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  • Acquisitions
    When a company buys a stake in another company.  This is often done to help the acquiring company grow.  Acquisitions can be hostile (when a company does not wish to be acquired) or friendly (when a company wishes to be acquired by the acquiring company) but in either case a company will likely pay a premium on the acquired company’s stock price.

  • After-tax-returns
    The return on investment after taking out all taxes.  This figure provides a useful number for investors because different investments are taxed in different ways or not at all.  The after-tax return will show what these differently taxed investments would be worth after taxes are taken out, showing a “real” return on investment.

  • Agency Bonds
    Agency bonds are debt securities issued by either a government agency or a government sponsored entities (GSE).  While the debt of government agencies is backed by the government, GSEs are not.  However, GSEs are corporations that hold government charters because their businesses are considered important to the public.  The idea behind these GSEs is that the corporations that have the charters will not be allowed to fail by the government, making the return on their bonds very low since they are considered so secure.

  • Alpha
    A number that measures a security’s performance against that of the market, i.e., its return that cannot be explained by the movements of the market. It is derived from the capital asset pricing model, where a is the x-root of the security characteristic line. Thus a positive alpha indicates an equity outperforming the market, and a negative alpha underperformance.

  • Altruism
    An action is considered altruistic if it benefits others while harming oneself. Altruistic acts are considered acts of self-sacrifice, and therefore, they are generally regarded as the opposite of self-interested acts. The doctrine of altruism (sometimes called The Principle of Beneficence) states that people have a moral duty to aid others, even at the sacrifice of individual self-interests. Generally, this doctrine is considered morally unacceptable because it mandates actions which are supererogatory (i.e., morally praiseworthy but not morally required). However, milder forms of altruism are often employed as components of ethical theories. For example, utilitarianism sometimes requires an individual to make personal sacrifices to promote the greatest overall good for everyone involved.

    One of the best contemporary examples of an altruistic moral principle originates from Peter Singer’s stance on world poverty. Singer argues that those with excess income are morally obligated to donate significant portions of their income to organizations like Oxfam to save the lives of starving individuals across the world. The basis for his argument is a clearly altruistic principle: “[I]f it is in our power to prevent something very bad from happening, without thereby sacrificing anything of comparable moral significance, we ought to do it.”1 Although many have criticized Singer’s position as being too demanding or impractical, his arguments raise some intriguing questions about when altruistic actions may be morally required rather than merely serving as a moral ideal.

    Defenders of psychological egoism contend that there is no such thing as altruism (although this notion seems implausible), and adherents to ethical egoism consider altruism an undesirable, morally backward doctrine. Nevertheless, most moral philosophers regard altruistic actions as admirable and think these actions have a role to play in morality. However, those who endorse mildly altruistic moral principles may reject altruistic principles that mandate extreme personal sacrifices.

    1. Peter Singer, Practical Ethics, 2nd ed. (Cambridge: Cambridge University Press 1999), 229.

  • American Depositary Receipts (ADRs)
    This is a way to buy shares in a foreign company while getting any dividends or gains in U.S. dollars.  An ADR is a certificate issued by a U.S. bank representing shares in a foreign company.  The actual security is held by the bank overseas.  These are done to reduce costs that would be associated with the purchases.

  • Arbitrage
    A trade that profits from exploiting the price differences between a financial instrument on different markets or identical financial instruments priced differently. To properly execute an arbitrage deal the sale and purchase of the asset must happen simultaneously. Due to computerization, these errors in the markets are usually found and fixed very quickly making these trades much harder today. The term arbitrage can also be referred to as a trade that has no risk of negative cash flow.

  • Ask Price
    The price at which the owner of a security is willing to sell.  Also known as the offer price or simply “the ask”, the ask price is the lowest price the owner will sell the security. The ask is the opposite of the bid price, which is the price a buyer is willing to pay for the security.  These terms are used in nearly all financial markets including security, bond, derivative, and currency markets.  The difference between the bid and ask prices is known as the bid/ask spread.

  • Asset allocation
    Investment strategy that uses the three asset classes: equities, fixed-income, and cash, to personalize the amount of risk that an individual is willing to take given her goals.  Asset allocation is different for different individuals because not everyone has the same goals, risk tolerance, investment horizon, etc.

  • Autonomy
    To be autonomous is to be one’s own person, that is, to be directed by preferences, motivations, and characteristics that are a part of or ‘internal’ to one’s self.  It may also refer to the capacity of a rational individual to make informed, self-determined decisions – to ‘self-rule.’

    Some moral theories – Immanuel Kant’s, for instance – ground our obligations to ourselves and others in our (and their) autonomy.  Thus, treating another person as a means rather than an end is wrong because it fails to respect that person’s autonomous will.   Likewise, killing is wrong because it violates the autonomy of the victim.

    On this Kantian view, we owe ourselves (and each other) moral respect in virtue of our autonomy.

    John Stuart Mill, a classical utilitarian, also held autonomy to be an important consideration – and value – in utilitarian thought, claiming that autonomy is an element of well-being.  Holding this view allows the utilitarian to consistently view morality through a utilitarian framework while still allowing for the importance of autonomy and self-determination in life.

  • b

  • Balance Sheet
    A financial statement showing a company’s assets, liabilities, and shareholder’s equity.  All balance sheets follow the same formula, Assets= Liabilities + Shareholder’s Equity.  The balance sheet is one of the three main financial statements, the other two being the statement of cash flows and the income statement.

  • Bear Market
    A term referring to a declining financial market.  A market is said to be in a bearish phase if the prices are falling over more than a two-month period (if under two months it is considered a correction).  The amount of negativity in a bear market makes prices continually fall as investors continue selling .  A bear market is the opposite of a bull market.

  • Beta
    A number representing a security’s risk, or volatility. Beta is the slope of the security characteristic line, thus measuring the security’s risk against that of the market (when the market moves, the security moves by a factor of b). A beta greater than one indicates higher volatility, b = 1 signifies volatility equal to that of the market, and b < 1 means lower volatility.

  • Bid Price
    This is the price that a buyer is willing to pay for a certain security.  This is the opposite of ask price, or the price at which the owner of the security is willing to sell.   These terms are used in nearly all financial markets including security, bond, derivative, and currency markets.  The difference between the bid and ask prices is known as the bid/ask spread.

  • Bid/Ask Spread
    This is the difference between the bid and ask prices.  Basically, the spread is the difference between the lowest price an owner will sell for and the highest price a buyer is prepared to pay for the security.  The primary reason for the difference in price is the amount of liquidity in the asset classes.  The more liquid the asset, the less the spread is likely to be.

  • Black-Scholes Model
    A formula that provides a standard method to price stock options. While it is not used in practice to price these derivatives, it provides a clear explanation for how the volatility of the product affects the price of an option. Fischer Black and Myron Scholes first introduced the model in a paper in 1973.

  • Block Transactions
    This is a very large buy or sell order placed for securities.  These orders are so large that they would have a large effect on the stock price.  To avoid this effect, the trades are often negotiated through an investment bank.  This matching of buyer and seller enables the buyer and seller of the securities to get a more favorable price.  These trades are most often used by institutional investors, such as hedge funds because they have large numbers of securities.

  • Bond Ratings
    Ratings given to bonds to show their risk of default.  Bonds are rated on a scale ranging from AAA, which indicates a very low chance of default, to C or junk bonds, which are considered very risky.  Ratings are done by private agencies such as Standard & Poor’s, Moody’s, and Fitch.

  • Bond Yields
    Yield refers to the profits made on an investment.  When referring to bonds there are four different types of yields; the coupon, which is the fixed interest rate when the bond is issued, the current yield, the interest rate as a percentage of the current price of the bond, yield to maturity, which is the estimated return on investment if the bond is held until maturity date, and the taxable-equivalent yield which is used in tax exempt bonds and is determined by the owners tax bracket.

  • Bonds
    A type of debt investment in which an organization borrows money from investors with the agreement to pay back the money at a certain date with a certain interest rate.  A bond’s interest rate is mainly determined by two factors: the quality of the issuing company’s credit and the duration of the bond.  If the company’s credit is low then it means that the bond is riskier as the odds of being paid back are less.  Thus, the interest rate on the bond rises.  In addition, the longer the bond takes to pay out, the higher the interest rate will be due to the Time Value of Money.

  • Book Building
    The process of determining the price of an Initial Public Offering (IPO) based on demand from various investor groups.  The process is performed by an underwriter or book runner, which is usually an investment bank.  The book runner builds the book by looking at orders from institutional investors that shows how much these investors will purchase and at what price they are willing to purchase the shares of stock. The process occurs off the market and is confidential to the book runner.

  • Book Value
    The value of a company based on the number of total assets minus intangible assets and liabilities.  This tells the value of a company if it were to be liquidated.  This usually differs from the market value of a company which fundamental investors look for in order to see if a company is undervalued.

  • Brokers
    A person or company that charges fees for buying and selling securities on behalf of investors.  Investors decide what they want to do while brokers are the ones who actually carry out the buy or sell instructions on the investors’ behalf.

  • Bubble
    An economic phenomenon whereby a security’s or commodity’s price rises far above its actual value. Examples include the American housing bubble of the early 2000s; the Dutch Tulipmania, sometimes considered the first bubble, when investors in the Netherlands began paying absurdly high sums for tulip bulbs; and the South Seas Bubble of 1720.

  • Buddhist Ethics
    Buddhism is a spiritual tradition founded in India around 500 BCE by Prince Siddartha Gautama, later to become Gautama Buddha (‘Buddha’ meaning “awakened one” in Sanskrit). Most Buddhist traditions (the main two being Theravada and Mahayana) share a common ethical code for lay followers, while monastic codes tend to vary by region and tradition.

    The common ethical principles of Buddhism were articulated by Gautama Buddha. They include the Five Precepts (or virtues) and three of the eight points on the Noble Eightfold path to enlightenment. These imperatives are not to be construed as commandments as in the Judeo-Christian tradition, but more as guidelines for attaining enlightenment. Enlightenment, or Nirvana in Sanskrit, is a state of mind or being in which one simultaneously realizes one’s true identity (which is infinite and eternal), the illusory nature of the world, and perfect bliss and equanimity. In mainstream Buddhism there is no separate “God” who is the judge or arbiter of ethical action. Rather, it is a general psycho-spiritual “law” that certain behaviors promote enlightenment and abate suffering while others impede enlightenment and bring about suffering. It is in these terms that an act or series of acts is generally deemed ethical or unethical. Ethical behavior both leads to and flows from an enlightened mind.

    In the Five Precepts Buddha advises abstinence from: (1) harming living beings, (2) taking things not freely given, (3) sexual misconduct, (4) false speech, and (5) intoxicating drinks and drugs causing heedlessness (Knierim). While there are up to ten precepts for lay practitioners and sometimes hundreds for ordained monks, these five are the most basic and important.

    The Noble Eightfold path to enlightenment consists of cultivating the following : (1) Right View, (2) Right Intention, (3) Right Speech, (4) Right Action, (5) Right Livelihood, (6) Right Effort, (7) Right Mindfulness, and (8) Right Concentration. These virtues generally fall into three categories. The first two tend toward cultivation of wisdom, the middle three toward ethical conduct, and the latter three toward mental development.

    Buddha viewed Right Speech as abstinence from lying, deception, slander, and idle chatter. Said in a positive way, he advocated speaking only when necessary, and with honesty, mindfulness, and loving kindness. Right Action generally entails the first three points of the Five Precepts listed above. The emphasis is to behave so as not to harm any sentient being physically, emotionally, or spiritually. Right Livelihood follows from Right Action in that one ought to make their living in a peaceful way. Buddha listed four occupations which ought be avoided for their promotion or condonance of harmful behavior. These are (1) weapons dealing, (2) dealing in living beings (including slavery, prostitution, and raising animals for slaughter), (3) meat production such as butchery, and (4) dealing in intoxicants and poisons.


    Knierim, Thomas. 1995 – 2010

    Easwaran, Eknath (translator and editor). The Dhammapada. Nilgiri Press.

  • Budget Deficit
    This occurs when an economic entity is spending more money than it is making.  The result is a budget deficit.  Budget deficits also refer to the same situation with the federal government.

  • Bull Market
    A bull market is when prices of securities traded on the market are rising.  Investors are optimistic in a bull market and continue to buy, driving up prices.  This is the opposite of a bear market.

  • Business Cycle
    Refers to the fluctuation of activity in the economy over a long period of time.  The five stages include growth, peak, recession, trough, and recovery.  Business cycles are incredibly hard to predict because they vary in length, frequency, and magnitude.

  • Buy side
    The sector of finance that invests funds for its clients.  Examples of buy side institutions include hedge funds, mutual funds, pension funds, and private banks.  These institutions  make decisions on where to invest money based on their own research and the research from sell side institutions.

  • Buy side research analyst
    Buy side analysts perform research on investments for the benefit of the investment management company that employs them.  Their research is not publicly available and is valued by how many correct recommendations are made by the buy side analyst.  These analysts work for pension funds, hedge funds, and other types investment management companies.  Their research and recommendations are guided by the investment strategy and philosophy of the investment management company.

  • c

  • Call Option
    A contract permitting the owner to buy a financial asset at a specified price (strike price).  The owner has a specific date or a period of time during which the owner may decide whether or not to exercise the option. The owner of a call option hopes that the stock price rises relative to the strike price. This allows the owner to purchase the stock at a price below market value, generating profit.  A call option is the opposite of a put option.

  • Callable Bonds
    A type of bond that can be bought back by the issuer before it reaches its maturity date.  For this option, the issuer has to pay a higher interest rate on the bond.  Issuers would want to do this if interest rates in the market have dropped so they could buy back their bonds and refinance their debt at a lower interest rate to save money.

  • Capital Adequacy Ratio
    A measure of a bank’s capital in terms of its risk weighted assets.

    The bank’s capital is divided up between two levels of capital, tier one and tier two. Tier one is the core capital of the bank, its equity and disclosed reserves. Tier two capital is the second most reliable form of capital and is composed mainly of undisclosed reserves, subordinated debt and general loss reserves. Before the banking failures and bailouts, the Basel accords (a series of supervisory banking laws and regulations) made sure banks had enough capital on hand to cover unexpected loses. A new set of Basel accords, Basel III, is under development and involves stricter definitions of Tier 1 and Tier 2 capital along with increasing the amounts of both needed to be held by banks.

  • Capital Asset Pricing Model (CAPM)
    The capital asset pricing model provides a mathematical measure of investment risk and shows how diversification reduces investment risk.  The model offers a technique to calculate the total risk of a diversified portfolio based on: (1) the risk of the individual investments in the portfolio and (2) the degree of correlation in investment returns among the individual assets that comprise the investment.

    CAPM is represented by the following equation:

    E(Rj) = Rj + bj[E(Rm) – Rf]


    E(Rj) the expected rate of return on an asset j

    Rfis the risk free rate of interest

    b is the undiversifiable risk associated with the asset j

    E(Rm) is the expected return on the market

  • Capital Gains
    The increase in value of a capital investment.  This means it is worth more than the purchase price but the gain is not realized until the asset is sold.  Capital gains are taxable.

  • Care, Ethics of
    Unlike deontological and utilitarian normative ethical theories, which emphasize impartial principles, the ‘ethics of care’ approach to normative ethics emphasizes our relationships, and our interdependence, with other people.

    Proponents of this approach to ethics, first developed by feminist philosophers of the late 20th century, claim that the dominant normative ethical theories – namely deontology and utilitarianism – overlook, and fail to account for, the basic structure of our relationships to others.  Included in this structure are partial commitments to other people founded on caring, which involves emotional responsiveness to particular circumstances and situations and a desire to thoughtfully maintain human relationships.

    The ethics of care seeks to highlight the importance of sensitivity, concern for others, and emotional responsiveness in shaping moral life.

    Not unlike virtue ethics, the ethics of care view stresses the importance of moral education.  This education includes nurturing the disposition to care for others and developing attentiveness to the needs of others and an awareness of our inevitable interdependence with others (a basic assumption of the ethics of care view).

    In a corporate financial context, the ethics of care might find expression in a corporation’s policies – and the formulation of policies – towards its employees and stakeholders.  A corporation might, for example, demonstrate responsiveness to the needs of its employees by involving them in policies that regulate their place in the daily operations of the company.

  • Cash Flow
    This is the flow of cash into or out of a company, investment, or project.  For companies, cash flow can be found in the statement of cash flows.

  • Categorical Imperative
    This is a requirement in Kantian deontological theory that we should act only according to the maxims that can be regarded as universal laws, that is, we should act only according to the maxims that all people will follow.

  • Caveat Emptor
    Latin term meaning “Let the Buyer beware”. This term adheres to the basic premise that when it comes to a transaction, the buyer is the one held entirely responsible for the transaction, as well as the product(s) that come with it. In other words, it is the buyer’s responsibility to choose well when making a transaction, and this can be done in the form of testing a product, making sure that the product being purchased has no defects, etc. Currently, the United States rejects such a philosophy as ‘Caveat emptor’, and does so by way of implied warranties and consumer protection laws.

  • Certificate of Deposits
    Also known as CDs, Certificates of Deposit are savings instruments issued by banks.  The investor receives interest payments for a period of time (generally one month to five years).  CDs are considered as safe investments because they do not decline in principal value.  In addition, CDs are insured by the FDIC.

  • Churning Accounts
    Churning is an unethical and illegal practice of excessive trading on an investor’s account by the broker to generate commission.  This excessive trading results in very little or no gain for the investor but the broker makes money on the commission for each trade.  Also referred to as “overtrading”.

  • Circuit Breakers
    This refers to measures taken by stock exchanges to prevent large and rapid price decreases from the selling of stock.  For example, if the NYSE has seen an index fall of 20%, it would shut down trading for an hour to try and prevent a free fall in that market.

  • Clearinghouse
    This is the third party that is responsible for settling accounts, clearing trades, and regulating trading data for a futures exchange.  Clearinghouses act as middlemen between all parties.  For example, at the end of the day, all future accounts must be adjusted for the losses or gains that they might have incurred during the day’s trading.  Clearinghouses make sure that individual parties have enough money in the accounts to transfer to the other party.  This means that the clearinghouses are responsible for making sure everyone participating in futures trading honor their contracts.

  • Closed End Fund (CEF)
    This is a publicly traded investment fund that raises an initial amount of capital through an Initial Public Offering (IPO).  The listing on an exchange turns the fund into a publicly traded stock.  The company’s stock operates like any other corporation’s stock, from supply and demand perspective.  The investment company takes the money it acquired in the IPO and uses it to invest in a certain industry or market sector much like a mutual fund.  CEFs are different from mutual funds in that CEFs are not open to new investors money on a daily basis.  CEFs do not redeem or issue shares.  Investors in CEFs who wish to cash out must sell their shares to other investors.  The shares of a CEF are traded at prices that can differ from net asset value of the fund i.e. the market value of all the assets in the fund.

  • Coercion
    Acts done as a result of coercion are acts done against one’s desires or against one’s will.  Coercion limits a person’s or group’s freedom to act, often by threat of force or other forms of pressure (incentives, rewards, threats of penalty, etc.).  To put it another way, when a person is coerced into acting in a particular way the autonomy of that person has been infringed upon.

    Often, when a person is found to be the victim of coercion his or her actions are judged differently.  The rationale behind this difference is as follows: a person can only be held responsible for his or her actions when the person chooses those actions freely, that is, of his or her own free will.  Since a coerced individual does not choose his or her actions freely, the coerced individual cannot be held (fully) responsible for his or her actions.

    In some cases, the coerced individual may be completely absolved of responsibility for the acts that he or she committed against his or her will.  In others, the coerced person may still be found guilty of wrongdoing to some degree, however limited.

    Coercion may be apparent or it may be inconspicuous.  Blackmail, for instance, is a case in which the coercive threats at play are apparent.  In other cases, coercion may be subtler, occurring undetected by the people whose freedom is being limited.

  • Collars
    The term collar refers to two different financial terms.  The first being an option strategy used to hedge risk.  The strategy is used after a long position in an equity has a large price rise.  Collars are when the investor purchases both out of the money call and put options to hedge against the risk of the stock falling in price.  Although this strategy  protects against large losses, it also prevents large gains.  This is also known as a “hedge wrapper”. The second way this term can be used is to refer to market making restrictions on trading activity, an example of which would be a circuit breaker.

  • Commercial Paper (CP)
    A short-term debt instrument issued by a corporation meant for meeting short term liabilities.  Commercial Paper does not last longer than one year and does not have to be registered with the SEC, which makes CP more cost effective.  Commercial paper also is not backed by any collateral.  Therefore, only companies with high credit ratings are able to issue CPs.  Commercial paper is very similar to bonds, but with a far shorter  duration.

  • Commodities
    Commodities are goods that are largely uniform and can be exchanged with other commodities of the same type.  Examples would include corn, sugar, oil, etc.  Commodities are traded through exchanges and frequently as futures contracts.

  • Commodity and Futures Trading Commission (CFTC)
    The Commodity Futures Trading Commission was created to regulate the trading of futures contracts. Created in 1974, the CTFC protects the public from fraud and manipulation.

  • Common Good, The
    Most basically, the common good is a ‘good’ that benefits the community at large.  The common good is often contrasted with private, or self-interested goods, such as the accumulation of personal wealth; conflicts between the common good and private goods sometimes arise.

    Philosophically, the common good is often associated with the utilitarian phrase “the greatest good for the greatest number.”  For utilitarians, the ‘good’ here refers to pleasure or the satisfaction of preferences.  A utilitarian conception of the common good can thus be summarized as ‘the greatest amount of pleasure (or preferences satisfied) for the greatest number of people.’

    The common good is often said to be the aim of politics, or the state, and the term often arises in political contexts.   In this context, “the greatest number” to which the utilitarian conception refers is typically limited to the citizens of a particular nation-state.  Politicians in the U.K. who are committed to the common good, for example, are committed to satisfying the preferences and interests of the citizens of the United Kingdom.

    In some instances, the conflict between the common good and self interested goods arise in political contexts.  In the United States, for example, some have voiced concern over the influence of special interests groups in Washington, which seek to advance their own interests even at the expense of the common good.

    Critics of this political arrangement often point to the financial sector, which contributes more money annually to politicians than any other industry or private interest group (see, to illustrate their point.  These critics claim that the lack of accountability and oversight which lead to the 2008 financial crisis – a significant detriment to the common good – was largely a result of financial deregulation that the financial sector lobbied to attain.

    Defenders of financial deregulation claim that the generation of wealth that results from deregulation benefits the community at large, that is, it contributes to the common good.  The impact of the recent financial crisis, however, poses serious problems to this argument, and with new regulations in place (and on the horizon), it seems that the equivocation of unchecked creation of wealth with the common good has fallen out of favor.

