continually make decisions at the same time that their opponent is making decisions as companies devise their marketing product development and operational plans competing companies are doing the same thing at the same time in some cases there is an intentional staggering of decision making steps enabling one party to see the other party s moves before making their own this is usually present in negotiations one party lists their demands then the other party has a designated amount of time to respond and list their own game theory can begin and end in a single instance like much of life the underlying competition starts progresses ends and cannot be redone this is often the case with equity traders who must wisely choose their entry point and exit point as their decision may not easily be undone or retried on the other hand some repeated games continue on and seemingly never end these types of games often contain the same participants each time and each party has the knowledge of what occurred previously for example consider rival companies trying to price their goods whenever one makes a price adjustment so may the other this circular competition repeats itself across product cycles or sale seasonality in the example below a depiction of the prisoner s dilemma discussed in the next section is shown in this depiction after the first iteration occurs there is no payoff instead a second iteration of the game occurs bringing with it a new set of outcomes not possible under one shot games internet encyclopedia of philosophyexamples of game theorythere are several games or situations that game theory analyzes here are a few the prisoner s dilemma is the most well known example of game theory consider the example of two criminals arrested for a crime prosecutors have no hard evidence to convict them however to gain a confession officials remove the prisoners from their solitary cells and question each one in separate chambers neither prisoner has the means to communicate with the other officials present four deals often displayed as a 2 x 2 box the most favorable strategy is to not confess however neither is aware of the other s strategy and without certainty that one will not confess both will likely confess and receive a three year prison sentence the nash equilibrium suggests that in a prisoner s dilemma both players will make the move that is best for them individually but worse for them collectively 7 tit for tat is said to be the optimal strategy in a prisoner s dilemma tit for tat was introduced by anatol rapoport who developed a strategy in which each participant in an iterated prisoner s dilemma follows a course of action consistent with their opponent s previous turn for example if provoked a player subsequently responds with retaliation if unprovoked the player cooperates 89the image below depicts the dilemma where the choice of the participant in the column and the choice of the participant in the row may clash for example both parties may receive the most favorable outcome if both choose row column 1 however each faces the risk of strong adverse outcomes should the other party not choose the same outcome internet encyclopedia of philosophythis is a simple game in which player a must decide how to split a cash prize with player b who has no input into player a s decision while this is not a game theory strategy per se it does provide some interesting insights into people s behavior experiments reveal about 50 keep all the money to themselves 5 split it equally and the other 45 give the other participant a smaller share 10the dictator game is closely related to the ultimatum game in which player a is given a set amount of money part of which has to be given to player b who can accept or reject the amount given the catch is if the second player rejects the amount offered both a and b get nothing the dictator and ultimatum games hold important lessons for charitable giving and philanthropy 11in a volunteer s dilemma someone has to undertake a chore or job for the common good the worst possible outcome is realized if nobody volunteers 12 for example consider a company in which accounting fraud is rampant though top management is unaware of it some junior employees in the accounting department are aware of the fraud but hesitate to tell top management because it would result in the employees involved in the fraud being fired and most likely prosecuted being labeled as a whistleblower may also have some repercussions down the line but if nobody volunteers the large scale fraud may result in the company s eventual bankruptcy and the loss of everyone s jobs the centipede game is an extensive form game in which two players alternately get a chance to take the larger share of a slowly increasing money stash it is arranged so that if a player passes the stash to their opponent who then takes it the player receives a smaller amount than if they had taken the pot the centipede game concludes as soon as a player takes the stash with that player getting the larger portion and the other player getting the smaller portion the game has a pre defined total number of rounds which are known to each player in advance 13game theory exists in almost every facet of life because the decisions of other people around you impact your day game theory pertains to personal relationships shopping habits media intake and hobbies types of game theory strategiesgame theory participants can decide between a few primary ways to play their game in general each participant must decide what level of risk they are willing to take and how far they are willing to go to pursue the best possible outcome a maximax strategy involves no hedging the participant is either all in or all out they ll either win big or face the worst consequence consider a new start up company introducing new products to the market its new products may result in the company s market cap increasing fifty fold on the other hand a failed product launch will leave the company bankrupt the participant is willing to take a chance on achieving the best outcome even if the worst outcome is possible a maximin strategy in game theory results in the participant choosing the best of the worst payoff the participant has decided to hedge risk and sacrifice full benefit in exchange for avoiding the worst outcome often companies face and accept this strategy when considering lawsuits by settling out of court and avoiding a public trial companies agree to an adverse outcome however that outcome could have been worse if the case had gone to trial in a dominant strategy a participant performs actions that are the best outcome for the play irrespective of what other participants decide to do in business this may be a situation where a company decides to scale and expand to a new market regardless of whether a competing company has decided to move into the market as well in prisoner s dilemma the dominant strategy would be to confess pure strategy entails the least amount of strategic decision making as pure strategy is simply a defined choice that is made regardless of external forces or actions of others consider a game of rock paper scissors in which one participant decides to throw the same shape with each trial as the outcome for this participant is well defined in advance outcomes are either a specific shape or not that specific shape the strategy is defined as pure a mixed strategy may seem like random chance but there is much thought that must go into devising a plan of mixing elements or actions consider the relationship between a baseball pitcher and batter the pitcher cannot throw the same pitch each time otherwise the batter could predict what would come next instead the pitcher must mix their strategy from pitch to pitch to create a sense of unpredictability that they hope to benefit from limitations of game theorythe biggest issue with game theory is that like most other economic models it relies on the assumption that people are rational actors who are self interested and utility maximizing of course we are social beings who do cooperate often at our own expense game theory cannot account for the fact that in some situations we may fall into a nash equilibrium and other times not depending on the social context and who the players are in addition game theory often struggles to factor in human elements such as loyalty honesty or empathy though statistical and mathematical computations can dictate what a best course of action should be humans may not take this course due to incalculable and complex scenarios of self sacrifice or manipulation game theory may analyze a set of behaviors but it cannot truly forecast the human element | |
what are the games being played in game theory | game theory tries to explain the strategic actions of two or more players in a given situation with set rules and outcomes while used in several disciplines game theory is most notably used in the study of business and economics the games may involve how two competitor firms will react to price cuts by the other whether a firm should acquire another or how traders in a stock market may react to price changes in theoretic terms these games may be categorized as prisoner s dilemmas the dictator game the hawk and dove and bach or stravinsky | |
what are some of the assumptions about these games | like many economic models game theory contains a set of strict assumptions that must hold for the theory to make good predictions in practice first all players are utility maximizing rational actors that have full information about the game the rules and the consequences players are not allowed to communicate or interact with one another possible outcomes are not only known in advance but also cannot be changed the number of players in a game can theoretically be infinite but most games will involve only two players | |
what is a nash equilibrium | the nash equilibrium is an important concept referring to a stable state in a game where no player can gain an advantage by unilaterally changing a strategy assuming the other participants also do not change their strategies the nash equilibrium provides the solution concept in a non cooperative adversarial game it is named after john nash who received the nobel prize in 1994 for his work 14who came up with game theory game theory is largely attributed to the work in the 1940s of mathematician john von neumann and economist oskar morgenstern it was developed extensively by many other researchers and scholars in the 1950s 2 it remains an area of active research and applied science to this day the bottom linegame theory is the study of how competitive strategies and participant actions can influence the outcome of a situation it s relevant to war biology and many other facets of life game theory is used in business to represent strategic interactions in which the outcome for one company or product depends on actions taken by other companies or products | |
what is gamification | gamification describes the incentivization of people s engagement in non game contexts and activities by using game style mechanics understanding gamificationgamification leverages people s natural tendencies for competition achievement collaboration and charity tools employed in game design such as rewarding users for achievements leveling up and earning badges are carried into the real world to help motivate individuals to achieve their goals or boost performance there are many examples of gamification the most well known perhaps being frequent flyer rewards programs offered by airlines the important measurable metrics of success from gamification include the level of engagement influence brand loyalty time spent on an activity and the game s ability to go viral gamification describes the incorporation of game style incentives into everyday or non game activities any time game like features or aspects of game design are introduced to non game contexts gamification is taking place in other words real world activities are made game like in order to motivate people to achieve their goals frequent flyer programs loyalty rewards points and frequent shopper points are all good examples of the everyday use of gamification in all of these examples customers are incentivized to keep playing and racking up points by rewarding ongoing consumption not all examples of gamification encourage people to spend nike is an app that encourages users to exercise by turning personal fitness into a game various nonprofits sponsor friendly competitive events a thons in order to increase charitable giving biological science has been advanced by encouraging gamers to fold proteins educational platforms can encourage learning through gamification unlocking various levels and badges based on successful completion of learning outcomes one important avenue of gamification is in the workplace by introducing game elements to a job employers can help workers track their own performance set goals and engage in friendly competition that can enhance the working environment and improve business performance it can encourage employees to give their best effort and provide them with rewards that are directly tied to their effort level risks of gamificationgamification is useful and successful because it takes advantage of the same human psychology that causes people to enjoy winning at games and to dislike or even fear losing as a result it can also have some downsides too choosing the right mechanisms and metrics can be a challenge since these are what participants will focus on it is important that the game elements actually encourage the desired behavior poorly designed or implemented gamification can become a distraction from other priorities encourage people to literally game the system or result in players engaging in zero sum or even negative sum competition against one another any of these outcomes can mean wasted time and money games can also sometimes become notoriously addictive as has been seen with immersive video gaming and compulsive gambling this raises possible risks when using gamification for commercial purposes from the point of view of a commercial entity that benefits from employees or customers developing an addictive compulsion to work or consume and pay for a product this is a positive feature but for workers and consumers it can easily be seen as manipulative or exploitative and raise potential ethical issues | |
what is gamma | gamma is an options risk metric that describes the rate of change in an option s delta per one point move in the underlying asset s price delta is how much an option s premium price will change given a one point move in the underlying asset s price therefore gamma is a measure of how the rate of change of an option s price will change with fluctuations in the underlying price the higher the gamma the more volatile the price of the option is gamma is an important measure of the convexity of a derivative s value in relation to the underlying asset it is one of the options greeks along with delta rho theta and vega these are used to assess the different types of risk in options portfolios investopedia laura porterunderstanding gammagamma is the first derivative of delta and is used when trying to gauge the price movement of an option relative to the amount it is in the money or out of the money it describes how the delta will change as the underlying asset changes so if an option s delta is 40 and the gamma is 10 a 1 increase in the underlying price would result in that option s delta becoming 50 | |
when the option being measured is deep in or out of the money gamma is small when the option is near or at the money gamma is at its largest gamma is also largest for options with near term expirations relative to longer dated options | gamma is an important metric because it accounts for convexity issues when engaging in options hedging strategies 1 some portfolio managers or traders may be involved with portfolios of such large values that even more precision is needed when engaged in hedging a third order derivative named color can be used color measures the rate of change of gamma and is important for maintaining a gamma hedged portfolio as an analogy to physics the delta of an option is its speed while the gamma of an option is its acceleration | |
what is gamma used for | since an option s delta measure is only valid for a short period of time gamma gives traders a more precise picture of how the option s delta will change over time as the underlying price changes delta is how much the option price changes with respect to a change in the underlying asset s price gamma decreases approaching zero as an option gets deeper in the money and delta approaches one gamma also approaches zero the deeper an option gets out of the money gamma is at its highest when the price is at the money the calculation of gamma is complex and requires financial software or spreadsheets to find a precise value however the following demonstrates an approximate calculation of gamma consider a call option on an underlying stock that currently has a delta of 0 40 if the stock value increases by 1 00 the option will increase in value by 40 cents and its delta will also change after the 1 increase assume the option s delta is now 0 53 the 0 13 difference in deltas can be considered an approximate value of gamma all options that are a long position have a positive gamma while all short options have a negative gamma example of gammasuppose a stock is trading at 10 and its option has a delta of 0 5 and a gamma of 0 10 then for every 1 move in the stock s price the delta will be adjusted by a corresponding 0 10 this means that a 1 00 increase will mean that the option s delta will increase to 0 60 likewise a 1 00 decrease will result in a corresponding decline in delta to 0 40 | |
how do traders hedge gamma | gamma hedging is a strategy that tries to maintain a constant delta in an options position this is done by buying and selling options in such a way as to offset each other resulting in a net gamma of just around zero at such a point the position is said to be gamma neutral often a trader will want to maintain zero gamma around a delta neutral zero delta position as well this is done via delta gamma hedging where both net delta and net gamma are close to zero in such a case an options position s value is immunized against price changes in the underlying asset | |
what is a long gamma strategy | if traders are long gamma the delta of their options position increases with price movements in the underlying asset for example a long gamma position will see an ever increasing delta as the underlying price rises or ever decreasing deltas as the price falls if the trader can sell deltas as prices rise and then buy deltas as prices fall the long gamma exposure can lead to net profits by incentivizing the trader to consistently buy low and sell high | |
what is gamma risk | for options positions that are short gamma there is a risk that price movements in the underlying will cause compounding losses for instance if such a position begins delta neutral and the stock rises it will produce increasingly short deltas for the position so that as the underlying rises the options will lose more and more money the risk however is that if the deltas are bought at these ever higher prices the underlying asset can reverse direction and fall creating long deltas on the way down compounding those earlier losses the bottom linegamma measures the rate of change in the delta for each one point increase in the underlying asset it is a valuable tool in helping traders forecast changes in the delta of an option or an overall position gamma will be larger for at the money options and goes progressively lower for both in and out of the money options unlike delta gamma is always positive for being long both calls and puts investopedia does not provide tax investment or financial services and advice the information is presented without consideration of the investment objectives risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors investing involves risk including the possible loss of principal | |
what is gamma hedging | gamma hedging is a trading strategy that tries to maintain a constant delta in an options position often one that is delta neutral as the underlying asset changes price it is used to reduce the risk created when the underlying security makes strong up or down moves particularly during the last days before expiration an option position s gamma is the rate of change in its delta for every 1 point move in the underlying asset s price gamma is an important measure of the convexity of a derivative s value in relation to the underlying asset a delta hedge strategy in comparison only reduces the effect of relatively small underlying price changes on the options price | |
