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what is a hash in cryptography | a hash is a mathematical function that converts a variable input to a deterministic hexadecimal number the bottom linein a cryptocurrency blockchain a hash is a deterministic hexadecimal number this means that no matter how many characters the input has the hash will always be the same number of characters for instance bitcoin s hashes are always 64 digits hashes are used to secure information in the case of cryptocurrency they are used to ensure data contained in the blocks on a blockchain are not altered the information encrypted by the hashing function is validated by network participants when they attempt to generate a hash less than the network target once the target hash is reached the network closes the block consensus is reached after the block closes because the network continues to validate transactions and block information after the hash solution is found the comments opinions and analyses expressed on investopedia are for informational purposes online read our warranty and liability disclaimer for more info | |
what is a hashed timelock contract htlc | a hashed timelock contract htlc is a type of smart contract used in blockchain applications it reduces counterparty risk by creating a time based escrow that requires a cryptographic passphrase for unlocking in practical terms this means that the person receiving the funds in a transaction has to perform two actions to access the funds enter the correct passphrase and claim payment within a specific timeframe if they enter an incorrect passphrase or do not claim the funds within the timeframe they lose access to the payment 1understanding hashed timelock contracts htlcs a hashed timelock contract htlc uses several elements from existing cryptocurrency transactions for example htlc transactions use multiple signatures consisting of a private and public key to verify and validate transactions however two elements distinguish htlc from standard cryptocurrency transactions with smart contracts the hashlock and the time contract the first element is the hashlock a hashlock is a hashed or cryptographically scrambled version of a public key generated by the person that initiated the transaction the associated private key is then used to unlock the original hash 2in htlc the initiating party generates a key and hashes it the hash is stored in a pre image which is revealed during the final transaction htlcs are programmed to expire after a certain period passes or a specific number of blocks are generated creating a known termination date and time 1to conduct a transaction using htlc both parties need to open channels with each other this is generally done using a wallet an exchange or both the second important element of htlc is a timelock two different timelocks are used to set time constraints on contracts generated using htlc the first one is checklocktimeverify cltv it uses a time base to lock and release cryptocurrency this means that time constraints are hardcoded and coins are released only at a specific time and date or a specific height of block size 3atomic swaps cross chain trading between cryptocurrencies are often achieved using htlcs 4 additionally bitcoin s lightning network ln also employs htlcs 1the second one is checksequenceverify csv it is not dependent on time instead it uses the number of blocks generated as a tracking measure to determine when to finalize a transaction 3the process in a hashed timelock contractsuppose alice wants to exchange her bitcoin for litecoin from bob a typical htlc transaction between them takes place as follows | |
what is a timelock contract | a timelock contract is a smart contract embedded in a blockchain that executes a transaction at a specific time they are used in hashed timelock contracts and payment channels where specific payment times are needed | |
does bitcoin have smart contracts | initially bitcoin s blockchain was not able to execute smart contracts however the taproot upgrade in 2021 allowed the blockchain to use smart contracts in transactions 5 | |
what is a smart contract | a smart contract is a program stored on a blockchain that executes when specific conditions are met | |
how much does a smart contract cost | on the ethereum blockchain a smart contract deployment takes gas which costs gwei a lower denomination of ether depending on the complexity of the contract it can cost billions of gwei to deploy a smart contract less complex contracts like a simple exchange are much cheaper 6investing in cryptocurrencies and other initial coin offerings icos is highly risky and speculative and this article is not a recommendation by investopedia or the writer to invest in cryptocurrencies or other icos since each individual s situation is unique a qualified professional should always be consulted before making any financial decisions investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein | |
what is hashgraph consensus | hashgraph consensus is an alternative to or the next generation of the technology behind blockchain consensus mechanisms instead of using the computational power of large networks to verify transactions transactions are recorded and confirmed via a protocol that uses node communication a hashgraph is a decentralized ledger in much the same way a blockchain is it stores information secures it with cryptography limits access and uses the stored data as verification however a hashgraph network reaches consensus in a much different way than a blockchain does hashgraph consensus is reached using concepts called gossip gossip about gossip and virtual voting designers of the system report that it solves the problems inherent to consensus building algorithms such as proof of work pow in terms of better speed and higher efficiency learn more about hashgraph consensus and how it is different and more efficient than blockchain consensus mechanisms hashgraph consensus gossip gossip about gossip and virtual voting is the mechanism the hedera distributed ledger uses to validate and confirm transactions 1understanding hashgraph consensushashgraph is an alternative to blockchain similar to a blockchain it stores data and encrypts it a hash is generated for transaction information and new transactions or data are added and built upon however a blockchain is a ledger that consists of blocks of data each block is linked to the previous block using its data verified by a network of validators to create the next block this process creates one chain a hashgraph isn t one chain all information is kept in an encrypted ledger and every user participates in the validation process not just the validators for example alice creates a transaction with bob and all of the information she knows is given to him bob then makes a transaction with kris all of the information bob has is communicated to kris kris transacts with eli and everything she knows is transferred this continues throughout the network with the chain essentially gossiping about the events taking place every node knows what all other nodes know so there is no need for computational validation as the gossip spreads from user to user the network uses algorithms and automation to ensure the state of the hashgraph ledger is updated and the same information about data is called gossip the data structure contained in a transaction are the two hashes are the last events from two syncing nodes that compare their information nodes are continuously creating events and syncing hashgraph the ledger is more efficient than blockchain because no energy is wasted on blocks that are not accepted all information is retained in a hashgraph information about transaction data is called gossip about gossip information is synchronized in the hashgraph network using an event called a gossip sync a gossip sync is a collaborative history of gossip events throughout the hashgraph in this way data cannot be altered or tampered with and there is consensus virtual voting occurs when the nodes compare events and reach a consensus via a voting algorithm here s how it works a transaction is assigned a timestamp as a node receives it as it passes to the other nodes in the network it is assigned a timestamp that is a median of all of the timestamps for that transaction received by the nodes in the network the median acts as the result of the vote this creates a more fair transaction system than a blockchain because the network decides not one node as with most distributed ledgers and blockchain there is always a chance that a participant in the network is not honest there might be delays in communication or network latency that causes nodes not to communicate properly consensus mechanisms are designed to deal with these faults by setting fault tolerance criteria developers need to consider and account for bad actors bad connections network latency and other network issues hashgraph consensus can tolerate one third of the network acting maliciously it is reportedly asynchronous byzantine fault tolerant the highest security level which means that honest nodes on a network continue operating even if there are bad actors 2 | |
how is hashgraph different from blockchain | hashgraph is a data structure that maintains the records of who told who what and in what order they did so it is a collaborative history of gossip events as participants add and share information which validates transactions much faster than a blockchain blockchain adds previous transaction information to new transaction information and encrypts it a third party is needed to validate the transactions between parties hashgraph doesn t need this slow process because of the gossip protocol hashgraph consensus is much faster than blockchain consensus mechanisms with average transaction confirmation times in seconds rather than minutes 1bitcoin and many other cryptocurrencies have issues with message timing however hashgraph s asynchronous byzantine fault tolerance overcomes the problem of message timing by assuming that lost or delayed messages will eventually make it to their destinations 2for example if two transactions occur simultaneously a blockchain network chooses which order the transactions occurred in some blockchains transaction fees prioritize confirmation other networks might decide which transaction is confirmed based on how many tokens a validator has staked in these blockchains one node influences the outcome hashgraph consensus eliminates the influence one node or a group of nodes can have on transactions because there is a timestamp on each transaction and each transaction is communicated to the entire network transaction timing issues are resolved 3 | |
what is hashgraph consensus | hashgraph consensus is a mechanism used in a hashgraph distributed ledger to validate transactions | |
how does hashgraph consensus work | hashgraph consensus works using consensus timestamps and gossip in which each node communicates everything it knows to random nodes in gossip events will hashgraph replace blockchain hashgraph is designed to be and marketed as an improvement on blockchain technology but whether it will replace it remains to be seen it doesn t yet have as much developer interest and adoption as blockchain technology | |
what is hawala | hawala is an informal method of transferring money without any physical money actually moving it is described as a money transfer without money movement another definition is simply trust hawala is used today as an alternative remittance channel that exists outside of traditional banking systems transactions between hawala brokers are made without promissory notes because the system is heavily based on trust and the balancing of hawala brokers books understanding hawalahawala originated in south asia during the 8th century and is used throughout the world today particularly in the islamic community as an alternative means of conducting funds transfers 1 unlike the conventional method of transferring money across borders through bank wire transfers money transfer in hawala is arranged through a network of hawaladars or hawala dealers hawala dealers keep an informal journal to record all credit and debit transactions on their accounts debt between hawala dealers can be settled in cash property or services a hawaladar who doesn t keep their end of the deal in the implied contractual system of hawala will be tagged as one who has lost their honor and will be excommunicated from the network or region hawala is thought to come from the arabic word for assignment or bill of exchange or the hindi word for reference 2migrant workers who frequently send remittances to relatives and friends in their countries of origin find the hawala system advantageous hawala facilitates the flow of money between poor countries where formal banking is too expensive or difficult to access in addition to the convenience and speed of conducting hawala the fees are usually low compared with the high rates that banks charge to encourage foreign exchange transfers through hawala dealers sometimes exempt expatriates from paying fees the system is also easy to use as one only needs to find a trusted hawaladar to transfer money benefits of hawalahawala allows people to transfer money even if they don t have formal banking relationships or access to established financial networks for people without a government issued id or bank account hawala networks may be the only way to send remittances particularly if the destination is in another country in other circumstances it may be cheaper or faster than dealing with the paperwork of official channels for this reason hawala networks are frequently used in countries where there are strict capital controls or sanctions on the flow of money traders and expatriates from sanctioned countries like iran might use hawala networks to make payments to their counterparties in neighboring countries example of hawala | |
how does hawala work let s say maryam needs to send 200 to amir who lives in another country she will approach a hawaladar nasir and give him the amount of money she wants amir to receive including the details of the transaction the name of the recipient city and password | nasir contacts a hawala dealer in the recipient s city muhammed and asks him to give amir 200 on the condition that amir correctly states the password muhammed transfers the money to amir from his own account minus commission and nasir will owe muhammed 200 the transaction initiated by maryam and concluded by amir s receipt of the funds takes only one to two days or in some instances just a few hours no money is moved and no ious are signed and exchanged by nasir and muhammed as the hawala system is backed only by trust honor family connections or regional relationships hawala provides anonymity in its transactions as official records aren t kept and the source of money that is transferred can t be tracked because money laundering aims to hide the source of cash that is generated from illegal activities hawala is often used as a system for money laundering hawala and illegal activitiesthe very features that make hawala an attractive avenue for legitimate patrons also make it attractive for illegitimate uses thus hawala is frequently referred to as underground banking this is because money launderers and terrorists take advantage of this system to transfer funds from one location to another in addition corrupt politicians and the wealthy who would prefer to evade taxes use hawala to anonymize their wealth and activities cash generated from business transactions that aren t recorded can t be taxed hawala is also used to fund terrorism which makes it more difficult to stop terrorism a large portion of discovering terrorist cells involves tracing the movement of money as terrorist organizations are funded and need money to buy weapons and feed their people hawala transactions make this movement of money easy as there is no paper trail from the source of funds to the terrorist organization 3hawala and government regulationbecause hawala transfers aren t routed through banks and hence aren t regulated by governmental and financial bodies many countries have been led to re examine their regulatory policies in regard to hawala for example in india the foreign exchange management act fema and the prevention of money laundering act pmla are the two major legislative systems that deter the use of hawala in the country india prohibits informal hawala transactions and people from entering into them by strictly defining the types of transactions not allowed which include the creation or procurement of any asset outside india 45in pakistan informal hawala transactions are prohibited as well the country specifies what entities are allowed to make remittances and currency exchanges there are laws in place that require money changers to register and comply with regulations to become foreign exchange companies within two years and if they don t register they aren t allowed to operate afghanistan s more than 300 money exchangers have organized themselves into a self regulatory body that has created rules and regulations that all members must comply with it has been more difficult for the country to bring unregistered money exchangers into the fold to prevent illegal activities through hawala exchanges some countries have made hawala illegal due to the difficulty of enforcing regulations most countries have laws related to informal funds transfer systems like hawala that seek to curb the negative activities created by such a system hawala and fintechsome fintech companies are implementing the hawala system in providing financial services to the unbanked and underbanked populations of the world mobile banking and payment platforms such as paga and m pesa are revolutionizing the financial system in certain african countries by promoting financial inclusion through the hawala system of financial services 6 | |
is hawala illegal | hawala trades are illegal in the u s and many other countries because financial regulations require money services businesses to obtain appropriate licenses and follow anti money laundering laws | |
what is hawala money | hawala money is funds that are transferred using the hawala system in which no actual movement of funds from one account to another account happens no paper trail is created and no promissory notes exist | |
what is the punishment for hawala in india | the punishment for hawala in india is | |
