CostIn production, research, retail, and accounting, a cost is the value of money that has been used up to produce something or deliver a service, and hence is not available for use anymore. In business, the cost may be one of acquisition, in which case the amount of money expended to acquire it is counted as cost. In this case, money is the input that is gone in order to acquire the thing. This acquisition cost may be the sum of the cost of production as incurred by the original producer, and further costs of transaction as incurred by the acquirer over and above the price paid to the producer.
Cost curveIn economics, a cost curve is a graph of the costs of production as a function of total quantity produced. In a free market economy, productively efficient firms optimize their production process by minimizing cost consistent with each possible level of production, and the result is a cost curve. Profit-maximizing firms use cost curves to decide output quantities. There are various types of cost curves, all related to each other, including total and average cost curves; marginal ("for each additional unit") cost curves, which are equal to the differential of the total cost curves; and variable cost curves.
Marginal costIn economics, the marginal cost is the change in the total cost that arises when the quantity produced is incremented, the cost of producing additional quantity. In some contexts, it refers to an increment of one unit of output, and in others it refers to the rate of change of total cost as output is increased by an infinitesimal amount. As Figure 1 shows, the marginal cost is measured in dollars per unit, whereas total cost is in dollars, and the marginal cost is the slope of the total cost, the rate at which it increases with output.
Option (finance)In finance, an option is a contract which conveys to its owner, the holder, the right, but not the obligation, to buy or sell a specific quantity of an underlying asset or instrument at a specified strike price on or before a specified date, depending on the style of the option. Options are typically acquired by purchase, as a form of compensation, or as part of a complex financial transaction.
Opportunity costIn microeconomic theory, the opportunity cost of a choice is the value of the best alternative forgone where, given limited resources, a choice needs to be made between several mutually exclusive alternatives. Assuming the best choice is made, it is the "cost" incurred by not enjoying the benefit that would have been had by taking the second best available choice. The New Oxford American Dictionary defines it as "the loss of potential gain from other alternatives when one alternative is chosen.
Options strategyOption strategies are the simultaneous, and often mixed, buying or selling of one or more options that differ in one or more of the options' variables. Call options, simply known as Calls, give the buyer a right to buy a particular stock at that option's strike price. Opposite to that are Put options, simply known as Puts, which give the buyer the right to sell a particular stock at the option's strike price. This is often done to gain exposure to a specific type of opportunity or risk while eliminating other risks as part of a trading strategy.
Real options valuationReal options valuation, also often termed real options analysis, (ROV or ROA) applies option valuation techniques to capital budgeting decisions. A real option itself, is the right—but not the obligation—to undertake certain business initiatives, such as deferring, abandoning, expanding, staging, or contracting a capital investment project. For example, real options valuation could examine the opportunity to invest in the expansion of a firm's factory and the alternative option to sell the factory.
Language modelA language model is a probabilistic model of a natural language that can generate probabilities of a series of words, based on text corpora in one or multiple languages it was trained on. Large language models, as their most advanced form, are a combination of feedforward neural networks and transformers. They have superseded recurrent neural network-based models, which had previously superseded the pure statistical models, such as word n-gram language model.
Large language modelA large language model (LLM) is a language model characterized by its large size. Their size is enabled by AI accelerators, which are able to process vast amounts of text data, mostly scraped from the Internet. The artificial neural networks which are built can contain from tens of millions and up to billions of weights and are (pre-)trained using self-supervised learning and semi-supervised learning. Transformer architecture contributed to faster training.
Exotic optionIn finance, an exotic option is an option which has features making it more complex than commonly traded vanilla options. Like the more general exotic derivatives they may have several triggers relating to determination of payoff. An exotic option may also include a non-standard underlying instrument, developed for a particular client or for a particular market. Exotic options are more complex than options that trade on an exchange, and are generally traded over the counter.
Binary optionA binary option is a financial exotic option in which the payoff is either some fixed monetary amount or nothing at all. The two main types of binary options are the cash-or-nothing binary option and the asset-or-nothing binary option. The former pays some fixed amount of cash if the option expires in-the-money while the latter pays the value of the underlying security. They are also called all-or-nothing options, digital options (more common in forex/interest rate markets), and fixed return options (FROs) (on the NYSE American).
Cost accountingCost accounting is defined by the Institute of Management Accountants as "a systematic set of procedures for recording and reporting measurements of the cost of manufacturing goods and performing services in the aggregate and in detail. It includes methods for recognizing, classifying, allocating, aggregating and reporting such costs and comparing them with standard costs". Often considered a subset of managerial accounting, its end goal is to advise the management on how to optimize business practices and processes based on cost efficiency and capability.
Bond optionIn finance, a bond option is an option to buy or sell a bond at a certain price on or before the option expiry date. These instruments are typically traded OTC. A European bond option is an option to buy or sell a bond at a certain date in future for a predetermined price. An American bond option is an option to buy or sell a bond on or before a certain date in future for a predetermined price. Generally, one buys a call option on the bond if one believes that interest rates will fall, causing an increase in bond prices.
Cost-effectiveness analysisCost-effectiveness analysis (CEA) is a form of economic analysis that compares the relative costs and outcomes (effects) of different courses of action. Cost-effectiveness analysis is distinct from cost–benefit analysis, which assigns a monetary value to the measure of effect. Cost-effectiveness analysis is often used in the field of health services, where it may be inappropriate to monetize health effect.
Employee stock optionEmployee stock options (ESO) is a label that refers to compensation contracts between an employer and an employee that carries some characteristics of financial options. Employee stock options are commonly viewed as an internal agreement providing the possibility to participate in the share capital of a company, granted by the company to an employee as part of the employee's remuneration package. Regulators and economists have since specified that ESOs are compensation contracts.
Cost–benefit analysisCost–benefit analysis (CBA), sometimes also called benefit–cost analysis, is a systematic approach to estimating the strengths and weaknesses of alternatives. It is used to determine options which provide the best approach to achieving benefits while preserving savings in, for example, transactions, activities, and functional business requirements. A CBA may be used to compare completed or potential courses of action, and to estimate or evaluate the value against the cost of a decision, project, or policy.
Monetary policyMonetary policy is the policy adopted by the monetary authority of a nation to affect monetary and other financial conditions to accomplish broader objectives like high employment and price stability (normally interpreted as a low and stable rate of inflation). Further purposes of a monetary policy may be to contribute to economic stability or to maintain predictable exchange rates with other currencies.
Natural language processingNatural language processing (NLP) is an interdisciplinary subfield of linguistics and computer science. It is primarily concerned with processing natural language datasets, such as text corpora or speech corpora, using either rule-based or probabilistic (i.e. statistical and, most recently, neural network-based) machine learning approaches. The goal is a computer capable of "understanding" the contents of documents, including the contextual nuances of the language within them.
Generative pre-trained transformerGenerative pre-trained transformers (GPT) are a type of large language model (LLM) and a prominent framework for generative artificial intelligence. The first GPT was introduced in 2018 by OpenAI. GPT models are artificial neural networks that are based on the transformer architecture, pre-trained on large data sets of unlabelled text, and able to generate novel human-like content. As of 2023, most LLMs have these characteristics and are sometimes referred to broadly as GPTs.
Natural language generationNatural language generation (NLG) is a software process that produces natural language output. A widely-cited survey of NLG methods describes NLG as "the subfield of artificial intelligence and computational linguistics that is concerned with the construction of computer systems than can produce understandable texts in English or other human languages from some underlying non-linguistic representation of information". While it is widely agreed that the output of any NLG process is text, there is some disagreement about whether the inputs of an NLG system need to be non-linguistic.