how gamma hedging works | a gamma neutral options position is one that has been immunized to large moves in an underlying security achieving a gamma neutral position is a method of managing risk in options trading by establishing an asset portfolio whose delta s rate of change is close to zero even as the underlying rises or falls this is known as gamma hedging a gamma neutral portfolio is thus hedged against second order time price sensitivity gamma hedging consists of adding additional option contracts to a portfolio usually in contrast to the current position for example if a large number of calls were being held in a position then a trader might add a small put option position to offset an unexpected drop in price during the next 24 to 48 hours or sell a carefully chosen number of call options at a different strike price gamma hedging is a sophisticated activity that requires careful calculation in order to be done correctly gamma vs deltagamma is the greek alphabet inspired name of a standard variable from the black scholes model the first formula recognized as a standard for pricing options within this formula are two particular variables that help traders understand the way option prices change in relation to the price moves of the underlying security delta and gamma delta tells a trader how much an option s price is expected to change because of a small change in the underlying stock or asset specifically a one dollar change in price gamma refers to the rate of change of an option s delta with respect to the change in the price of an underlying stock or other asset s price essentially gamma is the rate of change of the price of an option however some traders also think of gamma as the expected change resulting from the second consecutive one dollar change in the price of the underlying so that by adding gamma and delta to the original delta you d get the expected move from a two dollar move in the underlying security delta gamma hedgingdelta gamma hedging is an options strategy that combines both delta and gamma hedges to mitigate the risk of changes in the underlying asset and also in the delta itself as the underlying asset moves with delta hedging alone a position has protection from small changes in the underlying asset however large changes will change the hedge change the delta leaving the position vulnerable by adding a gamma hedge the delta hedge remains intact using a gamma hedge in conjunction with a delta hedge requires an investor to create new hedges when the underlying asset s delta changes the number of underlying shares that are bought or sold under a delta gamma hedge depends on whether the underlying asset price is increasing or decreasing and by how much a trader who is trying to be delta hedged or delta neutral is usually making a trade that has very little change based on the short term price fluctuation of a smaller magnitude such a trade is often a bet that volatility or in other words demand for the options of that security will trend towards a significant rise or fall in the future but even delta hedging will not protect an options trader very well on the day before expiration on this day because so little time remains before expiration the impact of even a normal price fluctuation in the underlying security can cause very significant price changes in the option delta hedging is therefore not enough under these circumstances gamma hedging is added to a delta hedged strategy as a way of protecting the trader from larger than expected changes to a security or even an entire portfolio but most often to protect from the effects of rapid price change in the option when time value has almost completely eroded while many times a trader will seek a delta gamma hedge that is delta neutral alternatively a trader may want to maintain a specific delta position which could be delta positive or negative but at the same time gamma neutral gamma hedging vs delta hedgingas we have seen above delta and gamma hedging are often used together a simple delta hedge can be created by purchasing call options and shorting a certain number of shares of the underlying stock at the same time if the stock s price remains the same but volatility rises the trader may profit unless time value erosion destroys those profits a trader could add a short call with a different strike price to the strategy to offset time value decay and protect against a large move in the delta adding that second call to the position is a gamma hedge as the underlying stock rises and falls in value an investor may buy or sell shares in the stock if they wish to keep the position neutral this can increase the trade s volatility and costs delta and gamma hedging don t have to be completely neutral and traders may adjust how much positive or negative gamma they are exposed to over time investopedia does not provide tax investment or financial services and advice the information is presented without consideration of the investment objectives risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors investing involves risk including the possible loss of principal | |
what is gamma neutral | a gamma neutral options position is one that has been immunized to large moves in an underlying security achieving a gamma neutral position is a method of managing risk in options trading by establishing an asset portfolio whose delta s rate of change is close to zero even as the underlying rises or falls this is known as gamma hedging a gamma neutral portfolio is thus hedged against second order time price sensitivity gamma is one of the options greeks along with delta rho theta and vega these are used to assess the different types of risk in options portfolios 1understanding gamma neutralitythe directional risk of an options portfolio can be managed through delta hedging creating a delta neutral or directionally ambivalent portfolio the issue is that an option s delta itself will change as the price of the underlying moves meaning that a delta neutral position could gain or lose deltas and become a directional bet especially if the underlying moves substantially gamma hedging tries to neutralize such a change in the delta a gamma neutral portfolio can be created by taking positions with offsetting gamma values this helps to reduce variations due to changing market prices and conditions a gamma neutral portfolio is still subject to risk however for example if the assumptions used to establish the portfolio turn out to be incorrect a position that is supposed to be neutral may turn out to be risky furthermore the position has to be re balanced as prices change and time passes gamma neutral options strategies can be used to create new security positions or to adjust an existing one the goal is to use a combination of options leaving the overall gamma value as close to zero as possible at a value near zero the delta value should not move when the price of the underlying security moves note that if the goal is to achieve a durable delta neutral strategy one would employ delta gamma hedging but alternatively a trader may want to maintain a specific delta position in which it could be delta positive or negative but gamma neutral locking in profits is a popular use for gamma neutral positions if a period of high volatility is expected and an options trading position has made a good profit to date instead of locking in the profits by selling the position and reaping no further rewards a delta neutral or gamma neutral hedge can effectively seal in the profits gamma neutral vs delta neutrala simple delta hedge could be created by purchasing call options and shorting a certain number of shares of the underlying stock at the same time if the stock s price remains the same but volatility rises the trader may profit unless time value erosion destroys those profits a trader could add a short call with a different strike price to the strategy to offset time value decay and protect against a large move in delta adding that second call to the position is a gamma hedge as the underlying stock rises and falls in value an investor may buy or sell shares in the stock if they wish to keep the position neutral this can increase the trade s volatility and costs delta and gamma hedging don t have to be completely neutral and traders may adjust how much positive or negative gamma they are exposed to over time | |
what are gann angles | gann angles are named after their creator w d gann gann believed the angles could predict future price movements based on geometric angles of time versus price gann was a 20th century market theorist the validity and usefulness of his theories however are subject to debate several gann angles used together make up the gann fan | |
what do gann angles tell you | according to gann the ideal balance between time and price is 45 degrees in total there are nine different gann angles for identifying trends and market actions when one of these angles is broken the price is expected to move to the next angle according to gann the most important angle is a line representing one unit of price for one unit of time now widely regarded as the 1 1 sometimes denoted as 1x1 and is the 45 angle in this instance the value of a commodity or stock which conforms to a 1 1 angle is said to increase by one point per day or price bar in reality a trader can fix the ratio to whatever they want as long as they remain consistent with the s p 500 at 3 000 one point a day is a minuscule movement so instead the trader could fix the ratio at 10 points per day or 30 and that would be the 1 1 alternatively open a chart draw an angle at 45 degrees on that chart then overlay the gann angles with 1 1 aligning with the 45 degree angle | |
when using gann angles it is important to lock the scale on the price chart most charting platforms adjust the scale when zooming in or out that changes the angle locking the scale prevents this | the other gann angles are 2 1 moving up two points per time unit 3 1 4 1 8 1 and 16 1 as well as 1 2 1 3 1 4 and 1 8 these movements are not limited to up moves these are also applied to downtrends 1 8 means that the price is moving up eight price units each period 3 1 means it takes three time periods to move one price unit example of how to use gann anglesthe application begins with tracking and waiting for tops and bottoms to form on a chart the gann angles are then applied a gann fan or gann angles indicator is available in most charting and trading platforms with the above mentioned angles included | |
when the trend is up and the price stays in the space above an ascending angle without breaking below it the market is regarded as strong when the trend is down and the price remains below a descending angle without breaking above it the market is considered weak depending on which angle it is respecting shows the overall strength or weakness of the trend | the idea is that if the price passes through one angle the price may be heading toward the next gann fans have been applied to a chart of the spdr dow jones industrial average etf dia the first angles were drawn off the late 2018 low angle 1 1 is drawn at a 45 degree angle over time the uptrend gradually began respecting the 3 1 angle the price then dropped further as the price declines it eventually breaks through all the up trending angles at any time during the decline gann angles can also be applied to the high price point descending lower 1 1 is once again aligned with 45 degrees an angle tool may be used to make sure that 1 1 is at 45 degrees the difference between gann angles and trendlinesgann angles are drawn at specific angles regardless of how the price moves trendlines connect swing lows to swing lows and swing highs in price to swing highs the indicators are providing different information gann angles were not meant to be drawn along price action they are independent of it limitations of using gann anglesgann created his own charts creating his own scales for time and price movements most charting platforms today auto scale data to fit the screen provided while a 45 degree can be drawn on any chart if someone has a different scale numbers showing on the x or y axis their angles will intersect at different time and price points therefore every trader unless their charts are identically scaled will have different angles this means the indicator is subject to great subjectivity this indicator is not particularly useful for actual trade signals indeed the price often does not proceed directly if at all to the next gann angle once an angle is broken | |
what are gann fans | gann fans are a form of technical analysis based on the idea that the market is geometric and cyclical in nature a gann fan consists of a series of lines called gann angles these angles are superimposed over a price chart to show potential support and resistance levels the resulting image is supposed to help technical analysts predict price changes | |
how to calculate gann fans | gann fans don t require a formula although they do require an understanding of slope degrees think of a piece of graph paper with lots of little squares or grids on it if the price ascends the height of the square within a one square time frame a line can be drawn from the bottom left to the top right of the square that line s slope degree will be 45 if it takes two time boxes to ascend the height of one box 2 1 the angle of ascent will be flatter than 45 degrees if the price ascends two box heights within the time frame of one box 1 2 that angle is steeper than 45 degrees the gann fan incorporates angles based on price to time moves in the following ratios 1 8 1 4 1 3 1 2 1 1 2 1 3 1 4 1 and 8 1 w d gann the creator of gann fans found the 45 degree angle to be the ideal angle for charting based on his theories regarding the balance of time and price | |
how gann fans work | angled lines are drawn above and below a central 45 degree line to help determine trend direction and strength gann fans are drawn from a central 45 degree angle line that extends out from a specified trend reversal level traders will draw a gann fan at a reversal point to see support and resistance levels extended into the future the 45 degree line is known as the 1 1 line because the price will rise or fall at a 45 degree angle when the price moves up down one unit for each unit of time all other lines in the gann fan are drawn above and below the 1 1 line traders can use a varying number of lines above and below the 1 1 line in a gann fan chart the other angles are associated with 2 1 3 1 4 1 8 1 and 1 8 1 4 1 3 and 1 2 time to price moves the 45 degree angle line of the gann fan should be aligned with a 45 degree angle on the chart to find the 45 degree angle use the degree angle tool on your charting platform the 1 1 line is the primary indicator however chartists have choices for adding additional lines at their discretion in both an uptrend and a downtrend the 1 1 line can help to detect a reversal in a downtrend a price that stays below the 1 1 line is considered bearish in an uptrend a price that stays above the 1 1 line is considered bullish thus the 1 1 line can serve as a resistance and support line additional lines drawn in a gann fan diagram are also used as resistance and support lines gann believed that if the price moved through one angle it would likely head to the next angle for example if the price dropped below the 45 degree angle 1 1 it would drop to the 26 25 degree angle 2 1 a price that drops below 1 1 doesn t necessarily mean the overall uptrend is over the price may find support at 2 1 and then keep rising that said the fall below 1 1 could indicate at least short term weakness if the price drops to the 2 1 line gann fan vs trendlinesthe gann fan is a series of lines drawn at specific angles the 45 degree line should extend out 45 degrees from the starting point a hand drawn trendline connects a swing low to a swing low or a swing high to swing high and then extends out the right the trendline is matched to recent price action and is not drawn at a specific angle a gann angle is thus a diagonal line that moves at a uniform rate of speed a trendline is created by connecting bottoms to bottoms in the case of an uptrend and tops to tops in the case of a downtrend the benefit of drawing a gann angle compared to a trendline is that it moves at a uniform rate of speed this allows the analyst to forecast where the price is going to be on a particular date in the future this is not to say that a gann angle always predicts where the market will be rather the analyst will know where the gann angle will be which will help gauge the strength and direction of the trend a trendline on the other hand does have some predictive value however because of the constant adjustments that usually take place it s unreliable for making long term forecasts limitations of using the gann fanwhile some charting platforms may provide the gann fan they may not provide an angle tool in order to set the 45 degree line at a true 45 degree angle for that chart since different assets have different prices they may not be scaled at 1 1 1 for one day for example they could be scaled quite differently upon placing the gann fan on multiple charts it is evident that the gann fan isn t always useful the price may stay between the levels but not reach them or the price may continue to rise even though it is below the 1 1 line for example the lines may not mark important support or resistance areas and the price may seemingly disregard the fan levels the lines continually spread out over time making the distance between the lines extremely large the distance between the lines may become so large that the indicator does not function for trading purposes since the price would need to move a considerable distance before reaching the next level trading signal gann fans should be used in conjunction with other technical indicators price action and other forms of analysis | |
what is a gantt chart | a gantt chart is a commonly used graphical depiction of a project schedule it s a type of bar chart showing the start and finish dates of a project s elements such as resources planning and dependencies henry gantt 1861 1919 an american mechanical engineer designed the gantt chart 1understanding a gantt chartthe gantt chart is the most widely used chart in project management these charts are useful in planning a project and defining the sequence of tasks that require completion in most instances the chart is displayed as a horizontal bar chart horizontal bars of different lengths represent the project timeline which can include task sequences duration and the start and end dates for each task the horizontal bar also shows how much of a task requires completion the length of the bar is proportional to the time necessary for a task s completion the project tasks are represented on the vertical axis a gantt chart helps in scheduling managing and monitoring specific tasks and resources in a project the chart shows the project timeline which includes scheduled and completed work over a period of time the gantt chart aids project managers in communicating project status and completion rate of specific tasks within a project and helps ensure the project remains on track by convention it is a standard tool that makes communication unified among the engineering and project management communities benefits of a gantt chartthe gantt chart identifies tasks that may be executed in parallel and those that can t be started or finished until others are complete it can help detect potential bottlenecks and identify tasks that may have been excluded from the project timeline the chart depicts things like task slack time or additional time for completion of a task that shouldn t delay the project noncritical activities that may be delayed and critical activities that must be executed on time gantt charts can be used in managing projects of all sizes and types these may include building infrastructures like dams bridges and highways they may also include software development and other technologies project management tools such as microsoft visio project sharepoint and excel or specialized software such as gantto or matchware can help in designing gantt charts sabrina jiang investopediaexample of a gantt chartcompany a is taking on a project to install new software on the servers of a large investment bank company a decides to create a gantt chart to help manage the project and its different components the project s tasks that require completion include conducting research selecting a software product testing the software and installing it these tasks appear as vertical lines on the gantt chart a milestone of the project is selecting the software the project s duration is 40 days as agreed upon between company a and the investment bank each task takes 10 days to complete and each task is dependent on the previous task a critical activity is testing the software in the development and test environments the task start and end dates duration and milestones appear as horizontal bars on the gantt chart the percentage of work completed for each task is also displayed on the horizontal bars using the gantt chart will help company a map out the tasks along a timeline to reach full completion in 40 days | |
what is a gantt chart used for | gantt charts help visualize various tasks and projects that occur simultaneously within an organization and how far along they have progressed they are used by management to plan and schedule such projects so that resources can be allocated in an optimal way and that projects that are prioritized can finish before less important ones begin who was henry gantt henry gantt was a social scientist and management consultant who also held a degree in mechanical engineering he worked in the field of scientific management developing methods to streamline and increase the productivity of corporations and their workforce he created the gantt chart in the 1910s to help supervisors understand the progress of their labor force and to ensure tasks were on schedule 1 | |