is hawala legal in dubai | hawala is legal in dubai as long as the hawala provider is registered with the united arab emirates central bank and abides by the regulations that exist 8the bottom linehawala is an informal funds transfer system that allows for the shifting of money from one person to another without the actual movement of money it is a simple process that requires no documentation and therefore is an anonymous system of moving money this has been beneficial for many poor countries where individuals move abroad to work and send money home avoiding costly transfer fees and other required documentation because of its anonymity hawala also has been a means for illegal activity to take place such as money laundering and the financing of terrorism for this reason many countries prohibit hawala or have placed regulations on it | |
what is an inflation hawk | an inflation hawk also known in economic jargon as a hawk is a policymaker or advisor who is predominantly concerned with the potential impact of interest rates as they relate to monetary policy | |
what does it mean to be hawkish hawks are seen as willing to allow interest rates to rise in order to keep inflation under control even if it means sacrificing economic growth consumer spending and employment | a hawk can be contrasted with a dove investopedia candra huffunderstanding inflation hawksa hawk generally favors relatively higher interest rates if they are needed to keep inflation in check in other words hawks are less concerned with economic growth and more focused on the potential of recessionary pressure brought to bear by high inflation rates whether being hawkish is a good or appropriate stance will depend on the strength of the economy and other macroeconomic factors this is because hawkish policies that can lower inflation can also lead to economic contraction and higher unemployment and can sometimes backfire and lead to deflation although it is common to use the term hawk as described here in terms of monetary policy it is also used in a variety of contexts in each case it refers to someone who is intently focused on a particular aspect of a larger pursuit or endeavor a budget hawk for example believes the federal budget is of the utmost importance a war hawk similarly pushes for armed conflict to resolve disputes as opposed to diplomacy or restraint the opposite of a hawk is known as a dove or an economic policy advisor who prefers monetary policies that involve low interest rates doves typically believe that lower rates will stimulate the economy leading to an increase in employment advantages and disadvantages of hawkish policiesalthough the term hawk is often levied as an insult high interest rates can carry economic advantages while they make it less likely for people to borrow funds they make it more likely that they will save money in some cases banks end up lending money more freely when interest rates are higher high rates dissipate risk making banks potentially more likely to approve borrowers with less than perfect credit histories moreover if a country increases interest rates but its trading partners do not that can result in a fall in the prices of imported goods higher interest rates can become deflationary making prices cheaper while this can be a short term positive deflation can often be worse than moderate inflation in the long run persistent deflation means that a dollar tomorrow will be worth more than one today and worth even more in a week or a month this incentivizes people to hoard money and put off large purchases until much later when ostensibly they will be even less expensive in terms of the dollar s greater purchasing power with higher interest rates consumers will borrow less and spend less on credit higher mortgage rates will also put a damper on the housing market and can cause housing prices to fall in turn higher rates on car loans can have a similar effect on the automobile market hawkish policies will likewise tend to reduce a company s desire to borrow and invest as the cost of loans and interest rates on bonds rise moreover companies will be less eager to hire and retrain workers in such an environment hawkish policies can also impact domestic manufacturers and trade if the relative inflation rate in the home country is falling relative to the inflation rate in a trading partner the exchange rate should adjust to keep prices in line with the dollar appreciating relative to the trading partners when the home currency strengthens the prices of imported foreign goods become relatively cheaper hurting domestic producers at the same time domestic exports become relatively more expensive for overseas consumers further hurting domestic manufacturing hawkish policies tend to favor savers and lenders who can enjoy higher interest rates they also make imports and traveling abroad cheaper hawkish policies tend to negatively impact borrowers and domestic manufacturers they also make exports and domestic tourism more expensive can stem runaway inflationincreases the savings ratecheaper importstourists to foreign destinations have greater purchasing powercan hurt domestic producersmakes borrowing more expensive for consumers and firmscan lead to deflationthese aren t the only instances in economics in which animals are used as descriptors bulls and bears are also used the former refers to a market affected by rising prices while the latter is typically one where prices are falling | |
why is it called hawkish | hawks and hawkish policy are more aggressive in nature whether in terms of monetary policy or military stance during a potential conflict it is named after hawks the aggressive birds of prey the opposite are a dove and dovish policies seen as more meek or conservative these epitomize peaceful symbolism can hawks become doves and vice versa yes as the recent history of u s fed leadership shows alan greenspan who served as chair of the fed from 1987 to 2006 was considered to be fairly hawkish in 1987 but he changed over time to a relatively dovish stance ben bernanke who served in the post from 2006 to 2014 also alternated between hawkish and dovish tendencies janet yellen fed chief from 2014 to 2018 was generally seen as a dove who was committed to maintaining low lending rates jerome powell named to the post in 2018 was rated as neutral neither hawkish nor dovish by the bloomberg intelligence fed spectrometer | |
how are interest rates determined | at eight annual meetings a group from the fed examines economic indicators such as the consumer price index cpi and the producer price index ppi and determines if interest rates should go up or down or stay the same those who support high rates are hawks while those who favor low rates are labeled doves high interest rates make borrowing less attractive as a result consumers become less likely to make large purchases or take out credit the lack of spending equates to lower demand which helps to keep prices stable and prevent inflation in contrast low interest rates entice consumers into taking out loans for cars houses and other goods consumers spend more and ultimately inflation occurs it is the fed s responsibility to balance economic growth and inflation and it does this by manipulating interest rates the bottom lineinflation hawks adopt policies to quickly stamp out inflation such as aggressively raising interest rates and other contractionary measures inflation hawks believe that low target inflation rates around 2 to 3 should be maintained even it comes at the expense of economic growth or employment those with the opposite policy stance are known as doves | |
what is the hawthorne effect | the hawthorne effect is the supposed inclination of people who are the subjects of an experiment or study to change or improve the behavior being evaluated only because it is being studied and not because of changes in the experiment parameters or stimulus it was first identified by organizational researchers in the 1920s more recent research suggests that the hawthorne effect may not actually be real and that the original study was flawed 1 | |
how the hawthorne effect works | the hawthorne effect refers to the fact that people will modify their behavior simply because they are being observed the effect gets its name from one of the most famous industrial history experiments that took place at western electric s factory in the hawthorne suburb of chicago in the late 1920s and early 1930s however subsequent analyses of the effect have revealed that the original results were likely overstated along with several flaws in the study s design and execution the hawthorne experiments were originally designed by the national research council to study the effect of shop floor lighting on worker productivity at a telephone parts factory in hawthorne however the researchers were perplexed to find that productivity improved not just when the lighting was improved but also when the lighting was diminished productivity improved whenever changes were made in other variables such as working hours and rest breaks the researchers concluded that the workers productivity was not being affected by the changes in working conditions but rather by the fact that someone was concerned enough about their working conditions to conduct an experiment on it 2the hawthorne effect and modern researchresearch often relies on human subjects in these cases the hawthorne effect is the intrinsic bias that researchers must take into consideration when studying their findings although it can be challenging to determine how a subject s awareness of a study might modify their behavior researchers should nevertheless strive to be mindful of this phenomenon and adapt accordingly while there is no universally agreed upon methodology for achieving this experience and keen attention to the situation can help researchers prevent this effect from tarnishing their results although it can be challenging to determine how a subject s awareness of a study might modify their behavior researchers should nevertheless strive to be mindful of this phenomenon and adapt accordingly the hawthorne effect in medical practiceas an example of the hawthorne effect consider a 1978 study conducted to determine if cerebellar neurostimulators could reduce the motor dysfunction of young cerebral palsy sufferers the objective testing revealed that the patients in the study claimed that their motor dysfunctions decreased and that they embraced the treatment but this patient feedback countered the quantitative analysis which demonstrated that there was scant increased motor function 3indeed the increased human interaction with doctors nurses therapists and other medical personnel during these trials had a positive psychological impact on patients which consequently fostered their illusion of physical improvements to their conditions when analyzing the results researchers concluded that the hawthorne effect negatively impacted the data as there was no evidence that the cerebellar neurostimulators were measurably effective 45 | |
is the hawthorne effect real | while the hawthorne effect is taught in business schools and sociology courses around the world recent scholarship has begun to question its validity according to scientific american out of the first three original experiments only one showed improved productivity the second found no improved productivity and in the third productivity actually worsened what is suspicious is that the sponsors of the study ordered the destruction of all data including everything that had been sent to mit and for no report to be written when the original data finally did resurface several scholars were able to debunk the initial findings 1 additionally modern attempts to replicate the hawthorne effect have been inconclusive 6 only seven out of 40 such studies found any evidence of the effect 1 | |
why is it called the hawthorne effect | the name comes from where the original studies took place in a factory complex known as the hawthorne works outside of chicago il | |
what were some of the flaws of the original hawthorne study | scholars have identified several flaws in the studies that led to the hawthorne effect for one the sample size was very small just five individual workers moreover the members of the sample changed over time the researchers conducting the study were not blinded and so could have been biased the data collected even if it had been sound has been further criticized as being misinterpreted 1 | |
what is hazard insurance | hazard insurance is coverage that protects a property owner against damage caused by fires severe storms hail sleet or other natural events as long as the specific weather event is covered within the policy the property owner will receive compensation to cover the cost of any damage incurred 1depending on the policy the property owner may need to pay their premiums to the mortgage lender who holds the money in an escrow account and pays the insurance company on the property owner s behalf mortgage lenders often require you to have hazard coverage through a homeowners policy however it s important to make sure your policy covers the most common hazards 2 | |
how hazard insurance works | hazard coverage is usually a subsection of a homeowners insurance policy that protects the main dwelling and other nearby structures such as a garage hazard insurance financially protects a property owner against physical damage to the property structures caused by sudden perils 1the events that can damage your home and surrounding structures that are covered by hazard insurance include to be prepared for every contingency homeowners should be sure that specific common hazards are covered in their insurance policy package some hazard insurance policies also cover theft and vandalism 3the amount of hazard insurance required depends on what it would cost to replace the home in the event of a total loss this dollar amount may differ significantly from the property s current real estate market value policies are typically written for one year and are renewable hazard insurance is not usually sold as a stand alone policy but is instead included in a comprehensive homeowners policy since it doesn t cover all types of risk such as liability 4typically hazard insurance only covers your home s structure roof and foundation though some policies extend coverage to include furnishings and personal belongings homeowners can often elect to beef up the hazard coverage of their policy it is much better to pay the upfront costs of extra insurance than to deal with the associated expenses out of pocket as severe weather events become more commonplace across north america due to climate change increased hazard insurance may become necessary for more homeowners 5hazard insurance is often considered synonymous with catastrophe insurance although both deal with coverage for large scale natural disasters they are technically different within the insurance industry hazard insurance refers to a portion of a general homeowners insurance policy that protects the structure of the home catastrophe insurance usually refers to a separate freestanding policy that covers specific types of disasters including man made ones 1hazard insurance and mortgagesif you have or are taking out a mortgage on your home it s common for your lender to require you to carry homeowners insurance strictly speaking what they want you to have is in fact hazard coverage since it is the portion of homeowners insurance directly related to the home structure itself as opposed to personal liability loss of use or personal property coverage usually purchasing a general homeowners policy will satisfy the lender s requirement though the level of protection required will depend on the laws of the local municipality and other special considerations if you have a very expensive property in a high risk area the lender may require additional coverage separate hazard insurance policiesin some areas certain natural or weather related activity is excluded from the hazard coverage of homeowners insurance usually because the area is so prone to these events and it s too costly for the insurance issuer to include them in a standard policy for example a florida beachfront property can be susceptible to hurricanes and tropical storms california properties located close to fault lines face earthquake threats 6homeowners living in high risk areas often need a separate hazard insurance policy to adequately protect their property such as flood insurance they might also need a policy that protects the property against landslides since conventional homeowners insurance s hazard coverage rarely covers landslides 7frequently asked questions faqs | |
is hazard insurance the same as homeowners insurance | hazard insurance is usually the part of your homeowners insurance policy that covers the physical structures such as your home and garage the policy provides financial compensation for covered damages including fire wind and snow your homeowners insurance includes hazard coverage plus it covers your personal belongings and liability if someone is injured on your property | |
what is the difference between hazard insurance and private mortgage insurance | hazard insurance helps the homeowner financially by paying you compensation if damage occurs to the home s physical structure from a covered event private mortgage insurance pmi protects the mortgage lender if you default on your payments can i remove hazard insurance from my mortgage if you have a mortgage loan you will be required to have hazard insurance coverage as part of your homeowners insurance policy hazard insurance protects you and the lender allowing you to receive compensation if a covered event damages your home and surrounding structures the bottom linehazard insurance falls under your homeowners insurance policy which covers physical damage to your home and other structures hazard insurance is designed to provide you compensation if sudden events damage your property structures including fire wind hail and snow however hazard insurance does not cover floods earthquakes and hurricanes in some regions of the country | |
