Terms Beginning With 'e'

Eavesdropping Attack

  • January 02, 2020
  • Team Kalkine

An eavesdropping attack or snooping attack is defined as an intrusion to steal the information transmitted over a network by various devices such as smartphones, computers or any device, which transmit over a network via taking advantage of unsecured network communications. ?

What is an Absolute Advantage? Absolute advantage is one of the key macroeconomic terms, which is based on the principles of Capitalism and is often utilised in international trade-related decisions. Absolute advantage refers to the competence of a company, region or country to produce goods or services in an efficient manner compared to any other economic entity. The efficiency in production can be achieved by: Production of the same quantity of good or services as produced by other entity by utilising fewer amount of resources Production of a higher quantity of good or services as produced by other entity by using the same amount of resources What is the Significance of Absolute Advantage? Different countries or businesses possess a different set of ability owing to their location, soil composition, weather, infrastructure, or human resource skills. When applied in the right direction, various factors may pan out to offer more cost-effectiveness and hence build absolute advantage of the entity in comparison to others.  The absolute advantage remains one of the critical determinants for the choice of the goods or services to be produced. Absolute advantage in a particular area often translates into profitability in the area. The profit margin increases by the achievement of cost efficiency, allowing the entity to ensure higher profitability over the competitors.  For example, let us assume that the US can produce ten high-quality aircrafts utilising a specific amount of resources. China, on the other hand, can build 6 similar quality aircrafts using the same amount of resources. Thus, in the production of an aircraft, the US holds Absolute Advantage Let’s say the US has the ability to manufacture a certain amount of steel using 10 tonnes of iron ore. China, on the other hand, can produce the same quantity of steel using 8 tonnes of iron ore.Here, China here holds Absolute Advantage in the production of steel.  How Countries Build Absolute Advantage? While natural conditions, which include climatic factors, geometry, topography, cannot be altered for achieving absolute advantage, the countries use the underlying factors strategically in their favour. Furthermore, factors of production are focused at by many companies or nations for building absolute advantages.  Some of the strategies for building absolute advantage includes: Development of Technological Competencies- The implementation of innovative or latest technological innovations allows the entities to lower their production cost, facilitating absolute advantage.  Enhancing Skills of Human Resources- The improvement in the cost-efficiency, along with the quality of the products, is targeted through imparting varying skill development programs. Many countries subsidize or aid the apprentice or labour training for enhancing the absolute advantage in trade.  Improving Infrastructure- The infrastructure enhancement in the form of road, telecommunications, ports, etc. can be useful in enhancing the cost-effectiveness across different industries.  What Do We Understand by Comparative Advantage Vs Absolute Advantage? Evaluating the comparative advantage introduces the concept of opportunity cost, which is the deciding factor to determine the production of particular goods or services. Opportunity cost refers to the potential benefits associated with the next best possible alternative which is missed out when one option is chosen over another.  The Absolute advantage simply considers the capability of a business or region to deliver goods or services in the most efficient manner. The Comparative Advantage, however, also takes into account the benefits that are forgone if an entity decides for production of a particular product or services.  Comparative advantage, based on the notion of mutual benefits, is often used in international trade deals. The Comparative advantage has been the major factor driving the outsourcing of services in search of cheap labour.  Understanding through an Example For instance, country A can produce ten televisions with the same amount of resources with which it can make 7 laptops. The opportunity cost per television is 7/10 or 0.7 laptops. Meanwhile, the opportunity cost per laptop is 10/7 or 1.42 television.  It highlights that country A is forsaking the production of 0.7 laptops if it is deciding to manufacture one television. On the other hand, it is missing out the opportunity to manufacture 1.42 televisions for every single laptop manufactured.  Now, say Country B’s opportunity cost for producing a television is 0.5 laptop, and that of producing laptop is 2 televisions. Then, country B will have a comparative advantage in making televisions, and country A will have comparative advantage in producing laptops. It has to be noted that despite country A having absolute advantages in both the products, it would be mutually beneficial for both the countries if country B produces television while country A produces laptops. Do You Know About Absolute Advantage Theory by Adam Smith? The concept of Absolute Advantage was indicated by Adam Smith in his book called ‘Wealth of Nations’ which focusses on International trade theory. Adam Smith, in his book attacked on the previous mercantilism theory, which mainly stressed for economies to maintain trade surplus in order to command power.  The Absolute Advantage theory considered that the countries possess different ability with respect to the production of varying goods or services. It argued that it is not necessary that a state may hold an absolute advantage in the production of all goods, and here the relevance of trade comes into play.  It advocates that countries should produce those goods over which they hold a competitive advantage. It would allow the countries to make the same amount of goods using few resources or in less time. The theory propagates the relevance of trade for economic sustainability.  What Are the Limitations of the Absolute Advantage Theory? The assumptions used in the Absolute Advantage Theory by Adam Smith may limit the application in real bilateral trade. The limitations of the theory by Adam Smith include: Smith assumed that the productive capabilities of a country could not be transferred between the two countries. However, in practical terms, the competitive scenario aids the nations to acquire new capabilities and acquire new resources, especially in the technological and human resource skill aspects.  The two-country trade which was used as a basis for the theory does not consider the trade barriers levied. The present scenario, however, is strikingly dominated by trade wars between economies. Nations impose huge tariffs, import duties and other type of barriers to promote local manufacturers.  Absolute Advantage theory assumes that the trade between the two nations will take place only if each of the two economies holds an absolute advantage in one of the commodities traded. However, in general, countries despite not holding absolute advantage are engrossed in international trade, boosting their economic setup.