what are the components of a gantt chart | a gantt chart can vary in complexity and depth but will always have three key components activities or tasks that are to be done running along the y axis milestones or progress stages indicated along the x axis either on the top or bottom of the chart and progress bars denoted as horizontal bars denoting how far along each task is at any given point the bottom linea gantt chart is a visual description of a project s timeline the chart shows the start and end dates of a project s components such as resources and planning if you are involved in a project it is recommended to use a gantt chart to help organize the various tasks within the project | |
what is a stock gap | a stock gap is an area discontinuity in a security s chart where its price either rises or falls from the previous day s close with no trading occurring in between gaps are common when news causes market fundamentals to change during hours when markets are typically closed for instance an earnings call after hours understanding a stock gapgaps typically occur when a piece of news or an event causes a flood of buyers or sellers into the security it results in the price opening significantly higher or lower than the previous day s closing price depending on the kind of gap it could indicate either the start of a new trend or a reversal of a previous trend gapping occurs when the price of a security or asset opens well above or below the previous day s close with no trading activity in between partial gapping occurs when the opening price is higher or lower than the previous day s close but within the previous day s price range full gapping occurs when the opening is outside of the previous day s range gapping especially a full gap shows a strong shift in sentiment that occurred overnight some traders make it a strategy to profit from playing the gap when such a situation occurs there are limitations despite gaps being easy to spot the glaring flaw is one s own ability to identify the different types of gaps that occur if a gap is misinterpreted it could be a disastrous mistake causing one to miss an opportunity to either buy or sell a security which could weigh heavily on one s profits and losses types of stock gapsthere are some fundamental differences between the different types of gaps common gaps breakaway gaps runaway gaps and exhaustion gaps each type of gap has certain consequences for traders for example reversal or breakaway gaps are typically accompanied by a sharp rise in trading volume while common and runaway gaps are not additionally most gaps occur due to news or an event such as earnings or an analyst s upgrade downgrade common gaps happen more regularly and do not always need a reason to occur also common gaps tend to get filled whereas other gaps may signal a reversal or continuation of a trend examples of a stock gapin the example below of amazon com inc amzn a small stock gap occurred between oct 26 2023 and oct 27 2023 when the price jumped from 119 57 to 127 74 this was a reversal of a downward trend which saw the stock s price continue to climb 1in the next example of alphabet inc googl a gap can be seen from oct 24 2023 to oct 25 2023 when the price fell from 138 81 to 125 61 after weeks of a general price increase the gap drop did not result in a continued downward trend instead the price continued to increase to its pre gap level filling the gap 2 | |
why do stock gaps fill | a stock gap is a large jump in a stock s price after the market closes usually due to some news when a gap has been filled this means the stock s price has returned to its normal price the pre gap price this happens quite often as the price settles after irrational buying and trading has stopped after the news | |
what is price gap risk | price gap risk is the risk that a security s price will fall or increase dramatically from a market close to a market open without any trading in between traders should plan for price gap risk such as by closing out orders at the end of the day or putting in stop loss orders | |
how often do stocks gap | the amount of times stocks gap really depends on the time frame that a trader is viewing and making trades the shorter the time frame the more frequent the gaps so a daily chart would have more gaps than a monthly chart the bottom lineprice movements of an asset indicate to traders when it might be a time to buy sell or ignore what is happening in the market gaps such as stock gaps are large jumps in a security s price during non trading hours due to external factors such as news when evaluating the gap traders and investors need to determine the cause before taking any action | |
what is a gap analysis | a gap analysis is the process that companies use to compare their current performance with their desired expected performance this analysis is used to determine whether a company is meeting expectations and using its resources effectively a gap analysis is the means by which a company can recognize its current state by measuring time money and labor and compare it with its target state by defining and analyzing these gaps the management team can create an action plan to move the organization forward and fill in the performance gaps understanding gap analysis | |
when organizations aren t making the best use of their resources capital and technology they may not be able to reach their full potential this is where a gap analysis can help | a gap analysis which is also referred to as a needs analysis is important for any type of organizational performance it allows companies to determine where they are today and where they want to be in the future companies can reexamine their goals through a gap analysis to figure out whether they are on the right track to accomplishing them gap analyses were widely used in the 1980s typically in tandem with duration analyses a gap analysis is considered harder to use and less widely implemented than a duration analysis but it can still be used to assess exposure to a variety of term structure movements there are four steps in a gap analysis ending in a compilation report that identifies areas of improvement and outlines an action plan to achieve increased company performance the gap in a gap analysis is the space between where an organization is and where it wants to be in the future | |
how to conduct a gap analysis | some gap analysis models break the following steps into four processes others are a little more elaborate and expand the analysis into a few additional steps in either case a gap analysis entails understanding your current position determining where you want to end up and devising a plan on how to arrive at the desired endpoint a gap analysis starts by focusing on where your organization is currently operating at this includes researching the products it offers customers it serves geographical locations it reaches and benefits it offers to its employees this information can be quantitative i e financial records as part of required filings or qualitative i e surveys or feedback from key stakeholders often a company will perform a gap analysis because it is already aware of an issue for example customer feedback surveys have generated poor results and a company wants to investigate why and implement remedies before it can dream of what it wants to become it must understand why these errors are happening when issues are arising and who the change management leaders must be the crux of gap analysis resides in this step where a company must identify what it wants to become this stage must be done with great care as the identity that a company wants to have will dictate the strategic steps that it must make to obtain those goals in gap analysis a company must make specific measurable goals to yield the greatest long term success for example in the situation above it would do the company little good to set the goal of becoming better at customer service instead the company must identify more trackable metrics such as achieve customer satisfaction of 90 within 12 months another way of identifying the desired outcome is to analyze what competitors or other market participants are doing it may be easier to identify when another company is doing something well and attempt to emulate that with the current state and future state defined it s time to bridge the two and understand where the most critical differences lie in our running example it s in this stage that a company realizes it may be woefully understaffed has not provided enough staff training or does not have the technical capability to keep up with customer inquiries now that a company has defined its deficiencies it s time to come up with plans on how it will reach its target state sometimes there may only be one solution other times the gap analysis may call for several simultaneous changes that must work in tandem to gauge whether a solution will work it must often be quantifiable with ways to measure change our example of improving customer service may have an easy metric such as customer satisfaction percentage other gap analysis findings such as deficiencies in brand recognition may require more creative thoughtful solutions that can still be evaluated once the best ideas from step 4 are chosen it s time to put them into action in this stage the company attempts to close the gap identified in the analysis by putting the solutions in place the company attempts to become better at a targeted area of business or overcome a deficiency this implementation stage often entails following a detailed set of processes at a specific cadence as part of the gap analysis the company has a defined outcome and careful steps must be taken to ensure that more damage isn t caused instead of cured for example consider employees feeling overwhelmed and discouraged from laborious training an effort of making workers more proficient may lead to loss or productivity or decreased morale for this reason the company must also conclude its gap analysis by monitoring any changes sometimes the company took exactly the right steps other times the gap might have been wider than the company thought or the company failed to adequately assess its current position in any case gap analysis can be a circular process where after changes have been made the company can reevaluate its current position and where it compares against regarding other future states a gap analysis often contains sensitive information therefore companies will often not disclose their gap analysis model in addition the analysis would tip off competitors about the direction of the company types of gap analysisalso called product gap analysis market gap analysis entails making considerations about the market and how customer needs may be going unmet if a company is able to identify areas where product supply is not meeting consumer demand then the company can take measures to personally fill that market gap this type of analysis may be performed by external consultants who have more expertise in these areas of business in which the company may not currently be operating also called performance gap analysis strategic gap analysis is a more formal internal review of how a company is performing the analysis often entails comparing how a company has done against long term benchmarks such as a five year plan or a strategic plan a strategic gap analysis may also be performed to compare how a company is faring against its competitors this type of analysis may unearth ways that other companies are utilizing personnel or capital in more strategic resourceful ways this type of information may be hard to come by especially if departed employees have signed nondisclosure agreements and the company does not publicly disclose much information about processes a company may choose to directly analyze where its company may be falling short compared to competitors by looking specifically at financial metrics this may include pricing comparisons margin percentages overhead costs revenue per labor or fixed vs variable components the ultimate goal of a profit gap analysis is to determine areas in which a competitor is being more financially efficient this information can then be used in further broader gap analysis types instead of looking at the financial aspects of a company a business may choose to look at the human element instead a skill gap analysis helps determine if there is a shortfall in knowledge and expertise with current personnel a skill gap analysis must clearly define the goals of the company then map how current laborers may fit into that design a skill gap analysis may lead to the recommendation of simply training existing staff to incur new skills or seeking outside expertise to bring in new personnel this type of analysis is especially important for innovative companies that must rely on having direct skill sets to continue to be competitors or leaders in their industry in addition skill gap analysis is critical for small companies that must rely on a smaller staff to operate in this case individuals must often have diverse flexible talents that can be useful in many different aspects of the business often leveraging internal audit functions a compliance gap analysis evaluates how a company is faring against a set of external regulations that dictate how something should be getting done for example a company may internally evaluate its accounting and reporting functions in advance of seeking an external auditor to provide an opinion on its financial statements compliance gap analysis tends to be preventative and defensive as opposed to more strategic forms of gap analysis for example instead of performing a gap analysis to attempt to gain a greater percentage of market share compliance gap analysis often has the intention of meeting regulations avoiding fines meeting reporting requirements and ensuring that external deadlines can be met successfully as a company builds new products gap analysis can also be performed to analyze which functions of the products will meet market demand and where the product will fall short this type of gap analysis is often associated with the development of software products or items that take a long time to develop in which the market demand may have shifted during product development gap analysis a company may also evaluate which aspects of the product or service have been successfully implemented delayed intentionally eliminated or still in progress with a blend of multiple types of gap analysis above the company can then perpetually evaluate how its product plan is changing and whether it has the internal resources to meet the internal gaps needed for product development completion gap analysis toolsto assist with the gap analysis process companies have an assortment of tools at their disposal the tools listed below have an intended use that is best suited for a specific aspect of a gap analysis one of the more recognizable analysis tools swot analysis determines a company s strengths weaknesses opportunities and threats as a gap analysis tool a company can evaluate both internal and external factors that it can improve upon or realize its lead on in a swot analysis a company evaluates its strengths and weaknesses as part of internal analysis during a gap analysis a company may choose to divert resources from its strengths especially if it feels comfortable with its current market lead on the other hand companies may be more interested in what its weaknesses are and how far behind it may be from outside parties in some cases companies may decide that its weaknesses cannot be overcome due to barriers of entry massive capital investment requirements or consumer preferences the other half of a swot analysis relates to external forces often outside of the control of a company the opportunities and threats that a company faces are often the uncontrollable forces that pose risk of the findings of a gap analysis not materializing for example a company may outline the plan to capture greater market share by releasing a new product should the threat of a government tariff on the product increase the per unit cost the company s gap may be more difficult to close a fishbone diagram also called a cause and effect diagram or an ishikawa diagram is useful to identify what might be causing problems it is also helpful to encourage creative thinking when sleuthing through a business constraint a fishbone diagram is created by determining the problem at hand and writing that at the center of an area then major categories are written on branches that expand away from the main problem eventually additional branches are added to these branches that identify why problems within each category exist in the end the fishbone diagram attempts to break a large complex problem into various aspects that can be more easily approached and solved the mckinsey 7s framework identifies seven elements that are key to determining how well a company performs and what has an impact on how it operates the model contains three hard elements of strategy structure and systems along with four soft elements of shared values skills style and staff using the mckinsey 7s model a company can identify how each area fits into prevailing gaps and how the company can influence each aspect to better conform to long term objectives as adjustments are made it s often recommended to iteratively monitor and review company performance the nadler tushman model is used specifically to identify problems understand how a company may be underperforming and determine how to address that performance the core of the nadler tushman model is based around the concept that aspects within a company should be aligned and work together otherwise the company will not be as successful the model is centered around different components including culture work structure and people these four core principles receive data that is input a company s strategy as well as output a company s performance the end goal is to determine how each of the four components are working together a pest analysis entails gauging external factors and how they may impact the profitability of a company pest stands for political economic social and technological a common variation of pest analysis is pestle analysis which also incorporates legal and environmental concerns pest analysis can help with a gap analysis as a company may not be considering external factors that may cause exacerbate or solve current gaps for example government legislation may cause a company s product to become much more expensive to export in this case a company may have a potential gap should external forces shift in a way that adversely impacts the company companies often use a combination of these tools as findings from one tool may contribute to the analysis in another | |
when to use a gap analysis | companies should perpetually evaluate the products it offers the customers it serves the market need it fills and the efficiency of its operations however there may be certain times when a more formal gap analysis is warranted these times include benefits of gap analysisbecause gap analysis can be used in an assortment of ways it carries with it a wide variety of benefits each benefit listed below may pertain to only one specific type of gap analysis still companies performing gap analysis may experience gap analysis in finance asset managementgap analysis is also a method of asset liability management that can be used to assess interest rate risk irr or liquidity risk excluding credit risk it is a simple irr measurement method that conveys the difference between rate sensitive assets and rate sensitive liabilities over a given period of time this type of analysis works well if assets and liabilities are composed of fixed cash flows because of this a significant shortcoming of gap analysis is that it cannot handle options as options have uncertain cash flows consider a situation where a company wants to make an investment but wants to ensure that it has enough capital on hand to cover contingent situations the company can review cash flows determine risks and assess where potential cash flow shortfalls may occur this is especially prevalent in long term projects high risk projects or projects sensitive to macroeconomic or external forces example of gap analysisfor years gamestop corp held its place in the market as a competitor in the video gaming industry customers could enter a physical location to either trade in video games from their existing collection or buy games consoles or gaming merchandise there is little public disclosure regarding the analysis or strategy performed by company management however in july 2022 the company released its non fungible token nft marketplace allowing gamers creators collectors and community members to buy and sell nfts 1 though this business endeavor was launched primarily relating to artwork the marketplace is expected to expand into gaming endeavors with a variety of nft usages to have made this business decision gamestop could have performed a gap analysis it could have though the ultimate internal discussions around the nft marketplace are not known one can infer that gamestop performed a gap analysis to understand that its existing position as a brick and mortar store could be enhanced with a new digital marketplace 1 | |
why is a gap analysis performed | a gap analysis is performed to understand where a company may be lagging against its goals or objectives it s a form of analysis that evaluates what it will take for a company to get from its current position to its future dream state | |
