Trading Terms

Contingency insurance (or difference in conditions)

Greetings, students! Today, we will be discussing the concept of contingency insurance in international transactions. As you may know, when two parties engage in an international transaction, they often take out insurance to protect themselves from any potential losses. However, sometimes there may be gaps in this coverage, which is where contingency insurance comes into play.

Contingency insurance is essentially an additional insurance policy taken out by one party to complement the coverage already taken out by the other party. This ensures that any potential gaps in coverage are filled, providing a more comprehensive protection for both parties.

Let's take an example to better understand this concept. Imagine an open account exporter, using FOB Incoterms, who is not obligated to insure the goods during the main international transport. However, they may still choose to take out contingency insurance to cover any potential losses or damages to the goods. This not only protects the seller from any financial loss, but also helps maintain a

Opportunity Costs

Opportunity cost refers to the loss of potential income when resources are invested in an alternative venture. This concept is a fundamental principle in finance, as it emph...

Dependence

In the world of finance, we often encounter the concept of an indirect relationship between two variables. This refers to the scenario where the first variable may not have ...

Correction Wave

Let's discuss the concept of a wave in the world of finance. In simple terms, a wave refers to a cycle of movements that go against the current trend. It is a pattern that f...

Bid and Ask

In finance, the terms "high price" and "low price" refer to the maximum and minimum amounts that an investor is willing to pay for a tradable asset. These prices are key fac...

Noisy Signal

A signal that cannot be ignored due to the impact of unpredictable factors. These factors, known as random influences, can greatly affect the validity and reliability of the...

Actuals

Physical commodities are tangible goods, in contrast to futures. They are physical products such as grains, metals, and energy sources that are traded in markets. These comm...