what is the hazard rate | the hazard rate refers to the rate of death for an item of a given age x it is part of a larger equation called the hazard function which analyzes the likelihood that an item will survive to a certain point in time based on its survival to an earlier time t in other words it is the likelihood that if something survives to one moment it will also survive to the next the hazard rate only applies to items that cannot be repaired and is sometimes referred to as the failure rate it is fundamental to the design of safe systems in applications and is often relied on in commerce engineering finance insurance and regulatory industries understanding the hazard ratethe hazard rate measures the propensity of an item to fail or die depending on the age it has reached it is part of a wider branch of statistics called survival analysis which is a set of methods for predicting the amount of time until a certain event occurs such as the death or failure of an engineering system or component the concept is applied to other branches of research under slightly different names including reliability analysis engineering duration analysis economics and event history analysis sociology calculating the hazard ratethe hazard rate for any time can be determined using the following equation h t f t r t h t f t r t h t f t r t f t is the probability density function pdf or the probability that the value failure or death will fall in a specified interval such as a specific year r t on the other hand represents the survival function or the probability that something will survive past a certain time t the hazard rate cannot be negative and it is necessary to have a set lifetime on which to model the equation example of the hazard ratethe probability density calculates the probability of failure at any given time for instance a person is certain to die eventually as you get older you have a greater chance of dying at a specific age since the average failure rate is calculated as a fraction of the number of units that exist in a specific interval divided by the number of total units at the beginning of the interval if we were to calculate a person s chances of dying at a certain age we would divide one year by the number of years that person potentially has left to live this number would grow larger each year a person aged 60 would have a higher probability of dying at age 65 than a person aged 30 because the person aged 30 still has many more units of time years left in their life and the probability that the person will die during one specific unit of time is lower the shape of the hazard rate curvein many instances the hazard rate can resemble the shape of a bathtub 1 the curve slopes downwards at the beginning indicating a decreasing hazard rate then levels out to be constant before moving upwards as the item in question ages think of it this way when an auto manufacturer puts together a car its components are not expected to fail in its first few years of service however as the car ages the probability of malfunction increases by the time the curve slopes upwards the useful life period of the product has expired and the chance of non random issues suddenly occurring becomes much more likely | |
what is the difference between the failure rate and hazard rate | the hazard rate and failure rate are essentially the same thing failure rate is basically another way to say hazard rate | |
what is the hazard rate used for | the hazard rate seeks to determine the chances of survival of its subject at a certain time point it can effectively be applied to any item with a set lifetime and is commonly used in engineering medicine and insurance | |
what is the bathtub hazard rate curve | the bathtub curve is a visual representation of the typical failure rate of a product or group of products over time the bathtub image maps out three distinct periods the initial downward slope also known as infant mortality represents the timeframe when the product is first used and goes from a high failure occurrence to a low one next the line levels out and becomes flat depicting the useful life period when assets are expected to have a relatively constant failure risk then finally the slope moves upward taking the form of a bathtub as the product in question enters its wear out period and degrades at an accelerated pace the bottom linethe hazard rate is a simple yet effective way to determine the likelihood that an item will survive to a given time point that might not sound particularly useful or groundbreaking however in certain industries the concept is used to make key decisions | |
what is a hazardous activity | hazardous activity refers to a recreational pursuit that life or disability insurance policy considers high risk the activities are not typically covered by insurance as they carry an increased potential for injury or loss hazardous activities include scuba diving base jumping hang gliding race car driving flying a plane horseback riding bungee jumping parasailing and off roading further some employment falls into this category such as some construction work logging aircraft pilots offshore oil rig worker offshore fisherman structural steelworkers and underground mining if a hobby falls under an insurance company s definition of hazardous activity the policyholder may not be able to purchase a life insurance or disability insurance plan or they may pay a higher premium because the insurer considers the action high risk another possibility is that the insurer will issue a policy but it will explicitly exclude the hazardous activities from the coverage the insurance policy will not pay benefits for death or disability from a designated hazard but will still provide benefits for other covered accidents and events understanding hazardous activitysome policyholders may omit a dangerous hobby or work on their insurance application to secure approval not being truthful on an application for insurance is fraud called non disclosure the 1984 insurance contracts act made it a duty to disclose all information that can reasonably be relevant to the final decisions of the insurer the insurance provider has corrective actions it may take if it learns the applicant lied on the application for coverage during the underwriting process the insurer will review medical records and past insurance coverage noting injuries sustained from hazardous activities the insurer may deny the application or adjust the policy and premium payment to reflect the hazards covered when the insurer learns of dangerous nondisclosed enterprises after writing a policy it may demand back payment of adjusted premiums limit the benefit payment for death or dismemberment or even cancel the insurance policy as a whole it is essential to understand that not all insurance providers consider the same activities hazardous also the occasional participation in a hazardous activity such as going scuba diving for the first time on a vacation will not necessarily classify you as a high risk applicant special considerationssome disability policies have exclusion riders alcohol and substance abuse limitations are key examples of exclusions coverage for a disability arising from substance abuse or alcoholism is often capped at two years but in some cases may not be covered at all prescription medication may also trigger the substance abuse limitation some medications are easily abused and insurers may argue you are taking more than warranted for your injury or illness if the substance abuse limitation kicks in your legitimate insurance claim for a physical condition may be restricted or even denied other exclusions may include some lesser known exclusions including smoking is also considered a hazardous activity insurance companies maintain separate rate schedules for smokers who pay more and non smokers alternative coverage for hazardous activitysome travel and sports insurance companies work with extreme sports enthusiasts and adventure travelers by offering adventure activities coverage this insurance is not the standard travel insurance that protects from lost luggage canceled flights and medical emergencies the design of adventure activities insurance specifically addresses the needs of those with more extreme pursuits or lifestyles it often comes in the form of an exclusion waiver since even some of the best travel insurance plans exclude coverage for adventurous activities and hazardous sports one hazardous activity that sometimes manages to avoid exclusion is scuba diving depending on the level of education and experience of the participants more specifically some insurers provide plans in which scuba divers who are professional association of diving instructors padi or national association of underwater instructors naui receive coverage in the base plan without the need for an extra rider and thus additional costs most other adventure activities would require an additional rider at an extra charge real world examplein india the south mumbai district consumer disputes court upheld a ruling during an appeal from nagin parekh 1 the court was hearing a complaint that mr parekh entered against an insurance provider who denied coverage for an accident he had during a 2012 ballooning trip parekh was on an organized hot air balloon ride when the balloon suddenly lost altitude the balloon s basket landed roughly and the pilot and co pilot jumped out before the basket could be secured the balloon craft rose into the air again carrying parekh and other adventurers aloft the balloon again crashed into the ground more violently this second time and parekh sustained injuries to both of his legs and received treatment for fractured bones parekh s insurance denied medical and disability coverage and rejected his claim for reimbursement the company stated one who went for the ride did it at their own self risk which the appeals court upheld the court ruled that hot air balloon riding always involves a high risk of life and it is hazardous in nature 1 | |
what is considered high risk for life insurance | high risk activities are a concern for life insurers because they can cause an untimely death for someone who is insured earlier than actuarial models would otherwise predict such activities may include piloting aircraft paragliding bungee jumping scuba diving racing cars off roading and so on the exact activities will vary by insurer | |
what is a high risk policy | high risk policies insure individuals that are more likely to have a claim whether it be an aggressive driver or an ill individual such policies will be at a higher cost and may have certain other limitations | |
what can disqualify you from life insurance | you may not be approved for life insurance during the underwriting process if they deem you to be too high of a risk this can come from a combination of lifestyle health family history and financial situation in addition if you are found to be lying on your insurance application it will disqualify you from coverage | |
what is the head and shoulders pattern | a head and shoulders pattern is used in technical analysis it is a specific chart formation that predicts a bullish to bearish trend reversal the pattern appears as a baseline with three peaks where the outside two are close in height and the middle is highest the head and shoulders pattern forms when a stock s price rises to a peak and then declines back to the base of the prior up move then the price rises above the previous peak to form the head and then declines back to the original base finally the stock price peaks again at about the level of the first peak of the formation before falling back down 1the head and shoulders pattern is considered one of the most reliable trend reversal patterns it is one of several top patterns that signal with varying degrees of accuracy that an upward trend is nearing its end investopedia jiaqi zhouunderstanding the head and shoulders patterna head and shoulders pattern has four components the first and third peaks are the shoulders and the second peak forms the head the line connecting the first and second troughs is called the neckline 1the opposite of a head and shoulders chart is the inverse head and shoulders also called a head and shoulders bottom it is inverted with the head and shoulders bottoms used to predict reversals in downtrends this pattern is identified when the price action of a security meets the following characteristics an inverse head and shoulders pattern is also a reliable indicator signaling that a downward trend is about to reverse into an upward trend 1 in this case the stock s price reaches three consecutive lows separated by temporary rallies of these the second trough is the lowest the head and the first and third are slightly shallower the shoulders the final rally after the third dip signals that the bearish trend has reversed and prices are likely to keep rallying upward | |
what does the head and shoulders pattern tell you | the head and shoulders pattern indicates that a reversal is possible 1 traders believe that three sets of peaks and troughs with a larger peak in the middle means a stock s price will begin falling the neckline represents the point at which bearish traders start selling the pattern also indicates that the new downward trend will likely continue until the right shoulder is broken where prices move higher than the prices at the right peak advantages and disadvantages of the head and shoulders patternexperienced traders identify it easilydefined profit and riskbig market movements can be profited fromcan be used in all marketsnovice traders may miss itlarge stop loss distances possibleunfavorable risk to reward possiblewhile traders agree that the pattern is a reliable indicator there is no guarantee that the trend will reverse as indicated | |
what does a head and shoulders pattern tell you | the head and shoulders chart is said to depict a bullish to bearish trend reversal and signals that an upward trend is nearing its end investors consider it to be one of the most reliable trend reversal patterns | |
how reliable is a head and shoulders pattern | the most common entry point is a breakout of the neckline with a stop above market top or below market bottom the right shoulder the profit target is the difference between the high and low with the pattern added market bottom or subtracted market top from the breakout price the system is not perfect but it does provide a method of trading the markets based on logical price movements can head and shoulders turn bullish an inverse head and shoulders also called a head and shoulders bottom is similar to the standard head and shoulders pattern but inverted with the head and shoulders top used to predict reversals in downtrends it is a bearish to bullish indicator | |
what is the opposite of a head and shoulders pattern | the inverse head and shoulders pattern is the opposite of the head and shoulders indicating a reversal from a bearish trend to a bullish trend the bottom linethe head and shoulders is a pattern used by traders to identify price reversals a bearish head and shouders has three peaks with the middle one reaching higher than the other two it indicates a reversal of an upward trend a bullish head and shoulders has three troughs with the middle one reaching lower than the other two it indicates a reversal of a downward trend | |
what is a head fake trade | a head fake trade occurs when a security s price moves in one direction but then reverses course and moves in the opposite direction the head fake trade gets its name from a tactic used by a basketball or football player to confuse the opposition leading with their head to pretend that they are moving in one direction but then moving in the other way the head fake trade occurs most often at key breakout points such as major support or resistance levels or with moving averages like the 50 day or 200 day simple moving average sma 1understanding a head fake tradeconsider a situation where a major market index has reached new highs amid deteriorating economic fundamentals traders who are looking to short the index will closely monitor significant technical levels to assess whether the advance is beginning to break down suppose the index advance stalls and begins to drift lower trading below a key short term moving average the bears might rush in at this point based on their trading view that the index decline has begun but if the index subsequently reverses course and heads higher this would be a classic head fake trade contrarians often try to profit from head fake trades because their trading philosophy embraces a willingness to go against the crowd they argue that institutional traders push a security s price through closely watched support resistance areas to find additional liquidity to fill larger orders at a better price for their clients traders and investors who fall for a head fake trade can incur significant losses as such trades often occur before the start of a major trend in the opposite direction that s why it s imperative to maintain strict adherence to stop loss orders with these instances to help minimize risk the head fake trade and breakoutsan initial breakout is typically followed by some level of pullback as price retraces to the original breakout level or somewhat further down traders are left to determine whether the pullback is the beginning of a head fake a false breakout or whether it is temporary and the market will soon continue in the direction of the primary trend in the latter case the pullback may present another opportunity to enter a breakout move at a more advantageous level example of a head fake tradeduring 2022 the u s dollar was on a massive winning streak against all but a few currencies the chart below shows the u s dollar against the hungarian forint usd huf in a clear long term uptrend usd strengthening huf weakening one can discern multiple pullbacks but all are contained by the dominant rising channel with one key exception highlighted in the red oval price fell below the key uptrend support line on an intraday basis but managed to regain that trendline support before the end of the day this is a classic example of a countertrend head fake pattern if one made a trading decision based on the break of trendline support they would have learned in short order by the end of the day that the break was false and constituted a head fake price movement tight stops or the simple fact that the usd huf pair finished the day back inside the dominant up channel would have told traders that this was a head fake this was also confirmed by the fact that nothing new on in fundamentals had altered the basis for the usd to continue to strengthen tradingview | |
how can i tell if price is moving in a new direction or if it s just a head fake | head fake trades usually only last a short period of time perhaps an hour or a day if the price move coincided with a break of key technical significance and that technical level is subsequently regained you re very likely looking at a head fake move that s why it s important to keep stop loss orders tight if you have gone with the price break so as not to get caught in a head fake and more important miss the potential resumption of the prior trend | |