  • Conflict of Interest
    When a clash between a professional or public obligation and one’s private interests occurs, the situation is referred to as a conflict of interest.

    Conflicts of interest jeopardize an individual’s ability to act ethically by interfering with his or her capacity to exercise good judgment. This interference may lead to willful negligence of the individual’s professional or public obligation for the sake of private interest, or to bias (both conscious and unconscious bias).

    A distinction can be made between actual conflicts of interest and potential conflicts of interest, though it is often difficult to know whether a potential conflict of interest will actually influence a decision. For this reason, many companies and institutions have policies that aim to minimize the possibility of conflicts of interest and require full disclose of potential conflicts of interest from their employees.

  • Conscience
    One’s personal sense of right and wrong is sometimes referred to as one’s conscience.  It has also been described as a kind of moral sense, faculty, or awareness.

    Having a conscience involves evaluating, from a moral perspective, the situations, persons, actions, and decisions that one faces.  It also involves dispositions to act in accordance with what one judges to be right on the basis of that moral evaluation, and, finally, involves feelings such as guilt, shame, or satisfaction depending on one’s success or failure in acting rightly.

    To see how each of these aspects of one’s conscience interact, consider the following example.

    A trader at a hedge fund, Samantha, is told by her superior that in order for the firm to remain competitive it must adopt a new business strategy – one that aims to aggressively obtain insider information on the dealings, successes, and failures of the corporations whose stock they trade.  Samantha quickly evaluates this newly proposed business model and judges it to be immoral.  She knows that what her superior is describing is a practice known as insider trading, she knows that it is an unfair and immoral practice, and she knows that it is illegal.

    Thus far, we have seen that Samantha has morally evaluated the situation and the decision that she faces, which is – should she or should she not participate in insider trading?  If Samantha is disposed to act, and indeed chooses to act, morally, by refusing, resigning, or otherwise avoiding involvement in the insider trading scheme, we would say that Samantha has followed her conscience and has done what is right.  As a result, Samantha may feel a sense of satisfaction in her moral resilience and courage.

    If, however, Samantha agrees to participate in the scheme, in spite of her knowledge of its immorality, Samantha may feel some sense of guilt or shame, suggesting that she recognizes that what she is doing is wrong.  This, too, would be evidence of Samantha having a conscience, even though in this instance she chooses not to follow it.

    The historical writings on the concept are primarily theological, coming from Christian thinkers such as St. Jerome, St. Bonaventure, and St. Thomas Aquinas.  In more recent times, the concept has received attention from notably non-religious thinkers, including David Hume, Friedrich Nietzsche, and Sigmund Freud.

  • Consent of the Governed
    The consent of the governed is the concept that a government must have the consent of the population to exercise its authority. According to this principle, the government has no legal or moral right to perform actions which have not been approved (typically through legal documentation) by the citizens of the society. Essentially, requiring the consent of the governed is a means of controlling governmental power. However, once a government’s authority has been established and approved by the citizens, the government is free to act in accordance with this agreement. Typically, achieving the consent of the governed does not require unanimous consent among the citizens; consent of a significant majority of the citizens is usually sufficient.

  • Consequentialism
    Consequentialist theories, unlike virtue and deontological theories, hold that only the consequences, or outcomes, of actions matter morally.  According to this view, acts are deemed to be morally right solely on the basis of their consequences.  The most common form of consequentialism is utilitarianism.

  • Corporate Bonds
    Debt security issued by corporations for the purpose of raising capital.  Corporate bonds are issued with a maturity date of over one year (maturity dates of less than one year are known as commercial paper) and usually pay interest payments, known as the coupon.  Interest rates are determined by the likelihood that a company will default (be unable to pay off) its debt.  Companies will sometimes use assets as collateral for their bonds. The bond will also pay out its face value on its maturity date.  Bonds are traded frequently due to changes in interest rates in the open market and perception of a company’s ability to be able to pay off the bond.

  • Corporations, Moral Status of
    Do corporations, like people, have moral responsibility?  What, to put it more broadly, is the moral status of a corporation?  These questions have received various responses from a variety of thinkers, some of which will be discussed here.

    Corporations are a special kind of entity.  Although they are not persons, they have the same legal rights as persons in the United States, and these rights are protected under the 14th Amendment.  This fact is uncontroversial.  There is, however, some controversy and disagreement as to what follows from this peculiar legal arrangement – particularly with respect to ethical considerations such as moral responsibility.

    Some hold that corporations – like individuals – have moral responsibilities, since they – like individuals – act and affect others with their actions.  This position is known as the moral person view of the corporation.  Proponents of this view take corporations to be full moral agents, with rights as well as moral responsibilities.  The argument for this view is fairly straightforward.  Philosopher Richard T. De George offers a concise account:

    “Morality governs the actions of rational beings insofar as they affect other rational beings.  Formal organizations – for instance, corporations – act. Ford Motor Company produces cars; it also builds factories, hires and fires people, pays them wages, pays taxes, recalls defective models, and so on. Not only do businesses act, they also act rationally according to a rational decision-making procedure. Because their rational actions affect people, these actions can be evaluated from a moral point of view. If it is immoral for an individual to discriminate, it is also immoral for a corporation to discriminate.  If it is praiseworthy for an individual to give to charity, it is praiseworthy for a business to give to charity…Actions can be morally evaluated whether done by an individual or by an entity such as a company, corporation, or a nation.”[1]

    This view is compelling to many, but the debate does not begin and end here.  Critics of the moral person view of the corporation point out that although formal organizations, such as companies or corporations, may have some legal rights, they are not persons with moral rights.  They do not, for example, have a right to life, as a person does.  In fact, corporations – unlike persons – have only limited rights, and – again, unlike persons – they are organized only for limited purposes.

    On the basis of this observation, proponents of the moral actor view of the corporation seek to establish a special moral status for corporations, which identifies a number of moral responsibilities that pertain to corporations, but limits the range of responsibilities that a corporation can have.

    Again, De George offers helpful insight:

    “Because the moral status of corporations is different from the moral status of human beings, the moral obligations of corporations are different from the moral obligations of human beings. The difference hinges on the fact that corporations are limited and organized only for certain purposes. The fact that a corporation does exist and has been established for certain purposes is no guarantee that it should exist or that its purposes are morally justifiable. But although we can morally evaluate the ends for which corporations are formed and the means by which those ends are pursued, corporations are not bound by a large range of moral rules that bind natural persons.

    “As is true of all other moral actors, corporations are bound not to harm others. This negative injunction is a major restraint on corporations. But the positive obligations of corporations depend on their ends, their particular situations, their legal status, and the sociopolitical environment in which they are organized and operate. Because corporations are not human persons, the injunction to produce the greatest amount of good applies differently to individual persons with a full range of activities open to them and to a corporation with very great restrictions on its purpose and its appropriate activities…what we can expect is that they not do what is morally prohibited.  We can praise them for doing what is in accord with the moral law, and we can blame them for what is a violation of it.”[2]

    The next, and final, view of the corporation to be considered here is what might be called the legal compliance, or Friedmanite view, of the corporation.  This view of the corporation restricts the range of the corporation’s moral obligations even further, claiming that a corporation’s legal obligations are its only true obligations.

    According to the legal compliance view, famously argued by Milton Friedman, corporations have no obligations to society, including moral obligations, outside of their legal obligations. Here the distinction between morality and the law is important.  After all, there may be a difference between what morality requires and what the law requires.  Although it is true that these categories often overlap, they do not necessarily do so in all cases.

    Thus, according to the moral compliance view, corporations are not bound by a moral law unless that moral law is expressed in the law of the land.  A corporation, for example, has no obligation to refrain from stealing, cheating, or lying unless they are legally required to refrain from doing so.

    This view tends to be embraced by so-called ‘Free Market Fundamentalists.’  There are, however, several deficiencies with the view, as De George notes:

    “…there are three deficiencies with the position, if taken to be the end of the discussion of corporate responsibility.  The first is that obeying the letter of the law is not the same as obeying the spirit of the law, and it is not clear that the former marks the end of society’s demands.  Many argue that the legalistic approach to compliance often results in corporations trying to come as close as possible to infringing the law without actually doing so, if that is to the corporation’s benefit…This legalistic approach to law is not what most people usually have in mind when they speak of a socially responsible company.  The second deficiency is that a corporation may have additional social and moral responsibilities beyond those mandated by law.  The third is that…morality begins before the law does, and goes beyond what the law may require.  This is both because of the lag of law behind morality and because laws may themselves be immoral or inadequate to protect people’s rights and legitimate welfare.”[3]

    Although not the only views on the moral status of the corporation, each of the three views outlined here – the moral person view, the moral actor view, and the legal compliance view – are perhaps the most common and most plausible of their kind.

    [1] Richard T. De George. Business Ethics (sixth edition).  Princeton, NJ: Prentice Hall, 2006.  pp. 184-185.

    [2] Richard T. De George. Business Ethics (sixth edition).  Princeton, NJ: Prentice Hall, 2006.  pp. 188.

    [3] Richard T. De George.  Business Ethics (sixth edition).  Princeton, NJ: Prentice Hall, 2006.  pp. 198.

  • Cross-Currency Swap
    A transaction where two parties exchange cash flows in different currencies. Usually the cash flows are fixed to a notional amount, which can also be exchanged. The parties will fix an exchange rate or peg each payment to the current exchange rate. At the end of the swap period, the two parties often exchange the cash amounts back. Organizations whose cash flow and expenditures do not occur in the same currency especially benefit from such trades, which hedge against turbulence in exchange rates.

  • d

  • Default Risk
    The risk that an entity will be unable to honor its debt obligations.  Entities with higher risk of default will try to attract investors with a higher rate of return. Default risk is measured in FICO scores, which are provided by credit rating agencies including Standard & Poor’s, Moody’s and Fitch Ratings.

  • Deflation
    Deflation is the opposite of inflation. Deflation is the general decline in the price of goods and services. Causes of deflation include a reduction in the supply of money or credit into the economy, or a large decrease in government or personal spending. Deflation may be cause by increased unemployment as well.

  • Delta (D)
    The first derivative of an option price in regard to the price of the underlying security. It therefore measures how quickly the price of an option changes depending on the price of the underlying stock. Delta always takes a value between 0 and 1 for long call and short put options, and -1 and 0 for short call and long put options. Volatility traders often construct delta neutral positions so that their position neither gains nor loses money (given low volatility). Note that the delta of any position will change if the markets move enough.

  • Demandingness Objection
    The demandingness objection refers to an argument against varieties of consequentialism. Tim Mulgan presents the argument in the following form:

    1. Consequentialism makes demand D.

    2. D is an unreasonable demand for a moral theory to make.

    3. Therefore, consequentialism makes unreasonable demands.1

    The demandingness objection derives much of its strength from cases in which adherence to consequentialism appears to require extraordinary sacrifices of moral agents, sacrifices which plausibly appear supererogatory. When confronted with a form of the demandingness objection, consequentialists must either deny that consequentialism requires the specified demand or deny that the demand made upon moral agents is unreasonable.

    1. Tim Mulgan, The Demands of Consequentialism (New York: Oxford University Press, 2001), 25.

  • Deontology
    Deontological theories (derived from the Greek word for duty, deon) base morality on certain duties, or obligations, and claim that certain actions are intrinsically right or wrong, that is, right or wrong in themselves, regardless of the consequences that may follow from those actions.  What makes a choice or an action right is its conformity with a moral norm.  Thus, an agent has a duty to act in accordance with a moral norm, irrespective of the (potentially beneficial) effects of acting otherwise.

    We might say that parents, for example, have an obligation to take care of their children.  On a deontological view, parents must fulfill this obligation, even if breaking the obligation were to result, for the parents, in some great benefit (increased financial savings, for example).

    The deontological view holds that some actions cannot be justified by their consequences. In short, for the deontologist, the ends do not justify the means.

    Indeed, Immanuel Kant, whose formulation of deontological ethics is perhaps the most well known, wrote that one must “act so that you treat humanity, both in your own person and in that of another, always as an end and never merely as a means.”  As with other deontologists (Thomas Hobbes and John Locke, for example), Kant held that the basis of our moral requirements is a standard of rationality.  In the case of Kant, the standard is a categorical imperative. This single principle of rationality comprehensively includes all of our particular duties.

    Objections to Kantian deontology:

    (1)   Kant’s claim is that the moral status of our actions is determined solely on the basis of the rightness or wrongness of the action itself.  This means that it is categorically wrong to, for example, lie, in any circumstances, regardless of the consequences.  It seems implausible, however, to hold that lying is categorically wrong in all circumstances.  Imagine, for example, a situation in which a serial killer is on the hunt for your daughter.  While searching for her, the killer, whom you know to be the killer, encounters you and asks for information regarding your daughter’s whereabouts.  According to Kant’s deontological theory, you would be required to tell the truth.  Does this seem reasonable?

  • Depreciation
    In accounting, depreciation is the expense associated with an asset getting old. For example, a machine might have a useful life of ten years.  Every year the machine will lose 1/10th of its value due to depreciation.  Depreciation can also refer to a currency losing its value relative to other currencies.

  • Derivatives
    A security whose price is derived from an underlying financial asset.  For example, the value of a stock option draws its value from the underlying stock’s price. Common derivatives include futures, options, forwards, and swaps.

  • Desert
    The idea that a person is deserving of something, whether good or bad, captures the philosophical meaning of desert.  It is importantly associated with other concepts in philosophy, including punishment, justice, praise, blame, and goodness.   The following illustrates how desert relates to some of these concepts.

    To ‘get what one deserves,’ for example, embodies the everyday notion of justice.  Conversely, we tend to think that when a person does not get what he or she deserves, the outcome is unjust.

    When a person bears a particular responsibility, and a person meets or exceeds the requirements entailed by that responsibility, we typically think that such a person is deserving of praise.  When the responsibilities are not met, we generally think of the individual as deserving of blame or, in some cases, punishment.

    We also tend to think that it is good to treat a person as they deserve and bad, or wrong, to treat them better or worse than they deserve.  It is wrong, for example, to incarcerate a person when he or she is undeserving (when he or she has not committed a crime), or to issue capital punishment for a crime – for example, jaywalking – that does not merit such harsh punishment.

    The concept of desert is also closely related to the concept of entitlement.  When, for example, people profit by making shrewd (and legitimate) investments in the stock market, or a corporation profits through the ingenuity and innovation of its own employees, we generally think that the people, or the corporation, is deserving of their success.   Moreover, they are entitled to the profits that they have earned.

    If, however, the profits were gained illegitimately – through insider trading, for example, or fraud – we judge the individuals, or corporations, to not be entitled to the profits.  Furthermore, people or corporations who have engaged in wrongdoing (i.e. fraud, deceit, insider trading) are often held to be deserving of punishment.

  • Discount Rate
    The interest rate charged by the Federal Reserve Bank to banks looking to borrow funds from it.  Another definition for discount rate is the present value of future cash.  It means that money in the future must be discounted by an interest rate to become relevant in today’s dollars due to the time value of money.

  • Disinflation
    Disinflation is a decrease in the rate of inflation. Although sometimes confused with deflation, prices do not actually drop nor does disinflation signal an economy in trouble, rather it is simply slowing inflation.

  • Dividends
    A payment from the company to ordinary shareholders. Dividends can be paid in different forms including cash and stock.  Companies that have relatively low growth try to make their stock more appealing with higher dividend payments to its shareholders

  • Double (Moral) Standard
    An ethical or moral code which allows for greater freedom to one person or group than to another. In other words, a double standard is a set of principles which apply more strictly to one group than to another.

  • Dow Jones Industrial Average
    A stock market index that tracks thirty large, publicly traded companies. The index uses an arithmetic formula, whereby the prices of the thirty stocks are summed then divided by a number known as the Dow divisor.

  • Dow Theory
    Theory based off a series of editorials written by Charles H. Dow, founder of the Wall Street Journal and co-founder of Dow Jones and Company.  The theory states six facts.  (1) The equity market has three movements: the primary movement which lasts the longest,  the medium swing which lasts from over a week to a couple of months, going back across the primary movement.  Lastly the short swing is the swings that happens daily in the stock market.

    (2) Market trends are broken down into three phases; the accumulation phase in which a minority of investors that know information accumulate stock, the rapid price change that occurs once the rest of the market’s investors have caught on to the trend, and finally the unloading by investors after speculation has drawn the price high.  (3) The stock market will incorporate company news quickly, and the price will reflect that news.  (4) Industries that rely on each other will move in the same general direction but if their prices do not, then it is a signal that something will change in the future.  (5) High volume means that a stock’s price is the true market price.  (6) Trends will exist until proven otherwise.  For example, the market in a general up trend might have periods of loss but the trend is still continues, until there is a decisive, prolonged break in the trend

  • Duty
    The term duty is used interchangeably with the term obligation.  The concept identifies something (an action) that we are required, or bound, to do.  An individual may have a variety of duties, including professional, familial, civic, and/or religious duties.

    In ethics, discussions of duty center on moral duties, or obligations.  Many people feel that morality is fundamentally a matter of duties (a Christian, for example, may feel that living a moral life amounts to dutiful adherence to the ten commandments, or dutifully living according to God’s will).

    Duty-based, or deontological (derived from the Greek word for duty, deon), accounts of ethics also place moral duties at the center of ethical life.

    In deontological theories, duties describe the rules by which we must live, if we are to live a life that is morally good.  They include actions that we must do and actions that we must refrain from doing.  Thus, we may be morally required (that is, we may have a duty) to provide assistance to a person who has been injured or who is in harm’s way (provided that it does not put oneself in harm’s way in the process), or we may have a duty to refrain from harming others.

    Duties also have an important relationship with rights.  Rights imply and impose certain duties to others.  Thus, a person’s right to free speech imposes on others a duty to not violate that right by censuring or otherwise interfering with that person’s ability to speak freely.  Likewise, one’s right to life implies a duty to others – namely, a duty to not kill.

    Some duty-based accounts of ethics also identify duty as the appropriate motivation for moral action.  According to this view, an act is moral only if the performance of that act is motivated by a sense of duty.  Thus, if an act is motivated by a person’s self interest, it does not count as a moral act.  This stipulation, however, is not a feature of all duty-based accounts.

  • e

  • Earnings Per Share (EPS)
    This is the company’s profit per share of stock.  EPS is considered to be the most important part of determining a share’s value.  EPS is used in many valuation tools for investors to decide whether or not to invest in a company.

  • Efficient Market Hypothesis
    The Efficient Market Hypothesis (EMH) states that it is impossible to outperform the stock market on a consistent basis. EMH claims that a stock’s price reflects all information. Therefore, there are no undervalued or overvalued stocks because the price on the stock exchange is the fair value of that particular stock. According to the EMH, the only way to beat the market is to purchase riskier investments. This theory has many disbelievers who point to Warren Buffet as an example of someone who can routinely beat the market. Disbelievers also point to stock market crashes as evidence that stocks can indeed outgrow their true value.

  • Egalitarianism
    Egalitarianism is the moral and political doctrine that people ought to be treated as equals in some respect. Egalitarianism can have many forms and address many issues. A gender egalitarian, for example, believes that men and women deserve to be treated equally; their biological and social differences are insignificant with regard to the rights and opportunities they deserve. On the other hand, a racial egalitarian believes that all people deserve the same rights and opportunities regardless of race. An egalitarian (in the broad sense) would probably support both of these views.

    Although many believe equality is a crucial component of a just society, egalitarianism is not universally endorsed in all contexts. For example, some egalitarians believe salaries should be roughly equal regardless of profession while others (who may believe in egalitarian principles regarding other matters) argue that differences in salaries are just. Another common difficulty with egalitarian principles concerns the physically disabled. Although we may wish to treat such individuals in the same manner that we would treat a non-disabled person, there are clearly some cases in which treating these individuals differently on the basis of their handicap is justified. If a man with an amputated arm applied for a construction job which required heavy lifting and the operation of heavy tools, the company would be justified in denying the person the job on this basis alone. Although this action could be labeled as an act of discrimination, it does not seem to be unjust discrimination.

    The cognitively deficient are also a topic of debate regarding egalitarianism. Do individuals with severely reduced mental abilities (sometime so severe that they cannot make reasonable decisions or care for themselves) deserve to be treated comparably to rational, independent individuals? Although we often desire to treat all people equally and give them all equal rights, individuals with certain mental deficiencies may demand exceptions. However, debate continues about whom we treat differently (if anyone), the extent to which we treat them differently, and why we do so.

  • Elliot Wave Theory
    The theory proposed by Ralph Nelson Elliot in the 1930s, says the stock market moves up and down in a series of predictable waves.  The theory suggests that these waves can be predicted by observation and study to find the pattern.  These predictable waves are said to move up in a series of five waves and down in a series of three waves.  Despite saying that these waves are predictable, Elliot does not put time requirements on how long it takes for the market to complete a given wave.

  • Emerging Market Bonds
    Debt securities issued by corporations or governments in countries with developing economies.  These bonds carry a higher risk of default because of political and economic conditions in developing nations and carry currency risk.  However, because of these risks the returns are usually higher than domestic and treasury bonds.

  • Emerging Markets
    These are markets in developing countries.  Generally, emerging markets do not have comprehensive or strictly applied standards or regulations, currency stability, or political stability.  Emerging markets are targeted by investors for their potentially higher returns versus developed markets.

  • Enterprise Value (EV)
    An alternative to market capitalization as a way to measure a company’s value. It is calculated as the dollar value of all the company’s outstanding shares plus the company’s debt, minority interests, and preferred shares, minus total cash and cash equivalents. This evaluation of a company is said to be more accurate than market capitalization because it includes more than just common equity.

  • Equality
    Equality in ethical and political thought centers on the belief that all human beings deserve the same moral consideration and the same treatment.  This principle is sometimes also addressed in terms of moral worth – the principle of equality states that all humans, in other words, have the same moral worth.

    In modern times, equality has been held up as one of the central, if at times controversial, political ideals of liberal democracies.

    In both political and ethical realms, two important issues arise in discussions of equality.  The first might be put as: (1) equality of what? The second as: (2) equality for whom?

    Adequately addressing (1) requires discussion of multiple topics.  First, it should be noted that the claim of equality is a claim about how people should be treated morally, not a purported statement of fact.  Thus, equality as a value or political ideal does not aim to imply, nor does it imply, that all people have the same talents, skills, or physical abilities, for example.  Rather, the moral claim of equality implies that people of all levels of talent, skill, or ability be treated with equal moral consideration, and as having equal moral worth.

    In the political sphere, equal treatment often amounts to the individuals of a society having equal civil, economic, and social rights, and an equal right to opportunity (sometimes addressed in terms of ability to secure various goods and services).