what are the types of gap analysis | gap analysis can be performed in an assortment of business situations most often more strategic in nature gap analysis can be performed to better understand market positioning product success labor needs or long term financial positioning gap analysis can also be used to analyze more operational aspects such as short term budget deficiencies or current employee satisfaction | |
what are the fundamental components of a gap analysis | gap analysis must always start with an analysis of a company s current position without understanding where it currently is a company can t adequately make a plan to get to where it wants to go in addition to identifying where it is today and where it wants to be in the future gap analysis entails crafting a plan with implementation steps that can be tracked and measured to hold change managers accountable | |
how do gap analysis and swot analysis differ | swot analysis is a tool that is often used as part of gap analysis as part of swot analysis a company identifies its strengths and weaknesses then the company should understand whether those strengths and weaknesses are suitable to where the company wants to be gap analysis is the plan that attempts to change a company s strengths and weaknesses in addition the opportunities and threats identified as part of a swot analysis are the risks that the plan outlined as part of a gap analysis will not be successfully carried out | |
what is static vs dynamic gap analysis | these two terms often refer to analyzing the performance and risks associated with banks or financial firms static gap analysis looks at the firm s sensitivity to changes in interest rates dynamic gap analysis looks at the firm s discrepancy between its assets and liabilities the bottom linea gap analysis is a technique that companies can use to evaluate their current position decide their dream position and formulate a plan on how to bridge the gap a company may choose to perform a gap analysis if it is struggling operationally or if it simply wants to become more strategic in either case there are several tools such as swot analysis pest le analysis or a fishbone diagram that can help the company formulate and execute a long term plan | |
what is a gap analysis | a gap analysis is the process that companies use to compare their current performance with their desired expected performance this analysis is used to determine whether a company is meeting expectations and using its resources effectively a gap analysis is the means by which a company can recognize its current state by measuring time money and labor and compare it with its target state by defining and analyzing these gaps the management team can create an action plan to move the organization forward and fill in the performance gaps understanding gap analysis | |
when organizations aren t making the best use of their resources capital and technology they may not be able to reach their full potential this is where a gap analysis can help | a gap analysis which is also referred to as a needs analysis is important for any type of organizational performance it allows companies to determine where they are today and where they want to be in the future companies can reexamine their goals through a gap analysis to figure out whether they are on the right track to accomplishing them gap analyses were widely used in the 1980s typically in tandem with duration analyses a gap analysis is considered harder to use and less widely implemented than a duration analysis but it can still be used to assess exposure to a variety of term structure movements there are four steps in a gap analysis ending in a compilation report that identifies areas of improvement and outlines an action plan to achieve increased company performance the gap in a gap analysis is the space between where an organization is and where it wants to be in the future | |
how to conduct a gap analysis | some gap analysis models break the following steps into four processes others are a little more elaborate and expand the analysis into a few additional steps in either case a gap analysis entails understanding your current position determining where you want to end up and devising a plan on how to arrive at the desired endpoint a gap analysis starts by focusing on where your organization is currently operating at this includes researching the products it offers customers it serves geographical locations it reaches and benefits it offers to its employees this information can be quantitative i e financial records as part of required filings or qualitative i e surveys or feedback from key stakeholders often a company will perform a gap analysis because it is already aware of an issue for example customer feedback surveys have generated poor results and a company wants to investigate why and implement remedies before it can dream of what it wants to become it must understand why these errors are happening when issues are arising and who the change management leaders must be the crux of gap analysis resides in this step where a company must identify what it wants to become this stage must be done with great care as the identity that a company wants to have will dictate the strategic steps that it must make to obtain those goals in gap analysis a company must make specific measurable goals to yield the greatest long term success for example in the situation above it would do the company little good to set the goal of becoming better at customer service instead the company must identify more trackable metrics such as achieve customer satisfaction of 90 within 12 months another way of identifying the desired outcome is to analyze what competitors or other market participants are doing it may be easier to identify when another company is doing something well and attempt to emulate that with the current state and future state defined it s time to bridge the two and understand where the most critical differences lie in our running example it s in this stage that a company realizes it may be woefully understaffed has not provided enough staff training or does not have the technical capability to keep up with customer inquiries now that a company has defined its deficiencies it s time to come up with plans on how it will reach its target state sometimes there may only be one solution other times the gap analysis may call for several simultaneous changes that must work in tandem to gauge whether a solution will work it must often be quantifiable with ways to measure change our example of improving customer service may have an easy metric such as customer satisfaction percentage other gap analysis findings such as deficiencies in brand recognition may require more creative thoughtful solutions that can still be evaluated once the best ideas from step 4 are chosen it s time to put them into action in this stage the company attempts to close the gap identified in the analysis by putting the solutions in place the company attempts to become better at a targeted area of business or overcome a deficiency this implementation stage often entails following a detailed set of processes at a specific cadence as part of the gap analysis the company has a defined outcome and careful steps must be taken to ensure that more damage isn t caused instead of cured for example consider employees feeling overwhelmed and discouraged from laborious training an effort of making workers more proficient may lead to loss or productivity or decreased morale for this reason the company must also conclude its gap analysis by monitoring any changes sometimes the company took exactly the right steps other times the gap might have been wider than the company thought or the company failed to adequately assess its current position in any case gap analysis can be a circular process where after changes have been made the company can reevaluate its current position and where it compares against regarding other future states a gap analysis often contains sensitive information therefore companies will often not disclose their gap analysis model in addition the analysis would tip off competitors about the direction of the company types of gap analysisalso called product gap analysis market gap analysis entails making considerations about the market and how customer needs may be going unmet if a company is able to identify areas where product supply is not meeting consumer demand then the company can take measures to personally fill that market gap this type of analysis may be performed by external consultants who have more expertise in these areas of business in which the company may not currently be operating also called performance gap analysis strategic gap analysis is a more formal internal review of how a company is performing the analysis often entails comparing how a company has done against long term benchmarks such as a five year plan or a strategic plan a strategic gap analysis may also be performed to compare how a company is faring against its competitors this type of analysis may unearth ways that other companies are utilizing personnel or capital in more strategic resourceful ways this type of information may be hard to come by especially if departed employees have signed nondisclosure agreements and the company does not publicly disclose much information about processes a company may choose to directly analyze where its company may be falling short compared to competitors by looking specifically at financial metrics this may include pricing comparisons margin percentages overhead costs revenue per labor or fixed vs variable components the ultimate goal of a profit gap analysis is to determine areas in which a competitor is being more financially efficient this information can then be used in further broader gap analysis types instead of looking at the financial aspects of a company a business may choose to look at the human element instead a skill gap analysis helps determine if there is a shortfall in knowledge and expertise with current personnel a skill gap analysis must clearly define the goals of the company then map how current laborers may fit into that design a skill gap analysis may lead to the recommendation of simply training existing staff to incur new skills or seeking outside expertise to bring in new personnel this type of analysis is especially important for innovative companies that must rely on having direct skill sets to continue to be competitors or leaders in their industry in addition skill gap analysis is critical for small companies that must rely on a smaller staff to operate in this case individuals must often have diverse flexible talents that can be useful in many different aspects of the business often leveraging internal audit functions a compliance gap analysis evaluates how a company is faring against a set of external regulations that dictate how something should be getting done for example a company may internally evaluate its accounting and reporting functions in advance of seeking an external auditor to provide an opinion on its financial statements compliance gap analysis tends to be preventative and defensive as opposed to more strategic forms of gap analysis for example instead of performing a gap analysis to attempt to gain a greater percentage of market share compliance gap analysis often has the intention of meeting regulations avoiding fines meeting reporting requirements and ensuring that external deadlines can be met successfully as a company builds new products gap analysis can also be performed to analyze which functions of the products will meet market demand and where the product will fall short this type of gap analysis is often associated with the development of software products or items that take a long time to develop in which the market demand may have shifted during product development gap analysis a company may also evaluate which aspects of the product or service have been successfully implemented delayed intentionally eliminated or still in progress with a blend of multiple types of gap analysis above the company can then perpetually evaluate how its product plan is changing and whether it has the internal resources to meet the internal gaps needed for product development completion gap analysis toolsto assist with the gap analysis process companies have an assortment of tools at their disposal the tools listed below have an intended use that is best suited for a specific aspect of a gap analysis one of the more recognizable analysis tools swot analysis determines a company s strengths weaknesses opportunities and threats as a gap analysis tool a company can evaluate both internal and external factors that it can improve upon or realize its lead on in a swot analysis a company evaluates its strengths and weaknesses as part of internal analysis during a gap analysis a company may choose to divert resources from its strengths especially if it feels comfortable with its current market lead on the other hand companies may be more interested in what its weaknesses are and how far behind it may be from outside parties in some cases companies may decide that its weaknesses cannot be overcome due to barriers of entry massive capital investment requirements or consumer preferences the other half of a swot analysis relates to external forces often outside of the control of a company the opportunities and threats that a company faces are often the uncontrollable forces that pose risk of the findings of a gap analysis not materializing for example a company may outline the plan to capture greater market share by releasing a new product should the threat of a government tariff on the product increase the per unit cost the company s gap may be more difficult to close a fishbone diagram also called a cause and effect diagram or an ishikawa diagram is useful to identify what might be causing problems it is also helpful to encourage creative thinking when sleuthing through a business constraint a fishbone diagram is created by determining the problem at hand and writing that at the center of an area then major categories are written on branches that expand away from the main problem eventually additional branches are added to these branches that identify why problems within each category exist in the end the fishbone diagram attempts to break a large complex problem into various aspects that can be more easily approached and solved the mckinsey 7s framework identifies seven elements that are key to determining how well a company performs and what has an impact on how it operates the model contains three hard elements of strategy structure and systems along with four soft elements of shared values skills style and staff using the mckinsey 7s model a company can identify how each area fits into prevailing gaps and how the company can influence each aspect to better conform to long term objectives as adjustments are made it s often recommended to iteratively monitor and review company performance the nadler tushman model is used specifically to identify problems understand how a company may be underperforming and determine how to address that performance the core of the nadler tushman model is based around the concept that aspects within a company should be aligned and work together otherwise the company will not be as successful the model is centered around different components including culture work structure and people these four core principles receive data that is input a company s strategy as well as output a company s performance the end goal is to determine how each of the four components are working together a pest analysis entails gauging external factors and how they may impact the profitability of a company pest stands for political economic social and technological a common variation of pest analysis is pestle analysis which also incorporates legal and environmental concerns pest analysis can help with a gap analysis as a company may not be considering external factors that may cause exacerbate or solve current gaps for example government legislation may cause a company s product to become much more expensive to export in this case a company may have a potential gap should external forces shift in a way that adversely impacts the company companies often use a combination of these tools as findings from one tool may contribute to the analysis in another | |
when to use a gap analysis | companies should perpetually evaluate the products it offers the customers it serves the market need it fills and the efficiency of its operations however there may be certain times when a more formal gap analysis is warranted these times include benefits of gap analysisbecause gap analysis can be used in an assortment of ways it carries with it a wide variety of benefits each benefit listed below may pertain to only one specific type of gap analysis still companies performing gap analysis may experience gap analysis in finance asset managementgap analysis is also a method of asset liability management that can be used to assess interest rate risk irr or liquidity risk excluding credit risk it is a simple irr measurement method that conveys the difference between rate sensitive assets and rate sensitive liabilities over a given period of time this type of analysis works well if assets and liabilities are composed of fixed cash flows because of this a significant shortcoming of gap analysis is that it cannot handle options as options have uncertain cash flows consider a situation where a company wants to make an investment but wants to ensure that it has enough capital on hand to cover contingent situations the company can review cash flows determine risks and assess where potential cash flow shortfalls may occur this is especially prevalent in long term projects high risk projects or projects sensitive to macroeconomic or external forces example of gap analysisfor years gamestop corp held its place in the market as a competitor in the video gaming industry customers could enter a physical location to either trade in video games from their existing collection or buy games consoles or gaming merchandise there is little public disclosure regarding the analysis or strategy performed by company management however in july 2022 the company released its non fungible token nft marketplace allowing gamers creators collectors and community members to buy and sell nfts 1 though this business endeavor was launched primarily relating to artwork the marketplace is expected to expand into gaming endeavors with a variety of nft usages to have made this business decision gamestop could have performed a gap analysis it could have though the ultimate internal discussions around the nft marketplace are not known one can infer that gamestop performed a gap analysis to understand that its existing position as a brick and mortar store could be enhanced with a new digital marketplace 1 | |
why is a gap analysis performed | a gap analysis is performed to understand where a company may be lagging against its goals or objectives it s a form of analysis that evaluates what it will take for a company to get from its current position to its future dream state | |
what are the types of gap analysis | gap analysis can be performed in an assortment of business situations most often more strategic in nature gap analysis can be performed to better understand market positioning product success labor needs or long term financial positioning gap analysis can also be used to analyze more operational aspects such as short term budget deficiencies or current employee satisfaction | |
what are the fundamental components of a gap analysis | gap analysis must always start with an analysis of a company s current position without understanding where it currently is a company can t adequately make a plan to get to where it wants to go in addition to identifying where it is today and where it wants to be in the future gap analysis entails crafting a plan with implementation steps that can be tracked and measured to hold change managers accountable | |
how do gap analysis and swot analysis differ | swot analysis is a tool that is often used as part of gap analysis as part of swot analysis a company identifies its strengths and weaknesses then the company should understand whether those strengths and weaknesses are suitable to where the company wants to be gap analysis is the plan that attempts to change a company s strengths and weaknesses in addition the opportunities and threats identified as part of a swot analysis are the risks that the plan outlined as part of a gap analysis will not be successfully carried out | |
what is static vs dynamic gap analysis | these two terms often refer to analyzing the performance and risks associated with banks or financial firms static gap analysis looks at the firm s sensitivity to changes in interest rates dynamic gap analysis looks at the firm s discrepancy between its assets and liabilities the bottom linea gap analysis is a technique that companies can use to evaluate their current position decide their dream position and formulate a plan on how to bridge the gap a company may choose to perform a gap analysis if it is struggling operationally or if it simply wants to become more strategic in either case there are several tools such as swot analysis pest le analysis or a fishbone diagram that can help the company formulate and execute a long term plan | |