what causes a head fake price move | typically a head fake move will involve a test of important technical support or resistance such as trendline support in an uptrend or a test of key moving averages these technical levels are made to be tested and frequently stop loss orders to buy sell are placed around that price level if the price move tests or breaks these levels stop loss orders may be triggered bringing in temporary buying selling pressure if the technical level is regained within a short period of time hours for day traders days for longer term traders the market has likely shown its hand as a head fake or a false break of that technical level | |
how much should i risk on going with a move that might be a head fake | by definition a head fake is countertrend so you need to be prepared with tight stop losses in case it is in fact a head fake in terms of how much to risk a quarter to a half of your usual position is conservative and reasonable to go with a potential head fake set up due to the tenuous nature of the scenario that way you re committing only a relatively small portion of your risk capital to the breakout trade and keeping tight stop loss orders to minimize losses the bottom linea head fake refers to a false breakout of a significant technical level for example the current price trend is higher a head fake occurs when a move lower below key support occurs and catches the market flat footed which can lead to outsized moves on the break of that technical level head fake price action is all too common in markets and represents a counter trend breakout most often at a significant technical price point a key element to consider in deciding whether to go with the breakout or if it s just a head fake is how much and for how long the break of the key price level lasts frequently the buying selling surrounding the break of a key price point is due to stop loss orders around a technical level once the stop loss buying selling is done there may be no real news to sustain the break on the other hand fresh news may have surfaced potentially leading to a counter trend movement and not a head fake that s why it s critical to be aware of any fresh news that could lead to a legitimate countertrend move or breakout if there is none it is less likely to be real breakout and more likely just a head fake | |
what is head of household hoh | filing your tax return using the head of household hoh filing status provides a higher standard deduction and lower tax rates but there are numerous qualifying rules you must support and provide a home for a qualifying dependent and you must be considered unmarried and pay more than half the cost of supporting your home understanding head of household hoh head of household is a filing status available to taxpayers who meet certain qualifying criteria they must file individual tax returns be considered unmarried and have a qualifying dependent such as a child or parent the hoh must pay more than one half the cost of supporting the qualifying person and more than one half the cost of maintaining that person s primary home 1the irs provides a breakdown of what constitutes a qualifying person in table 4 of publication 501 1head of household vs singlethere are some significant tax advantages to filing as head of household rather than single hoh qualifying rulesthe taxpayer must be single divorced or regarded as unmarried to qualify for hoh status married taxpayers would be regarded as unmarried if they didn t live with their spouse at any time during the last six months of the tax year the status also requires that the hoh meet one of these two requirements married taxpayers are considered unmarried if they haven t lived with their spouse for the last six months of the tax year 4an hoh must pay more than one half of the cost of a qualifying person s support and housing costs housing costs include rent or mortgage utilities repairs insurance taxes and other costs of maintaining the home where the qualifying person lives for more than half the year the home must be the taxpayer s own home unless the qualifying person is the taxpayer s parent and the home is the property of that parent 5it s still possible to file as head of household if your qualifying person is a parent who lives at another address provided that they re dependent on you and you cover more than half the cost of keeping up their home 5the enactment of the tax cuts and jobs act of 2017 tcja resulted in the suspension of the personal exemption for dependents through 2025 hoh filers had to be able to claim an exemption for their qualifying person when this tax provision was in effect taxpayers could release their exemption to a noncustodial parent in a divorce proceeding or a legal separation agreement and remain eligible to file as an hoh however 67hoh tax examplean hoh filer receives a standard deduction of 21 900 in tax year 2024 reducing 70 000 in taxable income to 48 100 of that amount 16 550 will be taxed at 10 and 31 550 at 12 bringing the total tax bill to 1 655 3 786 5 441 a taxpayer filing as single or married filing separately qualifies for a standard deduction of 14 600 in 2024 reducing their taxable income from 70 000 to 55 400 of which 11 600 will be taxed at 10 35 550 at 12 and the remaining 8 250 at 22 this results in a total tax bill of 1 160 4 266 1 815 7 241 2filing as head of household saved this taxpayer 1 800 numerous tax provisions are indexed for inflation so they can increase incrementally each year these 2024 figures represent the increases from 2023 who qualifies as head of household you must be considered unmarried pay at least half your household expenses and have a qualified dependent living with you for more than half the year to qualify as head of household you can also qualify if your dependent is a parent who doesn t live with you but for whom you cover at least half of their housing costs 1 | |
should i claim single or head of household status | it s almost always better to file as head of household hoh filers have a lower tax rate and higher standard deductions than single filers 5 | |
what is the standard deduction for head of household | the portion of income not subject to tax for heads of households is 21 900 in 2024 that s an increase from 20 800 for the 2023 tax year 38the bottom linehead of household hoh filing status can be claimed by unmarried taxpayers who support and house a qualifying person you must file a separate individual tax return be considered unmarried and have a qualifying child or dependent to qualify for hoh status the purpose of the hoh filing status is to provide a financial boost to single or separated individuals with dependents it s almost always better to file as head of household if you qualify hoh filers have a lower tax rate and higher standard deductions than single filers | |
what is a head trader | a head trader is the manager of a trading business responsible for the positions risk and ultimately the profitability of that business in a registered securities firm the head trader supervises all traders and other personnel within their purview and may also trade themselves most notably the head trader is charged with ensuring regulatory and internal compliance for every employee who is part of the trading operation i e not just traders a head trader may also be referred to as a head of trading understanding a head traderany head trader in a securities operation with supervisory and or approval responsibilities must be a registered principal meaning they must hold all of the basic securities licenses and possess one of the following certifications the exact principal exams required depend on the head trader s responsibilities in smaller firms there may only be one or two head traders but in large firms there can be many head traders each in charge of a specific market the head trader for municipal securities for example would have at a minimum a series 53 license 2 different licenses apply for futures and commodities trading operations a registered options principal for example will hold a series 4 license 3 head trader job descriptionin many environments such as wealth management companies or money managers a head trader may report to a chief investment officer and a chief operating officer and will have a key role in fulfilling and executing individual trade requests head traders may also be responsible for creating and maintaining relationships with external brokers and custodians a head trader should be among the most knowledgeable individuals at a firm regarding the markets and trading architecture environment some specific head trader job responsibilities may include head trader job evolutionas rapidly changing regulations alter the day to day responsibilities of head traders their role has shifted away from actively trading and toward more of a compliance and supervisory role in europe in particular the mifid ii regulations are shifting head traders daily priorities away from trading and toward market structure and regulation changes rather than keeping abreast of what the markets are doing 4 while being a seasoned trading expert is essential to becoming a head trader the role now may allow for only a small amount of time actually trading securities example of head trader order executionlet s say the head trader of a mid sized hedge fund is given a stock order from the portfolio manager the order is to buy 100 000 shares of abc stock best way because the head trader knows that abc is a thinly traded stock and typically trades 150 000 a day on average they decide to put 50 000 shares to buy in a dark pool in order to not impact the stock price from here they may also look at dealer indications of interest in the ticker to see if there is a natural seller available this transaction would be a cross trade because the head trader is familiar with how abc stock trades they know that it is not the best idea to work the order in the machines because the order size is too large knowing this information is critical to best execution and comes with years of experience | |
what is a headhunter | a headhunter is a company or individual that provides employment recruiting services on behalf of an employer headhunters are hired by firms to find talent and to locate individuals who meet specific job requirements headhunters may also be referred to as executive recruiters and the function they perform is often called executive search headhunters may have a pool of candidates for specific positions or may act aggressively to find talent by looking at competitors employees employers tend to enlist headhunters when there is a sense of urgency and they are unable to find the right person to fill a role on their own duties and responsibilities of a headhunterfinding and recruiting job candidates is often performed by hiring managers human resources personnel or internal recruitment specialists but in some cases employment agencies or executive search firms may be employed third parties working on behalf of a hiring company are colloquially referred to as headhunters a headhunter is retained to fill jobs that require specific or high level skills or offer high pay headhunters working on behalf of a firm often scour international organizations for top talent in addition some individuals may contact a headhunter to provide a r sum or curriculum vitae cv or to apply for a position for which the headhunter is seeking talent headhunting is supported on many levels by internet technologies including social media and online job boards | |
how headhunters are paid | headhunters typically only make money when they are successful in placing a candidate in a job independent third party recruiters are often paid on contingency meaning they do not get paid unless their candidate is hired the typical fee is 20 to 30 of a new hire s total first year salary as headhunters work for the employer they have the incentive to please them rather than the candidate some headhunter firms may also charge an upfront retainer to defray the costs of the search this can reduce the risk for the headhunter especially if the role is difficult to fill a retainer arrangement ensures that the headhunter receives some pay for their work even if the search is unsuccessful a container arrangement is a hybrid of a commission and retainer 1there is no licensing necessary to become a headhunter or recruiter so anyone can become one less established recruiters often compete with professional ones that possess large networks of clients and candidates they may operate in a similar way such as an unsolicited email call or linkedin request headhunters typically charge a commission for recruiting candidates ranging from 20 to 30 of the new hire s first year of salary this is only paid out if the new hire is a successful fit for the job | |
what should you look for in a headhunter | the quality and helpfulness of headhunters vary here are some characteristics to look for and avoid | |
what percentage do headhunters get | a typical commission for a headhunter is about 20 30 of a new hire s initial annual salary but this may vary depending on the industry and qualifications that the employer is looking for for management executives a typical commission is in a higher range of 25 35 for senior level executives the commission may be higher due to the increased stakes as well as the difficulty of the search 2 | |
what are the alternatives to recruiting through headhunters | for companies trying to recruit talent the main alternative to headhunters or recruiting firms is to recruit their own talent either through an in house recruiting department or by networking in house recruitment is more common at larger firms which have enough turnover to justify employing several full time professionals to look for new employees headhunters are more expensive but may have the industry expertise to find candidates with specialized qualifications | |
what s the difference between a headhunter and a recruiter | headhunters and recruiters are both recruiting professionals who seek to find job candidates for open positions the main difference is the positions they fill headhunters typically seek to fill high level executive positions while recruiters seek a wider variety of technical qualifications recruiters also seek people who are already seeking employment while headhunters may target people who are already employed 3the bottom linea headhunter is a recruitment professional who is hired to fill high level vacancies on behalf of a client company they are typically paid a percentage of the new hire s salary contingent upon finding a suitable candidate | |
what are headline earnings | headline earnings refer to a method of reporting corporate earnings based entirely on operational trading and capital investment activities achieved during the previous period excluded from the headline earnings figure are profits or losses associated with the sale or termination of discontinued operations fixed assets or related businesses or from any permanent devaluation or write off of their values understanding headline earningsheadline earnings provide a stringent measurement tool to isolate core operational profitability by excluding asset sales discontinued operations restructuring charges and write downs the headline earnings number shows the profitability of a company s core business because headline earnings make these exclusions it provides a better picture of a how company operates on an ongoing basis where one time charges or special items that are unlikely to occur again can give an unfair impression of true operations at the same time these items certainly do matter for analysts especially if they end up recurring or greatly impacting future prospects some companies report headline earnings per share eps in addition to required eps figures that take into account other items because it does not account for these items headline earnings are considered to be non gaap and must be reconciled with net income if presented in shareholder reports in accordance with sec regulations 1 this basis for measuring headline earnings per share was implemented in 1993 by the former institute of investment management and research iimr in the united kingdom 2 iimr developed this method as a way to better analyze a company s p l statement with a picture that would better represent a firm s operations during business as usual which could be clouded by a one time charge or write off criticism of headline earningsa company s quality of earnings is important so investors need to consider the validity of headline earnings and the exclusions that it makes on a case by case basis in order to avoid being misled or misinformed for instance research has shown that headline figures are more likely to exclude losses than gains gaap generally accepted accounting principles earnings now significantly trail non gaap earnings as companies become accustomed to including one time adjustments or charges which become problematic when they start to occur every quarter for example merck mrk turned a loss of 0 02 per share under gaap standards into an adjusted headline eps of 1 11 a share in the third quarter of 2017 a 5 650 difference 3 | |