    Stronger claims of equality are also made.  Some, for example, argue for equality of resources.  Others argue for equality of wealth and income.  That is to say, some claim that all individuals should earn an equal wage, regardless of their talents, skills, work ethic or, generally, occupation.   This view has a polarizing effect, attracting some and repelling others.

    Although perhaps few individuals in capitalistic societies would accept this radical view of equal wages, many feel that some constraints on inequality of wages is not only reasonable, but an important moral consideration.

    One example that highlights this issue is the vast income disparity, which has grown substantially in the United States since the 1960s, between corporate CEOs and the workers they employee.  This trend has been documented in a report entitled “The State of Working America” produced by the Economic Policy Institute.  According to the report:

    “The 1980s, 1990s, and 2000s have been prosperous times for top U.S. executives,

    especially relative to other wage earners. This can be seen by examining the

    increased divergence between CEO pay and a typical worker’s pay over time…

    In 1965, U.S. CEOs in major companies earned 24 times more than a typical

    worker; this ratio grew to 35 in 1978 and to 71 in 1989. The ratio surged in the

    1990s and hit 298 at the end of the recovery in 2000. The fall in the stock market

    reduced CEO stock-related pay (e.g., options), causing CEO pay to tumble to 143

    times that of the average worker in 2002. Since then, however, CEO pay has

    recovered  and by 2007 was 275 times that of the typical worker. In other words,

    in 2007 a CEO earned more in one workday (there are 260 in a year) than the

    typical worker earned all year

    (emphasis added,

    Without endorsing views or policies that aim to completely level unequal wages, many people feel that there is something wrong with an employer earning up to 275 times more in wages than the individuals he or she employs.

    Concluding the discussion of (1) equality of what?, it must again be stated that the moral claim of equality does not purport to be a statement of fact, but a moral claim about how other people should be treated.  The contexts in which the value of equality finds its expression, however, are various – including political, economic, civic, and social contexts.

    Addressing (2) equality for whom? is also important to any discussion of equality.  As recent civil rights, woman’s rights, and gay rights movements around the world have amply demonstrated, in practice equality is not always distributed equally.  In many cases, these kinds of issues have come to be seen as a moral issue.  Most people, for example, view discrimination on the basis of race or gender as not only morally contemptible, but morally wrong.  Treating people unequally on the basis of race or gender, as was the case throughout much of our history, is now seen as an arbitrary, and unjustified, practice.

    But if race and gender are arbitrary bases for excluding people from equal consideration and equal treatment, is an accidental feature like where someone happens to live not also arbitrary?  Some claim that it is, and that people and nations committed to equality should work to promote it around the globe, rather than limiting the scope of their efforts to the country in which they live.

    Whatever way one cares about human equality, the commitment to human equality is referred to as ‘egalitarianism’ (this view, as with many other philosophical views, may take various forms – gender egalitarian, racial egalitarian, etc.).

  • Equities
    These are financial securities that represent a share of ownership in a firm.  Examples of equities would include common or preferred stock.  Ownership of equity is effectively ownership of what is left of a company after all debts are paid to creditors.  People choose to own equity in a company in hopes of receiving dividends and capital gains, or, if enough equity is owned, control of the company.

  • Ethical Egoism

    Ethical egoism is the moral doctrine that everyone ought to act to promote his or her own interests exclusively. In contrast to psychological egoism, ethical egoism makes a claim about how people should behave rather than how they actually behave. Perhaps the most notable advocates of ethical egoism were Ayn Rand and Max Stirner, each of whom argued (although in slightly different ways) that pursuit of one’s self-interest should always be a person’s primary goal.

    Ethical egoism is often equated with selfishness, the disregard of others’ interests in favor of one’s own interests. However, ethical egoism cannot be coherently equated with selfishness because it is often in one’s self-interest to help others or to refrain from harming them. For example, Rand contends that it would be absurd to claim that a husband who spends a fortune to cure his wife of an illness does so entirely on her behalf.1 For an ethical egoist, the motivation to help family members and friends is one’s personal connection to them and the distress that would be caused by their misfortune or suffering.

    The kinds of deeds we perform for our friends and loved ones are not to be done for everyone, however. Rand describes such actions as “a reward which men have to earn by means of their virtues and which one cannot grant to mere acquaintances or strangers.”2 Complete strangers are not worthy of this special treatment. Nevertheless, Rand does advocate showing all people a “generalized respect and good will” which amounts to nonintervention; we should avoid arbitrarily doing harm to others, but our duties to aid them are also minimal.3

    Although ethical egoism has some appeal (especially in its ability to smoothly reconcile morality and self-interest), the theory has been almost universally rejected as an acceptable ethical theory. One of the most basic criticisms is that ethical egoists typically misrepresent altruism, the doctrine that opposes ethical egoism and basis morality on a concern for others’ interests. If one embraces altruism, Rand claims that the individual must also embrace low self-esteem, a disrespectful attitude toward others, and a “nightmare view of existence.”4 Stirner marks a similar mischaracterization of altruism in his description of charitable actions: “You love men, therefore you torture the individual man, the egoist; your philanthropy (love of men) is the tormenting of men.”5 Stirner and Rand do not consider the benefits of helping others; they recognize altruism only as an impediment to one’s individual goals. The problem with their view is that morality concerns all individuals, and the general welfare of others, even if it is not the exclusive focus of morality, is an indispensable component of any comprehensive ethical theory.

    Arguments supporting ethical egoism, especially Rand’s, also tend to rely on a false dilemma. Altruism is considered the only alternative view to ethical egoism, and once it is dismissed, ethical egoism is endorsed. This analysis is insufficient because it omits discussion and refutation of a variety of other ethical theories. Establishing that extreme altruism is an undesirable ethical theory does not provide a sufficient basis for endorsing ethical egoism over all other alternatives.

    These problems might be resolvable with further argumentation, but unfortunately, they are not the only difficulties with ethical egoism. Another is that an ethical egoist would not want ethical egoism to be universalized. If it were universalized, others would be deterred from acting altruistically toward the egoist, which would be against the egoist’s self-interests. Hence, it seems to be in one’s interests to endorse the theory personally but not publicly, which leads to an intriguing conceptual problem: how can ethical egoism be considered morally binding if its advocates do not want it to be universally applied?

    Another clear problem is that ethical egoism offers no means of resolving conflicts of interest. If ethical egoism were more widely followed, sooner or later, someone’s interests would conflict with another’s interests. In such a circumstance, it would be impossible for both to pursue their own interests simultaneously, but how does one decide whose interests take priority? Ethical egoism does not provide an answer.

    A final and perhaps decisive objection to ethical egoism comes from James Rachels. He equates ethical egoism with racism in terms of its conceptual construction. Racists divide all people into groups and treat people differently based on the trait of one’s race but have no justification for concluding that their own race is any better than others, rendering racism an arbitrary doctrine. Similarly, ethical egoists demand that we “divide the world into two categories of people—ourselves and all the rest—and that we regard the interests of those in the first group as more important than the interests of those in the second group.”6 The egoist can offer no justification for the distinction between the two groups. Hence, Rachels concludes that ethical egoism is an arbitrary doctrine and that others should be given the same moral consideration as ourselves because their merits and desires are comparable to our own.

    Overall, ethical egoism is a widely-rejected ethical theory with few contemporary advocates. Developing ethical egoism into a coherent, functional ethical theory would require massive revision to the original principle.

    1. Ayn Rand, ed., The Virtue of Selfishness (New York: Penguin Putnam, 1964), 51.

    2. Ibid., 53.

    3. Ibid.

    4. Ibid., 49.

    5. Max Stirner, The Ego and His Own, trans. Steven T. Byington (New York: Benjamin R. Tucker, 1907) 387.

    6. James Rachels, The Elements of Moral Philosophy, 4th ed. (Boston: McGraw-Hill, 2003), 89.

  • Eudaimonia
    Aristotelian virtue ethics is centered around the concept of eudaimonia, which is commonly translated as ‘happiness’ or ‘flourishing.’

    ‘Happiness’ as it is understood today, however, does not sufficiently capture the ancient meaning of the term.  Unlike our everyday concept of happiness, eudaimonia is not a state of mind, nor is it simply the experience of joys and pleasures.  Moreover, happiness is a subjective concept.  In other words, it is up to each of us to determine what it means, for us, to be happy.  Thus, Samantha may find happiness in intellectual pursuits, while happiness for James may consist in religious devotion, or particular spiritual practices.

    Eudaimonia, in contrast, is meant as an objective standard of ‘happiness,’ based on what it means to live a human life well.  For Aristotle (and, in one way or another, for most all virtue ethics theorists), ‘flourishing,’ or living well, involves living a life in accordance with virtue (see Virtue Ethics).

    Although Aristotle maintained that the virtues are a necessary part of living well, he does admit that other goods – such as health and beauty – are also needed.  Other proponents of virtue ethics hold views that diverge with Aristotle’s on this point.

    Some Greek virtue ethics theorists held that living a life in accordance with virtue was sufficient for attaining eudaimonia.  Others, Epicurus and his followers, for example, viewed eudaimonia exclusively in terms of pleasure (a conception of eudaimonia much closer to our modern concept of happiness).

    Generally speaking, however, eudaimonia is most often associated with Aristotelian virtue ethics; given this, it is important to bear in mind the conceptual differences between eudaimonia and ‘happiness’ when one encounters the term.

  • Eurobond
    Eurobonds are bonds issued in a currency other than the currency of the market in which it is issued.  These bonds are named after the currency that they are dealt in, such as Eurodollar bonds for U.S. dollars and Euroyen bonds for bonds denominated in the Japanese yen.

  • Eurodollars
    These refer to deposits made in U.S. dollars at banks outside of the United States.  Traditionally these banks were in Europe (hence the name Eurodollar) but have expanded all across the globe.  These deposits are not regulated by the federal reserve.  They therefore, offer higher margins for the banks who take these deposits.  Additionally, the prefix “euro” can refer to any currency in a country where it is not the official currency.  Examples include the Euroyen.

  • Evil
    In some ethical traditions (religious traditions in particular), a distinction is made between ‘bad,’ or ‘wrong,’ and ‘evil.’  Acts, in addition to people, organizations, or other entities are deemed to be evil when they are extremely immoral or destructive.

    In the Christian theological tradition, a further distinction is made between moral evil and natural evil.

    Natural evil is used to describe violent and destructive acts of nature, such as hurricanes, earthquakes and tsunamis, for example.  It can also be used to describe human illness and disabilities, such as blindness, malaria, or AIDS.  Essential to both usages of natural evil is the absence of an intentionally acting moral agent (i.e. person).  Thus, natural evils occur independent of human actions and decisions.

    Moral evil results from the intended actions of moral agents, that is, actions made of one’s own free will.  Simple wrongdoing is not typically regarded as evil (thus the distinction between ‘wrong’ and ‘evil’).  In most cases, the term evil is reserved for more egregious or reprehensible acts (or entities).

  • Evolutionary Ethics

    The discipline of evolutionary ethics has developed in response to the growth of scientific inquiry and the overlap between evolutionary theory and moral philosophy. The primary goal of evolutionary ethics is to arrive at conclusions by applying principles of evolutionary theory to clarify perplexing issues in moral philosophy or elaborate on previously debated issues with new insight. Evolutionary ethics can be divided into three distinct branches:

    • Descriptive Evolutionary Ethics explores how certain moral capacities arose in human being by examining scientific claims. For example, how did human beings develop an understanding of fairness and reciprocity?

    • Prescriptive Evolutionary Ethics uses evolutionary theory to undermine or support claims in normative ethics. For example, in developing a normative ethical theory, can we justify allocating lesser moral consideration to animals than human beings?

    • Evolutionary Metaethics evaluates metaethical claims and theories with the aid of evolutionary theory. For example, evolutionary theory has generated some new sentiments about the origin of morality which have contributed to debate concerning moral skepticism.

    Compared to other approaches to morality, evolutionary ethics is new and fairly underdeveloped. Nevertheless, with time and additional research, this interdisciplinary approach could produce a variety of interesting discoveries regarding the relationship between morality and evolutionary biology.

  • Exercise Price
    Also known as the strike price, this is the price at which a security can be bought (call) or sold (put) when exercising an option.  The price is determined when the option is formed and is the key to determining the value of an option.

  • Exploitation
    Utilization of others with the motive of self-interest. One person taking an unfair advantage of another, for selfish reasons.

  • f

  • Federal Deposit Insurance Corporation (FDIC)
    Created in 1933 with the Glass-Steagall Act, the Federal Deposit Insurance Corporation is a government corporation that insures individuals’ deposits in banks up to $250,000. The purpose of the FDIC is to encourage financial stability and confidence in the financial system.

  • Financial Accounting Standards Board (FASB)
    The FASB is a group of seven accounting professionals that maintain the financial accounting standards in the United States.  The standards that the FASB issues are called the Generally Accepted Accounting Principles (GAAP).  Companies must follow these standards in their financial reports.

  • Financial Futures
    Futures that track financial instruments instead of physical items, such as commodities. As opposed to commodities futures, where the underlying can always be delivered, financial futures often track undeliverable products, such as interest on a Eurodollar.

  • Floating rate or leg (of an interest-rate swap)
    The half of an interest-rate swap whose interest rate changes with LIBOR.

  • Flow Trading
    When a firm does trades on behalf of its clients, it is called flow trading. This type of trading is different from proprietary trading in which the firm trades for its own direct gain and uses its own equity.

  • Foreign Direct Investment (FDI)
    When a foreign company invests in a domestic company. An example of this would be a company, such as Yahoo!, in the U.S., investing in Baidu, a company in China.  FDI includes foreign investments into private domestic companies, as well as investments to start up local companies.

  • Foreign Exchange Risk
    This is the risk associated with an investment losing value due to changes in the currency exchange rates.  This risk applies to investors making international investments or companies that commonly import and export goods.

  • Forward Rates
    The amount it will cost to deliver an asset in the future; it is the price that is used to determine the price of a forward contract.  Forwards involve physical delivery of an asset at an assigned date.

  • Forwards
    A contract in which the price of a commodity is decided upon before the delivery date.  Commonly used to “lock-in” prices.  These contracts differ from futures contracts in that they are not exchange traded and are not standardized.  In addition, losses normally accrue over the entire length of the contract instead of being adjusted daily like futures. The main advantage to forwards is their ability to be customized for the two parties as they are traded “over the counter”.  Forwards involve future physical delivery of an asset at agree-upon price.

  • Free Cash Flow (FCF)
    A valuation method calculated by subtracting capital expenditures from operating cash flow.  FCF gives the amount of cash that a company has left over after paying to maintain its assets.  This number is considered very important because this represents the amount of money left over to increase shareholder value, for example by developing new products, paying off loans, or paying dividends.

  • Free Market
    A Free Market is a market free from governmental regulation and intervention (in the form of tariffs, regulatory codes, workers' and environmental rights, etc.) except to enforce contracts and protect property rights. A free market is allegedly “self-regulated,” ethically speaking, by market participants (firms, owners, workers, buyers, sellers, etc.) associating on the basis of non-coercion and mutual consent.

    Contemporary free market theory was espoused and most strongly advocated for by University of Chicago economist Milton Friedman. Friedman built upon the work of Austrian economist Friedrich von Hayek, and believed that free markets were the surest route to perfect competition among market players, a necessary condition for the maximization of efficiency, productivity, and ultimately the creation of wealth.

    An absolutely free market has yet to exist in “developed” economies, but Friedman's ideas have been highly influential in forming economic policy across the globe, from the Americas to Africa, Asia, the Middle East and Europe.

    The most dramatic expression of free market criticism was the 1999 protest at the World Trade Organization (WTO) conference in Seattle. Protestors claimed that by transferring regulatory power from (hypothetically) democratic governments to privately owned institutions, citizens' right to self-determination was compromised. They saw international financial institutions such as the WTO, International Monetary Fund (IMF) and World Bank as instruments of wealthy corporations to pressure countries in economic crisis into adopting free market policies.

    Defenders of free market capitalism point to the fact that where free markets appeared to exacerbate social or economic ills (i.e. Argentina, Mexico, Chile, Poland, South Africa, Russia, Malaysia, China), there were still governmental interferences which contributed to market distortions and malfunctioning.

  • Free Will
    Free will is described as the capacity for rational agents (namely humans) to choose one course of action over other possible alternatives. The main questions around Free Will are: (1) Do we have it? (2) If we do have it, to what extent? (3) If we do not have it, what are the alternatives? These questions have proven significant to moral philosophers because Free Will is often viewed as a precondition for moral responsibility.

    Some philosophers, such as Rene Descartes and Jean Paul Sartre, have argued for the position of radical Free Will – that each agent is wholly free of influence, whether internal or external, when making choices. The antithesis of this position is that of Determinism, the idea that the present or future is effectively determined by the state of the past in conjunction with the basic laws of nature. In this view the human will is not exempted from the laws of natural causality and thus not “free” to self-determination.

    There are some, however, who believe that the freedom of the will is in some sense compatible with Determinism in that the possibility still exists for agents to act otherwise. Because agents would necessarily act otherwise under varying natural conditions (including mental states), they are not destined for only one future.

    Those who reject this definition of freedom generally fall into the incompatibilist camp, stating that in order for the will to be free there must be multiple futures available to the agent regardless of past events or present conditions. Whether determinist or indeterminist, many incompatibilists insist that mental features, such as personality and emotion, exert influence over the will. They hold that if these psychological functions did not play a role in decision making then the will would simply operate ungoverned, acting at random; it would be no more “free” in the conventional sense than if completely determined by natural forces. Furthermore, such a will would not be an appropriate locus of moral responsibility.

    By this logic, then, in order for an agent to be held truly morally responsible, he or she must also be responsible for those personality traits which in some sense determine action. Philosopher Galen Strawson argues that one's initial personality is invariably a product of a confluence of forces outside of one's control (nature and nurture when one is an infant). Any personality, which subsequently arises must necessarily be determined (consciously or unconsciously) by the functions of this initial personality. It is thus impossible, according to Strawson, for any agent to be held ultimately responsible for any of his or her actions (he states we can still speak of proximate responsibility out of convention when referring to any one personality).

    Prominent Free Will philosopher Robert Kane accepts Strawson's premise that self-creation is a necessary condition for moral responsibility, but argues that aspects of each “subsequent personality” are not wholly determined by the former, but arise out of moments of intense internal conflict when strong desires and duties are competing for expression. In these moments when the agent is unaware of which desires or duties will “win out,” Kane argues there is in fact indeterminacy about the kind of personality that might subsequently emerge. In these “windows of indeterminacy” the agent is empowered to change herself, thus assuming greater moral responsibility for future behavior.

  • Freedom
    Freedom is generally described as a state absent of coercion, interference or determination by any internal or external force or authority. The concept of freedom can be applied to many (or most) spheres of human activity, including political, economic, relational and metaphysical realms.

    The most popular ideas of freedom are perhaps best explicated by British philosopher Isaiah Berlin; he distinguished between two fundamental types: negative and positive. Negative freedom is typically most associated with political freedom, that is, freedom from coercion, interference, or determination by other agents or institutions. Positive freedom, however, is described as the freedom to “be [one's] own master” in a psychological, cultural, or metaphysical sense.

    Negative freedom may be understood as the absence of external barriers to action, while positive freedom is measured by the presence of internal facilitators of self-determination (such as reason, wisdom, free will, etc.). For example, one who is free to smoke cigarettes but does so against his or her highest will would be considered free in the negative sense but not free in the positive.

    Virtually every political philosopher, from Plato to Locke, Mill to Marx, produced their own variations on what actualization of these two types of freedom would look like and how to achieve the freedoms.

  • Fundamental Research
    This research involves trying to find the intrinsic value of a security. Research would include looking at everything that would affect a security’s value from financial statements to economic conditions and interest rates. Qualitative factors are also researched, for example how well the management of the company is doing. The person who is said to have made fundamental research popular is Warren Buffet who used value investing (a particular style of investment) to become a billionaire.

  • Futures
    A contract used for the buying or selling of an asset at a certain date for a specified price.  This derivative instrument is between two parties that agree to perform a transaction in the future.  It can involve financial instruments or commodities that will be delivered in the future for an agreed upon price.  These derivatives can be used by the parties to hedge risk or it can be used to speculate and increase risk.  Profits and losses are calculated on a daily basis in the futures market, meaning that at the end of the day the two parties are debited or credited their respective amounts. Most futures are settled in cash and then the actual commodities are bought on the cash exchange.  This being said, it is just as likely to have two speculators on the futures market as it is to have two people actually exchanging the goods.

  • Futures Exchanges
    The place where futures contracts and options on futures contracts are traded.  An example would be the Chicago Mercantile Exchange.

  • g

  • Gamma (G)
    The first derivative of delta in regards to the price of the underlying security, and therefore the second derivative of the option in regards to the price of the underlying. All long positions have positive gamma (because delta increases as the price increases) and short positions have negative gamma.

  • Gamma Scalping/Trading
    Also known as volatility trading, traders attempt to construct delta (and gamma) neutral positions. For instance, one could first create a straddle of call and put options that have D = 0. If the market moves sufficiently in either direction, then the value of the position will become positive, as one can exercise one of the options. There are many varieties of Gamma trading.

  • Generosity
    Generosity, which might best be described as a disposition to give freely or overflowing goodwill, is a traditional virtue.  The term ‘generosity’ is derived from the Latin word generositas, which means ‘noble-mindedness,’ and is associated with the Greek notion of magnanimity, or ‘greatness of soul.’

    In various religious traditions – both Western and non-Western, generosity plays a key, if not central role.  In Buddhist thought, for example, the concept of dāna, which is commonly translated as generosity or giving, is among the most basic and important virtues.

    Confucius, perhaps the greatest non-Western philosopher, held that generosity was one of five great virtues, the having of which constituted perfect virtue.

    In Christianity, too, generosity is viewed as an important virtue.  St. Paul writes that human generosity “gives proof of our gratitude towards God” (2 Corinthians, 9:11).

    Generosity finds its way into the modern corporate world in a number of ways, sometimes in connection with corporate social responsibility, various corporate-sponsored community projects and foundations, as well as the personal generosity of countless members of the financial sector.

  • Going Long on Equities
    Buying a stock with the expectation that it will rise in value in the future.

  • Golden Rule, The
    “Treat others as you would like to be treated” is a moral principle known as the golden rule.  In one form or another, this principle is associated with the ethical codes in most religious traditions.