what is gapping | gapping occurs when the price of a stock or another asset opens above or below the previous day s close with no trading activity in between a gap is the area discontinuity in a security s price chart gaps may materialize when headlines cause market fundamentals to change rapidly during hours when markets are typically closed for instance the result of an earnings call after hours gapping may also refer to the difference or spread in rates at which banks borrow and lend the dynamic gap measures how assets money held and liabilities money loaned change over time understanding gappinggapping can occur in any instrument where the trading action closes and then reopens stocks do this on a daily basis currencies trade continuously throughout the week but can still experience gaps between when the market closes before the weekend and reopens after gapping may be partial or full in nature partial gapping occurs when the opening price is higher or lower than the previous day s close but within the previous day s price range full gapping occurs when the open is outside of the previous day s range gapping especially a full gap shows a strong shift in sentiment occurred overnight types of gappingthere are different types of gaps depending on the size of the gap and where they occur within the overall trend of the asset each of these types of gaps can be full or partial gaps common gaps are typically partial gaps as the price doesn t move significantly however in some cases the price may not move much yet and still end up as a full gap meanwhile breakaway runaway and exhaustion gaps tend to be full gaps common gaps occur frequently have little significance and are when the opening price is slightly different from the prior closing price the lack of a significant price move on the gap or after shows the gap is common a breakaway gap occurs when the price moves above a significant resistance area or below a significant support area on the gap it can also occur after the price has been in a tight trading range or when it moves out of a chart pattern the breakaway gap indicates the start of a strong trending move is typically a large gap and the price tends to follow through in the gap direction over the next few weeks runaway gaps occur during a strong trend and show that the trend is still strong enough to cause a gap in the trend direction in hindsight these are gaps that occur mid trend as the trend is picking up steam they are typically large and the price tends to follow through moving in the gap direction over the next few weeks tradingviewexhaustion gaps occur near the end of the trend they are typically caused by stragglers jumping onboard late in a trend after having regretted not getting in earlier once the price gaps are higher on this last push of demand there are very few traders left to keep pushing the price in the trending direction a reversal tends to follow within a few weeks gapping and stop loss ordersa trader can have a stop loss order filled significantly below their stop loss price for a long position due to gapping for example a trader may buy a stock on the close at 50 and place a stop loss order at 45 the next day before the market opens the company issues an unexpected profit warning and the stock opens at 38 the trader s stop loss order now becomes a market order because the stock s price is below 45 and gets filled at the next available price which is the 38 open traders can reduce gapping risk by not trading directly before company earnings and news announcements that are likely to have a material impact on a stock s price during periods of high volatility reducing position size helps minimize losses caused by gapping a trader in a short position can also get caught in a gap resulting in more significant losses than expected a trader may be short at 20 with a stop loss at 22 the stock closes at 18 in a profitable position for the trader but overnight another company expresses its interest in buying the company and the price opens up the next day at 25 the trader is punched out of their position at 25 not 22 resulting in an extra 3 per share loss gapping trading strategiessome traders use gaps for analytical insight for example if a gap occurs relatively early in a trend then it is probably a breakaway gap or a runaway gap which lets the trader know the price likely has further to run other traders use gaps for trading purposes they may enter positions after a gap occurs these strategies are called playing the gap day traders often refer to this strategy as the gap and go a position could be taken on the day the stock gaps with a stop loss order usually placed beneath the low of the gap bar the gap should occur above a significant resistance level and trade on heavy volume to increase the chances of a profitable trade alternatively traders could wait for prices to fill the gap and place a limit order to buy the stock near the previous day s close a similar strategy to the one above except in this case the trader enters a short position following a gap down contrarians may use a fading strategy to exploit gapping traders could take a trade in the opposite direction of the gap under the premise that most gaps tend to be filled over time a stop loss order is placed above the gap bar s high following a gap up with a profit target set near the previous day s close for a gap down the trader buys places a stop loss below the gap bar s low and sets a profit target near the previous day s close breakaway and runaway gaps can signal that there is more trend left to take advantage of for trading opportunities therefore following one of these gaps a longer term trader may initiate a position in the direction of the gap typically looking for gaps higher they may hold onto the trade until an exhaustion gap occurs or a trailing stop is hit letting them know to get out gapping often plays into candlestick technical patterns as well such as with the up down gap side by side white lines pattern or the upside gap two crows pattern example of gappingsome stocks have frequent gaps while others have fewer nearly all stocks are susceptible to experiencing a gap following earnings or other major corporate announcements such as a takeover bid a stock may also gap because the overall market moves sharply for example if the s p 500 experiences a volatile move lower one morning many stocks will gap down as a result in analyzing the chart of meta formerly facebook which is shown below the stock had a number of significantly large price gaps following earnings announcements it also had other gaps over the period shown which are marked on the chart image by sabrina jiang investopedia 2021the chart also illustrates that a breakaway gap doesn t always need to be in the trending direction a strong gap against the current trend could signal a break or reversal in the other direction take for example the 217 50 close high point on the chart just under 220 the following day the stock opened at 174 89 just below the 2nd arrow from the left after a worse than expected earnings announcement in other words investors who had purchased meta at 217 would have lost nearly 20 overnight showing how devastating a gap can be even if using a stop loss | |
what volume should a gapping stock have | a volume increase on a gap helps confirm that the price is likely to continue in the gapped direction a breakaway gap with higher than average volume for instance indicates strong conviction in the gap direction on the other hand exhaustion gaps should be associated with relatively low volume | |
what is a gap and go strategy | this strategy involves buying into a gap up and is a bullish position with this strategy stop loss orders may be placed at a level below the gap s bottom | |
how do you know if a stock will gap up | nobody can see the future of stock prices but a gap up may occur after a positive news announcement especially if that news is unexpected or better than expected positive earnings surprises news that a stock is a takeover target or the release or approval of a new product can all result in a gap up investopedia does not provide tax investment or financial services and advice the information is presented without consideration of the investment objectives risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors investing involves risk including the possible loss of principal | |
what is garage liability insurance | garage liability insurance is specialty insurance targeted to the automotive industry automobile dealerships parking lots or parking garages operators tow truck operators service stations and customization and repair shops will add garage liability insurance to their business liability coverage the policy protects property damage and bodily injury resulting from operations this insurance is not the same thing as garage keepers coverage | |
how garage liability insurance works | garage liability insurance is a type of umbrella policy that provides coverage for the day to day operations of the businesses in the automotive industry this insurance will add a layer of protection to the business general liability policy coverage includes bodily injury and property damage from direct garage operations not covered under most commercial or business liability insurance before buying a policy the business owner should verify that the garage liability coverage will add to and not merely replace their basic business liability coverage coverage will include injuries to customers while on the business grounds up to the chosen limits of the policy also most garage insurance will consist of an employee dishonesty provision for theft or vandalism done by an employee of a customer s car for an added premium any autos used in the conducting of business such as courtesy vans and parts delivery trucks may be added additional protections can include damages from parts or products sold by the company and coverage for loss from faulty parts installed on a client s vehicle garage liability insurance will not cover the tools building personal or business property of the policyholder it does not provide coverage for vandalism stolen vehicles or damage from events such as hail the policy does not cover accidents or damage to the customer s cars on site for service also all policy basic and additional items will have a listed maximum liability coverage amount and may have aggregate limits by claim or by year commercial general liability cgl insurance policies have varying levels of coverage this insurance may include coverage for the premises which protects the business from claims on location during regular business operations it may also include coverage for bodily injury and property damage resulting from finished products garage liability is not garage keeper coveragegarage keepers insurance is a separate policy that covers the property damage to a client s car while it is in the care of the policyholder this can include damage during road test drives and while storing the vehicle during non working hours the keeper s insurance will cover vandalism and theft of a customer s car businesses with multiple locations require policies for each site other business insurance productsbusinesses may purchase coverage for other business risks as well | |
what is the garch process | the generalized autoregressive conditional heteroskedasticity garch process is an econometric term developed in 1982 by robert f engle an economist and 2003 winner of the nobel memorial prize for economics garch describes an approach to estimate volatility in financial markets there are several forms of garch modeling financial professionals often prefer the garch process because it provides a more real world context than other models when trying to predict the prices and rates of financial instruments understanding the garch processheteroskedasticity describes the irregular pattern of variation of an error term or variable in a statistical model essentially where there is heteroskedasticity observations do not conform to a linear pattern instead they tend to cluster the result is that the conclusions and predictive value drawn from the model will not be reliable garch is a statistical model that can be used to analyze a number of different types of financial data for instance macroeconomic data financial institutions typically use this model to estimate the volatility of returns for stocks bonds and market indices they use the resulting information to determine pricing judge which assets will potentially provide higher returns and forecast the returns of current investments to help in their asset allocation hedging risk management and portfolio optimization decisions the general process for a garch model involves three steps the first is to estimate a best fitting autoregressive model the second is to compute autocorrelations of the error term the third step is to test for significance two other widely used approaches to estimating and predicting financial volatility are the classic historical volatility volsd method and the exponentially weighted moving average volatility volewma method garch models best for asset returnsgarch processes differ from homoskedastic models which assume constant volatility and are used in basic ordinary least squares ols analysis ols aims to minimize the deviations between data points and a regression line to fit those points with asset returns volatility seems to vary during certain periods and depend on past variance making a homoskedastic model suboptimal garch processes because they are autoregressive depend on past squared observations and past variances to model for current variance garch processes are widely used in finance due to their effectiveness in modeling asset returns and inflation garch aims to minimize errors in forecasting by accounting for errors in prior forecasting and enhancing the accuracy of ongoing predictions example of the garch processgarch models describe financial markets in which volatility can change becoming more volatile during periods of financial crises or world events and less volatile during periods of relative calm and steady economic growth on a plot of returns for example stock returns may look relatively uniform for the years leading up to a financial crisis such as that of 2007 in the period following the onset of a crisis however returns may swing wildly from negative to positive territory moreover the increased volatility may be predictive of volatility going forward volatility may then return to levels resembling that of pre crisis levels or be more uniform going forward a simple regression model does not account for this variation in volatility exhibited in financial markets it is not representative of the black swan events that occur more often than predicted | |
what is garden leave | a garden leave refers to the period of time during which an employee stays away from the workplace or works remotely during the notice period the employee remains on the payroll and is in the process of terminating their employment but is neither permitted to go to work nor to commence any other employment during the garden leave understanding garden leavesgarden is a term most commonly used in the financial industry in the u k australia and new zealand massachusetts passed a garden leave clause into law in 2018 making it the first state to do so in the u s 1while the name garden leave may sound pleasant and in fact an employee may sometimes prefer to serve their notice time relaxing at home rather than being in the workplace the restrictive nature and negative implications of this leave can make it less than ideal garden leave is a protectionist measure used by an employer when an employee is terminated or when they tender their resignation once in effect it often prevents the employee from being involved in any work activity for their current employer and typically restricts them from either taking on another job or working for themselves an employee is generally likely to spend their time pursuing hobbies such as gardening hence the term garden leave salaries and benefits continue until the end of the leave period garden leave is sometimes considered to be a euphemism for being suspended and can be perceived to have negative connotations such as the employee being unfit for anything other than tending to their garden the garden leave helps protect an employer s interests when an employee tenders a resignation or is given a dismissal notice reasons for instigating a garden leavefollowing the resignation or dismissal of an employee an employer may decide to place the employee on garden leave the primary reason for doing so is to safeguard against possible detrimental actions or behavior that the employee might indulge in during their notice period the employer may fear that the employee could become uncooperative or that they may negatively influence the working environment and other employees the employer may also prefer that the employee limit contact with clients for fear the employee may persuade clients to follow them to their new employer another reason for implementing a garden leave is that the employee may have access to up to date information that could be beneficial to the employer s competitors placing an employee on garden leave could help ensure that by the time the employee is contractually free they would have been out of the loop long enough to reduce any possible threat garden leave can be an employer s way of taking the employee off the market for a period of time which is why some employers may opt for this method rather than ending the employment abruptly with a cash settlement in lieu of notice | |
when and when not to use garden leave | there are times to consider a garden leave and there are times it is not suitable a garden leave is to be used when a worker s employment term is being brought to an end for any reason the first step in evaluating whether to use a garden leave is to consider the implications of the employee s departure questions to ask include due to the expense of carrying an important employee that is not working companies should be mindful when imposing a garden leave in addition companies may find themselves legally unable to impose a garden leave therefore when determining whether or not to place an employee on a garden leave a company must analyze the financial implications legal restrictions and business usefulness of temporarily retaining the employee rights and obligationsan employee is entitled to their salary and benefits during garden leave but depending on their employment contract may not be eligible for bonuses or accrual payments during a garden leave it is typical for an employee to be prevented from accessing the employer s data and computer system and to be prohibited from contacting clients suppliers or fellow employees the employee will usually be required to return company property such as laptops smartphones or vehicles during this period while on garden leave the employee is required to be available if the employer requires information support or even to resume working for this reason an employee should not plan to travel during garden leave unless approved by the current employer an employer may also compel the employee to take any accrued holiday time during the period of garden leave garden leave is also commonly referred to as a garden leave period or gardening leave garden leave clausesan employer does not need to put a garden leave clause in a contract during the on boarding process when a new employee is hired but they are recommended in certain cases some contracts especially those for senior management and other executives often come with a well drafted garden leave clause if a company decides to put the leave in effect without one it opens itself up to a breach of contract dispute signing a contractual clause may be problematic in some cases employees who don t receive a regular salary and work on a bonus or commission basis may be able to dispute a clause since their incentive is based on their work activities these cases may result in disputes even lawsuits between both parties pros and cons of garden leavethere s a number of reasons why a company may consider implementing a garden leave it is ultimately a defensive mechanism that makes sure an employee is still available during a transition period it can also be used to manage the goodwill and relationships with clients as an employee departures during a garden leave the departing employee often has restricted physical access to the building files or confidential company information this protects a company if it is concerned about illicit use of this information as an employee leaves the downside to this is primarily the cost an employer must continue to pay an employee during garden leave if that worker is a c suite executive the company is paying very high salary costs to retain someone who is producing little to no work there are also legal considerations to balance public perception to manage and ongoing risk of employee retaliation even when still under contract ensures that an employee will be available for queries prior to their departureprevents a customer from stealing customers prior to their departureensures proper transition of responsibilitiesprevents an outgoing employee access to certain sensitive aspects of a companymay prevent an employee from leaving to work for a competitor | |
