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Policy Gradient
Policy gradient methods optimize a parameterized policy π_θ directly by ascending the gradient of expected return, rather than via an action-value table.
Prompt Injection
Prompt injection is an attack that inserts instructions into retrieved or user-supplied text so the model obeys the attacker instead of the developer’s system policy.
Proximal Policy Optimization
PPO is a policy-gradient algorithm that clips the probability ratio so each update stays close to the previous policy, giving much of TRPO’s stability with first-order SGD.
Q-Learning
Q-learning is an off-policy TD method that learns action values Q(s, a) toward the greedy target r + γ max_a′ Q(s′, a′), without needing the behavior policy to be optimal.
Reinforcement Learning
Reinforcement learning trains a policy to maximize expected return by interacting with an environment: states, actions, rewards, and (usually) a discount factor.
Reinforcement Learning from Human Feedback
RLHF fits a reward model to human (or AI) preference comparisons, then optimizes a language model against that reward, usually with a KL penalty back to a reference policy.
Bank Capital Ratio
Bank Capital Ratio — Loss-absorbing equity buffer determining lending capacity and dividend policy.
Too Big to Fail
Too big to fail is the expectation that a firm’s collapse would force a public rescue — a subsidy in funding spreads and a policy problem.
Behind the Curve
Behind the curve means policy (or a book) is too easy or too slow relative to incoming inflation, growth, or a Taylor-type benchmark — the market is already pricing a catch-up.
Bull Flattener
A bull flattener is the curve flattening as yields fall, usually because the front end rallies more than the long end into easier policy or a growth scare.
Don't Fight the Fed
Don’t fight the Fed is the rule of thumb that a determined policy impulse (easing or tightening) will eventually dominate discretionary macro views.
Impossible Trinity
The impossible trinity (trilemma) says a country cannot simultaneously have a fixed exchange rate, free capital mobility, and an independent monetary policy — it must drop one.
Liquidity Trap
A liquidity trap is a state where the policy rate is at or near the effective lower bound and extra money is hoarded rather than spent, so conventional rate cuts stop working.
Taylor Rule
The Taylor rule is a simple policy reaction: set the policy rate to a neutral real rate plus inflation, then add weights on the inflation gap and the output gap.
Consumer Confidence Index
Consumer Confidence Index — Household expectations that influence spending, labor supply, and political pressure on policy.
CPI Shelter Component
CPI Shelter Component — The largest CPI bucket, lagged versus spot rents, creating policy communication traps.
Inflation Expectations Survey
Inflation Expectations Survey — Household and market-based expectations that can de-anchor if policy credibility erodes.
Output Gap
Output Gap — Estimated distance of GDP from potential output, informing policy reaction functions.
Primary Dealer Survey
Primary Dealer Survey — Desk-level policy expectations that front-run official communications.
Capital Controls
Capital Controls — Official restrictions on cross-border flows that reprice FX basis and investability.
Currency Peg
A peg is a policy that holds the exchange rate to a target or band — a promise that spends reserves and rates when the market disagrees.
ECB Balance Sheet
The ECB balance sheet reflects the scale of European Central Bank asset holdings and helps track euro-area liquidity, policy transmission, and duration absorption.
Fed Balance Sheet
The Fed balance sheet reflects the scale of Federal Reserve asset holdings and is a major driver of reserves, liquidity conditions, and policy transmission.
Countercyclical Capital Buffer
Countercyclical Capital Buffer — Bank capital requirements that tighten or ease through the credit cycle.
Cross-Currency Basis
Funding stress signal derived from FX swap pricing distortions and balance sheet constraints.
Dual Mandate
The Fed’s dual mandate is maximum employment and stable prices — two goals that agree in a demand shock and fight in a supply shock.
Emergency Liquidity Facility
Emergency Liquidity Facility — Standing and ad-hoc facilities that reveal where stress is concentrated in the financial system.
Federal Funds Rate
Federal Funds Rate — The effective overnight policy rate anchor that transmits through the entire USD funding stack and global risk appetite.
Federal Open Market Committee
The FOMC is the Fed body that sets the funds-rate target and the balance-sheet stance — the US rates committee.