    According to the International Encyclopedia of Ethics, the principle has “a long and rich history, a history that includes, but is not limited to, its appearance in Confucianism (sixth century B.C.E.), Buddhism (fifth century B.C.E.), Jainism (fifth century B.C.E.), Zoroastrianism (fifth century B.C.E.), Hinduism (third century B.C.E.), Judaism (first century B.C.E.), Christianity (first century C.E.), and Sikhism (sixteenth century C.E.).”[1]

    By modern philosophical standards, the golden rule is not commonly viewed as an adequate basis of moral theory.  The problem with the rule “treat others as you would like to be treated” is that it does not, and cannot, distinguish between the ‘good’ and the ‘bad’ ways in which one might like to be treated.  To put it another way, some people may have perverse or corrupted desires about how they would like to be treated, and the golden rule can do nothing to distinguish these desires from other, more beneficent desires.

    If, for example, a person wants to be subjugated, abused, harmed, or killed – the golden rule would provide license for that person to subjugate, abuse, harm, or kill others.  Since most of us would find it unacceptable for a person to treat others in this way, regardless of that person’s person preferences, it seems that the golden rule is indeed an inadequate basis for a moral theory.

    Nevertheless, for most people the golden rule serves as a reasonable rule of thumb, provided that the people who use the rule can in fact distinguish between the ‘good’ wants and the ‘bad’ ones.

    In business and financial contexts, the golden rule is as applicable as it is elsewhere.  When presented with the opportunity to profit by defrauding, cheating, or otherwise acting unfairly towards others in the market, the conscientious follower of the golden rule would ask him or herself: would I want to be defrauded, cheated, or otherwise treated unfairly by someone else in this situation?  Presumably, the answer would be ‘no’ and the golden rule would then demand that the person refrain from defrauding, cheating, or otherwise acting unfairly towards others.

    [1] Petrik, James.  “Golden Rule.” International Encyclopedia of Ethics.  pp. 354.

  • Good
    The term ‘good’ is not specific to ethics in particular, although it plays an important role in morality.  Good may be used to refer to anything – it is a general term that expresses positive value about something or assigns positive value to something.  Nevertheless, in philosophy the term takes on special meaning and that meaning is particularly related to ethics.

    Philosophers sometimes make a distinction between an intrinsic good (also referred to as a ‘good in itself,’ and an instrumental good, which serves as a means to in intrinsic good.  Money, for example, is a good, but it is typically regarded as an instrumental good.  Having money helps or enables a person to reach an intrinsic good (happiness, for example), but money itself is not an intrinsic good.

    Philosophers also tend to shape their ethical thought according to what they take to be good, or what they take to be the ultimate good.   To put it another way, the concept of good, though taken to be different things by different philosophers, is central to ethics.  It is often the case, moreover, that differences between ethical theories amount to differences in the conception of goodness.

    Aristotle, for example, made a distinction between intrinsic and instrumental goods, and argued that eudaimonia (roughly translated as happiness or flourishing) is the intrinsic, or ultimate, good for humans.  Accordingly, Aristotle’s virtue ethics is designed to be a normative ethical theory which, if properly followed, leads to eudaimonia, the ultimate good.

    Likewise, hedonistic utilitarians, who view pleasure as the ultimate good, offer a normative theory that seeks to maximize pleasure and tells us to act always according to the criterion “the greatest  good for the greatest number.”

    Desire-satisfaction utilitarians also hold that the central criterion of right action is to act to bring about “the greatest good for the greatest number.”  They differ from hedonistic utilitarians, however, because they view the ultimate good as the satisfaction of desires (which may not necessarily be reduced to pleasure, hence the distinction).

    Whatever the framework within which the conception of good is developed, goodness plays a central role in ethics – perhaps more so than any other single concept.

  • Goodwill
    A type of intangible asset.  Goodwill can include a patent, brand stature, or other intangible assets.  Goodwill usually appears on a company’s balance sheet after they have purchased another company and paid more than book value.

  • Greed
    Greed, or avarice, is a vice of character that consists in an excessive desire to acquire things, including, but not limited to, money, wealth, or possessions.

    In some religious traditions – Christianity, in particular – greed is viewed as a sin.

    Secular and religious traditions alike view greed as a vice of because the excessive desire that characterizes it may overwhelm, or lead the greedy person to ignore, other considerations.

    Most would agree that it is a bad thing to disregard one’s relationships with other people, one’s common decency, or one’s integrity for the sake of, for example, money.  Since greed often leads a person to disregard or overlook these considerations, greed is a bad thing.

    In addition to overwhelming, or causing a person to ignore, these considerations, greed can also lead a person to disregard moral considerations, in which case greed may result in immoral conduct.

    Financial scandals, such as the recent Raj Rajaratnam and Bernie Madoff cases, are often attributed to greed.  In both the case of Mr. Rajaratnam and the case of Mr. Madoff, illegal and immoral measures were taken in order to acquire massive profits.

  • Guilt
    Two senses of the concept guilt arise in moral contexts.  In the first sense, guilt is simply the state of having done something wrong.  We might say, for example, that a person is guilty of wrongdoing if he has committed a robbery.  This usage of the term ‘guilt’ extends beyond moral contexts to legal contexts.  Thus, although we may judge the robber to be guilty of wrongdoing quite apart from any legal context, we may also find the robber guilty of wrongdoing in a court of law.

    The second sense of guilt describes an emotional or psychological state.  A person may ‘feel guilty’ for having done (or failing to have done) something.  In some cases, this feeling of guilt may arise even when no actual wrongdoing has occurred.  A person may feel guilty, for example, if the person believes that he or she has offended or angered another person, even when the other person is not in fact offended or angered.

    The reverses, of course, also occurs.  An individual may in fact be guilty of wrongdoing yet feel no sense of guilt for what he or she has done.  A financier who has been convicted of fraud, for example, may maintain her innocence, and feel no guilt, despite being proven guilty of wrongdoing.

    The avoidance of guilt and the consequences that accompany it (punishment, repayment, mental anguish, etc.) often provide motivation for individuals to refrain from wrongdoing.  In this way guilt can also be seen as a form of moral reinforcement.

  • h

  • Happiness
    Throughout the history of philosophy, various philosophers (and various schools of philosophical thought) have sought to define happiness.  It is most often associated with pleasure or well-being.

    In most moral theories, happiness, understood in terms of pleasure, plays a role as an important end.  Nowhere is this more straightforwardly the case than in utilitarian moral theory(see Utilitarianism), which claims that actions is, morally speaking, right if and only if it maximizes happiness, or pleasure.  The view that happiness consists in a life of pleasure is classically referred to as hedonism.

    Other schools of thought have sought to dissociate the concept of happiness with pleasure.

    Aristotle, for example, held a view that centered around the concept of eudaimonia.  Although eudaimonia is often translated as ‘happiness,’ there are substantial conceptual differences between the Aristotelian concept of eudaimonia and our everyday, modern conception of happiness.  Perhaps most notably, eudaimonia involves living a life in accordance with virtue – a requirement that is notably absent from a concept of virtue defined purely in terms of pleasure.

    The Stoics, in contrast to the hedonistic and eudaimonistic views, held that happiness consists in peace of mind, or mental tranquility.  Attaining this peace of mind, according to the stoics, involves becoming indifferent to the external circumstances of the world (which, inevitably, we cannot control) and learning to control our passions and emotions.  It also involves acceptance of, and resignation to, one’s lot in life.

    Though these historical strands of thought offer interesting alternatives to our everyday concept of happiness, most modern accounts of happiness acknowledge pleasure as an important aspect of happiness (though not necessarily the sole aspect, as hedonism claims).

  • Harm
    Harm can be accounted for in several ways.  Most basically, and uncontroversially, it involves bodily injury.  One can also be harmed if damage or injury is done to one’s interests, or if a violation against one’s rights occurs (See Rights).

    ‘Do not harm’ is, for most all moral systems, a central principle.

    A distinction can be made between doing harm and allowing harm, although one may be held morally responsible for either.  If, for example, a schoolteacher strikes a child, we would say that the teacher is doing harm.  If the schoolteacher allows one student to strike another, without interference or punishment, we would say that the teacher is allowing harm.  In either case, however, the teacher would be held to some degree of accountability for his/her actions (or lack thereof).

    There are many ways in which the issue of harm arises in the ethics of business and finance.  The basis of many lawsuits brought against corporations, for example, is the claim that the company’s product, or the production of that product, resulted in harm to the plaintiff.

  • Hedge Funds
    Hedge funds use aggressive investment strategies including short, long, leveraged, and derivatives to try generating high returns.  Hedge funds are open to a limited number of investors and usually require a high initial investment.  Hedge funds are similar to mutual funds in that professional managers are in charge of a pool of money.  However, hedge funds are usually for wealthier investors and their strategies tend to vary more than hedge funds.  Also, hedge funds have in the past, tended to be unregulated.  This situation may change with financial reform enacted after the 2008 financial crisis.  Most hedge funds require investors to keep their money in the fund for at least one year.  Traditionally the term “hedge” is usually defined as reducing risk, which is how hedge funds started.  Today, the goal of hedge funds is to produce the most return on investment instead of just protecting against a bear market.

    The distinctiveness of hedge funds derive from their fee structure, sometimes known as 2 and 20.  Generally, hedge funds charge a 2% management fee (based of total assets managed) and a 20% performance fee (based off the performance of the fund for the year).

  • Hedging
    The act of reducing the risk in an investment.  An example of this would be to take a short position on a stock you own, making you less exposed to a downturn in the market.  When the long position falls, the short position in the same stock will rise, thus reducing the risk of a large decline in the position.

  • High Frequency Trading (HFT)
    High Frequency Trading involves strategies that are based on very short positions. HFT uses powerful computers to make large numbers of orders at very fast speeds. Instead of taking positions and looking for a profit in weeks or months, HFT traders try to make profits on fractions of a penny per share multiple times in a given day.

  • Holding Period Return
    The amount of return from a particular investment thus far.  Calculated as a percentage in a per dollar basis, it is difficult to use this to compare to other investments since it is not on a per time basis.

    Holding Period Return = Income + (End of Period Value – Initial Value) / Initial Value

    Annualized HPR = {[(Income + (End of Period Value – Initial Value)] / Initial Value+ 1}1/t – 1

    where t = number of years.

    Returns for regular time periods such as quarters or years can be converted to a holding period return through the following formula:

    (1 + HPR) = (1 + r1) x (1 + r2) x (1 + r3) x (1 + r4)  where r1, r2, r3 and r4 are periodic returns.

    Thus, HPR = [(1 + r1) x (1 + r2) x (1 + r3) x (1 + r4)] – 1


    *Equation courtesy of

  • i

  • Ideal & Nonideal Theory
    John Rawls conceives of justice as fairness as a work of ideal theory. Ideal theory “assumes strict compliance and works out the principles that characterize a well-ordered society under favorable circumstances.”1 Nonideal theory, on the other hand, “is worked out after an ideal conception of justice has been chosen” and addresses what the parties are to do when conditions are not as perfect as they are assumed to be in ideal theory.2 While Rawls acknowledges the importance of issues within nonideal theory (as these are the issues that we confront in the real world), he believes the work in nonideal theory can only be pursued after the ideal theory has been established. Hence, he devotes little time to discussing the application of the principles of justice as fairness within the realm of nonideal theory.

    1. John Rawls, A Theory of Justice: Revised Edition (Cambridge: The Belknap Press of Harvard University Press, 1999), 216.

    2. Ibid.

  • Immoralist
    An immoralist is a skeptical individual who believes it is preferable to act immorally when morality does not serve his or her self-interest. Thrasymachus of Plato’s Republic is one clear example of an immoralist.

    In “The Reconciliation Project,” Gregory Kavka attempts to reconcile morality and self-interest. However, before beginning this task, Kavka identifies a group of individuals which he believes he cannot satisfy. Some have supposed that a successful reconciliation would be able to persuade an immoralist to behave morally. Kavka, however, claims that this task cannot be accomplished.

    Kavka characterizes immoralists as individuals who “are not likely to understand or appreciate the benefits of living morally” and who will rarely “listen to, or be swayed by, abstract rational arguments.”1 Without understanding the benefits of living morally, immoralists cannot be encompassed within Kavka’s attempt to reconcile morality and self-interest, but Kavka does not think this notion defeats his efforts. According to Kavka, an immoralist’s boast that that it does not benefit him to act morally is “like the pathetic boast of a deaf person that he saves money because it does not pay him to buy opera records.”2 In other words, immoralists miss out on the satisfactions of moral behavior, but they are not in a position to recognize or properly appreciate the loss of these satisfactions.

    1. Gregory Kavka, “The Reconciliation Project,” in Ethical Theory: Classical and Contemporary Readings, 5th ed., ed. Louis P. Pojman (Belmont: Wadsworth, 2006), 101.

    2. Ibid., 107.

  • Impartiality
    The principle of impartiality is central to both deontological and utilitarian ethical theories, both of which call for an impartial appraisal of a situation, followed by the morally appropriate response.  These impartial moral theories require an individual to set aside personal interests and considerations, that is, they require us to make decisions based on an objective criteria, rather than personal bias.

    An impartial decision, in short, is one in which certain considerations (particularly personal ones) have no influence on the deliberation involved in the decision.

    The impartial value is represented in utilitarian theories in their insistence that outcomes or states of affairs are the solely relevant considerations in determining the appropriate moral action.  Noticeably absent from this view is a place for the personal considerations of an individual.  Thus, the utilitarian agent is not permitted to favor himself or herself, or his or her family, friends, and loved ones when deliberating over a decision.  Rather, the agent is morally required to act to bring about the best outcomes regardless of the beneficiaries of those actions.

    To illustrate the principle of impartiality, consider the following case.  A lifeguard is faced with a dilemma: he can either rescue (a) a group of 5 swimmers or (b) a lone swimmer, who happens to be his cousin, but he cannot rescue both (a) and (b).  According to utilitarianism, the fact that (b) is the lifeguard’s cousin is not a consideration that overrides the lifeguard’s utilitarian duty to bring about the best outcome, which he will achieve by rescuing (a).

  • Income Statement
    When a private company becomes public, it does an Initial Public Offering.  It is the first sale of stock by a company to the public.  IPOs may be used by smaller companies looking for more capital to expand or by older companies looking to go public.  During an IPO the company will hire an underwriting firm to help determine the best price and time to go to the market.

  • Index
    A formula that tracts the progress of a basket of stocks. Some such as the S&P 500 or Dow Jones are commonly used as benchmarks for the American economy.

  • Index Arbitrage
    A process whereby one makes risk-free profit (arbitrage) through index futures. Because the forward price of a portfolio is strictly less than its nominal price, one can short the future at that nominal price while buying the index-replicating portfolio. When the future is settled one sells the portfolio, making the difference between nominal and forward price risk-free.

  • Index Futures
    An example of a financial future. The future tracks a specific index; the price of the future at expiration is the same as the price of the index on that day.

  • Inflation
    Inflation is the general increase in the price of goods and services. When inflation rises, purchasing power falls. Two theories for the causes of rising inflation include demand-pull, which says that demand rises faster than supply so prices go up, and cost-push, which says that the increase in wages and materials is pushed to the consumer making everything more expensive. The Federal Reserve Bank decides the interest rate taking into account inflation. The Fed keeps the rate low to foster growth (and inflation) or sets the rate higher to curb future inflation. Despite popular belief, inflation is not inherently bad. It is too much or too little inflation that causes ill effects.

  • Initial Public Offering (IPO)
    When a private company becomes public, it does an Initial Public Offering.  It is the first sale of stock by a company to the public.  IPOs may be used by smaller companies looking for more capital to expand or by older companies looking to go public.  During an IPO the company will hire an underwriting firm to help determine the best price and time to go to the market.

  • Insider Trading
    The practice of buying and selling securities on the basis of information that is not available to the public is known as insider trading.  It is illegal and, because it violates principles of fairness, it is also immoral.

    The U.S. Securities and Exchange Commission (SEC) identifies detection and prosecution of insider trading as an enforcement priority, explaining that  “[b]ecause insider trading undermines investor confidence in the fairness and integrity of the securities markets, the SEC has treated the detection and prosecution of insider trading violations as one of its enforcement priorities.[1]

    Indeed, the basis of the illegality and immorality of insider trading is that it undermines the fairness; since insider traders make transactions with the use of information of information that is not available to others, critics of insider trading argue that those transactions are inherently unfair.  By undermining investor confidence in the fairness and integrity of the market, insider trading also has detrimental practical consequences.

    The SEC lists a number of examples of insider trading cases, including[2]:

    • Corporate officers, directors, and employees who traded the corporation's securities after learning of significant, confidential corporate developments;

    • Friends, business associates, family members, and other "tippees" of such officers, directors, and employees, who traded the securities after receiving such information;

    • Employees of law, banking, brokerage and printing firms who were given such information to provide services to the corporation whose securities they traded;

    • Government employees who learned of such information because of their employment by the government; and

    • Other persons who misappropriated, and took advantage of, confidential information from their employers.

    Some insider trading apologists argue that the practice should be legal, claiming that no harm comes from the practice and that it can be beneficial for individual companies as well as the market at large.

    These arguments in defense of the legitimacy of insider trading have gained little traction.  Indeed, SEC and European regulators have increased their efforts to crack down on insider trading in recent years.  High profile cases, such as the Raj Rajaratnam insider trading case of 2009, demonstrate this fact.  At the same time, they highlight the need for better oversight.



  • Institutional Investors
    A non-bank entity that buys or sells securities in large enough quantities to get different treatment from other investors.  For example institutional investors are charged lower commission fees.   These entities also have fewer protective regulations because it is assumed that they know what they are doing.  Institutional investors typically manage money for other people who are their clients.  Examples of institutional investors would be pension funds and life insurance companies.

  • Integrity
    Although it has been defined in a variety of ways, the notion of integrity is one of the central concepts of virtue ethics.  It is not, however, a concept employed exclusively in discussions of virtue.  Broadly speaking, the term refers to the quality of the moral character of an individual.  Perhaps most importantly, it involves moral consistency, moral conscientiousness, moral accountability, and having a set of strong moral commitments.  As the concept of integrity refers to moral character, it is also importantly related to one's self-concept, or identity.
    A person who has integrity holds true to moral commitments and resists actions and situations which would compromise those commitments.  A person committed to honesty, for example, would exhibit integrity if he or she refuses to lie even in the case that telling the truth would come at some personal cost.
    This example also demonstrates the importance of consistency to the concept of integrity.  A person committed to honest is a person who tells the truth <em>consistently</em>, not one who merely tells the truth when it is convenient.  Without this consistency, the individual cannot be said to have a genuine commitment to honesty.
    Persons of integrity, it might be said, have a desire to do what is right - or, more specifically, what they take to be right.  A slave owner in early 19th century America, for example, may be a man of integrity, but nevertheless be mistaken in his beliefs about what is morally right.  In other words, he is committed to certain moral beliefs, or principles, but the principles to which he is committed are not flawed.
    People who have moral integrity are also morally accountable, that is, they take responsibility for their actions and the consequences of their actions.

  • Interest-rate swap
    A trade in which one party pays a fixed interest rate on a notional sum, while the other party pays a floating rate, usually set by LIBOR.

  • Internal Rate of Return
    This is the interest rate that a project is expected to generate.  Also calculated as the discount rate that makes the net present value of all cash flows equal to zero.  With all things equal, an investment with a higher IRR should generate a greater return.  Note that IRR is the interest rate expected and will often differ from the actual interest rate the investment generates.

  • International Bonds
    A debt security issued in a different country or currency.  These bonds are influenced by currency risk as well as the risk of default.   Examples include Eurobonds, foreign bonds, and global bonds.

  • International Finance Corporation (IFC)
    The IFC is a member of the World Bank Group and works to promote private sector investment in developing countries.  The ways they do this include financing private sector projects in developing countries and providing advice to businesses and governments in poorer countries.

  • International Monetary Fund (IMF)
    An international organization created to monitor economic development, lend funds to struggling countries, and provides training for countries who ask.  The IMF is home to all members of the U.N. and helps facilitate international trade.

  • Intrinsic Value
    This is the true value of a company.  This value usually differs from the market value.  Investors hope to profit from the difference.  There are many different methods of finding the intrinsic value, hence there may be variation in intrinsic values for one company.   Intrinsic value can also refer to options where it is the difference between the underlying stock’s price and the strike price.

  • Intuitionists
    Intuitionists, as proponents of this theory are sometimes called, support their theory by pointing to several sources of evidence.

    For example, moral reasoning often comes ‘after the fact’ in moral judgments.  In other words, we often come to moral judgments quickly, on the basis of a first impression or intuition, and provide reasons or a rationalization for our judgments only after the judgment has occurred.

    Moreover, it seems that there are cases in which people – psychopaths, for instance, who show a deficit in affective emotions like shame, grief, and sympathy – show no signs of deficiency in intellectual or rational capacities, yet seem to lack the ability to make (correct) moral judgments.  This seems to support the claim that emotions are necessary to morality.

    The intuitionist position is classically referred to as a theory of moral sentiment.  Proponents of this theory point to the human tendency to sometimes favor, or privilege, family and friends in moral decisions to substantiate their claim.  Of the moral sentiment theorists, David Hume is perhaps the best-known.

  • Investment Bank
    A financial institution that acts as an underwriter for corporations issuing securities.  I-Banks also offer advisory services for investors, assist in mergers and acquisitions, and private equity placements.  Investment banks are on the “sell side” of finance meaning  they give advice to buy side investors.

  • Investment Grade Bonds
    Bonds that have a low risk of default. These bonds are said to be the bonds with the highest credit ratings (besides treasury bills that are not rated) meaning that they have the lowest risk of default.  Ratings for investment grade usually rang from AAA (lowest chance of default) to BBB (higher chance of default but still considered investment grade). Ratings are performed by private agencies such as Standard & Poor’s, Moody’s, and Fitch.

  • Investment Management
    The process of buying, selling, holding, and allocating investments within a portfolio in order to obtain the best returns.  Investment management can be done by a single individual or it can be done by a group of professionals at a large fund.  Strategies can differ from one fund to the next but investment managers develop these strategies to try and reach the objectives of the investors.

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  • Junk Bonds
    Also known as speculative grade bonds, these bonds have a much higher risk of default.  Because of this high risk of default, the potential yields on these bonds are much higher than bonds with better credit ratings.  Speculative grade bonds are seen as bonds with credit ratings BB and below.  Ratings are performed by private agencies such as Standard & Poor’s, Moody’s, and Fitch

  • Just Savings Principle
    John Rawls is credited with providing the first thorough discussion of what the current generation owes to future people. He argues that the main duty owed to our successors is the saving of sufficient material capital to maintain just institutions over time. Rawls calls this duty the “just savings principle” (JSP). Although JSP is only a minor aspect of justice as fairness, it has been widely discussed and criticized because of its significance with regard to intergenerational justice.