is often expensive especially when putting an executive on garden leave | yields little to no productive work in exchange for actual salary paidrequires adherence to complicated changing laws that may restrict some aspects of garden leavemay negatively impact perception of future prospective employeesfrom an employee s standpoint much of the opposite is true the employee has meaningful paying employment via the terms of employment through a specific contract date during this employment period the employee s responsibilities are often decreased an employee is often allowed to search for a new job during this period though there are limitations on starting a new job while on garden leave an employee is often still entitled to commissions and bonuses during garden leave on the downside employees may be restricted on what they do such as start a new job or work for a competitor an employee may not find personal satisfaction in getting paid but not being able to contribute to the success of an organization an employee may end up leaving a company with a bad taste in their mouth if they are cutoff from socializing with peers in which they have developed relationships with receives paychecks for a defined period of time | |
is often required to work little to no hours in exchange for ongoing compensation | may still pursue but not start other job opportunities while on garden leavemay still be entitled to bonuses and commission while on garden leavefaces restrictions on what they can do for a specific amount of timemay not find personal satisfaction for technically not earning their paycheckmay stagnate career development if put on a lengthy 90 day garden leavemay be seen as negative should the employee be getting let go or terminated against their will garden leave in the u s massachusetts passed the garden clause provision into law in mid 2018 making it the first state in the united states to give workers paid leave after leaving a job according to the associated press the new law states employees are entitled to at least 50 of their base salary during the garden leave 1in 2021 illniois passed the illinois freedom to work act ifwa though the ifwa never mentions the phrase garden leave it does restrict illinois employers regarding their ability to bind employees to non compete and non solicitation agreements 2 in turn this legislature would impact the limitations that can be placed on an employee while on garden leave additionally in april 2024 the ftc banned the use of non competes 3though present in new york financial industries garden law is still explicitly prohibited in many cases for example the new york rules of professional conduct published by the new york state bar association outlaws garden leaves this rule prevents an agreement that prohibits a departed lawyer from practicing law for any given period of time following his or her withdrawal from the firm 4example of garden leavethe securities and exchange commission sec publicly posted exhibit 10 3 related to the separation agreement between uniquire inc and its former chief operating officer in august 2019 it decided to part ways with its employee 5 in the cited agreement the separation letter called for several items including | |
what do people do during garden leave | during a garden leave most employees are required to produce little to no work they will remain on the company s payroll for a designated amount of time however they may not be contractually obligated to fulfill all previous aspects of their job when placed on a garden leave the expectations of the employee are often outlined can i start a new job while on garden leave a garden leave is often a mutually agreed upon contractual obligation between a company and an employee an employee is often allowed to pursue other jobs but courts have found there to be a breach of contract should the employee leave to begin a new job during a garden leave 6 | |
does garden leave exist in the united states | yes garden leave exists in the united states the concept was passed into law in 2018 in massachusetts while it has been widely adopted in new york while also gaining traction in illinois 7 | |
what are the rules around garden leave | garden leave laws will vary across jurisdictions in general most garden leave laws require advanced notice of resignation and last between 30 and 90 days during this time the employee remains on the company s payroll but are generally relieved of most if not all of their duties an employee can often not return to the physical workplace and the employee may be required to communicate with only select co workers during the garden leave period the bottom lineto protect company assets and preserve business interests during an employee departure a company may place an outgoing worker on a garden leave this paid recuse from work often reduces the employee s scope of work prior to their pre planned resignation in addition the employee will face many restrictions on what they can do what they can access and who they communicate with prior to their departure | |
what was the garn st germain depository institutions act | the garn st germain depository institutions act was enacted by congress in 1982 the primary purpose was to ease pressures on banks and savings and loans which increased after the federal reserve raised rates in an effort to combat inflation financial institutions that had taken on interest rate risk by lending at low rates in earlier years were faced with negative spreads when the fed drove deposit interest rates higher in the early 1980s the act followed the establishment of the depository institutions deregulation committee by the monetary control act mca which had begun phasing out interest rate ceilings on bank deposit accounts together these acts are today widely understood to have contributed to the subsequent savings loan crisis of the 1980s and 90s understanding the garn st germain depository institutions actinflation in the united states had spiked significantly in the mid 1970s after the last links between the u s dollar and gold were severed under the nixon administration and again in the late 1970s breaking above 10 by early 1980 1 after the federal reserve under chairman paul volcker aggressively began raising rates into the 1980s the trend finally reversed with inflation hovering between 2 5 5 0 for most of the 1980s traditional banks were caught in the middle as they were paying more for their deposits than they were earning on mortgage loans which had been made in earlier years at much lower interest rates they had taken on enormous interest rate risk through maturity mismatching lending long term at low rates for home mortgages and borrowing very short term at variable rates on bank deposits unable to get out from under lower rates of interest on their fixed rate long term holdings banks were becoming illiquid at the same time fed regulation q which had previously restricted banks and savings and loans known as s l or thrifts from raising their deposit interest rates was phased out for deposit accounts other than checking accounts under the mca investors and depositors flocked to money market mutual fund accounts cd s and savings accounts to obtain higher interest rates and corporations developed alternatives such as repurchase agreements as the deposit rates that they paid out rose while the interest they were receiving from existing mortgages remained fixed banks were caught in a squeeze on the lending side title viii of the garn st germain depository act alternative mortgage transactions authorized banks to offer adjustable rate mortgages however the act also had substantial benefits for consumer real estate owners because it allowed consumers to place their mortgaged real estate in inter vivos trusts without triggering the due on sale clause that allows banks to foreclose and collect the balance due on a mortgaged property when ownership of that property is transferred this made it easier for property owners to pass real estate to minors and heirs and also allowed the wealthy to protect their real estate holdings from creditors or lawsuit settlements many analysts believe that the act was one of the contributing factors to the savings and loan s l crisis which resulted in one of the largest government bailouts in u s history costing approximately 124 billion passage of the actthe garn st germain depository institutions act was named after sponsors congressman fernand st germain a democrat from rhode island and senator jake garn a republican from utah co sponsors of the bill included congressman steny hoyer and senator charles schumer the bill passed the house with a substantial margin of 272 91 the bill also passed the senate and was signed by president reagan in october 1982 2unintended consequencesthe garn st germain depository institutions act removed the interest rate ceiling for banks and thrifts authorized them to make commercial loans and gave the federal agencies the ability to approve bank acquisitions once regulations were loosened however s ls began engaging in high risk activities to cover losses such as commercial real estate lending and investments in junk bonds depositors in s ls continued to funnel money into these risky endeavors because their deposits were insured by the federal savings and loan insurance corporation fslic ultimately many analysts believe that the act was one of the contributing factors to the savings and loan crisis which resulted in one of the largest government bailouts in u s history costing approximately 124 billion long term consequences included the preponderance of 2 28 adjustable rate mortgages which may have ultimately contributed to the sub prime loan crisis and the great recession of 2008 | |
what is garnishment | garnishment or wage garnishment is when money is legally withheld from your paycheck and sent to another party it refers to a legal process that instructs a third party to deduct payments directly from a debtor s wage or bank account typically the third party is the debtor s employer and is known as the garnishee federal law prohibits employers from firing a worker to avoid processing a garnishment payment 1 garnishments are used for debts such as unpaid taxes monetary fines child support payments and defaulted student loans | |
how garnishment works | for a debtor s wage to be garnished a creditor must typically obtain a court order proving that the debtor owes money and has defaulted on payment if the debt is an internal revenue service irs levy a court order is not required 2 for example if john smith owes 10 000 in overdue unpaid taxes the irs can resort to garnishing his wages the irs would then direct smith s employer to remit a portion of his salary for a certain amount of time until smith s tax obligation is fully paid because garnishments are usually the last resort to collect debts and show a debtor s unfavorable repayment history they can harm an individual s credit rating types of garnishmentgarnishment comes in different forms but the idea is the same it s when a creditor legally takes money from you to pay off a debt here are some common types who can garnish wages wage garnishment can be initiated by a couple different entities each of these entities below have the legal capability of seizing assets depending on the type of debt owed and applicable laws here s a breakdown of who can garnish wages though this list is not meant to be exhaustive note that after the initial contact regarding the intention to see garnishment you may have the opportunity to settle your debt without having to go through the garnishment process notice of garnishmentreceiving a notice for garnishment typically involves a formal legal process the specific procedures can vary depending on the type of garnishment and applicable laws but there are general steps involved first you ll usually receive communication from the creditor or the entity seeking garnishment they want to inform you of the debt owed and their intent to pursue garnishment if the debt remains unpaid if the creditor decides to proceed with garnishment they must obtain a court order or judgment authorizing the garnishment once the court order is granted you ll receive official notification this is usually a legal document served by mail or hand delivered this notification will outline the details of the garnishment such as what s owed the creditor s identity and instructions on how to respond if you wish to contest the garnishment depending on the circumstances you may have the opportunity to challenge the garnishment legal professionals can help you understand your rights under the law and explore potential defenses otherwise the garnishment will occur as outlined as prescribed in the communication avoiding garishmentsyou can take proactive steps to avoid garnishments first you generally may have the greatest flexibility if you have open communication with your creditors if you re struggling to make payments reach out to your creditors as soon as possible to discuss potential solutions note that your specific situation may be more complex and consulting with legal counsel first may be advisable you may also want to consult legal counsel if you re facing imminent garnishment consulting with a qualified attorney experienced in debt resolution and consumer protection laws can help determine whether a garnishment claim will be valid an attorney can assess your situation explain your legal rights and options and represent you in negotiations with creditors or in court proceedings if necessary consider reaching out to a reputable credit counseling agency though they may not be able to help you avoid the garnishment process they can offer assistance in developing a budget managing debts and exploring debt relief options specific to your circumstances last one of your best defenses is to simply stay on top of your personal finances and make sound monetary decisions monitor your financial accounts closely for any notices or communications from creditors or collection agencies be mindful of debt your taking out and your ability to pay for it consider prioritizing setting up an emergency fund to help alleviate financial pressure if you lose your job every state will have its own garnishment laws for example washington s law defines garnishment defines what is subject to garnishment and outlines numerical limits 3 | |
how much can be garnished | the dollar amount that can be garnished will vary from situation to situation however there are some limits in some cases for example the information below relates specifically to wage garnishment the consumer credit protection act stipulates the amount of income that can be garnished from an individual s wage the garnishment amount is the lower of the following individuals who earn disposable income under 217 50 per week do not receive any wage garnishment individuals who receive a disposable income of between 217 50 and 290 per week can have any amount above 217 50 garnished for weekly disposable earnings above 290 a maximum of 25 can be garnished 1disposable income is defined as gross income minus legally required deductions such as federal state and local taxes and social security deductions 1special considerationsgarnishment limits set by the consumer credit protection act do not apply to unpaid tax debt child support bankruptcy orders student loans or voluntary wage allocations federal agencies and federal student loan holders can garnish up to 15 of an individual s wage 14sixty percent of wages can be garnished for child support payments if an individual has no other dependents to support federal and state garnishment limits may differ in which case the lower garnishment limit applies if an individual faces financial hardship due to wage garnishment they may be eligible to file a claim to reduce the garnishment amount 1example of garnishmentone famous example of wage garnishment involves the case of o j simpson the former nfl player and actor in 1997 simpson was ordered to pay 33 5 million in damages to the families of nicole brown simpson and ronald goldman in a civil wrongful death lawsuit following his acquittal in their criminal murder trial 5to enforce the judgment a portion of simpson s nfl pension and earnings from other ventures were subject to wage garnishment however the garnishment would be capped based on where mr simpson lived when granted parole for example simpon indicated he d in florida when paroled the state s garnishment limit is 25 5 it was supposedly reported that simpson had not willingly paid any money towards the court order 6 | |
how does garnishment work | garnishment works by creditors obtaining a court order or judgment that authorizes them to collect the owed funds directly from the debtor s income or assets once the court order is granted the creditor can proceed to garnish wages by instructing the debtor s employer to withhold a portion of their paycheck or levy bank accounts to access funds | |
what types of debts can lead to garnishment | common types of debts that can lead to garnishment include unpaid credit card bills medical bills student loans taxes and child support payments essentially any debt for which you ve defaulted on payments and haven t made arrangements to repay can potentially lead to garnishment proceedings can my employer fire me because of garnishment generally federal law prohibits employers from terminating employees solely because of garnishment for a single debt however there may be exceptions depending on state laws and company policies it s important to consult with legal counsel if you believe your employment rights have been violated due to garnishment | |
are there any exemptions from garnishment | yes certain income sources and assets may be exempt from garnishment under federal and state laws for example social security benefits disability payments certain pensions and child support payments are often protected from garnishment additionally each state has its own set of exemptions that may shield specific types of income or assets from garnishment the bottom linegarnishment is a legal process where a creditor obtains a court order to collect a debt by seizing a portion of the debtor s wages bank accounts or assets it allows creditors to recover owed funds directly from the debtor s income or assets to satisfy outstanding debts | |
what is the gartley pattern | the gartley pattern is a harmonic chart pattern based on fibonacci numbers and ratios that helps traders identify reaction highs and lows in his book profits in the stock market h m gartley laid down the foundation for harmonic chart patterns in 1935 1 the gartley pattern is the most commonly used harmonic chart pattern larry pesavento later applied fibonacci ratios to the pattern in his book fibonacci ratios with pattern recognition 2gartley patterns explainedthe gartley pattern is the most common harmonic chart pattern harmonic patterns operate on the premise that fibonacci sequences can be used to build geometric structures such as breakouts and retracements in prices the fibonacci ratio is common in nature and has become a popular area of focus among technical analysts who use tools like fibonacci retracements extensions fans clusters and time zones many technical analysts use the gartley pattern in conjunction with other chart patterns or technical indicators for example the pattern may provide a big picture overview of where the price is likely to go over the long term while traders focus on executing short term trades in the direction of the predicted trend the breakout and breakdown price targets may also be used as support and resistance levels by traders the key benefit of these types of chart patterns is that they provide specific insights into both the timing and magnitude of price movements rather than just looking at one or the other other popular geometric chart patterns used by traders include elliott waves which makes similar predictions of trends in the future based on the appearance of the price movements and their relation to each other identifying gartley patternshere s how the gartley pattern is structured the gartley pattern above shows an uptrend from point 0 to point 1 with a price reversal at point 1 using fibonacci ratios the retracement between point 0 and point 2 should be 61 8 at point 2 the price reverses again toward point 3 which should be a 38 2 retracement from point 1 at point 3 the price reverses to point 4 at point 4 the pattern is complete and buy signals are generated with an upside target that matches point 3 point 1 and a 161 8 increase from point 1 as the final price target oftentimes point 0 is used as a stop loss level for the overall trade these fibonacci levels do not need to be exact but the closer they are the more reliable the pattern the bearish version of the gartley pattern is simply the inverse of the bullish pattern and predicts a bearish downtrend with several price targets when the pattern reaches completion by the fourth point real world example of a gartley patternhere s an example of a gartley pattern appearing in the aud usd currency pair in the chart above the gartley pattern is followed by a bullish move higher point x or 0 70550 could be used as a stop loss point for the trade the take profit point could be set at point c or about 0 71300 | |