what is the headline effect | the headline effect refers to the effect that negative news in the popular press has on a corporation or an economy many economists believe that negative news headlines make consumers more reluctant to spend money understanding the headline effectwhether it is justified or not the investing public s reaction to a headline can be very dramatic and out of proportion when compared with the reaction to good news in the headlines therefore when a government agency or central bank releases an unfavorable economic report traders investors and members of the investing public might disproportionately react to that bad news by converting selling or shorting funds away from any stocks currencies or other investments that have been affected while this market reaction is to some extent natural and expected the headline effect can speed up and worsen the severity of the market reaction by bringing bad news to the forefront of the trading public s mind economists and market observers have put forth several possible explanations for the headline effect most likely a combination of different factors are in play but here are a few possibilities first media sensationalism may be responsible for the headline effect the media know that bad news sells and that attention grabbing headlines generate more clicks and page views so negative news tends to be featured and promoted more heavily people will naturally pay more attention and react more strongly to stories that are run for widely frequently or prominently by news outlets second risk aversion and loss aversion may also be responsible for the headline effect most people tend to weight potential dangers risks and losses more heavily in their decision making this can easily mean that people will be more likely to act on negative news than positive news finally institutional factors that bias the behavior of businesses and fiduciaries toward caution may also be responsible for the headline effect these include things like the basic accounting principle of conservatism or the prudential rules that certain institutional funds such as pensions are required to follow example of the headline effectan example of a headline effect is the media s extensive coverage of the impact of rising gas prices on consumers some economists believe that the more attention that is paid to small increases in the price of gasoline the more likely it is that consumers will be more cautious about spending their discretionary dollars the headline effect can be regarded as the difference between decreases in discretionary spending that are rationally justifiable based on economic fundamentals and those that occur purely as a result of news coverage another example of the headline effect is the effect of the greek debt crisis on the value of the euro the economic crisis in greece was credited with weakening the euro significantly despite the fact that the greek economy accounted for only 2 of the eurozone s overall economic productivity 1 the public s reaction to bad news about the greek economy affected not only the eurozone but also countries outside the eurozone such as the united kingdom that rely heavily on trade with the eurozone to support their own economies some have said that the headline effect could be as drastic as undermining the future of the euro and the european union itself | |
what is headline inflation | headline inflation is the raw inflation figure reported through the consumer price index cpi that is released monthly by the bureau of labor statistics bls the cpi calculates the cost to purchase a fixed basket of goods to determine how much inflation is occurring in the broad economy the cpi uses a base year and indexes the current year s prices according to the base year s values | |
what is headline risk | headline risk is the possibility that a news story will adversely affect the price of an investment such as a stock or commodity headline risk can also impact the performance of a specific sector or the entire stock market understanding headline riskheadline risk is the risk that a news headline or story can influence the price of a stock sector or broader market suppose that a pharmaceutical company releases a new drug called cholestride that dramatically reduces a person s cholesterol levels in response to the drug a competitor organizes for a study that finds a possible but not conclusive link between the new cholesterol medication and liver damage this creates a headline risk for cholestride s makers that must be managed to prevent it from having a material impact on the company s stock price headlines generated by newspapers television or online including social media posts can moves stock prices note that prices can move even if the story is incorrect or misleading although in such cases the prices will tend to snap back headlines can also create positive movements such as the approval of a new drug by the fda or some other breakthrough headline risk can be mitigated through effective public relations pr campaigns successful public relations efforts can promote positive images of a company that can help counteract any negative stories as well as provide swift damage control if such a story is released managing headline riskinvestors cannot control or manage headline risk directly unless they are able to manipulate the flow of information before it becomes public such efforts could potentially be considered to include unethical behavior depending on the circumstances and the information involved but investor sentiment can be quite capricious and even a trivial headline could trigger behaviors that will negatively affect asset prices headline risk is really nothing more than price risk as such it is best managed through diversification and allocation rules in a portfolio or by trading position rules that employ stop loss strategies example of sector specific headline riskin the aftermath of the 2007 2010 subprime lending crisis mortgage lenders such as bank of america jpmorgan chase co and citigroup faced significant headline risk from other financial institutions collapsing or coming under severe financial pressure after the collapse of lehman brothers and the bailout of prominent financial institutions including fannie mae and freddie mac in 2008 investors had little confidence in the stability of the financial system and any negative headline relating to the financial sector had the potential to spark a stock selloff in financial stocks | |
what is a heads of agreement | a heads of agreement is a non binding document that outlines the basic terms of a tentative partnership agreement or transaction also known as a heads of terms or letter of intent a heads of agreement marks the first step on the path to a full legally binding agreement or contract and a guideline for the roles and responsibilities of the parties involved in a potential partnership before any binding documents are drawn up such a document is commonly used in commercial transactions such as the purchase of a business as a business term heads of agreement is most commonly used in australia new zealand and the united kingdom understanding a heads of agreementsa heads of agreement document is only meant to serve as an introductory agreement to the basic terms of a transaction or partnership it happens during the pre contractual stage of negotiations by design a heads of agreement will not be comprehensive enough to cover all the necessary details involved in a binding formal agreement but its lack of detail is also its strength the parties are less likely to find something they do not agree on once both parties come to a broad consensus on a partnership or transaction and have signed a heads of agreement document the next step entails involving attorneys and accountants to iron out the details such details may include a number of pre conditions that must be satisfied before a final agreement is made the step after that is the signing of a binding contract though a heads of agreement may be terminated at any time by either party with some caveats a heads of agreement can provide both parties in a transaction or partnership the following heads of agreement binding or not heads of agreement can be binding or non binding depending on the language used though they are not generally binding that said some aspects such as intellectual property exclusivity confidentiality and non solicitation provisions tend to be binding though only if the time frames are reasonable if a heads of agreement document is written so that it is binding it can present problems since most aspects of a heads of agreement are not binding the remedies for non compliance by either party are few in fact they only apply to the legally binding terms listed above if there is a breach of those binding terms by one party the other may file for an injunction equitable relief damages or specific performance | |
what is health insurance | health insurance is a contract between a company and a consumer the company agrees to pay all or some of the insured person s healthcare costs in return for payment of a monthly premium the contract is usually a one year agreement during which you are responsible for paying specific expenses related to illness injury pregnancy or preventative care health insurance agreements in the u s generally come with exceptions to coverage including | |
how health insurance works | in the united states health insurance is tricky to navigate it is a business with a number of regional and national competitors whose coverage pricing and availability vary from state to state and even by county about half of the u s population has health insurance coverage as an employment benefit with premiums partially covered by the employer the cost to the employer is tax deductible to the payer and the benefits to the employee are tax free with certain exceptions for s corporation employees self employed people freelancers and gig workers can buy insurance directly on their own the affordable care act of 2010 commonly called obamacare mandated the creation of a national database healthcare gov which allows individuals to search for standard plans from private insurers that are available where they live the costs of the coverage are subsidized for taxpayers whose incomes are between 100 and 400 of the federal poverty threshold some states created their own versions of healthcare gov that are tailored to their residents people over the age of 65 and those with disabilities end stage renal disease or als qualify to receive federally subsidized care through medicare while families whose incomes are near the poverty level are eligible for subsidized medicaid coverage types of health insurancehealth insurance can be tricky to navigate in the u s managed care insurance plans require policyholders to get their care from a network of designated healthcare providers if patients seek care outside the network they must pay a higher percentage of the cost the insurer may even refuse payment outright for services obtained out of network many managed care plans for example health maintenance organizations hmos and point of service plans pos require patients to choose a primary care physician who oversees the patient s care makes recommendations about treatment and provides referrals for medical specialists preferred provider organizations ppos by contrast don t require referrals but do set lower rates for using in network practitioners and services insurance companies may deny coverage for certain services that were obtained without preauthorization they may refuse payment for name brand drugs if a generic version or comparable medication is available at a lower cost check an insurance company s rules before your buy their insurance | |
what are copays deductibles and coinsurance | most health insurance plans require their customers to pick up some of the costs of their coverage in various ways insurance plans with higher out of pocket costs generally have smaller monthly premiums when shopping for plans weigh the benefit of lower monthly payments against the potential risk of large out of pocket expenses in the case of a major illness or accident if you re self employed you may be able to deduct up to 100 of health insurance premiums you pay out of pocket high deductible health plans hdhp one increasingly popular type of health insurance is the high deductible health plan hdhp these plans have higher deductibles and lower monthly premiums their users are the only ones eligible to open a health savings account hsa that has substantial federal tax benefits for 2024 a high deductible health plan is one that has deductibles of at least 1 600 for an individual or 3 100 for a family total out of pocket maximums are 8 050 for an individual and 16 100 for a family high deductible health plans offer a unique advantage in that if you have one you re permitted to open and contribute pretax income to a health savings account which can be used to pay for qualified medical expenses these plans offer a triple tax benefit in that you can withdraw money from an hsa after age 65 for any reason with no tax penalty but you will pay income tax on the withdrawal if the money is not used for qualified medical expenses federal health insurance plansnot all health insurance in the us is provided by private companies medicare medicaid and the children s health insurance program chip are federal health insurance plans that extend coverage to older disabled and low income people in 2010 president barack obama signed the affordable care act aca into law in participating states the act expanded medicaid a government program that provides medical care for individuals with low incomes the affordable care act has prohibited insurance companies from denying coverage to patients with preexisting conditions and has allowed children to remain on their parents insurance plan until they reach the age of 26 in addition to these changes the aca established the federal health insurance marketplace it also prohibits insurance companies from denying coverage to patients with preexisting conditions and allows children to remain on their parents insurance plan until they reach age 26 the marketplace helps individuals and businesses shop for quality insurance plans at affordable rates insurance available through the aca marketplace is required to cover 10 essential health benefits under the aca tax payers were required to carry medical insurance that meets federally designated minimum standards or face a tax penalty but the tax cuts and job act removed that penalty after december 31 2018 a supreme court ruling in 2012 struck down an aca provision that required states to expand medicaid eligibility as a condition for receiving federal medicaid funding and a number of states chose to refuse to expand their medicaid programs as of 2023 an estimated 40 million people have health coverage through the affordable care act two public health insurance plans medicare and the children s health insurance program chip provide subsidized coverage for disabled individuals and children medicare which is available to people age 65 or older also serves people with certain disabilities end stage renal disease and als the chip plan provides health coverage for low income children under the age of 19 medicaid can help older seniors to pay for long term care in a nursing home but medicare does not this is why medicare recipients often pay for supplemental coverage through a private insurer | |
what is health insurance and why do you need it | health insurance is an agreement in which an insurance company agrees to pay for some or all of your medical expenses in exchange for a monthly premium payment you need it to ensure you can pay for any medical bills while staying in good financial health who needs health insurance everyone needs health insurance health insurance offsets the costs of minor medical issues and major ones including surgeries and treatment for life threatening ailments and debilitating conditions | |
how do you get health insurance | if your employer offers health insurance as part of an employee benefits package you will be covered although you will probably have to pay a portion of the costs if you are self employed you can purchase health insurance through a federal or state health insurance marketplace people over the age of 65 qualify for federal medicare insurance although many of them supplement its coverage low income individuals and families qualify for subsidized coverage through the federal medicaid or medicare programs | |
how much does health insurance cost | the cost of health insurance varies widely based on the scope of coverage the type of plan you have the deductible and your age when you sign up copays and coinsurance also add to your expenses you can get a good sense of the costs of plans by looking at the four levels of coverage offered by the federal health insurance marketplace it categorizes plans as bronze silver gold or platinum with each category priced according to the level of coverage provided and their corresponding costs to the user the bottom lineunlike many countries the u s does not have a universal government health care system instead it has a complicated system of subsidies and tax incentives that make health care affordable for most people most of the time if you are employed you probably have health insurance that is subsidized by your employer if you are self employed you can get insurance directly from a private insurer if your income is low you can get a subsidy for the costs if you are elderly or disabled you can get coverage through the federal medicare or medicaid programs | |
what is the aca health insurance marketplace | the health insurance marketplace is a platform that offers insurance plans to individuals families and small businesses the affordable care act aca established the marketplace as a means to extend health insurance coverage to millions of uninsured americans many states offer their own marketplaces while the federal government manages an exchange open to residents of other states understanding the aca health insurance marketplacethe health insurance marketplace is a key element of the affordable care act a healthcare reform signed into law by president barack obama in 2010 also known as obamacare 1 the law instructed states to set up their own exchanges where individuals or families without employer sponsored coverage could compare plans many states however have chosen not to establish a marketplace and have joined the federal exchange the marketplace facilitates competition among private insurers in a central location where people who do not have access to employer sponsored insurance can find a suitable plan individuals can compare and apply for plans via the marketplace during the open enrollment period typically this period takes place in november and december of the year prior to the year in which the coverage will take effect consumers can apply for a special enrollment period in the case of a qualifying event such as the birth of a child marriage or the loss of another insurance plan the marketplace categorizes plans into four tiers bronze silver gold and platinum in the order of least to greatest coverage the highest tier platinum includes plans that cover approximately 90 of health expenses but is also the most costly 2lower income individuals and families can qualify for extra savings on all the health insurance plans offered on the exchange through premium tax credits and cost sharing reductions 3aca health insurance marketplace requirementsthe health insurance marketplace has requirements for individuals and families who use it as well as for the insurance companies that offer coverage to be eligible to buy coverage offered on the marketplace you must live in the united states and be a u s citizen or national if you are covered by medicare you re not eligible 4while the plans that insurers offer on the marketplace can vary widely the aca requires that they must each satisfy 10 basic requirements or essential health benefits ehbs 5required benefits include the aca does not require large employer sponsored insurance plans to cover any of the ehbs instead the writers of the law felt that the marketplace would apply competitive pressure that would force employer plans to comply with these basic mandates special considerationschanges have been made to the aca that have addressed some of the objections raised by its opponents while still keeping the marketplace open for example as part of the tax cuts and jobs act in dec 2017 congress removed a penalty individuals had to pay for not having health insurance a requirement that many republicans had opposed president biden who had helped president obama pass the affordable care act enacted more changes eight days after he took office he signed an executive order focused on strengthening the aca as well as medicaid then on aug 16 2022 biden signed the inflation reduction act of 2022 to extend aca insurance premium subsidies to include more middle class families for three years through 2025 | |