    Rawls begins reasoning toward JSP by acknowledging that what the current generation owes the next generation is dependent on where the social minimum is set.1 He then claims that the social minimum “is to be set at that point which, taking wages into account, maximizes the expectations of the least advantaged group.”2

    Essentially, JSP is an addition to the difference principle designed to provide a constraint on its impact on posterity. If the difference principle has no intergenerational component, we may exploit the least advantaged of future generations for the benefit of the least advantaged currently living. In the final statement of the two principles, the difference principle reads as follows: “Social and economic inequalities are to be arranged so that they are to the greatest benefit of the least advantaged, consistent with the just savings principle.”3 However, JSP is not meant to be an extreme burden on the current generation, and “an excessive rate of saving must on balance mitigate the burden of those bearing this hardship.”4

    Notably, the forms of savings are diverse but are all to be understood as the accumulation of capital. The critical feature of this capital is that it furthers the maintenance of just institutions. It extends beyond mere monetary value, as Rawls suggests when he mentions “knowledge and culture” and “techniques and skills.”5 However, it does not include certain types of natural capital which are nonessential to the maintenance of a just society.

    JSP is our means of determining the proper level of intergenerational savings, but providing a substantive and precise definition of JSP proves extremely difficult, and Rawls stresses that he does not think it is currently possible “to define precise limits on what the rate of savings should be.”6 He does claim, however, that we can specify some limits to avoid certain extreme results. Our guidance for determining these limits comes from our deliberations in the original position. From behind the veil of ignorance, “the parties are to ask themselves how much they would be willing to save at each stage of advance on the assumption that all other generations have saved, or will save, in accordance with the same criterion.”7 JSP is understood as a rule regulating the rate of accumulation as society progresses; when the parties in the original position decide on a rate of savings, they are establishing regulations on the rate of accumulation that everyone is to follow.

    Since parties in the original position lack knowledge regarding the state of their society, they will avoid imposing high rates of savings at earlier stages of accumulation: while they will benefit from these rates if they come into existence later, they must also be able to accept the rates if they happen to live in a poor society in which they would suffer if the rate of savings is too severe.8 Simultaneously, some rate of savings must be binding on all generations because it is to everyone’s advantage (except perhaps to the first generation’s) for their predecessors to have saved. Through this deliberation, certain limits on JSP are established.

    The precise definition of JSP can be attained through some additional thought experiments in the OP. The parties are to ask what they should set aside for their descendants and what they feel entitled to have received from their predecessors. After a fair estimate is reached from both sides and some adjustments are specified based on the how favorable societal circumstances are, the rate of savings for that particular stage is established.9 Once this process is completed for each stage of accumulation, JSP is fully defined.

    At this juncture, we should note several other aspects of JSP before progressing to how the principle was modified in PL. First, we should not infer from the previous discussion that JSP entails continuous savings. JSP can be thought to occur in two stages. The first is the stage of accumulation: each generation saves material capital at a specified rate dependent on their stage of accumulation and the circumstances of their society. The second is the state of maintenance: once the second stage of JSP is reached, saving for future generations becomes supererogatory. All that justice requires is that the material base necessary for sustaining just institutions be preserved from one generation to the next.

    The purpose of JSP is not merely to make future generations wealthier, and according to Rawls, we would be mistaken “to believe that a just and good society must wait upon a high material standard of life.”10 In fact, Rawls actually discourages the supererogatory saving of wealth to some extent, remarking that it may become a “meaningless distraction” or even a “temptation to indulgence or emptiness.”11

    1. John Rawls, A Theory of Justice: Revised Edition (Cambridge: The Belknap Press of Harvard University Press, 1999), 251.

    2. Ibid., 252.

    3. Ibid., 266. Emphasis added.

    4. Ibid., 267.

    5. Ibid., 256.

    6. Ibid., 253.

    7. Ibid., 255.

    8. Ibid.

    9. Ibid., 256.

    10. Ibid., 257.

    11. Ibid., 258.

  • Justice as Fairness
    Justice as fairness refers to the conception of justice that John Rawls presents in A Theory of Justice. This conception of justice concerns society’s basic structure—that is, “society’s main political, constitutional, social, and economic institutions and how they fit together to form a unified scheme of social cooperation over time.”1

    Rawls constructs justice as fairness in a rather narrow framework and explicitly states, “Justice as fairness is not a complete contact theory.”2 Its purpose is to show how we ought to allocate a cooperative surplus of resources to individuals in society. As a result, justice as fairness relies on two implicit assumptions about the societies in question: first, social cooperation is possible and can work to everyone’s mutual advantage, and second, there exists a moderate surplus of available resources to be distributed. Justice as fairness cannot be used to determine the just distribution of sacrifices to be made by a society’s members when resources are scarce. More generally, it cannot help us identify just social policies in societies where background conditions (e.g., scarcity of natural resources, cultural barriers, war) have eliminated the possibility of mutually advantageous social cooperation.

    The process for determining how the basic structure should be arranged is based on a thought experiment in which rational, mutually disinterested individuals choose principles of justice from behind a veil of ignorance, a condition that specifies they do not know specific details about themselves (e.g., personal values, race, gender, level of income) or the society in which they live (e.g., societal stage of development, economic circumstances). However, when choosing these principles, the parties do possess general social, psychological, and economic knowledge, and they also know that the circumstances of justice obtain in the society to which they belong.

    From this hypothetical initial situation, which Rawls calls the “original position,” these individuals will presumably endorse two principles of justice. The first, known as the equal liberty principle, is that “each person is to have an equal right to the most extensive scheme of basic liberties compatible with a similar scheme of liberties for others,” and the second is that “social and economic inequalities are to be arranged so that they are both reasonably expected to be to everyone’s advantage, and attached to offices and positions open to all.”3

    Rawls’ primary argument for the two principles is that they would be chosen over any variation of utilitarianism, which he considers the strongest opposition to justice as fairness. Constrained by the veil of ignorance, the parties in the original position (as mutually disinterested rational agents) try to agree to the principles which bring about the best state of affairs for whatever citizen they represent within society. Since the parties are all unaware of precisely what social role they will occupy, they strive to maximize their individual shares of primary goods. These goods are defined as “things that every rational man is presumed to want” regardless of this person’s rational plan of life and include (among other things) rights, liberties, social opportunities, and income.4 Rawls argues, largely through the appeal to the maximin rule, that the parties in the original position would favor the equal liberty principle over variations of utilitarianism. He further argues that the parties would support using the difference principle to regulate the distribution of wealth and income instead of a principle of average utility
    (constrained by a social minimum) because the difference principle provides a stronger basis for enduring cooperation among citizens.

    The full application of justice as fairness can be regarded as a 4-stage sequence. The deliberations concerning the two principles occur at the first stage. With the two principles established, the parties then progressively thin the veil of ignorance and, as they acquire more specific knowledge about society at the subsequent stages, determine more specific principles of justice. At the second stage, the parties learn more about society’s political and economic circumstances and create a constitution that is consistent with the two principles. At the third stage, the parties agree to laws and policies which realize the two principles within the context of the agreed-upon constitutional framework. At the fourth stage, the parties possess all available information about their society and apply the established laws and policies to particular cases.

    One of Rawls major tasks in presenting justice as fairness is to show that the society it generates can endure indefinitely over time. To achieve this aim, Rawls deploys the just savings principle, a rule of intergenerational savings designed to assure that future generations have sufficient capital to maintain just institutions. Additionally, Rawls argues that the society generated by the two principles is congruent with citizens’ good and that citizens can develop the necessary willingness to abide by these principles. As a result, the society generated by adherence to justice as fairness is stable and can be expected to endure indefinitely over time.

    Notably, however, the arguments for the stability of justice as fairness that Rawls presents in A Theory of Justice do not prove convincing. Rawls does not account for reasonable pluralism, a critical aspect of any constitutional democracy with the guaranteed liberties that Rawls specifies. Thus, Rawls recasts his arguments for the stability of justice as fairness in Political Liberalism and strives to demonstrate that citizens, despite reasonable disagreement about many issues, will agree on a limited, political conception of justice through an overlapping consensus of their individual viewpoints.

    1. John Rawls, Political Liberalism: Expanded Edition (New York: Columbia University Press, 2005), xli (fn 7).

    2. John Rawls, A Theory of Justice: Revised Edition (Cambridge: The Belknap Press of Harvard University Press, 1999), 15.

    3. Ibid., 53.

    4. Ibid., 54.

  • Justice, Circumstances of
    John Rawls describes the circumstances of justice as “the normal conditions under which human cooperation is both possible and necessary.”1 Unless the circumstances of justice are met by the society in question, using justice as fairness to derive just social policies is a misapplication of the theory because human cooperation, a necessary staple of a functional and just society, cannot be properly established. Rawls identifies two distinct kinds of background conditions that must be met to give rise to justice (as he conceives it): objective circumstances and subjective circumstances.

    Objective circumstances are those concerning the natural state of the society. Its inhabitants must coexist in some clearly identifiable territory and be of comparable strength and intelligence such that no individual can dominate all the others. Perhaps the most crucial objective circumstance of justice is that the resources available to the society be moderately scarce. Rawls states that justice can only arise when “[n]atural and other resources are not so abundant that schemes of cooperation are superfluous, nor are conditions so harsh that fruitful ventures must inevitably break down.”2 When resources are so plentiful that anyone can have what he or she desires without the assistance of others, social cooperation is unnecessary. On the other hand, when resources are too scarce for everyone to fulfill even their minimal desires (i.e., when no surplus can be generated from the resources available), social cooperation is undermined because its benefits will always fail to satisfy people’s demands.

    Subjective circumstances are those pertaining to the individuals in the society and their cooperation. Individuals must have competing interests which cause them to all lay different claims to the resources available. When these competing interests come into conflict with mutually advantageous social cooperation, a need for the concept of justice arises.

    1. John Rawls, A Theory of Justice: Revised Edition (Cambridge: The Belknap Press of Harvard University Press, 1999), 109.

    2. Ibid., 110.

  • Justice, Concept of & Conception of
    John Rawls makes a crucial distinction between the concept of justice and specific conceptions of justice. He defines the concept of justice as “a proper balance between competing claims from a conception of justice as a set of related principles for identifying the relevant considerations that determine this balance.”1 In contrast, a conception of justice is not so broad. To illustrate the difference, Rawls states that the concept of justice is “the role of its principles in assigning rights and duties and in defining the appropriate division of social justice” while “[a] conception of justice is an interpretation of this role.”2 Justice as Fairness is a conception of justice.

    1. John Rawls, A Theory of Justice: Revised Edition (Cambridge: The Belknap Press of Harvard University Press, 1999), 9.

    2. Ibid.

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  • Kondratieff Wave Theory
    A theory suggesting that capitalist economies will experience periods of growth and deep recession around a 50 year period.  The theory states that a period of high growth will be followed by a recession, a recovery where the economy will plateau, and then an economic crisis will cause  another more severe depression and then start the cycle again.  This cycle of constant renewal and destruction is also known as “supercycles”, “Kondratiev waves”, “K-waves”, “surges”, or “long waves”.

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  • Letters of Credit
    A letter from a bank guaranteeing that the seller will be paid for the goods a buyer has purchased.  If the buyer is unable to pay, the bank will honor the buyer’s obligation.  Letters of credit are commonly used in international business as both parties trust the bank to make the payments.

  • Leverage
    This refers to the use of borrowed capital to increase the return on investment. It also refers to the amount of debt a company uses to fund its assets. A company that is highly leveraged refers to a company that has a great deal more debt than equity. Leverage is essentially used to magnify profits but it can also magnify losses.

  • Leveraged Buyout (LBO)
    An LBO is when a company uses considerable amounts of debt (leverage) to buy another company.  The acquired company’s assets are sometimes used as collateral for the loans.  The ratio is usually around 90% debt to 10% equity during an LBO.  Because of the small amount of capital, the bonds created to fund this are usually very low quality or junk bonds.  An LBO helps a company purchase another company without having to put up large amounts of capital.

  • Liabilities
    These are economic obligations of an entity.  Liabilities include loans that the company has taken out, expenses, and deferred revenues.  Current liabilities must be paid in one year while long-term liabilities are longer than one year.

  • Liberty

    Of central importance to liberalism – both as an economic and a political system – is the notion of liberty.  Liberal theorists, however, disagree as to the nature of liberty in liberal societies.

    One formulation of liberty – the negative formulation – views liberty as, simply, the absence of external obstacles or constraints.  Isaiah Berlin, a well-known proponent of negative liberty describes the position as follows:

    “I am normally said to be free to the degree to which no man or body of men interferes with my activity. Political liberty in this sense is simply the area within which a man can act unobstructed by others. If I am prevented by others from doing what I could otherwise do, I am to that degree unfree; and if this area is contracted by other men beyond a certain minimum, I can be described as being coerced, or, it may be, enslaved. Coercion is not, however, a term that covers every form of inability. If I say that I am unable to jump more than ten feet in the air, or cannot read because I am blind…it would be eccentric to say that I am to that degree enslaved or coerced. Coercion implies the deliberate interference of other human beings within the area in which I could otherwise act. You lack political liberty or freedom only if you are prevented from attaining a goal by other human beings” (Isaiah Berlin, “Two Concepts of Liberty” in Four Essays on Liberty, Oxford University Press, p.122).

    This conception of liberty, although it clearly protects freedom in a broad range of cases, is not without its limits; and one conceptual difficulty with liberty is locating those limits.

    Many hold the view that we arrive at the limits of liberty when our actions harm others.  John Stuart Mill proposed this position in what is commonly known as the ‘Harm Principle’:

    “The only purpose for which power can be rightfully exercised over any member of a civilized community, against his will, is to prevent harm to others.  His own good, either physical or moral, is not a sufficient warrant.” (J.S. Mill, On Liberty).

    Others argue for wider restraints on individual freedoms, claiming that freedom should also be restricted when one’s actions are offense or immoral.  The freedom to buy or produce pornography, for example, and the freedom to engage in prostitution, for another, are often held to be the kinds of offensive and immoral freedoms that should be restricted.

    Apart from these various positions with respect to negative liberty, some liberal theorist have proposed a conception of positive liberty, claiming that the concept of negative liberty is inadequate.  Positive liberty takes freedom to be self-determination, or autonomy.    It is “the possibility of acting — or the fact of acting — in such a way as to take control of one's life and realize one's fundamental purposes” (Ian Carter, “Positive and Negative Liberty,” Stanford Encyclopedia of Philosophy, October 8 2007,

    In spite of the disagreement among theorists about the concept of liberty in liberal theory, liberty is widely held to be a fundamental value of modern Western society, and is vital to political and economic life as we know it.

  • Liquidity
    How easily an asset can be sold without losing significant value.  Highly liquid assets can be bought and sold quickly while illiquid assets would lose value.  If an entity has no liquid assets it cannot quickly sell the assets to pay off unexpected liabilities.

  • Liquidity Ratios
    A ratio that indicates how well a company can pay off short-term liabilities.  The higher the ratio, the more likely the company is able to pay it off.  The higher the ratio, the more liquid the company’s assets are.

  • Lockean Proviso
    This proviso is an ‘enough and as good’ clause on original acquisition, stating that we can only appropriate unowned property if we leave enough and as good for others.

  • London Interbank Offering Rate (LIBOR)
    The rate at which banks can borrow funds from other banks in the London Interbank market.  The British Bankers’ Association decide on LIBOR rates on a daily basis

  • m

  • Margin Requirements
    Margin requirements are relevant to the use of borrowed funds to purchase securities.  It is the amount of an investor’s own capital that she is required to put in while making an investment with the use of borrowed funds.  Investors today can usually invest 50% of their own money and match it with 50% borrowed money.  Therefore, investors cannot finance the investment with more than 50% debt.

  • Mark-to-Market
    This is a way of valuing assets or a company based on what the market will pay for the asset or company.  Mark-to-market is considered a better way to evaluate assets.  If based on the fact that if the company goes under, the market value, not the historic value, is what you will be able to sell the company’s assets for.

  • Market Capitalization
    This figure represents how much a corporation is worth on the markets. It is calculated by multiplying the stock price of a company by the number of shares of stock outstanding.

  • Maxims
    Maxims are simple or basic rules that guide action.  They are often easily recognizable and easy to remember.  Folk sayings are examples of maxims.  “A penny saved is a penny earned,” for example, is a maxim which offers a simple rule of frugality.

    In philosophy, the term is frequently associated with the moral theory of Immanuel Kant.   In Kant’s deontological ethics, maxims are understood as subjective principles of action.  The maxims ‘Do not kill’ and ‘Do not steal’ are examples of such subjective principles.  Kant’s view is that we should act only according to the maxims that can be regarded as universal laws, that is, we should act only according to the maxims that all people would follow.   This requirement of Kantian theory is known as the Categorical Imperative.

  • Mergers
    This is when two companies come together and become one company.  A merger usually entails an exchange of stock.  Mergers add value only if the two companies are worth more together than apart.

  • Mezzanine Finance
    A hybrid of debt and equity financing often used to finance expansions.  A lender gives a loan to a company, with the ability to covert the debt into equity.  The debt can be converted by the lender into equity of the borrowing company if the loan is not paid back in time.  Advantages of mezzanine financing include less collateral for the loan for the borrower and large returns on investment for the lender.

  • Money Market Accounts
    A savings account that offers a more competitive interest rate but also requires larger than normal balances in the account.  Some accounts also limit the number of withdrawal you can make during a certain time period.

  • Money Markets
    The part of the financial market where highly liquid financial instruments are traded.  Money markets are used by many companies to acquire short term funding, from several days to just under a year.  Investors park money in money markets to earn higher interest rates while exposed to low market risk.

  • Moody's Bond Ratings
    Moody’s is an independent company that rates bonds based on credit rating.  The higher the risk, the worse the rating (but giving a potentially higher return).  The grades go from AAA to C, with anything under BB being considered a junk bond and less than investment grade (because of the high risk).

  • Moral Absolutism
    Moral absolutism is an ethical view claiming essentially that all forms of human conduct can be classified as either being right or wrong in any context. Regardless of intention or purpose, committing bad actions are always going to be bad, and they cannot be justified. In other words, certain actions are always right and certain actions are always wrong, no matter how one tries to rationalize it.

  • Moral Agency
    Normal adult humans are widely considered to be paradigms of moral agents.   To be a moral agent means to be responsible for one’s moral actions.  It means to be a being capable of acting with reference to right and wrong, and rationality is often associated with this capability.

    We tend to think, for example, that particular responses are appropriate when a person who is a moral agent performs or fails to perform an action.  A good Samaritan is praised for his conduct; a thief is blamed for his.  We also tend to think that moral agency is a matter of degree (we do not think of children, for example, as moral agents; teenagers may have some degree of moral agency, though not the full moral agency of adults).

    Not unimportantly, groups and organizations of various kinds can also be held responsible as moral agents.  Corporations may be held responsible for their moral actions, for example, when their actions do harm to people.

  • Moral Character
    Moral character is perhaps best described as the totality of a person’s dispositions or characteristics that play a role in how the person, morally speaking, behaves.  To put it another way, to have a particular moral character is to have (or to lack) certain virtues and vices of character.

    In the Western philosophical tradition, the concept of moral character is most often associated with Virtue Ethics, dating back to Aristotle, but also including such figures as Augustine and St. Thomas Aquinas.  The concept of moral character and its importance in moral life is not, however, a uniquely Western phenomenon.  Non-Western philosophers – notably Confucius – have also emphasized the importance of character (and, indeed, the virtues).

    Since a person’s character consists in his or her dispositions to act in certain ways, the development of good habits (both habits of thought and action) is essential to the formation of good character.  For this reason moral education is emphasized in connection with moral character.

  • Moral Community
    All entities that are regarded as moral agents or as having moral worth are said to be members of the moral community and are thus entitled to ethical consideration.  To put it another way, members of the moral community are owed some degree of consideration in our moral deliberation.

    What constitutes the boundaries of the moral community is an issue of some dispute.  While some entities clearly fall outside the boundaries of the moral community (non-living entities such as stones and minerals, for example), and other entities clearly lie inside it (human beings), the moral status of a number of entities is unclear.

    Fetuses, animals, and (if it exists) extraterrestrial life raise difficulties in delineating the boundaries of the moral community.  Some have argued that animals deserve some ethical consideration.  Some religious traditions hold this view; it has also been argued by philosophers on utilitarian grounds.   The abortion debate in the United States also points to the difficulty in establishing the boundaries of the moral community, with arguments both for and against the inclusion of fetuses in the community.

    The debate over the moral status of corporations is also ongoing.  Some argue that corporations are members of the moral community because they are moral agents.  Thus, on this view, corporations both owe ethical considerations to others and are owed ethical consideration by others.

    The extent to which corporations can be held morally responsible for their actions in the moral community, and to whom corporations are accountable, is also a contested issue.

    Some take the view that corporations are not members of the moral community, and that they cannot be held morally accountable for their actions.  Others argue that corporations are minimally accountable for their actions, and that their moral obligations are limited to the company’s shareholders.   Still others view corporations as fully incorporated (as it were) in the moral community as entities with full moral status.  On this view, corporations are fully morally responsible for their actions, and the consequences that follow from them.

  • Moral Dilemma
    When a conflict between moral requirements or obligations occurs, and a person thereby has reasons to perform two different actions, but the performance of both actions is impossible, the situation is referred to as a moral dilemma.

    It is sometimes the case that ‘all things considered’ one course of action – that is, acting in accordance with one of the two obligations – clearly overrides the other.  In this case, what one takes to be the stronger, or more serious, obligation is regarded as the right choice.

    In other cases, however, the right course of action in a moral dilemma is far less obvious.  Consider, for example, a case offered by the French philosopher Jean Paul Sartre.

    A young French man is faced with a dilemma after the death of his older brother at the hands of Nazi Germany.   The young man feels a sense of duty to avenge his brother’s death, and to defend his country against the invading Germans.  However, he also feels another sense of duty – a duty to his mother.  The young man realizes that the death of his older brother now leaves him as his mother’s only son.  Moreover, his mother lives with him, and he is responsible for taking care of her in her old age.

    Thus, the young man has two conflicting obligations – one to his brother and country and another to his mother – and meeting the requirements of one obligation thereby precludes him from meeting the requirements of the other.  The young man can either stay with, and take care of, his mother or he can join the fight against the Germans, but he cannot do both.

    In this case it is unclear which of the obligations is the more serious of the two, and part of the difficulty is that the consequences of acting in one way rather than the other are unknown.   What is certain, however, is that one of the obligations will be left unfulfilled.

  • Moral Judgment
    Judgments involve our intuitions and/or our capacity to reach decisions through reasoning.  Moral judgments refer to judgments that have moral content; they are used to evaluate situations, courses of action, persons, behavior, etc.

    The basis of moral judgments is a topic of some philosophical dispute.

    Some hold that moral judgments are based in intuition or feeling, often in connection with the emotions.  On this account of moral judgment, conscious reasoning plays no role in coming to a moral judgment.