What is the Dark Web?  The dark web is one such portion of the World Wide Web which is not accessible by regular search engines. The dark web is considered a hotbed for criminal activities, and it is much more than that. Various websites exist on an encrypted network inside the dark web. Standard web browsers and programs cannot find these websites. Once inside the dark web, different sites and pages can be accessed like one does on the web. Scientists believe that the internet we see is only 4% of the entire ocean of the web, meaning the 96% consists of the "Deep and Dark Web".  The user interface used in the dark web is usually internet-based, but it utilises special software which is not part of the standard ones. There are dozens of web browsers to surf the internet, but they all work in the same way. These standard browsers use ports and protocols to request, transfer and view data on the Internet. The website you access may look familiar, but as you enter, it may be illegal or something familiar but otherwise not monitored by anyone else. Therefore, the deep web and the dark web are famous for being anonymous. Also read: Cyber Espionage Campaign: Strings that tie China, Australia and the US How to access dark web browser? In order to access a few areas which are restricted, the user may need a password and a process to follow. A special software called TOR (The Onion Router) or the Freenet has these non-standard connections. These browsers are unlike standard internet browsers and have a process to access. They allow the users to browse around the dark web and are focused on keeping the user identity anonymous. If hacked or accessed, the regular web browser can easily provide user information such as who the user is and whereabouts. Though the dark web is providing 100% anonymity, federal agencies have been successful in tracking down criminal activities on the dark web. It is often said that the person you are talking to on the dark web could either be an FBI agent or a criminal. Image: Kalkine   What happens inside the world of the dark web?  The dark web is famous for allowing sinister activities, but many users go on the dark web to access information which otherwise may not be accessible on standard internet. Such as users from extremely oppressive governments who cut access to the world for their citizens. Unfortunately, such confidential environments also provide open platforms to criminals, terrorists and other such individuals involved in illegal activities.   Hence, experts advise users to not access the dark web even out of curiosity as it is a lawless environment. There have been many incidents where innocent, curious users were trapped and forced to get involved in criminal activities or their digital devices hacked and compromised without their knowledge.  A study conducted by a University of Surrey researcher Dr Michael McGuires in 2019, Into the Web of Profit, shows that the dark web has become worse in recent times. Since 2016 of all the listings on the dark web suggested, 60% could harm companies. Everything illegal and criminal can be found on the dark web, it also has other legitimate options such as chess clubs or book clubs, but because of the anonymity, the user will not know whom he/she is interacting with. Inside the dark web, anonymity and lawless nature make the crimes which exist otherwise in our society hard to trace.  The payment procedure inside the dark web is also different from the World Wide Web. Most often, Bitcoin and Monero cryptocurrency are used for the transactions.    RELATED READ: Knock Knock! Cybercriminal at Your Doorstep   What’s the difference between the deep web and dark web? The dark web is part of the entire deep web and is hidden from regular browsing access. Most people confuse the deep web and the dark web as one entity. It is not. The deep web content includes anything hidden and restricted behind the security wall such as content which otherwise requires paywall or sign-in or blocked by the author. Content which cannot be easily accessible on regular internet such as medical records, membership websites, paid content are available on the deep web; hence it is also called Invisible Web.  No one really knows the total size of the internet, but the experts believe that the standard World Wide Web consists of only 4% internet, the deep web consists of 90% and dark web consists of 6% of the entire internet.  ALSO READ: Technology has changed the way we work amid the COVID-19 crisis: A look at in-demand technologies Image: Kalkine     Also read: It happens again, NZX being bullied by Cyber-attackers- Down for the fourth day   What kind of risk companies face due to the dark web?  The Into the Web of Profit report listed below threats various organisations around the world are facing, especially the ones who have weak or insufficient cybersecurity measures.   Malware attacks Distributed denial of service (DDoS) attacks Botnets Trojan, keyloggers, exploits  Espionage  Credentials access  Phishing  Refunds Customer data Operational data Financial data Intellectual property/ trade secrets    Also read: Cybersecurity and the Requirement of a Resilient Environment in Australia  Are there advantages and disadvantages to the dark web?  The dark web provides complete anonymity, the users get complete privacy to perform any activity, be it illegal or legal. Many countries in the world still have authoritarian regimes offering no civil rights to their people. To such oppressed lot, the dark web provides an opportunity to access news, information, data and also express their views. The dark web is also a perfect place for law agencies to map criminal activities while being undercover. It is also easy to commit gruesome crimes through the dark web as it is complicated and lawless. Criminals can easily use the dark web to compromise someone's privacy, steal data or private information or even hire someone to commit murder.  Do internet users need to be concerned about the dark web?  The simple answer is no unless the user is using the dark web. Study says that most young people visit the dark web out of curiosity. They do not want to indulge in any criminal activity but want to see how the hidden and secret world of the dark web operates. And that is where the possibility of the electronic device IP address getting hacked by other criminals to perform their criminal activities lies.  The earliest use of darknet dates back to the year 2000. Freenet was created at the University of Edinburgh based on a student research paper. Ian Clark wrote the paper in 1999 on the possibility of such an encrypted internet base. Freenet was created to oppose censorship and provide a platform for free speech. The most powerful dark web is TOR, and it was created by the United States government to have a secure encrypted communication in case of emergency and complete disaster. Even today, many law agencies are secretly active inside the world of the dark web to gain access in the criminal world and stay one step ahead.