what is gas ethereum | gas is the fee required to successfully conduct a transaction or execute a contract on the ethereum blockchain platform fees are priced in tiny fractions of the cryptocurrency ether eth denominations called gwei 10 9 eth gas is used to pay validators for the resources needed to conduct transactions the exact price of the gas is determined by supply demand and network capacity at the time of the transaction understanding gas in ethereumthe concept of incentives for work paid in fees gas was introduced to compensate miners for their work on maintaining and securing the blockchain in addition to receiving block rewards after the proof of stake algorithm was rolled out in september 2022 a portion of the gas fee became the reward for staking eth and participating in validation the more a user has staked the more they can earn a transaction fee is similar to the fee you pay for a money wire transfer you re paying the service provider for using their network ethereum validators who perform the essential tasks of verifying and processing transactions on the network are awarded this fee in return for staking their ether and verifying blocks gas fees rise and fall with supply and demand for transactions if the network is congested gas prices might be high on the other hand they could be low if there is not much traffic | |
how do you calculate gas fees | originally gas fees were a product of a gas limit and the gas price per unit in august 2021 ethereum changed its calculations for gas fees to use a base fee a set fee for the transaction set by the network units of gas required and a priority fee the priority fee is a tip to the validator that chooses a transaction the more you tip the higher the chances are that your transaction will be processed faster 1gas fees are calculated using this formula so imagine you wanted to pay a friend 2 eth and you think it will require two units of gas the base fee is 11 gwei and you provide a tip of 3 gwei your gas fee would be this equals 0 000000028 eth it s added to your transfer total which is now 2 000000028 eth gas and the ethereum virtual machine evm ethereum as a platform and system is designed to be used by others to create more use cases for blockchain and cryptocurrency for this reason it is commonly called the ethereum virtual machine because applications can be created that run on it the evm is essentially a large virtual computer like an application in the cloud that runs other blockchain based applications within it many decentralized applications cryptocurrencies and tokens have been created using the evm because the ethereum blockchain is part of the evm the cryptocurrencies built on that blockchain require gas fees for example a popular token built on ethereum s blockchain is dai because it uses the ethereum blockchain users need to pay gas fees in gwei to conduct transactions on the chain concerns about ethereum gas feesan ongoing concern for any cryptocurrency that requires transaction fees is the price users pay for the transactions before 2020 gas fees on ethereum were very low measured in a few cents with occasional spikes after january 2020 gas fees began climbing as the network attracted new users reaching more than 20 sometimes much higher for long periods after the merge the merge of the beacon chain and the ethereum main chain when proof of stake was implemented fees began to range from a few dollars to as high as 30 however the merge was not designed to address the problem of high fees it was one of many updates that when combined are believed to eventually lower gas fees 2there are a few ways you can avoid high fees first you can choose times when the network is not so busy a challenging endeavor but not impossible etherscan provides a gas tracker that shows the day s high low and average gas fees so you can try to time your necessary transactions using its tracker or another like it 3 the website also provides a chrome extension you can install to the browser that lets you see gas prices in real time second you can use layer 2 solutions or dapps for your transactions taking your activity off the main chain is one of the best ways to keep your fees low | |
why is gas so high on ethereum right now | ethereum s transaction fees are the result of network traffic and validator availability when there is more traffic fees are higher | |
what is ethereum gas | ethereum gas is a blockchain transaction fee paid to network validators for their services to the blockchain without the fees there would be no incentive for anyone to stake their eth and help secure the network | |
does ethereum run on gas | the ethereum gas fee exists to pay network validators for their work securing the blockchain and network 1 without the fees there would be few reasons to stake eth and become a validator the network would be at risk without validators and the work they do so it essentially runs on gas the bottom linegas fees are used on the ethereum blockchain and network to incentivize users to stake their eth staking works to secure the blockchain because it discourages dishonest behavior for staking their eth owners are given small payments as a reward for helping to secure the blockchain and help it function fees are determined by the amount of network traffic the supply of validators and the demand for transaction verification the higher the demand and traffic the higher the fees when traffic and demand are lower fees become lower the comments opinions and analyses expressed on investopedia are for informational purposes online read our warranty and liability disclaimer for more info | |
what is the gas guzzler tax | the gas guzzler tax is a surcharge added to the sales or lease price of cars in the u s that have poor fuel economy ratings the tax which is paid by the manufacturer or importer of the vehicle varies depending on the miles per gallon efficiency of the vehicle and ranges from 1 000 to 7 700 1the gas guzzler tax is imposed on passenger cars but not on trucks sports utility vehicles or minivans this is because the law was passed in 1978 when such models were rarely used as passenger vehicles 2congress established the gas guzzler tax provision in the energy tax act of 1978 to discourage the production and purchase of fuel inefficient vehicles 3 | |
how does the gas guzzler tax work | in order to escape the gas guzzler tax a car must get at least 22 5 miles per gallon mpg in combined city and highway driving 4the amount of the tax due is based on just how much gas the car guzzles that is the worse the fuel economy the higher the tax cars that fall just below 22 5 mpg are taxed 1 000 while cars that get less than 12 5 mpg are taxed at 7 000 the top of the range the tax is reported on internal revenue service irs form 6197 it is reported after the end of the production year when the total number of vehicles produced is known 5shoppers for a new car will see the amount of the tax posted on the window sticker of the car if it is subject to the gas guzzler tax 2the epa published a list of new car models that were subject to the gas guzzler tax up until 2016 it has not published one since but the 2016 list of gas guzzlers gives a sense of the kind of cars that are subject to the tax 6the majority are high end luxury and sports cars including models from aston martin bmw ferrari and rolls royce a few american muscle cars were on the list too including the chevrolet corvette and one iteration of the ford mustang 6anyone interested in the fuel economy of any vehicle sold in the u s can check the fuel economy guide that has been published by the u s government for every model year since 1984 manufacturers are required to use the same test as the epa when they measure vehicle fuel economy for the gas guzzler tax and new car fuel economy labels however the calculation procedures are different according to the epa an adjustment factor is applied to the fuel economy test results for the purposes of the label but not for the tax 7the adjustment is meant to reflect the differences between real world driving and laboratory testing conditions this difference is referred to as in use shortfall to calculate the shortfall mpg values listed in the fuel economy guide and shown on fuel economy labels are based on three tests in addition to the standard fuel economy test 8the combined city and highway fuel economy that is used to determine tax liability is not adjusted to account for in use shortfall so it is higher than the mpg values provided in the fuel economy guide and posted on the window stickers of new vehicles 8problems with the gas guzzler tax | |
when the gas guzzler tax was imposed in 1978 prices at the pump had increased 75 from six years earlier meanwhile u s oil production peaked in 1970 and was falling steadily through the decade as demand increased 910 | the opec oil embargo of 1973 added additional pain for consumers in the u s and abroad the decade is famous for its gas shortages and skyrocketing prices 11this is the environment in which the gas guzzler tax was passed its purpose was to incentivize more fuel conscious spending on the part of consumers and fuel efficiency on the part of manufacturers 12in 1984 jeep introduced the cherokee xj which is widely credited as the first sport utility vehicle suv 13 the suv didn t exist when the gas guzzler tax was passed but over the next 30 years it became the most popular type of vehicle sold in the u s in 2019 american consumers continued to favor trucks and suvs over cars nonseasonally adjusted passenger car sales in the u s for 2019 declined 10 9 to 4 7 million units versus 5 3 million units in 2018 sales of trucks minivans and suvs for the year totaled 12 2 million units up 2 8 from the 2018 figure of 11 9 million units according to an s p global market intelligence analysis 14auto manufacturers were keen to take advantage of a loophole in the gas guzzler tax and its interpretation through regulatory agencies like the epa that exempted light duty trucks from the law consequently the amount of gas guzzler tax collected by the u s in the fiscal year 2019 was under 43 million 15 | |
what is a gate provision | a gate provision refers to a statement in a fund s offering documents that establishes the fund manager s right to limit or halt redemptions the prospectus or offering documents may provide more detail on a gate provision such as scenarios where redemptions would be restricted or halted entirely gate provisions are intended to stop a run on a fund particularly when the assets a fund holds are illiquid and difficult to turn to cash for redemption in a timely manner even with scenarios and guidelines the decision to exercise the gate provision is the fund managers understanding gate provisionsgate provisions restrict redemptions and help to prevent runs on the fund when a fund particularly a hedge fund is holding complex investment products unwinding positions can take time the gate provision is built into the fund offering to prevent a situation where redemption requests cost the fund further by forcing liquidation in an adverse market situation the gate provision in practicefund managers usually need to inform investors in writing when invoking the gate provision the notification will usually state the need for the provision and outline how much if any investors will be able to receive when they request a redemption even though they are part of most fund documents invoking the gate provision is a serious business and usually involves a consultation with an attorney because a gate provision is invoked at the discretion of the fund manager investors who find their money locked in understandably question the fund manager s judgment interestingly a gate provision doesn t always affect all investors equally institutional investors and preferred clients may have a side letter a separate agreement with the fund stating that their money will never be locked in as a result some hedge funds have eliminated gate provisions altogether because it doesn t actually cover the majority of the capital in the fund a famous example of a gate provision | |
when a fund enacts a gate provision it is generally seen as a negative event there have been cases however where a fund manager has used the gate provision to make certain that the capital is intact to carry out a critical phase of the strategy | one such situation was popularized in the film the big short when michael burry invoked a gate provision to halt redemptions so that his bet against the housing market wouldn t be liquidated until the mortgage meltdown occurred his investors enjoyed massive profits after the gate provision was invoked however by all accounts it was extremely unpleasant for all involved when the gate provision was announced investopedia does not provide tax investment or financial services and advice the information is presented without consideration of the investment objectives risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors investing involves risk including the possible loss of principal | |
what is a gazelle company | according to the original technical definition a gazelle company is a high growth company that has been increasing its revenues by at least 20 annually for four years or more starting from a revenue base of at least 100 000 1the rapid growth pace means that the company has more than doubled its revenues over a four year period as gazelle companies are characterized by fast sales growth rather than their absolute size they can range in size from small companies to very large enterprises though a majority of them are on the smaller end of the scale many gazelles are publicly traded companies meaning investors can buy and sell their shares | |
how a gazelle company works | author and economist david birch developed the idea of gazelle companies in some of his early studies on employment and introduced the concept to a wider audience in his 1987 book job creation in america how our smallest companies put the most people to work birch contended that small companies were the biggest creators of new jobs in the economy estimating that gazelles comprised only 4 of all u s companies but accounted for 70 of all new jobs birch noted that the job creation pace of gazelle companies far outstripped that of the fortune 500 elephants large enterprises and main street mice mom and pop type businesses the pace of job creation eventually slows however as most gazelle companies struggle to maintain the rapid rate of growth beyond five years 2in a more recent business landscape a gazelle refers to any fast growing company and has lost some of its strict birchian definition what is still generally true based on recent studies and empirical observations is that gazelles are good job creators for open entrepreneurial economies such as that of the united states many are in the technology sector but numerous others are in food and beverage retail apparel and other growth industries examples of gazelle companiessome gazelles keep bounding along some get tired and slow down and some get eaten by big cats gazelle companies like apple aapl meta formerly facebook meta and amazon amzn seem like they won t get caught by competitors perhaps this is because they have become too large to be acquired or they became so big they have eliminated true business competitors the natural maturation process of their businesses also makes it difficult for them to remain gazelles as they grow larger in size other gazelles with their rapid and flashy strides in the open field may attract the attention of big predatory cats these larger cats could jump on them and eat them literally through an acquisition or they could enter their markets and claim market share for themselves using their existing infrastructure to shake up the landscape social media giant instagram makes a good example having been acquired by meta mobile messaging provider whatsapp and the virtual reality company oculus shared the same fate | |
what is the gbp | gbp is the abbreviation for the british pound sterling the official currency of the united kingdom the british overseas territories of south georgia the south sandwich islands and british antarctic territory and the u k crown dependencies the isle of man and the channel islands the british pound sterling is symbolized by the pound sign and is sometimes referred to as sterling or by the nickname quid trading the gbpthe british pound competes with the u s dollar usd euro eur and japanese yen jpy in daily volume trading the most common currency pairs involving the british pound are the euro eur gbp and the u s dollar gbp usd gbp usd is referred to as cable by foreign exchange traders 1the penny sterling or pence is 1 100th of a pound many stocks are traded in pence rather than in pounds stock exchanges may use gbx to indicate pence though the official name of gbp is pound sterling sterling or stg may be used more commonly in accounting or foreign exchange forex settings currencies pegged to the british pound include the falkland islands pound gibraltar pound saint helena pound jersey pound jep guernsey pound ggp manx pound scotland notes and northern ireland notes the gbp or british pound sterling is the oldest active legal tender in the world 2history of the gbpthe british pound became the official currency of the united kingdom when england and scotland united to form a single country in 1707 but the pound was used as a form of money in the year 760 3 until 1855 when printing began the bank of england wrote all banknotes by hand the british pound served as currency in the colonies of the british empire including australia new zealand and canada in the late 19th and early 20th centuries many countries tied the value of their currencies to the price of gold the gold standard offered a uniform way to determine value among world currencies before world war i the united kingdom used the gold standard to set the value of the british pound at the outbreak of world war i the country abandoned the gold standard then reinstated it in post war 1925 only to abandon it again during the great depression in 1971 the united kingdom allowed the british pound to float freely allowing market forces to determine its value in 2002 when the euro became the common currency of most european union eu member nations the u k kept the gbp as its official currency this turned out to be a good decision for the u k as it officially left the eu in 2020 45legislation and the gbpin a june 2016 referendum british voters supported a measure to leave the european union through a process called brexit 6 the gbp declined significantly upon the u k s split from the eu and the value fluctuated in response to trade negotiations the pound sterling declined again in sept 2022 after prime minister liz truss announced economic policies on tax cuts although the truss government aimed to boost u k economic productivity investors and forex traders were concerned that tax cuts would increase already high inflation and debt the gbp usd sank to an all time low of 1 03 on sept 26 2022 7 | |
is british pound and sterling the same | yes the official name of the u k currency is pound sterling but it is often called the british pound or sterling | |
why is the british pound called sterling | reportedly the u k s currency evolved from sterling silver pennies that were used in the late 700 s 2 | |
why are pounds called quid | there doesn t seem to be a definitive answer similar to the dollar being referred to as buck some believe it originates from quid pro quo latin for something for something while others think it came from quidhampton where there was once a royal paper mill the bottom linethe gbp or british pound sterling is the official currency of the united kingdom the gbp is the oldest currency in the world that is still used as legal tender symbolized by the pound sign the gbp has one of the highest trading volumes in the world | |
what was gdax | gdax is the former name of the cryptocurrency exchange run by coinbase a popular broker for bitcoin and other digital assets unlike the in app purchases available through the coinbase wallet gdax was aimed at professional traders with tools to track price movements and set complex buy and sell orders the exchange was launched in 2015 under the name coinbase exchange and later rebranded to global digital asset exchange gdax in 2018 gdax was again rebranded to coinbase pro but kept its original functionality 1 in 2022 the exchange was rebranded once more becoming coinbase advanced trade 2 although gdax was launched with only a handful of major cryptocurrencies coinbase advanced trade now allows trading in hundreds of different virtual assets 3 | |