    Intuitionists hold that moral judgments are based in intuition or feeling, often in connection with the emotions.  Intuitionists support their theory by pointing to several sources of evidence.

    For example, moral reasoning often comes ‘after the fact’ in moral judgments.  In other words, we often come to moral judgments quickly, on the basis of a first impression or intuition, and provide reasons or a rationalization for our judgments only after the judgment has occurred.

    Moreover, it seems that there are cases in which people – psychopaths, for instance, who show a deficit in affective emotions like shame, grief, and sympathy – show no signs of deficiency in intellectual or rational capacities, yet seem to lack the ability to make (correct) moral judgments.  This seems to support the claim that emotions are necessary to morality.

    The intuitionist position is classically referred to as a theory of moral sentiment.  Proponents of this theory point to the human tendency to sometimes favor, or privilege, family and friends in moral decisions to substantiate their claim.  Of the moral sentiment theorists, David Hume is perhaps the best-known.

    Opponents of the intuitionist, or moral sentiment, theories hold that reason (see Rationality) is the basis of moral judgments.  On this account, moral judgments are understood as a result of conscious moral reasoning; we come to moral decisions by reasoning on the basis of moral rules.

    Kantian deontological and utilitarian moral theories both emphasize the role or reason in morality.  In fact, Kant’s deontological theory(see Deontology) famously puts rationality at the center of morality, claiming that morality is derived from reason, and that moral requirements are based on a standard of rationality (the categorical imperative).

    Utilitarian accounts of morality(see Utilitarianism) also emphasize the importance of reason in moral judgments, claiming that ‘right’ moral judgments involve a rational calculation of an action’s consequences.

  • Moral Relativism
    Moral relativists hold that there are moral facts, but that they are either relative to (a) the individual (this is known as personal moral relativism) or they are relative to (b) the moral norms, or conventions, of the culture from which they came (this is known as cultural moral relativism).  Cultural moral relativism is generally viewed to be the more plausible of these views, and is often taken to be a substantial problem for ethics in general.

    The cultural moral relativist holds that what is right or good in one society – that is, the ethical norms of one society – is different than what is right or good in another.  Since morality is relative to culture, the relativist claims, it is wrong for the people of one culture to interfere with or condemn the ethical beliefs, values, and practices of other cultures.  Thus, slavery may be right in one culture and wrong in another; neither culture, however, is ‘in the wrong’ because both are properly conforming to their own ethical beliefs.  Moreover, it would be wrong for either group to interfere or condemn the other for its ethical practices.

    Objections to moral relativism:

    (1)   A strong argument against the moral relativist position is that the view cannot account for the (often strong) feelings and beliefs that people express regarding immoral acts.  Are we really willing to accept, for example, that the Nazi’s treatment of the Jews or slavery or apartheid was morally right because it was consistent with the cultural beliefs of the people who committed these acts?  The moral relativist must accept this conclusion.

    (2)   Another strong argument against relativism is that it is logically inconsistent.  The relativist claims that ‘right’ and ‘wrong’ are relative terms – what is right relative to a given culture.  But the relativist’s claim that ‘it is wrong to condemn or interfere with the ethical beliefs and practices of other cultures’ uses ‘wrong’ in a non-relative sense.  In other words, the relativist goes from making the claim that what is right and wrong is relative to a given culture to the claim that it is wrong, generally, or absolutely, to pass moral judgment on the ethical norms of other cultures.

    (3)  Relativism also seems to fail to account for the fact that people, groups of people, and even cultures, often come to recognize that their beliefs and cultural norms are immoral.  If apartheid was morally right in South Africa, for example, why was the practice abolished? Why is now deemed (and, indeed, was even then deemed by some to be) morally abhorrent?  This phenomenon admits of the possibility that the ethical norms of a particular society can be wrong.

    (4)  Finally, there is the question of whether a single culture has homogenous values in the way that cultural relativism assumes.  Taking American culture as an example we can point to various devise, and hotly contested, moral disagreements.  On contemporary issues like the Iraq War, abortion, gay marriage, and affirmative action, not to mention past issues like slavery, woman’s rights, and the Vietnam War there is (and has been) serious disagreement about the moral status of these issues.  Are we to say, then, that ‘American culture’ is itself relativistic in its ethical norms?  In order to maintain consistency, the relativist would have to say that it is.  But this amounts to saying that, for example, on the issue of abortion, pro-lifers are morally right and pro-choicers are also morally right, and that it would be wrong for either group to condemn the views of the other.  Is this view plausible?  With respect to policy decisions, at least, the position seems untenable.

  • Moral Sense, Theory of

    Proponents of the theory of moral sense claim that the basis of morality is in moral sentiments, or a special moral sense.  To put it another way, we intuitively perceive things to be moral or immoral with what might be called “a sense for the moral,” just as we use our sense of hearing to perceive sounds and our sense of smell to perceive odors.

    Classically, versions of this position were argued by several notable philosophers of the early modern period, including Francis Hutcheson, David Hume, and Adam Smith, the renowned philosopher and economist.  Recently, the view has been imbued with new life from the biological and psychological sciences.

    Of the classical theories of moral sentiment, Hume’s theory is perhaps the most influential.  Hume argued that moral evaluations arise from our sentiments.  When we observe a morally praiseworthy or blameworthy action, that action produces in us a corresponding feeling of approval or disapproval.  In this way the moral sentiments are emotions.

    The emotion primarily involved with, and responsible for, these feelings is sympathy.  Sympathy allows us to “put ourselves in their shoes” when we observe the suffering or pleasure that others experience.    According to Hume, when we witness human suffering we are moved by feelings of sympathy to disapprove of the cause of the suffering, because we can imagine ourselves in that position.   Thus, we morally disapprove of harming others because our feeling of sympathy is stirred by instances of violence.

    Likewise, when we observe a morally praiseworthy act, we approve of it due to sympathy.   When witnessing an act of charity, for instance, sympathy moves us to feelings of pleasure or approval.

    For many years, this and other versions of moral sense theory fell out of favor.  However, recent developments in the sciences have led to renewed discussions about ‘moral sense.’  Harvard psychologist Steven Pinkner, in a 2008 New York Times article entitled “The Moral Instinct,” explains that findings in psychology have led scholars and scientists

    “to revive an analogy from the philosopher John Rawls between the moral sense and language. According to Noam Chomsky, we are born with a “universal grammar” that forces us to analyze speech in terms of its grammatical structure, with no conscious awareness of the rules in play. By analogy, we are born with a universal moral grammar that forces us to analyze human action in terms of its moral structure, with just as little awareness.

    “The idea that the moral sense is an innate part of human nature is not far-fetched. A list of human universals collected by the anthropologist Donald E. Brown includes many moral concepts and emotions, including a distinction between right and wrong; empathy; fairness; admiration of generosity; rights and obligations; proscription of murder, rape and other forms of violence; redress of wrongs; sanctions for wrongs against the community; shame; and taboos”

    The developments outlined by Pinkner are intriguing and offer fertile ground for new inquiries – for both philosophers and scientists – into the nature of our moral life.  However, Pinkner himself admits that “the moral sense… may be rooted in the design of the normal human brain. Yet for all the awe that may fill our minds when we reflect on an innate moral law within, the idea is at best incomplete.”

  • Moral Skepticism
    Those who deny that an objective foundation, or basis, of morality exists are commonly referred to as moral skeptics.  Moral skepticism can take various forms.

    Moral nihilists, for example, claim that there simply are no moral facts.   Moral nihilists point to irresolvable moral disagreements as evidence of the correctness of their view.

    Take, for example, the ethics of war.  If there is a fact of the matter about the morality of war – be it that war is immoral or that war is in some cases justified – the moral nihilists claims that we should be able to settle disagreements about the morality of war by pointing to that fact.   Thus, we should be able to determine who is right and who is wrong in a disagreement between a pacifist and a warmonger.

    It seems, however, that there is no fact of the matter to which we can point.  As the disagreement is irresolvable (in any case, the dispute is centuries old – and ongoing, that is, it hasn’t yet been resolved), the nihilist asserts that there is no fact of the matter about the morality of war.  More generally, the moral nihilist claims that there is no fact of the matter about morality; there are no moral facts.

    Moral relativists, on the other hand, hold that there are moral facts, but that they are either relative to (a) the individual (this is known as personal moral relativism) or they are relative to (b) the moral norms, or conventions, of the culture from which they came (this is known as cultural moral relativism).

  • Moral Standard
    A moral standard refers to the norms which we have about the types of actions which we believe to be morally acceptable and morally unacceptable. Specifically, moral standards deal with matters which can either seriously harm or seriously benefit human beings. The validity of moral standards comes from the line of reasoning that was taken to back or support them, and thus are not able to be formed or changed by particular bodies of authority.

  • Mosaic Theory
    The use of information from many sources to construct a portfolio strategy. It is also used as a defense in insider trading cases. Defendants can argue that they traded not on the basis of nonpublic information, but on a broad base of carefully collected public information.

  • Motive
    A motive is something – often desire(s) or emotion(s) – that move us to action.  In many cases, the motivation behind one’s actions is narrowly self-interested.  Our motives are not, however, necessarily self-interested, nor are they always so.

    In ethical contexts, perhaps more so than in other contexts, motivation and self-interest tend to diverge.  This is not to say that self-interest is absent from ethics.  Some accounts of moral motivation – ethical egoism, for example – hold that self-interest is the motivation for ethical behavior.

    Varieties of ethics based on divine command, in contrast, hold that the motivation for ethical behavior should be, for example, love (of the divine) or obedience (to the laws handed down from the divine).

    In mainstream normative ethics, the extent to which motives are taken to be morally relevant in the assessment of actions varies from one ethical theory to another.

    Utilitarian theories of ethics, since they are concerned solely with the outcomes of actions, are indifferent to the motivations of actions.  According to utilitarianism, an action is right if it brings about good (or the best) outcomes and wrong if it brings about bad outcomes.  Thus, the motivation behind an action has no bearing on its rightness or wrongness, because rightness and wrongness are determined by the outcome of the action.

    Theories of virtue ethics, in contrast, place considerable emphasis on the motivations for actions, because they reflect the good (or bad) character of the person who performed the action.  Virtue theorists will claim that a virtuous man is motivated by the right reasons – his generosity and magnanimity are not merely self-interested calculations.  Rather, they stem from his good character.  The virtue theorist would also claim that a man who happens to perform a good action (accidentally) is not virtuous.

    Kantian deontological theories, finally, place motivation at the center of ethical life.  Kant claims that duty is the appropriate moral motivation, and that only those actions motivated by duty are moral actions.  Thus, on Kant’s account, the man who gives to a charity for self-interested reasons (he wants to appear generous, for example), is not genuinely performing a moral act because he lacks a sense of duty, that is, he is not motivated by a sense of duty.

    Also of note is the following connection between moral motivations and moral judgments.  It is argued by some that moral motivations are entailed by moral judgments.  To put it another way, if a person reaches a moral judgment to perform (or not to perform) a given action, the person is thereby motivated to act in accordance with that judgment.

  • Municipal Bonds
    A debt security issued by a state and local governments.  These entities will borrow money from investors who are seeking to take advantage of the tax-exempt nature of the municipal bonds.  “Munis” as they are called help fund state projects such as roads, bridges, or schools.  Municipal bonds are also considered very safe investments as they are backed by state or local government institutions.  These investments are particularly popular with people in higher tax brackets because they are usually exempt from both federal and state taxes (if an investor buys munis issued by the state in which she is resident).  Municipal bonds vary widely in maturity.  Maturities range up to 30 years.

    There are basically two types of municipal bonds.  These are general obligation bonds, which are backed by the “full faith and credit” (i.e. the taxing power) of the issuer, and revenue bonds, which are issued to finance particular project and are backed either by the revenues from that project or by the municipal agency operating the project.  Revenue bonds are riskier in terms of default than general obligation bonds.

  • Mutual Funds
    A pool of money raised from investors and invested in assets according to pre-determined objectives set in the mutual fund’s prospectus.  These funds are regulated by the Securities and Exchange Commission and are managed by the an investment company that hires portfolio managers who control the trades that the fund makes.  These funds are similar to hedge funds, but tend to cater to people with less capital to invest.  Mutual funds tend to charge lower management fees than hedge funds, and do not charge performance fees.

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  • Nasdaq
    The National Association of Securities Dealers Automated Quotations is a stock exchange based in the United States. It includes stocks too small to be included on the NYSE.

  • New York Stock Exchange (NYSE)
    Begun in 1792 on Manhattan, the New York Stock Exchange is now the largest stock exchange by market capitalization in the world.

  • Nietzschean Virtues
    Many of the virtue ethics theorists – including Aristotle, Confucius, and the modern ‘moral sentiment theorists’ David Hume and Adam Smith – regard virtues as characteristics that help us to be congenial and to get on well with other people.  This makes sense, of course, because the aim of morality itself is to lay out the rules, or norms, of acceptable behavior in our dealings with other people.  Thus, someone who accounts for morality in terms of virtues will likely think that the characteristics, or virtues, that matter most are those that help us to interact congenially with others.

    In contrast to this picture of the virtues, Friedrich Nietzsche offers a starkly different account, emphasizing, as the philosopher Robert Solomon puts it, “more solitary, artistic and (at least in his metaphors) warrior-like virtues, such as independence, creativity and risk taking.”

    Given his well known criticisms of traditional morality – particularly Christian morality – it is perhaps unsurprising that Nietzsche offers an alternative account of virtue, one which is highly individualistic and which diverges from the aims of traditional morality.

    Nietzsche, after all, claimed that Christian morality is a form of ‘slave morality,’ which is to say, a moral system which identifies the traits of the weak and powerless (i.e. slaves) as the valuable, or morally good, characteristics.  Christian virtues such as meekness, kindness, and humility exemplify traits that Nietzsche views as characteristic of weakness and powerlessness.

    Nietzsche contrasts this slave morality with what he calls ‘master morality,’ a system in which ‘good’ or ‘virtuous’ characteristics – like independence and risk taking – are expressions of strength, power, and nobility.

    In spite of this perhaps radical grounding, Nietzschean virtues may hold a valuable place in the world of business and finance, albeit alongside and in conjunction with traditional virtues.

    As Solomon writes, “in business ethics, we can recognize the difference [between traditional virtues and Nietzschean virtues] in terms of the difference between the good corporate citizen and the entrepreneur.”  The good corporate citizen, on the one hand, will exhibit characteristics that fall within the traditional realm of virtues, like being trustworthy with insider company information, or being just in hiss dealings with colleagues and subordinates.

    On the other hand, the entrepreneur or (to consider another example) the hedge fund trader may demonstrate more Nietzschean characteristics, such as risk-taking, creativity, and independence.  The trader may take risks well, which is to say, take risks that lead to profits rather than losses.  The financial entrepreneur may exhibit creativity by developing a creatively new method of analysis, which better predicts market patterns and leads to higher profits.

    To say that these Nietzschean virtues are important in the business and financial world is not, however, to say that they are the only valuable characteristics in that world.  Nor is it to say that the Nietzschean virtues cannot exist alongside traditional virtues.

    Indeed, it is hard to imagine that any ‘Nietzschean’ entrepreneur or trader could be successful in business or finance without also exhibiting trustworthiness (in his or her dealings with coworkers, superiors, or clients) along the way.

  • Normative Ethics
    Virtue, deontological, and consequentialist (utilitarianism, for example), theories are all instances of normative ethical theories.  These theories aim to arrive at standards or norms of behavior, and in doing so provide a framework for ethical thinking.  Normative theories attempt to tell us what we should do and how we ought, morally speaking, to live.  They examine the rightness and wrongness of actions.

    Generally speaking, normative theories take into account (1) the agent (the person who acts) (2) the act itself and (3) the consequences of that act.  Differences between normative theories (a deontological theory, for example, versus a consequentialist theory) arise as a result of differing views on the relative importance of these considerations.

    Virtue theories emphasize (1) the agent, concentrating on the importance of the moral character, or virtuousness, of the individual in question.  Deontological theories are primarily concerned with (2) the act itself and the rightness or wrongness of that act.  Finally, consequentialist theories focus on (3) the consequences of an act, and claim that we always ought to act to bring about the best consequences.  These three approaches constitute the prevailing strategies employed in normative philosophical ethics.

    To illustrate the differences between these theories, consider the case of lying.  While all three theories would deem the act of lying to be morally wrong (although the consequentialist may find it justifiable in some circumstances), the reason for its wrongness differs according to the theory employed.  A consequentialist will say that lying is wrong because it produces bad consequences.  A breakdown in trust, for example, may result from lying and this would be a bad outcome.  A deontologist will say that lying is wrong because the act of lying is wrong in itself – under no circumstances is lying permissible.  Finally, a virtue ethicist will say that lying, or dishonesty in general, is a vice of character and, therefore, it is not the kind of character trait that a virtuous person would possess, nor an act that he or she would engage in.

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  • On-the-run Treasuries
    The most recently issued 10-year Treasury notes. They are called “on-the-run” because they are the most liquid Treasuries available.

  • Option Pricing Theory
    The option pricing model was first developed by Myron Scholes and Fischer Black and extended by Robert Merton.

    For a standard stock option, option pricing theory expresses the value of an option as a function of five factors: the stock price, the exercise price, the time until expiration, the risk-free rate of interest, and the riskiness of the stock.  The value of an option increases with the riskiness of the stock.

    Option pricing theory has been extended to the analysis of other types of financial instruments.  In addition, other kinds of non-financial contracts and investment opportunities can be understood by using the insights of option pricing theory.

  • Options
    This is a contract permitting the owner to buy (call option) or sell (put option) a financial asset at a specified price (strike price). The owner has a specific date or a specified amount of time to choose whether or not to exercise the option.  Options can be used to speculate, which gives more risk, or they can also be used to hedge risk. A person buying a call option would assume that the price of the stock will rise relative to the strike price, generating a profit for the owner. American options can be exercised within a certain period of time whereas European options have a specific date that the option must be exercised on.

  • Over-the-counter market
    A securities market that is not listed on an exchange. Because of this, trades are performed over the telephone or electronic network in this decentralized market.

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  • Panic
    When buy-side institutions and individuals lose faith in some aspect of the financial or economic system and sell securities en masse. Examples include the stock market decline of 1929, which induced the Great Depression, and the Panic of 1819.

  • Paternalism
    Policies, practices, or acts which, interfere with, infringe upon, or otherwise limit the autonomy of a person in the name of that person’s ‘best interests’ are paternalistic in nature.

    A distinction can be made between ‘hard’ and ‘soft’ paternalism.  Soft paternalism claims that paternalistic action is justified when the individual whose autonomy is infringed upon is not fully competent, or lacks important knowledge pertaining to the situation.

    To illustrate the claim of soft paternalism, consider the following case.  James picks up a bottle of what he believes is water, but Elizabeth knows it to in fact be poison.  The James prepares to take a drink from the bottle, but before he takes a drink Elizabeth take the bottle from him, warning that the bottle contains poison.  In this instance, Elizabeth has committed a paternalistic action, justifying it on the grounds that James lacked important knowledge pertaining to the actual contents of the bottle.

    Hard paternalism claims that paternalistic action is justified regardless of the competency of the individual in question.  In other words, hard paternalism claims that paternalism is justified even when the person is fully competent and fully informed.  Again consider James, Elizabeth, and the bottle of poison.  The hard paternalist would claim that Elizabeth is justified in interfering with James’ desire to drink from the bottle, even if James was fully competent and aware of the fact that the bottle contained poison.

    Paternalistic action occurs without the consent of the party whose autonomy is limited, and often occurs in direct contradiction to the stated wishes of that party.  To put it another way, paternalism ‘protects people from themselves.’

    Justifications for paternalism are typically grounded in the claim that the benefits to the individual considerably outweigh the cost (or harm) of the violation of autonomy or liberty which paternalistic action entails.  A law which requires motorcyclists to wear helmets, for example, is justified on the grounds that the benefit (protection from possibly fatal injury) far outweighs the violation of the motorcyclist’s autonomy (the freedom to ride a motorcycle without a helmet or the freedom to make one’s own decision about wearing a helmet).

    Opponents of paternalism hold that the violation of liberty and autonomy is not warranted, in spite of the benefits that may result from paternalistic action.

  • Political Pluralism
    Political pluralism begins with the basic claim that there exists a variety of differing value systems in the world today and thus a variety of positions regarding this claim. The overall concern of political pluralism is what sort of limits are governments able to put on people’s freedoms in order to act within their specific value system.

  • Portfolio Manager
    The individual responsible managing a portfolio of assets with the goal of obtaining the highest returns from these assets as possible.  Managers receive investment ideas from external sell side firms as well as internally from their own analysts.  Managers decide on asset allocation and stock selection.

  • Pragmatism
    Primarily a theory of meaning and truth, pragmatism is a philosophical view that claims truth lies in ‘whatever works,’ which is to say, whatever makes for a better life or society; it also claims that the meaning of a proposition lies in the practical consequences of accepting it.  To put it another way, ideas are true, on the pragmatist account, if they function effectively in the world.

    Pragmatism is not a theory of ethics, per se, but it does have consequences for ethical thought and, by extension, ethical life.

    One major consequence of pragmatism in ethics is that, according to pragmatism, ethical beliefs are true ethical beliefs on the basis of their functional effectiveness.  Thus, when we evaluate the truth of a proposition like “murder is wrong,” we conclude that the proposition is true, or false, on the basis of ‘what works.’  If we agree that it wouldn’t work – socially, morally, or practically – for people to go about murdering one another without consequence or penalty, then we would reach the conclusion that the proposition “murder is wrong” is a true belief.

    Conversely, if traditional morality demands that we abide by a particular moral rule, but the rule does not meet the truth requirements of pragmatism, it follows from the pragmatist account that the moral belief that we have, which tells us to abide by the rule, is false and, according to some pragmatists, should be discarded.

    Although pragmatism in ethics is more concerned with consequences than rules, it is not a utilitarian theory.

  • Praise & Blame
    The concepts of praise and blame are closely associated to the concepts of desert, punishment, and moral responsibility.

    When a person (or group of people) perform (or fail to perform) an action, we often respond to their action by assigning praise or blame, that is, we respond by holding them accountable or responsible for their actions.

    On a basic level, when we judge a person’s actions to be blameworthy, we judge them to be morally responsible for wrongdoing.  Conversely, when we judge someone to do something right, we judge their action to be praiseworthy.

    There are, of course, several notable exceptions to this general rule.  Aristotle, for example, argued that actions can only be blameworthy or praiseworthy in so far as they are voluntary actions, and voluntary actions can be limited by such things as force of circumstances, coercion, and ignorance (not all instances of ignorance justify the excusing of blame, however).