what is the health insurance portability and accountability act hipaa | the health insurance portability and accountability act hipaa is an act created by the u s congress in 1996 that amends both the employee retirement income security act erisa and the public health service act phsa hipaa was enacted in an effort to protect individuals covered by health insurance and to set standards for the storage and privacy of personal medical data 1 | |
how the health insurance portability and accountability act hipaa works | the health insurance portability and accountability act hipaa ensures that individual health care plans are accessible portable and renewable and it sets the standards and the methods for how medical data is shared across the u s health system in order to prevent fraud it preempts state law unless the state s regulations are more stringent since 1996 hipaa has been modified to include processes for safely storing and sharing patient medical information electronically 2 it also includes administrative simplification provisions which are aimed at increasing efficiency and reducing administrative costs by establishing national standards in 2009 the health information technology for economic and clinical health act hitech broadened hipaa privacy and security protections the hitech act was enacted as part of the american recovery and reinvestment act of 2009 as a way of promoting the use of health information technology a portion of the hitech act addresses privacy and security concerns 3the future of the health insurance portability and accountability act hipaa in 2018 bloomberg law reported on the privacy risks that come from digital healthcare data and the likelihood of updated federal laws in the near future 4 in an age of fitness tracking apps and gps tracked shareable data on everything from an individual s daily step count to their average heart rate medications allergies and even menstrual cycles there are new challenges for upholding standards in storing and protecting personal medical data in a video interview nan halstead health privacy and security attorney with reed smith llp said that future laws are unlikely to expand on hipaa rather they will use hipaa s framework as a model to create new laws governing the digital sector although no such federal laws have yet been passed states can pass laws that fill the gap in the meantime moreover companies tracking consumer data are currently also subject to supervision by regulating bodies like the u s food and drug administration fda and the federal trade commission ftc | |
what is a health maintenance organization hmo | an individual who needs to secure health insurance may find a variety of insurance providers with unique features one type of insurance provider that is popular on the health insurance marketplace is a health maintenance organization hmo an insurance structure that provides coverage through a network of physicians there are several key differences between hmo plans and preferred provider organization ppo plans with an hmo plan your primary care physician pcp will refer you to specialists and you must stay within a network of providers to receive coverage on the other hand hmo plans typically have lower premiums than ppo plans | |
how a health maintenance organization hmo works | hmos provide health insurance coverage for a monthly or annual fee an hmo limits member coverage to medical care provided through a network of doctors and other healthcare providers who are under contract with the hmo these contracts allow for premiums to be lower than for traditional health insurance since the healthcare providers have the advantage of having patients directed to them however they also add additional restrictions to the hmo s members 1 | |
when deciding whether to choose an hmo plan you should take into consideration | an hmo is an organized public or private entity that provides basic and supplemental health services to its subscribers the organization secures its network of health providers by entering into contracts with pcps clinical facilities and specialists the medical entities that enter into contracts with the hmo are paid an agreed upon fee to offer a range of services to the hmo s subscribers the agreed payment allows an hmo to offer lower premiums than other types of health insurance plans while retaining a high quality of care from its network the hmo as it exists today was established under the health maintenance organization act of 1973 signed by then president richard nixon the law clarified the definition of hmos as a public or private entity organized to provide basic and supplemental health services to its members the law further requires that plans provide insured individuals with basic healthcare in exchange for regular fixed premiums that are established under a community rating system 2hmo subscribers pay a monthly or annual premium to access medical services in the organization s network of providers but they are limited to receiving their care and services from doctors within the hmo network however some out of network services including emergency care and dialysis can be covered under the hmo those who are insured under an hmo may have to live or work in the plan s network area to be eligible for coverage in cases where a subscriber receives urgent care while out of the hmo network region the hmo may cover the expenses but hmo subscribers who receive nonemergency out of network care have to pay for it out of pocket 3in addition to low premiums there are typically low or no deductibles with an hmo instead the organization charges a co pay for each clinical visit test or prescription 4the insured party must choose a pcp from the network of local healthcare providers under an hmo plan a pcp is typically an individual s first point of contact for all health related issues this means that an insured person cannot see a specialist without first receiving a referral from their pcp however certain specialized services may not require a referral for example screening mammograms in most cases will not require a doctor s referral 5specialists to whom pcps typically refer insured members are within the hmo coverage so their services are covered under the hmo plan after co pays are made if a pcp leaves the network subscribers are notified and are required to choose another pcp from within the hmo plan hmos are regulated by both states and the federal government the mccarran ferguson act of 1945 established that states regulate the insurance industry and no federal law overrides state regulation unless it explicitly does so 6as such regulation of health insurance is left largely to the states though legislation such as the hmo act of 1973 and the employee retirement income security act of 1974 among other laws can bring some aspects of the health insurance business under the purview of the federal government 7that said the federal government does maintain some oversight of hmos the 2010 dodd frank act created the federal insurance office fio which can monitor all aspects of the insurance industry 8the affordable care act of 2010 created an agency charged with overseeing the implementation of the act s provisions called the center for consumer information and insurance oversight cciio 9hmo vs preferred provider organization ppo a preferred provider organization ppo is a medical care plan in which health professionals and facilities provide services to subscribed clients at reduced rates ppo medical and healthcare providers are called preferred providers 10ppo participants are free to use the services of any provider within their network out of network care is available but it costs more to the insured in contrast to ppo plans hmo plans require that participants receive healthcare services from an assigned provider ppo plans usually have deductibles while hmo plans usually do not 11both programs allow for specialist services however the designated pcp must provide a referral to a specialist under an hmo plan ppo plans are the oldest and due to their flexibility and relatively low out of pocket costs have been the most popular managed healthcare plans that has been changing however as plans have reduced the size of their provider networks and taken other steps to control costs hmo vs point of service pos a point of service pos plan is like an hmo plan in that it requires a policyholder to choose an in network pcp and get referrals from that doctor if they want the plan to cover a specialist s services a pos plan is also like a ppo plan in that it still provides coverage for out of network services but the policyholder has to pay more for those services than if they used in network providers however a pos plan will pay more toward an out of network service if the policyholder gets a referral from their pcp than if they don t secure a referral the premiums for a pos plan fall between the lower premiums offered by an hmo and the higher premiums of a ppo pos plans require the policyholder to make co pays but in network co pays are often just 10 to 25 per appointment pos plans also do not have deductibles for in network services which is a significant advantage over ppos also pos plans offer nationwide coverage which benefits patients who travel frequently a disadvantage is that out of network deductibles tend to be high for pos plans so patients who use out of network services will pay the full cost of care out of pocket until they reach the plan s deductible however a patient who never uses a pos plan s out of network services probably would be better off with an hmo because of its lower premiums if you don t travel frequently you ll be better off with an hmo plan than a pos plan because of the lower costs advantages and disadvantages of hmosit s important to weigh the advantages and disadvantages of hmo plans before you choose a plan just as you would with any other option we ve listed some of the most common pros and cons of the program below lower out of pocket costsprimary care physician directing your treatmenthigher quality of caremust use medical professionals in the plan s networkno specialist visits without a referralemergencies must meet certain conditionslower out of pocket costs you ll pay fixed premiums on a monthly or annual basis that are lower than traditional forms of health insurance these plans tend to come with low or no deductibles and your co pays are generally lower than other plans your out of pocket costs will also be lower for your prescription billing also tends to be less complicated primary care physician directing your treatment you ll have a pcp who you choose and who is responsible for managing your treatment and care this professional will also advocate for services on your behalf this includes making referrals for specialty services for you higher quality of care the quality of care is generally higher with an hmo plan that is because patients are encouraged to get annual physicals and seek out treatment early must use medical professionals in the plan s network you re restricted on how you can use the plan you ll have to designate a doctor who will be responsible for your healthcare needs including your primary care and referrals however this doctor must be part of the network this means that you are responsible for any costs incurred if you see someone out of the network even if there s no contracted doctor in your area no specialist visits without a referral you ll need referrals for any specialists if you want your hmo to pay for any visits if you need to visit a rheumatologist or a dermatologist for example your pcp must make a referral before you can see one for the plan to pay for your visit if not you re responsible for the entire cost emergencies must meet certain conditions there are very specific conditions that you must meet for certain medical claims such as emergencies for instance there are usually very strict definitions of what constitutes an emergency if your condition doesn t fit the criteria then the hmo plan won t pay | |
what are examples of hmos | almost every major insurance company provides an hmo plan for instance cigna and humana provide their own versions of the hmo aetna offers individuals two options the aetna hmo and the aetna health network only plan 12 | |
what are the benefits of an hmo | the main benefits are cost and quality of care people who purchase hmo plans benefit from lower premiums than traditional forms of health insurance this allows insured parties to get a higher quality of care from providers who are contracted with the organization hmos typically come with low or no deductibles and charge relatively low co pays hmo participants also don t need referrals to get specialty services such as mammograms | |
what is the difference between an hmo and health insurance | coverage under an hmo is generally pretty restrictive and comes at a lower cost to insured parties traditional health insurance on the other hand charges higher premiums higher deductibles and higher co pays but health insurance plans are much more flexible people with health insurance don t need to have a primary care physician pcp to outline treatment health insurance also pays some of the costs for out of network providers the bottom linehealth insurance is an important consideration for every individual choosing the right plan depends on your personal situation including your health finances and quality of life you can choose from traditional health insurance such as the ppo or the hmo the hmo provides insured individuals with lower out of pocket costs but more restrictive conditions including the doctor who you see make sure that you weigh the benefits and disadvantages of the plan regardless of what you choose | |
what is health plan categories | federal health plan categories refer to the four types of health insurance plans that are differentiated based on the average percentage of healthcare expenses that will be paid by the plan in the united states health insurance plans are offered in four actuarial levels bronze silver gold and platinum the level defines the amount of expenses each type of plan covers 1understanding health plan categoriesthe higher the actuarial value i e gold and platinum the more that the health plan category will pay on average toward healthcare expenses the lower the actuarial value bronze and silver the less the health plan category will pay the typical actuarial values for the four coverage tiers are all federal plans cover the same set of essential health benefits because each plan is different in terms of deductibles copayments and coinsurance amounts your share of the costs may come in the form of a large deductible with low coinsurance for example a 4 000 deductible with 10 percent coinsurance or a small deductible with high coinsurance such as a 1 500 deductible with 30 percent coinsurance as with all health plans consumers pay a monthly insurance premium whether or not they use healthcare services premiums are typically higher for plans that pay more of your medical expenses when you receive care such as gold and platinum plans in general premiums are also higher for plans that have lower deductibles and lower coinsurance amounts in addition to the four metallic coverage tiers a catastrophic level is available to people under age 30 and to certain people over age 30 who are granted hardship exemptions based on income and other circumstances that would prevent them from getting a bronze silver gold or platinum plan 2there are 14 reasons for which someone may be granted a hardship exemption including being homeless having substantial property damage resulting from fire flood or other disaster and filing for bankruptcy in the past three years 3comparing health plan categoriesbronzesilvergoldplatinum | |
what is a health reimbursement arrangement hra | a health reimbursement arrangement hra is an employer funded plan that reimburses employees for qualified medical expenses and in some cases insurance premiums employers are allowed to claim a tax deduction for the reimbursements they make through these plans and reimbursement dollars received by employees are generally tax free 1 | |