what is a gdp gap | a gdp gap is the difference between the actual gross domestic product gdp and the potential gdp of an economy as represented by the long term trend a negative gdp gap represents the forfeited output of a country s economy resulting from the failure to create sufficient jobs for all those willing to work a large positive gdp gap on the other hand generally signifies that an economy is overheated and at risk of high inflation the difference between real gdp and potential gdp is also known as the output gap understanding a gdp gapa gdp gap can be positive or negative and is calculated as a c t u a l g d p p o t e n t i a l g d p p o t e n t i a l g d p actual gdp potential gdp potential gdp actualgdp potentialgdp potentialgdpfrom a macroeconomic perspective you want the smallest possible gdp gap and preferably no gap at all a negative gap shows that an economy is operating at less than its full potential it s underperforming and essentially leaving money on the table from where it should be trend wise here production and value are irretrievably lost due to a shortage of employment opportunities negative gdp gaps are common after economic shocks or financial crises the negative gdp gap in this case is mostly a reflection of a hesitant business environment companies are unwilling to spend or commit to increased production schedules until stronger signs of a recovery are present this in turn leads to less hiring and perhaps even continued layoffs in all sectors that said a positive gdp gap is also problematic a large positive gdp gap may be a sign that the economy is overheated and heading toward a correction the larger the positive gdp gap the more likely it is that an economy is at risk of a period of high inflation at the very least example of a gdp gapaccording to the bureau of economic analysis bea the actual gdp in the united states for the fourth quarter of 2020 was 20 93 trillion 1 the federal reserve bank of st louis has its own real potential gdp in 2012 dollars adjusted to 2020 dollars it projected a potential gdp of 19 41 trillion 2running this through the formula 20 93 19 41 19 41 we get a positive gdp gap of about 0 8 that is near ideal from the perspective of sustainable economic growth however this represents just a moment in time policymakers watch the gdp gap closely and make adjustments to try and keep growth in line with the long term trend gdp gaps between nationsthe term gdp gap is also applied more simply to describe the difference in gdp between two national economies in recent years an increasing amount of attention has been paid to the gdp gap between the united states the world s largest economy in terms of gdp and china in 2020 this gdp gap was estimated to be around 5 9 trillion which while significant still represents a rapid closing in by china over the last decade 3china has been making up ground since the great recession with its huge infrastructure investments and also bounced back quicker than the u s from the 2020 economic crisis current projections anticipate that china could overtake the u s economy in gdp terms by 2028 however other economists are less convinced arguing that an aging population and growing debt pile could keep china confined to second place 3 | |
what is the gdp price deflator | the gross domestic product gdp price deflator is a formula that measures the amount to which the real value of an economy s total output is reduced by inflation the gdp deflator formula takes into account the value of all final goods including exports it does not factor in the prices of imports the gdp deflator formula is used by the bureau of economic analysis bea it helps economists track more accurately how the economy is faring over time while taking inflation into account formula and calculation of the gdp price deflatorthe following formula calculates the gdp price deflator to calculate the gdp price deflator divide the nominal gdp by the real gdp and multiply the result by 100 nominal gdp is the total value of goods and services produced during a specific period less the value of products made during production real gdp refers to the value of goods and services produced in a year and adjusted for inflation understanding the gdp price deflatorgdp represents the total output of goods and services but it doesn t factor in the impact of inflation or rising prices the gdp price deflator addresses this by showing the effect of price changes on gdp the price deflator formula establishes a base year and compares current prices to the base year prices the gdp price deflator shows how much of a change in gdp relies on changes in the price level it estimates the extent of price level changes or inflation within the economy by tracking the prices paid by businesses the government and consumers some companies use the gdp price deflator to adjust their contract payments the gdp price deflator closely resembles another economic metric the gdp price index which also measures the rise in prices of goods and services including exports however the two metrics are calculated differently data for the gdp price deflator is calculated and reported by the bea every quarter based on data reported every month as of the first quarter of 2024 the gdp price deflator increased by 3 1 compared to an increase of 1 7 during the fourth quarter of 2023 1benefits of the gdp price deflatorthe gdp price deflator helps identify how much prices have inflated over a specific time this is important because comparing gdp to a previous year can be deceptive if there s a change in the price levels between both periods without some way to account for the change in prices an economy that experiences price inflation would appear to be growing in productivity when it is really growing only in dollar terms the gdp price deflator helps to measure the changes in prices when comparing nominal to real gdp over several periods gdp price deflator vs the consumer price index cpi other indexes measure inflation many of these alternatives are based on a fixed basket of goods these include the consumer price index cpi which measures the level of retail prices of goods and services over time the cpi is an important inflation measure because it reflects real changes to a consumer s cost of living however all calculations based on the cpi are direct which means the index is computed using prices of goods and services already included in the index 2the fixed basket used in cpi calculations is static and sometimes misses changes in prices of goods outside of the basket of goods for instance changes in consumption patterns or the introduction of new goods and services are automatically reflected in the deflator but not in the cpi this means that the gdp price deflator captures any changes in an economy s consumption or investment patterns that said the trends of the gdp price deflator are usually similar to the trends illustrated in the cpi example of the gdp price deflatorgdp often referred to as nominal gdp shows the total output of the country in whole dollar terms that can be deceptive for example say the u s produced 10 million worth of goods and services in year one in year two the output or gdp increased to 12 million on the surface it would appear that total output grew by 20 year on year however if prices rose by 10 from year one to year two the 12 million gdp figure would be inflated when compared to year one in reality the economy only grew by 10 from year one to year two when considering the impact of inflation the gdp measure that considers inflation is called the real gdp so in the example above the nominal gdp for year two would be 12 million while the country s real gdp would be 11 million | |
what is gross domestic product gdp | gross domestic product is the total value of all the finished goods and services produced within a country s borders within a specific time as a broad measure of overall domestic production it functions as a comprehensive scorecard of a given country s economic health though gdp is usually calculated annually it is sometimes calculated every quarter as well the u s government releases an annualized gdp estimate for each fiscal quarter and for the calendar year the individual data sets included in the report are given in real terms so the data are adjusted for price changes and are therefore net of inflation | |
what is deflation | deflation is a general decline in prices for goods and services typically associated with a contraction in the supply of money and credit in the economy during deflation the purchasing power increases | |
what is the consumer price index cpi | the consumer price index is a measure of the weighted average of the prices of a basket of consumer goods and services such as transportation food and medical care it is calculated by taking price changes for each item in the predetermined basket of goods and averaging them changes in the cpi are used to assess price changes associated with the cost of living the cpi is one of the most frequently used measures of inflation and deflation it may be compared with the producer price index ppi which instead of considering prices paid by consumers looks at what businesses pay for inputs the bottom linethe cpi is important because it tracks the changes in the prices of a fixed basket of goods that most american consumers use regularly but it omits changes in prices of goods outside of that basket gdp is the total of all goods and services produced in the economy and the number is tracked consistently as a way to determine the health of an economy in this case inflation is relatively irrelevant and even confuses the issue the gdp price deflator separates the inflation factor from gdp so that each element can be analyzed separately | |
what is gearing | gearing refers to the relationship or ratio of a company s debt to equity d e gearing shows the extent to which a firm s operations are funded by lenders vs shareholders in other words it measures a company s financial leverage when the proportion of debt to equity is great then a business may be thought of as being highly geared or highly leveraged nez riaz investopediaunderstanding gearinggearing is measured by a number of ratios including the d e ratio shareholders equity ratio and debt service coverage ratio dscr which indicate the level of risk associated with a particular business the appropriate level of gearing for a company depends on its sector and the degree of leverage of its corporate peers for example a gearing ratio of 70 shows that a company s debt levels are 70 of its equity a gearing ratio of 70 might be very manageable for a utility company as the business functions as a monopoly with support from local government channels but may be excessive for a technology company with intense competition in a rapidly changing marketplace special considerationsgearing or leverage helps to determine a company s creditworthiness lenders may consider a business s gearing ratio when deciding whether to extend it credit to which a lender might add factors like whether the loan would be supported with collateral and if the lender would qualify as a senior lender with this information senior lenders might choose to remove short term debt obligations when calculating the gearing ratio as senior lenders receive priority in the event of a business s bankruptcy in cases where a lender would be offering an unsecured loan the gearing ratio could include information about the presence of senior lenders and preferred stockholders who have certain payment guarantees this allows the lender to adjust the calculation to reflect the higher level of risk than would be present with a secured loan gearing vs riskin general a company with excessive leverage demonstrated by its high gearing ratio could be more vulnerable to economic downturns than a company that s not as leveraged because a highly leveraged firm must make interest payments and service its debt via cash flows which could decline during a downturn on the other hand the risk of being highly leveraged works well during good economic times as all of the excess cash flows accrue to shareholders once the debt has been paid down example of gearingas a simple illustration in order to fund its expansion xyz corp cannot sell additional shares to investors at a reasonable price instead it obtains a 10 000 000 short term loan currently xyz corp has 2 000 000 of equity thus the debt to equity d e ratio is 5 10 000 000 total liabilities divided by 2 000 000 shareholders equity equals 5 xyz corp definitely would be considered highly geared | |
how is gearing measured | a number of ratios including the debt to equity d e ratio shareholders equity ratio and debt service coverage ratio dscr measure gearing the ratios indicate the level of risk associated with a particular business | |
how much gearing is appropriate for a company | that depends on the business s sector and the degree of leverage of its corporate peers | |
how does gearing apply to credit | gearing helps to determine the creditworthiness of a business lenders may consider a company s gearing ratio when deciding whether to provide it with credit the bottom linegearing measures a company s financial leverage the term refers to the relationship or ratio of a business s debt to equity d e gearing shows the extent to which a firm s operations are funded by lenders vs shareholders | |
what are gearing ratios | gearing ratios are financial ratios that compare some form of owner s equity or capital to debt or funds borrowed by the company gearing is a measurement of the entity s financial leverage which demonstrates the degree to which a firm s activities are funded by shareholders funds versus creditors funds the gearing ratio is a measure of financial leverage that demonstrates the degree to which a firm s operations are funded by equity capital versus debt financing investopedia xiaojie liuunderstanding gearing ratiosthe best known examples of gearing ratios include debt to equity ratio total debttotal equitytimes interest earned ebittotal interestequity ratio equityassetsdebt ratio total debttotal assets begin aligned text debt to equity ratio frac text total debt text total equity text times interest earned frac text ebit text total interest text equity ratio frac text equity text assets text debt ratio frac text total debt text total assets end aligned debt to equity ratio total equitytotal debt times interest earned total interestebit equity ratio assetsequity debt ratio total assetstotal debt a higher gearing ratio indicates that a company has a higher degree of financial leverage it s more susceptible to downturns in the economy and the business cycle because companies that have higher leverage have higher amounts of debt compared to shareholders equity entities with a high gearing ratio have higher amounts of debt to service companies with lower gearing ratio calculations have more equity to rely on for financing 1gearing ratios are useful for both internal and external parties financial institutions use gearing ratio calculations when they re deciding whether to issue loans loan agreements may also require companies to operate within specified guidelines regarding acceptable gearing ratio calculations internal management uses gearing ratios to analyze future cash flows and leverage interpreting gearing ratiosa high gearing ratio typically indicates a high degree of leverage but this doesn t always indicate that a company is in poor financial condition a company with a high gearing ratio has a riskier financing structure than a company with a lower gearing ratio regulated entities typically have higher gearing ratios because they can operate with higher levels of debt 1companies in monopolistic situations often operate with higher gearing ratios because their strategic marketing position puts them at a lower risk of default industries that use expensive fixed assets typically have higher gearing ratios because these fixed assets are often financed with debt a firm s gearing ratio should be compared with the ratios of other companies in the same industry example of how to use gearing ratiosassume that a company has a debt ratio of 0 6 this figure alone provides some information as to the company s financial structure but it s more meaningful to benchmark it against another company in the same industry the company s debt ratio might have been 0 3 last year the industry average is 0 8 and the company s main competitor has a debt ratio of 0 9 more information is derived by comparing gearing ratios to each other a company with a 0 3 ratio is performing comparatively well in its industry when the industry average ratio result is 0 8 and the competition s gearing ratio result is 0 9 | |
what is the times interest earned ratio | a company s times interest earned ratio is arrived at by dividing its earnings before interest and taxes ebit by its interest expenses it s a gauge of the company s ability to pay its debts each period 2 | |
what is shareholders equity | shareholders equity is the portion of a company s net assets that belongs to its investors or shareholders it appears on the company s balance sheet the par value of shares anything additional in capital retained earnings treasury stock and any other accumulated comprehensive income all contribute to shareholders equity 3 | |
what is financial leverage | a company s financial leverage is its total assets divided by its shareholders equity the result shows a comparison between total assets owned by the company versus shareholders ownership a high ratio indicates that a good portion of the company s assets are funded by debt 4the bottom linegearing ratios compare a company s equity to its debt the result indicates its financial leverage or how much of its operational debt is serviced via shareholders equity and or borrowed funds it s a strong measure of financial stability and something an investor should keep an eye on a high gearing ratio can raise a red flag and be risky | |
what is the gemini exchange | gemini is a global cryptocurrency exchange founded in 2014 the gemini exchange also known as the gemini trust company is the brainchild of cameron and tyler winklevoss the famous investors twins and harvard classmates of mark zuckerberg understanding the gemini exchangethe winklevoss brothers announced the launch of gemini in early 2014 although the exchange did not go live until october 2015 as of q2 2022 gemini operates in more than 60 countries including the u s u k and canada 1 like other digital currency exchanges gemini allows users to buy and sell various digital currencies either with digital currency for example using bitcoin to buy litecoin or using fiat currency like u s dollars to buy digital currencies gemini is the astrological sign representing twins gemini productsgemini boasts a diverse range of products for small investors and advanced traders offering features like charting and instant trades gemini exchange is gemini s platform for buying and selling cryptocurrency it is available both through web browsers and as an app the mobile app also includes the gemini wallet which allows users to pay for goods using their crypto holdings for advanced traders gemini offers its active trader platform according to its website the platform features advanced charting multiple order types auctions and block trading they also claim to be able to execute orders in microseconds but that may depend on how you define execute and what kind of cryptocurrency you re trading the gemini custody product is both a cold storage system for assets held by gemini and a crypto native finance platform the custody product is unique in providing insurance coverage of 200 million for crypto holdings it is a fiduciary and custodian licensed under new york banking law making gemini arguably the most secure crypto exchange that has ever existed gemini also is a clearinghouse for off exchange trades 2the gemini dollar gusd is gemini s stablecoin based on the u s dollar users can spend gusd or a few other select cryptocurrencies with gemini pay a function built into the gemini app gemini exchange plansthe gemini exchange set itself apart in early may 2016 when it became the first licensed ethereum exchange in the united states 3 in may 2018 gemini became the world s first exchange to be licensed to offer zcash trading as well 4 this announcement followed a report that gemini began offering block trading in april 2018 allowing users to buy and sell large orders of digital currencies outside gemini s usual order books block trading was implemented in order to create additional liquidity opportunities 5gemini has expanded its partnerships with other organizations and companies the most notable of these is gemini s partnership with nasdaq announced in april 2018 through this collaboration gemini can utilize nasdaq s smarts technology in order to weed out fraudulent activity and manipulation of digital currency prices besides the nasdaq partnership gemini also partnered with caspian the digital currency trading and risk management service 6as with most digital currency exchanges gemini has seen its share of issues in late november 2017 for instance gemini crashed for several hours due to unusually high demands on its website rival exchange coinbase also crashed around the same time in response gemini representatives wrote on the company blog to indicate that this is not the first scaling challenge we ve encountered and it won t be the last adding that the exchange is continuing to improve our performance and infrastructure monitoring so we can anticipate potential problems more quickly in the future 7gemini has worked to ensure compliance with federal and state regulations regarding the sale and purchase of digital currencies as such the company markets itself as a new york trust company regulated by the new york state department of financial services as of september 2023 the securities and exchange commission s lawsuit against the exchange continues additionally one of its lending partners genesis and its parent digital currency group filed for bankruptcy in 2023 gemini earn members are at the top of its creditor s list with more than 765 million owed to them 8 | |
what is the gemini exchange scandal | gemini used genesis global a subsidiary of digital currency group as a lender genesis declared bankruptcy in january 2023 withholding funds for gemini s earn program thousands of gemini customers were unable to withdraw funds as gemini froze its withdrawals all of which followed the collapse of ftx which had impacted gemini financially as well |
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