    Thus, we may withhold blame, for example, when we learn that an individual’s action was the result of coercion and not the result of the person’s own free choosing.  We may similarly refrain from bestowing praise on an individual when his or her seemingly praiseworthy action was merely the result of force of circumstances.

    Modern normative theories – Kantian deontology and utilitarianism– give considerable attention to the justification of the use of praise and blame.

    Utilitarians justify praise and blame by appealing to their social value.  On their view, praise and blame are justified because they encourage people to perform good actions and discourage people from performing bad actions – thus bringing about greater good.

    Kantians hold praise and blame to be justified because both responses recognize an individual’s rational agency.  We are justified in blaming or praising an individual because that individual chose his or her action freely.   Having chosen freely, the individual deserves praise or blame for his or her action.  This justification is closely connected to the concept of desert and, in the case of blame, is also sometimes associated with punishment.

  • Predominant Egoism
    In “The Reconciliation Project,” Gregory Kavka coined the term “predominant egoism” as a more plausible alternative to psychological egoism. Whereas psychological egoism states that human beings always act to promote their self-interest, predominant egoism claims that they predominantly (but not always) act to promote their self-interests.

    Predominant egoism contains two crucial principles. First, until people have attained a desirable level of security and individual welfare, their “self-interested concerns tend to override their other-regarding, idealistic, and altruistic motives in determining their actions.”1 Second, the extent to which individuals perform actions and behaviors which are significantly against their own interests is usually quite limited. People often perform such actions only on behalf of family members, close friends, or institutions or projects with which they feel a strong personal connection. Clearly altruistic actions which only benefit complete strangers are extremely rare.

    1. Gregory Kavka, “The Reconciliation Project,” in Ethical Theory: Classical and Contemporary Readings, 5th ed., ed. Louis P. Pojman (Belmont: Wadsworth, 2006), 112.

  • Price Earnings Ratio (P/E Ratio)
    A stock valuation method.  PER takes the market value per share and divides it by the earnings per share.  This ratio shows how much investors are willing to pay per dollar of earnings.  High P/E ratios can mean that a stock is overvalued or that the stock will have a future growth in earnings while a low P/E ratio means that a stock is either undervalued or the company’s earnings are declining.  The P/E ratio is commonly used by investors as one metric to determine which stocks to purchase.

    Price Earnings Ratio =

    Market Value per Share
    Earnings per Share (EPS)

  • Price to Free Cash Flow
    A ratio that is used to estimate a firm’s future financial health by comparing the firm’s market value to its cash flow.   This is another valuation tool that is similar to the P/E ratio but removes the non-cash factors.  When comparing companies they should be in the same industry because the ratio will vary depending on the industry. In general, the higher the Price to Free Cash Flow number, the more expensive the company is thought to be.

    Price to Free Cash Flow =

    Market Capitalization
    Free Cash Flow

  • Private Banks
    Banks that provide asset management services to very wealthy individuals by offering a wider range of investment options.  These banks also offer services for a client’s entire financial situation, such as trust and inheritance issues.

  • Private Equity
    Equity that is not listed on a public exchange. Investors in private equity can buyout public companies and make them private or invest directly into private companies.   Private equity investments are often made in order to turn around a company that is in trouble or to obtain a large amount of stock during a company’s IPO.  Private equity firms will buy these companies to resell them for a profit later or issue an IPO to turn a profit.

  • Privatizations
    This is the transition from either a government own business or a publicly traded company into a privately owned company.

  • Proprietary Trading
    Proprietary trading is when a firm trades its own funds to make gains on the market directly instead of through commission. Proprietary trading is considered to be riskier as the firm is using its own equity.

  • Prudence
    Since antiquity, prudence has been regarded as an important virtue; it is one of the four cardinal, or principle, virtues.  A prudent person is one who exercises sound judgment in his or her practical affairs.    Prudence is ‘practical wisdom.’

    In contrast to the prevailing everyday notion of prudence that we have today, which carries with it connotations of cautiousness, of narrow-minded self-preservation, or of calculating self-interest, the concept of prudence throughout most of its – and our – history in the West carries a much broader, nobler sense.

    Following Aristotle, St. Thomas Aquinas defined prudence as “right reason applied to practice,” and argued that the virtue was concerned not with determining means to ends, but with means to good ends, good ends for both the individual himself and for the community.

    More recently (and perhaps of greater interest to those concerned with finance), the great economist Adam Smith wrote of the importance of prudence in his The Theory of Moral Sentiments.  Smith, too, understood prudence in broader sense than narrow self-interest, writing that prudence

    “when carried to the highest degree of perfection, necessarily supposes the art, the talent, and the habit or disposition of acting with the most perfect propriety in every possible circumstance and situation.  It necessarily supposes the utmost perfection of all the intellectual and all of the moral virtues.  It is the best head joined to the best heart.  It is the most perfect wisdom combined with the most perfect virtue” (Adam Smith, The Theory of Moral Sentiment, 1759, p.216).

  • Psychological Egoism
    Psychological egoism is the claim that all individuals act to promote their own interests, and that this aim is the ultimate goal of all individual behavior. This claim does not suggest that individuals always succeed in this endeavor; it only claims that individuals always intend to promote their self-interests.

    One notable (and sometimes misunderstood) aspect of psychological egoism is that it does not entail that individuals do not perform other-regarding actions or suggest that they always avoid personal sacrifices. In many cases, it can be to one’s self-interest to make a sacrifice, such as doing a friend a favor, because the immediate sacrifice will be met with proportional benefits in the future, such as increased trust and a reciprocated favor in the future.

    Unlike ethical egoism, psychological egoism makes no claims regarding how people ought to behave. Rather, it is a claim about how people actually behave: They perform actions which promote their own welfare.

    Although psychological egoism is consistent with many observations of human behavior, claiming that all human behavior can be explained as an attempt to further an individual’s self-interest proves quite challenging. Some individuals seem to commit acts which have no clear benefit to their own welfare and sometimes virtually no hope of conferring a benefit to them. Acts of extraordinary self-sacrifice are difficult to explain if one accepts psychological egoism. A soldier who hurls himself on top of a grenade (thereby guaranteeing his own death) to prevent the deaths of his fellow soldiers does not seem to be acting to promote his own welfare in any conceivable way. One might claim that the guilt the soldier would have experienced if he had survived and let others die would have been overwhelming and that it was in his self-interest to avoid such guilt. This scenario may account for some instances of self-sacrifice (although it seems questionable to assume that everyone believes no life at all is preferable to a guilt-ridden life), but it cannot account for all of them.

    In financial ethics, whistle blowing frequently seems to be against the actor’s interests. Consider the case of Jeffrey Wigand, a former vice president of research and development at a branch of the Brown & Williamson Tobacco Corporation in Louisville, Kentucky. Wigand gained national recognition when he publicly announced that Brown & Williamson manipulated the ingredients in their cigarettes to increase the nicotine levels in cigarette smoke, potentially increasing their addictiveness.

    Although Wigand’s actions are morally commendable, the whistle blowing and subsequent lawsuit forced him to make meaningful sacrifices. He earned about $300,000 per year while working for Brown & Williamson; he now makes about $60,000 per year promoting an anti-smoking message to children and adolescents. Following his announcement, he faced harassment and death threats, and the stress of the ensuing lawsuit likely contributed to his wife divorcing him. Wigand attained a Ph. D. in biochemistry and is an intelligent person; we cannot think that he did not know these consequences were likely when he made the decision to release the information. The notion that Wigand exposed the unethical practices of Brown & Williamson for personal gain seems absurd.

    Although it can be difficult to explain, human beings do not always behave exclusively to promote their own interests. Nevertheless, one might contend that these self-sacrificing actions are rare and adopt a stance of predominant egoism, a less extreme and more plausible hypothesis about self-interested behavior.

  • Punishment
    In response to the wrongdoing of an individual, or group, a deliberate penalty is often imposed by an individual or institution (such as a family, church, corporation, or state).  The penalty often involves the infliction of harm – or some degree of unpleasantness – upon the wrongdoer.

    As ‘do not harm’ is a central principle of most all ethical theories, the practice of punishment calls for serious philosophical justification.

    Traditionally, punishment has been understood as a retributive practice, based on concepts of fairness or justice.   Thus, a wrongdoer gets his punishment ‘because he deserves it.’

    Utilitarians reject this justification on the grounds that it inflicts more suffering (the harm done to the wrongdoer) than it brings about happiness (the pleasure, for others, of seeing justice fulfilled).  In most cases, then, it seems that retributive justice does not meet the utilitarian requirement for morally right action.

    Nevertheless, utilitarians do not reject punishment outright on these grounds.  Rather, they hold that punishment is justified when it is beneficial to society, that is, when it brings about the greatest good for society.  Thus, if punishment effectively reduces crime by deterring wrongdoing, by reforming wrongdoers, or by keeping wrongdoers out of society, then the utilitarian will find punishment justifiable.

    In discussions of punishment and its justification, questions regarding the appropriate degree and duration of punishment also arise.  In other words, ‘what is fair?’ or ‘what is a fair punishment?’ is also an important question, and one which again highlights the connection between punishment and justice.

  • Put Option
    A contract allowing the owner to sell a financial asset at a specified price.  The owner has a specific date or a period of time to choose whether or not to exercise the option.   The owner of a put option hopes that the price of the stock falls relative to the strike price.  This allows the owner to sell the stock for a price above the market price, generating a profit.  Options can be used to increase risk or hedge against risk.  A put option is the opposite of a call option.

  • q

  • Quants
    Financial professionals who use quantitative methods and models to trade or invest. They often have PhDs in Math, Physics or Computer Science. Derivative pricing, specifically options pricing, originally drew a number of quantitative academics into the financial industry in the 1970s.

  • r

  • Rally
    A rise in the price of a security.

  • Rationality
    All normative ethical theories, in some sense, assume that moral agents are rational agents.  To put it another way, it is assumed that moral acts should be supported by generally accepted reasons.

    While the presence of rationality in moral discourse is explicit in some normative theories – for example, Immanuel Kant’s deontological moral theory, which derives morality from reason, claims that moral requirements are based on a standard of rationality (the categorical imperative), and delineates the community of moral agents as the ‘kingdom of rational agents,’ – it is nevertheless present as an assumption of other normative ethical theories as well.

    Aristotle, for instance, famously wrote that human beings are ‘rational animals’ as such, virtue and living virtuously involve reason.  Aristotle writes: “we take the human function to be a certain kind of life, and take this life to be the soul’s activity and actions that express reason. Hence, the excellent man’s function is to do this finely and well.” (Nicomachean Ethics).

    Utilitarianism also assumes rationality, trusting that moral agents are sufficiently rational to accurately predict the consequences of their actions, deliberate rationally, and on the basis of those rational processes, arrive at and act on the morally appropriate decision.

    Moreover, we tend to think that those who are not fully rational have diminished moral responsibilities, that is, they are not moral agents.  We do not hold infants and children to blame, for example, when they fail to act appropriately in what are, for adults, moral situations.  Hence, a child is not blamed or held responsible for failing to rescue a person in distress.  Since the child is not fully rational, the child is not a moral agent.Rational

  • Realistic Utopia
    Rawls perceives political philosophy as “realistically utopian: that is, as probing the limits of practical political possibility.”1 Rawls considers it vital to establish that it is not unreasonable to hope for a just and stable pluralist constitutional liberal democracy. In his words, “Our hope for the future of our society rests on the belief that the social world allows for at least a decent political order, so that a reasonably just, though not perfect, democratic regime is possible.”2 Rawls even states in the introductory remarks to Political Liberalism that the practice of political philosophy may be meaningless unless we sincerely believe that a just, stable democratic regime can be achieved.3 For Rawls, justice as fairness functions not only as the blueprint for the realistic utopia he envisions but also as a source of symbolic hope that we can one day live in just and stable society.

    1. John Rawls, Justice as Fairness: A Restatement, ed. Erin Kelly, (Cambridge: The Belknap Press of Harvard University Press, 2001), 4.

    2. Ibid.

    3. John Rawls, Political Liberalism: Expanded Edition (New York: Columbia University Press, 2005), lx.

  • Responsibility
    The issue of responsibility raises questions about moral agency as well as accountability.  It also raises questions about the distinction between moral, professional, and legal responsibility.

    To begin with, in order to be held responsible for something, morally speaking, the actor, or agent, must be a person or entity that is regarded as a moral agent.  Paradigm cases of moral agents are normal human adults.  Thus, an infant or child is not typically held morally responsible for committing some act in the way that an adult would be held responsible for committing the same act.

    Moral agency is not limited to human adults, however.  Groups and organizations – corporations, for example – can also be regarded as entities that both have moral responsibilities and that can be held morally responsible for their actions.

    When a person (or group of people) perform (or fail to perform) an action, we often respond to their action by assigning praise, blame, or liability, that is, we respond by holding them accountable or responsible for their actions.

    In this way, the concept of responsibility is often retrospective, as when someone is held responsible for the outcome or event which their actions (or lack thereof) brought about.  If, for example, a passerby on the beach were to rescue a person drowning in the sea, we would praise the rescuer for his or her action.  Conversely, if the passerby were to fail to offer assistance of any sort – if he or she did not, for example, alert a lifeguard or use a cell phone to dial 911 – we would respond by blaming the person for his or her negligence.

    Responsibility, however, is not solely retrospective.   It can also be prospective, as in the case of having a responsibility, or obligation, in a particular circumstance.  A parent, for example, has a responsibility to provide care for his or her child.  This example also illustrates how retrospective and prospective responsibility can relate to one another – if a parent fails to provide care for his or her child, that is, fails to meet his or her prospective responsibility, we typically hold them responsible for their negligence (that is, we hold them responsible retrospectively).

    Additionally, both retrospective and prospective responsibility can be assigned in moral, professional, and legal contexts, and overlap between contexts often occurs.

    In the United States, for example, a parent’s moral responsibility to provide care for his or her child is also a legal responsibility.  Analogously, a physician, as a moral agent, has certain moral responsibilities – the same responsibilities that all moral agents have – to provide assistance to a person who has been injured; in some contexts, the physician may also have a professional responsibility to provide assistance (and this professional duty may also be enforced legally).

  • Return on Equity (ROE)
    ROE is net income divided by shareholder’s equity.  This percentage shows how much profit a company can generate with the money shareholders have invested. It is a measure of how efficiently a company is using equity to generate profits.  Comparisons of ROE of companies in the same industry allow investors to ascertain which are most efficient.

  • Rights
    Rights are particular guarantees.   An individual who holds a right is thereby entitled to whatever that right guarantees.

    Human rights are moral rights to which all humans are entitled in virtue of their humanity.  The United Nations’ Universal Declaration of Human Rights includes, amongst others, “the right to life, liberty, and security of person,” “the right to freedom of thought, conscience, and religion” and the right “to seek and enjoy in other countries asylum from prosecution.”

    The human rights listed in the UDHR, as well as the rights listed in other charters (the Bill of Rights in the United States, for example), imply and impose certain duties to others.  Thus, a person’s right to free speech imposes on others a duty to not violate that right by censuring or otherwise interfering with that person’s ability to speak freely.

    A distinction can be made between legal rights and moral rights, although overlap is common (as in the case where moral rights are upheld legally).   Legal rights pertain to members of a given group or class.   Thus, a British citizen has certain legal rights in Britain that a Japanese, American, or Chilean citizen is not entitled to.

    One difference between moral and legal rights is that legal rights find their justification in municipal, state, federal, and international law; moral rights, although they may be legally codified, may be asserted even in the absence of legal justification.

  • Risk Adjusted Returns
    Looks at the return that an investment has and includes the amount of risk involved in the investment. The risk is usually expressed as a number rating. Investors must always compare the amount of risk involved when comparing two investments.

  • Road Shows
    Road shows occur when a company is issuing an Initial Public Offering (IPO).  It involves a member of the top management of the company and her investment banker traveling around the country presenting the company to potential investors.  Road shows are crucial for an IPO to work properly.

  • Russell Indices
    Russell Investments began calculating stock markets indices in 1984, the most famous of which is the Russell 3000. Unlike the Dow Jones Industrial Average, the Russell indices can be replicated as a stock portfolio. The stocks in the average are the 3,000 largest stocks trading in the US by market capitalization.

  • s

  • S&P Indices
    The rating agency Standard & Poor’s calculates indices representing various segments of the American and international markets. Its most famous index, often used as a gauge of US economic health, is the S&P 500. Similar to the Russell 3000, the S&P 500 can be reconstructed as a stock portfolio.

  • Samurai Bonds
    A bond issued in Japan by a non-Japanese company.  These bonds are issued in the yen and are subject to Japanese regulations.  Companies can use these bonds to break into Japanese markets or hedge their risk against currency exchange rates.

  • Secondary Offering
    Secondary offerings are subsequent issues of new stock for sale to the public after an Initial Public Offering has occurred.  Secondary Offerings are usually used when a company needs more capital for growth or is refinancing its debt.  A secondary offering dilutes the ownership position of shares in the company because the company is issuing new shares.

  • Security
    An instrument representing financial value. Stocks, Bonds, Futures, Options, and Swaps are all examples of securities. Securities are usually tied to the price of some underlying product, such as commodities, a corporation, or another security or basket of securities.

  • Security Characteristic Line
    A regression on the plot of an security’s risk-adjusted performance plotted against the risk-adjusted performance of a portfolio, usually an index meant to represent the market. Thus it seeks to measure how a security reacts to movement in the market.

  • Sell side
    The sell side generally refers to investment banks and brokerages.  Sell side firms sell their services to those on the buy side.  For instance, sales and trading divisions of investment banks recommend investment ideas and execute any resulting trades for commissions.

  • Sell side research analyst
    Sell side analysts work and produce research for investment banks and brokerages that in turn, give the research to their clients as part of their services.  Sell side analysts gather primary data, speak to managements of companies they cover, and produce research from publicly available information.  They offer recommendations based on their research e.g. buy, sell, or hold.  Sell side analysts do research across the spectrum of investment instruments such as bonds, commodities, equities, derivatives, and real estate.

  • Semi-Strong EMH
    A derivative of the EMH theory, Semi-Strong EMH states that stock prices already reflect all public information making it meaningless to look over a company’s financials or pay attention to news headlines about a company to make stock predictions. This theory is more widely accepted than the strong EMH theory but it still has many opponents.

  • Shame
    Shame is a social emotion in that it arises in a person when he or she recognizes that the act he or she has committed will be viewed negatively by other members of the social community.  Oftentimes, shame, or the avoidance of shame, is a powerful form of motivation for ethical behavior.

    A person experiences shame when he or she has acted immorally or, more generally, has broken a societal norm or rule.  It may occur self-consciously, that is, in anticipation or expectation of how others will respond to one’s actions (“if they knew what I’d done, I would be disgraced”) or publicly, with corresponding humiliation and disrepute.

    Of shame in business and financial contexts, Robert Solomon writes:

    “shame plays an essential role in sanctioning corporate and commercial behavior.  Although the practices of free enterprise allow and even encourage a certain lack of rigidity concerning the mutual expectations and standards of behavior in business, there are, nevertheless, communally agreed-upon even if not always explicit rules of decent and honorable behavior.  Shame is an essentially social emotion.  In business, it forms the basis of ethical behavior insofar as it is vitally concerned with behavior within a community practice…a corporation without shame is very likely without ethics as well” (Robert Solomon, “Shame” in Blackwell Encyclopedic Dictionary of Business Ethics, p.580).

  • Shorting Equities
    This involves borrowing stock and selling it, with the intention of buying the same stock back at a lower price and returning it to the stock lender. The investor is believes the price of the stock will fall, in which case the investor will purchase these shares at a lower price, making a profit when returning the shares.

  • Speculative Grade Bonds
    Also known as junk bonds, these bonds have a much higher risk of default.  Because of this high risk of default, the potential yields on these bonds are much higher than bonds with better credit ratings.  Speculative grade bonds are seen as bonds with credit ratings BB and below.  Ratings are performed by private agencies such as Standard & Poor’s, Moody’s, and Fitch.

  • State of Nature
    The state of nature refers to how human beings behave in the absence of a civil society. In other words, the state of nature describes how people interacted prior to the establishment of any government or other social institutions.

    Claims about the state of nature and the quality of life experienced by humans who live in the state of nature vary considerably. Thomas Hobbes, for example, thought that people living in the state of nature were engulfed in a constant war of all against all and that life was brief and nearly unbearable. In contrast, John Locke held that the state of nature was the condition in which people had the most freedom, but he also claimed that the state of nature had a natural law to govern it, which mandated (among other things) that we do not unjustly harm one another. Additionally, David Hume challenged the notion of the state of nature by arguing that human beings are naturally social and that it is not possible to conceive of human beings existing prior to the establishment of a society.

  • States of Affairs
    In consequentialist and utilitarian theories, the outcomes or consequences of an action are often referred to as ‘states of affairs,’ meaning the general state of things in the world.

    On the utilitarian model, for example, an action is right if and only if it brings about the best state of affairs, that is, if it brings about the most good to the general state of things.

  • Stock Exchanges
    A place where securities are bought and sold. Examples would include the New York Stock Exchange (NYSE), the American Stock Exchange (AMEX), or the Toronto Stock Exchange (TSX).

  • Strike Price
    This is the fixed price that a derivative contract can be exercised. For example with a call option, the strike price would be the price at which the party can buy the security, regardless of the market value of the underlying security.

    Treasuries where the interest payments have been removed, or stripped, from the principal and are sold separately.

  • Strong EMH
    A derivative of the EMH theory, Strong EMH states that stock prices reflect all information, public and private. This means that it is effectively impossible to use information for an effective trading strategy since all the information is already included in the stock price. This theory has its share of supporters and opponents.

  • Subordinated Bonds
    Also known as junior security or subordinated loan, subordinated bonds are bonds that have lower priority for repayment than other forms of debt.  This means that in the case of default, the subordinated debt will be paid off after normal debt.  Subordinated bonds have a higher risk than normal bonds since they will only be paid if there is anything left over.

