E-encyclopedia of banking, stock exchange and finance

Selected letter: Y

  • Yahoo - How it all started

    Official text taken from here on May 16th 2012.

    Yahoo! began as a student hobby and evolved into a global brand that has changed the way people communicate with each other, find and access information and purchase things. The two founders of Yahoo!, David Filo and Jerry Yang, Ph.D. candidates in Electrical Engineering at Stanford University, started their guide in a campus trailer in February 1994 as a way to keep track of their personal interests on the Internet. Before long they were spending more time on their home-brewed lists of favorite links than on their doctoral dissertations. Eventually, Jerry and David's lists became too long and unwieldy, and they broke them out into categories. When the categories became too full, they developed subcategories ... and the core concept behind Yahoo! was born.

    The Web site started out as "Jerry and David's Guide to the World Wide Web" but eventually received a new moniker with the help of a dictionary. The name Yahoo! is an acronym for "Yet Another Hierarchical Officious Oracle," but Filo and Yang insist they selected the name because they liked the general definition of a yahoo: "rude, unsophisticated, uncouth." Yahoo! itself first resided on Yang's student workstation, "Akebono," while the software was lodged on Filo's computer, "Konishiki" - both named after legendary sumo wrestlers.

    Jerry and David soon found they were not alone in wanting a single place to find useful Web sites. Before long, hundreds of people were accessing their guide from well beyond the Stanford trailer. Word spread from friends to what quickly became a significant, loyal audience throughout the closely-knit Internet community. Yahoo! celebrated its first million-hit day in the fall of 1994, translating to almost 100 thousand unique visitors.

    Due to the torrent of traffic and enthusiastic reception Yahoo! was receiving, the founders knew they had a potential business on their hands. In March 1995, the pair incorporated the business and met with dozens of Silicon Valley venture capitalists. They eventually came across Sequoia Capital, the well-regarded firm whose most successful investments included Apple Computer, Atari, Oracle and Cisco Systems. They agreed to fund Yahoo! in April 1995 with an initial investment of nearly $2 million.

    Realizing their new company had the potential to grow quickly, Jerry and David began to shop for a management team. They hired Tim Koogle, a veteran of Motorola and an alumnus of the Stanford engineering department, as chief executive officer and Jeffrey Mallett, founder of Novell's WordPerfect consumer division, as chief operating officer. They secured a second round of funding in Fall 1995 from investors Reuters Ltd. and Softbank. Yahoo! launched a highly-successful IPO in April 1996 with a total of 49 employees.

    Today, Yahoo! Inc. is a leading global Internet communications, commerce and media company that offers a comprehensive branded network of services to more than 345 million individuals each month worldwide. As the first online navigational guide to the Web, www.yahoo.com is the leading guide in terms of traffic, advertising, household and business user reach. Yahoo! is the No. 1 Internet brand globally and reaches the largest audience worldwide. The company also provides online business and enterprise services designed to enhance the productivity and Web presence of Yahoo!'s clients. These services include Corporate Yahoo!, a popular customized enterprise portal solution; audio and video streaming; store hosting and management; and Web site tools and services. The company's global Web network includes 25 World properties. Headquartered in Sunnyvale, Calif., Yahoo! has offices in Europe, Asia, Latin America, Australia, Canada and the United States.

  • YIELD CURVE (Encyclopedia)

    The term structure of interest rates is a function that links interest rates on specific assets to their maturity. In order to define this term structure, the market usually considers government bonds issued by highly rated countries, because of their low default risk: in this way, we focus specifically on the relation between rates and different maturities. Another way to compute the term structure is via the swap market (i.e., by using swap rates adopted by major banks in the inter-banking market, which implies a AA rating).
    Actually, “yield curve” is the name attributed to a graph that describes the yield of bonds of the same quality but for different maturities (i.e., US government bonds that mature in the next 30 years).
    Graphically, interest rates are on the y-axis, whereas maturities appear on the x-axis.
    Short-term rates reflect the expectation of investors over a short-term horizon. When they go down, it means that investors prefer to be liquid and safe.
    Long-term rates reflect, instead, the expectation of investors over a long-term horizon. When they go up, it means that investors are worried about inflation and long-term uncertainty.
    We distinguish between three different shapes of the yield curve:
    1. normal yield curve: in a quiet world, all the rate curves would appear like the following one approximately. Bonds with short maturity would be linked to lower rates because of their lower risk (since life to maturity is lower). Higher rates correspond to higher maturities (uncertainty increases because of inflation risk, etc.): investors receive a premium for the higher risk they bear (hence, a higher rate).

    2. flat yield curve: in this case, investors get approximately the same rate if they buy short-term, medium-term or long-term bonds. With a flat yield curve, it would be better to buy short-term bonds since you do not receive a premium corresponding to higher rates if you buy longer bonds.

    3. inverted yield curve: in this case, short-term bonds have higher yields than the longer ones. It is a less frequent scenario and sometimes it tells us that a relevant economic change is going to happen (e.g., depression). At first sight, we should be interested in buying only short-term bonds if this scenario takes place. But, in general, an inverted yield curve changes its shape very quickly, turning back to a normal yield curve, and you could miss the chance to lock a high yield linked to longer maturities. For instance, in the 1980s, we had an inverted yield curve and very high rates for all the maturities. Given the shape of the curve, risk-averse investors overbought 6-month deposit certificates missing the chance to lock a long-term yield of 15% related to long-term treasury bonds.

    Hull, J. C., "Options, futures and other derivatives" 7th edition, Prentice Hall, 2008
    Fabozzi, F. J., "Bond markets, analysis and strategies", 2004, Pearson Education
    Baxter, M., Rennie, A., "Financial Calculus: An Introduction to Derivative Pricing", Cambridge University Press, 2006
    Editor: Ugo TRENTA
    © 2009 ASSONEBB

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