how a health reimbursement arrangement hra works | a health reimbursement arrangement is a plan set up by an employer to cover medical expenses for its employees the employer decides how much it will put into the plan and the employee can request reimbursement for actual medical expenses incurred up to that amount all employees in the same class must receive the same hra contribution 2an hra is not an account therefore employees cannot withdraw funds in advance and then use them to pay medical expenses instead they must incur the expense first then have it reimbursed reimbursement at the time of service is possible if the employer provides an hra debit card an employee who uses up all the allocated funds in the hra before year end will have to cover any subsequent health bills out of pocket or with the funds in a flexible spending account fsa also known as a flexible spending arrangement when available or a health savings account hsa for employees who have a high deductible health plan hdhp 34maternity clothes gym membership fees and childcare are among the expenses not covered by a health reimbursement arrangement hra 5types of hrasthere are a few kinds of health reimbursement arrangements a qualified small employer health reimbursement arrangement qsehra is a health coverage subsidy plan for employees working for businesses that employ less than 50 full time workers also known as a small business hra a qsehra can be used to offset health insurance coverage or repay medical expenses that would be otherwise uncovered 6the yearly limits are set by the internal revenue service irs for 2023 a company with a qsehra can reimburse individual employees for up to 5 850 per year and employees that have families for up to 11 800 per year 7 in 2024 the limits change to 6 150 per individual and 12 450 per family 8the money that is reimbursed is tax free for the employees and tax deductible for the employers 6an individual coverage hra ichra is relatively new having only been available since january 2020 previously hras could not be used to pay individual health insurance premiums but as of january 2020 the government allows employers to offer their employees a new type of hra called an individual coverage hra instead of group health insurance 9employees can use these hras to buy their own comprehensive individual health insurance with pretax dollars either on or off the affordable care act s health insurance marketplace individual coverage hras can also reimburse employees for qualified health expenses such as copayments and deductibles 9whether or not your ichra makes you eligible for a premium tax credit to help pay for health insurance coverage under the affordable care act depends on whether your employer s ichra meets minimum standards for so called affordability and whether you choose to opt in or opt out of the coverage 9in addition employers that continue to offer traditional group health insurance can offer excepted benefit hras ebhra to reimburse employees for up to 1 950 a year in qualified medical expenses 10employees can enroll in an excepted benefit hra even if they decline group health insurance coverage but they cannot use the funds to buy comprehensive health insurance they can however use the funds to pay for short term health insurance dental and vision insurance premiums and qualified medical expenses 11benefits of health reimbursement arrangementshras can be used to pay for qualified medical expenses which include prescription medications insulin an annual physical exam crutches birth control pills meals paid for while receiving treatment at a medical facility care from a psychologist or psychiatrist substance abuse treatment transportation costs incurred to get medical care and much more 1213employees can also use hras to buy their own comprehensive individual health insurance with pretax dollars through the aforementioned individual coverage hra ichra 12employees can use the money in their hras to cover their spouse s and dependents allowed medical dental and vision costs 12limitations of health reimbursement arrangementsan hra only covers qualified medical and dental expenses according to the internal revenue service irs medical expenses are costs incurred to alleviate or prevent a physical or mental ailment not expenses to maintain general health such as vitamins 14an employer may exclude certain medical expenses even though the expenses are qualified by the irs an employer s list of reimbursable medical expenses will be outlined in its hra plan document for employees the irs issued a statement notifying taxpayers that at home covid 19 tests and personal protective equipment such as face masks and hand sanitizer are eligible medical expenses that can be paid or reimbursed under flexible health spending arrangements health savings accounts and health reimbursement arrangements hras 15can be used to pay for medical and dental expenses such as prescription medications an annual physical exam and birth control pillscan be used to pay for individual health insurance with pretax dollarsreimburses employees after they ve paid for certain medical expenses and insurance premiumscan t be used for costs that aren t deemed necessary such as teeth whitening funeral services or non prescription medication | |
is set up by the employer who decides how much money goes into the plan | can t withdraw funds first then pay expenses must pay first and then wait to get reimbursedhealth reimbursement arrangements vs other arrangementsan employee with both an fsa and an hra and an expense that is eligible to be reimbursed through both plans can t choose which will cover the expense instead the costs will be reimbursed by the plan that the employer has set up to pay first when this primary plan has been depleted the second plan will be used to cover any subsequent eligible medical expenses that are reported for reimbursement here s a closer look at two other options for funding out of pocket medical expenses a flexible spending arrangment fsa is funded using a portion of an employee s pre tax salary 4 in contrast to an hra each employee determines how much money should go into these arrangements annually up to 3 050 in 2023 and 3 200 in 2024 1617unused funds in hras may be carried over to the following year according to the employer s discretion 18 unused fsa funds generally cannot be used in the next plan year although an employer may offer either a short grace period 2 5 months or allow up to 640 to be carried over 16compared to an hra a health savings account hsa is a fully vested tax advantaged account that is not subject to forfeiture if funds remain in the account at the end of the year an hsa is paired with a high deductible health plan hdhp to pay for medical and dental expenses the employee or employer funds the account and like an fsa cannot be used to pay insurance premiums unlike hras and fsas employees can keep their hsas if they change employers 19 | |
how can i use hra funds | your employer determines the types of medical expenses that an hra can be used for some plans can only reimburse services in your health plan while others might include dental vision or pharmacy services hras often but do not always reimburse other expenses such as copays hospital expenses medical equipment eyeglasses or routine doctor s visits in addition the irs also excludes certain other expenses as being unqualified for example expenses that do not qualify as necessary medical expenses include teeth whitening maternity clothes funeral services health club membership fees controlled substances childcare for a healthy baby medication from other countries and non prescription medications 20hra funding and portabilitythe health reimbursement arrangement is funded solely by the employer which also decides the maximum annual contribution for each employee s hra employers determine how much to contribute to employees hras except that all workers in the same class of employees must receive the same contribution as noted above workers who are older or who have dependents may receive more 2any hra money unspent by year end may be rolled over to the following year although an employer may set a maximum rollover limit that can be carried over from one year to the next 18 furthermore if an employee is terminated or leaves the company to work for another firm the hra does not go with them that makes it different from an hsa health savings account which is portable hra tax advantagesas a benefit to employers reimbursements through the hra are 100 tax deductible 21 as an alternative to more expensive traditional healthcare an employer may use an hra to cover the health costs of several classes of employees 22 in addition since employers fully fund the plans they offer predictability allowing employers to anticipate their approximate maximum expense for hra health benefits for the year employees may use the arrangement to pay for a wide range of medical expenses not covered by their health insurance policies depending on the hra type they may also use it for medical dental or vision insurance premiums furthermore reimbursements are tax free up to a maximum amount for a coverage period some businesses may offer employees the added advantage of other employer provided health benefits such as an fsa in conjunction with an hra | |
what is a hra in health insurance | a health reimbursement arrangement hra is an employer s plan to cover employee medical expenses it pays employees in tax free money to reimburse for medical costs 1 | |
how does a hra work | the employer determines the amount of money that will go into the plan and the employee can ask to be reimbursed for qualified medical expenses up to the designated amount employers can take a tax deduction for the reimbursements made through these plans and the reimbursements given to employees are usually tax free 21 | |
what is a hra vs a hsa | a health reimbursement arrangement hra is a benefit used to pay employees back in tax free money for certain qualified medical expenses and health coverage premiums 1a health savings account hsa is a tax advantaged account used by individuals covered under a high deductible health plan hdhp looking to save up to cover the cost of qualified medical expenses 3can i cash out my hra you cannot cash out your hra hra money that hasn t been used by the end of the year can usually be rolled over to the following year with an employer determining the maximum amount that can be carried from one year to another 18 | |
what qualifies for hra reimbursement | examples of medical and dental expenses considered necessary might be an annual check up prescriptions or substance abuse treatment 13the bottom linea health reimbursement arrangement hra is a tax advantaged plan that employers use to reimburse employees for certain approved medical and dental expenses the employer determines the plan amount up to a yearly limit and the employee can be reimbursed up to that amount the reimbursements paid to the employee are tax free and the employers can claim a tax deduction for their reimbursements a qualified small employer health reimbursement arrangement qsehra is an hra for smaller companies with fewer than 50 full time workers an individual coverage hra ichra allows employees to buy their own individual health insurance with pretax dollars employees with an ichra can be reimbursed for health expenses such as copayments and deductibles | |
what is a health savings account hsa | a health savings account hsa is a tax advantaged account created for or by individuals covered under high deductible health plans hdhps to save for qualified medical expenses contributions are made into the account by the individual or their employer and are limited to a maximum amount each year the contributions to an hsa are invested over time and can be used to pay for qualified medical expenses such as medical dental and vision care and prescription drugs | |
how an hsa works | as mentioned above people with hdhps can open hsas individuals with hdhps may qualify for hsas and the two are usually paired together to qualify for a health savings account hsa you must meet eligibility standards established by the internal revenue service irs to be eligible you must 1the maximum contribution for an hsa in 2024 is 4 150 for an individual 3 850 for 2023 and 8 300 for a family 7 750 in 2023 23 the annual limits on contributions apply to the total amounts contributed by both the employer and the employee individuals age 55 or older by the end of the tax year can make catch up contributions of an additional 1 000 to their hsas 4an hsa can also be opened at certain financial institutions contributions can only be made in cash while employer sponsored plans can be funded by the employee and their employer any other person such as a family member can also contribute to the hsa of an eligible individual self employed or unemployed individuals may also contribute to an hsa provided that they meet the eligibility requirements 5individuals who enroll in medicare can no longer contribute to an hsa as of the first month of enrollment 6 however they can receive tax free distributions for qualified medical expenses hsa special considerationshdhps have higher annual deductibles the plan pays nothing until you reach these amounts in out of pocket expenses but lower premiums than other health plans 7 the financial benefit of an hdhp s low premium and high deductible structure depends on your personal situation the minimum deductible required to open an hsa is 1 600 for an individual or 3 200 for a family for the 2024 tax year 1 500 and 3 000 respectively for 2023 the plan must also have an annual out of pocket maximum of 8 050 for self coverage for the 2024 tax year 7 500 for 2023 and 16 100 for families for the 2024 tax year 15 000 for 2023 83 | |
when you pay qualified medical expenses equal to a plan s deductible amount additional qualified expenses are divided between you and the plan | for example the insurer may cover a percentage of the qualified expenses per the contract usually 80 to 90 while you may pay the remaining 10 to 20 or a specified co pay so if you had an annual deductible of 1 600 in 2023 and a medical claim of 3 500 pays the first 1 600 to cover the annual deductible you would pay 10 to 20 of the remaining 1 900 and the insurance company would cover the rest once the annual deductible is met in a given plan year the plan typically covers any additional medical expenses except for any uncovered costs under the contract such as co pays the insured can withdraw money accumulated in an hsa to cover these out of pocket expenses 9health savings accounts should not be confused with health spending accounts which employers use in canada to provide health and dental benefits for their canadian employees 10advantages and disadvantages of an hsahsas have advantages and drawbacks the effect of these accounts depends on your personal and financial situations contribution tax advantagesdistribution tax advantagesinvestment optionsdeductible requirementsrequires extra cashfiling requirementscontribution tax advantages employer and individual contributions by payroll deduction to an hsa are excluded from the employee s taxable income an individual s direct contributions to an hsa are 100 tax deductible from the employee s income earnings in the account are also tax free however excess contributions to an hsa incur a 6 tax and are not tax deductible 11distribution tax advantages distributions from an hsa are tax free provided that the funds are used for qualified medical expenses as outlined by the irs distributions used for medical expenses covered under the hdhp plan are included in determining if the hdhp s deductible has been met 12investment options you can also use the money in your hsa to invest in stocks and other securities potentially allowing for higher returns over time 13deductible requirements the most obvious key drawback is that you need to be a good candidate for an hdhp in addition you must have a high deductible plan lower insurance premiums or be affluent enough to afford the high deductibles and benefit from the tax advantages requires extra cash individuals who fund their own hsas whether through payroll deductions or directly should be financially capable of setting aside an amount that would cover a substantial portion of their hdhps deductibles individuals without enough spare cash to set aside in an hsa may find the high deductible amount burdensome filing requirements hsas also come with filing requirements regarding contributions specific rules on withdrawals distribution reporting and a record keeping burden that may be difficult to maintain 14withdrawals permitted under an hsaamounts withdrawn from an hsa aren t taxed as long as they are used to pay for services that the irs treats as qualified medical expenses the plan s manager will issue an irs form 1099 sa for distributions from the hsa here are some basics you need to know if distributions are made from an hsa to pay for anything other than a qualified medical expense that amount is subject to both income tax and an additional 20 tax penalty however once an individual turns 65 the 20 tax penalty is eliminated and only income tax would apply for non qualified withdrawals 18hsa contribution rulescontributions made to an hsa do not have to be used or withdrawn during the tax year instead they are vested and any unused contributions can be rolled over to the following year also an hsa is portable meaning that if employees change jobs they can still keep their hsas 1an hsa plan can also be transferred to a surviving spouse tax free upon the account holder s death 19 | |
what is a healthcare power of attorney | a healthcare power of attorney hcpa is a legal document that allows an individual to empower another person to make decisions about their medical care a healthcare power of attorney refers to both a legal document and a specific person with legal authority understanding healthcare power of attorneythe healthcare power of attorney helps people who cannot communicate to exert their wishes regarding their medical care and treatment the persons listed on the hcpa document become the sick or injured person s agent or healthcare proxy usually the form asks for alternates in case the first named hcpa is not available to serve in this capacity each state might differ in this and other such details however so you ll need to consult your own state s rules and forms when arranging for an hcpa healthcare proxies can communicate with the patient s doctors to prevent unwanted treatments and avoid making the wrong decisions they also have the power to make medical decisions for the person who is incapacitated writing an hcpa is straightforward you fill out a form and have it notarized moreover you can change or revoke who you want to be your healthcare proxy at any time by simply destroying the old hcpa and completing a new one anyone may serve as a healthcare power of attorney or an attorney in fact your hcpa can have any type of relationship with you this person might be your friend partner lover relative or colleague for example you are free to choose anybody so long as you trust them and feel that they are competent the healthcare power of attorney serves a vital function during both periodic illnesses and at the end of life | |
