This glossary is intended for you to better understand terminology used on the simExchange Video Game Prediction Market and in real financial markets. This glossary was last updated March 12, 2007.
Ask Price: This is the price someone is offering to sell at. If you take the ask price, you are buying shares from the seller at the ask price.
Bid Price: This is the price someone is offering to buy at. If you take the bid price, you are selling shares to the buyer at the bid price.
Bid Trust: This simExchange creation is a trust fund where DKP is deposited whenever someone bids content in the same direction you do. DKP in the Bid Trust cannot be spent and is deposited into your cash account at the end of the day.
DKP: DKP stands for "Dragon Kill Points" and is the standard currency between players in Massively Multiplayer Online Role-Playing Games (MMORPGs). Players earn DKP through accomplishments for their guild and bid their DKP for phat lewtz the guild acquires from beating bosses. Due to the term's place among gamers, "DKP" was chosen as the name of the currency on the simExchange.
Equity: Equity generally means the ownership of a company, usually measured in stock value. For securities unrelated to the ownership of a company, equity is the value of the securities.
On the simExchange, equity is the market value of your game stock positions.
Limit Order: A limit order is an order that requires both price and quantity as parameters. The order will only fill if an order of matching price or better is found. This type of order guarantees you get the price you want if the order is filled, but does not guarantee that the order will be filled. An order of matching price is required.
Long equity: On the simExchange, this is the total market value of your long positions. See Equity.
Market Price: This is the current value of the shares as determined by the market. The market price listed on your Portfolio Page for each stock is equivalent to the last price that was traded on the simExchange.
Market Value: This is the current value of the position as determined by the market. The market value listed on your Portfolio Page for each stock is equivalent to the last price that was traded on the simExchange multiplied by the number of shares you currently have for a long position or the current shares you do not have in a short position.
Margin: The cash deposit required to back your borrowed position -- this could be buying on margin or short selling.
Margin Call: This is when a broker contacts a customer for more cash deposits to back a leveraged position--such as buying on margin or short selling. This occurs when the customer's account loses value and so his margin is no longer sufficient to cover the borrowed position. If the customer does not deposit additional funds to cover the required margin, the broker begins liquidating positions for the customer.
On the simExchange, this may either happen because your shorted stocks have gone up in price (so your short equity is now larger) or your cash has decreased and you now have insufficient cash to cover your short equity. Your positions will be liquidated until your available margin is positive.
Net Worth: On the simExchange, your net worth is the sum of your Cash and Long Equity deducted by your Short Equity.
Prediction Market: A market created for the purpose of making predictions, rather than raising capital. Studies have shown that prediction markets can aggregate information to form more accurate predictions than any individual analyst.
Purchase Price: On the simExchange Portfolio Page, the purchase price is the average price at which you bought the stock. So if you bought 100 shares at 100 DKP and 50 shares at 75 DKP, your average purchase price would be (100 * 100 + 50 * 75) / (100 + 50) = 91.67 DKP. This is your total cost divided by the total number of shares you bought.
Short equity: On the simExchange, this is the total market value of your short positions. See Equity.
Short Price: On the simExchange Portfolio Page, the short price is the average price at which you short the stock. So if you short 100 shares at 100 DKP and 50 shares at 75 DKP, your average short price would be (100 * 100 + 50 * 75) / (100 + 50) = 91.67 DKP.
Short sell: This means you are selling stock when you do not own it. Logistically, this is done in the real stock market by borrowing shares of a stock and selling it. The plan would be for the stock to go down in value and repurchasing it at a lower price: Sell high, buy back low.
On the simExchange, all you have to do is sell the stock. If you do not have any shares of the stock in your portfolio, the action will automatically be treated as a short sell.
Time Trust: This simExchange creation is a trust fund where DKP is deposited over time. The Time Trust is capped so it must be spent or else DKP will not continue to accumulate beyond the cap. Expenses will always deduct from the Time Trust first. See related topic in Rules.