Falling Knife A falling knife is a colloquial term which is often used in the financial market. The term is specifically used when the price of the security falls quite rapidly or sometimes also referred to when the price keeps falling for quite some time. The term often comes across as “Don’t try to catch a falling knife” or “trying to catch a falling knife is very risky”.   Why is a falling knife so risky? The price moves every second throughout the trading window and keeps doing so every next trading session. Therefore, price is always said to be in motion, it could either be an upward or downward movement.   When the price falls with very high velocity like what the world witnessed during the initial phase of Coronavirus pandemic, then this specific movement or price is said to be a falling knife.   This downward momentum is so strong that there is virtually no level where the price stabilizes until the fall is not ended. Every support level, major or minor gets hammered, and during the fall, no enthusiasm is seen from the buyers. Therefore, the sellers keep on selling the security even at lower prices, without enough buyers to absorb the entire supply.   Hence the downward movement is on till the sellers feel that the market has reached an oversold price level and stop selling further. This is when the fresh enthusiasm of buyers comes in, and prices start to move up.   What does it mean to “Catch a falling knife.” During the course of severe correction in the market, it is tough to predict or estimate some support areas where the supply may end, and the price may halt. Trying to catch a falling knife means taking a very high risk and trying to buy the security at current levels in anticipation that the price would reverse from here.   In the normal conditions, generally more accurate estimates can be made as to from where the price may reverse but understanding the correct price at which one should buy in the case of a severe downtrend is not so easy. Therefore, if the timing goes wrong while buying the security, then the trader may not even get a chance to get out around the same price.   This situation is exactly like trying to catch a falling knife in the real scenario as in, if the knife keeps on falling after the intervention by your hand in an attempt to stop it, then it would probably cut through your hands.   What are the reasons for the occurrence of a falling knife? The falling knife is a dangerous downward move which is accompanied by huge volume. That means mass participation generally takes place during these kinds of moves as moving prices with such a very high momentum cannot be a one-man show, especially in a liquid market like ASX200 or Dow Jones. Image Source: ©Kalkine Group 2020   There could be many reasons which may instil a sense of excessive fear amongst the market participants, which ultimately triggers these moves. Here are a few examples of such reasons   Earnings Report Every quarter the listed companies declare their earnings report to the public. Every investor of the company has his own expectations with respect to the company’s performance. But not always, the company meets the investor’s expectation and sometimes leads to disappointment.   If the company’s performance is totally not acceptable by the investors, then it may also trigger excessive selling of shares which may last for a few weeks.   Global Threat The most recent example of a global threat is Coronavirus pandemic. In the initial phase of the pandemic, during Feb and March 2020, the markets across the globe were depicting the exact movement of a falling knife. The fall was so intense that the only mechanism that was stopping the markets from falling further were the lower circuits.   Other global threat or emergencies like a terrorist attack, severe natural calamity etc. may also be the reasons for such aggressive downfall.     Technical Breakdown Technical breakdown refers to a break of a significant support level on the price chart. Sometimes a major technical breakdown is enough to trigger a ferocious selling. This happens mostly after the break of long-term support or a firm support level. These technical levels often provide a warning well before the breakdown, although may not always be correct, a trader can definitely become cautious after the breach of these levels.   How to profit from a falling knife? The ideal trade to place during a falling knife is to go short on the security and follow the trend. Trend following approach may help even better if the trader could enter around the beginning of the move and ride the trend all the way to the bottom.   However, there is never the “only way” in the market, and there is another bunch of traders/investors who think the opposite and try to buy during the fall. This is called a mean-reversion approach because it is expected that if the price falls too much too quickly, then it tends to deviate from its mean price. These investors bet on the assumption the price would soon revert back to its mean by giving an opposite move.   Bottomline A falling knife is a ferocious down move which is difficult to trade for both the short or long position. Traders need to have quite an accurate timing of their trades. If timing the move is done correctly, then a trader can make money both ways else it isn't easy.   For the new traders with less experience, it is generally recommended to sit aside till the calm sets in.    