why would someone want or need an hcpa | imagine that you are the sick person cited above not only are you sick but you re also debilitated you can t speak or move and possibly can t even think what might this look like you might be in such terrible pain that you literally cannot speak maybe you are unconscious as the result of an accident perhaps you are a terminally ill patient who has entered into a coma if you ve ever found yourself in these types of situations and come out alive you likely would have been grateful that your hcpa was in place to communicate with your doctors and others for the sake of your wellbeing of course if you are dying or comatose you might not actually witness your healthcare proxy speaking with your doctors but some people might take comfort now in the thought that when they are dying their healthcare proxy will be there to ensure that their wishes are fulfilled properly the hcpa serves an important function both during periodic illnesses and at the end of life on the other hand some people might not want an hcpa perhaps they are uncomfortable with the concept of someone making decisions for them maybe they don t want to envision a situation where they are physically debilitated or comatose or it could be that some people just don t want to think about their deaths at all while they are alive as with other major life decisions whether or not to engage an hcpa is a personal choice a healthcare power of attorney may not be for everybody | |
when the patient owner of the hcpa becomes too ill to communicate their wishes about their medical care to others the hcpa becomes activated meaning that the person you named in the document has the power to make life and death decisions about and for you now hcpa refers to both the hcpa document and the person you named in it | an hcpa could say to my doctors for example if carla cannot breathe on her own then she does not want any life saving measures to be taken for her aside from specific directives like this one you can include in your hcpa filing more general insights such as your religious beliefs morals and basic ethical values choosing a healthcare proxynaming a healthcare power of attorney is an important step toward caring for yourself having an hcpa lets everyone including your doctors know the exact nature of your wishes were you to face big medical decisions but be unable to communicate knowing your wishes can help lift the burden of trying to guess what they are from others the more they know about your treatment preferences the smoother your care can be it is an understatement to say that you must trust your hcpa of course you should trust them but because you ll be sharing intimate self knowledge with this person you also need to have a special rapport with them relaxed enough to be your true self no holds barred this is true no matter what other roles your hcpa serves vis vis you so before choosing an hcpa consider carefully however relationships change as do our feelings toward others so what if you feel that you ve made a mistake you are truly free to choose anyone you want as your healthcare proxy this includes the freedom to reverse your decision at any time if you want to assign a new hcpa just eradicate the original document and create a new one designating the new hcpa not everyone has an hcpa but if more people understood this term perhaps they would see the benefit of assigning one | |
how to set up an hcpa | to appoint someone as your healthcare power of attorney you may fill out a form that names the individual along with any stipulations that you wish them to have regarding your medical care the form will also list any special requests you may have such as asking for a do not resuscitate dnr order and avoiding interventions that will extend your life some states namely indiana new hampshire ohio texas and wisconsin do not permit a universal power of attorney form and require that you use their state specific form instead to designate your power of attorney 1some states also require witnesses to be present if the individual is in a nursing home or care facility a basic healthcare power of attorney form will require you to list your name birthday date and the identifying information of the individual that you are naming you can also name two back up agents in the event that your first preference is not available or unwilling to take on the role if you live in missouri north carolina south carolina or west virginia the form must be notarized 2 the healthcare power of attorney takes effect immediately once the paperwork is signed | |
what is the healthcare sector | the healthcare sector consists of businesses that provide medical services manufacture medical equipment or drugs provide medical insurance or otherwise facilitate the provision of healthcare to patients understanding the healthcare sectorthe healthcare sector is one of the largest and most complex in the u s economy accounting for 18 of gross domestic product gdp in 2020 1 the u s healthcare sector benefits from a strong system of medical research and development in cooperation with the higher education system and the technology industry the aging u s population and the advancing senescence of the baby boomer generation are driving ongoing strong demand in the healthcare sector economically healthcare markets are marked by a few distinct factors government intervention in healthcare markets and activities is pervasive in part due to some of these economic factors demand for healthcare services is highly price inelastic consumers and producers face inherent uncertainties regarding needs outcomes and the costs of services patients providers and other industry players possess widely asymmetric information and principal agent problems are ubiquitous major barriers to entry exist in the form of professional licensure regulation intellectual property protections specialized expertise research and development costs and natural economies of scale within the sector the need for working and investment capital can vary greatly between pharmacutical companies and large facilities and those providing insurance and medical supplies consumption or non consumption and production of medical services can involve significant externalities particularly regarding infectious diseases transactions costs are high in both the provision of care and the coordination of care industries within the healthcare sectorthe healthcare sector contains a diverse array of industries with activities ranging from research to manufacturing to facilities management drug manufacturers can further be broken down into biotechnology firms major pharmaceutical firms and makers of generic drugs the biotech industry consists of companies that engage in research and development to create new drugs devices and treatment methods many of these companies are small and lack dependable sources of revenue their market value may depend entirely on the expectation that a drug or treatment will gain regulatory approval and fda decisions or rulings in patent cases can lead to sharp double digit swings in share prices examples of larger biotech firms include novo nordisk nvo regeneron regn alexion alxn vertex vrtx gilead sciences inc gild and celgene corp celg major pharmaceutical firms also engage in research and development but tend to focus more on manufacturing and marketing an existing portfolio of drugs than the typical biotech firm these companies tend to have more dependable streams of revenue and a more diversified pipeline of drugs in the research and development stages making them less dependent on make or break drug trials and their shares less volatile examples of major pharmaceutical firms include johnson and johnson roche pfizer eli lilly novartis ag glaxosmithkline and astrazeneca some pharmaceutical firms specialize in generic drugs which are identical to name brand drugs but no longer enjoy patent protection as a result there is often competition to manufacture identical drugs leading to lower prices and thinner profit margins an example of a generic drugs firm is teva pharmaceutical industries ltd medical equipment makers range from firms that manufacture standard familiar products scalpels forceps bandages and gloves to those that conduct cutting edge research and produce expensive hi tech equipment such as mri machines and surgical robots medtronic plc is an example of a medical equipment maker managed healthcare companies provide health insurance policies the big five firms that dominate the managed medicaid industry are unitedhealth group inc anthem inc aetna inc molina and centene 2healthcare facilities firms operate hospitals clinics labs psychiatric facilities and nursing homes examples include laboratory corp of america holdings which operates facilities that perform blood tests and other analyses and hca healthcare inc which operates hospitals and other healthcare facilities in the u s and u k healthcare in the u s and the oecdaccording to the oecd some of the highest quality care in the world can be found in the u s but in terms of some measures of health the u s lags other wealthy developed countries life expectancy is 78 9 years according to the oecd below the oecd average of 80 the oecd s 38 members are mostly rich industrialized countries in europe and north america 34despite these subpar results the u s spends far more than any other country on healthcare measured per head of population 10 948 5 this situation has led to a number of national reform efforts including the affordable care act investors in the healthcare sector face considerable political risk as a result of uncertainties around the push and pull between politics and industry interests | |
a heating degree day hdd is a measurement designed to quantify the demand for energy needed to heat a building it is the number of degrees that a day s average temperature is below 65o fahrenheit 18o celsius which is the temperature below which buildings need to be heated the price of weather derivatives traded in the winter is based on an index made up of monthly hdd values the settlement price for a weather futures contract is calculated by summing hdd values for a month and multiplying that sum by 20 1 | basics of heating degree day hddwhile hdd can describe the overall need for heating as part of the planning for residential or commercial buildings it is critical for the pricing of weather futures in turn that creates a risk management tool that utility agriculture construction and other firms can use to hedge their activities that depend on the weather energy needs growing season outdoor work time etc the first weather futures contracts based on hdd were listed in september 1999 at the chicago mercantile exchange cme 2 | |
how to calculate heating degree day hdd | there are several ways to calculate hdd the more detailed a record of temperature data the more accurate the hdd calculation for all methods if the value for any given day is less than or equal to zero that day has zero hdd but if the value is positive that number represents the hdd on that day a similar measurement cooling degree day cdd reflects the amount of energy used to cool a home or business one caveat is that heating degree days are extremely localized heating and cooling needs vary greatly depending on the geographical region and further the average hdd in one building may not have the same impact as it does in the building next door due to differences in construction orientation relative to other buildings insulation sun exposure and the nature of the building s usage | |
what is the heath jarrow morton hjm model | the heath jarrow morton model hjm model is used to model forward interest rates these rates are then modeled to an existing term structure of interest rates to determine appropriate prices for interest rate sensitive securities formula for the hjm modelin general the hjm model and those that are built on its framework follow the formula 1df t t t t dt t t dw t where df t t the instantaneous forward interest rate ofzero coupon bond with maturity t is assumed to satisfythe stochastic differential equation shown above adaptedw a brownian motion random walk under therisk neutral assumption begin aligned text d f t t alpha t t text d t sigma t t text d w t textbf where text d f t t text the instantaneous forward interest rate of text zero coupon bond with maturity t is assumed to satisfy text the stochastic differential equation shown above alpha sigma text adapted w text a brownian motion random walk under the text risk neutral assumption end aligned df t t t t dt t t dw t where df t t the instantaneous forward interest rate ofzero coupon bond with maturity t is assumed to satisfythe stochastic differential equation shown above adaptedw a brownian motion random walk under therisk neutral assumption | |
what does the hjm model tell you | a heath jarrow morton model is very theoretical and is used at the most advanced levels of financial analysis it is used mainly by arbitrageurs seeking arbitrage opportunities as well as analysts pricing derivatives the hjm model predicts forward interest rates with the starting point being the sum of what s known as drift terms and diffusion terms the forward rate drift is driven by volatility which is known as the hjm drift condition in the basic sense an hjm model is any interest rate model driven by a finite number of brownian motions the hjm model is based on the work of economists david heath robert jarrow and andrew morton in the 1980s the trio wrote a series of notable papers in the late 1980s and early 1990sthat laid the groundwork for the framework among them bond pricing and the term structure of interest rates a discrete time approximation contingent claims valuation with a random evolution of interest rates and bond pricing and the term structure of interest rates a new methodology for contingent claims valuation 1there are various additional models built on the hjm framework they all generally look to predict the entire forward rate curve not just the short rate or another point on the curve the biggest issue with hjm models is that they tend to have infinite dimensions making it almost impossible to compute there are various models that look to express the hjm model as a finite state hjm model and option pricingthe hjm model is also used in option pricing which refers to finding the fair value of a derivative contract trading institutions may use models to price options as a strategy for finding under or overvalued options option pricing models are mathematical models that use known inputs and predicted values such as implied volatility to find the theoretical value of options traders will use certain models to figure out the price at a certain point in time updating the value calculation based on changing risk for an hjm model to calculate the value of an interest rate swap the first step is to form a discount curve based on current option prices from that discount curve forward rates can be obtained from there the volatility of forwarding interest rates must be input and if the volatility is known the drift can be determined | |
what is a heatmap | a heatmap is a two dimensional visual representation of data using colors where the colors all represent different values a heatmap can be used with all sorts of data from the real estate market representing the number of foreclosures to the spreads of credit default swaps cds to webpage analysis reflecting the number of hits a website receives understanding a heatmapheatmaps were used as early as the 19th century in statistical analysis and grew as a useful tool for almost every industry and field including medicine marketing engineering and research as a practical example of how heatmaps can be helpful they became trendy during the recession that began in 2008 many people used heatmaps to quickly see the foreclosure rates in various states and compare them to heatmaps from previous months to see if foreclosures were rising falling or staying the same heatmaps are helpful because they can provide an efficient and comprehensive overview of a topic at a glance unlike charts or tables which have to be interpreted or studied to be understood heatmaps are direct data visualization tools that are more self explanatory and easy to read heatmaps can also be more user friendly for consumers in particular they benefit those consumers not accustomed to reading large amounts of data because they are more visually accessible than traditional data formats heatmap exampleheatmaps can be employed in a variety of situations and industries for example a heatmap of foreclosures data could show parts of the u s experiencing high foreclosure rates in a dark color and states with low foreclosure rates in lighter colors which could be useful for real estate professionals looking to understand more about the market and identify market trends a color gradient legend typically accompanies a heatmap to specify the data and help the map reader understand the data heatmaps are also widely used in webpage industries to show where users are clicking heatmaps can be used to quickly view foreclosures across the united states special considerationshowever heatmaps can also be misleading because they often involve large amounts of data and may not include all of the necessary information needed to make an accurate assumption about the trend heatmaps can show that certain situations happened but do not provide insight into why the situation occurred what factors were involved in the situation happening or what the forecast for the future will be heatmaps are often made before all of the data on a topic is released to provide some preliminary analytics for viewers so they have to be read with that caveat in mind | |
what is heavy industry | heavy industry relates to a type of business that typically carries a high capital cost capital intensive high barriers to entry and low transportability the term heavy refers to the fact that the items produced by heavy industry used to be products such as iron coal oil ships etc today the reference also refers to industries that disrupt the environment in the form of pollution deforestation etc understanding heavy industryheavy industry businesses typically involve large and heavy products or large and heavy equipment and facilities such as large machine tools and huge buildings or complex or numerous processes because of those factors heavy industry involves higher capital intensity than light industry does heavy industry is also often more heavily cyclical in investment and employment products that result from heavy industry tend to be large in size and low in terms of transportability | |
how heavy industry works | transportation and construction along with their upstream manufacturing supply businesses comprised most heavy industry throughout the industrial age along with some capital intensive manufacturing traditional examples from the industrial revolution through the early 20th century included steelmaking artillery production locomotive erection machine tool building and the heavier types of mining |
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