Economics & markets: questions and answers
How markets, inflation, interest rates and economic theory work, in plain English. Clear answers to the economics and markets questions people ask most, written in plain English and checked against official sources. 9 answers so far.
Fact-checked against official sources such as GOV.UK, HMRC and the IRS · Updated 6 October 2026
Worldwide 9
- How do you convert an annual inflation rate to a monthly rate?
For a compounded annual inflation rate, the monthly rate is (1 + annual rate)^(1/12) − 1. Dividing the annual rate by 12 is only a rough approximation. The same…
- When does it make sense to exercise an American call option early?
An American-style call can be exercised before expiration, but early exercise is usually a decision to weigh against the option’s remaining time value. It can make…
- How do I find the right DAX symbol in a market-data API?
There is no universal DAX ticker across every data provider. For Alpha Vantage, the best method is to use its Index Catalog to find the supported index symbol first…
- Does optimisation-based choice theory fit Walrasian theory?
Yes. Standard Walrasian consumer theory is built around consumers choosing their most-preferred affordable bundle, which is commonly written as an optimisation problem…
- When should you multiply or divide an exchange rate?
Use the direction of the quoted rate to decide whether to multiply or divide. If £1 buys $1.25, then £100 converts to $125 by multiplying. To go back from $125 to…
- Why are financial transactions much larger than GDP?
GDP measures current production, not every movement of money or ownership. Buying a share, moving money between accounts or making a loan can involve a large financial…
- How is trading P&L calculated?
Trading P&L measures the gain or loss created by a position after considering entry and exit values, position size and relevant costs. The exact formula changes for…
- Why does the law of one price not always hold?
The law of one price is an economic tendency, not a guarantee. Identical goods can trade at different prices because transport, taxes, regulation, information gaps…
- Which quantitative-finance books are worth having on a serious reading list?
There is no single best quantitative-finance bookshelf. A useful sequence covers probability and statistics first, then fixed income, derivatives, portfolio theory and…
More topics
General information, not personal financial advice. How we check facts.