What is the October Effect: a myth, or a reality? October effect refers to the theory that stock prices crash in the month of October. This happens without any methodical reason or any specific factor affecting the stock prices. However, the theory has come into existence because of repeated crashes observed in October over the years. October effect is more of a psychological concept than a real-stock market concept.  There have also been price crashes observed in September. However, the reasons for these crashes have been varied. How does October Effect impact the markets? The hysteria around the October effect might make investors scared in this month. The expectations of a price decrease might lead to many investors selling their stocks in early October. If too many investors end up selling stocks, that might inadvertently lead to more panic selling among the investors. Why do investors believe in the October Effect? Often investors let emotions get the best of them. People might lose out on their money because they let their emotions guide them, which may include fear, greed, or a herd mentality. Behavioural finance suggests that investors might be motivated by factors other than their rational decision making. Some of the biggest crashes in history have happened because of the poor decision-making of the investors. People might follow a crowd and put their money in stocks which are more popular among investors, without having any other reason for doing it. At times, the media accounts about the market and a general notion, which is framed without any rational explanation, end up misguiding investors into the wrong direction. These factors may lead to investors giving in to the mass hysteria prevailing during October, which may end up fuelling the October Effect. Therefore, investors must consider all the factors before putting their money in a particular stock. Why was the concept of October Effect formed? The following historic incidents led to the phenomenon of stock prices crashing during October: Panic of 1907: This occurred in the beginning of October. It started with the bankruptcy of two small brokerage firms. Two investors failed to buy shares of a copper mining firm, which led to a run on banks associated with them. This resulted in a domino effect. The crash started with New York city, but it eventually spread to other parts of America. As money was withdrawn from the economy, financial institutions faced the brunt. It also led to the shutdown of Knickerbocker Trust, which had been refused a loan by JP Morgan. The crash was ultimately resolved when the US government gave a fiscal credit of over $30 million, which led to the consumer confidence coming back. Stock Market crash of 1929: This is also referred to as Black Tuesday and it occurred on October 29, 1929. During the 1920s, the US economy was going through various expansions and peaked during a period of high speculation. This was referred to as the Roaring Twenties. As a result of this rise in speculation, there was overvaluation of the stocks, when their prices went way beyond their actual value. However, the bubble burst with reasons attributed to low wages, a downfall of the agricultural sector, and a multiplication of debt. Black Monday: This event occurred on 19th of October, 1987. There were many factors at play, which led to the stock market crash. These included a widening of the trade deficit, incoming of computerised trading and various other geopolitical reasons. The computerised models used for trading were programmed to give a positive feedback. This led to the model generating increased buy orders when prices were increasing, and more sell orders when the prices began to fall. International tensions between countries also led to the crash and loss of confidence in the market. Other events in September: There were historical events which led to a crash in September, like the Black Friday, Black Wednesday, the WTC attacks in 2001, and the housing market crash of 2008. Black Wednesday occurred on September 16, 1992. A collapse in the Pound Sterling led to the UK to opt out of the European Exchange Rate Mechanism. All these factors occurred because of different reasons, which were specific to that particular time period and set-up. Thus, it can be argued that the fact that these events occurred in October is a coincidence. Is the October Effect real or just a coincidence? It is safe to say that October Effect is nothing more than a mere coincidence. The events discussed above happened without any methodical linkage connecting them to the month of October. There has been further evidence proving that the October Effect failed to occur in the years when the market remained strong in this month. The historical crashes mentioned above occurred because of issues which had been specific to those times. Stock exchanges and trading platforms have incorporated the necessary changes to ensure that these events do not get repeated. Regardless of these regulations, it is safe to say that some of these crashes were Black Swan events and could not have been predicted under any circumstances. Therefore, it is difficult to say whether the current market is immune to phenomena like the October Effect or any other crash.

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