Financial Conditions Index
A Financial Conditions Index aggregates variables such as rates, credit spreads, equities, and the dollar to measure how supportive or restrictive the market environment is for growth and risk assets.
Fiscal Policy
Fiscal policy is government spending and taxes — the demand impulse that is not the policy rate.
Foreign Exchange Intervention
Foreign Exchange Intervention — Official buying or selling of currency to manage disorderly moves and imported inflation.
Forward Guidance
Forward Guidance — How central bank language shapes term premium and front-end rate expectations before actual policy moves.
Hard Landing
A hard landing is a policy-induced recession — inflation (or a bubble) comes down because demand was broken.
Macroprudential Policy
Macroprudential Policy — Countercyclical tools that alter credit creation before traditional monetary policy reacts.
Monetary Policy
Monetary policy is the central bank’s control of short rates, liquidity, and sometimes the balance sheet — the price of reserves and the path of the front end.
2s10s Treasury Curve
The 2s10s Treasury curve measures the spread between 10-year and 2-year Treasury yields and is a key indicator of growth expectations, policy path, and term structure dynamics.
3M10Y Treasury Curve
The 3M10Y Treasury curve compares 10-year Treasury yields with 3-month Treasury bill yields and is closely watched as a recession and policy-cycle indicator.
Bank Capital Ratio
Bank Capital Ratio — Loss-absorbing equity buffer determining lending capacity and dividend policy.
Behind the Curve
Behind the curve means policy (or a book) is too easy or too slow relative to incoming inflation, growth, or a Taylor-type benchmark — the market is already pricing a catch-up.
Bull Flattener
A bull flattener is the curve flattening as yields fall, usually because the front end rallies more than the long end into easier policy or a growth scare.
Consumer Confidence Index
Consumer Confidence Index — Household expectations that influence spending, labor supply, and political pressure on policy.
Countercyclical Capital Buffer
Countercyclical Capital Buffer — Bank capital requirements that tighten or ease through the credit cycle.
CPI Shelter Component
CPI Shelter Component — The largest CPI bucket, lagged versus spot rents, creating policy communication traps.
Cross-Currency Basis
Funding stress signal derived from FX swap pricing distortions and balance sheet constraints.
Currency Peg
A peg is a policy that holds the exchange rate to a target or band — a promise that spends reserves and rates when the market disagrees.
Don't Fight the Fed
Don’t fight the Fed is the rule of thumb that a determined policy impulse (easing or tightening) will eventually dominate discretionary macro views.
Dual Mandate
The Fed’s dual mandate is maximum employment and stable prices — two goals that agree in a demand shock and fight in a supply shock.
ECB Balance Sheet
The ECB balance sheet reflects the scale of European Central Bank asset holdings and helps track euro-area liquidity, policy transmission, and duration absorption.
Emergency Liquidity Facility
Emergency Liquidity Facility — Standing and ad-hoc facilities that reveal where stress is concentrated in the financial system.
Fed Balance Sheet
The Fed balance sheet reflects the scale of Federal Reserve asset holdings and is a major driver of reserves, liquidity conditions, and policy transmission.
Federal Funds Rate
Federal Funds Rate — The effective overnight policy rate anchor that transmits through the entire USD funding stack and global risk appetite.
Federal Open Market Committee
The FOMC is the Fed body that sets the funds-rate target and the balance-sheet stance — the US rates committee.
Financial Conditions Index
A Financial Conditions Index aggregates variables such as rates, credit spreads, equities, and the dollar to measure how supportive or restrictive the market environment is for growth and risk assets.
Fiscal Policy
Fiscal policy is government spending and taxes — the demand impulse that is not the policy rate.
FOMC Meeting Effect in Stocks
Time equity exposure around scheduled FOMC days — a calendar of policy-event premia, not a statement-parse.
Foreign Exchange Intervention
Foreign Exchange Intervention — Official buying or selling of currency to manage disorderly moves and imported inflation.
Forward Guidance
Forward Guidance — How central bank language shapes term premium and front-end rate expectations before actual policy moves.
Hard Landing
A hard landing is a policy-induced recession — inflation (or a bubble) comes down because demand was broken.
Impossible Trinity
The impossible trinity (trilemma) says a country cannot simultaneously have a fixed exchange rate, free capital mobility, and an independent monetary policy — it must drop one.