  • Supererogation

    Moral actions were once thought to be of only three types: required, forbidden, or permissible (i.e., neither required nor forbidden). Required acts are good to do, forbidden acts are bad to do, and permissible acts are morally neutral. This trinity seemed well-established until J.O. Urmson challenged this classification system by arguing for the existence of a fourth category of acts.1 Urmson posited actions performed by saints and heroes as paradigm examples of supererogatory acts—those which are morally praiseworthy but not morally required. Gregory Mellema later posited a more specific definition: a moral act may be described as supererogatory if (1) performing the act fulfills no moral duty, (2) performing the act is morally praiseworthy, and (3) omitting the act is not morally blameworthy.2

    Urmson had many critics, but as debate has progressed, the existence of supererogatory acts has become more difficult to deny. Roughly thirty years after Urmson’s “Saints and Heroes” was published, Susan Hale described the new fourfold categorization of moral acts (required, forbidden, permissible, and supererogatory) as “near dogma.”3 Perhaps the reason for this trend is that certain paradigm examples of supererogatory actions seem impossible to properly describe under the tripartite classification system. Consider a poignant example offered by M.W. Jackson:

    "In January of 1982 an Air Florida plane crashed into the Potomac River. In the ensuing crisis, a man in the water passed the life-line on to the others four times. When the rescue helicopter came back a fifth time, he had gone under never to be seen again. He was as anonymous as he was selfless."4

    It would be ludicrous to claim that this action was morally forbidden: we react to this man’s sacrifice by commending his action, not condemning it. Simultaneously, it would be absurd to claim that this person was morally required to make such a sacrifice. We do not condemn the others involved in the crash for not passing their life-lines along to others. Moreover, the plane crash was an unfortunate accident, and this man deserved to survive as much as anyone else in the water. We are left to conclude that the action must be considered morally permissible, but unlike standard (merely) permissible actions in the tripartite scheme, this action has moral worth. Hence, a fourth category of moral actions seems necessary to fill this conceptual gap.

    1. J.O. Urmson, “Saints and Heroes,” in Essays in Moral Philosophy, ed. A.I. Melden (Seattle: University of Washington Press, 1958), 198-216.

    2. Gregory Mellema, Beyond the Call of Duty: Supererogation, Obligation, and Offence (Albany: SUNY Press, 1991), 3.

    3. Susan Hale, “Against Supererogation,” American Philosophical Quarterly 28, no. 4 (1991): 273.

    4. M. W. Jackson, “Above and Beyond the Call of Duty,” Journal of Social Philosophy 19, no. 2 (1988): 3.

  • Swap
    A transaction where two parties exchange cash flows with different stipulations attached to them. Two of the most common types are cross-currency swaps and interest rate swaps.

  • Syndicated Loans
    A loan offered by a group of lenders in order to spread the risk of default across a larger group.  The borrower may be a corporation, a country, or a large project.  The value of the loans tend to be much larger for the lenders to come together and make it a syndicated loan.

  • t

  • Technical Analysis
    Evaluating securities based on market activity, not by intrinsic value. Technical analysts will use graphs and charts of market activity to try and find patterns that they can use to predict the future value of the stock. This is considered the opposite of Fundamental analysis.

  • Telos
    In ancient Greek, the ultimate end, purpose, or goal of an action is referred to as the telos of an action.  In moral philosophy, and in philosophy generally, the term is still employed.

    Broadly speaking, teleological accounts of ethics focus on means and ends of human action.  On this view an action – regarded as a means – is determined to be right or wrong according to its success or failure in achieving an end.  Consequentialism is a paradigmatic example of teleological ethics.

    As an example, consider utilitarianism, widely regarded as the most plausible form of consequentialism.  Utilitarianism identifies pleasure, or happiness, as the ultimate end of human actions.  Thus, actions are judged to be right or wrong on the basis of the amount of pleasure or happiness they bring about.  Right actions are those that bring about pleasure, while those actions that bring about suffering are regarded as wrong.

    Ultimate ends are also referred to as intrinsic goods, and contrasted with instrumental goods, which are obtained in order to reach intrinsic goods.  Money, for example, is a good, but it is typically regarded as an instrumental good.  Having money helps or enables a person to reach an intrinsic good (happiness, for example), but money itself is not an intrinsic good.

    In addition to this general use of the term, telos is also often associated with Aristotle, who thought that the ultimate end, or telos, of human life is happiness (eudaimonia).

  • The Greeks

    A number of terms, mostly denoted by Greek letters, that measure an option’s (or a position’s) sensitivity to the price of the underlying security, time decay, and volatility. They are delta, gamma, theta, and vega. Amusingly, vega is not a Greek letter, but is still lumped in with “the Greeks.” These quantities are used by traders to construct portfolios that react in certain ways to changes in time, volatility, or price of the underlying security.

  • Theta (Q)
    The first derivative of the option price regarding time. This quantity measures the time decay of an option.

  • Ticker Symbol
    The symbol by which a stock is recognized on an exchange. The ticker symbol for Goldman Sachs, for instance, is GS.

  • Time Value of Money
    The idea that money now is worth more than money in the future because money now has the potential to grow.  This growth could come from interest from a bank account or an investment that grew. For example $100 today earning 10% per annum would be worth $110 in one year.

  • Treasury Bills
    Also known as T-Bills, these are short-term debt obligations issued by the U.S. government.  These bills mature in one year or less and do not make fixed interest payments. T-Bills are issued at a discount from face value and return the face amount at maturity. Treasury bills are backed by the U.S. government, which makes the investment virtually riskless.

  • Treasury Bonds
    Also known as T-bonds, these are debt obligations issued by the U.S. government.  They have a fixed interest rate, which is paid semi-annually and have a maturation date of greater than 10 years.  Advantages of the T-Bond include its backing by the U.S. government, the fact that the semi-annual payments are only taxed on the federal level, and the ability to resell the bonds on the secondary market.  T-Bonds, like T-Bills are considered very safe investments and are useful for investors looking for a safe, steady stream of income.

  • Treasury Notes
    Treasury notes are medium-term debt obligations issued by the U.S. government.  T-note maturities range up to 10 years. T-notes make semiannual interest payments known as coupon payments.  Interest payments on T-notes are taxed on the federal level but not the state level.

  • Trust/trustworthiness
    Often regarded as indispensible to human relationships and interactions, trust is an attitude that we have towards other individuals, groups, and/or institutions.  It involves a kind of expectation or reliance on others.

    Part of what it is to trust another person, group, or institution is to accept the fact that trusting involves risk, or some level of vulnerability.  One’s trust, for example, may be betrayed if the person in whom one trusts proves to be unreliable.  To put it another way, one’s trust can be betrayed, or undermined, if the person in whom one trusts is untrustworthy.

    Trustworthiness has long been considered a virtue, and one which is especially important to living in a community.  A community, after all, cannot function without personal, commercial, and professional relationships – all of which depend on trust.

    This fact is especially pertinent to relationships, and interactions, in financial markets where, for example, prospective investors must trust that the price of a given security reflects its actual value, or that the information they obtain regarding a security comes from a trustworthy source.

    Trust is also an important aspect of public, and investor, confidence.  Indeed, one practical reason why fraud, insider trading, and other illegal trading practices are illegal is that such practices undermine the public’s trust in the fairness and integrity of financial markets.

    Clearly, then, trust and trustworthiness hold an important place in the world of finance.  In fact, some argue that in the world of business “trustworthiness finds its most distinctive place in modern life, especially in connection with the provision of financial services,” as Steven Baker writes in the International Encyclopedia of Ethics (p. 883, Fitzroy Dearborn Publishers, 1995).  He continues:

    “Since the eighteenth century, the fiduciary trustworthiness of corporate entities has come to be even more important than that of individuals and families (some corporate entities even came to be called ‘trusts’).  Without fiduciary trust, the economic world as it is known could not exist” (Baker p883).

    The German philosopher Immanuel Kant also linked trust in human relationships to respecting others, as well as ourselves.  On Kant’s view, trust is an expression of respect.  By trusting and being trusted by others, we thereby show mutual respect to one another.  This consequence of trust, in addition its cooperative benefits, made trust an important part of Kant’s ethical theory.

  • u

  • Universalizability
    Judgments or principles of which it can be said that everyone should judge or act in the same way, are universalizable judgments or principles.   In other words, they are independent of any particular point of view.

    ‘Do not kill’ or ‘Do not break promises’ or ‘Do not cheat’ might be examples of universalizable principles – they are judgments which everyone, it could be argued, should follow.

    Universal judgments or principals are, in a way then, also impartial.  They are impartial because the person who makes them will be required to judge him or herself according to the same standard by which he or she judges others.

    The moral philosophy of German philosopher Immanuel Kant is most often associated with universalizability.  It is a requirement of Kant’s theory that the principles that one follows be universalizable.

  • Utilitarianism
    Utilitarianism states that actions are morally right if and only if they maximize the good (or, alternatively, minimizes the bad).  Classical utilitarians like Jeremy Bentham and John Stuart Mill (as well as many contemporary utilitarians) take ‘the good’ to be pleasure or well-being.  Thus, actions are morally right, on this view, if and only if they maximize pleasure or well-being or minimize suffering.

    This approach is sometimes called hedonistic utilitarianism.  For hedonistic utilitarians, the rightness or our actions are determined solely on the basis of consequences of pleasure or pain.

    Utilitarian theories may take other goods into consideration.  Preference utilitarianism, for example, takes into account not just pleasures, but the satisfaction of any preference.

    Utilitarianism can also be divided along other lines.  Act-utilitarianism claims that we must apply a utilitarian calculation to each and every individual action.  By making this calculation, we can thereby determine the moral rightness or wrongness of each action we plan to take.

    Rule-utilitarianism eases the burden that act-utilitarianism places on practical reasoning by establishing moral rules that, when followed, brings about the best consequences.  Rule-utilitarianism can be illustrated by the rule “do not kill.”  As a general rule, we would be better off, that is, the best consequences, or state of affairs, would be brought about, if we all followed the rule “do not kill.”

    Objections to Utilitarianism:

    There are a number of objections to utilitarian theories, both in their act- formulations and in their rule- formulations.

    (1)  Act-utilitarianism, for example, seems to be impractical.  To stop to calculate the possible outcomes of every act we intend to make, as well as the outcomes of all of the possible alternatives to that act is unrealistic.  Moreover, it may hinder one’s ability to bring about the best consequences – for example, in cases where a quick response is vital (as in responding to a car wreck).

    (2)  Others have objected to utilitarianism on the grounds that we cannot always predict the outcomes of our actions accurately.  One course of action may seem like it will lead to the best outcome, but we may be (and often are) mistaken.  The best it seems we can do, then, is to guess at the short-term consequences of our actions.

    (3)  Objections to utilitarianism have also been made on the grounds that it is excessively demanding and places too large a burden on individuals.  Since utilitarianism says that acts are morally right if and only if they maximize pleasure or well-being, it seems that leisure activities, such as watching television, may be morally wrong because they do not maximize well-being.  Any person watching television could, after all, be doing something else – something that would maximize utility, like helping others or volunteering.

    (4)  Finally, utilitarianism receives criticism because seemingly immoral acts and rules can be justified using utilitarianism (this criticism is applicable both to act- and rule- utilitarianism).   Genocides, torture, and other evils may be justified on the grounds that they, ultimately, lead to the best outcome.  Unjust rules – for example, laws that legalize slavery or apartheid – might also be justified on utilitarian grounds.

  • Utopianism, Problem of
    According to Thomas Nagel, “An ideal, however attractive it may be to contemplate, is utopian if reasonable individuals cannot be motivated to live by it.”1 When given serious consideration, utopian ideals generate what he calls the "problem of utopianism.” While a given political or moral theory may be well-supported by rigorous philosophical argument, if it is a utopian ideal, then this particular political or moral theory will not have any practical use because too few individuals will abide by it for its benefits to be meaningfully realized. In a manner similar to the demandingness objection, the problem of utopianism suggests that satisfactory, useful political and moral ideologies cannot demand unreasonable sacrifices of individuals’ self-interests.

    1. Thomas Nagel, Equality and Partiality (New York:  Oxford University Press, Inc., 1991), 21.

  • v

  • Value in the Markets

    In the world of finance, generating wealth is undeniably among the driving values, if not the chief value.  Yet regardless of the extent to which the value of generation of wealth is highlighted, it is not, nor can it be, the only value in the market.  After all, fairness and honesty are presuppositions of a functioning free market, as is liberty.  Without these ‘action-guiding’ values, the free market system cannot stand.

    But values like fairness, honesty, and liberty, which enable a thriving market, are not the sole values in the market.  Other societal values, including moral values, are also essential. (It should also be noted that honesty, fairness, and liberty, too, are moral values).  This claim is predictably dismissed by so-called ‘Free Market Fundamentalists,’ who claim that, within the free market, the market itself determines what is right and wrong.

    Free Market Fundamentalists often invoke Adam Smith, the great economist and author of Wealth of Nations, in defense of their claim.  Yet, as the Nobel Prize-winning economist and philosopher Amartya Sen rightly points out, this reading of Smith is, in fact, misconceived.  Sen writes:

    “Beyond his attention to the components and responsibilities of a well-functioning market system (such as the role of accountability and trust), he was deeply concerned about the inequality and poverty that might remain in an otherwise successful market economy. Even in dealing with regulations that restrain the markets, Smith additionally acknowledged the importance of interventions on behalf of the poor and the underdogs of society. At one stage, he gives a formula of disarming simplicity: "When the regulation, therefore, is in favour of the workmen, it is always just and equitable; but it is sometimes otherwise when in favour of the masters." Smith was both a proponent of a plural institutional structure and a champion of social values that transcend the profit motive, in principle as well as in actual reach.[1]

    Thus, even Adam Smith, who is commonly held to be the champion of free market capitalism, recognized the importance of moral values in a well functioning market system.

    Given the complexity and reach of today’s global economy, attention to the values – moral values in particular – that guide our decisions in the market are more crucial than ever.


  • Value Line Index Futures
    The Kansas City Board of Trade introduced these first index futures in 1982. Unlike other indices, the Value Line Index used a geometric formula, thus ensuring that its value would always under-perform an arithmetic formula for calculating the same index. The futures became infamous when Goldman Sachs traders, realizing the opening created by the geometric formula, began shorting the futures.

  • Values

    Values guide action.   In other words, when we value something – or when we have a particular set of values – we think that what we value (or the values we have) give us reasons to act in particular way.  As the philosopher David Ozar puts it, “to value something is to consider it a candidate for action aimed at achieving it.[1]

    When it comes to values, and valuing, we tend to talk about them in a number of ways.  Words like ‘value,’ ‘values,’ ‘to value,’ and ‘valuable’ occur in numerous contexts, and encompass a wide range of meaning.  Moreover, we often use words like ‘good’ and ‘bad,’ ‘better’ and ‘worse,’ and ‘best’ and ‘worst’ to ascribe value (or lack thereof), without the explicit use of the term ‘value.’

    But all of these meanings and uses build on the idea that “to value something is to consider it a candidate for action aimed at achieving it.”

    Indeed, this description seems to capture our everyday notion of value.  Values are ‘action-guiding’ in that we typically pattern our actions after what we take to be of value (i.e. “It is a good/bad job, so I will/will not take it.”  “It would be better/worse to speak to her now, so I will/will not call.” “It would be best/worst, to start early, so we should/should not get to work.”).

    Values are sometimes divided into categories, of which ‘intrinsic’ and ‘instrumental’ (or ‘extrinsic’) are perhaps the most common.  An intrinsic value is something that is valuable in itself or for its own sake.  A human life, for example, is widely viewed as intrinsically valuable.

    Instrumental, or extrinsic values, are said to be valuable for the sake of something else, that is, for the sake of an intrinsic value.  Money, for example, may be valuable to you, but it is only valuable insofar as it allows you access to other, intrinsic values (i.e. the pleasure of a fine meal, or of experiencing opera).  Money is an instrumental value, in other words, because it loses its value if it does not afford you access to other things.

    [1] David T. Ozar. “Values” in The Blackwell Encyclopedic Dictionary of Business Ethics.  P. 645

  • Vega (n)
    The first derivative of the option price as regards the volatility of the underlying stock.

  • Veil of Ignorance
    A hypothetical mental state, in John Rawls version of Social Contract Theory, in which we imagine ourselves as being situated behind a “veil of ignorance” in which we are ignorant of our particular characteristics such as sex, race, IQ, financial status, family background, religious ideology, personal philosophy, etc. The “veil of ignorance” forces us to imagine ourselves in a position, free of bias, and one in which we are unaware of any particular skills or abilities we may have. According to Rawls, valid principles of justice are those we would agree to if we could freely, impartially, and rationally consider the social situation, from an original position of such ignorance

  • Virtue Ethics
    Virtue ethics takes its philosophical root in the work of the ancient Greek philosopher Aristotle.   Virtue theories claim that ethics is about agents, not actions or consequences.  Living an ethical, or good life, then, consists in the possession of the right character traits (virtues) and having, as a result, the appropriate moral character.

    Unlike deontological accounts, which focus on learning and, subsequently, living by moral rules, virtue accounts place emphasis on developing good habits of character.  In essence, this means developing virtuous character traits – dispositions to act in a certain way – and avoiding bad character traits, or vices of character.

    Character traits commonly regarded as virtues include courage, temperance, justice, wisdom, generosity, and good temper (as well as many others).  This approach to normative ethics also emphasizes moral education.  Since traits of character are developed in youth, adults are responsible for instilling in their children the appropriate dispositions.

    Objections to virtue ethics:

    (1)  The first difficulty, which any virtue theorist must surmount is figuring out which characteristics count as virtues (and which count as vices).  Given that different cultures sometimes hold different traits of character to be virtuous, it seems that virtue ethical theories are susceptible to the difficulties involved with cultural relativism.

    (2)  It also seems that virtuous characteristics can be exhibited even when the actions carried out are immoral.  Courage, for example, is often regarded as a virtue, but can there not be courageous bank robbers?  It certainly seems that a bank robber could exhibit courage while robbing a bank, yet we generally agree that robbing is morally wrong.

    This consequence is problematic because the aim of any normative theory is to arrive at standards, or norms, of behavior for living a moral life.  In the case of the courageous bank robber, it seems that the bank robber lives according to the standard set by virtue ethics (that is, he acts courageously) but his behavior is nevertheless immoral.

    It may be suggested in response to this objection that the courageous bank robber, though meeting the requirements of the virtue of courage, fails to live according to the standard set by some other virtue – for example, honesty.  This response, however, only serves to highlight another objection to virtue ethics – competing virtues.

    (3)  Virtue theories encounter problems with moral dilemmas in which two (or more) virtues conflict.  In other words, the requirements of one virtue may be opposed, or contradictory, to the requirements of another.  The requirements of honesty, for example, require us to tell the truth, even if it is hurtful.  The virtues of kindness or compassion, on the other hand, point to remaining silent, or perhaps even lying, in order to avoid harm.

  • w

  • Wall Street Journal
    One of the best-respected sources of information about the economy and markets, the Wall Street Journal was founded in 1889. Dow Jones and Company publishes it. In 2007 the News Corporation bought Dow Jones, adding the Wall Street Journal to Rupert Murdoch’s holdings.

  • War of All Against All
    Thomas Hobbes perceived the state of nature to be a state of utter chaos. Hobbes argued that there could be no morality in the state of nature because everyone would be fighting for individual survival. To Hobbes, moral notions had no place in the state of nature because everyone has an equal claim to everything. Without a government, no laws exist to regulate behavior. Since no one has the power to regulate human behavior (on a large scale) alone, any notions of justice or morality must arise from a social contract that all individuals adhere to. Without government, everyone’s equal claim to everything combined with the scarcity of resources leads everyone into the war of all against all: Everyone is the enemy of everyone else, and every individual must compete with others to gather enough resources to survive.

    Hobbes considered the war of all against all to be unacceptable. Life in such a state is too short and too fraught with suffering and insecurity. Hobbes proposed the establishment of an authoritarian state which had the power to control its subjects and establish a civilized society. In this authoritarian state, the ruler or governing body, known as the sovereign, has the ability to violate an array of individual rights to promote peace and prevent society from reverting back to the war of all against all.

  • Weak EMH
    Weak EMH is a derivative of the EMH theory. The theory states that stock prices fully reflect all market trading data, such as the history of past prices, trading volume, or short interest. This version of the hypothesis implies that trend analysis is futile. This form of EMH is the most supported version of EMH but still runs into problems when trying to explain the tech stock bubble in 2000 and the housing bubble in 2006.

  • Well-being/welfarism
    In contrast to the popular use of the term, which is typically related to health, ‘well-being’ in philosophical contexts is used to describe an intrinsic, or ultimate, good for a person (this is not to say that health is not, or cannot be, included in the philosophical account of well-being).

    In short, the philosophical use of the term ‘well-being’ is broader than the term’s common everyday use.  To consider a person’s well-being is to consider how well life goes, on the whole, for that person.  It is similar to, though not identical with, the concept of happiness.

    Theories of well-being typically fall into one of three categories:

    (1)  The hedonistic view: Hedonistic theories of well-being account for well-being strictly in terms of pleasure.  On this view, a good life – that is, a life in which one enjoys a high level of well-being – amounts to the greatest balance of pleasure over pain.

    (2)  The desire-satisfaction view: The satisfaction of desires is another way of accounting for well-being.  Proponents of this view note that we sometimes desire things that do not bring us pleasure, or which on balance bring about more pain than pleasure.  I may desire, for example, to run a marathon, or to climb Mount Everest.  While I may experience pleasure upon the completion of my endeavor (if indeed I am successful), that pleasure may not outweigh the pains to which I subjected myself in the process.  The desire-satisfaction view allows for well-being to consist in more than simply pleasure (I may have climbed Mount Everest not for pleasure’s sake, but because it was somehow meaningful to me, for example).

    (3)  The objective list view: Finally, well-being can be accounted for in terms of an objective list of human goods.  On this view, well-being consists in various goods which, objective list theorists claim, cannot be merely reduced to pleasure or the satisfaction of desires.  The list of goods may include pleasure and the satisfaction of desire, but it may also include things like knowledge, for example, or friendship.

    Well-being, however it is accounted for, plays an important role in moral theories, as they seek to promote the well-being of persons.   When a moral theory claims that well-being is the only consideration that matters morally, the view is regarded as a welfarism view.  Of the views associated with welfarism, utilitarianism is perhaps the best known.

  • y

  • Yankee Bonds
    Bonds issued by foreign banks in U.S. dollars.  Foreign banks must first register their bonds with the Securities and Exchange Commission before they can sell them in U.S. markets.

  • Yield Curve
    A graph showing the relationship between bond interest rates (y-axis) and the time to maturity.  The curve will take different shapes depending on anticipated future interest rates.  The curve is monitored closely as people try to predict changes in economic growth from the curve.  A steep yield curve indicates the anticipation of high interest rates.  Some believe it presages inflation.  A flat yield curve shows that long term interest rates are almost the same as short term interest rates, indicating the absence of inflationary expectations.

  • Yield to Maturity (YTM)
    The potential rate of return if a bond is held until its maturity date.  This calculation includes the price, par value, coupon, and time to maturity of the bond.  YTM also assumes that all payments will be made on time.

  • z

  • Zero Coupon Bonds
    A type of bond that does not have an interest payment (a coupon).  These bonds pay off profits at their maturity date.  Some bonds are issued as zero coupon while others are bonds with the coupon removed and resold.  Also known as an accrual bond, these are traded at a price much lower than face value because of the time it takes for the profits to be realized.